26 April 2020
4QFY20 Results Update | Sector: Financials
ICICI Prudential Life Insurance
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E MARCH
Net Premiums
Surplus / Deficit
Sh. holder's PAT
NBP growth
Unwtd (%)
APE growth - (%)
Tot. Premium
Growth (%)
VNB margin (%)
RoE (%)
RoEV (%)
Total AUMs (INR t)
VNB (INRb)
EV per share
Valuations
P/EV (x)
P/EPS (x)
FY20 FY21E FY22E
328.8 355.6 390.8
21.9 13.5 15.4
10.7 11.4 12.3
20.5
-2.9
8.1
21.7
15.0
6.5
1.5
16.0
160
2.1
45.2
8.0
8.1
7.7
22.9
14.9
14.3
1.7
17.6
183
1.8
42.5
11.5
13.4
9.9
23.0
14.5
15.7
2.0
20.1
212
1.6
39.4
IPRU IN
1,435
483.2 / 6.8
538 / 222
15/-10/12
1147
CMP: INR337
TP: INR430 (+28%)
Buy
APE growth declines led by ULIPs; Growth outlook modest
VNB growth steady with margin improving to 21.7%
IPRU Life (IPRU) reported weak business trends due to the ongoing
lockdown and volatile markets. APE growth declined 20% YoY led by ULIPs
while protection business growth was steady. Persistency remained under
pressure with 13
th
/25
th
month persistency declining 140bp/50bp YoY,
mainly in the ULIP segment.
FY20 VNB growth remained steady at 21% YoY led by improvement in asset
mix (protection/annuity segment). VNB margins, thus, improved to 21.7%
during FY20 (470bp YoY increase).
We have cut our EPS estimates by 12%/18% for FY21/FY22E, mainly to
factor in the softer business growth.
Maintain Buy with revised PT of
INR430.
VNB margins expand led by protection business; cost ratios improve
4QFY20 PAT declined 31% YoY to INR1.8b impacted by weak business
trends due to the lockdown in Mar’20. Gross premium income moderated
~5% YoY led by 26% YoY decline in the first year premium while single
premium grew ~111% YoY.
Renewal premium declined 4% YoY as persistency in the ULIP segment
suffered. 13
th
/25
th
month persistency declined by 140bp/50bp YoY.
In 4QFY20, total APE declined ~20% YoY (5.4% decline in FY20) led by ULIPs
plunging 43% YoY. Protection APE grew 35% YoY, and thus, share of the
protection business improved to 17.8% (15.1% in FY20). Share of ULIPs
declined to 54% (~65% in FY20 v/s ~80% in FY19).
VNB margins improved to 23.8% (21.7% in FY20) due to higher share of the
protection/annuity business driving 12% YoY growth in VNB to INR4.7b.
Total operating expenses (incl. commissions) declined 8% YoY, and thus,
cost to weighted received premium declined to 14.2% (15.9% in FY20) v/s
16.5% in 3QFY20.
Shareholding pattern (%)
As On
Mar-20 Dec-19
Promoter
75.0
75.0
DII
5.5
5.5
FII
13.3
13.3
Others
6.1
6.2
FII Includes depository receipts
Mar-19
75.0
6.5
10.1
8.4
Highlights from management commentary
COVID-19 impact:
Market risk exists due to the decline in interest rates and
choppy equity markets. While the stress in certain sectors builds in credit
risk; however, ~94% of the fixed income portfolio is invested in Government
bonds/AAA corporate bonds. Under stress scenario, solvency ratio remains
comfortable.
The entire reinsurance price hike would be passed on to customers, and
thus, would not impact VNB margins. Further, the protection segment is
significantly underpenetrated and should continue witnessing strong
trends.
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
Himanshu Taluja
(Himanshu.Taluja@motilaloswal.com)
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com);
Yash Agarwal
(Yash.Agarwal@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal
January
research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
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Oswal
2020
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