Good evening, ladies and gentlemen, a very warm welcome to ICICI Lombard General Insurance Company Limited Q1 FY 2024 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 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 involved risks and uncertainties, which could cause results to differ materially from the current views being expressed. As a reminder, all participant lines will be in 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, good evening to each one of you. Thank you for joining the earnings conference call of ICICI Lombard General Insurance Company Limited for Q1 FY 2024. I will give you a brief overview of the industry trends and developments that we have witnessed in the past few months. For this, our CFO, Mr. Gopal Balachandran, will share the financial performance of the company for the quarter ended June 30, 2022. India's real GDP growth recorded a stronger growth than estimates and has surpassed the pre-pandemic levels. Domestic demand conditions remain supportive of growth on the back of improving household consumption and investment activity. Urban demand remains resilient, with indicators such as passenger vehicle sales and domestic air passenger traffic posted robust growth on a year-on-year basis.
This growth can have some impact from headwinds, such as weak external demand, volatile global financial conditions, and prolonged geopolitical tensions. For the quarter, as per data published by SIAM, the new vehicle sales continued to grow year-over-year for private car and two-wheelers. The growth narrowed in the month of June this year. The growth in sales of commercial vehicle was at a double-digit during the quarter. Two-wheeler sales for the quarter in terms of volumes remained below the pre-pandemic levels. Health insurance continued to remain the largest contributor to overall growth. The commercial lines witnessed growth in line with the current market environment. The fire market has seen some rate pressures, the inherent growth remains intact.
The focus of the government on infrastructure has led to a 41.3% growth during Q1 of FY 2024 in the engineering line of business, it's expected to show encouraging growth in the future as well. We remain optimistic that the industry will continue to grow given favorable macros, regulatory changes, low penetration, and positive consumer sentiment. Speaking of the performance, the general insurance industry delivered a GDPI growth of 17.9% for Q1 of this year. Overall, the underwriting performance improved with a combined ratio of the industry at 115.8% for FY 2023, as against 109.1% for FY 2022.
For motor business, the combined ratio for the industry remained elevated at 121.1 for FY 2023, up from 115.6 for FY 2022. The combined ratio for motor in H1 of FY 2023 was 123.5, which improved to 118.8 for H2 of FY 2023. Moving to regulatory updates, the authority on June 30th, 2023, published guidelines for remuneration of non-executive directors and key management personnel, prescribing limits on remuneration, age, and tenure. Moving to business impact for us in Q1 2024, the company grew by 18.9% as compared to the industry growth of 17.9%. Excluding crop, the company grew by 19.2% as against the industry growth of 17.4%.
Coming to the growth of key segments during the quarter, in property and casualty line of business, we grew at 17.0%, which is higher than the industry growth of 7.8%. During the quarter, we accreted market share across all segments such as fire, marine, engineering, and liability. Discontinuation of the IRDAI rates had a moderate impact, which is in line with our expectations. We will continue to monitor the development in coming quarters. In motor, the growth was tepid at 5.3% for the quarter, while we grew at 10.8% in June. While we witnessed month-on-month growth in new private car segment during the quarter.
With no motor TP price hike, we have rebalanced our portfolio, resulting in a commercial vehicle mix at 21% and two-wheeler mix at 30.3% for Q1 of 2024. The health segment continued to be the fastest growing segment for the industry. During the quarter, we grew at 40.4%, which is higher than the industry growth of 20.7%. In group health employer-employee segment, the change in underlying industry pricing sentiment resulted in customers moving towards companies with better underwriting and service capabilities, resulting in our group health segment to grow by 43.9% during the quarter. As a result of our continued investment in retail health distribution, we have outgrown the industry growth of 18% in Q1 2024, with a growth of 22.8%.
This was driven by business sourced through retail health agency vertical growth of 25.6%. I would also like to share that our one-stop solution for all insurance and wellness need, IL TakeCare app, has surpassed 5.6 million user downloads till date. The incremental download for the quarter was close to 1 million. For Q1 of this year, the premium sourced through IL TakeCare contributed INR 588.0 million to the GDPI, reflecting 5 x year-on-year increase. Our bank insurance and Key Relationship Group grew at 27.3% this quarter. Post-pandemic, steady credit growth, along with deep mining and increase in wallet share and distribution partners, has been the key growth driver. Our business sourced through our digital one team grew by 24.7%.
Overall, our digital focus has enabled us to increase our digital revenues, including IL TakeCare app revenues, to INR 3.12 billion, which accounts for 4.9% of our overall GDPI for the quarter. We continue to make significant investments in modernizing our technology architecture. After moving to the cloud in FY 2022, we have modernized a number of our front-end applications. Being on the cloud and transitioning to cloud native has led to increase in reliability of our technology platforms, as evidenced by the reduction in error tickets by close to 71% this year, in the last year. At the same time, we have seen an 86% reduction in response times across some of our digital channel partners.
