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Margin and growth outcomes improve but positives are somewhat priced in

Our view – Product level margin focus aids VNB margin whereas ULIP and annuities drive growth

VNB margin – VNB margin rose YoY, with the company continuing to focus on improving product level margin: The VNB margin for 1QFY25 was 24.0%, down -593 bps QoQ but up 258bps YoY. Management stated that it is more appropriate to look at the evolution of margin in 1QFY25 compared with FY24 as a whole as opposed to looking at 4QFY24 only. As regards surrender rules impact, management stated that the impacted portfolio is about 17% of business, which could see a 1-2% margin impact and so, the overall impact would be minimal. The VNB margin of 24% for the quarter has been achieved despite a high share for ULIP of about 50%. The company does not target a product mix but does try to maximise product level margin through tenure, riders and other factors.

APE growth – APE growth YoY looked far healthier than it has in recent times, with both agency and banca supporting: Overall APE in 1Q grew by 34.4% YoY to Rs 19.63bn. Within this, retail APE in 1Q grew by 42.2% YoY to Rs 16.66 bn whereas group APE in 1Q grew by 2.8% YoY to Rs 2.97 bn. The company is aiming to grow higher than the industry growth in FY25. The agency channel has grown 61.6% YoY in 1Q and contributed 29.4% to APE. The company has onboarded 12,062 agents in 1Q and the total agents were at 211,000 plus. The bancassurance APE has grown 33.6% YoY in 1Q and contributed 28.8% to APE. The total banca partners are at 43 which gives the company access to 21,500 branches. ICICI Bank is delivering a topline of Rs 1bn per month and is doing well on retail protection. Non-ICICI banca has grown 31% YoY, with the company having invested in creating an enablement framework for partners. We rate IPRU a relatively cautious ‘ADD’ with a price target of Rs 750: We value IPRU at 1.9x FY26 P/EV for an FY25E/26E RoEV profile of 15.4%/15.4%.

Other Aspects (See “Our View” above for elaboration and insight)

* VNB growth: VNB de-grew/grew -39.2%/7.8% QoQ/YoY, where the YoY growth was aided by growth in APE

* Expense control: Expense ratio rose 797/392bps QoQ/YoY as opex ratio rose/fell 655/-263bps QoQ/YoY and comm. ratio rose 142/655bps QoQ/YoY

* Persistency: 13th month, 37th month and 61st month persistency ratio improved sequentially by 190bps, 170bps and 10bps respectively

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