New India, GIC, other insurance cos fall up to 6% as GST decision deferred

In one month, the stock prices of ICICI Prudential, HDFC Life and SBI Life have fallen between 6 per cent and 10 per cent, as against the 2 per cent decline in BSE Sensex

Shares of insurance companies, including both life as well as general insurers, declined by up to 6 per cent on the BSE in Monday’s intra-day trade after the Goods and Services Tax (GST) Council deferred the decision of GST on insurance. Thus, GST on insurance continues to remain unchanged.

 

The decisions on reducing GST on life and health insurance premiums and on the much-anticipated rate rationalisation of 148 items were deferred, as the Group of Ministers (GoM) panel required more time to finalise its reports.

 

“The report on rate rationalisation is not final. On health and life insurance premiums, the GoM is awaiting inputs from the Insurance Regulatory and Development Authority of India (Irdai). Only after receiving these inputs will they finalise their reports and submit them to the Council for discussion,” said Union Finance Minister Nirmala Sitharaman during the post-meeting press briefing.

 

Shares of the New India Assurance Company (Rs 200.80), and General Insurance Corporation of India (Rs 485.55) were down 6 per cent and 3 per cent, respectively. On Friday, General Insurance Corporation of India had rallied 14 per cent to Rs 502.75 and New India Assurance had gained 4 per cent to Rs 214.15 in an otherwise weak market.

 

Among other insurance stocks, ICICI Prudential Life Insurance Company, ICICI Lombard General Insurance Company, SBI Life Insurance Company, HDFC Life Insurance Company, Star Health and Allied Insurance Company, Life Insurance Corporation of India and Niva Bupa Health Insurance Company were down in the range of 1 per cent to 2 per cent. In comparison, the BSE Sensex was up 0.67 per cent at 78,567 at 09:46 AM.

 

In one month, the stock prices of ICICI Prudential, HDFC Life and SBI Life have fallen between 6 per cent and 10 per cent, as against the 2 per cent decline in the benchmark index.

 

While the matter is still under discussion, ambiguity on the decision of the council, along with timelines for implementation is expected to keep insurance stocks under pressure in the near-term, ICICI Securities said in a note.

 

According to the brokerage firm, insurance penetration is still low as compared to international benchmarks. Factors such as a large protection gap and expanding per capita income are key long-term growth drivers for the sector. "India has a high protection gap; and credit protection products are still at an early stage and have the potential to grow multi-fold as penetration of retail loans improves in the country. Hence, we believe the insurance sector has a huge growth potential in India," it added. 

 

Against this backdrop, analysts believe that strong players with the right mix of products, services, and distribution are likely to gain disproportionately from the opportunity. However, there is a high risk of regulatory changes/ competition, which can impact profitability.