ICICI Prudential Life Insurance continues to present a compelling long-term investment opportunity, despite muted near-term growth and headwinds in its individual annualized premium equivalent (APE). According to Mirae Asset Sharekhan, which has reiterated a BUY recommendation on the stock with a price target of Rs. 750, the insurer remains well-positioned for recovery and expansion, driven by its diversified product and distribution strategy. With improving margins, rising persistency in critical segments, and sound embedded value (EV) metrics, the company offers a steady play in India's under-penetrated life insurance sector.
Valuation Outlook: Maintained Buy with Rs. 750 Price Target
Sharekhan's latest valuation update places ICICI Prudential Life Insurance at a target price of Rs. 750, based on a projected 1.5x and 1.3x FY2026E and FY2027E EV per share, respectively. At its current market price of Rs. 568, the stock offers an upside potential of over 30%. This valuation appears attractive when balanced against expected APE/VNB/EV CAGR of 12%/14%/13% over FY2025–FY2027E.
Embedded Value (EV) grew 13.3% year-on-year in FY25 to Rs. 47,951 crore, and is projected to reach Rs. 61,000 crore by FY27. VNB (Value of New Business) also showed positive momentum in Q4FY25, growing by 2% YoY to Rs. 795 crore, while VNB margins expanded 120 basis points YoY to 22.7% due to a favorable product mix.
Core Performance Metrics: Strength in Margins, Weakness in Growth
Despite the headline improvement in VNB margins, the company reported a 3% YoY decline in APE for Q4FY25, largely driven by a soft performance in the individual business segment.
APE for Q4FY25: Rs. 3,503 crore vs. Rs. 3,616 crore YoY
VNB for Q4FY25: Rs. 795 crore vs. Rs. 776 crore YoY
VNB Margin: Improved to 22.7% (vs. 21.5% in Q4FY24)
In FY25, however, full-year APE grew 15% YoY and VNB expanded 6% YoY, supported by strong contributions from ULIPs (+29%), retail protection (+25%), and group fund (+107%). Annuity and non-par savings businesses declined due to a high base and softer investor demand.
Channel-Wise Distribution: Bancassurance Leads, Partnership Lags
APE growth in FY25 was distributed unevenly across channels.
Bancassurance: Grew 18% YoY
Direct Channel: Increased by 17% YoY
Agency Channel: Up 14% YoY
Partnership Channel: Declined 3% YoY
The partnership channel, despite historically delivering 17–18% CAGR over the past four years, underperformed due to a skew toward non-linked products. The company continues to rely heavily on ICICI Bank, which contributed around 14–15% of APE.
Strategic Shift: Focus on Protection and Non-Par Products
A significant driver of margin improvement was a product mix shift toward the non-par segment and retail protection plans. The launch of ICICI Pru Gift Select, a non-participating guaranteed income plan, is designed to appeal to risk-averse investors amid market volatility.
Retail protection showed strong momentum, growing 25% YoY, while the non-par segment surged 14% YoY in Q4FY25 after a 17% decline in the first three quarters.
Reserve Adjustments Impact Embedded Value
An operational assumption change involving increased mortality reserves for group credit life protection led to a Rs. 254 crore hit to EV. This was in response to delayed claim reporting trends, reflecting prudent risk management despite the near-term financial impact.
Despite this, RoEV remained solid at 13.1% for FY25, underlining management’s ability to navigate operating headwinds while preserving long-term value creation.
Persistency and Solvency: Mixed Signals
Persistency ratios in FY25 showed a mixed trend. Early-year ratios like the 13th, 25th, and 37th-month persistency improved, which is crucial for VNB generation. However, 49th and 61st-month ratios declined, signaling some long-term retention concerns.
The company’s solvency ratio rose to 212.2% from 191.8% in FY24, reflecting enhanced capital adequacy and room for further business growth without near-term capital infusion.
Company Profile and Strategic Edge
ICICI Prudential Life Insurance, promoted by ICICI Bank and Prudential Corporation Holdings (UK), began operations in 2001 and is currently the third-largest private-sector life insurer in India by RWRP (Retail Weighted Received Premium).
The company maintains a broad distribution platform, encompassing individual agents, corporate agents, bancassurance partners, digital channels, and proprietary sales forces. Its wide product spectrum—protection, savings, annuities, and non-par offerings—supports its strategy of serving various customer life-stage needs.
Outlook: Positioned to Outpace Industry
ICICI Prudential is targeting APE growth ahead of the industry average by bolstering its multi-channel and multi-product framework. The focus remains on absolute VNB expansion and better persistency across products. Over time, higher allocations to annuity, non-PAR, and protection products could lift VNB margins back to prior highs of 24%+.
With continued innovation—such as launching first-in-industry products and recalibrating risk pricing—ICICI Prudential is positioned to benefit from India's under-penetrated insurance landscape, especially as household savings shift towards financial instruments.
Investment Summary: BUY with Long-Term Structural Tailwinds
Mirae Asset Sharekhan maintains a BUY rating with a price target of Rs. 750. The stock trades at a reasonable 1.5x FY26E EV, offering investors an opportunity to capture growth in India’s expanding life insurance sector. The company's disciplined execution, margin recovery, and strategic recalibration post-COVID have re-established it as a formidable player among private insurers.
Comments