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.

Stock Performance and Market Reaction

Shares of ICICI Prudential Life Insurance remained in focus following the strong quarterly results. The stock ended 2.16% lower at ₹699.25 on BSE, after hitting a high of ₹700.15 in early trade, representing a 2% gain from the previous close of ₹684.05. Despite the day's decline, the stock has largely received positive reactions from brokerages.

Margin Resilience Drives Brokerage Optimism

The standout performance came from VNB margin expansion, which demonstrated the company's operational efficiency despite external pressures. VNB margin remained resilient at around 24%, slightly better than brokerage forecasts, while the 4% rise in annualised premium equivalent (APE) supported overall performance.

Jefferies noted that the GST impact was largely neutralised through better product mix, supportive yield curve, and tight cost control. The brokerage raised VNB estimates by 3-4% and expects 16% CAGR in VNB over FY26-28, arguing that steady growth could help the stock re-rate.

Persistency Challenges Remain Key Concern

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

While Jefferies flagged that persistency remains weak and could lead to a small negative variance in embedded value, brokerages remain optimistic about the company's ability to address these challenges through corrective actions.

Mixed Brokerage Outlook

CLSA highlighted strong 40% year-on-year growth in retail protection aided by GST removal, alongside pickup in ULIP and non-par sales. HSBC expects favourable base, robust demand and pickup in credit protection products to drive APE growth recovery.

However, some brokerages maintained cautious stances. Goldman Sachs retained its neutral rating but cut target price to ₹690, noting muted APE growth at 4% year-on-year. Nomura maintained neutral with ₹740 target, acknowledging good margin performance but expecting full-year VNB growth to remain in single digits.

Despite mixed views, most brokerages believe ICICI Prudential continues to trade at a 15-25% discount to peers, with consistent growth execution potentially driving gradual re-rating supported by margin stability and improving growth momentum.

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.