ICICI Lombard General Insurance Company Ltd

NSE:ICICIGI

Earnings Call Analysis

Solid Performance with Growth and Profit Gains

The company reported a strong quarter with gross direct premium income (GDPI) of the health segment growing by 20.3% year-over-year (YoY) to INR 13.62 billion. The retail health segment and group health grew by 19% and 20.6%, respectively, while digital revenues reached INR 3.66 billion, representing 6% of the total GDPI. The solvency ratio improved slightly to 2.59, remaining well above the regulatory requirement. The combined ratio improved YoY to 102.7% from 104.2%, excluding catastrophic events. Investment income rose to INR 9.36 billion, with a 25.3% YoY growth in profit before tax to INR 7.64 billion for Q2. However, profit after tax (PAT) slightly decreased by 2.2% to INR 5.77 billion for Q2. An interim dividend of INR 5 per share was declared for H1 FY '24.

Sustained Revenue Growth and Digital Advancements Lead the Way

The company has shown a commendable increase in revenue, recording a growth of 10.9% to reach INR 19.28 billion in the second quarter of fiscal year '24. This is an indicator of the company's strong operational performance and its ability to grow amidst market challenges. A significant aspect of this growth is the advancement in digital realms, particularly a 26.7% growth in business sourced through the Digital One team, reflecting the company's adeptness in adapting to technological trends and consumer preferences.

Health Segment Shows Robust Growth

A detailed look at the health segment reveals a staggering 20.3% growth in Gross Direct Premium Income (GDPI) for Q2 FY '24, indicating robust demand in health insurance products and the company's solid market position in this domain. Retail health and group health segments flourished with an impressive growth of 19% and 20.6%, respectively. The strategy appears to be focused on solidifying the company's presence in the retail market for sustainable growth in market share.

Profitability Fluctuates Amidst Strong Investment Gains

On the profitability front, the company's Profit Before Tax (PBT) experienced a healthy 19.4% increase for the first half of FY '24, showcasing the management's competence in financial stewardship. However, there was a mixed outcome in Profit After Tax (PAT), indicating an overall growth of 3% for H1 FY '24 but a slight degrowth of 2.2% in the second quarter, suggesting there are areas where the company could enhance its profitability.

Enhanced Investment Portfolio and Dividend Increase

The investment assets saw an uptick to INR 453.12 billion, reflecting the company's strong asset management capabilities. Moreover, there was a significant increase in investment income, contributing to the overall financial strength. Acknowledging this, the Board declared an increased interim dividend of INR 5 per share for H1 FY '24, stepping up from INR 4.5 per share for H1 '23, which underlines the company's commitment to delivering shareholder value.

Prudent Underwriting Practices in Motor

The motor insurance segment witnessed an improved combined ratio, dropping from 124% to 120%, indicating some level of improved efficiency in claims and expense management. The loss ratios for motor own damage and third party remain within the company's comfortable operating range. This careful balancing act in underwriting reflects the company's prudent risk assessment practices and their effects on financial health.

Strategic Partnerships and Business Cyclicality

The company's recent partnership with ICICI Prulife to launch a new health and protection product showcases innovative approaches to product offerings and an excitement for exploring new market opportunities. Moreover, the management acknowledges the cyclicality inherent in their business, suggesting variability in growth rates on a monthly basis but an overall positive outlook for achieving high-teens percentage growth for the entire year, potentially outperforming the market by 100 to 200 basis points.

Earnings Call Transcript 2024-Q2

[Operator]

Good evening, ladies and gentlemen. A very warm welcome to ICICI Lombard General Insurance Company Limited Q2 and H1 FY '24 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 involves risks and uncertainties which could cause results to differ materially from the current views being expressed.

[Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [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, [ Zico ], and good evening to each one of you. Thank you for joining the earnings conference call of ICICI Lombard General Insurance Limited Company for Q2 and H1 FY '24. Let me give you a brief overview of the industry trends and developments that we have witnessed in the past few months, post which, our CFO, Mr. Gopal Balachandran, will share the financial performance of the company for the quarter and the half year ended September 30, 2023.

The global economy is experiencing a loss of momentum. However, the Indian economy is gaining strength, led by domestic drivers such as private consumption and fixed asset investments by public sector CapEx. The southwest monsoon rainfall recovered during September. However, it ended below the long period average. The manufacturing and services PMIs and other high-frequency indicators exhibited a robust expansion during this quarter. On the demand front, urban consumption is buoyant, while rural demand is showing some signs of revival. However, the current geopolitical conditions and higher interest rates in the advanced economies can impact global and domestic economic growth negatively, and we have to be watchful of the same.

For the quarter, as per data published by SIAM, the new private car sales continued to deliver robust growth year-on-year. The 2-wheeler sales registered moderate growth for the quarter and in terms of volume still remains below the pre-pandemic levels. The commercial vehicle growth was driven by growth in infra and other core sectors. Health insurance continued to deliver robust growth, remaining the largest contributor to overall growth. The commercial segment witnessed growth in line with the current market environment. We remain optimistic that the industry will continue to grow given the favorable macros, regulatory changes, low penetration and relatively positive consumer sentiment.

Speaking of the performance, the general insurance industry delivered a GDPI growth of 14.9% for the first half of this year over the first half of last year. Excluding the crop insurance, the growth is at 18% for the same period. Overall, the underwriting performance worsened with a combined ratio of the industry at 113.3% for Q1 FY '24 as against 111.4% for Q1 FY '23. For motor business, while the combined ratio continues to remain elevated, the combined ratio of the industry improved to 120.1% from Q1 2024 as against 124.5% for Q1 2023.

