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ICICI Pru Life to reach a new business value of Rs 2,560 crore in FY 2023
25-Jul-22   09:27 Hrs IST

Private insurer ICICI Prudential Life has said it is on course to meet its target of doubling the value of new business this fiscal to Rs 2,560 crore from FY19 levels.

The optimism of the management is confident of achieving the target set for itself by the start of FY2019 with a value of its new business (VNB) of Rs. 1,328 crore, while expected VNB growth in the first quarter was Rs 471 crore, up 31.7 percent from Rs 358 crore in the previous year.

VNB is an important profitability metric in the life insurance industry because life insurance is a long-term business unlike general insurance. Hence, VNB is the future profit of the life policy written now. The higher the VNB margin, the better will be the profitability of a company. It is calculated by dividing the VNB by the annual premium equivalent or regular premium and 10 percent of the single premium.

Having already achieved this much growth in the first quarter, the company now needs to grow at a lower 22.5% rate only to meet the target, according to the management.

"We've ticked on all the four boxes in the June quarter. Our 4Ps strategy, initiated in FY19, of focusing on premium growth, products especially on the protection side, improving persistency, and enhancing productivity, are performing as planned and we're on track to achieve our aspiration of meeting the target set in FY19 of doubling the VNB to Rs 2,650 crore this fiscal from Rs 1,328 crore then," N S Kannan, managing director and chief executive, said in a release.

Having already in Q1 VNB has grown a shade below 32 percent, giving the company the flexibility to hit the target at a very low quarterly run rate of 22.5%, he explained and emphasized the strong 31.6% VNB. The growth was driven by a strong 24.7 percent growth in APE and the overall numbers show the success of our 4P strategy.

The first quarter was exceptionally well because of steeply fallen Covid claims which fell to a trickle of Rs 16 crore from almost Rs 500 crore a year ago, leaving it bleeding Rs 186 crore. Another enabler was the improving persistency ratio which jumped to 85%, Kannan said.

Persistency ratio, a measure of customer trust and the quality of its business, improved in Q1 across all cohorts and the key 13th month ratio stood at 85.5%. While the premium income grew 25%, productivity component also chipped in with a 4 percentage points overall improvement, Kannan said.

The quarter also saw the company becoming the largest among the peers in terms of new business sum assured at Rs 2.21 lakh crore and with a market share of 15.8% in the reporting quarter, up from 14.7% in the year-ago period.

VNB margin soared 31% from 29.4% on-year, on the back of a 24.7% growth in the APE (Annualised Premium Equivalent) which grew to Rs 1,520 crore, while its annuity APE grew 69% to Rs 98 crore, the chief financial officer Satyan Jambunathan said.

From a product perspective, he said the savings rose 22.4% to Rs 1,092 crore, protection grew by 22.2% to Rs 330 crore, annuity jumped by 69% to Rs 98 crore and the new business received premium improved by 24.4% to Rs 3,184 crore.

Assets under management grew 3.1% to 2,30,072 crore.

"Going forward I see more traction for protection given the massive under-penetration and the pandemic-induced fear for safety. Currently this segment gets us 21% of the income, up from 17% in FY22 and I see this scaling to 23-25% over the medium term," Kannan said.
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