3 Insurance Stocks To Buy As They Fall To 52-Week Lows

See 10-12% negative impact on VNB

Emkay Global sees a 10-12% negative impact on VNB and the regulatory shock led to a de-rating. "The Rs 5 lakh-cap is likely to affect growth of the 10% premium base of HDFC Life and Max Life, and the 5% premium base for SBI Life and ICICI Prudential. However, the 80C-related impact is likely to be slightly higher for SBI LIFE (among private life insurers). On net, 15% of overall premium for these players could be under severe growth risk, leading to a 3-4% hit to growth expectations," the brokerage has said.

 

Margins for insurance players maybe compromised

According to Emkay Global, it can be argued that the segments at risk generally have lower profitability (owing to product design of higher ticket and high distribution cost in lower ticket), but the impact ongrowth will also compel insurers to compromise a bit on margins. "In the immediate term, non-par guaranteed products could see a fire sale over the next 2 months. Overall, it would be interesting to see how insurers deal with distribution cost and opex, as they attempt to keep their products competitive. On net, we see ~10-12%reduction in the medium-term VNB, coupled with moderated terminal growth and higher cost of equity; our target price comes down by 20%. We downgrade HDFC Life to HOLD, while we uphold our BUY rating on SBI life Insurance, Max Financials and ICICI Prudential Life, on undemanding valuations, implying relatively-lower value to future. We shall review our LIC rating and target price post its 9MFY23 results," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of Emkay Global and Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.