ICICI Lombard General Insurance Company Ltd

NSE:ICICIGI

Earnings Call Analysis

Robust Growth and Profit Uptick in Q3 FY'24

In a period marked by strategic investments in product launches and preferred segments, the company's new business expanded by 24.5%. Bancassurance and key relationships bolstered this growth, evidenced by a 13.6% increase in the quarter and a 21.5% rise over nine months. Gross direct premium income (GDPI) followed suit, climbing to INR 187.03 billion in nine months of FY'24, a 16.5% jump outpacing industry averages. Focusing on thriving segments, property and casualty GDPI surged by 12.5%, and the health segment witnessed a remarkable 24.7% hike. Pre-tax profits also saw a significant uptick, with a 20.6% rise to INR 18.57 billion in nine months, and after-tax profits grew by 22.4% to INR 4.31 billion in Q3 FY'24.

Overview of Financial Performance

The company reported a robust performance this quarter, demonstrating a Gross Direct Premium Income (GDPI) growth of 16.5% during the 9-month period in FY '24, outpacing the industry growth. This growth escalated to 16.5%, exclusive of crop and mass health revenues, indicating a strong preference and performance in its strategic sectors. The property and casualty segment experienced a 12.5% expansion, with retail motor and health segments showcasing solid increases of 5.6% and 24.7%, respectively. Impressively, the advanced premium metrics depicted a modest uptick, underscoring sustained retention and trust from policyholders.

Strength Despite Catastrophes

Despite encountering three major catastrophic events which presented challenges across the industry, the company's insured losses were contained below its natural market share. The combined ratios for both the quarter and the 9-month period showed improvement and, excluding catastrophic losses, indicated even more effective management of expenses relative to premiums.

Investments and Profitability

Investment assets witnessed an appreciable growth, and the portfolio's investment income contributed positively, with net capital gains of INR 3.95 billion over the nine months. This translates into a profit before tax growth of 20.6% for the nine months and a 22.4% rise in profit after tax for the quarter, signaling robust profitability margins. However, it's worthy to note that the return on average equity experienced a slight dip as compared to the previous year.

Operational Efficiency and the Road Ahead

In an outlook of operational stability, the company’s combined ratio goal remains at a steady 102%. An emphasis on consolidating this stability over subsequent quarters before contemplating revisions reflects a prudent, data-driven approach to financial forecasting.

Claims and Growth Perspective in Motor Insurance

In the motor insurance landscape, the company sustains a loss ratio within a comfortable range of 65-67%, an indicator of well-managed claim expenses against premiums. Despite a past trend of elevated fourth-quarter claims, recent trends don't necessitate bolstering loss reserves. The focus remains on cautious growth with a strategic view rather than aggressive pursuit of market share, balancing profitability with competitiveness.

Efficiency Gains in Management Expenses

The company's management efficiency is seen through a reduction in the expenses of management relative to the Gross Written Premium (GWP), with a decrease from 28.6% to 28.1% over the nine months. While the thrust remains on maintaining a favorable combined ratio over isolated metrics, this decrease emphasizes vigilant cost management.

Earnings Call Transcript 2024-Q3

[Operator]

Ladies and gentlemen, good evening, and a very warm welcome to the ICICI Lombard General Insurance Company Limited's Q3 and 9-month FY '24 Earnings Conference Call.

From the senior management, we have with us today Mr. Sanjeev Mantri, MD and CEO of the company; Mr. Gopal Balachandran, CFO and CRO; Mr. Alok Agarwal, Executive Director; Mr. Girish Nayak, Chief Technology and Health Underwriting and Claims; and Mr. Sandeep Goradia, Chief Corporate Solutions Group.

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 do not constitute an indication of any future performance as future involves risks and uncertainties, which could cause results to differ materially from the current views being expressed. [Operator Instructions]

I now hand the conference over to Mr. Sanjeev Mantri, MD and CEO of 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 for quarter 3 and 9 months financial year 2024. I would like to wish you and your family a great 2024 ahead. While we had a brief interaction in the last quarter, I'm happy and excited to engage with you all in my new role.

I would like to take the first few minutes to share my vision on the journey ahead for our company. I firmly believe we are in the midst of exciting times both as a country and as an industry. India is expected to be the fastest-growing economy globally. Insurance sector is our -- in the country continues to provide a multi-decade growth opportunity supported by the regulatory commitment to enable insurance for all by 2047. In my view, this will unleash tremendous positives for the industry in time to come. As a company, we will continue to create newer value pools in the industry and maximize our participation in the existing ones. And I believe we can achieve this through our vision of One IL One Team.

Now let me give you a brief perspective on our vision of One IL One team. Over the years, the company has created multiple functions team to access various business opportunities available. This was an approach which was well for us in that phase of our journey. However, the present scenario is fast evolving and dynamic due to which the existing view of functioning inhibits us from leveraging the combined strength of the organization.

Keeping this in mind, we have decided to bring a conscious shift in our core philosophical approach. We aim to transcend functional silos and convert the entire organization into a united team working towards a single organizational purpose. Simply put, it implies when ICICI Lombard wins, everyone wins. This will be our core cultural anchor and every decision that we take, whether strategic or tactical will be guided by this. I'm excited to share that we have already taken early steps to align our organization to this in letter and spirit. However, as we embark on this journey, we will continue to focus on market opportunities and leverage our existing distribution channel. We have, over the years, followed a customer-centric approach and will continue with our overarching philosophy of balancing growth and profitability.

Let me now give you a brief overview of the industry trends and developments that we have witnessed in the past 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, 2023.

Domestic GDP grew by 7.6% during quarter ended September 30, 2023, indicating strong growth, primarily driven by the government infrastructure push. Healthy balance sheets of banks and corporates, improving business sentiments and rise in public and private CapEx should boost CapEx activity going forward. Broader economic activity indicators like GST collection, e-way bills generation, manufacturing PMI, non-food credit growth indicate robust demand in the economy. However, the headwinds for domestic growth can emerge from weak external demand, tight financial conditions and geopolitical tension.

