ICICI Lombard General Insurance Company Ltd

NSE:ICICIGI

Earnings Call Transcript 2022-Q4

[Operator]

Good evening, ladies and gentlemen. A very warm welcome to ICICI Lombard General Insurance Company Limited's Q4 and FY '22 Earnings Conference Call. From the senior management, we have with us today Mr. Bhargav Dasgupta, MD and CEO of the company; Mr. Gopal Balachandran, CFO and CRO; Mr. Sanjeev Mantri, Executive Director, Retail; and Mr. Alok Agarwal, Executive Director, Wholesale.

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

I now hand the conference over to Mr. Bhargav Dasgupta, MD and CEO, ICICI Lombard General Insurance Limited. Thank you, and over to you, sir.

[Bhargav Dasgupta, executive]

Thank you, Nirav. Good evening to each one of you, and thank you for joining the earnings conference call of ICICI Lombard General Insurance Company Limited for Q4 FY '22 and for the full year '22. 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 the year ended March 31, 2022.

The industry registered a GDPI growth of 11.1% for FY '22. As per public disclosures, the combined ratio of the industry was 119.2% for 9 months FY '22 as compared to 110.4% for 9 months FY '21, and the industry reported a loss of INR 4.05 billion as against profit after tax of INR 55.6 billion for 9 months FY '22 -- '21. Further, the overall combined ratio for the private multiline general insurance was 112 in 9 months FY '22 as compared to 104.6 in 9 months FY 2021. The industry's solvency at 9 months FY '22 were worsened to 1.71x as against 2.07x at 9 months of FY '21.

So moving to the quarter under review, the industry delivered a mixed performance. As for the data published by [ CM ], the new vehicle sales witnessed tepid growth of private car segment on the back of supply chain challenges. The 2-wheeler segment remained far from recovery, while the commercial vehicle segment has shown growth supported by underlying demand.

Health insurance, on the other hand, contributed significantly to the overall industry growth in line with the expectation, and is now the largest contributing segment to the GDPI of the industry. The commercial line witnessed robust growth in sync with current market environment.

Coming to the business impact for us, the company has grown in line with the market growth of 12.7%. This is excluding crop and [ marine ] as against the lower growth that we witnessed till 9 months of FY '22. Within the quarter, the growth momentum has increased each month, and the company has significantly outgrown the market in the month of March 2022.

Coming to the growth for key segments during the quarter. For motor, the company has grown faster than the industry, and we have now attained market leadership in this segment for the year. Our investment in the retail health side has started to show results and has resulted in our agency channel premium growth of 29.5% for the quarter.

As indicated in our previous calls, of the 1,000 retail health agency managers to be added to our employee base, we have now onboarded 750 of them during this fiscal, and the balance 250 offers have been made. We expect the growth to accelerate in the next few quarters as the sales force starts getting productive.

The corporate channels, including bancassurance, is back in the black with overall growth of 19.4%. Within this, ICICI Bank distribution grew by 24.9%, primarily driven by helping [indiscernible] SME and motor business and other distribution partners acquired through the integration grew 15.9% during the same period.

Our business sourced through our website grew by 20%. Within this, our health business grew by 23%; travel grew by 130% and motor grew by 10%. Business sourced through strategic alliance partners in the digital ecosystem grew by 19.2%. Overall, our digital solutions has enabled us to increase our digital revenues to INR 7.74 billion for the current year, which amounts to 4.3% of our overall GDPI. As for the commercial lines are concerned, we experienced robust growth, driven by 17.8% growth in the SME segment.

Let me now give you an update on some of our other key initiatives. On the integration, I'm very happy to share that as we speak, ICICI Lombard stands as the second largest nonlife insurer in India. Exactly as envisioned while evaluating the scheme as a potential transaction, the integration enabled us to strengthen our market leadership, augment and further strengthen our diverse distribution channels. The revenue and operating -- operational synergy plans are on track, and Gopal will talk about this in detail in his segment.

Our IL TakeCare app has surpassed 1.3 million downloads with successful submission of over 130,000 claims and over 70,000 teleconsultation requests. The recently added feature, face scan, helps users to keep a track of vitals such as blood pressure, heart rate, respiration rate, et cetera, all without any additional devices and from the comfort and safety of one's home. IL TakeCare is built to be user-friendly and a continuous engagement platform, which is increasing our ability to cross-sell.

We are also pleased to share with you that we are the first large insurer to move our entire core systems onto the cloud this year. In our data center, we had about 110 applications across 600 servers and around 1,000 terabytes of data. Moving our complete setup onto cloud has given us some immediate benefits, including stability, availability and scalability.

As such, some of the investments that we have made during the year in distribution and technology is bearing fruit, and we expect to see momentum and growth as we head into the next financial year. We intend to continue with our expansion across distribution, digital technology and claim services. Towards this, we have planned additional investments in the range of INR 1 billion to INR 1.5 billion during this year -- during the coming year.

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

[Gopal Balachandran, executive]

Thanks, Bhargav, and good evening to each one of you. I will now give you a brief overview of the financial performance of the company for quarter 4 and FY 2022. 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 have 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 pertained to stand-alone ICICI Lombard and hence, are not comparable.

The company has enhanced disclosure requirement of reserving triangles by giving separate reserving triangles for motor third-party and nonmotor third-party lines of businesses. This is in accordance with the regulatory guidelines on public disclosures, which is applicable to all the players in the market. You may refer to Slide #29 and 30 of the investor presentation under reserving triangle disclosures.

Our gross direct premium income of the company was at INR 179.77 billion in FY 2022 as against INR 140.03 billion in FY 2021. The industry reported a double-digit growth of 11.1% 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 27.5 billion in FY '22 as against INR 21.58 billion in FY '21. As indicated in our results presentation, the overall GDPI of our property and casualty segment was INR 50.24 billion in FY '22 as against INR 39.29 billion in FY '21.

