The brokerage sees the company benefiting from favourable macro trends in the life insurance industry, robust bancassurance partnerships, channel diversification and improving operational metrics.
According to Motilal, the life insurance industry in India remains significantly underpenetrated, providing fertile ground for long-term growth. With private players steadily increasing market share and regulatory tailwinds aiding capital efficiency and product expansion, Canara HSBC Life is well positioned to deliver a 16% to 18% APE CAGR over the medium term.
1. Industry underpenetration and regulatory support
India’s life insurance sector remains structurally underpenetrated, with premium-to-GDP ratios significantly lower than peers in Asia. At 2.8% and 85%, India lags behind Singapore at 7.4% and 332%, Thailand at 3.4% and 143%, and Malaysia at 3.7% and 153%. The protection gap in India is also substantial at 83%. APE growth has remained strong at 12% over the past decade. Motilal expects this underpenetration, combined with regulatory reforms such as risk-based solvency and the introduction of a composite licence regime, to unlock new growth levers for life insurers. The brokerage expects 16% to 18% APE CAGR for the sector over the medium term.
2. Canara Bank offers strong distribution backbone
Motilal highlights Canara Bank as the key growth pillar for Canara HSBC Life. The analytics-driven model, enhanced customer segmentation and TAT-monitored lead flows are aiding premium growth. The firm notes that productivity at Canara branches was just Rs 1.6 million per branch in FY25, significantly below SBI’s Rs 6.8 million. Even a partial catch-up could unlock material growth, with Motilal estimating that reaching Rs 2.8 million per branch could lead to a 21% CAGR in premiums between FY25 and FY28. With an embedded base of around 80 million insurable customers, Motilal sees visibility on long-duration, low customer acquisition cost growth from the bank channel.
3. HSBC adds a structurally important second growth lever
Motilal Oswal positions HSBC as a strategically critical second leg in the company’s distribution model. The bank’s strong presence in the affluent segment, high relationship manager engagement and advisory-led selling add depth to renewal rates and persistency. HSBC’s scale in corporate salary accounts, international clients and digital-savvy users also provides cost-efficient expansion potential. With the addition of 20 new branches, HSBC’s contribution is expected to increase, and if branch productivity improves to Rs 115 million and new branches achieve 75% of that, it could result in a 19% CAGR between FY25 and FY28.
4. Diversification through agency and digital channels
Motilal notes that the company’s investment in the agency channel is expected to be margin dilutive initially by around 200 basis points, but it will enhance long-term value creation by widening reach into rural and underpenetrated geographies. The Canara brand’s credibility offers a natural advantage in recruiting agents, similar to how SBI Life built a large agency force. The insurer is also tapping rural regional banks, brokers and corporate agents. Digital efforts, including multilingual content marketing and online scaling strategies, are expected to reduce concentration risk and support long-term VNB growth.
5. VNB margin expansion led by mix, cost control and technology
Motilal projects that Canara HSBC Life’s VNB margin will rise to 20.5% by FY28, up from 19.6% in the first half of FY26, despite near-term headwinds such as the loss of input tax credit on renewal commissions and rising agency ramp-up costs. The margin gains are expected to be driven by higher demand for protection products, non-par savings, rising rider attachments currently at 45% to 50%, and technology-led process efficiencies. Operating expense ratios are already improving, from 13.1% in FY24 to 12.4% in FY25, and are expected to fall further to around 10% by FY28 as automation scales up.
Motilal concludes that these five structural and executional levers, including industry tailwinds, bank partnerships, multi-channel presence, agency build-out and margin expansion, position Canara HSBC Life Insurance well to deliver strong earnings growth and return ratios over the medium term.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times.)