IPRU Life’s (IPRU) business trends were weak due to the COVID-19 led lockdown and subdued buyer sentiment toward capital market linked insurance and investment products. APE growth declined 44% YoY led by 66% YoY drop in ULIPs while other segments maintained steady trends. Persistency declined further with 13th/25th month persistency dropping 140bp/170bp QoQ. However, it is recovering and is above the assumptions incorporated in EV calculations. 1QFY21 VNB declined 35% YoY; however, management has reiterated its intention to double FY19 VNB guidance over the next 3-4 years. VNB margins improved to 24.4%, led by sharp increase in Protection mix of 26% (v/s 15% in FY20).
OutlookWe expect continued buoyancy in the Protection business along with gradual recovery in ULIPs to drive business /VNB growth over the near term while persistency should move in a narrow range. Maintain Buy with revised PT of INR510.
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