ICICI Prudential Life Insurance Company’s FY22 second quarter results according to HDFC Securities
- Net premium income during the quarter grew just 8.3% year over year as renewal premium declined 4% year over year. Both standard and single premiums achieved healthy growth of over 30%. Shareholder earnings are up 47% year over year on the back of lower claims payments.
- New Business Premiums (NBP) grew by 45% YoY and Annual Premium Equivalent (APE) grew by 47.8% in H1 FY22. The value of New Business (VNB) for H1 FY was Rs 22.8.73 billion, Growth of 45.0% YoY, with VNB margin was 27.3% for H1 FY22 compared to 25.1% in FY21. For Q2 FY22, VNB margins decreased 330 bps quarterly due to weak Hemaya business growth retail.
- Total assets under management (AUM) increased 31% year over year. The company had a mix of debt-equity of 52%: 48% on September 30, 2021. 97% of the debt investments were in AAA rating and government bonds. The 13th month flat rate was 85.1%, up 300bps y/y and down 30bps qoq, while the 61st month was 51.6%, down 10 bps bps and 620bps qoq. The company’s solvency ratio was 199.9% on September 30, 2021, well above regulatory requirements of 150%.
Rating and Recommendation of HDFC Securities
The company reported good numbers for the second quarter of FY22, however, VNB margins declined qoq due to weak growth in the retail protection business. The company still has high claims paid due to second wave delays; IPRU has sufficient provisions. Management has confirmed that it is on track with the goal of doubling VNB by FY23 FY19. Business growth in October and November was encouraging. We estimated that IPRU will deliver a compound annual growth rate of 23% for new business value (VNB), 26% for business premium (NBP) and 12% for embedded value (EV) through fiscal year 21 to FY24E. The company is trading at 2.0x the intrinsic value in fiscal year 24. Given the high growth environment, we believe that Indian life insurers will continue to have higher multiples than other economies
The company aspires to double the absolute value of new business (VNB) for fiscal year 2019 (VNB) by fiscal year 23E with a 4P strategy for outstanding growth, protection business growth, improved persistence, and improved productivity while ensuring customer focus continues to be the cornerstone of everything. During the second quarter of fiscal year 22, management confirmed that it is on track to achieve this target, which requires a compound annual growth rate of 28% over the current and next fiscal years. With VNB currently growing at 45% in the first half of FY22, management believes it is on track to realize this ambition.
We believe investors can buy the shares in the range of Rs 580-587 and add dips to Rs 532 (1.8xFY24E P/EV) for the base case fair value of Rs 652 (2.3xFY24E P/EV) and the brokerage said in its research report, a fair value of 686 Rs (2.4xFY24E P/EV) over the next six months is a bull case.
The stocks above were selected from HDFC Securities’ brokerage report. Investing in stocks involves the risk of financial losses. So investors should exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not responsible for any losses resulting from decisions based on the article.