ICICI Pru Life’s Q4 strong: Key things watch out for in FY24
ICICI Prudential Life Insurance Company Ltd (IPru Life) reported strong results for the March quarter (Q4FY23), with its annualized premium equivalent (APE) growing approximately 27% year-on-year (y-o-y), thanks to a favourable product and channel mix. The increase in APE was also supported by sales of high-ticket insurance policies in February and March, following the budget announcement of taxation on life insurance policies with aggregate premiums over ₹5 lakh starting from 1 April.
The management said that Q4 growth was not solely driven by high-ticket sales. Healthy business, particularly from traditional savings and annuity product segments, contributed to a robust value of new business (VNB) growth of 36% y-o-y during the quarter. While VNB margin dipped slightly sequentially, it increased to 32% in Q4 from around 30% last year, primarily due to the shift in product mix and ongoing diversification in channels.
However, growth concerns for FY24 persist.
Analysts from Emkay Global Financial Services said, “Looking ahead on one hand, taxation changes will affect the high-ticket, non-linked product growth and, on the other, regulatory changes in commissions, expenses of management (EoM) and banca partnership limits might drive the intensified competition in banca and partnership channels.”
As a result, the outlook for growth and profitability is sober than the strong recent past, they added. Shares of ICICI Pru Life fell around 3% on the National Stock Exchange on Friday.
Nevertheless, there are a few factors that may support ICICI Pru Life’s growth in upcoming quarters. While the slowdown in ICICI Bank channel distribution has impacted sales growth, ICICI Pru Life has made strides in enhancing product distribution through alternative channels. For example, the company increased bancassurance channels excluding ICICI Bank to 16% in FY23 from 4% in FY19. IPru Life also continues to invest in agency channels and onboard new bank and non-bank partners, adding 13 new banks and 113 non-bank partnerships in FY23.
Analysts from Kotak Institutional Equities believe that the diverse range of partners sourcing customers from various segments, such as linked, traditional, or web/digital products, will support sales of the company’s diversified product portfolio. Additionally, the growth in lower ticket size products and the gradual uptick in protection policies, particularly in the retail segment, may enhance sales and boost margins for the company in coming quarters.
Kotak analysts emphasized that while the high base of FY23 may result in muted FY24E growth, focusing on lower ticket sizes will drive business over the medium term.
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