ICICI Lombard General Insurance Company Ltd

NSE:ICICIGI

Earnings Call Transcript 2023-Q2

[Operator]

Good evening, ladies and gentlemen. A very warm welcome to ICICI Lombard General Insurance Company Limited's Q2 and H1 FY '23 Earnings Conference Call.

From the senior management, we have with us today Mr. Bhargav Dasgupta, MD and CEO of the company; Mr. Gopal Balachandran, CFO and CRO; Mr. Sanjeev Mantri, Executive Director; and Mr. Alok Agarwal, Executive Director.

Please note that any statements, comments are made in today's call that may look like forward-looking statements are based on information presently available to the management and do not constitute an indication of any future performance as future involved risks and uncertainties which could cause results to differ materially from the current views being expressed. [Operator Instructions]

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, executive]

Thank you, and good evening to each one of you. Thank you for joining the earnings conference call of ICICI Lombard General Insurance Company Limited for the second quarter and half year of FY '23. I will give you a brief overview of the industry trends and developments that we have witnessed in the last few months. Post this, our CFO, Mr. Gopal Balachandran, will share the financial performance of the company for the quarter and half year ended September 30, 2022.

Domestically, the economic activity has been gathering pace and the recovery is evidenced by the high frequency indicators in the industrial and services sector. The improvement in consumption spending is expected to be sustained by strong festive demand and possible improvement in rural consumption in the second half of the year. The systemic credit is quite robust and broad-based. At the same time, headwinds from geopolitical tensions, tightening global financial conditions, strong dollar and elevated global inflation is slowing global demand resulting into lower imports, which may have an adverse impact on Indian economic growth in the near-term.

As per data published by SIAM, the new vehicle sales witnessed strong growth for private car segment amidst easing supply chain constraints and festive demand. The Commercial Vehicle segment grew robustly supported by underlying demand, while the two-wheeler segment continued to remain slow compared to pre-pandemic levels. Health insurance continued to drive the overall industry growth. The commercial lines witnessed growth in line with the current market environment. We remain optimistic that the industry will continue to grow given the low insurance penetration, positive consumer sentiment and enhanced risk awareness.

As a result, the GI industry delivered a GDPI growth of 15.3% for the first half of this year over the first half of last year. Excluding crop insurance, this growth is at 18% for the same period. However, we continue to see pricing aggression in certain segments like motor, while there is some improvement in the Group health segment. For motor business, combined ratio for the industry was 124.5% in quarter on of FY '23 as compared to 107.1% for quarter one of FY '22 as per public disclosures. Overall, the combined ratio of the industry improved to 111.4% in quarter one of 2023 as compared to 124.0% in quarter one of 2022.

In the recent past, the authority has announced several reforms to increase insurance penetration in the country. During the quarter, the authority has issued and proposed following changes. One, the exposure draft on expenses of management and payment of commission regulations proposing an aggregate limit at a company level. Two, master guidelines on AML, including KYC requirements along with establishing internal policies, procedures, controls and compliance arrangement effective November 1, 2022. Three, increase in number of tie-ups from 3 to 9 in case of corporate agents for each category of insurer. Four, other forms of capital wherein insurers can raise capital by the way of preference shares or subordinated debt without having to avail prior approval of the authority. Five, amendments to the regulatory sandbox -- the sandbox regulations, eliminating time limit to facilitate innovation in products or solutions and to increase the experimental period up to 36 months.

These are all under consideration and we believe that these and the many other changes have been made or are being proposed, which will have a significant positive effect on product innovation, ease of doing business and insurance penetration.

Moving to business impact for us, during the quarter, the company grew by 22.6% as compared to the industry growth of 15.3%. Coming to the growth of key segments during the quarter, in Motor, growth remained tepid at 4.5%. We continued to combat challenges like heightened competitive intensity on the Motor Own Damage side. We remained focused on growing our market share in certain key profitable sub-segments within Motor. Overall, new vehicle sales have been strong and demand sentiment also continues to be positive. We are optimistic that with the improving pricing environment, we will be able to consolidate leadership position given our strength of distribution in this segment.

Our investments in retail health distribution resulted in growth of 15.8% as against 8.0% in quarter one of FY '23. Within the quarter, we have outgrown the industry and standalone players for the month of September with a growth of 21.1%. This was driven by growth in business sourced by retail health agency vertical of 30.7% in the quarter 2 of FY '23. I would also like to share that our one-stop solution for all insurance and wellness needs, IL TakeCare app, has surpassed 2.7 million user downloads till date. The incremental download for the quarter was 1 million.

Our Bancassurance and Key Relationship Groups grew at 36.1% this quarter. Within this, ICICI Bank distribution grew at 33.9% and non-ICICI Bank distribution grew by 37.6%. Post-pandemic, the recovery in credit along with increase in wallet share in distribution partners acquired through the demerger has been the key growth driver. Our business sourced through our Digital One team grew by 24.5%. Overall, our digital focus has enabled us to increase our digital revenues to INR 2.26 billion, which accounts for about 4.4% of our overall GDPI for the quarter.

As far as the commercial lines are concerned, we experienced robust growth, driven by 26.9% growth in the SME segment. We remain on track and are focused on growth levers such as launching new products, strengthening our distribution engine, digital advancements, realizing synergy, rationalizing cost while scaling up our preferred lines of business.

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

[Gopal Balachandran, executive]

Thanks, Bhargav, and good evening to each one of you. I will now give you a brief overview of the financial performance of the company for quarter 2 and H1 FY 2023. The results presentations are already put up on the stock exchanges. And we are in the process of putting it on the website of the company. You can access it as we walk you through the performance numbers.

