The earnings of the insurance sector are expected to be impacted in the volatile circumstances for most life insurers, followed by asset management companies, while non-life insurers are relatively better placed, according to HSBC.
In its recent note, the brokerage also revised target prices for various insurance companies, highlighting preference for market leaders who can gain or protect market share.
Customers are postponing insurance purchases amid growing uncertainty, likely to impact near term growth, especially for ULIPs. In this context, the annual-premium-equivalent growth, a metric indicating year-over-year increase in new insurance sales, is expected to moderate to 7% on an year on year basis.
However, margins are expected to hold well with better product-level margins, faster growth in protection and a supportive interest-rate curve to outweigh headwinds from the GST impact, dropping renewal retention rates, and high fixed costs. Hence, the brokerage forecasts a sequential margin improvement in the fourth quarter of FY26.
For the upcoming fiscal, HSBC estimates lower APE growth, cutting value of new business by 4-7% for HDFC Life Insurance Company and ICICI Prudential Life Insurance. The target price of HDFC Life Insurance is at Rs 700, a 20.3% upside from last closing price, while ICICI Prudential Life Insurance has seen an upside of 33.6% at a target of Rs 690.
Meanwhile, SBI Life is expected to grow 1-3% over stronger growth and margins.
The brokerage prefers SBI Life at revised target price of Rs 2,300, a 24.9% upside from Wednesday's closing price of Rs 1,841.4, given better resilience to GST changes and potential commission-limit revisions, alongside product mix benefits.
ICICI Lombard target price has been revised to Rs 2,200, a 27.4% upside and ICICI Prudential AMC target price is Rs 3,600, 19.6% upside, while PB Fintech target price is at Rs 1,980, 35.6% upside.
Which Stocks Should You Buy?
HSBC has marked a 'Buy' rating for the following stocks:
- SBI Life Insurance
- HDFC Life Insurance
- ICICI Prudential
- ICICI Lombard
- ICICI Prudential AMC
- PB Fintech
Additionally, the significant correction in broader equity markets is likely to pressure AMCs earnings through slower AUM growth and treasury losses. However, the demand for retail health and motor insurance remains strong, supporting healthy top-line growth for non-life insurers.
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