ICICI Prudential Life Insurance Q1FY22 performance beat the street estimates with its VNB margin at 29.4% vs 25.1% in FY21. VNB stood at Rs 358cr vs Rs 201cr, up by 78.1% YoY exemplifying a significant growth. CLSA expects VNB CAGR of 25% over FY21-23 believes both growth & VNB margins is headed in right direction.

It lifts VNB estimates by 13-14% initiates coverage on the stock with ‘BUY’ recommendation with a 13% (CMP Rs 642) potential upside TP Rs 725.

CITI initiates coverage on the stock with a ‘BUY’ recommendation TP Rs 750. It is of the opinion that favorable product mix is driving the VNB margin expansion. It raises FY22/23 VNB estimates by 6% and 3% respectively. Additionally, lowers FY22/FY23 profit estimates by 18% and 13% respectively on the back of higher claims and operating expenses.

New Business Premium stood at Rs 2559cr vs Rs 1499cr, up by 70.6% YoY. Also, APE Rs 1219cr vs Rs 823cr, up by 48.1% YoY. ICICI Prudential Insurance reported a net loss of Rs 186 cr as compared to net profit of Rs 288 cr in the corresponding quarter last year. This was due to higher claims and provisions set aside for Covid-related claims. The company is carrying a provision of Rs500 cr on its books for Covid-related claims.

Claims and benefit pay-outs were up by 118.3% YoY on account of increase in surrender/withdrawals and death claims. Furthermore, the company reported a 19 per cent growth in net premiums earned at Rs 6,602 crore in Q1 of FY22.

The solvency ratio stands at 194% as 30th June 2021 against regulatory requirement of 150%. Management says “Aspire to double the FY2019 VNB by FY2023”. Diversified product and distribution mix to aid growth in premiums. The insurer to Continue to improve its persistency to aid product margins