Buy ICICI Prudential Life Insurance Company Ltd For Target Rs.837 - Yes Securities
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IPRU continues to diversify product and channel mix
Result Highlights
* VNB margin: Calculated VNB margin increased as much as 65bps QoQ to 26.7% primarily due to rise in share of overall protection
* VNB growth: VNB growth was 20.3% YoY and flat QoQ as APE growth was negative on sequential basis
* APE growth: New business APE growth was 15.8% YoY but -2.4% QoQ, with only Linked and Protection businesses displaying sequential growth
* Expense control: Expense ratio rose 102/176 bps QoQ/YoY as opex ratio rose 96/146 bps QoQ/YoY
* Persistency: 13th month and 37th month ratio worsened sequentially by 30 and 140 bps but 61st month ratio improved 10 bps QoQ
Our view – IPRU continues to diversify product and channel mix
IPRU introduced innovative ROP and long-term guarantee products in a continued evolution of strategy: The ROP product is relatively lower VNB margin and is targeted at the mass and mass affluent segment and we do not regard it as cannibalistic for pure term product, which is targeted generally at a relatively more affluent segment. IPRU displayed strength on the GTI and credit life side, with overall protection APE rising 9.3% QoQ. Retail protection business was stable sequentially and management stated that it has bottomed out.
IPRU also effected a strategic change to their policy for reinsurance ceding by hiking threshold for pure retail protection five-fold to Rs 10mn: IPRU explained that it was able to take this call on the back of analytics-driven segmentation of customers, which allowed them to filter out customer segments that were sub-optimal from a claims experience perspective. Ultimately, protection price hikes post reinsurer discussions were kept within 0-10%, while keeping VNB margin intact for this product basket.
Share of ICICI Bank remained at 27-28% for 9MFY22 new business as IPRU continued to bolster non-ICICI channels: Non-ICICI bank partners are growing faster than ICICI and contributed about 12% to new business. Non-banca partners continue to be added at a healthy clip with 72 being added in 9MFY22 and the partnership channel growing faster than 30% YoY.
We maintain ‘Buy’ rating on IPRU with a revised price target of Rs 837: We value IPRU at 3.2x FY23 P/EV for an FY22E/23E/24E RoEV profile of 14.3/16.8/17.3%.
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