The Gross Direct Premium Income of the company was at INR 105.55 billion in H1 FY '23 as against INR 86.13 billion in H1 FY '22, a growth of 22.6%. This growth was higher than the industry growth of 15.3%. GDP was at INR 51.85 billion in Q2 FY '23 as against INR 44.24 billion in Q2 FY '22, a growth of 17.2%. This growth was higher than the industry growth of 10%. Our GDPI growth was primarily driven by growth in preferred segments. The overall GDPI of our property and casualty segment grew by 16% at INR 32.13 billion in H1 FY '23 as against INR 27.69 billion in H1 FY '22.

On the retail side of business, GDPI of the Motor segment was at INR 37.09 billion in H1 FY '23 as against INR 32.46 billion in H1 FY '22, registering a growth of 14.3%. Our agents, which includes the point of sale count, for the first time crossed 1 lakh to 1,00,636 as on September 30, 2022, from 94,559 as on June 30, 2022. The advance premium was INR 34.34 billion as at September 30, '22 as against INR 33.68 billion as at March 31, 2022. Resultantly, the combined ratio was 104.6% in H1 FY '23 as against 114.3% in H1 FY '22.

Excluding the impact of cyclone and flood losses of INR 0.28 billion, the combined ratio was 104.2% in H1 FY '23 as against 113% in H1 FY '22, excluding the impact of cyclone and flood loses of INR 0.82 billion. Combined ratio was 105.1% in Q2 FY '23 as against 105.3% in Q2 FY '22. Excluding the impact of flood and cyclone losses of INR 0.28 billion, the combined ratio was 104.3% in Q2 FY '23 as against 103.7% in Q2 FY '22, that again, excluding the impact of cyclone and flood losses of INR 0.50 billion.

Our investment assets rose to INR 400.96 billion as at September 30, '22 from INR 398.34 billion as at June 30, '22. Investment leverage net of borrowings was 4.08x as at September 30, '22, as against 4.18x as at June 30, '22. Investment income was at INR 13.94 billion in H1 FY '23 as against INR 16.05 billion in H1 FY '22. On a quarterly basis, investment income increased to INR 7.39 billion in Q2 FY '23 as against INR 7.16 billion in Q2 FY '22. Investment income of quarter 2 FY '23 includes impairment on equity investment assets of INR 0.89 billion as per the company policy.

Our capital gains net of impairment on equity investment assets stood at INR 1.43 billion in H1 FY '23 as compared to INR 4.71 billion in H1 FY '22. Capital gains net of impairment on equity investment assets in quarter 2 FY '23 was lower at INR 1.11 billion as compared to INR 1.44 billion in quarter 2 FY '22. Our profit before tax grew by 26.1% at INR 10.75 billion in H1 FY '23 as against INR 8.52 billion in H1 FY '22, whereas profit before tax grew by 2.7% at INR 6.1 billion in quarter 2 FY '23 as against INR 5.94 billion in Q2 FY '22.

Consequently, profit after tax grew by 46.6% at INR 9.40 billion in H1 FY '23 as against INR 6.41 billion in H1 FY '22, whereas profit after tax grew by 32.2% at INR 5.91 billion in Q2 FY '23 from INR 4.47 billion in quarter 2 FY '22. Profit after tax for Q2 FY '23 includes reversal of tax provision of INR 1.28 billion. Excluding this, growth in profit after tax was 26.5% and 3.4% for H1 and Q2 FY '23 respectively.

Return on average equity was 19.9% in H1 FY '23 as against 15.2% in H1 FY '22. The return on equity for quarter 2 FY '23 was 24.5% as against 21% in quarter 2 FY '22. Excluding the reversal of tax provision, the return on average equity for H1 and Q2 FY '23 was at 17.3% and 19.3% respectively. Solvency ratio was at 2.47x as at September 30, '22 as against 2.61x as at June 30, '22, continued to be higher than the regulatory minimum of 1.5x.

The board of directors of the company has declared interim dividend of INR 4.5 per share for H1 FY 2023. The company has exercised the call option to redeem the debentures of INR 2.20 billion in full along with final interest due post receipt of the necessary regulatory or statutory approvals on July 7, 2022. The record date for the same was August 7, 2022. Thus, the outstanding debentures stands at INR 0.35 billion as at September 30, 2022.

As I conclude, I would like to reiterate, we continue to stay focused on profitable growth, sustainable value creation and safeguarding the interest of policyholders at all times.

I would like to thank you for attending this earnings call, and we'll be happy to take any questions that you may have.

[Operator]

[Operator Instructions] The first question is from the line of Swarnabha Mukherjee from B&K Securities.

[Swarnabha Mukherjee, analyst]

I have three questions. First of all, the flow-through from gross written premium to net earned premium, so I can see that there has been a sequentially higher retention level during the quarter. And also seems there is some unexpired risk reserve release that has happened. If you could highlight what explains this? That would be my first question.

Second is on the motor book. So the GDPI mix shows that there is a higher share of private vehicles. I mean, if you could throw some light on what is going on there? And what is the reason behind the TP loss ratio -- the outcome of the TP loss ratio? And thirdly, on the crop portfolio. So we have reached INR 800 crore kind of a number in first half. I think you had mentioned earlier that you want to put a run of what Bharti AXA used to do in crop. So does that mean that there would not be any further premium improve in crop going ahead in the second half? So these are the three questions, sir.

