Author: Raoji

(Disclosure:I am market making in the shares of ICICI Pru Life)

ICICI Prudential Life Insurance’s decision to shift focus back to unit-linked insurance plans (Ulips) has paid off, with the private insurer being the first to cross Rs 1 lakh crore mark in terms of assets under management. The company, which generates nearly 80% of its new business premium through the sale of Ulips, has seen new business grow 40% during the first nine months of the fiscal – as against 16% growth by other private companies and with LIC showing a fall in new business premium.

“We are the only private insurer with assets of over Rs 1 lakh crore. In the mutual fund industry — which has been around longer, seen consolidation, and has significant wholesale assets — there are only four or five private funds with assets over Rs1 lakh crore,” said Puneet Nanda, executive director, ICICI Pru Life.

The growth in assets are a big boost for the insurer as it comes at a time when its parent ICICI Bank has an opportunity to unlock value with the government notifying amendments to allowing foreign direct investments up to 40%. ICICI Bank has been looking at selling a minority stake, similar to HDFC which sold a 0.95% stake to Azim Premji Trust for Rs 198.9 crore, valuing the company at close to Rs 20,000 crore. HDFC Life has moved up to the number two slot following a growth push last year. ICICI Prudential has been in the number one position consistently since the industry opened up in 2000.

According to Nanda, the growth in AUM will have implication for earnings. “A large part of the costs are fixed, which includes infrastructure cost and employee costs. The more scale you build up, the more you are able to defray costs and you are able to become more efficient. In our case since a large part of the business is Ulips, the earnings are from fund management charges.”-from TOI