How will the GST rate cut affect life insurers?

The GST rate cut is expected to boost premium growth and profitability for life insurers, with significant increases in new business premiums.

What is the impact of input tax credit (ITC) loss on insurers?

The loss of input tax credit (ITC) is expected to put pressure on profit margins for life and general insurance companies.

Which insurance companies are performing well in Q3?

Companies like HDFC Life and ICICI Prudential Life are expected to show growth, while MAX Financial is a preferred play in life insurance.

Home / Business and Economy / Insurers Face Mixed Q3: GST Boost vs. ITC Loss

Insurers Face Mixed Q3: GST Boost vs. ITC Loss

6 Jan

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Summary

Insurers expect a 14% premium growth and 17% profit increase.
GST exemption on life insurance premiums fuels premium growth.
Loss of input tax credit may reduce insurer profit margins.

Insurers Face Mixed Q3: GST Boost vs. ITC Loss

Life insurers are projected to report a mixed financial performance for the third quarter. Analysts anticipate a notable year-on-year increase in premium growth, potentially reaching 14%, and a 17% rise in profit after tax. This growth is largely attributed to the government's decision to fully exempt GST on all individual life insurance premiums, a move that has already spurred a significant jump in new business premiums in recent months.

However, the financial landscape for insurers is not without its challenges. The loss of input tax credit (ITC) is expected to exert pressure on profit margins. Insurers previously claimed ITC on various operational expenses, but this benefit has been curtailed following the GST exemption. This loss is estimated to cause a drag on value of new business (VNB) margins across the sector.

Despite these margin pressures, the industry is witnessing robust growth, particularly in health insurance segments. General insurers are also expected to see substantial premium growth. Key players like HDFC Life and ICICI Prudential Life are navigating these shifts, with analysts suggesting specific strategies and market plays to mitigate potential impacts and capitalize on emerging opportunities.