ICICI Prudential Life Insurance Company Ltd
NSE:ICICIPRULI
Earnings Call Analysis
Q1-2024 Analysis
ICICI Prudential Life Insurance Company Ltd
The company has reported a solid value of new business (VNB) of INR 4.38 billion for the first quarter of 2024, which indicates a healthy margin of 30%. This is a critical metric for investors as it represents the future profitability of new policies sold during the quarter. Furthermore, the company experienced impressive profit growth with profit after tax surging by 32.7% year-on-year, rising from INR 1.56 billion in the previous year's quarter to INR 2.07 billion.
Total annualized premium equivalent (APE) stood at INR 14.61 billion for the quarter, bolstered by a significant 61.8% year-on-year increase in the company's protection APE, which reached INR 3.44 billion. The company has strategically strengthened its product portfolio and solidified its distribution channels, including adding more than 7,400 agents, to ensure diversified premium growth which is crucial for sustained revenue. The strong growth in non-ICICI Bank retail APE of 20% in May and 21% in June further demonstrates momentum in premium inflow from diversified channels.
Persistency, which measures customer retention through continued policy renewals, showed marked improvement with the 13th-month persistency at 86.4% and 49th-month persistency at 64.7%. The cost to total weighted received premiums (TWRP) ratio for the savings segment was reported at 18.8%, showcasing efficiency in managing the cost of generating new business. These indicators reflect the company's operational strength and effectiveness.
Assets under management (AUM) stood strong at INR 2.6 trillion with a robust solvency ratio of over 203%. These figures are a testament to the company's financial health and risk management capability, ensuring they can meet long-term obligations and weather potential market fluctuations.
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Ladies and gentlemen, good day, and welcome to ICICI Prudential Life Insurance Company Limited Q1 FY 2024 Earnings Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Anup Bagchi, MD and CEO of ICICI Prudential Life Insurance. Thank you, and over to you, sir.
Hi. Good afternoon, everyone, and welcome to the results call of ICICI Prudential Life Insurance Company for the quarter ended June 30, 2023.
Let me begin by highlighting the recent changes in our key managerial personnel. On behalf of the entire team at ICICI Prudential Life Insurance, I would like to express our heartfelt depreciation to Mr. Kannan for his exceptional leadership in scaling up the organization prudently and sustainably.
We'd also like to express our gratitude to Mr. Satyan Jambunathan, who's role as our company's CFO, for his invaluable contribution to the growth and success of ICICI Pru Life. Satyan, he was a founding member, has decided to pursue early retirement after a remarkable career spanning decades with us.
I'm pleased to announce that Dhiren Salian has been appointed as the CFO effective May 18, 2023. Dhiren has been associated with the company for 20 years and has held various positions across functions within the company. We'd also like this opportunity to extend our best wishes to him in his new role. Dhiren is with me on this call.
I also have on the call several other senior colleagues: Amit Palta, who heads distribution, brand marketing and products; Ajit, who heads the human resources, customer service and operations; and Deepak, who handles audit, legal, risk and compliance; Manish, our CIO; and Souvik, our appointed Actuary; and Dhiraj, our Chief Investor Relations Officer.
Let me take you through some of the key developments during the quarter before moving on to our performance. Firstly, on the regulatory front, IRDAI has extended the use and file mechanism towards launching new products that include group unit-linked life and health insurance products as well as combi products, where the life insurer takes the lead. Additionally, the approval process for new funds have also been simplified. These measures are aimed at providing insurers with better flexibility to swiftly react to market dynamics and meet the evolving needs of the customers, thereby supporting IRDAI's vision of insurance for all.
Secondly, aligned with our customer-centric philosophy, we further strengthened our product portfolio in Q1 2024 by launching new products and funds that complement our offerings. iShield, which was launched in 2023 in partnership with ICICI Lombard, offers a comprehensive protection proposition that combines the benefits of life and health insurance under one umbrella. In addition, we launched ICICI Pru Protect N Gain, a protection-oriented unit life insurance product that addresses both the protection and savings need of the customer.
We further strengthened our savings portfolio with the addition of two new optional attachments, ICICI Pru Non-Linked Accidental Death and Disability Rider and ICICI Pru Linked Accidental Death and Disability Rider. Both are options. These attachments provide additional protection against accidental death and disability and can be currently be added to many of our products. We have also expanded our products of funds by adding Constant Maturity Fund, a debt fund offered with our unit-linked insurance plans. Against the backdrop of rising interest rates, this fund is suitable for customers looking for wealth preservation and tax-efficient returns.
Thirdly, I'm happy to inform you that during the quarter, our company was awarded with the ASSOCHAM Award for organizational excellence in the field of data science and analytics. Additionally, at Customer Fest Awards for 2023, our teams were honored with a slew of awards, namely Best Data/Analytics Team, Best Use of Data & Insights in a Transformation Project, Best Use of Mobile to Enhance Customer Experience and Best Data Enablement Campaign in a Loyalty Programme. Our corporate communications team was featured in the Top 30 Corporate Communication Teams for 2023 at India Inc. instituted by Reputation Today.
I will now move on to discussing our company strategy and performance. We have uploaded the presentation on the stock exchanges and our website. You can refer to the same as we go through our performance. In FY 2023, we successfully accomplished our stated objective of doubling the 2019 VNB. This achievement was made possible through the meticulous execution of our 4P strategy, that is: protection growth, premium growth, persistency improvement and productivity enhancement. These 4P strategic elements will continue to play a crucial role in growth of our absolute VNB while keeping customer-centricity at the core of everything we do, along with integrated ESG with business management.
Our very purpose of existence is to provide financial security to our customers and their families. We believe we are the trustees of the life savings entrusted to us by our customers in order to achieve their protection, health, retirement and long-term savings goal. Our philosophy is to understand the latent needs of our customers and curating products that address the unique needs of diverse customer segments. We leverage digital and analytics capabilities to distribute our products through the most appropriate channels. Our goal is to provide a superior experience throughout the customer lifecycle while following a diligent risk management framework.
To ensure that we remain true to our philosophy and improve our performance across all the 4P strategic elements, we have a 4D framework, which drives our 4P strategy. The elements of the 4D frameworks are data analytics, diversified propositions, digitalization and depth in partnerships with focus on quality business in a risk-calibrated manner. This framework will ensure products are aligned with the customer needs, are designed to meet those needs effectively, are developed with the highest quality standards and are developed through the most appropriate channels. Also, this framework will help us provide simplified and hassle-free processes to our customers across the product lifecycle.
The framework has been detailed in Slide 5 of the presentation. The first element of the 4D framework is data analytics. Over the period, we have built a significant analytics capabilities that help us to provide better value to our customers and partners. We have leveraged data and information to help us improve our various processes, such as distribution operations, et cetera, and to identify new growth opportunities. We understand that customers expect seamless and personalized experience. And data and analytics play a crucial role in making this a reality. We have, therefore, invested in machine learning and artificial intelligence to provide tailor-made insurance solutions to our customers.
Our analytical capabilities help us to identify customers through machine learning segmentation across demographics and customer behavior, create geographic clusters and position appropriate products in those geographic clusters. With data sciences and analytics, we aim to reduce barriers and points of friction in the entire process that prevent customers from buying life insurance. These capabilities are also extended to our partners to help identify opportunities to cross-sell our products. Further machine learning models are enabling us to improve persistency, streamline claims and bolster our risk management practices. Through AI, we analyze customer sentiments to improve overall customer satisfaction. The details of our extensive deployment of analytics capabilities are set out on Slides 36 to 38. Further, our analytics team's awards during the quarter are a testimony to our constant efforts in deploying extensive data analytics.
The second element of the 4D framework is diversified propositions. Over years, our customers' product strategy has been focused on expanding the product suite and continuously providing innovative propositions to our customers. This approach ensures that our products are suitable and accessible to a wider range of customers spread across customer segments, age, affluence and other demography aspects, enabling us to serve a large market effectively. Further, we have continuously recalibrated these product offerings to align with the evolving need of customers. This proactive approach has allowed us to effectively navigate the changing landscape and ensure that our products remain relevant and impactful Building on this approach in Q1 2024, we have successfully launched new products and fund offerings.
Moving on to the third element, that is digitalization. Together with our customer-first philosophy, as a company, we realized very early that digitalization would be a differentiator in times to come. We use technology to help us make life insurance accessible and in empowering experience for customers. As a part of that belief, we were one of the first life insurance companies to begin our digital transformation journey way back in 2012. Across the customer lifecycle, starting from policy purchase to claims settlement/maturity, digitalization has underpinned our journey. Our endeavor is to create simplified and hassle-free processes for our customers. We have fully digitalized our presales, onboarding, issuance and servicing processes.
Through digitalization, we have empowered our customers on servicing aspects, including self-service, renewals and quick claims assistance. More than 99% of all our policy issues are logged digitally. Further, our digital platform has been extended to employees and partners, too. We have been leveraging digital tools to strengthen our sales' digital capabilities. We empowered our partners with customer-centric digital support across their processes with a very clear focus of ease of doing business and creating a better customer experience. A few examples of the digital support, including our own technological capabilities to identify customer opportunities within partner database, utilizing our demand generation tools to enhance partner productivity and leveraging digital onboarding to reduce [ wasteful ] time. As we look forward, we will continue to reimagine all our processes to leverage the ever-changing digital ecosystem and continue to provide a better experience to all our stakeholders.
