BL Interview. Primary goal is VNB growth, margin is a derivative: NS Kannan, I-Pru Life

I am immensely satisfied, but that doesn’t mean it is over. We have a wider and more comprehensive product suite today across their savings, protection and annuity needs and at group platforms. The derivative of that has been that from being 82 per cent ULIP-dependent in FY2018, we have brought it down to 41 per cent in H1-FY2023. The share protection has risen from six per cent to 20 per cent during this period.

If we look at new business premiums received, in FY2018, retirement and protection segments accounted for less than 1/3 of this business. As of H1-FY2023, it’s about 50 per cent. In FY 2018, we were 50:50 in bancassurance from ICICI Bank and non-ICICI Bank. In the last 3 – 4 years, we have been adding partners. Currently, we have about 200,000 agents and over 850 partnerships, including 31 bank partners. The last mile reach has improved phenomenally, resulting in improved resilience and the ability to take advantage of the government and IRDAI policies on the development side.

Our balance sheet is rock solid, with zero NPA in 22 years. The solvency ratio is 200 per cent plus. With risk-based capital set to come in about two years, we will not require external capital; we will get the release of capital.

The bulk of the challenges was external. In the second wave, the claims intensity was high; more than double of what we handled every year. Claims capacity had to be increased within one and a half days and that was the moment of truth for the life insurance industry. But ultimately, we exist to pay the claims and we have the highest market share among the private players on the sum assured at 15.7 per cent.

Also, in the June FY21 quarter, during the second wave, we made a loss and we said so be it. A life insurance company’s reason for existence is to pay the claims and in a 100-year pandemic, if you don’t make a loss, you have not done a good job covering people.

The primary target for us was to double the FY2019 VNB by FY2023. We should be able to get there. Beyond that, what multiples the market gives it’s the market’s outlook. In terms of top-line growth being a bit volatile, it has also got superimposed by some of the issues we faced around retail protection. Not just for us, but the entire industry.

Due to Covid, reinsurance tightening of standards, even our underwriting standard tightening, and the inability to send customers for medical examination etc., the retail protection growth was lower than anticipated. But sequentially, we are doing better, and these concerns have abated. I don’t foresee a price change from reinsurers or us, as the mortality rate is in line with expectations.

Beyond doubling VNB, which is expected to happen by March 2023, on a medium-term basis, we will be able to put out a VNB growth rate in line with the industry at 15 – 20 per cent per annum.

Our primary goal is the growth in absolute VNB; the margin is a derivative. It is largely driven by protection (group, retail and credit life), which at about 20 per cent protection to the APE mix, is the highest in the industry. The retail segment growth has been impacted, but credit life and group protection are growing well. Also, our 61st-month persistency has gone beyond 60 per cent.

A bulk of AUMs was contributed by the savings line. Sometimes the savings line of business (not annuity) becomes an easier working model in terms of high-ticket size and ease of sale, whereas protection is a hardworking model. It is to the benefit of customers and shareholders. The company’s transformation from a 6 per cent protection to 20 per cent impacts the top line and AUM. But I do not have the mandate to be No 1 or No 2 on AUM. The focus will be on VNB. Profitability has also increased from 8 per cent during the IPO to 31 per cent.