HSBC backs life insurance stocks for FY26, expecting up to 17 percent APE growth
Global brokerage house HSBC reiterated its optimistic stance on the life insurance sector, stating that earnings risks appear limited and current valuations remain supportive—even after the recent market uptrend. The firm remained positive on key players such as SBI Life, HDFC Life, and ICICI Prudential.
Among these, HSBC expressed preference for HDFC Life, although it has maintained a “buy” rating on all three insurers. The brokerage raised its price targets by up to 8 percent across the board. Specifically, it now sees SBI Life at Rs 1,950 per share, HDFC Life at Rs 870, and ICICI Prudential at Rs 720 per share.
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HSBC noted that the appeal of non-linked insurance products is steadily improving. This, along with a recovery in credit term plans, is expected to help offset the pressures currently affecting growth. It further highlighted that margin outlooks are becoming more positive, supported by shifts in product mix and declining competitive intensity.
The brokerage also pointed out that the consensus expectation for total annualised premium equivalent (APE) growth among large private insurers in FY26 stands between 13 percent and 14 percent. This is lower than the mid-to-high teens growth these companies generally target.
Nevertheless, HSBC believes several tailwinds—such as a more accommodative interest rate environment, a rebound in unsecured loan disbursements (including microfinance institutions), and the growing appeal of non-participating savings products—could bolster growth prospects in the coming quarters.
Overall, HSBC anticipates APE growth to range between 14 percent and 17 percent in FY26 for the insurance stocks under its coverage.
According to the firm, HDFC Life appears best positioned due to its relatively low dependence on linked products. In contrast, SBI Life may face greater impact should linked product sales experience a sharp decline.
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The brokerage acknowledged that margins took a hit in FY25, driven by a slowdown in credit protect offerings, heightened competition, and revised surrender value norms. However, it expects incremental changes in product mix to support margin recovery.
HSBC added that most new product launches in 2025 so far have been concentrated in the non-linked category. The firm also expects that softer competition and rising attachment rates for riders should further contribute to margin expansion.
Finally, HSBC projects that value of new business (VNB) margins will rise by an average of 18 basis points year-on-year during the current financial year.
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