Moving to the business numbers for us in Q2 FY 2024. The company grew at 17.4% as compared to the industry growth of 12.5%. In terms of growth of key segments during the quarter, property and casualty line of business grew at 17.2%, which was higher than the industry growth of 8.6%. Further, during the quarter, we accreted market share across all segments such as fire, marine, engineering and liability. In motor, our growth for the quarter was 10.9% as against the industry growth of 13.9%. The growth in motor segment was aided by robust growth of 27.6% in the new private car segment. The private car mix stands at 51.8% for this quarter.

While the competitive intensity of the motor segment remained elevated, we continue our focus on developing a quality portfolio based on granular data. We continue to rebalance our portfolio, resulting in commercial vehicle mix at 22.1% and 2-wheeler mix at 26.1% for quarter 2 of this year.

We also continue to harness our digital capabilities in building claims efficiency in motor. In Q2 FY '24, through our preferred partner network, PPN network, we were able to service 63% of our non-OEM claims, up from 44% in Q2 of 2023. The health segment continued to be the fastest-growing segment for the industry. During this quarter, we grew at 20.3%. As a result of our continued investment in retail health distribution, we have grown in line with the industry at 18.7%. This was driven by growth in business host to the retail health agency vertical of 21.7%.

I would also like to share that our one-stop solution for all insurance and wellness needs, IL Take Care app, has surpassed 6.9 million user download till date. The incremental download for the quarter was 1.3 million. For Q2 of FY '24, the premium sourced through IL Take Care app contributed to 884.57 million to the overall GDPI, reflecting a 3.5x increase year-on-year. We have been updating you about our digital business initiatives like Digital One and IL Take Care, which we've been driving in an agile manner. We are now scaling these agile models to business lines across the company, completely redefining the ways of working and the business processes. Coupled with the transformation of the core system, we expect this to be a key driver for our future growth as a digitally empowered insurance company.

As you are all -- you may be aware, I have decided to pursue an overseas opportunity after spending over 14.5 years with ICICI Lombard. It has been a wonderful journey for me, and I'm grateful for the collective support of all our stakeholders, our employees, customers, channel partners, analysts and shareholders. We have made large strides in the industry and made IL a much loved brand as India's largest private sector GI player. I take this opportunity to thank all of you for your support and hope you will extend the same support as I pass on the baton to my dear colleague, Sanjeev Mantri.

Sanjeev has been with the ICICI Group for over 20 years. Sanjeev has played a stellar role in terms of his achievement within the company. He's spearheaded headed the retail division as an Executive Director, where he was leading distribution of products across agency, bancassurance, direct and alternate channels. He was also in-charge of the strategy products, pricing, marketing and corporate communication verticals at ICICI Lombard. I'm convinced that ICICI Lombard will continue to be a strong force of positive change in the industry under his leadership.

Over to you, Sanjeev.

[Sanjeev Mantri, executive]

Thank you Bhargav, your leadership is an inspiration for all of us and the stellar record over the last 15 years has left an indelible impact on the organization and the industry at large. We are excited for you and the opportunities that lie ahead and wish you the very best.

I'm keenly looking forward to taking the journey ahead, and will rely heavily on the support of all our stakeholders. These are interesting times for the GI industry, and we are very well positioned to capitalize on this. I look forward to meeting and interacting with each one of you personally. We will continue to remain focused on our overall philosophy of balancing growth and profitability.

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

[Gopal Balachandran, executive]

Thanks, Sanjeev. I would now like give you a brief overview of the financial performance of the recently concluded quarter and half year. We have uploaded the results presentation on our website. You can access it as we walk you through the performance numbers.

The Gross Direct Premium Income of the company was at INR 124.72 billion in H1 FY '24 as against INR 105.55 billion in H1 FY '23, a growth of 18.2% as against industry growth of 14.9%. Excluding crop, GDPI of the company was at 17.6%, which was in line with the industry growth of 18% in quarter 2 FY '24. GDPI was at INR 60.86 billion in Q2 as against INR 51.85 billion in Q2 FY '23, a growth of 17.4%. This growth was higher than the industry growth of 12.5%. Our GDPI growth during the quarter was primarily driven by growth in the preferred segments. The overall GDPI of our property and casualty segment grew by 17.2% at INR 14.76 billion in quarter 2 FY '24 as against INR 12.59 billion in quarter 2 FY '23.

On the retail side of the business, GDP of the motor segment was at INR 21.38 billion in quarter 2 FY '24 as against INR 19.28 billion in Q2 FY '23, registering a growth of 10.9%. The advanced premium numbers was at INR 32.89 billion as at September 30, 2023 as against INR 32.17 billion as at March 31, 2023. GDPI of the health segment was at INR 13.62 billion in Q2 FY '24 as against INR 11.32 billion in Q2 FY '23, registering a growth of 20.3%. Our agents, which included the point-of-sale distribution count, was at 122,461 as on September 30, 2023, up from around 117,149 as on June 30, 2023.

GDPI of retail health segment grew by 19%. Group health segment, that's the corporate employer-employee segment, grew by 20.6% during the quarter. The bancassurance and KRG group grew at 24.3% this quarter. During the quarter, our business sourced through our Digital One team grew by 26.7%. Overall, our digital focus has enabled us to increase our digital revenues, which includes the IL Take Care app business to INR 3.66 billion, which accounts for 6% of our overall GDPI for the quarter.

Resultantly, the combined ratio was 103.7% for H1 FY '24 as against 104.6% for H1 FY '23. Excluding the impact of cash losses of INR 0.83 billion in H1 FY '24 and INR 0.28 billion in H1 FY '23, the combined ratio was 102.7% and 104.2%, respectively. Combined ratio was 103.9% in quarter 2 FY '24 as against 105.1% in quarter 2 FY '23. Excluding the impact of cat leases of INR 0.48 billion in Q2 FY '24 and INR 0.28 billion in Q2 FY '23, the combined ratio was 102.8% and 104.3%, respectively.

