Global investment banking and management services provider Morgan Stanley has downgraded target prices of life insurer companies by 3-8 percent while cutting the value of new business (VNB) forecast by 3-6 percent amid proposed changes in insurance laws by the government. The brokerage, however, remains ‘overweight’ on private insurers such as HDFC Life, ICICI Prudential Life and SBI Life, which it termed as its top pick.

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The investment banker has maintained a constructive view on the life insurance segment as it believes that insurers should be able to cope with proposed changes in the Union Budget for 2023-23 without material structural destruction in total asset management (TAM).

The brokerage sees deep value investing opportunities and large upsides in stock prices of insurers in a very poor 3-10 percent 15-year VNB CAGR (compounded annual growth rate).

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Among potential catalysts, Morgan Stanley believes a pick-up in retail protection growth and an expected 15-20 percent growth in annual premium equivalent (APE) in the first half of FY2023-24 would support the insurers.

Favourable outcome on representation by industry could be a potential catalyst for life insurers.

Budget 2023-2024 proposed that life insurance policies with a premium exceeding Rs 5 lakh annually will be taxed. The new proposal will, however, not impact taxation of unit-linked insurance plans (ULIPs), term insurance and old policies.

Life insurance companies are hoping that the government will consider amendments to the taxation of large life insurance savings policies. The Lok Sabha is expected to take the Finance Bill for consideration on Friday.

SBI Life shares were trading lower by 1.65 percent at Rs 1,100.25 apiece on BSE at 10:02 am on Friday. ICICI Prudential declined 0.94 percent to Rs 414.65 per share while HDFC Life share traded lower by 2 percent at Rs 488.10 apiece. LIC stock was down 0.91 percent at Rs 563.90 per unit.

(Edited by : Anshul)