As we speak, India is globally the fastest-growing auto market and the third largest in terms of sales volume. As per CM, in 9 months 2024, new private car sales continue to have robust growth despite the higher base, with over 3.1 million vehicles being sold, mainly driven by festive demand. For 9 months 2024, 13.5 million 2-wheelers were sold, also helped by uptick in rural demand. For the full year, the sales are expected to cross pre-COVID levels. For 9 months financial year 2024, 1.2 million commercial vehicles were sold. This was driven by growth in infra and other core sectors.

Health insurance continued to deliver robust growth, remaining the largest contributor to overall industry premiums. The commercial lines of business witnessed growth in the line with current market environment. Further private and public CapEx involved investments have led to robust growth in the engineering line of business. We expect the commercial lines segment to do well in the future on back of overall economic growth and capacity creation.

Now speaking of the performance, the general insurance industry delivered a Y-o-Y growth -- gross direct premium income growth of 14% for 9 months 2024. Excluding crop and mass health, the growth is at 15.2% for the same period. Overall, the combined ratio of the industry was at 111.9% for H1 2024 as against 112.2% for H1 2023, excluding the impact of [ wage ] areas for the PSU insurers.

Within the industry, the industry combined ratio for motor business was 119.4% for H1 of 2024 as against 123.5% for H1 of 2023. While the improvement in combined ratio is directionally positive, it continues to remain at elevated levels. Further, for 9 months 2024, the industry has witnessed 3 catastrophe events, which is expected to have an impact on financial year 2024 industry combined ratio.

Moving to business impact for us in quarter 3 and 9 months for 2024, the company grew at 13.4% during Q3 of 2024, which was higher than the industry growth of 12.3%. For 9 months 2024, our growth was 16.5% against an industry growth of 14%.

I will now speak about the performance in key business segments during the quarter ended 9-month financial year 2024. In the commercial line of business, we have developed strong capabilities on the back of a unique distribution franchise, duly complemented by our value-added services, risk-based underwriting and large and highly rated reinsurance capacities. As a result, we have consolidated our market position in this business over the last decade.

During quarter 3 financial year 2024, we grew at 12.5% at an industry growth of 13.3%. For 9 months financial year 2024, we have grown by 15.7%, which was higher than the industry average of 9.7%. Motor as a category has always been a focus area for us. As we speak, for the first 9 months, we are the second largest motor insurer for quarter 3. We achieved an industry-leading position in this segment. We have a robust reserving philosophy, which is demonstrated by our reserving triangles and granular data for our portfolio decisions. We'll continue to leverage our strong multi-distribution structure, which enables us to access the market, along with the best-in-class claims servicing teams focusing on superlative customer experience.

For the motor segment in quarter 3, we've registered a growth of 5.6% as against the industry growth of 10%. For 9 months financial year 2024, we grew at 7.1% as against the industry growth of 14.3%. The growth in motor segment was aided by strong growth in the new private car segment, which grew at 30% for 9 months. Our 2-wheeler growth of 9 months 2024 was 14% which was higher than the CM volume growth of 9.9%. As the rural demand picks up, we hope to see the trend continue.

The CV segment, as we had mentioned in our earlier call, had no TP price hike for financial year 2024. And consequently, we focused on targeted portfolio sourcing among the available value pool. For 9 months 2024, our mix of private cars, 2 wheeler and CV stands at 51.4%, 27.8% and 20.8%, respectively. We also continue to build efficiency in motor claims. In quarter 3 2024, through our preferred partner network, we have been able to service 67% of our agency and direct claims, up from 51% in quarter 3 financial year 2023. We are excited about the opportunity in motor segment, and we'll leverage all our existing capabilities as one team to carry the momentum in the coming quarter.

The health segment continued to be the faster growing segment for the industry. We grew faster than the industry, both in Q3 and 9 months, registering a growth of 24.7% and 29.1%, respectively. Our health business -- retail health business grew in line with the industry at 19.2% for 9 months 2024. To create a sustainable portfolio, we are focusing on preferred geographies and higher sum insured. Our new business grew at 24.5% during this period. While we would have liked to grow faster, we will continue to invest by focusing on preferred segment and new product launches in the coming quarters.

On bancassurance, we have developed an industry-leading practice which continues to be a strong pillar for our company. Our bancassurance and key relationship grew at 13.6% for the quarter and 21.5% for 9 month 2024. We'll continue to define our existing relationships by creating new value streams, which, at the same time, focusing on acquiring new relationship. Within this, ICICI Group distribution grew at 19.9% for quarter 3 and 16.9% for 9 months.

One-stop solution for all insurance and wellness needs by IL Take Care app has surpassed 8.5 million user downloads to date. We continue our growth momentum with 1.6 million user downloads for the quarter. And during the quarter, source premium was over 100 billion -- sorry, [ 1 billion ], through this app registered a 3.2x increase Y-o-Y. Our digital business grew at 39.1% in quarter 3 and 43% in 9 months and constitutes 6.6% and 5.8%, respectively, of overall business numbers. It would continue to be the key growth driver for us. As I look ahead, I'm personally very excited with this opportunity and committed to creating long-term sustainable value for all our stakeholders.

Now I would request Gopal to take you through the financial numbers for the recently concluded quarter and 9 months.

[Gopal Balachandran, executive]

Thanks, Sanjeev, and good evening to all. I will now give you a brief overview of the financial performance of the recently concluded quarter and 9 months. 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 187.03 billion in 9 months FY '24 as against INR 160.48 billion in 9 months FY '23. This was a growth of 16.5%, which was higher than the industry growth of 14%. Excluding crop and mass health, GDPI growth of the company was at 15.6%, which was higher than the industry growth of 15.2% in 9 months FY '24. GDPI was at INR 62.3 billion in Q3 FY '24 as against INR 54.93 billion in Q3 FY '23, a growth of 13.4%. This growth was higher than the industry growth of 12.3%. Excluding crop and mass health, GDPI growth was at 12%, which was again higher than the industry growth of 11.3% in 9 months FY '24. Our GDPI growth during the quarter was primarily driven by growth in the preferred segments. The overall GDPI of our property and casualty segment grew by 12.5% at INR 16 billion in Q3 FY '24 as against INR 14.22 billion in Q3 FY '23.