Our investment assets rose to INR 453.12 billion as of September 30, 2023, up from INR 449.05 billion as at June 30, 2023. Our investment leverage net of borrowings was 4.07x as at September 30, 2023 as against 4.16x as at June 30, 2023. Investment income was at INR 17.59 billion in H1 '24 as against INR 13.94 billion in H1 FY '23. On a quarterly basis, the investment income was at INR 9.36 billion in Q2 FY '24 as against INR 7.39 billion in Q2 FY '23.

Our capital gain, net of impairment on investment assets, stood at INR 2.87 billion in H1 FY '24 as compared to INR 1.43 billion in H1 FY '23. Capital gains net of impairment on investment assets stood at INR 1.65 billion in Q2 FY '24 as compared to INR 1.11 billion in Q2 FY '23. Our profit before tax grew by 19.4% at INR 12.84 billion in H1 FY '24 as against INR 10.75 billion in H1 FY '23. Whereas PBT grew by 25.3% at INR 7.64 billion in Q2 FY '24 as against INR 6.10 billion in Q2 FY '23. Consequently, profit after tax grew by 3% at INR 9.68 billion in H1 FY '24 as against INR 9.40 billion in H1 FY '23. PAT degrew by 2.2% at INR 5.77 billion in Q2 FY '24 from INR 5.91 billion in Q2 FY '23.

[Technical Difficulty]

In H1 FY '24 and 24.8% in Q2 FY '24. Return on average equity was 18% in H1 FY '24 as against [indiscernible] H1 FY '23. The ROAE for quarter 2 FY '24 was 21.1% as against 24.5% in quarter 2 FY '23. Solvency ratio was at 2.59x as at September 30, 2023 as against 2.53x as of June 30, 2023, continue to be higher than the regulatory minimum requirement of 1.5x.

The Board of Directors of the company has declared an interim dividend of INR 5 per share for H1 FY '24 as against INR 4.5 per share for H1 '23.

As I conclude, I would like to reiterate we continue to stay focused on driving profitable growth, sustainable value creation and safeguarding the interest of 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 specific questions that you have. Thank you.

[Operator]

[Operator Instructions] Our first question is from the line of Avinash Singh from Emkay Global.

[Avinash Singh, analyst]

Best wishes to you Bhargav for your future endeavors and congratulations to Mr. Sanjeev for his new role. Good set of performance. A couple of questions. First one, I mean, on your motor side, of course, you commented about the competitive intensity. But whatever I see incrementally in your quarter 2, overall motor profitability seems to be quite good for you. Yet you remain sort of very guarded with the motor. I mean -- so why such, I would say, the guarded approach even when profitability seems to be suggesting that, okay, things are better than what they were a few quarters back? So that is on your entire strategy around motor. Because even in motor CV, you've started to sort of take a bit of more business. But again, there, it seems that as you are sort of trying to slow down.

So on overall motor, I would like to understand the philosophy. And on the same point, now I guess if I understand that and listen correctly, now even Motor TP, technically a commission is sort of a possible because, I mean, business line-wise, commission caps are gone. So what is sort of practices you are witnessing in the market as far as motor is concerned? So that's on motor.

And on health, I -- of course, I see that, okay, the results are coming from your focus on agency and that sort of leading to sort of a growth in retail. Yet if I see, because you are growing strongly in the group, both on the banca side as well as the employer-employee, your mix is shifting again more towards group. I mean, of course, the banca is largely retail, I understand. Yet, I think that on the individual side, I mean, is that growth still a bit less calibrated? Or why? I mean, because on the group employer-employee side, if I understand, the price hike is now behind. So it will be largely kind of a volume-led growth. So that growth is strong, banca growth is strong, I mean -- so on the pure core retail, why sort of a bit of a slower as per your own experience? So these 2 questions.

[Bhargav Dasgupta, executive]

Maybe Sanjeev can answer the question more from the technical help.

[Sanjeev Mantri, executive]

Yes, sure. So thanks, Avinash. Clearly from a motor perspective, as you rightly said, there are enough and more tailwinds available at the industry level, and we are well set to capitalize. In a way, in your question itself, I see the answer that we are able to drive it profitably because we have kept ours calibrated. And we have also always maintained that we will move where we see an opportunity in terms of profit pools. If you look at our own consideration of motor portfolio overall, you will see that the CV portfolio has marginally gone down in terms of a contribution in H1 of 23.4% and moved to 21.6%. And we have grown on private car and 2-wheeler as a company.

If you ask me in terms of the view the way we expect ourselves, we would continue to exert what is required. But if you see intensity, which is in our mind, not working out overall, we will probably be attack for sure in terms of driving it. So overall, our plan of being competitive and being in this place because this is where actually distribution is, we will continue to exert ourselves as we did. On the health part which you spoke about in terms of growth coming primarily from group health rather than retail. If you see our investment, largely has been on the retail side and where you'll see a delta our industry growth of 2%. Group health has always maintained that we go in strategically if we see that we are able to see some sanity in terms of gradually going deep, less positive in quarter 1 while in quarter 2, if you see, we have grown rather subdued vis-a-vis the market. That plan, per se, for us as a company will not change, but our trajectory on the retail side is far more permanent and you will see us doing much better. There's a marginal improvement in market share, but I would not like to read too much into that because over a period of time, we would do much better and we continue to stay invested as far as health agency is concerned.

[Avinash Singh, analyst]

Yes. And that question regarding current practices around commissions in motor. Because I mean, technically now, I mean, one time pay commissions on Motor TP as well. So what sort of a market? And post the sort of basically the commission caps going to your own cap, what kind of market practices you are seeing as far as the payoffs are concerned?

