Good evening, ladies and gentlemen. A very warm welcome to ICICI Lombard General Insurance Company Limited Q3 and nine months FY 2023 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, and Mr. Alok Agarwal, Executive Director. 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 involves risk and uncertainties which could cause results 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, and over to you, sir.
Thank you, Faizan. Good evening to each one of you. Thank you for joining the earnings conference call of ICICI Lombard General Insurance Company Limited for Q3 and nine-month 2023. As always, I will give you a brief overview of the industry trends and developments that we have witnessed in the past few months. Post this, our CFO, Mr. Gopal Balachandran, will share the financial performance of the company for the quarter and nine months ended December 31, 2022. During the quarter, the Indian economy was largely driven by domestic consumption, with activity across the industry and services sectors in expansion mode. Credit growth has been showing double-digit growth since April 2020, supported by both retail and wholesale lending. However, the synchronized tightening of policy rates by global central banks has been slowing down global demand and international trade.
Global slowdown has been putting pressure on the current account and can adversely impact domestic growth going forward. For the quarter, as per data published by CM, the new vehicle sales continued to deliver strong growth year-on-year for private car segment, with continued momentum in the underlying insurance demand. The commercial vehicle segment growth was supported by robust growth in end user industries such as infrastructure and e-commerce. While the two-wheeler segment grew on a smaller base, however, in volume terms, the segment continues to remain below pre-pandemic levels. Health insurance continued to drive the overall industry growth. The commercial lines witnessed growth in line with the current market environment. We remain optimistic that the insurance industry will continue to grow given the low penetration, favorable regulatory changes and positive consumer sentiment.
Speaking of the performance, the GI industry delivered a GDPI growth of 16.2% for nine months FY 2023. Excluding crop, the growth was 17.5% for the same period. At the same time, the underwriting performance remained poor, with a combined ratio of the industry at 116.6% as on half year 2023. For motor business, combined ratio for the industry was 123.5% for half year 2023 as compared to 110.4% for half year 2022, as for public disclosures. The authority in the current financial year has introduced various reforms seeking to expand the market and increase the penetration of insurance products towards its mission of Insurance for All by 2047.
During the quarter, the authority mandated KYC requirements, which occurred from January 1, 2023, notified the increase in number of tires from three to nine in case of corporate agents for each category of insurance, notified regulatory sandbox regulations eliminating the time limit to facilitate innovation in products or solutions and to increase the experimental period up to 36 months, constituted working committee to put in place effective regulatory framework post de-notification of existing tariff wordings under fire engineering and motor OD. Further exposure drafts has been issued for long-term motor insurance products covering motor OD and motor TD and long-term fire insurance products. The authorities also issued registration of insurance company regulations, simplifying process of registration for insurance companies and to promote ease of doing business.
We believe that these changes will be disruptive in the short term, but will have a positive effect on the insurance penetration over the long term. Moving to business impact for us during the quarter, the company grew by 16.9% as compared to the industry growth of 18.1%. Excluding crop, the company grew by 17.1%. Coming to the growth for key segments during the quarter, in motor OD in motor the growth remained neutral at 4.7%. The competitive intensity continued on the motor OD side, especially on the private car segment. We continue to focus on profitable sub-segments using historical granular data and rebalance our portfolio, resulting in CV mix at 22.2% for nine months of FY 20 23.
Similar to the previous year, health segment continued to be the fastest growing segment for the industry. During the quarter, we grew at 47.9%, which was significantly higher than the industry growth of 24.9%. As a result of our continued investment in health and retail health distribution, we have outgrown the industry and standalone players with a growth of 24.2%. This was driven by business sourced through retail health agency vertical, which grew at 40.1%. I would also like to share that our one-stop solution for all insurance and wellness needs, IL TakeCare app, has surpassed 3.7 million user downloads in date. The incremental download for the quarter was 0.9 million.
IL TakeCare app contributed INR 3,347.9 million to the GDPI of Q3 FY 2023. Our bank insurance and key relationship groups grew at 39.3% this quarter. Within this, ICICI Bank distribution grew by 30.9% and non-ICICI Bank distribution grew by 44.2%. Post pandemic, the recovery in credit growth, along with increase in wallet share and distribution partners acquired through the demerger, has been the key growth drivers. Our business sourced through our digital one team grew by 28.3%. Overall, our digital focus has enabled us to increase our digital revenues to INR 2.62 billion, which accounts for 4.8% of our overall GDPA for this quarter. This excludes revenues from IL TakeCare app mentioned earlier.
As far as the commercial lines are concerned, we experienced robust growth, driven by growth of 35.2% in the SME segment. We remain on track and are focused on growth levers such as innovation, digital advancements, new products, strengthening distribution engine, rationalizing costs, while scaling up our preferred lines of business. I will now request Gopal to take you through the financial numbers for the recently concluded quarter.
Thanks, Bhargav. Good evening to each one of you. I will now give you a brief overview on the financial performance of the company for quarter three and nine months of FY 2023. We have uploaded the results presentation on our website. You can access it as we walk you through the performance numbers. The GDPA of the company was INR 160.48 billion in nine months FY 2023, as against INR 133.11 billion in nine months FY 2022, a growth of 20.6%, which was higher than the industry growth of 16.2%. Excluding crop, GDPA growth of the company was at 19.9%, which was higher than the industry growth of 17.5% in nine months FY 2023.
