2 min read.Updated: 21 Apr 2021, 01:46 AM ISTAparna Iyer
ICICI Pru reported 23% growth in its new business premium for the March quarter
On an annualised premium equivalent basis, the insurer’s business grew 23%
India’s life insurance companies reported a sharp rise in business growth in March, thanks to a low base in the year-ago period. That said, the fourth quarter metrics of ICICI Prudential Life Insurance Co. Ltd has given much to cheer about.
The private sector life insurer’s shares gained 5.5% on Tuesday, while its peer HDFC Life Insurance Co. Ltd rose more than 3%. Others, such as SBI Life Insurance Co. Ltd and Max Financial Services, too, surged during the day, but ended flat. Much of the optimism towards life insurance shares was from the robust business growth data for March.
On an annualized premium equivalent (APE) basis, the life insurance sector reported business growth of 121% year-on-year during the month. The largest insurer, Life Insurance Corp. of India (LIC), saw its premium growth surge, while the private sector, too, wasn’t far behind.
But recall that March 2020 was hit by a lockdown due to the pandemic and life insurers lost out on their busiest period. The final month of a financial year is a typical blockbuster one in terms of growth for life insurers. After all, the salaried class wanting to save tax piles into last-minute insurance policies to avail of tax deductions before the end of the deadline. This didn’t play out in March 2020, which has inflated the growth metrics for FY21 optically.
Nevertheless, life insurers have seen steady improvement in growth. A raging pandemic with a second covid wave in tow has prompted Indians to have a relook at mortality and insurance policies. But growth means little if there is no profitability.
Here, ICICI Pru Life’s fourth quarter metrics have given much to hope. A laggard among private life insurers, the company reported 23% year-on-year growth in its new business premium for the March quarter, a sharp improvement from the previous quarter.
The insurer’s APE grew by 23%, ending the streak of contraction for three consecutive quarters. The insurer managed this through fortifying its distribution network, tying up with 110 new partners. For the fourth quarter, profitability metrics shined too. Value of new business (VNB) grew by 26% and new business margin expanded to 25.1%. “We estimate ICICI Pru Life to deliver 25%/26.5% CAGR (compounded annual growth rate) in new business APE/VNB growth over FY21-23, led by stable margin and controlled operating expenses, enabling 15% growth in operating return on embedded value," analysts at Motilal Oswal Financial Services Ltd wrote in a note.
While most factors seem to be positive for life insurers, investors should note that profitability metrics may look robust in FY22 largely because of a low base.
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