Life Insurance Sector Update : All eyes on profitability despite multiple regulatory actions by Motilal Oswal Financial Services Ltd
GST exemption-led growth continues; potential commission regulations ahead
* The life insurance industry has been impacted by multiple regulations since 2HFY25, such as surrender value regulations, new product guidelines, GST waiver, etc., which disrupted the industry’s near-term growth trajectory. The industry posted single-digit growth in 2HFY25 after surrender value regulations and weak ULIP demand; however, growth rebounded to double digits in 2HFY26 after GST waiver and recovery in ULIPs.
* Individual APE growth moderated in Mar’26 due to volatile geopolitical conditions (from ~20% YoY in Oct-Feb’26 to 8% in Mar’26). Apr’26 witnessed recovery (21% YoY growth) with additional benefits of a low base. We expect the growth to stabilize from the current levels to a sustainable mid-teen trajectory. MAXLIFE/CANHLIFE were the only two private listed players witnessing double-digit APE growth in 4QFY26 and we expect them to continue leading the pack going forward.
* During 4QFY26, most listed players witnessed double-digit YoY growth in absolute VNB, with CANHLIFE leading the pack (+49% YoY). CANHLIFE also reported the highest VNB margin in the industry (30.5% in 4QFY26). Traction in the traditional product segment, rising share of protection and strong growth in rider attachments continue to be profitability drivers, offset by the impact from loss of input tax credit (ITC), which is likely to be mitigated by the end of 1HFY27.
* On the regulatory front, discussions are ongoing regarding commission regulations, which can possibly disrupt channel economics, posing near-term risks to new business growth and distribution expansion. Accounting transition to IFRS and risk-based solvency framework are the emerging regulatory themes, which would lead to operational changes but improve transparency, global comparison and capital allocation in the industry.
* Following 4QFY26 results, we expect stable APE growth momentum and positive outlook for VNB margin expansion, backed by a rising share of non-ULIP products and improving profitability of ULIPs. However, the stocks have seen de-rating after IFRS implementation and the noise around commission regulations, and we expect more color on both in the near future. Our preferred picks in the space are CANHLIFE (TP of INR180 premised on 1.7x FY28E P/EV) and SBILIFE (TP of INR2,340 premised on 2.1x FY28E P/EV).
CANHLIFE: Valuation and view
* CANHLIFE continues to deliver industry-leading growth in 4QFY26, along with stellar VNB margin expansion, supported by a pickup in traditional segment contribution and improving product-level profitability.
* The company offers a rare multi-year compounding opportunity anchored in a structurally improving banca engine, rising contribution from premiumized HSBC flows, and disciplined agency expansion. With one of the most underpenetrated PSU-bank funnels and clear visibility on branch activation, product mix upgrades, and operating leverage, we expect the company to deliver 18- 19% operating RoEV going forward.
* Post 4QFY26 results, we have maintained our APE estimates and increased VNB margin estimates by 200bp each for FY27/28, considering the strong performance in 4QFY26. This has led to 2% increase in our EV estimates for FY27/28. We reiterate our BUY rating, maintaining a TP of INR180 (based on 1.7x FY28E EV).b
SBILIFE: Valuation and view
* SBILIFE’s 4Q VNB margin was impacted by GST changes, which was offset, to some extent, by a strong traction in protection products, rising rider attachment rates, and a shift in the product mix toward non-ULIP products. Going forward, steady traction in non-linked products is expected to drive VNB margin expansion.
* Continued investments in agency and digital channels are expected to drive overall growth, supported by a gradual growth recovery in the bancassurance channel.
* Post 4QFY26 results, we have slightly cut our APE estimates and expect ~14% CAGR over FY26-28E, resulting in 2% decline in VNB/EV estimates for both FY27/FY28. Operating RoEV is expected to remain stable at 18%. We reiterate our BUY rating with a revised TP of INR2,350 (based on 2.1x FY28E P/EV).
MAXLIFE: Valuation and view
* MAXLIFE maintains a better-than-industry APE growth trajectory. A shift in the product mix towards traditional has resulted in continued VNB margin expansion despite the impact of labor code and GST. The proprietary channel continues to drive growth across offline and online channels, while the bancassurance channel posted strong growth in non-Axis partnerships. Persistency trends improved across almost all cohorts.
* We expect the VNB margin trajectory to remain stable, as the company is likely to reinvest incremental margin arising from the product mix shifts into growth opportunities. We reiterate our BUY rating on the stock with a TP of INR1,980, premised on 2.1x FY28E EV.
HDFCLIFE: Valuation and view
* HDFCLIFE has witnessed a slowdown in growth at the end of 2HFY26. However, some green shoots were witnessed with respect to improvement in agency channel growth, rising protection contribution and improving ULIP margins. We expect the growth trajectory to improve, along with a stable VNB margin, driven by a diversified product mix, rising sum assured (especially in ULIPs), and improving rider attachments. While the loss of ITC has impacted profitability, the same is likely to be fully absorbed by 1HFY27, normalizing its VNB margin while maintaining a strong position in the industry.
* Post 4QFY26 results, we maintain our premium estimates but cut our VNB margin estimates by 150bp/100bp for FY27/28, considering the 4QFY26 performance and with operating RoEV near 15%. We reiterate our BUY rating with a revised TP of INR760 (based on 2x FY28E EV).
IPRULIFE: Valuation and view
* IPRU’s continued efforts toward the product mix shift and increasing retail protection contribution have resulted in continued YoY expansion in VNB margin, despite the loss of input tax credit after GST exemption. In the long term, the company’s profitability will be supported by higher volumes, driven by GST exemption, increased traction of non-linked products, and improved product-level margins.
* Post 4QFY26 results, we have increased our APE/VNB estimates by 1.8% each for FY27/28, considering the 4QFY26 performance. However, owing to variances in FY26, we have cut our EV estimates by 1.2% each for FY27/28. We reiterate our BUY rating with a TP of INR650 (based on 1.4x FY28E EV).
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