GDPA was at INR 54.93 billion in quarter three FY 20 22, as against INR 46.99 billion in quarter three FY 2022, a growth of 16.9% as against industry growth of 18.1%. Excluding crop, GDPA growth of the company was at 17.1%, which was higher than the industry growth of 16.6% in quarter three FY 20 23. Our GDPA growth was primarily driven by growth in the preferred segments. The overall GDPA of our property and casualty segment grew by 17.8% at INR 46.35 billion in nine months FY 20 23, as against INR 39.34 billion in nine months FY 20 22.
On the retail side of the business, GDPA of the motor segment was at rupees sixty-four billion in nine months FY 2023 , as against fifty-eight point one five billion in nine months FY 2022 , registering a growth of ten point one percent. Our agents, including point of sale or POS count was at one lakh six thousand one one nine as on December thirty-one, twenty twenty-two, up from one lakh six hundred and thirty-six as on September thirty, two thousand twenty-two. The advance premium was rupees thirty-two point seven nine billion as at December thirty-one, twenty-two, as against rupees thirty-four point three four billion as at September thirty, twenty-two. Resultantly, combined ratio was hundred and four point six percent in nine months FY 2023, as against hundred and eleven percent in nine months FY 2022.
Combined ratio was 104.4% in quarter three FY 20 23 as against 104.5% in quarter three FY 20 22. Our investment assets rose to INR 414.51 billion as at December 31, 2022, up from INR 400.96 billion as at September 30, 2022. Our investment leverage net of borrowings was 4.16 times as at December 31, 2022, as against 4.08 times as at September 30, 2022. Investment income was at INR 21.6 billion in nine months FY 20 23, as against INR 22.95 billion in nine months FY 2022. On a quarterly basis, investment income increased to INR 7.66 billion in quarter three FY 20 23, as against INR 6.9 billion in quarter three FY 20 22.
Our capital gains net of impairment on equity investment assets stood at INR 2.94 billion in nine months FY 2023, as compared to INR 6.01 billion in nine months FY 2022. Capital gains in quarter three FY 2023 was at INR 1.52 billion as compared to INR 1.31 billion in quarter three FY 2022. Our profit before tax grew by 21% at INR 15.4 billion in nine months FY 2023, as against INR 12.73 billion in nine months of the previous year. Whereas profit before tax grew by 10.5% at INR 4.65 billion in quarter three FY 2023, as against INR 4.21 billion in quarter three FY 2022.
Consequently, profit after tax grew by 34.8% at INR 12.92 billion in nine months FY 2023, as against INR 9.59 billion nine months FY 2022. Profit after tax grew by 11% at INR 3.53 billion in Q3 FY 2023 from INR 3.18 billion in Q3 FY 2022. PAT includes reversal of tax provision of INR 1.28 billion in Q2 FY 2023. Excluding this, growth in PAT was 21.4% for nine months FY 2023. Return on average equity was 18.1% in nine months FY 2023, as against 15.1% in nine months FY 2022.
The return on average equity for Q3 FY 2023 was at 14.3%, as against 14.6% in Q3 FY 2022. solvency ratio was at 2.45 times as of December 31, 2022, as against 2.47 times as of September 30, 2022, continued to be higher than the regulatory minimum of 1.5 times. As I conclude, I would like to reiterate we continue to stay focused on driving profitable growth, sustainable value creation, and safeguarding interest of policyholders at all times. I would like to thank you for attending this earnings call, and we will be happy to take any questions that you may have. Thank you.
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 the touchtone telephone. If you wish to withdraw 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. The first question is from the line of Swarnabh Mukherjee from B&K Securities. Please go ahead.
Good evening, sir. Thank you for the opportunity. Congrats for the numbers. Your retail health segment numbers seems to be coming out very nicely. Just wanted to understand on that segment in a little bit more detail you have shared that the agency segment in retail health has grown by 40%.
Sorry to interrupt you, Mr. Mukherjee. The audio is not clear from your line. Please use the headset mode.
Yeah. Just give me a minute. Yeah. Is this better?
Yes, it's better. Yes.
Okay. Okay. On the retail health agency side, if you could give some color on what would be its share in the mix and how do you anticipate this to be growing going ahead, that would be very helpful because that growth of 40% must have come on a slightly smaller base. Will that growth rate sustain or how will it pan out? That is the first question that I have. Second is on the Motor TP loss ratio. This quarter the number is very, very strong. How should we think about that? Particularly that, you know this quarter I am seeing that there has been some amount of change in the GDPI mix between two-wheeler and CV. Is that also a quarterly kind of a thing which would reverse?
I thought that you wanted to keep CV at around 24%-25%. Broadly, yeah, these are my questions.
Maybe the specifics of the TP loss ratio I'll ask Gopal to answer. To answer your first question on the retail health business, as we've been saying, when you invest at the scale that we are doing, you know, relative to our current size, it takes time for people to come in, stabilize, you know, hire agents, for the agents to become active and then productive. It takes some time. We've been saying it will start building up, maybe, you know, 3 to 6 months from the time that we started talking about it. This quarter is the first quarter where we are beginning to see, you know, real impact of the investment that we are making. This is still, you know, early days.
We are very confident that this growth number for the retail health agency channel will sustain going ahead. Overall health growth will be driven by multiple other factors. You'll have to look at what happens on the bank insurance share side because if you look at our group health number, that's also growing quite fast compared to the industry. That's driven by two reasons. One, the bank insurance channels that we talked about, you know, both in terms of what came through the acquisition and also in terms of our existing partners, they are growing really well. ICICI Bank has been growing well in this quarter. Those other channels are largely driven by slight share of wallet increase while largely driven by credit growth. That will be the dynamic for that segment of the group health business.
