18 August 2025 Sector Update

India Insurance
Q1FY26 - a mixed bag;  Growth  Profitability
Indian insurers, across life, multi-line general and health businesses, reported
CMP TP
a mixed bag for Q1FY26, with many franchises prioritizing profitability over Company Reco.
(INR) (INR)
topline growth. Outliers such as GODIGIT, NIACL, GICRE, and MAXL ticked InsurTech
both boxes, while IPRULIFE continued to disappoint on both fronts. In the LI POLICYBZ 1,867 BUY 2,280
business, companies witnessed green shoots on product mix alignment in the
Conglomerate
banca channel. Multi-line GI players witnessed muted growth and continued
BJFIN 1,994 BUY 2,430
to prioritize EOM compliance and profitability on the back of investment gains.
Life Insurers
Standalone health insurers (SAHIs) grappled with rising incidence rates and
accounting changes, reflecting in distorted reported numbers. The reinsurance IPRU 636 ADD 690

business is witnessing structural changes with the likely entry of a couple of LICI 890 ADD 1,040
potentially disruptive franchises, which could trigger regulatory changes and MFSL 1,640 ADD 1,550
consequently, changes in insurers’ ceding behavior. We maintain our BUY on SBILIFE 1,863 BUY 2,100
SBILIFE, ICICIGI, and NIVABUPA in the LI, GI and HI segments, respectively. Standalone Health Insurers
NIVABUPA 86 BUY 95
▪ Life insurers - product interventions drive margin surprise: We saw early
signs of a shift in the banca channel product mix with AXSB, and SBIN to STARHEAL 447 ADD 450

move away from low-margin ULIPs, which is likely to benefit the overall Multi-line General Insurers
banca channel economics. We reiterate SBILIFE (BUY; TP INR2,100) as our GODIGIT 365 ADD 395
top pick in the LI space, given its inherent moats around lowest cost ratio, ICICIGI 1,946 BUY 2,210
parent’s distribution strength and strong sustainable RoEV of 18-20%. As NIACL 195 ADD 200
outlined in our insurance thematic, we expect BALIC to deliver substantial Reinsurer
margin expansion on the back of its revised product proposition. GICRE 389 ADD 450
▪ Multi-line general insurers - focused on profitability: As highlighted in our
insurance thematic, multi-line general insurers are singularly focused on
EOM compliance and delivering RoE with less focus on combined ratio (CoR).
Given growth headwinds, earnings were driven by capital gains for ICICIGI
and NIACL, while GODIGIT benefitted from growth, expense rationalization
and higher mix of recurring investment income. Our channel checks suggest
that the IRDAI and other stakeholders are solving for dropout on renewals in
the motor segment. We maintain ICICIGI (BUY; TP INR2,210) as our top pick,
for its prudent risk selection and conservative reserving.
▪ SAHIs - focus on secular trends amidst accounting distortions: SAHIs
reported weak outcomes, as growth and profitability were distorted due to
transition to 1/n accounting norms. Given the noise around accounting
changes, we argue that investors need to focus on claims management and
incidence rates. We reiterate NIVABUPA (BUY; TP INR95) as our top pick,
anchored on its superior customer franchise and quality of risk management.
▪ Insurtech: POLICYBZ reported slower new business premium, given focus
on the health insurance business, which is likely to emerge as a strong annuity
business. As highlighted in our insurance thematic, there were early signs of
improving operating leverage, contributing to improved profitability. We
reiterate POLICYBZ (BUY; TP INR2,280) as our highest-conviction pick.
Krishnan ASV
▪ GST rate rationalization: Media reports suggest that the government is likely
[Link]@[Link]
to rationalize GST rates or introduce exemptions for key insurance segments.
+91-22-6171-7314
We believe efficient rate transmission will be critical for benefits to accrue to
policyholders. However, in case of an inverted duty structure for insurers, the
pass-through could be diluted, failing to adequately address the affordability Shobhit Sharma
challenge. We believe health insurers are likely to be prime beneficiaries of [Link]@[Link]
any potential rate rationalization. +91-22-6171-7341

HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
India Insurance: Sector Update
Valuation Summary
CMP VNB Margins % P/EV (x) Implied P/EV (x)
Life Insurers Rating TP (INR)
(INR) FY25 FY26E FY27E FY25 FY26E FY27E FY27E
SBILIFE 1,863 BUY 2,100 27.8 28.0 28.2 2.6 2.2 1.9 2.2
MAXF* 1,640 ADD 1,550 24.0 24.3 25.0 2.7 2.3 2.0 2.1
IPRULIFE 636 ADD 665 22.8 22.8 22.8 1.9 1.7 1.5 1.6
LICI 890 ADD 1,040 17.6 17.6 18.1 0.7 0.7 0.6 0.7
BALIC NA NA NA 14.5 17.3 17.9 NA NA NA NA

CMP Combined Ratio P/E(x)

