ICICI Life Insurance reported a 22.3% year-on-year (YoY) increase in value of new business (VNB) for the September quarter (Q2FY27), supported by an improvement in VNB margins. However, brokerages remain watchful of the insurer's growth mix, with Jefferies and Goldman Sachs cutting their target prices while retaining their existing ratings.
Jefferies maintained its ‘Buy' rating on ICICI Life Insurance but lowered its target price to Rs 670 from Rs 685, due to lower-than-expected VNB margins and a higher contribution from group business. Goldman Sachs retained its ‘Neutral' rating but cut its target to Rs 500 from Rs 525, pointing to product-mix-led margin improvement while remaining cautious about forecasting topline growth.
Bernstein maintained its ‘Market-Perform' rating with a target price of Rs 680, saying margin expansion is helping offset softer new business sales growth.
The brokerage highlighted a favourable shift in new business mix, with growth concentrated in retail protection, annuity products and the partnership channel.
ICICI Life Insurance Q2 Results: Profit Rises 25%, VNB Up 22%
ICICI Life Insurance's net profit rose 25% YoY to Rs 374 crore in the September quarter, compared with Rs 299 crore a year earlier.
READ | ICICI Life Insurance Q2 Results: Profit Rises 25%, Net Premium Income Up 17%
Net premium income increased 16.6% to Rs 13,804 crore from Rs 11,843 crore, while total premium income rose 15.3% to Rs 24,505 crore.
Annualised premium equivalent (APE), a measure of new business sales, grew 15.1% year-on-year to Rs 4,935 crore. VNB increased 22.3% to Rs 1,283 crore, while the VNB margin expanded to 26% from 24.5% a year earlier.
Embedded value rose 12.2% to Rs 56,669 crore. The claim settlement ratio remained unchanged at 99.3%, while 13-month persistency improved to 84.5% from 84% in the previous quarter.
Jefferies: VNB Margin Misses Expectations, Target Cut to Rs 670
Jefferies retained its Buy rating on ICICI Life Insurance but reduced its target price to Rs 670 from Rs 685. The brokerage said VNB margins came in below expectations, partly because of a higher contribution from group business.
APE growth was led by group business, while growth in the bancassurance and agency channels remained slow despite a favourable base. Jefferies also cut its FY27–FY29 VNB estimates by 2%, citing a lower retail protection mix.
The brokerage believes the risks are priced into the stock, even as the business mix and distribution-channel performance remain important variables for future growth.
Goldman Sachs: Neutral Rating, Target Cut To Rs 500
Goldman Sachs lowered its target price on ICICI Life Insurance to Rs 500 from Rs 525 while maintaining its Neutral rating.
The brokerage attributed the improvement in margins to product mix but remained cautious about forecasting topline growth. It reiterated that the insurer has the levers to deliver sustainable VNB growth over the medium term, with protection and annuity products remaining key focus areas.
Bernstein: Margin Expansion Offsets Softer New Business Sales
Bernstein maintained its Market-Perform rating and target price of Rs 680, noting that margin expansion is helping compensate for softer new business sales growth.
The brokerage attributed the improvement in margins to a favourable shift in the mix of new business. Growth remained uneven, with strong traction in retail protection and annuity segments, alongside the partnership channel.
What Management Said: Protection Mix Improves, VNB Remains Key Focus
ICICI Life Insurance said its protection business and overall product mix continued to improve during the quarter. Protection accounted for 20% of the business mix in Q2, while savings products remained the largest component of the overall product mix.
Growth was healthy across both retail and group businesses, although the agency and bancassurance channels saw slower growth while the partnership distribution channel expanded. Persistency ratios remained steady.
Management said growth in unit-linked insurance plans (ULIPs) was modest because of market volatility. It reiterated that VNB growth remains the primary objective and expects protection growth to normalise in the second half of the financial year.
The company also said it was too early to assess the potential volume impact of the Insurance Regulatory and Development Authority of India's consultation paper. Diversification across distribution channels remains important to maintaining resilience in growth.
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