Good evening, ladies and gentlemen. A very warm welcome to ICICI Lombard General Insurance Company Limited's Q2 and H1 FY 2027 earnings conference call. From the senior management we have with us today, Mr. Sanjeev Mantri, MD and CEO of the company, Mr. Gopal Balachandran, CFO, Mr. Anand Singhi, Chief - Corporate, International, Banca (KRG) & Government Business, Mr. Girish Nayak, Chief - Enterprise AI and Technology , Mr. Sandeep Goradia, Chief – Retail, Business Strategy & Solutions team , Mr. Gaurav Arora, Chief - Commercial Lines and Motor, Underwriting & Claims, and Mr. Girish Sehgal, Chief Health Underwriting and Claims, Customer Service.
Please note that any statements, 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 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 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 and then zero on your touch-tone phone. I now hand the conference over to Mr. Sanjeev Mantri, MD and CEO, ICICI Lombard General Insurance Company 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 for half year ended September 30th. I would like to commence with an overview of the economic and industry trends, followed by our company's performance and key initiatives. Our CFO, Gopal Balachandran, will take you through the financial performance for the year ended September 30th. The domestic economy continued to have its growth momentum with real GDP expanding at 7.8% year-on-year in quarter one. Economic activity remained firm, aided by private consumption, manufacturing growth, and investment spendings. Supportive monetary and fiscal policies helped cushion the impact of the ongoing conflict in West Asia and broader geopolitical tensions on domestic economic activity.
Looking at specific industries in context of our business, the automobile sector, based data from VAHAN, contributed to business strong double-digit growth across key segments during H1 of 2027, with total vehicle sales reaching 15.6 million, showing a growth of 21.1%. More importantly, the growth of the industry across all segments was higher in Q2 2027 than Q1 2027, with the overall growth in Q2 being at 26.9% against Q1 growth of 16%. September 2026 was particularly a strong month, with total vehicle sales growing at 32%. This sustained demand provides a healthy base as we enter the key festive season. Bank credit remained robust at approximately 19.6% in Q2 2026, compared with 17.6% in the preceding quarter. Lending to industry services and agriculture grew between 15%-20%, including approximately 15% growth in credit to large industries.
These trends indicate broad-based credit demand and supporting financing conditions across both business investment and household consumption, which is always a positive for our sector. Talking about regulatory update, as you would be aware, IRDAI has recently released a landmark consultation paper titled Recalibrating Economics of Insurance Distribution, which seeks to address the evolving needs of the insurance sector with the underlying emphasis on transparency, customer trust, and distribution efficiency. This is expected to result in simplifying distribution structures, improving accessibility, and enhancing customer experience. We believe that the broad objectives outlined in the paper are aligned with the long-term vision of insurance for all. Further, the GST Council, in its meeting held on October 8th, 2026, has recommended further process reforms along with certain measures for trade facilitation and streamlining compliances.
Within this, an important clarification relates to removal of restrictions on availing input tax credit on group health and life insurance. This recommendation will ensure a smoother flow of ITC across the supply chain. Let me now dwell upon the industry performance for the period ending September 30th. The general insurance industry continued to demonstrate steady GDPI growth of 8.9% in H1, supported by 10.9% in Q1 and 7% in Q2 2027. However, the GDPI growth, excluding crop and mass health segment, was 12.6% in H1 of 2027. Speaking of specific segments within the industry, the commercial line segment witnessed an improvement in growth trends during Q2 2027 as compared to the preceding quarter. Most of the key segments, namely engineering, marine liability and miscellaneous, that is the segment sans fire insurance, collectively reported a healthy growth of 15.9% for Q2 2027.
While the fire segment continued to witness a degrowth of 26.6% for H1 2027, the pace of decline moderated to 24.4% in Q2 as against 27.8% in Q1 of 2027. With September at a degrowth of only 13.6%, these trends indicate a gradual improvement in the operating environment for commercial lines, which augurs well for the segment in coming quarters. As highlighted earlier, the motor segment continued to record healthy growth. Notably, EV penetration across passenger vehicles and two-wheelers surged 1.5x , rising from a 6.4% penetration to 9.7% with a combined 1.3 million vehicles sold during H1 of 2027. The industry registered a growth of 13.1% in motor insurance for H1 2027 vis-à-vis H1 2026. Moving into the festive season, we expect the motor sales to continue surpassing previous trends. However, growth may appear to be moderated on account of a higher base.
Health continues to be a fastest-growing segment for general insurance industry. This segment reported a robust growth of 21% for H1 2027, with health insurance group health line of business growing by 15.3%, while retail health recorded a healthy growth of 32% during the same period. As mentioned earlier, the recent GST Council recommendation to allow input tax credit on employer-sponsored group health is a welcome development. Improved affordability could encourage wider employee health coverage among SMEs and large corporates, supporting the segment's growth. Speaking on the underwriting performance of the industry, the underwriting performance of general insurance industry continued to remain under pressure, with the overall combined ratio deteriorating to 116.8% in quarter one financial year 2027 from 115% in quarter one 2026.
Within this, the industry combined ratio for motor segment deteriorated significantly to 131.4% in quarter one 2027 from 125% in quarter one 2026, driven by increase in both loss ratio and commission ratio, reflecting a continued pressure on underwriting profitability. Against this backdrop, ICICI Lombard's motor combined ratio moved only marginally to 108.3% in quarter one 2027 from 107.6% in quarter one 2026, primarily attributable to the impact of Supreme Court judgment as discussed during our previous earning call. Consequently, the delta in combined ratio of motor between the industry and the company widened significantly to 23.1% in quarter one 2027 from 17.4% in quarter one 2026. This widening differential reinforces the strength of our underwriting discipline, pricing capabilities and claims management practices, enabling us to sustain a leadership position while consistently delivering superior outcome relative to the industry.
