IPRU posted 24.7% y-o-y growth in new business APE, led by all-round growth of 25%/22% in Savings/Protection. Within Savings, Annuity/Non-Linked/ULIPs grew 69%/41%/15% y-o-y. VNB grew 31.6% y-o-y to Rs 4.7 bn (in line). This was primarily driven by a 128bp q-o-q improvement in VNB margin to 31% in Q1FY23.
IPRU remains on track to achieve its stated objective of doubling FY19 VNB by FY23. With adequate growth and margin levers available, we estimate IPRU meeting its guidance, which entails ~23% VNB growth in FY23. We expect IPRU to deliver 24% CAGR in VNB over FY22-24, largely led by healthy premium growth and steady margin, thereby enabling operating RoEV at 17% in FY24. We maintain our Buy rating.
Margin accretion encouraging; distribution mix getting broad-based Net premium income grew 4% y-o-y in Q1FY23, led by healthy new business premium. However, it missed our estimate by 16% due to decline in renewal premium. PAT fell 16% q-o-q to Rs 1.56 bn. The share of Protection in the overall mix improved by 420bp q-o-q to 21.7%. Within Protection, demand for Retail Protection remains weak, while Credit Life saw a strong traction.
Annuity APE grew 69% y-o-y. On a NBP basis, it constitutes 18% of the mix. The pension subsidiary clocked a strong performance. IPRU remains committed to scaling this segment further. ULIPs grew 15%, lower than the overall growth of 25% due to a volatile capital market. The ULIP mix declined to 41% from 45% in Q4FY22.
On the distribution side, slack in the banca channel was picked up by new partnerships and the agency channel. While sales at new bank partnerships is performing well (up 71% y-o-y), sales from ICICIBC (down 11% y-o-y) continues to drag overall banca growth. The management’s strategy on the direct channel, which contributes 11% to APE, remains to upsell to its existing customers through data analytics. Persistency improved across cohorts, with 13th/61st month persistency improving 90bp/100bp q-o-q to 85.5%/55.7%. VNB growth of 32% y-o-y to Rs 4.7 bn was led by a higher share of higher margin products like Non-PAR savings, Annuity, and Protection.
Valuation and view
IPRU has maintained a steady traction in VNB growth, led by a healthy product mix and APE growth. The share of banca (excluding ICICIBC) has risen to 15% v/s 4% in FY19, thus aiding growth and diversification in the distribution mix. The increase in agent recruitment and the strong pace of adding new partnerships will continue to support premium growth. The idea of approaching customers with a wider product bouquet, through all channels, will further boost premium growth. We expect VNB margin to improve marginally and expect IPRU to deliver 18%/24% CAGR in new business APE and VNB over FY22-24. We maintain Buy with a TP of Rs 630/share (2.1x FY24E EV).