28 January 2021
3QFY21 Results Update | Sector: Financials
ICICI Prudential Life Insurance
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
IPRU IN
1,435
716.6 / 9.9
538 / 222
0/-16/-20
1163
CMP: INR499
TP: INR575 (+15%)
Buy
Distribution, product diversity to drive premium growth / VNB
Non-linked Savings seeing strong traction
Financials & Valuations (INR b)
FY20 FY21E FY22E
Y/E MARCH
329 345 373
Net Premiums
21.9 23.2 24.7
Surplus / Deficit
10.7 11.9 13.6
Sh. holder's PAT
NBP growth unwtd (%) 20.5 -3.0 10.0
-2.9 -15.1 18.2
APE growth - (%)
8.0
4.4
8.3
Tot. Premium gr. (%)
21.7 26.1 27.1
VNB margin (%)
15.0 15.6 15.9
RoE (%)
6.5 21.0 14.8
RoEV (%)
1.5
2.1
2.4
Total AUMs (INRt)
16.0 15.7 19.3
VNB (INRb)
160 194 223
EV per share
Valuations
P/EV (x)
P/EVOP (x)
3.1
21.8
2.6
20.4
2.2
17.3
ICICI Prudential Life (IPRU) posted 14% YoY growth in new business
premium, led by a sharp rise in the single premium business. However, on
APE, new business declined 18% YoY, largely due to ULIP plunging 39% YoY
(strong trends reported on a sequential basis). Persistency rate improved in
13th/61st month by 60bp/50bp QoQ to 82.7%/58.0%. However, on a YoY
basis, it declined across cohorts (barring 61st month). Overall, persistency in
the Protection segment has improved sharply.
VNB margins moderated to 25.7% (26% in 9MFY21), led by moderation in
the Protection mix, but were supported by stronger trends in the Non-
linked segment. Overall, we estimate IPRU Life to deliver a ~22% CAGR in
VNB over FY21–23E, largely led by continued expansion in VNB margins to
~28%; operating RoEV would sustain at ~15% by FY23E.
Maintain BUY.
Gross premium income grew ~11% YoY, led by 81% YoY growth in single
premium, while first-year premium declined 27% YoY. Also, renewal
premium grew at a modest ~9% YoY. Overall, shareholders’ PAT in 3QFY21
was broadly flat YoY at ~INR3.1b (in-line).
Total APE declined 18% YoY in 3QFY21, led by 39% YoY decline in ULIP
(~21% sequential growth). The Protection business also declined 4% YoY.
However, the Non-linked business posted growth of 36% YoY, led by the
Annuity business. Overall, the share of ULIP declined to ~51% (v/s 65% in
FY20). The share of Protection also declined to 15.4% (17.8% in 9MFY21).
IPRU indicated stronger trends in Credit Life in the coming quarters.
VNB margins moderated to 25.7% (v/s 27.4% in 2QFY21) on a lower
Protection mix, but were supported by stronger trends in the Non-linked
segment. Absolute VNB for 3Q stood at INR4.3b (flat YoY). For 9MFY21,
absolute VNB stood at INR10.3b (~9% YoY decline); VNB margins came in at
26%.
Total operating expenses (incl. commissions) surged to 126% YoY; thus,
cost-to-total weighted received premium (TWRP) increased to 15.0% (14.6%
in 9MFY21 v/s 14.3% in 1HFY21). Also, in the Savings business, cost/TWRP
increased to 9.3% in 9MFY21 (v/s 8.8% in 1HFY21).
Persistency in the Protection segment has improved meaningfully. On a
sequential basis, it improved 60bp/50bp to 82.7%/58.0% in 13th/61st
month. However, on a YoY basis, it declined across cohorts (barring 61st
month).
On the distribution side, the share of the banca channel in total APE
declined to ~42% in 9MFY21 (v/s ~51% in FY20), while the share of the
agency channel improved to ~24% (v/s ~21% in FY20).
Total premium grows 11% YoY; persistency improves sequentially
Shareholding pattern (%)
As On
Dec-20 Sep-20
Promoter
73.5
73.5
DII
4.7
4.6
FII
16.3
15.8
Others
5.5
6.1
FII Includes depository receipts
Dec-19
75.0
5.5
13.3
6.2
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com) |
Himanshu Taluja
(Himanshu.Taluja@motilaloswal.com)
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com);
Yash Agarwal
(Yash.Agarwal@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.