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ICICI Prulife’s steady climb in valuations may sustain on growth efforts

ICICI Prudential Life Insurance added 110 new partners in the March quarter to boost business growth. (Photo: Reuters)Premium
ICICI Prudential Life Insurance added 110 new partners in the March quarter to boost business growth. (Photo: Reuters)

  • the company’s efforts to regain growth has have been appreciated by investors. The fact that its shares trade at a far lower valuation multiple compared with its peers HDFC Life Insurance Company Ltd and SBI Life Insurance Company Ltd also works in its favour

MUMBAI: Investors of ICICI Prudential Life Insurance Ltd have had a lot to cheer for over the past few months and gains in the company's shares reflect this. As such, analysts have noted the modest valuations and held to their buy ratings on the stock.

The insurance company added 110 new partners in the March quarter to boost business growth. Analysts at Jefferies India Pvt Ltd point out that the company may benefit immensely from its bancassurance partners.

But there is another, albeit smaller, push that could benefit ICICI Prulife’s growth. Its banking partners have also grown their deposit base sharply. In fact, deposit growth for banks have been faster in the March quarter. With deposits coming in droves, banks have begun to cut deposit rates. Jefferies points out that this may redirect funds into traditional insurance plans. “Even as the cut in deposit rates primarily reflects the strengthening of their deposit franchise, we believe that it will have a positive rub-off for cross-sell of financial products, especially where returns are guaranteed (like non-par products and annuities) as well as other traditional products like PAR," said a note from the brokerage.

ICICI Prulife’s bancassurance partners too have announced deposit rate cuts. Considering that they hawk the life insurer’s products, the drop in their deposit rates and the availability of insurance plans on the counter could direct flows into these plans easily. “We understand that these platforms collectively had originated about Rs6-7 billion ( 600-700 crore) of annualised new premiums over past year and targets would be to double this in the next 3 years or so, with ICICI Pru Life being a key beneficiary," the Jefferies note points out. The bancasurrance channel contributed 42% of the insurer’s annualised premium equivalent (APE) in FY21 and remains the strongest distribution channel.

ICICI Prulife has had a tough two years when the company saw its business growth plummet. The pandemic had increased challenges with APE showing a contraction of 12% in FY21. However, the company’s efforts to regain growth has have been appreciated by investors. The fact that its shares trade at a far lower valuation multiple compared with its peers HDFC Life Insurance Company Ltd and SBI Life Insurance Company Ltd also works in its favour. The stock trades at a multiple of 2.3 times its estimated embedded value for FY22, cheaper than the multiple of 4.3 for HDFC Life and 2.5 for SBI Life.

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