Go Digit General Insurance Ltd (NSE: GODIGIT) Q1 2026 Earnings Call dated Jul. 28, 2025
Corporate Participants:
Ansuman Deb — Investor Relations
Kamesh Goyal — Non-Executive Chairman of the Board
Analysts:
Avinash Singh — Analyst
Supratim Datta — Analyst
Prayesh Jain — Analyst
Nidhesh Jain — Analyst
Dipanjan Ghosh — Analyst
Divij Punjabi — Analyst
Sanketh Godha — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q1FY26 earnings conference call of Go Digital Journal Insurance Co. Ltd. Hosted by ICIC Securities Ltd. As a reminder, all participant lines will be in the listen only mode. And there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero unattached in phone. Please note that this conference is then recorded. I now have the conference over to Mr. Anshuman Dave from ICIC Securities Ltd. Thank you. And over to you sir.
Ansuman Deb — Investor Relations
Good evening ladies and gentlemen. On behalf of ICC securities we welcome you all to Q1FY26 conference call of Godigit General Insurance. I now hand over the call to Chairman Kamesh Goel. Over to you sir.
Kamesh Goyal — Non-Executive Chairman of the Board
Thanks Anshuman. Good evening everyone. And I have with me our CEO Jaslene Kohli. CFO Ravi Ketan, Head of Investor Relations, Piyush and Divya who is also part of Piyush team. We’ll just make some opening remarks and then go slide by slide. Our profit before tax has increased from 101 to 161 crore this year. This year as we had mentioned last year. This year we expect to basically compensate for all accumulated losses. So we’ll be paying tax. Our assumption is that this year the current tax rate we are expecting will be about 13.9% for the whole year. So our PAT has been calculated based that. So 161 is the PBT. And after a tax rate of 13.9% the PAT would be 138 crores.
This is the first time the PAT and PBT is different. ROE on the PAT basis is 3.4% this year compared to 3.3 in last year same quarter. This obviously is not annualized. And last year our average net worth was about 3100 crores which this year is 4100 crores. So almost 33% increase in the net worth. Tax rate of 13.9% and ROE has slightly improved to 3.4%. Our net worth compared to March 25th which was about 4033 crores has also increased to 4173 crores. AUM over the last one year have increased significantly by roughly 3100 crores. So now the AUMR around 20,861 crore. Solvency continues to be very strong at 227%.
Now moving on to the slide. If you look at our deck this is more like a dashboard which we give premium figures. Market shares, portfolio mix, number of customers have increased to now 7.1 crores. Distribution part to our partner network has also increased. Assets under management have already spoken and customer satisfaction score continues to be quite good. Now moving to the next slide which is slide number five here. I think if you look at our loss ratios last year for the whole year was about 72.8 quarter one last year was 70.5 and this year loss ratio is 70.5. One major area which I think I should discuss right now is that our retention ratio this year has reduced to 65.4% compared to 76.2%. And this obviously is making our combined ratio higher in terms of ID combined ratio economically it actually hasn’t made any change.
But because net written premium has gone down because of that the combined ratio looks up. Why net retention ratio has gone down this year is primarily two reasons. One is that last year we had looked when we looked at the last quarter of our book we felt that some of the business which we had retained we should increase the session a bit which the impact of that has come in the first quarter. Secondly you will see that our growth in the fire business has been very strong in the first quarter. We also got leaderships and very high shares in lot of very large corporate accounts. And looking at what is happening in the market especially again in the first quarter industry saw a loss fire loss of 2000 crore digit was not participating in that. So looking at some large positions we felt that it is better for us to not retain this in the first quarter some of this large risk and ceded to reinsurer so that our TT overall and our own net retention gets diversified and gets balanced out.
The second reason is that our growth in two wheeler business has been very strong in the first quarter and when you do this one plus five new two wheelers as we had also explained in February in our results in our analyst day, this obviously has a very major impact because the premium earning is only for first year while the commission outgo is accounted for for the whole five years. So because of that there has also been the net retention has been a bit lower. If we last year we had kept our retention to about 15% last year in the fire, marine engineering and liability business, this year the retention has become nine.
