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Growth in 1Q26 was expectedly soft for life insurers on a YoY basis while general insurers performed relatively better, especially with fire segment firing with 16% YoY growth over April-May. On reported basis, we expect premium growth of <5% for both ICICIGI and Star Health, with COR of ~102% for both. With normalising investment income, we expect muted PAT growth of 3%/-12% YoY for ICICIGI/Star Health. For life insurers, growth on a two year CAGR was in line at 15%, hence, stocks have done well despite weak YoY numbers. We expect margins to improve in FY26 with a mix shift away from ULIPs, higher product-level margins with a steepening yield curve and retail credit recovery in 2HFY26. At CMP, we prefer private life insurers over general insurers - we like HDFC Life for the steady VNB growth (expect 13% YoY in 1Q), prefer IPRU Life for improving margins (16% lower ticket size and 25%+ Sum Assured growth despite YoY contraction in premiums), with expectation of improving YoY growth trajectory as the year progresses.

* With surrender norms and growth concerns baked in, expect life insurer stocks to do well: Private life insurers have grown 5% YoY in individual APE over Apr-May’25 while LIC has seen a 5% contraction. For 1Q, we expect total APE growth of 13%/-5%/7%/3% for HDFC Life/IPRU Life/SBI Life/LIC. We expect margins to improve from 1Q25 levels for all the players. Going into results, we note that IPRU has seen 16% contraction in average ticket size (for regular plans) and 25%+ Sum Assured growth, hence, we expect 120bps QoQ expansion in margins to 24.0%, in line with 1Q25. Since 2 year CAGR in individual APE is >15% and YoY contraction is only due to a strong base, we prefer IPRU going into the results.

* General insurers to see weak profitability: While both ICICIGI and Star Health have delivered under-5% gross direct premium growth in 1Q26, we expect NEP (Net Earned Premiums) to grow 13% and 9% YoY, respectively. We expect Loss Ratio to improve 100bps YoY for ICICIGI (to 73.0%) and detriorate 200bps for Star Health (to 69.6%). We expect Combined Ratio (COR) of ~102% for both. FY25 saw strong investment income in 2Q and 3Q before falling in 4Q. He expect normalised investment income in 1Q26, resulting in PAT of INR 6.0bn for ICICIGI (+3% YoY) and INR 2.8bn for Star Health (-12% YoY).

* Valuations and view: General insurance sector has delivered stronger growth -10% for industry in 1Q26, compared to 5% for private life insurance in Apr-May’25. Like-to-like growth would be ~200bps higher. However, both ICICIGI and Star health have underperformed with 1%/3.5% growth. At CMP, we prefer private life insurers over general insurers - we like HDFC Life for the steady VNB growth (expect 13% YoY in 1Q), prefer IPRU Life for improving margins and expectation of improving YoY growth trajectory as the year progresses.

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