[Bhargav Dasgupta, executive]

Let me take the third question and I'll ask Gopal to answer the first and we'll jointly maybe handle the second. On the crop business, it's a seasonal mix. Kharif is usually bigger. And the point that we had made earlier was that crop business will remain about plus-minus 5% of our portfolio. I don't think there's going to be any change in that. So second half of the year, the amount of crop business will be significantly lower than this number that you see in the first half.

Again, the principle that we are following is that business that came from [ Bharti ] which had a three-year commitment, that we are maintaining. And apart from that, the new business that we've written is largely -- entirely on the 80:110 model. Certain states, as you know, have shifted to 80:110 model where the cost of reinsurance product is significantly lower because of the natural limit of loss at 110. So that's what we have written. But the mix of the business will be much more in the first half compared to the second half. Overall guidance that we had given in terms of composition of the mix of portfolio, that doesn't change.

I'll ask Gopal to answer your first, then we'll come back to the second question.

[Gopal Balachandran, executive]

So with the first question, I think there are a couple of elements in that. One is sequentially why is the retention ratio higher. So if you look at I think quarter 1 typically is a period of commercial policy renewals where the extent of reinsurance support are relatively higher. And that's the reason why you find quarter one retention ratios to be relatively lower than Q2. Q2 is more a book where you also get to see a higher proportion of retail business coming through. And hence, to that extent, sequentially is why you find the retention ratios for quarter two to be higher than quarter 1. Otherwise, in that sense, there is -- it's largely to do with the kind of business mix that we have for Q2 relative to Q1.

To your second point on -- in terms of unexpired risk reserve releases being slightly elevated, I think that's primarily again a function of -- so again, no change in the way we kind of earn revenues. It's over the period of the contract.

As one of your questions was in the context of crop bookings, given the fact that Kharif season typically has a shorter time cycle when it comes to earning of revenues. And hence, to that extent, you will obviously find an elevated levels of earnings coming through in quarter 2. Having said that, obviously, you also kind of given the fact in line with what we explained, so far as the loss experiences are concerned, unless and until we don't have the complete estimate of the claims experience, till that point of time, we obviously continue to provide for losses at 100% of the earnings that has happened. So that's primarily the reason why you get to see slightly elevated earnings as compared to, let's say, the relative period that you're looking at.

[Bhargav Dasgupta, executive]

On the motor, let me maybe take it. The mix of the business is in line with what we had indicated at the beginning of the year and in the last conference call. I don't know where you've got this point about private car increasing, actually it's coming down. If you look at last year first half, private cars was about 56.5% of our mix. As we speak for this year first half, 66.5%. This year it's about 49.6%. The increase is largely in CV. Two-wheelers almost steady, 26.5% has gone to 27.1%. And CV has increased from 17.1% to 23.4% in line with what we have been saying for the last couple of quarters. The CV mix will be in the mid-20s range.

So given the loss dynamics that we are seeing in the private car particularly -- particularly, private car Motor OD is, we believe, significantly underpriced at this point in time. We've been a bit more cautious in the private car segment. In any case, it's part of our strategy of increasing our very selected CV business, that strategy is playing out. And if you see the growth for CV, we have had a very good growth for the first half. The CV business has grown about 56% for us this first half.

[Swarnabha Mukherjee, analyst]

Sir, just to follow up on that. So actually, in terms of the mix I was talking about what has happened sequentially. So in Q1 I think the premium mix was 47.7% and in the first half it was 49.6%. So from that point of view, I was asking whether you are seeing more traction on the private vehicle side?

[Bhargav Dasgupta, executive]

Yes, I understood your point. Related to Q1, yes. But if you again compare with Q2 to Q2 last year -- and you have to look at your Y-o-Y numbers because of seasonality. There's just a period where private car does more. So if you look at last year Q2, we had about 57% of mix coming from private cars. This year, it's 51%. In spite of the fact that the festive season has been a bit preponed. So actually, it will drop -- limited dropping we will have.

[Swarnabha Mukherjee, analyst]

Gopal sir, please go ahead. I, I think, interrupted you.

[Gopal Balachandran, executive]

Your last point -- your last question on with respect to motor third-party loss ratios, again, fundamentally, as we keep saying, you should look at loss ratios more in the context of, let's say, year-to-date numbers are actually full year numbers, particularly for motor third-party given that it's a long tail line of business. In a particular quarter, there are various elements that goes into it. We would continue to reiterate that you have to look at the portfolio experience more on a year-to-date or as I said, more on a financial year basis.

[Operator]

The next question is from the line of Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

Just a few questions from my side. First is on the health claims. Health claim ratios, they have increased significantly on a sequential basis. So could you break it down as to what was the reason? Secondly, could you throw some light on the implementation of Vehicles Act and how is it panning out across the country? And do we see some benefits of it coming down or coming in the next couple of quarters or it's more driven from a next year perspective how do we see that happening? And lastly, the -- could you cite the reason for the dip in solvency on a sequential basis? That would be my three questions.

[Gopal Balachandran, executive]

So maybe let me take the last part first. The decline in the solvency is purely a function of what kind of growth rate that you see and the mix of business that you write. So as I said, I think quarter 2 generally tends to be a portfolio mix, which is relatively more also in favor of retail. And as per the current factor-based solvency regulations that are in place, the relative capital requirement for the retail business is far higher than, let's say, the commercial line of businesses. So hence, that's purely a function of what kind of business volume that you write. But otherwise, if you see, I think we are quite comfortable with the level of solvency that we're operating at, which is at about 2.47x.

