ICICI Prudential Life Insurance Company Ltd

THE GROWTH AT ICICI PRUDENTIAL LIFE INSURANCE HAS SURPASSED ALL ODDS AND ACHIEVED ITS STATED OBJECTIVE OF DOUBLING ITS FY2019 ABSOLUTE VALUE OF NEW BUSINESS (VNB) BY FY2023.

DEAR SHAREHOLDERS,

It is with great pleasure that I present to you our Annual Report for FY2023, a year that coincides with India's platinum anniversary - ‘Azadi ka Amrit Mahotsav'. As we celebrate 75 years of independence, the momentous occasion calls for reflection and celebration of India's extraordinary growth story. Despite encountering numerous challenges, India has emerged as the world's fifth largest and the fastest-growing economy.

A TRANSFORMATION STORY

The growth at ICICI Prudential Life Insurance has been equally buoyant. It has surpassed all odds and achieved its stated objective of doubling its FY2019 absolute Value of New Business (VNB) by FY2023. I can't help but feel immense pride in congratulating all employees on this remarkable achievement against all odds. Be it the COVID-19 pandemic or the persistent volatility in the market, each challenge was met with a steely resolve and unrelenting commitment to achieving the set goals.

On behalf of all employees, I express my sincere gratitude to Mr. N. S. Kannan for the remarkable transformation that our Company has undergone under his leadership. Thanks to his visionary insights and strategic direction, the Company has now become more resilient with a well-balanced product mix, diversified distribution network and superior customer service.

During his tenure, Mr. Kannan also championed the integration of ESG factors into the business objective and the publication of the Company's first-ever ESG report in FY2020. Mr. Kannan's contributions have set a high standard for excellence and we are grateful for his inspiring leadership during the challenging times faced by the Company. We wish him a fulfilling and rewarding retirement.

Let me also take this opportunity to extend a warm welcome to Mr. Anup Bagchi, who will be succeeding Mr. Kannan as the MD & CEO of ICICI Prudential Life Insurance. Mr. Bagchi, a long-time veteran of ICICI Group, has also served on the Board of ICICI Prudential Life Insurance as a non-executive director for five years. With over three decades of experience in the financial services industry, he brings a wealth of knowledge and expertise to his new role.

DELIVERING VALUE TO ALL STAKEHOLDERS

In addition to achieving the VNB target, the Company excelled in all key areas this year. It launched several innovative annuity and long-term savings products to cater to the evolving needs of customers. The Company today has a much wider and a more comprehensive product suite across savings, protection, annuity and group platforms.

Moving forward, the Company is committed to capturing a larger share in the under-served segments of protection and retirement. Significantly, protection and annuity premiums account for nearly half of new business premiums.

As the world continues to evolve at a rapid pace, so do technologies that shape our lives. In 2023, the Company made significant strides in incorporating new-age technology solutions to better serve customers and improve overall efficiencies. This year, we received awards from top industry bodies - FICCI and ASSOCHAM - recognising our efforts in innovation, customer service and technology to drive distribution.

A GROWING PROTECTION OPPORTUNITY

India's life insurance penetration, at 3.2%, remains one of the lowest globally, with the protection gap estimated to be $16.5 trillion, according to Swiss Re. Our analysis indicates that India's retail protection sum assured as a percentage of GDP is only 22%, as compared to Singapore, Japan, Malaysia and Thailand, which stand at 332%, 252%, 153% and 143% respectively. Currently, only 12% of the addressable population in India is covered by retail protection policies, presenting a vast growth potential.

As an organisation that prioritises customer needs, we see low penetration as a tremendous opportunity to provide financial security to millions of Indian families. Raising awareness about the significance of insurance and encouraging individuals to integrate it into their future-proofing strategy can aid in bridging the insurance protection gap.

BUSINESS AS A FORCE FOR GOOD

The Company is committed to using business as a force for good and our Corporate Social Responsibility initiatives proactively support meaningful socio-economic development in the country. Our efforts on enabling sustainable livelihoods through skill development have positively impacted over a million lives till date. I am also glad to inform you that, at the Dun & Bradstreet ESG

Leadership Summit 2023, ICICI Prudential Life Insurance was felicitated with the Corporate Governance Award.

