The global brokerage house Jefferies has shared its latest outlook on India’s life insurance sector. The brokerage has identified four companies where it sees potential upside from current market levels.
According to the brokerage report, structural changes in accounting standards and steady demand for protection products could influence the sector’s performance in the coming years.
The brokerage has given a ‘Buy’ recommendation on four major life insurance companies. This includes HDFC Life Insurance Company, ICICI Prudential Life Insurance, Max Financial Services and SBI Life Insurance. Based on its estimates, Jefferies believes these stocks could deliver up to 32% upside from current levels.
The report also discussed upcoming regulatory and accounting changes that could alter how insurance companies report profits, although the brokerage said the impact on valuations may remain limited.
Let’s take a look at the brokerage take on the insurance sectors and the rationale behind it –
4 insurance stocks in focus
As per the brokerage house report, HDFC Life Insurance carries the highest potential upside. Jefferies has set a target price of Rs 900. This indicates an upside potential of around 32%.
Another major player, ICICI Prudential Life Insurance, has been assigned a target price of Rs 820. This suggests a possible upside of 30%.
The brokerage is also positive on Max Financial Services, the holding company of Axis Max Life Insurance. Jefferies has set a target price of Rs 1,747. This implies a potential upside of around 28%.
Meanwhile, SBI Life Insurance also features on the list with a target price of Rs 1,931. This indicates an upside potential of about 30% from current levels.
Accounting changes could reshape reported profits
One of the major factors highlighted in the report is the transition to new accounting standards known as Indian Accounting Standards (Ind AS).
According to the brokerage report, “P&L will change, and CSM will be closer to VIF/EV/VNB.”
In simple terms, the Profit and Loss (P&L) statement of insurance companies could look different under the new rules. The Contractual Service Margin (CSM) which represents the future profit expected from insurance contracts, will become more important in determining reported earnings.
The brokerage noted that “the financial statements will be more aligned to fee-based and cost-based financials compared to total cash flows.”
Implementation timeline moves earlier
Another key issue discussed in the report is the timeline for adopting the new accounting framework.
According to the brokerage, “the rollout of IND-AS accounts has been advanced to April 1 2026 from April 1, 2027.”
If implemented as planned, insurers will start reporting quarterly financial results under the new standards from the first quarter of the FY26–27.
However, industry participants may request more time to prepare. The brokerage house said, “Most are surprised by the advancement of timing and may ask for the original time of April 2027 instead of April 2026.”
Business growth remains a key driver
Beyond accounting changes, Jefferies also pointed out that business growth trends will remain the most important factor for life insurers.
According to the brokerage report, “protection sales (including riders) continue to grow well, but demand for Ulips has been impacted by recent market corrections.”
Market volatility has affected demand for these investment-linked products in recent months.
Sector outlook and risks
The report also mentioned that insurers are currently adjusting their cost structures after the introduction of the Goods and Services Tax (GST) changes.
According to Jefferies, “most insurers will seek to complete the process of redistributing GST changes into distribution costs, operating expenses and product mix.”
At the same time, the brokerage added that companies may prioritise expanding their distribution networks rather than increasing profit margins if regulatory changes allow greater flexibility in commission structures.
Conclusion
Overall, while accounting changes may alter how profits are reported, Jefferies believes the broader investment approach to insurance companies may not change significantly. The brokerage noted that “we see limited impact of transition from approach to valuations and assessment of insurance stocks.”
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.
