2 days ago
HomeMarket NewsHSBC is bullish on life insurance stocks — Here's why it prefers HDFC Life
Overall, HSBC expects total APE growth to be between 14% and 17% in financial year 2026 for stocks under its coverage.
The earnings risks of life insurance companies such as SBI Life Ltd., HDFC Life Ltd. and ICICI Prudential Ltd. appear low, and valuations are supportive despite the recent rally, said HSBC Global Research in its note, as it remains positive on the sector.
It also increased its price targets on the three life insurance stocks by up to 8%.
| Stock | Rating | Previous TP | Current TP | % Increase | Upside from CMP |
| SBI Life | Buy | ₹1,800 | ₹1,950 | 8.3% | 9.5% |
| HDFC Life | Buy | ₹830 | ₹870 | 4.8% | 14% |
| ICICI Prudential | Buy | ₹675 | ₹720 | 6.66% | 13% |
Among the three life insurance, HSBC has a preference for HDFC Life, despite having a "buy" rating on all the three.
HSBC said the life insurance companies' attractiveness of non-linked products is improving, which, besides a pick-up in credit term, can offset growth pressures.
It added that margin outlook is turning positive as well for these companies on the back of favourable product mix changes and easing competition.
Growth risks are reflected in expectations
HSBC said the FY26 consensus total annualised premium equivalent (APE) growth expectation for large private insurers is between 13% and 14% which is lower than the mid-to-high teens growth that they usually target.
However, the following growth drivers, according to HSBC can offset the pressure:
In an easing rate environment, attractiveness of non-participating savings products improves.
Preference for participating products increases in volatile equity markets.
With recovery in unsecured loan disbursements, including MFI, the brokerage expects the credit protect business to recover for the insurance players.
Overall, HSBC expects total APE growth to be between 14% and 17% in financial year 2026 for stocks under its coverage.
While HDFC Life looks best placed because of its low exposure to linked products, SBI Life could be most impacted if linked product sales slow materially, it added.
Margin tailwinds improve VBN growth outlook
The brokerage said margin moderated sharply in FY25 for most insurers, impacted by:
Product mix change in favour of low margin-linked products.
Slowdown in credit protect.
Elevated competition.
Surrender value impact.
Going forward, product mix should change favourably on an incremental basis, HSBC said.
The brokerage added that the new product launches have largely been in the non-linked categories in 2025, so far. It is also of the view that easing competition and increase in rider attachment rates should support margin expansion.
"Most insurers expect value of new business (VNB) margins to remain range-bound as they are looking to invest in distribution and technology. Nonetheless, this should improve the VNB growth outlook over the medium term," HSBC said.
The brokerage expects VNB margins to increase by 18 basis points on average during the current financial year on a year-on-year basis.
Positive outlook, prefer HDFC Life
HSBC said that there is further scope for multiple expansion for these insurance companies due to margin tailwinds, low downside risks to earnings and supportive valuations.
HDFC Life's growth can outperform peers given its strength in non-linked products, giving it the edge over its peers, HSBC said.
A total of 37 analysts have coverage on SBI Life and HDFC Life, each, including 35 "buy" ratings and two "hold" ratings for the former and 31 "buy" ratings and six "hold" ratings for the latter.
Of the 35 analysts that have coverage on ICICI Prudential, 22 have a "buy" rating, 11 have a "hold" rating" and two have a "sell" rating.
Also Read: Maruti Suzuki shares in focus after e-Vitara production target cut, launch delay