MOVING FORWARD

ICICI Prudential Life Insurance is strategically positioned to seize the emerging growth opportunities in India. Our unwavering commitment to innovation, product differentiation, talent management and implementation of cutting-edge technology solutions have resulted in a slew of benefits.

These include superior customer service, improved efficiency and personalisation and increased scalability, all of which collectively enabled us to develop better products and agility.

I am thrilled to share that we have been ranked as the top-performing brand in ‘Insurance CuES 2023'. The Customer Experience Score (CuES) is an annual syndicated report by Hansa Research which captures insights about consumers' perceptions and experiences with life insurance brands. The Company has met with the customers' approval on parameters such as digital experience, ease of dealing, easy documentation, communication and responsiveness of distribution channels, which is a testament to our relentless focus on customer satisfaction.

INTRODUCING PATH-BREAKING REFORMS

The industry is now well poised for further growth, thanks to the reforms initiated during the year by the Insurance Regulatory and Development Authority of India (IRDAI). These reforms include initiatives to increase insurance penetration and promote ease of doing business. To enhance insurance penetration in rural areas, the IRDAI has proposed two innovative initiatives - Bima Vahak and Bima Vistaar. ICICI Prudential Life Insurance supports these initiatives and will fully discharge its responsibilities to ensure their success.

Before I conclude, I take this opportunity to thank our Board for their continued support. Our journey of sustainable growth, profitability, innovation and delivering future-ready products to customers would not have been possible without the continued support of our leadership team, our employees and all other stakeholders including partners, regulators and customers.

Message from the Managing Director & CEO

ICICI PRUDENTIAL LIFE INSURANCE HAS ACHIEVED ITS STATED OBJECTIVE OF DOUBLING THE FY2019 VALUE OF NEW BUSINESS (VNB) IN THIS FISCAL YEAR.

DEAR SHAREHOLDERS,

I am delighted to present to you our Annual Report for FY2023. At the outset, I am pleased to inform you that ICICI Prudential Life Insurance has achieved its stated objective of doubling the FY2019 Value of New Business (VNB) in this fiscal year. As we all know, VNB is an important business value metric for life insurance companies from a shareholder perspective.

Before we deep dive into our business performance that resulted in the above outcome, let me talk about the environment which we function in. Despite global headwinds, India continues to be one of the world's fastest growing economies and a shining star amidst the gloomy outlook prevalent in several parts of the world.

The country's economic transformation continues at speed, supported by robust macroeconomic fundamentals and strong balance sheets in both financial and non-financial sectors. The International Monetary Fund (IMF) projects a growth rate of 5.9% for India in 2023, surpassing global growth projections by over 3.1%.

The private sector has been making significant progress while showing an eagerness to ramp up capital expenditure amidst facilitative policy and regulatory measures. According to the Centre for Monitoring Indian Economy (CMIE), new private sector investment proposals in 2022 reached an all-time high since 1996, at Rs. 19.7 trillion. Corporate deleveraging has worked wonders for banks, significantly improving their balance sheets. Thanks to the robust Goods and Services Tax and Direct Tax collections, the Government has been able to allocate funds to productive sectors of the economy amidst global slowdown, thereby ensuring that the economy stays buoyant.

INSURANCE INDUSTRY OVERVIEW

As per a Capgemini report titled ‘Life Insurance Trends 2023', globally, the life insurance sector witnessed a significant uptick in premium growth in 2021 but is now grappling with a challenging macroeconomic landscape coupled with the after-effects of the pandemic. To maintain the competitive edge, life insurance companies must prioritise business resilience as their primary objective given that this is a long-term business. Additionally, they need to intensify their pursuit of operational excellence and expedite digital transformation efforts.

In India, the life insurance industry occupies a prominent position in the country's financial sector due to several factors. Owing to changes in the regulatory framework, growing awareness of insurance products, Government support and technological advancements, the industry finds itself in a sweet spot. According to a recent report by Swiss Re, the insurance sector in India is expected to become the sixth-largest market globally by 2032. Besides, it is poised to be one of the largest employment generators.

