ICICI Prudential - Building A Robust Business Model For Long-Term Growth: Motilal Oswal

Motilal Oswal Report

ICICI Prudential Life Insurance Company Ltd. has diversified its product mix as well as distribution mix over the past few years. Unit linked insurance plans have seen an increased traction owing to the optimism in the Indian equity markets.

Protection momentum is picking up with supply-side pressures easing.

On the distribution side, the share of the banca channel (excluding -ICICI Bank Ltd.) has increased to ~15% (from 4% in FY19).

ICICI Life has been investing in building the agency and distribution channels over the past couple of years. The company achieved its stated guidance of doubling its FY19 value of new business by FY23 and expects healthy growth in VNB to continue, aided by:

1. opportunities in the long-term savings/Protection businesses, and

2. improving persistency and cost ratios. In FY23, the protection business accounted for ~39% of total VNB, while the non-linked business made up 53%.

We estimate ICICI Life to deliver a 16% compound annual growth rate in VNB over FY23-25. VNB growth will be fueled by premium growth and a slight improvement in margins, thereby enabling an operating return on embedded value of ~17% over FY23- 25E.

We reiterate our 'Buy' rating with a target price of Rs 630 (based on 1.8 times March-25E EV).

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