Good evening, ladies and gentlemen. A very warm welcome to ICICI Lombard General Insurance Company Limited Q2 and first half FY22 earnings conference call. From the senior management we have with us today, Mr. Bhargav Dasgupta, MD and CEO of the company, Mr. Gopal Balachandran, CFO and CRO, Mr. Sanjeev Mantri, Executive Director, Retail, Mr. Alok Agarwal, Executive Director, Wholesale, and Mr. Lokanath Kar, Chief Legal and Compliance Officer. Please note that any statements or comments are made in today's call that may look like forward-looking statements are based on information presently available to the management and do not constitute an indication of any future performance, as future involve risk and uncertainties, which could cause result to differ materially from the current views being expressed.
As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. I now hand the conference over to Mr. Bhargav Dasgupta, MD and CEO, ICICI Lombard General Insurance Limited. Thank you, over to you, sir.
Thank you, good evening to each one of you. Thank you for joining the earnings conference call of ICICI Lombard General Insurance Company for Q2 and first half. I hope you and all your colleagues are safe and healthy. I will give a brief overview of the industry trends and developments that we've witnessed in the last few months. Post this, our CFO, Mr. Gopal Balachandran, will share the financial performance of the company for the quarter and half year ended September 30, 2021. As we speak, the economic activity across the country is picking up. Various high-frequency indicators like GST collections, manufacturing PMIs, import of non-oil and non-gold merchandise, electricity demand and railway freight traffic has shown sequential uptick, thereby showing signs of economic environment moving towards the pre-pandemic level.
The upcoming festive season should give a much clearer picture of where we are headed on the recovery path and how the demand situation will pan out for segments such as motor insurance. Looking ahead, the rapid pace of vaccination is a positive and expected to minimize the risk of complete lockdown in the future. Turning to the GI industry, during the quarter, motor insurance saw more moderate growth and the new motor vehicle sales were impacted due to chip shortages and underlying demand sentiment in the two-wheeler segment. The corporate health and employer-employee health insurance continued to grow. However, unlike previous quarters, the growth in retail health for the quarter was moderated due to the base effect.
As far as commercial lines are concerned, the growth in fire segment was stronger in the second quarter, while marine and engineering lines witnessed growth in momentum, mirroring the resurgence in the economic activities. Speaking of the performance, as per the GI Council report, the general insurance industry registered a growth of 12.8% in the first half of this year over last year, with the industry GDPI moving to INR 1,087.05 billion in first half 2022 from INR 963.90 billion last year. Excluding the crop segment, this growth would have been 16.9%. The overall growth and growth excluding crop was 12.1% and 17.5% respectively for quarter two FY 2022 as compared to quarter two FY 2021. The combined ratio of the industry was 120.5 in quarter one FY 2022 as compared to 104.4 in Q1 FY 2021 based on available information from public disclosure.
This includes two companies that are yet to disclose their quarter one numbers. The overall combined ratio of private multi-line general insurance was 116.9 in Q1 of FY 2022 as compared to 103.0 in Q1 of FY 2021. Let's move to the claims behavior experienced by us during this quarter. The motor own damage claim frequency in the second quarter reached pre-COVID levels. On the health side, the overall COVID-19 claims reported for the industry for first half FY 2022 crossed 1.6 million against 1 million cases reported in the whole of last financial year, of which roughly about 4.6% of claims were reported with us. In the second quarter, most of the COVID claims reported were in respect of admissions or incidents pertaining to Q1 FY 2022 and earlier, which was adequately estimated and provisioned for by the company.
While the incidence of COVID claims went down, the non-COVID health claim frequency in Q2 FY 2022 saw a sharp increase as compared to Q2 of last year. This can be primarily attributed to increase in medical acute cases such as dengue, acute respiratory diseases, or on account of deferred elective surgeries. We are also witnessing an increase in average claim size. It is possible that this is due to additional precaution which may be taken during or post the second wave. We will have to monitor this trend for coming few months to assess if this is a temporary or a structural change. Moving to business impact this quarter, as indicated in our last call, we increased pricing on our corporate health portfolio by more than 15%-20%. In spite of the increase, we were able to retain over 90% of the accounts of our corporate customers.
In retail health, we grew faster than the industry, thereby maintaining our market share. Retail health continues to be a key focus area for the company. We expect it to grow in times to come. Our holistic insurance and wellness app, IL TakeCare, has surpassed 880,000 downloads, enabling us to get closer to our customers by providing a unique platform for continuous engagement. This app has the potential to harness entire healthcare needs of our customers at their fingertips. Our motor business continued to face headwinds in form of supply disruptions, lower demand sentiment, and competitive intensity. Going forward, we would continue to maintain cautious approach in certain sub-segments that we believe can make our business unsustainable in the long run. As far as the commercial lines are concerned, we continue to see robust growth given the resurgence of the economic activity.
