ICICI Lombard General Insurance Company Ltd

NSE:ICICIGI

Earnings Call Analysis

Impressive Financial Growth in Q1 FY 2025

ICICI Lombard reported strong financial performance in Q1 FY 2025. Gross direct premium income grew by 20.4% to INR 76.88 billion, outpacing the industry's 13.3% growth. The company's profit before tax surged by 48.8% to INR 7.74 billion, while net profit rose by 48.7% to INR 5.80 billion. The health segment saw a 28.5% increase, and the motor segment also performed well with a growth of 26.3%. Investment income increased by 33.7%, reaching INR 11.28 billion. The company remains focused on leveraging technology and a multiproduct strategy to sustain its growth momentum.

Strong Growth in Premium Income

ICICI Lombard General Insurance demonstrated robust performance in the first quarter of FY 2025, with gross direct premium income (GDPI) experiencing a significant growth of 20.4%, rising to INR 76.88 billion from INR 63.87 billion in the same period of the previous year. This growth outpaced the industry average of 13.3%, highlighting the company's strong market position. Excluding Crop and Mass Health, the GDPI growth was 19.7%, still higher than the industry growth of 14.8%【6:0†source】.

Segment Performance

The Property and Casualty segment's GDPI grew by 9.7% to INR 25.08 billion. The Motor segment saw a substantial increase, with GDPI growing by 26.3% to INR 23.69 billion, driven primarily by older vehicles. The Health segment also performed well, with GDPI rising by 28.5% to INR 23.37 billion【6:0†source】【6:1†source】.

Improvement in Combined Ratio

The company’s combined ratio, a measure of profitability, improved to 102.3% from 103.8% in the previous year. This indicates better operational efficiency but still suggests that, slightly, more than the total income is being spent on claims and expenses.【6:0†source】.

Investment Income and Assets

ICICI Lombard’s investment income for Q1 FY 2025 was INR 11.28 billion, a substantial rise from INR 8.44 billion in the same period last year. Investment assets grew to INR 510.04 billion from INR 489.07 billion over the same period, reflecting the company's strong asset management capabilities. The investment leverage increased marginally to 4.14x【6:0†source】.

Profit Growth

Profit before tax grew by an impressive 48.8% to INR 7.74 billion, and profit after tax mirrored this growth at 48.7%, reaching INR 5.80 billion. The return on average equity (ROAE) improved to 19.1% from 14.7%, demonstrating enhanced profitability and efficient use of equity【6:1†source】.

Regulatory Environment and Market Conditions

The Indian economy grew by 8.2% in FY 2024, better than the expected growth of 7.6%. Key economic indicators like toll collections, GST receipts, and E-way bills remained strong. However, global geopolitical tensions and uneven domestic monsoon distribution pose potential risks. The auto industry saw mixed growth, with wholesale numbers better than retail figures【6:2†source】.

Technological Advancements and Digital Growth

ICICI Lombard continues to invest in digital transformation through initiatives like the IL TakeCare app, which has surpassed 10 million downloads. Their customer-facing digital business grew by 20.7%, contributing 4.9% to the overall business. The company's chatbot, RIA, has seen doubled utilization for checking health claim status and downloading policy copies compared to last year【6:3†source】.

Guidance and Financial Outlook

ICICI Lombard remains focused on driving profitable growth through its multi-product, multi-distribution strategy. The company emphasizes leveraging data, embracing digital advancements, and introducing new products to ensure continued growth and profitability【6:0†source】【6:3†source】.

Earnings Call Transcript 2025-Q1

[Operator]

Good evening, ladies and gentlemen. A very warm welcome to ICICI Lombard General Insurance Company Limited Q1 FY '25 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. Alok Agarwal, Executive Director; Mr. Girish Nayak, Chief Technology and Health Underwriting and Claims; Mr. Sandeep Guradya, Chief Corporate Solutions Group; Mr. Anand Singhi, Chief Retail and Government Business; and Mr. Gaurav Arora, Chief Underwriting and Claims Underwriting and Claims, Property and Casualty.

Please note that any statements, 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 involve risks and uncertainties, which could cause results to differ materially from the current views being expressed. [Operator Instructions]

I now hand the conference over to Mr. Sanjeev Mantri, MD and CEO, ICICI Lombard General Insurance Limited. Thank you, and over to you, sir.

[Sanjeev Mantri, executive]

Thank you. Good evening to each one of you. Thank you for joining the earnings conference call of ICICI Lombard General Insurance Company Limited for Quarter 1 Financial Year 2025.

Let me give a brief overview of the industry trends and developments that we have witnessed in the ensuing months. For this, our CFO, Mr. Gopal Balachandran, will share the financial performance of the company for the quarter ended June 30, 2024.

During the financial year 2024, the Indian economy [ surged ] by an impressive 8.2%, which is better than the expected growth of 7.6%, maintaining its position as the fastest growing major economy globally.

During quarter 1, 2025, the key frequency indicators such as toll collections, GST receipts and E-way bills continue to remain buoyant. Manufacturing and construction sectors showed strong activity and PMI data also highlighted robust demand and strong export orders. However, global geopolitical tension and uneven distribution of domestic monsoon can be a key risk to the ongoing growth momentum.

Now talking about the auto industry. During the quarter, we have seen decent growth in the wholesale numbers as reported by SIAM with private cards growing at 3%, two wheeler at 20.4% and CV at 7.8%. This entails approximately 1 million private cars, 5 million two wheelers, and 0.4 million CVs being sold during the quarter. However, the retail numbers, as reported by FADA has seen muted growth for private car at 2.5%, two wheelers at 12.6% and CV at 6% for quarter 1, 2025. Despite relatively lower retail sales during the quarter, we expect the onset of the festive season in the coming months to augur well for auto industry.

Health insurance as a segment continues to be driven by under penetration in retail health business, coupled with enhanced awareness. In the last 5 years, health care segment is growing more than 20% CAGR, and we expect this trend to persist for 2025.

The commercial lines of business grew by 10.3% during the quarter. Fire line of business continued to witness pricing pressure due to impact of discontinuance of IIB rates. However, with better awareness of new hedge risks and continued government focus on infrastructure development and related capital expenditure, the commercial line business is expected to do well in coming quarters. Overall, from an insurance industry standpoint, we see a significant convergence with macro and micro factors supporting the growth.

