ICICI Prudential Life Insurance registered a 30.6% year-on-year (YoY) drop in its net profit in the first quarter of the current fiscal year. The private sector life insurer’s profits fell from ₹406 crore in last year’s first quarter to ₹282 crore, the company said in a statement, sighting ‘new business strain’ and change of base year as reasons for the losses.
New business strain occurs when the premium paid during the commencement of a business contract is not enough to cover for the expenses, commissions and statutory reserves of the business. In simpler terms, when the outflow is more than the inflow in a company’s transactions, then the extra outflow amount is called ‘new business strain’.
However, the company’s Value of New Business (VNB), an important metric used to determine an insurers profitability, increased by 34% to ₹244 crore, as compared to previous year’s figure of ₹182 crore. The VNB margin of the company increased from 16.5% to 17.5% in the first quarter of the fiscal year as well, owing to an increase in protection mix. The insurer’s total premium also grew by 13%, landing the company’s premium at ₹5,518 crore, as compared to last year’s ₹4,885 crore.
Commenting on the latest development, NS Kannan, who took over ICICI Prudential Life Insurance last month after former chief Sandeep Bakshi was appointed as ICICI Bank’s Chief operating officer said, “Our focus continues to be on growing absolute value of new business using the four-P strategy of focusing on premium growth, protection, persistency and productivity. This has yielded the desired outcome and we have been able to grow VNB (value of new business) with an uncompromising focus on quality.”
With the insurer’s market share at 11.3%, and Kannan also said that there had been an increase in the retail weighted receiver premium (RWRP) of the company.
“Our focus will be on carrying forward this momentum,” he said at the end of the first quarter.