Commercial co-corporate group, which is a, you know, B2B2E, as in for employees, GMC or GSA, whatever you call it, that segment is largely driven by pricing. Right now we are increasing pricing. We are still winning accounts because I think the market is finally stabilizing in terms of pricing. That growth will come through as long as the pricing is to our satisfaction. That's to give you an overall perspective on health, but specific if your question is on retail health agency growth, can we sustain 40%? We believe we can.
Okay. Okay, sir. Any color on the mix, how much would be retail health agency now in your overall retail health? Some ballpark number would be fine, sir.
I think relatively, Swarnab, I think, it's kind of doing well. If you look at our overall retail health indemnity, that number would have for the quarter would have kind of grown by almost about 25%-26%. Within that I think the agency vertical has kind of grown at about 40%. Hence I think, as Vargo mentioned, one of the other things that we have been talking to the market is to try and sustain whether on retail health indemnity can we sustain a growth numbers which is faster than not just the industry but even the standalone health companies. At least for the last four months in September onwards, I think we have been able to kind of demonstrate that. I think the key will be to sustain it as we kind of look forward.
Clearly we are kind of optimistic and we are continuing to make those investments in the retail health distribution franchise. To your second point on the TP loss ratios and let's say relative and corresponding to that let's say the CV mix. Insofar as the thought process is concerned, at least on the selection of business mix within motor, there is no change in thought process. Which is to say that while the market continues to remain competitive, at least on certain segments of private car for sure, and therefore we continue to take a calibrated position. Wherever we see opportunities, whether it's on two-wheeler or CV, I think obviously we have been writing those profitable segments as what we indicated as a part of our opening remarks.
In the process is what we had indicated that possibly our mix of commercial vehicles could stay range bound within, let's say around that 24%-25% threshold. In a quarter that number going down to let's say 22% mix, I think obviously it's a function of what kind of business mix that one is able to source in a particular quarter. Given the fact that Q3 generally is a seasonal quarter when it comes to, let's say, writing of risks between private car, two-wheelers and commercial vehicles.
Insofar as thought process is concerned, I think so far as the year-end mix is concerned, we should get to see the CV around that range of 23%-24% kind of levels is what one would say.
This is a quarter where there's not a festive demand for private car and two-wheelers, so those numbers get elevated in this quarter. That's the reason why the mix is relatively smaller for CV, nothing else.
To your other point on the TP loss ratios, again, that's what we keep saying. I mean, you have to obviously look at loss ratios again, not between quarters. Obviously, you have to look at it more over longer periods. Ideally at a year-to-date, year-end basis is the best way to kind of look at the TP loss ratios. Because in some quarters you'll obviously see the effect of some of the, some of the, let's say, positions that we'd have taken from a reserving perspective, that we would start to see it getting played out insofar as actual loss development experiences are concerned. In sense, in that particular quarter, you may possibly see some kind of a release of reserves that would have kind of been given effect to.
Corresponding to that is what you get to see the outcome insofar as the TP loss ratio numbers are concerned. Otherwise, insofar as the reserving philosophy is concerned, I don't think there is any change in the reserving philosophy. It kind of pretty much remains the same. Hence, you should look at more the TP loss ratios over not just on a quarter-on-quarter basis, but look at it more over longer periods of development.
Sure, sir. Got it. Very helpful. Can I squeeze in one quick question, on the expense ratio side? If you could throw some light on how to think about it in terms of maybe CapEx and OpEx and, you know, think about it going ahead, say, for the next three, four quarters, how it will pan out? Because it continues to remain elevated close to around, 30% mark.
This is what we had indicated, Sonal. I think that's what we have been kind of talking through. What essentially happens is, particularly when you are continuing with your investments in various areas of opportunities that we have spoken about in terms of long-term growth potential. Whether it is with respect to the opportunity that we see on the digital side or even for the matter of fact, the continued investment that we are making on building the retail health distribution franchise. Where it's not just a one-off addition to manpower that we did last year. That's a continuing one even as we speak in the current period as well. All of this is something as what we have been explaining in our earlier calls will entail an up-fronting of expenses.
The benefit of revenues is obviously something that will get played out over a period of time. Now, as I mentioned in response to the earlier one, clearly we are seeing early signs of some of those investments getting played out in terms of our growth percentages reflecting those investments. Hence, given the fact that this is a continuing one, we will obviously get to see the expense ratio stay at the current levels at where we are kind of largely operating at. Having said that, we will obviously monitor and come back to the market and give an update in terms of how those investments are playing out in each of the areas. That's something that will be a continuing one. Obviously revenue will catch up.
Your other point on, let's say some of the investments between CapEx and OpEx, I think that's something that we is again, an ongoing one. As we have been talking through, we do undertake various transformational projects which will keep the organization future ready, in terms of our ability to deliver products and services to the market. Hence to that extent you will obviously see continuing investments, whether it is on CapEx or whether it is for the matter of fact any operating expenses. The only aspect that I will add is, from Q4 onwards, in line with what we have been again talking about, we have been able to successfully complete the technology migration. Which we had kind of indicated that we will complete it by quarter three of this year. That's pretty much kind of done.
Hence to that extent the benefit of whatever amount of synergies that we were expected to realize out of those technology expense is something that we will start to see from Q4 onwards.