As you are aware, in August last year, we undertook a landmark step and entered into a scheme of arrangement with Bharti AXA General Insurance Company. Over the past year, after receiving all the requisite approvals from the concerned statutory regulatory authorities, we are happy to share that a milestone in this journey has been achieved with IRDAI granting final approval on September 3rd, 2021. With all approvals in place, September 8, 2021 was the effective date of integration, wherein both the organizations came together to form a single larger entity. In those few days, our two teams worked tirelessly and seamlessly to ensure a smooth transition.
On day one of the merger, we transitioned over 15,000 distribution partners with minimal disruption, onboarded 3,000+ hospital network and 3,700+ hospital network and garages, smoothly transitioned over 60 applications, these are technology applications, including the connectivity, access, security, and data aspects, onboarded over 3,400 employees and staff members, transitioned and rebranded over 140+ branches of Bharti AXA. Over 30.5 million communications were sent on the merger to customers and partners to ensure uninterrupted business continuity and operational efficiency. We are excited with the progress made on operational integration of the two entities. We expect to realize synergy benefits over the next 24 months. As we head into the second half of the fiscal, we are reasonably well-placed. I'm confident that we will continue to deliver long-term value for our shareholders.
I will now request Gopal to take you through the financial numbers for the recently concluded quarter.
Thanks, Bhargav, and good evening to each one of you. I will now give you a brief overview of the financial performance of the company for Q2 and first half FY 2022. We have put up the results presentation on our website. You can access it as we walk you through the performance numbers. As mentioned by Bhargav earlier, merger with Bharti AXA was formally consummated on September 8, 2021, with April 1, 2020 as the appointed date. The effect of the demerger in the financials has been incorporated in the form of opening net worth as on April 1, 2021. Further, the financials for the current year represent numbers of the merged entity. Accordingly, Q1 FY 2022 has been restated. The comparative numbers for the previous year in the financials pertain to standalone ICICI Lombard, and hence are not comparable.
The gross direct premium income of the company increased to INR 86.13 billion in first half FY 2022 as against INR 64.91 billion in first half of last year. The industry reported a double-digit growth of 12.8% on a lower base for a similar period. Our GDPI growth was primarily driven by growth in preferred segments, given that our approach has always been growing business sustainably.
The fire segment GDPI was INR 16.1 billion in first half this year, as against INR 12.59 billion in first half last year. As indicated in our results presentation, the overall GDPI of our property and casualty segment was INR 27.69 billion in first half this year, as against INR 21.13 billion in first half last year. On the retail side of business, GDPI of the motor segment was INR 32.46 billion in first half FY 2022, as against INR 27.51 billion in first half last year.
To harness the potential of these segments, we have been expanding our distribution network to increase penetration in tier three and tier four cities. Our agents, which includes the point of sale distribution, has seen an increase to 78,035 as on September 30, 2021, up from 61,385 as on June 30, 2021. The advance premium was INR 36.86 billion as at September 30, 2021, as against INR 32.06 billion as at March 31, 2021. During our Q1 earnings call, we had indicated creating a provision of INR 6.02 billion in respect of COVID claims, keeping in view increase in reimbursement claims and anticipation of thick tail of claims. However, after considering the recent claim intimation trends, our overall assumption has been favorable for Q2 FY 2022. We thus revised our COVID claim estimate to INR 5.61 billion for first half FY 2022 for the combined entity.
Resultantly, combined ratio was 114.3% in first half FY 2022 as against 99.8% in first half FY 2021. Excluding the impact of flood and cyclone losses of INR 0.82 billion, the combined ratio was 113% in first half this year as against 97.5% in first half last year, excluding the impact of cyclone and flood losses of INR 1.07 billion. Combined ratio was 105.3% in quarter two this year as against 99.7% in quarter two last year. Excluding the impact of flood and cyclone losses of INR 0.5 billion, combined ratio was 103.7% in quarter two this year as against 96.6% in quarter two last year, excluding the impact of cyclone and flood losses of INR 0.77 billion. Our investment assets rose to INR 331.95 billion at September 30, 2021 from INR 331.07 billion at June 30, 2021.
Our investment leverage net of borrowings was 4.27x at September 30, 2021, down from 4.34 x at June 30, 2021. Investment income increased to INR 16.05 billion in first half of the current year as against INR 10.91 billion in first half of last year. On a quarterly basis, investment income increased to INR 7.16 billion in quarter two this year, as against INR 5.92 billion in quarter two last year. Our capital gains was INR 4.71 billion in first half this year, as against INR 1.84 billion in first half of last year. Capital gains in quarter two this year was at INR 1.44 billion, as against INR 1.24 billion in quarter two last year. The expenses incurred of approximately INR 0.17 billion on account of the demerger has been absorbed in the P&L during first half FY 2022.
Our profit before tax was INR 8.52 billion in first half FY 2022, as against INR 10.86 billion in first half last year, whereas PBT was INR 5.94 billion in quarter two FY 2022, as against INR 5.55 billion in quarter two of last year. Consequently, profit after tax was INR 6.41 billion in first half this year, as against INR 8.41 billion in first half of the previous year.
