ICICI Prudential Life Insurance Company Limited — Q3 FY25 earnings call

Call held 28 Jan 2025

Management summary

ICICI Pru Life reported strong growth in 9M-FY2025, with RWRP up 31.4% and APE up 27.2% to ₹69.05 billion. VNB increased 8.5% to ₹15.75 billion, and PAT grew 18.3% to ₹8.03 billion, supported by a robust solvency ratio of 211.8%. While linked business and key protection/annuity segments performed well, non-linked savings declined, and credit life faced headwinds from the MFI sector.

Highlights

  • RWRP growth of 31.4% year-on-year in 9M-FY2025, outperforming both the private and overall industry.

  • APE grew by 27.2% to ₹69.05 billion in 9M-FY2025, with retail APE growing 28.5% to ₹57.53 billion.

  • Annuity APE grew by 81.7% and Retail Protection APE grew by 24.2% year-on-year respectively in 9M-FY2025.

  • PAT for 9M-FY2025 grew by 18.3% to ₹8.03 billion, with Q3 PAT growing 43.6% to ₹3.26 billion.

  • Solvency continued to be strong at 211.8% at December 31, 2024, aided by a ₹14 billion sub debt fund raise.

Concerns

  • Non-linked savings business (excluding annuity) declined 17.4% year-on-year in 9M-FY2025.

  • Credit Life business witnessed some slowdown due to ongoing challenges in the MFI industry, impacting Q3.

  • Group Term business continues to be impacted due to increased competition.

Key financials

3 periods

Headline

  • RWRP Growth
    31.4%
  • APE
    69.05 Bn
    YoY +27.2%
  • VNB
    15.75 Bn
    YoY +8.5%
  • VNB Margin
    22.8%
  • Assets Under Management
    3.1 Tn
  • Solvency Ratio
    211.8%
  • Cost/Premium
    19.8%
  • Cost/TWRP
    27.8%

Q3-FY2025

  • PAT
    3.26 Bn
    YoY +43.6%

9M-FY2025

  • PAT
    8.03 Bn
    YoY +18.3%

What they filed

Q1 FY27: revenue up 12.3%, net profit up 27.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue25,157 4,536 15,687 25,400 11,935 −53%22,833 +403%3,299 −79%28,513 +12%
EBITDA327 250 424 223 -6 −102%755 +202%-639 −251%293 +31%
Net profit252 326 386 302 299 +19%390 +20%609 +58%386 +28%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Retail APE
    57.53 Bn APE28.5% Growth
  • Linked Business
    49.8% Growth50.8% Contribution to APE
  • Non-linked Savings (ex-annuity)
    -17.4% Decline17.5% Contribution to APE
  • Group Funds Business
    102.5% Growth6% Contribution to APE
  • Protection APE
    6.9% Growth16.9% Contribution to APE
  • Retail Protection Business
    40% Growth (Q3-FY2025)24.2% Growth (9M-FY2025)
  • Annuity Business
    50% Growth (Q3-FY2025)81% Growth (9M-FY2025)8.9% Contribution to APE
  • Agency Business APE
    41.3% Growth30.2% Contribution to Overall APE36.2% Contribution to Retail APE
  • Direct Business APE
    31.6% Growth15.3% Contribution to Overall APE18.4% Contribution to Retail APE
  • Bancassurance Business APE
    26.3% Growth27.7% Contribution to APE Mix
  • Partnership Distribution Business
    2% Growth10.1% Contribution
  • Group Business
    20.9% Growth16.7% Contribution to APE Mix

Capital allocation

high confidence
  • Debt Debt disclosed
    • New borrowing Raised subordinated debt, strengthening solvency to 211.8% ₹14 Bn
    During the quarter, we raised subordinated debt of ₹ 14 billion, thereby strengthening our solvency to 211.8% at December 31, 2024.
  • M&A Bima Sugam India Federation Investment · Announced · Consideration ₹[object Object] (cash)

    Part of IRDAI's 'Insurance for all' initiative to create a centralised marketplace of insurance products and services.

    Investment not exceeding 10% of the share capital.

    Recently, the Company has approved the proposal to invest up to ₹ 100 million, not exceeding 10% of the share capital in Bima Sugam India Federation.

Guidance & targets

Profitability

  • VNB Growth Profitability · medium-term · Medium confidence mid-teens
    The view that we want to take from a medium-term perspective is to work towards mid-teens. No doubt about that.