Our, you know, Responsible Intelligent Assistant, we call RIA, our chatbot, has enabled our DIY adoption by 3.4 x over a 13-month period. Alongside transitioning to the cloud and modernization, we completed the migration of applications and data from the erstwhile Bharti AXA data center to our application platforms and cloud data center in just 14 months. We believe that this was one of the fastest migrations of this scale in the insurance industry globally. We also continue to remain focused on leveraging our digital capabilities and building claims efficiency. Case in point was motor claims settlement process. We introduced cloud calling feature, enabling over two lakh customers during the quarter to connect seamlessly using a dedicated virtual number. 81% of our customers filed e-claim form in Q1 2024, up from 67% in Q1 of last year.
In Q1 2024, through our PPN network, the Preferred Payment Guarantee Network, we were able to service 60% of our non-OEM claims, up from 40% in Q1 2023. Resultantly, our overall NPS for non-cashless claims improved to 62% for the year till May, 2023, up from 42% for Q1 of 2023. NPS for cashless claims increased, improved to 68% for YTD May 2023, up from 60% in Q1 of last year. To conclude, I would like to summarize that we are well positioned for the future. We remain focused on growth levers such as innovation, digital advancements, launching new products, strengthening our distribution engine, rationalizing costs, whilst 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 of the financial performance of the company for Q1 FY 2024. We have uploaded the results presentation on our website. You can access it as we walk you through the performance numbers. Gross direct premium income of the company was at INR 63.87 billion in Q1 FY 2024, as against INR 53.70 billion in Q1 FY 2023, a growth of 18.9% against the industry growth of 17.9%. Excluding crop, GDPI growth of the company was at 19.2%, which was higher than the industry growth of 17.4% in Q1 FY 2024. Our GDPI growth was primarily driven by growth in the preferred segments.
The overall GDPI growth of our property and casualty segment grew by 17% at INR 22.86 billion in Q1 FY 2024, as against INR 19.54 billion in Q1 FY 2023. On the retail side of the business, GDPI of the motor segment was at INR 18.75 billion in Q1 FY 2024, as against INR 17.82 billion in Q1 FY 2023, registering a growth of 5.3%. Our agents, including the Point of Sales distribution count, was at 117,149 as on June 30, 2023, up from around 113,000 as on March 31, 2023. The advance premium was INR 32.63 billion as at June 30, 2023, as against INR 32.17 billion as at March 31, 2023.
Resultantly, combined ratio was 103.8% for Q1 FY 2024, as against 104.1% for Q1 FY 2023. Excluding the impact of cyclone losses, cyclone losses of INR 0.35 billion, the combined ratio was 102.9% for Q1 FY 2024. The technical reserves, which are presented as a part of the reserving disclosures, are not discounted as per the current regulatory framework. However, globally, we understand technical reserves are presented on a discounted basis. If we were to discount the technical reserve, particularly for the long-tail businesses, such as motor third party, which constitutes around 80% of our total outstanding and IBNR reserves, our current reported combined ratio of 104.5% for FY 2023 would look better by around 400 basis points.
Our investment assets rose to INR 449.05 billion as at June 30, 2023, from INR 431.8 billion as at March 31, 2023. Our investment leverage net of borrowings was 4.16 x as at June 30, 2023, as against 4.15 x as at March 31, 2023. Investment income was at INR 8.23 billion in Q1 FY 2024, as against INR 6.55 billion in Q1 FY 2023. Our capital gains stood at INR 1.23 billion in Q1 FY 2024, as against INR 0.32 billion in Q1 FY 2023. Our profit before tax grew by 11.8% at INR 5.2 billion in Q1 FY 2024, as against INR 4.65 billion in Q1 FY 2023.
Consequently, profit after tax grew by 11.8% at INR 3.90 billion in Q1 FY 2024, as against INR 3.49 billion in Q1 FY 2023. Return on Average Equity was 14.7% in Q1 FY 2024, as against 15% in Q1 FY 2023. Solvency ratio was at 2.53x as at June 30, 2023, as against 2.51 tx as at March 31, 2023. Continue to be higher than the minimum regulatory requirement of 1.5x . 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. We will now 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 their 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. We have our first question from the line of Prayesh Jain from Motilal Oswal. Please go ahead.
Yeah. Hi, good evening, everyone. Just a few questions. Firstly, could you talk us through the loss ratios, you know, like, ex-catastrophic, what would be the loss ratios and where is this loss ratio kind of setting? If I look at a group health loss ratio, your total health loss ratio is at 78.7%. Could you split that up for us for, you know, in terms of core retail health and group health? Where is this catastrophic loss exactly sitting, in which line item, which of the segments?
Prayesh, insofar as the breakup of the overall health loss ratio numbers that you see, which is 78.7% for Q1 FY 2024, the breakup of that for employer-employee or the group health is at about 92.6%. The Retail Indemnity business is at about 64.2%. That's the breakup for the overall health. To your other question, in terms of where is the impact of cyclone losses largely sitting upon, it is predominantly in the property and the casualty line of businesses, which is in the fire and engineering line of businesses, predominantly. A very small proportion of claims is there in motor, but predominantly a large part of the impact on the cyclone is in fire and engineering. The combined impact, that's what we gave as a part of the opening remarks.
For this quarter, the net impact of claims on account of cyclone losses has been about INR 35 crores.
Any reason for this, for the very high loss ratio on the group side? Is there a spike in terms of number of claims, or frequency or severity?
