ICICIGI — earnings call
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Prepared remarks
Moderator · Conference Operator
Good evening, ladies and gentlemen.
A very warm welcome to ICICI Lombard General Insurance Company Limited Q1 FY2024 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 & 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 ‘*’ then ‘0’ 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.
Bhargav Dasgupta
Thank you and good evening to each one of you.
Thank you for joining
Questions and answers
Moderator · Conference Operator
Thank you very much.
We will now begin the question-and-answer session.
We have our first question from the line of Prayesh Jain from Motilal Oswal.
Please go ahead.
Prayesh Jain
Just a few questions.
Firstly, could you talk us through the loss ratio like ex-catastrophically, what would be the loss ratios and where is this loss ratio kind of sitting?
So, if I might look at a group health loss ratio, your total health loss ratio is at 78.7%.
Could you split that up for us in terms of core retail health and group health?
And where is this catastrophic loss exactly sitting in which line item, which of the segments?
Gopal Balachandran
Prayesh, the breakup of the overall health loss ratio numbers that you see, which is 78.7% for Q1 FY2024, the breakup of that for employer- employee or the group health is at about 92.6%.
Retail indemnity business is at about 64.2%.
And 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.
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 is what ICICI Lombard General Insurance Co.
Ltd. July 18, 2023 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 ₹35 crore.
Prayesh Jain
Any reason for very high loss ratios on the group side, is there a spike in terms of number of claims or frequency or severity?
Gopal Balachandran
So, nothing specific; if you see what we have been speaking about it 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 95% threshold between 90% to 95%, because it primarily comprises of two books as what we have spoken, one is relatively large corporates which runs at a loss ratio anywhere ranging between 95% to 100%.
And then we have SME, which is relatively small and the mid corporate portfolio which runs at a loss ratio experience between 90% to 95%.
So, on balance, historically we have run the book at a loss ratio, around that 95% threshold.
Currently for the quarter, as I said, the number stands at about 92.6%.
So, hence 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.
Bhargav Dasgupta
Actually Prayesh, if you look at our last year full year group health loss ratio, that was roughly about 95%.
So, if you look at the current quarter it is 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 stands.
Prayesh Jain
Got that and coming to motor segment, again from a profitability perspective and the change of mix that you've spoken about going away from commercial vehicles, would that be a strategy for FY2024 or from a longer-term perspective?
And secondly, for many quarters we've spoken about some green shoots on the OD pricing, but that's not really reflecting very heavily in terms of numbers.
While you mentioned about the industry combined ratios improving between first half and second half, is there any more clear trends that you see further improvement or it's just getting arrested at the current levels?
Bhargav Dasgupta
So, on the first one, commercial vehicles, some of the granular calls that we took, some strategic calls that we took over the last two to three years that we've talked about, we are staying invested with that.
There is a bit of rationalization that we did was because the TP price hike this year did not happen, so with our estimate of inflation as we've always talked about, certain marginal portfolios become unviable for that.
ICICI Lombard General Insurance Co.
Ltd. July 18, 2023 Having said that, if you see our CV mix at 21%, is still higher than what our traditional CV market mix had been, which was about 15%-16%.
And our sense is that we are not planning to reduce it significantly.
It will probably be in the similar ballpark, 20 plus, minus.
Coming to your question on OD, again, if you look at this quarter loss ratio for us in the OD compared to last year, you will see an improvement.
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 of some of the players, we were expecting some more rationalization, some more improvement.
At this point in time, we've not seen it, but we have reached a level where we have ironed out most of the marginal portfolios, so most of the pain is behind us as we think.
Moderator · Conference Operator
We will take our next question from the line of Sanketh Godha from Avendus Spark.
Please go ahead.
Sanketh Godha
My question is around the Motor OD business.
If I look at the loss ratio numbers, consistently it has been improving from Q2 or Q1 of FY2023. That number is around 67%, so just wanted to understand that this number of 67% is sustainable or what corrective measures you have taken, except for the choice of not seizing the market share, that has led to the improvement in the loss ratio in the Motor segment, OD segment rather.
That is one thing and second, just wanted to again understand this IL TakeCare app which you said today probably contributes almost 1% of your GDPI in Q1, so want to understand how you see this channel to be a cross-sell upsell channel, which products and how much it can potentially contribute to the entire GWP as time progresses?