    — Dhiren Salian

Efficiency

  • Cost Efficiency in Savings Business Efficiency · coming years · Medium confidence efficiency
    Our objective is to bring efficiency in savings line of business while we continue to focus on growth in the protection business.

    — Dhiren Salian

Business Growth

  • Alpha on Business Growth Business Growth · ongoing · Medium confidence continuously create alpha
    Our endeavour is to continuously create an alpha on business growth over the industry.

    — Anup Bagchi

What to watch in Q4 FY25

Credit Life Business Recovery

next couple of quarters
Current Slowdown due to MFI industry challenges
Target Positive momentum and recovery

Why it matters

Recovery in the MFI sector and credit life business is crucial for overall protection segment growth.

Hopefully, with the outlook expected to get positive over the next couple of quarters, we are well present across all our MFI partners to come back to the original share of credit life once the business reverses.

Risks & concerns

  • MFI Industry Challenges impacting Credit Life Business

    medium

    Slowdown in Credit Life business due to lower disbursements in the MFI industry, impacting Q3 performance.

    Management acknowledged

  • Increased Competition in Group Term Business

    medium

    Group Term business continues to be impacted by heightened competition in the market.

    Management acknowledged

  • Product Mix Shift to Lower Margin ULIPs

    medium

    The shift in product mix towards unit-linked products, which have lower margins, is influencing the overall VNB margin.

    Management acknowledged

Q&A highlights

7 direct
Group Fund Numbers Spike Direct
Yes, we had a spike in group fund numbers in this quarter. Group fund is typically lumpy in nature and it's a good business, we do make money off it and we're happy to pick it up.

Clarifies the nature of the spike in group fund numbers, indicating it's a lumpy but profitable segment for the company.

Asked by Pankita Srivastava

Product Mix, Margin, and Non-linked Product Decline Partial
So, when you look at that you'll see that for the quarter, you've got nearly 60% of the business that comes in from Unit Linked plus Group Funds. Now when you overlay the overall margins, you'll find that you're broadly in line with the number that we have reported for the nine month period.

Addresses concerns about margin compression by explaining the significant contribution of Unit Linked and Group Funds, and reiterates focus on absolute VNB over margin percentage.

Asked by Avinash Singh

Zero Surrender Value Product Experience Direct
With regard to our annuity products, yes, it's a little about three weeks over a year since we launched and frankly we have not seen any adverse trends at this point, because again, our belief is that this product has been bought from the perspective that the customer wants to take an annuity.

Provides an update on the newly launched zero surrender value product, indicating no adverse trends and aligning with the company's expectation of customer intent for annuity.

Asked by Supratim Datta

Agency Channel Growth and Open Architecture Direct
Overall productivity increase with the entire agency base has gone up by almost 10% to 12%. And all this is by of course doing a lot of ground-up activity and breaking down the entire process beyond relationship management to having a very strong digital sales process of tracking skill levels and then monitoring and certifying over a period of time.

Highlights the success of digital enablement ('IPru Edge' app) in boosting agency productivity and the strategic focus on segmented capability building for advisors.

Asked by Shreya Shivani

Banca Channel Mis-selling Concerns Direct
See, first of all, mis-selling is not something that we have ignored ever. We always want to focus on mis-selling and improving it all the time, irrespective of what the guidelines come eventually. So, the persistency I believe is a good, fair measure of the quality of sale that you do and there I think we are improving very regularly and every year we are actually showing an improvement in persistency and that is the best outcome that you can expect from a quality of sale.

Reassures on the company's proactive stance against mis-selling, emphasizing improving persistency as a key indicator of sales quality, and notes no specific adverse trends in banca channel.

Asked by Shreya Shivani

VNB Growth vs APE Growth Discrepancy Direct
But what you would also notice is that the mix shift has also happened more towards unit linked which has got a lower margin. So, that explains how we're working at a 8% to 9% VNB growth for nine months. The view that we want to take from a medium-term perspective is to work towards mid-teens.

Explains the reason for VNB growth lagging APE growth (mix shift to lower-margin ULIPs) and reiterates the medium-term target for VNB growth.

Asked by Madhukar Ladha

Credit Life Business Decline Direct
Yes. So, group protection being down like is quite well known for the stress that we see on MFI business. And largely it is because of disbursements getting lower, which has impacted credit life side of the business taking a hit in Q3.