The second element, what you also look at in terms of impact on solvency, I think this is something that you will get to see more or less in every quarter 2 is post -- I mean, we declared dividend, insofar as final dividend declaration has happened towards the end of the year, which gets confirmed at the AGM and the payment happens in quarter 2. So to that extent, there is also an outflow on account of dividend payout, which tends to have an impact insofar as solvency numbers are concerned. So otherwise, it's a minor sequential decline, but these are the two key factors with respect to solvency outcomes.

To your first point on the loss ratio numbers, I think when you look at health, for example, the break-up for the loss ratios for the corporate book, I'm giving you quarter 2 numbers -- quarter 2 FY '23 numbers, the corporate or let's say the employer-employer loss ratios are about 99.1%. And the retail indemnity numbers, and that's broadly the kind of range that we have spoken about on the corporate side. And our retail hedge indemnity, I think the loss ratios for quarter 2 is about 64.4%. The benefit also is kind of relatively profitable. So hence, I think this is within our acceptable levels of loss numbers.

[Prayesh Jain, analyst]

Sir, just on the health book, sequential increase in the loss ratios can be attributable to what factors? Because the intensity -- or is it monsoon-related or what would be the factors for driving increases sequentially?

[Bhargav Dasgupta, executive]

So there are some seasonality impact of monsoon and medical acute cases, the dengue, malaria. There is usually a spike that we always see in this period. And the second point about sequential is that the previous quarter there could have been some releases that we got in that quarter. But overall, the number is not going to be as high as a number that Gopal talked about for the whole year. Our sense is that group -- and this is the group of the employer-employee, not the B2B2C, the Banca business is separate. But the group employer-employee loss ratio will remain in the ballpark number that we had indicated, which is in the mid-90s for the year as a whole.

What we are also seeing is that even as we speak on a base, if you remember, last year, we used to talk about the fact that we had asked for -- we have gone back to our clients, corporate clients and taken price increases. Premium per life had increased post-COVID. And we -- this year also, on top of that, we are seeing some price increases. So we are quite comfortable with the group health portfolio as we see it. Just one quarter number, we may not be fully reflected with the book that we write.

Your last point on motor third-party, again, there are some early signs, but it's too early for us to call. We would want to watch this for a couple of quarters before we take a view on whether the Motor Vehicles Act impact is across the nation. We are seeing some early signs here and there, but that's not -- it's too early for us to take a call that it's happened at a national scale.

[Operator]

The next question is from the line of Shreya Shivani from CLSA.

[Shreya Shivani, analyst]

Sir, I have 2 questions. First is on the overall growth. I wanted your opinion on how should we build in growth for the full year given that for first half you guys have grown at 23%. And particularly, your health book, I mean, on a month-on-month basis, you guys are writing INR 400 crores that way. So I want to understand how sustainable this 23% is or particularly the group -- sorry, the health book of INR 400 crores per month is? First is on that.

Second, I wanted to understand maybe a little bit better insight on why is there so much cyclicality or movement in your investment yields between 1Q and 2Q? Like the quarterly move is quite high. If I see it over previous years -- the quarters of previous years, it wasn't this wide. So I wanted to understand that as well.

[Bhargav Dasgupta, executive]

Shivani, on the first one, clearly the growth momentum is higher than what we executed or indicated at the beginning of the year. In the first half, if you see, we've been significantly more careful about the private car business. In spite of that, we've been able to deliver the growth numbers that we are seeing. So my sense is that the health numbers are sustainable. The point that we've been making that the investment that we've made on the agency distribution, we are beginning to see that play through. If you see, as we mentioned in our opening remarks, the agency -- retail health agency numbers are picking up.

Group health, we are seeing some improvement in pricing. Some of the large players who have been in the past very aggressive, they're trolling down their aggression on pricing and getting a bit more disciplined. So even on group as an employer-employee portfolio, we are seeing conversions at prices that we are comfortable with. So I don't see any constraint.

And the last thing on the health side, ICICI Bank has restarted distributing the indemnity policy on the home side. So that's why the bank numbers are high. And the Banca overall numbers are also high for -- given the tie-up that we've got through the acquisition, they are performing really well. And the credit disbursals are higher, so our attachment business have also picked up. So on the health side, we remain reasonably optimistic and confident about maintaining outperformance and growth.

Motor actually -- as I said, the market has been over aggressive and I don't believe it's sustainable. We are again seeing some players recalibrate on the CV side further as in reduced discounts and improve -- increased prices. We want to see -- we are seeing quite a few players taking similar decision on the private car side. Equally, there are two players who are still aggressive. So if pricing aggression gets muted on the motor side, it may give us an opportunity to grow even faster than what we have grown in this quarter.

That again may not be watchful, but I don't see the numbers going below the current growth numbers that we're seeing. So overall, we remain reasonably confident about the growth trajectory that we've set. I think the only concern that we remain -- about the market is the pricing on the Motor Own Damage side. That is something that we would want to watch a bit closely.

[Gopal Balachandran, executive]

So yield on investment, Shreya, I think it's purely a function of what kind of interest rate environment that you see in the market. I think at this point of time, we are seeing an increasing interest rate regime. And therefore, to that extent, you will obviously find the yields to kind of fluctuate between periods. So otherwise, it's purely a function of what kind of mix of investment that we are making. And largely to do with the interest rate environment that's operating this way. But still, you will always find cyclicality in terms of outcome. So that's one.

And secondly, when you look at the overall yield on the aggregate, assuming on the entire investment income when you look at, obviously, it's a function of both interest accruals as well as capital gains. And you will never find evening of capital gains across periods. For example, if you look at, let's say, the half year numbers, the capital gains for, let's say, first half is just about INR 1.43 billion this half year. This number when you look at H1 of the previous year is at about INR 471 crores.