On the retail side of business, GDPI of the motor segment was at INR 82.8 billion in FY '22 as against INR 70.2 billion in FY 2021. 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, which include the point-of-sale, has increased to 88,539 as on March 31, 2022 from 81,969 as on December 31, 2021.

The advanced premium numbers was INR 33.68 billion as at March 31, 2022, as against INR 34.59 billion as at 31st December 2021. Resultantly, combined ratio was 108.8% in FY '22 as against 99.8% in FY '21 and 111% in 9 months FY 2022. Combined ratio was 103.2% in quarter 4 FY '22 as against 101.8% in quarter 4 FY '21, and 104.5% in quarter 3 FY '22.

Our investment assets rose to INR 387.86 billion at March 31, 2022, from INR 374.54 billion at December 31, 2021. Our investment leverage net of borrowings was 4.23x at March 31, 2022, compared to 4.23x at December 31, 2021. Investment income was at INR 30 billion in FY '22 as against INR 21.96 billion in FY '21. On a quarterly basis, investment income was INR 7.06 billion in quarter 4 FY '22 as against INR 5.37 billion in quarter 4 FY '21. Our capital gains was at INR 7.38 billion in FY '22 as against INR 3.59 billion in FY 2021. Capital gains for quarter 4 FY '22 was at INR 1.36 billion as against INR 0.66 billion in quarter 4 FY '21.

The successful integration of the demerged business of Bharti AXA into the company has led to optimization of our organizational structure, rationalization of offices, efficiencies in claim settlement practices and technology applications. This will result in an annualized synergy benefits of INR 2 billion, of which INR 0.7 billion has been realized in FY 2022. Our profit before tax was INR 16.84 billion in FY '22 as against INR 19.54 billion in FY '21, whereas PBT was INR 4.1 billion in quarter 4 FY '22 as against INR 4.5 billion in quarter 4 FY '21.

As explained above, the company has seen higher growth momentum in Q4 FY '22, and within that, in the month of March 2022. Due to the current accounting norms, this results in upfronting of sourcing costs, whereas the benefit of earned premium will be realized over the policy period. Consequently, profit after tax was INR 12.71 billion in FY '22 as against INR 14.73 billion in FY '21, whereas profit after tax stood at INR 3.13 billion in Q4 FY '22 as against INR 3.46 billion in Q4 FY '21.

The Board of Directors of the company has proposed a final dividend of INR 5 per share for FY 2022. The payment is, however, subject to approval of shareholders in the ensuing Annual General Meeting of the company. The overall dividend for FY '22 including the proposed final dividend is INR 9 per share.

Return on average equity was 14.7% in FY '22 as against 21.7% in FY '21. The return on equity for Q4 FY '22 was 14% as against 18.8% in Q4 FY '21. Solvency ratio was at 2.46x at March 31, 2022, as against 2.45x at December 31, 2021, which 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 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 be happy to take any specific questions that you may have. Thank you.

[Operator]

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

[Shreya Shivani, analyst]

Sir, a couple of questions I had. I'll probably just take 2 and then get back in the queue. First one is on the TP high grade that was announced and what is the -- what is your feedback on how comfortable are you with the kind of hike that the regulator have to post? And if you can help us get to an idea in spite of the hike, I think given that the car -- underlying car sales is still weak, if you can help us understand how much proportion of your motor CP book is private cars. That would be the first question.

Second is on your -- so just looking at your March '22 data, the monthly data. So the trend in your motor TP book was quite strong, and it was stronger than the industry, for that matter. So if you can give me -- if you can help us understand that.

And lastly, on the loss ratio, so fire, it has come down quite dramatically in this quarter. So if you can help us understand that, that would be the question.

[Bhargav Dasgupta, executive]

Thanks, Shivani. So let me take the questions and give the answer in the same sequence. So if you look at the TP rate hike, it's different across different segments, but the long-term TP rate hike is a bit higher. Overall, at a portfolio level for the industry, its weighted average increase comes to roughly over 3-odd-percent, plus/minus.

Honestly speaking, given the general inflation that we see, we would have liked to see slightly higher rates in certain categories. In certain categories, we are fine with the rate hike that has been given. So in aggregate, maybe a little bit higher would have been appropriate is our view on this.

When is it expected? As of now, the understanding is that it will come around May. So that's where we are on the TP hike. In terms of the mix, I'll ask Gopal to answer the mix point, on the private car.

[Gopal Balachandran, executive]

Yes. So sure, as you can see, so far as we have given on this slide the split of OD and TP, which is roughly about INR 40.68 billion is own damage and about INR 42.12 billion is third-party. Within that INR 42.12 billion, private car third-party will be about INR 13.09 billion.

[Bhargav Dasgupta, executive]

Coming back to your question on growth. I think what's happened as we've been kind of explaining for the last few quarters is that we took some calibrate call on kind of readjusting our portfolios away from certain private car segments given the pricing competition that we saw in the private car and the [indiscernible] and increasing on the CV side, again, very calibrated, very selective calls, based on ground level insights, plus some experimentation that we've been doing for the last 3 years to figure out if some of those books are going to be better risk for us.

When in retail, when you cut down, you cut -- the number goes away immediately, but to build up, it takes some time. So on the commercial side, the growth momentum has now picked up. And what we've been kind of indicating is that if you look at our overall portfolio mix, unlike the market where our total motor book, roughly 45% would be commercial vehicle for us, that was in the teens, maybe 15% to 17%. That, as we've been saying, that should go to roughly in the mid-20s. So that journey has now started. We will have to see if we can maintain the momentum of growth of March, but clearly, the increase in the market share of CV is something that we expect going ahead.

[Gopal Balachandran, executive]

And your last question on fire loss ratio share. Again, I think that's 1 segment where we keep talking about saying that quarterly loss ratio may not necessarily be reflective of the underlying outcome of the performance. The better number to look at will be more, I would say, financial year numbers.

In fact, within that, I mean there could be years where because of, let's say, various large losses or catastrophic years, in fact, the loss ratio of that particular, this segment could get impacted. So hence, quarterly numbers may not necessarily kind of reflect, as I said, the underlying outcome. Look at more the annual numbers for the fire part of the business.