No specific. In general, if you see what we have been speaking about, Prayesh, even in the past, on the employer-employee segment, generally, we have spoken about the loss ratios to stay in the range of around that 95% kind of threshold, between 90%-95%.
Mm-hmm.
Because it primarily comprises of two books at what we have spoken. One is relatively large corporates, which kind of runs at a loss ratio anywhere ranging between 95% to 100%.
Okay.
We have the relatively SME, which is a small and the mid-corporate portfolio, which runs at a loss ratio experience between 90%-95%. Historically, we have run the book at a loss ratio, as I said, around that 95% threshold. Currently, for the quarter, as I said, the number stands at about 92.6%. To that extent, no specific changes when we see in the context of whether, let's say, an increase in frequency or increase in severity with respect to claims.
Yeah, actually, Prayesh, if you look at our last year, full year group health loss ratio, that was roughly about 95%.
Okay.
If you look at the current quarter, it's actually lower. We don't see any significant pressure on the health loss ratio side. Retail is still performing well, and group health, because the cost of acquisition is low, this is typically where the loss ratio lands.
Got that. Coming to motor segment, you know, from again, from a profitability perspective and the mix that you have, change of mix that you've spoken about to going away from commercial vehicles, would that be a strategy for FY 2024 or from a longer term perspective? Secondly, could you talk about, you know, like for many quarters we've spoken about some green shoots on the OD pricing, but, you know, that's not really reflecting very heavily in terms of numbers. While you mentioned about the industry loss ratios kind of, or combined ratios kind of, improving between first half and second half, is there any more clear trends that, you know, you see further improvement or it's just, you know, kind of, getting arrested at the current levels?
On the first one, commercial vehicles, I think some of the granular calls that we took, certain strategic calls that we took, over the last two to three years, which we've talked about, I think we are kind of staying invested with this, with that. The bit of rationalization that we did was because the TP price hike this year didn't happen.
Mm.
With our estimate of inflation, as we've already always talked about, then certain marginal portfolios become unviable. Having said that, if you see our 21% is still higher than what our traditional PV market mix had been, which was about 15%, 16%.
Mm.
Our sense is that we are not planning to reduce it significantly. It will probably be in the similar ballpark, you know, 20 +, minus. Coming to your question on OD, again, if you look at this quarter loss issue for us in the OD compared to last year, you'll see an improvement.
Yeah.
Having said that, the expectation that we've had is some of the aggression on sourcing side, given the Expense of Management, will cap the flexibility to some of the players. We were expecting some more rationalization, some more improvement. At this point in time, we've not seen it, but I think we've kind of reached a level where we've ironed out most of the marginal portfolios. Most of the pain is behind us, I think.
Okay. Gopal, just last question from-
Mr. Jain, I request you to join back the queue, sir. Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer queries from all participants, please restrict your questions to two at a time. You may join back the queue for follow-up questions. We'll take our next question from the line of Sanketh Godha from Avendus Spark. Please go ahead.
Yeah, thank you for the opportunity. My question is around the motor OD business. If I look at the numbers, consistently it has been improving from second quarter or first quarter of FY 2023. The number is around 67. Just wanted to understand that this number of 67 is sustainable, or actually want to understand more in detail what corrective measures you have taken so that except for the choice of not seizing the market share, which has led to the improvement in the loss ratio in the motor OD segment, rather. That's one thing.
Second, just wanted to again understand if this IL TakeCare app, which you said today probably contributes almost 1% of your GDPI in the quarter one you have done. Want to understand how you see the channel to be a cross-sell, upsell channel, which product and how much it can potentially contribute to the entire GDPI as time progress?
Sanketh, on the first question, you know, on motor OD side, there are multiple things that we've been doing. You know, in a sense, we've been saying that a lot of, you know, heavy lifting we did last year. One is the selection, the marginal portfolios we've let go, that has an impact. Our sourcing, which is the target loss ratio and the source of business, that has also come down. The second is on the claim side, there's been a huge amount of effort that we have done more in terms of some of the abuse that was, that generally happens, but we believe had picked up post-COVID. On the claims control, we've done a lot of work on using data analytics to reduce waste and abuse.
Thirdly, we talked about the % increase in PPN. That also gives us some savings on the claim side. There are multiple initiatives that has happened. You know, is it sustainable? Again, we'll have to wait to see market conduct, but we are reasonably hopeful that we should be able to sustain this at this current level. Coming to your point on IL TakeCare, the number that we gave out, it's about 5 x of last year's similar number for the quarter. In aggregate for the company, even if we add this IL TakeCare number to the overall digital business, it's as we said, it's about 4.9% of our of our total business.
Let's say, IL TakeCare contribution for this quarter was about INR 58 crores, INR 588 million. It's not a material number as yet, but we believe this is actually helping us at multiple levels. One is customer engagement, retention. We see some loss, you know, better loss ratio for clients which use IL TakeCare. In group levels, we see a better retention of, you know, profitable accounts in the corporate side, we are looking at how we can use that further in terms of strategically, in terms of increasing cross-sell and upsell. That's a work in progress. Still, honestly, in terms of aggregate numbers, we are very heartened by the scale, the speed at which it's picking up, but still small in the overall scheme of things.