On the retail side of the business, GDPI of the motor segment was at INR 28.42 billion in Q3 FY '24 as against INR 26.91 billion in Q3 FY '23, registering a growth of 5.6%. The advanced premium numbers was at INR 33.04 billion at 31st December 2023, as against INR 32.89 billion at December 30, 2023. GDPI of the health segment was at INR 13.79 billion in Q3 FY '24 as against INR 11.05 billion in Q3 FY '23, registering a growth of 24.7%. Our agents, which include the point-of-sale distribution count, was INR 1,25,088 as on December 31, 2023, up from INR 1,22,461 as on September 30, 2023. GDPI of the retail health segment grew by 16.2% during the quarter 3. Group health segment grew by 27.2% during Q3 FY '24.

As against last year, where we saw no major catastrophic events during the year, during this year, we witnessed 3 major catastrophes, Cyclone Biparjoy, North Indian floods and Cyclone Michaung. Our share of insured losses in these cat events have been lower than our natural market share. Resultantly, combined ratio was 103.7% for 9 months FY '24 as against 104.6% for 9 months FY '23. Excluding the impact of cat losses of INR 1.37 billion, in 9 months FY '24, the combined ratio was 102.6%. Combined ratio was 103.6% in Q3 FY '24 as against 104.4% in Q3 FY '23. Again, excluding the impact of cat losses of INR 0.54 billion in Q3 FY '24, the combined ratio was 102.3%. Our investment assets rose to INR 468.67 billion as at December 31, 2023, from INR 453.12 billion as at September 30, 2023. Our investment leverage net of borrowings was 4.11x as at 31st December 2023, as against 4.07x as at September 30, 2023.

Investment income was at INR 25.96 billion in 9 months FY '24 as against INR 21.6 billion in 9 months FY '23. On a quarterly basis, investment income was at INR 8.38 billion in Q3 FY '24 as against INR 7.66 billion in Q3 FY '23. Our capital gains, net of impairment on investment assets stood at INR 3.95 billion in 9 months FY '24 as compared to INR 2.94 billion in 9 months FY '23. Capital gains net of impairment and investments asset stood at INR 1.08 billion in quarter 3 FY '24 as against INR 1.52 billion in Q3 FY '23.

Our profit before tax grew by 20.6% at INR 18.57 billion in 9 months FY '24 as against INR 15.4 billion in 9 months FY '23, whereas PBT grew by 23.3% at INR 5.74 billion in Q3 FY '24 as against INR 4.65 billion in Q3 FY '23. Consequently, profit after tax grew by 8.3% at INR 13.99 billion in 9 months FY '24 as against INR 12.92 billion in 9 months FY '23. Excluding the impact of tax reversal provision in quarter 2 of FY '23, PAT grew by 20.2% in 9 months FY '24. PAT grew by 22.4% at INR 4.31 billion in Q3 FY '24, up from INR 3.53 billion in Q3 FY '23. Return on average equity was 17.1% in 9 months FY '24 as against 18.1% in 9 months FY '23. The return on equity, average equity for quarter 3 FY '24 was 15.3% as against 14.3% in Q3 FY '23. Solvency ratio was at 2.57x at December 31, 2023, as against 2.59x at September 30, 2023. This continued to be higher than the regulatory minimum of 1.5x.

As I conclude, I would like to reiterate, we continue to stay focused on driving profitable growth, sustainable value creation and safeguarding 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] We will proceed to the next question, which will be from the line of Shreya Shivani from CLSA.

[Shreya Shivani, analyst]

Congratulations on a good set of numbers. I have 2 questions. Sir, firstly, excluding all the calamities that we have seen in 9 months, your combined ratio has come at 102.3%, right? And we had earlier given a guidance to reach 102% by FY '25 end. So clearly, a much better growth in new vehicle sales has supported lower loss ratios this year. So can you help us understand what is your revised guidance for the next year or next 2 years on the combined ratio side, given that we know that you are currently investing in the health portfolio and on technology front, et cetera. So that will be the first question.

And the second question, sir, can you quantify the loss ratio trend for retail health and group health? And there have been some COVID cases in the southern part of the country. How many cases do you have? Is it something that we should be concerned about for the fourth quarter, for the next quarter? Just trying to understand if there's yet another thing that hits us in the next quarter.

[Sanjeev Mantri, executive]

Okay. I think -- thanks, Shreya. As far as the combined ratio guidance is concerned, then Gopal will share with you in detail the loss issues that you're seeking on the retail as well as the group health side. Clearly, we'll stick to the guideline of what we have mentioned that we will go to 102% over a period of time. In terms of revision, clearly, from an industry standpoint, again, we are seeing [indiscernible] well. But does this need to make us believe the guideline can go through a change at this point? We would say we hold to this. We want to see this trend holding up over next maybe a quarter or 2. And then we'll come back to the market if we believe there is a revision to be done on that.

In terms of retail and GHI, trending wise, yes, we have seen improvement over what we had seen over the last quarter. Gopal will share the numbers in details.

[Gopal Balachandran, executive]

Yes. Shreya, so I think -- so if you look at the -- this is the employer-employee or let's say the group health loss ratios. For quarter 3 of last year, that number was 98.9%. This year, quarter 3, that number stands at about 93.1%. On a 9-month basis, the -- again, the GHI loss ratios for last year was 95.9%. 9 months of the current year, that number is at 95.8%.

On retail indemnity, again, in the same order, Q3 last year was 68%. Q3 this year is at 66%. This is pretty much in line with the range that we have been talking about, which is in the range of between 65% to 70% is the threshold that we are comfortable with on the retail indemnity side. And on the 9-month basis, again, retail indemnity loss ratio last year was at 65.2%. This year, we are at about 65.6%. So that's the breakdown in terms of the loss ratio across different segments.

To your last point on COVID claims intimations, I think too early. At this point of time, we don't see any specific instances or any spikes that we get to see. Obviously, we will watch for the development, but nothing at this point of time for us to call out.

[Sanjeev Mantri, executive]

As of now, no cause of concern.

[Shreya Shivani, analyst]

Okay, sure. And the overall combined ratio guidance, I get it right, that you may come back to us after maybe a quarter or 2, if there's any change in the guidance. For now, it's 102% for FY '25?

