ICICI Lombard General Insurance Company Ltd

NSE:ICICIGI

Earnings Call Transcript 2022-Q3

[Operator]

Good evening, ladies and gentlemen. A very warm welcome to ICICI Lombard General Insurance Company Limited Q3 and 9 months FY '22 Earnings Conference Call. From the senior management, we have with us today, Mr. Bhargav Dasgupta, MD & CEO of the company; Mr. Gopal Balachandran, CFO & CRO; Mr. Sanjeev Mantri, Executive Director, Retail; and Mr. Alok Agarwal, Executive Director, Wholesale.Please note that any statements or comments are made in today's call that may look like forward looking statements are based on information presently available to the management and did not constitute an indication of any future performance as future involved risks and uncertainties which could cause results to differ materially from the current views being expressed.As a reminder, all participants' lines will be in the listen only mode 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.

[Bhargav Dasgupta, MD, CEO & Executive Director]

Thank you, Rituja. Good evening to each one of you. Thank you for joining the earnings conference call of ICICI Lombard General Insurance Company for Q3 and 9 months of FY '22. I hope all of you and your colleagues and family members are all safe and healthy.I will give you a brief overview of the industry trends and developments that we've witnessed in the last few months. Post this, our CFO, Mr. Gopal Balachandran, will share the financial performance of the company for the quarter and 9 months ended December 31, 2021.The data for Q3 FY '22 indicates that the momentum in the economy activity has gained further traction aided by expanding vaccination coverage and release of pent-up demand. Contact-intensive [ industrial ] services and urban demand recoup for improving consumer optimism. Amidst this, the resurgence of COVID-19 infections by the way Omicron variant has created some sense of uncertainty, especially for service industry. While this may have some impact on the near-term growth given the ramp-up in the vaccination program, its overall impact on the economy is expected to be lower than the first and the second wave.Moving to the GI industry. The industry during Q3 FY '22 delivered mixed performance. Segments such as motor insurance witnessed continued headwinds due to heightened competitive intensity, chip shortages in the 4-wheeler segment, and weak festive demand in the 2-wheeler segment. Health Insurance, on the other hand, continued to show robust growth primarily driven by group health, while growth in retail head has moderated since Q2 of this fiscal due to base effect.As far as commercial lines are concerned, segments such as fire, marine, and engineering lines witnessed strong growth in sync with the current market environment. Overall, the industry registered a growth of 11.2% in 9 months of FY '22 and a growth of 8% in Q3 of FY '22 as per disclosures on the website of IRDAI. The combined ratio of the industry was 119.3% in H1 FY '22 as compared to 105.6% in H1 of 2021 based on available information from public disclosures, excluding 3 companies. Further, the overall combined ratio of private multiline general insurance was 112.4% in H1 FY 2022 as compared to 103.2% in H1 '21, excluding one company.Moving to business impact this quarter. As you know, we have been making investments to benefit from the opportunity that the current environment has to offer, especially in the retail health segment. These investments are gradually steering growth for us, thereby enabling us to gain market share in our preferred line of business. In that backdrop of the 1,000 incremental head count to be added in our retail health agency sales force, we have rolled out offers for 800 and have successfully onboarded close to 400 of them during this quarter. As a result, we are seeing month-on-month improvement in growth, and we expect the growth through this channel to accelerate in the next few quarters as it start getting productive.As indicated during our earlier call, there was a base effect on the health benefit segment for the first 3 quarters of FY 2022. From the middle of the current quarter, the base effect started to fade as a result of which health business from our banca channels grew by 15% in December of 2021. Going ahead, we expect this channel to continue to deliver a robust growth.Our one-stop solution for all insurance and wellness needs, IL TakeCare App has surpassed 1.1 million downloads with successful submission of over 95,000 claims and over 55,000 teleconsultation requests. Our objective is to get closer to our customers by providing a unique digital platform for continuous engagement to help them take better care of their health, motor, and other risks anytime anywhere.As indicated in our previous earnings calls, in Group Health segment, our continuous direct engagement with large corporates enabled us to retain over 90% of our customers at a higher price, thereby improving in premium per life since June 2021. The underlying environment suggests that the consumers are willing to pay a higher premium for better coverage and adopt technology for better customer service, thus creating an opportunity for us to grow in this segment.In motor, we continue to combat challenges from the lap of Motor TP rate hike for over 2 consecutive years, heightened competitive intensity in the Motor OD segment, chip shortages in the new private car sales, et cetera. However, our expectation is that these are short-term challenges. When we take a closer look on ground on the private car side, the consumer sentiment remains strong. And during the quarter, we have continued to focus on growing our market share in certain key profitable subsegments.As far as the commercial lines are concerned, we have seen strong growth and believe we are in that environment now where growth will continue. In current time, major trend has been the significant increase in online buying by consumers. At ICICI Lombard, we have been continuously investing in this front. Our Digital One team is set up like a full stack InsurTech firm, consisting experts across functions, offering together like a fully functional entity within the overall organizational framework.Business sourced through our website increased by 20% in Q3 FY '22. Within this, our health business grew by 22.9%. Travel business grew by 156.9%, and motor business grew by 11.9%. Business sourced by this team through strategic alliance partners in the digital ecosystem grew by 70% in Q3 of FY '22. Our Digital One business is fully important to deep mine customer data and fine-tune customer outreach efforts, service customers through play systems that enable real-time communication and thereby optimize cost of acquisition. We are excited on the progress of this channel and believe it is all set to drive benefit and benefit from the longer-term opportunities the current environment is operating.Overall, our focus on sustainable market leadership continued through the third quarter as we prioritize underwriting discipline, portfolio optimization, and growing in segments that are favorable and fall within our risk appetite. We remain on track and are focused on growth levers such as strengthening our distribution engine, aided by lower base effect, realizing synergies, rationalizing costs while scaling up our preferred license business, servicing customers with excellence, digital advancements that will enable us to sustain the return on equity objective over longer term.I will now request Gopal to take you through the financial numbers for the recently concluded quarter.

