ICICIGINSEQ4 & FY2023April 24, 2023

ICICI Lombard General Insurance Company Limited

10,129words
31turns
10analyst exchanges
5executives
Management on call
Bhargav Dasgupta
MD & CEO
Gopal Balachandran
CFO & CRO
Sanjeev Mantri
EXECUTIVE DIRECTOR
Alok Agarwal
EXECUTIVE DIRECTOR
Bhargav Dasgupta
MD & CEO of the Company; Mr. Gopal Balachandran –
Key numbers — 40 extracted
16.4%
ng of the performance: The GI industry delivered a Gross Direct Premium Income (GDPI) growth of 16.4% for FY2023. At the same time, the underwriting performance remained weak, with the combined ratio
116.2%
me time, the underwriting performance remained weak, with the combined ratio of the industry at 116.2% for 9MFY2023 as against 119.2% for 9MFY2022. For motor business, the Combined Ratio for the indus
119.2%
formance remained weak, with the combined ratio of the industry at 116.2% for 9MFY2023 as against 119.2% for 9MFY2022. For motor business, the Combined Ratio for the industry was 123.5% for H1FY2023 w
123.5%
Y2023 as against 119.2% for 9MFY2022. For motor business, the Combined Ratio for the industry was 123.5% for H1FY2023 which improved to 118.9% for Q3FY2023, as per public disclosures. While there may
118.9%
r motor business, the Combined Ratio for the industry was 123.5% for H1FY2023 which improved to 118.9% for Q3FY2023, as per public disclosures. While there may be gradual signs of improvement in the
115.6%
rovement in the motor segment the Combined Ratio remains higher than FY2022 levels which was at 115.6%. ICICI Lombard General Insurance Co. Ltd. April 18, 2023 The Authority in the curr
6.7%
om 1st April 2023. Moving to the business impact for us during the quarter: The company grew by 6.7%. Excluding crop and one off transaction in the motor segment, the company grew by 12.6% as agains
12.6%
ny grew by 6.7%. Excluding crop and one off transaction in the motor segment, the company grew by 12.6% as against industry growth ex crop of 17.9%. Coming to growth of the key segment during the qua
17.9%
ansaction in the motor segment, the company grew by 12.6% as against industry growth ex crop of 17.9%. Coming to growth of the key segment during the quarter-  In the commercial lines we experie
15.9%
ring the quarter-  In the commercial lines we experienced robust growth, driven by growth of 15.9% in the SME segment. Further during the year, we accreted market share across segments such as Eng
11.5%
cross multiple lines of business at scale, should benefit from this.  In motor we de-grew by 11.5%. Excluding one-off transaction the growth was muted at 0.6% as against the industry growth of 13.
0.6%
m this.  In motor we de-grew by 11.5%. Excluding one-off transaction the growth was muted at 0.6% as against the industry growth of 13.1%. We continue to focus on profitable sub segments using hi
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Guidance — 18 items
Speaking of the performance
opening
“We believe that although this may create short-term disruption, in the long term we expect it to be positive and bring in underwriting discipline.”
Avinash Singh
qa
“The same number on a full year basis what you are seeing of 29.6% which is again based on gross direct premium income in line with the requirement of the regulation which is on gross written premium that number will be looking like 29%, which is again within the threshold on limit that has been laid down by expense of management.”
Avinash Singh
qa
“And thirdly, with the new EoM regulation coming on the GWP basis, probably, the way some private companies or even the reinsurance companies soliciting or started reinsurance businesses, where commissions might get a bit disturbed, the kind of a reinsurance commission you would be paying because of this new EoM regulation of 30% will be applicable on all.”
Avinash Singh
qa
“And we have been talking about the fact that in commercial line, there will be fair amount of change even in the last quarter before these things were explicitly cleared.”
Avinash Singh
qa
“Of course, we couldn’t anticipate the rate hardening of the reinsurance side till that time, but that’s now evident.”
Avinash Singh
qa
“So, if that happens, if any company does that, our sense is that in the next year they will find it very difficult to get proper treaty capacity.”
Avinash Singh
qa
“Our experience or our estimate for the year, we have been giving a guidance as a company that over the next two years we want to bring down combined ratio to 102, we are not changing the guidance in spite of this cost increase on the reinsurance side.”
Prayesh Jain
qa
“So, what is the kind of run rate that we should think about from a full year perspective of next year?”
Prayesh Jain
qa
“Hence, it is a commercially viable transaction that we have kind of undertaken and the outcome of the transaction will be reflected in the overall underwriting result when you look at the aggregate numbers.”
