ICICI Prudential Life Insurance delivered a strong December quarter performance, demonstrating remarkable margin resilience that successfully offset challenges from soft premium growth and GST-related headwinds. The insurer's ability to maintain stable profitability amid regulatory changes has drawn positive attention from leading brokerages, who see the quarter as a margin-led positive surprise.

Strong Financial Performance Despite Headwinds

The company's financial metrics for Q3 showcased mixed but overall positive trends, with profit growth compensating for revenue pressures.

Margin Resilience Drives Brokerage Optimism

The standout performance came from VNB (Value of New Business) margin expansion, which demonstrated the company's operational efficiency despite external pressures. VNB margin expanded 320 basis points year-on-year while remaining flat quarter-on-quarter at 24.4%. This margin strength was supported by several strategic factors including product mix improvements, higher protection share, yield curve benefits, and disciplined cost management.

Jefferies maintained its 'buy' rating and raised the target price to ₹820.00 from ₹800.00, highlighting the resilience in margins despite the loss of GST input tax credit. The brokerage noted that while the absence of GST input tax credit weighed on margins, this impact was neutralized by better product mix, favorable yield curve movements, higher protection and rider attachments, longer policy tenures, and effective cost controls.

Persistency Challenges Remain Key Concern

Despite the positive margin story, persistency trends continued to present challenges across multiple timeframes.

The persistency trends remain weak, particularly the 13-month ratio, which declined 540 basis points year-on-year due to challenges in certain products and channels. Management has indicated that corrective actions are underway, though the timeline for improvement remains uncertain.

Brokerage Outlook and Valuations

Citi also maintained a constructive stance, highlighting stable margins, gradual normalization in APE growth, and revival across channels. The brokerage rolled over to December 2027 estimates and maintained a target price of ₹900.00. Jefferies raised VNB estimates for FY26-28E by 3-4%, factoring in slightly higher APE growth and stronger margins, expecting 16% CAGR in VNB over the period.

Both brokerages noted that ICICI Prudential continues to trade at a 15-25% discount to peers, largely due to lower ROEV and earnings volatility. However, they believe consistent growth execution could drive a gradual re-rating of the stock, with margin stability and improving growth momentum supporting medium-term prospects despite persistency risks.

ICICI Prudential Life Insurance has expressed confidence in the recovery of its annuity business segment as market conditions are expected to normalize in the coming period. The insurance company's outlook reflects optimism about improving market dynamics that could benefit its annuity offerings.

Business Recovery Expectations

The company's leadership has indicated that the annuity business, which has faced challenges in recent periods, is positioned for a turnaround as underlying market conditions stabilize. This recovery expectation suggests that external factors affecting the annuity segment may be showing signs of improvement.

Strategic Focus on Group Term Business

Beyond the annuity segment recovery, ICICI Prudential Life Insurance has outlined its growth strategy for the group term insurance business. The company predicts sustained long-term expansion in this vertical, indicating confidence in the segment's potential.

Risk-Reward Optimization Strategy

The insurance provider has emphasized its commitment to meeting specific risk-reward goals as part of its business strategy. This approach suggests a measured and calculated expansion plan that balances growth opportunities with prudent risk management practices.

Market Positioning

The company's dual focus on annuity business recovery and group term business growth reflects a comprehensive strategy to strengthen its market position across multiple insurance segments. This diversified approach may help the company navigate varying market conditions while capitalizing on emerging opportunities in the insurance sector.