[Gopal Balachandran, CFO & Chief Risk Officer]

Thanks, Bhargav, and good evening to each one of you. I will now give you a brief overview of the financial performance of the company for Q3 and 9 months FY '22. We have put up the results presentation on our website. You can access it as we walk you through the performance numbers.. The effect of the demerger in the financials has been incorporated in the form of opening net worth as on April 1, 2021. Further, the financials for the current year represent numbers of the merged entity and the comparative numbers for the previous year in the financials pertains to standalone ICICI Lombard and hence, they are not comparable.Gross direct premium income of the company was at INR 133.11 billion in 9 months FY '22 as against INR 105.25 billion in 9 months FY '21. The industry reported a double-digit growth of 11.2% on a lower base for a similar period. Our GDPI growth was primarily driven by growth in preferred segments, given that our approach has always been growing business sustainably. The Fire segment GDPI was INR 22 billion in 9 months FY '22, as against INR 17.48 billion in 9 months FY '21. As indicated in our results presentation, the overall GDPI of our property and casualty segment was INR 39.34 billion in 9 months FY '22 as against INR 17.61 billion in 9 months FY '21. On the retail side of the business, GDPI of the motor segment was INR 58.15 billion in 9 months FY '22 as against INR 51.48 billion in 9 months FY '21.To harness the potential of these segments, we have been expanding our distribution network to increase penetration in tier 3 and tier 4 cities. Our agents, including the point-of-sale distribution, increased to 81,969 as of December 31, 2021, up from 78,035 as on September 30, 2021. The advanced premium was INR 34.59 billion as at 31st December 2021 as against INR 36.86 billion as at September 30, 2021. Resultantly, combined ratio was 111% in 9 months FY '22, up against 99.1% in 9 months FY '21 and 11.3% in H1 FY 2022. Combined ratio was 104.5% in quarter 3 FY '22 as against 97.9% in quarter 3 FY '21 and 105.3% in quarter 2 FY '22.Our investment assets rose to INR 374.5 billion at 31st December 2021, up from INR 371.9 billion at December 30, 2021. Our investment leverage net of borrowings was 4.23x at December 31, 2021, compared to 4.27x at September 30, 2021. Investment income was at INR 22.95 million in 9 months FY '22, at against INR 16.59 billion in 9 months FY '21. On a quarterly basis, investment income was at INR 6.9 billion in quarter 3 FY '22, as against INR 5.68 billion in quarter 3 FY '21. Our capital gain was at INR 6.01 billion in 9 months FY '22 as against INR 2.92 billion in 9 months FY '21. Capital gains in quarter 3 FY '22 was at INR 1.31 billion as against INR 1.08 billion in quarter 3 FY '21. The expenses incurred of approximately INR 0.16 billion on account of the demerger has been observed in the P&L during 9 months FY '22.As indicated in our previous earnings call, during the integration process, we were able to smoothly transition and onboard our partners to seamlessly operate with minimal disruption. Our branch network as at December 31, 2021, stood at 285 as against 431 as at September 30, 2021. Apart from the immediate benefit, this transaction entails an opportunity to unlock significant operational and revenue synergies in times to come. We are on the right path on our road map of realizing the synergy benefits by the second half of fiscal 2023.Our profit before tax was INR 12.73 billion in 9 months FY '22 as against INR 15.04 billion in 9 months FY '21, whereas profit before tax was INR 4.21 billion in quarter 3 FY '22 as against INR 4.18 billion in quarter 3 last year. Consequently, profit after tax was INR 9.59 billion in 9 months FY '22 as against INR 11.27 billion in quarter -- 9 months FY '21, whereas profit after tax for this quarter 3 stood at INR 3.18 billion as compared to INR 3.14 billion in quarter 3 FY '21.Return on average equity was 15.1% in 9 months FY '22 as against 22.4% in 9 months FY '21. The return on average equity for quarter 3 FY '22 was 14.6% as against 17.6% in quarter 3 FY '21. Solvency ratio was at 2.45x at December 31, 2021, as against 2.49x at September 30, 2021. It continued to be higher than the minimum regulatory requirement of 1.5x.As I conclude, I would like to reiterate that we continue to stay focused on profitable, sustainable value creation, and safeguarding interest of policy orders at all times. I would like to thank you all for attending our earnings conference call, and we would be happy to take any questions that you may have. Thank you.

