ValuePickr Forum

ICICI Prudential Life Insurance Company

What is your projection of VNB growth number of ICICI Pru? Do you have idea how this number has been for ICICI Pru historically?

:slight_smile: I am surprised at the present rate of growth, which is 70%!

They were able to grow the VNB every year and even more than 71% that they managed this time.

Even the VNB Margin is going up steadily from 5.7% to 11.7% now. I feel they are in a sweet spot now. They are growing the VNB and the VNB margin also is increasing. Good thing is they have still more room to expand the VNB Margin. SBI Life has a VNB Margin of 15.4% and HDFC Life does 21.6%.

I’m not an analyst or have a crystal ball. :smiley: My guess is that they should grow by 30% in the near future coupled with expansion in VNB Margin.

Q2 Concall Highlights (source: capital market)

  • The company has continued to approach the overall market opportunity as two distinct segments-savings and protection. The savings business APE grew by 37% and protection APE grew by 32% leading to the overall APE growth of 36.8% in H1FY2018.
  • The company has exhibited strong 71% growth in value of new business to Rs 417 crore in H1FY2018. New business margin was 11.7% in H1FY2018, driven by an increase in protection mix and an improvement in the margin of savings products.
  • The retail weighted received premium or RWRP grew by 39% in H1FY2018, higher than the industry growth of 25% and private industry growth of 37%. Consequently, the market share of the company stood at 13.7% in H1FY2018. The company aims to continue to maintain leadership position amongst the private companies.
  • The total premium improved 27% to Rs 11484 crore in H1FY2018 from Rs 9029 crore in H1FY2017.
  • In addition to strong new business growth, retail renewal premium also grew by 23% from Rs 5699 crore for H1FY2017 to Rs 7032 crore for H1FY2018.
  • The protection mix increased from 3.9% in FY2017 to 4.2% for H1FY2018. Growth in protection business is also reflected in the 30.6% growth in new business sum assured from Rs 1.49 trillion in H1FY2017 to Rs 1.94 trillion in H1FY2018.
  • The growth of the company is well supported by strong performance across channels. During this period, Agency grew at 59%, Bancassurance grew at 25% and direct business grew at 57%.
  • The focus of the company on persistency continues with its 13th month persistency of 87.0% is amongst the best in the industry.
  • Overall cost to TWRP ratio for H1FY2018 is 14.1%.
  • The company is amongst the largest fund managers in India with an AUM of Rs 1.31 trillion. Linked funds contribute 71% of AUM with equity investments comprising of 58% of linked AUM.
  • The Embedded Value of the company stood at Rs 17210 crore end September 2017.
  • The solvency ratio continues to be strong at 275.7%.
  • The margin for this quarter is 12.6% and margin expansion has happened due to new unit-linked products which have a marginally better margin and even the participating business mix is slightly more. The company expects to sustain this level of margin.
  • The company intends to grow the protection business at a much higher rate over a longer period.
  • The company expects to maintain stable expense ratio.

Well, this is sad. Very bad for banks image if found guilty


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This is unfortunate and hope the companies and IRDAI act on misselling.

This is not a new trick: Don’t Buy HDFC Crest – It is Not a Fixed Deposit.


This is hardly mis-selling, this is cold blooded cheating with criminal intent to dupe gullible public of their money to meet internal target in institutions (in)famous for their “aggressive” culture. What are the poor victims supposed to do if they are unable to get their monthly payouts to meet living expenses? I hope the guilty are awarded exemplary punitive sentences to deter such wrong doings from other officers in future. Sorry for the rant, but such criminal acts really gets me riled.



Operating metrics:
(1) 9mFY18 APE growth was 25% with protection APE growth at 32% YoY (good business growth across business lines). Management expects growth
in protection business to sustain;
(2) NBAP margins reported for 9mFY18 @ 13.7% were largely a reflection of product mix & cost structures; incremental levers for margin improvement are: a) protection growing faster than savings will feed into higher margin; b) persistency 13th month is at 86% while in assumptions it is 82%, so as it comes for review it will boost margin; and c) also, long-term persistency itself is expected to structurally improve;
(3) solvency trajectory has three elements playing out: a) dividend payout at 60%; b) savings business is gaining traction & consuming capital; c) growth in protection business - capital for whole sum assured & since premium is low, capital for same amount of premium is high;
(4) most of the protection business comes from retail - credit linked was merely INR0.38bn, of INR2bn of protection business.

Overall business:
Key objectives:
a) Customer-centric products (ULIP+ protection contributes 87.0% to total APE); and
b) focus on retail through multi-channel distribution architecture backed by strong technology platform.
Wider direct market operates in two segments - web aggregator (fee based model - no spend on advertising) and company website (needs to do advertisements to direct traffic). 50-60% business through web aggregators. For ICICI Prudential Life, one more element in direct business is own direct employee selling insurance. Any cost efficiency resulting due to direct sourcing will be passed on as a benefit to the customer.

Other highlights:
(1) Since headline rate for insurance companies at 12.5% is lower than prevailing corporate tax rate, the risk of increase in tax rate prevails. However, how much it will be raised will depend on several factors;
(2) in the short term, insurance products are more expensive than MFs, but in the long term they are at par or better than mutual funds;
(3) 55-60% of assets get allocated to equity in ULIP & balance to debt funds. Insurance products help customers switch over across asset class without tax implications.


Why de-growth in Q4FY18?


ICICI Prudential declared a very good set of results for Q4FY18 & FY18.


Investor Presentation:

Few interesting points from results & conf call ->

  • VNB & VNB Margin: VNB grew from 6.66bn (FY17) to 12.86bn (FY17) resulting in growth of 93%. The VNB margin increased by phenomenal 640bps from 10.1% to 16.5%.

