ICICI Prudential Life Insurance Company Ltd

NSE:ICICIPRULI

Earnings Call Analysis

Strong Growth and Resilient Financials

ICICI Prudential Life Insurance reported robust growth for Q1 FY 2025 with total Annualized Premium Equivalent (APE) rising by 34.4% to INR 19.63 billion. Retail APE saw a 42.2% increase, driven primarily by agency and direct business, which reported 61.6% and 40.6% growth respectively. Annuity and linked business performed exceptionally well, growing 135.2% and 78.3% year-on-year. The company's VNB grew by 7.8% to INR 4.72 billion with margins at 24%. Despite increased costs, the company's PAT rose 8.7% to INR 2.25 billion, supported by a strong solvency ratio of 187.9%.

A Strong Quarter with Significant Growth

ICICI Prudential Life Insurance presented a robust performance in Q1 FY2025, continuing its strong growth streak for the third consecutive quarter. The company’s total Annual Premium Equivalent (APE) surged by 34.4% year-on-year to INR 19.63 billion, primarily driven by retail APE which grew by an impressive 42.2%. Additionally, the agency business APE saw a massive growth of 61.6%, highlighting the company's strategic focus on expanding its agency and direct distribution channels.

Value of New Business and Margins

The Value of New Business (VNB) grew by 7.8% to INR 4.72 billion, with margins holding strong at 24%. This growth was driven by a healthy product mix and efficient cost management, even as the overall cost to Total Weighted Received Premium (TWRP) ratio increased to 32.6%. Despite slight pressure on costs, specifically in the savings line of business, the company successfully maintained efficiency and growth.

Strong Financial Health

ICICI Prudential's financial resilience remains solid, with the Profit After Tax (PAT) rising by 8.7% year-on-year to INR 2.25 billion. The company’s solvency ratio stands robust at 187.9%, indicating strong financial stability and the ability to meet long-term obligations. Additionally, the company’s Assets Under Management (AUM) have crossed INR 3 trillion, covering 98.4 million lives with total in-force sum assured of INR 35.1 trillion.

Customer-Centric Innovations

Customer satisfaction continues to be a cornerstone of ICICI Prudential's strategy, evidenced by an industry-leading claim settlement ratio of 99.2% for FY2024. The average turnaround time for non-investigative claims is remarkably low at 1.3 days. The company’s digital transformation initiative is also noteworthy, with 85% of policies issued using digital KYC, and 48% of savings policies being issued the same way. These efforts have been recognized through numerous industry awards.

Product Diversification and Channel Expansion

ICICI Prudential has diversified its product offerings to adapt to market demand and ensure sustainable growth. The contribution from linked savings products surged from 38.8% to 51.4% year-on-year, while the non-linked savings segment saw a decline due to shifting customer preferences towards liquidity and unit-linked products. The company has also expanded its agent network significantly, adding over 12,000 new agents and forging partnerships with 43 banks and 47 non-bank entities. The focus on proprietary channels such as agency and direct business has led to substantial growth, accounting for 52.5% of the retail APE mix.

Annuity and Protection Business

The annuity business grew robustly, with its contribution to overall APE increasing from 6.2% to 10.9%. This growth was driven by a preference for regular premium annuity products over single premium ones. Although the retail protection business experienced modest growth of 1.8%, the company focuses on this area for future expansion. Credit life business and group term business segments also showed strong alignment with economic growth, albeit with flat APE due to renewal dynamics.

Looking Ahead

ICICI Prudential is committed to delivering sustainable VNB growth by balancing business expansion, profitability, and risk management. The company continues to innovate in product offerings, distribution strategies, and customer experience initiatives. Despite the changing regulatory landscape, the company remains confident in its ability to navigate these changes through strategic adjustments and a focus on aligning stakeholder interests.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the ICICI Prudential Life Insurance Company Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded.

I now hand the conference over to Mr. Anup Bagchi. Thank you, and over to you, sir.

[Anup Bagchi, executive]

Good evening, and welcome to the results call of ICICI Prudential Life Insurance Company for the quarter ended June 30, 2024. I have several of my senior colleagues with me on this call, Amit Palta who heads Distribution, Brand Marketing and Products; Dhiren, CFO; Ajit, who heads Human Resources, Customer Service and Operations; Deepak Kinger, who handles Audit, Legal Risk and Compliance; Manish Kumar, Chief Investment Officer; Mr. Souvik Jash, appointed actuary; and Dhiraj, Chief Investor Relations Officer.

Let me take you through the key developments during the quarter before moving on to discuss the company's performance. We held our 24th AGM over video conference on June 28, 2024. All items specified in the AGM notice were approved by the shareholders of the company. We express our sincere gratitude to Mr. Ramachandran, who retired from the position of Chairman of the Board of Directors effective June 30, 2024. Mr. Sandeep Batra has been re-designated as Chairman with effect from the same date.

I'm also pleased to inform you that Mr. Suresh Vaswani has been appointed as an additional independent director, effective July 4, 2024, subject to the approval of the shareholders. Mr. Vaswani is a highly experienced leader in global technology and IT services. He has experience of effectively building, scaling up and transforming businesses and served on the Board of various public and private companies.

On the regulatory front, we welcome [indiscernible] effort to increase insurance penetration by improving the customer value proposition for non-linked products. It will lead to an improvement in the surrender value in case of already exist, and come in to force effective October 1, 2024. We believe that such customer-centric changes will boost the industry's long-term process.

As you are aware, even before the revised surrender value norms came into force, we had launched ICICI Pru GPP Flexi with benefit enhancer to provide customers the option to receive 100% money back of premiums paid any time. The commission structure in this product is more level-based, while keeping the overall lifetime payment at a similar level. The product has been well accepted in the market segments where it was launched.