Coming to the performance of General Insurance industry, it delivered a year-over-year gross direct premium income growth of 13.3% for quarter 1 financial year 2025. Ex crop and mass GDPI for the industry was at 14.8% for the same period. We have seen quarter 1 financial year 2025 growth being sequentially better than Q4 of last year and we expect this trajectory to continue in the coming quarters.

Overall, the combined ratio of the industry was at 112% for financial year 2024 as against 115.8% for financial year 2023. For Motor, the combined ratio was 118.5% for financial year 2024, as against 121.1% for financial year 2023. While there seems to be some improvement in the overall combined ratio with no Motor TP hike rate, the Motor combined ratio for the industry continues to remain under pressure.

In our previous call, we discussed the series of regulation prescribed by the authority. The regulatory environment is becoming more cohesive, and recently, the authority has issued various circulars, including master circulars on health and general insurance, respectively. These developments are expected to augurs well for policyholders and the industry over the long term.

Now I'll speak about the business impact for us in quarter 1 financial year 2025. The company's GDPI grew at 20.4% during quarter 1 financial year 2025, which has been higher than the industry growth of 13.3% during the same period.

Let me now touch upon our performance in key business segments during the quarter. In the Commercial lines segment and during quarter 1, 2025, we grew at 9.7%. We continue to maintain leadership position in segments such as Engineering, Liability and Marine Cargo.

As mentioned earlier, while the Fire segment has seen pricing pressure, the inherent growth continues to remain intact. Despite the headwinds, we have maintained our market share in the Fire segment. We remain vigilant in terms of risk selection, and we'll continue to monitor developments in coming quarters.

In Motor for quarter 1 financial year 2025, we registered a growth of 26.3% vis-a-vis industry growth of 12%. We continue to harness our strong capabilities in this segment across distribution, underwriting, claims servicing and actuarial practices. The overall growth in Motor segment was aided by strong growth in the old business.

The new private car business grew at 13.4% as against SIAM volume growth of 3%. Two wheeler segment registered growth of 21% in quarter 1 financial year 2025 in line with the SIAM volume growth. While the new CV segment grew by 20.3% as against SIAM volume growth of 7.8% during the same period. During the quarter, we have continued to maintain balanced portfolio with private car, two wheeler and CV mix at 51.5%, 26% and 22.5%, respectively.

We also continue to build efficiency in Motor Claims. In quarter 1, 2025, we were able to service 69.9% of our Agency and Direct claims to our Preferred Partner Network, up from 56.3% in quarter 1 financial year 2024.

With the de-notification of tariff wordings and the operational guidelines of master circular, we expect new product opportunities in the Motor segment, which will enable the segment to expand further. We are excited to share that we have recently introduced long-term products for private car and two wheeler segment. We stay positive on the Motor segment and are leveraging our multi-distribution strategy to drive growth across channels, which enables us to sustain market leadership in this segment.

The Health segment grew at 28.5% in quarter 1 financial year 2025 against the industry growth of 16.6%. In Group Health - Employer, Employee segment, we grew at 31.1% in quarter 1, 2025. The change in the underlying industry pricing sentiment resulted in customers moving towards insurers and superior servicing capabilities, helping us to build this portfolio.

For the first couple of months in the quarter, Retail Health business grew lower than our expectation. However, with the launch of a new health insurance solution, growth reached 14.4% in the month of June. Overall, the Retail Health business grew at 12.6% in quarter 1 financial year 2025 compared to the industry growth of 19%.

As updated earlier, we continue to remain committed to invest, create differentiation and provide solutions for the Retail Health segment. In this endeavor to enhance our value proposition, we recently launched a new revolutionary Retail Health insurance solution, Elevate, powered by AI. Elevate offers key add-ons such as infinite sum insured, infinite care, power booster jumpstart, et cetera. These add-ons are industry first or industry best offerings. Further, the solution is done by AI engine, which offers optimal coverage based on customer persona. We launched this solution across the country through 200-plus Bandhan events with our agency distribution.

During the quarter, with lower credit disbursement growth of our key relationship partners, our banca business grew by 7.5%. However, ICICI Group distribution grew by 31.4% for quarter 1 financial year 2025 due to strategic focus on branch banking business. When it comes to our relationship across distribution, we continue to deep-mine our existing relationships by creating new value streams, and at the same time, focus on expanding relationships by staying invested in this channel.

As mentioned in our last call, we continue to stay invested in strengthening our digital business. Resultantly, our customer-facing digital business grew by 20.7% in Q1 contributing 4.9% of our overall business. Our one-stop solution for all insurance and wellness needs, IL TakeCare app, has surpassed 10 million user downloads to date. We issued a premium of INR 504.5 million for the quarter.

As far as servicing our customer is concerned, we continue to leverage solutions such as cloud-based calling for motor claims, which has enhanced the customer experience by allowing direct interaction with the assigned claim manager, bypassing a need for IVR systems at call centers. This advancement has provided them immediate clarity on claims processes, current status and prompt resolution of their inquiries.

Our clients are increasingly embracing the self-service capabilities of our chat-bot, RIA, which provides assistance across all our digital customer interfaces. The utilization of RIA for checking health claim status and downloading policy copies have doubled in comparison to the previous year.

During our previous call, we spoke about One IL One Team vision. As a part of this initiative, we continue to drive synergies, whether it is for -- in terms of One IL One Digital, One IL One Agency and One IL One Call Center. Our collective efforts, focused on the organization goals, has created tailwinds, which are driving superior growth in the recent months. We will continue to consistently leverage the power of One IL One Team through efficient systems and processes driven by our teams.

In our previous update, we discussed our core business and technology transformation, Project Orion. We initiated this transformation journey with our health business and are now progressively extending these efforts to our other lines of businesses.

We will remain focused on leveraging our multiproduct, multi-distribution strategy. We aim to achieve profitable growth by harnessing data effectively, embracing digital advancement and introducing new products. Simultaneously, we will continue to foster growth as One IL One Team.

I will now request Gopal to take you through the financial numbers for the recently concluded quarter and year.