[Operator]

The next question is from the line of Abhishek Saraf from Jefferies.

[Abhishek Saraf, analyst]

So I just had 2 follow-on questions on the earlier question asked. So when you mentioned that in the CV, we are looking at a higher mix in the -- what is giving us confidence in terms of maintaining or continuing the loss ratios in that? If you can just give us a few more details in the kind of experiments that you have run and where are we are deriving this confidence from?

Secondly, if you can help me understand, I believe that we have taken hikes in motor OD segment. So what would be the average quantum of hike that we would have taken? And which kind of car segment? And is it across the board that we are taking it, in the new -- or the sequence -- in the same that for new cars? Or is it possible for new and old cars?

I have 2 more questions after this. We'll just after -- if you answer this, I'll follow up.

[Bhargav Dasgupta, executive]

Thanks, Abhishek. So in terms of the [indiscernible], I think we've been talking about what we've -- the way we've handled this. Again, if you again reiterate the point, it is not as if we believe the whole CV portfolio is [indiscernible] viable or sustainable or profitable. If you look at the overall industry mix, CV will be, as I said, between 40% to 50%. We are not talking about going anywhere near that number.

Now what we've been doing for the last 3 years, again, as we've said, as we talked about this. is that based on ground level insights, based on some changes that we are seeing both at in certain micro segments, certain markets, based on certain usage patterns or accident patterns that are changing in certain states or even some amount of the regulatory and the compliance standards in some of these markets, we have been identifying some segments that we believe are viable today than what they were in the past.

And what we've been doing as a company is that we've been taking small bets to see, writing small amounts of business, reserving at a level where we believe it is very, very conservative, but allowing the team to drive some of those businesses to see what is the experience that we have over the next 2 to 3 years. Some of those experiments have proved to be in line with our expectations, so those are areas where we are scaling up businesses.

So that's the confidence that we are getting in terms of the segment of business. Now in terms of -- and the approach that we are taking is not just a loss ratio -- [indiscernible] loss ratio, you look at the company ratio in terms of sourcing costs and loss ratio together, and wherever there is more viability, that's where we are taking those costs. In terms of private car, the increase is reasonably across both. There are 1 or 2 OEMs which haven't agreed. We are discussing, but most of the areas, we've taken price increases.

[Abhishek Saraf, analyst]

Just if you can help us understand if you can share the quantum of hikes on an average that we would have taken?

[Bhargav Dasgupta, executive]

It'll be single digitation. It's not as if you've taken a huge hike. It will be a single-digit hike.

[Abhishek Saraf, analyst]

Okay. Okay. That's very helpful. Secondly, on this move that in the calamity losses, our share of losses have actually gone up in this year. So is it only because of integration with Bharti AXA? Or is there more to it? So if you can help me understand, is our share of premium also has gone up proportionately in line with the losses as well?

[Bhargav Dasgupta, executive]

Yes. So this was largely the Cyclone Tauktae that you're talking about. I mean, if you look at the -- if you look at the last 10, 12 cats, our share of loss has been significantly lower than our normal market share. In Tauktae, we had 2 of our corporate exposures that got hit. So it was kind of an unfortunate concentrated event, not as if there was a large impact across board.

So that's why we have an impact in the [indiscernible] because given those cases, you end up in the western market where we have a slightly higher share than our natural market share. So when you look at a, let's say, last year that we've got, relative to the market share in these markets, it's again lower.

[Operator]

The next question is from the line of Madhukar Ladha from Elara Capital.

[Madhukar Ladha, analyst]

Sir, your OD loss ratios for ODI and TP, and specialty TP actually, for Q4 has risen quite materially. And if you look at the quarter-by-quarter trend, there is quite a bit of volatility. Now when we look into the future, how should we be thinking about it? Should we be thinking more in terms of exit rate will be more appropriate for next year? Or the full year rate as a base? And so what sort of -- how do you sort of project these things? Or how do you look at it?

[Gopal Balachandran, executive]

So Madhukar, so if you look at on the motor own damage segment, I think to my mind, when you look at more the exit rates for quarter 4 will be largely reflective of the trend line that one could potentially see so far as the way forward is concerned. And the reason why we are saying is in line with what we have discussed even in our earlier calls, the thought process is to try and see how we can get significantly into writing businesses which will be relatively driven insofar as more on, let's say, high loss ratios and relatively lower cost of sourcing led businesses.

That's the thought process that we have in terms of increasingly building the book, and that's the reason why I would say quarter 4 on the motor own damage is largely reflective of what one could experience, at least in so far as the trend line for the future is concerned.

Having said that, obviously, we continue to kind of micro segment the portfolio to see which are the segments which we want to select and underwrite in terms of building the overall book. But the thought process is in line with, as I said, build a book which is relatively high [indiscernible] and low expense insofar as cost of sourcing is concerned.

On the third-party portfolio, I think -- maybe I think what you could -- the full year numbers are largely representative of what one could experience insofar as the way forward is concerned. Quarter 4, specifically, I think in line with what we had done in quarter 4 of last year, if you recollect, I think there were those Supreme Court judgments which had come through.

This is which we had to kind of revisit all the outstanding cases that we had as of the previous year, and we had to kind of strengthen the reserving requirements, assuming the fact that we could expect an increase in average claim payout consequent to those judgments on the outstanding cases as well.

On the similar lines, I think what we have experienced over the last couple of years, which is, for understandable reasons, that the courts in India, which is predominantly where you get bulk of the motor third-party orders being received, that has not been functioning at full force. While we have started to see particularly maybe quarter 4, we have already seen things coming back, but at least, over the last, I would say, 3 to 6 quarters, the courts have not necessarily been functioning at full swing.

What this does is, obviously, it kind of starts to have an impact insofar as a trend line of settlements or closures of cases of third-party that would have done related to the historical past, which would mean, obviously, given the fact that there has been some lag insofar as the extent of closures that we would have normally seen, which could happen in the future period, we obviously have to kind of factor in for maybe building an element of further inflation assumption as a part of our reserving book, particularly the element of interest that we'll have to add insofar as over reserving circumstances. And hence, the trend line for Q4 on the third-party book will be more representative of what one could expect. So for us, future trend line is concerned. So that's what I would...

