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Business growth perks up on strengthened distribution and product segments

Non-Linked Savings mix increases sharply; reiterates guidance to double VNB over FY19-23

* ICICI Prudential Life (IPRU) posted 23% YoY growth in new business premium, led by a steady traction in both regular and single premium business. APE in 4Q grew 27% YoY (22% beat, 27% YoY decline in 9MFY21), led by a 106% growth in Non-Linked Savings APE. Annuity APE grew 215% YoY (120% for FY21), while linked APE growth recovered to 11% YoY. Persistency improved across most cohorts, with 13th month persistency at 84.8% (higher than pre-COVID levels).

* VNB margin moderated to 23.6% (25.1% in FY21), led by moderation in Protection mix. We estimate IPRU to deliver ~25% CAGR in VNB over FY21- 23E, led by robust premium growth, buoyed by new partnerships and product segments, enabling operating RoEV of ~15% over FY21-23E. Maintain BUY

Total premium grows 14% YoY; persistency improves sharply

* Gross premium income grew ~14% YoY led by 23% YoY growth each in regular and single premium business. Renewal premium grew at a modest ~7% YoY. Shareholders’ PAT declined sharply to INR0.64b in 4QFY21. During FY21, IPRU reported 7% growth in premium income, while shareholder PAT declined 10% YoY.

* Total APE grew 27% YoY in 4Q, led by a 106% growth in Non-Linked Savings business (215% growth in Annuity), while growth in the Linked Savings business turned positive (at 11% YoY) after being in the red for most of FY21. The share of ULIP declined to ~48% (v/s 65%/82% in FY20/FY18), while the share of Protection stood at 16.2% (15.1% in FY20). The management expects continued momentum in business growth led by the Non-Linked Savings business.

* VNB margin moderated to 23.6% (25.1% in FY21) on lower Protection mix. The same was supported by stronger trends in the Non-Linked segment. Absolute VNB for 4QFY21 grew 26% YoY (7% beat), driving 1% YoY growth in VNB over FY21. The management suggested retaining VNB margin in the - 1-+1% range even as the mix of Non-Linked Savings business is likely to improve further.

* Opex grew 20% YoY, while commissions grew 26%. Cost-to-total weighted received premium (TWRP) moderated to 14.8% (15.9% in FY20). In the Savings business, cost/TWRP moderated to 9.6% (v/s 10.4% in FY20).

* Persistency has improved across cohorts and product segments. On a sequential basis, it has improved in the 13th/61st month by 210bp/30bp to 84.8%/58.3% and the management expects it to improve further. Thirteen month persistency in the Non-Linked Savings business, including single premium, improved to 94% (among the highest in the industry).

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