Bhargav Dasgupta
So, Sanketh on the first question, on Motor OD side, there are multiple things that we've been doing and in the sense we've been saying that a lot of heavy lifting we did last year, one is the selection, the marginal portfolio you let go that has an impact.
So, our sourcing, which is the target loss ratio when we sourced our business, has also come down.
The second is on the claim side, there's been a huge amount of effort that we have made more in terms of some of the misuse that generally happens, but we believe had picked up post COVID.
So, on the claims control, we've done a lot of work on using data analytics to reduce waste and misuse.
Thirdly, we talked about the percentage increase in PPN that also gives us some savings on the claim side.
So, there are multiple initiatives that have happened and if it is 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.
ICICI Lombard General Insurance Co.
Ltd. July 18, 2023 Coming to your point on IL TakeCare, the number that we gave out, it's about 5x of last year similar number for the quarter, but in aggregate for the Company even if we add this, IL TakeCare number to the overall digital business, as we said, it's about 4.9% of our total business.
Let's say IL TakeCare contribution for this quarter was about ₹58 crores (₹588 million).
So, 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 better loss ratio for clients which use IL TakeCare in group levels, we see a better retention of profitable accounts in the corporate side and we are looking at how we can use that further strategically in terms of increasing cross sell and upsell that's work in progress.
But 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.
Sanketh Godha
Bhargav, there's just one clarification, is this IL TakeCare app you are able to manage cross-sell predominantly retail health at Rs 58 crores or 59 crores or it is other products also you have seen the traction?
Bhargav Dasgupta
It's other mix of products.
We are seeing Two-wheelers, Health, Private cars, employees of corporates buying policies on their own.
So, it's a mix of most products that we have there.
Sanketh Godha
Got it.
And finally, last one, Gopal, if you can explain the reason why the commission costs have boosted, overall expense has not changed, but the commission cost has gone up while the expense has come down.
So, you have seen that EoM impact already visible with respect to shifts from advertisement cost to the commission?
Gopal Balachandran
So Sanketh, if you recollect in the way we have always talked about is to look at the businesses from an overall combined perspective because as we keep saying, there are different models of sourcing that exists in the market.
There are segments which relatively run on high LR and low expense ratio and the other way around.
So, which is what now when you look at from a Q1 perspective, I would always keep urging to look at it more from an expense of management standpoint rather than looking at any break ups around that.
So, if you look at the overall expense of management ratio in terms of the breakup of the combined ratio that we reported about 103.8% for Q1 FY2024, 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 Q1 FY2023, the expense of management number was about 32.1%.
And again, when you look at it even vis-à-vis Q4 FY2023, the ICICI Lombard General Insurance Co.
Ltd. July 18, 2023 expense of management number was about 29.9%.
So, even on a sequential basis, we have seen an improvement in the overall expense of management and even on a year-on-year basis, clearly there have 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 exists and as a Company, that's what we would want to look at.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Nidhesh Jain from Investec.
Please go ahead.
Nidhesh Jain
Thanks for the opportunity.
Firstly, if you could 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 on Y-o-Y basis?
Bhargav Dasgupta
So, if you look at the way we manage this business, there is the Digital One team which looks at, 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 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 5x, it is around 480%.
Nidhesh Jain
Because 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 flattening out.
Growth is largely coming from the digital ecosystem.
So, are those trends continuing in this quarter also and because the business coming from our own website will be much better quality, though low, though more profitable probably over a period of time.
So, how we think about the strategy on the digital side, from sourcing business from our own website?
Gopal Balachandran
So, Nidhesh, it is a combination of both, so obviously we look at all of them are 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 of growth, 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, and overall, as we said, the Digital ICICI Lombard General Insurance Co.
Ltd. July 18, 2023 One contribution in terms of revenue for the Company for this quarter has grown at about 24.7%.
Nidhesh Jain
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, while if you look at our loss ratios have improved quite a bit and OpEx ratio has also seen some improvement, so how is the trend there?
How is the share of that business shaping up on overall Motor GDPI?
Gopal Balachandran
Again, it's a combination of both.
For us, if you look at this particular quarter, the growth on new private car has come back, which is exhibited when you look at it sequentially on a month-on-month basis, the growth in new private cars seems to be doing well.