I will now proceed to present our company's performance across key business segments for half year. The company reported a growth of 5.4% in GDPI for H1 2027 compared to the industry growth of 8.9%. Further, the GDPI growth of the company, excluding crop and mass health segment, was 13.9% for quarter two 2027 as compared to industry growth of 13.2%. Within our commercial line segment, Q2 2027 witnessed a significant improvement over the preceding quarter. Excluding fire, our commercial line portfolio registered a healthy growth of 20% in quarter two 2027 and 13.2% for H1 2027. With broad-based traction across lines of business within fire, the pace of decline moderated significantly with degrowth reducing to 21.2% in quarter two from 32.1% in quarter one 2027. Pertinently, the degrowth for the month of September 2026 moderated further to just 6%, reflecting a sequential improvement through the quarter.
Our market share in fire line of business for the period ended half year 2027 stood at 12.2%. We have gained market share in Q2 vis-à-vis Q2 2026 in fire from 11.4%- 11.9%, in marine cargo from 17.1%- 19%, in engineering from 15.8%- 16.4%, and in liability from 16.1%- 16.6%. We maintained our leadership position in marine cargo and engineering line of business for H1. In the motor segment, we recorded a healthy growth of 13% for H1 2027, broadly in line with the industry growth of 13.1% for H1 2027, thereby maintaining our market leadership position with a market share of 10.3% for H1 2027. We remain focused on strengthening our granular distribution across OEM dealerships and diversified retail channels. Our portfolio mix for private cars, two-wheelers, and commercial vehicles stood at 49.8%, 28.1%, and 22.1%, respectively, for H1 2027.
As indicated during our quarter one 2027 earnings call, the company had made incremental provisions towards the motor third-party reserves following the Supreme Court judgment in the Shishupal case, in line with our prudent and conservative reserving philosophy. Given that the judgment was delivered towards the end of the quarter, the company had recognized the impact on the entire portfolio for quarter one of 2027, resulting in an incremental reserving requirement. During Q2 of 2027, we have calibrated our business operations to factor in the implications of the judgment, and the same has now been fully integrated into our regular course of business. Looking ahead, we are well-positioned to enhance our market position given the robust volume growth as reflected in VAHAN data, increased retention rate, and significant difference in the combined ratio versus that of the industry in the motor insurance segment.
In the health segment, we recorded a healthy growth of 26.8% for H1 2027, as against the industry growth of 21% for 2027. Our retail health business continued to demonstrate strong growth of 66.4% for H1 2027, significantly outpacing the industry growth of 32%. Consequently, our market share improved to 4.7% for H1 2027 from 3.7% for the corresponding period last year. Fortunately, we exited September 2026 with the market share in retail health reaching 5% for the first time, reflecting the sustained strength of our retail health franchise. The group health segment recorded a growth of 15.4% for H1 2027, with market share remaining stable at 8.8% for H1 2027, in line with the corresponding period last year. On August 3rd, 2026, ICICI Lombard marked its Silver Jubilee, celebrating 25 years of operation.
As we step into the next phase of our journey, we remain committed to driving innovation, strengthening our customer promise, and creating sustainable long-term value. We extend our heartfelt gratitude to all our stakeholders for their trust and support, which continue to inspire our progress. To commemorate this significant milestone, ICICI Lombard unveiled 25 innovative solutions across multiple lines of business, including offerings such as Complete Home Protect, Paw Care, Motor Service Assure, Power Booster Plus amongst others. Notably, these comprise five industry firsts and seven industry-leading solutions. Further, the company organized its digital day in the last week of September 2026, where we showcased how technology is closely integrated with our business operations and helping us drive tangible outcomes across key areas, including product development, underwriting, claims management, and customer service. I would like to thank all of you who took the time to participate in the event.
On the same day, we also launched the latest health insurance offering, VIBE, for our Gen Z customers, designed to provide a comprehensive wellness solution that goes beyond traditional health insurance protection. The product reflects our continued innovation in making health insurance more relevant and accessible to the younger generation. AI and agentic AI are enhancing claims accuracy, accelerating genuine claims, and strengthening fraud risk assessment with human oversight. Precision rates on leakage fraud-related triggers have improved from 45%- 60% through usage of Gen AI. Adoption of our digital journeys for customer service continue to grow, with 73% of our total customer interactions being handled through digital DIY journeys, as against 39% last year. In health underwriting, our industry's first WhatsApp-based Gen AI bot helps customers complete their underwriting through a conversational interface, enabling a more comprehensive risk assessment and faster turnaround time.
This journey now includes over 40% of our agency business, new business. These initiatives I have outlined reflect our continued focus on leveraging technology and innovation to strengthen our business capabilities and drive sustainable, profitable growth. As articulated during our recent digital day, one of the key strategic priorities is to scale up digital sourcing with a defined roadmap to elevate its contribution from the current 6% to 15%, thereby reinforcing our commitment to innovation and future-ready distribution. I will now request Gopal to take us through the financial numbers of H1 2027.
Thanks, Sanjeev, and good evening to each one of you. Before I proceed with giving a brief overview of the financial performance of the recently concluded quarter and half year, I would like to share here some aspects of some of the key initiatives as an organization. Our IL TakeCare app, a one-stop solution for insurance and wellness needs, achieved 23.3 million downloads as of September 30, 2026, reflecting growing digital adoption. The total number of health and travel claims serviced through the IL TakeCare app witnessed an uptick by 25.6% and reached 378,583 claims for H1 FY 2027. Our preferred provider network serviced 75.9% of our non-OEM claims for Q2 FY 2027, vis-à-vis 75.1% for Q2 FY 2026. In the health segment, 99.2% of our total claims were paid within 30 days for the half year FY 2027.