[Sanjeev Mantri, executive]

Yes, yes. Right now it's 102%, We are not changing it. But as I said, seeing how the quarter 4 goes, we'll come back probably by the year-end.

[Operator]

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

[Sanketh Godha, analyst]

Sanjeev, we are seeing a little better trend in motor, especially in the month of November and December compared to the industry. So sir, just wanted to understand that our strategy with respect to motor has little changed, probably we are seeing a little growth coming back. Is it because of the pricing environment changing? Or we believe we will be more aggressive or more confident to do motor than what we were doing in the past. That's my first question.

And on similar lines, again in the third quarter, if I see, you seem to have grown health, retail health, especially at a lower rate compared to the industry. I mean despite doing investments, we thought that we will grow at least 1.2x to 1.3x of the industry. Your growth seems to be broadly lower than the industry -- marginally lower than industry. So sir, I just wanted to understand why the cautious stance being taken with respect on health? Or is it because of the competition on retail health? That's on growth.

And just on -- Gopal, the question is motor TP loss ratio. See, that number seems to be, again, very good at around 62% in third quarter of 65% in 9 months. So sir, typically, we tend to boost up the results in fourth quarter, the historical trend suggests so. So sir, is it a case that we will see a similar trend? Or you believe that 65% motor TP loss ratio reported for 9 months will sustain for the entire year? And similarly, if you can comment on the motor OD, too, whether this is the number that we are looking at 65%.

[Sanjeev Mantri, executive]

Okay. Fair. I will -- Gopal will cover the TP part, I'll cover the motor, what's the trend that we are seeing and the strategy going forward. Also, on the retail health in terms of the numbers, which are relatively subdued, which I also said in my initial comments and definitely would have wanted to grow faster than that.

First thing, on the motor, I think we continue to be a very competent and relevant player. We saw in the past also, and we've given that guidance that whenever we've seen that kind of a market share, we [indiscernible]. It was more cautious because the intensity, what we thought would get stabilized, did not happen. So we had taken a step back and let it flow the way it is. Now we have seen some of our key competitors who are ruling in have started putting a lot more method in the madness, and that has given us an opportunity.

That being said, quarter 3 typically has a tendency to have a lot more new sales in the season. And there, we do end up with the structure that we have, having a lot more to achieve as a team on motor overall on market share. But more importantly, a very critical trend, which I can highlight to all of you is that Y-o-Y, we had been losing a bit of market share. But for the month of December, we have gained a market share of 10.7% and we have 10.5% last year in December. So that trend is a critical one, and we are well placed in terms of what we believe if we see this environment operating [ in a funnel ], we will not participate in any crazy hunt, if that's what the market leads to. And we are to believe there'll be a bit more of semblance. And in that scenario, we will see ourselves exerting a lot more and further for in time to come. So that's what we have on motor trend broadly.

On the retail health, subdued number. It's not something which we are very worried, but yes, we would have loved to grow faster. We have taken certain calls in terms of sum insured, which category or portfolio is right because, again, if you know whatever health book that we write, it is for a lifetime visibility technically and we need to hold on to that customer. We had sort of early trends which got us concerned.

That being said, our new book has still grown at almost 25%. And we do believe that in time to come with the sort of investment that we have done with our human capital as well as the product profile, which will also happen over next couple of quarters from our side, we would be a potent force, and the mission that we have shared is firmly on track. These are all conscious calls which does not deter us in terms of where we stand.

Motor TP, I'll ask Gopal to answer in terms of the details that you had shared.

[Gopal Balachandran, executive]

So Sanketh, my -- I think our response will pretty much be on the lines is what I've been talking even in the past few earnings call. So the range within which motor OD loss ratios will operate, I think even last quarters, we've been talking about in the range of 60% to 65%. I think we pretty much stay on course in terms of that part of the range on the motor own damage side. That's largely because I think as an organization, we are kind of focusing a lot more insofar as the claims initiatives are concerned, whether it is in the context of the average claim size, et cetera, et cetera. And therefore, to that extent, I think the range that we are comfortable with on motor OD is in the range of 60% to 65%.

On motor third party, I think as we keep saying, again, quarterly numbers may not be the right way to look at it. But even on a 9-month basis, I think the number for us stands closer to about 65%. There you recollect, I think the range that we have talked about has been in the range of 65% to 70%, but that, again, would be a function of what kind of a risk selection that we do.

And the point that Sanjeev made, I think, clearly, as an organization, we are significantly focusing on much more granularization of data, risk selection and so on and so forth. And therefore, to that extent, the range that we would be kind of looking at operating would be on third-party side between 65% to 70%, which is why on balance, when you look at motor in the aggregate, that number should be in the range of between 65% to 67%, which if you look at the 9-month numbers, the motor on an aggregate basis, the loss ratio stands at about 65% for this year. So the range that we would be comfortable will be between 65% to 67% on an aggregate basis.

The only point I would say, Sanketh, is insofar as there is no specific trend line for us insofar as Q4 being -- seeing any form of abrasion, I think possibly what you're referring to is maybe couple of years back, this is, I think, financial year 2021, if I recollect it correct, I think there was certain Supreme Court judgments that have come through in that particular year. And that's the reason why not just for ICICI Lombard, even at an industry level, companies had to recalibrate their ultimate loss experiences and therefore, to that extent, one had to take some impact of strengthening of losses. But otherwise, it is not necessary that we do see any kind of an inch up insofar as third-party loss experiences are concerned so far as quarter 4, which you are referring to.

[Sanketh Godha, analyst]

Okay. No, no, because I saw a similar trend in fourth quarter FY '23, too. So that's the reason I was asking the question, that 65% number is sustainable, but you answered that you are looking at a broad number of 65% to 70% to -- for the motor TP loss ratio. That's what Sanjeev...

[Sanjeev Mantri, executive]

That's correct.

[Sanketh Godha, analyst]

Yes. Sanjeev, just to -- your comment on motor, just wanted to understand. You are saying that in market -- overall market competitive environment in motor OD, the relative madness has had come out and therefore, market is more convinced you than it was in the past. That's the conclusion I should make?