Just one more comment to add to Gopal, what Gopal said. As we shared with you last year, we moved our entire technology stack to the cloud, right? All our applications are on cloud. That's a call that we've taken not from a CapEx versus OpEx perspective, because all of that, you know, part of the CapEx spend in future will be converted into OpEx. That's a call that we've taken in the interest of business from a longer term perspective. It gives us more agility, more, you know, elasticity, so, you know, more scalability.
All of that factors go in our decision from a longer term perspective rather than looking at whether we want to keep that expense on-prem and kind of amortize cost over a period and, you know, look at CapEx versus OpEx to manage your financials.
Thank you.
Mr. Mukherjee, may we request that you return to the question queue for follow-up questions. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Avinash from Emkay Global Financial Services. Please go ahead.
Yeah. Hi. Good evening. A couple of questions, both looking at minus data just to sort of clear out the noise of quarter-to-quarter. Firstly, I mean, now, the combined ratio at around, say, 104%-105%, that is where you have indicated. Now, because of this, you know, investment side volatility, and if I were to remove the tax refund, this 104%-105% combined ratio is leading to a more of a 16% kind of ROE. Is that where, I mean, you are comfortable? I mean, if the investment yields continue to be at this level, providing this combined ratio means that the ROE is at 16 odd % level. Are you comfortable with this thing?
You can argue that vis-a-vis where industry is or sector is, you are much better, and that I admit. Of course, you don't have the advantage of not being listed. You are a listed company, of course you are monitored on all the return parameters. That question on sort of, your, you know, balancing your combined ratio growth and profitability. That's number one. Number two, again, if I look at motor as a combined portfolio, you know, what I see, there is like on a year-on-year basis, your loss ratio are more or less fine. That's 100 basis point movement.
If I just go and, sort of, delve down into underwriting results, it suggests that, I mean, overall, there is a kind of a material increase on the OpEx side in motor. If you can just help us understand what is the OpEx that is driving perhaps that, you know, higher underwriting losses for on a nine months basis on overall motor portfolio. These are my two questions. Thank you.
Avinash, let me take the first one, and I'll ask Gopal to give you a breakdown of, you know, where that is coming from in terms of motor underwriting. On the first, as we've articulated, you know, since the time that we perpetuated the transaction, we had said that there were certain synergy benefits that we were, we had, assumed, but in reality we are seeing higher synergy benefits. We felt that it was appropriate from a longer term perspective to invest that for growth. That is what we did. I mean, it was really a capital allocation call of looking at the longer term versus some short-term efficiency.
We also said that in the first couple of years, maybe the combined ratio will be elevated, but our endeavor will always be to reduce it and bring it closer to maybe 102 in a couple of years. To that extent, our view or our outlook hasn't changed. If that happens, obviously our ROE, as we've indicated in the past, will be in the high teens. Now you can calculate the ROE for yourself. It will probably be higher than 16% if it, if we achieve the objective that we set for ourselves. It is also a fact that, you know, during this period, we probably did not anticipate the pricing aggression on the motor OD side to the extent that we've experienced in the last 6 months.
That has had, you know, some impact on us this year. What we are seeing is that, finally we are seeing some calibration, some moderation. We are seeing some early signs of improvement. If that happens, you know, that will help us in achieving the objective that we've talked about. Hopefully, you know, just to explain your answer your question, it is not about being comfortable at where we are. This is really a short-term journey to achieve something which is more value creating for the longer term. Objective in the longer term is continues to be, improving combined and improving ROEs.
To your second point on the motor underwriting experience, Avinash, I think it's a function of two things. One is, obviously you will have to look at it in the context of what kind of growth are we exhibiting. Relative to, let's say, the market, as you would have seen clearly on motor in the aggregate, we have kind of underperformed, which is a conscious call that we're kind of taking in order to kind of stay focused on risk selecting portfolios, which is from a profitability perspective. To that extent, obviously there is a denominator effect that tends to play out when it comes to the expense ratios.
Two, given the fact that at the end of the day there is obviously a set of expenses that you can identify with a particular segment, but equally there are large expenses which are of, let's say, of a fixed nature, which typically gets allocated between various product lines. Therefore, to that extent, that will also be a function of, let's say, what outcome that you see insofar as the overall expense ratios for a particular segment is concerned. Which is why, instead of maybe specifically looking at individual lines of businesses from an expense ratio standpoint, it is rather better to look at the overall expense ratios for the company as a whole.
If you look at it at least on a whether you look at it on a nine-month to nine-month basis, or with let's say even for the matter of fact, when you look at those numbers on a quarter-on-quarter basis, the expense ratios have kind of largely stayed around the threshold of around 29.5% to around 30% thereabout. Hence as growth gets revised, particularly in the context of motor and the fact as we have kind of indicated the market at this point of time is obviously competitive, which is why as a part of the opening remarks we also specifically put out for motor the industry combined ratios continue to stay elevated at almost about 124%.
Hence once we start to see, as what Bardha also mentioned, some bit of easing is what we have seen. Once we start seeing the cycle completely turning back, we will be obviously able to get the growth back and therefore to that extent you will also see maybe the expense ratios getting allocated to that segment reflecting better numbers.
Thank you. Mr. Avinash, may we request that you return to the question queue for follow-up questions. The next question is from the line of Shreya Shivani from CLSA. Please go ahead.
Thank you. I have three questions. My first question is on the yield of investment. Sorry, the realized investment yield. That came in at about 1.88 for this quarter. If we sort of plot your yield versus the 5-year G-Sec yield performance, this, your yields have sort of ranged between 1.7% to 2% on quarterly basis.
