ICICI Prudential’s net premium grows on higher renewals. (Photographer: Akio Kon/Bloomberg)

Q1 Results: ICICI Prudential Life Bets On Protection Segment For Higher Margins

ICICI Prudential Life Insurance Company Ltd. is looking to increase its investments in protection products to earn higher new business margins.

The life insurer’s share of protection business—which ensures income to a policyholder’s family in the event of death or illness due to a certain type of adversity—rose to 8 percent in the quarter ended June from 5 percent of annualised premium equivalent a year ago. This was the key reason for a 700-basis-point expansion in the company’s new business margin, a measure of profitability for insurance companies, at 17.5 percent. (1 percentage point equals 100 basis points)

“One element of the strategy is growing the protection business that gives us higher value of new business, which also meets requirement of customers,” Managing Director and Chief Executive Officer NS Kannan told BloombergQuint in an interview. The company, he said, is investing in advertising and awareness building, among others, to increase the share of protection business.

The insurer’s new business premium in the June quarter rose 34 percent over last year to Rs 144 crore. The expenses on the addition of new business were higher, also reflected in the advertising costs which rose 387 percent to Rs 112 crore. Therefore, the cost ratio, a measure of cost efficiency in life insurance, declined 300-basis-point at 14.2 percent.

Kannan expects the cost ratio to improve as the company’s investments in the past start yielding benefits in the form of volume.

Also read: ICICI Bank To Sell 2% Stake In Life Insurance Arm

Other Highlights

  • Profits were 31 percent lower at Rs 282 crore as the initial premium received for the new protection business was not enough to cover for acquisition costs, expenses and statutory reserves.
  • Market share fell 400 basis points year-on-year to 11.1 percent.
  • Annualised premium equivalent, which reflects a life insurer’s sales, fell 18 percent to Rs 1,396 crore due to continued base effect of demonetisation.
  • Savings annualised premium equivalent fell 21.2 percent to Rs 1,282 crore, which Kannan said, was also because growth in savings products in the comparable year-ago quarter was higher due to note ban.
  • Protection annualised premium equivalent jumped 48.1 percent to Rs 114 crore.
  • Investment income fell 32 percent to Rs 2,462 crore.
  • Total expenses (including commissions) increased 38 percent to Rs 1,030 crore.
  • Thirteenth month persistency was flat at 85.8 percent; 49th month persistency rose to 63.7 percent from 59.2 percent.

Also read: Q1 Results: HDFC Life Insurance’s New Business Margin Grows