[Sanjeev Mantri, executive]

So I'll tell you, I think that will be a relatively sharper conclusion. But yes, we do see some bit of semblance overall, and the LR of the industry has gone down from 93% to 87%. And so if that is the indication here, there's an improvement. But still, if you ask from an overall standpoint, the industry is writing the motor portfolio at a reasonable triple digit of 118, 119. So there is a lot more that has to come off. And even the private sector is writing at 114, 115.

It's a long journey, but what I can tell you, Sanketh, is that where we stand, the lens through which we are looking at the market, we are reasonably confident of our practice. And we will be able to drive value for the organization in the current environment that is prevailing. But long-term trends have to manifest. You know that the industry numbers come with a lag. We are awaiting the 9-month numbers for the industry to get a sense, which we'll be able to give you closer to when the financial year gets closed for us. At that point of time, we can have a much more evolved discussion on this, Sanketh.

[Operator]

[Operator Instructions] The next question is from the line of Madhukar Ladha from Nuvama Wealth.

[Madhukar Ladha, analyst]

Congratulations for a good actually underwriting performance. Clearly, you're -- you seem to be achieving your guidance sooner than expected. So just a couple of questions on the motor side. So I wanted to understand how is the implementation of the entire loss reporting within 6 months' time period? How is that progressing? And what is our sort of expectation on that?

And related question on this is, is the industry in this -- sort of believing that this will get implemented? And as a result of that, the competitive intensity had been high? Or are they sort of looking because they believe that the ultimate loss ratios will be lower. So is that the correct way to think about it? Or is that the way some industry participants are thinking about it and acting in that way?

And second question on your investment yield, that seems to have dropped this quarter. So some understanding of what has actually played out there. So those 2 would be my questions.

[Sanjeev Mantri, executive]

Sure. So I'll let Gopal come in and I'll give my comments. Yes, Gopal. Go ahead. Yes.

[Gopal Balachandran, executive]

Yes. So Madhukar, I think on the 6 months' loss limitation, I think as we have been kind of indicating, that matter still is before the Supreme Court. And obviously, we will wait for, let's say, the verdict to come out. What we understand is I think most of the state seems to be in favor of getting the law of 6 months implemented. And therefore, to that extent, I think one would obviously wait and see how the final verdict plays through. But the direction that states want to take is clearly to kind of get a law of limitation in place.

Having said that, what could happen, let's assume for a moment that if it goes in favor of, let's say, in line with the 6-month law of limitation, again, the impact could vary between players in the market because at an aggregate level, for the market, obviously, there will be some reduction in frequency as we have been explaining consequent to reduction in possible frauds. So that's a positive insofar as the overall market is concerned.

Second, I think in the context of ICICI Lombard, obviously, we have been inflating reserves with an inflation assumption for ICICI Lombard at between 12% to 13%. This inflation assumption for the market may not be the same. And therefore, to that extent, whenever this will play out, the impact could be slightly more beneficial for companies which have been reasonable in their inflation estimations. And for us, as I said, ICICI Lombard has been inflating at 12%, 13%. Market, is they have been inflating at a slightly lower number, therefore, to that extent, the impact could be relatively moderate for those set of players. So hence, in that sense, I think it would obviously translate into an incremental business opportunity for us.

Having said that, this law of 6 months limitation will be applicable only on a prospective basis, which is effective from April 1, 2022. So hence, to that extent, is where you would be able to see, as I said, a relative benefit play out for us in the context of the market. The other thing, what could also happen as a flip side to this is, in case if finally, this law gets implemented, there is a possibility that next year or maybe in future, the regulator and the government will very closely watch for the need for any kind of a TP price increase.

While last 3, 4 years, again, we have not necessarily seen any kind of a meaningful price change on the third-party side. But given the fact that this 6 months law could lead to a positive development from an overall industry standpoint. We made the periods where we may not able to see further increases on the third-party pricing. But obviously, that's a development that we will again closely watch for insofar as the third-party 6 months law of limitation dynamics is concerned.

I'll quickly answer the second question of yours, and then maybe I'll give Sanjeev if you want to kind of add on. So on the investment yield, again, Madhukar, I think, as we have always said, our realized return is a function of what do we see as interest accruals. And what is it that we see as capital gains. For us, given the fact that we have been significantly, as we've been explaining even in the earlier earnings calls, the high interest rate regime is something that we have obviously taken advantage of.

And hence, to that extent, if you would have seen our yield to maturity on the overall book, that currently impacted December 31, stands at 7.31%. This number, if you recollect, maybe a couple of few quarters back, this number was less than 7% at about 6.92%. So hence, to that extent, we have actually been taking advantage of the higher interest rate regime, and that's kind of auguring well insofar as interest accruals are concerned, wherein you may possibly see in some quarters, possibly a decline in yield is consequent to, let's say, maybe relatively lower levels of capital gain. That's purely a function of what we believe are market opportunities for any gains to be realized.

We have generally not seen any instance where we have seen uniform levels of capital gains across quarters. So in fact, there, again, I would urge similar to the discussions that we've been having on the loss ratio side, the yield on the overall portfolio should be looked at again, ideally over on a financial basis, ideally over longer years, but definitely not on a quarter-on-quarter basis.

[Sanjeev Mantri, executive]

So okay. Just to add, Madhukar, in terms of the point that you had mentioned on TP, directionally, and we all will allude that even when we became part of Motor Vehicle Act, the adoption at the state level would have always gone through [indiscernible]. But if the intent is to make the overall consumer benefit, these things, in spite of the hiccups, I believe over a period of time, will get implemented. In a country like ours, it will always be a little more complex, but multiple decisions have been taken by the bodies. We remain positively cautious and see that this will flow in that direction over a period of time.

But one bigger thing which I want to add, Madhukar, is the way IIB has come up the stream and improved the quality of data sharing that can happen at the industry level. That part has been transformative and the level of accuracy and the real-time manner in which we can think, all of the industry will benefit and with the level of business that we do and that kind of an accuracy.

I mean you know that banking got transformed and bureau came into place and you could really figure out where what stands. And this data, once it gets created in the form, will also end up helping us figuring out fraud and so on and so forth. So the base work has got done. To me, that is also a big positive, which can benefit companies like us substantially to drive efficient acquisition in the market. Thank you, Madhukar.