Whereas profit after tax stood at INR 4.46 billion in quarter two this year from INR 4.16 billion in quarter two of last year. The return on average equity was 15.2% in first half FY 2022, as against 24.9% in first half of last year. The return on equity for quarter two this year was 21%, as against 24.7% in quarter two of last year. Solvency ratio was at 2.49 x at September 30, 2021, as against 2.61 x at June 30, 2021.
Continued to be higher than the minimum regulatory requirement of 1.5 x. The board of directors of the company has declared interim dividend of INR 4 per share for first half FY 2022. As I conclude, I would like to reiterate that we continue to stay focused on building a profitable book and creating sustainable value creation. I would like to thank you all for attending this earnings call and will be happy to take any questions that you may have.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Avinash Singh from Emkay Global. Please go ahead. Mr. Avinash Singh, your line is in talk mode. Please go ahead with your question.
Hello. Yeah. Good evening. Two questions. The first one is more on strategy than quarter, that you have chosen profit over growth over the last few years. You have reached a point where a crop business is not your target segment, largely. In motor also, you remain selective. Going forward, what is your medium-term strategy in terms of how are you going to grow the top line? You have been selective for quite a long time, if I were to look, the market in the segments where you are avoiding still remains very hypercompetitive. What sort of growth strategy or medium-term you are going to apply? In terms of, again, retail health, the regulatory arbitrage or the advantage that a standalone health insurance players have, that still remains.
What sort of plans do you have for this growing retail health book? At some point, if you go aggressive, then again the market will become in terms of the profitability will be impacted. Yes, these are my two questions. Thank you.
Thanks, Avinash. On the first one , if you study the business over a long period of time, it's not unusual to see phases where there is competitive or there are aggressive pricing in sub-segments at different points in time. Usually, they don't sustain. Our belief is that over a longer period of time, if you see history of general insurance companies that do well, they've always focused on underwriting. Having said that, at different points in time, as you rightly identified, more segments could be under competitive pressure. For example, right now because of the slowdown in motor and given the fact that new vehicle sales have been low, there is probably additional aggression that we are seeing there.
Equally, at the same time, what we are seeing is the commercial lines are growing much faster than what we had budgeted in the beginning of the year, and we are gaining market share ahead of what we had planned for. The approach that we've taken is wherever we are seeing sensible pricing, and in any case we've built some amount of competitive advantage, we will gain market share there. The second area that we are focusing on is that, as we've talked about in the last quarter also, is the health indemnity piece. On the health side, there is a bit of a base effect that we are facing, which we'll get over this year. The base effect is largely given the fact that one of our large bank partners has reduced their distribution business on the insurance side.
That is affecting us, but that effect pays through by end of this quarter.
From next quarter onwards, we anticipate growth to come back. On health, as we talked about in the last quarter, we are adding significant amount of distribution. That's an investment call that we are making, and we are going to go ahead and, in a sense, invest for the long-term growth. That brings me to your second question in terms of health. Yes, there is some regulatory arbitrage on the distribution side. At the same time, there is a POS license that has been given to multiline companies that helps us in terms of address that to some extent. What we're also doing is, with the distribution, there is many other things that we can do in terms of the fact that we can provide multiple products to the same distribution, et cetera. We have our own advantages.
On the cost side, we have some advantages, and we are still going ahead and adding agents at a pace that you've seen in the last quarter. We are being able to add agents. That's not been that big a challenge. Overall, the health side remains a thrust area for us, retail health, and indemnity. On the benefit side, the base effect is largely getting played out this quarter, and from next quarter onwards, that should start coming back. Lastly, on the motor segment, yes, we've been a bit cautious in the last couple of quarters. We are also looking at certain sub-segments where we're growing. In aggregate numbers, it doesn't show, but in certain sub-segments, we are growing faster than what we had anticipated. When you cut down on certain segments, that cut down happens more sharply.
When you add, it takes a bit more time to build up. We are reasonably confident that we will be able to recover the motor business in a matter of time, because also our sense is that this kind of aggressive behavior doesn't sustain for too long because people start realizing the cost of the aggression very soon.
Thank you. A quick follow-up. What's your outlook on the so-called online broker or web aggregator platform? Because you have been sort of shying away from that platform.
Yeah, there's no change in that. Our approach is that we would rather invest in our own D2C channel rather than pay online aggregator for getting business through that. At the end of the day, customer ownership is more valuable, and our D2C business is growing reasonably well. No change in that front.
Okay. Thank you. Very clear. Thanks.
Thank you. Participants, to ask a question, you may press star and one. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Abhishek Saraf from Jefferies. Please go ahead.
Yeah. Hi, thanks for the opportunity. I have just two questions. Now with the merger with Bharti AXA, now crop segment has become around 7%. If you can just reiterate what our strategy will be going forward, and what are the trends that we are witnessing in crop segment which can affect our strategy. Second is on the motor TP price hike. It has still not come by, so when do you think that that can come through, and what could be the quantum that one may be expecting? Just these two questions, sir. Thanks.