That typically also comes with a relatively better loss experience.
Having said that, we are also increasingly focusing on exactly the point that you mentioned, with respect to focusing on relatively older vehicle segment, which also comes with a relatively high LR and let's say lower cost of acquisition and that's again reflecting also in the expense of management number.
And 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, the OEM channel distribution will be in the range of about 60%- 65%.
So directionally, 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 opportunities that one sees.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Shreya Shivani from CLSA.
Please go ahead.
Shreya Shivani
I have two questions.
First is on the total Motor segment.
So, if I compare Lombard’s both loss ratio and growth across the private peers, I will specifically look at the private general insurer.
So, many of them would have just a few percentage point higher loss ratio on this segment, but they're delivering about 15% growth in this quarter as per the IRDAI data.
So, what can we expect for the Lombard’s Motor segment for the full year and any guidance on the overall premium growth for FY2024, that's the first question?
And the second question is on the crop loss ratio, it seems a little higher at more than 100% and last year I remember you guys had shared that the crop program that you had participated in, was 80-120 capped plan something like that.
So, if you can help us understand on that front?
ICICI Lombard General Insurance Co.
Ltd. July 18, 2023
Gopal Balachandran
So, if you recollect obviously the claim 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 to 100% loss ratio basis.
Which is why when you look at that number, you will find the loss ratios to be a bit elevated.
But when the actual experience starts to play out, you will obviously start getting that reflected on actuals.
And typically, it roughly takes about 2 quarters for the loss development to play out in the Crop segment.
So, as and when we get to see the impact of the cycle, we will actualize those numbers.
To your first point on what is it that we can expect 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, you would have seen for Q1 FY2024, I think we have had close to almost about 200 basis points outperformance relative to the market growth numbers when you look at ex of Crop.
And so that's clearly the expectation that we have at the Company, we have the necessary strength so far as distribution, claim service and technology is concerned and hence from an overall market standpoint, we would obviously want to expect to continue to have similar outperformance.
Now within that, your first point on how does one see 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.
So, for example, in April we had a de-growth in Motor.
For the month of May, we had a positive growth of about 5% and for the month of June, we had a growth of almost 10%.
Sequentially, we have been able to get better growth and the extent of gap between the industry growth numbers and the growth that we have been exhibiting is getting narrowed down.
So, the only thing that 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's coming to post from this year.
In fact, when we were looking at the FY2023 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 number greater than the regulatory prescribed limit of 30% or 35%.
So, this clearly calls for 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 have exhibited.
Once some of these things starts to correct over the period of time, obviously, ICICI Lombard General Insurance Co.
Ltd. July 18, 2023 as I said and so far as our positioning is concerned, we should be able to see relatively better growth, even in Motor as a category.
Bhargav Dasgupta
And the comment that you had, Shreya, in terms of the loss ratios, 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 will see certain patterns, you can do the analysis yourself and in third party again if you do a bit deeper dive on the reserving picture which is now available to all of you, 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.
Shreya Shivani
So, one just clarification I wanted, the retail indemnity loss ratio that you mentioned at 64.2%, this is 64.2% for the retail indemnity sold by agents or the one which is getting sold by ICICI Bank?
Bhargav Dasgupta
Not the group, this retail indemnity is the individual retail indemnity.
Shreya Shivani
And what is the loss ratio of the ICICI Bank portion that is getting sold ICICI Bank?
Bhargav Dasgupta
We are not giving that level of detail, that is not fair on the part of distributor also.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Rishi Jhunjhunwala from IIFL Institutional Equities.
Please go ahead.
Rishi Jhunjhunwala
Just couple of questions.
Firstly on the Health side, in the 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?
And secondly on the Corporate side, there is a significant growth that has come here, is that being driven by the normal group health plans or there is a large component of the credit protect plans also which are coming here and is that the reason why unexpired risk reserve has shot up quite significantly for us in this quarter?
Gopal Balachandran
So, on the second part, Rishi, I'll just 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, we have actually been able to exhibit significant market share as what we 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% and this spans across Fire, ICICI Lombard General Insurance Co.
Ltd. July 18, 2023 Marine, Engineering, Liability etc. across the key commercial line and there the growth is aided by across all factors, which is, it is driven by volume increase, it is equally driven by, accretion of market share and 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 growth that one has seen in the overall commercial lines portfolio.