[Madhukar Ladha, analyst]

Understood. Just 1 question on the investment book. What is the amount of capital gains this time around, if you could give that versus the last quarter?

[Gopal Balachandran, executive]

Simply, the number of capital gains for the quarter 3 was about INR 108 crores. That is in quarter 3 of this year as against INR 152 crores, which was the capital gains that we had in quarter 3 of the last financial year.

[Madhukar Ladha, analyst]

And last quarter, what was the number, sorry?

[Gopal Balachandran, executive]

Quarter 2 numbers of capital gains, that number was about INR 164 crores.

[Operator]

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

[Prayesh Jain, analyst]

Just a few questions. Firstly, Sanjeev, sir, could you elaborate on your strategy side you were talking more in initial opening remarks? Could you just elaborate on that new philosophy that you're talking about?

[Sanjeev Mantri, executive]

Yes. Okay. Fair enough. I'll do that. You have -- second question also you want to say now, which I can cover? Or we'll come back once I reply on this?

[Prayesh Jain, analyst]

No, sir. Actually, second question was more on motor business granularity as we've seen faster premium growth with respect to -- as compared to the vehicle growth and that's possibly because of certain factors like premiumization, share of EVs going higher, CNG share going higher, top models going higher or automated vehicles going higher. Any of these cohorts where you think that, particularly EVs where your experience would have been kind of much better than what you have expected earlier, and you see some price corrections out there? Or in with respect to drive as you use or the pilot projects that we were working on earlier, how is that mix evolving? I think some granularity on the motor business will help us kind of look forward into the future on this business.

And last question was on commission ratio, where how do you see the commission ratio kind of panning out this quarter, it was at 17% thereabout? And so how do you look at this ratio from a full year perspective in this year as well as years beyond that, yes.

[Sanjeev Mantri, executive]

Okay. Thanks, Prayesh. I think -- let me give you a quick perspective on One IL One team. I think as I also mentioned when I spoke earlier in my script, the fact that it's a core philosophy change. We've been in the business the last 22 years. And obviously, as an organization, we have created multiple center of excellences. And these departments have gone on to deliver a lot more for the organization than one could have thought at the inception level. But the time has come where we need to add an overarching level, see that we're able to drive value at a multiplier level for the organization.

To give you an example, right, we had value-added services, which was being driven by us as a company. We have our own patents, which are registered to manage risk. But these value-added services used to work more on a project basis with the entities. What we have mentioned is that we are getting this embedded with the organization at multiple departments on the commercial side to drive the impact.

Another part is on the data analytics side, the data engineers. We do have that particular department, which was running and quite effectively, but it was not embedded. They used to operate on a project basis. What we have done is that, we've gone ahead and got that department working with business teams to direct reporting in terms of making it work.

So there's a lot of synergy benefits that can be driven on this. At multiple counts, we would be driving and cross leveraging it. Our practice, as we have always mentioned, on the corporate side has been very extensive, but our ability to harness, to even procure retail business becomes a significant part of our strategy. It's not even cross-sell. It's actually all embedded solution. The bulk of the products that we deal with are naturally inclined towards strategic one, whether it's SME, on the commercial side or motor. Health is the only discretionary product that corporates indulge in. You will also see product launches in time to come, which would be harnessing this opportunity across the segment. We've got large presence, but the consolidated approach that was required.

Mind you, but the word of caution is it does not mean that the dissecting of the market and ensuring that the leverage on our distribution will get diluted at any point in time for us. So that's my 2 bit in terms of discussing One IL One team as a company.

Now coming on to the motor part of the strategy, as you see, we have seen a significant transformation. I'll just cover the EV part of business which you spoke about. From an overall industry penetration level, it has moved 9 months, the presentation was 3.5%. It's gone to almost 4.2% for us. We, as a company, have a very dominant share on the EV side. On the private car, which is the passenger car we are talking about, we have a market share of almost 18%. And on 2-wheeler, we have a market share of almost 28%. We are obviously bullish, and we do believe that over next couple of years, we will have the inflection point as the infrastructure, which is required to see this getting much more -- so 2 points. One, infrastructure and other is the price point, which makes it workable. We would continue to invest.

And loss ratio, yes, we do see that it's relatively better, but I would not rush to conclude that as yet because it's very early days. This will emanate over a period of time, but we'll stay invested because this is a category which can rule the market.

In terms of overall motor, clearly, quarter 3, new sales, which we spoke about and you've read those numbers, that we have seen a growth in private car of 30%, in 2-wheeler by almost 14%, much higher than what the industry has done. Again, multiple things. One, we are well equipped in terms of the new business. As and when that growth comes back, our ability to operate in a decisive manner is pretty much there existing, and we do believe that this should exhibit over next probably a quarter or so also. But we never expected the industry on the private car to grow at the level of almost 7%, 7.5% because the base for last year itself was high. And India has moved on to become the third largest manufacturer of overall motor vehicles which itself, I think, speaks about how the volumes are getting driven.

Another big change which has happened is the SUV cars have started dominating, which is the average ticket size in that. So you would also see that getting exhibited in our number as we speak about the motor growth that will come in. So overall, we remain positive in terms of driving our motor initiative as a team.

On the commission ratio, I'll ask Gopal to just quickly give you an update. We've been pretty much within the regulatory limits as prescribed, and quarter 3, since the new vehicles are there, the expense ratio tends to be elevated historically for the industry and also for us.

[Gopal Balachandran, executive]

So Prayesh, I think, again, in line with what we have been mentioning, even the earlier earnings call, I think a better metric to look at, as we keep saying, is combined ratios because there will always be businesses which could be high on LR and low on cost of acquisition and vice versa as well. So hence, to that extent, I think one would urge to continue to look at more the combined ratios of the company as a whole. Having said that, I think in line with what Sanjeev said, if you look at our expense of management numbers as a percentage of GWP, this number for the 9 months last year was at about 28.6%. For the 9 months of current year, this number stands at about 28.1%. So there has been some improvement in the overall expense of management number. But as I said, a better metric to look at is more the combined ratios for the company as a whole.

[Operator]

[Operator Instructions] Next question is from the line of Nidhesh from Investec.