[Sanjeev Mantri, executive]

So Avinash, clearly, we spoke about the industry level numbers on motor, and we see a marginal improvement in the overall combined ratio, from 124%, it move to 120%. Frankly speaking, there is not too much you can do in those numbers as far as this point of time, even on expense of management while it has come in, you'll see almost 50% of the company being more than the limit which is there, which is scattered. Have we seen the overall rational will be prevailing across, frankly speaking, the industry itself is adjusting too at this point of time. And over a period of time, I do believe that you will see far more rationalization than what's happened now. And we do expect to strategy to come back quarter 3 or quarter 4 overall -- from an overall perspective.

[Operator]

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

[Shreya Shivani, analyst]

Congratulations on a good set of numbers. Sir, on the -- coming back on the motor book. I wanted some more understanding on the loss ratio improvement that has happened in 1H versus 1Q. I know you don't want us to look at cost issues on a quarterly basis, but even the 1H numbers look quite good. So that would be one question.

Second is on the monthly performance. So while I understand your monthly performances do vary, but if you can give us some color in understanding what specifically happened in probably August and September? Because until July, you guys were -- had a very strong run rate of about 20%. So any color around what happened and any growth outlook that you can give.

And sir, one more question. Third question, probably. You've launched a new product with ICICI Prulife, the health and protection product management mentioned in the conference call yesterday. So if you can give us some understanding of the economics of such a product, premium, the way partnership with ICICI Pru works out. I'm assuming this will get sold on the ICICI Bank platform. So some color on that.

[Gopal Balachandran, executive]

So Shreya, I think on the first one, I think if you look at -- on the loss ratios for motor, I think you're right. I think we keep saying that you should never look at numbers over quarters or even, let's say, even on a financial year basis because some of these lines will obviously kind of start to exhibit outcomes over a relativity longer period of time, particularly in the context of motor third parties. Having said that, I think when you look at even for, let's say, the half year on motor OD specifically, in general, what we have talked about is the portfolio loss ratio should kind of range between the 65% to 70% kind of threshold on motor own damage.

For the half year, I think the number is at, let's say, 65% or thereabout. But that's the range at which you would possibly see, depending on what kind of a business mix that we write in terms of whether we are able to relatively pick up a higher proportion of new or, let's say, relatively what kind of proportion will we be able to write in the context of the older portfolio. So that's broadly the range at which we will be able to operate at.

Within quarters, obviously, the loss ratios will undergo a change, but that's the range that we are comfortable with in so far as the own damage book is concerned.

On third party, again, the point is the same. I think while for the quarter, you would have again seen the numbers slightly better or, let's say, even on a half yearly basis, I think the number stands at about 66%. But these are experiences that 1 should logically again look at over relatively longer periods and also to the fact that depending on what kind of a mix of business that we write, in terms of private car, 2-wheeler and CV. And that's something that we keep calibrating from time to time, corresponding to which you could possibly see a change in the loss ratio experience. But otherwise, there's nothing specific to call out in the context of, let's say, the quarter 2 numbers.

Having said that, I think what we also keep doing is, given the fact that from a reserving perspective, generally, we have tried to be prudent at all points of time. That philosophy still continues to remain the same, even as we write whichever portfolio of the book. But over a period of time, as you would have seen, some of our experiences have actually started to turn out to be much, much positive and, let's say, what our initial estimates have been. So that will obviously get calibrated from time to time. But otherwise, in so far as the overall portfolio is concerned, it's purely a function of what kind of mix of business that we're able to write.

[Bhargav Dasgupta, executive]

Just to add to a point that Gopal made is that the way we look at business is on a combined basis, not just loss ratio. And overall, you should study our numbers on a combined perspective. The certain businesses may have higher expenses, lower loss ratio and vice versa. So as a team, we look at overall combined as an objective. Sanjeev, over to you for the comment.

[Sanjeev Mantri, executive]

[indiscernible] Yes, we're really excited. We have taken the term [indiscernible] product or have given a combined offering to our customers through our agency channel. If you look at it, Pru has a very decent agency practice, and we have a very decent bancassurance structure overall, a gap which needed to be filled. We have created this product line to leverage on each other's distribution. And as per the regulatory environment that is there, it's something which is a very feasible option. We have gone ahead and done this partnership with them, and we expect this product to fully ramp up in time to come. To be very honest, our regains will require a bit of a training and process. It will come with a lag over a period of time. But that being said, we are really excited with this partnership that we have done with them to drive the combo product in the market, which in many ways is first of its kind.

[Gopal Balachandran, executive]

And to your last question, Shreya, on the monthly performance numbers, again, I think that's purely a function of what kind of businesses do we write between periods. As we had explained even in the earlier call, our business do tend to have a bit of cyclicality across businesses. So for example, in quarter 1, you will obviously see a relatively higher proportion of some of the commercial lines being underwritten. In quarter 2, we do see businesses booked particularly in the context of crop. Now that could get booked in a particular month. And therefore, to that extent, you may possibly see variations in growth percentages when you look at it relatively on a month-on-month basis. But yet again, as we keep saying, I think a better way to look at given the cyclicality of the business that we get to see, maybe, for example, quarter 3, you will see a lot more business largely driven through maybe some of the retail growth. So again, you may see a month-on-month changes between segments of businesses. But however, when you look at it on a full year basis, I think in line with what we have spoken, largely looking at the way how things are positively shaping up for us, we should definitely look at ending the year within that high-teens percentage growth that we have talked about. And in general, I mean, depending on what Sanjeev also mentioned, on the expense of management side, I think if things starts to get improved much better from an industry perspective, then the relative outperformance that we have talked about of 100, 200 basis points over and above the market growth rate, that's something that we still believe we will be able to achieve.