93% of the customers surveyed as a part of our IL Sat initiative have rated their experience as exemplary, that is, have given us a score of at least greater than or equal to 4.5 out of five. Now, moving on to the financial performance. We have uploaded the results presentation on the exchanges. You can access it as we walk you through the performance numbers. All numbers mentioned below are on an annual basis unless stated otherwise. Please refer our investor presentation on slide numbers 14 to 17, which have got details of outcomes on both [annual and 1/n basis] for further details. Our combined ratio was 104.5% in Q2 FY 2027, as against 103.9% in Q2 FY 2026. Excluding the impact of CAT losses of INR 1.18 billion in Q2 FY 2027 and INR 0.73 billion in Q2 FY 2026, the combined ratio was 102.7% and 102.6% respectively.
Combined ratio was 105.2% for H1 FY 2027, as against 103% for H1 FY 2026. Excluding the impact of CAT losses of the same number, INR 1.18 billion in H1 and INR 0.73 billion in H1 of last year, the combined ratio was 104.2% and 102.3% respectively. Our investment assets during the quarter rose to INR 643.32 billion as at September 30, 2026. This is up from INR 605.79 billion as at June 30, 2026. Our investment leverage net of borrowings was 3.58x as at September 30, as against 3.59x as at June 30, 2026. On a quarterly basis, investment income was at INR 15.54 billion in Q2 FY 2027, as against INR 12.49 billion in Q2 FY 2026.
Investment income for the current half year was INR 27.28 billion, as against INR 25.38 billion in H1 last year. Capital gains stood at INR 4.53 billion in Q2 FY 2027 as compared to INR 2.36 billion in Q2 FY 2026. Our capital gains stood at INR 6.37 billion in H1 FY 2027 as compared to INR 6.16 billion in H1 FY 2026. Our profit before tax grew by 27.8% at INR 13.59 billion in Q2 FY 2027, as against INR 10.63 billion in Q2 FY 2026. PBT de-grew by 5.8% and stood at INR 19.21 billion in H1 FY 2027, as against INR 20.39 billion in H1 FY 2026. Consequently, PAT grew by 27.5% and stood at INR 10.31 billion for Q2 FY 2027 from INR 8.09 billion in Q2 FY 2026.
Our profit after tax de-grew by 5.8% and stood at INR 14.54 billion in H1 FY 2027, as against INR 15.43 billion in H1 FY 2026. The ROE for the quarter two FY 2027 was 23.7%, as against 21.3% in Q2 FY 2026. Return on average equity was 16.8% in the half year FY 2027, as against 20.7% in H1 FY 2026.
Solvency ratio was at 2.74 x at September 30, 2026, as against 2.68 times at June 30, 2026, continues to be higher than the regulatory minimum requirement of 1.5x . Solvency ratio was at 2.62x as at March 31, 2026. The board of directors of the company has declared an interim dividend of INR 7 per share for H1 FY 2027, as against INR 6.5 per share for H1 FY 2026. As I conclude, I would like to reaffirm that we continue to stay focused on driving profitable growth and sustainable value creation while protecting the interest of our stakeholders and customers at all times. With this, we will be happy to take questions from all of you. Thank you.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on their touch tone. If you wish to remove yourself from the question queue, you may press star and then two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the questions are assembled. Your first question comes from the line of Nischint Chawathe with Kotak. Please go ahead.
Yeah. Hi. Just two questions. One was, I was looking at the change in motor TP claims ratio on a sequential basis is almost 2,000 basis points. So I was just curious how to read this. Have you provided for the recent Supreme Court verdict this time around? And what could be the ratio X of that? The second question, obviously, is on the distribution reforms and how do you see that affecting your business?
Nischint, thanks for that. This was obviously an expected one. I think we have always maintained that at an aggregate level, third party is always a line of business that obviously exhibits a long tail liability of claim development. And hence to that extent the time at which we provide for ultimate loss reserves and let's say the development of claims paying out obviously takes time.
Hence to that extent, we have always maintained to look at outcomes on, particularly for motor third party, over long cycles. Ideally on a year-to-date basis and ideally over longer annual cycles. Having said that, I think if you look at our loss development patterns over years, particularly on the third party book, I think we have generally followed a principle of prudence at the time when we have underwritten the risk. The portfolio has always exhibited consistently, over long periods, a small amount of reserve releases. Hence to that extent, a particular quarter will also get influenced by maybe some of this development of losses getting actualized. Hence to that extent, the loss ratios are what they are in terms of its ultimate depiction.
Having said that, I think if all of you would recollect, I think we have been proactive even in quarter one when the judgment had come in to call out the need for the industry to get impacted consequent to this judgment. On that basis is where this is the available information that we had at that point of time. I think we had considered for a reserving requirement of INR 1.65 billion in Q1. Having said that, we at the same time in the call did speak about to make sure that as an organization we would want to take this going forward as a business as usual element. Hence to that extent, what we have been able to achieve is, on the extent of the reserving, we don't anticipate any need for any further requirement of provision for reserves.
To that extent, of course, we will continue to monitor in terms of what the development of court judgments are because as I said, the book takes time to play out. But at this point of time, in line with what we had said, honestly, it's now a part of our business as usual, and genuinely, we don't believe the need for us to separately call out any specific additional charge consequent to the Supreme Court judgment. So that is where we are on the change in the motor third party loss ratio. On the distribution reforms then maybe I think I will request-
Yeah. So clearly, as we also said in our investors' kit, the landmark change, truly a recalibration in terms of how insurance will get distributed probably from next year onwards. Whatever the regulator has put across is a reboot in many ways. We have seen across industry in the past that whenever cost gets moderated or made reasonable, volumes pick up. That's where the penetration equation that we want will call out. For us as an institution, whatever the wish that comes from the regulator is 100% binding, and we look forward to this evolving over time and coming into play on a real time basis. We are as much a recipient of the draft as anybody else in the industry.
If you look over quarters, it will be a big plus for the industry in every possible manner over time, is what we will say at this point of time.
Sure. Given the fact that commissions are potentially coming off significantly, do you see the risk of third party tariffs getting revised downwards?
