MOSL: ICICI PRUDENTIAL LIFE INSURANCE (Buy)-Strengthened distribution and product mix to drive growth
(IPRU IN, Mkt Cap USD11.6b, CMP INR605, TP INR700, 16% Upside, Buy)
Higher COVID-19 claims drives shareholders' losses
- IPRU posted ~48% YoY growth in total APE, led by healthy (66%/~164%) trends in the Non-Linked Savings/Annuity business, while linked APE growth bounced back strongly (49%). Growth in the Protection segment was mainly aided by Credit Life/Group term, while Individual Protection saw a decline. Absolute VNB growth was robust (~78% YoY, 15% beat), with VNB margin improving sharply to 29.4% (500bp YoY) v/s 25.1% in FY21.
- It reported a shareholders' loss of ~INR1.9b on account of higher COVID-related provisions and claims settlement. It settled total gross COVID-19 claims of ~INR11.2b over 1QFY22 (3.2x increase over FY21). It has created provisions of ~INR5b (Mar'21: INR3.3b) towards future COVID-19 claims.
- We estimate IPRU to deliver ~36% CAGR in VNB over FY21-23E, led by robust premium growth, buoyed by new partnerships and product segments, thus enabling operating RoEV of ~17% over FY21-23E. We maintain our BUY rating.
Sharp improvement in VNB margin; robust trends in the Non-Linked segment continues
- Net premium income grew by ~19% YoY, led by a 40%/89% growth in the regular/single premium business. Thus, New business premium (NBP) grew ~71% YoY. However, renewal premium trends remain muted (flat YoY). IPRU reported a shareholders' loss of ~INR1.9b on account of higher COVID-related provisions and claims settlement.
- Total APE grew 48% YoY led by a 66%/~164% growth in the Non-Linked Savings/Annuity business. Growth in the Linked Savings business bounced back strongly (49% YoY). Growth in the Protection segment (26% YoY) was led by Credit Life/Group term, while Retail Protection declined in 1QFY22. The share of Protection/Annuity rose to 22.1%/~5% (v/s 16%/~4% in FY21), while that for ULIP fell further to ~44% (v/s 57% in FY21). The management sees continued momentum in business growth, led by Non-Linked/Annuity and Group Protection in the near to medium term.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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