HDFC Life Insurance announced a 4 per cent rise in Q4FY26 net profit to Rs 495.6 crore, alongside HDFC Bank’s plan to inject Rs 1,000 crore, increasing its stake and bolstering the insurer’s solvency ratio.

Photograph: Kind courtesy HDFC Life/Instagram

HDFC Life Insurance’s net profit for the January-March quarter of FY26 (Q4FY26) increased 4 per cent year-on-year (Y-o-Y) to Rs 495.6 crore, impacted by changes in goods and services tax (GST) and labour code regulations.

Separately, the insurer said its parent, HDFC Bank, would infuse Rs 1,000 crore through a preferential share issuance, increasing its stake in the life insurer to 50.5 per cent from 50.2 per cent.

Boosting Solvency and Future Growth

The equity infusion will bump up the solvency ratio of the insurer to 186 per cent, from the current 177 per cent.

The solvency ratio has dropped from 194 per cent in Q4FY25.

The insurance regulator mandates a solvency ratio of 150 per cent.

“This will result in HDFC Bank’s share going up from 50.2 per cent to 50.5 per cent.

“It is done for two reasons. One is that we already have a fairly reasonable level of (solvency ratio) 177 per cent. We are yet to have a clear line of time frame for risk-based capital (RBC) regime.

“With that, the solvency position would have been higher than 200 per cent. Given that, it would take some time, and the over 45-46 per cent growth in protection business would require capital,” said Niraj Shah, executive director and chief financial officer, HDFC Life Insurance, told Business Standard.

The solvency ratio, he added, can improve to about 186 per cent.

“It will also give us room to raise subordinated debt through the year if required and this will further raise the solvency levels by another 4-5 per cent.”

Leadership and Financial Performance

In the post-earnings analyst call, HDFC Life Insurance Managing Director (MD) and Chief Executive Officer (CEO) Vibha Padalkar said her tenure ends in September, and the board would take a call on her reappointment closer to that date.

According to Insurance Regulatory and Development Authority of India norms, she clarified, an MD and CEO can serve up to 15 years in the role.

Padalkar, who assumed charge in 2018, will complete eight years as MD and CEO of HDFC Life by the end of her current tenure.

Previously, she served as the company’s executive director and chief financial officer.

The life insurer’s net premium income rose by 8.68 per cent Y-o-Y to Rs 25,829.43 crore in Q4FY26.

The total annualised premium equivalent (APE) was marginally up by 1.3 per cent Y-o-Y to Rs 5,254 crore.

APE is the sum of annualised first-year regular premiums, plus 10 per cent weighted single premiums.

Value of new business (VNB), a measure of profitability of life insurers, contracted by 8.36 per cent Y-o-Y to Rs 1,261 crore in Q4FY26.

The VNB margin of the insurer stood at 24 per cent, compared to 26.5 per cent in Q4FY25.

Impact of Regulatory Changes and Product Mix

“We have had the GST change that happened mid-year and there was labour code effect also coming through.

“When the GST change was announced, we had quantified 300 basis points (bps) impact on margins and we had said we will progressively bring it down through multiple measures.

“We brought it down back to about 190 bps the previous quarter and the impact now stands at about 110 basis points.

“We will neutralise impact in the early part of next year,” Shah said.

Out of its total product mix, HDFC Life had a 44 per cent contribution from unit-linked insurance plans (ULIPs), compared to 39 per cent in FY25.

Non-participating products contributed 18 per cent, down from 32 per cent. Annuities were flat at 5 per cent, while the share of protection products increased to 7 per cent from 5 per cent.

Participating products increased to 25 per cent from 19 per cent.

The expenses of the insurer rose by 14.51 per cent Y-o-Y to Rs 4,925.23 crore in Q4 FY26 and the commission increased by 7.89 per cent Y-o-Y to Rs 2,785.15 crore.

The 13th-month persistency of the insurer at the end of FY26 stood at 85 per cent, compared to 87 per cent in FY25.

The 61st-month persistency of the insurer stood at 64 per cent as against 63 per cent in FY25.

Shah added that HDFC Life has received approval from its board to seek forbearance from the insurance regulator for transition to International Financial Reporting Standards.