[Gopal Balachandran, executive]

Thanks, Sanjeev, and good evening to each one of you. I will now give you a brief overview of the financial performance of the recently concluded quarter. The results have been uploaded on our stock exchanges, and you will be able to see the same getting reflected on our website as well. You can access it as we walk you through the performance numbers.

The gross direct premium income of the company was at INR 76.88 billion for quarter 1 FY '25, as against INR 63.87 billion in Q1 FY '24. This was a growth of 20.4%, which was higher than the industry growth of 13.3%. Excluding Crop and Mass Health, GDPI growth of the company was at 19.7%, again, higher than the industry growth of 14.8% in Q1 FY '25.

Our GDPI growth during the quarter was primarily driven by growth in the preferred segment. The overall GDPI of our Property and Casualty segment grew by 9.7% at INR 25.08 billion in Q1 FY '25, as against INR 22.86 billion in Q1 FY '24.

On the retail side of the business, GDPI of the Motor segment was at INR 23.69 billion in Q1 FY '25, as against INR 18.75 billion in Q1 FY '24, again registering a growth of 26.3%. The advanced premium numbers was at INR 34.56 billion at June 30, 2024, as against INR 33.3 billion as at March 31, 2024.

GDPI of the Health segment was at INR 23.37 billion in Q1 FY '25, as against INR 18.19 billion in Q1 FY '24, registering a growth of 28.5%. Our agents, which include the point-of-sale distribution count was at [ INR 1 lakh 31,021 ] as on June 30, 2024, up from [ INR 1 lakh 28,411 ] as on March 31, 2024. Our combined ratio was 102.3% for quarter 1 FY '25 as against 103.8% for quarter 1 FY '24.

Our investment assets rose to INR 510.04 billion as at June 30, 2024, up from INR 489.07 billion as at March 31, 2024. Our investment leverage was 4.14x as at June 30, 2024, as against 4.09x as at March 31, 2024.

Investment income was at INR 11.28 billion in quarter 1 FY '25 as against INR 8.44 billion in quarter 1 FY '24. The investment income for Q1 FY '24 has been revised basis the recent IRDAI master circular dated May 17, 2024.

Our capital gains, net of impairment on investment assets, increased to INR 2.84 billion in quarter 1 FY '25 as compared to INR 1.23 billion in quarter 1 FY '24. Our profit before tax grew by 48.8% at INR 7.74 billion in Q1 FY '25 as against INR 5.2 billion in quarter 1 of the last year.

Consequently, profit after tax also grew about a similar number at 48.7% at INR 5.80 billion in FY '25, as against INR 3.9 billion in Q1 FY '24.

Return on average equity for quarter 1 this year was 19.1% as against 14.7% in Q1 last year. Solvency ratio was at 2.56x at June 30, 2021, as against 2.62x as at March 31, 2024, and this continues to be higher than the minimum regulatory requirement of 1.5x.

As I conclude, we remain steadfast in our commitment to driving profitable growth, creating sustainable value and safeguarding the interest of our policyholders at all times.

I would like to thank you all for attending this earnings call, and we will now be happy to take any questions that you may have. Thank you.

[Operator]

[Operator Instructions] Our first question is from the line of Shreya Shivani from CLSA.

[Shreya Shivani, analyst]

Congratulations on a good set of numbers. Sir, I basically have a question on the Motor segment. And you guys have delivered quite well, particularly in the first 2 months of this quarter. Some color, if you can give about. I know you've said that more growth came from old vehicles than new vehicles. I'm not sure if I got that right, if you can help me with that?

Second, the thing with the Motor segment is that the Motor TP book has seen quite a strong growth. OD is the fastest for you, but TP growth was also very strong given that competition in this segment has been growing. Also, the loss ratio or the reserving triangles for a lot of competition for FY '24 saw a bit of worsening. So is there any dramatic shift in the industry dynamics or the competitive landscape? Or any color that you can give to us about the Motor segment and whether we can sustain this 20, 25-plus percentage growth rate in the Motor segment, that will be useful.

[Sanjeev Mantri, executive]

Shreya, you're seeing a long couple of months in the full quarter. The team has been able to do pretty well as far as Motor segment is concerned. But look, we've always maintained a very steady line that telling a multiline, multiproduct company in that sense. We will go where we believe there is value.

At some point in time, if you go back in time in terms of our quarter 1, quarter 2 call last year, we had seen that we had [ retracted ] significantly because it was not making commercial sense to pursue what was going on. We spoke about the industry number for financial year 2024. There is a bit of a semblance in terms of, again, the loss ratio, which is there, which is overall, industry-wide, some improvement, while still it stays concerning. We were able to leverage that part of it.

With respect to the new and old, new sales [ but, as I said, the part of 1] a very muted number. But overall, supplies have increased, and that should hold good as we are entering a quarter when you have a festive season coming in.

For us, again, from deep mining, we were able to do a much better job on getting the whole book, you're right. Our new grew at X percentage of maybe around 16%, 17%, but the old book is growing at almost [ 33% ]. So that's what has given value for us as a company.

Question on the last one, and as many years ago, and I can leave to Gopal, if you want to add something to [ this ] sustainable. I mean this kind of a market share. I don't think sustainable will be the right thing, but we will continue to stay vigilant. And there is a value on the table for us. You will see us operating with same intensity. It's not then we are not gaining market share. We were not doing what was required. We'll continue doing the right thing, and hopefully, the outcome will fall in place. But yes, on Motor overall as a segment, we continue to remain committed to value and entity.

Gopal, do you like to add something?

[Gopal Balachandran, executive]

Yes. I think only I'll just kind of add on to say that I think the good news is there seems to be semblance paying out in Motor as a segment, I think, which is what we kind of put out also as a part of the opening remarks. To say that directionally possibly the combined ratio for the industry looks to be kind of, as I said, going down, almost by 3% or 4% when you look at it on a full year basis. This is obviously a trend that we will watch for even for the subsequent quarters.

And linked to this is your last question that you asked in terms of what has been the loss experienced or let's say, the loss ratios for the industry, let's say vis-a-vis, what has it kind of worked out for us. Honestly, I'm sure each companies will have their own approaches to write risks in the way they would want to source. And the outcome is more a reflection of the thought processes that they would have had taken in their respective companies. So very difficult to comment on. The reserving triangle disclosures are moving for those players.