[Madhukar Ladha, analyst]

Q4, even for TP?

[Gopal Balachandran, executive]

Yes. And the other, I think, one should also be mindful, Madhukar, is I think given the fact that we also strengthened the reserving book of the motor third-party pool, as you would have seen in terms of the enhanced disclosures, this element of increased inflation that we'll build in as a part of the reserve has obviously led -- insofar as the erstwhile motor pool book is concerned, we have obviously strengthened the reserves. However, on an aggregate basis, we have motor third-party, which is actually reflecting a small amount of reserve releases.

[Bhargav Dasgupta, executive]

So just to add to what Gopal said, so effectively what we are looking at is the combined rather than the loss ratio when we are selecting business. And the attempt is to bring the combined more under control, not just look at the loss ratio.

[Madhukar Ladha, analyst]

Right. I'm guessing the competitive intensity is driving us in this direction and that's why we're seeing slightly probably lower commission ratio and expense ratios in 4Q. Would that be right to say? And what would be like the trend for FY '22?

[Bhargav Dasgupta, executive]

More than the [indiscernible] competitor intensity is overall driving up the overall combined for motor. But if you look at from a pure ROE perspective, businesses which are high in LR but low expense ratio are better businesses because the expense is upfront. LR comes over the period.

[Madhukar Ladha, analyst]

And our expectation on how like the integration with Bharti and what should be our expense ratios? And what sort of expense ratio should we expect in FY '22, '24? Any guidance on that?

[Bhargav Dasgupta, executive]

So in terms of synergy numbers, Gopal has explained.

[Gopal Balachandran, executive]

It's very difficult to put out a number, Madhukar. Because I think on the one side, as we have put out what will be the annualized synergy numbers which we put out as a part of the opening remarks, which is about [indiscernible].

Having said that, I think what we will continue to do, when we look at, let's say, FY '23 or maybe the year thereafter, we would want to continue to kind of stay invested in building some of our expansion plans, particularly what we have spoken about on, let's say, on the health agency distribution side, we want to continue to stay invested on building our digital opportunities that we see, including the investments in technology and claims service.

So to some extent, I think largely, what we would end up is, obviously, we would -- we are pretty much on track in order to kind of realize the benefits of synergy. But at the same time, we would want to kind of use some of these to kind of increase the opportunity that we see on account of the renewed growth momentum that we have seen for ourselves.

[Bhargav Dasgupta, executive]

So if you remember what we had discussed when we did the transaction, we have said that for a couple of years, our combined ratio will be irrigated and then it will start coming down. If you see our combined ratio for this quarter, it's, relative to the last 2 quarters, it's already trending down. So that is an ongoing effort that we will make to keep the combined ratio under control.

Now we also said that as a strategy, rather than bringing combined down to 100% and delivering a 20% ROE, we want to keep on investing and grow the book a bit faster. Consequently, the ROE rate have come down to the high teens. But directionally, the improvement in combined, that should continue.

[Madhukar Ladha, analyst]

Understood. Understood. And final question. I was reading the notes to accounts. There is a INR 65 crore payment of GST are under protest and an additional agreement of INR 14 crores. Can you explain that? And what is this the result of? And what are the implication...

[Gopal Balachandran, executive]

Yes. So these are a couple of matters that as what we have put out as a part of that disclosure on offshore accounts. As an insurance, we're entitled to claim input credit insofar as settlement of motor claims-related expenses are concerned, both with respect to the arrangement that we have whether it's cashless or whether it's on a reimbursement basis. Insofar as the GST department is concerned, I think they seem to kind of allege that possibly we are not entitled to claim certain inputs with respect to some of those motor claims-related expenses. So that's one.

The second is [indiscernible] with respect to realization of a part of claim settlement again in the context of motor portfolio, we do kind of end up having certain elements of salvages. The view of the department is that on that particular amount of salvage amount that we end up realizing, there should be an element of GST applicability on the extent of realizations that we have made.

We have consulted the expert opinions as well as senior counsels on this in terms of the stand that the company has taken, both with respect to the eligibility of input credit on motor claims as well as whether there will be any element of applicability of GST insofar as salvage-related realizations are concerned. The stand of the company is pretty much well found and it is legally correct.

So at this point of time, obviously, that's the reason why the amount that of INR 65 crores is paid under protest and another INR 14 crores is something that we will -- we are committed to pay. At appropriate point of time, in due course, we will be filing a refund for getting these amounts back. But at this point of time, these amounts are largely kind of paid under protest.

What we clearly understand is obviously, this is something which is applicable more at an industry level. And hence, to that extent, collectively, we will -- the stand of the industry is something that we will work with and ensure that we are able to get the rightful amount that is due back to us.

[Madhukar Ladha, analyst]

Understood. Understood. So this is an industry phenomenon for the [indiscernible] lenders.

[Bhargav Dasgupta, executive]

Absolutely. This is not specific to ICICI Lombard. This -- both the issues are at an industry level applicable to almost all the players in the market.

[Operator]

[Operator Instructions] The next question is from the line of Prayesh Jain from Motilal Oswal Financial Service.

[Prayesh Jain, analyst]

Firstly, could you talk about the health claim ratios on the retail side, in particular on the [indiscernible]? How has this fared in Q4? And are they back to pre-COVID levels? Or there are certain [indiscernible] which are still ahead with respect to COVID? And how do you see this going ahead? I'll ask my second question after that.

[Bhargav Dasgupta, executive]

So if you look at the split of the health loss ratios, which has been given in the aggregate on the presentation deck, the breakup of that in terms of the employer/employee portfolio or, let's say, the corporate book that number for quarter 3 was 93.1%. That number for quarter 4 is 95.3%. And on the retail indemnity book, the loss ratios in quarter 3 was about 65.7%. And for quarter 4, that number stands at about 57.6%.

