ICICI Lombard General Insurance Company Ltd

NSE:ICICIGI

Earnings Call Analysis

ICICI Lombard Reports Strong Premium Growth Amid Market Challenges

ICICI Lombard's gross direct premium income surged 15.5% to INR 144.09 billion in H1 FY '25, outpacing the industry growth of 7%. Q2 alone saw a 10.4% increase, driven by a robust 16.1% growth in the Motor segment. Despite facing catastrophic losses impacting the combined ratio, it improved slightly to 103.2% for H1. The company's health sector flourished with a 12.3% growth, primarily in retail health, where market share rose to 3.5%. The company maintains a solid solvency ratio of 2.65x and anticipates sustainable growth, with no major changes to guidance.

Strong Revenue Growth Amid Industry Challenges

In the first half of FY 2025, ICICI Lombard General Insurance Company Limited experienced robust growth, with Gross Direct Premium Income (GDPI) reaching INR 144.09 billion, a 15.5% increase compared to INR 124.72 billion in H1 FY 2024. This growth notably outperformed the industry growth average of 7%. Specifically, GDPI growth excluding crop and mass health sectors was recorded at 15%, illustrating the company’s strength in its core business lines, particularly in the automotive and retail health segments.

Quarterly Performance Highlights

In Q2 FY 2025, the company reported GDPI of INR 67.21 billion, marking a 10.4% rise from INR 60.86 billion in Q2 FY 2024, also surpassing the industry's 2% growth. The growth was largely attributed to strong performances in the motor segment, which saw a 16.1% increase in premiums, reaching INR 24.82 billion. Health segments fared well too, with a 12.3% increase, underlining the company's effective strategies in these areas.

Rising Profits and Return on Equity

ICICI Lombard's profit before tax surged by 31.9%, reaching INR 16.93 billion in H1 FY 2025, compared to INR 12.84 billion last year. Profit after tax experienced a similar boost, rising by 31.7% to INR 12.74 billion. The return on average equity improved from 18% in H1 FY 2024 to 20.3% in H1 FY 2025, indicating efficient capital management and profitable growth.

Catastrophic Events Impacting Combined Ratios

A significant aspect affecting the financial results was the impact of catastrophic (CAT) losses, amounting to INR 0.94 billion in H1 FY 2025, which influenced the combined ratio negatively. The overall combined ratio for the first half was 103.2% compared to 103.8% in H1 FY 2024. When excluding these CAT losses, however, the adjusted combined ratios show improvement, underscoring operational resilience despite external challenges.

Guidance on Future Performance

Looking ahead, the management has maintained the guidance for achieving a closing combined ratio of 101.5% by Q4 FY 2025. This estimate emphasizes the company's commitment to managing losses associated with catastrophic events. The overall strategies focus on optimizing the product mix and driving profitable lines of business.

Investment Portfolio and Dividends

As of September 30, 2024, ICICI Lombard's investment assets rose to INR 515.57 billion from INR 510.04 billion in June, underlining a steady investment strategy. Investment income jumped to INR 22.52 billion in H1 FY 2025 from INR 18 billion the previous year, demonstrating effective asset management. Furthermore, the company declared an interim dividend of INR 5.5 per share, up from INR 5 the previous year, reflecting a commitment to return value to shareholders.

Strategic Initiatives Supporting Growth

ICICI Lombard reported significant strides in customer engagement, with the ILTakeCare app surpassing 11.6 million downloads and generating premiums of INR 556.8 million in the recent quarter. Investments in digital and CRM technologies have enhanced customer service and operational efficiencies notably. Initiatives such as consolidating call centers and leveraging AI tools have further bolstered their capabilities in underwriting and claims management.

Market Trends and Future Outlook

Despite the overall economic challenges posed by rising crude prices and political instability in West Asia, ICICI Lombard remains bullish about its growth prospects. The company anticipates single-digit growth in the motor segment for the second half of FY 2025, coupled with a focus on strategies that will capitalize on seasonal demand fluctuations. This strategic positioning, alongside a robust operational framework, aims to secure continued market share growth.

Earnings Call Transcript 2025-Q2

[Operator]

Good evening, ladies and gentlemen. A very warm welcome to ICICI Lombard General Insurance Company Limited's Q2 and H1 FY 2025 Earnings Conference Call. From the senior management team, we have with us today Mr. Sanjeev Mantri, MD and CEO of the company. Mr. Gopal Balachandran, CFO; Mr. Girish Nayak, Chief Technology and Health Underwriting and Claims; Mr. Sandeep Goradia, Chief Corporate Solutions Group; and Mr. Anand Singhi, Chief Retail and Government business.

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

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

[Sanjeev Mantri, executive]

Thank you. Good evening to each one of you. Thank you for joining the earnings conference call of ICICI Lombard General Insurance Company Limited for quarter 2 and H1 financial year 2025.

Let me give you a brief overview of the industry trends and developments that we have witnessed in the ensuing months. For this, our CFO, Mr. Gopal Balachandran will share the financial performance of the company for the quarter and half year ended September 30, 2024. During the quarter 1, 2025, India's real GDP grew by 6.7%, primarily driven by private consumption.

Moving into Q2 of financial year 2025, the government expenditure started witnessing an uptake. GST collections continue to remain steady and for Q2 and the direct tax collections are growing at a decent pace. This may provide much needed support to retail spending in the upcoming festive season.

Further, a normal monsoon may help drive rural demand in coming months. Nevertheless, the current situation in West Asia region and a substantial increase in crude prices remains a major risk for the overall economic growth. Speaking of general insurance performance, industry delivered a GDPI growth of 7% for H1 of financial year 2025 over H1 of financial year 2024 impacted by quarter 2 financial year 2025 growth of 2%.

