Subscribe to ICICI Prudential Life Insurance IPO -:- Equity Research

ICICI Prudential Life Insurance Company Limited (ICICI Pru) is the largest private sector life insurer in India by total premium and AUM (INR 1.0 trillion) at the end of FY16. The company offers wide range of life insurance, health insurance and pension products and services. It’s market share, on a retail weighted received premium (RWRP) basis, has increased from 5.9% in FY12 to 11.3% in FY16. As on Q1FY17, it's distribution network includes 124,155 individual agents and over 4,500 bank branches. It’s 13th month persistency ratio in FY16 was 82.4%, which was one of the highest in the sector. The company has a strong capital position with solvency ratio of 320.5% as on Q1FY17 compared to the IRDAI-prescribed control level of 150.0%. Outlook & Valuation Indian life insurance sector offers strong growth opportunity considering that it is already the tenth largest life insurance market in the world despite underpenetrated insurance market with a life insurance penetration of 2.7% in 2015 compared to Thailand (3.7%), Japan (8.3%) and South Africa (12.0%) and global average of 3.5%. We are positive on the prospects of the company given above industry growth in premiums, diverse presence across all business verticals, customer focused approach, pan India presence, strong persistency & claim settlement ratio and parentage & brand equity of the promoter. At the issue price, the stock is valued at 2.8x FY18E Embedded Value (considering RoEV of 10%) which is on the lower side considering the recent HDFCMax Life merger, which happened at 3.1-3.4x FY18E EV. There is further scope for improvement in RoEV due to shift to higher margin non-linked business and higher investment variance. We recommend investors to SUBSCRIBE to the issue for long term gains.