[Operator]

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

[Swarnabha Mukherjee, Research Analyst]

Sir, I have a couple of questions. First, on the motor side, sir, if you could throw some light on the reason for the underwriting for this business? Is it because of any kind of change after the amalgamation of Bharti AXA or any other driver of the sales?

[Bhargav Dasgupta, MD, CEO & Executive Director]

On the motor side, as we've been saying on the -- the underlying challenge is more in terms of the distribution admission that we are seeing on the ground. It's not to do with the merger. On the merger front, actually, we are quite happy with the way things are progressing. Except for -- as we had earlier said, except for OEMs dealership, we've actually got a complete synergy in terms of benefiting from that distribution channel. We are also seeing growth across most of the agency and the other distribution channels that we've acquired through the Bharti AXA integration.The real challenge of the ground has been -- we've always found that whenever the growth slows down in the market because of various things and right now, we have challenges in the market because of keep shortage for private car -- because of underlying demand for 2-wheelers. So overall, the industry is not growing as fast as it is used to, the motor insurance industry. And whenever the fat situations happen, we find that the market as in our industry is very aggressive on sourcing. That's the real reason why the motor book is underperforming. If you look at the -- largely that's on the cost side.On the loss issue side, it's also because of the fact that the claim frequency has now gone back to normal. First 2 quarters, we had some benefits because of relatively slower utilized or -- lower utilization because of some lockdowns across the country. That is -- that went away in Q3. So the loss issues have climbed back up to what we believe is more normal. So those are the real reasons that we are seeing. So it's more underlying industry issues and within that, our experience rather than any -- rather than the merger.

[Swarnabha Mukherjee, Research Analyst]

So then if I look ahead on the motor side, which you have commented that you have seen some green fits in certain segments in previous quarters, you had mentioned that. So what would be the trends now because I think these kind of challenges are continuing for quite some time, especially competitive intensity. So are you seeing situations improving and what is the status in terms of -- you had talked about price increases also in certain segments?

[Bhargav Dasgupta, MD, CEO & Executive Director]

What we have been saying that we don't -- we expect that to happen, at least our experience tells us that, that could happen from next year. We don't expect anything this year as we've been saying. There are 2 components on the price increase. One is the third-party price increase that is more tariffed and regulatory driven. Again, we believe that the industry needs a tariff price increase. But that is, as I said, driven by the regulators, we can't -- we don't control that. But 2 years, we've not seen a price increase. We are hopeful that this year we'll see.On the OD side is where we have greater control as an industry. And as I said, I think the industry benefited a bit from the first quarter because of lower usage, and that's a benefit that people probably have factored it in terms of the additions. So we've never -- we've been saying that we don't expect a price correction this year, but we are hoping that we should see that from next year onwards. Historically, we've never seen 2 to 3 years of price aggression. In these 2 years, we've seen 2 COVID lockdowns that has probably been the reason why this has sustained for this longer period. From our perspective, I believe you've kind of done most of the corrections that we wanted to. And on this base, we are reasonably confident that we'll start going from the coming quarter onwards.

[Swarnabha Mukherjee, Research Analyst]

Okay. That's very helpful, sir. Additionally, on…

[Operator]

Sir. May I request to please rejoin the queue? We have participants waiting for their turn.

[Swarnabha Mukherjee, Research Analyst]

Sure I will join back. Thank you.

[Operator]

[Operator Instructions] The next question is from the line of Abhishek Saraf from Jefferies.

[Abhishek Saraf, Equity Analyst]

[Technical Difficulty]

[Bhargav Dasgupta, MD, CEO & Executive Director]

Abhishek, we can't understand what you're saying. Your voice is cracking.

[Abhishek Saraf, Equity Analyst]

Sorry. Is this better now?

[Bhargav Dasgupta, MD, CEO & Executive Director]

It's better now. Yes.

[Abhishek Saraf, Equity Analyst]

Yes. Sorry about that. So first of all Happy New Year to Bhargav and Gopal. And so I had a question on -- with regard to our retention. So it appears that this quarter, we have had a higher retention at around 76% versus what was there in the previous 2 quarters of this year, around 60%, 66% and 68%. So what explains this stance, which category have you seen higher retention? And is it driven by the reinsurer or we are doing it on our own volition? That's the first question.Second, I noticed that the investment yield, both on the policyholder investments or shareholder investments have actually come down quarter-on-quarter, while the yield curve or the rates have generally been on a more trajectory. So if you can just help me understand what has happened there also, it will be very helpful.

[Bhargav Dasgupta, MD, CEO & Executive Director]

I'll ask Gopal to take the first one. It's largely due to the mix of business. [Technical Difficulty] Gopal [Technical Difficulty]. With regard to the second one, in terms of the investment yield, the aggregate field could be driven a little bit by the mix of capital gains that we have. Overall, the book is earning roughly about 7% and when interest rates go up, our aftermarket benefit that we are sitting on the bond book, that goes away. But equally, the new flow that we get into the investment portfolio that are the higher later. Now given the overall mix of the new flow versus the old stock, the new flow impact is very little because it takes some time for -- related to the overall size of the book, which is INR 38,000 crores, the new flow will be much, much smaller. So you don't see that impact too soon, while you see the impact of the mark-to-market benefit of the bond book going away. But anyway, bond book for us more or less has been kind of more of an ATM strategy. So we don't see a problem with that. But as the mix of the book changes with a greater flow coming in, the increased yield starts benefiting us. On the reinsurance, I'll ask Gopal to answer the question.