Since even during FY 2021 when the G-Sec yields were at its lowest in the recent past, right? I'm trying to understand where are we missing on the yields bit, if you can help me understand that, because my main question is that we were expecting this to be higher than what it has turned out to be. First is on that. Second is on the crop book. For the nine-month period, the loss ratio sort of inched up to 90%. Now, last time you had mentioned that you've written a big chunk of this business with Maharashtra government, which has some capped loss program at 80, 100 and 10 or something like that.
How is the performance of that book and whether this inching up of the loss ratio is from the Bharti AXA book? Just trying to understand where the higher loss ratio is coming from. Third is on retail health. The last, you had mentioned that you guys have hired 1,000 retail health sales managers and each one of them will go out and onboard more agents, et cetera. If you can give us an update on whether all those 1,000 onboarding is finished. Are we hiring more sales manager and, how is that process going? Thank you.
Shreya, let me, you know, respond in the same sequence. If you look at the realized yield, it's an annualized number. On an annualized basis, that reflects roughly about 7.52%, which given the current interest regime is, we would think is pretty good, in terms of, you know, realized yield on the portfolio. On the second one, in terms of, on the crop. Our entire crop is, crop book is Bharti AXA book, there is no Bharti AXA book in our book. Everything that we have is the Bharti AXA book. There is no change in terms of what we are seeing with the book performance. In Q2, which is last quarter, based on actual realization of the experience, we had some releases.
The approach that you know we do is that till we get the complete results, we tend to reserve conservatively and then once we actually get the final data, then we release, if at all there is a scope for release, we release that. This quarter we've reserved as a, as a practice in a conservative manner. Our belief is on the underlying, or at least what we get to see, the kharif, you know, the rabi losses are well within our comfort level and kharif has been well within our comfort level. Rabi crop production also we think should be good given the bountiful rainfall that we've had. Crop looks comfortable for us at this point in time, but again, you know, these are, you know, uncertain businesses. We'll see what happens in rabi.
The Rabi proportion of our business is also very small, so we don't think it'll have a material impact even if it goes against our anticipated, you know, losses. On the last one, Gopal, you want to take?
On the, yeah. On the retail health, Shreya, just to answer, yes, we have kind of pretty much onboarded all the 1,000 retail health agency managers that we've kind of spoken of to be hired. That's pretty much kind of done. As I said, this is a continuing one. It's not that it's a one-off investment that we wanted to do in, that we spoke of it since quarter two of last year. That's a continuing one. As I had indicated, obviously early signs of it getting played out is what I spoke about. Since September onwards, we are getting to see month-on-month traction in us clearly exhibiting outperformance relative to even the standalone health companies.
I think the key will be for us to kind of sustain this momentum as we kind of build up this distribution. End of the day, as we have kind of also indicated in the past, the market share of retail health for us is still at sub 3%. It's about 2.9%-3% in that range. There is clearly an opportunity for us to kind of stay invested and possibly try and increase market share on this end.
Sure. Just one clarification. The Maharashtra crop book was also a part of the Bharti book or I thought that was a new contract that you guys have entered into?
Yeah, in that sense, yes. This is basically, Bharti AXA had a Maharashtra business. We've kind of renewed it this year based on the 810 model. You're right. The crop business came with Bharti AXA.
Thank you. Ms. Shivani, may we request that you return to the question queue for follow-up questions. Next question is from the line of Hitesh Gulati from Haitong. Please go ahead.
Thank you for giving me an opportunity. Firstly, I wanted to understand on agency in retail health, how many agents would have been added? For instance, if we have 1,000 new sales force, how many agents would be active in health? I think in the past we had about 6,000 agents selling health. What would that number be right now?
We'll just give you a number, Hitesh. We'll come back to you with a number.
Sure, sir. sir, the second question I had was, so these benefit policies, I assume other than the ICICI Bank, the other partnerships that we have, we are doing attachment products with them, and these policies generally tend to be quite profitable. Is that the scenario and should we expect that combined ratio in this segment will be good with all these distribution partnerships that we are working on?
No, absolutely, Hitesh. I think, if you recollect, while the mix currently on health for us is skewed more in terms of indemnity as compared to benefit. If you look at historically, the mix was actually the opposite, where we had a relatively large proportion of health premiums contributed more by the benefit product. Relatively at that point of time, we were building up the indemnity franchise. For the last couple of years on the benefit segment because of market constraints in terms of credit disposals being significantly lower and also what we have explained in terms of the decision that one of our bank distribution partner had taken. All of that is behind us, which is why now as we speak, the credit dispersals is back and this segment is obviously a profitable one.
Yes, you are right. It's something that will kind of contribute to our underwriting outcomes. In general, the product segment is positive.
Sure, sir. Just one last thing, sir. Investment income on a QQ basis is lower, but I think on capital gains it's not materially different. Can you just guide on that, sir?
There is no specific consideration behind that, Hitesh, because I think between quarters, insofar as capital gain numbers are concerned, that could also kind of vary between periods to periods. Otherwise it is pure as we have always indicated, in general, when you look at the breakup of our overall investment income, roughly about 3/4 of that investment income tends to be through accruals and roughly about 1/4 happens to capital gains. It's quite possible that in some quarter you have a capital gain number which is slightly higher in mix, but otherwise between quarters there is no specific change in the underlying investment thought process. In general, I think obviously we are seizing this opportunity of higher interest rates, which obviously kind of augurs well insofar as higher accruals are concerned.
Hence, to that extent, is what you get to see, the income between quarter-to-quarter more as an outcome as compared to anything that is specifically contributing to it.