On the second one first, as we said in the last quarter earnings call also, we wouldn't anticipate an increase this year because we are halfway past the year. We will also need to see the new leadership in IRDAI. At the same time, it's a fact that for two years we've not got a price increase, so that is definitely affecting the industry. We are reasonably hopeful that if you go back to the past, every April 1st we used to get a price increase. We are hopeful that coming April 1st, we will see a price increase. In terms of quantum, it's very difficult for us to anticipate what exactly the percentage will be.
If you just look at what the exposure draft talked about in March of 2020, before the first lockdown happened and hence that was deferred, that roughly meant a roughly about 7% increase on a weighted average portfolio basis for the industry. Maybe that is an indicative number because that used data of the previous year or previous period to come up with that estimate. That doesn't necessarily mean that we will get a 7% increase. I'm just giving you what the past indication was. Coming to crop, so the new crop business has come in. As our usual practice, our reserving on the crop, if you remember what we used to do when we used to write crop, we reserve at assuming no profit, no loss till the actual picture emerges. Even this quarter, we've given a full 100% loss on the crop book.
In terms of where we are seeing it, as of now, I think the basic performance of the crop has been pretty good till now. Future, we'll have to see how it goes. What we said is that we will observe the crop business closely with the new team and see how that is playing out. We will then take a call. We anyway have to continue for a couple of years because these are three-year commitments. We'll honor that commitment and then see how the environment changes for the crop to take a final call. There is also the possibility that the team itself, if there are some changes which addresses some of the concerns that we've had in the past, that would definitely help in the call that we take.
Sure. That's very helpful. Just one final clarification on this. From the crop side, whatever business we are having, this is basically flow through of the earlier contracts or commitments that we have had. There would not be any new ones in the recent times with Bharti AXA. Is there also new ones could also be there?
Yeah. These are basically contracts that Bharti AXA had signed. As I said, most of the contracts are three years, so that is continuing right now in two states. That's what we are continuing with. There is nothing incremental that we are adding.
Okay. Thanks. That's great. Thanks a lot, Bhargav.
Thank you. The next question is from the line of Neeraj Toshniwal from UBS. Please go ahead.
Yeah. Hi. Uttam Wadekar here.
Yeah, Uttam.
Yeah. There was supposed to be a one-time tax benefit from the accumulated losses. Have we captured that in this quarter? Because I couldn't run through independently. If you can help me out.
Uttam, as I mentioned as a part of our opening remarks, the appointed date for the scheme is from April 1, 2020. Given the fact that the tax returns for the financial year 2021 is yet to be filed, we have already done a special purpose financial statements for the previous year ended March 31, 2021. As a part of the tax returns that we will file for that year is where the entire tax benefit of carry forward losses would be available to us. To answer your point, I think the entire benefit of the tax on the carry forward losses of Bharti AXA will be available for us as a part of the tax return that we will file for the financial year 2021.
Okay. How much would the quantum be, if you can disclose that? It will be straightforward, it should be eight years of losses from 2020, right? I mean, before that eight years, before 2020, right? The appointed date is April 1, 2020.
If you remember what we had given at the time when we had announced the transaction, we had indicated the amount to be about between INR 675 crore-INR 700 crore. That amount pretty much remains the same. That's the amount of tax losses on which you will be getting a benefit of 25%.
Okay. Got it. This is helpful. On the COVID morbidity claims, I heard it correct, hopefully that pricing and provisioning you had some positive favorable outcome on the reserves you did, but actually the amount of active cases were higher than probably what we have estimated. Did severity actually come down severely? That could have got the differential in terms of the favorable outcome. How one should read that?
Uttam, I think if you look at even in quarter one when we had reserved for COVID claims, the actual incurred at that point of time was about INR 3.78 billion and we had carried about INR 212 crores as the IBNR, anticipating the thick tail of claims in the subsequent quarters, which is what we have put out as a part of our opening remarks. In line with what you see at a national level and which is true what you get to see for the overall sector as well. I think clearly we are seeing a declining trend insofar as number of COVID claims intimations are concerned. quarter two specific, I think clearly we have seen a significant decline in number of intimations corresponding to what you would have seen in quarter one.
Which is why against that INR 602 crore number, that number was, of course, for ICICI Lombard on a standalone basis. On a merge basis, when you look at the numbers for the half year, that number of INR 602 plus whatever would have been attributable to Bharti AXA for quarter one, both of that put together stands revised to INR 561 crore. In effect, in quarter two, I mean that number for Bharti AXA was roughly about INR 26 crore. In quarter two , we have seen a benefit of about INR 67 crore of COVID claims reversal on account of the trend line that we are seeing on decreased intimation of cases. Going forward, what will happen is anybody's guess.