Bhargav, just one clarification. Is this IL TakeCare app, you are able to manage cross-sell predominantly retail health at INR 58 crores or INR 59 crores or it is other products also you have seen it action?
It's other mix of products. We are seeing two-wheelers, we are seeing, health, we are seeing, you know, more, you know, private cars. We are seeing, employees of, you know, corporates buying policies, on their own. It's a mix of, most products that we have there.
Got it. Got it. Finally, last one, Gopal, if you can explain the reason why the commission cost has boosted. Overall expense has not changed, but the commission cost has gone up, but the expense has come down. You have seen that EoM impact already visible with respect to shifts from advertising cost to the commission?
I think, Sanketh, if you recollect, I think the way we have always talked about this, I think to look at the businesses from an overall combined perspective, because as we keep saying, there are different models of sourcing that exist in the market. I mean, there are segments which relatively run on high LR and low Expense of Management and the other way around. Which is what now when you look at, let's say, even from a quarter one perspective, I think I would kind of always keep urging to look at it more from an Expense of Management standpoint, rather than looking at.
Mm-hmm.
... any breakups around that. If you look at the overall Expense of Management in terms of the breakup of the combined ratio that we reported about 103.8% for quarter one, of which the loss ratio was about 74.1%, and the balance, which is almost about 29.7%, is the Expense of Management number. This, if you look at it for quarter one of last year, the Expense of Management number was about 32.1%. Again, when you look at it even vis- à -vis quarter four, the Expense of Management number was about 29.9%. Even on a sequential basis, I think we have seen an improvement in the overall Expense of Management.
Even on a year-on-year basis, I think clearly there has been an improvement in the overall Expense of Management. That's the way we would want you to look at, because as I said, there are different models of sourcing that exist, and as a company, that's what we would want to kind of look at.
Got it. Perfect. That's it from my side. Thanks.
Thank you. We have our next question from the line of Nidhesh Jain from Investec. Please go ahead.
Thanks for the opportunity. firstly, if you break the digital business, what percentage of business is coming from our own website, plus IL TakeCare, and how are the trends in that segment year-over-year basis?
If you look at the way we manage this business, there is the digital one team. If you remember, we had said there are two objectives that they have. One is the website business growth, and the other is working with the digital ecosystem partners. You know, and we look at it together, that growth for this quarter is about 37.8%. The IL TakeCare number, as we said, is relatively small, but that's grown from a small base at five times, you know, it's about 500%, you know, 400%.
If you look at the annual disclosure, I think last year, in the public disclosure, the data indicates that the growth from our own website has not been that strong. It has been flat, flattening out. Growth is largely coming from the digital ecosystem. Are those trends continuing in this quarter also? Because the business coming from our own website will be much more better quality, though low, much more profitable probably over a period of time. How we think about the strategy on the digital side from sourcing business from our own website?
Sorry. Nidhesh, it's a combination of both, Nidhesh. Obviously, we look at all of them, our preferred channels of sourcing, whether you look at business through website, business through alliances, and even, let's say, the IL TakeCare opportunity, as what Bhargav explained. For us, all the three segments have grown, whether you look at it from a website standpoint, whether you look at it even from an alliances standpoint. In fact, during the quarter, we have further strengthened the number of alliances tie-ups that we have, and that's the reason why that part of the business has done phenomenally quite well. Overall, as we said, the digital one contribution in terms of revenue for the company for this quarter has grown at about 24.7%.
Sure. Secondly, last year, we put out a strategy that we will focus on higher loss ratio and low OpEx ratio business in the motor OD segment. How, while if you look at our loss ratios have improved quite a bit, and OpEx ratio has also seen some improvement, how is the trend there, where the share of that business is shaping up on overall motor GDPI?
Look, again, it's a combination of both, Nidhesh, is what I would say. I think what we put out as a part of our opening remarks, I think for us, if you look at this particular quarter, I think the growth on new private car has kind of come back, which is kind of exhibited when you look at it sequentially on a month-on-month basis. I think the growth in new private car seems to be kind of doing well. I think that typically also comes with a relatively better loss experience. Having said that, I think we are also kind of increasingly focusing on exactly the point that you mentioned, with respect to focusing on relatively older vehicle segments, which also comes with a relatively high LR and, let's say, a lower cost of acquisition.
That's again reflecting also in the Expense of Management number. If you recollect what we have been talking about, historically, our proportion of motor business coming in through the OEM channel of contribution used to be in the range of 75%-80%. Increasingly, that proportion of contribution of business of motor coming in from, let's say, the OEM channel of distribution, it will be in the range of about 60%-65%. Directionally, I think what we have been trying to do is to balance the overall portfolio between contribution from OEM dealership, agency, as well as the earlier point that we made in terms of the digital opportunity that Bhargav said.
Sure, sure. That's it from my side. Thank you.
Thank you. We have our next question from the line of Shreya Shivani from CLSA. Please go ahead.
Yeah, hi. Thank you. I have two questions. First is on the motor segment, total motor segment. If I compare Lombard's both loss ratio and growth across the private peers, I would specifically look at the private general insurers. Many of them would have just a few percentage point higher loss ratio on this segment, but they are delivering about, you know, 15% growth in this quarter, as per the IRDAI data. What can we expect for Lombard's motor segment for the full year, and any guidance on the overall premium growth for FY 2024? That's the first question. The second question is on the crop loss ratio, it seems a little higher at more than 100%.