[Nidhesh Jain, analyst]

Firstly, on the health insurance, we have been investing in that distribution for last almost 2 years. But still our growth has been broadly in line with industry as in the month of December we lagged the industry. So what are the aspirations there? And when do you think the growth pickup in the retail health insurance, I believe is there in our numbers?

[Sanjeev Mantri, executive]

Yes. I think a very valid question, Nidhesh. Again, as I was mentioning, given when I was talking earlier in the call, we also would have preferred growing faster. If you see our growth in quarter 1 was quite higher than the industry, but we have taken certain calls on the sum insured as well as the nature of new business that we want to procure. These are very finite definite calls. We are very much on track in terms of what we want to achieve.

Our new business side of this call has grown by almost 25% as a company. So if you ask me where we see real growth coming in this since these changes have been done over quarter 1 and quarter 2, you will see this playing out very clearly over next financial year. And what we've spoken with the market at probably 3 quarters back in terms of the growth, at that point, these calibrations that we have done because we felt health as a portfolio, which comes with lifetime renewability requires real-time calibration. So we choose to take that call at this point of time, so that the long-term value creation that we want for the organization does not get compromised.

But you will see our convergence as a team, not only in terms of growth but also product launches, which are still -- if you ask us on a score of 10, on product solutioning stack that we want to create on the health side, we would probably be 6.5 and thereabouts over 10 as a score. So we have that distance to be covered and that also will get done in the next couple of quarters. So we are very positive, and we do see good value creation coming from next financial year onwards.

[Nidhesh Jain, analyst]

So secondly, on the motor side, sir. Our profitability has improved quite well and our loss ratios are tracking, one of the best that we have seen. So why don't we paddle -- we push the paddle on the growth and start focusing on market share gains in that segment, given the profitability is quite good for us?

[Sanjeev Mantri, executive]

I think, Nidhesh, you have only answered the question in terms of a we were -- we stayed focused and we had some losses on market share, but we decided to stick the course and that's what we are doing at this point of time. Some of the other partners who were being aggressive have also pulled down. So it's a combination of the we sticking to the course. And as I have, also stating that December was the first month in which we have seen relatively better market share. In our mind, we do believe that quarter 4 should hold good for us as a team.

[Operator]

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

[Avinash Singh, analyst]

A couple of questions. The first one on commercial line, I mean fire, marine, engineering, if I look on a 9-month basis, the movement Y-o-Y in claims ratio is material. Now in terms of nat cat, it would have kind of played out maybe a bit higher this year, but not material. Now this question is that, is this sort of a claims ratio increase in the commercial line and outcome of any sort of a pricing deterioration at the industry level? Or is it also or largely due to the reinsurance price hike that industry has seen? So I mean some color on what is driving this commercial line loss ratio increase. And if the factors that I just mentioned, the pricing deterioration or reinsurance price hike, if they are largely done this year and should improve going forward next year? That's one.

Second, again, going on health. You have -- I mean overall growth is reasonably good. Growth is, of course, led by the pricing as well as some kind of volume growth. Yet the claims ratio at the aggregate level, of course, if you go segment by segment, there could be some difference there, but at an aggregate level, claims ratio is still inching up. Now is this an outcome of just the claims inflation or also claims frequency also sort of reflecting some kind of increase year-on-year? So 2 questions.

[Gopal Balachandran, executive]

Yes. So Avinash, I think on the first one on the commercial lines, pretty much in line with what you mentioned, which is primarily whatever you see as change in the cost ratios, whether it is for fire, engineering or some of the key commercial lines, the large part of the change in the loss experience is predominantly driven by the impact that we have seen on account of flood events. So -- and this year, unfortunately, if you would have seen, which is what we put out also as a part of the opening transcript. I think the aggregate impact that we have seen on account of various catastrophic events last year was about INR 28 crores.

This year, if you look at 9 months, we are already -- that number is at about INR 137 crores. A large part of it is, of course, some of the commercial lines. But maybe the recent Chennai floods, I would also say, we have also got a reasonably large number of claims that is coming on the retail side, which is more on the motor side of the business as well. But to stay within the commercial lines, I think the last quarter, the loss ratio change is predominantly driven by the impact that we have seen on account of the various flood events that we have seen and not because of any other reason.

In fact, the overall growth in the commercial lines, particularly on fire, has pretty much played out in line with what we have been speaking even in the earlier quarters, as in to say that the price drop consequent to the removal of the IIB rate has been broadly in that range of 5% to 7%. And which was largely offset, I would say, by the increase in the reinsurance rate that we had seen at the time of negotiating the program at the beginning of the year. So hence, to that extent, is where I think our -- the growth for the overall market has been largely muted in line with what we spoke even during the April call.

What will happen in the next year's reinsurance renewal program, I think -- maybe I think we will be able to come back with a much better insight when we announce numbers on a full year basis in April because that's the time when we would have largely concluded the reinsurance placement. But otherwise, insofar as the attritional losses are concerned, I think there is nothing other than the [ existence ] of the impact on catastrophic losses related numbers.

To your second point, on the health loss ratio, I think it's pretty much, which is why I think in response to one of the earlier questions that had come through is where we had kind of put out the breakdown of the loss ratios. So in that sense, there, if you clearly see I think the loss ratios are pretty much in line with the range that we are comfortable with, which is, just to kind of reiterate, group health loss ratios, we have generally spoken about it being in the range of 94%, 95%. That's the number at which we have ended even at the current 9-month numbers.

And retail health indemnity, I think the range that we have spoken about has been between 65% to 70%. If you would have looked at the 9-month numbers, again, they're pretty much in line with the range that we have spoken about. Of course, we do see inflation and, let's say, possibly at times increase in claim frequency, particularly, let's say, during quarter 2, largely driven by monsoons and other related seasonality. But that's something, again, like what I mentioned on motor, where we actively engage in kind of driving the PPN initiatives. On the motor side, for example, we would obviously want to drive a large part of the motor accidents to a preferred network of garages.

The same thought process is what we have even on the health side, which is to kind of -- we have a separate network management team, which significantly looks at focusing on driving a lot more traffic to a preferred network of hospitals, where we are not only able to guarantee so far as the policyholders are concerned quality of care, which is very, very important for us, and more importantly, an outcome, which is, let's say, a possible reduction in the average claims size.

