ICICI Prudential Life Insurance Company Limited — Q4 FY25 earnings call

Call held 22 Apr 2025

Management summary

ICICI Prudential Life Insurance reported a strong FY2025 with APE growth of 15.0% to ₹104.07 billion and PAT growth of 39.6% to ₹11.89 billion. The company saw an improvement in cost ratios and robust retail new business sum assured growth. However, VNB growth was more modest at 6.4% with a margin of 22.8%, impacted by a shift in product mix towards lower-margin linked products and negative operating assumption changes related to mortality. Challenges in the MFI segment and a decline in partnership distribution business were also noted.

Highlights

  • APE grew 15.0% year-on-year to ₹104.07 billion in FY2025, demonstrating strong business growth.

  • Total premium grew by 13.2% year-on-year to ₹489.51 billion in FY2025.

  • PAT grew by 39.6% year-on-year to ₹11.89 billion in FY2025.

  • Embedded value grew by 13.3% year-on-year to ₹479.51 billion on March 31, 2025, with RoEV at 13.1% for FY2025.

  • Cost/premium ratio improved from 18.2% last year to 18.1% in FY2025, and Cost/TWRP for savings improved from 15.8% to 15.4%.

  • Retail new business sum assured grew by 37.0% year-on-year to ₹3,324.49 billion.

  • 13th month persistency stood at 89.1%, and 49th month persistency at 69.5%.

Concerns

  • VNB grew by 6.4% year-on-year to ₹23.70 billion in FY2025, with a margin of 22.8%, indicating slower VNB growth compared to APE.

  • Annuity business declined 57.8% year-on-year in Q4 FY2025 due to a high base from the previous year.

  • Partnership distribution business declined by 3.2% year-on-year, attributed to lack of tailwind from ULIP sales and surrender guideline adjustments.

  • Negative operating assumption changes of ₹2.54 billion were recorded due to strengthening of mortality assumptions, primarily from the group business.

Key financials

  1. APE 104.07 Bn +15%YoY
  2. Total Premium 489.51 Bn +13.2%YoY
  3. VNB 23.7 Bn +6.4%YoY
  4. VNB Margin 22.8%
  5. PAT 11.89 Bn +39.6%YoY
  6. Embedded Value 479.51 Bn +13.3%YoY
  7. AUM 3,093.59 Bn +5.2%YoY
  8. Solvency Ratio 212.2%

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

SegmentContribution to APEGrowth
Linked Business (APE)48.3%28.5%
Non-linked Savings Business (APE)21.2%-5.6%
Annuity Business (APE)8%—
Overall Protection APE15.7%7.4%
Group Funds (APE)6.4%100%
Agency Business (APE)28.9%14.2%
Direct Business (APE)14.4%17%
Bancassurance Business (APE)29.4%18.2%
Partnership Distribution Business (APE)10.9%-3.2%
Group Business (APE)16.4%24.6%

Capital allocation

high confidence
  • Liquidity Liquidity disclosed The company's solvency ratio stood strong at 212.2% as on March 31, 2025. The company raised ₹14 billion in sub-debt in Q3, which contributed about 18-20% to solvency, in anticipation of the call option for a previous ₹12 billion sub-debt in November 2025 and potential RBC implementation.
    Our solvency ratio is strong at 212.2% as on March 31, 2025. ... We raised ₹14 billion in Q3. That roughly contributed about 18% to 20% of our solvency. And across the quarter, you have seen the solvency being broadly steady. Now, you also have to keep in mind that about four and half years back, we had raised 12 billion sub debt as well, which has a call option coming up in November 2025.

Guidance & targets

VNB Growth

  • VNB growth relative to APE VNB Growth · ongoing · Medium confidence grow VNB ahead of APE
    On your third question on VNB, of course, the endeavour is to be able to grow VNB ahead of the APE. And that's what we will continue to work towards.

    — Dhiren Salian

APE Growth

  • APE growth APE Growth · medium-term perspective · Medium confidence 13-15%
    However, I think if you were to look at a medium-term perspective, I think we should be able to build in a range of 13% to 15% APE growth

    — Dhiren Salian

Protection Margins

  • Protection VNB margins Protection Margins · as time goes by · Medium confidence improve
    See, we would expect these margins to improve as time goes by, and we've got an opportunity to correct these via pricing actions that we have on the ground.

    — Dhiren Salian

Cost Management

  • Cost structure Cost Management · ongoing · Medium confidence align with product mix
    I would like to highlight that the cost ratios have been improving quarter-on-quarter, and we will continue to work towards aligning a cost structure commensurate with the product mix.

    — Dhiren Salian

MFI Segment Performance

  • MFI segment pressure MFI Segment Performance · coming quarters · Medium confidence continue
    We expect some pressure to continue in the MFI segment in coming quarters as well.