Last year, I remember you guys had shared that the crop program that you had participated in was a 80/120 capped plan, something like that. If you can help us understand that as well.
The second part is, I'll kind of answer that, Shreya. In general, if you recollect, obviously, the claims development cycle takes time, and that's the reason, from a conservative standpoint, whenever we book the revenues, given that we don't have complete experience of loss development, we end up providing it on a 100% loss ratio basis. Which is why when you look at the numbers, you will find the loss ratios to be a bit elevated. But when the actual experience starts to kind of play out, you will obviously start getting that reflected on actuals. Hence, and typically, it roughly takes about two quarters for the loss development to play out in the crop segment.
As and when we get to see the impact of the cycle, we will kind of actualize those numbers. To your, to your first point on what is it that we can expect on overall growth for the company as a whole, I think in line with what we have spoken, as we always keep saying, the market needs to get better in terms of pricing. At this point of time, if you would have seen for quarter one, I think we have had almost close to almost about 200 basis points outperformance relative to the market growth numbers when you look at x of crop. That's clearly the expectation that we have as a company. We have the necessary strength insofar as distribution, claim service, and technology is concerned.
Hence, to that extent, from an overall market standpoint, we would obviously want to expect us continuing to have similar kind of outperformance. Within that, to your first point on how does one see on motor? As I said, again, when you look at it on a sequential basis, month-on-month, I think clearly we have been able to possibly arrest the extent of degrowth that we had seen in that particular segment. For example, in April, we had a degrowth in motor. For the month of May, we had a positive growth about 5%, and for the month of June, we had a growth of almost about 10%.
Sequentially, I think we have been able to kind of get better, and the extent of gap between the industry growth numbers and let's say, the growth that we have been exhibiting is kind of getting narrowed down. There again, I think, and so the only thing that we would watch out for, to your point on what we could expect for the rest of the year, is the adherence to the Expense of Management guidelines that come into force from this year. In fact, when we were looking at the FY 2023 numbers that's now out for the entire market as a whole, almost close to two-thirds of the industry participants have their Expense of Management numbers greater than the regulatory prescribed limit of 30% or 35%.
This clearly calls for an action, which is what I presume even the regulator would be significantly putting a focus on once all companies start putting out their Q1 numbers. I'm sure they will start looking at the Expense of Management numbers for the overall market as a whole, and within that, each individual companies in terms of how they are exhibited. Once some of these things start to correct over the period of time, obviously, as I said, insofar as our positioning is concerned, I think we should be able to kind of see relatively better growth even in motor as a category.
Got it.
The comment that you had, in terms of the loss ratios, you know, I think as we've been explaining this for some time, that when you look at motor, if you split the loss ratio between own damage and third party, you see certain patterns. I mean, you know, you can do the analysis yourself. In third party, again, if you do a bit deeper dive on the reserving picture, which is now available to all of you'll be able to figure out the reserving practices, and that will probably throw some light on the loss ratio numbers of some of the players in the market.
Got it. Got it. One just clarification I wanted. The Retail Indemnity loss ratio that you mentioned at 64.2, this is for the Retail Indemnity sold by agents or the one which is getting sold by ICICI Bank?
No, not the group structure. This is Retail Indemnity is the individual Retail Indemnity.
what is the loss ratio of the ICICI Bank portion that is getting sold by ICICI Bank?
Level of detail.
Okay.
That's not fair on the distributor also.
Sure, sir. Okay. Thank you.
Thank you. We have our next question from the line of Rishi Jhunjhunwala from IIFL Institutional Equities. Please go ahead.
Yeah, thanks for the opportunity. Just a couple of questions. Firstly, on the health side, so, can you tell us, you know, in the, you know, retail health, the 23% year-on-year growth that we have seen, how much of that is driven by pricing increase that you have taken in February? Secondly, on the corporate side, there is a significant growth that has come here. You know, is that being driven by, you know, the normal group health plans, or there is a large component of, you know, the credit protect plans also, which are coming here? Is that the reason why unexpired risk reserve has shot up quite significantly for us in this quarter?
The second part, Rishi, to your point on the.
I'll just kind of talk about the commercial lines as a category, and within that, then I will talk about your corporate health, or let's say the group health point that you wanted to understand. Across commercial lines, I think we have actually been able to exhibit significant market share as what we kind of also put out as a part of the opening remarks. In fact, relative to an industry growth of which is single-digit, 7.8%, our growth has been about 17%. This spans across fire, marine, engineering, liability, et cetera, et cetera, across the key commercial lines. There, the growth is aided by across all factors, which is, it is driven by volume increase. It is equally driven by, I would say, accretion of market share.
Specifically now, also in the context of corporate health, we have also been able to see accretion in pricing as well. So it's been an all-round kind of growth that one has seen in the overall commercial line portfolio. To your second point on now within the co- group health or let's say within the corporate health, again, it's been a combination of both. We have been, as you would kind of recollect, some of the participants in the market had exhibited significant underwriting losses, particularly in the corporate health space. There have been clear instructions that they have given to their respective operating officers to get better on underwriting.
