INSUBCONTINENT EXCLUSIVE:
Citigroup has a buy call on ICICI Prudential Life Insurance Company with a target price of Rs 525.
The current market price of ICICI
Prudential Life Insurance Company is Rs 412.50.
Time period given by the brokerage is 'Long Term' when ICICI Prudential Life Insurance
Company price can reach the defined target
Citi estimate of 12 per cent, resulting in VNB growth of 93 per cent in FY18
This is being driven by increasing share of high margin protection business and also new savings products launched in early FY18
While there were two accounting changes which led to higher VNB margin and operating RoEV, even adjusted for that operating RoEV was strong
We expect operating RoEV of nearly 19 per cent over FY19E-20E, which in turn should drive stock valuations
5.7 per cent in FY15 to 16.5 per cent in FY18
Most of this expansion has been driven by better product mix and favorable operating variance
13th persistency is at 86.9 per cent against assumption of 82.5 per cent for VNB calculation
IPRU has not yet changed its base case persistency assumption as it wants the number to stabilize
If and when IPRU makes this change there could be an additional leg-up in VNB margin
APE growth was muted (FY18E +18 per cent YoY, 4QFY18 -4 per cent YoY) partly due to high base and partly due to IPRU clamping on errant
changes to bring it in line with industry peers
It has changed the way it accounts for one-year group term insurance, which led to higher protection APE
Protection APE growth was 71.5 per cent for FY18; adjusting for this change it would still have been 35-40 per cent
Also, for EV and VNB calculations it is now taking effective tax rate, which is lower than the earlier assumption of marginal tax rate
Impact of this on EV is one-off while that on VNB is recurring
Adjusted for tax rate change, operating RoEV would be nearly 18 per cent against reported 22.7 per cent
margin of 17.5 per cent / 18 per cent in FY19E / FY20E against earlier estimates of 12 per cent / 13 per cent
