ICICI Prudential Life (IPru Life) reported NBP/APE growth of 10%/16% y-o-y in Q3FY22. However, 9MFY22 growth is robust at 30% each. We expect Q4 to be a strong quarter, driven by launch of new products at the end of Q3 and seasonal bias. Improvement of 110bps y-o-y in VNB margin to 27.1% is primarily due to product mix (higher share of annuity and non-par savings). As a result, VNB printed robust growth of 35% y-o-y to Rs 13.8 bn in 9MFY22.
Aspiration of doubling the absolute level of FY19 VNB by FY23 should from now on be led by volume growth, rather than margin accretion. An enhanced product suite as well as augmented distribution capabilities will boost growth. Maintain ‘Buy’ with an unchanged TP of Rs 870.
Robust operating performance
While APE growth moderated in Q3 to 16%, we expect a strong comeback in Q4 driven by launch of new products and seasonal bias. Growth in Q3 was led by all product segments other than group business. ULIP continues to print strong growth (21% y-o-y plus) on the back of buoyancy in capital markets. Sales of traditional savings and annuity grew at 15%. Protection witnessed a jump of 21% y-o-y. Within protection, trend in retail term was divergent to GTI and credit life. Near-term headwinds in the form of price hikes and reluctance for medical check-ups affected retail momentum.
However, the decline in retail has been arrested and momentum is improving on a m-o-m basis. Selective opportunistic GTI business and strong growth in credit life has boosted protection segment. As underlying loan momentum continues to pick up, this segment should do well in Q4.
Broad spectrum growth delivery
New bank partners are delivering strong growth and now form ~12% of overall APE. Agency, direct and partnerships also registered strong growth. Close to 18,000 agents were on boarded in 9MFY22 along with 72 new partnerships. Direct channel is primarily employed to upsell to existing customers through extensive use of data analytics. Distribution mix is now truly diversified and focus remains on adding partners across all platforms.
Outlook: Sustaining growth
Premium growth is led by ULIPs (due to strong capital markets) and non-par savings (relative attraction to FDs). Protection is showing signs of pick-up, led by improved demand for group term and improved momentum in credit life on the back of higher loan disbursements. Retail is also witnessing sequential growth. Maintain ‘BUY/SO’.