IGI Logo

ICICI Life reported steady performance in 2QFY27, with APE growing ~16% to Rs28bn (Emkay estimate: Rs28.6bn), while VNB margin at 25.4% (up by 100bps yoy) was largely in line with our estimate of 25.5%. Consequently, VNB at Rs7.1bn grew ~20%, although ~2% lower than our estimate, led by lower APE. While retail APE grew ~11% in 2Q, growth in overall APE was driven by ~40% growth in group APE. Retail protection grew at strong ~37% during 2Q, while Non-par products saw good traction. The improvement in VNB margin was largely driven by a shift in product mix toward high-margin products, as also led by better profitability across products driven by sale of longer-tenure products and higher rider attachment now. Management mentioned that the IRDAI consultation paper on distribution reforms allows room for renewal commissions which is expected to align the interest of all stakeholders. To bake in the 2Q developments, we cut APE estimates by ~2% over FY28-29E and increase our VNB margin by ~20bps over FY27-29E; this leads to ~1% cut in VNB over FY28-29E. We maintain ADD and Sep-27E TP of Rs550, implying FY28E 1.2x P/EV. Prudential’s stake sale remains an overhang on the stock.

Steady performance; VNB margin improvement led by shift in product mix

During 2QFY27, APE at Rs28bn grew 15.6% yoy and was ~2% lower than our estimate. Protection APE grew ~33% in 2QFY27, led by ~37% growth in retail protection. For 1HFY27, APE at Rs49.4bn increased ~15% yoy. VNB margin for 2Q stood at 25.4% (up by 100bps yoy) and was largely in line with our estimate of 25.5%, driving VNB growth at 20.3% during 2QFY27. The yoy improvement in VNB margin was driven by a shift in product mix toward high-margin products, also supported by the sale of longer-tenure products and higher rider attachments now. For 1HFY27, VNB margin at 26% (+150bps yoy) led to VNB at Rs12.8bn (up 22% yoy). EV at Rs566.7bn grew 12.2% yoy, at ~2% higher than our estimate of Rs558bn, led by better-than-expected outcome in economic variance. PAT at Rs3.7bn increased 26% during 2QFY27 and beat our estimate by ~4%. Persistency ratio saw a mixed trend in 1H, while Solvency margin improved to 230%.

Focus remains on growing annuity and protection

The company saw the non-linked mix shift toward non-par products, especially towards the end of the quarter which was visible across channels. While non-par products have been repriced, the mgmt mentioned that it is a continuous exercise and the increase in yield benefit is largely passed on to customers, thus driving demand. ULIPs saw modest growth during the quarter, owing to increased market volatility. While protection has grown at a strong pace in 1H, Management expects the growth to moderate in 2H owing to the base effect. The focus remains on growing the annuity and protection businesses, while mix in the savings business is expected to be driven by customer demand. Management remains focused on strengthening the proprietary channels to drive growth.

We maintain ADD and Sep-27E TP of Rs550

To bake in 2Q developments, we tweak our estimates – cut APE by ~2% over FY28-29 and increase VNB by ~20bps; this leads to ~1% cut in VNB over FY28-29E. We retain ADD and Sep-27E TP of Rs550, implying FY28E P/EV of ~1.2x. Ahead, the regulatory transition wrt Ind AS, RBC, and distribution reforms remains a key monitorable.

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354