That exactly is what we kind of wait for as opportunities for us to kind of write businesses, because as I said, we have the necessary back-end strength in terms of distribution and, let's say, claim service to our advantage. So hence, we have been able to again accrete market share from some of those companies into us, where customer starts to look at more in terms of service as the basis of placing the risk. So hence, the growth is aided by accretion in market share. Again, volume, we do see in some sectors, incremental hiring being done by some of the corporate concerned, and hence, to that extent, it is also volume driven. And three, it's also a function of, as I said, the relative overall growth that one has seen.
Health is also aided by, I would say, reasonable growth, even on the bank insurance space, as we have kind of put out even as a part of the opening remarks. Our bank insurance, which comprises of distribution through banks and our key relationship through partners, that's again done reasonably well, at almost about 27% growth. On the back of, again, reasonable growth coming back in terms of credit, disbursements. What one would watch for is obviously the extent of disbursement levels as we head into the subsequent quarters. I think that we will wait for in terms of how the development takes place.
Understood. Second question, you know, while you explained about the Expense of Management thing and, you know, that to look at on an overall basis, and that's anyways what we are going to do. Just from a, you know, purpose of understanding, wanted to understand the change in commission and the business promotion. Is it purely a reclassification issue from books of accounts perspective, from the way you are now paying to the distributors, or is there any actually on ground business model change also?
If you ask us, as we always keep saying, Rishi, I think at the end of the day, we always look at the overall cost of acquisition in terms of the way we kind of do businesses. That's the reason why I kind of specifically put out that number in the context of Expense of Management. That's what I would urge to kind of look at. Honestly, the kind of split between what constitutes commission, what constitutes, let's say, my overall operating expenses, all of them are taken as a part of our operating model. Fundamentally, if you ask us, have we changed anything in so far as the underlying way of doing business? Honestly, not. There is no specific change that one has kind of done.
Hence, which is why I'm saying that one should start looking at the numbers more from an Expense of Management standpoint, rather than trying to look at splits between how much has been the growth in commissions and how much has been the changes in operating expenses.
Okay. Thank you. All the best.
Thank you. We have our next question from the line of Avinash Singh from Emkay Global. Please go ahead.
Yeah, hi, good evening. Two questions. First one is more on commercial lines, your particularly fire engineering. There was sort of multiple factors affecting the pricing and all. Just, I mean, if you can give some color on that, adjusting for your cyclone losses, if there has been sort of an impact on overall claims ratio because of the pricing environment, or if you could quantify also the price changes effectively that happened in this quarter. That's on commercial line.
Second, on group health, employer, employee part, if you can provide some sort of, you know, either quantify or some qualitative disclosure in terms of how has been your experience on the, you know, business that you had initially acquired, pre-COVID period and continue to renew, I mean, with price hikes and the business you have acquired, say, last year. Are there sort of a difference in terms of the claims experience in these two sets? These are two questions. Thank you.
Let me take the second one, and Gopal can give you the split of, let's say, the commercial line business. In aggregate, the commercial line business, there has been some softening on the fire side for the reasons that we've been talking about, which is that the IIB rate is no longer there. It's well in line with our estimates. It's a single-digit change, not a material reduction that we have seen in the first quarter. We'll have to be watchful of how this progresses for the rest of the year. Till now, it's largely been, you know, in line with expectations. The difference in the, you know, the loss ratios for fire and engineering with and without fact, Gopal will answer that separately.
coming back to your question on group health, Avinash, I think the real good news for us was that, you know, the accounts that we had pre-COVID, you know, and we've been talking about this in the past as well. you know, from July of the year after the first, second wave, we started increasing prices by between 15%-20%, and we used to see almost more than 90% retention of the large accounts. I think the service proposition that we delivered, you know, the various features of IL TakeCare, et cetera, I think overall, we've had good experience in terms of retaining these accounts.
This year, for the reasons that Gopal explained, we are seeing a good traction in business moving from, some of the other, you know, companies that's coming in.
... the way we are pricing it is again in line with our, you know, general practice of being disciplined about underwriting. The question then is that will these guys also renew next year if prices go down? That we'll have to wait for. The approach that we take is even when we go in with any of these accounts, the approach is to look at customers who are not, you know, price seekers every year who switch from one company to the other. To look at companies who've generally been stable with one insurer for some time, maybe were wanting to move now because of service experiences or because pricing has significantly gone up and come close to our numbers, and we are able to get a slight premium over the market price.
On balance, I don't see a big difference between the accounts that we had in the past to the accounts that we have got now on the group health side.
Avinash, to your point on what could be the potential impact on some of this pricing led changes and let's say, cyclone led impact, as Bhargav said, I think so far as the price decline is a single digit number, roughly in that range of, I would say between 5%-7% kind of decline in pricing is what one had seen. That's on expected lines. That's what we had mentioned even during the April earnings call at the time when the guidelines had come into force. Which is the reason why you see for overall market, fire growth for quarter one is far more tepid at, let's say at 5.9% or 6%. Even despite that, if you look at for ICICI Lombard, we have again had an outperformance in that category.