[Prayesh Jain, analyst]

So my question was what it has -- and the retail definitely has come up. And this is more of a normalized level now, and you can presume it to be in a similar trajectory going onwards, right?

[Bhargav Dasgupta, executive]

So when you look at, for example, on the corporate -- or let's say, the employer/employee book, we have always spoken about saying that it typically, particularly the large corporations who kind of operate at a loss ratio which could be ranging anywhere between 95% to 100%, anywhere between that. And insofar as the relatively small and mid-corporate book is concerned, they generally tend to kind of operate on, again, the employer/employee part at anywhere between 90% to 95%. Which is why, on a blended basis, I think one generally gets to see the loss ratios which are relatively around those 95% threshold.

However, the cost of acquisition with respect to these businesses, particularly the large corporate, tends to be more direct. And hence, to that extent, on an aggregate basis on a combined ratio book, it becomes viable for us to underwrite. Having said that, I think over the last 3 quarters, we have been kind of talking through particularly on the employer/employee book, given the fact that we have seen, particularly this year, the impact of COVID losses playing out.

We have been affecting clearly price increases insofar as the renewal of the portfolio is concerned. While we had indicated a price increase in the range of 15% to 20% during our quarter 1 earnings call, but subsequently, as and when the actual renewals have happened, we have been able to [indiscernible] price realizations, which have been slightly higher than that. And even with the increased price realization, we have been able to clearly hold on to in fact more than 90% of the renewals insofar as the employer/employee or let corporate book is concerned.

On the retail side, again, the thought process is pretty much similar. We continue to keep looking at the portfolio outcome in terms of what is the desired loss ratio of the book. In general, I think, particularly the indemnity book, I mean, depending on the kind of book that you write, the loss ratios could range anywhere between, I would say, 60% to 70% on a steady state. Whereas, the relative cost of acquisition in the initial period would tend to be relatively higher given the investments that we are making on building distribution. So that's what I would say insofar as steady state loss experiences are concerned, both on the corporate health or let's say the retail indemnity book.

[Prayesh Jain, analyst]

Sir, the second question is more broad level and a slightly longer term as well. So if you look at the efforts that players like you all have taken with regards to tech inability in premium processes on the health side or on the motor side, several initiatives have been taken.

So do you see that this benefit -- the benefits of these efforts will get more reflected in the pricing coming down? Or it will translate into more combined ratio improvement? So what will be the strategy that IL will be adopting in order to take benefits of these [indiscernible]?

[Bhargav Dasgupta, executive]

So in terms of our long-term thought process, this is just -- what you're talking about is definitely correct, but it's only one element of what we are -- how we are building this. So if you look at, for example, on our claims. On the health side, we have launched that AI-driven authorization, the ML engine, for settling claims for corporates. That's currently running at exchange more than 60%. We believe that number will keep increasing as we go along.

But the approach is across multiple levels. So if you think about it, the entire approach with IL TakeCare was to look at an engagement and a continuum of care approach with corporates. And we believe there are multiple advantages of that beyond cross-sell, upsell engagement, renewals, et cetera. Even at the time of claims, we believe in the longer term, we will see some benefits. So we are already beginning to see that more than 40% of our corporate plan claims are coming -- even reimbursement cases are coming through that app.

We are -- what we've seen in the past is when we have moved the entire claim service in-house back in 2008, '09, because we run the complete data and do a lot of analytics around it, we are able to control -- we could, at that point in time, control [ falls ] better. On top of it, we've built a lot of capability again using artificial intelligence to identify fraudulent claims better.

Now as we digitize the entire journey, the ability to run those engines better becomes even -- you have [indiscernible] run those engines even better. So we are already beginning to see some benefits in terms of fraudulent claims being managed better. Lastly, we believe we can drive the video consultation, teleconsultation as a model to even control unnecessary hospitalization, that could be additional benefit.

So overall, there is a very comprehensive thought process in terms of using technology to both give better convenience and service to customers and in the process, improve our relative loss costs for the health claims.

[Operator]

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

[Sanketh Godha, analyst]

The price hike, which we have taken in motor only, which we have said is largely related to the new business or we have taken price hike in the [indiscernible]. And then just wanted to check whether this business is limited to cars or...

[Bhargav Dasgupta, executive]

Largely new private cars, Sanketh.

[Sanketh Godha, analyst]

Okay. New private cars. The control of price hike we have taken, does -- will it help in improving the loss ratio, which we have currently [indiscernible] and at 73% within 4 quarters. Is the expected improvement in the loss ratio because of this coming price hike?

[Bhargav Dasgupta, executive]

We will have to see a few things. One of the things that we are watching very closely is the claim inflation. Because the input costs are going up for everyone, so there is a risk that there would be a claim inflation. Though until now, in spite of the inflation, the team has managed it really well in terms of controlling the ACS, average claim size, inflation.

We are also driving a lot of our non-OEM source policies through our PPN network. That number has really gone up this year, so we are trying multiple strategies to prevent that from going up. But the fact of the matter is that we've seen significant increase in input costs. So there is a risk that there would be an inflation because of that.

If that happens, then we may not be able to see that benefit. But our sense is that at this point in time, where the private car OD loss ratios are, it needs the price increase. It's a fact, whether we factor in the inflation or not. So difficult to predict whether we'll see improvement in loss ratio. If the inflation doesn't happen, the answer is yes, but we would have to guard against that.

[Sanketh Godha, analyst]

But is this an industry phenomena despite the fact you are seeing across the pace [indiscernible]? I mean the reason I'm asking that is the potential [indiscernible] for a market share loss if you are the only guys who have taken prices?

[Bhargav Dasgupta, executive]

We don't think so, because if you see the market share, the recalibration that we had to do, we've effectively done this year. If you see our OD market share this year has gone down largely for that reason, right? Because we felt that the pricing was not adequate.

