ICICI Prudential Insurance Q1FY19 Concall Summary

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Organizational Structure

  • NS Kannan has been appointed as MD of the company effective June 19, 2018 subject to IRDAI approval.
  • Punnet Nanda has been promoted as Deputy Managing Director of the company.
  • 94 of the top 113 managers have been with the organization for more than 10 years.
  • Company boasts a strength of 17,000+ employees.

Strategy & Performance

  • Focus continues to be on growth of absolute Value of New Business (VNB)
  • The path to growth is reflected in 4 Ps of “Premium growth”, “Protection focus”, “Persistency improvement” and “Productivity enhancement”

Premium Growth

  • Range of product have been increased to ensure customers’ on-boarding and service through distribution architecture.
  • A diverse distribution architecture helped translate product and service into business.
  • Even with growth in new business, Annualized Premium Equivalent (APE) has declined by 18.1% and market share being 11.3%

Protection Focus

  • Nuclear families are growing and need to protect loved ones from losing family income is on the rise.
  • Retail customers are borrowing to make assets and need to secure them through insurance.
  • The company is devising solutions and products to cater to this need.
  • The protection APE growth was 48.1%, with protection accounting for 8.2% of APE.

Persistency Improvement

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  • Customer retention has improved by changing the organization and partner culture.
  • Customer retention actually creates profitability to the company and is best parameter to gauge customer experience.
  • The efforts to increase customer retention led to 13% growth in total premium and 29% growth in yearly retain renewal. Also, 13th month persistency was 85.8%.
  • 49th persistency has also improved to 63.7% from 59.2%

Productivity enhancement

  • Focus was on technology and re-engineering to improve on expense ratios. But, increasing focus on protection will lead to increment in cost ratios.
  • Expense ratio for the saving business was at 13.7% mainly due to decline in the business

VNB Growth

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  •  The Value of New Business for Q1-2019 was Rs. 2.44 billion with a margin of 17.5%.
  • The growth in VNB was 34.1% even with the decline of 18.1% in APE
  • The growth would be led by rising working population and increasing per capita income for both savings and protection businesses.

Retail Focus

  • Retail business accounts for 96% of new business APE. It has marginally reduced because of increase in group protection business.
  • Total AUM growth in the quarter was 12.7% to Rs. 1.43 trillion. Retail AUM constituted of Rs. 1.28 trillion, i.e. 89% of the total AUM
  • Private market share continues to be around 21.0%. Whereas total market share of 11.3% was a decline from 11.8% in FY 2018.
  • The first 2 months of FY 2019 saw 30% decline in RWRP numbers because of strong first-quarter in last year due to demonetization.
  • RWRP numbers for June were 36% higher than that of May.
  • Year-on-year decline was low at -5%.

Multi-Channel Distribution

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  • Non-bank channels contributed to almost 45% of APE.
  • Different channels like agency, bancassurance partnerships, proprietary sales force, corporate agents and brokers including web aggregators have been developed.

Customer centric Products

  • ULIP were focal point in delivering lower cost and lower persistency risk to customer while offering transparency.
  • Individual life/health, credit cover, and group life are three key segments of protection all of which saw growth in Q1-FT2019

Productivity Cost

  • Cost to TWRP ratio was Q1-FY2019 as compared to 14.2% for Q1-FY2018.
  • Cost to TWRP for saving business was 13.7% compared to 12.5% for Q1-FY2018.
  • Commission Ratio is stable at 5.5% is stable and is higher than Q1-FY2018.
  • Non-commission component of cost has gone up by 40%.
  • For Q1-FY2019, 73% if new business policies are issued within 2 days, 61% of renewal premium is receipted through electronic mediums and 99% of customer-initiated pay-outs are processes electronically.

Financial Update

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  • Total premium increased be 13% to Rs. 55.18 billion in Q1-FY2019.
  • Profit after tax for Q1-FY2019 was Rs. 2.82 billion down from Rs. 4.06 billion in Q1-FY2018
  • The decline in profit is because of increase in expenses with focus on protection business.
  • Expenses grew by 43.4% in Q1-FY2019 because of increased ads and publicity.
  • Solvency ratio continues to be a very strong number at 235%.
  • AUM grew by 12.7% to Rs. 1.43 trillion and 86% of linked portfolio has performed better than the benchmark indices
     

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