Clearly, if you see what we have been talking about in line with what we are seeing in some of the other markets, wherever, let's say, vaccination rates have significantly increased, clearly the extent of hospitalization cases are kind of seeing a declining trend. Maybe a similar thing could possibly happen even in our markets. That's something that we will wait and see insofar as any possible third wave. Otherwise, as things stand currently, I think there seems to be a declining trend in intimations on COVID cases.
Sure. Thanks. The last question on the synergies on the time of 24 months. Can we further break it down into how we are actually planning every six months or what kind of review we will be doing and how much we can actually benefit out of it?
Uttam, what we have been doing is, I think, if you remember what we have been saying over the last couple of few quarters is from the time the transaction was announced, we had already engaged integration consultants who would help us as a part of the, one, the operational day 1 integration, which is what we have been able to successfully get it, in that sense, effective. I think now is the time for us to get some of the benefits of synergy. The tax is something that I already spoke about, which we will be able to realize it in FY 2021.
For the rest of the synergies on the cost side and let's say on the revenue synergies, what you would possibly get to see is a large part of the cost synergies is something that will play out over the next, I would say, nine months. The benefit in the form of revenue synergies, again, in line with what we have been talking about, something that we will start to see over the next 18-24 months.
In terms of revenue synergy, what we mean by that is obviously the businesses that you see, the aggregate numbers that you're seeing, obviously that benefit is straight away coming in. With the distribution, the thought process that we had was to see if we could increase the depth and the products that we have with the same distribution partners. We have more presence across the country. We have more product capabilities. That's what Gopal is talking about in terms of incremental benefit out of the same distribution.
Sure. Got it. Okay. Thank you so much.
Thanks, Uttam. Thank you.
Thank you. The next question is from the line of Nidhesh Jain from Investec. Please go ahead.
Thanks for the opportunity. Sir, post Bharti AXA merger, can you elaborate how is the experience with the two banks which we have got post-merger? That is the first question. Second is, what will be our digital strategy going forward? If I look at the online premium for us has been quite stagnant for last three years. How do we see that number panning out and what is the strategy to scale that number? Third is that we are seeing increased competition from some of the new age players who are private equity driven. That sort of competition probably we have not seen in the industry in the past. Probably they will not worry too much about near-term profitability. In that context, does our focus on 20% ROE remain steady or do we plan to change that singular focus on 20% ROE?
These are the three questions, sir.
Yeah. I think great bunch of questions. In terms of the distribution that we've got from the Bharti AXA transaction, we're very happy to see the progress that is happening on those. As of now, all the banks that were there, they are continuing with us and in fact vis-à-vis their numbers last year, there's been good growth in the first six months in most of these banking partners, including the larger ones that you talked about. That one is fine. The second, in terms of our online business, you are right. In the last couple of years we've not grown but that's also to a large extent because of two reasons. One, we had a very large share of travel business that we used to do online. That business effectively disappeared which is beginning to come back, so that's a positive story.
Second is two-wheeler business post the 5+1 that had some impact on the online business because pure only for two-wheeler distributing or in a sense marketing or trying to do digital marketing, the cost was too prohibitive. That's the second thing. In terms of the current numbers, we are growing reasonably well on the D2C side. On the D2C side, there's another aspect which is a partnership with the digital players, the ecosystem that is evolving in this country. That business has done well. The approach that we've taken in that business is to address the third question that you had. We basically kind of internally carved it out into a separate almost like a digital arm, virtual company, whatever you call it, with its own advisory board, with external advisors and some of us being there with lot of flexibility and freedom in terms of what we do.
We believe that increasingly that business will grow faster than the overall business that we have. In terms of the competition, you're right. It's a very different set of competition. We obviously can't be bleeding and operating at such high combined ratios. At the same time, we have to look at lifecycle value of a customer and see whether over a long lifecycle we create value for our shareholders and accordingly we'll have to take a calibrated call. In the long term, if it means that we have to get a bit more aggressive in that segment, we will have to because we don't want to lose that segment for the long term.
Sure. Understood. Thank you. That's it from my side.
Thanks, Nidhesh.
Thank you. Participants to ask a question, you may press star and one. The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah, good evening sir. Firstly on the health claim, could you guide us as to what kind of exit rate would you have seen in, say, the month of September where possibly the higher claims would have been front ended in the quarter and so a more normalized run rate would be a September month. In case the wave three or something that doesn't turn out will the September kind of loss ratio run rate may be sustainable from a medium-term perspective?
I'll ask Gopal to give some more details, but just from a headline perspective, if you divide this into COVID and non-COVID. COVID, if there's no wave three then whatever we are holding, we should be very comfortable. We have some IBNR still kept for ourselves, if there's no wave three we should be fine. As Gopal explained, it's very difficult to credit whether there will be a wave three or not. We are hopeful based on experiences that we've seen globally based on vaccination. That's to answer your question on the COVID and the run rate has come down significantly, we are reasonably confident of the COVID numbers. At the same time, the non-COVID claims have gone up both in terms of frequency it's gone higher than last year.