[Gopal Balachandran, CFO & Chief Risk Officer]

Yes. Abhishek, Happy New Year to you as well. I think on the retention side, as Bhargav said, there is no specific change in the retention philosophy that pretty much kind of remains the same. It's just that what you see in quarter 1, typically, you end up seeing a lot of corporate renewals happening where relatively, the proportion of reinsurance is higher and retention is, to that extent, slightly lower. And whereas in quarter 2, I think if you recollect what we have been saying, consequent to the demerger, we have also kind of inerted the crop book that Bharti AXA had already kind of committed to. And that book is something that got booked in quarter 2 and which is why you see a relatively lower retention for quarter 2. Quarter 3 is typically the period where you actually see a large part of the business being underwritten on the retail franchise, predominantly motor and health, where in line with what we have mentioned, no change in the retention philosophy. Typically, these are small ticket policies where our retentions are relatively higher. But otherwise, on an aggregate basis, no change in our retention philosophy assets. It is purely a function of what kind of rigs of business that we have underwritten in Q1 and Q2.

[Abhishek Saraf, Equity Analyst]

Sure. Quite clear. So basically, one thing probably going forward, building that these kind of retention of reinsurance percentages would be broadly in line with the mix of that particular quarter. Just one thing, if I can ask on COVID claims for this quarter. If you can share it, Gopal the data -- how were the net COVID claims for us this quarter. And I believe that in last quarter, we mentioned that we could see some of the release also. So what has been the trend there on COVID claims in this quarter? If you can just throw some light on that?

[Gopal Balachandran, CFO & Chief Risk Officer]

Abhishek if you recollect what we had talked about was for the first half of the year, we are [Technical Difficulty] COVID claims [Technical Difficulty] about INR 5.61 billion. Now that number, if you look at on a 9-month basis, stands revised at about $5.29 million. So hence, to that extent, while in line with what we are seeing as let's say, declining trend on the Wave 2 related COVID cases. Obviously, relative to the approach of reserving that we have kind of built-in in quarter 1, as I said, 9 months number stands at about $5.29 million. Having said that, I think what will be important for us to kind of watch for, which is what we will do in quarter 4 is this Wave 3 impact that has started to kind of play out. Obviously, early trends in terms of the number of cashless intimations that we are seeing tend to be slightly little lower than the peak what we had seen in Wave 2. But having said that, obviously, we will monitor the development of intimation because these are cashless requests. Honestly, we'll have to wait for in case if there are any reimbursement claims that get implemented, which typically happens. But on the Wave 2 related COVID impact, I think, as I said, 9-month number stands at about $5.29 million.

[Operator]

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

[Nidhesh Jain, Lead Analyst of NBFC and Insurance]

Sir, how should we think about combined ratio and ROE going forward given that this was a really normal quarter from a claims ratio perspective and our combined ratio is around 105% for the quarter. So how should we think about combined ratio over the next coming years? Also, we expect some benefit for the profiting cost. So should we expect this number to towards the [indiscernible] over the next couple of years?

[Bhargav Dasgupta, MD, CEO & Executive Director]

Yes. Nidhesh, as we've been saying, we believe that, as you know, the merger just -- the consolidation effectively happened in the last month of last quarter. So we started taking most of the calls that we need to take in terms of the synergy benefit on the cost side. On the revenue side, as I explained, we are quite happy with the way things are playing out in terms of the synergy with the existing distribution that Bharti team had already built, and we are seeing growth coming through in some of those partnerships as well. But the entire benefit for this, as we've been saying, will take some time. And our sense is that we will start to see the benefits play out, maybe what we have been saying FY 2024, but we think it will probably be a bit earlier than that. So the second half of next year, we will start seeing that benefit.Now if you look at the combined -- on a pro forma basis, the pre-deal announcement and ICICI Lombard pre-deal announcement, it will get pro forma integration. That would have been about 104 combined. So the question is how soon can we bring that down. Now today, what's the situation is that the core underlying business of ICICI Lombard is also not at the sub-100 number that we used to experience because of all the pressures that we've talked about. So it may be challenging to bring it under 100 that we have seen in the past. But directionally, it will start coming down. And in terms of the synergies, Gopal can explain some of the sales growth that has already happened.

