Motilal Oswal: Maintain ‘buy’ with TP of Rs 475 on ICICI Prudential

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Published: September 27, 2019 12:52:02 AM

Accordingly, the share of ULIP in total APE has declined to ~70% from ~85% in FY17, while that of the protec-tion business has increased sharply.

We hosted a boardroom discussion with Mr N S Kannan (MD & CEO) and Mr Satyan Jambunathan (CFO) of ICICI Prudential Life Insurance (IPRU).We hosted a boardroom discussion with Mr N S Kannan (MD & CEO) and Mr Satyan Jambunathan (CFO) of ICICI Prudential Life Insurance (IPRU).

We hosted a boardroom discussion with Mr N S Kannan (MD & CEO) and Mr Satyan Jambunathan (CFO) of ICICI Prudential Life Insurance (IPRU). Key takeaways: ULIP to remain dominant segment: IPRU reported a 2.1% YoY decline in savings business APE in 1QFY20 and growth trajectory remains tepid even in 2QFY20 YTD (1% YoY APE growth). Accordingly, the share of ULIP in total APE has declined to ~70% from ~85% in FY17, while that of the protec-tion business has increased sharply.

However, the company cited ULIP will remain a dominant business segment and contribute 60-70% of total APE over the medium term. IPRU has consciously improved the granularity of its ULIP business and reduced the average ticket size from INR180k last year to ~INR150k. This will help it maintain stable growth and drive an improvement in the persistency levels.

VNB margin have expanded sharply, maintain positive outlook: IPRU’s VNB margin improved 400bp QoQ to 21% in 1QFY20, led by strong cost control and a sharp rise in the protection business mix to ~14.6%. The company reported ~73% CAGR in protection business APE over FY16-19 and aims to maintain this healthy growth rate.
Protection business thus now contributes ~59% of total VNB, while the reliance on the volatile ULIP segment has reduced. This will enable IPRU to achieve its guidance of doubling VNB over 3-4 years. VNB margin is also likely to maintain a positive bias as the business mix continues to improve and the revival in the core savings business provides further support.

Maintain Buy with an unchanged target of INR475 (2.3x FY21E EV).

Digital initiatives and lean operating structure to rein in cost ratios: Several digital initiatives have facilitated an improvement in employee productivity and helped IRPU to reduce the cost ratios.

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