Also, there are some impressive data points about the sector, that I would like to highlight. The assets under management of the industry have skyrocketed from Rs. 2.3 trillion at March 2002 to a staggering Rs. 52.5 trillion at March 2022. Furthermore, the in-force sum assured has grown from Rs. 11.8 trillion at March 2002 to Rs. 205.5 trillion at March 2022, demonstrating the rising popularity and importance of life insurance in the country.

With rising incomes and growth in household purchasing power and savings, the insurance industry is expected to witness new trends in product innovation, improved claims management and expanded multi-channel distribution network, which is well supported by a facilitative regulatory framework. As penetration increases in under-served markets, the sector's expansion will contribute significantly to the country's economic growth.

ENCOURAGING REGULATORY REFORMS

In fiscal 2023, the Insurance Regulatory and Development Authority of India (IRDAI) introduced several ground-breaking reforms aimed at transforming the industry. These reforms reflect a broader drive to increase insurance penetration, to strengthen the sector's competitiveness and to create an inclusive and efficient marketplace.

Specifically, the increased flexibility in launching new products through the Use and File regime which has been permitted for certain product categories will enable insurers to respond more quickly to changing customer needs, thereby supporting the IRDAI's vision of improving insurance penetration in the country. Reforms such as new regulations for registration of companies will attract more domestic and foreign investments, eventually leading to increased and healthy competition. Increasing the number of permissible tie-ups for corporate agents and insurance marketing firms will expand customer choice and lead to innovative products and better service. Similarly, eliminating the requirement for prior approval to raise Tier 2 capital will enhance solvency.

The IRDAI, in its pursuit of its objective of "Insurance for all" by 2047, has put forth several initiatives which are currently under various stages of discussions. These initiatives, namely Bima Vahak, Bima Vistaar and Bima Sugam can be catalysts for driving the Regulator's objective.

Bima Vahak, intended to be a women-centric insurance distribution channel, will focus on addressing the diverse needs of the rural population by providing them with a hassle-free and convenient means of fulfilling their insurance needs. Bima Vistaar is a composite insurance product fashioned to meet the unique insurance needs of the rural population.

Bima Sugam is the Regulator's proposed solution to modernise and simplify the insurance industry. It is an all-in-one digital platform combining solicitation, service and claims processes for a seamless experience to customers and insurance providers by leveraging the evolving Indian digital ecosystem. This initiative has the potential to be the UPI moment for the insurance industry.

EMERGING TRENDS

The global insurance market is going through a major shift towards digital-first business models. As insurers increasingly focus on personalised premiums and usage-based coverage, they are adopting state-of-the-art technology such as Internet of Things (IoT), Artificial Intelligence (AI), Machine Learning (ML) and Advanced Analytics to develop more precise risk profiles of individuals and offer customised products and processes.

In my opinion, some of the trends that will emerge from the increased use of technology include seamless onboarding and claims experience. AI-powered Chatbots and virtual assistants will deliver personalised support. We will witness a surge in usage-based insurance, leveraging data analytics and predictive modelling to assess risks more accurately, offer dynamic pricing and develop targeted product offerings. There will be a greater emphasis on wellness initiatives as part of the service offering to enhance customer engagement.

A TRANSFORMATION STORY LED BY THE 4P STRATEGY

Let me now delve deeper into our transformation story. I am delighted to announce that, despite the unprecedented challenges posed by the COVID-19 pandemic and the persistent market volatility, we have successfully surpassed our stated objective of doubling our FY2019 absolute VNB by FY2023. Our VNB for FY2023 stood at Rs. 27.65 billion at a VNB margin of 32%.

To pursue our goal, expanding our distribution network was one of our top priorities, which we achieved by acquiring new partners and developing innovative sourcing channels. As of March 2023, we have established over 900 partnerships, including 39 bank partners, giving us access to more than 17,500 bank branches. We now have over 200,000 advisors, with more than 33,500 recruited in FY2023 alone. This has helped us to create a robust and well-diversified distribution mix and all our distribution channels have been growing at a healthy pace. The distribution mix in FY2023 comprised 30% from bancassurance, 26% from agency channel, 17% from group, 15% from partnership distribution and 12% from direct business.

