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Strong set, likely to taper off

CICI Prudential Life Insurance's (IPRU IN) Q1FY27 print was strong, with APE growing 14.6% YoY to INR 21,360mn, led decisively by protection. Retail protection APE rose 60.4% YoY a third straight quarter of ~60%+ growth — aided by the GST exemption and distribution -led execution, while group protection grew 38.1% YoY, taking overall protection APE up 45.7% YoY. ULIP APE experienced a slowdown (+6.4% YoY) given volatile equity markets , and non - participating guaranteed savings APE fell 40 % YoY as bank term deposit rates remained higher. Annuity (+33.0% YoY) and group funds (+42.2% YoY, lumpy) were healthy. VNB rose 25.0% YoY to INR 5,710mn, with margin expanding 220bps YoY to 26.7%, driven by the richer protection mix even as the loss of GST input tax credit (ITC) remained a drag. However, the Agency channel returned to growth (+2.0% YoY), while partnership/broker channels (+29.5% YoY) remained the key engine.

Protection leads; mix shift drives margin expansion: IPRU continued to witness strong growth in the retail protection segment, though we believe the momentum has started to taper off as evidenced by lower SA/Premium multiple in Jun -26 (63x) versus 97x in Apr -26. Management highlighted partnership distribution has grown faster in retail protection as compared with other channels. We believe the share of retail protection is likely to settle at 8.6% of overall APE (Q1FY27:10.4%), resulting in an APE growth of ~27% in FY27E (FY26:32%).

VNB margin expands to 26.7%, though likely to taper down: The 220bps YoY gain was mix - led , driven by a higher share of protection . We believe current VNB margins also have an impact of higher yield curve , which we expect to trend lower by end of FY27E. Notably, despite a favorable base for individual business in Q1 (Q1FY26: -9%), APE growth remained modest at 9%. The agency channel, which had contracted 21% in Q1FY26, has yet to show a meaningful recovery, growing just 2% YoY in the current quarter.

Persistency stable; GST ITC to roll into base by Q3FY27: On persistency, 13 -month held broadly stable at ~84%, with 25 -month weakness reflecting earlier -cohort surrenders already in FY26 assumptions and no EV -assumption risk flagged. ULIP outflows are structural (lock - in expiries and maturities), already in pri cing. The GST ITC drag persists a quarter more before entering the base in Q3FY27. Key monitorable s are non -par recovery, agency turnaround and partnership momentum , which may aid strong retail protection .

Recommend Accumulate with a TP of INR 625: We value the franchise on appraisal value approach, and r ecommend Accumulate with a TP of INR 62 5, implying a multiple of 1.3x Mar - 28E EV PS of INR 471.5 – a 19% upside to the CMP. We believe IPRU has consistently chan ged its product strategy, which has likely impacted the growth sustainability – three -year CAGR (FY23 -26) of ~ 7% versus private players ’ growth rate of ~12 %. Further we believe any material rationalization in first year commission by the IRDAI will likely pose a downside risk to our estimates.

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