Supratim Datta
qa
“One on the retail health side, could you talk about the investment opportunities that you are looking at going forward?”
Risks & concerns — 9 flagged
At the same time, the underwriting performance remained weak, with the combined ratio of the industry at 116.2% for 9MFY2023 as against 119.2% for 9MFY2022.
— Speaking of the performance
Also, the impact of global hardening on reinsurance terms especially on natural catastrophic production was experienced by the insurers during April 1 renewals.
— Speaking of the performance
So, individual companies can charge whatever they want to and hence there is a risk that the pricing can drop.
— Avinash Singh
So, if that happens, if any company does that, our sense is that in the next year they will find it very difficult to get proper treaty capacity.
— Avinash Singh
And thirdly, we have seen a sharp, good decline in terms of absolute cost for advertisement and publicity sales promotion, employee remuneration sequentially.
— Prayesh Jain
Firstly, what is the impact of this one off transaction on our Combined Ratio of 104.2% for the quarter?
— Nidhesh Jain
On the point on the impact of Combined Ratio Nidhesh, the fact that it is a commercially viable transaction that’s why we have done that and hence it does not have any material impact so far as the overall combined ratio is concerned.
— Nidhesh Jain
There is minor positive impact of combined ratio that is the way we should look at it.
— Nidhesh Jain
In that sense nothing one off which is there in the part of the unexpired risk reserve block.
— Supratim Datta
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Q&A — 10 exchanges
Q
Two questions, first is more on the regulatory side where the regulator has a vague clause, stating the benefit of direct distribution to be passed on to the policyholders. The question is that, is the regulator stating that if you have a direct version of the same policy, a health or retail policy, and a customer coming for renewal, if the customer is willing to pay at your branch or at your portal directly, are you willing to or are you required to pass on this commission difference? This is with respect to renewal, where there is almost no cost in terms of direct compared to the cost on the
Avinash Singh
Thank you. On the reinsurance side, if I see there are three kind of changes is happening. One, the global hardening there is in the market, ICICI Lombard General Insurance Co. Ltd. April 18, 2023 the second thing is the regulator nudging the primary insurer to go ahead, without any sort of a reinsurance prescribed flow rate that was a kind of practice in commercial lines. And thirdly, with the new EoM regulation coming on the GWP basis, probably, the way some private companies or even the reinsurance companies soliciting or started reinsurance businesses, where commissions might get a bit dis
Q
Few questions from my side. Firstly, could you highlight as to when this one off transaction happened in February, there would be some income and which line item does that income sits in? Secondly, is there some seasonality in motor TP loss ratios because in past three years we have seen Q4 being far more elevated than Q3 and in one of the fourth quarters you had mentioned that it was because of adverse judgments in that case. And thirdly, we have seen a sharp, good decline in terms of absolute cost for advertisement and publicity sales promotion, employee remuneration sequentially. So, what i
Management
Q
Sir, most of my questions are answered. I have one doubt, basic doubt, the reinsurance that gets added to the gross direct premium and eventually it becomes gross premium written, is high for fourth quarter ICICI Lombard General Insurance Co. Ltd. April 18, 2023 seasonally or because even last year fourth quarter it was a higher number, this year again it is a higher number, if you can help me understand this a bit? Gopal Balachandran: So, nothing unusual Shreya in that sense. The reinsurance inward is again an opportunity that one sees depending on how we are able to get businesses for a part
Shreya Shivani
So, in the fourth quarter this is heavy because of health, is what you are trying to say, because commercial is mostly first one? Gopal Balachandran: Not necessarily. All that I am saying, all that I was referring to is different segments of businesses could have seasonality attached to it. As an example, I am not saying in the context of reinsurance inwards. Even on the direct side on retail health, you will possibly see Q4 to be slightly seasonally higher quarter. The reinsurance inward could be mix of business across different segments, it need not be necessarily only health.
Q
Three questions. Firstly, what is the impact of this one off transaction on our Combined Ratio of 104.2% for the quarter? Secondly, what is the health agency GDPI in absolute terms for FY2023 and Q4 FY2023? And lastly, we have got access to HDFC Bank and Axis Bank. If you ICICI Lombard General Insurance Co. Ltd. April 18, 2023 can share how is the progress there? What is the business which we have been able to source from these channels in FY2023 and Q4 FY2023? Bhargav Dasgupta: So, let me take the third one. I think we are quite happy with as we said in the covering remarks, most of the distr
Nidhesh Jain
There is minor positive impact of combined ratio that is the way we should look at it. Gopal Balachandran: That is correct. And sir, on the health agency I was talking about health agency GDPI for FY2023 or FY2022, so Rs. 47.82 billion is total health GDPI, right? Health Agency GDPI I was looking for? Gopal Balachandran: So, the health agency GDPI for the full year at about Rs. 5.6 billion.