[Operator]

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

[Nidhesh Jain, analyst]

What is the share of OEM and the non-OEM business in the motor and how it has been trended over the last 2 to 3 years?

[Sanjeev Mantri, executive]

Overall, if you see split in terms of the motor that we're speaking about, we will almost have 70% thereabout of our business coming from the OEM business and the rest would be coming through other channels which is agency and bancassurance.

[Nidhesh Jain, analyst]

I think last year, we articulated our intention to move towards -- to enter the share of non-OEM by focusing on high loss ratio, low expense ratio business. So how is the progress on that? Has the share of non-OEM going up?

[Sanjeev Mantri, executive]

So overall, if you see, again, incrementally, yes, we intend exercising ourselves more on the agency side, but the manner in which our motor book has got created, there is a fair amount of contribution. And if we see an opportunity there, it's not one for the other. We'll continue to invest excessively on the agency business side. But that being said, OEM, where we have been working for years and we built a franchise, we will continue to drive that. So we need to look at both of these in a stand-alone here. There are times that OEM contribution can go really up. I mean, there is a season coming in quarter 3, obviously, you will find again OEM probably showing a larger percentage. But that being said, agency business should continue to do well. But relatively to put percentage pool would be a very difficult option. It's not one for the other.

[Bhargav Dasgupta, executive]

So Nidhesh, just to add to supplement what Sanjeev said, I think strategically and philosophically, while we are investing, there will be times when OEM would again come back up, right? So if new vehicle sales increase, as has happened, I mean, as we said in the opening remarks, I think the share of new vehicle pools has been very positive for us and those are profitable pools. So when we see those opportunities, we want to garnered them.

[Nidhesh Jain, analyst]

Sure. Understood, understood. Secondly, I noticed that there is some change in the senior management personnel structure. So if you can explain what is the rationale for that. And what is this emerging market group, if you can share some details on that emerging market group.

[Sanjeev Mantri, executive]

So effectively, it's a very minority, it's not a significant change, but we have an experienced resource which has joined in. And he's an expert in terms of driving the emerging markets. So we have pulled him in to report into Alok, which otherwise had a multiple reporting. So we want to use the benefit of his presence in the system.

[Nidhesh Jain, analyst]

And the emerging market group is the commercial lines? Or...

[Sanjeev Mantri, executive]

Emerging market operates across channels and business lines.

[Bhargav Dasgupta, executive]

Basically, this is the Bharti rather than the top cities, right? So this is were -- if you remember last year, we had done a little bit of restructuring change where Alok Agarwal was really looking at the wholesale business, this was given specific focus, given charge of that market with specific focus. And we are investing and we are growing that business. So typically, let's say, the top 40 cities would be not there. But thereafter, it would be considered to be emerging.

[Operator]

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

[Sanketh Godha, analyst]

My first question is that whether you want to prepone your guidance of 102.5% to be achievable? Because excess of cat losses, I see you're almost there, what you have thought will be achieved by exit of FY '25. Sir, just wanted to understand whether -- given the underwriting environment, you believe that could happen little quicker than expected? That's point number one.

And second, within this 102.5% or combined ratio improvement, means some retail was expected to come from the OpEx part. But despite EOM, our OpEx compared to last year still has been higher or [ 1H '23 ] higher. Sir, just wanted to understand that EOM overall dragging the OpEx higher or increasing the OpEx on the higher side? Or you believe sanity will come and EOMs will -- expense ratios will improve for the sector?

[Bhargav Dasgupta, executive]

Sanket, cut a bit of slack to the team, right? I mean you just -- you're delivering better-than-expected numbers and that's what we want to continue to do. No change in guidance. As you know, the market is still very competitive. We've talked about where the combined issue for the industry is in terms of motor share -- motor segment. But clearly, I think over the last 1 year, the team has done a brilliant job in terms of significantly calibrating the business as also building a lot of capability on the cost side, both on the claims and expense side. So I think we -- and the team is doing really well. But there's no need to change guidance as we see it at this point in time. On the cost side, I'll ask Gopal to answer.

[Gopal Balachandran, executive]

Yes. So I think, Sanket, we'll still continue to maintain what we have been kind of talking about, which is I think the businesses as always has to be looked at as what Bhargav also just mentioned in response to the earlier one, which is we always look at the business from an overall combined perspective. Because different businesses will obviously have a mix of, let's say, loss experience and let's say the expense ratios as well. Just to kind of look at the overall expense of management, specifically to answer your point, first half of last year, our expense of management was at 27.3%. Relative to that, if you look at our first half of this year, we are at about 26.9%. So hence, to that extent, even from an EOM perspective, we have actually seen a marginal improvement in line with what we definitely wanted to kind of drive it towards. And this is despite the fact that we continue to make our investments in those areas of building distribution on health agency, technology, some of the core transformation projects that we talked about. . I think clearly, we would want to continue to make those investments. And hence, to that extent, you may not suddenly see a big shift happening in so far and specifically in the context of the expense ratio numbers are concerned. We will obviously drive a positive change. But having said that, I think we will directionally be more guided by the other objective that we have specifically spelled out, which got reiterated as we speak, which is a combined ratio objective of 102%. It's something that we want to achieve by the end of next year. So that's something that we want to clearly drive. And as I said, purely the breakdown of expense is a function of not an expense.

[Sanketh Godha, analyst]

Got it. Just last 2 questions or 1 question, which is one data keeping typical loss ratio of retail health and group health that if you can share? And second, I just wanted to understand this IL Take Care app. 6% of GWP is a big achievement. So how do you see this to be contributing? And if you can give a color how much mix is driven by motor and health in IL Take Care app?

