Fundamental Radar: ICICI Pru Life can see 6% CAGR in VNB over 3 years, here’s why

With this concern now behind, the outlook for insurance companies has improved and Motilal Oswal Financial Services remains positive on Life Insurance.

“IPRU (ICICI Prudential) has maintained healthy traction in VNB growth by achieving its stated guidance, led by improving product mix in favor of higher-margin products, which resulted in a robust margin of 32%,” said Sneha Poddar, associate vice president - research at Motilal Oswal.

The share of banca (excluding ICICI Bank) increased to 16% from 4% in FY19, thus supporting growth and diversification in the distribution mix. The increase in agent recruitments and the strong pace of new partnership additions should boost premium growth.

The brokerage firm expects ICICI Prudential Life Insurance to deliver a 6% CAGR in VNB over FY23-26.

“Going forward, premium growth and expansion of VNB margin will be the key drivers for the re-rating of the stock,” Poddar said.

The brokerage believes that growth delivery would be the key driver for valuation re-rating, and that would come from improved efficiency of investments made in various channels over the past two years, such as direct and agency.

The 1-year forward P/EV for the life insurance major has declined to 1.5x from 1.8x in June 2023. Therefore, the brokerage firm has reiterated its “buy” rating on the stock with a price target of Rs 715.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)