If we had actually kept the retention same as last year 15 then our combined ratio without 1N would have been 105.2 which would have been an improvement over last year. As we go forward because most of the large accounts in India written on 1st of April, we actually expect our retentions in corporate business to also come definitely close to last year and maybe fire business et cetera, depending upon how retail portfolio looks at it could be slightly higher. So this low retention was more or less I would say 1/4 impact. As I said also it has not impacted the profitability as you can see. Profitability continues to be good but optically it makes your combined ratio look worse. Loss ratio I think there was some discussion last quarter about loss ratios and I’ll cover the loss ratios also in a bit more detail. When we look at overall expenses to GWP they have increased this year from 31.
Last year was 31.4%, 30.9% and this year it has increased to 31.4. This primarily is due to two wheeler business because in motor we have grown well in the first quarter compared to last year. So despite growing a lot more in corporate lines our expense ratio has increased due to two wheeler. We continue to ride two wheeler business as much as possible because the business we feel is profitable and secondly it also gives us a decent amount of AUM which is stay with the company for much longer moving forward, sorry, can we go back to this slide? ROE etc. Have already covered solvency ratio. So nothing much to cover here. We can go to the next slide. I think when we look at the GWP growth, growth has been I would say for us about 12.1%. And if we remove one by N then the growth is 14.5. As all of us know, last year in the first half there was no one by N. So I think in the first two quarters this difference will come from first of October. Then one can look at growth rate on the same basis.
Overall when we look at the growth rate in own damage, our growth rate is similar to the industry. One of the main I think developments in the market in the first quarter has been that there has not been any new vehicle sales actually in cars especially which drives own damage. Premium has been a bit down. In tt we have grown better than the industry and in health and travel etc. Our growth rate has been less. This again is primarily driven by employer employee segment. Where we April we saw companies being very aggressive, but this is off and on. I would say this is more like a volatile business. Difficult for us to say what has happened in the coming quarter. But one distinct trend which we saw this quarter is that companies which were especially private companies, you might recall last year I had said that private companies were actually taking market share in group health business away from public sector.
I think the companies who did that last year, this year they are definitely not taking the market share. In fact they are de growing. So based on where the market is, our sense is that there has to some sense has to come in the group health business because companies whichever try to write that business for six months or one year, they don’t follow that. So my sense is we would see almost all companies getting covered in this and hopefully some discipline will come as we go towards second half. As I said property business we have seen very strong growth. Growth rate has been 40% compared to industry 17 and in others also we have grown by 23% and in this case others would be marine liability etc.
Where also we have very strong growth. So growth in the corporate line of business as we had expected continues to be strong. We had also on 1st of April increased capacities of our TTS direct corporate team is also now fairly stable and we have presence all over India. So I think corporate business as I said is something which is doing well. Moving on in terms of within the GWP if I have to give maybe a few more highlights industries ODTP mix this year is 41, ODTP is 59. For digit it is 37 OD and 63 TP. So broadly there’s not much difference now in the mix. We hope that private car business will actually pick up as we get into the festival season.
Our mix within motor is 41%, private car 31% two wheeler and commercial vehicle is 28. So when you look at actually each of these segments we would be a large player across each of these segments and I think as a percentage of premium, total premium in motor I think 31% in two wheeler would probably be amongst the highest or maybe the highest in the industry. We don’t know figures for all but based on where we are we feel that probably will be our position. Motor share also has increased this year in the first quarter or it is similar to the first quarter overall. So TP we have seen increase while OD we have actually been more or less flat.
Going further in terms of profits and combined ratio, I think if you look at we already said that this year we are paying taxes of 22 crores. Overall profit has increased without 1 by N the combined ratio would have been 107.5 compared to last year of 105.4 which was also without 1. As I already mentioned if we would have kept the same retention as last year our combined ratio would have been 105.1. So overall but this has no impact on the profit. This is more optical from that perspective and for some of the people I just want to remind that we had covered how this IGAAP combined ratio which is calculated actually is not really logical. We had covered that in a bit of detail with examples on 17th of February meeting. Investor Analyst meeting.