To cater to the evolving needs of our customers, we invested extensively in product development resulting in an array of customer-centric products across the protection, savings and pension segments. In FY2023, the Company launched innovative products such as ICICI Pru Sukh Samruddhi and ICICI Pru Gold. These products have received positive feedback from our customers. In FY2023, non-linked products contributed 37%, linked comprised 36%, protection stood at 17%, while annuity and group products were at 6% and 4% respectively. We now have a well-diversified product mix catering to the needs of several customer segments.

Our protection business has exhibited consistent growth, as evidenced by the new business sum assured of Rs. 10.41 trillion in FY2023. This growth has enabled us to achieve a market share of 14.3% in FY2023, based on new business sum assured. Additionally, in the annuity business, which is a rapidly expanding product category within the industry, the Company registered a year-on-year growth of 69%. I am pleased to inform you that we are recognised as one of the leading providers of pension and annuity products in the industry. In FY2023, our annuity and protection business jointly contributed 47.8% of the new business received premium.

HUMAN CAPITAL STRATEGY

Our people are at the core of our success. They are the driving force of our strategy and their growth and development are what gives us the competitive edge. Some of the areas that I would like to highlight include the implementation of a multi-platform capability architecture that provides learning opportunities for all employees. This initiative has empowered our people to acquire new skills, boost productivity and advance their careers, while also helping us build a workforce that is future-ready. During FY2023, over 12,000 employees were certified, with a cumulative learning time of over 1.3 million hours.

We introduced an Equal Opportunity, Diversity & Inclusion policy in FY2023. We also instituted a Diversity Council and adopted a four-pronged ABCD framework to implement it. This framework serves as a tool to attract a diverse range of talent, enhance workplace belonging and foster meaningful connections with employees from various groups through supportive policies and platforms. Notably, the framework includes Diversity Dashboards that enable us to track our progress towards further achieving diversity in our workforce.

Employee well-being has been a priority for us and we have established a comprehensive framework for physical, mental and financial health. This initiative has helped us create a thriving workplace culture that values our people's wellness and happiness. Also, our biennial Voice of Employee survey enables us to identify pertinent areas of improvement at the workplace. We listen, empathise and respond to their needs effectively. Our employees have given us scores above 90% on parameters such as Advocacy, Alignment, Mood and Support in times of their need. They have also appreciated the challenging roles we offer, coupled with learning and growth opportunities, a safe and secure workplace and adequate freedom to perform well.

LEVERAGING TECHNOLOGY

Technology is the backbone of our Company's efforts towards delivering unparalleled services to our customers. In today's fast-paced world, we understand that customers expect a seamless and personalised experience and technology plays a critical role in making this a reality. We have therefore made significant investments in new-age technologies such as data analytics, AI and ML to provide tailor-made insurance solutions to our customers.

We have developed robust ML models to analyse customer behaviour, preferences and needs to provide a personalised experience. Also, these models are enabling us to streamline claims and bolster our risk management processes.

Our Mobile App has been a game-changer, with over 1.5 million downloads and 3.4 million digital service interactions every month. The app provides access to over 45 types of policy transactions, making it easier than ever before to manage insurance policies on-the-go. In FY2023, we introduced new features in the app, such as access to free health webinars and a fitness tracker to encourage our customers to lead healthy lifestyles.

CUSTOMER-CENTRICITY

Our driving force in the last two decades has been our strong commitment to being a customer-centric brand. Our innovative products with industry-first features resonate well with our customers and are a testimony to our product development approach. Our customer service architecture encompasses being fair, transparent, responsive and empathetic. Through our digital enablers such as WhatsApp, Mobile App, Website and Chatbot LiGo, we have empowered our customers to initiate and complete service requests independently. Over 92.5% of service interactions in FY2023 were conducted by customers in the self-help/digital modes, showcasing the convenience of our anytime anywhere digital platform.

Claims is the moment of truth for us and as a Customer-First brand we have been delivering on the promises made to our customers. We have introduced a quick claim assistance process and real-time tracking for pre-claim assessments. These initiatives have enabled us to further bring down the claims settlement turnaround time. In FY2023, the average turnaround time for non-investigated retail death claims, after receiving all documents, stood at 1.21 days, a marked improvement from 2.34 days in FY2019.

