ICICI Prudential Life Insurance Company, the largest private sector life insurer by total premium and assets under management in FY16, will open its Rs 6,057-crore public issue for subscription on September 19. It is the largest IPO in last six years after Coal India ‘s Rs 15,000-crore public issue.
The price band is fixed at Rs 300-334 per share for its 18.13 crore equity shares initial public offer (representing 12.63 percent of the post-offer paid-up equity share capital) that will close on September 21.
It is an offer for sale by ICICI Bank . Hence, the company will not get any issue proceeds.
Incorporated at Mumbai in July 2000, ICICI Prudential Life already raised Rs 1,635 crore through anchor investors’ portion on Friday, the day before issue opening.
Here are 10 important things you need to consider before subscribing the issue:
1) Joint Venture and Shareholding
ICICI Prudential Life Insurance Company is a joint venture between India’s largest private sector lender ICICI Bank and Prudential Corporation Holdings, a part of the UK-based Prudential Group. It provides a range of life insurance, health insurance and pension products & services.
ICICI Bank held 67.52 percent stake and Prudential Corporation Holdings 25.83 percent stake in the company at the time of filing RHP.
In November 2015, ICICI Bank sold 6 percent stake in ICICI Prudential to Temasek and Azim Hasham Premji for around Rs 1,950 crore (Rs 226 per share) at a valuation of Rs 32,500 crore. Hasham Traders, owned by Azim Premji, holds 4 percent stake in the insurance company and Compassvale Investments, an indirectly wholly owned subsidiary of Temasek, owns 2 percent.
Top 10 Shareholders
2) Market Share
In FY16, its market share, on a retail weighted received premium basis, among all insurance companies in India was 11.3 percent (increased from 5.9 percent in FY12) compared with 9.7 percent for nearest private sector competitor. Among the 23 private sector life insurance companies in India, it had a market share of 21.9 percent (increased from 16.1 percent in FY12).
For the three months ended June 2016, market share among all insurance companies in India and among private sector life insurance companies in India was 11.2 percent and 23.3 percent, respectively.
3) Financials and Market Capitalisation
Gross premium income in FY16 rose by 25.2 percent to Rs 19,164.4 crore YoY and 23.16 percent in FY15 to Rs 15,306.6 crore. It was Rs 3,560 crore in Q1FY17, up 14.4 percent over Q1FY16. New business premium in FY16 was up by 23 percent to Rs 6,563 crore compared with FY15.
Profit grew only by 0.75 percent to Rs 1,652.7 crore in FY16 and 5 percent to Rs 1,640.35 crore in FY15 on YoY basis. Profit in quarter ended June 2016 was at Rs 405 crore (up 2 percent over Q1FY16).
The market capitalisation at price band of Rs 300-334 per share stood at Rs 43,059.7-47,939.8 crore.
The insurance company said return on equity had exceeded 30 percent for each year since fiscal 2012.
Value of new business grew from Rs 270 crore in FY15 to Rs 412 crore in FY16, representing an increase of 52.6 percent.
Contingent liabilities were more or less stable at Rs 198.75 crore at the end of June quarter of 2016 against Rs 200.65 crore in FY16 and Rs 196.92 crore in FY15.
4) Strong Business Model
ICICI Prudential has a strong capital position with a solvency ratio of 320.5 percent at June 2016 compared to the IRDAI-prescribed control level of 150 percent.
It has paid annual dividends since fiscal 2012. Board has declared an interim dividend of 1.10 per share and a special dividend 1 per share for the quarter ended June 2016.
Over 95.1 percent of debt portfolio invested in domestic AAA-rated instruments, including sovereign instruments and AAA equivalent rated instruments.
Its 13th month persistency ratio in FY16 was 82.4 percent, which was one of the highest in the sector, and 82.5 percent for Q1FY17.
Grievance ratio in FY16 improved to 153 per 10,000 new policies issued from 185 in FY15 and 253 in FY14.
Claims settlement ratio for individual death claims improved to 96.2 percent in FY16, which is the highest compared to nearest private sector competitor.