Thank you, Mr. Gulati. May we request that you return to the question queue for follow-up questions. The next question is from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah, hi, sir. Just a couple of questions from my side. Firstly, Gopal, if you could mention, how do we think about the unexpired risk reserve for the full year of FY 2023 now that we have gone into nine months? I understand that it depends on what kind of growth we see in the remainder in fourth quarter. Assuming a ballpark growth of around what we've seen, around 15%, do we see, you know, the NEP growth to be better going ahead? That is one. Secondly, sorry, the motor segment, I would like your view as to when do we really see growth coming strongly in, for you guys, you know?
What would be the point or what are the factors that can really drive this growth, you know, like in line with the industry or even better than the industry? In the past, you've been alluding to the fact that past few quarters that the motor OD pricing has become more or less, you know, is getting some cognizance and is getting better, but we don't see that in the numbers yet. Any thought, further thoughts there, that would be helpful?
Yes. Prayesh Jain, on the first one, honestly what you said is what it is. When it comes to unexpired risk reserve, it's purely a function of what kind of business mix that you write, and the earnings is purely a function of the contract term for which let's say the policies are issued. Hence, to that extent, like for example, if a large part of our policies are predominantly of a 1-year duration, hence to that extent the earnings will typically kind of get earned over the contract period.
Hence to that extent, given the fact that for example this particular year we have seen the growth being relatively better than what we have seen in the past 2 periods, which is why you get to see in whichever period you are writing the higher quantum of business, to that extent for the period at which you're ending up reporting numbers, you end up carrying a higher amount of unexpired risk reserve, which will obviously get released in the future periods.
Mm-hmm.
A better outcome will be to look at more, because corresponding to that you would also have, let's say, the loss experience getting paid out as well.
Yeah.
Rather it is better to look at more either the loss ratio numbers for the company as a whole or more importantly, I think combined ratios will be far more a better reflection rather than just looking at NEP on a standalone basis because it has got multiple factors, as you rightly mentioned, in terms of mix of business, at what point of time are you kind of writing those risks and so on and so forth. Hence, a better way to kind of look at is more let's say the loss ratios and the combined ratios. That I think corresponds to the first one.
To your second point on when do we see let's say us changing stance, I think obviously we have, this is not the first time that we have been kind of taking a calibrated call with respect to going a little slow in writing certain segments of business. That's the reason why, just to kind of repeat what we had put out as a part of the introductory, opening remarks, is what you get to see as an outcome for the overall market with respect to the motor combined ratios.
Clearly you see, this is public information, which is why, I mean the industry as a whole is operating at a combined of 124%.
Mm-hmm.
Hence, obviously does not make viable sense for us to kind of significantly go after that segment, which is going to exhibit a very adverse underwriting outcome. That's the reason why we have been taking calibrated calls in the segments where we think the competitive intensity is far more elevated. Our sense is given that now we are seeing maybe continued quarters of combined ratio staying elevated for the market, we don't think this can something that can continue to sustain for maybe a further longer period of time. Already we are seeing, which is what Bhargav also mentioned, we are clearly seeing signs of some of the players in the market starting to become far more
Rational when it comes to underwriting this particular segment. Our sense is we will obviously watch out for the development over the next couple of quarters and then but at least insofar as our investment is concerned, I think we are pretty much staying on course in the sense that we are kind of expanding investments in expanding distribution even on the motor side, whether it comes to working with OEM in terms of the number of dealers whom we have an access to or for the matter of fact, even with the number of agents that we are working with, which is what you would have seen for the company as a whole. Again, the aggregate number of agency count has kind of gone up. We are continuing to make those investments in writing those businesses.
As and when we see the opportunity turn up, we are kind of better placed to write this particular segment of business.
Thank you. Mr. Jain, may I request that you return to the question queue for follow-up questions. The next question is from the line of Sanketh Godha from Spark Capital. Please go ahead.
Thank you for the opportunity. Can you give me the loss ratio breakdown for retail health, benefit-based health and group health and PA if possible? Just to understand how it is panning out, given the large part of the business will be new in nature. Just wanted to understand whether it is substantially below 60% or 65%, especially in case of retail indemnity.
Yeah, Sanketh, I think I'm just giving you right now quarter three numbers. quarter three loss ratios for the corporate health book, which is a GHI portfolio, that number is 98.9%. insofar as the retail indemnity book is concerned, that number is set up inside about 68%.
Okay. Okay. But at 68, I'm just really still asking because with that 68, which means it might be a developing ROE product. Which means you are changing a product which will drag down the entire ROE of the company. I just wanted to understand if 68 is like a sustainable number what you look to the kind of growth you are delivering or it could come down in your view.
Sanketh, there are a couple of factors. One is the mix of new versus old. Our new mix is increasing as we are, you know, the fresh business is increasing. That NEP of that book hasn't flown in as much. As that happens, the loss ratio is expected to come down a bit. Second is we are also looking at repricing the reinsurance, sorry, the renewal book, which is something that we will do in this quarter itself. Overall, we expect the loss ratio to further come down going ahead.
Got it. In health, it has been a phenomenal year for us, this year, at least for nine months. Out of the entire health, if I look the PA, benefit-based health and group health are driven by some kind of factors which are not repeatable in nature, like credit growth being very strong and group health pricing being better. I just wanted to check whether the group health pricing you have already seen a correction and if on a higher base, the credit growth slows down, then the highly profitable products like benefit base and PA might contribute lower in the next year. Just wanted to know, retail indemnity as you highlighted, might do well because of the investments you have made.
