ICICI Pru Life Q3 margins expand despite slow premium growth, say analysts

ICICI Prudential Life Insurance’s December-quarter (Q3FY26) performance drew a broadly positive response from brokerages, led by a sharp expansion in value of new business (VNB) margins driven by a favourable product mix and strong retail protection growth, even as premium growth remained muted on a high base and weakness in group business.

 

Most analysts highlighted that the insurer’s ability to sustain margins despite the loss of GST input tax credit was the key takeaway from the Q3FY26 results.

Margins shine amid modest growth

 

Motilal Oswal, Emkay, JM Financial and Elara Capital all flagged the 320 basis points (bps) year-on-year (Y-o-Y) expansion in VNB margin to 24.4 per cent as the standout feature of the quarter. This was well ahead of most estimates, with Emkay noting that margins exceeded both consensus and its own expectations.

 

 

ICICI Prudential Life reported an annualised premium equivalent (APE) of ₹2,530 crore in Q3FY26, up around 4 per cent Y-o-Y and largely in line with estimates. For the first nine months of FY26, APE declined marginally by about 1 per cent Y-o-Y to ₹6,810 crore, reflecting a high base last year supported by ULIP traction and an annuity product launch.

 

Despite the modest APE growth, absolute VNB rose 19 per cent Y-o-Y to ₹620 crore in the December quarter, while profit after tax grew 19 per cent Y-o-Y to ₹390 crore, aided by strong operating leverage and better-than-expected margins.

 

JM Financial described the quarter as “strong and in-line,” highlighting that margins held steady sequentially despite the impact of GST reforms and a one-off hit from labour law changes.  ALSO READ | ICICI Lombard Q3 review: PAT slips YoY; analysts stay bullish on franchise

Retail protection drives mix improvement

 

Brokerages were unanimous that the sharp rise in retail protection was the biggest margin driver. Motilal Oswal and Emkay pointed out that retail protection APE grew over 40 per cent Y-o-Y in Q3FY26, aided by improved affordability following GST exemption on pure-term products.

 

Motilal Oswal noted that the overall protection contribution rose to 18.4 per cent in Q3FY26 from 16 per cent a year ago, while retail protection’s share within APE climbed steadily. CLSA reportedly said the GST input tax credit loss was effectively offset by a product mix shift toward higher-margin retail protection.

 

In addition to protection, ULIPs and non-linked savings products also supported margins. Several brokerages highlighted higher sum assured policies, increased rider attachments and favourable yield curve movements as incremental positives. Elara Capital pointed to strong growth in non-linked savings as customers locked in yields, while ULIPs saw a recovery amid stable equity markets.

 

On the flip side, group business remained volatile. Motilal Oswal and JM Financial flagged a sharp decline in lumpy group APE during the quarter, while annuity sales also dipped on a high base.

Outlook: Cautious growth, stable to improving margins

Moving forward, brokerages remain constructive on margins but more measured on growth. Management commentary cited by multiple analysts indicated that APE growth should improve in Q4FY26 as base effects normalise and retail protection momentum sustains.

 

Emkay expects VNB margins to see a slight uptick in the March quarter as cost efficiency improves and distributor negotiations conclude. Motilal Oswal raised its VNB margin assumptions for FY26-FY28 by up to 100 bps, while maintaining its APE growth estimates.

 

JM Financial expects consistent growth over the medium term, building in gradual margin expansion to 25.5 per cent by FY28E, and reiterated its view that current valuations remain undemanding relative to peers.

 

Valuation calls, however, were mixed. Motilal Oswal and JM Financial reiterated their ‘Buy’ ratings on ICICI Prudential Life stock with target prices of ₹800 and ₹880, respectively. Emkay maintained ‘Add’ with a raised target of ₹775, while Elara Capital kept an ‘Accumulate’ rating with a target of ₹730. Nomura remained ‘Neutral’ with a target of ₹740, citing single-digit VNB growth expectations for FY26 despite a positive near-term outlook. According to reports, CLSA maintained ‘Outperform’ with a higher target of ₹790.

 

That said, the brokerages agree that ICICI Prudential Life’s improving product mix and margin resilience have strengthened the investment case, even as sustained growth recovery remains the key monitorable in the coming quarters. 

   

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