We have also experimented with a trail-based commission on the unit platform where, again, we have seen acceptance by distributors in the market segment where it has been launched. We believe that by aligning the interest of all the 3 stakeholders, namely customers, shareholders and distributors will be able to absorb any impact that might come due to the change in regulations. We continue to work on process innovation in line with our objective to become the most customer and distributor-friendly life insurers. 85% of our policies have been issued using digital KYC and 48% of our policies were issued on the same way for savings line of business in Q1 2025.

Notably, we are also the first life insurer to pay out commissions on the same day to our distributors. Our focus is on building customer trust by enhanced coverage and superior claim settlements. Our AUM is over INR 3 trillion, and we cover 98.4 million lives for INR 35.1 trillion total in-force sum assured as of June 30, 2024. Claim settlement is the moment of truth for any insurer, and we have an industry-leading claim settlement ratio of 99.2% for FY 2024 with an average turnaround time of 1.3 days for set non-investigative teams. Our customer centric efforts have been recognized by various industry platforms. The list of awards won during Q1 2025 is presented on Slide 39.

Now let me talk about the key performance highlights. We have delivered RWRP growth of 46.8% year-on-year in Q1 2025, outperforming both the private and the overall industry for the third consecutive quarter in a row. In line with our focus on propriety channels, agency and direct to weather have delivered 54% APE growth year-on-year in Q1 FY 2025. On the product side, annuity and linked business grew strongly by 135.2% and 78.3% year-on-year in Q1 2025.

The overall company APE grew by 34.4% to INR 19.63 billion, and number of policies increased by 15.1% year-on-year in Q1 2025. 13-month persistency stood at 89.7% and 49-month persistency stood at 70.7%. The value of new business grew by 7.8% year-on-year to INR 4.72 billion, with an APE of INR 19.63 billion. Margins stood at 24%. Lastly, our business growth and profitability has been delivered with risk and prudence and is exhibited in a strong and resilient balance sheet.

To summarize, we will continue to offer the right product to the right customer and deliver it through the right channels. With customer centricity at the core of everything that we do, we'll continue to work on our strength that is product leadership, extensive distribution network and business excellence aided by the building box of people, digitalization and analytics. With the strong business fundamentals, our endeavor will be to deliver sustainable VNB growth with our first pivoted towards balancing business growth, profitability, risk and prudence.

Thank you, and I'll now hand it over to Amit to take you through the business updates.

[Amit Palta, executive]

Thank you, Anup. Good evening, everyone. I will be talking about performance update for quarter 1 FY 2025. Let me start with premium growth, which is presented from Slides 10 to 12. As highlighted by Anup, our market-leading performance has continued in quarter 1 for the third consecutive quarter in a row on the back of our innovative and comprehensive suite of products, distribution strength, robust technology, superior customer service and strong risk management architecture.

Our total APE grew by 34.4% year-on-year to INR 19.63 billion, and retail APE grew by 42.2% year-on-year to INR 16.66 billion. Agency business APE grew by 61.6% year-on-year and contributed 29.4% to overall and 34.6% to retail APE in quarter 1. Direct business APE grew by 40.6% year-on-year and contributed 15.2% to overall APE and 17.9% to retail AP in quarter 1 FY '25. Together, agency in direct distribution now contributes 52.5% of our retail APE mix in quarter 1, and we will continue to invest in our proprietary channels to drive the business growth further.

Bancassurance business APE grew by 33.6% year-on-year and contributed 28.8% to APE mix. Partnership distribution APE grew by 24.9% year-on-year and contributed 11.5% to APE mix. And group business, APE grew by 2.8% year-on-year and contributed 15.1% to APE in quarter 1.

To ensure our products have delivered extensively, which is our continuous endeavor to deepen our partnerships, which is presented on Slide 37. We continue to build capacity and have added more than 12,000 agents during quarter 1 spread across geographies. We have tie-ups with 43 banks with access to more than 21,500 bank branches and 1,150-plus nonbank partnerships with an addition of 47 nonbank partners during quarter 1.

Contribution from linked savings product to overall APE increased from 38.8% last year at quarter 1 to 51.4% in the quarter [indiscernible] on account of customer preference shifting towards unit products from non-link products. In this category, we have recently launched Protect and Gain growth, which offers differentiated value proposition to our customers preferring ULIPs and comprehensive live accident health and accident disability cover.

Non-linked savings contribution to overall APE decreased from 27.7% last year quarter 1 to 16.8% in current year quarter 1. In this segment, we have seen an increase in the customers' demand of immediate liquidity products. Each company has different products across participating and nonparticipating segment to cater to this demand. In the par category, our flagship product, Gold caters to immediate income need of the customer. It continues to deliver a very strong growth for us.

Our annuity business contribution increased from 6.2% last year, quarter 1 to 10.9% in the current quarter 1 -- current year quarter 1. [indiscernible] annuity, we continue to witness a tilt towards regular premium annuity over single premium annuity. The overall protection APE stood at INR 3.55 billion and contributed 18.1% to overall APE in quarter 1. Retail Protection business grew by 1.8% in quarter 1 with number of qualities growing by 6.7%. On a 2-year basis, retail production APE has grown at a CAGR of 28.3% for us. Retail protection continues to be one of our focus areas, and we expect a strong growth trajectory going forward. Credit life business has continued to be well in line with the strong growth in the economy, as we continue to add partners and introduce propositions, aligned to their various lines of businesses.

Coming to group term business, it is a yearly business, which comes up for renewal on an annual basis. Therefore, if you also include the renewals, our APE is actually flat. We understand this segment well and we'll underwrite business only if it matches our risk reward expectations. Our focus on data analytics to mitigate insurance risk at onboarding stage has led to 71% reduction in cases with higher propensity for fraud and early claims for savings policies.

