Mumbai: ICICI Prudential Life Insurance Co Ltd reported a 3.3% increase in its December quarter net profit to Rs450 crore as strong growth in premiums were eroded by a rise in management expenses and loss in investments.
ICICI Prudential, the country’s only listed insurer, said that its net premium income grew 2.9% from a year ago to Rs5,698 crore for the three months ended 31 December. This was aided by a 46.7% rise in first year premium to Rs1,780 crore.
However, the company’s management expenses for the December quarter increased by around 19.2% year-on-year to Rs754.61 crore primarily due to an increase in employees’ remuneration and a 34% jump in net commission paid. The company said in a release that the increase in commission expense is broadly in line with the product mix and increase in premium.
“The expenses increased mainly due to the increase in our new businesses. From a ratio angle The expenses are more or less in line with our topline growth,” said Sandeep Batra, executive director, ICICI Prudential Life.
The company also posted an investment loss of Rs665.19 crore in the December quarter compared to a net income of Rs1,656 crore a year ago. This was primarily due to losses incurred on investments made under linked life insurance policies (Rs837.1 crore) and linked pension policies.
“This is not really a loss but it is a part of the linked business whose net asset values (NAVs) keep fluctuating. The fluctuation essentially needs to be moved both at the topline which shows as part of the investment income as well as consequential changes in actuarial results relating to the linked business. The two will net off each other. So this is essentially the marked to market value of the equity movement on the linked side,” Batra added.
In the quarters ahead, ICICI Prudential will continue to focus on protection business as it believes that there still exists a significant need for protection in India, Batra said, adding that customers are still choosing the linked category of policies the most.
At the end of December, the company’s solvency ratio was at 294%, down from 306% at September end and 319% at the end of December 2015. Regulations require an insurer to maintain a solvency ratio of 150% at all times.
Batra said the solvency ratio is still at a comfortable level as against the regulatory requirement and as the company continues to grow, using its assets, the solvency ratio will continue to come down.
At the end of December the insurer had assets of Rs1.13 trillion, the highest among all private life insurers and second only to state run Life Insurance Corp. of India which currently have assets worth at least Rs22 trillion.