However, excluding crop and Marshall segments, the industry registered growth at 10.9% for H1 of 2025 and 6.9% for quarter 2 financial year 2025. Now talking about the auto industry, growth for the quarter was muted as reported by [ CMs ]. Private car with higher base degrew at 1.8% 2-wheel pillars grew at 12.6% and CV degrew at 3.2%. This entails approximately 2.1 million private cars, 10.2 million 2-wheelers and 0.8 million CVs being sold in H1 of 2025.

Further, the retail numbers, as reported by has also seen degrowth for private cars at 5.1%, 2-wheeler growth at 4.7% and CV growth remained muted at 1.1% for quarter 2 financial year 2025. The Health segment during the quarter continued to deliver double-digit growth, largely driven by retail business registering growth of 17.7%.

The growth in the group business was moderated due to pricing pressure and the health business was impacted due to relatively muted disbursement by financial institutions. The Commercial Lines segment during the quarter was a mixed bag, with industry growth at 2%, while Fire segment degrew at 10.7% on account of pricing pressure. However, government spend on infrastructure development and acceleration in private sector investment has put positive growth, especially in segments such as engineering, liability and marine. The regulatory environment continues to focus on policyholders' interest while fostering innovation, competition and sustainable growth for the industry, thereby reinforcing the authority's vision of reinsurance for all by 2047.

Overall, for the medium to long term, we remain positive that the general insurance industry will continue to grow given the favorable regulatory changes, low penetration and rising disposable incomes. Now speaking of the underwriting performance of the industry, the combined ratio for the industry remained at 113.9% for quarter 1 financial year 2025, as against 113.5% for quarter 1 financial year 2024.

For the Motor business, the industry's combined ratio was [ 225.6%] in quarter 1 financial year 2025 from 121% in quarter 1, 2024. This can be largely attributed to the increase in loss ratio. Now let me update you on performance of key business segments for us.

The company's GDPI for quarter 2 financial year 2025 grew by 10.4% as compared to the industry growth of 2%. Excluding the crop and mass health of company grew by 9.4% as compared to the industry growth of 6.9%. In the Commercial Lines segment, we grew at [ 1.22% ] as against industry growth of 2%. We continue to maintain leadership position in engineering liability and marine cargo segment. However, in the Fire segment, we remain vigilant in terms of risk selection, while maintaining our market share.

In Motor segment, during the quarter, we registered a growth of 16.1% as against the industry growth of 6.2%. The overall growth in Motor segment during the quarter was aided by growth in old business. We continue to maintain our market share leadership with robust capabilities across distribution and writing claims, servicing and actuarial practices. During the quarter, we sustained a balanced portfolio with a mix of private car, 2-wheeler LCV at 54.4%, 24.6% and 21%, respectively.

Our preferred partner network enabled us to service 72.8% of our non-OEM claims in quarter 2 of 2025, up from 63.4% in quarter 2 of financial year 2024. The Health segment grew at 12.3% in quarter 2 financial year 2025, led by retail health. We registered a growth of 41.4% in quarter 2, 2025 as against industry growth of 17.7% in the retail health segment.

Our growth in quarter 2 was supported by our recently launched product Elevate. Our market share for retail health segment has now reached 3.5% in quarter 2 of financial year 2025. In the Group Health employer employee segment, we look -- we took a cautious approach due to increased competitive intensity. Consequently, we grew by 1% in quarter 2 financial year 2025 as compared to growth of 34.6% in quarter 1 of financial year 2025.

During the quarter, our banca business degrew by 2.6% due to lower credit disbursement growth in our key leadership partners. Within this, ICICI Group disbursement and distribution grew by 19.6% for quarter 2 of financial year 2025 due to our continued strategic focus on banking business. We continue to strengthen our digital business. During the quarter, our customer facing digital business grew by 14.7%, contributing 6.3% of our overall GDPI.

Our investment in new customer acquisition strategy through website led to a growth in fresh business of Motor and Health segment by 45.9% in quarter 2 financial year 2025. Our one-stop solution for all insurance and wellness needs the ILTakeCare app has surpassed 11.6 million user downloads till date registering a premium of INR 556.8 million for the quarter.

As discussed in our previous call, we continue to harness synergies through one-on-one team under this 1 of our initiatives, 1 IL, 1 call center. We have consolidated multiple call centers into 3 specialized teams, fresh acquisition renewals and servicing to drive improvement in operational efficiencies and the overall customer experience.

Additionally, our investment in CRM technology and AI tools have further increased productivity by high teens and improved customer service, particularly in Retail, Health and Motor segments. In conclusion, we continue to strengthen our multiproduct multi-distribution strategy led by our focus on product innovation, data analytics and digital enhancements.

These initiatives, coupled with the spirit of 1 IL, 1 Team position as well to capitalize on future opportunities and drive profitable growth. 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, and good evening to each 1 of you. I will now 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.

Gross direct premium income of the company was at INR 144.09 billion in H1 FY '25 as against INR 124.72 billion in H1 FY '24, a growth of 15.5% against the industry growth of 7%. Excluding crop and mass health GDPI growth of the company was at 15%, which was higher than the industry growth of 10.9% in H1 FY '25. GDPI was at INR 67.21 billion in Q2 FY '25 as against INR 60.86 billion in Q2 FY '24, a growth of 10.4%. This again was higher than the industry growth of 2%.

Excluding crop and mass health, GDPI growth as the company was at 9.4%, which was higher than the industry growth of 6.9% in quarter 2 FY '25. Our GDPI growth during the quarter was mainly driven by preferred lines of businesses. On the retail side of the business, GDPI of the Motor segment was at INR 24.82 billion in Q2 FY as against INR 21.38 billion in Q2 FY '24, registering a growth of 16.1%.

The advanced premium number was INR 35.13 billion as at September 30, 2024. as against INR 34.56 billion as at June 30, 2024. GDPI of the Health segment was at INR 15.29 billion in Q2 FY '25 as against INR 13.62 billion Q2 FY '24. Again registering a growth of 12.3%. Our agents, which include the point-of-sale distribution, count was 133,683 as on September 30, 2024, up from 131,021 as at June 30, 2024.