Look, every call, I think, Nischint, you are right. Every call we have had this discussion where the current economics used to make us believe that we would seek a hike in third party. How does it get viewed out? How does the paper get finalized? There are multiple variables which are there. This obviously is the one which is related to the third party claim deflation. It will obviously lower down the cost and to that extent, yes, there is a play that comes with it.
But at the same time, we have seen judgments changing the economics of it. So it is playing out both ways and early days to say how it will get addressed. But all I can say is you have got a point, and we are as much processing it at this point of time as anybody else. It may change the economics. My answer is yes. How and this, only time will tell.
Just one last one, if I can please.
Sorry to interrupt, Nischint sir, I request you to return to the queue for any further follow-up questions.
Oh.
Thank you.
Sorry. Okay.
We have our next question coming from the line of Supratim Datta with Jefferies. Please go ahead.
Hi. Thanks a lot for the opportunity. My first question is on the motor TP side. We see that on the motor side there has been a mix shift with the share of two-wheelers going up this quarter. Just wanted to understand what role has that played in the motor TP loss ratio, if any. That would be my first question. The second would be on IFRS accounting. I do understand that the commission ratio being higher is again a function of this two-wheeler mix going up. You would have filed the first quarter financials on IFRS with the regulator. If you could give us some color on 1/n and n, we know how the economics look like. If you transition to IFRS, how would these numbers change? If you could give us some color there, that would be really appreciated.
Lastly, if you could give us how is the loss ratio, the retail group health, and the attachment loss ratio moved this quarter versus last quarter, like you gave, that would also be very helpful. Thank you. Those are all.
Thanks, Supratim. I think I'll go in the reverse order. I will start with the loss ratios on group health. I am giving you numbers for Q2 last year, both for group health and retail indemnity. Group health last year was 93.7%, and retail indemnity was 65.4%. Both of these numbers are for Q2 last year. The same numbers in the current quarter two for group health is 97.9%, and retail indemnity is 64.6%.
Both of these ratios, I think if you look at it, is pretty much within the ranges that we have always spoken about, as in to say that the group health will continue to be underwritten at typically around the mid 95 levels. Retail health, we have always maintained that the loss ratio range that we are comfortable underwriting is between 65%-70%. Hence, to that extent, I think both of them have played out in line with what one has been speaking about.
The good part is, I think if all of you would recollect, in Q1 when we announced results, our group health loss ratios were actually closer to 100, almost about 99.9%. Relative to that, on a sequential basis, actually, we have seen an improvement in the corporate health loss numbers. In that sense, that is a good sign. Generally, we believe, I think even insofar as the way forward is concerned, we should continue to see efficiencies coming on the corporate health side. That is on the health loss ratios breakdown. On IFRS, I think honestly, Supratim, I think we have always maintained we will definitely come back to all of you, and we will explain in terms of what the impact is on account of, let us say, the change from Indian GAAP to IFRS. Yes, you are right.
We had to do the regulatory filings of quarter one by September 30, which is what we have done. Having said that, I think we will obviously come back and maybe at a separate point of time, take all of you through in terms of what do we see, how do we see the impact of the change from Indian GAAP to IFRS play out. Having said that, I think we will continue to reiterate that one should keep looking at one form of reporting on a consistent basis, for any form of comparisons. Relative comparisons, honestly, will not necessarily lead you to any meaningful outcomes. We will come back. On the motor third-party loss ratio, I think just to again reiterate, we have always maintained the outcome of the combined ratio of motor in specific.
You are right, it gets influenced by what we write as a mix, what we incur as a cost of acquisition, et cetera. We have also seen that obviously third party is, in that sense, a tariff product and own damage is free to price. That is the reason we have always maintained the way you should look at loss ratios for motor in specific is to look at it in the aggregate. The range that we have always spoken is to see the book running at between 65%-67%. There, if you would have seen the numbers for H1 last year, was about 66.6% for overall motor, and H1 of the current year, the number is at about 65.4%. So it is well within the range that one has seen. Hence, to that is where we are.
But some of this, as I said, gets influenced by mix. It gets influenced by the quality of risk that we underwrite. And third, and more importantly, genuinely both on OD and on TP. On ground, we do a lot of work when it comes to managing claims efficiently, and that also has a significant role to play out when it comes to outcomes on the loss ratio numbers.
Yeah. And also just what we source in the current quarter in that sense on a business as usual basis will not change the economics of TP. TP is more about the book that is flowing over multiple quarters that we acquired. But yes, if the two-wheeler has enhanced contribution, which is what you see, it does have a P&L impact in terms of cost of acquisition, which gets debited, and the benefit of that flows over time. So to that extent, it is the cost part which comes in, not the TP which gets impacted immediately.
Got it. That is very helpful. Thank you.
Thank you.
Thank you.
Ladies and gentlemen, we request participants to limit themselves to two questions each and rejoin the queue for any further follow-up questions. Thank you. Our next question comes from the line of Nidhesh with Investec. Please go ahead.
Yeah, thanks for the opportunity. So first question is again on consultation paper. So, post-implementation of the proposed consultation paper, how do you see industry growth evolving, specifically on the renewal business on the motor side? Because commission rates have been cut quite sharply and PoS channel, which probably is a large contributor to CV TP business, that may see big disruption. So how do you see renewal business evolving and what are the steps that company will be taking to improve on the renewal business? And second is, what is the rationale of growing in CV segment when the motor TP price have not changed in last three years and Supreme Court verdict is also likely to increase the claims severity in future? These are the two questions I have.
Yeah. [If you will say. ]
On the consultation paper, I think, again, for us, not just the consultation paper. I think if you look at for ICICI Lombard, obviously, sourcing of businesses either through new or let's say continued retention of our customers, obviously has been a priority. Most of you would have been hearing about the increased focus that we have obviously put on retention as an area of thrust. If you would all recollect, even in the last year when we spoke in the April earnings call, we did talk about our retention numbers moving at an aggregate level across both the retail lines, anywhere between 3%-5%. That particular trend continues even if you look at the first half year.
