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

ICICI Prudential Life Insurance’s share price rose in July, a day after the insurer reported that its Annualized Premium Equivalent (APE) for the quarter ended June 2023 fell 4% year-on-year to Rs 1,461 billion. It fell more than 3% on the 19th.
The amount equivalent to annual insurance premiums serves as a guideline for new businesses of life insurance companies.
At 10:30 am on the NSE, the shares were trading at 551 rupees, down 4% from the previous close. The trading volume at that time was 1.8 million shares. Insurers’ value of new business (VNB), which measures the present value of future profits, fell by 7% year-on-year to Rs 438 million in the April-June period. The DSO margin was 30 percent as of June 30, compared to 31 percent a year ago. ICICI Pru Life’s net profit increased by 33% to reach Rs 270 crore amid the slump in DNB and APE, largely driven by investment gains. Life insurance companies invest the premiums earned by their policyholders for profit.
Investment income amounted to Rs.1,632.7 billion compared to his loss of Rs.849.6 billion in the same period last year, reflecting higher market prices of securities and increased gains on sale of investments.
Despite a weak quarter overall, brokerages maintained a buy rating on the stock as it posted strong APE growth in June. “The first quarter saw an improving trend in business, including double-digit growth in APE in June 2023,” said Anup Baguki, Managing Director of ICICI Prudential Life Insurance. This suggests that the company’s situation may turn around in the second half of fiscal year 2023.
Morgan Stanley has given ICICI Prou ​​Life an ‘Overweight’ rating and a price target of Rs 685 per share. The stock broker said stocks could fall slightly in the short term after a sharp rebound since March lows.
Still, the firm’s strong growth in the personal line segment and strong annual premium equivalent (APE) growth from channels other than ICICI Bank remain positive indicators, the broker said. Mr. Jeffries also emphasized the same. In June alone, non-ICICI bank sales growth increased 17% year-on-year, accounting for 86% of his APE, while sales through the ICICI bank channel fell 14%.
Nomura also gave ICICI Pru Life a Buy rating with a price target of Rs 670 per share. Protection insurance premiums rose 4% year-on-year, while savings insurance premiums fell 6%, leading to a decline in overall APE.
CLSA has set a more aggressive price target of 700 rupees per share with a buy rating, reflecting the surge in retail sales of protective products. Retail protection business APE recorded strong growth of 61.8% year-on-year, from Rs.680 million in Q1 FY2023 to Rs.110 million in Q1 FY2024.