MOSL: ICICI PRUDENTIAL LIFE INSURANCE (Buy)-Mixed quarter-higher opex remains a drag on earnings
ICICI Prudential Life Insurance: Mixed quarter; higher opex remains a drag on earnings
(IPRU IN,Mkt Cap USD8.0b, CMP INR385, TP INR450, 17% Upside, Buy)
- IPRU reported a muted 1QFY19 performance, with shareholder net profits declining 31% YoY (25% miss) even as policyholder surplus stood in line at INR3b (est. of INR3b). Key highlights of 1QFY19: (a) 13% YoY 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) 49th month persistency improved by 450bp to 63.7%.
- Premium growth muted; protection business now forms 8.2% of total APE: 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. Share of ULIPs in total new business APE stood at 79.8%, while that of protection business improved further to 8.2% (4.5% in 1QFY18). IPRU continues witnessing strong growth opportunity in the protection business, and we expect the business to account for ~10% of total premiums by FY20.
- Operating metrics continue improving; new business margin expands to 17.5%: IPRU reported a continued improvement in the persistency rate across various tenures. The 49th month persistency, thus, improved to 63.7% from 62.3% in FY18. New business margin has also expanded to 17.5% v/s 16.5% in FY18, helping drive 34% VNB growth. Product mix improvement remains the single-biggest driver of margin expansion.
ICICI Prudential Life Insurance Company Limited is a life insurance company, which is a joint venture between ICICI Bank Limited and Prudential Corporation Holdings Limited. The Company provides life insurance, pensions and health insurance to individuals and groups. It conducts business in participating, non-participating and unit linked lines of businesses. Its segments include Par Life, Par Pension, Non Par, Annuity Non Par, Health, Linked Life, Linked Pension, Linked Health and Linked Group. It offers term plans, such as ICICI Pru iProtect Smart; unit linked insurance plans (ULIPs), such as ICICI Pru Wealth Builder II and ICICI Pru Elite Life II; child education insurance plans, such as ICICI Prudential SmartKid with Smart Life; retirement plans, such as ICICI Pru Easy Retirement; traditional savings/money back plans, such as ICICI Pru Cash Advantage and ICICI Pru Savings Suraksha, and Health insurance. It offers products on retail, mortgage and group platforms.
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