    — Amit Palta

What to watch in Q1 FY26

MFI segment recovery

couple of quarters down the line
Current Under pressure
Target Following the trend of recovery

Why it matters

The MFI segment has been a drag on credit life business; its recovery is crucial for overall protection growth.

It's only the non-MFI part, which is 40% of our credit life, which has got impacted, which we believe that couple of quarters down the line.

Risks & concerns

  • Negative operating assumption changes (mortality)

    high

    The company strengthened its operating assumptions, leading to a negative movement of ₹2.54 billion, primarily due to aligning long-term mortality assumptions after observing negative variances.

    During the current year, we have strengthened our operating assumptions, which has led to a negative movement of ₹ 2.54 billion. As you may recollect, last year, we had shown a mortality variance due to higher expected claims incurred but were not reported in the group business. We continuously monitored this variance throughout the year, and we have now aligned our long-term mortality assumption.

    Management acknowledged

  • MFI segment challenges

    medium

    The MFI segment of credit life business was impacted due to continued challenges in the MFI industry, with pressure expected to continue in coming quarters.

    In the credit life business, the MFI segment was impacted due to continued challenges in the MFI industry. We expect some pressure to continue in the MFI segment in coming quarters as well.

    Management acknowledged

  • Increased competition in group term business

    medium

    The group term business was impacted due to increased competition, leading to a focus on underwriting strategy to meet defined risk-reward expectations.

    The group term business was impacted due to increased competition. As a long-term player in the industry, we have a deep understanding of this market, and our underwriting strategy remains focused on selecting businesses which meet our defined risk reward expectations.

    Management acknowledged

  • Market volatility impacting ULIPs and product mix shift

    medium

    Market volatility in Q4 led to customer preference shifting away from ULIP products, impacting proprietary channels and creating expense affordability stress due to lower-margin linked products.

    As markets became volatile in Q4, customer preference started shifting away from ULIP products. ... the unit linked product does have lower affordability and the shift in the product mix does create stress if the expense growth is ahead of what could be afforded within the product mix.

    Management acknowledged

  • Persistency decline in longer-term cohorts

    medium

    Some minor drops in persistency were observed, particularly in longer-term cohorts (61st month), partly due to cover continuance options in unit-linked products.

    Coming to your question on persistency, I think you believe you are referring to the 61st month. A large portion of the portfolio that sits in the 61st month is unit linked, where we've been able to get our customers to continue staying in the product even though they are not paying premiums. ... some minor drops that we've seen in terms of persistency, but that's largely around certain segments which we will look at correcting as we go through the year.

    Analyst acknowledged

Q&A highlights

6 direct
Operating assumption changes and VNB margin impact Direct
If you recall last year, we had seen a large negative variance in mortality. That is one of the components that has gone into this operating assumption changes at this point. You see our philosophy has been that if you start to see some variances and there are negative variances, then we would like to correct them as quickly as we can.

Analyst questioned the negative impact of operating assumption changes on VNB margin and EV, and management clarified it was primarily due to strengthening mortality assumptions after monitoring last year's negative variance.

Asked by Avinash Singh

Capital strategy and sub-debt raising Direct
We raised ₹14 billion in Q3. That roughly contributed about 18% to 20% of our solvency. ... about four and half years back, we had raised 12 billion sub debt as well, which has a call option coming up in November 2025. So that is something that is in our minds as well, whether we need to call it at November. And then if we need to, we could re-raise it.

Analyst questioned the rationale for raising sub-debt despite comfortable solvency; management explained it was in anticipation of a call option on existing sub-debt and potential future regulatory changes (RBC).

Asked by Avinash Singh

Partnership distribution channel growth struggles Partial
Partnership distribution channel focuses more on non-linked side of business, so they could not capitalise on the tailwind which was there in the ecosystem. That was one of the reasons why the overall growth for the year looks muted. ... I would like to look at FY25 as only a transitionary phase.

Analyst probed the reasons for muted growth in the partnership channel; management attributed it to product mix not aligning with market tailwinds (ULIPs) and surrender guideline adjustments, viewing FY25 as a transitionary phase.

Asked by Avinash Singh

VNB margin impact from cost structure due to ULIP mix Direct
Given the fact that there has been a shift towards unit linked, that does create a little bit of an expense affordability from a margin perspective. ... the unit linked product does have lower affordability and the shift in the product mix does create stress if the expense growth is ahead of what could be afforded within the product mix.

Analyst sought granular detail on how the cost structure, particularly due to the ULIP mix, impacted VNB margins; management confirmed ULIPs have lower affordability and create stress if expense growth outpaces product mix affordability.