[Gopal Balachandran, executive]

So the number of 6% is the digital contribution, Sanket, the second part of your question. So therefor, to that action, that also includes, let's say, the business that we source through IL Take Care app. And as we have been talking about, I think consistently, whether you look at it on a year-on-year basis, obviously, there is a multiplier increase in so far as the premium that you are sourcing through IL Take Care is concerned, roughly about 3.7x increase that we have seen. But even when you look at it on a sequential basis, I think we have been able to kind of grow the contributions coming into that particular app. So we are very, very excited with the way how things are getting played out. And equally, we are getting to see a lot more product per customer insofar as the use of the app is concerned. And that will continue to drive both volumes as well as, let's say, value of premium insofar as the digital contribution is concerned.

To your first point, insofar as the breakdown of the loss ratios are concerned, I think for quarter 2, the breakdown of the overall health loss ratios into corporate health and retail indemnity, corporate health loss ratios are at about 102% and the retail health indemnity loss ratios at 66.6%. This number, I think when you get the numbers that we gave out for quarter 1 last year, corporate health was about 92.6% and the retail health indemnity numbers were 64.2%. Now obviously, these numbers have to be looked at in the context of how do we see some of the loss incidences play out. And particularly in quarter 2, we do get to see a slight increase in a loss incidents primarily because typically, it's a monsoon season, and we get to see a lot more increase in health-related ailments that we get to see. And this is not specifically only for this particular quarter 2.

Even otherwise, when you look at it even for the last year, for example, clearly, we had seen an increase in the loss ratios playing out between, let's say, quarter 2 versus quarter 1. So hence, in that sense, I think we are pretty much okay with the way how the loss experience is playing out. And as we had indicated in so far as the portfolio growth is concerned, I think it is coming at a price at which we are comfortable with. And in the subsequent quarters, we should start seeing some of these loss ratios getting normalized, particularly in the context of lowering down of loss incidences that we see in Q3 and Q4.

[Bhargav Dasgupta, executive]

Just to supplement what Gopal said, and we've talked about this in the past, the entire thought process and the approach behind IL Take Care was consumer engagement, right, engaging with our customers, be it the employer-employee segment where the individual is a potential retail customer or our retail customer -- B2C customer who comes onboard. And the approach that we are taking is that as we have more engaged customers, they will renew better, we'll have cross-sell opportunities, and hopefully, the relationship will be more sticky.

So principally, for us, whatever business we get as well as it's viable, we are not driving motor numbers or health numbers there. It's a customer engagement app. And as an organization, we don't want to split that number at this point in time to say, okay, this is my motor number, this is my health number. Because it might drive us in a manner which is not customer-centric. So as an organization, we've been giving the numbers into the number of app downloads, the total volume of cross-sell and upsell business that we are doing, which is something that will continue to create.

[Operator]

Our next question is from the line of Swarnabha Mukherjee from B&K Securities.

[Swarnabha Mukherjee, analyst]

Congrats on a good set of numbers. So I'll come back to the motor loss ratios. So I understand that what you have articulated in terms of your experience and maybe some of the releases that are coming. But just for a view of how the loss ratios are going through turnout, I mean, say, for in Motor TP, your loss ratios have been a little bit fluctuating over quarters. Right now that there has been a bit of an improvement going ahead.

If you can give some color for the full year, how we should think about this number where it can sustain. Same for OD given that you are picking up on growth on the OD business and particularly private vehicle in the mix. How confident would you be in kind of maintaining this type of loss ratio? So that is the first one.

And secondly, in terms of the investment income, I just wanted to understand the yield that you have shown, a realized return is fairly strong, I think slightly higher than what we have done in the past. So is there certain technical bets that have worked out, which might not play out in the coming quarters? So what kind of releases we can think about going ahead on a normalized basis?

[Gopal Balachandran, executive]

So for the first one, I think, which is what I kind of responded to the earlier one and one I kind of talked about the range at which we would be comfortable. So one, I think when we look at motor as a line of business, we obviously look at it again more from a combined perspective, which will be a combination of both the loss experience and, let's say, the expense ratios. And as what we just discussed, again, it will depend on what proportion of new business that we write because new typically comes with a relatively better loss experience. And correspondingly, let's say, the expense ratios could slightly stay elevated. And correspondingly, let's say, the older portfolios, as we just discussed, typically comes with a slightly high LR and, let's say, a relatively lower cost of distribution.

So honestly, that will be an interplay that one would get to see insofar as writing this book is concerned. But having said that, I think the range at which one would be comfortable to operate in the context of motor own damage is what I kind of responded earlier, which is in the range of between 65% to 70%, depending on what kind of a business mix that we write in the aspect of proportion of new or, let's say, the relatively older portfolio.

On third party, again, pretty much we have kind of talked about, that's what I responded. Obviously, we should again not look at these numbers particularly for quarters, so let's say, even on a half-yearly basis, you have to look at the numbers over a relatively longer period. So there, again, it will be a function of what kind of loss experiences that one sees. But broadly, I would say that one could see that third-party loss ratios, again kind of hovering around what you see on a full year basis, that will be largely representative of the range at which we would get to see the loss ratio play out. So that's the response to your first one.

To your second one on the overall investment book, I think, in fact, in the past quarters, people have been asking us why have we not seen let's say, so much of an increase in the overall interest income of the portfolio. Now if you recollect, I think what we generally do is depending on the market opportunity that one sees is how we place our overall portfolio at. And for example, we tend to kind of -- in this high interest rate environment, we obviously want to capitalize the opportunity at one stage insofar as accrual to the book is concerned, which is why our overall duration of the book, in fact, stands at about 5.2, 5.3 years. This number, if I remember it correctly, at the end of -- at the beginning of the year, was at about 4.9 years. So obviously, we have gone a bit long, and we have kind of rightly positioned the portfolio in order to capitalize, as I said, the increased interest rates that one sees in the market. So hence, to that extent, we will obviously get to see this kind of play out even as we kind of head into the subsequent quarters.