We have grown at almost about 10% in fire as a line of business. That's the impact in so far as pricing is concerned. On the other part, what we discussed even in the April earnings call, if you recollect, is also the hardening of reinsurance rates. Therefore, to that extent, we also had seen an increase in the XOL costs. What effectively happens is, the NEP does a catch up, because typically your cost of XOL starts accreting in quarter one, and as the book kind of grows, the earnings play through over the remaining quarters. Now when you look at the loss ratios, what is put out in the investor deck for fire, let's say at about 85% for quarter one and let's say 98.6% for engineering.
Now, this has the impact of the XOL cost. It also has the impact of, I would say, losses from cyclone, as what I kind of mentioned. Very difficult to kind of separately call out the impact of the XOL cost, but if I were to just exclude the impact of cyclone losses, the loss ratio on fire, which is at about 85%, will look like about 64%-65%. Engineering, which is looking like about 98.6%, will look like about close to about 80%-82% in that range. That's the kind of numbers that one sees in so far as excluding the cat losses are concerned. As I said, Q1, particularly for engineering, is relatively more long tail.
As the projects start to kind of, build over a period of time is where you will see a relatively larger proportion of earnings coming through. Hence, to that extent, you will always find possibly the Q1 loss ratios to be a bit more skewed.
Okay, okay. Yeah, I mean, on group health, broadly, I can expect that the 90% broadly is for your old book as well as new book. I mean, there is no different experience.
I request you to join back the queue, sir, as there are other participants waiting. Thank you. We have our next question from the line of Swarnabha Mukherjee from B&K Securities. Please go ahead.
Hi, sir. Thank you for the opportunity. Couple of questions. First, on the retail health. Sir, you mentioned around 64-ish loss ratio in the retail indemnity portfolio. I was just wondering that historically, you have told that you have run this book at around some loss ratios of between 65%-70%. Is there a possibility that we'll push the pedal a little bit more in terms of growth going ahead so that we are in between that mark? Profitability-wise, I think we are much better than where we were running the business.
Whether we should expect to see growth panning out at a faster rate and, you know, much more higher than the industry, given that our market share is still lower than what our company average market share is, across categories. That is the first question on retail health. Then the second question of on the fire loss ratios, you pointed out that there are XOL losses that are waiting right now.
Just wanted to understand that, is there, you know, given the elevated loss ratio there that you have reported, if we were to remove the impact of XOL losses also, should we also see some element of that deregulation playing out in the loss ratio in terms of, you know, denominator being lower from the pricing point of view? Thirdly, on the crop premium for the month of June, I think there was a sizable crop premium. That pertains to Maharashtra and of a similar structure of what it was done last year. That would be three.
Let me add to, on the fire, let me take it, and I'll ask Gopal to cover the rest. As Gopal explained, the loss ratio for those two businesses look a bit elevated, but we are very comfortable and very happy with the book. As I, as he explained, a big chunk of that incremental loss ratio is because of cat, which happens once in a while. Secondly, the price softening has had a 5% - 6% impact, not as big as one was worrying about. In that sense, it's a positive. Third is the XOL cost is an upfront cost. As we go through the year, the NEP keeps accreting, and the XOL cost gets spread over the whole 12 months.
The Q1, it looks elevated because it's a smaller book through, you know, which is absorbing that, the increment. I think overall our, you know, property and casualty business, we are very happy with the way things are progressing, just to give you an overall sense of where we see the business. I ask you-
Just a follow-up on that, the price softening part that you mentioned, 5%-6%. So in a scenario, if the reinsurance market kind of softens next year from where it is, can it, and the softening can be more in our.
This is getting into the realms of speculation. You know, too many factors are unknown in terms of global reinsurance markets, so there's no point in talking about it right now. Maybe we can discuss this post January one.
Yeah. Sure, sir.
I just only add to what Bhargav said, Swarnabha. One is, as we keep saying, which is what is there in the numbers if you would have seen on the overall basis. While we said our growth in revenues has been, let's say, close to about 19%, ex of crop, if you would have seen the growth in net return premium has been almost about 23%, which is a function of, let's say, what we retain and what we kind of reinsure. Relative to that, if you would have seen the growth in NEP, has been only about 12%. That's the catch-up that will start to happen, and this is not just specific to any particular segment.
I think for across segments, when we kind of exhibit growth, we will start seeing NEP doing a catch-up over the subsequent quarters. Which is what you should kind of watch out for. As we always keep saying, for us, you should ideally look at outcomes over years, if not ideally on a financial year basis, definitely not quarters. I mean, quarters will have lots of elements attached to it, and we, again, we will urge everyone to keep looking at numbers more on annual basis, ideally over years, because that's how the insurance cycles typically work. That's just an addition to what Bhargav said.
To your third point on the crop, I think, pretty much similar to what we have been talking, which is even the one that we have won in Maharashtra, that again operates under the 80 -110 model, which is where we are kind of clear about what kind of risk that we want to undertake. Two, as we had discussed even during the April call, potentially there is an expectation that this year could be a year of El Niño. Hence, to that extent, again, from an exposure standpoint, I think we would want to be a bit guarded. Even otherwise, what we have said, even earlier as well, on crop, relative to our overall numbers, we would definitely want to see it at less than 5% of the aggregate annual revenues.