Moving on to the fourth element, that is depth in partnerships. Distribution in life insurance business is a critical link that bridges the gap between the products and the customers. We have made significant strides in expanding our distribution reach by onboarding additional partners and investing in our own proprietary channels. The natural advantage that it gives us is access to a heterogeneous set of customer bases that spans across geographies, demographics, age and affluence. We believe that to have a sustained competitive advantage, we need to equip our partners to grow their overall insurance business. And we continue to focus on increasing the depth of our customers and distributor pace.
We extensively work with our partners to deep mine the customer opportunities while remaining focused on the quality parameters. We empower our partners with a suite of digital tools to help them position life insurance more effectively and in a more holistic manner. We support them by integrating the ecosystem for easy onboarding of customers and post-sale service and build capacity by training partner employees in products and processes.
This entire 4D framework has been put in place by keeping in mind our core objective to deliver quality business in a risk-calibrated manner. Our risk management framework sets out the risks that we are prepared to accept, given the expected risk/rewards and consistency with strategic objectives and those risks for which we have no tolerance and want to avoid. We regularly monitor our experience in respect of insurance risk, that is mortality, morbidity, persistency and experience, and take actions to ensure that our emerging experience is consistent with our expectation.
We will minimize our investment risk by following a prudent investment philosophy. Our investments are made with regard to nature and term of liabilities. We have a low exposure to interest rate guaranteed products. And we hedge the risk for these products. We continue to diversify our product and distribution mix to avoid any excessive concentration risk in the business. To summarize, the diligent and prudent risk management framework we operate on is reflected in our strong and resilient balance sheet.
Moving on to quickly the key quarterly performance highlights for Q1 2024 presented in Slide 6. Our VNB for Q1 2024 stood at INR 4.38 billion with a margin of 30%. Our total APE stood at INR 14.61 billion for Q1 2024. We have witnessed a very strong growth momentum in our retail APE from non-ICICI Bank channels in the month of May and June. Amit will talk in detail later during the call. Our protection APE stood at INR 3.44 billion in Q1 2024 on account of strong retail protection growth of 61.8% year-on-year. Our persistency improved significantly across all cohorts. Our 13th month persistency stood at 86.4% and 49th month persistency stood at 64.7%. Our cost to TWRP ratio for savings' strength of business stood at 18.8% in Q1 2024.
I will now hand it over to Amit to talk to you through our results on 4P strategic elements. After which, Dhiren will take you through the financial highlights. Thank you, and over to you, Amit.
Thank you, Anup. Good afternoon, everyone. I will now talk about performance update for quarter 1 FY '24 through the elements of the 4P strategy.
Starting with the premium growth element from Slides 7 to 12. We have used a two-pronged strategy to drive premium growth: first, investing in building existing channels and widening the distribution to maintain a diversified distribution mix; and second, continuing to strengthen our product portfolio to address changing consumer preference in a dynamic economic environment.
As you can see on Slide 8, on the distribution front, we have continued to invest across channels. Our strategy in the agency channel is to leverage on strong relationship of agents with customers while we provide institutional support to agents in terms of data, analytics and processes. We continue to build capacity and have added more than 7,400 agents during quarter 1 spread across geographies. Within the bank and nonbank channel, we continue to add new partnerships and increased share of shop in the existing partnerships. We now have a total of 39 bank partnerships and more than 950 non-bank partnerships with additional 49 nonbank partners during quarter 1.
As you can see on Slide 9, for overall quarter, our APE, excluding ICICI Bank, grew by 3.7% Y-o-Y. Agency for the quarter grew by 4.4%. However, we have witnessed a strong growth of 20% in May and 23% in June 2023. Direct business grew by 28.5% year-on-year. Partnership distribution grew by 7.7% year-on-year. And our excluding ICICI Bank retail business witnessed strong growth momentum of 20% in May and 21% in June 2023. As you can see from Slide 10, we have a comprehensive suite of products. Also, as mentioned by Anup, we continue to strengthen our product portfolio to address changing consumer preference in a dynamic economic environment.
As you can see from Slide 11, our APE for quarter 1 stood at INR 14.61 billion. Our APE from savings business stood at INR 11.17 billion per quarter. And we continued to maintain a very diversified product mix with quarter 1 APE contribution from linked savings business at 38.8%, non-linked savings at 27.7%, protection at 23.5%, annuity at 6.2% and the balance, 3.8%, coming from group sales products. As you can see from Slide 12, we are very diversified in terms of distribution mix and product mix, which allows us to manage the impact of the external environment and respond swiftly to shifting consumer preference.
Another important focus area for us is to serve the life protection needs of the customer. On this aspect, let me talk about the second P, which is protection growth, on Slide 14. With an APE of INR 3.44 billion, the overall protection segment saw a year-on-year growth of 4.2%, leading to a business mix of 23.5% in the quarter. The retail protection business registered a strong year-on-year growth of 61.8% to INR 1.1 billion. Our total new business sum assured stood at INR 2.4 trillion per quarter and a growth of 8.8% year-on-year. Our total sum assured stood at INR 13.41 trillion as of June 30, 2023.
Coming to our third P, which is persistency improvement, it is presented on Slide 16. We continue to have a strong focus on improving the quality of business and customer retention, which is reflected in the significant improvement in persistency ratios across all cohorts. We would like to highlight here that our 13th month persistency ratio improved to 86.4% and our 49th month persistency ratio improved to 64.7%.
Now moving on to fourth P, which is productivity enhancement, which is presented on Slide 18. Our total expenses grew by 21.9% year-on-year. The expenses are higher as compared to the same period last year on account of continued investment and capacity creation to support future growth. Our overall cost to total weighted received premiums stood at 27.7% and cost to TWRP ratio for the savings business at 18.8% for the quarter. Even with the cost increase, our cost to average asset under management has been stable at 2.3%.
Through the 4P strategy of premium growth, protection business, persistency improvement and productivity enhancement, our objective remains the same, to increase the absolute value of new business.
I will now hand it over to Dhiren to talk you through the outcome of 4P strategy and financial update for quarter 1 2024.
Thank you, Amit. Good afternoon. I will now take you through some of the financial metrics. We continue to maintain a strong and resilient balance sheet as presented on Slide 19. We have evaluated insurance risk and mortality experience. And they are within our expectations. And we will continue to monitor them closely.
On credit risk, only 0.2% of our fixed income portfolio invested in bonds is rated below AA. And we continue to maintain a track record of not having a single NPA since our inception. Of our total liabilities, 74.7% of liability is largely passed on market performance to customers. We continue to closely monitor our liquidity and ALM position. And we have no issues to report. As a result of the 4P strategy, the VNB for quarter 1 was INR 4.38 billion. Given our APE of INR 14.61 billion, the result in VNB margin was 30% for quarter 1.
Coming to the financial update as presented on Slide 21. Our profit after tax grew by 32.7% year-on-year to INR 1.56 billion in quarter 1 last year to INR 2.07 billion this quarter. Our assets under management stood at INR 2.6 trillion and our solvency ratio continued to be strong at over 203% at June 30. To summarize, we will continue to make progress against the 4P framework of premium growth, protection business growth, persistency improvement and productivity enhancement. We expect that our performance in these aspects will translate into our objective to grow absolute VNB.
Before concluding the call, I would also like to share that during the quarter, we released our FY '23 annual report, which has themed Delivery on Promises and Delivering Sustainable Growth. Along with that, we also released a stand-alone ESG report, which articulates our approach and outcomes of our efforts towards sustainability. The integrated reporting structure prescribed by the International Integrated Reporting Council has been followed for developing the annual report.
Thank you. And we're now happy to take any questions you may have.
[Operator Instructions] We have our first question from the line of Suresh Ganapathy from Macquarie Group.
My first question is to Anup. I know it's been maybe a couple of months for you as the CEO. In your assessment, I know it is still early days, what do you think are the areas of improvement? Or what are the gaps that you have identified? That's my first question. And of course, related to that, how well do you plan to leverage the ICICI Bank distribution channel? Is there a change in mindset with respect to distribution of products by them? How do you plan to leverage that network? That's the first question.
And the second question, maybe Dhiren can take it, what explains the sharp rise in expense ratios and the fall in margins this quarter despite a sharp pickup in protection APE? Overall APE was down, but still OpEx is high. So just a clarity on these two questions.
Thank you, Suresh. So I'll just answer your two questions, area of improvement and ICICI Bank. First of all, I now say that the team here is very good. Kannan has left a very good balance sheet, a very sound and prudent balance sheet. So there is really nothing really to worry on those fronts at all. The other thing of transformation is largely complete. And the transformation by way of diversification of products and diversification of channels is also largely complete. There is no area of improvement. One area of focus certainly will be growth.
