Protection segment to be 22-25% of our product mix: ICICI Pru CEO

Private sector insurer ICICI Prudential Life will look at increasing the share of the protection business in its product mix and may take it to as high as 25 per cent in the medium to long term, said N S Kannan, managing director and chief executive officer.

This is because this segment is expected to have high demand, given the under-penetration and the pandemic-induced awareness among consumers.

In an interview to Business Standard, Kannan said: “We don’t have a target in terms of product mix.”

As of FY22, the protection segment in the company’s product portfolio was 17 per cent, and that has now gone up to over 21 per cent in Q1FY23.

In the past two years of the pandemic, the life insurance industry has faced significant supply-side challenges when it comes to their protection business. Also, the frequent premium hikes in this business meant that a significant amount of demand in this segment has remained unfulfilled.

“We have had some challenges on the supply side as an industry in not being able to fulfil the demand in the short term due to the pandemic-induced environment. Currently, the credit life and group business is driving our protection growth but once things settle down on the retail side, I think retail protection will also be a great opportunity,” Kannan said.

Protection and annuities are the two lines of business driving the margins of the insurer. In Q1FY23, it reported a value of new business (VNB) margin of 31 per cent. In FY22, the VNB margin of the insurer stood at 28 per cent.

This margin is a measure of profitability for life insurance companies.

In Q1FY23, the insurer’s annualised premium equivalent (APE) in the protection business grew 22 per cent to Rs 330 crore.

The decline in retail protection has stopped and there could be growth in it beginning Q3 of the current financial year.

“Directionally the share of protection and annuities could become higher. The ULIPs and non-linked business will depend on market conditions. We are indifferent to pushing either of the two based on the customer preferences”, Kannan said. The share of the linked business for the insurer has come down to 40 per cent in Q1FY23 from 48 per cent in FY22.

Analysts are upbeat about the company’s performance and see it well on course to achieving its target of doubling of FY19 VNB margins by the end of FY23.

“ICICI Prudential Life’s performance in Q1FY23 has been commendable, as it delivered VNB growth of 31.6 per cent year-on-year (YoY), which is better than the ask rate of 22-23 per cent YoY growth for achieving the target of doubling FY19 VNB by FY23”, said Macquarie Research in its note.

The company reported net profit of Rs 156 crore in the April-June quarter (Q1) of FY23 as against a loss of Rs 186 crore in the year-ago period, aided by significantly lower claims and provisions due to Covid-19.

Its VNB increased 32 per cent to Rs 471 crore in Q1FY23 as against Rs 358 crore in the year-ago period.

And, the APE stood at Rs 1,520 crore in the reporting period, up 25 per cent over the same period last year.