But at least so far as our standpoint is concerned, from an ICICI Lombard standpoint, I think we continue to stay prudent in our approach to reserving. And even if you recollect what we have been talking through since the last few quarters is on Motor asset category. We have said the loss ratio band at which we will be kind of largely comfortable at on an overall basis has been between 65% to 67%. And within that, on own damage, we have generally talked about the loss ratio staying in the range of 60% to 65%, and third party, in the range of, let's say, 65% to 70%.

So that's largely the kind of loss ratio band that we have been kind of largely working with. And at this point of time, given the point that Sanjeev made in terms of our ability to kind of go after micro segmentation and doing the right risk selection, we believe, I think we are kind of pretty much poised to stay around those loss ratio bands. But obviously, it's all a function of what kind of business mix that we write at the end of the day.

[Shreya Shivani, analyst]

Sure, sure. And sir, just last one comment. Is there -- are you guys seeing any benefit from the Motor vehicle [ app ] in the centers? Are you seeing faster [ claim intention ]? Is there some change in the industry dynamics from that perspective?

[Sanjeev Mantri, executive]

Actually [ Shiv ], early days, but we do see, overall, on a peak [indiscernible], claims division, on a faster node than what it used to be. But can we be conclusive about it as yet? No. But we, overall, early signs are positive in the direction, that augurs well for the industry, not only us.

[Operator]

The next question is from the line of Madhukar Ladha from Nuvama Wealth Management.

[Madhukar Ladha, analyst]

Congratulations on a great set of numbers. So a couple of things. First, I know it's early days, but maybe you can talk a little bit about the health product? What's the kind of numbers that you are seeing? And what sort of -- what are you sort of building in, in your mind, the target for this year?

And second, you've done very well on the investment income side. So I'm not sure whether you gave this number. I would notice, but what is the capital gain amount and if you can split the investment income in capital gains and normal gains?

And then in the opening remarks, you had mentioned about the numbers for private car, two wheeler and CV. If you could just repeat the CV number. What is it for the industry and what is it for us? So those would be my question.

[Sanjeev Mantri, executive]

I will speak on the health products, and then I'll ask Gopal to share with you details on investment income as well as the private car and two wheeler that we have shown.

Again, it's been a [ thoughtful ] process for us. So we've been talking on health, more so on the retail health side in a very big way. As a team, we've launched this product, Elevate. Supremely excited in terms of the way it has got received mark-to-market across channels and partners in this sort of time.

Number wise, probably, we will wait till it comes to the end of the quarter 2. As you rightly said in your question itself, early days. But what I can tell all of you on the call that the way [ it has not received ] in terms of multiple industry first that we put across. We do see significant traction and as a team, all of us are very excited as to where it can take us in the health segment. And yes, this should be one of the critical steps to make our journey more concrete.

So as I said earlier in a couple of calls that we have done, that our efforts on health had many times has not reflected the output. Hopefully, we are seeing through this some conversion on that as an entity, is all I can say.

Now I'll hand it over to Gopal to take the other 2 questions and the answer.

[Gopal Balachandran, executive]

So maybe I'll go in the reverse sequence. I'll take the third one, which is relatively easier. I think we put out -- you're right, we put that as a part of the opening remarks. Just to kind of reiterate, the mix between overall Motor, private car, two wheeler and CV, that mix is at 51.5% is private car, 26% is two wheelers and the CV mix is 22.5%.

To your other question on the...

[Madhukar Ladha, analyst]

No. Sorry, Gopal. Gopal, I wanted the number of new CV growth was. What for the industry and what is it for [indiscernible]?

[Gopal Balachandran, executive]

For the SIAM numbers? The SIAM numbers for private car, two wheeler and CV for this quarter. Private car growth was 3%, two wheeler is 20.4% and CV is at 7.8%.

[Madhukar Ladha, analyst]

And what is it for us, that 20 -- for the CV?

[Gopal Balachandran, executive]

For the CV, it's about 20%.

[Madhukar Ladha, analyst]

Got it.

[Gopal Balachandran, executive]

Now coming back to your second question in terms of what is the split between the overall investment income. I think, again, we kind of called that out as a part of the opening transcript. So the capital gain numbers for this quarter, this is quarter 1 of the current year, is at INR 2.84 billion. This number in quarter 1 of last year was INR 1.23 billion.

[Operator]

[Operator Instructions] The next question is from the line of Sanketh Godha from Avendus Spark.

[Sanketh Godha, analyst]

My first question is on the reasons, what led to the significant improvement or decent improvement in the OpEx ratio? Because if I look outside commissions, your overall OpEx has declined by 7 to 8 percentage year-on-year. So where did this saving has come easy? Because we have focused on all of new vehicles. Has that played a role in significant improvement in the OpEx ratio? That was my first question. I just wanted to understand what led to it and how sustainable it is going further.

And the second question, what I had is that when you do long-term, what you launched in private cars and the two wheelers. I just wanted to understand from an accounting point of view, it is recognized on a cash basis or it is [ one buying ]. For other than the new TP, what you write for 3 years and 5 years?

And lastly, my question is on -- you said that on [ bank ] has seen a growth issue, which is even reflected in [ personal accident ] cover growth, which has declined year-on-year for the quarter. So is it because the major bank channels, like this year actually, have slowed down our business? And how do you think it is to play out going ahead? These are my questions.

[Sanjeev Mantri, executive]

With respect to the OpEx part that you referred to, definitely configuration of the portfolio has [ stable ], there's no doubt about it. The growth of [ old ] has definitely helped us in overall averaging our cost. So you're absolutely right. And besides we see on the growth in GHI, it comes from a relatively lower OpEx, which we have grown as a business at almost 31.1% as they [indiscernible]. A little bit of very micro but small number of crop also has got growth in an incremental basis, I but wouldn't say that, that has [ came ] the OpEx. It's largely driven by the nature of business in which it has got done. But there is sustainable.

