ICICI Pru Life profit falls 69% to Rs 2.82 billion in June quarter of FY19

ICICI Prudential Life insurance has seen its net profit fall by 69 per cent for the quarter ended 30 June 2018 to Rs 2.82 billion from Rs 4.06 billion in the same quarter last year. The company’s management said they are performing against the base effect experienced during the first quarter of FY18 due to the economy reviving after demonetisation.

Total premium revenue grew by 13 per cent during the first quarter of FY19 to Rs 55.18 billion compared to Rs 48.8 billion in Q1 of FY18.

“We plan to expand the retail business through a multi-channel network, customer-centric products with technology as an enabler,” said N S Kannan, managing director and chief executive officer at ICICI Prudential Life Insurance.

Kannan was recently appointed as the life insurer’s chief, replacing Sandeep Bakshi, who on Monday was appointed as the Wholetime Director and Chief Operating Officer (COO) designate of ICICI Bank.

While the Value of New Business (VNB) has risen by 34.1 per cent from Rs 1.82 billion in Q1FY18 to Rs 2.44 billion in Q1FY19, the VNB margin has increased by 100 basis points, year-on-year, to 17.5 per cent.

The total Annualised Premium Equivalent (APE) has seen a fall in growth of 18.1 per cent from Rs 17.04 billion in Q1FY18 to Rs 14 billion in Q1FY19. This was mainly driven by a large fall in the APE for savings products which decreased by 21.2 per cent, year-on-year, to Rs 12.82 billion at the end of Q1FY19.

“Given the base effect in the first quarter of last year we had seen an increase of 75 per cent in the new business weighted premium. We want to grow both the savings and protection products, but we wish to push the protection business at a rate ahead of the savings business,” he said.

The APE for the protection business grew at 48.1 per cent to Rs 1.14 billion in Q1FY19 as against Rs 0.7 billion in the same period of the previous year. The protection APE now contributes 8 per cent to the overall APE as compared to contributing 5 per cent to the overall APE in the same quarter of last year. 

There is no targeted number for the company while the emphasis on growing the protection business will continue. All types of products will continue to be offered to the customers, depending on their needs, Kannan told members of the press. 

The cost-to-income ratio has grown from 14.2 per cent in Q1FY18 to 17.5 per cent at the end of Q1FY19.

This increase in expenses is largely on account of a substantial increase in the protection APE and increased investments in marketing campaigns. "We will watch the (expenses) ratio as the premiums pick up on a year-on-year basis. It should correct over the next few quarters," Kannan said.

Assets under Management grew by 12.7 per cent from Rs 1.2 trillion at the end of Q1FY18 to Rs 1.4 trillion in Q1FY19.

Investment income has come down from Rs 36.2 billion in Q1FY18 to Rs 24.62 billion at the end of Q1FY19, largely caused by a fall in the unit-linked (ULIP) investment income. 

The 13th-month persistency ratio remained the same at 85.8 per cent as compared to the corresponding period of last year, while the 49th-month persistency has improved from 59.2 per cent in Q1FY18 to 63.7 per cent in Q1FY19. There has been a 7 per cent improvement in persistency ratio across some cohorts of customers.

Overall market share for the company standing at 11.3 per cent at the end of Q1 on the basis of retail-weighted received premium.

“This occurred due to a huge base effect arising out of demonetisation impact and the consequent immediate impetus on the financialisation of savings in the economy which took place in the base period of the previous year. Our focus is to reverse this trend,” says Kannan.

ICICI Prudential’s stock price closed at Rs 385.3, up by 2.73 per cent from its previous closing price on the Bombay Stock Exchange.