ICICI Prudential Life Q3 Results Review - VNB Margin Hit Due To Adverse Product Mix: Motilal Oswal

Motilal Oswal Report

ICICI Prudential Life Insurance Company Ltd. reported a 4.7% YoY growth in annual premium equivalent (9.5% higher than estimated) to Rs 19.1 billion in Q3 FY24. In Q3 FY24, protection/unit linked insurance plan segments rose 5.3%/8.9% YoY but the group segment declined 15.5% YoY.

Value of new business declined 29% YoY to Rs 5.4 billion (15% miss), due to a moderation in margins. VNB margin for the quarter stood at 22.9% (-510 bp QoQ) versus our estimate of 29.5%. For nine months-FY24, APE stood at Rs 54.3 billion and VNB was at Rs 14.5 billion, with a VNB margin of 26.7%.

Considering the Q3 FY24 performance, we have cut our APE/VNB margin for FY24E and FY25E.

We expect ICICI Prudential to deliver a 6% compound annual growth rate in VNB over FY23- 26.

Going forward, premium growth and expansion of VNB margin will be the key drivers for the re-rating of the stock.

We note that the one-year forward price/embedded value for ICICI Prudential has declined to 1.5 times currently from 1.8 times in June 2023.

We reiterate our 'Buy' rating with a target price of Rs 580 (based on 1.5 times September-25E EV).

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