ICICI Pru Life sees biggest crash in one year, stock down 10% after Q3 misses estimates

The impact on ICICI Pru Life’s margins was mainly due to change in product mix, the management said in earnings concall. ULIP sales, which fetch lower margins, were higher in the October-December 2023 quarter

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ICICI Prudential Life Insurance crashed over 10 percent on January 18, making its steepest fall in over a year. The stock saw a selloff as the insurer’s October-December 2023 quarter results came way below the Street estimates, along with a sharp fall in margins.

At 10:30am, the stock recouped some losses and traded at Rs 485.60 on the NSE, down 5 percent from its previous close, after hitting an intraday low of Rs 464.

For Q3FY24, ICICI Pru Life‘s VNB (value of new business) declined 29.5 percent YoY to Rs 436 crore, against the Moneycontrol estimate of Rs 547 crore. VNB margins came in at 23 percent, over 600 basis points below the estimate of 29.3 percent.

The impact on margins was mainly due to change in product mix, the management said in earnings concall. ULIP sales, which fetch lower margins, were higher in the October-December 2023 quarter.

ULIP stands for unit-linked insurance products. These are linked to the market as a combination of insurance plus investment. With the markets scaling new highs last calendar year, ULIP sales grew fast.

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For Q3FY24, ICICI Pru Life’s APE (annualised premium equivalent) jumped 4.72 percent on-year to Rs 1,907 crore, slightly higher than the Moneycontrol estimate of Rs 1,856 crore. In the earnings concall, the management said that credit life and group term business provide an exciting opportunity, going ahead.

The company’s commission expenses have increased after re-designed commission structure, which has also put pressure on margins. ICICI Pru Life has been diversifying its distribution to non-ICICI Bank channels.

On the distribution side, domestic broking firm Motilal Oswal pointed out that the share of banca, corporate agents, group channels declined sequentially to 26.8 percent, 11 percent, 16.4 percent, respectively, in Q3 FY24.

Also read: HDFC Life Insurance and other insurers in talks with IRDAI on draft surrender value regulations, says ED and CFO

Most brokerages have not shared revised ratings, target prices and earnings estimates as the concall took place early morning on January 18. Morgan Stanley has an ‘overweight’ call with the target at Rs 660 per share, but is awaiting clarity if FY24 performance should be extrapolated to FY25.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.