ICICI Prudential Life Insurance Company
’s (IPru Life) reported 3% growth in its annual premium equivalent (APE) during the month of December 2018. The company has been able to arrest the decline in APE growth since November 2018.
During Q3FY19, the APE witnessed a marginal decline of 2.1% yoy due to a steep fall in premiums during October 2018 (11.8% down yoy). For the period M9FY19, APE declined 4.2% yoy against a high base during M9FY18 which saw APE growth of 25.1% yoy.
The decline in APE during M9FY19 for IPru Life has been on account of various factors such as
• Volatile capital markets impacting the premium inflows under the linked business which forms a significant part of IPru Life’s business mix (~82% of the total APE in H1FY19), and
• Focus towards the protection segment leading to a decline in the ticket size of policies issued.
Overall, we expect new business premium (APE) CAGR of ~9% over FY18-21E with a shift in mix towards protection. We project the VNB margin to expand ~319bps over FY18-21E to 19.7% in FY21E owing to a favorable mix and cost optimization.
We expect margin improvement on the back of (1) traction in the protection segment; (2) sustainability of existing persistency and (3) maintenance of operating costs. We estimate the VNB margin to expand by ~319bps over FY18-21E, thereby shrinking the gap vs. peers.
ICICI Prudential Life Insurance Company Ltd is currently trading at Rs321.50 up by Rs1.75 or 0.55% from its previous closing of Rs319.75 on the BSE.