General Insurers & Reinsurers Rating TP (INR) Implied P/E(x) FY27E
(INR) FY25 FY26E FY27E FY25 FY26E FY27E
ICICIGI 1,946 BUY 2,210 102.8 102.1 100.9 38.5 36.1 28.8 32.4
GODIGIT 365 ADD 395 109.3 107.0 105.5 79.2 45.1 37.7 40.7
NIACL# 195 ADD 200 116.7 116.1 114.8 0.8 0.8 0.7 0.7
BAGIC NA NA NA 102.7 103.3 101.1 NA NA NA NA
STARHEAL 447 ADD 450 101.1 100.7 99.7 40.6 31.4 24.9 25.1
NIVABUPA 86 BUY 105 101.2 103.1 101.8 74.2 72.5 61.7 40.7**
GICRE# 389 ADD 450 108.0 106.8 106.1 0.9 0.8 0.7 0.8

CMP Cost/income ratio P/E(x)

Others Rating TP (INR) Implied P/E(x) FY27E
(INR) FY25 FY26E FY27E FY25 FY26E FY27E
PBFINTECH 1,867 BUY 2,280 101.2 92.3 86.8 242.7 106.2 63.0 53.8
BJFIN 1,994 BUY 2,430 NA NA NA NA NA NA SOTP
Source: Company, HSIE Research. *Valuation adjusted for subsidaires #Multiple on book value , ** on FY28E EPS

Return Ratios
Ind APE Growth (%) VNB Growth (%) Operating RoEV (%)
Life Insurers
FY25 FY26E FY27E FY25 FY26E FY27E FY25 FY26E FY27E
SBILIFE 12.2 11.4 14.0 7.2 11.8 14.3 21.8 20.2 17.6
MAXF 18.2 17.5 16.5 7.5 19.1 19.8 19.1 18.0 18.1
IPRULIFE 13.3 12.0 15.0 6.4 11.7 14.2 13.7 12.4 12.5
LICI -0.6 1.0 6.5 4.5 -0.1 9.2 11.4 9.8 9.8
BALIC 11.7 13.0 17.0 8.6 33.4 19.5 11.9 14.5 14.7

NEP Growth (%) PAT Growth (%) RoE (%)

General Insurers & Reinsurers
FY25 FY26E FY27E FY25 FY26E FY27E FY25 FY26E FY27E
ICICIGI 17.4 11.1 14.4 27.7 9.7 25.8 18.0 16.7 18.4
GODIGIT 13.4 12.9 12.3 133.9 75.7 19.8 10.5 14.8 15.0
NIACL 4.0 7.6 9.2 -8.5 36.8 28.7 3.7 4.6 5.5
BAGIC 7.7 4.1 6.2 18.2 -4.8 16.1 15.3 13.3 14.2
STARHEAL 14.6 11.7 17.7 -23.6 29.4 26.2 9.7 11.2 12.6
NIVABUPA 28.4 20.5 25.6 161.4 1.6 17.5 6.3 5.6 6.2
GICRE 8.9 12.4 8.1 11.2 10.6 15.2 10.5 10.6 10.6

Net revenue growth (%) PAT Growth (%) RoE (%)

Others
FY25 FY26E FY27E FY25 FY26E FY27E FY25 FY26E FY27E
PBFINTECH 44.8 37.6 31.9 448.4 128.4 68.7 5.7 11.8 17.5
Source: Company, HSIE Research

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India Insurance: Sector Update

LI - Product interventions drive margin surprise

Life insurers revised their product constructs to mitigate the impact of the
IRDAI’s surrender value guidelines on VNB margins - this impact had been
relatively muted in H2FY25 on account of operating leverage benefits and year-
end review of actuarial assumptions. Q1FY26 witnessed early signs of a shift in
the banca channel product mix with Axis Bank moving away from low-margin
ULIPs and State Bank of India shifting towards PAR segment, which is likely
to benefit the overall banca channel economics. We reiterate SBILIFE (BUY; TP
INR2,100) as our top pick in the LI space, given its inherent moats around
lowest cost ratio, parent’s distribution strength and strong sustainable RoEV of
18-20%. As outlined in our insurance thematic, we expect BALIC (life insurance
subsidiary residing within Bajaj FinServ) to deliver margin expansion on the
back of its revised product proposition.
Exhibit 1: NOP growth remains a challenge since H2FY25 onwards for the industry

Source: LI Council, HSIE research

Exhibit 2: Top 6 private players continue to realign the product mix with focus on increasing policy ticket size

Source: LI Council, HSIE research

Exhibit 3: Shift in banca business product mix in Max Life’s banca channel
Segment Q1FY25 Q2FY25 Q3FY25 Q4FY25 Q1FY26
PAR 15% 9% 16% 18% 11%
NPS 26% 24% 22% 21% 34%
NPT 5% 7% 3% 8% 7%
ANN 5% 3% 7% 5% 7%
ULI 49% 57% 51% 48% 41%
Source: Company, HSIE Research

