ICICI Prudential Life Q3 FY21 was a stable quarter, with operational numbers largely matching expectations indicating an encouraging recovery. Annualised premium equivalent (APE) growth momentum continued across channels. APE increased by 13.7% yoy, to Rs 1666 cr, indicating a revert to normalcy. Savings APE stood at Rs 1409 cr, up 14.4% qoq for Q3 FY21.

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Also, VNB margin for 9M FY2021 for ICICI Prudential Life improved to 26% (from 21.7% for FY2020. An increase in VNB margin was primarily on account of increase in share of protection products in the mix. During 9M FY21, protection APE was Rs. 703 crores resulting in an improvement in share of APE from 14.1% for 9MFY2020 to 17.8% in 9M FY21. As a result, new business sum assured was Rs 161161 cr up 22.2% yoy.

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ICICI Prudential Life management has maintained its guidance for VNB margins as its cost management and business mix improves. We believe m-o-m premium recovery trend for IPRU indicates its agility and ability to deploy digital channels and measures to ensure business continuity. Going forward, Sharekhan expects protection and annuity products to continue seeing higher growth.

Sharekhan finds the insurance space attractive, given a long runway for growth and believes that players with a strong balance sheet and business metrics would be able to tide over the crisis. ICICI Prudential Life’s strong balance sheet, comfortable solvency, and structural growth potential are long-term positives. Sharekhan maintains a Buy rating on the stock with a revised price target of Rs 584.

ICICI Prudential Life's Key positives:

Solvency ratio of 226% as on Dec 31, 2020
Strong sequential improvement in persistency across all cohorts

ICICI Prudential Life's Key negatives:

Value of New Business (VNB) stood at Rs 1030 cr for 9M FY21, down by 9.3% yoy

ICICI Prudential Life's Key risks:

A prolonged lockdown and adverse regulatory policies/guidelines may impact ICICI Prudential Life’s profitability and growth