See, this is a very dynamic situation. We have a regulatory requirement that we need to manage our expense of management below 30%. We would continue to stay committed, at the same time, to dynamically operate and ensure that the profit pools are taken care of. We would take calls that are appropriate in the interest of the company. So I wouldn't go and say that it's all sustainable, but some way or the other, yes, we will seek efficiency and that is the direction that we'll operate on.

With respect to the [ bank ] long-term, I will request Gopal to speak. But on the [ nonbank ] channel, which is [indiscernible] that we are referring to, we have a larger relationship, which is driven by NBFC. And the overall unsecured part, we have seen in the market that the [ disbursement ] has gone down because of the changes in the regulations for them. That has impacted our [ sourcing ]. And we remain are very committed to this business plan. It has been a key value driver for us as an organization. As and when the overall involvement includes, we will be there present with the relationship to drive our own market share with them. And on the long-term part, Gopal, if you could please?

[Gopal Balachandran, executive]

And on the second question, Sanketh. Pretty much similar to the same prescription, as you rightly mentioned. Whatever is true for the new private car or new two wheeler prescription, the same prescription is what we are following with respect to the long-term offering that we do for the rest of the businesses as well.

[Sanketh Godha, analyst]

Got it. Got it. And just on the OpEx part, just wanted to see. I understand the ratio improvement is because of a little more [indiscernible] and crop. But actually, decline in the cost is the point I was more focused on, that declined by 7.58%. So is it largely attributable to the fact that your retail health growth was lower and old component has increased in the motor? Just wanted to understand that. And if that is the strategy going ahead, then we can see sort improvement in the OpEx ratio?

[Gopal Balachandran, executive]

Yes. So Sanketh, again, I think this is something that keeps coming to us every quarter, right, in terms of where is the directional movement on the overall expense number. I would, again, kind of keep reiterating the fact that end of the day, as an institution, what I think everyone should be kind of largely watching out for is the combined issue outcome. Because again, rightly mentioned by you, businesses obviously get impacted by different mix, different growth levels within a particular segment. And each of them have obviously its own nuances and dynamics with respect to the overall cost of acquisition.

Having said that, I think if you look at generally, quarter 1, obviously, it tends to be slightly lower because the relative proportion of commercial lines insurance tends to be higher. So hence, to that extent, there is an element of the cost of acquisition that plays out. But having said that, I think what we've also been able to achieve is the relative efficiency and the productivity gain on even motor as a category in terms of the top line coming back to us at the acceptable level of cost of acquisition. And again, the point that we made out. Within that segment, the growth has also kind of largely stemmed from what Sanjeev mentioned. The old growth in motor has been 33% plus. Obviously, as the older portfolio grows faster, the relative cost of acquisition equally is lower. And that's something that we kind of keep moderating.

If you ask us what will be the directional trend that this expense ratio will take, I think the only thing that we would kind of call out to say is at all points of time, we stand committed to staying within the threshold of 30%, very difficult to pull out and say that what we'll finally end the number, with the endeavor to obviously to kind of make sure that we operate within that overall objective. So hence, lots of moving parts, very difficult to call out a particular thing to say that what has led to the overall efficiency in the expense numbers.

[Operator]

Mr. Godha, may we request you return to the question queue for follow-up questions as there are several other participants.

We'll take the next question from the line of Aditi Joshi from JPMorgan.

[Aditi Joshi, analyst]

So I have 3 questions. Sir, can you please help us understand, on the group health side, what are the competitive dynamics you see? And also in terms of pricing trend that was [ as of June ] and your outlook as in going forward in the coming quarters, how do you see the health insurance pricing, both in the retail segment as well as in the group segment, that is the employer, employee.

The second question is related to the combined ratio guidance. It came up in the last call suggesting that the improvement in the combined ratio might be faster than the previous expectations. But in the first quarter, it was around [ 302% ] level versus 101.5% that you are expecting. So can you expect -- can you please help us and can you refer, that is what you continue to think? And if so, then what would lead to that faster-than-expected improvement?

And then just the third question is in the underwriting profit segment-wise, there was a significant improvement in miscellaneous group and corporate. So can you please suggest what is this precisely?

[Gopal Balachandran, executive]

So Aditi, I think maybe I will go in the same sequence. I think this is -- let me start with the corporate health. Again, it's very much similar to what Sanjeev explained on the motor side. I think as the thought process, I think many markets have been quite aggressive. We have obviously tried to take a guarded stance, but continue to stay invested in our distribution/servicing capabilities. The same thought process is what we have even on the corporate health.

I think market did see signs of [ stress ] for some time, at least for the -- in the last few years. That seems to be kind of coming back, which is why even as a part of the opening remarks, we did call out to say that there seems to be kind of pricing discipline coming back, particularly from players who have been very aggressive in driving this particular segment.

So obviously, now the fact that let's say pricing discipline is happening on corporate health, that obviously is giving us an opportunity, which is why as a segment, I think we have been able to kind of outgrow the market at an underwriting outcome, which is to our liking, which also kind of a response to the last question that you asked in the context of, let's say, the corporate/miscellaneous group segments in terms of the absolute outcome on the underwriting side.

On the retail, I think, obviously, one keeps looking for what is the quality of the book that we want to write. I think we'll kind of stay to the loss threshold that we have generally spoken about, which has been around 70% numbers on the retail health. I think that loss ratio band is something that we would obviously want to kind of stay focused on. And the fact that we have been able to kind of launch this new health insurance solution, we'll obviously kind of aid in terms of the loss ratio outcomes that we are kind of expecting for the rest of the year as well.

And obviously, we continue to monitor the portfolio in terms of its development. We believe we are fairly priced for the risk features that we have kind of launched as a part of this solution. But as I said, at the end of the year -- at the end of the day, we would obviously want to see that particular segment operating in that loss ratio range of about 70%.

On the last one, on the second question, in terms of the combined ratio trajectory, I think pretty much, I think what we are seeing is obviously a directional improvement in the way we have been able to kind of exhibit our combined ratio outcomes. But again, as we keep saying, this has to be looked at in the context of the industry movement on combined. The good news is, again, what we called out, at least this is public disclosure on the full year numbers for FY '24 has been relatively better than FY '23 by almost 4 percentage points improvement in combined for the overall market.

