ICICI Prudential is on track to achieve new business value of Rs 2,560 crore in FY23

Private insurer ICICI Prudential Life said it was on track to meet its target of doubling the value of new business to Rs 2,560 crore this financial year from levels in financial year 2019.

Management’s optimism to achieve the target it set at the start of FY 2019, when the value of its new business (VNB) stood at Rs 1,328 crore, stems from VNB growth. much more than expected recorded in the first quarter at Rs 471 crore, 31.7% higher than a year ago, when it was only Rs 358 crore.

VNB is a key profitability measure in the life insurance industry because life insurance is a long-term business unlike general insurance which is a one-year commitment. So, VNB means the future benefit of a life insurance policy written now. The higher the VNB margin, the better a company’s profitability will be. This is calculated by dividing the NAV by the annualized premium equivalent or the regular premium plus 10% of the single premium.

Having already grown so much in the first quarter, the company now needs to grow at a lower rate of 22.5% just to meet the target, management said.

“We ticked all four boxes in the June quarter. Our 4P strategy, launched in fiscal 2019, of focusing on premium growth, products especially on the protection side, improving of persistence and improved productivity, is operating as planned and we’re on track to achieve our aspiration to achieve the target set in FY2019 of doubling VNB to Rs 2,650 crore this FY from Rs 1,328 crore then,” NS Kannan, Managing Director and Managing Director, told PTI in a recent interview.

Having already increased VNB by just under 32% in the first quarter, this gives the company comfort in hitting the target at a much lower quarterly run rate of 22.5% now, a- he explained and asserted that the strong 31.6% VNB growth was driven by a robust 24.7% growth in APE and the overall figures show the success of our 4P strategy.

The first quarter was exceptionally good due to the sharp drop in 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 catalyst was the improved retention rate which jumped to 85%, Kannan said.

The persistence ratio, a measure of customer confidence and business quality, improved in the first quarter across all cohorts and the key ratio at month 13 was 85.5%. While bonus income increased 25%, the productivity component also contributed to an overall improvement of 4 percentage points, Kannan said.

The quarter also saw the company become the largest among its peers in terms of new sum assured business at Rs 2.21 lakh crore and with a market share of 15.8% in the benchmark quarter, compared to 14 .7% a year ago.

VNB margin climbed 31% from 29.4% YoY, driven by 24.7% growth in APE (Annualized Premium Equivalent) to Rs 1,520 crore, while its annuity APE increased by 69% to Rs 98 crore. , CFO Satyan Jambunathan said in the interview.

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

Assets under management increased by 3.1% to reach 2,30,072 crores.

“Going forward, I see more traction for protection given the massive under-penetration and pandemic-induced security scare. Currently, this segment brings us 21% of revenue, up from 17% over the past from FY22 and I see that growing to 23-25% in the medium term,” Kannan said.

He also hailed the growth target set by new Irdai Chairman Debasish Panda to increase insurance penetration by doubling sales, saying this will usher in sustainable growth for the industry.

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