Value of new business grew 90%, persistency is a clear focus for us: Sandeep Batra, ICICI Pru Life Insurance

In an interview with ET Now, Sandeep Batra, ED, ICICI Prudential Life Insurance says, “at 86.9% persistency ratio, we believe we are among the best in class.” Edited excerpts:

ET Now: What has led to improved margins and rise in value of the new business?

Sandeep Batra: The value of the new business has grown significantly during the year. We have had a growth of over 90% and the VNB for this fiscal year is 12.86 billion as compared to 6.66 billion. This is due to a robust top line growth. Our savings business grew by 15% and the protection business by 17%. Our margins are a function of growth on savings business, growth on protection business, improvement in the cost ratios and persistency.

ET Now: What factors led to the improvement in the EV and on equity on EV?

Sandeep Batra: The expansion in embedded value has moved to nearly Rs 19,000 crore from Rs 17,000 crore last year. It is a function of unwinding of discount as well as value of new business. The ROEV is 22% which is a very healthy number compares with 16% of last year.

ET Now: How do you see the share of savings as well as protection business shape up over next two years?

Sandeep Batra: These are two separate set of businesses and we not want to put a percentage there. The savings business depends upon the formalisation of savings; we along with the rest of financial services industry are beneficiaries of that. We do expect this part of our business to grow little ahead of the nominal GDP.

Coming to the protection side of business, the extent of cover that most Indians have is grossly inadequate and that is growing at a much faster pace.

In near term, we do expect both the segments to do well. We are focussed on both but given the extent of under penetration in the protection business it can grow at a much faster pace than the saving business.

ET Now: Your cost and persistency ratios have also improved. What have been the key drivers? What further improvement do you see on both these variables?

Sandeep Batra: Persistency is the single most important metric to measure the quality of business. At 86.9%, 13-month persistency, we believe we are among the best in class.

When we disclosed these numbers, we did not put single premium on its space neither did we clubbed this with the group business, it is pure retail persistency.

About three-four years back this number was in late 70s. We have worked really hard in ensuring that customers do get value for their money and they are able to continue with their policies over a longer term period. Persistency is a clear focus area for us and it will remain so.

After 13-month persistency, we are looking at moving other cohorts like 25, 37 and 49-month persistency. In all these categories you will see about a 2% improvement.

ET Now: The overall market share, based on RWRP, is at 11%; how do you plan to improve the share?

Sandeep Batra: We would focus on our business which is selling customer centric products both on the saving and protection side. There are enough opportunities there and we believe that the market share on savings side is not only confined to the life insurance space but competing with the entire financial service space.

As long as we are able to deliver value to the customers, they are going to reward us. The protection side of the business is a very under penetrated market and there are a lot of opportunities to grow in that space.

ET Now: What is the growth strategy going forward? Do you have any plans for inorganic growth?

Sandeep Batra: Right now we are focussed on the organic growth itself. In case any opportunities that come our way add to our distribution strength and makes financial sense from a shareholder perspective, we will look at it.

ET Now: The solvency ratio is above regulatory norms although there is one minor disappointment which has led to lower solvency performance this time around; could you explain it?

Sandeep Batra: The solvency ratio for this year end was 250% as compared to 280% last year. There has been a drop mainly due to the growth in the business both on the savings and the protection side.

As we continue to grow, solvency would come down but we are still very comfortable given that the regulatory requirement is 150%.

We still have some time to go before we really need to come back to market to raise further capital.