The kind of growth what you have reported health and PA 40+, in overall for nine months, what likely number you expect it to moderate in 2024?
Sanketh if you go back to our, you know, before let's say the NBFC crisis, we used to have roughly 75% of our business in the health coming from the bancassurance you know, the retail benefit structure. This year it looks like suddenly it's increased because of the low base of the last two years. Going ahead, do we expect credit growth to, I mean particularly for let's say, retail product, you know, retail credit growth to come down significantly? You know, that's a call. I mean, if it comes down significantly for many, some other, you know, macroeconomic reasons, of course it will come down. In terms of what we believe that, you know, we are one gaining market share in most of the bancassurance partners that we are working with.
We are looking at opening up other streams of businesses from each one of these partners, which we believe there's an opportunity. We remain reasonably confident of growing the bancassurance business. May not be at the same rate given that we have a very high growth this year. On that base maybe it will not be at the same rate of growth, we remain confident of growing that channel. The second question that you had in terms of group health pricing. Look, at the end of the day, of course it is driven by pricing and someone could come in and, you know, get very aggressive. That is a possibility.
If you go back to the reason why the group health pricing was the level where it was, it was largely a few large, you know, companies who were doing it in an aggressive level. Most of them today have some solvency challenges, and we really don't anticipate them coming back and doing the same thing, you know, right now. There is still a capital constraint there. We believe that the market for group health structurally is getting better. We believe that this growth should sustain for some more time. In terms of price increase, we took a price increase as we discussed last year. We had talked about post-COVID we had taken 15%-20% price increase.
On that base, we are able to get further price increases, not at the same pace, but we are still able to get small price increases and hold on to the business. The other thing that is happening in health is that in Q2 we had talked about the fact that the claims frequency had got elevated. We are seeing that rationalize and kind of come down to normal levels. From all of those perspectives we remain reasonably confident about the health business as of now.
Thank you, Mr. Godha. May we request that you return to the question queue for follow-up questions. Ladies and gentlemen, please limit your questions to one per participant. Should you have a follow-up question, we would request you to rejoin the question queue. The next question is from the line of Nidhesh from Investec. Please go ahead.
Thanks for the opportunity, sir. In your opening comments, you mentioned that there has been multiple regulatory drafts and proposed changes, and that could have a disruptive impact on the company on the sector in the short term. Can you elaborate what sort of disruption you are expecting because of those changes?
Look, any, you know, when there are changes, there will be some, you know, consequential, impact on the ground, right? What we are seeing is a plethora of changes happening at the same time. It's just that, you know, let's look at a couple of things that could create some amount of disruption. One is, you know, fresh licensing. It may not come in by next year, but if that comes, then there's a lot more capital coming into the sector that could create some, competitive pressure. You know, that's a possibility. I'm not saying it'll happen, but these are things that you know, you need to be conscious of and aware of. Secondly, for example, commercial lines, there is a talk of complete de-tariffication.
If that happens, there could be a round of competitive pressure. You know, we don't believe that it will have dramatic changes because if you look at the overall combined ratio of the sector and some of the players who are very aggressive last time when this happened, they may not have the capability or the capital to continue with that approach this time. Still there is always a probability of some amount of disruption. That's a point that I want to make. I think the larger point is that these are all, in our opinion, very positive changes from a longer term perspective, and we believe should help discipline underwriters, you know, players like us who have capital, brand and presence across multiple lines of business at scale. I think it should benefit us.
You know, we just wanted to kind of tell you that there is also a probability of some amount of, you know, destabilization given the amount of changes that are happening. That's always a possibility.
Sure. There's a follow-up on that. There is also talk of deregulating the commission rate across all lines of business while Expenses of Management will be capped at a particular level. Do you see as a multi-line insurance company, we will have advantage in the retail health insurance segment because of that regulation?
I think the advantage for us is if you look at the proposed Expenses of Management limit that is being talked about, we are within that number as a company. We are comfortably placed. Some of the companies which have been aggressively growing, spending a lot of money, they may have to calibrate. To that extent, yes, there could be an advantage.
Thank you. We'll take the next question from the line of Madhukar Ladha from Nuvama Wealth Management. Please go ahead.
Hi, good evening. Most of my questions have been answered. Just a couple of them. One on the Motor TP segment. We're seeing a lot of improvement in the loss ratio. I'm not sure whether you've clarified this earlier or not. Has there been some improvement taken from, you know, the six months restriction on the period of reporting any accident? What have been the developments on that? You know, if you could give us some guidance in terms of how the courts are ruling and whether there can be any benefit flowing through more and whether we have accounted for any sort of reserve releases because of that?
Second, on the group others business, which is excluding the employed employee business, what is the source of that? I believe you're not doing that business more with ICICI Bank. What are our other partners? You know, broadly, if you can help us with, you know, banks, NBFC, some sort of classification and against what products are these attachments?
On the first one, Madhukar, the first answer is no. We have not taken benefits of the shortening of the tail as yet. What we've seen happen is there's been a recent Madras High Court judgment, which is reaffirming this point that you have to, you know, file claims within six months. Now we have case law supporting the change in the regulation or law of the land, which is a positive. What we are beginning to see is some signs. For first six, seven months, we didn't see a big change in terms of frequency or, you know, acceleration of claims. As we speak, early signs of some acceleration happening in some states.