Because as you know, our margins, while last year was at 31%, this year, it is 30%. So margin, we are at the top-ish level in the first -- in the top quartile of the market. The real driver of VNB, our plans will be towards to get it to growth rather the margins. And so to activate, many of our channels are 18 months old and 24 months old. And so they are not really fully mature in the sense that our share of shops in those channels, we can improve. We can help them through data and analytics, understanding -- core understanding of their own client base, making sure that we are able to train them on the most suitable products, ensuring that during the life stage that we are able to help and support them so that both of us generate good business.
And that is really the area of focus. And not really an area of improvement, but I'll say area of focus. And I must also say that the team here is very, very good and realigned to this objective. As you know, we have been focusing on getting the transformation right. And successfully, I will say that in 4 years, the VNB was doubled in absolute amount. But the driver of that was margin more than APE growth. And so now with the bank, in a way, the contribution of the bank coming to on the growth side, all other channels will now start to almost start to show up on growth. Now as far as bank is concerned, I must say that bank has two distinct roles, one as a shareholder, one as a distributor.
As a shareholder, they are a fantastic shareholder. They are extremely supportive, both ICICI Bank as well as Prudential. But in the context of distribution also, because Prudential is not a distributor, ICICI Bank also is a distributor for us, they are focused on protection and annuity. And that is something that is up to them as a distributor. What is their role in distribution? Our plans largely are, now because it's a small proportion and contribution is lower for ICICI Bank, we can get our growth primarily from all other channels as well. In banks, it is vulnerable, but it is really up to the banks to respond to that question. Over to you, Dhiren.
So some of the larger contributions of expense growth are manpower costs, which of course, additional people that we have on the ground to be able to activate some of our newer channels and some other elements around distribution costs, which are fundamentally on the advertising and sales costs. But also, I think when you look at the VNB, you are aware the way we look at it is more from a full year perspective of where we expect costs to be. And so when we look at the VNB, you'll see that largely it is driven by the industry product mix profile that has been shifting.
What you can see anyway is somewhat traditional perspective, you are anyway aware that there is INR 5 lakh cases. There are anyway the taxation aspects that have come through in the 1st of April. So within the traditional pool, we still have dropped away from the higher ticket sizes. Non-linked guaranteed portfolio, to some level, that has gone across to the participating side, which have picked up quite smartly. And from another level, we're seeing some signs of moving towards the unit-linked side. So while you are right at one level, we have got growth in retail protection, there are some contrasting elements that have come through overall.
We have our next question from the line of Supratim Datta from AMBIT Capital.
I will start up with your point on investing into newer channels. So you have 39 bank partners. Could you give us an understanding about what would be your share of VNB banks outside of [indiscernible] bank? And how do you plan to grow here? Because 26 of these partners have been there for more than 2 years. So how are you planning to grow the channel going forward? That's one.
Next, on the agency side, that has been a strong growth driver for you. But from a productivity perspective, your agents -- the new business premium for agents is still at the lower end compared to the industry. So how do you plan to grow that? What are the steps that you are taking? If you could shed some light on that. But when I look at your RWRP and compare that to the individual APE, your RWRP comes out to INR 10.6 billion whereas your individual APE is INR 11.7 billion. So if you could help me understand what's driving the difference between these two lines, it could be very helpful.
Yes. So Amit, will you just take those questions? And then...
Yes, so I'll comment here. Let me start with share of business with our new bank partners. So if you were to look at new partnerships that we have stitched over a period of last 18 to 24 months, we saw a huge traction of business, which was driven through [ packs ] of the entity that we witnessed in March, specifically during March. And we saw some part of the business pulled into last quarter of last year. And hence, there was generally overall slowdown, which was witnessed not just in bank partners but also in some nonbank partnerships as well, which spanned across corporate agency and broker. But the good news is that while overall pie may have shrunk because of half of the quarter, the remaining half of the quarter actually was we have seen the growth coming back. So overall pie has started to grow in the second half of the quarter. And our share of business actually has incrementally grown across all our large partnerships. So where we were to where we are, of course, delta of share could be different from partner-to-partner. But a large number of our partnerships, we have seen our share growing even though the overall pie was kind of static. So that is the status on all the bank partnerships, not just bank partnership but extending this argument to even other multi-insurer area of partnerships that we have. So that is one thing, one area of -- area I would like to just articulate.
Second point, you spoke about agency productivity. So now I would understand that probably the way you are calculating agency productivity is on the total number of agents, total business done divided by total number of agents. So if you recollect that for large -- for a long period of time in the past, we were actually not terminating advisers, right? So as you know, the advisers, over a period of time, they rolled on to the insurance business, the continuing insurance business. And a large number of advisers also kind of stopped doing insurance after they exhausted their natural market. So even after they have exhausted their natural market, we tended to stay away from terminating these advisers. And hence, they are reflecting in the pool.
What is most important is agency distribution while calculating productivity is to see our manageability of these advisers. And this manageability of advisers, we used to look at 3,000-odd unit managers, who used to manage these advisers. Now that manageability, we have increased over a period of last 12 to 15 months by increasing our unit manager capacity from 3,000 to almost 4,000, which is almost like adding capacity of 33%. So if you look at productivity of the units, that we have seen significantly growing over a period of last 2 to 3 years. In between, there was a period during COVID when we refrained from adding this capacity, as you know, that this is direct addition to our cost.
But however, whatever investment that we have done in the last 15 months or so, we are starting to see the results already. As we speak in quarter 1, we can clearly attribute some 4% to 5% of our top line in agency being contributed by the capacity that we have built over a period of last 12 to 15 months, which means that at an early gestation period, if you were to look at low vintage pool of our units to contribute 5% to 7% of our top line is quite significant. And as we go deep into the year, we expect this capacity to deliver anywhere close to around 15% to 18% of our business as we have planned anyway in the agency business.
So Supratim, your third question was the [ management ] between what is RWRP and APE. That can come through if there are, let us say, non-annual modes that have been written. Of course, they do not show up in RWRP. It will show up in APE.
Sorry, yes, it's non-annual what? I could not get that.
Monthly mode policy.
We have our next question from the line of Avinash Singh from Emkay Global.
A couple of questions. First one is if I just try to look within protection, and we can see, on the group side, I mean, there had been sort of a decline. And it could have been, given the kind of a retail credit growth, it can largely be into the GTI where you are investing decline. Can you just help us sort of -- you are pretty kind of a dominant player in this market. So how has been the market? And what has been the reason behind sort of your growing cost or withdrawing accounts on some parts of the GTI market? So that's number one. Second question, a bit continuing from what Mr. Bagchi said on sort of things being in place and growth being sort of top of the agenda that sort of -- if you can just help, I mean, if I look back at the 4 years, you had your VNB at -- absolute VNB growth flat. If you were to look ahead with the 4% growth, what sort of a relative or absolute growth of kind of range or experience you have for the medium-term? And related to that, I mean, your direct has been growing already strongly this quarter. Is the sort of that is driven by retail protection growth? Or it's the other way? I mean, how sustainable is this direct channel growth?
So Avinash, let me take out the questions. Within the group protection, there are two parts of it. There is a credit life and there is group term, which is employer-employee. Now the credit life continues to grow. But if you recall our earlier conversations on group term, which is the employer-employee space, if you recall that we actually had higher prices which was an offshoot of COVID pricing that was still remnant to last year's -- a portion of last year's business. As you are renewing business this year, all those COVID loadings have gone away. So to that extent, there is a challenge in staying in the same place. While even though we're doing much better in terms of enclosures, the absolute premium, therefore, is a little challenged to that extent. But you go through year, we expect this to wash away. That's at one level.
In terms of what we are starting to see in terms of VNB from a medium-term perspective, clearly as Anup pointed out earlier, the profile shift in terms of the product has actually happened towards last full year. And going forward, I don't think there's going to be a large shift in the product profile, which means we are not seeking to grow VNB through margin. You seek to grow VNB primarily from APE growth. And to that extent, some of the trends that you could see over this last quarter, particularly when you look at the month of May and June, you'll see one sequential growth plus you'll see strong year-on-year growth. In fact, in the month of June, we had a double-digit growth in APE for that month. So clearly, we see good movement and strong movement in terms of APE.
Where we should end up, I think would be a function of two key segments, one, of course, how does savings actually pan out over the next full year. There are, of course, these transient elements in terms of the taxation aspect that will possibly impact it. But as we had mentioned before, we kind of expect to see that wash away as we look to the full year. Of course, environment factors will continue in terms of macro. But we'll have to see how that pans out through the year. Fundamentally, we don't think that this is going to be a drag. I think more from a medium-term perspective, there is expectation that same business will continue to grow in terms of a nominal GDP. Where we see [indiscernible] obviously in terms of protection and more specifically in terms of retail protection. You've seen those green shoots come through. We've been speaking about this for the past few quarters. And now as you see the strong growth of 62% year-on-year for the quarter, I think it gives us a lot of comfort to say that the entire sales distribution team has understood that this is the new way of doing business. And that is actually to see through not just in sales but in terms of the back-end operations team as well.
So I think we are in a far better position today than what we were even 18 months back. And from that perspective, from the medium term, we will see how this evolves. At best, this could be another -- sorry, we've always held that from a protection perspective, from a retail protection perspective, it's not just a few years in terms of the trajectory, we think it's a multi-decade opportunity. And we continue to hold on to that view.
