ICICI Prulife disappoints with Q2 security hike

The private sector life insurer reported year-on-year (YoY) growth in turnover on an annual premium equivalent (APE) basis, although the base effect is also a factor behind this. New business developments led by unit-linked insurance products (ULIPs) were driven by increasingly bullish equity markets.

Profitability metrics saw an increase in value of new business (VNB) by 28% and improvement in VNB margins by up to 26%. To be sure, both growth and profitability metrics have come down as expected from the prior quarter. Recall that in the first two quarters of FY21, growth was affected due to the lockdown.

But growth and profitability didn’t excite investors and one reason was weak growth in the retail security. While total retail APE was up 34%, most of it came from credit lives and annuities. Saral Suraksha products are margin friendly and have been a major focus for all life insurance companies including ICICI Prudential Life. The weak performance of retail security should be a concern, although much of this can be explained by second wave sanctions. Another reason is price increases due to higher reinsurance prices. “Reinsurance pricing discussions are ongoing and management has indicated passing on a potential reinsurance price increase in 2HFY22. In the last instance of reinsurance price increases, there was an average 15% increase in net period prices over a 35% reinsurance increase ,” wrote analysts at Jefferies India Pvt Ltd in a note. Analysts say the firm will have to sustain, even as margins look difficult to improve, so profitability has spurred its growth from here on.