The overall GDPI of our Commercial Lines segment grew by 1.2% at INR 14.93 billion in Q2 FY '25 as against INR 14.76 billion in Q2 FY '24. During the quarter, the industry witnessed multiple catastrophic events, namely floods in Andhra, Telangana, North India, Gujarat, et cetera, et cetera, impacting our combined ratios, which was 103.2% for H1 FY '25 as against 103.8% for H1 FY '24. Excluding this impact of CAT losses, which was INR 0.94 billion in H1 FY '25 and INR 0.83 billion in H1 FY '24. The combined ratios were 102.2% and 102.7%, respectively.

Combined ratio was 104.5% in Q2 FY '25, as against 103.9% in Q2 FY '24. Again, excluding the impact of CAT losses primarily, we had the cat losses in Q2 this year, which was again INR 0.94 billion and INR 0.48 billion in Q2 FY '24. The combined ratio was 102.6% and 102.8%, respectively.

Our investment assets during the quarter rose to INR 515.57 billion as of September 30, 2024, up from INR 510.04 billion as at June 30, 2024. Our investment leverage net of borrowings was 3.91x as at September 30, 2024, as against 4.14x as at June 30, 2024. Investment income was at INR 22.52 billion in H1 FY '25 as against INR 18 billion in H1 FY '24.

On a quarterly basis, investment income was at INR 11.24 billion in Q2 FY '25 as against INR 9.56 billion in Q2 FY '24. Our capital gains net of impairment on investment assets stood at INR 5.21 billion in H1 FY '25 as against INR 2.82 billion in H1 FY '24. Capital gains net of impairment investment assets for the quarter 2 FY '25 stood at INR 2.37 billion as compared to INR 1.65 billion in Q2 FY '24.

Our profit before tax grew by 31.9% at INR 16.93 billion in H1 FY '25, as against INR 12.84 billion in H1 FY '24. Whereas PBT grew by 20.3% at INR 9.19 billion in Q2 FY '25 as against INR 7.64 billion in Q2 FY '24. Consequently, profit after tax grew by 31.7% at INR 12.74 billion in H1 FY '25 as against INR 9.68 billion in H1 FY '24.

Profit after tax, again, grew by 20.2% for this quarter to FY '25 at INR 6.94 billion, up from INR 5.77 billion in Q1 FY '24. Return on average equity was 20.3% in H1 FY '25 as against 18% in H1 FY '24. The return on average equity for Q2 FY '25 was 21.8%, as against 21.1% in Q2 FY '24. Solvency ratio was healthy at 2.65x as at September 30, 2024, as against 2.56x as of June 30, 2024, continue to be higher than the minimum regulatory requirement of 1.5x.

The Board of Directors of the company has declared an interim dividend of INR 5.5 per share for H1 FY '25 as against INR 5 per share, which was for H1 FY '24. As I conclude, I would like to reaffirm that we continue to stay focused on driving sustainable value creation and profitable growth while protecting 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 questions that you may have. Thank you.

[Operator]

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

[Shreya Shivani, analyst]

I have 2 questions. First is on the net commission rate for the quarter. It seems like it's slightly elevated when I compare it to the second quarter of last year. Could it be because of higher sales in the retail segment, are we -- have we changed our commission structure in that product? Or is it just because the product mix has shifted more towards that segment? That's the first question.

And second, sir, majority of the rise in the combined ratio in this quarter has been because of the catastrophic losses. So will we still hold on to a guidance of being able to touch [ 101.5 ] as a closing combined ratio in 4Q '25 given that the majority is from catastrophe and in case we don't see any more [indiscernible] cycle, just the guidance around that.

[Sanjeev Mantri, executive]

Yes. I think Gopal will answer the first one, and I'll talk about the guidance part. Yes.

[Gopal Balachandran, executive]

Yes, so Shreya, I think you're absolutely right. I think -- so far as the net commission ratio numbers are concerned, it's obviously a function of the mix of business that you underwrite.

And as you would have seen, I think our approach to writing risk as what we put out also as a part of the opening transcript was to drive profitable growth. And therefore, in that context, when you look at the mix of business, largely what we have been able to drive is profitable businesses in motor and the retail health segment in the specific.

And relative to that, I think our growth in, let's say, the group health/commercial lines has been relatively muted. And that's clearly a factor that has contributed to, let's say, the change in the net commission ratio. And given the fact that we have also been a bit cautious on the commercial line -- there is also some bit of impact insofar as reinsurance commissions are concerned, because the ratio is on a net commission basis. So therefore, it is a factor of both change in business mix as well as, let's say, our approach to being a bit cautious on the commercial line side, which is what has contributed to the net commission numbers.

To your point on -- have we changed anything in so far as commission structures are concerned, I think the short answer is I think we keep looking for market opportunities in terms of how we want to write businesses -- but at an aggregate level, I think what we stand committed is to kind of make sure that from an expensive management standpoint, which includes both commission plus operating expenses, both of that put together as a company, we stand committed to make sure that we are well within the limit of 30% at an aggregate level. Sanjeev, yes.

[Sanjeev Mantri, executive]

So overall, you're right, the CAT event in the quarter 2 has impacted the loss ratio by 1.9% and thereabouts. Otherwise, overall, the combined ratio of the company, if net of CAT event had looked at, that's shown an improvement. In terms of the guidance, as things stand, we have no reason to change the guidance at this point of time. We very keenly will look at the industry numbers also as they come out on the quarter 2 and the H1 P&L.

I spoke about in my own script, which I said that the quarter 1 number for the industry has come out relatively status quo, while we used to have a Y-o-Y improvement last year, and that also has come on account of elevated loss ratio and a little bit of impact on account of expenses. We stay committed. We have no reason to, at this point of time, deviate from it. We do look at the intensity and the landscape that you see in the commentary overall as to what's happening on the commercial line of business.