Asked by Swarnabha Mukherjee

FY26 growth outlook and sustainability of group funds Partial
The other thing that we have also in the unit linked are a variety of other features and benefits that we've added. So, it is not just a plain vanilla unit linked product anymore. There are additional riders which provide benefits for customers, which we think can take away some of the market effects. ... group funds business in your product mix, right? Historically, every year you used to do between 2 to 3 billion of that, right? This time it is much higher. It is about 6.6 or whatever. ... this is lumpy business. Difficult to predict how it would forecast into the future.

Analyst asked about realistic growth for FY26 given the high FY25 base and the lumpy nature of group funds; management highlighted product innovations in ULIPs to mitigate market volatility but noted the unpredictable nature of group funds.

Asked by Shreya Shivani

VNB margin impact from economic assumption change (yield curve) and persistency decline Direct
The economic change that you see in the VNB walk is largely on effect of the yield curve. ... Coming to your question on persistency, I think you believe you are referring to the 61st month. A large portion of the portfolio that sits in the 61st month is unit linked, where we've been able to get our customers to continue staying in the product even though they are not paying premiums.

Analyst questioned the negative impact of economic assumption changes and persistency decline; management explained yield curve effects and clarified that 61st-month persistency for ULIPs is impacted by cover continuance options.

Asked by Aditi Joshi

Sustainability of protection VNB margins Direct
See, we would expect these margins to improve as time goes by, and we've got an opportunity to correct these via pricing actions that we have on the ground.

Analyst asked if the current protection VNB margins are sustainable; management indicated an expectation for improvement through pricing actions.

Asked by Rishi Jhunjhunwala

Non-commission cost reduction in Q4 and sustainability Direct
The endeavour that we will have is to keep our overall costs in line with the product mix and therefore the affordability that we are able to generate out of this. And we would like to keep this as low as possible while of course continuing to invest in areas that we think give a strategic advantage, such as IT digitisation, as well as supplementing channels with the feet on street where required.

Analyst questioned the sustainability of the significant non-commission cost reduction in Q4; management affirmed their commitment to keeping overall costs in line with product mix affordability and strategic investments.

Asked by Sanketh Godha

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Detailed narrative

Q4 FY25 and Full Year Performance Highlights

ICICI Prudential Life Insurance reported a robust FY2025, with Annualized Premium Equivalent (APE) growing by 15.0% year-on-year to ₹104.07 billion. Total premium for the year increased by 13.2% to ₹489.51 billion. The company achieved a Profit After Tax (PAT) of ₹11.89 billion, marking a significant 39.6% year-on-year growth. Retail new business sum assured also saw strong growth of 37.0% year-on-year, reaching ₹3,324.49 billion, while the 13th and 49th month persistency stood at 89.1% and 69.5% respectively.

Value of New Business (VNB) and Embedded Value (EV) Dynamics

VNB for FY2025 grew by 6.4% year-on-year to ₹23.70 billion, resulting in a VNB margin of 22.8%. The Embedded Value (EV) increased by 13.3% year-on-year to ₹479.51 billion as of March 31, 2025, with a Return on Embedded Value (RoEV) of 13.1% for FY2025. Operating assumption changes, particularly the strengthening of mortality assumptions, led to a negative movement of ₹2.54 billion in EVOP, reflecting the company's proactive approach to risk management.

Product Strategy and Innovation

Product innovation remains a core focus, with the introduction of 'ICICI Pru GIFT Select', a non-par guaranteed income product, in Q4. This product, designed to offer guaranteed returns and quasi-inflation hedge features, gained strong traction and helped offset the impact of market volatility on linked business. The company also emphasized increasing the proportion of linked products that offer goal protection and high sum assured, making them less susceptible to market fluctuations.

Channel Performance and Mix Shift

Bancassurance business APE grew by 18.2% year-on-year, contributing 29.4% to the overall APE. Agency and Direct channels, comprising proprietary channels, collectively contributed over 50% of retail APE, with growth rates of 14.2% and 17.0% respectively. Partnership distribution, however, declined by 3.2% year-on-year, primarily due to its non-linked focus missing the ULIP market tailwind and adjustments post-surrender value regulations. Group business grew by 24.6% year-on-year, contributing 16.4% to APE.

Cost Management and Efficiency

The company demonstrated improved cost efficiency, with the cost/premium ratio improving from 18.2% last year to 18.1% in FY2025. For the savings line of business, the Cost/TWRP improved from 15.8% to 15.4%. Management highlighted continuous efforts to align the cost structure with the product mix and control overall expenses, even while making strategic investments in IT digitization and channel expansion.

ESG Initiatives and Recognition

ICICI Prudential Life Insurance maintained its highest ranking in the Indian insurance industry for ESG performance by two leading rating agencies. The company received the 'Platinum Award' for its 2024 ESG report. Key initiatives include adopting green energy across branches, achieving LEED Platinum Certification for its headquarters, and committing to responsible investing as a signatory to the UN Principles for Responsible Investment. Gender diversity improved from 27% to 30% of women employees, and 73.7 million lives were covered through micro-insurance products.

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