ICICI Prudential beats Q4 estimate with income surging 27%: What do brokerages say?

ICICI Prudential Life Insurance share price will remain in focus on April 21 after the company reported better numbers in the quarter ended March 2023.

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The ICICI Prudential Life Insurance share price will remain in focus on April 21 after the company reported better numbers in the quarter ended March 2023.

The private life insurer announced a 27.2 percent increase in net income to Rs 235 crore for the March quarter on the nearly record margins earned from new policies sold. For the full fiscal year, the company reported a net income of Rs 811 crore, representing a 7.6 percent increase from the previous fiscal earnings of Rs 754 crore.

The company’s bottomline was bolstered further by meeting its goal of doubling the value of its new business, delivering Rs 2,765 crore from its FY19 level by a significant margin, which grew at an annualised rate of 27.8 percent over FY22. Margin from new business surged to 32 percent in the reported quarter, up by a full 400 basis points from the same period a year ago.

The annualised premium equivalent (APE), which measures new business, increased by 11.7 percent to Rs 8,640 crore for the year, driven by various factors such as an expanded distribution network and a wider range of products. Protection APE increased by 14.5 percent to Rs 1,504 crore, while the sum assured for new business grew by 34.7 percent to Rs 10.4 lakh crore.

In addition, there was a significant improvement in persistency for all groups during FY22, with the 13th-month persistency ratio increasing by 90 basis points to 86.6. The company’s assets under management increased by 4.4 percent year-on-year to Rs 2,51,191 crore, and the solvency ratio remained strong at 208.9 percent.

Here’s what brokerages have to say about stock and the company after its March quarter earnings:

CLSA 

The brokerage house has given an ‘outperform’ rating on the stock and raised its target price to Rs 520 a share from previous close. CLSA said the strong fourth quarter of the fiscal year 2023 was supported by a pre-buying trend related to budget tax changes in March 2023, leading to a 27 percent increase in annualized premium equivalent (APE) and a consistent high margin of 32 percent.

However, the fiscal year 2024 is expected to be challenging due to the high base established by the previous fiscal year’s strong performance.

Macquarie 

The brokerage firm has given an ‘outperform’ rating on the stock and increased its target price to Rs 580 a share from previous close after the strong earnings.

As anticipated, all metrics demonstrate a strong performance. In the fourth quarter, the share of ICICI Bank channel decreased to 9 percent, which may have already reached its lowest point. The management team remains optimistic about achieving robust value of new business (VNB) growth, Macquarie said.

The management team is confident about achieving significant growth in the value of new business (VNB) in the upcoming years. They also dismissed concerns regarding the base effect on full-year annualized premium equivalent (APE) growth.

Morgan Stanley 

The brokerage firm has given ‘overweight’ target on the stock and given target price of Rs 600 a share from its previous close.

The value of new business (VNB) was 14 percent higher than expected, primarily due to much stronger annualised premium equivalent (APE) growth in the non-linked segment, which was attributed to changes in the Union Budget. A more sustainable positive impact was seen from a stronger uptake in retail protection. However, the VNB margin was lower than anticipated. As a result, the VNB forecasts for fiscal years 2024-25 are being revised downward, Morgan added.

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