Now just to add, see today, business in other ICICI is now close around 87% of our business. And this 87% of our business grew by 20% in May, grew at 20% in June. So that business comes out, in our respect, even if ICICI is still is where it is, I think 87% of the business will help us be in line with the industry growth. And margins will allow customer consensus to dictate how the market margin will pan out. But overall, on APE growth aspirations, I think we are in a better position now with 87% of the portfolio already exhibiting the most recent growth trends of May and June. Coming to one more question you had on direct business, yes, we do have an upside on direct channel. As you know, direct channel comprised the sales force, largely looking at upsell opportunities within the existing customer base of ours. We'll continue to use our deep analytics to identify spaces, how we can leverage in a dynamic environment, where tax benefits are going away. And we'll capitalize on our ability to reach out to our existing customers without real competition [indiscernible]. So you have the advantage of direct channel being [indiscernible] going to our customers. And that is something that we are seeing in the conversion.
This has also given us the cues to create enablement through our partnership with [indiscernible] businesses as well. I do believe that this is sustainable, not just on upsell, but we are looking at going beyond upsell and explore some of the strategic segments that we can address through our proprietary sales force, which is part of direct. And also, as you know, the direct business also comprises our ability to cross-sell through our digital assets, which is our website and application. We continue to improve our customer experience at our website as well as application. And of course, we'll explore opportunities around our partners to see how we can do this [indiscernible] as well. So it looks quite sustainable in our share if I were to tell you.
[Operator Instructions] We'll take our next question from the line of Prakash Kapadia from Anived Portfolio Managers.
My questions have been answered.
We have our next question from the line of Madhukar Ladha from Nuvama Wealth Management.
So I wanted get a better sense of why are our other bank channels in Q1, if you look at that segment, they have been flattish. In fact, there has been a decline of about 0.5%. So what is sort of hindering growth over there? And maybe if you could let us know or tell us about, what is our count of share in some of our major bank partners and whether growth will be driven more by the channel growth itself? Or are we looking at increasing our share? Some color over there will be helpful.
Yes, so Madhukar, I answered this question previously as well. Let me just reiterate once again. Growth has looked flattish for the quarter, actually returned to growth in the month of June. They are close around 6% to 7% of our growth. That is bank partnership beyond ICICI. And like I mentioned, multi-insurer banks as well as [indiscernible] partners did see a huge scaleup on traction built around tax scarcity in the month of March. And hence, we did not allow some part of the demand being pulled into March.
And hence, we saw some impact of that in the first half of the quarter. So overall pie at these banks was relatively construed. But however, our share at these shops still continued to increase. I can't give specific numbers around partnerships. But all I can say is it was quite significant in terms of overall growth in the share of our business. And we believe that with growth returning in the second half of the quarter, even in the current share, [indiscernible] having picked our market share up in the second half. So that is what I would like to articulate there.
Understood. Just a follow-up on the ICICI banking channel, I think Mr. Bagchi clearly mentioned that the decision of what they want to sell lies with them. Having said that, what is your expectation in terms of numbers from there? Do you think that this channel, which made about INR 500 crores last year in business, does it -- has it plateaued? Or will it decline further from here? What are you guys about building in when you make your business plans?
So this is Anup here. So today, the proportion of ICICI Bank is small. So to that extent, I see it as a positive thing in the sense that 85% to 87%, we have full control of growing. And 85% -- the balance, 13% to 15%, which is on ICICI Bank as to what their stance is. But they have said that the two products that -- or two categories that they would be focused on will be protection and annuity. Our plans essentially are not so much dependent on ICICI Bank now. So ours is an independent plan based on other channels.
And on the other channels, we are very clearly seeing that these are all 18 months, 24 months older channels. The share of shop there is increasing. And wherever we have done partner workshops and we have put out strategy, clearly there is a good acceptance of that. We certainly want to be the partner of choice for all our partners. And we would want to help them do more and more of these businesses.
In many cases, we have seen that the absolute penetration of customers, that is customers divided -- policy divided by the customer base is all less than 1%, 0.5% somewhere, 1.5%, 2%. And it is inconceivable that only 0.5% or 1% would be wanting this kind of -- or would -- insurance product would be suitable to only 1% of the customer base. And to that extent, what we have to really work hard is to move the penetration up and also show value to the partner that by selling an insurance product, which is a long-term product, in a good way, that is with high persistency indeed increases the stickiness of the customers with the partners.
And long-term stickiness of the partners is really helping in their other products as well, particularly in banking. And that is the value that we will, with our full data analytics and 4D, we would want to demonstrate to them and keep increasing our share, number one, of the existing business that they do, but we will also help them create new drivers of business for their insurance businesses, which is going to help us. So that is going to be the approach in general from our side.
Sir, but I understand that it's up to ICICI Bank as to how much business they want to do. But what do you think? What is sort of your expectation of growth from ICICI Bank?
As a manufacturer, all manufacturers think that distributors should do good business. So our expectation also is that if ICICI Bank does well, we will only be very happy.
[indiscernible], Madhukar. In the businesses that they have chosen to prioritize, ICICI Bank is already on a growth path. So to that extent, in protection, ICICI Bank is on a good double-digit growth.
We have our next question from the line of Prithvish Uppal from AMSEC.
So just firstly, wanted to understand the retail protection growth has been quite strong for us for this quarter. And even sequentially, we've been more or less at a similar kind of run rate. So what channels has this been driven by? And second is have you seen an increase in policy count in retail protection as well? Or is it more driven by sum assured being -- like a greater amount of sum assured being purchased? So that would be my first question. So if you could just highlight what could possibly be the average ticket size in your nonpar segment during the quarter compared to probably, say, last year and possibly even how much the policy count has grown. So these are the first two questions and then I'll come back for a follow-up.
Yes, Amit, you want to? And Dhiren, you want to?
Prithvish, in terms of policy counts for retail protection, of course, there's been an improvement. It's not just the ticket size angle, it's also a policy count aspect there. So yes, the uptick actually has been on more number of cases being sold. And this is actually quite broad-based. It's not just one or two channels. Of course, at the biggest point in time, you might see some shift across from one to another. But it's a broad-based effort that has been going on across all channels through the year. And we start to see that in this particular quarter as well.
In terms of the ticket side as you mentioned for nonpar, I think we're seeing it broadly stable and it is trending downwards. Because of course, we don't have the more than INR 5 lakh cases in the same quantum that we had last time. But as you also have read, the total cases over 5 lakh was not that large for us as a company. So to that extent, we are not [indiscernible]. And more importantly, I think we're starting to see some migration away from non-linked more than INR 5 lakh towards the [indiscernible], which means we're not losing the customer. We're able to offer them something else as they come and approach us.
Also, just to add on the income -- on the retail protection side, essentially there are four things that you're required to do. One is on the KYC side. Second one is income estimation, that is in general for life insurance policy. Third is health. And fourth, more and more and more, if you want to do preapproved sum assured kind of products for retail protection, you would then want to only take it essentially as a question-answer, then customers give information.
And so the fourth element becomes a critical thing, how do you establish authenticity of the information. Because it's later on during the claims, if the information given doesn't turn out to be fully right, then there could be an issue on the claim, which is something that no insurance companies would want to do because we are there to give claims for good customers.
And now if you see over the last 3, 4, 5 years, many of the things either are fully digitizable. Device is fully digitizable. Better and better income estimation models are coming in. Better and better health models are coming in and with better cath labs, et cetera. So that ecosystem is also developing. And if you go towards preapproved sum assured, there also, on the authenticity of data, there are other marker that you can bring in to get more authenticity of data.
So actually, more and more and more, we see that the condition levels on the protection, if it is brought down, we are also seeing a shift in the society wherein the demand for protection is coming, albeit for certain segments of customers. So when there is a demand, if we are able to then streamline the processes of meeting the demand through decongested processes without trading of risk and prudence, I think this is a business of growth and this is a business that we will certainly be focused.
We are focused on this business. We will be focused on this business. And I think this is a good business to be in. It is margin-accretive. It is good for customers. It increases policy count. And it indeed is what insurance companies, life insurance companies particularly, we all strive to do more and more and more of that.
We have a next question from the line of Anirudh Shetty from Solidarity Investment Managers.
I have two questions. Sir, my first question is within protection, you have this employer-employee type of protection. So I just wanted to understand, as of today, what is our share of -- like what is this percentage of premium that comes from this segment? And from a long-term perspective, do we see this as strategic to us or this is more of a tactical business wherein -- where the pricing is right, you could consider, but it's not core to ICICI Pru? And my second question is in your opening remarks, you have mentioned that your guaranteed product is not very large as a share of business. So if you could just quantify how much comes from this interest rate guaranteed business? And just another question here is that some of our peers have a larger share of business coming from this category. And they claim that they are able to hedge it quite well. So what would explain our hesitation in growing this business to a larger percentage more closer to what our peers are doing today?
Yes, Dhiren, do you want to...
Yes. Anirudh, so in terms of the group term business, I think some of the improvement in protection share that you have seen over the past few years has come through group term. So to think of it as a one-off and a tactical move, I think, is the wrong way. We've fundamentally been able to establish our position quite well in the group term market because we've been able to invest in our group sales business for the past many, many years.
