What is your projection of VNB growth number of ICICI Pru? Do you have idea how this number has been for ICICI Pru historically?
I am surprised at the present rate of growth, which is 70%!
What is your projection of VNB growth number of ICICI Pru? Do you have idea how this number has been for ICICI Pru historically?
I am surprised at the present rate of growth, which is 70%!
They were able to grow the VNB every year and even more than 71% that they managed this time.
Even the VNB Margin is going up steadily from 5.7% to 11.7% now. I feel they are in a sweet spot now. They are growing the VNB and the VNB margin also is increasing. Good thing is they have still more room to expand the VNB Margin. SBI Life has a VNB Margin of 15.4% and HDFC Life does 21.6%.
I’m not an analyst or have a crystal ball. My guess is that they should grow by 30% in the near future coupled with expansion in VNB Margin.
Q2 Concall Highlights (source: capital market)
Well, this is sad. Very bad for banks image if found guilty
G1
This is unfortunate and hope the companies and IRDAI act on misselling.
This is not a new trick: Don’t Buy HDFC Crest – It is Not a Fixed Deposit.
This is hardly mis-selling, this is cold blooded cheating with criminal intent to dupe gullible public of their money to meet internal target in institutions (in)famous for their “aggressive” culture. What are the poor victims supposed to do if they are unable to get their monthly payouts to meet living expenses? I hope the guilty are awarded exemplary punitive sentences to deter such wrong doings from other officers in future. Sorry for the rant, but such criminal acts really gets me riled.
NOTES FROM ELEDWEISS CONFERENCE - 3-FEB-18
Operating metrics:
(1) 9mFY18 APE growth was 25% with protection APE growth at 32% YoY (good business growth across business lines). Management expects growth
in protection business to sustain;
(2) NBAP margins reported for 9mFY18 @ 13.7% were largely a reflection of product mix & cost structures; incremental levers for margin improvement are: a) protection growing faster than savings will feed into higher margin; b) persistency 13th month is at 86% while in assumptions it is 82%, so as it comes for review it will boost margin; and c) also, long-term persistency itself is expected to structurally improve;
(3) solvency trajectory has three elements playing out: a) dividend payout at 60%; b) savings business is gaining traction & consuming capital; c) growth in protection business - capital for whole sum assured & since premium is low, capital for same amount of premium is high;
(4) most of the protection business comes from retail - credit linked was merely INR0.38bn, of INR2bn of protection business.
Overall business:
Key objectives:
a) Customer-centric products (ULIP+ protection contributes 87.0% to total APE); and
b) focus on retail through multi-channel distribution architecture backed by strong technology platform.
Wider direct market operates in two segments - web aggregator (fee based model - no spend on advertising) and company website (needs to do advertisements to direct traffic). 50-60% business through web aggregators. For ICICI Prudential Life, one more element in direct business is own direct employee selling insurance. Any cost efficiency resulting due to direct sourcing will be passed on as a benefit to the customer.
Other highlights:
(1) Since headline rate for insurance companies at 12.5% is lower than prevailing corporate tax rate, the risk of increase in tax rate prevails. However, how much it will be raised will depend on several factors;
(2) in the short term, insurance products are more expensive than MFs, but in the long term they are at par or better than mutual funds;
(3) 55-60% of assets get allocated to equity in ULIP & balance to debt funds. Insurance products help customers switch over across asset class without tax implications.
Why de-growth in Q4FY18?
Q4FY18 RESULTS
ICICI Prudential declared a very good set of results for Q4FY18 & FY18.
Results:
https://www.bseindia.com/xml-data/corpfiling/AttachLive/bf0b9ac8-0b6b-41f5-9a2f-54f9ef7f3f49.pdf
Investor Presentation:
Few interesting points from results & conf call ->
Retail Franchise: ICICI Pru has a very retail focused franchise where 98% of APE is from retail. Retail franchise has better margins than group business (high proportion for HDFC Life).
Cost Efficiency: ICICI Pru has reduced cost/TWRP from 15.1% to 13.7% i.e. reduction of 1.4%. As non-ULIP portfolio grows, it would be interesting to see how this number evolves. The cost has gone up for HDFC Life.
