ICICI Pru Life pre-tax profit down 38% in Q4 on investment losses

Insurer's full-year income halves to Rs 20,843 crore from Rs 41,523 crore in FY19

Private sector life insurer, ICICI Prudential Life Insurance, reported a 38 per cent decline in pre-tax profit in the quarter ended March 31, 2020 (Q4FY20), due to losses in investment amounting to Rs 18,898 crore. The profit before tax of the insurer stood at Rs 172 crore compared to Rs 278 crore in Q4FY19. Net profit declined 31 per cent in the reporting quarter to Rs 179 crore from Rs 261 crore. For the full year (FY20) the net profit of the insurer shed 6 per cent to Rs 1,069 crore from Rs 1,141 crore.

The company’s total income turned negative in Q4FY20 due to losses in investment of Rs 18,898 crore. It suffered a loss in total income to the tune of Rs 8,401 crore in Q4FY20 while total income in Q4FY19 was Rs 15,926 crore. In FY20, the company’s total income halved to Rs 20,843 crore from Rs 41,523 crore in FY19.

The insurer’s investment loss in FY20 was to the tune of Rs 12,117 crore, comprising losses of Rs 16,072 crore in under the unit-linked portfolio and an investment income of Rs 3,955 croreunder the non-unit funds.

“The investment income under unit-linked portfolio is directly offset by a change in valuation of policyholder liabilities. Unit linked portfolio investment income decreased from Rs 7,252 crore in FY19 to a loss of Rs 16,072 crore in FY20 primarily on account of decrease in market value of the securities held”, the company said.

Equity markets in quarter ended March 31, 2020 were negative and S&P BSE 100 gave an annualised negative return of 75 per cent. Due to subdued equity market performance, absolute return for the Non Par Linked line of business during the quarter ended March 31, 2020 was negative 17.5 per cent and annualised return for the quarter ended March 31, 2020 was negative 53.9 per cent, the company said.

For the month of March, the insurer’s new business premium fell 32 per cent to Rs 983 crore compared to Rs 1,451 crore in March, 2019. New business received premium of the company saw a healthy growth of 20 per cent to Rs 12,348 crore in FY20 compared to Rs 10,252 crore in FY19. The annuity new business premium registered a growth of 52 per cent to Rs 1,043 crore in FY20 compared to Rs 685 crore in FY19.

The insurer’s net premium rose 4.16 per cent to Rs 10,475 core in quarter ending March (Q4FY20) compared to Rs 10,056 crore in the same period last financial year. In FY 20, net premium earned by the company rose 7.52 per cent to Rs 32,879 crore compared to Rs 30,578 crore.

 

The value of new business (VNB) grew 21 per cent to Rs 1,605 crore in FY20 compared to Rs 1,328 crore in FY19. The insurer’s VNB margin was 21.7 per cent for FY20 as compared to 17.0 per cent for FY19. The increase in VNB margin is primarily on account of increase in protection mix. The embedded value of the private insurer rose 6.5 per cent 23,030 crore in FY20 compared to Rs 21,623 crore. The annualized premium equivalent however fell 5.4 per cent to Rs 7,799 crore in FY20 compared to Rs 7,381 crore mainly due a drop in savings portfolio (-11.5 per cent). Protection APE of the insurer rose 54.6 per cent to Rs 1,116 crore from Rs 722 crore.

In a forward guidance, the company has said it will encourage higher levels of digital adoption across channels and focus on contactless conversations through video conferencing given the current norm of social distancing. Moreover, they will focus more on protection products more given the fact that demand for unit linked savings will be weak and they will target small growth in non-linked savings.

The thirteenth month persistency ratio of the company 83.2 per cent.