ICICI Prudential Life Insurance is on course to meet the target of doubling the value of new business this fiscal from the FY19 levels, as the largest private-sector life insurer expects to continue the good run it had in FY22 and expand the margin by 22 per hundred.
It had nearly trebled the net income in the March quarter on the back of robust margin growth from new sales.
The ICICI Group firm had in FY19 set a target of doubling the value of its new business (VNB) by FY23 — from Rs 1,328 crore in FY19 to Rs 2,650 crore by FY23.
It closed fiscal 2022 with a VNB of Rs 2,163 crore, a growth of 33.4 per cent over FY21, and it expects to grow the same at 22 per cent this fiscal to meet the target.
In life insurance parlance, VNB is the key profitability metric and the equivalent of the net interest income for a bank.
Stated differently, VNB is the present value of all future profit at the time of selling a new policy. It’s also referred to as new business profit booked by an insurer from selling new premium, the other being income from renewal premium, which totaled Rs 15,036 crore in FY22, up 15 per cent from Rs 13,032 crore in FY21.
Though H1 was impacted badly by the second wave of the pandemic, H2 was much better helping us close the year with a VNB of 33.4 per cent at Rs 2,163 crore. The VNB margin expanded by 28 per cent from 25.1 per cent in FY21.
Given that we are off the pandemic now, we’re very confident of easily meeting our target of doubling the VNB this fiscal, as we need to grow it only by 22 per cent over FY22, which is easily achievable, NS Kannan, chief executive and managing director of ICICI Prudential, told PTI in an interview on Monday.
Kannan, however, added that the insurer paid five times more in COVID-19 claims at Rs 1,000 crore in FY22, net of re-insurance, most of which in the first half. In FY21, the net pandemic claims were only Rs 200 crore.
According to brokerage Emkay Global, between fiscal 2019 and 2022, the company has delivered 1.63x VNB growth, led mainly by 64 per cent growth in VNB margins –from 17 to 28 per cent, even though its APE has declined by 100 bps.
It expects the company to marginally miss the VNB target at Rs 2,500 crore or 1.9x of FY19 VNB.
Emkay Global expects limited scope for further VNB margin expansion and the key to achieving the 22 per cent VNB growth target in FY23 will have to be led by APE growth.
Kannan said hopefully the pandemic is behind us and there is no fourth wave. Yet we are maintaining Rs 25 crore in additional provisioning for any pandemic eventuality.
ICICI Prudential Chief financial officer Satyan Jambunathan credited the better show in FY22 to the well-balanced product mix wherein 79 per cent of its business came in from savings (48 per cent unit-linked savings, 31 per cent traditional savings), which overall grew 19 per cent to Rs 6,420 crore; 17 per cent from the protection that grew 26 per cent to Rs 1,313 crore and the balance 4 per cent from the group.
The protection mix rose from 16.2 per cent of APE (annualised premium equivalent) in FY21 to 17 per cent in FY22. Focus on premium growth and expanding protection business led to the new business sum assured grow 25 per cent to Rs 7.73 lakh crore in FY22, taking the market share to 13.4 per cent from 12.5 per cent in FY21.
Over the weekend, ICICI Prudential reported Rs 185 crore net income for Q4, up from Rs 64 crore a year ago.
It has reported a net income of Rs 754 crore for FY22, down from Rs 960 crore in FY21.
Its VNB rose 33.4 per cent to Rs 2,163 crore over FY21, led by a robust 25 per cent growth in new business sum assured at Rs 7.73 lakh crore and 20 per cent in annualized premium equivalent to Rs 7,733 crore.
The total outstanding sum assured stood over Rs 23.5 lakh crore, Jambunathan said, adding AUM stood at Rs 2,40,492 crore, up 12 per cent and the solvency ratio at 204.5 per cent.
Its 13th-month persistency ratio improved to 85.7 per cent for FY22, up from 84.8 per cent in FY21, while the embedded value grew 9 per cent to Rs 31,625 crore and the return on this grew to 15.2 per cent from 11 per cent.
Welcoming the new Irdai chairman Debasish Panda’s move to usher in a principal-based regulatory regime, Kannan said the move will allow insurers to make risk-based capital allocation that will be very good for the industry as it will allow them to make fund allocation according to their risk exposure.
On the forthcoming LIC share sale, Kannan said it will be very good for the industry, as it will lead to an improvement in the industry profile, and the weighting in the indices, which will lead to more fund allocation for the insurance sector.
He also feels allowing 74 per cent FDI in the sector will begin to play out from this fiscal but he parried a question about whether Prudential is likely to increase the stake in the company, saying that’s a call for the promoter shareholders to take.
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