KOLKATA:Private-sector bank, ICICI’s insurer branch, ICICI Prudential Life Insurance posted a 31.5% year-on-year (YoY) drop in the consolidated net profits from the March quarter (Q4) of FY2020. This has resulted in a net profit of ₹178.73 Crore for the private life insurer. They attributed this to a drop in investment income and provisions, in a statement. Even so, the company posted a 21% YoY increase in the value of new business (VNB) that might amount to ₹1605 Crore in FY21.
For context, VNB is supposed to be the present value of a business, on the basis of the new policies it wrote in a specific time period. VNB demonstrates to shareholders, the embedded value of new business, measured at the point-of-sale.
The VNB margin for ICICI’s Insurance branch stood at, a much better, 21.7% for FY20 as compared to the expected 17%, last fiscal.
Their net revenue for Q4 of FY20 hit the negatives, at -₹18,940.21 Crore. This is way less than their revenue of ₹5,617.63 Crore for the same quarter in FY19.
The life insures had made a total provision of ₹213.24 Crore in FY20. They had set aside ₹73.31 Crore in Q4 itself, expecting a decrease in the value of their shares. In comparison, they had made no such provision in Q4 of FY19.
These negatives in investment income is purely profit and loss neutral, in the books, as the mark to market (MTM) losses are passed on to the customers, said Satyan Jambunadhan, chief financial officer, ICICI Prudential Life Insurance.
Furthermore, he added that their provisions, this fiscal, are purely MTM on equity holding and that the insurer is a zero (non performing assets) NPA company with no impairment or provisions on the debt side.
Net premium earned in Q4 of FY20, amounted to ₹10,475 Crore compared to ₹10,056 Crore in the same period from FY19. However, for the full fiscal of 2019-20, net earned premium saw a 7.5% YoY surge which stood at ₹32,879 Crore.
N S Kannan, MD and CEO of ICICI Prudential Life Insurance said that in April 2019, the company had set an aspiration to double the FY19 VNB within 4 years.
“I am happy to report that in FY20, VNB grew by 21% which is well within the growth range required to meet that aspiration,” Kannan added.
The insurer’s protection business contributed ₹958 Crore while linked savings accounts contributed ₹420 Crore to this VNB growth. Nonetheless, the return margin of the VNB stood at 15.2% in FY20 compared to 20.2% in FY19.
For FY20, the annualised premium equivalent (APE) declined by 5.4% YoY down to ₹7,381 Crore. APE refers to 100% of the regular premiums and 10% of single premiums. Out of this result, protection business saw a 54.6% growth in APE to ₹1,116 Crore whereas savings saw a drop of 11.5%.
In the post earnings call, Kannan explained that the protection business growth will continue to outpace the savings growth. Nevertheless, he added that once the market condition is stable, unit-linked products will be in demand again.
Within their savings business, linked (products like unit-linked insurance) APE saw a 23.2% YoY decline down to ₹4,772 Crore while non-linked APE saw a 62.2% YoY growth up to ₹1,246 crore.
A total of 64.7% of the APE came from linked business in FY20 compared to 79.6% in FY19. During the same period, the protection business share of APE rose from 9.3% in FY19 to 15.1% in FY20.
Regarding the pandemic due to COVID-19, the insurer said that the mortality outcomes continue to be better than what was originally expected.
Moreover, in the same call, Kannan added, “The proposed pricing of protection fully absorbs the increase in reinsurance rates. There have been insignificant claims from COVID-19 so far and additional reserve held for such potential claims.”
While Kannan did not disclose the quantum of increase in premium, he added that the protection policies would still be reasonable for the public.
The 13th month persistency (renewal after first year) stood at 85.3% for 11 months of FY20 compared to 86.2% in the year-ago period. The 61st month persistency (renewal after fifth year) stood at 57.4% in 11 months of FY20 compared to 58.1% in FY19.
The assets, under ICICI Prudential Life Insurance management, decreased to 4.6% YoY at ₹1,52,968 Crore in FY20.
India is currently going through a 40-day nationwide lockdown. This decision, announced by PM Modi, was enforced from March 25 for the next 21 days. It has now been extended till May 3 to further curb the spread of coronavirus infection.
In the investor earnings call, Kannan assured that from mid-March, 2020, the company had opted for a 100% work-from-home excluding a few essential staff . The company, he added, had a topline (premium collection) impact of ₹400-500 Crore in the last 10 days of March.
As far as relevant claims are concerned, ICICI Prudential Life Insurance has seen 2 COVID-19 death claims being reported, so far. Kannan added that the company has set aside some additional portion in the reserves for COVID-19 though he did not share an exact figure.
Moreover, He stated that the company is encouraging digital closure of pending requirements as far as distribution is concerned. Even the insurer’s largest distribution partner, ICICI Bank, is actively selling products using the online channel and mobile application, he reported.
ICICI PruLife Insurance had a solvency ratio of 194.1% at the end of FY20 against the regulatory requirement of 150%.
The insurer said in its investor presentation that the company is comfortable on solvency even considering stress test scenarios (including shocks for equity, bond yields and claims).