Overall, I'm very pleased with our performance in quarter 1. I would like to reiterate that we have been undertaking various initiatives over the last 2 years on various building blocks of the business to strengthen our fundamentals across products distribution and processes. The results you see now are the consequence of the consistent growth we have put in over the last few years and not an outcome of some short-term initiatives. With a diversified and innovative product portfolio, extensive distribution network and customer-centric initiatives aimed at delivering best-in-class customer journey and superior claim settlement, we enable to deliver sustainable VNB growth through business growth. Thanks.

[Dhiren Salian, executive]

Thanks, Amit. This is Dhiren. Good evening. Now let me take you through the financial metrics. The VNB for quarter 1, 2025 grew by 7.8% year-on-year to INR 4.72 billion. The VNB margin stood at 24.0%. The relevant comparison of Q1 FY 2025 margin is with financial year 2024 margin as that captures the impact of all assumption changes, done at March 31, 2024. The movement in margin is primarily on account of product mix shift. While quarter-on-quarter, the overall product mix may vary given the customer preference, the wide range of our distribution partners spread across geographies with access to varied customer segments will always help us sustain a balanced product mix.

Coming to expenses. Our overall cost to TWRP ratio stood at 32.6% in Q1 FY 2025. Our cost of TWRP on the savings line of business has shown a marginal increase and stood at 19.2%. We monitor cost ratios for the savings line of business separately. Our objective is to bring efficiency in the savings line of business, while we continue to focus on growth in the protection business. We will continue to invest and create capacity, greater digitalization and improving brand awareness in order to deliver sustainable VNB growth.

Moving to other financial metrics. The company's PAT for Q1 2025 stood at INR 2.25 billion, an increase of 8.7% year-on-year. Our solvency ratio continues to be strong at 187.9%. Our AUM is over INR 3 trillion, and we cover 98.4 million lives for INR 35.1 trillion total in-forced sum assured at June 30, 2024.

Thank you, and we are now happy to take any questions that you may have.

[Operator]

[Operator Instructions] Our first question is from the line of Swarnabha Mukherjee from B&K Securities.

[Swarnabha Mukherjee, analyst]

So I had -- the first question is on the cost side. So if you could give some color on why the cost to TWRP number has gone up? And also, you had mentioned in the results release that there is a INR [ 446 crores ] impact on policy liabilities because of some allocation methodology changes that you have undertaken. So I just wanted to check whether -- what is the reason for that? What change have you taken? And whether that is already in our VNB assumption? Or should we expect that to flow in maybe upcoming quarters? So if you could give some color on that. So that is my first question.

Second is on the agency side, if you could give some further cuts on which product is increased selling and given that annuity growth has been very, very strong, whether agency is driving that, which product you've seen some traction, whether it is the product where we have a trail commission [indiscernible]. So if you could highlight. And lastly on the impact -- of the surrender value evolution, how you were seeing that? How should we see and expect on your strategy [indiscernible]?

[Dhiren Salian, executive]

Swarna, this is Dhiren. Comment to your question on cost to TWRP, I think you should note that the cost to TWRP for savings business is roughly at about 19%, so that's broadly stable. The larger increase that you see in the cost ratio is primarily on the group side. If you recall, April last year is when the new commission guidelines came into effect, quarter 1 was subject to the effect where we were still working through our commission guidelines. A large portion of that is now being seen on the group side, which is visible in terms of the overall cost ratio. And that's stable at this point from quarter-to-quarter sequentially.

Coming to other point on the expense of management change that we have done that primarily is a change around the expense drivers. IRDAI requires us to disclose this if there is a change in expense drivers. It has been done for a specific segment of expenses, such that we're able to allocate them more appropriately for that line of businesses as well. This doesn't really have any material impact on the VNB at this point. The larger impact as we have disclosed is on the statutory library fees.

In terms of the surrender value regulations, Anup spoke about it. We've already had experience across a couple of products where we have tried out a trail commission structure or level commission structure. As we've always said, we will look at a win-win-win situation for customers, distributors as well as us as we modify our structures into the coming quarter.

[Amit Palta, executive]

So coming to agency business, your question on the reasons for success in agency. As you know that agency overall has delivered a 61% growth for us. It is a combined effort of initiatives taken on distribution, capacity, capability and products. So while products have played an important role and in alignment with our overall strategy of trying out a trail-based commission product on [ digital ] platform and 100% money back future launched by us on the Annuity platform. Both these products did extremely well with agency, and we are very happy that large part of our distribution on the value side, really aligned to this organization objective of long-term customer investments product portfolio, and hence, we were very happy with the deferred or a level commission structure that we design for them, and they have done exceedingly well, both on trail-based commission product or units as well as on annuity range of products.

The rest of the product performance has been in line with what we have witnessed with other channels as well, on immediate liquidity feature, which has been quite a benign in the market today through our participating product called Gold, they've been able to deliver quite a decent growth for us on an overall basis. But like I mentioned, a product was only one element of growth that we witnessed in agency. It was also about capacity that we built by almost 20% over last year quarter 1 and also the increase in productivity that we witnessed by having invested enough on building levels and cutting the learning curve and converting our capability architecture to support them to deliver better productivity. So we are seeing productivity right across various cohorts of employees as well as various segments of our advisers.

[Operator]

Our next question is from the line of Supratim Datta from AMBIT.

[Supratim Dutta, analyst]

So on the VNB margin side, first, I wanted to understand was that how do you allocate costs across quarters? Do you assume a similar cost across quarters? Or is there a cost loading in the later quarters? That would be my first question.

Secondly at the fourth quarter or in FY '24, you had indicated that there was a change in operating assumption. Now that had a negative impact on the VNB margin. Can you let us know that what has been the impact from that in this quarter? That would be the second question.

And the third question was that from 1st October, there is going to be a shift towards a new product design in non-par segment due to the higher surrender charges. Could you let us know what kind of impact from that do you expect on margins? And how are you looking at mitigating that?

And finally, on the group protection side, could you give us a breakdown of what is your credit protect versus what is your GTI? After several quarters, that category seems to be growing. Just wanted to understand what is driving the growth in this category?