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India Insurance: Sector Update

Multi-line GI - Focus on regulatory compliance, earnings

Given muted underlying new vehicle sales, increased dropouts in motor
renewals, and sustained irrational pricing in the property segment, earnings
were driven by capital gains for ICICIGI and NIACL, while GODIGIT
benefitted from growth, rationalization of expenses and higher mix of recurring
investment income. As highlighted in our insurance thematic, multi-line
general insurers are singularly focused on EOM compliance and delivering
RoE/earnings growth with less focus on managing their combined ratio (CoR).
Q1FY26 witnessed a strong earnings boost, driven by capital gains for ICICIGI
and NIACL, whereas GODIGIT benefitted from higher growth coupled with
rationalization of expenses and higher mix of recurring investment income.
Our channel checks suggest that the IRDAI, alongside other stakeholders, is
solving for structural dropouts on renewals in the motor segment. We maintain
ICICIGI (BUY; TP INR2,210) as our top pick within the GI space, given its
prudent risk selection and reserving.
Exhibit 4: Growth in motor impacted by lower new vehicle sales; elevated competitive intensity (for better EOM
compliance) dragging growth in property and other lumpy segments
Industry Q1FY24 Q2FY24 Q3FY24 Q4FY24 Q1FY25 Q2FY25 Q3FY25 Q4FY25 Q1FY26
Motor OD 22% 20% 15% 15% 15% 6% 8% 5% 5%
Motor TP 20% 10% 7% 7% 10% 6% 8% 8% 11%
Property 10% 9% 14% 7% 5% -4% -14% 0% 18%
Group health 23% 30% 9% 20% 20% 2% 15% 4% 10%
Crop 37% -7% 15% -16% 2% -7% 29% -19% -48%
Others 14% 19% 17% 15% 15% 6% 11% 1% 9%
Total 18% 13% 12% 9% 13% 2% 9% 2% 9%
Source: GI Council, HSIE Research

Exhibit 5: Revival in demand of commercial and passenger vehicles to support growth in motor segment

Source: FADA, HSIE Research

Exhibit 6: Insurers aligning on reducing the dropout rates by integration with other stakeholders
Year Motor TP Renewal Rate (proxy) Motor OD Renewal Rate (proxy) Motor OD/Motor TP policy
FY20 95.9% 83.7% 69.1%
FY21 93.0% 80.5% 62.8%
FY22 95.0% 84.7% 60.0%
FY23 94.2% 91.1% 63.3%
FY24 90.5% 84.0% 63.7%
Source: GI Council, HSIE Research

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India Insurance: Sector Update

Health Insurance - Focus on secular trends

We believe health insurers will likely migrate to discussion on IFRS reporting,
given the noise created by 1/n basis of accounting. We believe IFRS reporting
will also create noise in terms of the mark-to-market income from the
investments book. Additionally, there would be some benefit, which can accrue
for business underwritten during H2 of the financial year, owing to deferral of
acquisition cost. This benefit is now lower as most insurers have deferred their
distribution payout over the policy tenure for long-term policies. Additionally,
given that health insurance has a short tail of claims reporting (unlike in the
Motor TP business, where claims development begins from year 3 onwards),
we believe health insurers are unlikely to see any material benefit on the loss
ratios in the longer term. We maintain BUY on NIVABUPA with a TP of INR95
(40.7x Mar-28E EPS), given superior customer franchise and risk management.
Exhibit 7: Impact of 1/n on the reported financial statements - FY28 to witness improvement in loss ratios (LR)
Without 1/n With 1/n Change
Year
GWP NEP Loss Ratio GWP NEP Loss Ratio GWP NEP Loss Ratio
FY23 77 77
FY24 100 88 53.0% 100 88 53.0% 0% 0% 0.0%
FY25 125 113 53.5% 115 107 56.1% -8% -5% 2.6%
FY26 156 141 54.0% 135 125 60.8% -13% -11% 6.8%
FY27 191 173 54.5% 177 156 60.5% -7% -10% 6.0%
FY28 229 210 55.0% 220 198 58.2% -4% -5% 3.2%
Source: HSIE Research; Note: GWP has been indexed to 100 in both scenarios; we assume share of long-term policies at 25% every year; for FY25,
the impact is considered only for the second half (H2FY25)

Exhibit 8: Average claims size (ACS) in retail health Exhibit 9: Steep rise in retail health incidence rates at
business grew 5% during FY15-24 (INR’000) industry level

Source: IRDAI, HSIE Research Source: IRDAI, HSIE Research

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Niva Bupa
Mar-25 Mar-25
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Policy Bazar
May-25 Apr-25 Apr-25

Insurance
May-25
>+15% return potential
India Insurance: Sector Update

Jun-25 May-25 May-25

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ICICI Lombard General

REDUCE: -10% to +5% return potential

Jul-25
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Bajaj Finserv

Star Health
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HSIE Results Daily

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HSIE Results Daily

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