Confirms the specific reason for the decline in credit life business (MFI industry stress and lower disbursements) and acknowledges the impact on Q3.

Asked by Madhukar Ladha

Commission Structure Changes Post Surrender Guidelines Direct
I think our options that we have worked with our partners is either deferring commissions or claw-back of commissions or reducing commissions. So, different partners have agreed for different structures, different models. It also had to be aligned with what their Opex requirement was, what their business models are. So, more than 95% of our partners, we have closed the arrangement, the revised structures and whatever is pending is something very small, I think also will get over in the next couple of weeks' time.

Details the company's approach to adapting commission structures following new surrender guidelines, indicating successful renegotiation with the majority of partners.

Asked by Aditi Joshi

3 min read 7 chapters

Detailed narrative

Strong Business Growth and Market Outperformance

ICICI Prudential Life Insurance Company Limited demonstrated robust performance in 9M-FY2025, with its Retail Weighted Received Premium (RWRP) growing by 31.4% year-on-year, outperforming both the private and overall industry. Annualized Premium Equivalent (APE) increased by 27.2% to ₹69.05 billion, and the number of policies grew by 14.4% year-on-year, surpassing the private industry's growth of 8.7%. This growth underscores the company's continuous effort to create alpha on business growth.

Profitability and Capital Strength

The Value of New Business (VNB) for 9M-FY2025 grew by 8.5% year-on-year, reaching ₹15.75 billion, with a VNB margin of 22.8%. The company's Profit After Tax (PAT) for Q3-FY2025 saw a significant increase of 43.6% year-on-year to ₹3.26 billion, contributing to a 9M-FY2025 PAT of ₹8.03 billion, up 18.3%. The balance sheet remains strong, with Assets Under Management (AUM) at ₹3.1 trillion and a healthy solvency ratio of 211.8% as of December 31, 2024, further strengthened by a ₹14 billion subordinated debt raise.

Evolving Product Mix and Segment Performance

The product mix saw a notable shift, with linked business growing by 49.8% year-on-year and increasing its contribution to overall APE from 43.1% to 50.8% in 9M-FY2025, driven by market buoyancy. Conversely, non-linked savings business (excluding annuity) declined by 17.4%, reducing its APE contribution from 26.8% to 17.5%. Annuity APE and Retail Protection APE, key focus segments, grew significantly by 81.7% and 24.2% respectively in 9M-FY2025, with Annuity's contribution to APE rising from 6.2% to 8.9%.

Diversified Distribution Channels and Digital Initiatives

ICICI Pru Life maintains a well-diversified distribution mix. Agency business APE grew by 41.3% year-on-year, contributing 30.2% to overall APE, while Direct business APE grew by 31.6%, contributing 15.3%. Bancassurance business APE also increased by 26.3%, making up 27.7% of the APE mix. The company's digital enablement efforts, including the 'IPru Edge' app, have led to a 37% productivity enhancement for value advisors, contributing to an overall 10-12% productivity increase for the entire agency base.

Challenges in Credit Life and Group Term Segments

The Credit Life business experienced a slowdown, growing by 8% and contributing approximately 38% to the overall protection business, primarily due to ongoing challenges and lower disbursements in the MFI industry. Similarly, the Group Term business continued to be impacted by increased competition. Despite these headwinds, the company is focused on expanding market coverage and selecting businesses that meet its defined risk-reward expectations.

New Product Launches and Customer-Centric Strategy

Customer-focused innovation remains central to the business strategy. During the quarter, ICICI Pru Life launched 'ICICI Pru Wish', an industry-first women's health plan offering fixed lump sums for critical illnesses and surgeries. Additionally, an increasing annuity variant of GPP Flexi was introduced to safeguard retirement income against inflation, and 'ICICI Pru Signature Assure' was launched for goal-based savings. These initiatives aim to cater to evolving customer needs and enhance value propositions.

Cost Management and Operating Leverage Outlook

The company's cost/premium ratio stood at 19.8% and cost/TWRP at 27.8% for 9M-FY2025. While expenses for 9M-FY2025 increased by 19.8% year-on-year, management noted a sequential downward movement in costs from Q2 to Q3. This indicates ongoing efforts to improve efficiency and leverage investments in people, technology, and processes, with the expectation of delivering operating leverage in the coming years and bringing efficiency to the savings line of business.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Financial Services earnings calls