[Dhiren Salian, executive]

So Supratim, Dhiren here. From a cost perspective, as we look at VNB, we look at forecasted expense of cost for the full year. Absolute cost, obviously, when you look at from a cost to premium perspective, will be higher in the first quarter, and we will get an operating leverage as you look through the coming quarters. What we do is we look at a build out of cost for the full year and we factor that's part of our expense setup. At quarter 1, as you look at the margin, the reason why I told you to look at full year numbers is because whatever assumptions that we've had primarily, which were around the expense impact that we have taken at the end of last year. That's been built into full year margins. And therefore, it is more relevant to look at quarter 1 movement from the full year numbers rather than quarter 1 of last year.

The group business, we haven't broken that out. We do that on a yearly basis, Supratim, across group credit as well as group term.

[Amit Palta, executive]

So broadly, on group protection, as you know, there are 2 elements of our Group Protection business. One is credit life, which is through our banks and NBFC partners. And second is group term employer employee businesses. Broadly, when you were to look at credit life business, I think this business has been almost growing twice the rate of credit life industry -- sorry, credit growth in the banking setup. So there, we are quite happy with the progress of 27%, 28% growth that we have on the credit life business. And that is largely on account of new partner additions that we are doing consistently. And also, we are exploring various opportunities with our partners to align differentiated propositions across various lines of businesses of both. So both has led to us managing our growth quite significantly in creating an alpha.

Coming to group term business, now this is usually different because we have been actually in this business for very long. We understand this business. We made out our entire relationship structure to reach out to large corporates, the organized sector to offer this group proposition, and we have done very well over a long period of time. And currently since we have the largest share of this business, we do see that this business being a 1 year business comes up for renewal every year, while we are persisting with 85% to 88% of our own customers to come and renew with us. But instantly, 20% to 15% of the business that doesn't get renewed and its renewed with any other competitive -- competition insurer is counted as a new business.

So from that perspective, the way we look at our group business is new deals, new corporate deals plus the business that we renew. And both the deals if you were to look together, I think our -- our total premium has been quite similar. However, the growth has been relatively subdued because of very, very competitive practices. So that's what is my view on the group term and credit life business.

[Dhiren Salian, executive]

And Supratim, on your question on surrender value impact, I think the old set of products don't matter anymore, and they will see to exist beyond 30th of September. As we have mentioned earlier, the focus for us is to align the interest of all 3 stakeholders; customers, shareholders and distributors. And we believe that will be able to absorb any impact that might come about due to the change in regulations. As we also spoke about, there are experiments that we have done around 2 sets of products and which have met with very reasonable success in the market segment that we've launched. As we look at what happens beyond 1st October, I believe the market will switch to some degree towards some of these products.

[Supratim Dutta, analyst]

Got it. Got it. And just one follow-up question. So have you seen any increased competition in the credit life business in the recent -- because one of your competitors indicated that competition in that segment has been indicated [indiscernible]?

[Amit Palta, executive]

See, I have to still come across a distribution segment or a customer segment where we are not facing competition. Competition has gone right across the customer segments and credit life is no different. So to that extent, there will always be an action across product lines. We are in a competitive environment. And you see insurers presence in most of these businesses may not be the same insurer present everywhere. But we have competition across all segments.

[Operator]

[Operator Instructions] The next question is from the line of Shreya Shivani from CLSA.

[Shreya Shivani, analyst]

Congratulations on delivering a good set of growth from this given year. Sir, on -- my question is, again, on the margin itself and 24% margin while the quarter saw 50% mix coming from units is quite good. Going ahead 2 questions over here. Are we -- is there any artificial limit that we maintain on the product mix on the ULIP world? Or is it just going to be dependent on what is the flavor of the season and what is selling more?

And second is, this 24%, I mean, one can expect this to continue for another quarter. But after 1 second half starts, that is after October begins, where should we see the trajectory? If you could give us some numerical -- some numbers around it, maybe [indiscernible] contraction, any numbers that you can help us with on where would this 24% be in third quarter or maybe 9 months or full year '25. That will be very useful.

[Amit Palta, executive]

So on product trajectory, I will speak about, and I'll ask Dhiren to talk about VNB trajectory. See, on products that where the mix will eventually move and what is the targeted mix. These are the questions we have answered at various points in time that our focus over years has been about ensuring that we stay relevant to respective of what the economic environment is around us. So when the markets are good, we are happy to serve the unit-linked products. When markets are tilting towards guaranteed products, we should be ready with and have the products available with us. And hence, a lot of time and energy and capacity has been deployed to create options and create choices across platform of products and make it available to the customer, depending upon the prevailing economic environment.

So we actually don't look at a targeted product mix. But yes, we do look at margin maximization initiatives within product lines, and that could happen by increasing the tenure of the policy and looking at riders, which adds value to the customer as well as to the company, and by looking at sum assured multiples over the premium that we can get customers to be convinced on to drive a higher profitability for us.

But for every step that we take towards profitability within the product line, what is sacrosanct is something which has to add value to the customer. So whether how long a tenure or whether riders or whether increasing sum-assured multiple, all 3 elements you will see adds value to the customer. So as long as it is value, we'll be more than happy to let customers choose what is the most relevant depending upon the economic environment. On VNB trajectory, I will ask Dhiren to...

[Dhiren Salian, executive]

So on the VNB trajectory, I think it's still a little too early to call, primarily because of 2 fronts. One, the products are still in the development phase at this stage, and conversations with our distributors is still live at this stage. So until these come to air, it's a little difficult to identify where the margin would be. But as we mentioned before, fundamentally, what we're trying to do is to align interest of all 3 stakeholders, customers, shareholders and distributors. And we want to create a win-win-win situation out of this.

[Operator]

The next question is from the line of Ravi Purohit from Securities Investment Management Private Limited.

