Release Date: July 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ICICI Lombard General Insurance Co Ltd (NSE:ICICIGI, Financial) reported a 20.4% growth in gross direct premium income (GDPI) for Q1 FY25, outperforming the industry growth of 13.3%.
- The company's motor segment registered a robust growth of 26.3% in Q1 FY25, significantly higher than the industry growth of 12%.
- The health segment grew by 28.5% in Q1 FY25, outpacing the industry growth of 16.6%.
- ICICI Lombard General Insurance Co Ltd (NSE:ICICIGI) maintained a balanced portfolio in the motor segment, with private car, two-wheeler, and commercial vehicle mix at 51.5%, 26%, and 22.5% respectively.
- The company's investment income rose to INR11.28 billion in Q1 FY25 from INR8.44 billion in Q1 FY24, driven by higher capital gains.
Negative Points
- The combined ratio for Q1 FY25 was 102.3%, indicating that the company is still facing challenges in achieving optimal operational efficiency.
- The health segment's retail business grew at a lower-than-expected rate of 12.6% in Q1 FY25 compared to the industry growth of 19%.
- The commercial line of business experienced pricing pressure in the fire segment due to the discontinuance of IIB rates.
- The company's solvency ratio decreased to 2.56 times as of June 30, 2024, from 2.62 times as of March 31, 2024.
- Global geopolitical tensions and uneven distribution of domestic monsoon were highlighted as key risks to ongoing growth momentum.
Q & A Highlights
Q: Can you provide some color on the motor segment's performance, particularly regarding old versus new vehicles?
A: Sanjeev Mantri, CEO: The motor segment performed well throughout the quarter, with significant growth in old vehicles compared to new ones. The new vehicle segment grew around 16-17%, while the old vehicle segment grew by approximately 33%. This growth was driven by deep mining and leveraging our distribution, underwriting, and claims servicing capabilities. While sustaining such high growth rates may be challenging, we will continue to stay vigilant and pursue value where it exists.
Q: What are the competitive dynamics and pricing trends in the group health insurance segment?
A: Gopal Balachandran, CFO: The market has seen signs of stress, but pricing discipline is returning, particularly from aggressive players. This has allowed us to outgrow the market at favorable underwriting outcomes. For retail health, we aim to maintain a loss ratio around 70%. The launch of our new health insurance solution should aid in achieving these outcomes.
Q: Can you explain the significant improvement in the operating expense (OpEx) ratio?
A: Sanjeev Mantri, CEO: The improvement in the OpEx ratio is largely due to the configuration of the portfolio, with a higher growth in old vehicles and group health insurance, which come at relatively lower OpEx. While some efficiency gains are sustainable, the dynamic nature of the business means we will continue to seek efficiencies while managing expenses within regulatory requirements.
Q: What is the impact of the recent IRDAI guidelines on long-term motor policies?
A: Gopal Balachandran, CFO: The implementation of these guidelines has been deferred for a couple of quarters. We will work with the regulator to understand the final shape and form of these guidelines. Once finalized, we will assess and communicate the impact on our business.
Q: How has the new health insurance product, Elevate, been received in the market?
A: Sanjeev Mantri, CEO: The new health insurance product, Elevate, has been well-received across channels and partners. While it's early days, we see significant traction and are excited about its potential to enhance our retail health segment. The product's modular design allows for risk-based pricing, which should help in achieving better underwriting outcomes.
Q: What are the trends in motor third-party (TP) loss ratios, and do you expect a price hike in this segment?
A: Gopal Balachandran, CFO: The motor TP loss ratio for the quarter was around 69%. While quarterly numbers may not be fully reflective, we aim to maintain a loss ratio range of 65-70% for this segment. We continue to pursue regulatory price hikes to rebalance the book and expand the market.
Q: Can you explain the provision release of INR355 million in the first quarter?
A: Gopal Balachandran, CFO: The provision release is a result of our internal impairment policies. When we find that a stock has reached a price we are comfortable with, we may exit the position, leading to a reversal of the provision for impairment. This is more coincidental and not specific to the first quarter.
Q: What is the profile of customers targeted with the new health insurance product, and what were the retail versus group health loss ratios for the quarter?
A: Gopal Balachandran, CFO: The new health insurance product targets a wide range of customers across various age groups, geographies, and sum insured expectations. The group health loss ratio is expected to be around 94-95%, while the retail health indemnity loss ratio is targeted at around 70%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
