ICICI Pru Life slumps 4% as premium growth falters, but brokerages stay bullish

Brokerages have maintained their Buy rating on the stock as the insurer clocked strong APE growth for the month of June alone, despite the overall quarter being weak

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ICICI Prudential Life Insurance shares fell over 3 percent on July 19, a day after the insurer reported a 4 percent on-year decline in annualised premium equivalent (APE) to Rs 1,461 crore for the quarter ended June 2023.

Annualised premium equivalent is a measure of new business written by a life insurance company.

At 10:30am, the stock was quoting at Rs 551 on the NSE, down 4 percent from its previous close. Trading volumes at the time were 1.8 million share.

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The insurer’s value of new business (VNB), which represents the present value of future profits, stood at Rs 438 crore in the April-June quarter, down 7 percent on-year. The VNB margins were at 30 percent as on June 30, as against 31 percent a year ago.

Since VNB and APE slumped, ICICI Pru Life‘s net profit jump of 33 percent to Rs 207 crore came entirely on the back of investment gains. Life insurers make money by deploying the premium they collect from policyholders into investments.

Investment income stood at Rs 16,327 crore compared to a loss of Rs 8,496 crore a year ago, due to increase in market value of securities along with higher profits on sale of investments.

Brokerages have maintained their ‘buy’ rating on the stock as the insurer clocked strong APE growth in June, despite the overall quarter being weak.

“Through Q1, we have observed an improving trend in business, with double-digit growth in APE for the month of June 2023,” Anup Bagchi, MD of ICICI Prudential Life Insurance, said. This indicates that things might turn for the company in H2 FY23.

Morgan Stanley has assigned an ‘overweight’ rating to ICICI Pru Life, with a target price set at Rs 685 per share. The brokerage said that the stock may experience a slight decline in the near term, after the robust rally since March lows.

Despite this, the company’s strong growth in retail protection segment and a notable increase in annual premium equivalent (APE) from non-ICICI Bank channels remain positive indicators, the broking firm noted.

Jefferies also highlighted the same. For June alone, growth in non-ICICI Bank distribution was up 17 percent YoY and formed 86 percent of APE while distribution from ICICI Bank channel was down 14 percent.

Nomura, too, has given a ‘buy’ rating to ICICI Pru Life, with a target price of Rs 670 per share. While protection premiums experienced a 4 percent year-on-year growth, savings premiums were down 6 percent, resulting in an overall decline in APE, it noted.

CLSA has a ‘buy’ rating with a rather bullish target price of Rs 700 per share, on the back of strong surge in retail protection sales. Retail protection business APE registered a strong growth of 61.8 percent year-on-year from Rs 68 crore in Q1 FY23 to Rs 110 crore for Q1 FY24.

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