[Ravi Purohit, analyst]

So I have a more fundamental question in the sense. When I look at our reported profits, I looked at our reported net worth, right, it gives you a number of return on equity of around 8%, right? Of course, we understand a lot of expenses get booked in year 1 and income is spread over a longer period just like health insurance companies have started kind of indicating what are their IFRS-based numbers and ROEs. Can you help understand what is ICICI Pru life insurance businesses through normalized ROE of the business, right? Is it like if all those accounting norms were to be changed, would our economic profit be INR 1,500 crores today on a net worth of INR 11,000 crores? If you could just indicate some ballpark to understand and evaluate what's the real true economic profit of this company, our business?

[Dhiren Salian, executive]

So Ravi, you're probably right, ROE in the current Indian GAAP doesn't make too much sense. The true ROE will start to emerge when we move to IFRS. We are awaiting instructions from the regulator as to how -- when we could move IFRS. There are a set of conversations [ in July ], but we are still waiting for notification on this.

I think it would be suffice to say that there would be -- we expect to have a release of capital based on the regulation that we expect coming out of IFRS. But it's too early to figure out what these numbers would be. In the current context, given that we are still working with Indian GAAP, we are looking at VNB and EV and ROEV is the more relevant metric at this point to look at from a return perspective.

[Ravi Purohit, analyst]

But you see, if you could just do an exercise, I mean if you -- if this was a case study and if you were actually doing a study and trying to assess just to give some ballpark range also, not even like a pinpointing thing that health insurance companies have gone to the extent of actually reporting both P&Ls and ROEs. But let's say, even if you are not able to do at least some ballpark range, would that kind of not help the investors kind of make some sense of the reported numbers. Those the reported numbers are absolutely like no connection with the true economic power of the business, which we are never able to assess in that sense.

[Dhiren Salian, executive]

Yes, you're right, Ravi. I think at this point, we work with ROEV. It's a little easier to do on the health insurance side given that they are shorter-term businesses. But in our case, the nature of the business is quite different and it is long term. So until we get to IFRS, it is a little difficult to call out these numbers.

[Operator]

The next question is from the line of Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

A couple of questions. Firstly, just a clarification on budget. There has been some calculation changes with respect to expenses that can be identified. And does that impact our tax rate in any form? That is one.

Second is on the current [indiscernible], you mentioned that you will create a balance between all the 3 stakeholders. So is it fair to assume that the returns could go down? Company structure, obviously, are changing. And for that matter, even VNB margins could also be -- could be hit. And within that, while agency mentioned that moving to trade has been quite successful. But with your Bancassurance for your corporate agents, would you feel that a clawback would be a better option? And how is the kind of negotiation [indiscernible]?

[Dhiren Salian, executive]

So right now, Prayesh, from the budgetary aspect, we are not seeing any material impacts on to us. On the -- so on the surrender aspect, I think we've been able to demonstrate that there is a segment of distribution towards looking at picking up level commission products. And that's essentially, we are not losing margin in these sets of products, and we discussed that in our previous call as well. The very fact that the pickup has been quite good in segments that we had launched this in gives us a great deal of confidence that you can actually manufacture products that create a win-win for all the stakeholders.

So that's the direction that we're going around. Yes, our conversation with our Bancassurance and other partnership distributors are live, and these are some of the offerings that you would take to the table as we have conversations with them and figure out what the right commission structures would be, which create value for all parties.

[Amit Palta, executive]

In fact, just to add here, I see Bancassurance partners or nonbank partnerships, ABR that we have, they contribute 23% of our business. So remaining part of our business is mostly proprietary. Apart from ICICI, as you know, focuses on protection and standard charter, which also is a single insurance. So our multi-insurance business that we're talking about actually forms only 23% of our business. And there also, we are in discussions. Some of them [indiscernible] partners have picked up our 100% money back on a level commission kind of a structure. So we'll see how discussions pan out, but eventually that is not as large an issue and that is probably an advantage of having a proprietary distribution contributing almost 55% of the business.

[Dhiren Salian, executive]

Just to add to that, Prayesh, if you look at the entire non-link mix, they're looking at about a 20% mix. And even within that, you're looking at par and non-par. So actually, the impact on to us is quite muted, compared to what the rest of the industry may be at.

[Operator]

The next question is from the line of [ Vinod Chandra Kailash Chandra A.G. ] who's an individual investor.

[Unknown Attendee]

I just have one question. What is our Q1 ending embedded value?

[Dhiren Salian, executive]

We have not disclosed that to market yet. We do that half a year, once in every half year.

[Unknown Attendee]

Okay. Okay. And congratulations for the good set of numbers.

[Dhiren Salian, executive]

Thank you, Vinod.

[Operator]

The next question is from the line of Madhukar Ladha from Nuvama Wealth Management.

[Madhukar Ladha, analyst]

So a couple of questions from me. One, your bank channel has done quite well. There's a growth of about 33%, 34% of that. So what's driving the growth? How -- some color on how ICICI Prudential has done? Are we still in the INR 80 crores to INR 100 crores type of range? Or is there any sort of pickup of the new business in there?

Second, you mentioned about INR 446 crores expense allocation methodology change, which has resulted in policy liabilities coming down. Is this more like expenses getting allocated to par policies, which is sort of helping this?

And also on -- finally, on the annuities side of the business, annuity has seen a very good growth, whereas protection -- on a year-over-year basis, retail [indiscernible] protection is very muted. So I wanted to understand what's wrong -- what's not working with protection? And what sort of growth should we be looking at for the year? And what's actually doing very well for annuities? And how we are able to grow that piece of the business over there? So those would be my questions.

[Amit Palta, executive]

Yes. Thanks, Madhukar. I'll take your questions pertaining to distribution. So I'll start with ICICI here. So ICICI is now stable like we have maintained even in our previous earnings calls as well. ICICI is consistently at around INR 100 crores kind of top line. But what is very heartening is that they're being creating a delta on retail protection very well. So they're doing well on retail protection. And this is a choice that we've made and we are quite happy with the outcome on retail protection, specifically on ICICI.