We grew GHR business at almost 31% and thereabouts. And the quarter 2, again, you look at the numbers we have gone down, and we clearly do understand that these are all changes. The fire business has -- it has gone through a bit of a concern in terms of where the discounting has increased again. We've exchanged from any wild participation and still we've been able to maintain the market share on each of these business lines.

So yes, we stay committed to that, but we continue to watch the market scenario.

[Gopal Balachandran, executive]

I think -- just to only add to that, Shreya, I think what we would say is -- in fact, we will start seeing this impact felt from an overall market as well. And if you would have seen, in general, given our ability to reselect portfolios, our exposure from some of these CAT events have been relatively lower compared to the natural market share that we have had as a company. And hence, a large part of this change, consequent to the cat losses will also be reflected from a market perspective at the time of the reinsurance renewals that will start happening from the next year.

So in fact, the real impact is something that you will start seeing from an industry standpoint at that time of the reinsurance renewals, which will kick in for next year.

[Shreya Shivani, analyst]

Got it. Understood. So you're saying your -- your catastrophe reinsurance will be priced worse off for us for the industry going ahead, right? Because of the number.

[Sanjeev Mantri, executive]

These are events that are playing out, right? So honestly, if you ask us, could we have anticipated, let's say, about 4 events coming and hitting us, at an industry level in 1 quarter, the short answer is no. And therefore -- and with, let's say, wavering weather patterns that you're seeing across periods. Honestly, I think 1 will have to kind of wait and see how this develops. And then maybe as things move forward, we will be able to start giving you better insights, yes.

[Operator]

[Operator Instructions] We have the next question from the line of Prayesh Jain from Motilal Oswal.

[Prayesh Jain, analyst]

This is a question from the Motor segment. So in the last quarter, you had mentioned about the growth in new versus old -- so it will be great, if you could share a similar trajectory for H1. And just an extension to that, whether the growth in the -- in the renewal or the older business, on the new vehicle has been stronger.

What are the drivers for the same that you have been kind of been able to get more growth there? And second question would be on the Motor outlook again. You mentioned in the opening remarks that the growth has been slowing down in terms of number of vehicles, and so do you see -- and whatever the outlook that we are hearing is that its outlook is also going to be muted in the second half. Even for festive season, the demand outlook is not expected to be great. So what kind of growth trajectory should we anticipate for the Motor segment especially in the H2? Yes, those would be my questions.

[Sanjeev Mantri, executive]

So, Prayesh, on the first one, I think if you recollect what we had said in quarter 1, when the aggregate growth in Motor for us was about 26%. At that point of time, we had said the growth in new was about 16% and the growth in renewal was roughly about 33%. And given what we have talked about as a part of this opening transcript in terms of, as you rightly indicated, new being relatively muted, pretty much on similar lines.

I think if you asked us for quarter 2, the growth in new has been flattish -- and a large part of the growth of that 16% that we spoke about has been significantly aided by growth in the renewal book or, let's say, the old book, which has grown at almost about 26%. So that's a split. This is specifically in the context of quarter 2 vis-a-vis what we had seen in Q1.

To your point on what's driving, let's say, some of this growth, I think -- as a company, I think we have always been kind of looking at -- which we have spoken about even in earlier calls. I think, while we stay invested in obviously leveraging our relative strength on OEM/dealership partnerships, but at the same time, we have also been significantly investing on our agency/other distributions as well.

And in that context, our strength on distribution, service use of technology, all of that is what is kind of significantly aiding the growth in the renewal book. Plus equally, if you recollect what we also talked about was also to kind of significantly move into, let's say, 1 IL, 1 call center initiative, under which we had wanted to kind of -- which is also what we put out as a part of the opening transcript to kind of also have a significant focus as 1 of the streams insofar as retentions are concerned, and that is also in a big way, is aiding the growth in the old book.

[Unknown Executive]

So on the second point on the motor outlook, you're right. The overall numbers that have come out for the industry as you muted, and there's nothing new that we are talking about it. It's all over every possible channel as to where the industry is. But I must also highlight 1 fact that on private car in particular, which contributes more than 50% of our practice as far as Motor is concerned, it's on a very high base.

We've had a very secular run on private car as an industry. Almost when the COVID was still there and then it kind of continued for a while. So on a very high base if it is flattish or so, it does not overly concerns us. Yes. And 2-wheeler has shown better numbers. The 2-wheeler also have recovered only 80%, 85% of pre-COVID levels, while private car has moved in the zone of 130% to 140% of what it was pre-COVID peak.

Commercial vehicle mixed bag, but which can be a proxy in many ways to the industrial activity, which takes place. We do believe it can pick up in quarter -- end of quarter 3 -- or it will be by quarter 4. So overall, yes, we are expecting a single-digit growth in H2, but that itself should suffice. And this also is a backdrop that as an industries has had not much of a TP hike for almost last 3 years, if I may say. So it's a combined factor which stays, but we stay committed to harness what works for us.

So there is -- we are excited with H2 also in the festive season has just got started. Footfalls have been high. The sales numbers are still building up. Probably we'll have a much better sense how the festive season goes by November, mid and thereabout once the Diwali part is over.

[Prayesh Jain, analyst]

Just a clarification on this. You mentioned the single-digit growth that you expect in H2 is for vehicle sales? Or is it for the premium growth of the Motor segment for general insurance industry.

[Unknown Executive]

I'm talking about the premium -- the vehicle sale is what I'm referring to.

[Prayesh Jain, analyst]

Vehicle sales. Okay.

[Operator]

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

[Madhukar Ladha, analyst]

First, I think in your opening remarks, you mentioned that on the motor segment industry combined ratios have worsened. Now in this backdrop, I think H1, your performance has been very good. And do you think that this will be sustainable given industry loss ratios are worsened. And so how do you think this can pan out?

Do you think -- is the competitive intensity is not higher or yes. So that's question #1.