And so we've held the relationship all this while, especially in the period of COVID, when there weren't that many companies quoting to clients. We were the ones who were willing to quote and quote appropriately. Of course, COVID was an evolving scenario at that time, and we were able to correct prices as we went through. Fundamentally, this is part and parcel of our strategic element. And I don't think we are treating this as a one-off in that aspect.
Coming to your second question that you called out, the way we look at the nonpar guaranteed business is that, at the core of it, it caters to the mass, mass affluent customer, which means that there is adjacency between participating and the nonparticipating business. There may be shifts between these two businesses, depending upon the interest rate environment. But fundamentally, they would cater to the similar set of consumers, which is why we have called them out as a traditional business in our disclosures.
Of course, what also happened over the past couple of years is that given the interest rate cycle and the status of the yield curve, there were, of course, some element of pickup that is coming in from affluent customers. But that was a transient point. And as you see the new taxation rules, there is, of course, some hesitancy that would come in from that particular set. Even though we think that, from a long-term perspective, these sets of products, even at about INR 5 lakhs, even if being taxed completely, do make a lot of sense because they do take away reinvestment risk. So from the assets available that the customer may be able to let money in, which should definitely form part of their portfolio. Coming to your third question, whether we're able to hedge it, I think we've been very, very categorical. The reason we did not step into this market 4 years back was because of the lack of any instrument. As instruments were made available primarily through [ fraud ], we grew that business quite well. We run a very, very tight strategy in terms of hedging. And we also run a tight strategy in terms of repricing. And that is how we've been able to manage any residual risk that comes out of this book.
And it's extremely important to recognize that this particular book has to be managed tightly from a hedging perspective. Because world over, insurance companies have gone down for mismanaging interest rate risk. I don't think insurance companies have gone down from a mortality risk perspective. So this is a portion that we have been extremely watching very, very closely. And we continue to work on that. When we mentioned that a small portion of the book comes in from this pool, [indiscernible] from the overall book and not just the incremental segment, Anirudh.
Yes, maybe just one thing I wanted to clarify. Over a period of last few years, our effort has been to be most comprehensive product provider, which takes care of consumer preference changes that may happen because of the environment change. So once we complete the product portfolio, which could be within savings, linked, non-linked, with linked [indiscernible], within non-linked participating or nonparticipating, we allow the environment to take over and consumer preference to eventually decide what they want to buy.
After that, we don't carry a bias against building one category of products. We allow it to play out [indiscernible]. And we build capabilities over a period of time to adjust to that. And that is what exactly we did. When we saw an opportunity on guaranteed side, we adjusted our capability to deliver on what consumer preference was. And that's when the hedging opportunity came. And we capitalized and converted and catered to the consumer preferences.
Got it. And would it be possible to quantify how much of our premium in Q1 FY '24 comes from these guaranteed products? And how much comes from this employer-employee protection?
No, we've not called those numbers out, Anirudh. We've been consistent about the way that we've put out our disclosures. And I think at one level, like I explained earlier, the way we look at the traditional book is fundamentally because of the fact that this caters to a different set of consumers. And the interesting mix between the two can vary at a point in time, depending upon the rate cycle.
We have our next question from the line of [ Shashank Mundra ], an individual investor.
So I was seeing the margin, so it has grown Y-o-Y despite being a high protection business mix, which is, I think, 70%, 80% less margin. So I want to understand the reason behind the drop in the margin. And another one is on the cost side, despite the business being flattish, the expenses have increased so much.
Dhiren here. So I picked up this margin question earlier. And the reason for that is basically the industry mix between the product profile, where at one level, yes, you're right, retail protection has gone up. As we discussed earlier, there has been a drop in group term. Similarly, in the high-value nonpar guaranteed segment, that has dropped. To some extent, those customers have gone towards the participating and more towards unit-linked. So it's essentially the underlying product profile that has resulted in this margin that you see here.
Having said that, margin is not a focus, as we've been reiterating on the call. I think our vision is to be able to grow absolute VNB. And given the way that the product profile has actually transformed over the past 4 years, I think the core driver of VNB is going to be absolute APE. To that extent, while we've had a drop in APE in the quarter, that is the core driver of where the VNB drop is.
Having said that, through the quarter also, we have seen improvements in -- sequential improvements in absolute APE so much so that in the month of June, we've been able to reach double-digit growth numbers. The cost numbers, of course, as I mentioned earlier, also has risen. Some of the larger cost elements where this has gone up has been on employee costs as we've been investing in adding more people on the ground, fundamentally around -- along new banks and on new partnerships and other elements of distribution costs as well.
Okay. And one more thing, you mentioned about the agent termination in one of the earlier questions. So I assume there must be some cost if you don't terminate some inactive agents.
So that's a good question, Shashank. Fundamentally, the way we look at agents is because these are completely commissioned agents, it doesn't cost us to keep them on books. The first point of fixed cost and the efficiency that the fixed cost element draws out is what is very critical. And that is the manager on the ground. So to be able to manage productivities of the managers who manage these agents is what becomes very critical in looking at agency productivity and profitability. I'd also like to add that we spoke about the fact that we've been on a digitalization journey for many years.
And in fact, we've actually built up an agent platform, which allows stance of these frontline managers to run low as 10 to 12 to as high as 200. And again, because it doesn't really cost us to keep these agents on books, retail or fixed cost, we're able to eke out, even from a long-tail perspective, some of these businesses well. So yes, while it looks like an agent productivity which would be the total APE divided by the 200,000 agents looks like not so great as compared to rest of our peers, but I think more important that we look at productivity at the frontline level.
We have our next question from the line of Nidhesh Jain from Investec.
Firstly, how should we think about the VNB margins going forward? Do we think that we have already made the required investments as per required to scale APE growth or that will still ahead of us and which will have some -- which will probably drive APE growth but may have impact on VNB margins going forward?
So Nidhesh, again no guidance on VNB margin. Absolute VNB growth is what we seek. Again, a lot of it would be a function of the product profile that comes through. As Amit also pointed out earlier, essentially we're laying bare the entire product profile. And as Anup pointed out, what we're seeking to see is what is the specific product that can fit a particular customer through that specific distribution channel?
So understanding the nuance of the distribution channels to see what kind of customers they have and therefore what are the products that we could sell to them. The outcome of all of that is what we would end up in terms of the VNB margin. Again, we hold no targets on VNB margin. Absolute growth in VNB is what we seek. And again, based on the way the product profile comes through, we can take it as it comes.
And I can give you an example, Nidhesh. Like what we mentioned that changing the consumer preference, whenever it happens, we want to be there catering to customers' changing requirements. Like for instance, what we saw towards the end of the quarter is where large value [indiscernible], which typically were coming in nonparticipating platform. We started seeing a large part of business shifting to more unit-linked products, right?
So internally, at the organization level, we don't get partial towards any one category of products. If customers started choosing unit-linked products, we were more than happy to serve them through that. And that is what is evident in the way we have looked at our average premiums in nonparticipating unit-linked. So unit-linked went up by 10% and nonparticipating went down by 10%. So it was all about consumer deciding as to what it is.
So to answer your question on the margin outlook, while absolutely right what Dhiren mentioned that we will not be guided on margin percentage, we will allow the ecosystem and the environment to drive the margins for us. We will stay focused on the drivers that we have identified for our distribution through which we intend to deliver our APE growth. I think that is what we will focus more as a controllable, where the market forces and the environment can take over.
Sure. So just a follow-up on that, so if you look at last full year journey for us, we have delivered on VNB growth despite a lot of headwinds that we were facing. But in the process, we have maxed out on product mix changes. We have probably also invested less in our distribution at least until FY '22. In FY '23, we probably started this investment in the distribution. So how should -- where are we currently in the investment journey? Or do we think our investment will continue to accelerate going forward in FY '24, leading to [indiscernible] growth for cost ratios with this top line growth that we have seen in Q1? Is that likely to continue in FY '24, '25 or not?
Absolutely. We want to stay invested in building capacity. I think proprietary channels already are close to half of our business today. And we want to stay invested there and want to build capacity, As you rightly mentioned, Nidhesh, in between during COVID, adding to capacity would have added cost without any bottom line or top line. Because gestation period [indiscernible] into reasonable productivity is much longer in proprietary channels. And hence, for a very reasonable reason, we stayed away from investing during times which were very difficult. And we were banking mostly on efficiency and productivity enhancement of our existing distribution.
So the journey that we started 12, 15 months back, we want to continue. And for the next couple of years, we want to stay investing relentlessly. And that is what, like I mentioned in the previous -- to the previous question as well, almost 5% to 7% of our [indiscernible] business we are seeing coming through from the additional capacity that we built in the last 12 months. And that is something that will continue. So this is incrementally going to only add and become significant as we go deep into the year and in the coming financial year. But that's what will really happen if we continue investing. And that is what is one of the reasons also that we invested in the first quarter. We did not stop, though for seasonality of business, typically you see much lower business in quarter 1. So [indiscernible] in the earlier quarters. But as we go deep, we can all get squared up.
We have our next question from the line of Sanketh Godha from Avendus Spark.