Across the customer life-cycle, the Company has successfully implemented technology and digital solutions. The outcome of this is the steady increase in digital adoption percentages and an impressive boost in our Net Promoter Score. I feel proud to share that ICICI Prudential Life Insurance has secured the distinguished position of being India's premier life insurance provider, as per the Insurance CuES report, published by Hansa Research.

Our commitment to excellence has also been recognised through several awards in innovation, customer service and technology. Notably, we were named the ‘Most Innovative Insurer' in the Life category and recognised for ‘Excellence in Driving Distribution through Digital' by FICCI. We were also honoured to receive the ‘Innovation Award' in the category of new customer propositions and experiences by ASSOCHAM.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) FOCUS

Sustainability is intrinsic to life insurance and our vision is to build an enduring institution that serves the protection and long-term saving needs of customers with sensitivity. We, therefore, strive for sustainable value creation for all our stakeholders. Our sustainability framework is built on the three pillars of Environmental, Social and Governance, which we have integrated into our business processes.

Through our commitment to benchmarking our ESG against leaders from other industries and implementing initiatives based on a gap analysis, we have achieved significant progress. As a result of our efforts, two prominent ESG rating agencies have upgraded our scores and we are now the highest-rated Indian insurance Company. I am delighted to announce that our dedication to corporate governance has also been recognised by Dun

& Bradstreet with the ‘Corporate Governance' award, a testament to our unwavering commitment to operating in a responsible manner.

WAY FORWARD

India is poised to emerge as the third largest economy in the world by 2029. However, it is intriguing to note that life insurance currently occupies a mere 17% of the total household financial savings in India. This statistic highlights a significant growth opportunity for long-term savings products. Also, the protection gap in the country points to a huge untapped opportunity for life insurers.

Moreover, retirement as a category is fast becoming the next frontier for growth. Currently, only 11% of the working population in India has access to any form of a pension programme. Also, the value of pension assets stands at just 5% of the country's GDP. These numbers coupled with favourable demographic factors such as a burgeoning middle class, increasing urbanisation, rise in working population and improving per capita income indicate retirement planning needs of customers are substantially under-served.

Over the last few years, with the objective to be a more resilient organisation, we have invested in enhancing our long-term capabilities. These capabilities are focussed on the building blocks of People, Process, Technology & Analytics and Product & Distribution. In the longer term, these capabilities will serve as a robust platform for sustainable growth, quality of business and profitability of the Company.

As we set our sights on the future, we stand poised to seize the immense potential within the insurance landscape of our country, with a favourable economic environment and supportive regulatory framework. With our steadfast resilience as an organisation, we are fully equipped to capitalise on the enormous opportunities that lie ahead. We have all the levers available with us to continue our journey of sustainable growth, going forward.

NEW BEGINNINGS

Looking back, I feel humbled and fortunate to have got the opportunity to work with the ICICI Group for over three decades. My career began with ICICI Limited as a Project Officer and I have had the privilege of working with several group companies and functions, alongside some of the brightest minds in the industry. The opportunity to learn and grow has been phenomenal and unparalleled. Over the past few years, I have witnessed the remarkable growth and success of ICICI Prudential Life Insurance as we continued to set new industry benchmarks and achieved several industry-first accomplishments. It brings me great satisfaction to have been a part of this journey.

I would like to extend a warm welcome to Mr. Anup Bagchi, who will succeed me as the MD & CEO upon my superannuation on June 18, 2023. Mr. Bagchi, a veteran of the ICICI Group, has till recently been serving as a non-executive director on the Board of ICICI Prudential Life Insurance. I would like to thank our Chairman and the Board for putting in place a well thought out succession plan.

Let me also take this opportunity to express my gratitude to all our employees for their dedication, hard work and resilience. I would also like to express my gratitude to each one of you who contributed to and supported our journey in serving millions of customers and improving lives and livelihoods. Finally, I am grateful to our Board, Regulators and the Government for their continued support and constant guidance throughout this incredible journey.