On banks, other than ICICI, our growth has been close to around 31%. So 31% growth is what we have actually delivered on banks other than ICICI and Standard Chartered. We look at ICICI and Standard Chartered as businesses, which are only with ICICI Prudential. So what is driving our growth in those bancassurance channel is actually again multiple. We have invested in creating a 7 block enablement framework called Partner Stack to help our bank partners grow end-to-end, right from opportunity identification, procuring value propositions, which are unique to the customer segments, then investing hugely on capability building and offline, online channels when doing a network digitization and creating integrated sales processes, investing in demand generation.

And then through onboarding process and policy life cycle management, we have completely been able to integrate our business with their banking end to end. And I think that is what has been able to give us the alpha on growth over a period of time. So there's not necessarily only price or commercial considerations. It is also the investment that we have done through our sheer hard work and our presence lease shops for a long period of time now.

Coming to on product, your comment on annuity, you're right, we've done very well on annuity. And within annuity, we actually chose customers at 50 years of age as a huge opportunity, because we thought that large number of customers less than 50 were still investing in life insurance, but there was an opportunity where customers will start investing for their retirement subsequently. And to reach out to this customer segment, we have created a very -- we have segmented our distribution to see there and who has access to these customers, and then came out with this product, which has a differentiation of 100% money back, which basically takes the crisis away from the minds of the customer. And they can without any fear buy a life insurance product without having apprehension of moving the principle in case he was to lose his ability to pay premiums later. So annuity was a natural success, which already we have already spoken.

On retail protection, see, if you look at a longer time frame, 2-year time frame, like you will see a CAGR of around 28%, 29% growth on retail protection. Now both our own online business as well as our web aggregator business has been a significant contributor to our retail protection business. And the consequence of that also in that channel is extremely competitive nature of business, because extremely competitive platform that they operate on. So in between, there are a few price considerations, few interventions done by us, few interventions that competition a bit on pricing and specific financial banks where we are very strong. I think we saw some impact, short-term basis, which has been corrected now, and we are quite confident that absolute business will come back once again.

But good part is that since this business will always be in volatile, it is important to keep investing in proprietary channels, keep building capability to sell protection through them. ICICI is already doing very well on retail protection. And like the way what agency has done on the overall top line, we are very confident that they will become significant on retail protection as well.

So while we stay invested on online channels, where there is a natural disadvantage of very stick competition. But I think we'll reduce our volatility by improving capability through our proprietary channels. So we are very worried. This is an interim phase tactically, we will handle it. And we are quite confident with the focus that we have in new products which are there in pipeline on retail protection. In the latter part of the year, you will see growth coming back.

[Dhiren Salian, executive]

Under the expenses. Yes, go ahead, Amit.

[Amit Palta, executive]

No, no, Dhiren, you go ahead.

[Dhiren Salian, executive]

Yes. So on the expense management policy chain that we spoke of within the quarter, the expense reallocation has actually given some relief to par. So they have not loaded the par book at all. In fact, the 4 policies that you referred to does not have any par impact.

[Madhukar Ladha, analyst]

Understood. And one final follow-up to maintain this VNB margin of 24%, what is sort of the full year growth that you have built in, in your assumptions because you work on unit cost method for the year, right? So that would at least give us some idea on how do you think about margins versus our sort of projections and APE growth.

[Dhiren Salian, executive]

Madhukar, I think we've built out a fairly decent growth in this current financial year with, of course, looking at how the product mix will evolve. As we would do at every quarter, we will reassess where we are in terms of how expenses are evolving and how the top line also moves in that direction. So we'll keep coming back to the market every quarter and let you know how that's headed.

[Operator]

The next question is from the line of Avinash Singh from Emkay Global.

[Avinash Singh, analyst]

Couple of questions. Now first one more sort of a near term that, of course, you have [indiscernible] many times. On the retail protection, I mean, is sort of a new growth in line broadly with the market, and also going forward, the growth, will it be kind of driven by volume or the ticket sizes, I mean, any sort of pricing mix and because I mean the media was reporting very recently that there are kind of scenario where leading licensees are taking price hike in this business. So I mean the outlook on sort of volume growth and the pricing [ mix ] and that's one.

Second, more from a medium term a bit of, I would say, jumping on, as I mean in the lead to sort of for some release of title or like a scenario being overcapitalized. So what would be sort of a alternate level for insurer like you in terms of optimizing your capital allocation, I mean, what to do with the [indiscernible] capital, what are the options that regulatorily that you will be allowed to take out that capital or do something else?

[Dhiren Salian, executive]

So Avinash, in terms of protection pricing, this is a continuous process. We keep looking at where we are in the market space. We keep looking at various segments. If you look at how the emerging trends are in each of them from a risk and a profitability perspective, and we keep taking price actions in specific spots. So I know there are some media reports that have spoken about the biggest price rises. But this is the need of the industry, and I'm sure other companies would also be taking similar actions on that front.

With respect to Ind AS, IFRS, I think we'll have to allow that to come first. It's a little difficult to estimate what would happen and what could potentially happen with the release that comes into network, it is difficult for us to say at this point.

[Operator]

The next question is from the line of Sanketh Godha from Avendus Spark.

[Sanketh Godha, analyst]

See, our growth on individuality has been very strong around [ 42% ] for the quarter. Just wanted to understand how you are looking at the full year number. And honestly, the growth was largely driven by top channel around [ 53% ] for the quarter. Where is this number is base increasing is sustainable? How do you see the number to play out from a full year perspective? That's most point number one. And if growth remains as strong as it was in Q1, given our solvency at 187% will it be sufficient? Or we would also plan to do a subject to fund the growth if is the growth sustained fairly currently? So that was my first question.

