MOSL: ICICI PRUDENTIAL LIFE INSURANCE (Buy)-Transforming into more than just a play on capital markets
ICICI PRUDENTIAL LIFE INSURANCE: Transforming into more than just a play on capital markets
(IPRU IN, Mkt Cap USD8b, CMP INR384, TP INR475, 24% Upside, Buy)
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).
APE growth showing recovery signs after volatile FY19
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 protection business remains robust.
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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