[Unknown Executive]

Okay, you want to put your second question if you have, yes, I should answer this.

[Madhukar Ladha, analyst]

And second, sir, last year, we were sort of discussing that IRDA, a lot of your competition is sort of above the 30% expense and commission ratios. So -- yes, and it's not in compliance of the EUM norms. So is IRDA looking to do something about it? What is the thought process there, that may in getting industry combined ratios under check and we can benefit in that scenario?

[Unknown Executive]

Yes. So I think -- so I'll answer both of them. On the core side, when we spoke about Motor, the core for the industry has moved from 121% to 125.6%. So clearly, it worsened. When you look at the loss ratio on that, the industry had in quarter 1 last year loss ratio of 84.5%, it's gone to 87.6%. And there is an increase on the expense side also, which has taken it from 36.5% to 38%.

Interesting place, when you split this in PSU and private sector, clearly, PSUs has worsened from 134% to 141% driven by, again, significant increase in loss ratio, private from 107% to 115%. So that has been the kind of movement that you have seen in loss ratio for PSU. For private sector, in particular, it also in a way answers as to what Lombard can look at. It has remained in the zone of 74.2% to 75%. So it's -- and there's a marginal increase in the private sector as far as expense ratio is concerned, where it moved from 41.1% to 43.5%.

So from a balance perspective and where IL journey can be, while I don't want to stretch the line too far, we stay committed and we do back ourselves on 2 counts. One is in terms of the selection that we are able to do as an entity and secondly, the manner in which we are able to service our customers, which is at speed and in a far more efficient manner. So all of that in combined, we would love to probably put this across that we stay committed to where we are.

Yes, at the industry level, finally, we are part of our overall operations of the business. As things stand, we would love to see improvement at the industry level also because if that happens, it can create further niche for us and improve our combined ratio. So that's my take, and we stay committed to take care of a motor practice. We would be agile enough to make movements within private car, 2-wheeler and commercial vehicles as it warrants at that -- in a dynamic manner at any point of time.

On the second question, in terms of the stuff that we mentioned on expense of management, yes, the data is out. It's there with the regulator. We are in no position to put a comment. We continue to pursue with them as to what structure they will do at some point of time. There are multiple nodes and the lot of proactive work being done by the regulator of multiple accounts, including the master circular, which has come for each of the product categories. So we do believe something is in the opting, but we are in no position to comment as to when and how this would get transpired.

[Unknown Analyst]

Right. But you definitely expect some action to bring the industry in line, would that be...

[Sanjeev Mantri, executive]

From our position, we definitely will expect, but we are not the right set of people to comment as to how and when they will do it, that prerogative fairly and squarely stays with them. But yes, we do expect that some actions will be taken by them at some point of time.

[Unknown Analyst]

And 1 more question, finally, on the Health segment. Health segment loss ratios have sort of worsened in the first half. In Q2, I know seasonally is a little bit of a weaker quarter in that respect. But is there any structural problem in the industry -- is pricing adequate? What is your sense?

[Sanjeev Mantri, executive]

So we continue to monitor this closely structural problem. My answer is no. Are there challenges which comes on account of some bit of seasonality, which leads to increase in frequency? The answer is yes. There is an element of that, Madhukar that does come in. Nevertheless, the way we process work and the way the regulators care the environment, and there are challenges, each 1 of us as well within the rights to seek a repricing of the portfolio. So in an agile mode, all this can be addressed over a period of time.

[Operator]

We have the next question from the line of Sanketh Godha from Avendus Park.

[Sanketh Godha, analyst]

Gopal, can you split the Motor growth for the quarter and for the half into new and old -- and in this old, can you give a bit of color that this old is driven by the existing customers that is they are renewing what they bought last year with you? Or is it the business which is coming from other companies because compared to the industry, we seem to be gaining significant share of market in this business.

So if you can give a color there and how sustainable it will be useful to understand the future outlook too. And the second question related to that is that if you are doing more old in OD, then ideally, the loss ratio should deteriorate in OD, but we are seeing an improvement in 1H or 1 quarter compared to the last year. So just wanted to understand what is playing in our favor to see that better loss ratio in Motor OD.

And lastly, on TP, I believe you guided last time that you have loss ratio of 65% to 70% is the number, what you need to watch out for and that's the guidance you have given and that was last year. And now it is start below 65% for first half. Just wondering, given there is no TP price hike, whether you believe this number is still sustainable? Because I'm asking this question from the perspective that -- in last 3 years, last time that is '23, '22, '21 you did not choose to take any reserve released from Motor TP. So just wondering whether this number is sustainable or not? And lastly, if you can give a data point, health loss ratio broken down into retail and group?

[Gopal Balachandran, executive]

All right. Perfect. Super Thanks, Ankit. So one, I think I'll take it in the sequence, which is the -- I'll start with last and go to the first. So on the breakup of the health loss ratio, which is something that you would obviously ask us every quarter -- so hence, to that extent, quarter 2 of last year, on the employer employee side, that number was 102% vis-a-vis that quarter 2 of this year, the number is about 98%.

On the retail indemnity, again, quarter 2 numbers are roughly about 66.6% and quarter 2 of this year is about 70.3%. But again, at the point that we have always maintained is I think if you look at -- on the employer-employee side, largely, we have said, I think the portfolio should possibly end the year in that range of about 94%, 95%. This is I'm referring to the corporate health.

And on the retail side, I think broadly, we have talked about trying to run the portfolio at a loss ratio around that 70% threshold. So that's why we are kind of largely working towards, at least in so far as the portfolio buildup is concerned. And to your third question on the TP loss ratio range that we spoke about. I think when I talked about at an aggregate Motor segment level, we had said broadly the range that we are comfortable operating at is between 65% to 67%.