[Gopal Balachandran, CFO & Chief Risk Officer]

Yes. Abhishek, I think -- I mean we have been kind of talking about broadly 3 areas of synergy, right? I think in line with just to kind of refresh, I think tax synergy is something that -- I mean, actually, we will be filing the returns of 2021 by January 31. So we will -- in line with what we have said earlier, we will be able to observe the full benefit of the carryforward losses. On the cost front, I think as a part of our opening remarks, which is what we kind of put out, I think we have looked at the overall office infrastructure. And clearly, I think we have been able to kind of -- keeping in mind the policyholder interest, we have been able to kind of look at what kind of existence do we need to have so far as physical offices are concerned. And clearly, the numbers as at 31st December, the number of office network stands revised at about 285.Again, given the fact that this rationalization of the office infrastructure has happened in quarter 3 and more towards the latter part of the quarter, so we will again start to see some benefit of synergies in the form of cost playing through from Q4 onwards. Equally, I think we have been kind of looking at various areas of productivity improvements and efficiencies, which is what we had kind of indicated as the earlier call to play out over the next 6 to 9 months. So there again, we are on post in order to be able to realize better improvement in productivity when we look at the other cost elements.The final cost element in terms of technology-related spends where, again, we will be able to kind of see benefits on synergy playing out. That will take some time because over the next 9 to 12 months is when we will be able to significantly migrate even, let's say, historical data and other related information. So the impact of technology-related spends on the synergy front will start to play through most probably towards the second half of the next financial year. But otherwise, on force to kind of realize most of the cost elements that we had talked about and the revenue synergies as Bhargav explained is something that we will again start to realize towards the second half of the next financial period.

[Nidhesh Jain, Lead Analyst of NBFC and Insurance]

Sure, sure. And secondly, across [Technical Difficulty] we keep on hearing that we are on disruption. We have seen significant disruption in some of the segments as looking. In our industry, also, a lot of new companies are coming up in terms of distribution, there is previous company model, which are coming [Technical Difficulty] in the entire manufacturing side on the insurance. Some of these business products have also succeeded outside India. So how do we think about from a longer perspective with respect to the possibility of disruption to our business?

[Bhargav Dasgupta, MD, CEO & Executive Director]

So I think we've been discussing this pretty regularly. If you look at the scope of disruption, there are both in terms of InsurTech, the way people source policies, the way people service policies, the way people service claims. There is a tremendous scope for disruption, again, using digital tools that are now our business. Similarly, there is also some amount of disruption that is possible in the distribution side.If you look at what we've been doing is that on the first in term of sourcing policies or servicing policies through modern technology, that's been an area that we've been investing heavily. Our approach on the business side has been, as we mentioned in the opening statement, focus was to create a forgo team, which focuses on the digital disruption on the customer acquisition side. and we call it our digital one team, where we've kind of created a team, which is sales contained with all key capabilities and with separate locations, separate philosophies in terms of even people processes. And that team has been ramping up, and we are reasons we are quite happy with the way the team is growing business, both in terms of tying up with digital ecosystem partners and as I explained, in this quarter, we've seen a 70% growth in that business. And also in terms of the business that gets written on our website, and we've seen about 20% growth in this quarter on business written on our website.Now the other thing that we are to study is the -- honestly speaking, the fact that some of these players are willing to lose a lot of money for growth. We have to be a bit more calibrated than some of them. Obviously, our philosophy has always been to build a sustainable model. And we may not want to go to the level of losses that some of them incur. But even without that, we are reasonably confident that we are able to grow -- we will be able to close the segment quite fast. Towards that, we are also -- towards this end of this quarter, we've taken a fair amount of calls, and we believe that, that will reflect an even faster growth in this channel going ahead.On the claims side, we've been giving out some numbers in terms of digital claims settlement that you've seen both from motor and health using AI, ML, et cetera. Those numbers are increasing by the quarter. Even this quarter, we had a significant increase in the claims that we process through our InstaSpect service and also the cashless operation that we gave using our ML feature. And similarly for us in terms of the initiative on the IL TakeCare side, that's the way we believe we will be able to engage with customers even better on a web-based platform or mobile apps rather and build a greater correct while providing the user insurance services. And there, the focus is not just in terms of the usual things that the insurance companies provide, but a lot more services and features, which increased engagement and potentially reduces risk for our customers. So this is a big trust area for us in terms of the digital disruption.

[Operator]

Sorry to interrupt. May I request, Mr. Jain, to please rejoin the queue? We have participants waiting for their turn. The next question is from the line of Shreya Shivani from CLSA.

[Shreya Shivani, Research Analyst]

Sir, I wanted to ask you a question if I see the third quarter growth numbers for Lombard including AXA -- Bharti AXA in the base. So there has been a 4% contraction for this quarter for the combined entity, while the industry or the private players were at around 5% to 8%. Now motor, we can see has degrown much more, 12%, 13% for the combined entity, while the private players are still grown around 6%. On the health side, again, Lombard consolidated, which is around 3% growth for third quarter, while the industry and the private players are significantly higher. So sir, if you can give us some understanding of how do you plan -- what is your growth target, it's not target, but how do you plan your growth across these 2 segments because these are your largest segments, basically? And what should we expect for the coming year or for the coming quarters on the growth side?