Renewal Premium: Renewal premium has grown at 23% for FY18 compared to 11% for HDFC Life. This might be on account of lower share of group business or more retail focused franchise.
Tax rate assumption: The company has used lower effective tax rate similar to what some of the industry players have been doing. This has added ~ 1.4bn in EV & ~1.3% in VNB margin.
Valuation: I still struggle to put a valuation number to life insurance companies. After going through several research reports for Indian & overseas insurance companies, appraisal value (AV) seems like one decent metric. AV = EV + multiple * VNB. Many reports seem to have used multiple ranging from 10-30. One can use his own multiple & come up with AV.
Disc - Forms more than 5% of portfolio. No transactions for last 90 days.
Very good set of numbers!
However my observations are that ape ticket size for protection is coming down . Is there some sort of pricing pressure??
There has been a dip in market share and growth is less than that of industry growth for the period
Most encouraging thing is faster growth in protection when compared to savings. Protection. Share has increased to 6 % from 4%
It will be interesting to see how vnb margins shape up when protection share goes to 10-15%
Disclosure: invested
Q1 2018 results out. Can anyone who is tracking this stock please analyze the results. I don’t have much understanding of insurance business.
Indian Embedded Value is the main matrix used to analyze Life insurance company, which they do not publish every quarter.
Their stated position is we will publish IEV half-yearly in-line with best industry practices. Their competitors do it every quarter. I really do not know what best industry practices this group follow. Top management in all the organizations of the group seem to follow most opaque and crooked policy in name of transparency and corporate governance.
It is difficult to analyze the company given management choose not publish IEV for reasons best know to them.
It is difficult to analyse the performance of the insurance companies as the embedded value is a function of many assumptions…however we can always compare the performance of HDFC life and ICICI pru and use them as bench marks…
HDFC life is way better than icici life in terms of performance but HDFC is almost 2.5 times costlier on the basis of price to EV…other way of looking at it is that ICICI pru is undervalued…
HDFC will command that premium due to their excellent mgt and unique initiatives but we need to define that premium…for my calculation purpose i am keeping a 40% premium for HDFC life over icici life…so with HDFC life as a benchmark which has a PEV ratio of minimum 6-6.25, the ICICI should have a PEV of 3.75…to reach that PEV, the ICICI share should be valued at Rs. 491…
Q1 FY19 RESULTS UPDATE
Overall I find results to be satisfactory. Insurers start making money from 2nd, 3rd years of their business due to high cost of acquisition. The growth in renewal premium & 5th year persistency numbers are very good in that direction.
The company is focused on growing VNB & VNB margin through up-scaling protection side of the business. This direction will bring product mix closer to competitors like HDFC Life or Max Life & hopefully VNB margins will also be closer to them over time.
In the short term (FY19), if company can stem the de-growth in savings side of business & continue to grow protection side of business at this rate, we might see healthy VNB growth (50%+) by the end of the year.
On the question of EV development, one can assume the unwind of 7-10% and add VNB of the current year to get approximate estimate of EV for next year.
Disc - The stock forms > 5% of my portfolio and no transactions in last 90 days. This is not a buy/sell recommendation & investors are advised to do their own due diligence. I am not a SEBI registered analyst.
This should be cause of concern for investors. We don’t even have one matrix to compare life insurance companies!
I would argue that assumption which affect the valuation of Life insurance companies should be decided by regulator. Also they should be disclosed more readily by companies.
Hi,
Can someone please explain as to why did ICICI Pru go after the ULIP market in such an aggressive manner, given the cyclicality in this segment and very lower margins? What are the advantages of being in this business apart from the growth that was witnessed in the last few years in this segment?
Thanks.
Uploading the H1 investor presentation for reference. Slide 22, VNB drivers (4P’s concept is pretty interesting - Premium Growth (APE), Protection Premium Growth, Persistency and Productivity) is an interesting read!.
H1-FY2019-Business-Presentation_IPRU.pdf (461.5 KB)
Disclosure: Initiating position through long term SIP
Disc : No holding. Waiting for <250 levels