And thereby which is how we are able to kind of manage the possible change that we see on inflation/frequency. But on an overall basis, I think we are comfortable at the range at which the loss experience is playing out.

[Operator]

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

[Supratim Dutta, analyst]

My first question is on the new strategy of One IL One team. So could you help me understand what would be the impact on the top line from this strategy? And what would be the -- would this also have a cost impact in the form of cost savings? That's my first question.

My second question is on the reinsurance. So globally, if we see the reinsurance rates this year at 1st January had gone up somewhere between 30% to 50%, what are we expecting here in India given CY '23 so on, number of nat cat events, which were higher than what we had seen in CY '22. So that's my second question.

And lastly, I would just like to understand, currently now that the growth has returned on the motor side, what is the market share that you have now within the private car segment or the 2-wheeler segment and the commercial vehicle segment? If you could go through with that, that would be helpful.

[Sanjeev Mantri, executive]

Okay, sure. So on the One IL One team part, in terms of the top line as well as the cost, I think it will get [indiscernible]. What Gopal said, we combined ratio and what we are able to deliver as a team. We have taken certain initiations in terms of what we have done structurally. It will be early days for us to quantify anything of that to the market. You will see that getting exhibited in time to come. We believe that we'd rather do it then announce that this is what we believe will get transpired.

But clearly, what I can assure you is we do believe there is a kicker available on the top line as well as bottom line on account of what we are pursuing as a team. So that's where it is. And the reinsurance part, I'll ask Gopal to just give an update. We don't expect the [ reinsurance numbers ]. We do have a guideline where we say 5% to 7%, 7.5% thereabout is what we expect to come in, but it will all get probably called out in specific over quarter 4. Gopal?

[Gopal Balachandran, executive]

Yes, yes. So I think just to kind of -- Supratim, I think as I said, so I think we are in the midst of the negotiations insofar as renewing the reinsurance program is concerned. And as I mentioned, I think we will be able to give you much better insight when we kind of announce numbers for the April call is when we would have stitched in the reinsurance program and the rates for the next year. But the initial indication seems to kind of unlike last year where we have seen a significant increase in the cost of reinsurance for protecting the net retention or let's say, the actual cost that we are seeing for protecting catastrophic event-related losses.

Our sense is, obviously, the hike may not be as much as what we had seen last year. Exact numbers, I think, as I said, I will come -- we will be able to come back and give you much better clarity when we announce numbers in April. That's on the reinsurance side.

To your point, on market share within, let's say, the new market share for private car and 2-wheelers. Private car, we have a market share of roughly about 12%, around that range. And on 2-wheelers, the new market share has been currently in the range of about 22%. This, of course, is slightly lower than what we would have normally had. I mean in the past, maybe our market share could -- on the private car side would have been higher by almost about 3%, 4%. And even on 2-wheeler, almost at a similar level. I mean it would have been -- we have always been saying that on new 2-wheelers, 1 in 4 2-wheeler sales is a policy of ICICI Lombard. So to that extent, this is pretty much in line with what we have seen over the last 2 years where we have lost some market share.

But as Sanjeev indicated, I think the momentum for us, as we speak, looks to be very, very strong and positive. And which is why if you look at some of the quarter 3 or month of December numbers, the head start that we're getting into in Q4 and thereafter seems to be very, very positive for us. And that's what we are very optimistic. And hence, to that extent, even in the earlier earnings call, if you recollect what we had said was motor we should see on an aggregate basis, growth coming back in line with the market. The early trend seems to indicate that. In fact, for the month of December, just to reiterate, we have actually had an outperformance relative to the industry growth of 8.8%.

[Operator]

Ladies and gentlemen, due to paucity of time, we will now take the last question from the line of Ashish Sharma from ENAM Asset Management Company.

[Ashish Sharma, analyst]

Just 1 question on -- similarly on the combined ratio, given that we are trending better than in terms of improvement in combined ratio. So can -- I mean if -- as you mentioned, that will take another quarter or so before you would want to change the guidance. But just wondering now, is there a possibility now that the business can operate at a combined ratio of 100% or below? I mean given that we are seeing some sort of a...

[Sanjeev Mantri, executive]

So I think a fair question, Ashish, from your perspective. But as things stand, once we'll discuss this thoroughly by next quarter as to where we are still because we still want the overall trend coming out in a consolidated. We don't want to jump the gun while the early signs do look better for us. But this sort of opportunity that we have as a company, we will continue to invest. So I would be very honest that size investment, we can be where we are. But -- and the industry combined overall is still at 112%. So there are structural changes and my firm belief is, which I can share with you, we would love to see industry itself improving in a significant way because today, well, industry where we are able to perform [ ahead ].

If the whole industry improves structurally, I don't see any reason why ICICI Lombard can drive far better benefit out of it. So we are operating both at industry level as well as the company level to make an impact. But for a company like us and the opportunity, which I said in the opening remarks, again, is significant. So we would definitely use some percentage of what comes our way to reinvest to ensure that we are future ready in terms of the opportunity that comes. We would not jump the gun to call out and say 100 is what it is. It will be a mix of things, hence we'll continue to see more investment from us because we have reasonable competition as well as opportunity being made available to us.

And similarly, on the retail space, we'll continue to do what is required to harness our own ambition of where we want to be. So with all that in mind, I don't want to close out simply, that is what it would be, but let's discuss this when we are there on the April in the call.

[Operator]

Ladies and gentlemen, due to paucity of time, that would be the last question for today. I now hand the conference over to Mr. Sanjeev Mantri for closing comments. Over to you, sir.

[Sanjeev Mantri, executive]

I think -- thanks so much. I think the call has gone beyond the distance, but I absolutely enjoyed interacting with each one of you and look forward to catching up with each one of you in time to come. We stay positive, and we do believe that we have a great set of colleagues operating in this segment with very, very extensive experience, and we would definitely do what is required to add further value to the company in terms of the industry which gives us tremendous opportunity. Thank you so much, and have a great 2024, and see you soon.

[Operator]

Thank you. 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.