ICICI Prudential 'Confident' Of Crossing FY23 Value Of The New Business Target By March

ICICI Prudential Life Insurance is "very confident of crossing doubling the VNB target" by March on the back of a record jump in its high-margin protection business share and the resultant highest-ever margin it has booked in the just-concluded December quarter.

The company reported a 23.2 per cent growth in the value of the new business (VNB) to Rs 1,710 crore for the first nine months of this fiscal, up from Rs 1,388 crore on-year. In FY19, the company had set a target to grow at 22.5 per cent annually to double its VNB to Rs 2,650 crore from Rs 1,325 crore then. 

The confidence of the management in crossing the target by a higher margin arises from the traditionally busy season March quarter when people normally buy insurance to save tax. 

On Tuesday, the ICICI group firm, which leads the private sector in terms of the sum assured at Rs 6.9 lakh crore in payback commitments to policyholders, reported a 29 per cent decline in net profit at Rs 221 crore for the December quarter due to across board spike in cost, whittling down the highest-ever margin of 33.9 per cent in Q3 since inception 22 years ago, and helping it average the nine months margins at 32 per cent.

It is the second-largest private player in terms of VNB.

During the quarter, its net premium income rose to Rs 9,465 crore from Rs 9,074 crore and assets under management rose to a record Rs 2.52 lakh crore—the second highest among private life insurers.

"I am very confident of doubling the VNB by March as planned in FY19 when we had said we'd double it in four years. Given that we've already grown by 23.2 per cent so far this fiscal, it's very possible to even cross the target of Rs 2,650 crore in VNB by the end of this fiscal," its managing director and chief executive NS Kannan told PTI here on Wednesday.

This is a more-than-expected growth rate—as we needed only a 22.5 per cent growth rate to maintain this fiscal to achieve the target—places us in a very comfortable position to cross the target, he added.

Kannan explained that this higher growth has been achieved on the back of exceptionally high margins from protection products, which now brings them 20 per cent of the business.

"The protection products brought us 32 per cent VNB margin in the third quarter, making it the highest product from a margin perspective," Kannan said.

He is also confident that the share of protection products going up to 25 per cent of the total business going forward with a caveat that such growth depends on how the markets perform—in case of a bull-run, Ulip products will fare better and in case of a bad market, protection policies should shine more as the share of Ulips would likely fall in a range of 35-50 per cent.

Now the company has a healthy product mix with Ulips chipping in 40 per cent of the business, followed by non-Ulips savings products chipping in with 30 per cent and protection fetching in 20 per cent and the annuity and group products getting in the remaining 10 per cent, its chief financial officer Satyan Jambunathan said.

Back in FY19, when the company had set the target of doubling the VNB, the product mix was 80:20—wherein 80 per cent of the business was concentrated in Ulips and the remaining in all other verticals, and the rise of protection and non-Ulips helped the company book higher margins. In FY19, the average margin was 17 per cent, which rose to 32 per cent now, Jambunathan said.

Kannan exuded confidence in not just maintaining such a high margin but even building further on it, given the faster growth of the protection products.

In Q3, from a growth rate perspective annuity products clocked the highest rate 56 per cent, helping the company clocked a 34.9 per cent growth in new business sum assured.

Kannan attributed the higher business numbers to the successful execution of the 4P strategy comprising growth in premium and protection business, besides improvement in persistency and productivity has driven robust growth in VNB.

The new business sum assured grew by 34.9 per cent year-on-year to Rs 6.9 lakh crore, the highest among private life sector players, giving it a market share on the new business sum assured of 14.6 per cent from 12.7 per cent for nine months period in FY22.

Persistency is one of the strategic pillars of the 4P strategy, and its 13th-month persistency ratio improved to 86.1 from 84.8. Similarly, the 49th-month persistency ratio improved to 66 from 63 per cent.