Buy ICICI Prudential Life Insurance; target of Rs 740: Motilal Oswal

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Motilal Oswal's research report on ICICI Prudential Life Insurance

In 1QFY25, ICICI Prudential Life Insurance (IPRU) reported 34.4% YoY growth in APE to INR19.6b (4% miss). APE in ULIPs grew 78% YoY, while protection and ex-ULIP individual savings segments reported a moderate APE growth of 3.2% YoY and 10% YoY, respectively. VNB grew 8% YoY to INR4.7b (6% miss). VNB margins declined to 24% in 1QFY25 (down 600bp YoY) vs. our estimate of 24.5%. Considering the 1Q performance, we have cut our VNB margin estimates for FY25 and FY26. However, we have raised our APE growth estimates to factor in a strong trajectory in proprietary channels.

Outlook

IPRU has been delivering strong growth in the past three quarters and has been gaining market share. VNB margins have been under pressure owing to the product mix (higher share of ULIPs) and the allocation of costs, but scale benefits should help to offset the impact. In terms of surrender charges, the company expects a minimal impact. Considering the 1Q performance, we have cut our VNB margin estimates for FY25 and FY26. However, we have raised our APE growth estimates to factor in a strong trajectory in proprietary channels. We expect IPRU to deliver a 19.4% CAGR in VNB over FY24-26. Going ahead, the company’s ability to sustain strong premium growth and VNB margins will be vital for re-rating of the stock. Retain BUY with a TP of INR740 (based on 1.7x Mar’26E EV).

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