Q
First, on the regulatory EoM side, it now allows the differentiation ICICI Lombard General Insurance Co. Ltd. April 18, 2023 between the SAHIs and General Insurers as far as the health business is concerned. So, SAHIs are allowed 35% but the General Insurers under aggregate level are allowed only 30%. Does that create some sort of an uneven playing field for the industry and for you? And second, I see that your investment income has improved considerably in Q4 and also if you look at the Q3 balance sheet versus Q4 balance sheet, the unrealized gains have dropped significantly from about Rs. 55
Management
Q
I have two questions. One on the retail health side, could you talk about the investment opportunities that you are looking at going forward? Also, what these investment opportunities include and acquisition to drive the retail health and channel faster? And secondly on the URR, and if I look at it and compare it with a net written premium, then that ratio comes out to around 56% for FY2023, basically it has been around 58%-59% previously, so it seems like you are booking more revenues in FY2023. So, how should I look at it? If you could give some clarity around that, that would be very helpfu
Management
Q
I wanted to understand what exactly you are going to do with the crop insurance business in FY2024 because this year is the last year for the AXA business what you acquired. So, given the EoM rules are around and if you intent to focus more on retail business which are Opex intensive, do we go little aggressive on the crop business in the current year? Bhargav Dasgupta: So, let me answer that. So, will we go aggressive on crop business just because of EoM flexibility? The answer is no. We had said at the beginning of or even last year, last couple of years, post the acquisition, we had said th
Sanketh Godha
Got it. And given the reinsurance market as you highlighted have hardened and probably the commercial lines potentially could see a lower profitability in the current year because of the EoM rules. So, the glide path what you have mentioned that 104 combined gradually improving to 102 by FY2025, despite competitive intensity increasing in few profitable lines, you still continue to maintain that 102 by FY2025 will be achieved or there could be a deviation there? Bhargav Dasgupta: So, that’s what we said earlier in the call, Sanketh, our objective hasn’t changed. Yes, while in commercial lines
Q
Just one question from my side. So, for the investment book that we have, what is the average maturity and what is the difference roughly between the yield that we are realizing on the investment book right now excluding capital gains and the incremental yield we can invest by maintaining the same average duration? Bhargav Dasgupta: So, the duration of the book at the end of the year FY2023 was 4.99. This was slightly lower duration than what we had at the end of 9 month because in the month of March we had very good inflows into the portfolio, largely because the March numbers from a business
Management
Q
I am looking at the advanced premium figures and for last couple of quarters this was actually not been going up but it has come down a little bit over the last three quarters. This was despite the fact that you’re actually growing faster in motor TP. So, I am just curious as to how should we look at this trend? Gopal Balachandran: So, if you look at, so Nischint, if you look at it in general, I think the relative growth for us on the overall motor has been kind of slightly lower than the market as what we have seen from public data and relatively if you see the growth on third party, a large
Management
Q
Except for the historical information contained herein, statements in this release which contain words or phrases such as 'will' , 'would' , ‘indicating’ , ‘expected to’ etc., and similar expressions or variations of such expressions may constitute 'forward-looking statements'. These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to our ability to successfully implement our strategy, our gr
Management
Speaking time
Moderator
14
Nidhesh Jain
3
Sanketh Godha
3
Avinash Singh
2
Shreya Shivani
2
Speaking of the performance
1
Prayesh Jain
1
Madhukar Ladha
1
Supratim Datta
1
Gaurav Singhal
1
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Opening remarks
Speaking of the performance
The GI industry delivered a Gross Direct Premium Income (GDPI) growth of 16.4% for FY2023. At the same time, the underwriting performance remained weak, with the combined ratio of the industry at 116.2% for 9MFY2023 as against 119.2% for 9MFY2022. For motor business, the Combined Ratio for the industry was 123.5% for H1FY2023 which improved to 118.9% for Q3FY2023, as per public disclosures. While there may be gradual signs of improvement in the motor segment the Combined Ratio remains higher than FY2022 levels which was at 115.6%. ICICI Lombard General Insurance Co. Ltd. April 18, 2023 The Authority in the current financial year introduced various reforms seeking to expand the market and increase the penetration of insurance products. During the quarter the Authority notified “Expenses of management” and “Payment of Commission Regulations” proposing an aggregate limit at the company level with effect from 1st April 2023. Moving to the business impact for us during the quarter: The comp
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