I just wanted to check on this protection business again. But probably there was a campaign run on -- running bank or even business channel, even to some extent, [indiscernible] that the price hike is coming in. But just I wanted to understand, what led to like an upfronting of the growth in the current quarter in the individual protection business? That's point number one.
And if the buyback is coming, just wanted to understand the reason for it. Because I don't see any competitor increasing price. Have we changed our reinsurance strategy? Because we have a different reinsurance strategy compared to the peers. So just wanted to understand that part a little better on protection. And the second question was more on margin again. I mean, there should be some level where you might be thinking that beyond -- below this number, I am not comfortable to grow margin. Whether that number is 30% or 29% or 28%, I'm not sure. But there should be some number in your mind probably beyond which the margins going down might not be comfortable. So at that point of time, you will take a calibrated step on more product mix rather than chasing and chasing what the customer wants. So just wanted to understand these two parts.
Okay. So Sanketh, let me try addressing, first of all, this protection part. I think the protection pricing part that you are putting, actually this is an ongoing exercise that we keep doing. Internally, in a committee-based approach, we keep looking at profiles in various cohorts and keep looking at our best pricing balance between the two. And we do correct our pricing on a regular basis. Now this is something which is not periodic, but it is something that we take step every month. Sometimes, we will decide to increase pricing in some cohorts. And some months, we will decide not to.
So it is generally at some pockets in some cohorts where we find an experience, we're expected to take first to correct pricing. And that is what we do. It has no implication on demand going forward to that extent because protection products is more or less now standardized in terms of pricing, which is much of construction that we have seen in the industry. So to that extent, there is nothing in terms of demand which is upfronted because of some price change that have happened in the past. So that is on protection part.
Second, on margins, you spoke about what is that bare minimum. So let me answer by saying that the biggest driver, if you were to ask me as to what we should be doing to look at enhancing our overall margins, if at all, is, of course, to reach out to customer segments where the natural demand of the products from those customer segments is the one where we see margin-accretive. For instance, typically, mass and mass affluent, where the entire industry is going to be focused on to increase the number of policies by reaching [indiscernible] more and more.
Anup spoke about the fact that current penetration has been 0.7%, 1%, 1.5% across various partnerships. I think if you were to move towards 5% kind of a number, you have to go deeper and go beyond affluent and go to mass and mass affluent. And there, naturally, you will understand that probably simplified products like participating and nonparticipating will make more meaningful sense. So our efforts will be to increase, we'll reach out to more and more customers, increase penetration. And by virtue of reaching out to this customer segment, probably you will see a category of products will start growing, where probably margin accretion is relatively better in comparison to what you see in [indiscernible] products.
And just coming here, just to add to what Dhiren and Amit said, on this margin management theme, there were a couple of questions that come under the margin management. So what is the approach and philosophy of margin management? So margin management essentially, just mathematically, is a function of product. Now if it is a function of product mix, then it is then a function. But ultimately, it emanates from the customer segment.
So what we have seen is that we are in a wide-ranging quality parameter on when you triangulate the persistency, the product and the customer's quote. And wherever we have seen that the customer's suitability and the product suitability is not right, there the persistency drops perceptively. And wherever there is a customer suitability and the product suitability is there, even after 5 years, we have seen 90%-plus persistency. Although the market persistency, as you know, on the [indiscernible] is hovering around 50%, mid-50s and 60s. But we have seen 90%.
Then the real question that comes back is that why is it that some people are at that level and some people are at 90%-plus? The real answer to that, and that's the only answer to that, is that wherever the product suitability is proper and there is continuous customer engagement, you get high customer propensity because that is why the customer needed the product. They understand the product. And it is well-sold and it is well-accepted and then your engagement. And so the [indiscernible] doesn't happen that they forget whether to pay a premium, not pay premium. And they understand that these are locked-up products and they understand why they have bought the product.
Then the question really is that if you really want to do margin management, then we have to find out peers of such products and such customers. So if you don't diversify your products and you just allow the customer to play, they obviously will pick up a particular kind of product if you put a control on quality. And so while your quality may be good, if you don't diversify your product customer base, you will have lesser growth, but you will have quality growth and you will have our product. Now that our product, depends on it could be a low-margin product, it could be a high-margin product. Now as a company, you cannot allow that fully. So because ultimately, VNB will come from margin multiplied by the top line growth.
And so because of the heterogeneity of the partners that we have, we have seen that we have all kinds of customer cohorts within us, within our customer partners' base. And so we are digging deeper into the partner base to see which are the kind of core and which are the kind of products, core that you bring and you pay them for higher quality business. And then you go after that one by one by one by one and make sure that the challenge is activated for that product through the channel for the current customer segment. And that is the way in which your quality also will be maintained, your growth will also come and your margin will also come. And that is going to be our approach.
And we have seen, working very closely with partners, that wherever we have done this kind of a workshop, we have seen that the green shoots are very good. And they understand it and it is easy. And then the partners don't see it purely as a fee income. It is a fee income product, but they also see it as a part of the overall book of products wherein they will get attachment for a long period of time. And if you are a bank where ultimately you require attachment for you to lower the volatility of your liability and lower the volatility of your customers, this is a very, very good product.
Because it is a locked-up product and if understood well, you have to sell it only to 10%, 15% of the income. Just as you cannot over-leverage in lending, you cannot over-leverage in insurance as well, otherwise you'll have persistency problems. So this is a slightly multivariable issue that we have to solve. And that is the approach that we are taking. And this is the approach that is going to be useful to us. And I'm very confident that it is going to be useful to us. And I'm also very confident that the game that we are to play is not 0.71% going to 1.1%. The eye we have to keep is to, of course, we have to month-on-month, month-over-month, quarter-over-quarter, we have to grow.
But really, the big problem that we have to solve within our company is how do you set up the foundation that you can go from 1% to 10%? And how do you do the full penetration on the customer base? How do you understand the barrier to adoption? How do you understand that why customers don't buy? And you get to know why customers don't buy from the customers who buy. And which is the peer, which is the agent, which is the channel through which the customers buy in a more persistent manner without complaints. So really, I thought I'll just answer it comprehensively because what I was getting is that this is coming from disjointed questions. There's actually just one big problem that has to solve. Of course, by breaking it into four, five variables but doing it in a cohesive, integrated manner.
[Operator Instructions] We'll take our next question from the line of Shyam Srinivasan from Goldman Sachs.
Just the first one, just the only one on ULIP. I think in the opening remarks, there was a mention that ULIP demand is starting to come back. So -- and maybe it's also a result of this tax breaks going away. So I just want to understand what are the demand dynamics here. It still is a 40% kind of APE contribution. So when we talk about growth, both APE and VNB, can you talk about what's happening on the ULIP demand dynamics? And also the constant maturity product, thought process behind it? Was it a missing product in our portfolio. So any color here will be helpful.
When it comes to the philosophy of product, essentially, the constant maturity came up because on the mutual fund side, the tax advantages have gone up. Here, the tax advantages remain the same, and there are a segment of customers who don't want to take -- of course, ULIP is associated essentially with equity, I must admit our adverse balance advantage funds equivalent. But there are a certain set of customers who want their -- well, to get compounded in a tax-free manner for a long period of time, and that is where this product comes in, like I said, Essentially, it is not about coming out with the product, it is about understanding is there a position that there is a product listing for a segment of customers and then searching for those customer segment of customers and which channels can that be paired to with what product. And that is there. So we are seeing reasonable traction on the product. And customers who have taken these products, they seem to be generally happy because it is clear that they are taking, for example, in constant maturity products that they are taking a debt product and they should not expect equity type of return.
I think selling and expectation is very, very critical to all of us in this call belong to financial services, and it's important that everything is against an expectation. And so disappointments and happiness all comes against expectations. So this is a product that is basically tuned for that kind of customer segment through these kind of channels. So these are not traditional equity unit kind of channels also that also we are seeing and -- but they search for this kind of product and then sell it and the experience so far has been quite good.
Sir, just on the first question, [indiscernible] overall nonconstant maturity?
Non-consent maturity, I think what has happened is a little bit of spillover has happened greater than 5 lakhs because they're affluent. Affluent essentially, if you look at ULIP and if you look at ULIP equity, they were all nonaffluent types. So part of the spillover has come to ULIP. But it is 40%. So there is -- it's not too much of a deviation from our general product mix.
Specifically if were to exceed ULIP business, there is a bit of a channel color as well that we have internally, which is very unique to us. If you were to keep ICICI ULIP aside, then you will see actually a certain 11% kind of growth on bank business that we are seeing in channel over at [ ICICI ] and that is largely contributed by what we witnessed in the second half of the quarter where large value deals stop coming in, nonparticipating range of products started coming in, in this business. And that is when it coincided with CMS launch, consumer maturity [ fund ] launch. And since the story came at a time when the number of options available towards tax savings. Relative tax savings was very attractive in this kind of a platform, and we saw an uptick in the channel over in ICICI.
We have our next question from the line of Shreya Shivani from CLSA.
I have 2 questions. First is on the credit life business. So in the annual report for the full year, you've given about INR 4.8 billion of credit life. In previous years, you used to give us the breakup of credit life between ICICI and other banks, if you could help me with that. Also, any color on what kind of attachment rates are we seeing in the other banks because I'm assuming that the majority of the growth should be coming from that segment. First is that.