It's gone back to the previous year, in fact slightly more elevated because this year second quarter we've seen lot of medical acute cases that I talked about in the opening remarks. The second thing that we've seen is a average claim size increase. Like to like over two years it's almost a 10% compounded growth in average claim size. So that
Could be because of, as I said, more precautions being taken in the hospitals in terms of additional tests, an RTPCR test just to start with, more BP issues, etc , which could also be structural or temporary. That time will tell. Gopal Balachandran, you want to add anything to that?
Yeah, sure. Prayesh, I think in line with what we mentioned earlier, I think if you look at the overall health loss ratio experience for quarter two, that number would be roughly at about 78%. Unlike, let's say, the significant increase in loss ratios that we had seen in quarter one because of understandable reasons of higher COVID cases. Even when you look at this number of 78%, as I said, as a part of one of the responses to the earlier questions, we did talk about, in that sense, a reversal of almost about INR 67 crores. Which, in that sense, I would say is a one-off reversal is what you get to see in quarter two.
Hence, when you look at this loss ratio of 78%, you will have to factor in for this release that you have seen on account of COVID claims. Having said that, I think to answer your point in terms of how could this loss ratio trend up, at least when you look at, let's say maybe the subsequent couple of quarters, as what Bhargav mentioned, clearly we are seeing the number of intimations on non-COVID cases to be on the higher side. Therefore, from a trend line, clearly the 78% loss ratios is something that may not be necessarily sustainable as we look forward, particularly when you look at, let's say, quarter three or quarter four.
Having said that, I think the benefit of the increased pricing that we have effected on the corporate health portfolio, which has been upwards of 15%-20%, and we have been able to hold on to, let's say, more than 90% of those corporate customer accounts. Those benefit of increased pricing will start to play through over the next, I would say, three or four quarters. In the immediate quarters, you could see some increase in the overall health loss ratio numbers. As we kind of look forward maybe over the next three or four quarters, the benefit of increased pricing that we have effected on the portfolio will start to play through.
Yes. That's helpful. From a pricing perspective, is there any scope to increase the pricing on the retail side and how soon can you take it? That is the second question.
Retail, if you remember, we had talked about this. We had actually taken a decent price increase in November and January of this year. November for the new and January for the renewal book. That was based on the data of the past, because in retail health, to get a real price increase, you have to again present an actual picture to the authority and get their buy-in. We have done that. That has actually helped us in terms of the retail book. We will study this number. As we said, we are not sure about this average claims has increased, whether it's a structural or a temporary phenomenon. We will need maybe about a couple of more months to firm up our views on that. Based on that, we will take a call. If it is more temporary in nature, we may not need the pricing.
Okay. My last question is again on the health book. What is your reinsurance strategy for the overall health book segment and I've heard that the pricing on the reinsurance for group health has also increased substantially. Is that true, and how do you plan to counter that?
Prayesh, for us, if you look at particularly on the retail indemnity book, predominantly, we have never operated with a reinsurance structure. I mean, leave aside the 5% obligatory that is mandatory for every risk that you write as a company. On the indemnity book, we kind of pretty much retain the entire 95% of the risk on the net account. Hence, to that extent, any dependency on reinsurance is something that is not there, at least on the indemnity book. On the benefit construct, which kind of pays for those coverages of critical illnesses, that historically, we have always operated through a reinsurance structure, and that's something that we will kind of continue to do so even as we look forward. On the indemnity side, clearly there is no dependence on reinsurance given that we retain 95% of the risk.
Okay.
I think unlike in the life side, as of now, we've not seen any pressure on the reinsurance market.
All right. Thank you. That's really helpful.
Thank you. The next question is from the line of Chetan Thacker from ASK Investment Managers. Please go ahead.
Good evening, sir. There is two questions. One is on the number of claims to which this INR 561 crore of COVID claim pertains to. Second is, what is the difference between COVID and non-COVID average claim?
Chetan, if you look at the number of COVID intimations, what we had said was in quarter one, that number was roughly at about 46,000 and thereabout in terms of number of intimations. If you look at quarter two, the number of COVID claim intimations that we have got is roughly at about 26,000 in number. For the half year, that number will be about 72,290 and thereabout, which corresponds to this number of INR 561 crores.
Sure. Sir, the average claim size of COVID and non-COVID?
To your other point on average claim size on COVID and non-COVID, COVID claims will generally kind of average between about INR 85,000-INR 90,000 thereabout, and non-COVID health claims will be slightly in the range of about INR 60,000-INR 65,000.
That includes the 10% CAGR inflation that we were on the non-COVID side.
That's correct.
Oh.
The only caveat that I will add is that these numbers change depending upon the type of claims that you get. If you have more dengue or malaria cases, it could be lower. If you have elective surgery, it will be higher.
No, it'll have.
It's not advisable to use that number and project.