Where we are focusing on, the effort that we are building in terms of our digital and agency channel, maybe some of the slightly older segment, we remain reasonably confident about holding on to our market share and OD size. And something that we've been saying, that these 2 years have been unusual because people have benefited from long terms and different times on the motor portfolio, right?

And traditionally, whenever we see pricing aggression in the last for 12, 18 months and then things correct that. We were talking about a pricing correction requirement even before the pandemic, right? So market was, in our opinion, ready for that. And then because of pandemic, there was -- people felt no need because of frequency loss came down.

We believe the market will have to rebalance and correct this year. And we are seeing the stress -- we are seeing that even with price increase, price correction that we are doing, we are holding on to our market share. You've seen our March numbers and the trend line remains that way.

[Sanketh Godha, analyst]

Got it. Got it. And just on the PC business, you said that the mid-teens of the contribution of [indiscernible] will be reached to mid [indiscernible]. Sir, just wondering that have you identified a particular product segment where you can increase the test market or contribution to 10%? Is it like [ SCVs ] or [ auto recharge ] or [indiscernible]? Which are the agents which you have identified, which will drive this increase in the contribution and so the loss ratios?

[Bhargav Dasgupta, executive]

Yes. So it's not that. It's not just at that level of segmentation. It's significantly more granular, which obviously, I don't want to get into. But we've looked at down to [indiscernible] level parameters to take those calls, not just in term [indiscernible]. For [indiscernible], we obviously have no overarching level, but we've done a lot more deep analysis on the ground in terms of various factors we have beyond categories. And on that basis, we've taken this call.

If you see our market share, it's not a 10% shift that you talk about. As we speak, in the Q3 numbers already come to close to 30%. So we are talking about that number going to mid-teens, mid-20s is not that big a stretch. And as I said, when we started doing those experiments about 3 years back, and we've watched the data for the last 2 years, almost 80%, 85% of the experiments have worked out well for us. That's where we are kind of expanding. So yes, a lot more micro segmentation than those just the type of vehicle that you're talking about.

[Operator]

[Operator Instructions] The next question is from the line of Neeraj Toshniwal from UBS Securities.

[Neeraj Toshniwal, analyst]

So I wanted to understand what is the aggregate level item [indiscernible] change in mix towards [indiscernible]?

[Bhargav Dasgupta, executive]

Neeraj, can you repeat? There's an echo. We can't understand what you're saying, Neeraj.

[Neeraj Toshniwal, analyst]

[indiscernible] motor TP hike level.

[Bhargav Dasgupta, executive]

Motor TP hike?

[Neeraj Toshniwal, analyst]

Yes, on aggregate level for us.

[Bhargav Dasgupta, executive]

At the portfolio level, roughly about 3%, Neeraj.

[Neeraj Toshniwal, analyst]

Okay. And would that [indiscernible]...

[Operator]

Sir, sorry to interrupt you. Your voice is not coming very clear. May I request you to speak through the handset?

[Neeraj Toshniwal, analyst]

And how much exactly would the change in mix between the motor TP with higher CV [indiscernible]? Would that be different? Or would the profit share identify -- I mean we have grown substantially higher in the March motor TP, so I wanted to get more sense how much [indiscernible] and what kind of run rate we can expect going forward. [indiscernible] in losses. So that would be kind of [indiscernible], but what incremental [indiscernible] we can get to?

[Bhargav Dasgupta, executive]

Not sure what your question is, it's still not clear. But if you're asking because of the TP price hike and the run rate of growth that we see in March, if it's linked, so if you just look at the increases that is being proposed, we don't have to wait for the final increases, the increases for the long-term TP policy is a bit higher. So there, our new business should benefit.

The approach on the CV business is what we explained earlier that we are picking up segments on a combined ratio basis. Maybe the expense ratio is a bit low, but the loss ratio could be a bit high. But in aggregate, our combined issue is what we are focusing on in terms of building in a more disciplined manner.

[Neeraj Toshniwal, analyst]

Got it. Got it. And one more question on motor OD. How do -- I mean, you obviously explained, but I wanted more color that how are we looking, if let's say, price comp intensity doesn't go down. So how are we thinking about [indiscernible]?

[Bhargav Dasgupta, executive]

So as I said, we think it should because as I was explaining normally, we've seen over the last -- since the verification, we've seen these episodic aggression in the private car and OD segment. It does not sustain beyond 18 months, 24 months. This time, it's been close to 3.5 years. So 2 of those years have been pandemic.

So we believe it was also driven by the fact that during pandemic, people saved on claims cost. So if you look at the industry, we don't believe people can sustain these kind of pricing aggression for too long. But we'll have to see. And as I said, when we are taking price increases, we are sensing that the market is also expecting something like this.

[Neeraj Toshniwal, analyst]

Okay. And on the last question, the [indiscernible] indemnity [indiscernible] onboarding, how much delta we can expect in terms of growth coming in? And what time line, if at all?

[Bhargav Dasgupta, executive]

You've seen a delta in the month of March itself. We remain reasonably confident of sustaining that going ahead. In fact, as we explained that when you hire agency managers, they come onboard, which takes about 2 to 3 months from time to even build channels of agents. And then the agents start getting productive. So as of now, we've only hired about 750, the balance previously are expected to come in.

And the initial signs in terms of the hiring of agents that they have done, if you look at this month -- this quarter, we had added almost 8,000 agents for this quarter, so it's picking up. The traction is high. So there's no reason to think that this gap in outperformance vis-a-vis the industry should drop off. In fact, we should be able to build momentum. We are actually very optimistic about that channel that we are building. If you see just the last quarter, our agency channel has grown by about 29.5%, so I don't see a reason why it should be lower than that for next year.

[Operator]

The next question is from the line of Chetan Thacker from ASK Investment Managers.

[Chetan Thacker, analyst]

Sir, 2 questions. One is on the health side. Just wanted to understand how should we view combined over the longer term, both for group and retail put together and the mix that you're targeting?

The second would be on the [ 7 75 ] crore expense that is there in the shareholder account, which does not pertain to the insurance business. So what does that exactly pertain to?

