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HDFC Securities Insitutional Equities
HDFC Secuirites has maintained 'Add' rating on ICICI Prudential Life Insurance Company Ltd. after the Q4 results and has set a target price of Rs 595 (1.3x Mar-28E EV), implying a ~45% discount to SBI Life.
ICICI Prudential Life has witnessed significant shifts in business strategy, product mix, and financial reporting over the past three years - revising expense assumptions in FY24, launching nil-surrendercharge annuity products and pivoting to low-cost unit linked insurance plans during FY25, and pursuing cost optimisation through FY25–26.
While these moves reflect an evolving strategic intent, the cumulative effect has weighed on topline growth, value of new business margins, and embedded value, with return on embedded value stuck in low double-digits due to negative variances and assumption changes.
Sustained stability across key operating parameters is a prerequisite for meaningful re-rating.
Q4 Results Review
ICICI Prudential Life's FY26 annual premium equivalent grew 2% YoY, below estimates, while 11% VNB growth beat expectations. VNB margin at 24.7% surprised positively, as headwinds from GST input tax credit and softer retail business growth, amid a volatile geopolitical environment, were more than offset by a higher share of protection, a favorable yield curve movement, and improved rider attachment.
Operating RoEV, however, weakened to 11.9% (FY25: 13.1%), weighed down by persistently adverse experience on operating assumptions and expenses.
Given the uncertain macro backdrop, the brokerage trims its APE estimates for FY27E/FY28E by 6%/8% and reduce VNB estimates by 3%/5%.
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