And within that, we had said OD possibly are looking at running between 60% to 65% and third party, as you rightly mentioned, was between the range of 65% to 70%. What we also keep saying is, honestly, I think you should kind of keep looking at numbers more on ideally multiple annual cycles because these are third-party books, which typically runs over multiple long-term periods in terms of development.

And hence, to that extent, I think at this point of time, I think we kind of stay within that range of what we spoke about, which is Motor at an aggregate level of 65% to 67%. And within that third party, we believe should broadly kind of run at a range of about 65% to 70%. And that also kind of resonates with 1 of the other points that you rightly mentioned, which is what we are also seeing is obviously no TP price increases.

And therefore, to that extent, that's another factor that we will be fully be mindful of in terms of how we kind of select the portfolios. So that's in response to question 3. To your point on question 2 on the OD loss ratios, I think, I kind of largely answered as a part of question 3, which is I think the range that you see even on a half yearly basis or even within that, if you look at in quarter 2, broadly, that loss issue range on own damage has been running between -- in that range of about 60% to 65%.

But having said that, I think 1 of the things that we have been speaking about even in our earlier earnings call is, I think there is a lot of thrust and focus on us to make sure that we are able to significantly leverage on the service parameters, particularly on trying to see how we can manage the overall cost of claims in the context of Motor specifically.

And if you remember, 1 of the initiatives that we spoke about driving in that front was to leverage on our TPA network. And there, again, if you would have seen what we have tried to do is to -- the proportion of claims that has got settled through the TPA network, the numbers have kind of clearly seen an increase. So all in all, I think pretty much comfortable with the range at which we are operating at in the context of own damage, to your point on the second one.

And to your first point, I did kind of give out the numbers of the growth between new and old. Just to reiterate, quarter 1 new grew at about 16%, old book had grown at about 33%. Quarter 2, as I said, the growth in new has been largely flattish and the growth in the renewal book has been about 26%. On a half yearly basis, the growth in new has roughly been about 7% to 8% and the growth in the renewal book has been close to about 30%. 29%, 30%.

So that's been the breakup. Now in terms of where is that growth largely coming in on the old side, I think -- as I said, there is a significant thrust on us in terms of making sure that we are able to retain as many customers of ours. And insofar as the initiative that I kind of also spoke about, but equally, what we've also been able to see is to also get some expanded market as well, which is why if you see, for example, on motor as a category where we used to kind of possibly actually kind of see us running at a market share of slightly less than, in fact, 10%.

Right now, we are at a market share of close to about 11%. So hence, in that sense, that's also kind of aiding. So obviously, we have also been accreting some of the businesses from market as well. So it's been a combination of both. But as I said, the endeavor is to should try and see how we can maximize retention particularly at times when you see possibly some kind of slowdown from a market perspective, then we will obviously, as I said, leverage our strengths on distribution, service and technology to increase customer retention.

[Sanketh Godha, analyst]

Gopal, just a follow-up. Can you give a trend last year 1H how was our retention and what is today in Motor just to give a color, whether it is driven by our own book?

[Gopal Balachandran, executive]

So on an average, I think what I would kind of say, Sanket, is I think if you look at it from a motor standpoint, in general, and I'm largely just kind of confining to private car and 2-wheeler as categories. On an average, I would say, we would have seen an increase in retention ranging between 2% to 4%. That's the kind of increase in retention that 1 has seen.

And the same trend line, while you are talking in the context of Motor just to kind of possibly expect a follow-on on the health side as well. I think even there, I think what we have seen is obviously a slight uptick in so far as our retention numbers are concerned, around pretty much around the similar ranges. So I think as a company, we believe -- there's a lot that we can do in so far as retaining the customers are concerned, and to that extent is where we are driving a lot of our initiatives now.

[Operator]

The next question is from the line of Aditi Joshi from JPMorgan.

[Aditi Joshi, analyst]

Just 2 questions from my side. Firstly, on the investment leverage side, I see that the first half investment levels were slightly downward. So can you please help explain like the reason behind that? And going forward, what do you think of investment leverage trend? And secondly, on the retention side, the premium retention, it was slightly on the higher side. So I just want to understand your strategy going forward, will you plan to retain more on your books? Or how are you thinking about it. That's all.

[Gopal Balachandran, executive]

Again, I'm going in the reverse sequence. So if you look at the premium retention -- as I said, it's largely a function of the change in the business mix. As I kind of outlined at the beginning, I think in quarter 2, relatively, our sourcing on the commercial lines have been relatively muted, where we kind of typically have a slightly higher than -- higher reinsurance extent, and therefore with our extent, retentions are lower.

And given that we were cautious that book has grown at a relatively slower pace. Compared to that, I think we have seen a significant uptick on both the retail lines, which is both retail health as well as our motor lines of businesses, both of which predominantly, we end up retaining pretty much everything on the net account. So hence, to that extent, is where you would have possibly seen a slight uptick insofar as the premium retentions are concerned.

To your point on what can we expect going ahead? I think purely very difficult to comment on a number because it all depends on how we see the momentum play out in terms of different lines of businesses. But if you ask us, is there any change in the thought process in terms of retention versus reinsurance. At this point of time, obviously, there is no change in stance. But obviously, we will take it as we play through once the discussions for the reinsurance programs happened at the beginning of quarter 4 of maybe the next calendar year beginning. So that is where we are on premium retention.

To your point on investment leverage, I think -- which is again something that we put out as a part of the opening transcript in the context of the market being a little slow, particularly in quarter 2. You should have seen, a certain, industry grew at about 13%, we grew at 20% in Q1 vis-a-vis that it's market grew at about 2% thereabout in quarter 2, we grew at roughly at about 10%.

So to that extent, the fact that there has been a relative slowdown in growth, that obviously kind of acts as a factor insofar as, let's say, the investment leverage is concerned. And secondly, in general, if you would have seen the trend line, Q2 over Q1, generally the investment leverage seems to show a declining trend. And this trend starts to reverse as we kind of head into the festive season or maybe quarter 3, where you will still start seeing a lot more collections kind of play through.