I think first half year relative to half year of last year, I think we have been able to see an improved retention in that range of 3%-5%. Honestly, for us, retention continues to be an area of focus and with the distribution reforms, obviously it further aids, because genuinely we believe that the objective with which the consultative paper is put out is to also meet the requirement of trying to see how we can improve penetration. Insurance becomes far more affordable in the hands of policyholders or customers, and therefore, to that extent, obviously, it significantly aids any which way is our increased thrust on improving renewals. That's on the response to the point on renewals.
To your point on CV, I think we have always maintained that we would obviously want to write risks which are relevant from an underwriting standpoint, and that's the reason why we always keep saying that the mix of motor between two-wheeler, private car, and CV at various points of time will obviously undergo a significant change. Which is what you would have seen even when you would have looked at the mix of, forget about year-on-year. Even if you would have looked at it on a sequential basis, there would have been some kind of a change in the mix of private car, two-wheeler, and CV in the overall composition of motor. Having said that, on the commercial vehicle side, in general, I think what we have maintained is we have tried to keep the overall mix within that 20%-25% band.
If you would have seen even for the half year gone by, I think the extent of CV that we have is within that range. So that's where we are, and honestly, what we have been writing is actually also creating value for us from an ROE standpoint, and hence to that extent, that's the reason why we have been writing that segment.
Just a follow-up on CV segment, sir. On CVTP, since there is no additional value the customer is getting, pricing is likely to remain same, and distributor commission is cut. How that will improve penetration in your view?
See, all this is still work in progress in many ways, and there are certain sections which have been impacted with the change in guidelines adversely. Certain who there is a big thrust that will be given to the digital part of the business. Motor is not a discretionary purchase. Motor is the law of the land, where if you are plying your vehicles on road, you are expected to have a coverage. I am sure there is enough pull available on the customer side to seek cover and the economics part of it as to how it comes out is all subject to discussions. Right now, the regulators itself has been very clearly seeking feedback from each and every section who has been impacted. We wait for those discussions to conclude from the regulators' side, and we will be abiding with whatever final outcome that comes.
Sure.
Please understand, motor is the one which is very clearly driven by a reasonable pull. It is not a push product.
Thank you.
Sure, [Prashant.] Thank you.
Thank you. The next question comes from the line of Sanketh Godha with Avendus Spark. Please go ahead.
Yeah. Thank you for the opportunity. Just on motor OD loss ratio, given the car contribution has come down. Ideally, there is an impression that motor OD loss ratio should improve because car is the most abused product, if I want to put it in that way. But our numbers have deteriorated relatively if I look year-on-year or sequential. Just wanted to understand what led to that. Is it because of the more renewal pile in the overall motor OD business is leading to that? That's my first question. The second question again is on reinsurance accepted business, which seems to have done meaningfully very good in 2Q. Just wanted to understand the color of the business, how significant it is different from what you did last year.
Sanketh, I will go in the same sequence. Motor OD, all of you again, I'll just keep reiterating this time and again. One, you should keep looking at motor aggregate 65%-67% band. That's the range that you should look at for the overall category. Having said that, generally what you experience is in quarter two, there are lot of, let's say, weather-related events that play out. That's true for any particular quarter two. You have seen this particular quarter getting impacted by severe flooding events across different states, and therefore, the number that you get to see there is inclusive of the impact of some of the floods that we have seen that has impacted different segments of businesses.
That's the reason we have separately called out the overall impact of the losses from some of these flood events aggregating to almost about INR 118 crores in quarter two of this year, relative to roughly about INR 74, INR 75 crores of impact that we had in quarter two of last year. Therefore, you have to look at, whereas in Q1, since you said those numbers have gone up sequentially. In Q1 obviously, you would recollect that we did not necessarily have in that sense impact on any flood events. Therefore, the numbers have to be looked at-
Sir, Gopal, except CAT event in motor OD, is it fair to say the loss ratios have remained stable or improved? If you can give that number, it will be useful then.
Which is the reason, if you recollect, I did talk about when in response to one of the earlier questions, I did equally say that both on OD and on third party, genuinely on ground, we do a lot of efficiency with respect to some of the claim settlement practices. That's also the reason why if you also see one of the other metric that we keep putting out is the percentage of claims that we service through our PPN network is also something that has seen a continued increase. It's almost 75% of our claims get serviced through the non-OEM platform.
Yes, you are right. If one was to take out the impact of the flood losses in the quarter two OD loss ratios numbers, the number will be sequentially better than what you would have seen in Q1.
Yes, Sanjeev, you're spot on. Adjusted to CAT event, you would find our OD book has run on a relative basis, far more efficiently than what it was.
Yeah. That's in response to the first one. On the second one, I think, again, we have maintained that the overall reinsurance accepted book on an nual basis, we have said that what we are comfortable is a single-digit number as the overall contribution. That's broadly the range at which we have seen the overall mix of reinsurance accepted. Having said that, what we write is only, which is very similar to the same thought process what we have even on the domestic side, which is only if it is making underwriting sense is when we write for some of these risks. Hence to that extent, there is no change in the quality of book that we have underwritten in this half year or this quarter two relative to, let's say, what we would have done even in the prior periods.
Understood. Maybe if I can ask one. Can you tell us how much exposure you have to banca business of the total GWP as a percentage of total GWP or GDPI we wrote in last year or in the current half?
I may not remember the number offhand, but what I remember is the business that we do through. Each of these tie-ups, whether it is with banks, NBFCs, financial institutions, et cetera. All of those businesses are typically get sourced through corporate agency distribution. The business that we do through each of these banks, NBFCs or financial institutions on a full year basis of the total premium that we would have returned, roughly that contribution from this particular franchise would be anywhere between 12.5%- 15%.
