ICICI Prudential Life Insurance Company Limited (IPru Life) reported strong results for the March quarter (Q4FY23), with its Annual Premium Equivalent (APE) growing nearly 27% year-on-year (YoY), a favorable product and Thanks for mixing the channels. The increase in APE was also supported by the sale of high-ticket insurance policies in February and March, higher than the total premium after the Budget announcement of taxation on life insurance policies. 5 lakh from 1st April.
Management said the Q4 growth wasn’t driven solely by higher ticket sales. Healthy business, especially from the traditional savings and annuity product segments, contributed to strong value of new business (VNB) growth of 36% during the quarter. While VNB margin dropped slightly sequentially, it increased to 32% in Q4 from approximately 30% last year, primarily due to changes in product mix and ongoing diversification into channels.
However, growth concerns remain for FY24.
Analysts at Emkay Global Financial Services said, “Looking forward, on the one hand, taxation changes will impact high-ticket, non-linked product growth and on the other, regulatory changes in commissions, expenses under management (EoM) and banca partnership limits may drive intense competition in banka and partnership channels.”
As a result, the outlook for growth and profitability is calmer than in the strong recent past, he said. Shares of ICICI Pru Life fell nearly 3% on the National Stock Exchange on Friday.
Nevertheless, there are certain factors that may support ICICI Pru Life’s growth in the coming quarters. While the slowdown in ICICI Bank channel distribution has impacted sales growth, ICICI Pru Life has made progress in increasing product distribution through alternative channels. For example, the company grew bancassurance channels from 4% in FY19 to 16% in FY23, excluding ICICI Bank. IPru Life continues to invest in agency channels and onboard new bank and non-bank partners, adding 13 new bank and 113 non-bank partnerships in FY23.
Analysts at Kotak Institutional Equities believe that a diverse range of partners sourcing customers from different segments, such as linked, traditional, or web/digital products, will support sales of the company’s diverse product portfolio. Additionally, growth in smaller ticket size products and gradual enhancement of security policies, especially in the retail segment, could drive sales and margin growth for the company in the coming quarters.
Analysts at Kotak emphasized that the higher FY23 base may result in a drag on FY24E growth, but the focus on lower ticket sizes will drive business growth in the medium term.
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