Oh, sure. Understood. Thank you so much for that, sir. All the best.
Thanks.
Thank you. The next question is from the line of Sanketh Godha from Spark Capital. Please go ahead.
Yeah. Thanks for the opportunity. I have two, three questions. First question is on the IL&FS, DHFL, Reliance Capital exposure of Bharti AXA. The numbers what we see is fully provided or maybe something needs to be provided. I think we had an exposure of INR 85 crores when the deal was announced. Just wanted to understand how the provisioning is there.
The entire amount has been provided for, Sanketh.
Okay, perfect. Second, Gopal, the question was on the tax benefit, which you have said, on accumulated losses. It will be routed through P&L, or it will be adjusted in the network itself whenever you take it?
As I said, given that last year's FY 2021 accounts was already approved by our AGM, so the benefit of tax on the carry forward losses will be a part of the opening network.
Okay, perfect. This INR 561 crores of COVID claims which has been revised down. We are still carrying IBNR or it is actual paid amount and if there is an IBNR, there is a possibility of release there, too.
No, there is always an element of IBNR that we carry, Sanketh. If you see, for example, if one would have to slightly go back to, let's say, quarter two last year, when we were at the thick of COVID cases, clearly the extent of IBNR that we had to carry was far higher because there was always an element of uncertainty on maybe intimations coming through in the subsequent quarters. As things started to kind of subside, maybe in Q3 and more towards Q4, clearly, obviously, the number of COVID cases comes down and correspondingly, obviously, the extent of IBNR that you carry as a part of the book also tends to slightly get moderated. It's pretty much on the same lines.
Even today when we speak, it's not that we have seen the end of, let's say, intimations of claims that pertains to, let's say, loss admission that would have happened in quarter one or even, let's say, for the matter of fact, pertaining to the last year. The extent of cases that could come for the last year could be slightly lower. Clearly, at least so far as quarter one loss admissions are concerned, we continue to see intimations of claims that come through, given the fact that these are largely reimbursement cases. Hence, when we build the number, it's always built in with an element of IBNR anticipating a possibility of claims to come in the subsequent quarters. That's for, let's say, loss admissions till quarter one.
Quarter two, still there are cases that come under the cashless route and there are cases that still come through reimbursement. Therefore, hence, when you look at it on an aggregate basis, we will be required to continue to carry those IBNR numbers.
Yeah. My question was more specific to COVID, whether we are still carrying-
Absolutely. On COVID. Specifically in the context of COVID, on quarter two, we are anticipating certain cases to come through under the reimbursement route in quarter three, and hence to that extent, we have built in an element of IBNR as a part of the COVID claim numbers of INR 561 crores.
Can you confirm that INR 561, how much is IBNR?
I think if you look at the IBNR numbers, that number would be roughly anywhere between about INR 65 crore-INR 70 crore.
INR 65 crore-INR 70 crore. Yeah. One more thing. Just wanted to understand the entire strategy on motor, especially with respect to the structural thing which is happening with electrification of the vehicle. Just wanted to understand if there are completely new OEMs, not the existing OEMs which operate an IC engine. If new OEMs develop or gain market share in electric vehicles, how are we placed in tying up with those OEMs? In general, I wanted to understand your view. Maybe too early to comment, but just wanted to understand whether if most of the vehicles over a period of time become electric, then the overall loss ratios either in OD or TP with respect to electric vehicles, how it will play out compared to IC engine vehicles.
Yeah, Sanketh, again, great question. To answer the first part of your question, obviously, we are clearly focused on whatever can happen in the future and we are very active in the EV segment as well. In the four-wheeler side, there is really two OEMs who are doing anything of consequence and we are partnering with both. The real action is seen in the two-wheeler side.
Yeah.
We are partnering with almost all of them. In fact, the one which has been talked about a lot in terms of very large-scale launch, we were the first company that they tied up with. I'm sure they'll tie up with a couple of others, but we're already there whenever they launch it. This is something that clearly remains a focus for us. We are again building a leadership position there also.
And then on the second-
The second part of the question in terms of the loss ratios, look, there are two parts of the motor vehicle. One is the third party, the first, and the other is the own damage. In own damage, yes, the traditional thought process is the number of moving parts are less, but the motor claims happen because of theft, because of, let's say, in this case, maybe a theft of a battery or a physical damage to the vehicle when you're driving. Time will tell whether the losses are less or not. As of now, we believe that there will continue to be losses and the third party claims anyway will continue to come. There will probably be new types of damages, maybe something through the software or some other liability risk that we'll have to cover in due course.
That we'll discover as we go along.
Thank you. Mr. Godha, may we request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Hitesh Gulati from Haitong. Please go ahead.
Yes, sir. Thank you for giving me an opportunity. I just wanted to check how has been the traction on the non-ICICI Bank channel in the benefit health space. You did mention there is some base effect, but in general, what has been the traction there?
Yeah. We'll just give you the numbers. Just one minute. Gopal will give you the numbers.