We will have to study this for some more time to tell you that it's happening at a national level. Early signs are positive. We will have to, if that happens, then it could be a positive for the sector. As of now, we've not taken any benefit of that in our numbers because it's too early to take a benefit. In terms of your second question, you know, this was always our strength, working with multiple bank issued companies, NBFCs, HFCs. We work with, you know, digital, lending companies. We work with a whole host of, entities which, provide retail credit with whom we sell some of these-
Group other category of health products, which is what has come by, which is the point that you were making that last couple of years that was low that and we had a relatively higher share of that business. To that extent it was negative for us. That has now come back this year and that's where this is going from. ICICI Bank business on that account what they last year they stopped selling. They haven't restarted that. What they've done is, they have started selling indemnity products, retail indemnity products, both through their branches as also as attachments for their, you know, mortgage customers. That's why the number from the bank side is also positive.
If you look at the percentages we gave that in the opening remarks, ICICI Bank distribution grew by about 30.9%. Non ICICI Bank distribution, which includes multiple other banks, so most of the large private sector banks we are their partners. Most of the large, NBFCs and HFCs, we are their partners. That segment, that is non ICICI Bank distribution grew at 44.2%.
Thank you. We'll take the next question from the line of Rishi Jhunjhunwala from IIFL Institutional Equities. Please go ahead.
Yeah, thanks for the opportunity. Can you hear me please clearly?
Yes, Rishi.
Yeah. Sir, I just, you know, wanted some, you know, color on, you know, how do we look at the expense ratio trajectory, right? There are 2 parts to it. Over the past 15 months since the acquisition of Bharti AXA, there was one, you know, trajectory which suggested that, you know, the gap between the expense ratios between Bharti AXA and us should converge over, you know, 2 and a half year period, and that is something that will drive the overall combined ratio down. On the other hand, you know, we had intended to basically invest in retail and retail health and digital in order to, you know, gain some of the shares, you know, market share there.
Now, if I look at, you know, both these aspects, you know, it would be great to just understand, one, you know, on the Bharti AXA rationalization, has the progress been slower than expected? Two, you know, it seems like even on a 9-month basis, significant growth in, say, sales growth and expenses or even overall OpEx excluding commissions. It doesn't seem to reflect that it is going into retail health. Looking at the combined ratio of retail as it seems to be going into Motor. Just wanted to understand, you know, in the second part, you know, how the expenses are getting allocated to, and as a result, what should be the trajectory going forward.
Rishi, I think, your second part of the question with respect to the progress of the Bharti AXA integration in line with what we have been communicating, I think that is pretty much, we have kind of realized whatever synergies that we spoke about. I think the only large synergy which we had said is something that we will realize in this financial year is the technology synergy. Consequent to once we get the applications integrated or merged, we should start realizing the benefit of that synergy play out from Q4 of the current year onwards. Happy to note that even that particular aspect in respect of integration between the two companies have kind of been done. Hence to that extent you may start to see, the synergy on the technology cost play out from Q4 onwards.
To your first part on with respect to what could be the trajectory that the expense ratios could take. Yes, you are right. I think there are multiple aspects that goes into insofar as determination of the expense ratio trajectory is concerned. One is the function of what kind of revenue growth opportunity that one sees, which is what I had explained. Certain lines of businesses, while there are costs that we kind of continue to incur, however, the revenue is something that we have not been able to completely realize it to its fullest potential. A segment in reference is motor, for example. Clearly, we have not been able to kind of realize the complete potential of what we would like to see that segment operate at.
Now, as and when, let's say, the growth comes back, that itself will be a function of, let's say, some form of efficiencies or maybe some form of improvement that you will get to see insofar as the expense ratio trajectory is concerned. The second is obviously, as I mentioned, the investments in retail health to your other point, was not just a one-off investment. It's a continuing one. We continue to hire, let's say, the number of retail health agency managers whom, as we have explained, will obviously go and add more number of agency distribution. Those costs again comes and hits us today in our P&L because these are actual number of employees who are getting onboarded, insofar as retail health distribution is concerned.
Which is why you will continue until the time, let's say, the benefits in the form of incremental revenue play out, which is what, which is in the past also, which we have explained, it roughly takes about 12 to 18 months for the cycle to completely get efficient, is when you will start seeing, let's say, incremental revenues being contributed. Insofar as early signs are concerned, I think the investment seems to be kind of playing out in line with our expectations. Hence, to that extent, I think we are quite happy with the way how things are playing out.
Finally, in terms of what number the expense ratio trajectory could take, I think rather we would look at it more from a combined ratio perspective, which is a combination of both expense and loss ratios because different segment exhibits different outcomes in terms of the way businesses will get sourced. Clearly what we had indicated was over a 2-year period, we would want to see a declining slope on the combined ratio front, and we are pretty much staying on course with respect to that particular thought process of ours. I mean, already we in line with what we have spoken about for FY 2023, we had said the combined will stay range bound in that 104% levels and in FY 2024 you will start seeing a declining slope.
We are pretty much on course in order to kind of getting that reflected. That's the trajectory that one would see insofar as the combined ratios is concerned.
Thank you. Ladies and gentlemen, we'll take that as the last question. I now hand the conference over to Mr. Bhargav Dasgupta for closing comments.
One question I think.
Yeah, I think there was that one question which Hitesh had asked in the context of how many agents did we add consequent to that 1,000 health agency managers. That number is at about 10,000 agents is what we have been able to add by these agency managers that we've added.
Again, thank you everyone for joining the call. It's pretty late for all of you. Look forward to our interaction during the quarter. Thank you. Thank you so much.
Thank you. Ladies and gentlemen, on behalf of ICICI Lombard General Insurance Company Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.