Buy ICICI Prudential Life Insurance Company Ltd For Target Rs. 675 - Yes Securities
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IPRU addresses multiple doubts emphatically
Result Highlights
? VNB margin: Calculated VNB margin decreased by -194bps QoQ to 32.0% driven by various factors
? VNB growth: VNB grew 70.7%/36.1% QoQ/YoY, where the YoY growth was aided by improvement of 226bps in calculated VNB margin
? APE growth: New business APE grew 81.1% QoQ and 26.5% YoY, where the sequential growth was driven by Savings Non-Linked segment
? Expense control: Expense ratio rose 320/204 bps QoQ/YoY as opex ratio rose 137/97 bps QoQ/YoY and commission ratio rose183/107 bps QoQ/YoY
? Persistency: 13th month, 37th month and 61st month persistency ratio improved sequentially by 190bps, 60bps and 20bps respectively
Our view – IPRU addresses multiple doubts emphatically
IPRU has delivered on APE growth without really drawing materially from pre-buying before tax rule changes kick in: As such, the healthy growth in 4Q is not attributable to pre-buying of large-ticket policies, on which the tax benefit expired on 31st March 2023. The pre-buying / incremental sales in February and March are not material. The overall APE growth for the company has been 26.5% YoY in 4Q compared with 4.2% in 9M. This has been driven by an APE growth of 42.9% YoY, excluding ICICI Bank channel, compared with 19.9% in 9M. Thus, the impact of de-growth in ICICI Bank channel has been more than mitigated by the other channels
Importantly, the Retail Protection business has delivered healthy YoY growth and, sequentially, pure term has outperformed ROP: The retail protection APE has grown 27.7% in 4Q compared with a -29.3% YoY de-growth in 9M. Management stated that they are focused on the revival of retail protection. While FY22 had seen a slowdown in retail protection, the company had invested in distribution and re-training. The ROP product had been introduced and as such, the company had started to additionally focus on lower sum assured segments such as the Rs 5-10mn range. However, the contribution of ROP in 4Q was Rs 0.25bn out of total retail protection APE of Rs 1.06bn, implying a 37% QoQ growth in high-margin pure term compared with 4% for ROP
We maintain ‘Buy’ rating on IPRU with a revised price target of Rs 675: We value IPRU at 2.3x FY24 P/EV for an FY24E/25E RoEV profile of 17.7%/18.0%
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