Yeah. In general, Hitesh, I think in line with what we have been saying, I think that part of the book has generally been doing well. With now, let's say, disbursements are starting to come back, I think clearly we have started to see increasing trend of growth coming in on account of the non-ICICI Bank-related book. The growth has been quite positive.
Okay. Any range of growth that we can expect? For example, in the mix, we used to talk about last year indemnity being 70% and benefit being 30%. Is that what is broadly continuing this year as well?
I think that will take time. If you look at, I think the extent of benefit mix to reach that kind of proportion in the past, in fact, two third used to be benefits and one third used to be indemnity. That mix underwent a substantial change post what we spoke about of one of our large bank insurance partners deciding to take that call from quarter three last year. Hence the mix of indemnity benefit underwent a substantial change. As I said, I think clearly the expectation is with the levels of disbursement starting to pick up, I think the growth in the non-ICICI Bank distribution, I think clearly is looking at upwards of growth in the range of anywhere upwards of 30%-35% and above. Yes.
Sir, among these, can you highlight which are the major ones that you are focusing on, non-ICICI Bank?
Most of the banks now, in terms of apart from the new partners that have come on board post the merger, we've also been there with quite a few of the other banks like private sector banks like Yes Bank, which is a reasonably new addition. IDFC Bank, again, reasonably new addition. We've added Karur Vysya Bank, again, reasonably a new addition. So there's quite a few partners. Plus, the bigger opportunity that we see also is the HFC, NBFC space, where we used to have a very large share, but post IL&FS, their business came down. Now we are beginning to see them come back very strongly.
Okay. Sir, just one last thing. Motor OD, the last two years combined ratio for the industry has been bad. For us has been above 100. This year, do we think for us at least, because we are moderating growth a little, combined ratios will come closer to 100? We don't have the public disclosure for one year, we only have claim ratio. Asking on the combined ratio, if you could give some trend.
Very difficult, Hitesh, to tell. I think the endeavor is I think we would look at the portfolio on an aggregate basis. Particularly for motor OD lines of businesses, you will find in some periods, possibly the loss development could be better than, let's say, what we would have expected, and therefore you could see some periods of release, in which case the loss ratios will look lower. Generally, the thought process is, as we have articulated, I think we would want to see on an aggregate basis, try and price the portfolio in a manner which will meet our long-term sustainable objectives that we have laid out, which is to try and see if we can drive the business towards the combined ratios, which can be closer to the 100% threshold. I think that's largely the drive.
Having said that, I think in the short term, given the increased competitive intensity that we are seeing in the market, I think there is clearly going to be some levels of stress on the OD loss ratios. Whether it will be sub 100, I think honestly, very difficult to say.
Thank you, sir. That's it from my side.
Thank you. The next question is from the line of Madhukar Ladha from Elara Capital. Please go ahead.
Hi, good evening. Thank you for giving me this opportunity. I have a couple of questions. First, on the OD side, I see that from 1Q to first half, the loss ratio is down from about 68% to 64%. I just want to understand what is driving that. Second, when do these crop contracts that Bharti has end? What sort of time period is left? I think you mentioned three years for two states. What is the balance time period? Third, I just wanted to get the numbers right. INR 602 crore was the COVID claim provisioning in 1Q for Lombard standalone. What would that number be including Bharti? The INR 561 is now Lombard plus Bharti. Is my understanding correct?
Let me answer the last one first, Madhukar. Yes, your understanding is absolutely correct. As I had mentioned, the INR 602 crore is for ICICI Lombard on a standalone basis. Bharti AXA had a number of about INR 26 crores. Both of that put together was about INR 628.
That's for the first half.
That is for the first quarter.
Okay.
That number is 628. Against that, for the half year, that number stands revised to 561.
Got it. Hence the write back.
Which is why I said the overall release in quarter two is about INR 67 crores. That's the response to your question on the health COVID numbers. On the OD loss ratios, I think again, when you look at the numbers, you're looking at ICICI Lombard on a standalone basis, which was at about 68.2%. On a merged basis in quarter two, that number is kind of stands revised , about 62.8%. Again, when you look at these numbers, including Bharti AXA, I think Q1, the numbers on a merged basis for OD would be looking like 65.3%, which is down to 62.8%. If you recollect, Madhukar, what we had kind of spoken about even in quarter one, we have been not necessarily kind of taking the entire benefit of the reduction in motor claim incidences.
That conservatism of reserves is something that is helping us to kind of see the relative reduction in motor OD claims ratios for quarter two.
The last question that you had, Madhukar, in terms of crop, the contracts are there till next year, FY 2023.
Okay. That's it from me. All the best. Thank you.
Thank you. Bye for now.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Raghuvendra Gupta for closing comments.
Thank you all. We started late today, but thank you for joining this call, and look forward to engaging with you during the course of the next few weeks. Thank you.
Thank you.
Thank you. Ladies and gentlemen, on behalf of ICICI Lombard General Insurance Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.