GST Indecision Pressure Insurance Stocks; HDFC Life, SBI Life Shed Up To 4%

3 min read Last Updated : Sep 10 2024 | 4:26 PM IST

Shares of insurance companies, including life and general insurance forms, were trading weak on profit booking, falling by up to 4 per cent on the BSE in Tuesday’s intra-day trade in an otherwise firm market.

HDFC Life Insurance Company, The New India Assurance Company and ICICI Lombard General Insurance Company, slipped over 4 per cent on the BSE, while SBI Life Insurance, ICICI Prudential Life Insurance Company and General Insurance Corporation of India, wer down in the range of 1 to 3 per cent at close.

In comparison, the BSE Sensex closed 0.4 per cent higher at 81,921. Most of these stocks have outperformed the market thus far in the calendar year 2024.

The Goods and Services Tax (GST) Council, during its meeting on Monday, made several key decisions that include establishing a state panel to examine the future of the compensation cess, proposing the treatment of cess collections post-loan repayment, expanding the existing state panel on rate rationalisation to address issues related to life and health insurance.

The council has also announced the formation of a new Group of Ministers (GoM) to review the issue of GST rate reduction on health insurance. The GoM has been tasked with submitting its report by the end of October, after which the GST Council, in its November meeting, will make a final decision based on the report.

While a decision on GST is awaited, stock of insurance companies could trade in a broad range, ICICI Direct Research said in a research note.

Meanwhile, as per industry body Life Insurance Council, the industry has reported healthy growth in business momentum, with industry premium increasing 22 per cent year-on-year (Y-o-Y) for the month of August 2024, while between April and August 2024, the growth was at 20.8 per cent YoY.

In terms of annual premium equivalent (APE), private players delivered 9 per cent Y-o-Y growth, and LIC reported a 13 per cent YoY growth led by single premium.

Business momentum continued to remain robust for the industry, which induces confidence. However, ICICI Direct Research said that it remains watchful regarding the impact of new surrender guidelines on business growth and margins.

The industry’s regulatory body Insurance Regulatory and Development Authority of India (IRDAI) announced new regulations regarding surrender values, to be implemented from October 1, 2024.

Moreover, the industry’s product and commission construct could also undergo notable changes, leading to volatility in premium growth for the rest of FY25.

Nevertheless, over the medium term, Motilal Oswal Financial Services believe these changes are favorable for customers and will bring back growth for the industry.

First Published: Sep 10 2024 | 4:13 PM IST