And second is just a clarification. You said that agency channel in May and June grew at 20%, 23%. Does that -- is that correct because that implies a 50% decline in April. Just these 2 from me.
Yes, yes. On the second question, yes, agency broadly right. You got the numbers broadly right there. Yes. Shreya, as you know that there is generally a traction of spillover business that happens from March to April. And that has been the trend in the past. And this year being special, most of the volumes that we experienced in the last week of March was issued by us March itself because there was sensitivity around the tax proposition. Hence, we actually dislodge ourselves from April performance because large part of spillover, which was a trend in the past, did not happen for us this year. Hence, April looks a little scaled, but you are right. May, June is 21%, 22% growth for agency and this [ alters ] whatever we saw in the month of April.
On the second -- first question that you asked on credit life, we actually don't share -- channelize numbers on this. But if you ask me on attachments, see, this is something that we completely go by our partner priority. Depending upon the type of customers, the type of businesses they are in, whether it is enterprise, whether it is home loan, personal loan, vehicle loans, you know that credit life today has been sold across category of loan products. And we have seen attachment rates are varying from product category to product category and also depending upon partner priorities, right? So to that extent, there is no standard number that I can reply a bit, but it varies from partner to partner. So that number varies as such, Shreya, in terms of what are the shares of ICICI Bank that comes in. It can even be between a quarter 2 or half, depending upon the period.
Yes, because last 3 years, FY '20 to '22, the annual report did have a breakup of credit life between ICICI Prudential and [indiscernible].
Yes. So a lot of it also is additional credit life across new partners. That's how the growth is coming from.
We have our next question from the line of Arvind R from Sundaram Altenight.
Talking about the agents, some of them are being not active. Can you give some color on a number of active agents in the system?
So I think we've not called that out. Like I said, 1 of the core reasons is looking at total APE and looking at channel economics, it makes more sense to look at what is the front line that we have. And also, as I mentioned, given the way that we manage the channel using our digital platform spans from [indiscernible] can be as low as 10, which can go all the way up to 200 [indiscernible]. So I think it becomes a little more important to kind of look at what the channel delivers in terms of absolute APE because end of the day, the agent is completely variable for us. So he takes his commission only if he performs and deliver business. If he doesn't, he doesn't. So that's the way we actually run that business, and it's not looking at number of agents that we have overall in our books that is chasing at any point. Obviously, at some point in time, through the year, there will be a change in number of agents who are active at that point. But again, it's also a function of the underlying nature of those agents. Some of them are far more professional. Some of them are semi professionals. And so to that extent, their activity levels remain through the year.
Just one more question, if you can permit. Like I understand like you are talking about [indiscernible] ICICI bank itself. But in terms of business per branch of bank, when you compare to other peers, it's one of the lowest among the peers. Like so is there any target or something in mind to improve that to some average levels in the industry for certain things?
Are you referring to ICICI Bank productivity per branch?
Yes, yes, yes.
So I think we've discussed quite a bit on ICICI Bank's philosophy on what they're looking at from a third-party perspective. And the new data, I don't think comparing ICICI Banks, 4 banks productivity with any other bank would make -- would be active to a competitor actually. The bank is very clear that their kind of products that they're focused on are going to be Protection & Annuity. And given those ticket sizes, it obviously is going to be much less than that of other products.
We have a next question from the line of Supratim Datta from AMBIT Capital.
Just one follow-up question. So from April this year, the new IRDAI guidelines have come in and which has removed product-wise [ comics ] and caps. So just wanted to understand how has that resulted in some of the negotiation with the non-ICICI Bank partners? How are commissions there now trending post these changes?
So Supratim, the short answer to that is this is still an evolving scenario. There are conversations on. At some level, one would expect commissions to go up but from a company perspective, I think what we would seek to do is to keep overall unit cost broadly stable across where we were because at the end of the day, there's only so much that can be put into the product from a pricing perspective. And so if there is going to be an increased commission, then there is going to be a reduced set of operating expenses that will have to happen there. But I don't think the market has stabilized at this point. That is our sense with some of the conversations. Yes, to some level. In some cases, there have been some increases in commissions, but I don't think all of it has played out. I think we'll get a much better picture as we go through to the end of the year. This could just be a little premature at this point.
We have our next question from the line of Neeraj Toshniwal from UBS India.
My first question is on the ULIP since you discussed that we are selling products driven by demand. I just want to understand anything you are doing towards increasing the product level margin, particularly for ULIP because in the last call, I think you discussed that the margin can normalize so much lower level and remain as is. Is that is the case of -- in our strategy or you can see the margins might improve from that?
So Neeraj, taking the question on ULIP margins. I think by regulation, there's only so much that a ULIP product can deliver in terms of margin. There could be variations from year-to-year, period-to-period depending upon how efficient we are in that period. But I don't think this is going to be like a high double-digit kind of a margin product at all. I think guidelines are fairly clear in terms of what has to be given to customers. And so to that extent, this is not going to be a fairly high margin relatively speaking. But again, as we have said before, it's a question of where is the customer opportunity.
This product clearly caters to our affluent customer segment. If they're able to sell much, much more than what we would have sold in another customer segment, then clearly, it gets VNB on the table. Because, again, I come back to the first point, we're not guided with margin, we are looking at growth and absolute VNB, which is opportunity pool that we should not be letting go of. Traditionally, we had great strength in this pool. We continue to have strength in this segment and we will continue to innovate and bring new products that would be relevant for customer to these segments. And one example of that is this constant maturity fund that we launched in the month of May. Clearly, that was an opportunity we saw, given all of the changes that's happening in the environment and the fact that there wasn't a credible offering from the life insurance table, which is where we moved quickly and got that out.
We have our next question from the line of Sahej Mittal from 3P Investment Managers. Since there is no response, we'll move on to the next question from the line of Akshen Thakkar from Fidelity.
Couple of...
Sir, we are unable to hear you. Can you use your handset, please?
Is it better?
A little better, Akshen.
Yes. Okay. So a couple of questions. One on retail protection, strong growth this quarter. In the past 2 to 3 years, we've spoken about constrained in terms of underwriting, in terms of ability to -- for customers to pay that much. Now when you think I'm not saying this year, this quarter, et cetera, just the next 2 to 3 years, would you say that this business has now got back to a run rate where you feel confident that it will deliver the kind of growth which an under-penetrated category like this deserves? That's question one. I'll wait for you to answer and then ask a follow-up question.
Okay. So Akshen, I think we're getting a lot more confidence in the numbers that have been generated on a month-to-month basis. There's a lot more stability that we see. Of course, as you pointed out, in the past periods, the environment challenge was a key factor in the drop that we saw in retail protection. But as we had mentioned earlier also, we have been working hard, actually at a unit level to try and understand what are the core drivers, be it at the sales side, be it at the operations side, be it underwriting side. And we've been slowly working and addressing these over these years. So as we stand today, I think we're more in a much further direction. And we're getting a lot more confidence that the way numbers are actually shaping up. Can we do more? Of course, we can do more. And as I mentioned earlier, we fundamentally think that this is a multi-decade opportunity. We are not shying away from that. It was essentially coming out of that period of adjustment that we had to work through. And as we see it, I think we are far, far better positioned today than what we were, let's say, a year back. Amit, do you want to add?
Yes. So actually, just to explain it further and understand what happened in protection over the last few years. I just want to mention that one part of congestion was created because of underwriting policies becoming stringent on account of unforeseen impact on mortality risk which was envisaged during COVID. So that is one factor that you can now factor -- that this is no longer as big a fear of apprehension as it was 2 years back. So experience is definitely much better than what we thought a few years back, which is leading to process becoming simpler.
Two, Anup mentioned that congestion actually by natural process over a period of last few years has actually eased out because of the overall data which is available in the ecosystem. So everything to do with process today, our ability to get KYC from the customers, get income documents from the customer is getting easier and easier and newer options are emerging to make process more seamless for the customers. So I want to believe that, one, because of experience; two, because of ecosystem data process are becoming simpler. And third element, which is also critical is the distribution reset because distribution was selling protection in the first rate in FY '17, FY '18. And subsequent to COVID, it had to take some time to reset and follow a different regime of selling protection.
So all 3 things have contributed towards retail protection now turning around. So I do believe that all these 3 are quite sustainable because ecosystem will only get stronger and stronger. Ecosystem is in data-rich experience, I don't see it undergoing any drastic change because all those calamities are behind us, and the distribution base has already happened. So more and more participation you will see from distribution going forward as well.
All right. Great. Second, Dhiren, to you, a little bit of a housekeeping question. You mentioned that growth in April was a little bit of a -- a little muted because March 1 had seen a big bump up in premium growth. When we think through growth for the full year, would you say that the extra bump that you got in March, the effect of that would have played out in Q1 largely? Or do you think as we look at growth in Q4, you will have some residual impact on Y-o-Y growth in Q4 as well? Just trying to -- Dhiren, I'm not looking at exact numbers, just directionally, how we'll be thinking about that.