So when you look at the yield of the overall portfolio, including the -- on a realized basis, then you will obviously find fluctuating outcomes. But at this point of time, when we look at it from an overall portfolio standpoint, a higher increase -- higher interest rate regime actually augurs well insofar as our interest accruals are concerned, because typically when you look at our overall investment income breakdown, on an average, roughly about 70% to 75% of our investment income is through accruals. And typically, on an average, balance 25% to 30% is capital gains on an annual basis. Within quarters, obviously, there can be cyclicality with respect to what the actual yields are.

[Operator]

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

[Nidhesh Jain, analyst]

Just two, three questions. Firstly, what is the number of the sales that we have done from the IL Take Care, you shared that number last quarter? What is the number that you have achieved this quarter? Secondly, the downloads that we have done -- which have been done on the IL Take Care app have been quite strong this quarter. So how are we driving that downloads? Are we incurring any cost to make a customer download this app? That is second question.

Third is, your commentary on the competitive intensity that few players have become -- are recalibrating. That is on Motor TP or Motor OD segment that you are seeing a reduction in competitive intensity? And what are your sense that by what time period we may start seeing Motor Own Damage competitive intensity coming down given that it has been quite intense for the last couple of years? And lastly, sir, any comment on the management succession planning given that there is a possibility of a cap on senior tenure of 15 years? These are the questions, sir.

[Bhargav Dasgupta, executive]

Let me get the last one out. Yes, the exposure draft is there for 15 years. It's an exposure draft. If it becomes a final regulation, then obviously, something will have to be done. But we'll wait for that exposure draft to come through.

The second question on aggression, as we mentioned, see the real problem is in the OD segment. In our opening remarks, we talked about the overall combined ratio for Motor. The combination for Motor OD is even worse than that. So TP is actually going to be better at this point in time. So the aggression is in certain segments and aggression gets played out in terms of -- since you can't do anything on the TP price, people kind of do higher discounting in the OD or incur higher cost in getting that business. So the problem is more on the OD side.

The other question that you had on IL Take Care, just to give you the -- so one is how we are driving it. What we're doing is, initially, if you remember, IL Take Care app was largely setup to engage our corporate customers. What I mean by corporate customers is the employees of corporate customers. So when we sell our group health insurance policy, it's a policy sold to a corporate, but the health insurance is for the employees, and really there was hardly any engagement with them. So that was the original thought process when we launched it about a bit more than 2 years back. As we speak today, more than 50% of the employees of our corporates have downloaded the app and used that app. And that -- this percentage has been increasing quarter-on-quarter. So that's one area where how we present this.

The second is, gradually, we're now putting a lot of effort on the Bancassurance and the agency -- the retail side. And there, it is not as easy to bring about change because there's a behavioral shift and you're working with distributors and agents, et cetera. But even there, we are seeing very good traction, largely because people are seeing value in that engagement. So overall, there is -- there may be some cost, but it's not material. But overall, we are driving it through basically coverages. We think about it, we have roughly -- last time we had about 30 million policies that we've sold, right? So let's say, 2.7 million downloads still gives us a lot of runway of growth. A lot of those numbers may be small ticket or two-wheeler policies, but still, we see that as an opportunity. So that's what we're driving.

Your last question on sales, sales is something that we started only last year. So it's beginning to pick up. And when we talk about sales, it includes the renewals that people do on their own on the app. That number in Q1 was about INR 9.8 crores. That number has grown roughly 3x in this quarter. So it's become a INR 27.4 crores for this quarter. And for the month of September, it was about INR 10 crores.

So we are seeing very, very good traction in terms of adoption, engagement, even in terms of the -- what we track monthly average users, daily average users, on a Y-o-Y basis, those numbers have grown about 4x. So we are seeing very good traction with that app as originally as we had talked about this being a potential game changer for our engagement model with customers.

[Nidhesh Jain, analyst]

And last question on investment yield. If I look at the accrual investment yield, it has increased almost 80, 90 basis points sequentially, so at around 7.3%. So going forward, this will -- with the base yield and it will continue to increase, right? Is that the right understanding?

[Gopal Balachandran, executive]

Very difficult to comment on that, Nidhesh, because I think we will have to wait and see in terms of how does the interest rate cycle play out. As I kind of mentioned, an increasing interest rate regime obviously augurs well for us insofar as interest accruals are concerned. But equally, you should be mindful of the fact that correspondingly to that extent from a mark-to-market perspective on the fixed income book, you will obviously have a mark-to-market negative. And therefore, the ability of us to possibly realize any amount of capital gain, you may not see that happening.

So when I kind of gave that broad split of, let's say, 70%, 75% interest accruals and 25%, 30% to be capital gains, that could possibly see some kind of a change. But if this momentum of, let's say, interest rate cycle sustains, then from an overall -- as flows continue to accrue from business realization, which should definitely help in overall increase in the yield of the book.

[Bhargav Dasgupta, executive]

So maybe your point is absolutely right. I mean, the carrying yield should keep on increasing given the -- it's very positive from a longer term perspective. But on a quarterly basis, the point that Gopal is making on capital gains, that may play out opposite to that positivity.

[Nidhesh Jain, analyst]

I was trying to understand adjusted for capital gains, there is no one-off in the accrual yields, because accrual yields in last 2 quarters have increased quite significantly, almost 130 basis points, while our tenure of the book is 4 years and we are of the opinion that it will improve, but it will improve slowly, but it has improved quite significantly in these two quarters. So I was trying to understand there is no one-off in the accrual yield?