And hence, I think to that extent, it's where we are. I would say, on a normal trajectory, I think broadly, what we should say is I think we have talked about trying to maintain investment leverage of around 4x. I think that's broadly the trend line that 1 should expect. But in a particular quarter, you can always see some of these operations play.

[Sanjeev Mantri, executive]

And then we also 1 more thing just to add is mathematically speaking, if your growth of -- if your growth of profit is higher than the growth of investment, there can be a bit of a denominator that will come out, it should get moderated with cash flows over time.

[Operator]

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

[Unknown Analyst]

My question is on Motor TP. In Motor TP last 3 years there is no price hike and deposit of which the loss ratio in the segment should ideally be going up and some of the companies, I think, also are going slow in the Motor TP. So what is giving us confidence that the business that we are underwriting is of appropriate quality in terms of profitability?

[Sanjeev Mantri, executive]

So Nidhesh, yes, there has been no hike, and I spoke about that just some time back. The configuration in terms of how our book has placed the contribution of commercial vehicle is around 21%, and we always will remain in that range of 18%, 19% to 23%, 24% is what we expect the commercial record is, which is the bare minimum. We are more driven by private car and 2-wheeler. So there is a mix and selection that comes into play.

Clearly, yes, industry would love to see in certain categories increase on the third-party premium, and we continue to be in discussion with the regulators and all the other authorities who are involved in that. But we stay committed to our process of selection and the rigor that which we go through even in times, when industry was doing extremely well in certain categories, we had let go and have shown a declining trend. So we have stuck to our courts and every reason to believe that we should be able to play -- play it out the way we have been giving our numbers. That's all I can say at this point of time.

[Nidhesh Jain, analyst]

The 60% combined loss ratio that we are showing on Motor TP, is it a function of decline in accident incidents or -- so this number looks pretty good. So why that is -- how we are able to deliver this number? Is it our underwriting or it is a structural decline in the incidence of the accidents or it is the benefit of Motor Vehicle Act that we are expecting now.

[Gopal Balachandran, executive]

The last -- so again, Nidhesh, I think we have kind of reiterated this even in our quarter 1 earnings call, particularly in the last piece in terms of are we factoring in any element of maybe a benefit in the context of the likely implementation of the 6 months through the short answer is no. So at this point of time, we are not necessarily factoring in anything in the context of reserving at least so far as the law of limitation is concerned.

But if you ask us I think, so far as third party is concerned, as I keep saying, you should ideally start looking at this number over longer cycles because of the development of the inherent nature of the business in terms of how the large development takes place. And that's the reason why we said generally at an aggregate level, the range that we are comfortable operating at is between that 65% to 70% kind of a threshold.

And even the point that Sanjeev made in terms of our mix of business, There, if you would have seen, I think, a large part of our third-party significantly kind of also contributed by the relatively higher mix that we have on private car and 2-wheelers relative to, let's say, the exposures that 1 has in so far as the commercial vehicle segment is concerned. So hence, that's also a factor that plays out.

And in general, I think what we've also been able to do not just now over periods I think we have been able to significantly work on making sure that we are able to identify pockets, which we believe are viable from an underwriting standpoint. And to that extent, that aids in risk selection. And if you also remember, even within CV, while I said we have been underweight. I think the call that we took, if you remember, almost about 4, 5 years back is to stay invested in the segment where we think there is an opportunity.

We will possibly take those calls in possibly earmarking some capital on doing the right risk selection. And in hindsight, I think we've actually seen some of these calls play out to our advantage. So all in all, I think multiple factors that is aiding. But as I keep saying, we just want to reiterate I think the range that we are comfortable operating is between 65% to 70%.

[Nidhesh Jain, analyst]

Sure. And just last question on 2-wheeler. In 2-wheelers, the sector growth has been reasonably strong, but are the share of 2-wheeler business on a Y-o-Y basis. And H1 has declined from [ 20% to 25% ]. So what is happening there?

[Gopal Balachandran, executive]

So that's primary the mix Nidhesh. I think, again, as we keep saying, -- it's all a function of how you see the market play out. And obviously, I think as things -- as let's say, for example, Q3 typically cycle could again undergo a change once you see some of the demand kind of picking up. So automatically, you will see the mix of business within Motor undergoing a change.

So all in all, for us, there's no specific change in thought processes unless Sanjeev...

[Sanjeev Mantri, executive]

I'll just add this. So the decline of 20% to 25%, which you are referring to Nidhesh more the configuration. We haven't lost market share in 2-wheeler, but we have gained more in private car at a faster clip. So that changes the percentage distribution our business. Otherwise, Motor overall, if you look at it, and which is a bigger number to see, we've moved from a 9.8% kind of a market share to almost 11%, which is 10.9%. So there's an overall gain.

And in that journey, as we -- whichever way the configuration comes out, it's more driven by output of percentages of portfolio distribution, not that they've lost anything in 2-wheelers.

[Operator]

The next question is from the line of Jayant K from Jefferies.

[Unknown Analyst]

Just a bit on the renewal book. Can you help us understand how the renewal rates across the segments within Motor have been trending? And how much has improved over the last, say, 1 or 2 years? And maybe even the last 2 quarters, is that contributing to the renewal growth?

[Gopal Balachandran, executive]

So Jayant, I think, -- kind of possibly answered that. I don't think they're talking specifically in the context of specific subsegments within Motor. I think all that we can talk about is to say that at an aggregate level, Motor as a category, we have seen an improvement in retention broadly kind of increasing between 2% to 4%. And that's what I kind of also referred to helping us relatively grow our proportion of the old business, the breakup of which I had given in response to 1 of the questions.

[Unknown Analyst]

And do you expect this to continue improving from here? I mean basis the efforts that you guys are taking on an improving renewals.

