ICICI Prudential Life Insurance
BSE SENSEX
38,897
S&P CNX
11,588
15 July 2019
Update | Sector: Insurance
CMP: INR384
TP: INR475 (+24%)
Buy
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Transforming into more than just a play on capital markets
The trajectory in new business premium at ICICI Prudential Life (IPRU Life) seems to be
stabilizing as the company reported ~5.3% YoY APE growth in 1QFY20 as against flattish
growth in FY19. Higher new business strain driven by rising mix of the protection
business and associated advertisement & marketing cost impacted earnings growth in
FY19. We estimate earnings growth to turn positive at 9% CAGR over FY19-21 led by (a)
Protection business continuing to grow at a robust pace, thus driving margins, (b)
improved operating leverage aided by increasing use of technology, and, (c) recovery in
the core savings business. We estimate IPRU to report ~22% CAGR in VNB over FY19-21E
led by 17% CAGR in new business APE while operating RoEV is expected to sustain at
~19%. Maintain BUY with PT of INR475/share (2.3x Mar-21E EV).
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
During FY19, ULIP APE declined 2.7% YoY v/s an average 18% growth over FY17-
19. Protection business though has grown at ~62% YoY and its share in the total
APE improved to 9.3%. Though FY20 has started on a softer note, we believe that
introduction of new customer friendly ULIP product (Exhibit 33) and stable
market performance should drive ULIP sales over FY19-21E while the growth in
Financials & Valuations (INR b)
Y/E MARCH
FY19 FY20E FY21E
protection business remains robust.
Net Premiums
305.8 349.8 402.8
Surplus / Deficit
12.3 14.8 14.6
Sh. holder's PAT
11.4 12.2 13.4
New bus.gr-unwtd (%) 12.5 15.0 17.0
New bus gr-APE (%)
-3.0 15.4 19.2
NBP margin (%)
17.0 18.5 19.6
RoE (%)
16.4 16.5 16.6
RoEV (%)
15.1 16.4 16.5
VNB(INRb)
13.3 15.6 19.7
EV per share
151 175 205
Valuations
P/EV (x)
2.6
2.2
1.9
P/EPS (x)
48.4 45.3 41.1
Shareholding pattern (%)
As On
Mar-19 Dec-18 Mar-18
Promoter
75.0
78.7
80.7
DII
6.5
4.6
3.7
FII
10.1
8.6
6.5
Others
8.4
8.1
9.1
FII Includes depository receipts
IPRU IN
1,435
551.9 / 8
428 / 278
8/4/0
705
25.0
APE growth showing recovery signs after volatile FY19
VNB margins to expand on back of rising protection mix & cost-control
Protection new business premium mix has improved from 4.6% to 20.6% over
FY16-19. Retail Protection and Credit Life forms ~61%/~22% of the total