[Bhargav Dasgupta, executive]

No one-off at all. There's no one-off at all.

[Gopal Balachandran, executive]

In fact, the duration of the book has actually kind of increased. The duration at March '22 was roughly at about 3.96 years. That number in June was 4.4 years. When you look at September, the duration is at almost about 4.8 years.

[Bhargav Dasgupta, executive]

Also, we're having the gains from equity, not from debt, if that is your question.

[Operator]

The next question is from the line of Sanketh Godha from Spark Capital.

[Sanketh Godha, analyst]

Sir, the Motor OD loss ratio at 74.3% in the current quarter, is it just because of the price discounting or to some extent we can believe -- is it true that the new policies that is pay-as-you-go and the other policies which industry has introduced has had also contributed to the loss ratios? And if you believe this pay-as-you-go kind of policies are going to increase in the contribution, are we seeing structurally higher loss ratios in Motor OD business going ahead?

[Bhargav Dasgupta, executive]

So the answer to your first question is no because the contribution of those policies is negligible as we speak. So that is not going to move the needle. Not just now, for a long period of time in our estimate.

The second part of the question, in the long-term what will it do? Look, logically, what it should do, we'll have to wait to see what happens, is to price risk more granularly for better customers. So if better customers get a cheaper price, logically, the not so good customers should pay a higher price. Now whether the second thing will happen or not, that time will tell, but that is how it should play out. It should give us more ability to price appropriate. I mean, in the past, we've done secondary measures of driving behavior, NCB and what not. This gives you ability to price based on driving behavior and driving distance. So you should price your risk better. Doesn't mean that it should overall become cheaper for the whole category.

[Sanketh Godha, analyst]

And second, personal accident cover business, which is highly profitable, has seen a very strong growth when I look at 1H and second quarter number, which is even getting reflected in the Banca channel numbers what you have mentioned. So just wanted to understand, sir, that these numbers are sustainable beyond FY '23 because these channels initially started doing business for us, and therefore, this delivered the growth? And I just wanted to know the sustainability of these particular numbers given it has been very strong.

[Bhargav Dasgupta, executive]

So Sanketh, as you recollect, what we've been saying is that the credit disbursal is picking up. Q1 -- in the first quarter, we had a base effect of the previous year's first quarter. That was the second -- the Delta wave and the business numbers were very, very low last year first quarter. So on that base, the first quarter of this year looks very, very elevated. So as a percentage, it may not sustain, but in the absolute terms, yes, we are reasonably optimistic that it will sustain.

[Sanketh Godha, analyst]

And finally, a fundamental question. If I look at the historical trend for the industry as a whole, the AUM growth of the industry or even for your company has always been higher compared to GDPI growth. But if we look at the current year trend, it is almost the opposite because GDPI growth is very strong, but AUM growth somehow is struggling because it's just 8% on year-on-year basis for our company. So just wanted to understand what is that missing link which is not driving the AUM growth compared to what we have witnessed in the past?

[Gopal Balachandran, executive]

So AUM growth, again, it's a function of, let's say, what kind of business outcomes that you're operating at. Now at this point of time, Sanketh, as you would have seen and what we have been talking through is that insofar as our combined ratios are concerned, I think it is currently slightly at elevated levels than what we would expect it to operate at. So for example, you saw the numbers for Q2 at, let's say, 105.1%. Half year, it was, let's say, 104.6%. So hence, to that extent, obviously, the relative accretion to cash flows or let's say the assets under management will be relatively lower. So that's one component that will be a function of what you see relative to growth.

Second, when you specifically look at in the context of quarter 2, you will always find the close to the overall assets under management to be lower. That primarily happens because, as I mentioned in response to one of the earlier questions, Q1 is a period where you see bulk of the corporate renewals taking place, where you end up getting the premiums in quarter one. However, given that where I mentioned also that the corporate book generally tends to have higher proportion of reinsurance. As per the reinsurance arrangement, those settlements take place in quarter 2.

So bulk of the outflows again happen in Q2. And hence, to that extent, and not just this quarter 2, if you look at historically in any of the quarter 2, you will find relatively the flows that gets approved insofar as the overall investment book is concerned to be lower. And hence, as we kind of continue to improve in bringing down the overall combined ratios within acceptable threshold over the next couple of years is what we have indicated. You should logically get to see a higher proportion of flows getting approved in the investment book. So that's the second component.

The third, in line with what we have indicated, I think relative to, again, what kind of business mix that you write. For example, health, as we indicated, will not have as much of a long tail of flow compared to, let's say, motor. And at this point of time, I think insofar as the motor book is concerned, given the relative competitive intensity that we see in the market, we are a bit cautious. Our health is doing reasonably well for us. And hence, that's also a function of what kind of accruals that happens to the overall assets under management. As we get to see pricing improve in motor over the next, let's say, few quarters, and growth comes back, then obviously, you will start seeing a relatively higher proportion of accruals happening to the overall assets under management.

[Sanketh Godha, analyst]

And the last one...

[Operator]

Mr. Godha, sorry to interrupt, but for any follow-up, may we request you to rejoin the queue, please? [Operator Instructions] The next question is from the line of Neeraj Toshniwal from UBS India.

[Neeraj Toshniwal, analyst]

I wanted to understand post July I think there have been some pressure on Motor OD in terms of market share. Have some players again started to kind of become more competitive and that is impacting or how one should read about this?