  • Embedded Value: IEV increased from 161.84bn to 187.88bn despite healthy dividend of 11.88bn. EVOP of 36.8bn & RoEV of 22.7% are very healthy. The company said that dividend will go down in FY19 as they need to preserve capital to support growth in non-ULIP business. My feeling is healthy dividend is probably paid to help in troubles of parent group.

  • Protection APE: The protection business grew by phenomenal 71% i.e. 2.6bn in FY17 to 4.46bn in FY18. This has lead to growth in VNB & VNB margin. The growth in credit cover business was higher than individual life businesses. For the first time, I noticed credit protect products - Loan Protect, Loan Protect Plus, Group Loan Secure. This business has been such a driving force for HDFC life. With more players trying to get into credit protect segment, it would be interesting to track how this space evolves.

  • Retail Franchise: ICICI Pru has a very retail focused franchise where 98% of APE is from retail. Retail franchise has better margins than group business (high proportion for HDFC Life).

  • Cost Efficiency: ICICI Pru has reduced cost/TWRP from 15.1% to 13.7% i.e. reduction of 1.4%. As non-ULIP portfolio grows, it would be interesting to see how this number evolves. The cost has gone up for HDFC Life.

  • Renewal Premium: Renewal premium has grown at 23% for FY18 compared to 11% for HDFC Life. This might be on account of lower share of group business or more retail focused franchise.

  • Tax rate assumption: The company has used lower effective tax rate similar to what some of the industry players have been doing. This has added ~ 1.4bn in EV & ~1.3% in VNB margin.

  • Valuation: I still struggle to put a valuation number to life insurance companies. After going through several research reports for Indian & overseas insurance companies, appraisal value (AV) seems like one decent metric. AV = EV + multiple * VNB. Many reports seem to have used multiple ranging from 10-30. One can use his own multiple & come up with AV.

Disc - Forms more than 5% of portfolio. No transactions for last 90 days.


Very good set of numbers!
However my observations are that ape ticket size for protection is coming down . Is there some sort of pricing pressure??

There has been a dip in market share and growth is less than that of industry growth for the period

Most encouraging thing is faster growth in protection when compared to savings. Protection. Share has increased to 6 % from 4%

It will be interesting to see how vnb margins shape up when protection share goes to 10-15%

Disclosure: invested

Q1 2018 results out. Can anyone who is tracking this stock please analyze the results. I don’t have much understanding of insurance business.

Indian Embedded Value is the main matrix used to analyze Life insurance company, which they do not publish every quarter.

Their stated position is we will publish IEV half-yearly in-line with best industry practices. Their competitors do it every quarter. I really do not know what best industry practices this group follow. Top management in all the organizations of the group seem to follow most opaque and crooked policy in name of transparency and corporate governance.

It is difficult to analyze the company given management choose not publish IEV for reasons best know to them.

It is difficult to analyse the performance of the insurance companies as the embedded value is a function of many assumptions…however we can always compare the performance of HDFC life and ICICI pru and use them as bench marks…
HDFC life is way better than icici life in terms of performance but HDFC is almost 2.5 times costlier on the basis of price to EV…other way of looking at it is that ICICI pru is undervalued…
HDFC will command that premium due to their excellent mgt and unique initiatives but we need to define that premium…for my calculation purpose i am keeping a 40% premium for HDFC life over icici life…so with HDFC life as a benchmark which has a PEV ratio of minimum 6-6.25, the ICICI should have a PEV of 3.75…to reach that PEV, the ICICI share should be valued at Rs. 491…



  • There was de-growth in APE for the Q1 FY19. The management claimed that de-growth was due to high base in Q1 FY18 & equity market performance. The de-growth was much lesser in the month of June. The protection APE continued to grow which has aided in growth of VNB.
  • The renewal premium growth came in at 29%, which I find to be very good.
  • There was marked improvement in the 49th month persistency & that also I find to be very good.
  • As % of protection business grows, the cost ratios will continue to inch up.
  • The VNB margin increased by 100bps to 17.5% compared to March’18 due to higher protection buinsess share & lower APE. Let’s see if they can maintain/improve VNB margins through the year.

Overall I find results to be satisfactory. Insurers start making money from 2nd, 3rd years of their business due to high cost of acquisition. The growth in renewal premium & 5th year persistency numbers are very good in that direction.

The company is focused on growing VNB & VNB margin through up-scaling protection side of the business. This direction will bring product mix closer to competitors like HDFC Life or Max Life & hopefully VNB margins will also be closer to them over time.

In the short term (FY19), if company can stem the de-growth in savings side of business & continue to grow protection side of business at this rate, we might see healthy VNB growth (50%+) by the end of the year.

On the question of EV development, one can assume the unwind of 7-10% and add VNB of the current year to get approximate estimate of EV for next year.

Disc - The stock forms > 5% of my portfolio and no transactions in last 90 days. This is not a buy/sell recommendation & investors are advised to do their own due diligence. I am not a SEBI registered analyst.

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This should be cause of concern for investors. We don’t even have one matrix to compare life insurance companies!

I would argue that assumption which affect the valuation of Life insurance companies should be decided by regulator. Also they should be disclosed more readily by companies.


Can someone please explain as to why did ICICI Pru go after the ULIP market in such an aggressive manner, given the cyclicality in this segment and very lower margins? What are the advantages of being in this business apart from the growth that was witnessed in the last few years in this segment?


Uploading the H1 investor presentation for reference. Slide 22, VNB drivers (4P’s concept is pretty interesting - Premium Growth (APE), Protection Premium Growth, Persistency and Productivity) is an interesting read!.

H1-FY2019-Business-Presentation_IPRU.pdf (461.5 KB)

Disclosure: Initiating position through long term SIP

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Disc : No holding. Waiting for <250 levels