[Gopal Balachandran, executive]

The short answer is yes, Jayant. Because I think 1 of the other points that I spoke about is our increased thrust that we are putting on customer service. And if you see 1 of the other things that we keep talking a lot about, which is also there in our annual report and even in multiple of our disclosures that we have made is clearly, at least insofar as customer satisfaction scores/NPS scores are concerned, it is only seeing an uptick.

And that automatically kind of, in some sense, aids customers to kind of stay hooked at least in so far as retentions are concerned. So hence, to that extent, that's definitely a factor. And the fact that we are also able to divert maybe a lot of our customers in so far as the preferred provider network is concerned, where, again, so far as the customer is concerned, they are assured of clearly 2 things.

One, obviously, it helps in so far as managing the overall average cost of claims. But 2, and more importantly, what we're able to kind of assure the customer there is the quality of repair and let's say, the relative turnaround time that we are able to exhibit insofar as servicing those claims are concerned. So that is exactly what a customer looks for when he or she gets a claim. I think the earliest possible time within which a vehicle can be repaired and given back that possibly kind of results into a delightful experience. And there, we have seen a significant uptick on the TPA network, which again is kind of translating into an improved retention for us.

[Unknown Analyst]

Just sort of 1 last follow-up on this. In terms of channels, is some channel sort of helping over others in terms of improving the retention rates over here?

[Sanjeev Mantri, executive]

Channel-wise, it is -- I think, again, Jayant. Channel-wise, see, when it comes to retaining our own customers, we have our own direct reach out to them. To some extent, it's channel agnostic. But yes, certain categories may end up having better retention than other channel website has a good retention, agency business is a much better retention. OEM relatively at times get distributed may have a lower one. But when we approach our customers through call center in terms of retaining it -- it's more a process improvement and a consistent reach out that we have created, which is helping us retain.

[Unknown Analyst]

Is digital slightly better over agency over here?

[Sanjeev Mantri, executive]

Historically, it's been better. There is no doubt on that. Yes.

[Operator]

We have the next question from the line of Prithvish Uppal from Elara Securities.

[Unknown Analyst]

Just wanted to understand the context of the rising CAT losses. Some color in terms of how the pricing is on the reinsurance side, specifically on the CAT events, how do you see that possibly moving the next year or in the medium term. And in case there is some kind of reinsurance price hike. What strategy do you think would be viable in terms of at an industry level, the passing on of the cost or the absorption?

And second, I wanted to understand, in the health segment, what is the mix between the old and the new book? And if possibly you could give some color on the loss ratio split between the renewal book and the new book.

[Gopal Balachandran, executive]

So I think on the first one, insofar as writing CAT losses are concerned, I think your point is absolutely right. And that is exactly what we kind of keep looking for. Now again, if I were to slightly go back to history, if you remember, almost about 4, 5 years back when the market had seen stress, particularly in fire line of business, at that point of time, clearly, reinsurers had seen -- and they had said in case if companies wants to avail appropriate reinsurance capacity, the market has to be more disciplined in so far as pricing is concerned.

And to that extent is where they had kind of calibrated pricing terms and the extent of possibly reinsurance commission that they would be kind of ascribing to individual companies. And in that context, if you would have seen from an ICICI Lombard's standpoint, given that we were largely exhibiting a profitable book in terms of our ability to select better quality book. We were actually able to keep improving our panel of reinsurers.

And relatively, our terms on reinsurance were also better. And therefore, now when you look at it in that context, if the market further improved pricing, that is very, very positive because that, in some sense, aids market to get far more disciplined because if reinsurers were to kind of define an increase in price, then that's a call that companies will have to take in terms of their ability to pass on to, let's say, what they're able to do in so far as keeping it on the net. So any increase in pricing, but all this will start getting reflected once we do our reinsurance conversations, which will happen towards quarter 4 of this year.

So we will see how that plays out. To your point on the health side, I think for us, the growth, I think, is aided by both contribution by -- as I said, even on the Motor, where I spoke about on retention, even at that point of time, I said even on health, there is a significant focus for us. And therefore, to that extent, we have also seen an improvement in the retention ratios of customers on health as well.

And in so far as the growth numbers, I think it is a growth that is aided by both retention of customers. And more importantly, also, if you see, I think, the newly launched solution Elevate, particularly that we launched in quarter 2 of this year, that has been received very well across multiple stakeholders. And that's why when you look at retail health as a category, the market share, which was largely over in around 2.9% or thereabout for quarter 2, that number stands at about 3.5%, while it's an outcome of just 1 quarter as we launch this solution, but obviously, I think we are quite excited and happy with the way how this has played out.

And honestly, we will have to kind of keep this momentum going as we kind of look forward. To your point on what could be the split in so far as the loss ratio of new and the renewal book is concerned, honestly, to my mind, I think that's purely a function of what kind of a mix of business that we write. And our objective will be to obviously write a combination of both new and renewal. And that's why I kind of talked about in the context of the overall loss ratio that we're comfortable on the retail health side, which is roughly at around 70%. The mix thereon is the split between new and renewals will be purely a function of what mix of business that we write.

[Unknown Analyst]

Okay. Sir, just 1 follow-up. In terms of industry loss ratios that we're seeing across the board we have been rising. So is that driven more by frequency of claims? Or is it also from -- I mean, or is it just purely claim size that has been increasing?

[Sanjeev Mantri, executive]

Such frequency number at the industry levels are not available. So very difficult to comment. But if the loss ratio is the 1 which is contributing more, it can be a contribution of nothing but frequency and the average claim size that comes into play is what our understanding is, yes.

[Operator]

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

[Sanjeev Mantri, executive]

Thank you so much for joining in. I think we're in the midst of the festive season. We're wishing you all great Happy Diwali to you and your family members, stay good, stay fit, stay happy and we are excited in terms of what quarter 3 entails for us, and I hope it brings us all good luck. Thank you so much and look forward to interacting with you one-to-one as an and when your time permits. Thank you. Thank you so much.

[Operator]

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