No, there are two parts to it. I mean, outside ICICI, probably it will be single digit.
Single digit.
It will be single digit number outside ICICI.
Understood. Thank you very much. That is it from my side.
Okay.
Thank you. The next question comes from the line of Madhukar with JP Morgan. Please go ahead.
Hi. Good evening. Thank you for taking my questions. First, when you say now the impact of the Supreme Court judgment is fully taken into account and is part of business as usual, should we think of this as back, like TP loss ratios and motor OD loss ratios should trend back to that 60%-65%, 65%-70% that you used to call out that that is what they will sort of normally trend towards. Is that the right way to think about this? Second, on the commercial lines. First half, obviously, loss ratios continue to look quite high, but there is a substantial improvement in quarter two, and you also called out that things are improving. What is the sense now over here? Have we gone past peak sort of deterioration in underwriting over here and probably loss ratios again sort of trend downwards?
How should we think about this life in the medium term, like next year and after that, let's say? Those would be my two questions.
Madhukar, on the commercial lines of business, the loss ratio moved down. If you remember quarter one, we had explicitly called out that we had couple of large losses which otherwise had not happened over last almost 10 years. But we've had that in quarter 1 coming through in space of 48 hours, which impacted our loss ratio, and we had that almost at 118%. The reason only we called out that is because it was one of those exceptional events on a quarter basis. As things have panned out, we did not have that kind of a challenge in quarter two, and you've seen moderation happening. The NEP part also plays a significant role as the book develops over quarters for a financial year loss ratio being put across. That being said, the trajectory looks positive. The denominator growth looks reasonably better.
But for us to give you a clear sense in an exposure-based business that events cannot go haywire would be a fallacy. We also want to believe it will play out the way you are asking your questions, but we remain. Look, this is the reason why we are in the business that people take covers from us. These portfolios are very strongly protected on the balance sheet as well as the P&L through a good reinsurance cover, which we are able to get with the best of the best with best terms in the industry. So that is all we can say at this point of time and leave it at that.
We remain positive, but I must say that we are very optimistic on the H2 on commercial line as an entity and the role that we will like to play because of the environment changing and industry has faced significant losses, which has led to much more disciplined approach overall to ensure that we are able to fulfill the promise that which the corporates or companies buy insurance for. The second one, if you can just.
Madhukar, just again on the same thing. That is the reason why we called out to say that when we say that it is a part of our business as usual, and that is the reason I reiterated that range again for motor overall. We are not changing any of our estimations of loss ratio range that we have spoken about, which is between 65%-67%. Hence, to that extent, what we took for quarter one is all that we see as the impact of the Supreme Court judgment at this point of time. Anything else, it is kind of baked in as a part of our business as usual outcomes. Hence, to that extent, we don't believe there is a need for us to separately call out any incremental reserving requirements that one is required to take consequent to this judgment. That is where we stand.
Obviously, of course, we will see the development of the book play out, but at this point of time, I think what we provided for in Q1 is all that we are required to take as an impact in our books. We will obviously see the development, how it plays out there.
Understood, sir. That makes sense, yes. All the best.
Thank you.
Thank you.
Thank you. The next question comes from the line of Shobhit Sharma with Elara Securities. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. I am sorry to harp back again on the motor loss ratio side, sir. If I remember correctly, on Q1 call, you mentioned categorically that the TP loss ratio may go by 12%-15% because of the Supreme Court judgment. So can you help us understand what kind of measures you have taken? Maybe the rationalization commission, or changing underwriting policies, or the reduction, the discounting on the OD side, which has helped us to mitigate this impact. Secondly, on the OD side, if I look at, we have seen consistently recurring losses coming in from the flood events over the last couple of years. So is this going to be a normal behavior phenomena going forward? And also we have seen rising EV on the flow share side for the motor industry.
What can be the possible impact on the OD loss ratios for ICICI Lombard? And if you can give us some color on what was the share of EV for our book. And sir, lastly, we are heading to a very stronger base for motor segment, for H2. So how confident are we to sustain the kind of growth momentum we have shown in the first five, six months of this year? And how is the competitive intensity going all around? Yeah, these would be my questions.
Maybe I will take it in the reverse sequence. I think honestly, we are extremely excited with what we are seeing on ground play out for us, particularly the momentum that we are seeing on the motor line of business. The reason is very simple. I think, one, if you see the environment, the environment is in that sense very positive. I think what we have been able to see, particularly with respect to new vehicle sales, I think obviously quarter on quarter, we have seen significant historic highs in terms of volumes play out. Having said that, obviously from Q3, you will have maybe the base effect catching up to some extent because we had the GST reforms play out from October of last year. We will wait and see how that plays out.
On ground, the momentum is very positive, and that is the reason why we are quite excited. But having said that, I think for the industry, if you see the industry combined ratios on motor has actually got further worsened from 125%- 131%. Therefore, the industry has to take a lot more efforts in order to get better in terms of the underwrite. That is again a big positive. The third is, I think, which is what I responded to one of the earlier questions in terms of when the questions was asked in the context of renewals. I did call out to say that on both the retail lines, which cuts across motor and health, on an average, we have seen an increase in retentions anywhere between 3% to 5%. That holds true for motor, whether it is for private car, whether it is for two-wheeler.
I think genuinely we have seen a decent increase on the overall renewals that we have seen on the book. Therefore, to answer your point, and we continue to be market leaders, by the way, in motor as a line of business. We have been able to maintain market share. The good part is if you see the relative gap between our combined and the industry combined ratios, we have only numbers for Q1. The gap has only widened, as in we continue to have almost a 23% delta relative to the industry combined ratios in motor. Hence, I think very excited with how things have played out, and hence to that extent, I think it is quite positive on the way how one is seeing the growth on motor.
