ICICI Prudential – A Wealth Creation Opportunity

Indian Insurance sector is a sunrise sector and set to evolve in future. Insurance has a low penetration which is evident from the fact that It is ranked tenth in the world, in life insurance business. According to certain estimates India has a very low share in Global Life insurance market. During 2019, its share was only 2.73% compared to global life insurance market.  In non-life insurance business, India is ranked much lower and has insignificant share. In non-life space it is ranked 15th and has a share of 0.79% compared to global non- life insurance market.

India has low Insurance penetration. From 2.71 % in 2001, it was near to 3.76 % in 2019 (This includes a mix of Life 2.82 % & Non-Life 0.94 %).

. Government has been taking significant measures to strengthen the Insurance sector in India. IRDAI (Insurance Regulatory Authority of India) has supported the digital inclusion by enabling the KYC procedure through the digital verification and promotion of Digilocker facility in the insurance sector. Account Aggregator system, regulated by RBI is an important step for increasing the market size by expanding the digital reach. It will act as a repository of data of individuals and will allow sharing of data, with banks, insurance and fintech companies. Single source of data sharing will help the companies to reach out to wider market as well as reduce the cost and increase efficiency.

However biggest push comes from the ‘The Insurance (Amendment) Bill, 2021’ which was passed earlier this year. The bill raised the foreign investment in Indian insurance company from 49% to 74%, and intended to removes restrictions on ownership & control, subject to rules and conditions. The Act provides the framework for functioning of insurance businesses as well as regulating the relationship between an insurer, insurance policyholders, shareholders of the insurance company, and Insurance regulator i.e., the Insurance Regulatory and Development Authority of India). More than Rs 25,000 crore FDI had flown into the insurance sector, between 2015 to 2020, after the FDI limit in insurance was enhanced to 49% from 26%.

Insurance is a sunrise sector. Enhanced limit of 74% will help the overall industry in attracting investment, gaining scale of operation and maintain solvency ratio.

ICICI Prudential Life Insurance Company (ICICI Prudential Life) is a key player in the insurance sector and is well positioned to benefit from the emerging changes and future opportunities.   It is promoted by ICICI Bank Limited and Prudential Corporation Holdings Limited. ICICI Prudential Life began its operations in the fiscal year 2001. In FY 2015 ICICI Prudential Life became the first private life insurer to attain assets under management of `1 trillion. In FY2021 it  Crossed Rs 2 trillion of assets under management. In 2017, it became the first insurance company in India to list on NSE and BSE

ICICI Pru has strong digital footprints and receives 95% of new customers digitally. It has a digital platform to onboard the client. Platform offers frictionless, contactless and instant issuance opportunity by providing pre-approved sum assured (PASA) offers. It has partnered with digital-first companies, which includes, payment providers, insuretechs, e-Commerce platforms and fintech companies as distributors.

ICICIC Pru digital platforms are device-agnostic and accessible through the voice bots, AI-powered chatbot, WhatsApp etc to understand and deliver on the needs of the customer and deliver on it. Its  humanoid calling app can make 50,000 calls to customers in an hour for reminding on premium dues. Its partnerships and tie-ups with IndusInd Bank, AU Small Finance Bank, IDFC First Bank, RBL Bank and NSDL Payments Bank, to tie-ups with distributors such as PhonePe Private Limited, Wealth India Financial Services, BSE EBIX, Magnum Insurance Broking etc has enabled  to increase distribution footprint.

During FY 2020-21, Company posted:

  • solvency ratio of 216.8% as against required minimum of 150%
  • Value of New Business was Rs 16.21Bn, a 5-year CAGR growth of 32% and VNB Margin of 25.1%
  • Embedded Value of Rs 291.06 Bn, a 5-year CAGR of 16% and RoEV Margin of 15.2%
  • Annualised Premium Equivalent (APE) of Rs 64.62 Bn
  • AUM of Rs 2.14 Trillion, a 5-year CAGR growth of 16%
  • Protection APE of Rs 10.46 Bn, a 5-year CAGR growth of 50%
  • Total Sum Assured Rs 20.30 tn

H1 – FY 2022 – Financial highlight

Rs BillionSeptember 2021H1-
FY2022
   
APE7.6831.96
YoY growth44.90%39.70%
RWRP6.2325.88
YoY growth41.00%37.30%
New business sum assured595.533,374.16
YoY growth-11.40%34.80%
New business premium14.6964.61%
YoY growth20.80%45.00%

Though life insurance density in India has moved up to $ 55 in 2018 from $ 9.1 in 2001, India’s insurance density is still one-sixth of China, according to the estimates of the Insurance Regulatory and Development Authority of India. Similarly, India’s protection gap stands at $ 16.5 trillion, which can be an enormous business opportunity.

Insurance sector is set for transformation. Pandemic has revealed the gap in the healthcare system and need for the family to adopt the healthcare cover. During 2021, company has raised subordinated debt capital of Rs 12 billion in FY2021,  largest by an insurance company in India, to support next phase of growth. Company s truly a digital company and has wide range of products to suit the need of customers. It has best in class Corporate Governance, which is successfully creating value for shareholders over the years and protecting stakeholder’s interest. ICICI Pru is one of the market leaders, uniquely positioned, set to benefit from its competencies and massive opportunities that will be unfolding in the Insurance space in future.

(BSE: Closing Market Price on Friday, 8th October Rs 660.2   Market Cap (Full) Rs 94,865.08 Crore)

Bureau Galactik Views

(Article is not an Investment Advice)

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