HDFC Life, SBI Life, ICICI Prudential shares rise after GST exemption; brokerages bullish as insurers see minimal impact

HDFC Life, SBI Life, ICICI Prudential Shares Today: Shares of insurance companies like HDFC Life, SBI Life, and ICICI Prudential were trading higher on Friday after the companies told that the recent GST changes would have little impact on their core business.

This comes in the aftermath of GST Council's 56th meeting on September 3, wherein an announcement was made regarding a complete exemption of GST on life and health insurance premiums, a move that is expected to lower the cost of insurance for customers and potentially boost demand.

Stocks reacted positively in early trade. As of 10:20 am, HDFC Life, SBI Life, and ICICI Prudential were trading up by as much as 0.8 per cent.

Insurers say the GST hit will be "minimal"

While the GST exemption is seen as good news for customers, the industry will need to adjust backend systems to align with the new tax rules. This, in turn, could have a small impact on a key financial metric: embedded value (EV) — essentially the long-term value of an insurer’s business.

Here’s how insurers are assessing the change:

HDFC Life expects a less than 0.5 per cent impact on EV. The company said the move could actually help its business in the long run by doubling the value of new business over the next 4–5 years.

SBI Life pegs the impact even lower, at under 0.2 per cent, and said it’s working on aligning its product portfolio to the new tax framework.

ICICI Prudential estimated a slightly higher hit of around 1 per cent.

Axis Max Life also said the effect on EV would be less than 1 per cent.

What brokerages are saying

Brokerages appear cautiously optimistic.

Morgan Stanley has kept its ‘overweight’ rating on HDFC Life, with a target price of Rs 890 per share. The brokerage said the GST reform is likely to boost insurance penetration, improve customer stickiness, and support long-term growth.

On the flip side, CLSA pointed out that insurers will lose input tax credit (ITC) benefits under the new rules, which could have a bigger impact on existing policies (the backbook). According to its early estimates, the overall EV hit could be up to 1.5 per cent, with 0.5–1.4 per cent drag on the backbook surplus.

Still, CLSA believes insurers can manage the pressure on new business through price adjustments and lower commissions.