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Result Highlights

* NBP – NBP was at Rs 51bn growing by 23% on YoY basis which was better than our expectation. The performance was mainly supported by a jump of 23% in single premium while First year premium registered a growth of 23%.

* APE – APE at Rs 25bn was higher than our estimate of Rs 21.9bn. APE grew by 27% yoy and by 50.6% qoq. The growth was led by strong performance in saving products.

* APE Mix – Share of Non‐linked savings business increased by 1103bps which was offset by decline of 687bps in share of ULIPs and 412bps in Protection.  

* VNB & VNB Margin – Q4FY21 VNB at Rs 5.9bn was higher than our forecasts of Rs 5.8bn, while VNB margin at 23.6% was lower than our estimates of 26.5%. On a yoy basis VNB margins contracted by 25bps and by 214bps on sequential basis.

* Persistency improvement – Sequentially, persistency saw an improvement across all time period, however on a yoy persistency across all time period saw a decline.

* Opex and commission ratios – Cost ratios have improved with commission ratios falling 46bps yoy whereas opex ratio improved by 16bps yoy.

* Profits ‐ PAT came at Rs 625mn, reduction on both YoY and QoQ basis.

* EV ‐ Embedded Value grew 26.4% to Rs. 291.06 bn during the year

* Channel Mix – Mix of Agency channel increased by 167bps on YoY basis, however, saw a sharp decline of 173bps on qoq basis. On yoy basis, share of banca saw a decline

Our view:

ICICI Pru is embarking on an aggressive target of a 28% CAGR in VNB Margins during FY21‐23E. The drivers for this growth include 1) Strong growth in business from non‐ICICI bank partners (IndusInd Bank, AU Bank, RBL Bank, IDFC and Standard Chartered) as most of these relationships were created in fag end of the past fiscal, 2) in terms of products there is a strong focus on non‐par products, which would be margin accretive, 3) no price hike in protection will enable market share gains  and 4) impact of ICICI Bank change in stance is now in the base.

Factoring these in, we are raising our VNB estimates for FY22E and FY23E by 8% and 11% respectively. A delivery on their aspirational target of 28% CAGR can call for a re‐rating, which we have not built in our target price yet. We retain our BUY rating with a 1‐year revised price target of Rs574 (from Rs562 earlier).

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