To your second point on now, within the group health or within the corporate health, again, it's been a combination of both.
As you would recollect, some of the participants in the market had exhibited significant underwriting losses, particularly in the corporate health space.
And there have been clear instructions that they have given to their respective operating officers to get better on underwriting.
That exactly is what we wait for as opportunities for us to write businesses because as I said, we have the necessary backend strength in terms of distribution and claim service to our advantage.
So, hence we have been able to gain or accrete market share from some of those companies into us where customers start 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 corporates concerned and hence to that extent it is also volume driven.
And three, it's also a function of the relative overall growth that one has seen.
Health is also aided by, reasonable growth even on the Bancassurance space as we had put out even as part of the opening remarks.
Our Bancassurance, which comprises distribution through banks and our key relationship group partners, that's done reasonably well at almost about 27% growth on the back of a 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, that we will wait for in terms of how the development takes place.
Rishi Jhunjhunwala
And second question while you explained about the expense of management thing and to look at on an overall basis and that's anyways what we are going to do, but just from a 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?
Gopal Balachandran
If you ask us that as we always keep saying Rishi, at the end of the day, we always look at the overall cost of acquisition in terms of the way ICICI Lombard General Insurance Co.
Ltd. July 18, 2023 we do businesses.
And that's the reason why I specifically put out that number in the context of expense of management and that's what I would urge to look at.
And honestly, the split between what constitutes commission, what constitutes my overall operating expenses, all of them are baked in as a part of our operating model.
Fundamentally, if you ask us have you changed anything in the underlying way of doing business?
Honestly not.
There is no specific change that one has done and hence, which is why I'm saying that once you start looking at the numbers more from an expensive 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.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Avinash Singh from Emkay Global.
Please go ahead.
Avinash Singh
Two questions.
So, first one is more on Commercial lines.
Particularly fire and engineering, so there were sort of multiple factors affecting the pricing and all.
So, 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 can quantify the price changes effectively that happened in this quarter?
So, that's one commercial line.
Second on group health or employer- employee part, if you can provide some sort of either quantify or some qualitative disclosure in terms of how has been your experience on the business that you have initially acquired a pre-COVID period and continue to renew with the price hikes and the business you have acquired last year?
So, are there sort of a difference in terms of the claims experience in these two sets?
These are two questions.
Thank you.
Bhargav Dasgupta
So, let me take the second one and Gopal can give you the split of the commercial lines business.
In aggregate 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, but it is well in line with our estimates.
So, it's a single digit change, not a material reduction that we have seen in the Q1 FY2024, but we'll have to be watchful of how this progresses for the rest of the year.
But till now it's largely been in line with expectations.
The difference in the loss ratios for fire and engineering with and without CAT, Gopal will answer that separately.
Coming back to your question on group health, Avinash, the real good news for us was that the accounts that we had pre-COVID, we've been talking about this in the past as well.
From July ICICI Lombard General Insurance Co.
Ltd. July 18, 2023 of the year, after the second wave, we started increasing prices between 15% to 20% and we used to see more than 90% retention of the large accounts.
So, the service proposition that we've delivered, the various features of IL TakeCare etc., overall we've had good experience in terms of retaining these accounts.
This year, for the reasons that Gopal explained, we are seeing good traction in business moving from some of the other companies that are coming in.
The way we are pricing it is again in line with our general practice of being disciplined about underwriting.
So, the question then is that will these guys also renew next year if prices go down that we'll have to wait for.
What 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 price seekers every year who switched from one Company to the other.
But to look at companies who generally being stable with one insurer for some time, maybe 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.
So, 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.
Gopal Balachandran
Avinash to your point on what could be the potential impact on some of this pricing led changes and cyclone led impact.
As Bhargav said, the price decline is a single digit number roughly in that range of, 5% to 7% decline in pricing and 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 the overall market, fire growth for Q1 FY2024 is far more tepid at let's say at 5.9% or 6.0%.
Even despite that if you look at, for ICICI Lombard, we have again had an outperformance in that category.
We have grown at almost 10% in fire as a line of business.
So, that's the impact 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 the reinsurance rate, and therefore, we also had seen an increase in the XOL cost.
What happens is the NEP there is a catch up because typically your cost of XOL hit in Q1 and as the book grows, the earnings plays through over the remaining quarters.
