HDFC Life Insurance Company Ltd. delivered a steady yet unspectacular earnings performance in Q3FY26, marked by resilient premium growth, stable margins, and strong balance-sheet fundamentals. While reported profitability was muted due to a one-time labour code impact, underlying business momentum remained intact, supported by healthy renewal premiums, improving embedded value, and disciplined capital management. Persistency trends were mixed but broadly stable, while distribution expansion continued to support long-term growth visibility. Geojit Investments has reiterated its BUY recommendation, valuing the stock at 2.1x FY28E embedded value, with a rolled-forward target price of Rs. 828, implying a 14% upside from current levels.

Geojit Maintains BUY Call with Rolled-Forward Target of Rs. 828

Research house: Geojit Investments Limited
Recommendation: BUY
Current Market Price (CMP): Rs. 729
Target Price: Rs. 828
Expected Upside: 14%
Valuation Basis: 2.1x FY28E P/EV

Geojit Investments has reiterated its BUY rating on HDFC Life Insurance Company Ltd., citing steady operational performance, balance-sheet strength, and sustained long-term growth drivers despite near-term regulatory friction. The brokerage continues to view HDFC Life as a structural compounder within India’s life insurance sector, benefiting from favourable demographics, rising insurance penetration, and an expanding distribution footprint.

Premium Growth Anchored by a Strong and Expanding Back Book

Gross premium growth remains a key pillar of stability. During Q3FY26, gross premium income rose 8.8% year-on-year to Rs. 18,803 crore, led primarily by an 11.7% YoY increase in renewal premiums. This performance underscores the durability of HDFC Life’s back book and reflects improving policy retention across mature cohorts.

For the nine-month period ended FY26, overall annual premium equivalent (APE) increased 10.6% YoY to Rs. 11,387 crore, while individual APE grew 11.2% YoY to Rs. 9,988 crore. These trends highlight sustained demand across retail segments, even as the industry navigates regulatory recalibration.

Muted Profit Growth Masks One-Time Labour Code Impact

Reported profitability understated core earnings strength. HDFC Life reported PAT of Rs. 421 crore in Q3FY26, up a modest 1.4% YoY. The subdued growth was largely attributable to an exceptional, one-off labour code impact estimated at approximately Rs. 98 crore.

Excluding this impact, adjusted profitability remained broadly stable, supported by steady premium growth and disciplined cost management. For 9MFY26, reported PAT increased 6.7% YoY to Rs. 1,414 crore, reinforcing the company’s ability to absorb regulatory shocks without compromising long-term profitability.

Value of New Business Expands Despite Margin Pressures

VNB growth reflects balanced product and channel execution. The value of new business (VNB) rose 7.2% YoY to Rs. 2,773 crore in 9MFY26. VNB margins stood at 24.4%, despite GST-related challenges and the aforementioned labour code adjustment.

Management’s focus on profitable growth, rather than aggressive volume expansion, continues to support margin resilience. Product innovation and customer-centric design have enabled HDFC Life to defend margins even as competition intensifies across protection, savings, and annuity segments.

Persistency Trends Signal Improving Quality of the Book

Mixed near-term persistency, but improving long-term retention. The 13th-month persistency ratio declined 200 basis points YoY to 85%, reflecting near-term volatility in policy retention. However, the 61st-month persistency ratio improved by 200 basis points to 63%, indicating strengthening long-term policyholder stickiness.

This divergence suggests that while early-stage policy retention faced pressure, the quality of mature cohorts continues to improve — a critical indicator for long-term embedded value accretion.

Distribution Expansion Continues to Drive Market Share Gains

Agent productivity and network scale remain strategic priorities. During 9MFY26, HDFC Life added over 80,000 agents, taking its branch network beyond 700 locations. Growth remained well diversified across Tier-1, Tier-2, and Tier-3 cities, with over 70% of new customers being first-time policy buyers.

Individual weighted received premium (WRP) market share improved by 20 basis points to 10.9% over the nine-month period, reflecting the company’s ability to penetrate under-insured regions and sustain competitive momentum.

Embedded Value Growth and Capital Strength Reinforce Valuation Comfort

Embedded value trajectory remains firmly intact. As of December 2025, embedded value increased 16% YoY to Rs. 61,565 crore, supported by an operating return on EV of 15.6%. The solvency ratio stood at a robust 180%, aided by Rs. 749 crore of subordinated debt raised during the quarter.

Looking ahead, EVPS is projected to rise from Rs. 296.8 in FY26E to Rs. 397.2 by FY28E, underlining the compounding potential of the franchise.

Financial Snapshot and Forward Estimates

Valuation, Levels, and Investment View

Valuation remains demanding but justified. HDFC Life currently trades at 2.5x FY26E P/EV, moderating to 1.8x FY28E. While headline multiples appear elevated, Geojit believes they are warranted given the company’s superior franchise quality, consistent EV growth, and capital efficiency.

Key Levels:

Support zone: Rs. 690 – Rs. 705

Near-term resistance: Rs. 760 – Rs. 780

12-month target: Rs. 828

The brokerage maintains that long-term investors should view interim volatility as an opportunity to accumulate a high-quality insurance compounder.

Bottomline for Investors: Stability Over Spectacle

HDFC Life remains a long-term structural play. While near-term earnings growth has moderated due to regulatory adjustments, the company’s core fundamentals — premium growth, improving embedded value, strong solvency, and diversified distribution — remain firmly intact. Geojit’s reiterated BUY call reflects confidence in HDFC Life’s ability to deliver sustainable shareholder value over the medium to long term.