ICICI Pru Life Shares Fall Even As Analysts Retain 'Buy' Calls After Q2

Shares of ICICI Prudential Life Insurance Co. fell even as most analysts retained 'buy' calls on the insurer, after it returned to profitability in the quarter ended September.

The company's revenue rose 38.3% sequentially, while it reported a profit of Rs 445.6 crore against a loss of Rs 185.3 crore in the preceding three months. That was aided by a growth in new business premium numbers amid growing awareness on the need for life insurance during the pandemic.

At 12:21 p.m., the stock however was trading 4.7% lower than the pre-result closing price compared with a 0.4% decline in the Sensex.

Here’s what brokerages have to say about ICICI Pru Life’s second-quarter performance:

• Maintains ‘buy’ rating with a target price of Rs 780 apiece implying an upside of 18%.

• The company has maintained strong traction in premium growth, led by a recovery in unit-linked insurance products.

• Healthy momentum continues in the non-linked and annuity segment, backed by a strengthened distribution.

• Share of banca has gone up.

• The increase in agent recruitment and adding of new e-commerce players will continue to support premium growth.

• Value of new business growth moderated in second quarter of FY22 affected by weak protection trends.

• Expect VNB margin to remain stable as growth trends remain steady and protection growth recovers.

• ICICI Pru to pass on entire reinsurer price hike to customers, as per the management commentary.

• Maintains ‘buy’ rating with a target price of Rs 817 apiece implying an upside of 24%.

• Annual premium equivalent growth was led by linked savings, supported by a favorable base.

• The share of linked savings is expected to settle lower at 40-45% over time, compared to 48% in first half of FY22.

• New business growth in retail protection segment is likely to remain muted in the near term due to supply-side constraints.

• Focus is likely to be higher on the group term business.

• VNB margin for the quarter moderated due to higher growth (quarter-on-quarter) in the linked savings business.

• The brokerage remains confident about APE growth but states the need to watch the evolution of the product mix through the year and its implications on VNB margin.

• Covid-19 reserve top-up in second quarter of FY22 was Rs 276 crore with the total stock outstanding of Rs 412 crore as of Sept. 2021.

• The management stated that Covid-related intimations declined through the quarter.

• Maintains ‘buy’ rating with a target price of Rs 710 apiece implying an upside of 8%.

• APE growth for second quarter of FY22 came in at 33% year-on-year, in line with private peers, aided a low base.

• However, on a two-year compound annual growth rate basis, second quarter FY22 APE was down 1% versus 15% growth for private peers owing to the product rejig at ICICI Pru.

• Product mix during first half moved in favour of savings led equally by traditional and linked products.

• Non-banca channels improved share of distribution to 61% in first half of FY22 versus 58% last year.

• Management expects the current level of provisions to be adequate, thus protecting the balance sheet.

• Brokerage expects APE compound annual growth rate of 15% over FY21-23 (vs 10% over FY19-21) driven by pickup in ULIP sales and scale-up of new partnerships.

• Retail-focused portfolio, strong distribution network, no asset quality/ investment risks and comfortable solvency are the company's strengths.

• Recommends 'hold' rating with a target price of Rs 760 per share implying an upside of 15.2%.

• Results broadly on expected lines.

• Increasing share of savings in the product mix slightly softened the VNB margin over the year.

• Operating parameters, including persistency, product mix and distribution mix, were broadly stable.

• Despite forging a new partnership, focusing on retail protection products and increasing digital outreach, ICICI Pru has struggled to increase its retail policy count.

• With Covid-19 disruptions behind, the company expects that it will be able to deliver sustainable growth in new business policy.

• Management sounded confident of delivering 2x FY19 value of new business by FY23.

• The brokerage believes that the implied multiples for ICICI Pru need to be at a discount to peers considering volatile track record of growth, slightly poorer embedded value returns and a relatively tough road ahead.

• Retains ‘buy’ rating with a target price of Rs 775 apiece implying an upside of 17.4%.

• Expect increasing share of ULIPs to likely continue in second half on the back of strong capital markets and drive high APE growth for ICICI Pru Life.

• Falling share of the protection business, mostly retail term — a segment in which the company expects to take tariff hike shortly, coupled with higher ULIPs, will put pressure on VNB expansion.

• ICICI Pru‘s new bank partnership and penetration will continue to increase, driving superior growth for the next few months.

• Remain positive on ICICI Pru's diversifying product portfolio.

• Partnership with new players will provide more multiyear legs to growth, with limited impact of idiosyncratic factors.

• Expect further stock rerating as the company delivers positive growth on two-year compound annual growth rate basis in second half of FY22.

• Maintains ‘buy’ rating with a target price of Rs 830 apiece implying an upside of 25.8%.

• Broad-basing growth engines help absorb retail term dip.

• ICICI Pru posted strong growth across categories (barring retail term) with non-par savings, annuities, ULIPs and credit protect.

• Persistency trends were somewhat softer quarter-on-quarter (13th/ 61st month at 85.1% / 57.1% vs 85.4% / 57.8% quarter-on-quarter).

• New banca partners, agency growing strong.

• While ICICI Pru has been witnessing muted trends from ICICI Bank due to limited product push (mainly annuities, protection, guarantees), its efforts to build a strong partnership ecosystem is helping.

• ICICI Pru continues to pursue group term opportunities selectively and sees this as good risk-reward given strong Covid-19 protocols at corporates and limited competition.

• Given declining Covid infections and deaths, and vaccination in full swing, management reserves should be adequate for the rest of the year, barring unexpected third wave claims surge.