HDFC Life's June quarter results demonstrated resilient margin performance despite slower premium growth, with management expecting recovery in the HDFC Bank channel and stable VNB margins. According to Business Standard, the insurer's margins remained strong even as total APE grew 9% Y-o-Y with a two-year annual growth rate of 11%. The company's VNB margin expanded to 25.6% from 25.1% a year earlier, with management guiding margins in the range of 25% going forward. Excluding GST, the new business margin (NBM) expanded to 25.6% from 25.1% a year earlier, with only around 60 basis points of the residual GST impact remaining to be absorbed.
The company achieved significant improvement in its product portfolio, with unit-linked insurance plans (ULIPs) contributing 44% compared to 38% in Q1 FY26, while non-participating (non-par) savings plans accounted for 22% versus 19% previously. As reported by Business Standard, the rise in non-par savings was aided by a favourable yield environment, while the annuity mix more than doubled to 11% following the successful launch of a variable annuity product in Q4 FY26. Retail protection grew 42% Y-o-Y, while credit protection grew 19%, with variable annuity products now accounting for half of the annuity mix. Channels other than HDFC Bank collectively grew contributions by 17% Y-o-Y, with agency growing 21% and new branches contributing 15-16% of agency APE.
HDFC Life said distribution through promoter HDFC Bank remained subdued after slowing in the previous quarter because of a bank-level slowdown. As reported by Mint, HDFC Bank accounted for around 47% of the insurer's retail annualised premium equivalent (APE) during the quarter. However, management expects the weakness in the HDFC Bank channel to be cyclical and anticipates a return to a mid-teens growth trajectory. The VNB contribution from the HDFC Bank channel remains "noticeably higher" than its APE contribution, while excluding HDFC Bank, other proprietary channels grew by more than 20%. Management believes branch coverage is now largely complete, with any further expansion expected to be selective.
Despite bancassurance slowdown, HDFC Life reported healthy financial metrics with embedded value (EV) growing 13% Y-o-Y to ₹65,860 crore and operating return on embedded value (RoEV) of 14.7% calculated on a rolling basis. The 13-month persistency ratio moderated by 200 basis points Y-o-Y to 84% due to softer ULIP collections and ticket-size moderation following the ₹5 lakh tax change, while the 61-month persistency ratio improved by 150 basis points to 65%. The company's solvency rose to 185% from 177% in March 2026, following a ₹1,000 crore preferential capital issuance to HDFC Bank, with management expecting a transition to a risk-based capital (RBC) regime within 15-18 months.
Both insurers' stocks showed mixed reactions to the quarterly results, with HDFC Life's stock ending 0.2% lower at ₹567.60 and ICICI Prudential Life shares closing 3.1% lower at ₹508.85. According to Business Standard, management has assumed mid-teens growth rates for APE and VNB between FY26 and FY29, with the base case underpinning that HDFC Life will match industry APE growth of around 15%. An acceleration to over 16% in the next three quarters will be needed to achieve this target, with growth being the focus ahead of margins. The company maintains its target of growing at the industry rate or faster while aiming for VNB growth in line with APE, with management viewing the current weakness as cyclical and expecting recovery in the HDFC Bank channel.