Now obviously, if this kind of a trend line continues, and within that model, has seen almost again at 3% to 4% improvement from an overall industry standpoint. If this trend line was to kind of further continue for the rest of the year, I think we believe that we should be able to kind of stick to our exit quarter 4 combined ratio thought process that we have of about 101.5%. I think we should be able to kind of get to that trajectory by the end of the year.

So that's in response to the second one. The last one, I think, again, I will keep kind of saying that an absolute underwriting outcome in itself may not mean much, particularly when you look at it in a quarterly context because as we know that whenever you end up doing relatively higher growth, this could be across any segment, the relative cost of acquisition comes and hits as you operate. But all that we can say for sure is hence, you always keep marching to keep looking at the combined ratio numbers. The good news is, as I said, the fact that we have been able to write a risk portfolio, which is to our underwriting outcome. And hence, to that extent, the combined ratio trajectory for the company as a whole has been in line with what we would want to see ourselves there.

[Aditi Joshi, analyst]

Just a clarification, what categories come under the miscellaneous in this disclosure?

[Gopal Balachandran, executive]

So anything which is not covered by the rest of the segments for which there is a separate disclosure that is put out, all of them come as a part of the miscellaneous segment.

[Aditi Joshi, analyst]

And that would include the engineering part in it?

[Gopal Balachandran, executive]

Yes, Yes. So all those separate segments that have been specifically put out in terms of regulatory prescriptions, have been put out separately. Anything which is not there as a part of those separately laid out requirement, they will all form a part of miscellaneous. That is correct.

[Operator]

[Operator Instructions] The next question is from the line of Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

Congrats on the great set of numbers. So on the health ratio, loss ratio front, there is an increase from 78.7% to 83.6%. What is this really reflective of in terms of mix or are there any adverse trends that we've seen in the quarter? And also we think about this? That would be our first one.

Second is on the motor strategy, wherein you've spoken about the older vehicles, growth has been stronger. Generally, OEM growth, OEM channel has been our strength and that simply drives our growth in the new vehicle business. So what differently have you done to grow the older vehicle channel? It's digital, whether we become more competitive or it's through the agent channel? How has this kind of come across and be as sustainable? And asking on the motor TP price side, with this kind of loss ratios trending to really average of price hike coming this year or even for that matter, if it's sustained any time soon and better [indiscernible]. Those are my questions.

[Sanjeev Mantri, executive]

On the health side, in particular, where we see relatively increased loss ratio. I think Gopal in a way also spoke about it as to where we expect it to be around. There are 2 segments showing, which is retail health and then the other part is the group health. But that being said, there is no denial of the fact that we have seen relative increase in frequency, which has impacted the loss ratio overall. And from what also we are aware of, it has been at the industry level. And it has completed something which is witnessed across [ is what we are ] understanding. Whether this trend will be [ secular ] and will be there quarter 2, technically has an elevated loss issue because of the monsoon that comes in with our [indiscernible], which can have an impact over on this.

But for us, since we have also launched the product, which is expected to do well. I think the mix should also play out over coming quarters to help us in rebalancing our book, and we remain committed to the overall health care segment and more so on the Retail Health which we want to continue to invest in growth. So that's first part as far as health is concerned.

On motor [ purchase ] strategy, where it stands, the new and old. So it's not that the new part, which we have shared the numbers also, has not done that for us. We have done well on the new side, but this is the growth of old, which has also significantly which has exceeded new. Both sections have done well, but definitely old has grown at double the rate of what new has grown as for the company, and that has helped us rebalancing it. Agency also has done well. And other channels also from wherever we are able to source motor, like [indiscernible] channel also has done well.

In terms of overall strategy, we will be -- we are deeply enclosed in every single section, whether it is private cars, two wheeler and commercial vehicles. We will continue to explore opportunities. There are a lot of work that has been done by us actually as well as underwriting in terms of further micro segment in the market to create white spaces and see we can do further [indiscernible] in that.

On motor, we had the last part that you have spoken about. Look, I mean this is something which comes under the regulatory requirement. We continue to pursue -- because at the industry level, there still need in some segments to see increase and maybe there are some segments that they can also decrease also on third party to overall rebalance the book. And it is not only for growth, it is also for us as an entity that pricing factor comes in, since it is regulated, it will help us to further expand our market. That's what it is on our side. Yes.

[Prayesh Jain, analyst]

But just clarification on motor part. So have we, like in the last 6 to 9 months, got more competitive in terms of pricing? Or what has been the change in the approach of our [indiscernible]? Obviously, the industry trends have been feasible. But even from our side, what changes we have done with respect to pricing, because -- does that play a role?

[Sanjeev Mantri, executive]

Yes, obviously, there is an element of pricing, but we have continued to be in a similar journey, to be very honest. [indiscernible] Who were far more aggressive, we celebrated it and that again also has accrued to us. It is not that we have gone magically on the price cut side, we are still moderate in the zone, which is what we've always been talking to each one of you. In case that there are [others who were] being far more adjusted in the market have gone ahead and taken some more of control in terms of numbers. So that's where it stands.

We've been consistent and also marketing, whichever we acquire in the market that you want to acquire, we have done what is required to still have value in those, [indiscernible] which is where PPN network that we have started leveraging very extensively. And today, we would be on the agency and direct side, we got almost 70% of our claims, which are being processed at the PPN network, which is the preferred partner network that we have. And that drives significant efficiency also for us overall and helps us in the motor profitability.

[Operator]

The next question is from the line of Nidhesh from Investec.

[Nidhesh Jain, analyst]

My question is on health insurance product. What is the underwriting process or philosophy in that product given that pricing is quite attractive? So how are we controlling underwriting at the central customer origination level? And what are the rejection rates for the product?

[Sanjeev Mantri, executive]

Sure. So pricing obviously is a function of our own modeling that we have done. And clearly, I would say that we are aware of what we are doing. Further details in terms of what is the rejection and all, I mean, honestly, we would not like to share that. But yes, the business is seeing there's a decent pull besides launching this product. It does give us the leeway of underwriting what we believe will make sense and one which will not, we wouldn't. So it's at a simpler level.