[Bhargav Dasgupta, executive]

So as I mentioned, we are seeing some green shoots. In CV, we are seeing some moderation from some of the larger traditional players. In OD, we are seeing some of the players now rationalize the aggression. However, at the same time, there are still a few players who are very aggressive. Our sense is that this will not sustain, but that is the reason why we've been saying that we are a bit cautious in the Own Damage segment.

[Neeraj Toshniwal, analyst]

Any [ outgrown ] trend because September for the industry was also weak, not only particularly for ICICI Lombard, anything which has changed or just a one-off one should think about it?

[Bhargav Dasgupta, executive]

So it's been a trend that we've been talking about for last -- actually couple of years, there's been aggression, but it's sustained. I mean, generally -- I think we've mentioned this many times, but generally, we see this aggression turned down after about a year, year and a half. This time it's sustained probably because of the COVID benefits that people saw last year. We were probably expecting this to come down as moderate sooner this year. It's taking a bit more time. But the early signs are quite better. Early signs are positive. So we are optimistic that second half will be a bit better than what we've seen in the first half.

[Neeraj Toshniwal, analyst]

And sir, second half, definitely will get the benefit of lower [ views ] also in terms of premium. So how actually -- overall, given the commercial is already doing well and this already pick up in health, what kind of growth are we kind of internally do have for the full year? Any color on that?

[Bhargav Dasgupta, executive]

I think I answered that question earlier. Our sense is that vis-a-vis what we indicated at the beginning of the year, we've given the optimism that we have.

[Operator]

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

[Avinash Singh, analyst]

A couple of questions. First, if I look at the overall commercial lines, particularly the liability, that is quite profitable, but you have -- you seem to have lost market share. So either market has grown too fast and you have been cautious. So what is driving sort of your market share loss in that highly profitable line, that particular liability? So that's one. And second would be more on what is -- I mean, again, the media reporting around this Bima Sugam initiative. Considering that it is more targeting health, particularly retail, do you see some kind of a channel conflict there? These are the two questions.

[Bhargav Dasgupta, executive]

So Avinash, in terms of liability, last year, there was launch of a product by one company last year, which is classified as a liability product, which the authority has now asked the industry not to write. So if you look at our growth as it is, our growth for Q2 is roughly about 26.4%. So our business continues to do well. In terms of market share, it is only because of that one company's one product which we believe right now is not there in the market. That's the reason that you are seeing market share drop. But the traditional liability business which is profitable, the one that you're talking about, that's something that we continue to do well and we are growing and we're even #1 in traditional liability. If you keep out this, the HCL product that we're talking about.

Your second question was...

[Gopal Balachandran, executive]

I didn't get your second question, Avinash. If you can just repeat your second one?

[Avinash Singh, analyst]

Yes, it's around Bima Sugam, the direct distribution initiative that -- of course, media report has only come. So will there be a channel conflict? Because, I mean, this is -- I mean, trying to reach a retail customer, retail health is something where you or anyone else drive business a lot to agency. So will there be some kind of a channel conflict? Because I mean, you need to have differential pricing, otherwise, I mean, this Bima Sugam will kind of fail from day one.

[Bhargav Dasgupta, executive]

So our sense is that this is something that the authority is also very keen on. So this will pick up and take up. And our sense is that it will actually increase penetration rather than creating channel conflict. We will have to wait to see what the governance of that entity -- the understanding that we have at this point in time is that it will be a industry consoled entity, as in the shareholding will be largely distributed across the players with maybe a technology partner who will also have some stake.

We'll have to design the governance mechanism of that entity. And the products that go on there, we will have to see what goes there and which segments of customers it focuses on. Overall, we believe it's a great positive in terms of creating greater awareness because everyone will talk about it. And the fact that it's something that the regulatory is endorsing, it should create a fair approach to distribution online that we've been kind of hoping for and waiting for. So we are quite optimistic about this.

[Avinash Singh, analyst]

And quickly, on Motor TP losses, so there are 3 moving parts. Of course, you have seen 3%, 4% blended price hike or maybe in the CV may be higher. Second part, of course, you have this Motor Vehicle Act implemented and that probably is kind of really just throw out and all. And third part will be of course inflation, claim inflation that is typically double-digit and some very, extreme quarters at retail as well. So all these 3 put together, you sort of -- your trend for the first half sees that you are still seeing a lot of improvement or scope for improvement, because ultimately, at this point, it's estimation and you have been typically very conservative. What makes you feel sort of okay, the Motor TP with these 3 moving parts is going to improve?

[Bhargav Dasgupta, executive]

I got most of the part of what you said, Avinash. What I assumed just there is the last line. What do you think that -- why do you think it will improve? Was that the question?

[Avinash Singh, analyst]

So I think that price hike has happened, but it's muted. But claim inflation are very, very strong, I mean in Motor TP particularly, some extreme claim awards. And then, of course, Motor Vehicle Act will have positive impact. So there are multiple moving parts. But if I see your Motor TP kind of claims ratio for first half, there is improvement. So I mean -- because I mean my claims -- yes, so my claims is typically double-digit, close to double-digit, so what is sort of your view? I mean, you are facing this to go down.

[Bhargav Dasgupta, executive]

So Avinash, your point is right. There are multiple moving parts and that's why it's very difficult to predict. But if you go back to what Gopal said, don't look at a quarterly number from TP loss ratio, look at an annualized number. If you look at last year -- and that's what we had kind of indicated at the beginning of this year to a similar question. If you look at last year, our TP loss ratio was 74%. For half year, it's about 70.1%. But it's better to look at an annualized number rather than this quarter 66.6% to give you a sense of what we believe is a more reasonable and sustainable number.

