ICICI Prudential Life: APE growth lagging but slowly improving

15 Feb 2024 , 01:36 PM

Analysts of IIFL Capital Services hosted the management of ICICI Pru Life (IPRU) at IIFL’s Investor Conference in Mumbai. While IPRU has managed to double its VNB over FY19-23, APE growth has remained a challenge for the Company, primarily due to the change in distribution philosophy by ICICI Bank and the impact from COVID pandemic. However, they have managed to arrest the impact by building on other distribution channels. Management remains excited about the protection business, which is a multi-decadal opportunity nowhere close to saturation, while the Company has also been witnessing increasing interest in Annuity products. FY24 has been a transformation year on the payouts front due to the change in EOM regulations, but management expects the same to be far more stable going forward. IPRU continues to aspire to deliver a double digit APE growth in Q4. Analysts of IIFL Capital Services forecast IPRU to deliver 14% VNB/EV Cagr over FY24-26. Maintain ADD given modest growth and pressure on margins. 

Investments in distribution diversification: 

IPRU has heavily invested in diversifying its distribution footprint, primarily the Agency and Direct channels. A large proportion of IPRU’s front-line sales force is young and soon will be in a position to deliver, which would further be boosted by Q4 being a strong quarter for life insurance. IPRU does not aspire to provide the best payouts in the industry, rather the focus remains on smoothing the entire onboarding process right from sales support, claims and other ancillary services, providing better value to the distribution partner. 

Excited about the Protection proposition: 

While management expects the savings business for the life insurance sector to grow largely in lines with nominal GDP growth rate, they remain excited about the protection proposition. Protection is viewed as a multi-decadal opportunity nowhere close to saturation, and the segment can only go up from here. 

Regulatory changes not seen as headwinds: 

Management also gathers a lot of positives from the recent regulatory changes, as it eases the process of doing business, be it flexibility provided by the new EOM regulations or the Use and File procedure for products. IRDAI is giving more control to the insurance companies and not looking at micro-management, which is a positive move. On the proposed surrender value regulations, IPRU does not see any benefit for the policyholder on early surrender.