And if I understood you, Amit, properly, you said the ICICI Bank is just INR 100 crores for the quarter, which means that your -- which means that ICICI bank would have declined by 49 odd percentage and other channels would have grown materially in the quarter, that's the way I need to understand it, which includes solvency.

And lastly, just a hypothetical -- you can choose to pick up to answer that. I suppose the current product mix remains [indiscernible] for second half, and then the likely impact on the margin in absolute [indiscernible] second half because of the surrender risk. It will be great if you can give a directional quantification on the margins. Or you can otherwise tell me to what extent you need to claw back to make sure that margin doesn't get impacted?

[Dhiren Salian, executive]

We are not able to get you. Can you just repeat the last part?

[Sanketh Godha, analyst]

The last part I was trying to ask is that in the current product mix, what you have reported in 1Q remains true for the second half of the current year, when the surrender rules becomes live, what is the likely impact on the margin, assuming your projected cost in the margin remains true for the full year? And suppose -- or you can otherwise tell me how much product you need to do to make sure that the margin will remain at the similar level that you have reported, assuming the product mix remains at the current level?

[Amit Palta, executive]

So let me first clarify, Sanketh. Your colleagues are also there on the call let me clarify. ICICI Bank, I mentioned INR 100 crores on an average in a month. They are -- at that level, plus/minus 5%, 10%, it keeps happening. Growth numbers are only outcome of what happened last year. So within that INR 100 crores [indiscernible], they are doing much better on the choice that they have made, which is protection. So protection is growing definitely quite consistently month on month. On overall top line is what I mentioned on a monthly basis.

Second question on sustainability of growth that you witnessed in quarter 1, I see when we delivered an alpha growth in quarter 3 last year, we gave a guidance of 10% growth in quarter 4 and very happy, but we deliver that. And that happened not because what we did in quarter 4 -- quarters the results in quarter 4. That was on the confidence that investments we did over a period of few years was at the point of starting to deliver outcomes for us. So to that extent, that fundamentally doesn't change.

I will not comment on outlook on what we will do in quarter 2, but we will grow our confidence from what we have done over the period of last 2 to 3 years. After that, I'll leave it for you to read how consistent and sustainable will be the growth from quarter 1. By the way, after delivering an alpha in quarter 4, what you see now is the growth number. So there's a consistency of performance from quarter 3 to quarter 4 and now quarter 1. Now over to Dhiren.

[Sanketh Godha, analyst]

Just some -- okay, I'll let Dhiren to answer the first question.

[Dhiren Salian, executive]

Yes. So the question on sub debt is always available, and we keep assessing whether we need any help on solvency from time to time. We discuss with the Board, and if we need to, we'll go on the track as we, as you know, we already have INR 200 crores of sub debt on our book.

[Sanketh Godha, analyst]

Dhiren, my question was, if the current growth rate must maintain then will it become inevitable for you to raise sub debt?

[Dhiren Salian, executive]

Those are actions that we will evaluate when we get there, Sanketh.

[Amit Palta, executive]

Any impact on margins because of surrender value line changes from 1st October, Sanketh if you can look at product mix slide, you will note that, that side of business is only 17% of our portfolio. So at a 17% of portfolio, the impact on margins that you see today, you can back calculate and see don't really visualize anything happening on demand, like I mentioned, we want to stay true to the customer proposition and want to manage with other 2 stakeholders, which is manufacturer and a distributor. I don't see demand going away anywhere. So in that scenario, existing 17% mix even if it is impacted by 1% or 2% will not have an impact on the overall company.

[Operator]

The next question is from the line of Nidhesh from Investec.

[Nidhesh Jain, analyst]

Firstly, what is the share of trail based or level commission products in our APE today?

[Dhiren Salian, executive]

We have not called that out, Nidhesh. It has been launched in a specific segment, and it has done quite well there.

[Nidhesh Jain, analyst]

Secondly, the growth in annuity has been very, very strong for last 2, 3 quarters. So can you give some detail on what is the product structure on the annuity side, which is driving such high growth for us? And how are we hedging that product?

[Amit Palta, executive]

Yes. So you can nicely get in touch with us offline and we can detail out the product contours, you can consider for yourself and your family as well. But yes, it is a feature pack and the biggest feature, of course, is to take the fewer away from the minds of the customer of [indiscernible] if you were to lose ability to pay his subsequent premiums. Apart from that also it is very feature riched, and we believe that annuity is a great opportunity to be unfolded. It's only a beginning. I guess we will only get stronger from current levels.

[Nidhesh Jain, analyst]

And from a hedging perspective, it's fully hedged?

[Amit Palta, executive]

It's fully hedged, yes.

[Dhiren Salian, executive]

We've been very, very tight about our hedging program. We do this on a very, very rigorous basis, as the level of -- the time that we have launched all our nonlinked products as well as annuity products, we have ensured that they've been fully hedged?

[Nidhesh Jain, analyst]

So just point to the regular pay annuity, right?

[Dhiren Salian, executive]

Yes, the larger portion of the annuity business right now is a regular pay annuity. We do have a sizable single pay annuity as well.

[Amit Palta, executive]

In a single premium, as you know, the last 4, 5 quarters have been relatively muted because of multiple options available resulting bank deposits. So this trend is kind of continuing this year as well on single premium platform.

[Operator]

The next question is from the line of Aditi Joshi from JPMorgan.

[Aditi Joshi, analyst]

I have 2 questions. So firstly, on the product side. On the non-linked segment, can you please help us understand that within that segment and it is between par and nonpar. So what was the reason for weakness in that segment -- in that product segment?

And secondly, on the other partnership channel, it's still not majority portion of the business coming from that, but [indiscernible] FY 2024, we have added some significant number of new distribution partners in that segment. So in that segment among the all channels has delivered a strong double-digit growth, but still lower than the other channel, so going forward, do you think that there might be some growth pickup in that segment? These are my questions.