So, now when you look at the loss ratios, what is put out in the investor deck for fire, at about 85% for Q1 and 98.6% for engineering.
Now this has the impact of the XOL cost.
It also has the impact of losses from cyclone as what I mentioned, very difficult to 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% and engineering, ICICI Lombard General Insurance Co.
Ltd. July 18, 2023 which is looking like about 98.6% will look like about close to about 80%-82% in that range.
So, that's the kind of numbers that one sees so far as excluding the CAT losses are concerned.
But as I said, Q1, particularly for engineering is relatively more long tail as the project starts to build over a period of time is where you will see a relatively larger proportion of earnings coming through.
And hence to that extent, you will always find possibly the Q1 loss ratios to be a bit more skewed.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Swarnabha Mukherjee from B&K Securities.
Please go ahead.
Swarnabha Mukherjee
So, couple of questions.
First on the retail health, so sir you mentioned around 64% loss ratio in the retail indemnity portfolio, I was just wondering that historically you have told that you have run this book at around loss ratios of between 65% to 70%.
So, 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 because profitability-wise we are much better than where we were running the business.
So, whether we should expect to see growth panning out at a faster rate and much higher than the industry given that our market share is still lower than our Company average market share is across category.
So, that is the first question on retail health.
And on the second question on the fire loss ratios, you pointed out that there are XOL losses that are baked in right now.
Just wanted to understand given that the elevated loss ratio 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 denominator being lower from the pricing point of view and thirdly on the crop premium for the month of June, I think there was a sizable crop premium so that pertains to Maharashtra and of a similar structure of what it was done last year.
Bhargav Dasgupta
So, let me add to the fire, and 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 he explained, big chunk of that incremental loss issues because of catastrophe which happens once in a while.
Secondly, the price softening has had a 5% to 6% impact, not as big as one was worrying about.
So, in that sense it's a positive.
Third is the XOL cost is an upfront cost.
As we go through the year, anything keeps accreting and the XOL cost gets spread over the whole 12 months.
For the Q1 it looks elevated because it's a smaller book which is absorbing the increment.
So, overall, our property and casualty business, we are very happy with the ICICI Lombard General Insurance Co.
Ltd. July 18, 2023 way things are progressing.
Just to give you an overall sense of where we see the business.
Swarnabha Mukherjee
Just a follow up on that.
The price softening part that you mentioned 5% to 6%, so in a scenario if the reinsurance market softens next year from where it is, can the softening be more
Bhargav Dasgupta
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 1.
Gopal Balachandran
I'll just only add to what Bhargav said, 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, close to about 19% ex of crop.
If you would have seen the growth in net written premium has been almost about 23% which is a function of what we retain and what we reinsure.
But relative to that, if you would have seen the growth in NEP has been only about 12%.
So, 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 exhibit growth, you will start seeing NEP doing a catch up over the subsequent quarters.
So, which is what you should watch out for and 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 again, we will urge everyone to keep looking at numbers more on an annual basis, ideally over years, because that's how the insurance cycles typically work.
So, that's just in addition to what Bhargav said.
To your third point on the crop, 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 clear about what risk that we want to undertake.
And two, as we had discussed even during the April call, potentially that there is an expectation that this year could be a year of El Nino, and hence to that extent again from an exposure standpoint, I think we would want to be a bit guarded and 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.
So, that stand pretty much remains the same.
To your first point on the overall retail health loss ratios, again, I mean this is Q1 numbers, right?
I think the range that we gave is the range that we are comfortable to operate with as a segment and what we are quite happy and excited about is the fact ICICI Lombard General Insurance Co.
Ltd. July 18, 2023 that even if you look at consistently since H2 FY2023 and even for the whole of, in fact FY2023, we have had outperformance on retail health vis-à-vis the market.
I mean if you recollect for FY2023, our growth was almost about 17%, industry on retail has grew at 15%.
Even Q1, when you look at the numbers for us, individuals or retail health grew at almost about 23%.
Market growth was about 18%-19%.
So, again, we have had outperformance 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 Q1 FY2024 has largely been in line with the standalone health growth numbers as well.
So, 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 and 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're 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 and hence to that extent we will continue to stay invested in building that distribution force and loss ratios as I said will be more an outcome and the range is what we largely talked about.
