ICICI Prudential Life Insurance Q4 Results Preview: Value of new business likely to drop nearly 21%, margin may shrink

ICICI Prudential Life Insurance (ICICIPRULI) Q4 FY24 Results Preview: ICICI Prudential Life Insurance Company is all set to report its financial results for the final quarter of the financial year 2023-24 on Tuesday, April 23. Analysts expect the private sector life insurer to stage a mixed performance for the January-March period with strength in its protection segment amid industry-wide overall margin pressure. 

Brokerage Nirmal Bang estimates ICICI Prudential Life Insurance to log an annual premium equivalent (APE)—a key metric used to compare the revenue potential of different types of policies—of Rs 3,161.7 crore for the quarter ended March 31, which translates into a decline of 4.2 per cent on a year-on-year basis.

It pegs the life insurer's value of new business (VNB) margin—a key measure of profitability for insurance businesses—for the final quarter of FY24 at 26.5 per cent, down 550 basis points (bps) on a year-on-year basis, as it expects the insurer's VNB to shrink by 20.6 per cent to Rs 837.8 crore. 

Another brokerage, IDBI Capital expects ICICI Pru to clock a VNB margin of 27.0 per cent in an outperform scenario "assuming improvement in the high ticket size products".

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Nirmal Bang expects the value of new business (VNB) margins of its life insurance coverage universe to be subdued owing to factors such as: 

• High ULIP focus
• Low non-participating (NPAR) segment volumes
• Increased investments in growth  

The brokerage expects a trend of strong growth in the first two months of 2024 to continue for ICICI Prudential in March on the back of strong retail protection growth and high ULIP volumes. However, it expects the company's fourth-quarter margins to be subdued as the company continues to invest in the franchise. 

Nirmal Bang, which has four insurance stocks under its coverage, prefers SBI Life Insurance Company and ICICI Prudential Life Insurance citing valuations that "remain conducive to growth". Here's how it rates the four life insurance stocks:

IDBI Capital sees the fourth-quarter VNB margins of HDFC Life, ICICI Pru and SBI Life—the three stocks under its life insurance coverage—to come in the range of 26.5-27.5 per cent. It expects their persistency ratios to improve by 50-100 bps with consistency in maintaining retention rates.

The persistency ratio is another important metric that determines the proportion of renewal premium-paying policyholders in total policyholders. 

Here's how IDBI Capital views the three stocks: 

Key monitorables in ICICI Prudential Q4 results

Investors will keenly look out for the following aspects in the upcoming earnings report of ICICI Prudential:

• FY25 growth guidance
• FY25 VNB margin outlook
• Recovery in NPAR sales
• Expected trends in high-margin segments
• Pricing changes