Having said that, I think the point that you're making in terms of claim inflation, this is a point that we've always been making. And accordingly, we've had reasonably high claim inflation numbers in our reserving. We believe that a lot of companies hold a significantly lower percentage of inflation, and in a sense, that may be inadequate. But we are quite comfortable with the inflation number that we are holding.

What we want to observe is the frequency drop that we anticipate because of the new Motor Vehicle Act that we earlier responded to. But the frequency drop we have to watch for before we conclude that it's actually come through and the reduction in [indiscernible] the figure that you're talking about is coming through. My sense is that we'll give it some time to develop for us to build confidence and talk about our reduced number. I hope that explains you what are the short-term thinking is and what we believe can happen in the long-term.

[Operator]

The next question is from the line of Ansuman Deb from ICICI Securities.

[Ansuman Deb, analyst]

My question was regarding the comment that you made on the ICICI Bank restarting some of the attachment sales for home loan. So is this the kind of benefit product that we used to sell earlier because that was very profitable and used to contribute a decent amount to our profit? If you could clarify on that.

[Gopal Balachandran, executive]

So Ansuman, I mentioned that it's an indemnity product. And it's not just this quarter, even last quarter we had indicated that the bank has restarted selling attachment of health indemnity. So that's where the growth is very strong. Obviously, the product construct is very different from the original benefit construct. And accordingly, profitability will be very different.

[Operator]

The next question is from the line of Deepika Mundra from JPMorgan.

[Deepika Mundra, analyst]

So just following up on the ICICI Bank loan-linked product. In terms of scale, is there scope to go back to the earlier scale of premiums that were being done even though it's an indemnity product?

[Gopal Balachandran, executive]

At an aggregate relationship, look, with the bank, there are many things that we do. It's not one product that we sell with the bank. So there is SME business that we do with them. There is corporate business that we do with them. There is health business across different lines, be it attachment or in terms of indemnity that we do with them. In aggregate, the relationship has become bigger.

The reason why we always talk about the health number that we talked in the opening remarks was because this last year was a bit of a drag because the health business -- the attachment business had been stopped. The point that we are making is that the attachment business has started, though the product construct is different from what it was last year or not last year, prior to last year.

[Deepika Mundra, analyst]

And sir, on the retail health portion, could you tell us a little bit about the experience on renewals that are coming in from the older books? So what would be the renewal rate of older customers? And in terms of loss experience between new and old customers, what would be the differential?

[Bhargav Dasgupta, executive]

I'll ask Gopal to give you the numbers. Before that, I'll just give you the contribution, since you asked that question about can we go back. Just to give you the sense of the numbers in aggregate, ICICI Bank contribution, if you go to 2 years back before they took that call, was about 5.9%. Last year, it dropped to about 5.3%. Even though that business which we are sourcing in terms of attachment went away, we built other -- we grew other segments, other product categories. For Q1 this year -- sorry, Q2 this year, it's become about 6.1%. For the whole year, it's about 5.8%. So in a sense, for the half year, we are back to a similar number that we had in 2021 in terms of our contribution. Now obviously, our business has grown, so ICICI Bank business has also grown with us.

Coming to your question on renewals, I'll ask Gopal to answer.

[Gopal Balachandran, executive]

So on the health renewal percentages, that number is that it ranges between 75% to 80%. That's the kind of retention that we get to see. Your other point on what kind of split do we see insofar as the loss ratios on the new portfolio and the older portfolio, on the new, I think the portfolio loss ratio could range again anywhere between 45% to 50%. And the old portfolio loss ratios could range between 75% to 80%.

[Deepika Mundra, analyst]

Got it. Sir, one last question...

[Bhargav Dasgupta, executive]

And [indiscernible] Deepika, as you know, probably the health indemnity as it exist become higher.

[Operator]

The next question is from the line of [ Dhruvish Pujara ] from Mirabilis.

[Unknown Analyst]

So I have three questions. First is that 48% of the GDPI comes from broker channel. I think could you find anything about number of brokers or how has been the growth on the broker front? So can you talk about that? And also, do we have a separate...

[Bhargav Dasgupta, executive]

Sorry. So there are 2 segments of business where brokers play a big role. One is the Motor business, all the OEMs. That MISD business largely comes through brokers. This could be an OEM controlled or OEM owned broker like Maruti has their own broking entity through which you get access to the dealerships or some of the OEMs work with other brokers, but it's still a broking business in terms of the business coming through and how we reflect it in our numbers. So one is the Motor business, which is the OEM-driven MISD business. So that's one.

The second is the Corporate business. Corporate -- we are one of the few companies which has a direct sales team. So we have direct relationship management teams, which does business development, goes to corporate. But we equally work with brokers, particularly for the SME segment and also for corporate customers. Now for the SME and for corporate customers, we have a separate broking team, which is dedicatedly looking at the broking channel.

[Operator]

Thank you. Ladies and gentlemen, due to time constraint, we take that as the last question. I now hand the conference over to Mr. Bhargav Dasgupta for closing comments. Over to you, sir.

[Bhargav Dasgupta, executive]

No more comments, it's late night. Thank you guys for staying up to listen to us. And let me wish all of you a very Happy Diwali on the behalf of the entire management team of ICICI Lombard. Thank you, and look forward to our interactions over the quarter.

[Gopal Balachandran, executive]

Thank you so much.

[Operator]

Thank you. Ladies and gentlemen, on behalf of ICICI Lombard General Insurance Company Limited, that concludes this conference. We thank you all for joining us. And you may now disconnect your lines.