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Motilal Oswal
ICICI Pru Life (Buy)
Target: ₹525
CMP: ₹408.55
ICICI Prudential Life Insurance (IPRU) posted a sharp improvement in Value of New Business (VNB) margins at 27.4 per cent (the highest among the listed insurers). This was aided by the growing mix of the non-linked savings business and improvement in protection margins – as the entire re-insurance hike was passed on to the customer. Annual premium equivalent (APE) declined 23 per cent y-o-y, mainly led by a 45 per cent y-o-y plunge in ULIP (reported strong trends on a sequential basis). Overall, persistency in the Protection segment improved sharply, while also showing recovery in ULIP (but lower v/s last year’s levels).
According to the management, ULIP showed strong sequential improvement in Q2-FY21 and is expected to recover in H2-FY21. Overall, expect growth to pick up post Q4-FY21.The management expects persistency to revert to normal levels in H2-FY21 as ULIP persistency is showing recovery, while protection persistency has improved sharply.
IPRU is focused on expanding its distribution strength and has added IndusInd as its new banca partner (in the previous quarter, it had tied up with IDFC First Bank), which would aid growth in the medium term.
We estimate IPRU to deliver 17 per cent VNB growth over FY20–23E. Margins are expected to improve to approximately 28 per cent, and operating RoEV would sustain at about 15 per cent by FY23.
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