[Amit Palta, executive]

Firstly distribution, if you see their growth being relatively lessen than other channels, is largely on account of the choice that this distribution segment has made on prioritizing businesses other than link. As you know, that market poses positive sentiment in the market really got tailwinds going for midline products. [indiscernible] unit-linked products form a very small proportion of partnership distribution space.

So within the space that we are operating, I guess, they have delivered quite a decent growth of 25% or so. But yes, because they have not participated as much on unit link business, their growth is relatively lower to others.

Your second question was about participating...

[Dhiren Salian, executive]

So roughly about total 1/3 is there is a par and nonpar [indiscernible]. And then the decline that you see although nonlinked [indiscernible] is because of the stress that we've seen in terms of volumes of the non-par product.

[Aditi Joshi, analyst]

Okay. And is there a reason why we had income weakness in the non-par? And going forward, what is your sense where this product line will go ahead?

[Dhiren Salian, executive]

So I think, Aditi, the market buoyancy has been a big factor in this. Our principle has not been to set out product mixes, but to drift where the customer demand is. Very clearly, you've seen the market buoyancy affect positively the growth in the unit-linked segment, and that's grown about 70%, 80%. So clearly, we've seen some customers gravitate towards the unit-linked product, which is a great product in this environment.

[Operator]

The next question is from the line of Nischint Chawathe from Kotak Institutional Equities.

[Nischint Chawathe, analyst]

When I look at Slide 10, which is essentially the channel-wise takeup, partnership distribution is around 11.5%. And in the call, you mentioned that partnership -- multi-insurance partnership is around 23%. So that effectively means that the balance sits in bancassurance?

[Amit Palta, executive]

So what I mentioned, let me clarify. I mentioned that multi-insurance banks and partnership distribution, which is 100% multi-insurance, both put together are 23% [ down ]. So you are right, outside this 11.5% mix, the remaining you can count it as banks who are multi-insurance partnership for us.

[Nischint Chawathe, analyst]

Which is essentially other than ICICI and to some extent [indiscernible]?

[Amit Palta, executive]

Yes. ICICI [indiscernible], yes.

[Nischint Chawathe, analyst]

Okay. So in terms of the product mix in these channels, is there a substantial difference between partnerships and the proprietary channels? The product mix.

[Amit Palta, executive]

Yes. Product -- see product mix, of course, even within banks, every bank's product mix is very different from each other. So these are the choices that our partners make. We only align and ensure that the resources are provided by us, both in terms of products as well as people to build capability and systems to integrate our processes with them, and give them a seamless distribution and customer experience. That is common. Otherwise, the choice of products and prioritization of the customer segments where they want to offer our products is entirely our partners.

By the way, what you see as our product mix at the company level, not even a single channel has that product mix. What you see is there is some total product piece of all the channels put together, which gives you a view on ICICI Prudential. Every partner is different. Every partner is different, very difficult, 1 or 2 here and when you will see likewise distribution players, who may have similar looks. But there is no player who have a similar kind of product mix.

[Dhiren Salian, executive]

Nischint, full year numbers in terms of channel-wise product mix are there in Slide 16.

[Nischint Chawathe, analyst]

Yes, yes, sure. I was just looking at the quarter. And finally, have you given any guidance on growth for the year on some part of the call?

[Dhiren Salian, executive]

Our ideas to be able to work sustainably and to look at delivering an alpha over the market.

[Operator]

The next question is from the line of Dipanjan Ghosh from Citi.

[Dipanjan Ghosh, analyst]

Just a few questions from my side. First, going back to the cost by TWRP ratio especially for your savings business. Now what I understand is you looked mix during the quarter has been substantially higher despite that your cost per TWRP has been stable and only marginally up. So just wanted to get some color on product level cost by TWRP within the savings business and how that is stacking up.

Second, have you seen any margin level changes ex of the cost impact or the operating assumption impact? Has there been any margin level change because of the subsegment or subproduct mix change within respective product segment?

And lastly, if I heard correctly, did you mention that ICICI Bank and [indiscernible] growth was around 31%. Just wanted to get that number rectified?

[Dhiren Salian, executive]

No, we didn't put that number out, Dipanjan. So coming to your other questions. So the answer to your cost of TWRP increase lies, of course, is the redesign of the commission guidelines that was started last year, but had its effect through quarter 2 and quarter 3 as well. So as we are in quarter 1 of this year, we have the full impact of that available, which is why you see this cost increase.

We have not seen too much of a margin level change, but these are elements that we are working with, especially in terms of delivering value to customers. As Amit spoke about, improvement in terms of longer tenure, which time with the customers' goals that have been set adding riders along the way, which makes a lot of sense from a protection perspective for the customer as well. So these are some of the actions that we have on the ground. They do help a little bit in improving margin at the segment level, and that's what we will continue to work.

[Dipanjan Ghosh, analyst]

Sir, in just on the cost part, I mean, if I understand your fourth quarter cost per TWRP for the savings sort of been anywhere ballpark around 15% -- or 14%, 15% for us a number and while I understand that fourth quarter is high on volumes, and this quarter, it's like 19% despite ULIP mix thing like almost 8%, 9% higher than fourth quarter. So adjusted for the higher ULIP mix, which product is offset by the higher volume that you see in fourth quarter, should one expect the exit run rate for 4Q and 1Q to be similar in terms of the payouts across the different servings products?

[Dhiren Salian, executive]

Yes. If you assume the product mixes to be steady. There are multiple elements at play, but one of the big elements is going to be the product mix.

[Operator]

As there are no further questions, I would now like to hand the conference over to Mr. Anup Bagchi, for closing comments.

[Anup Bagchi, executive]

Thank you. Thank you, everyone, for joining. Have a good day.

[Operator]

On behalf of ICICI Prudential Life Insurance Company Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.