Stock plummeted by 10% following the announcement of an 82% year-over-year decline in revenue and a failure to meet margin expectations
Stock plummeted : The shares of ICICI Prudential Life Insurance Company Ltd have dropped by up to 10 percent following an 82 percent year-on-year decline in revenue and missed margins in Q3FY25.
Currently, with a market capitalization of Rs 84,010.90 crore, the shares of ICICI Prudential Life Insurance Company Ltd are trading at Rs 581.30 per share, showing an increase of around 8.59 percent compared to the previous closing price of Rs 635.90 per share.
Reasons for the decline:
The company’s shares have experienced a bearish trend after reporting stable results in Q3FY25. Revenue decreased by 82 percent quarter-on-quarter, dropping from Rs 25,158 crore in Q2FY25 to Rs 4,536 crore in Q3FY25. Additionally, revenue fell by 82 percent year-on-year, from Rs 26,430 crore in Q3FY24 to Rs 4,536 crore in Q3FY25.
The company’s net profit increased by 29 percent quarter-on-quarter, rising from Rs 251 crore in Q2FY25 to Rs 325 crore in Q3FY25. Furthermore, net profit surged by 43 percent year-on-year, climbing from Rs 227 crore in Q3FY24 to Rs 325 crore in Q3FY25.
ICICI Pru Life reported weaker margins in Q3 FY25 due to a shift in product mix favoring low-margin linked and group savings businesses, despite growth in fund management and ULIP segments. The VNB margin dropped by 220 bps QoQ to 21.2%, with no significant cost changes.
Brokerage Views:
Morgan Stanley has assigned an ‘equal-weight’ rating to ICICI Prudential Life with a target price of ₹695. Despite stronger Annualized Premium Equivalent (APE) growth on a weak base, the company missed Value of New Business (VNB) forecasts in Q3.
Following a margin miss, Morgan Stanley has adjusted its VNB estimates for FY25-27 by 2%. The brokerage has given an “equal-weight” rating, pointing to performance volatility, weaker margin delivery, and lower RoEV compared to peers as the main reasons for the downgrade.
Segment Growth
In the first half of FY2025, ICICI Pru Life saw a 26.8% YoY growth in APE, reaching ₹44.67 billion. This growth was primarily driven by strong performance in various segments: Annuity saw a 99.5% increase, Retail protection grew by 17.2%, and Linked business increased by 54.5%. APE growth in Agency and Direct channels was at 45.7% YoY.
Strategic Focus
The company is currently dealing with pricing pressures in the group-term business due to increased competition. Discussions are ongoing with partners regarding commission structures in light of regulatory changes. Despite challenges in the partnership distribution channel, management remains positive about future growth, anticipating a rebound following regulatory adjustments.
Company Snapshot
ICICI Prudential Life Insurance Company Ltd specializes in providing life insurance, pensions, and health insurance products to individuals and groups. The company operates in participating, non-participating, and unit-linked lines of business.
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