Yes. So April was not a great month. And I think to some extent, we were fairly clear that we needed to get operational efficiency fairly high in the month of March, given that some of the policy is more in the traditional pool. And some of them, of course, were in the more than 5 lakh range, and there was no way that we want them very close spillover into the month of April.
So typically, April is one of those months that there is new business generation that is quite low. That has been the case of the industry. And depending upon different years, looking at whatever spillover comes through because of the [indiscernible] issue on the cases in the month of March, you see some of the April numbers shape up. But having gone beyond that, I think looking at May and June are the ones that are more critical. And there, you could see even within as we've disclosed earlier as well. There has been a sharp movement up in terms of the overall business for the month of June sequentially as well as on a Y-o-Y basis.
We continue to see those trends even now. And the way we look at it is that by quarter 1 is only about 15% of the overall business. We are cognizant of the fact that March last year was a fairly strong March. And therefore, it's important for us to be able to drive growth in the balance month as we go through to the end of the year. So I'm not giving a set of numbers difficult to call out, but effectively, there is a certain amount of color that I can provide in terms of what we're driving towards.
Yes. So I mean, it will be a volatile year. But I think Q2 and Q3 from what you're saying, should give a better reflection of the growth cadence in your business rather than looking at Q1 or Q4 or full year numbers because there will be a lot of noise either side of the quarter. So..
You're right. You're right. And Akshen, as we spoke of earlier, one of the core drivers of VNB development is going to be APE growth. And therefore, this is clearly top of our mind. Not that it wasn't top of our mind earlier, I think people are not able to appreciate the overall movement across those channels, given the performance of some of our channels that were not doing so well. But as you now see that portions of the business are much smaller, overall, you can start to see the APE growth come through quite strongly.
We have our next question from the line of Dipanjan Ghosh from Citi.
Just 2 questions. One on the persistency improvement. Can you give some color on whether it is led by mix change on the product side that you have seen or on the individual product classes also you're witnessing improvement across cohorts?
And second, if you can give some color on your individual rider attachment rates across your policies that you're seeing and whether there has been any trend shift on that particular segment out there?
So on persistency, Dipanjan, the answer is both. We're seeing some improvement at the LOB level as well as some amount of exchange. And the first one is what is more critical. I think with respect to where the product mix -- underlying product mix is, it's important for us to be able to deliver on persistency because that's essentially the promise that we've got from the customer. So all efforts are on towards improving unit level persistency as well.
In terms of rises, I think they're quite small at this stage. We just started another drive on improving rider attachments. Let's see how that shapes up through the year.
We have a next question from the line of Nischint Chawathe from Kotak.
Now that we sort of look back over the last 6 months and kind of say that March was extraordinarily a strong month, which obviously had a [ bounce ] in this quarter. Would you want to call off the extraordinary during the month of March?
Call out extraordinary? So Nischint, I don't think that's a fair question on the perspective that if we haven't taken the business on the table, you would have asked a different question about now. So I think it's -- we saw the business, we took it, and I think we move on to the current quarter. Do you know it wasn't that large overall. But clearly, we know our -- what our work has to be, what's a cutout perspective. Important to see that on a sequential basis, you are seeing positive trends. And as I said, coming into June, it is a double-digit growth number, and that's what we want to build on.
I guess when I'm coming in is that for March this year, you're probably kind of -- you'll be looking at growth over growth, right? Or it's not something that...
We want to stay optimistic because March is still quite far away. And I'm sure the journey that we have started doing and building capacity will also start playing out through the year. So there are a lot of things that we probably have built up over a period of last 15 months, and that will either go and become more and more efficient and productive as we go do it. So March is still far away. I'm sure we will work towards filling up for the -- filling up for the scale up in March through the build up capacity in the next few months.
We kind of see along here, these are 2 independent questions. Whether March was a strong month, of course, March was a strong month because there was an event there so March was a strong month. Should we have taken the business? Yes, we should have taken the business. I mean the business in March is strong. You don't leave a business or you don't take the business thinking that year-on-year next year will be low. So that's an independent thing. Now whether the next March has been strong or weak is a function of what capacities we are building and what is the market opportunity there. Our general focus and our approach will be that whatever with the March last March, we will see it's an independent thing. It's a thing that is behind us to look forward and ensure that we have to keep growing. And we have to build capacities for growth. And whether March was good or bad, we will see we will want to make last March and not any March. And we will all push and focus to make it in an ordinary March so that when you look back, you say that while it was an extraordinary March, your growth is so strong that it was an ordinary month. So this is also my request to Amit and team.
Sure. On the product strategy side, it looks like ULIP is kind of making a comeback. And I think at the same time, you are investing in the franchise, investing in the agency ports. Typically, the trend that we have seen over the last 3 years is that agency tends to be sort of more nonlinked than ULIP probably may be driven by persistency outcomes. So how do you see both adding up in terms of...
It was a good question. Good question. Good question. I am not seeing -- see ULIP -- see, we have all products. And what happens when the market in general is good, et cetera, there is a bit of shift towards ULIP, also because [indiscernible] guarantee has moved off, some part has shifted towards ULIP. But our sense is that it is not as if it's a secular trend moving towards ULIP and it will not go back. It is for us to discover different customer segments and come out with more suitable product to manage our product mix so that we are a balanced company. Now of course, through the channel, which is, let's say, more ULIP-focused and if they have got ULIP customers, they obviously will sell more ULIP. But then it is up to us to also find out other channels develop other customers cohorts so that we get good balance. So I think that is nearer to the situation. I don't think it's a secular thing that the market moves. ULIP is a market-focused business, so when it moves, it moves. And when it moves one should take.
Just to add efforts like what Anup in one of his answers to the previous question mentioned. Idea is not to say more to ULIP, but we could grow in absolutes, but how to reach out to customer segments who need a product which is different from ULIP. And that is a journey that we have started. It's a journey which is about understanding customer segments of our partners. And with only 1% kind of penetration that our partners have, I'm sure there are customers which are beyond affluent, who will lead products other than ULIP. And that is a journey that we have to traverse, and that is what we have started working on. I think absolute growth in ULIP is welcome, but at the same time, we have a task laid out in terms of what we want to do to increase it by increasing number of policies and segments beyond ULIP customers.
We have our next question from the line of Mohit Mangal from BOB Capital.
My first question is towards the annuity. So we saw annuity declining. And if you look at last 3 to 4 quarters, we saw very strong growth. So what went wrong this quarter in the annuity business?
So I'll take that. First of all, let me just put into context that last year, we had an introduction in one of our new products on a regular [ period ] platform. So last year, first quarter was a good 60% plus kind of a growth for us in annuity, so it was one -- it was on a very large base, the annuity growth declining. That is one, which is a very technical [indiscernible] mathematical explanation.
The second thing which I want to articulate here is that if you were to segregate annuity business into regular premium products and single premium products, then we actually saw a constrained growth in single premium products, right? So regular premium continue to grow at around 30%, 40% for us in this quarter. However, single premium was impacted. As you know that currently, rates available in deposits are at an all-time high at this point in time. And some of our bank partners did prioritize at this point in time to look at deposit mobilization as a trending objective. But we believe that it is transient. Eventually, what the regular premium annuity product serves is a customer who is nearing retirement against customer a segment, which is -- who is already retired when it comes to single premium product. So it's not a customer segment issue, it is a transient issue, which we do believe that demand will come back as we go through the end of the year.
We have a next question from the line of Prayesh Jain from Motilal Oswal.
Just a couple of questions. Firstly, the 5 lakh plus ticket size, what would be the share of that premium in 1Q versus a 1Q of last year? If you could help us with that. And secondly, with respect to the retail protection, what is the kind of risk that you are taking on your own balance sheet? And what is the level that you're passing out beyond which you are passing it on to the reinsurers? And any change there? That would be my 2 questions.
Prayesh, I think breaking it down back again into less than 5 lakhs and more than 5 lakhs, I think we would want to stay away from that fundamentally because we still are looking at the opportunity. And like we said, there is going to be some shift that happens across. It is not a large amount that used to be for us more at this point. I think our focus overall is to be able to reach out to different consumer segments and offer a product that is relevant there.
So if at some level, the more than 5 lakh ticket size, we're seeing some -- if we see some drop coming from non-par segment, there are other products that we are offering, and we're starting to see some pickup on that, which is what we mentioned earlier on the call. I think our focus will still be to be able to grow overall business irrespective of which segment it comes in from.
Coming to your second question on retail protection. We've not changed our reinsurance levels on retail protection. The retention levels continue to be at INR 1 crore and we're comfortable with the experience that we've taken on.
We have our next question from the line of Nidhesh Jain from Investec.
So in FY '19, we put out our expiration to double VNB over 4 years -- 3 to 4 years. What are our aspirations for VNB and APE over medium to long term in terms of growth?
We'll just continue to work hard to ensure that VNB keeps increasing and with a slant towards growth.
Mr. Jain, does that answer your question?
Yes, yes.
As there are no further questions, I would now like to hand the conference over to Mr. Anup Bagchi for closing comments. Over to you, sir.
Yes. Thank you all very much for joining this evening. And we continue to work hard to ensure that all our customer needs are met through the suitable products through the most appropriate channel. Thank you.
Thank you. On behalf of ICICI Prudential Life Insurance Company, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.