ICICI Prudential Life’s Stock Gains Most In A Year On Bullish Analyst Ratings After Q4 Results
An agent selling insurance products to customers. (Photographer: Brendon Thorne/Bloomberg)

ICICI Prudential Life’s Stock Gains Most In A Year On Bullish Analyst Ratings After Q4 Results

Shares of ICICI Prudential Life Insurance Co. surged the most in a year after analysts maintained their bullish stance on the private insurer, citing improved value of new business, diversified distribution network and growth in non-linked plans.

That’s despite a 64.2% year-on-year slump in net profit at Rs 63.78 crore in the quarter ended March, according to an exchange filing. The bottomline for the full fiscal, too, fell to Rs 960 crore from Rs 1,069 crore a year ago.

  • The company’s value of new business premium rose 26% year-on-year to Rs 591 crore in the reported quarter, while for the full year jumped 21.7% to Rs 1,621 crore. VNB margin stood at 25.1% for FY21.

  • The insurer’s solvency ratio stood at 217% on March 31, 2021, well above the regulatory requirement of 150%.

  • Total assets under management stood at Rs 2.14 lakh crore as of March 2021, a 40% increase over the year earlier, which the company said is an “outcome of growth in new business, strong persistency and robust fund management”.

“Despite the disruptions caused by Covid-19, we were able to demonstrate resilience in our operations. In this quarter, APE grew 27% year-on-year, with March posting the best ever monthly sales for the company in any year since inception,” NS Kannan, chief executive officer at ICICI Prudential Life, was quoted as saying in the filing. “We were able to capitalise on opportunities to build a well diversified product portfolio, on the back of 114.1% and 214.7% year-on-year growth in the traditional savings and annuity product segments, respectively, in Q4 FY21. The strong performance was driven in equal measure by over 100 valuable partnerships forged this year, as part of our strategy to deepen and widen distribution.”

Share of ICICI Prudential Life gained as much as 13.9%, the most since April 27, 2020, but pared some of it to trade around 8% higher as of 2:30 p.m. on Tuesday.

Of the 36 analysts tracking the company, 31 have a ‘buy’ rating, four suggest a ‘hold’ and one recommends a ‘sell’, according to Bloomberg data. The average of the 12-month consensus price target implies an upside of 20.2%.

Here’s what analysts had to say about ICICI Prudential’s March-quarter results...

CLSA

  • Upgrades to ‘buy’ from ‘outperform’ rating but cuts target price to Rs 575 from Rs 580 apiece.

  • FY21 saw multiple headwinds with a big contraction in ULIP business, a change in distribution strategy at the bank and repricing challenges for its protection business, and in that context, value of new business performance was managed well.

  • Reinsurance-related tightening will remain a headwind in the near term but expect ICICI Pru to turn the corner on APE.

  • Expects a 17% CAGR over FY21-23 versus a 17% contraction over FY18-21, driven by a more diversified product and distribution mix.

  • Dependence on ICICI Bank has also dropped from 47% in FY18 to 31% in FY21 and ICICI Pru has new distribution engines, including empanelment of new banks which will aid growth.

  • ICICI Pru will reverse its three years of APE contraction (FY18-21) as its product and distribution mix is much better diversified now.

Credit Suisse

  • Maintains ‘underperform’ rating with a target price of Rs 415 apiece.

  • ICICI Pru’s Q4 APE growth came in ahead of expectations (+27% YoY) on strong sales in guaranteed-return product.

  • “Given the 4Q pick-up, we increase our APE growth for FY22E, driving EPS increase of 8% for FY22/23E.”

  • With protection sales and margins under pressure, expect VNB expansion to slow and drive its de-rating.

  • Given weak base and pick-up seen in Q4, management is confident of delivering a strong top line growth in FY22 with stable/softer margins.

Nomura

  • Upgrades to ‘buy’ rating with a target price of Rs 560 apiece.

  • Particularly impressed with ICICI Prudential’s ability to deliver margin improvement across savings products despite impacted volumes.

  • Base now turns favourable with linked APE having halved versus FY18 levels, ICICI Bank’s contribution reducing, VNB pool’s diversification and recent partnerships.

  • Growth rebound right around around the corner as linked APE is now less than 50% of the FY18 level, ICICI Bank mix has reduced to 31% from 47% in FY18, and recent distribution tie-ups delivering.

UBS

  • Maintains ‘buy’ rating and a price target of Rs 590 apiece.

  • Strong growth in APE in Q4 FY21, better than estimates, led by strong growth in non-linked segment, especially annuities forming 4% of APE in FY21.

  • Group protection continues to do well for the company.

  • Recent bancassurance tie-ups aiding growth, contributing 11% of APE.

  • Retail protection growth was impacted by higher base of last year’s and supply-side constraints.

  • Premium growth and improvement in persistency should be reflected across the board with some pushback from linked segment persistency.

ICICI Securities

  • Upgrades to ‘buy’ from ‘add’, with a target price of Rs 452 apiece.

  • Big strategic achievement for ICICI Pru is the establishment of an ex-ICICI Bank product as well as distribution capability.

  • Appears better prepared for more bottom-up approach to follow a demand-based business strategy as it offers the entire bouquet of segments.

Nirmal Bang

  • Maintains ‘buy’ rating with a target price of Rs 624 apiece.

  • FY21 growth was largely supported by establishment of new partnerships and product launches.

  • In FY21, the company forged over 100 new partnerships, which are expected to contribute fully from next year onwards.

  • Non-ICICI Bank bancassurance channels also contributed to overall growth as new bancassurance partnerships gained momentum.

  • Strong growth in non-linked savings is expected to diversify the VNB pool contribution.

  • Annuity would be one of the key drivers in the management’s pursuit to achieve 28% CAGR in VNB up to FY23.

Kotak Institutional Equities

  • Maintains ‘buy’ rating and hikes target price to Rs 660 from Rs 560 apiece.

  • Recent initiatives both on product as well as channel diversification are encouraging.

  • ICICI Prudential Life has effectively diversified its product bouquet as well.

  • Agency expansion remains high with the addition of 11,885 net new agents in the second half of the fiscal

  • Overall bouquet is currently much more diversified with 48% ULIPs, 31% non-linked, 5% group savings and 16% protection.

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