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Robust performance; Promising Outlook

ICICI Prudential Life Insurance Co. Ltd. is a joint venture between ICICI Bank and Prudential Corp. Holdings. The issuer offers protection for life and health along with pension products and services.

* Q3FY22 gross premium up 2.1% YoY to Rs. 9,344cr and net premium up 1.1% YoY to Rs. 9,074cr, supported by well diversified product and distribution mix.

* VNB grew 34.8% YoY to Rs. 1,388cr in 9MFY22, aided by strong growth of 29.7% in New business premium during the same period.

* There has been a lucrative turnover in business by emphasizing on the key strategic elements (KSE) i.e, yielding premium growth, directing better production, aiding persistency and reducing claims. Indirectly proportional COVID-19 fatalities to augmented vaccinations lead to positive outlook. Hence, we reiterate our BUY rating on the stock with a rolled forward TP of Rs. 657 based on 2.0x FY24E EVPS.

Premium growth led by well diversified product and distribution mix

In Q3FY22, gross premium and net premium stood flat at Rs. 9,344cr (+2.1% YoY) and Rs. 9,074 (+1.1% YoY) respectively, driven by well diversified product and distribution mix. APE product mix was well diversified at 50%, 25%, 4%, 4% and 17% for linked, non-linked, annuity, group savings and APE protection respectively. APE distribution mix was also diversified at 39%, 24%, 13%, 9% and 15% for bancassurance, agency, direct, partnership and group respectively. Retail savings APE posted 33.9% YoY growth to Rs. 1,509cr, while protection APE grew by 21.8% to Rs. 856cr in 9MFY22.

New business growth greater than expenses growth

Value of New Business rose 34.8% YoY to Rs. 1,388cr in 9MFY22, primarily led by robust growth of 29.7% in New business premium in the same period. VNB margin stood at 27.1% (vs. 25.1% in 9MFY21). Growth in expenses (25.0% YoY to Rs. 3,505cr in 9MFY22) is lesser than growth in New business. Cost to TWRP ratio stood at 17.7% (vs 14.6% in 9MFY22). Gross claims stood at Rs. 2,045 crore and net of reinsurance came in at Rs. 982cr in 9MFY22. However, due to lesser fatality rates of Omicron variant, the company has reduced its provisions to Rs. 203cr (vs Rs. 412cr in Q2FY22). Assets under Management (AUM) grew 16.0% YoY to Rs. 2,375bn, with a debt-equity mix of 52:48. 97.8% of the debt investments are in AAA rated and government bonds

Key Quarter highlights

* 1st Indian insurance company to become a signatory to United Nations supported Principles of Responsible Investment (UNPRI).

* Launched ICICI Pru iProtect Return of Premium product which auto adjusts the life cover based on the customer’s life stage and also covers 64 types of illnesses.

* Strong solvency ratio of 202.2% (vs. 199.9% in Q2FY22), well above the mandated regulatory requirement of 150%. The 13th/61st month persistency ratio stood at 84.8%/52.7% in 9MFY22 (vs. 84.8%/49.8% in 1HFY22).

Valuation

With financial security for individual and their retirement planning, ICICI Prudential looks forward to doubling the FY2019 VNB by FY2023. Also, Company’s strategy includes - 1) Premium: continue diversifying product and distribution mix, 2) Protection: maintain sequential momentum despite short term headwinds in retail business 3) Persistency: continued improvements to aid product margins and 4) Productivity: target operating leverage with growth in premium. Hence, we reiterate our BUY rating on the stock with a rolled forward TP of Rs. 657 based on 2.0x FY24E.

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