[Bhargav Dasgupta, executive]

I'll ask Gopal to explain the second one, then I'll...

[Gopal Balachandran, executive]

Let me explain the second one, Chetan. I think it's not that -- it's -- those are expenses not related to the insurance business. That's more a classification requirement in accordance with the regulatory prescription. Just to kind of explain this, I think the regulatory has laid down limits for all players in the market to comply with limits on expenses of management for the company as a whole. For ICICI Lombard, we are in compliance with those limits for the -- at an aggregate level.

Having said that, what the regulator has also stipulated is individual limits for some of the subsegments of businesses within the aggregate portfolio. And in case if in any of those subsegments, if the actual -- based on the allocation of expenses that have happened to those individual subsegments in cases we exceed, then to that extent, from a classification standpoint, those amounts are separately required to be given on the face of the profit and loss statement, which is why you find a large amount being reflected there. But equally, when you possibly see the revenue account statement you will find...

[Chetan Thacker, analyst]

There's a counter entry there [indiscernible] more account shareholder to policyholder and then policy.

[Gopal Balachandran, executive]

Yes, exactly. So it's more a classification requirement that is stipulated insofar as regulatory guidelines are concerned. But as I said, for ICICI Lombard, it's an aggregate level. In accordance with the requirement of regulation, we are in compliance with those [indiscernible] expense.

[Bhargav Dasgupta, executive]

And coming back to your second question -- first question on health. Look, at this stage, Gopal explained the corporate book. It is a high loss ratio business in the 90s, but the cost of sourcing is low. So it stays in the just shade above 100%, between 100% and 105%. We want to continue to write that business because that volume also helps us in terms of the network and all the other assets that corporate relationships plus, we are doing a lot of work with the IL TakeCare app with corporates to see what we can do in terms of cluster and upsell.

So that's something that we want to stay invested in, but that's the kind of range that we expect going ahead. On the retail, we are investing. And that's why when I, in my opening remarks, I talked about the overall investment that we are making in distribution and technology. So retail indemnity, the health agency team that we are scaling up, obviously, at this point in time, reasonably high combined ratio. Our sense is that it will take a couple of years for us to see that coming in line with our numbers because we want to keep on investing in that segment for some time, at least for the next couple of years.

[Chetan Thacker, analyst]

Sir, next 5 years out, would 95% combined for health be a number that we can work with? So I understand it will be a buildup and then things will scale up. I just wanted a more longer-term picture.

[Bhargav Dasgupta, executive]

I always am very worried about predicting 5-year out numbers because none of us can paint 5-year out numbers. My sense is that, of course, the combined would obviously come under much better control. I do not believe that the number can be a low 90s that some people articulate. We don't believe that, that can sustain in the Indian market. So we have to operate at combined ratios which are maybe closer to 100%, not closer to 90%.

[Operator]

The next question is from the line of Prateek Poddar from Nippon India Mutual Fund.

[Prateek Poddar, analyst]

Just 1 small clarification. Did I hear you right saying that you have diluted your ROE aspirations for growth? And hence the journey to an aggregate combined ratio might not be something which we will [indiscernible] for?

[Bhargav Dasgupta, executive]

Yes. What we've been saying is that we would want to invest in some of these segments of business, largely digital and health agency. And we have said that while we -- on the integrated basis, on a pro forma basis, we were about 104-odd number, if you look at a 2020 pro forma, we had said that we would want to bring it down closer to our normal target number of 100%, but we do want to invest a bit in terms of just getting up these businesses. Towards that, if the ROE comes down below 20%, we are okay. It will be in the high teens, may not be 20%.

[Prateek Poddar, analyst]

Is this because of competitive pressures? Or it is just a more strategic question or [indiscernible]? Like what I'm saying for you to -- I remember earlier in our conversations always the focus was on ROE and not diluting the combined ratio. It looks like there has been some change to this.

[Bhargav Dasgupta, executive]

So a bit of both, honestly, if you see the -- on the health side, it's more strategic because of the investment. But if you remember some of the conversations that we've had that on the health indemnity side, we were building up some of the capabilities both in the outpatient, OPD, product and the IL TakeCare app. Now that we've done that, we want to scale up the business. So that's a strategic call.

The rest, of course, driven by current context in the market. If the market remains very aggressive, then we don't want to kind of lose market share beyond the level. If, however, the market corrects, there will be an opportunity to bring combined down under -- into our comfort zone. But at this point in time, it's a bit of both, investment both in the agency and also in digital to scale up the business for the future.

[Operator]

The next question is from the line of Hitesh Gulati from Haitong Securities.

[Hitesh Gulati, analyst]

Sir, out of the 88,000 agents that you have mentioned, how many would be selling health for us? And also in continuation with health, ICICI Bank has started selling indemnity. How much of this can be kind of -- like go up? What can be the growth path here? And also, is there any update on HDFC Bank and AXA selling health for us? Or after Bharti AXA partnership?

[Bhargav Dasgupta, executive]

So let me take it in the reverse order. So in terms of the key banker partners that we got through the acquisition, we are very happy with the way those partnerships are developing. As of now, they are primarily focusing on SME and motor products. But I'm sure there will be opportunities to distribute health in due course. And if you see the growth of that channel, while the aggregate banker partners of [ Bharti ] as we said, has grown at about 15.9%, I think these 2 partners have grown even faster. So we are quite happy with the way that those channels are shaping up.

Coming to your question on the bank business, no. I think we've been talking about the fact that we had a base effect because of the decision of the bank not to sell benefit policies for -- from Q3 of the previous year, and that had an impact for this year number for 9 months. That, and we've been saying that, that -- that base effect will play out in this quarter. What the bank has decided to do is rather than selling benefit, they are keen to sell indemnity, so we've kind of structured suitable products for the bank, and we've launched it.

I don't want to give any guidance on whether the number will go up or down because at this point in time, we just started selling some of these products. We will see how it goes along and then we will see what numbers we see. But at least the base -- the negative base that we had of the benefit book being dealt the previous year and that business being stopped this year, that FX has now gone.