[Bhargav Dasgupta, MD, CEO & Executive Director]

Yes. The 2 segments separately. Let me start with Motor. So if you look at some of the commentary that you've given on the Motor side, if you look at the 3 segments, private car, 2-wheeler, and commercial vehicle. We are a bigger player in terms of a private car supplement and even a bigger player when you look at the share of new -- our share of new is much higher than our normal share of business as a company. And at a time when the new sales have been muted for reasons that all of us are aware largely shortage issues rather than demand issue, that has had a higher impact on us than maybe the overall industry.Similarly, if you look at our mix of business, 2 weeders for us is a much higher mix of business. We have roughly about 20% of our motor mix coming from 2-wheelers, industry mix would be about roughly about 15%. Now 2-wheeler slowdown has hence affected us a bit more. From a market share perspective, we are fine within that segment. But from a mix perspective, our growth gets affected when 2-wheelers goes down.On the commercial vehicle side, there has been a growth again, while for the industry commercial business is up to about 40% to 45%. For us, it's about 17% now. So when that segment grows faster than our service than the other, then relatively, we underperformed. Having said that, there is also the pricing aggression point that we've been making. And our sense is that most of the calls that we want to take in terms of correcting the portfolio has happened, and we remained optimistic about growing or outgrowing the market from the coming quarters onwards on the motor segment.On the health, again, there is a opportunity bit of a base effect, one, because we were traditionally more of a banca player, and there was a base effect in terms of ICICI back stocking distribute our benefit products. that had some amount of impact on our overall business. But separate from that, now we are seeing that growth come back. So as I expect, if you look at even during the quarter, while overall number is -- you are rightly annuitized that the health business has undergone for the quarter. But if you look at just the month of December, we've outgrown the market on the retail health indemnity business as we are adding more agents and distribution that we've talked about.And similarly, with the bank, the base effect is largely played out. And our overall bank distribution in the month of December has grown by about 15% because the base effect has got paid out. And we are optimistic that this will start growing from this quarter onwards. Even the bank has started -- restarted selling not benefit, but our indemnity product as an attachment just started. So we'll have to wait to see the impact. It may take a bet of time. But overall, I think the base effect headwinds are behind us. And on top of it, we are investing in terms of the retail agency distribution that we've talked about. So all in all, we are quite optimistic about growth from going forward.

[Shreya Shivani, Research Analyst]

Got it, sir. And also I wanted to ask you, particularly on your health business, your group good business is a bigger portion of your health portfolio. So sir, is there any target you are putting on, what kind of mix you want to maintain between retail and group in that portfolio?

[Bhargav Dasgupta, MD, CEO & Executive Director]

We don't -- we take calls based on pure risk selection. I mean, if, let's say, Group Health business is the performance poorer, we will cut out on Group Health business. What we are very happy with is what we've been saying for some time from June onwards after the Wave 2 we went back to our corporate clients for price correction -- from a prospective prospect, not for the bank book. And we said we will look at 50% to 20% price increase. We are very happy to say that for large corporates, we've got an even higher price increase on an overall portfolio basis on our per-life premium. We factored in the potential -- some potential third wave also in the price, and we are quite happy that we've retained more than 90% of our large corporate accounts in spite of this kind of a price increase. So with this, we are reasonably confident about the Group Health book right now. We'll have to watch for the impact of COVID Wave 3 and the system pricing. So we don't put a target of mix, we put a target of profitability for each of the segments.

[Operator]

Sorry to interrupt. May I request, Ms. Shreya, to please rejoin the queue, ma'am?

[Shreya Shivani, Research Analyst]

Yes, sure.

[Operator]

[Operator Instructions] The next question is from the line of Rahul Jha from Bay Capital.

[Rahul Jha]

Happy New Year to you. My question is you said that there will be around 400 kind of net add in the retail health side. But when I look at the numbers, from 78,000 it has gone to 82,000. So this is how come only 400 in retail health -- only going into a retail health?

[Bhargav Dasgupta, MD, CEO & Executive Director]

First, again, Happy New Year to you too. What the 400 number is our own sales force that we hire on our roles. The number that you are talking about is the agent count. So what we do is -- these people join our company, and then they recruit agents who are not on our own, these are commission agents, tied agents or point of scale agents. So these are 2 different numbers. Now when we get these 400-odd people, as we mentioned in the second earnings conference call, we wanted to recruit about 1,000 or you want to add about 1,000 sales force in the retail agency channel. These are people that will take on role. Each of them will still then [indiscernible] agents to do the distribution. But for 400 of them have joined this quarter, then they will now hire more agents. And those agents will then produce business on this ground.

[Operator]

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

[Prayesh Jain, Research Analyst]

Happy New Year, everyone. What was the help in loss ratio in the quarter? And last previous quarter, we had some INR 67 crores of reserve release on the income book. So in a like-to-like comparison, what would have been the finance ratio. And on the motor TP price side, where are the uniforms is IRDAI talking about it or what are the processes that are needed for the price hike and has anything been started from IRDAI side?

