ICICI Prudential Life Insurance saw a significant uptick in single-premium annuity plans, with the company writing Rs 100 crore of business in this segment during the first quarter of FY26 alone.
This surge was attributed to falling bank fixed deposit (FD) rates, which made long-term guaranteed income solutions more appealing, said chief distribution officer Amit Palta, during the company’s analyst call post-results on July 15.
However, despite this traction, insurance firm's overall annuity business registered a sharp 53.3 percent year-on-year decline in the first quarter of current fiscal, largely due to a very high base in the same quarter last year, at around Rs 214 crore.
An annuity is a long-term financial product offered by insurers that provides a guaranteed stream of income, typically used for retirement planning. It can be purchased through a lump sum or regular premiums and is designed to ensure steady payouts over a chosen period or for life.
FD rates have been falling since the beginning of the interest rate cut cycle, as inflation eased and the Reserve Bank of India signalled a shift in monetary policy. As a result, several banks have gradually lowered their FD rates by 25–50 basis points across various tenures.
During the same quarter last year, Bagchi said, the company had benefited from strong momentum in both regular pay and single-premium annuity products, driven by increased demand for guaranteed income options. However, replicating the same number this year was difficult, said MD & CEO Anup Bagchi.
“Our annuity business and ULIP offerings did exceedingly well last year, thanks to a buoyant equity market and a unique product proposition [Guaranteed Pension Plan Flexi]. This year, the tide has shifted,” he said.
He noted that while regular pay annuities, typically designed for long-term income streams post-retirement, have slowed, the company is now seeing a demand shift towards other categories of guaranteed products, particularly non-par savings plans.
These newer products, such as guaranteed income plans, have emerged as attractive alternatives, especially for customers in the 50–60 age group looking for stability, predictability, and long-term yield in a low interest rate environment, the management said.
Total premium collections rose by 8.1 percent to Rs 8,954 crore.
Notably, the cost-to-premium ratio improved by 280 basis points to 21.2 percent, a result of efforts to realign expenses to the evolving product mix and drive efficiency.
On the distribution side, proprietary channels, including agency and direct sales, declined 18.1 percent year-on-year, contributing 38.5 percent to total APE. The decline, according to the management, was linked to a high annuity base and reduced ULIP sales. Bancassurance also saw a minor decline, while partnership distribution and group business posted growth.
Despite a subdued Q1, management maintained a positive outlook for the rest of FY26.
The company anticipates a recovery in ULIP demand in the second half of the year as market sentiment improves, alongside sustained growth in protection and guaranteed products. “We are not building in a decline for the next nine months. Our endeavor remains focused on growing absolute VNB and aligning our costs to where the market is headed,” said CFO Dhiren Salian.
The company’s assets under management (AUM) grew 5.1 percent to Rs 3.2 trillion.
Persistency ratios saw a slight dip, and the 13th month persistency stood at 86 percent and the 49th month at 69.8 percent. The company attributed this to product-channel combinations and regulatory changes that extended grace periods for linked and non-linked policies. “The shifts are marginal and manageable,” Salian said, adding that the company was actively working on improving persistency in specific cohorts.
The firm maintained a solvency ratio at 212.3 percent and a claim settlement ratio of 99.6 percent. It reported a 34.2 percent year-on-year increase in net profit for the first quarter of FY26, reaching Rs 302 crore.
The value of new business (VNB) stood at Rs 457 crore for the quarter, with VNB margins improving to 24.5 percent, up from 22.8 percent for FY25.
This expansion in margin was attributed to a favourable change in product mix, particularly, the growing contribution of protection and non-linked products, as well as ongoing cost optimisation measures.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