What is it that you may not necessarily see playing out over the subsequent period is purely a function of the extent of capital gains that one sees in the market. That's purely driven by, let's say, the market opportunity that one sees. And even in the past, we've talked about it. Between quarters, you can always see fluctuations in the breakup of the overall investment income. Depending on how the market plays out is what you will be able to see some kind of gains playing out. So hence, to answer your point, I think the way we have positioned the portfolio is what is helping us in terms of capitalizing the increased interest income.

[Bhargav Dasgupta, executive]

And just to supplement the point that Gopal made, as we've been talking about this, that our carried yield will increase and Gopal has given this number. If you also look at the split of the unrealized gain, the unrealized gains in the equity book has increased at the end of this quarter. Obviously, on the debt side, and the bond side, it's come down because interest rates have gone up. But that is not something that we're worried about because these are all calls that you've taken to stay long in the debt market. That's how our yield has increased.

[Operator]

Our next question is from the line of Rishi Jhunjhunwala from IIFL Institutional Equities.

[Rishi Jhunjhunwala, analyst]

Just a couple of questions. Firstly, this September month would have seen the first 5-year anniversary of the 2-wheeler long-term TP. So how has the experience been in terms of renewal given that 5 years of TP means that the renewals are pretty much down to 0? And as a result, if you can give some color in terms of what would that amount of premium for September month be as proportion of overall motor TP?

[Sanjeev Mantri, executive]

So thanks, Rishi. Clearly, this was the first month. Overarchingly, if you ask me overall at an industry level, there's a good reason why I think Supreme Court get the verdict in term of having longterm debts. The retention rates continue to be relatively on the lower side. I would not speak in term of the amount, but retention levels that we are seeing as a team right now is around 15% to 20%. The development of this will happen over a submission of probably a quarter in terms of what are the 2 numbers. Because we'll have to pursue this with our own customers and see where we end up closing it. But it's something as a pool that we are very keen to using all possible analytics to see if we can further sharpen our axe and see that we can drive these numbers. Even if it's only TP, we'll be more than happy to write this pool.

[Rishi Jhunjhunwala, analyst]

Understood. And the second is just on the total payouts to the distribution channels. Some of our life insurance peers have talked about industry-wide increase in payouts to the distribution channels. How has it behaved for us in the key banca partner channel as well as outside of that in terms of the total payout? I understand there was categorization or reclassification. But just in terms of payout, has there been a demand for increase in payouts for us? And have you seen any kind of anomalies in the industry otherwise?

[Sanjeev Mantri, executive]

So overall, if you see, for us, as a company, expense of management has stayed within the range. And in fact, it's come down from 27.3% to 26.9%. So frankly speaking, there is no accelerated increase. But in certain pockets where we have seen a bit of an acceleration, you will see that directly, we will go again to what our basic prices have been. We will see that we can get a viable business in terms of acquiring it. In a way, to some extent, you can see our motor market share also is reflecting that we had a calibrated growth to fully maintain profitability over just market share growth. So you can lead in terms of what's happening over actually. But overall, we seem to be in control at this point of time.

[Operator]

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

[Prayesh Jain, analyst]

Congratulations on a good set of numbers. Firstly, I just missed the agency count number. Can you just repeat that Gopal?

[Gopal Balachandran, executive]

It's about 1,22,000, which includes the agency. That includes the point-of-sale distribution as well. So this is 1,22,000. This number at the end of the period was about 1,13,000.

[Prayesh Jain, analyst]

So just on the previous question...

[Operator]

Sorry to interrupt, Prayesh Jain, we request you to use your headset please as your audio is muffled sir.

[Prayesh Jain, analyst]

Is it better?

[Sanjeev Mantri, executive]

Your voice is slightly not stable, Prayesh. We can't hear you clearly.

[Prayesh Jain, analyst]

I'll come back in the queue.

[Operator]

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

[Madhukar Ladha, analyst]

Congratulations on a good set of numbers. A couple of questions. One, we are seeing a good increase in the crop business that you're doing this year. What is the philosophy behind that? I remember in the past, you wanted to avoid that business. And I also know that you've got this business again from Bharti. So is that only those states? Or are you also growing from the other states? So that's one.

Second, again, I'm just going back to the guidance of 102%. Given that your performance is quite strong in first half, it's 102.7%. So are you being a little bit too conservative over here? And finally, most of the industry is ahead -- or sorry, is not meeting the EOM norms right now. So what regulatory action can we expect? And what would you say, by then will the regulators start looking at this and implementing this?

[Bhargav Dasgupta, executive]

Madhukar, let me answer it in the same sequence. One, on crop, there is no change in philosophy. As Gopal had explained that -- I think Sanjeev explained that there are certain months where you book premium. It just shows up in that quarter. In aggregate, our share of crop business, which we have guided the market was to be -- would be around 5% of total business -- for the annual business, not on a quarterly basis. I think we'll stay at that kind of range. We are not significantly growing our crop book. In spite of the fact that we believe some players in the market are trying to do that because of the advantage that they get on EOM. But philosophically, we don't believe that's the right strategy, right approach. So we are not doing that. There was some amount of booking in the kharif season because most of the business for us is in the kharif market -- kharif period. So it's a bit higher in this quarter. That's about all.

Secondly, most of the crop that we've got is in the 80:110 model. So it's a reasonably well-contained business. And our experience in the last couple of years has been very reasonably positive on the upwards that we had. In terms of your question on...

