Shares of ICICI Prudential Life Insurance Company Ltd tanked 10 per cent in Wednesday's trade as adverse product mix led to 166 basis points YoY drop in Q3 margin. The management indicated that the impact on margins due to increased surrender charges was minimal as 60–65 per cent of non-linked savings business sales is PAR, where the impact is low. Analysts largely remained positive on the stock.
Emkay Global said IPRU Life reported a weak performance for 9MFY25, with VNB margin at 22.8 per cent, significantly lower than its estimate of 23.6 per cent.
"Growth spike in the Group fund management business and stronger growth in the ULIP segment in Q3 led to IPRU Life logging a weaker margin performance in Q3 and 9MFY25. The management stated that the group fund management business remains lumpy in nature, albeit profitable for the company. With focus on the protection and annuity lines of business, the management expects the growth trajectory to sustain, with continued investments in the proprietary channel," it said.
To bake in the Q3 developments, the brokerage tweaked its APE estimates slightly, while cutting its VNB Margin by 90-110bps. This resulted in a 4 per cent cut in VNB over FY25-27E.
Nuvama said the fall in VNB margin was a result of change in product mix in favour of low-margin linked business and group savings business. For 9MFY25, VNB improved just 8.5 per cent, it said.
"Renewal premium continued to stay weak with growth of just 0.2 per cent YoY while Q3 adjusted profit grew just 43.2 per cent," it said.
Antique Stock Broking said ICICI Pru Life’s growth was primarily led by ULIP, annuities, and group fund. Non-linked savings declined 17 per cent YoY and retail protection grew 24 per cent YoY. Total expenses rose 19.8 per cent YoY despite higher growth in cost-effective ULIP and group fund, it said.
"Accordingly, VNB margin declined 390 bps YoY to 22.8 per cent (vs. Antique’s est. of 24.5%) led by adverse product mix and higher costs. Management expects to continue to grow APE ahead of industry average while VNB should be more a function of product mix. Factoring lower growth we reduce our FY25-27 APE/ VNB by 2-4 per cent and reduce our DCF-based target price to Rs 810 from Rs 865," Antique said.