On the point on motor OD loss ratios, I think, or TP loss ratios, whichever way you look at it. I think we will continue to reiterate that the range that you should keep monitoring us is look at overall motor between 65%- 67%. I think that is the range that we have spoken about. When we say that what kind of initiatives have we— what kind of efforts drives, let us say, an improvement in loss ratios, whether it is own damage or third party, multiple elements.
I think it is a function of what kind of mix of business that we write between, let us say, different categories of private car, two-wheeler, CV. It is also a function of how much efficiency are we able to create on ground when it comes to settlement of claims, again, in the context of, let us say, own damage or third party.
On the combined ratio front, obviously there is also a factor in terms of the extent of efficiencies that one can see insofar as distribution cost is concerned. With the industry experiencing such a stress of combined at 131, obviously, there is enough and more interventions that the market will have to do. Again, genuinely, we believe that we are well-positioned, and hence that would answer your point on the loss ratio, the range that we should keep looking for is 65%-67%.
Also, the question that you had on EV, the contribution of EV is still in single digit. It has moved over time from a low single digit to relatively high single digit, so it is 7%-8% of our book. Relatives on the thing, it got by and large equal to what you used to have in a non-EV kind of a book. So it started with a distinct advantage at some point of time. Over time, on EV to EV, the loss ratios have got elevated, but the difference is probably on the TP book because still long distance EV is still restricted movement overall, but only has. If even Steven is the non-EV book that we have seen over time. The other question that you had with respect to the CAT event in Q2, I think Gopal spoke about it.
Yes, generally, we do end up having it, and that leads to elevated loss ratios. It is part of the process that we exist in. For us as a company, the threshold is relatively higher than many other companies till we call it a CAT event. But if it does end up crossing and we have the reinsurance part triggered, we do have definite cut-offs on which it becomes an event. But it is part of business as usual for us in many ways, and over a summation of four quarters, it should get averaged out and we should be back to what we call a normal range, which Gopal has already spoken about.
Got it. Sir, just last one. On the competitive intensity side, because the Supreme Court judgment, have you seen competition pulling back from?
As Gopal mentioned, the quarter one numbers of motor are alarmingly high at 131 and definitely not workable. The new paper which has come for discussion will redefine a lot of this and the industry and the distribution is working to represent themselves on many counts, and we need to see how that evolves. But the simple answer is 131 at the industry level is certainly for motor not a workable combined ratio, whichever way one looks at it.
Sure, sir. Thank you, and all the best.
Thank you.
Thank you.
Thank you. The next question comes from the line of Swarnab Mukherjee with 360 ONE Capital. Please go ahead.
Hi, sir. Thank you for the opportunity. Two, three questions. First one, I just wanted to understand, our earned premium growth continues to be fairly strong over, I think, six, seven quarters now at least, while in the base period even the gross premium growth had been slower. I just wanted to understand how long do you think this trajectory would continue and what is driving this? As we move ahead now, in the base period, third quarter of last year, we had seen a gradual growth uplift playing out. Would it have a similar impact on the earned premium level? Some comments on this would be useful. Second, sir, I wanted to understand in the P&L, the other OPEX head has gone up meaningfully between the last two quarters. I just wanted to understand that what is driving this number.
Also, I do not know if I missed this, if you have already commented on this, but the expansion in the commission ratio, so net commissions to net earned premium. While I understand that there is a higher retail mix during normally second quarter, but is there anything else to read into? Because this number has gone a bit above what normally used to be the trend for second quarter. Yes, sir. These will be my questions. Thanks.
Yeah. On the first one, Swarnab, on earned premium. Thanks for highlighting, and that is exactly what we stand for as an organization. I think consistently what we want to deliver is growth in revenues and growth in earned premium, which gets paid out over a period of time. I think the only reason for you to see a relative softness on growth in top line relative to NEP is primarily because I think we did call out to say that we have obviously been a bit cautious in underwriting crop in this particular year, and that is the reason why you would see that headline number being, in that sense, relatively muted.
However, the rest of the businesses, whether it is motor, whether it is health, whether it is commercial lines, I think all of them have done phenomenally well, and the momentum looks very promising because I think as, for example, that's the reason why we called out separately on commercial lines. For example, leave aside April. Consistently since the month of May until September, we have been able to continue our trajectory of improving market share. Obviously that adds to, let's say, the growth in earned premium. Retail health, we continue to have a 2x outperformance relative to the industry growth. So that also contributes to growth in earned premium and even motor. As I said, I think we have continued to be able to hold on to our market share.
All of those are the ones that have contributed to growth in earned premium relative to, let's say, what one would have seen in terms of growth in revenues. So that's one. The trajectory to continue for the third and fourth quarter, I think given that we are heading in that sense, as we highlighted on a positive note, genuinely we believe that we should be able to maintain this momentum further. For example, even on gross premiums, relative to the industry growth of 13.2%, if you take out crop and mass health, industry grew at about 13.2% in Q2. Our growth was 13.9%. So we actually had an outperformance in terms of the overall numbers, and that is the momentum that one expects to continue even as we head into quarter three and quarter four.
Base effect is not just for us, base effect is for the entire industry, and therefore, to that extent, one will have to see how things play out. But generally, for us, we believe very positively placed in so far as maintaining the momentum on the earned premium trajectory is concerned. On the point on the third question of yours in terms of the expense and commission ratios being high, I think possibly you answered yourself.
Yes.
Because yes, you're right. Our mix of business obviously has seen a change, and this is not just for quarter one, even for quarter two. I think obviously we have seen a relatively higher proportion of retail business coming in, and obviously retail comes with a relatively higher cost of acquisition, but with a better, let's say, loss outcome. Hence, to that extent then. But at all points of time, one thing that ICICI Lombard is very clear about is to make sure that we are able to run our businesses within the limits on expense of management that's laid down by the regulator. What we see in the industry is clearly there are players who continue to have exceedance on the expense of management limit, and these players have to genuinely work to make sure that they are well within the limits when it comes to.