[Madhukar Ladha, analyst]

The combined ratio.

[Bhargav Dasgupta, executive]

Coming to question on combined, I think just to add whether we are being conservative, that's your call, you'll take your own view about whether we are being combined or conservative. As I said, the guidance should remain the same. If we can outperform, all of you should be happy.

Third, in terms of the regulatory actions, look, it's not for us to talk about what the regulator will do. But at least we hope and we think that this time, the regulator is serious about this. At the same time, this is not about a quarterly number that they're monitoring. They will want it -- they've given [ BA ] for a company on an annual basis. And my sense is that at the end of the year, they look at who has improved and who is not improved and who's gone beyond 30%. So I think it would be wise for most companies which are running at higher than that number, I think it will be wise for them to bring it under control. But as I said, it's not for us to talk about what the regulator will do. That's a question that, in a sense, time will give us the answer. And you'll see what the regulator does.

[Madhukar Ladha, analyst]

Right. Just a follow-up on this, sir. Are we seeing a heightened competitive intensity in the group health segment also to sort of meet your norms?

[Bhargav Dasgupta, executive]

I think Gopal answered that. In the first quarter, we saw the market on group health to be better, and we had a much higher share. This quarter, we've seen some amount of aggression. And in fact, we've seen some otherwise sensible companies buy very large chunky group of businesses. Our sense is it's probably to manage the extensive management. But at the end of the day, the business is not just about expense and management, business is about combined, right? So you want to do it in a manner which is sensible. So we will be watchful and we'll see what happens. But overall, at this point in time, we are quite comfortable with the group health business that we are writing.

[Operator]

Our next question is from the line of Nischint Chawathe from Kotak Institutional Equities.

[Nischint Chawathe, analyst]

Just a small one. When I look at the monthly figures for the Motor TP business, I was just curious that did you do any transaction in the last month, just something that you have done probably in the February, March month last year.

[Sanjeev Mantri, executive]

No issues. We have not done any transaction. .

[Operator]

Our next question is from the line of Supratim Datta from AMBIT Capital.

[Supratim Dutta, analyst]

Just wanted to understand a few things. So one, the INR 0.48 billion of nat cat losses, which lines of business are those attributed to?

[Gopal Balachandran, executive]

It's been largely -- so this quarter has been largely, let's say, relatively retail. So we have had a higher proportion of losses coming in from the motor line of business. But equally, we have also had some amount of claims coming in here on the property side. Unlike quarter 1, where relatively the losses of roughly about INR 35 crores, which was the cat losses in Q1, that was largely property heavy as compared to motor.

[Supratim Dutta, analyst]

Got it. And within -- so if I adjust for the nat cat losses there in the motor OD line that, that would result in the loss ratio being lower than 60%. Is that a correct assumption? And then my follow-up question to that is how sustainable is this loss ratio going forward?

[Gopal Balachandran, executive]

Supratim, I had kind of already responded to that. But just to kind of reiterate, again, we will keep saying this and you will get to hear us some time and again, you should never look at quarterly numbers. And largely, it is better to go to look at numbers more on a yearly basis. Just to kind of reiterate on motor own damage, I think the loss ratio depending on the kind of mix of business that we write in motor, we are comfortable at a loss ratio range between 65% to 70%. That's the range depending on what kind of mix of business we write.

And on TP, again, it's better to kind of look at more annual numbers, which is largely reflective of the loss ratio range that one would be comfortable writing. So hence, to that extent, whether you adjust it for the quarter 2 losses from cat in the loss ratios. But if you do that on a simple basis, then obviously, yes, the loss ratio will definitely look better than what the reported numbers are. But having said that, I think the range at which we are comfortable at is between 65% to 70%. And what equally we need to remember is that whatever be the amount of losses, I think we do have appropriate reinsurance support such that if there is a very large cat-led event having an impact on the net, that gets appropriately protected through necessary reinsurance arrangement.

[Supratim Dutta, analyst]

Got it. And just one last question. So on the fire side, there has been a slowdown in the second quarter. So just wanted to understand how much of this is due to the [ IRB ] bond rate versus overall competition or you wanting to not write some kind of business. So just wanted to understand that.

[Bhargav Dasgupta, executive]

On that, the experience that what we discussed at the -- in the first quarter is the same, which is that roughly about 5%, 6% reduction from the earlier rate, which is better than what we had actually -- we had anticipated at the beginning of the year. We'll have to see if this holds. In terms of fire, there are maybe 1 or 2 large qualities that have not moved from period to period. And there's some policies in earlier booked in per period, which may have moved somewhere else. So you should look at the numbers with a longer period rather than just a quarter.

[Gopal Balachandran, executive]

The only thing just to add to that, I think having said that, I think if you look at across segments on the commercial lines, I think we still continue to outperform the market. I think we continue to upgrade market share in fire as a line of business. Or whether you take any of the other commercial lines, we continue to outgrow the market.

[Operator]

Ladies and gentlemen, due to time constraint that was the last question of our question-and-answer session. I would now like to hand the conference over to Mr. Bhargav Dasgupta for closing comments.

[Bhargav Dasgupta, executive]

Thank you. Thank you, everyone. I think all of you have been great support to the company and me personally, and I really want to take this opportunity to thank all of you for being great analysts and investors in our company. As I said earlier, I'm hoping that you continue to engage with us as you have in the past, and Sanjeev wants to have the last word.

[Sanjeev Mantri, executive]

No, I think absolute pleasure. And really keen to, in fact, meet each one of you personally as and when your schedule permits. Nothing much to add, but absolutely in agreement with Bhargav that we've had great inputs and discussions with all of you, and that continues. Thank you so much, and let's meet up soon. Thank you.

[Operator]

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