Release Date: July 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ICICI Prudential Life Insurance Company Limited (BOM:540133, Financial) reported a strong APE growth of 34.4% year on year to INR19.63 billion.
- The company achieved a high claim settlement ratio of 99.2% for FY 2024 with an average turnaround time of 1.3 days for settling non-investigative claims.
- The annuity and linked business segments grew significantly by 135.2% and 78.3% year on year, respectively.
- The company has successfully implemented digital KYC for 85% of its policies and issues 48% of its policies on the same day for savings business.
- ICICI Prudential Life Insurance Company Limited (BOM:540133) has a robust solvency ratio of 187.9% and an AUM exceeding INR3 trillion.
Negative Points
- The cost to TWRP ratio increased to 32.6% in Q1 FY 2025, indicating higher expenses.
- Non-linked savings contribution to overall APE decreased from 27.7% last year to 16.8% in the current year, reflecting a shift in customer preference.
- The company's retail protection business grew by only 1.8% in Q1 FY 2025, indicating slower growth in this segment.
- There is increased competition in the credit life business, which could impact future growth.
- The company faces potential challenges due to new regulatory changes on surrender value norms effective October 1, 2024, which may impact margins.
Q & A Highlights
Q: Can you explain the reasons behind the increase in the cost to TWRP ratio and the impact of the INR446 crore change in policy liabilities?
A: The increase in the cost to TWRP ratio is primarily due to the new commission guidelines that came into effect last year, particularly impacting the group side. The INR446 crore change in policy liabilities is due to a reallocation of expense drivers to better align with specific business lines, with no material impact on VNB.
Q: What has driven the strong growth in the agency business, and which products are seeing the most traction?
A: The agency business growth of 61% is due to initiatives in distribution capacity, capability, and product offerings. Products like the credit-based commission product on the ULIP platform and the 100% money-back feature on the annuity platform have been particularly successful.
Q: How do you allocate costs across quarters, and what impact do operating assumptions have on VNB margins?
A: Costs are allocated based on full-year forecasts, with higher costs per premium in the first quarter due to lower volumes. The impact of operating assumptions, primarily around expenses, is reflected in the full-year margins rather than quarterly figures.
Q: What is the expected impact of the new surrender value regulations on margins and product design?
A: The new regulations will lead to the discontinuation of certain products by September 30. We are confident in our ability to absorb any impact by aligning the interests of customers, shareholders, and distributors. We have already seen success with trail commission structures in specific segments.
Q: Can you provide insights into the growth and competition in the credit life business?
A: The credit life business has grown at twice the rate of credit growth in the banking sector, driven by new partner additions and differentiated propositions. Competition is present across all segments, including credit life.
Q: What is the outlook for VNB margins and product mix in the coming quarters?
A: It's too early to provide specific numbers for VNB margins post-October 1. However, we aim to create a win-win-win situation for customers, shareholders, and distributors. The product mix will continue to evolve based on customer demand and market conditions.
Q: How do you view the true economic profit and ROE of ICICI Prudential Life Insurance under current accounting norms?
A: The true ROE will become clearer with the adoption of IFRS. Currently, we focus on VNB and EV as more relevant metrics. The current Indian GAAP does not fully capture the economic profit of the business.
Q: What are the drivers behind the strong growth in the annuity business, and how are you managing the protection business?
A: The annuity business growth is driven by targeting customers around 50 years of age and offering products with features like 100% money-back. The protection business has seen some short-term impact due to competitive pricing but is expected to recover with new product launches and investments in proprietary channels.
Q: What is the impact of the expense reallocation on policy liabilities, and how does it affect the par book?
A: The expense reallocation has provided some relief to the par book, with no additional load. The INR446 crore impact is primarily on statutory liabilities, not affecting the par book.
Q: How do you plan to manage solvency if the current growth rate continues, and what is the impact of the new surrender guidelines on margins?
A: We continuously assess the need for additional capital and will consider raising sub-debt if necessary. The impact of the new surrender guidelines on margins is expected to be minimal, given that the affected product segment constitutes only 17% of our portfolio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