And if you see the [ construct ] of the product being very important, [indiscernible] we all have not seen it, you must go through. It's a very modular product. The features are available as [indiscernible]. So it's up to the customers, whether they want to pick it up or not.So there is a risk pricing element that [ that has created ] which otherwise was not the case. So it was one shoe fits all kind of a program, which will say that this is what's available. But in this, we want [ case ] model, which is we say that this is a core, which we [ resell ] and then there are features which should be required, then you must offer it. So it's [ a wide reselling ]. And at the same time, it allows us to price very appropriately.

[Operator]

The next question is from the line of Neeraj Toshniwal from UBS Securities.

[Neeraj Toshniwal, analyst]

So 3 questions for us, just on the duration of the book and the [ which you ] work with. Second is on the retentions, which have been -- given retentions are lower, [indiscernible], is that relatively lower? Is it the motor, the mix which are -- and driving the higher [indiscernible]? And further this, more towards 2 great incident of the [ global IT outage ], wanted to understand any cyber insurance from the [indiscernible] perspective. Are we -- are you seeing any impact? Or how should we [indiscernible] portfolio are real small, but just wanted some thoughts here.

[Gopal Balachandran, executive]

Maybe I'll take the last eleventh. So I think, obviously, too early to call out whether that -- because it's like a cyclone happening and can we kind of estimate what will be the impact of losses that it will take on our book. So obviously, it will take a while for us, if at all, there is any impact so far as claims is concerned. But again, just kind of going back to the underwriting discipline, I think what we have tried to do from an underwriting standpoint is obviously to kind of write and [indiscernible] book, which we think will be within our underwriting appetite. And hence, and end of the day, whatever underwriting we do, we are in the business of paying claims, and therefore, to that extent, if there is genuinely a claim and obviously, to the extent, we will honor those commitments. But too early to call out. But obviously, maybe in the subsequent quarter, we will be able to give you a much better update in terms of where we are consequent to this outage that one would have possibly came.

To your first point, I think in terms of what is the duration of the book. The duration of the book currently is at about [ 5.48 ] years. This is something, if you recollect, I think we have been obviously kind of taking advantage of the higher interest rate regime over the last couple of years. And that again kind of augurs very well in terms of the portfolio interest accruals, and that's kind of pretty much playing, and we are kind of well positioned to capitalize the opportunity depending on how the interest rate cycles move in the market.

So that's what we keep doing. It's not just in this period. I think even over the years, when we have seen periods of high interest rate regime, during those times, we have obviously tried to kind of go along. And as possibly a cycle of interest rate starts to reverse, we have been able to see the benefit of maybe higher realization getting kind of accrued to us in terms of capital gains. And obviously, till that time, higher interest accruals. So that's the response to the duration of the portfolio.

On the second question on, if I got you right, on the commission ratios. Again, I have kind of explained earlier. I think at the end of the day, what we would be largely guided by, I think this is something that you will keep hearing from us, we will be largely guided by the combined ratio objective, which will obviously be a function of what is it that one case on the loss ratio and what is it that one case on the expense of management.

To call out one over the other, honestly, for us may not be the right thing because that's the inherent nature of the business that we are in. We will -- we are in a multi-product, multi-distribution. We source different type of businesses. And therefore, each business mix will have an outcome, which will be very different.

So hence, again, just to reiterate, we stand committed to the trajectory of the declining combined ratio that we have spoken about. And at the end of the year, assuming the market continues to kind of show improved trajectory, we stand committed to see a combined ratio, which is quarter 4, exit of about 101.5.

[Operator]

The next question is from the line of Avinash Singh from Emkay Global.

[Avinash Singh, analyst]

A couple of questions. The first one, if you can help again on motor, that you explained that share of old has gone up. I mean, is it -- how it has panned out in various distribution channel? I mean [ agent ]? Or is it again gaining share from other players and the OEM dealer point or is it something to do with the new corporate broker or online broker tie up that you have done? That's one.

Second is, I mean, if I look at the motor third-party losses, you're 59-odd percent for the quarter, it looks -- I mean, so is it just based on this quarter? Or like the [indiscernible] because I mean if I see -- but I see in the industry, you are the only one who has in motor TP for FY '22 or '23, you have not taken any kind of full year business so far. So is the 69% now getting some support from the early year or this quarter only?

And if you can give some kind of pro forma idea that how is -- I mean, in the days, when the discounting is allowed, how this 69% would typically look?

[Gopal Balachandran, executive]

Maybe I'll take the second, if I can, and maybe I'll kind of respond to the couple of questions on TP loss ratios and maybe the related impact on the [indiscernible] front. Let me start with the reverse order. I think again, [indiscernible] for us is a work in progress. And as I have been saying, even in the earlier calls, I think we will come back to the market at appropriate time to talk about what exactly will be the relative impact when we transition to the [indiscernible] from a discounting of reserve standpoint.

But one element, which I will again keep reiterating is irrespective of whether it is Indian GAAP or whether it is transition to [indiscernible], the underlying economic profit of the business that we are writing is not undergoing a change. It's more a reflection of what profits you see under the current accounting prescription vis-a-vis, let's say, a change accounting prescription, that could be the only dynamic. But the core underwriting objective or let's say, the economic outcome will be something that we will be kind of largely working towards in terms of its outcome. Specific numbers, I think we'll wait for a couple of quarters to come back.

On the third-party loss ratio, Avinash, I think, again, which is why one called out at the beginning to say what is the range that one is comfortable with in terms of the third-party loss ratio outcomes.

But having said that, I think you're absolutely right. Does it make sense to look at the number more on a quarterly basis, is something that we again keep kind of talking about. I think ideally, you understand -- all of you understand this part better, particularly on third party, this is a segment which you have to look at numbers over long years. So hence, the range is something that we have talked about, and that's what we will possibly end up doing in terms of the mix of the business that we write within private car, two wheeler and commercial vehicles. And that's what we kind of keep revisiting. Forget about the numbers that we put out on a quarterly basis to all of you. Internally, for us, it's on an everyday basis. In terms of the way how we kind of reselect portfolios between private cars, two wheelers and commercial vehicles.

So hence, I think the range, just to kind of reiterate on third party, what we will be comfortable is within the range of 65 to 70, and obviously, the experience on third-party books has to be looked at over longer cycles.

