Expansion in value of new business (VNB) for ICICI Prudential Life Insurance is now likely to be driven more by volumes rather than margins, according to MD and CEO NS Kannan.

“Our target will continue to be expansion in VNB as a key metric, but probably in the medium term, it will be driven more by growth rather than margins; a bit opposite to what we did in the last four years where there was more margin-driven growth,” Kannan told businessline.

“Now you could see margins stabilising or even going up a little bit, but volumes being the primary contributor of VNB”, he said adding that over the last few years, bulk of the VNB growth had come through margin expansion and product mix change.

Led by protection

The insurer posted a VNB growth of 28 per cent to ₹2,765 crore in FY23. The VNB margin expanded to an industry high of 32 per cent from 28 per, in line with the objective of doubling the FY19 VNB by FY23. Net profit for the year was 7.6 per cent higher at ₹811 crore.

Kannan expects growth in the current financial year to be led by protection, especially retail protection, and annuity products. The two segments contributed nearly half of the ₹15,036 crore new business received premium in FY23.

“Annuity has grown at 100 per cent for Q4 and about 70 per cent for FY23. Retail protection is just about to take off and we saw 28 per cent growth. These two will be the leading segments in terms of growth, followed by linked/non-linked depending on the market situation and customer preference,” he said.

Annualised premium equivalent (APE), a measure of new business, was higher by 12 per cent for FY23 at ₹8,640 crore led by 15 per cent growth in protection APE and 69 per cent in annuity APE. For Q4, APE growth was 26.5 per cent YoY, led by 102 per cent growth in annuity.  

New tax norms

Asked about the effect of the new tax norms for high-value policies, Kannan said that the impact on ICICI Prudential Life will be minimal owing to its product mix.

“The impact on account of this fire sale due to the tax change is not material. Given that this doesn’t set any unusual base for us, medium-term results will not be impacted,” he said, adding that if the tax changes were driving growth, there would be no reason for annuity and retail protection products to do so well in March and Q4.

The life insurer’s 13th month persistency ratio improved by 90 bps to 86.6 per cent for the 11-month period ended February, whereas the 61st month persistency improved by 1130 bps to 65.7 per cent. The solvency ratio stood at 208.9 per cent as of March 31.