At first glance, the growth story of ICICI Prudential Life Insurance Co. Ltd seems to show its first crack, because of a sharp fall in the annualized premium equivalent (APE) for the first quarter of 2018-19.

The second largest private sector life insurer’s savings products had few takers in the first quarter, with APE falling 21.2% to 1,282 crore. This dampened the growth in total premium to just 13%. Put this together with an increase in cost ratios and the picture doesn’t look good. Perhaps investors had anticipated that the insurer’s past rapid growth won’t be repeated, as the stock has dropped 12% over the last two months.

The retail weighted received premium, or the total premium collected through retail policies, fell 21.6%, which means that ICICI Prudential couldn’t sell its savings products to customers as fast as it used to in the past. Hence, it lost market share to competitors—its share eroded to 12.3% from 15.3% a year ago.

But this drop in business growth metric should not perturb investors at all. The fall in APE in the quarter is due to a base effect as in the corresponding quarter last year, the insurer had reported a stellar 68% growth. Not just ICICI Prudential Life Insurance, but most insurers had reported a sharp jump during that time as demonetization channelled huge investments into insurance products.

The management said the momentum in retail weighted received premium continues to be strong and it expects the growth rate to continue in the coming quarters. “To look at the momentum excluding the demonetization effect, we should look at the growth for three years and it works out to a CAGR of 17% growth for the first quarters," said N.S. Kannan, managing director and chief executive officer.

Another factor that would please investors is the sharp jump in its protection business. Protection products are margin-friendly and are the most profitable for an insurer. These products now form over 8% of ICICI Prudential’s portfolio, up from 5% a year ago. Value for new business grew at a healthy 34.1% and margins expanded to 17.5% because of the increase in the protection business.

The management stressed its focus on growing the protection business faster than that of savings and this augurs well for future profitability. Its improving persistency ratios across tenures should also give comfort.

Kotak Securities estimates the insurer’s embedded value for FY19 to be 21,400 crore. Considering the stock trades at about 2.5 times of this estimate, it is cheaper than immediate rivals SBI Life Insurance Co Ltd and HDFC Standard Life Insurance Co. Ltd.