[Bhargav Dasgupta, MD, CEO & Executive Director]

Let me take the first part first. On the first one, on the health loss ratio, I think when you look at the investor deck, we have put out the numbers, which include health and accident put together. Just on the health side, if you were to look at, quarter 2 loss ratios for the overall health book was 77.7%. Quarter 3, that number stands at about 82.7%. And if you look at quarter 3 last year, which is for ICICI Lombard on a stand-alone basis, the overall health loss ratio stands at about 88.1%. Those are 3 numbers. Q2 77.7%, Q3 of current year 82.7, and Q3 of last year, IL on a stand-alone basis at 88.1%. So those are 3 numbers. That's of the first question of yours.Your second point on the release of reserve that we had seen in quarter 2, which is what I kind of talked about. For the first half, we had a net COVID impact of about INR 5.61 billion. That's for the first half of the year. That number, if you look at on a 9-month basis, now stands revised to INR 5.29 billion. So hence, to that extent, I think relative to the trend line, what we are seeing on account of Wave 2 COVID cases, I think the numbers stand revised at about 5.29.As I mentioned, I think, obviously, what we will have to wait for is this new Wave 3 that has come through. What impact does it have both in terms of count of intimation and 2, in terms of average claim size. I think as we move forward in this quarter, I think we will be able to share better insights subsequently. The initial trend seems to suggest when we look at the cashless count in terms of informations on Wave 3 relative to the peak that we had seen in Wave 2, the number of integrations under Wave 3 seems to be far lower. So that's one trend line but early trends. We will have to wait, as I said, for more data to come soon.Even on the claims side, as we speak, maybe it looks like things there in cases that are getting intimate are relatively milder. And hence, to that extent, maybe a 10% to 15% lower average claim size than what we would have normally seen in a relative quarter. That's what early trends are. Obviously, we have to wait for further integration as and when we get those intentions. So that's one.To your second point on motor third party, I think we have been talking about the price increase. Unfortunately, we have not seen a price change happening over the last couple of years. Having said that, I think we have also been talking about, let's say, increase in, in fact, the average playing payouts, consequent to various core judgments that we have seen over the last couple of years. The expectation that we have is maybe as we head into list of India FY '23, hopefully, we should be able to see some form of a draft guideline getting put out in terms of increasing motor third-party pricing.

[Operator]

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

[Sanketh Godha, Vice President]

Gopal, we started seeing a significant increase in the OpEx on a quarter-on-quarter basis. If you see the sales promotion has increased almost by 20% Q-on-Q. I just wanted to understand why it has gone up given it's a combined entity. We thought this number will come down compared to what you have done in the second quarter. And also, I just wanted to understand this cost, there are low hanging through branch rationalization and the employee rationalization, then what is the likely absolute cost you could be sharing during FY '23 and FY '24 so that your OpEx ratios from Bharti AXA could substantially improve in '23 and '24 compared to what we are seeing right now. Around 35% -- sorry -- 30% is what we are seeing right now for the combined entity except commission.

[Gopal Balachandran, CFO & Chief Risk Officer]

So mainly it's -- Sanketh, to your first question on the sales promotion front, I think maybe you have to always look at the overall expense ratio number in the context of the mix of business that we have. I think as I kind of mentioned in one of the responses to the earlier question, Q3 typically happens to the period where we see typically a bulk of the retail business getting sourced. For example, the mix of motor within, let's say, whatever volumes of business that you would have done in, let's say, Q2 and Q3, you will find motor contributing to a relatively larger proportion of broad written premiums. And hence, to that extent, correspondingly, where you will get to see the cost of sourcing getting reflected in so far as expense numbers are concerned. Having said that, I think when you look at the aggregate expense ratio numbers for quarter 2, that number was at about 35.4%. This I'm talking about both operating expenses plus commissions put together.For quarter 2, that number was about 35.4%. That number is actually kind of slightly come off, and that number stands at about 34.9%. So hence, to that extent, we are actually seeing maybe a 0.5% improvement in the overall management expense ratios in quarter 3 compared to quarter 2. So -- so that's the trend line that one would obviously want to kind of see as we kind of head into the subsequent quarters. To your point on, let's say, some of the cost synergies getting played out, which is what we explained, your point is absolutely right. On the office infrastructure space is what I, again responded to one of the earlier questions. If you look at December 31, our office number stands revised at book to 185 as compared to almost more than 400 plus offices which we had towards the end of September. So we have clearly been able to kind of get benefits of rationalization in the office space.A large part of it happened towards the second half of quarter 3, and hence, to that extent, the impact in the form of benefits on cost is the something that you will start to see it playing through in the Q4 number onwards. The same thing is what we will obviously also want to see improvement in efficiencies and productivity playing out even when it comes to on the people side. Again, the impact of which is something that we will see over the next, I would say, 6 to 12 months kind of time period. The trajectory that one would take is what I think Bhargav also responded insofar as the combined ratio is concerned, again, when you look at quarter 2, combined, we were at about 105.3%. Quarter 3 numbers have come to 102.5. And over the period, I think we would obviously want to try and see if we can start seeing improvement in combined as we head into the subsequent quarters. That's how the cost synergies would play out. Every cost element is being looked at and some of the immediate benefit is something that we already started to see and certain elements of cost, particularly as we do the technology side will play through towards the second half of FY '23.

[Operator]

[Operator Instructions] The next question is from the line of Avinash Singh from Emkay Global.