5) Products and Value
Unit linked insurance products comprised 82.6 percent of retail annualised premium equivalent in FY16 and 75.2 percent in Q1FY17. Annualised premium equivalent from unit linked insurance products increased from Rs 2,210 crore in FY14 to Rs 4,179 crore in FY16.
As of June 2016, it had Rs 1.09 trillion of assets under management. Of these, 73 percent were in linked assets. Funds representing 94.2 percent of linked assets with identified benchmarks as at June 2016 had performed better than their respective benchmarks since inception.
Annual premium equivalent (APE) from ULIPs increased from Rs 2,210 crore in FY14 to Rs 4,179 crore in FY16, a CAGR of 37.5 percent. APE from par products increased from Rs 628 crore to Rs 727 crore, at a CAGR of 7.6 percent. APE from pure protection products increased from Rs 63 crore to Rs 133 crore, at a CAGR of 45.4 percent in same period.
6) Strong Network
It offers products and services through an extensive multi-channel sales network across India including through the branches of bank partners, individual agents, corporate agents, employees, offices and website. Apart from parent company ICICI Bank and its subsidiary ICICI Securities, it also has bancassurance relationship with Standard Chartered Bank & Capital Small Finance Bank and long-term relationships with other financial services distributors such as India Infoline Insurance Brokers and Bluechip Insurance Broking.
As of June 2016, it had 1,24,155 individual agents and as of July 12, bank partners had 4,606 branches (including ICICI Bank’s 4,450 branches).
Its annualised premium equivalent through bancassurance, the largest distribution channel for the company, constituted 58.6 percent of retail annualised premium equivalent in FY16 and 56 percent in Q1FY17, respectively while non-bank channels contributed 41.4 percent and 44 percent in same period.
Direct sales grew at a CAGR of 52.8 percent between FY14 and FY16 and accounted for 10 percent and 12.9 percent of retail annualised premium equivalent in FY16 and the three months ended June 2016, respectively.
7) Efficiency Through Digital Technology
The ratio of cost to total weighted received premium, which it uses to monitor expenses, declined from 17.9 percent in FY12 to 14.6 percent in FY16 and compared favourably with peers, according to CRISIL Research, Life insurance industry report, July 2016. The ratio of cost to total weighted received premium was 21.1 percent for the three months ended June 2016.
Employee productivity improved, measured as retail weighted received premium per employee per annum, from Rs 0.28 crore in FY14 to Rs 0.46 crore in FY16, representing a CAGR of 29.1 percent.
8) Over 50% Business From 5 States
Maharashtra, Gujarat, Karnataka, Tamil Nadu and Delhi accounted for over 55 percent and 56.1 percent of total received premium from new business retail policies in FY16 and the three months ended June 2016, respectively.
9) Loss in Subsidiary
ICICI Prudential has a wholly owned subsidiary, ICICI Prudential Pension Funds Management Company. Since it commenced operations in 2009, it has incurred cumulative losses of 1.57 crore till June 2016.
It had Rs 831 crore in assets under management at June 2016 as compared to Rs 701 crore at FY16.
10) Experienced Management Team
MD & CEO, Sandeep Bakhshi has been with company for over five years. He has over 32 years of experience in the banking, financial services and insurance (BFSI) sector.
Puneet Nanda is the executive director of business, Sandeep Batra is executive director of corporate center and Satyan Jambunathan is chief financial officer of the company.
28 of the top 36 members of management team have worked within the ICICI Group for over 10 years and have an average work experience of 20 years. Senior managerial personnel in the actuary, investment, underwriting and claims department have an average functional experience of over 16 years.
About the issue
Bids can be made for a minimum of 44 equity shares and in multiples of 44 equity shares thereafter.
Equity shares are proposed to be listed on the NSE and BSE.
The Global book running lead managers to the offer are DSP Merrill Lynch and ICICI Securities. The book running lead managers are CLSA India, Deutsche Equities India, Edelweiss Financial Services, HSBC Securities & Capital Markets (India), IIFL Holdings, JM Financial Institutional Securities, SBI Capital Markets and UBS Securities India.