ICICI Prudential Life Insurance Company Ltd. share price target

We like IPRU's re-engineered business model which is focused on a more diversified product mix along with an increased protection share. We expect VNB to grow at FY19-22E CAGR of 19.3%. Lower than expected growth and lower protection share remain key risks. We rate IPRU a NEUTRAL with a TP of Rs 495 (Dec-20E EV + 19.5x Mar-22E VNB). IPRU printed a higher than est. 3QFY20 total APE of Rs 20.4bn (3.9/7.3% YoY/QoQ,+5.5% vs. est.). 9MFY19 reported VNBM was steady at 21.0%, leading to a +24.7% YoY VNB of Rs 11.4bn.

21 January 2020 IPRU reported moderation in premium growth as renewal premium growth was muted due to weak persistency. Although the opex ratio stood elevated, VNB growth remained strong at 33% with margins stable at 21%. Maintain PAT increased 2% YoY to INR3b (7% miss) in 3QFY20. Renewal premium growth was muted month persistency declining by 100bp/230bp YoY. Total APE was up ~4% YoY led by 37% YoY growth in protection APE, while savings APE growth was flat. VNB margin stood stable at ~21% due to the higher share of protection business, which resulted in 33% YoY growth in VNB to INR4.3b. VNB growth was mainly led by retail and group protection business. Total expenses (commission + opex) were up 26% YoY (higher than premium growth) as operating expenses increased 32% YoY, mainly driven by investment in protection business. Cost to weighted received premium increased 120bp YoY to 16.

In Q2FY20, gross premium income rose 6.6% YoY, driven by the increase in group level premium by 80.4% YoY. Value of New business (VNB), a measure of profitability of new business underwritten in a period, increased 20.2% YoY to Rs. 709cr in H1FY20. VNB margin, which is the ratio of VNB to the amount of new business underwritten in the period expanded to 21.0% from 17.5% in H1FY19. Profit after tax rose marginally by 0.5% YoY to Rs. 302cr in Q2FY20. We revise our target price to Rs. 572 based on 2.6x FY21E embedded...

Value of New Business APE has increased by 5 percent in Q2FY20 with VNB Margin at21.2 percent with percentage contribution from Protection APE has increased by 86.8 percentYoY and now contributes 14.8 percentin overall APE.

We like IPRU's re-engineered business model which is focused on a more diversified product mix along with an increased protection share. We expect VNB to grow at FY19-22E CAGR of 17.5%. Lower than expected growth and lower protection share remain key risks. We rate IPRU a NEUTRAL with an unchanged TP of Rs 445 (Sep-20E EV + 19.2x Sep-21E VNB). While IPRUs 2QFY20 APE declined 4.3% YoY to Rs 19.0bn, protection share grew to 14.9% (+560bps vs. FY19). VNB and VNBM increased to Rs 4.0bn (+15.6/29.0% YoY/QoQ) and 21.0% (vs. 17.0% in FY19) respectively.

This resulted in VNB growing 16% YoY to INR4b, mainly led by Retail and Group Protection business. commission) grew 9% YoY (higher than the premium growth) as operating expenses increased 14% YoY, mainly driven by investment in the protection business. Management also highlighted that there has been decline in the higher ticket size ULIPs in Protection mix improved to 14.9% of the total APE driving 360bp YoY improvement in VNB margins stood at 21% (+360bp YoY) in 2QFY20. APE in the Non-PAR savings (Annuity) segment grew 115% YoY to INR280m Value of new business grew 16% YoY to INR4b in 2QFY20 while for 1HFY20 VNB IPRU Lifes management has taken initiatives to develop a wherein the entire process right from pre-sales, on-boarding to claims & servicing has been smoothened by the company using digital capabilities. We expect Indian insurers to trade at a premium Private sector life insurance companies have 51% market share in total new business APE, and IPRU is amongst the leading players.

The company reported ~73% CAGR in protection business APE over FY16-19 and aims to maintain this healthy growth rate. VNB margin is also likely to maintain a positive bias as the business mix continues to improve and the revival in the core savings business initiatives have facilitated an improvement in employee productivity and helped IRPU to reduce the cost ratios. Total opex ratio declined from 11.3% in FY15 to 9.3% in FY19 even as IPRU continued improvement in the persistency levels across cohorts despite volatility in the markets. The improvement in the persistency rate (13 month persistency in PAR products at ~90% better than ULIP products) and controlled cost ratios (which have ensured healthy returns to customers) have enabled IPRU to focus on the PAR business. IPRU has taken a strategic call to move toward balanced product categories and improve granularity in ULIP, which is likely to help reduce volatility in the business.

In Q1FY20, gross premium income rose 14.7% YoY, with the amount of premium renewed at retail level up 9.7% YoY. Value of New business (VNB), a measure of profitability of new business underwritten in a period, increased 26.6% YoY to Rs. 309cr in Q1FY20. VNB margin, which is the ratio of VNB to the amount of new business underwritten in the period expanded to 21.0% from 17.5% in Q1FY19. Profit after tax rose marginally by 1.2% YoY to Rs. 285cr in Q1FY20. We maintain our BUY recommendation with a revised target price of Rs....

Value of New Business APE increased by 26.6% in Q1FY20 with VNB Margin at 21% with % contribution from Protection in APE increasing by 87.7% and now contributing 14.6% in overall APE which has contributed 5.3% of APE growth this quarter.

We like IPRU's re-engineered business model which focused on a more diversified product mix and an increasing protection mix. Sharp increase in VNB margin (to 21%) drive up our FY20/21E VNB estimates by 18.8%/16.1% to Rs 18.0/20.2bn. Lower than expected growth and lower protection share remain key risks. While IPRU reported an APE growth of a mere 5.3% YoY, protection share grew to 14.6% (+530bps vs. FY19). This boosted VNBM to an unexpected 21.0% (+400bps vs. FY19) and absolute VNB to Rs 3.1 (+29.9% YoY). We upgrade IPRU to a BUY with a TP of Rs 445 (Jun-20 EV + 19.0x FY21E VNB).