After IIFL, CLSA is bullish on ICICI Prudential Life Insurance

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Published: October 4, 2017 10:13:50 AM

Research and brokerage firm CLSA is bullish on ICICI Prudential Life Insurance, which surged by more than 7% yesterday on value buying. CLSA says that the life insurance firm remains its top pick in the space.

Chanda Kochhar, ICICI Bank, ICICI Bank CEO, Rakesh Mohan, project financing, project loans, project finance, pension funds, infra development fund, credit growthCLSA has a target of Rs 560 on ICICI Prudential Life Insurance, implying an upside of more than 36%. . (Image: PTI)

Research and brokerage firm CLSA is bullish on ICICI Prudential Life Insurance, which surged by more than 7% yesterday on value buying. CLSA says that the life insurance firm remains its top pick in the space. The shares were trading at Rs 415.7, up by more than 0.6% since the previous close. CLSA has a target of Rs 560 on the stock, implying an upside of more than 36%. 

Even IIFL sees a lot of steam left in the stock. Initiating coverage on the stock, IIFL said, “The company has established a leading market position among private sector life insurers, aided by robust distribution architecture and cost competitiveness. ICICI Prudential Life Insurance is well positioned to capture growth opportunities arising from the buoyant equity markets, given its predominant positioning as seller of unit-linked products (ULIPs).” IIFL has a target of Rs 480 on the shares.

CLSA says that cut in dividend payout will help the company to boost growth internally. The global firm predicts that ICICI Prudential Life Insurance will see healthy growth in premiums in the coming years. According to its estimates, the company’s premia will grow at 24% CAGR in the next three years. The scrip has returned more than 36% in the year so far, as opposed to BSE Sensex returns of 18%. Notably, the shares have corrected by more than 6% in the last one month. The scrip listed on the exchanges in 2016. In fact Chanda Kochhar pointed to the stellar returns posted by the stock at the time of  ICICI Lombard General Insurance IPO. “I really cannot comment on the returns going forward but if you go by an example, last year we did an IPO (ICICI Prudential Life Insurance) of our life insurance company and if you see the track record there so far for those investors the group has delivered a 33% annualised return just in this last year.”

As there are not many life insurers in India so far not much of the overall wealth is invested in the space. However, that is likely to undergo a shift. S Ramesh of Kotak Investment Banking said that India Inc is set to raise Rs 1 lakh crore in the next 12 months. Talking specifically about mutual funds, he told the ET Now last month, “Out of the Rs 1 lakh crore expected to be raised by the Indian markets, a lot of paper is by the Insurance and banking and financial services (companies).” Out of the total inflows, nearly one-third is invested in the financial services space. However, with the insurance companies entering the game, the mutual funds are likely to change their asset allocation. S Ramesh points out, “Close to 33% of the domestic and international money is in the financial services. My judgement is 5-7% out of this will now move to the insurance sector. So, it’s exactly what the doctor ordered.”

 

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