[Gopal Balachandran, executive]

And your last question on -- the number of health agents within that number will be about 6,000.

[Hitesh Gulati, analyst]

Okay. So sir, last quarter, we have added about 8,000 to 10,000 agents. So not all of them are obviously health.

[Bhargav Dasgupta, executive]

Yes. We have seen separate agency channels. One is motor, one is health, one is SME. Of course, we work across the channels and [indiscernible], but we have dedicated channels for the 3 segments.

[Hitesh Gulati, analyst]

Okay. Okay. And sir just one last, if I can squeeze. Our advanced premium number for March is lower than December. So that means motor TP growth is more towards CV. Is that understanding correct? Or it is towards renewal premiums?

[Bhargav Dasgupta, executive]

It's a combination of both, Hitesh. I think relatively you're right to some extent, given the fact that, let's say, the contribution of CV in the overall motor growth is also kind of higher in FY '22 compared to FY '21, so that's obviously 1 contributor. Having said that, I think equally, if you look at some of the older [indiscernible] as we had said even at the time when this long-term policy guidelines have come in, we had said it will start to kind of peak maybe [indiscernible] almost about -- between the third and the fourth year.

This number of advanced premium will pretty much start to kind of peak because you will obviously start to have -- the incremental numbers to advance to them will be more reflective of what kind of growth that we have -- that we will achieve in the motor portfolio, which is what we have seen in FY '21, '22. This is the year where it's been almost about 3 years since the time the new long-term guidelines had come. So hence, that's the reason why you see a small dip insofar as the advance payment number at 31st March as well.

[Gopal Balachandran, executive]

That's the other thing that we've been saying that new vehicle sales, both for private car and 2-wheelers have been quite low. That is also happening.

[Operator]

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

[Nidhesh Jain, analyst]

Two questions. Firstly, there's a lot of insurtech companies are scaling their cost [indiscernible] business. So how do we view this business? Do we see it as a threat or opportunity for us?

Secondly, in the new vehicle -- new private cars segment have been lost -- all the market share trends in that segment as we lost market share, gain market share in the last 2 years, and that's in the new private car segment.

[Bhargav Dasgupta, executive]

So Nidhesh, I get the second question first. In the 9 months, we lost market share. That's why our -- if you see our motor numbers, we're quite low in the -- relatively lower in the first 9 months. This quarter, we have not lost as much. We lost a little, but in the private car side, but [indiscernible] 2-wheeler and the CV side for the quarter.

And our sense is that even on the private car, the recalibration of the portfolio of just alignment that we wanted to do, given the pricing aggression, were largely behind us, so we should -- we hope to see market share even in private car segment being held on.

Coming back to your first question on insurtech. Look, at this point in time, we are partnering with almost all of them. In terms of whether, in the long term, it's positive or negative, there is one positive in terms of them potentially expanding.

As of now, they're not expanding the market really because they're more playing like aggregating existing agents under their umbrella. But we hope that in due course, they will expand the market and grow. And we are, at this point in time, we are working with all of them. On the cost side, we are not with the digital aggregator. But on this segment, we are working with them.

[Operator]

The next question is from the line of Nischint Chawathe from Kotak Securities.

[Nischint Chawathe, analyst]

Yes. My question actually pertains to the last 2 slides of the presentation. And I think what you mentioned there is that based on the revised disclosures, you have split the reserving triangle disclosures between motor TP and the others. Now I think what we can see over here is that [indiscernible] in the other segment is higher than motor TP, if I look at it, I mean, over the years. So how should one really be reading it? What is the interpretation of the business? Is it something that we're reserving a little more conservative in the other segments? Or I mean -- if you could just help us interpret this.

[Gopal Balachandran, executive]

So Nischint, if you look at -- so far as approach to reserving is concerned, fundamentally, there is no change in terms of the process that we follow for the current year relative to, let's say, what approach we have been following over the last several years. And the approach is to kind of reserve conservatively at source.

And as and when each of this portfolio kind of starts to develop in terms of lost experiences, you will possibly see whether the reserve estimates that we made at source was adequate or not so adequate. In some of these lines, the conservatism of reserving will start to play out faster. However, in certain long-tail lines of businesses that will obviously take a relatively longer time for you to reflect whether the reserves that we carried at source were adequate or not.

Slide 29 and 30, the point that you made, other than motor third-party lines of businesses are predominantly businesses which have a relatively shorter tail insofar as claim settlement is concerned, which is why the play out of the actual loss experience tends to be faster and you are able to kind of see relative to the amount of reserves that we carry, you are able to see small amount of reserve releases.

However, insofar as the third-party book is concerned, as I said, that's a book which is long tail. And obviously, it takes a longer horizon before which one can say whether the amount of reserves that we have kind of built in is appropriate or not. Having said that, if you look at the information that gets put out whether it is for motor third-party or whether it is for the other lines of businesses other than third-party, the information is given for the last 10 years.

And you can see over the last 10-year cycles, even after 10 years of development, both with respect to the motor third-party triangles that you see as well as the other than motor third-party triangles, this is the loss development experiences, our approach to reserving has played out to be conservative at source and both of them reflect small amount of reserve releases in the portfolio.

[Bhargav Dasgupta, executive]

And if I can add to what Gopal said, we are actually very happy that this disclosure has been mandated by the regulator. We've been asking for this disclosure for a long, long time. We were the first company to disclose and now we are seeing more disclosures. It's not just the 2 full and aggregate. The further disclosures of TP business for the running book and the non-TP business, which is a very good development.

[Operator]

Ladies and gentlemen, we will take that as the last question. I now hand the conference over to Mr. Bhargav Dasgupta for closing comments.

[Bhargav Dasgupta, executive]

Thank you. Thank you, everyone, for joining. And again, if you have any other separate questions, feel free to reach out. We'd be happy to take this separately. Thank you again.

[Gopal Balachandran, executive]

Thank you so much.

[Bhargav Dasgupta, executive]

Take care and good night.

[Operator]

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