Add ICICI Prudential Life Insurance Company Ltd For Target Rs.750 By Yes Securities Ltd
VNB growth remains unsatisfactory as of now
Our view – Calculated quarterly VNB margin at 5-year low
VNB margin – Calculated VNB margin declined materially on sequential basis as product mix evolved negatively: The VNB margin for 3QFY25 was 21.2%, down - 220bps QoQ and -166bps YoY. There has been a spike in group fund business and a large portion of the group fund business has a low margin profile similar to ULIP. Secondly, unlike peers, Non-Par Savings business has been weak, impacted by the current interest rate environment where fixed deposits are attractive to savers. The company wants to offer products that customers demand leading to ULIP traction. There has been very very limited impact on margin from surrender rule changes while the product level margin has largely remained the same. The VNB margin would remain at similar levels (presumably at product levels for 4Q). In the medium term, the company is targeting mid-teens VNB growth
APE growth – APE growth was healthy with various businesses contributing: Overall APE in 3Q grew by 27.8% YoY to Rs 24.38bn. Linked business and Annuities grew 42% YoY and 50% YoY, respectively. Group fund APE jumped 348% YoY. Non-linked APE de-grew -24% YoY. Total protection was sluggish, growing 9% YoY whereas Retail Protection did well, growing 40% YoY. Group fund business is typically lumpy and the company is happy to pick up opportunities. Within Protection, Group term business continues to be impacted by heightened competition. Credit life was up 8% YoY and the share of credit life in overall protection was 38%. Credit life was impacted by issues in Microfinance, which comprises 45% of Credit life business. In the Annuities business, earlier, single premium annuities were not doing well and hence, regular pay annuity was introduced in January last year and it has done well. For the last 5 quarters, the company has delivered alpha on the market and wishes to continue to do so.
We maintain a relatively cautious ‘ADD’ with a revised price target of Rs 750: We value IPRU at 1.9x FY26 P/EV for an FY25/26/27E RoEV profile of 15.4/15.3/15.3
Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632