[Sanjeev Mantri, executive]

And also on the motor in terms of the old part, as I mentioned also in the previous questions that were asked, our growth has been across channels. Clearly, we know the old can grow at the level rate of new. If we don't have better retention coming from [indiscernible], from our dealer network, so that also has played out. And that being said, even the agency as well as the [indiscernible] booking business has contributed. But it is not something which is that -- one of those are few which has delivered. It's been overall a very, very comprehensive, well-thought plan.

Again, it's a question of where we believe we are able to derive value for it [indiscernible], if we see that over coming quarters not playing out, we choose to stay where we are. So we are all very dynamic because that we have to take in an entity on a real-time basis. And fortunately, as far as private car, in particular, which is almost 51% of our motor book, the ability to read the own damage numbers, it's pretty current and we don't have to wait to perceive playout. These calls will take on a monthly -- month-to-month basis.

[Operator]

We take our next question from the line of Supratim Datta from AMBIT.

[Supratim Dutta, analyst]

My first question is on the recent IRDAI change with respect to commissions for long-term motor policies. Now the commission limit has been [indiscernible], so just wanted your opinion on how do you see this playing out in the industry? And what impact could this have? That would be the first one.

The second one is when I look at the quarterly numbers, there appears to be a provision release of around [ INR 355 million ]. Now there was a lower kind of provision released last year in the first quarter itself. Just wanted to understand why does this keep happening in the first quarter? And is there something that we need to be [indiscernible] of going forward? That would be my second question.

And lastly, on the health insurance space. If you could help us understand what is the profile of customers that you are targeting with this new product? And what was the retail versus group loss ratio breakdown for this quarter?

[Gopal Balachandran, executive]

Yes. So are you in the same sequence. On the IRDAI recent guidelines on accounting for long term, I think at this point of time, we would not want to kind of put out specifically in terms of what the impact would be primarily because at this stage. As you all know, the regulator has rightly kind of put forth the implementation of this to be deferred for a couple of quarters. And in the interim, obviously, industry and regulator will work to see how -- what finally and in which shape and form does this guideline eventually translate into. So honestly, maybe at that point of time, once we have a finality to the way how this will get played out is when we will call out in terms of what impact would it have on the overall book.

To your second point, Supratim, if I got you correct, this [ INR 355 million ] provision, are you referring in the context of any specific line item?

[Supratim Dutta, analyst]

It's the provision for [indiscernible] investments.

[Gopal Balachandran, executive]

Understood. Okay. All right. So which is what I was just wanting to try to understand. So obviously, that's again a function of what does one see. We do have our own impairment policies, which is more internal that we have kind of put in place. And that obviously gets assessed on a time-to-time basis.

What effectively happens is in case if you find that a particular value of a stock has reached the price, which we believe is right. And to that extent, obviously, we take calls in terms of making an exit. And whenever we take calls to exit, maybe that particular stock, at that point of time, this is more an accounting reflection. As in at that point of time, one would see a reversal of the provision for impairment happening in the quarter and with the call to exit the stock would have been taken. And correspondingly, there would be an element of capital gains as one would have possibly seen, given the fact that we have seen the value of the stock reaching a price at which we are comfortable to take that call.

So hence -- so there is no unusual or specific instance that one has seen specifically happening in quarter overall, that is more coincidental than -- because, as I said, it's more a call that the investments like the treasury function does. This is individual stock that one fixed.

To your point on the last one, which is with respect to the health insurance segment in terms of what profile of customers that we want to underwrite. Obviously, it's across [ banks ]. Again, if you look at the entry age of this particular health insurance solutions that we have, that's again something that we have been able to kind of expand. I think it starts from 18 and it kind of goes on to whichever age limits that would want to kind of get in as a part of the portfolio underwriting.

So therefore, the endeavor for it is not that we would want to kind of tick and choose any particular category of customers. Our endeavor is, I think, again, what Sanjeev mentioned. I think the good part of the solution is what we want to create as an offering is something that will be more unique and personal to an individual. And hence to that extent, whatever is the right health insurance solution for that customer or that individual is what we would want to kind of recommend as a part of the solution. And that's the kind of profile of customers that one would want to write, and that would cut across various age groups, that would cut across various geographies, that would cut across various limits of some insured expectations because each customer will have its own expectations. So that's what I would kind of leave it with.

And finally, just on the loss ratio front. I think, again, as we have spoken, quarterly numbers, again, may not be largely reflective of what the portfolio experience of the overall group will be. Again, just to reiterate, the corporate health of the group and book is something that you will see on a full year basis at a loss ratio range anywhere between 94% to 95%. That's the range that we have spoken about even in the past. And retail health [indiscernible], again, we have spoken about the loss ratio about [indiscernible]. Sanjeev?

[Sanjeev Mantri, executive]

Just one last one on, obviously, the target which we want to have is healthy lives. It's very difficult. I mean I can share with you quickly. It's only the younger population that persistency drops because they have a tendency to move away, there are some other expenses incurred. So it's a healthy mix of young as well as relatively older population is a mix that we have it. Idea is to overall source as much as possible healthy lives. That is the criteria that would works for each. One of it comes with its own set of challenges.

[Supratim Dutta, analyst]

Got it. That's very fair. Just one clarification. So you had called out that related increase in claim frequency within the health insurance portfolio. Now was that at a retail level or a group health level?

[Sanjeev Mantri, executive]

Supratim, I don't know. It's important to understand whether it derives group or derives retail. The unit, when it comes and reports [indiscernible] is a legal customer in sale, the mode of writing is of no consequence. So the [indiscernible] would come at a category level, not at a -- whether it is individual or group. I hope you're able to understand it. It's always the category that we are seeing more people falling sick. Which manner they'll come, whether will come from group of retail is part of the process of how the product of health insurance has been set by then.

[Operator]

Ladies and gentlemen, we would take that as a last question for today. I would now like to hand the conference over to Mr. Sanjeev Mantri for closing comments.

[Sanjeev Mantri, executive]

Great. I think, thank you so much for joining in, and wish you all a great quarter 2, and look forward to connecting with you individually as and when you are visiting our offices. All the best.

[Gopal Balachandran, executive]

Thank you so much.

[Operator]

Thank you. On behalf of ICICI Lombard General Insurance Company Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.