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VNB misses estimates, declines 29% YoY | Margin moderates 510bp QoQ to 22.9%

* Gross premium grew 4% YoY in 3QFY24 to INR103b (in line), with renewal /first-year premium up 6%/11% YoY and single premium flat YoY. PAT grew 3% YoY to INR2.3b in 3QFY24. For 9MFY24, PAT rose 18% to INR6.8b.

* APE grew 5% YoY to INR19.1b (9.5% above estimates) as ULIP business saw a growth of 9% YoY in 3QFY24. Compared to 9MFY23, ULIP/protection grew 6%/4% YoY, but non-Par declined 3.5% YoY.

* VNB declined 29% YoY to INR4.4b in 3QFY24 (15% miss), as margins moderated. VNB margins stood at 22.9% (down 510bp QoQ) vs. our estimate of 29.5%. For 9MFY24, APE stood at INR54.3b, VNB came in at INR14.51b, and VNB margin stood at 26.7% (32% for 9MFY23).

* On the distribution side, the share of banca/corp. agents/group channels declined sequentially to 26.8%/11%/16.4% in 3QFY24.

* On premium basis, 61st month persistency improved 120bp QoQ to 63.1%, whereas 49th month persistency declined 220bp QoQ to 65.7%.

* AUM grew 13.8% YoY to INR2.87t, while solvency ratio moderated to 196.5%.

Valuation and view

* IPRU’s VNB margin is lower than estimated due to an adverse product mix. The growth in the non-ICICI Bank channel and agency channel is likely to pick up as the base effect kicks in. The increase in agent recruitment and the strong pace of new partnership additions is likely to aid premium growth. Further, the strategy of approaching customers with a wider product bouquet through all channels will also boost premium growth. Persistency has also improved in most cohorts. We will review our estimates and the TP after the earning call scheduled for 18th Jan’24.

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