ICICI Prudential Life Insurance posted strong growth of 25.1% in the Value of New Business (VNB) in H1-FY2023. VNB margin, a key measure of profitability, expanded to 31.0% and absolute VNB, stood at ` 10.92 billion in H1-FY2023.

Annualised Premium Equivalent (APE) grew sequentially by 32% for Ǫ2-FY2023 ending H1-FY2023 with an APE of ` 35.19 billion and New Business Premium of ` 73.59 billion. In H1-FY2023, the Protection business segment APE grew by 29.1% year-on-year, resulting in a protection mix of 20.2% of overall APE. APE from the Annuity business segment, which is a key focus area, grew by 68.8% year-on-year. Due to under- penetration, both these segments offer significant growth opportunities. The diversification of product and distribution mix has enabled the Company to manage the impact of external developments and respond to changing consumer preferences in an agile manner.

The Company’s New Business Sum Assured was ` 4.8 trillion in H1-FY2023, a growth of 42.3% year-on-year, enabling it to maintain its private market leadership position with a market share of 15.7%.

Persistency ratios have improved across all cohorts. The 13th month ratio, which is representative of the quality of business, stood at 85.9% for H1-FY2023, an improvement of 80 bps over H1-FY2022.

Mr. N S Kannan, MD & CEO, ICICI Prudential Life Insurance said, “We achieved a robust year-on-year growth of 25.1% in the Value of New Business (VNB), ending H1-FY2023 at ` 10.92 billion, emphasising our ability to navigate rapidly-evolving situations successfully. This was driven by growth in APE as well as margin expansion to industry leading levels of 31%. On the back of this strong VNB growth and with a favourable premium base for the coming months, we believe we are on track to achieve our objective of doubling our FY2019 VNB by the end of this fiscal year.

Our two focus areas of annuity and protection, which represent underserved needs of the country, have also done well in the period. The annuity segment has delivered an impressive performance of 69% year-on-year growth in H1-FY2023 and the protection segment contributed to 20% of APE in the period. With a solvency ratio of over 200%, which is well above the regulatory requirement, we are well positioned to capitalise on this opportunity.

The strong performance has also enabled us to maintain our position as the private sector market leader on New Business Sum Assured basis, which grew by 42.3% year- on-year, with a market share of 15.7%.”

Company Performance

Value of New Business (VNB)

The VNB increased by 25.1% from ` 8.73 billion in H1-FY2022 to ` 10.92 billion in H1- FY2023. The VNB margin for H1-FY2023 stood at 31.0%, up from 27.3% for H1-FY2022.

Progress on our 4P strategy

• Premium

New Business Premium witnessed a year-on-year growth of 13.9% from ` 64.61 billion in H1-FY2022 to ` 73.59 billion in H1-FY2023. Annuity APE registered a robust growth of 68.8% from ` 1.38 billion in H1-FY2022 to ` 2.33 billion in H1-FY2023. The Company has a well-diversified product mix with linked savings at 40.8%, traditional savings at 28.3%, protection at 20.2%, annuity at 6.6% and the balance of 4.1% accounted for by group savings products.

• Protection

Protection APE grew by 29.1% year-on-year to ` 7.10 billion in H1-FY2023. With protection APE now constituting 20.2% of overall APE for H1-FY2023 compared to 17.2% for H1-FY2022, a consistent increase in the share of protection business in APE has been witnessed.

• Persistency

The persistency ratios have seen significant improvements due to the focus on improving the quality of business and customer retention. Specifically, the 13th month and 49th month persistency ratios stood at 85.9% and 65.4% respectively for H1- FY2023. The Assets under Management (AUM) grew from ` 2,370.87 billion at September 30, 2021 to ` 2,442.79 billion at September 30, 2022.

• Productivity

The Cost/TWRP for the savings business was 14.4% for H1-FY2023 as compared to 11.8% in H1-FY2022 and the overall cost ratio was 21.6% in H1-FY2023.

• Embedded Value (EV)

The EV stood at ` 326.48 billion as on September 30, 2022, registering a growth of 8.1% during the year. Value of inforce business grew by 16.4% year-on-year and stood at ` 247.97 billion as on September 30, 2022.

Operational Metrics:

` billion	H1-FY2022	H1-FY2023	Growth Y-o-Y
Value of New Business (VNB)1	8.73	10.92	25.1%
Value of New Business Margin (VNB Margin)	27.3%	31.0%	–
Embedded Value (EV)	302.03	326.48	8.1%
Value of inforce business	212.96	247.97	16.4%
New Business Received Premium	64.61	73.59	13.9%
Annualised Premium Equivalent	31.96	35.19	10.1%
Savings	25.08	25.76	2.7%
Protection	5.50	7.10	29.1%
Annuity	1.38	2.33	68.8%
13th month persistency2	85.1%	85.9%	+80 bps
Savings Cost Ratio (Cost/TWRP3)	11.8%	14.4%	–
Overall Cost Ratio (Cost/TWRP3)	17.8%	21.6%	–
Solvency	199.9%	200.7%	–
Assets under management	2,370.87	2,442.79	3.0%

1. For full year, based on actual cost; for H1: based on management forecast of full year cost

2. Regular and Limited pay persistency in accordance with IRDAI circular on ‘Public Disclosures by Insurers’ dated September 30, 2021; Twelve month rolling persistency

3. Total cost including commission/(Total premium – 90% of single premium)

Definitions, abbreviations and explanatory notes

• Annual Premium Equivalent (APE): APE is a measure of new business written by a life insurance company. It is computed as the sum of annualised first year premiums on regular premium policies, and ten percent of single premiums, written by the Company during any period from new retail and group customers.
• Value of New Business (VNB) and VNB margin: VNB is used to measure profitability of the new business written in a period. It is present value of all future profits to shareholders measured at the time of writing of the new business contract. Future profits are computed on the basis of long term assumptions which are reviewed annually. VNB is also referred to as NBP (new business profit). VNB margin is computed as VNB for the period/APE for the period. It is similar to profit margin for any other business.
• Retail Weighted Received Premium (RWRP): RWRP is a new business measure very similar to APE for the retail (also referred to as individual) business with the only difference being that the regular premiums considered here are first year premiums actually received by the life insurer and not annualised. Secondly, since it is a new business measure for retail business, it includes only Premium received from retail customers. It is the sum of all retail first year premiums and ten percent of retail single premiums received in a period.
• Persistency: It is the most common parameter for quality of business representing the percentage of retail policies (where premiums are expected) that continue paying premiums.

Regular and Limited pay persistency in accordance with IRDAI circular on ‘Public Disclosures by Insurers’ dated September 30, 2021.

• Total Weighted Received Premium (TWRP): TWRP is a measure of total premiums from new and existing retail and group customers received in a period. It is sum of first year and renewal premiums on regular premium policies and ten percent of single premiums received from both retail and group customers by the Company during the period.
• Cost Ratio: Cost ratio is a measure of the cost efficiency of a Company. Expenses are incurred by the Company on new business as well as renewal premiums. Cost ratio is computed as a ratio of all expenses incurred in a period comprising commission, operating expenses, provision for doubtful debts and bad debts written off to total weighted received Premium (TWRP).