So that again, to your point on the momentum, that again gives us an opportunity for us to ride market growth. To your point on any significant change in the operating other expenses, I think nothing specific to call out in terms of impact. I think these are genuinely business as usual for us. But happy to connect separately in case if you believe there's a separate. If you need any additional information on that.
Sure, sir. Just one small technical clarification, since you report the headline numbers both on N basis and 1/n basis. So the difference in combined ratio for N and 1/n would largely pertain to commission, or is there anything related to OPEX also there?
Swarnab, this is similar to the point that I keep saying. When you start doing relative comparisons between outcomes on financial performances, this is exactly what happens. This is the same thing when comparing Indian GAAP versus IFRS and then trying to figure out why did the combined ratios in a particular quarter go up or go down. So relatively, obviously, there will be multiple nuances attached to it. The same thing goes into the difference between N and 1/n. That's the reason if you would have seen even in the opening script that we read out, we have confined ourselves to N basis outcomes because that is something that we believe drives the economic value of the business that we are underwriting. Even from an ICICI Lombard, our own internal assessment standpoint, the board assesses us in terms of the outcomes on an N basis.
That is what we would want to continue to keep looking at it consistently. On that basis, if you would have seen our combined ratios for Q2 last year, if you exclude the impact of CAT losses, our combined ratios have largely been maintained at about 102.6. That was the number in Q2 last year. That number in the current year, quarter two, excluding CAT losses, is 102.7%. So that's what we will keep monitoring, and hence to that extent, I think we're extremely happy with the way how the performances has played out and the momentum that we're riding into Q3. I think we believe this momentum should continue for us.
Very helpful, sir. Understood. Thank you so much.
Thank you.
Thank you. Ladies and gentlemen, we will take one last question from the line of Avinash Singh with Emkay Global. Please go ahead.
Hi. Quickly, one, that again, coming on this draft revision. Let's keep aside things. Assume that how the interplay of commission EOM moves, but at least EOM, the new normal of 25% comes into play. Do you see that reducing the unfair competition, unfair practices, giving you advantage, one? And second, in that case, will you be able to see at least part of. You are somewhere close to 31% on a full year basis, that going to 25% or 6%, part of that at least even if the pricing takes away, partly able to retain on your profitability side. This is the question, how do you see even adjusting for all this uncertainty? And second, if I see you have launched many, I would say very small products on your IL TakeCare platform like a warranty extension and mobile insurance and a few more others.
Now, of course, these are very small ticket, but eventually, how do you see the distribution dynamics of the product? Are you just looking for it on an online direct channel or you have a more longer, bigger omni-channel plan for these small products? Thanks.
On the first one, Avinash, I think what we have always maintained is one, just to make sure that we get the math correct. ICICI Lombard as a company has always maintained the EOM within 30%. Therefore, to that extent, on an n basis, we have always been well within the limits when it comes to compliance with expense of management. In a given quarter or so, it can be largely been influenced by the business mix. Otherwise, when you look at compliances on an n basis, we have always been, as a company, well within the limits on EOM, consistently across multiple annual periods. To your point on this expense of management trajectory, which is put down to 25% at the initial phase.
Honestly, it's a very positive step, which is a point that we made in response to one of the earlier questions, which is to say that there are companies in the market who are operating at levels which are far more in exceedance of 30%. So they genuinely will have to put a lot more effort to try and make sure that they bring down their trajectory to less than 25%, as what the limits are. I'm sure the regulator will keep a very close watch on these companies in terms of how do they bring the thresholds down. That obviously, in that sense then, therefore, gives us a great opportunity for us to be able to because we do have the distribution, we do have the reach in terms of tech and the processes in terms of claim service.
Honestly, that is what we have always maintained. When relatively, if the competitive intensity is to see a positive change, ICICI Lombard will obviously be a key beneficiary of the market share change. The other is, forget about the distribution, forget about the consultation paper. If you look at the quarter one combined ratios for the industry in motor, which is what even Sanjeev also talked about. The industry combined ratios have touched 131%. Honestly, we believe for the market to consistently keep losing 30 cents to a dollar, it's a lot of money to lose, and therefore the market has to correct itself. The moment we get to see that, either which ways, I think we should continue to be beneficiaries of this particular change, and we are pretty much well-positioned to get the impact of this play out. On the new product.
On the new products, Avinash, the question that you had, certainly one of the biggest advantage that we have as an institution is we are multi-product, multi-channel. Whatever we end up doing is omni-channel in many ways. That being said, there are certain products by sheer nature, like the VIBE product that we have launched for Gen Z as a category, would be delivered on the digital-first platform because that is the way Gen Zs will prefer to buy. But our philosophy has been very clear that our products are meant for our customers, and the customers can choose which way they want to access it, is the first principle on which we follow our distribution model and product creation.
Got it. Okay. Thank you.
Thanks.
Thank you.
Thank you. Ladies and gentlemen, we take that as the last question for today. I now hand the conference over to Mr. Sanjeev Mantri, MD and CEO of the company, for closing comments. Over to you, sir.
Great. Thank you so much for joining in. We are moving into the festive season and wishing you all great times together. Already Navratri has started, and you know that quarter three is pretty special from a general insurance perspective. Wish you all prosperity. The backdrop in terms of the discussion paper that has come also has let all of us believe that the insurance industry will go through a reboot, and we see a play for ourselves. We are excited about opportunities in motor that comes in the ensuing quarter. Commercial, as we spoke, has also gone through a transformation from the lows that we had witnessed in quarter one. Health continues to speed its way, and we playing a role by exiting at 5% in the month of September.
So we've got some exciting times ahead of us, and we look forward to work with all stakeholders because we do believe that the strength of our existence also lies in the strength of our partners whom we work with, and we will continue to evolve ourselves. Thank you so much.
Thank you. On behalf of ICICI Lombard General Insurance Company Limited, that concludes this conference. Thank you everyone for joining us. You may now disconnect your lines.