ICICI Prudential Life Insurance Company Ltd. share price target

23 October 2018 renewal/single premium increasing 18%/50% YoY, gross premium growth was restricted to 16% YoY due to tepid 3% YoY growth in first year premium. in 1HFY19 from 16.5% in FY18, enabling 41.5% VNB growth for the first half of the fiscal. Trend in persistency improved across month persistency held largely stable at 85.2%. This enabled healthy 18% YoY growth in renewal premium in 2QFY19. led by sustained growth in the protection business. Opex increased 34% YoY on account of higher advertisement cost and investments made in the protection business. Cost to weighted received premium, thus, increased to 16.1% in 1HFY19 from 13.7% in FY18. The share of agency/direct channel in the distribution mix dropped to 22.1%/11.8% from 27.

Operating Income fell by 37.18% to Rs. 5437.82 Cr in Q1FY19 when compared to the previous quarter. ICICI Prudential Life Insurance Company Ltd Q1FY19 results Comment

We maintain BUY with a TP of Rs 484 (FY20 EV+ 26x FY20E VNB). Despite a decline of 18.1% YoY in APE, and an increased cost ratio (17.5% vs. 13.6% for FY18), ICICI Prudential Life Insurance (IPRU) delivered a strong VNB margin of 17.5% (+100bps over FY18). Increase in margin was primarily as a result of higher share of protection business (8.2%, +250bps over FY18).

24 July 2018 IPRU reported a muted 1QFY19 performance, with shareholder net profits declining 31% YoY (25% miss) even as policyholder surplus stood growth in net premium income due to a 13% decline in new business premium. (b) Total commission expenses grew 29.3% YoY due to a change in product mix, while opex increased 44.5% due to higher advertisement/employee cost. (c) New business margin improved to 17.5% from 16.5% in FY18. (d) Share of protection business in total APE increased to 8.2%. (e) 49 month persistency improved by 450bp to 63.7%. IPRU reported an 18% YoY decline in total APE. Savings APE declined 21% YoY to INR12.8b, while protection APE grew strongly by 48% YoY to INR1.1b.

ICICI Prudential Life Insurance (IPRU) is amongst the market leader in the private sector life insurance space, aided by its strong brand, distribution capabilities and product portfolio. It has increased its market share in retail weighted premium to ~12% in FY18 (~6% in FY12) and has alongside reported sharp improvement in persistency ratios. This coupled with change in product mix in favor of protection business and strong cost control has enabled healthy margin expansion (16.5% VNB margin in FY18 v/s 10.1% in FY17). We expect margins to improve further to 18.2% by FY20E, boosting average operating RoEV to ~20% over FY18-20E. We value IPRU at INR480 per share using P/EV multiple of 2.7x (implied new business multiple of 21x). Initiate coverage with BUY.

We maintain BUY with an increased TP of Rs 515 (FY20 EV+ 25x FY20E VNB). ICICI Pru Life delivered a strong set of numbers of 4QFY18. Higher share of protection, operating efficiency and lower tax rate drove its full year margin to 16.5% (9MFY18: 13.7%). With this margin, ICICI Pru has narrowed margin gap with competitors despite higher share of ULIPs (VNB Margins- HDFC Life: 23.2%; SBI Life: 16%, Max Life: 18.5%). 4QFY18 APE came in at Rs.22.1bn (+2.1% YoY); growth was subdued on higher base and as new business premium declined in Jan and Feb18.

We maintain BUY with a TP of Rs 480 (FY20 EV+ 26x FY20E VNB). ICICI Pru Lifes 3QFY18 was a strong beat on margins. Better cost management, operating efficiency along with higher product margin on new ULIP products drove its 9MFY18 margin to 13.7% (9MFY17 9.4%). APE growth for the quarter was subdued on higher base at 8.7%.

ICICI Prudential Life is amongst the earliest and also the largest private life insurers in the country in terms of life insurance premium collected and AUM as of FY16. The life insurer beats it's nearest competitors by a healthy margin on key parameters of life insurance business: a) RWRP (retail weighted received premium) market share of 11.3% (9.7% SBI Life), b) Average premium per policy Rs85,607 (Rs45,712 Max Life), c) and a healthy 13th and 49th month persistency of 82% and 62% respectively (82% and 71% for Kotak Old Mutual Life) (for a more detailed comparison, see page 2). That life insurance is under penetrated in India and therefore offers strong growth...

ICICI prudential is India's largest private sector insurance company. The company commenced its operations in 2001 with ICICI holding with a major stake of 74% and prudential holding minority Issue Details stake of 26%. The company has banking partners like ICICI bank and Standard Charted Bank to sell its products. Also it is having 124,155 individual insurance agents. The products offered by Offer Period...

ICICI Prudential Life Insurance Company Limited (ICICIPru) is a joint venture between ICICI Bank Limited and Prudential Corporation Holdings Limited. It has commenced operations in fiscal 2001 and currently is the largest private sector life insurer in India by total premium in FY16 and AUM as on 31 March 2016. ICICIPru offers a vast product basket to customers which includes life insurance, health insurance and pension products and services.

With a large distribution network comprising of 124155 individual agents and 4500 bank partner branches, ICICIPru has attained 11.3% market share among all insurance companies in India, on a retail weighted received premium basis (RWRP) and 21.9% market share among private sector life insurers. RWRP has increased at 15.2% CAGR in FY12-16. As of 30 June 2016, AUM stood at |1.09 trillion. PAT was at |1653 crore in FY16, with return on equity exceeding 30% for each year since FY12. Capital position remained strong with solvency ratio at 320.5% at 30 June 2016 compared to the IRDAI prescribed level of 150%.