HDFC Life FY26: Growth held steady as margins absorbed regulatory headwinds

HDFC Life ended FY26 with steady growth in scale metrics, while profitability indicators reflected a year of regulatory and mix changes. Individual APE rose to Rs 146.4 billion, up 7% year-on-year. Renewal premium grew faster at Rs 432.9 billion, up 15%, underscoring the compounding strength of the in-force book. Assets under management increased 12% to Rs 3,752 billion.

Value of New Business (VNB) was Rs 40.3 billion, up 2% on a reported basis, while New Business Margin (NBM) declined to 24.2% from 25.6%. Management attributed the decline largely to the impact of GST changes and surrender value regulations, along with weaker fixed-cost absorption in a slower Q4. The company also presented normalised numbers which exclude the impact of GST, labour code and surrender regulation changes, showing VNB of Rs 42.5 billion and NBM of 25.5%.

Profit after tax (PAT) stood at Rs 19.1 billion, up 6% reported. On a normalised basis, PAT was Rs 20.9 billion, implying 16% growth.

Product mix shifted toward protection and UL, while non-par savings stayed soft

The FY26 individual APE mix was unit-linked at 44%, participating products at 25%, non-par savings at 18%, term at 7% and annuity at 5%. A key operating highlight was protection. Overall protection value grew 31% and retail protection grew 43% for the year. Management linked this to lower prices post-GST and a strengthened product portfolio, noting that first-time buyers accounted for over 80% of protection sales post-GST, with customers moving to higher sum assured coverage.

Alongside protection, the company highlighted progress in annuities, including the launch of Aajeevan Growth Nivesh and Income, described as a variable annuity combining lifelong guaranteed income with growth potential linked to the Nifty 50 Index. Management said margins on this product are higher than company-level margins.

Non-par savings demand was softer than management expectations. The company emphasised pricing discipline in this segment, acknowledging a near-term volume impact but positioning it as supportive of long-term value and margins. Management also said it has undertaken selective product refinements and expects a gradual recovery as the yield curve becomes more favourable.

Distribution: proprietary channels outperformed while partnership channels were volatile

HDFC Life continued to rely on bancassurance for scale. Bancassurance contributed 58% of individual APE and 50% of individual NBP. The company also detailed a large partnership ecosystem of 500-plus partners across banks and non-bank alliances.

In the earnings call, management acknowledged volatility in partnership channels during FY26, driven by heightened competitive intensity. It said it stepped away from unviable business, particularly where pricing did not meet profitability thresholds. This played out most visibly in Q4, where management said growth was below its original expectations, driven by unabsorbed GST, temporary softness in bancassurance, and deferment of demand in March amid global uncertainty.

Proprietary channels were positioned as a stabiliser. Management said proprietary channels delivered 15% to 16% growth in Q4 and for FY26, despite broader softness.

The agency build-out remained a major operating theme. The company reported gross agent additions of over 97,000, taking the base to about 2.7 lakh, and noted that AI-powered tools and analytics are improving agent productivity.

Costs, persistency and capital: visible pressure, with mitigation actions underway

A key watch item in FY26 was the cost ratio. Total expenses as a percentage of total premium rose to 21.2% from 19.8% in FY25. Management linked part of the margin pressure to fixed-cost absorption in a weaker Q4.

Persistency was mixed. The 13th month persistency declined to 85% from 87%, while the 61st month persistency improved to 64% from 63%. Management said the 13th month movement was cohort-driven and noted that trends stabilised in Q4.

Customer metrics showed both strength and strain. Claim settlement ratio remained strong at 99.7% for individual and 99.8% overall in FY26, while complaints per 10,000 policies rose to 43 from 31.

Capital and solvency were front and centre. Solvency stood at 177% in March 2026, down from 194% in FY25. The investor presentation noted that a proposed Rs 10 billion preferential issue is expected to increase solvency by about 9% to around 186%, with additional headroom to raise sub-debt during the year. In the concall, management reiterated board approval to raise up to Rs 1,000 crore through a preferential issue to HDFC Bank and also indicated capacity to raise about Rs 500 crore of sub-debt if required.

The company also guided on reporting transition. Management said the board has approved applying to the regulator for Ind AS forbearance for FY27, with full adoption targeted from FY28.

Takeaways for investors

FY26 reinforced the company’s scale and back book strength, with renewal premium and AUM continuing to compound and embedded value rising to Rs 621.4 billion. At the same time, near-term profitability and growth optics were shaped by regulatory changes, competitive intensity in bancassurance, and cost absorption in a softer Q4.

Management’s near-term priorities were stated clearly: absorb the GST impact into the business model through FY27, support recovery in non-par savings as the yield curve improves, and continue to scale protection and annuities. The proposed capital raise is positioned as a growth buffer as the industry prepares for a shift toward risk-based solvency and a more disclosure-intensive accounting regime.