[Avinash Singh, Senior Research Analyst]

2 questions. One, firstly, on that, your retail health [indiscernible] seems to be higher size in Q3 despite some INR 30-odd crores of COVID reserve relief adjustment. So was it sort of in sort of net increase in frequency of non-coal or delayed procedures? Or was there some sort of a change on the severity side? So that's on the retail end part.And secondly, on the motor side, now we have talked a lot about competition. What -- and Bhargav told that okay early has happened the 2, 3 years of intense competition. But one thing that's different in this kind of competition is that there are a lot of new players like they have been funded or being funded on the patterns of the futuristic InsurTech business, we have sort of we are on the willingness of taking losses is pretty high for longer period. And on the other hand, you have the large incumbents, extra being to just maintain their top line, of course, they have been recapitalized. So their ability again to drag the pricing is better -- I mean actually it's higher. So these are 2 questions. How do you see the motor or recompetition losing out?

[Bhargav Dasgupta, MD, CEO & Executive Director]

Avinash, great questions. On the first one, it was largely because elevated frequency of noncorporate claims that we see. We've been talking about it. And in Q3, we had both medical acute cases, which are basically the dengue malaria cases, which kind of continued from Q2. Usually, it's linked to the monsoon season, it continued in the early part of Q3. And separately on top of that, the electric surgery numbers have been quite high for Q3. Early times in Q4, both those are medical equity cases came down in the second half of Q3. And even electric surgeries right now is again trending down, but we'll have to watch this trend for a period.In terms of ACS, very similar to the number that we gave in the last earnings call, over a 2-year period, we've seen roughly about 20% increase. So our 9,000 to 10,000 annualized increase in average game size is what we are seeing, which is largely a medical inflation that we are seeing. We will have to, again, wait to see if this is structural. We explain the reason why we think this is happening in terms of additional tests, PP suits, et cetera. But until COVID plays through, this will remain. And then -- and thereafter, we'll have to wait to see if this is structured. So that's on the health side.On the motor side, your point is absolutely valid. In the past, we've not seen kind of a TP funded entity, which is just going for growth. We've had disciplined insurers who've come into the market. So that risk is there. Having said that, we believe that from our perspective, we've taken the necessary call that we wanted to in this year, and we are reasonably confident that on this space will continue to grow on the motor book. I'm hoping that there will be some price correction next year because of TP, et cetera. But even otherwise, we've kind of geared up to handle the sector. We've done a lot of granular analysis during this year to prepare ourselves for a situation where this market continues to remain aggressive, and we will still be able to compete with urgency.

[Operator]

The next question is from the line of Prakash Kapadia from Anived Portfolio Managers.

[Prakash Kapadia, Principal Officer]

Bhargav, you mentioned about the app downloads, 1.1 million. So are we happy with this number? And can you share some customer experiences because the app has certain very good features like a consultation or a direct planning, so how is the customer experience been? Because some of these things once they are appreciated and kick in automatically stickiness and cross-sell can improve for us. And in dental insurance, there was some tie-up. So is it under the same policy or some of these initiatives for creating a more differentiation at our retail level kind of focus which were…

[Bhargav Dasgupta, MD, CEO & Executive Director]

Absolutely correct. This is exactly our thought process on the benefit of the app from a longer-term perspective. If you look at the number, INR 1.1 billion is just scratching the surface. We launched this app about 2 years back, largely focused on the business to employee segment, which is basically the Group Health segment for employees of our corporates. At that point in time, our thought process was -- this was a segment with whom we had hardly any engagement. Individuals in corporate wouldn't even realize that the insurance was from ICICI Lombard unless they had a claim and a small percentage of people actually claim. So the word thought process was to build engagement. And then very rapidly, we realized that we needed to pivot and provide a comprehensive solution across product lines to these customers because the same customer who is an employee of corporate is also a retail insurance customer of ours through maybe a motor or some other policy.So we've been consistently pivoting and -- or we pivoted and we've been consistently building features on an agile mode. Every 15 days, we turn new features on that app. And the number of downloads that we have seen is really a 2-year story. Right now, we are adding almost 100,000 new app users every month. On the service and the engagement, we are watching it like a hawk. There is -- we believe you're absolutely right. This will create [indiscernible]. We launched the renewal and the cross-sell upsell module in the middle of this year, around July or August, if I recollect. And month-on-month, we are seeing good traction in terms of people using the app for upselling or cross-selling. But on a very small way, so the numbers are not meaningful in the overall theme of things, but the growth numbers are quite phenomenal. We'll wait for some time before the numbers become meaningful to talk about some of these is my guess. But overall, we are very clear that this is going to be a tool to build a strong engagement with our customers, which will, in the long term, help us with cross-sell, upsell, and we believe even loss issue.

[Operator]

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Bhargav Dasgupta for closing comments.

[Bhargav Dasgupta, MD, CEO & Executive Director]

Thank you, Rituja. Again, thank you, everyone, for joining this call. We are available for answering any other call separately, feel free to reach out in case you have a question and time didn't permit us to answer those them and look forward to engaging you during the quarter and thereafter. Thank you, and take care. Bye.

[Gopal Balachandran, CFO & Chief Risk Officer]

Thank you so much.

[Operator]

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