Q1 FY2024, honestly again very difficult to comment on one particular quarter.
You have to ideally look at it more on a full year basis.
Moderator · Conference Operator
Thank you.
We have a next question from the line of Prakhar Sharma from Jefferies.
Please go ahead.
Prakhar Sharma
Just wanted to get a pulse of this flooding in the Northern Indian part.
How big is the business?
How should we assess any potential loss?
That's part one and just wanted to get a sense on, you know, the full year and next year combined ratio expectation, are we sticking to our earlier guidance, so these were my two questions.
Thank you.
Bhargav Dasgupta
So, the second one is easier to answer.
Yes, we are sticking to it in spite of these losses that catastrophe losses that we had in this quarter and the North Indian floods will come in the Q2 because these even now, as we speak, the losses are coming in.
Till now, it doesn't look to be significantly an area of concern.
But it's too early to call Prakhar, what happens in floods is that it takes some time for the customers to come back and report all the claims, so I don't want to give a false comfort that it's low value catastrophe loss.
We'll have to wait for some time.
But whatever it is, you know as a Company, unless these losses are significantly out of sync with the past experiences, we are clear that we are staying within the same guidance level that we've talked about.
ICICI Lombard General Insurance Co.
Ltd. July 18, 2023
Moderator · Conference Operator
Thank you.
We have our next question from the line of Neeraj Toshniwal from UBS India.
Please go ahead.
Neeraj Toshniwal
So, given we have seen some improvement in June in motor which is quite impressive, just wanted to understand the outlook going ahead and are we seeing some pricing improvement which has happened due to expense of management changes and no hike in Motor TP pricing for this year?
Bhargav Dasgupta
As we said on the second point, not much, we have expected some more improvement because of the expense of management constraints.
We have seen some bit of correction in terms of certain elements of PA price etc. for the sector.
So, a lot of companies have improved some elements of pricing, but it is not to the extent that one had expected given the expense of management, as Gopal explained, you know, for a large number of companies in the sector, they're over their limit.
As of now, we've not seen a change, but as we explained, we'll have to see what happens after Q1 FY2024 and how the regulator looks at industry numbers and Company specific numbers.
So, we'll be watchful.
From our perspective, we are well within the limit.
We have a big cushion, but that doesn't mean that we are going to be profligate.
We are focusing on building a sustainable business.
Neeraj Toshniwal
So, what kind of growth in Motor portfolio we are now given the momentum is coming back, we are building in?
Bhargav Dasgupta
As I said earlier the difficult part is behind us is what we think.
So, our expectation is that we should definitely go in line with the market for this quarter.
Neeraj Toshniwal
And last question is on the tenure which you just mentioned in the opening remarks there is the guideline from the regulator, any incremental color on that?
Gopal Balachandran
So, Neeraj, this is something that we have been talking about earlier as well.
So, obviously at an appropriate point of time, as we keep saying succession planning is something that actively gets discussed at the BNRC and at the board level across management levels, so maybe at an appropriate time, we will come back if at all wherever we have to make any necessary announcements.
ICICI Lombard General Insurance Co.
Ltd. July 18, 2023
Neeraj Toshniwal
Got it.
And one last question on the ICICI Bank stake buy which would be happening over some time?
Has any proceeding or approval from the regulators happened because there is no update on that front?
Bhargav Dasgupta
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.
Moderator · Conference Operator
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.
Bhargav Dasgupta
Thank you everyone for joining and look forward to interacting with you over the next few days.
Feel free to reach out to us.
Thank you very much.
Gopal Balachandran
Thank you so much.
Moderator · Conference Operator
Thank you.
On behalf of ICICI Lombard General Insurance Company that concludes this conference.
Thank you for joining us and you may now disconnect your lines.
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Ltd. July 18, 2023 uncertainties include, but are not limited to our ability to successfully implement our strategy, our growth and expansion in business, the impact of any acquisitions, technological implementation and changes, the actual growth in demand for insurance products and services, investment income, cash flow projections, our exposure to market risks, policies and actions of regulatory authorities; impact of competition; the impact of changes in capital, solvency or accounting standards, tax and other legislations and regulations in the jurisdictions as well as other risks detailed in the reports filed by ICICI Bank Limited, our Promoter company with the United States Securities and Exchange Commission.
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