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ICICI Prudential Life Insurance Q4 net profit down 31.5%

The company posted a 21 percent YoY growth in value of new business to Rs 1,605 crore in FY20.

April 25, 2020 / 08:39 PM IST
 
 
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Private life insurer ICICI Prudential Life Insurance posted a 31.5 percent year-on-year decline in its March quarter (Q4) consolidated net profit at Rs 178.73 crore due to a drop in net investment income and provisions. However, the company posted a 21 percent YoY growth in value of new business (VNB) to Rs 1,605 crore in FY20.

VNB is the present value of expected future earnings from new policies written during a specified period and it reflects the additional value to shareholders expected to be generated through the activity of writing new policies during a specified period.

VNB margin stood at 21.7 percent in FY20 as compared to 17 percent in the year-ago period.

Income from investment (net) slipped into the red and stood at a negative  Rs 18,940.21 crore in Q4FY20 compared to income of Rs 5,617.63 crore in the year-ago period. The insurer made a provision of Rs 73.31 crore in Q4FY20 (and Rs 213.24 crore for FY20) for diminution in value of investments. No such provision was made in the year-ago period.

Satyan Jambunadhan, chief financial officer, ICICI Prudential Life Insurance said that the investment income negative is P&L neutral since the mark to market (MTM) losses are fully passed on customers.

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He added that the provisions are purely MTM on equity holding and that the insurer is a zero NPA company with no impairment or provisions on the debt side.

Net premium earned in Q4FY20 stood at Rs 10,475 crore compared to Rs 10,056 crore in the year-ago period. For the full year, net earned premium saw a 7.5 percent YoY rise to Rs 32,879 crore.

N S Kannan, MD & CEO, ICICI Prudential Life said that the company had set an aspiration in April 2019 to double the FY19 VNB within four years. I am happy to report that in FY20, VNB grew by 21 percent which is well within the growth range required to meet that aspiration.

In the VNB, protection business contributed Rs 958 crore while linked savings contributed Rs 420 crore. The rest Rs 227 crore of VNB came from non-linked business.

The embedded value grew by 6.5 percent YoY to Rs 23,030 crore in FY20.  The return on embedded value was at 15.2 percent in FY20 compared to 20.2 percent in FY19.

For FY20, the annualised premium equivalent (APE) declined by 5.4 percent YoY to Rs 7,381 crore. APE refers to 100 percent of the regular premiums and 10 percent of single premiums. Of this, protection business saw a 54.6 percent growth in APE to Rs 1,116 crore whereas savings saw a drop of 11.5 percent.

Kannan explained in the post earnings call that protection business growth will continue to outpace the savings growth. However, he added that once the market condition is stable, unit-linked products will be in demand again.

Within savings business, linked (products like unit-linked insurance) APE saw a 23.2 percent YoY decline to Rs 4,772 crore while non-linked APE saw a 62.2 percent YoY growth to Rs 1,246 crore.

A total of 64.7 percent of APE came from linked business in FY20 compared to 79.6 percent in the year-ago period. In the same period, protection business share of APE grew from 9.3 percent in FY19 to 15.1 percent in FY20.

As far as Coronavirus (COVID-19) outbreak is concerned, the insurer said that the mortality experience continues to be better than assumptions.

"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," said the insurer in its investor presentation.

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 percent for 11 months of FY20 compared to 86.2 percent in FY19. The 61st month persistency (renewal after fifth year) stood at 57.4 percent in 11 months of FY20 compared to 58.1 percent in FY19.

The insurer's assets under management declined by 4.6 percent YoY to Rs 1,52,968 crore in FY20.

How has COVID-19 impacted the insurer?

In the post earnings call, Kannan said that the company opted for a 100 percent work-from-home except a few essential staff from mid-March 2020 onwards due to the Coronavirus outbreak.

The company, he said, had a topline (premium collection) impact of Rs 400-500 crore in the last 10 days of March due to COVID-19 outbreak. A nation-wide lockdown was announced by Prime Minister Narendra Modi from March 25 for 21 days (now extended till May 3) to prevent the infection spread.

As far as claims are concerned, ICICI Prudential Life Insurance has seen two 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 the exact number.

He added 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 added.

ICICI PruLife Insurance had a solvency ratio of 194.1 percent at the end of FY20 as against regulatory requirement of 150 percent.

The insurer said in its investor presentation that the company is comfortable on solvency even with stress test scenarios (including shocks for equity, bond yields and claims).

 
Moneycontrol News
first published: Apr 25, 2020 06:12 pm

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