Buy ICICI Prudential Life Insurance Ltd For Target Rs.580- Motilal Oswal
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Guides for a double-digit growth in 4QFY24
* ICICI Prudential Life Insurance (IPRU) reported a 4.7% YoY growth in APE (9.5% higher than estimated) to INR19.1b in 3QFY24. In 3QFY24, protection/ULIP segments rose 5.3%/8.9% YoY but the group segment declined 15.5% YoY.
* VNB declined 29% YoY to INR5.4b (15% miss), due to a moderation in margins. VNB margin for the quarter stood at 22.9% (-510bp QoQ) vs. our estimate of 29.5%. For 9MFY24, APE stood at INR54.3b and VNB was at INR14.5b, with a VNB margin of 26.7%.
* Considering the 3QFY24 performance, we have cut our APE/VNB margin for FY24E and FY25E. We expect IPRU to deliver a 6% CAGR in VNB over FY23- 26. Going forward, premium growth and expansion of VNB margin will be the key drivers for the re-rating of the stock. We note that the 1-year forward P/EV for IPRU has declined to 1.5x currently from 1.8x in Jun’23. We reiterate our BUY rating with a TP of INR580 (based on 1.5x Sep’25E EV).
Shift in product mix towards ULIPs and par products
* IPRU’s gross premium grew 5.4% YoY to INR103b (in line with our estimate) in 3QFY24, with renewal/first-year premium rising 6%/11% YoY and single premium being flat YoY.
* PAT grew 3% YoY to INR2.3b in 3QFY24. For 9MFY24, the company’s PAT rose 18% YoY to INR6.8b.
* APE grew 4.7% YoY to INR19.1b (9.5% higher than estimate). In 3QFY24, protection/ULIP segments rose 5.3%/8.9% YoY but the group segment declined 15.5% YoY.
* VNB declined 29% YoY to INR5.4b (15% miss), due to a moderation in margins. VNB margin for the quarter stood at 22.9% (-510bp QoQ) vs. our estimate of 29.5%.
* On the distribution side, the share of banca/corp. agents/group channels fell sequentially to 26.8%/11%/16.4%. ICICI Bank channel dipped 4.8% YoY.
* Business from the ICICI Bank channel has settled at INR0.8-1.0b per month. On YoY basis, the banca channel has grown in double digits (ex- ICICI Bank).
* Cost-TWRP increased 450bp YoY to 23.9% led by a rise in opex.
* On a premium basis, the 61st month persistency improved 120bp QoQ to 63.1%, whereas the 49th month persistency declined 220bp QoQ to 65.7%.
* AUM rose 13.8% YoY to INR2.87t, while solvency ratio moderated to 196.5%.
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