Value of New Business (VNB) continues to grow by 33% in FY2022 | ICICI Pru Life Insurance Q4 FY22 Concall Highlights4 min read
- In FY22, the company launched two new products in the Linked Savings category – Balanced Advantage Fund and Sustainable equity fund (the first ESG fund in the insurance industry in India). The contribution of new products launched in the last two years is more than 25% of FY22 APE (Annualised Premium Equivalent)
- The company saw strong growth in APE across business segments except for group segments. Linked savings APE grew by 21%, annuity by 31%, and non-linked by 29% while group funds APE decreased by 17.9% and protection segment APE grew by 26%. Overall APE grew by 20%. Due to higher linked product mix
- Linked products contributed to less than half of top line, non-linked products 28%, protection – 17%, annuity 4% and group 3%. The diversification agenda on product mix is well on track.
- The overall protection APE that includes retail, credit life and group term grew by 26%. Total sum assured new business stands at Rs.773,146 Cr and it grew by 25% in FY22.
- Market share of total new business sum assured has increased from 12.5% in FY21 to 13.4% in 11M FY22 and the company continues to remain market leader in the private sector.
- Annuity business contributed 19% in terms of total new business received premium. Pension fund AUM (Assets Under Management) grew by 54% over FY21 to Rs.11,614 Cr.
- Almost 50% of new business premium has been contributed by protection and annuity segment which are the significantly underpenetrated parts of the market segment
- New business premium grew by 22% while expenses grew by 20% over FY20. APE per employee grew by 11% in FY22 from FY21
- The company added about 25,000 new agents and 107 new distribution partnerships during FY22. Currently, it has 27 bank partnerships. APE through ICICI bank decreased by 5% while for other banks it grew by 52%. Other banks has seen a traction as share of other banks has grown from 11% in FY21 to 14% in FY22.
- Value of New Business (VNB) – VNB grew by 33% from Rs.1,621 Cr in FY21 to Rs.2,163 Cr in FY22. The movement in VNB margin from 25.1% in FY21 to 28% in FY22 is due to the following –
1) 4.3% of improvement in the business mix which includes higher non-linked savings and protection mix
2) Negative 2% due to change in operating assumptions
3) 0.6% is due to yield curve movement which was favorable during the year
- Embedded Value – EV increased by 8.7% from Rs.29,106 Cr in FY21 to Rs.31,625 Cr in FY22 on account of an 18.8% increase in value of in-force (VIF)
- The company reported a PAT of Rs.187 Cr for Q4FY22, up 199% on account of a sharp drop in actuarial liability. For FY22, Profit After Tax was Rs.956 Cr, down 21% due to a decrease of 46% in investment income and an increase of 37% in operating expenses
- Total expenses have increased by 27.3% in FY22 as the company has focused on increasing the distribution presence and brand strengthening due to relative improvement in the economic activity
- The company has met expectations on each of its 4P strategic elements –
Premium – APE growth was 20% in FY22
Protection – APE growth of 25% in FY22
Persistency – improved persistency across all cohorts (13th month – 85.7%, up 90 bps and 49th month – 63.7%, up 70 bps)
Productivity – APE per employee has grown by 11% in FY22
- During FY22, end-consumer prices for the retail protection plans increased, driven by reinsurer-led price hikes. Supply-side constraints in the omicron environment including the general reluctance to visit the medical centers and the revised underwriting guidelines also impacted the protection plans. In response, the company has emphasized sourcing customers with minimal price hikes and increased retention.
- Protection APE grew by 32.8% in Q4FY22 on a YoY basis and 25.5% in FY22 increasing the protection mix to 17%.
- The company expects supply-side constraints to reduce due to the easing of norms and back to normalcy across the country. Therefore expects a revival of the retail protection business.
- The distribution of annuity and pension products by ICICI Pru Pension Fund Management is expected to support the growth of the annuity business.
- The company said that the revival of the retail protection business, expansion of annuity business streams, expansion of agency business, and direct channels would be pursued in a focused manner.
- The company aims to increase its presence in the affluent customer segments and deepen its presence in mass and mass affluent segments and expand its geographical footprints in smaller cities through the agency channels.
- The company will continue to explore new opportunities in new tie-ups and will increase synergy between physical and online sales processes.
- The primary objective of the insurer is to outperform the industry on VNB growth.
- The management is confident of doubling FY19 VNB by FY23. VNB grew by 33% to Rs.2,163 Cr in FY22. VNB margin was up from 25.1% in FY21 to 28% in FY22.
- Due to growth levers and margin levers, management believes that they are on track to achieve the objective of doubling FY19 VNB by FY23 and are poised to grow.