That stand kind of pretty much remains the same. To your first point on the overall retail health loss ratios, again, I mean, this is quarter one numbers, right? I think the range that we gave is the range that we are comfortable to kind of operate with as a segment. What we are quite happy and excited about is the fact that even if you look at consistently since, I would say second half of last year, and even for the whole of in fact FY 2023, we have had outperformance on retail health vis-à-vis the market. I mean, if you recollect, for FY 2023, our growth was almost about 17%, industry on retail health grew at 15.
Even quarter one, when you look at the numbers for us, individual or retail health grew at almost about 23%. Market growth was about 18%, 19%. Again, we have had outperformance in relative to the overall market. The good news is, even when you look at it in the context of standalone health companies, our growth in quarter one has largely been in line with the standalone health growth numbers as well. Hence, to that extent, whatever investments that we are doing on retail health, we are quite excited with the way how the investments have played out. That's the reason why you already start to see some small levels of increase in market share that we have seen, which used to be sub 3%.
Right now we are at about close to about 3.1% market share in the retail health indemnity segment. Of course, as you rightly said, there's a lot of catch-up that we have to do. Hence, to that extent, we will continue to stay invested in building that distribution force. Loss ratios, as I said, will be more an outcome, and the range is what we kind of largely talked about. Q1, honestly, again, very difficult to comment on one particular quarter. You have to ideally look at it more on a full year basis.
Understood, sir. Can I squeeze in a question, on group and just want to.
I request you to join back the queue, sir.
All right.
Thank you. We have our next question from the line of Prakhar Sharma from Jefferies. Please go ahead.
Thank you, and congratulations to all of you. Just wanted to get a pulse of, you know, this flooding in the northern Indian parts. How big is the business? How should we kind of assess any potential loss? That's part one. Just wanted to get a sense on, you know, the full year and next year combined ratio, you know, expectation. Are we, you know, sticking to our reguidance? These were my two questions. Thank you.
The second one is easier to answer. Yes, we are sticking to it. In spite of these losses that cat losses that we had in this quarter and the North Indian floods will come in the Q2, because these were not... I mean, even now as we speak, the losses are coming in. Till now, it doesn't look to be significantly, you know, an area of concern. It's too early to call, Prakhar. I think, you know, what happens in the floods is that it takes some time for the customers to come back and report all the claims. I don't want to give a, you know, false comfort that it's a low value cat loss. We'll have to wait for some time.
Whatever it is, you know, as a company, unless these losses are significantly out of sync with the past experiences, I think we'll be, we are clear that we are staying within the same guidance levels that we talked about.
Thank you. Thank you, and best of luck.
Thanks, Prakhar.
Thank you. We have our next question from the line of Neeraj Toshniwal from UBS India. Please go ahead.
Hi. Given we have seen some improvement in June in motor, which is quite impressive, wanted to understand the outlook going ahead. Are we seeing some kind of pricing improvement which has happened due to Expense of Management changes and no hike in motor TP pricing for this year?
As we said, on the second point, not much. We had expected some more improvement because of Expense of Management, you know, constraints. We've seen some, you know, bit of correction in terms of certain elements of, you know, PA price, et cetera, for the sector. A lot of companies have improved some element of the pricing, but it's not to the extent that one had, you know, expected, given the Expense of Management, as Gopal explained. You know, for a large number of companies in the sector, it's, they are over their limit. As of now, we've not seen a change, but as we explained, we'll have to see what happens after quarter one and how the regulator looks at industry numbers and company specific numbers. We'll be watchful.
From our perspective, we are well within the limit. We have a big cushion, that's doesn't mean that we are going to be profligate. We are focusing on building a sustainable business.
What kind of growth in motor portfolio we are kind of now, given the momentum is coming back, we are building in?
I think, as I said earlier, I think the, you know, the difficult part is behind us, is what we think. Our expectation is that we should definitely go in line with the market for this quarter.
Got it. Last question is on the tenure, which you just mentioned the opening remarks. There's a guideline which from the regulator in implementing color on that.
Neeraj, I think this is something that we have been talking about, earlier as well. Obviously, at an appropriate point of time, I think as we keep saying, succession planning is something that actively gets discussed at the BNRC and at the board level, across, management levels. Maybe at an appropriate time, I think we will come back, if at all, wherever we have to make any, necessary announcements.
Got it. The last question on the ICICI Bank stake buy, which will be happening over some time. Had any proceeding or approval from the regulators happened, because there's no update on this thing over for on that matter?
I think they will announce it whenever they're ready to announce it. Obviously, they'll have to wait for to get all the approvals, but they've got enough time to do the same. As of now, we are awaiting all clearances from the regulators.
Got it. Thanks for the details. Thank you, Bhargav and Gopal.
Thanks, Neeraj. Thanks.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Bhargav Dasgupta for closing comments. Over to you, sir.
Thank you. Thank you, everyone, for joining, and look forward to, you know, be interacting with you over the next few days. Feel free to reach out to us. Thank you again. Thank you so much.
Thank you. On behalf of ICICI Lombard General Insurance Company, that concludes this conference. Thank you for joining us,F and you may now disconnect your lines.