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ICICI Prudential Life Insurance Company’s stock spurted 4.5 per cent on Wednesday in reaction to good performance on the VNB (value of new business) margin and operational cost control front in FY18 (including the March 2018 quarter). Many analysts have not only upgraded the stock rating (Citi Research, Prabhudas Lilladher) to ‘buy’ from ‘neutral’ or ‘accumulate’ but also raised the target price by 14 per cent to an average ₹525.
Analysts see continued improvement in VNB margins, going ahead, due to higher share of protection mix and persistency. Also, the company is a strong beneficiary of financialisation of savings in India and low penetration of insurance.
The company reported VNB margin of 16.5 per cent in FY18, signficantly better than analysts’ expectations, and compared to 10.1 per cent in FY17. Further, it has narrowed the margin gap with competitors despite higher share of unit-linked insurance products (ULIPs), analysts pointed out. According to HDFC Securities, VNB margins of HDFC Life, SBI Life and Max Life stand at 23.2 per cent, 16 per cent and 18.5 per cent, respectively.
The stock has been the best performing stock among ICICI Bank’s subsidiaries with gains of 30 per cent over its issue price, compared to 17 per cent of ICICI Lombard and negative 18 per cent of recently-listed ICICI Securities.
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