Analysts see gains in HDFC Life, ICICI Prudential stocks after Q1 results

The results of two large private life insurers for the first quarter of 2025-26 (Q1FY26) were assessed by analysts as encouraging. A quick look at the two majors:

 

ICICI Prudential Life Insurance Company (ICICI Pru) reported a decline of 5 per cent year-on-year (Y-o-Y) in new business annualised premium equivalent (APE) to ₹1,860 crore in Q1FY26, impacted by base effect and slowdown in unit linked insurance plans (ULIPs). The value of new business (VNB) margin was 24.5 per cent, a gain of 50 basis points (bps) Y-o-Y. Absolute VNB declined 3 per cent Y-o-Y to ₹460 crore. 

ICICI Pru reported 34 per cent Y-o-Y rise in shareholder PAT (profit after tax) to ₹300 crore. The gross premium grew 8 per cent Y-o-Y to ₹8,950 crore, with renewal premium growing 14 per cent Y-o-Y to ₹4,940 crore, and single premium up 6 per cent Y-o-Y. First-year premium declined 5 per cent Y-o-Y. 

The APE decline was due to 14 per cent Y-o-Y fall in ULIPs, and 53 per cent Y-o-Y drop in annuity. The non-linked segment saw 20.8 per cent growth Y-o-Y. Group business grew 54 per cent Y-o-Y, and protection was up 15 per cent Y-o-Y. 

The Y-o-Y expansion of 50 bps in VNB margin was due to increase in the share of non-linked business to 21.5 per cent (versus 16.9 per cent in Q1FY25), and growth in protection contribution from 18 per cent (Q1FY25) to 22 per cent in Q1FY26. Retail APE declined 9 per cent Y-o-Y while retail protection APE grew 24 per cent Y-o-Y. The annuity segment was down 53 per cent Y-o-Y on a higher base. 

 

Operating expenses declined 13 per cent Y-o-Y, driven by cost optimisation measures. Agency channel saw a decline of 19 per cent, and direct channel witnessed a fall of 15 per cent Y-o-Y due to weak ULIP offtake and high base. The bancassurance channel declined 2 per cent Y-o-Y, with the share of ICICI Bank stable at 15 per cent of overall business. The assets under management (AUM) grew 5 per cent Y-o-Y to ₹3.2 trillion while the solvency ratio was 212 per cent.

 

The management’s focus is on VNB growth, and it is confident of the same over the next nine months. The ULIP demand trajectory remains similar to Q1FY26, and a sharp rebound is not expected. There’s a customer shift away from linked products, which may be temporary.

 

HDFC Life Insurance Company (HDFC Life) reported an APE of ₹3,230 crore in Q1FY26, up 13 per cent Y-o-Y, driven by 13 per cent Y-o-Y growth in Individual and 12 per cent Y-o-Y growth in group APE. VNB grew 13 per cent Y-o-Y to ₹810 crore in Q1FY26. Margins were at 25.1 per cent, a decline of 90 bps.

 

There was 14 per cent Y-o-Y growth in shareholders’ PAT to ₹550 crore, supported by 15 per cent increase in back-book profits. VNB margins were range-bound. Gross premium grew 16 per cent Y-o-Y to ₹14,880 crore, with 19 per cent Y-o-Y growth in renewal premium and 17 per cent Y-o-Y growth in single premium. The overall APE growth of 13 per cent Y-o-Y was driven by growth of 117 per cent in Par (participating), 16 per cent in ULIP, and 17 per cent in term business while non-Par and group businesses reported Y-o-Y declines of 36 per cent and 16 per cent, respectively. 

 

The share of ULIPs was stable at 33 per cent. The non-Par segment dipped temporarily due to an unusual pricing environment. The management expects these trends to normalise. Credit protection was in recovery. There will be similar growth across distribution channels in Q2FY26.

 

Total AUM increased by 15 per cent Y-o-Y to ₹3.6 trillion, and embedded value (EV) grew 18 per cent Y-o-Y to ₹58,400 crore, reflecting return on EV (RoEV) of 17.6 per cent. Solvency ratio stood at 192 per cent. Market share was up 70 bps to 12.1 per cent. Renewal collections grew 19 per cent Y-o-Y. Around 70 per cent of new customers were first-time buyers.

 

Digital integration with the parent (HDFC Bank) will support an improved product mix in the second half (H2) of FY26. The management expects growth in H2 to outpace that of H1 but FY26 growth will be less than FY25’s. The non-Par product mix is seen rising to the mid-20 per cent range while Par products may drop to 25 per cent.

 

Analysts remain positive on both stocks, with consensus upside for each being over 10 per cent. But HDFC Life corrected slightly to close at ₹756.05 while ICICI Pru lost nearly 3 per cent and closed at ₹650.65 on the BSE.

 

According to Bloomberg, 24 of 26 analysts polled in the past two days are bullish on HDFC Life. Of the remaining duo, one is neutral and the other bearish on the stock. Likewise, 20 of 26 are bullish on ICICI Pru, four are neutral, and two are bearish on the stock. Their average one-year target price for HDFC Life is ₹876, and for ICICI Pru is ₹724, indicating an upside of 11-15 per cent.