Accumulate ICICI Prudential Life Insurance; target of Rs 545: KR Choksey

KR Choksey's research report on ICICI Prudential Life Insurance

In Q3FY24, the Gross Written Premium (GWP) grew 5.2% YoY but fell by 1.4% QoQ to INR 102,850 Mn. The premium was lower by 2.4% than our estimates owing to lower-than-expected single premium segment. The Annualized Premium Equivalent (APE) for Q3FY24 stood at INR 19,070 Mn, a growth of 4.7% YoY (a fall of 7.5% QoQ). The APE was higher by 1.6% than our estimates. In 9MFY24, the APE growth was 1.7% YoY at INR 54,300 Mn. The VNB for Q3FY24 declined by 29.4% YoY/ 24.4% QoQ to INR 4,360 Mn. VNB margins were 22.9% for the quarter as against 28.0% in Q2FY24 (vs 33.9% in Q3FY23). The margins were lower than our expectations of 29.0% due to significant change in the product mix vs our expectation. The margins for 9MFY24 stood at 26.7%, a decline of 529 bps YoY. The total assets under management of the company were INR 2,867 Bn as of December 31, 2023, a growth of 13.8% YoY/ 5.4% QoQ (1.2% higher than our expectations). As of December 31, 2023, the solvency ratio was 197.0% against the regulatory requirement of 150%.

Outlook

We assign a 1.5x P/EV on FY26E EVPS of INR 368.2 and a VNB multiple of 8.2x to arrive at a weighted average Target Price of INR 545 per share (earlier INR 625) (50:50 weights on the P/EV and appraisal value methodology); indicating a 12.1% upside from the CMP. Accordingly, we downgrade our rating from “BUY” to “ACCUMULATE” on the shares of ICICI Prudential Life Insurance Ltd.