Going to the next slide, slide number eight. I think this is assets under management. As you can see that our AUM has grown well leverage which plus 4.8 as of quarter one last year became 4.9. For the whole year 2425 has increased now slightly to 5. In terms of investment income of 372 crores, there is a capital gain of 10.2. Excluding that capital gain which anyway is small, the yield is 1.8. So I think our fixed income yield continues to be decent because we had gone with a higher duration last year. So that seems good.
Moving on. I think one difference compared to the 31st of March 25th and first quarter is in equity. Our AUM has grown but equity allocation from 6.4 is now only 6.3. We haven’t really increased that to keep up the pace. 81 bonds also have reduced slightly because the supply of new 81 bonds has been a bit less and overall government securities percentage is also slightly reduced because we were trying to very slowly reduce the duration. Sector wise exposure etc. Is given nothing major failed quality of fixed income portfolio continues to be very very strong. Loss ratios in own damage if you remember quarter four own damage loss ratio was I think if I remember correctly above 70.
The year ended at 67.8 and quarter one is 69.3. You would have seen some companies which have declared results that own damage loss ratio has gone up slightly for the industry. I think we’ll wait and see whether this is happening due to low premium rates in the industry or something else. In case of digit Whenever we write comprehensive policies we look at own damage and third party together. When it is standalone own damage policy then obviously we look at ROE from a standalone own damage perspective. Third party loss ratio is 66 which is very similar to what it was last year first quarter and also similar to the whole year in terms of absolute amount.
The reserve release this quarter is actually the same as last year so there has not been any change in the reserve release. So it is the same in both. And I want to wanted to specifically mention this because normally a question anyway comes on this health I think if you recall last year we had continued to see improvement in our health loss ratio and even compared to first quarter last year, our health loss ratio has improved. Our proportion of retail health in our total health portfolio is less than 10%. As you know, most of our business is group. If you actually take any company and take their loss ratios for retail and group together, you’ll find us in the maybe the best in class or in the top quartile or top 10% in terms of health loss ratios.
So I think this is something which is encouraging as and when we see opportunities of pricing discipline coming in, I think it’s an area which we would ideally want to grow. Fire loss ratios are similar this year. We have seen some flood claims in the first quarter, which normally is the summer season. Flood season is now. But overall things are fine. And fire and all other lines of business. And as I said earlier, a loss ratio in this quarter is similar to what it was last year, 17.3 this year compared to 70.5 last year. Going further, that was the last slide. I think we always cover IFRS slide. And here I would want to make, I would say 2, 3 comments here on the IFRS results. One is that if you notice this time we have actually mentioned the discount rate which we take in the notes. If you look at point number one, discount rates which we take and the discount rates are basically the risk free rate for each year on which you basically discount your liabilities.
Since the interest rates have gone down this year, the discount rate used this year is 6.3, which last year which as of March was 6.8. Which basically means as you increase your reserves, as you reduce your discount rate, your reserve liabilities actually go up. So discounting impact has become negative this year. 44 crores. But if you look at it on the unrealized gains on investments, because interest rates have gone down, your unrealized gains would have actually gone up. As we have always said that in IFRS results, the way we look at it is to basically look at profit before tax as per icaas, we add deferred acquisition cost to this because this is like a profit which will materialize coming here. And then we divide it by 25% tax completely and then divide it by net worth. So that is how we look at IFRS results.
But on the basis of IFRS 17 the ROE and all this is on a fully taxed basis has increased to 4.8% for the quarter. And this again is non annualized. And I think after the call etc. If people feel that there’s something else you would want us to know about IFRS results, please reach out to us and our investor relations department will be more than happy to give more disclosures to ifrs.
And this time again the suggestion came from one of the analysts that people don’t understand what the discount rate, et cetera is. So we decided to declare this. We would want to be as transparent as possible for IFRS 17. So please do reach out. We’ll be more than happy to give any kind of disclosure of IFRS results. And as you know, end of the year we actually get our IFRS results also audited by the same auditors every quarter. We don’t get it audited. It is essentially management certified. So that’s, I wanted to say the rest of the notes on Triangle etc is what you saw last time. So there’s really nothing new. They are only done on a once on a year basis. So with that I think happy to answer any questions which you may have. Thank you for listening patiently.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask question can press star N1 on the touchdown telephone. If you wish to remove yourself from question Q, you may press STAR into. Participants are requested to use answers while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Avinash Singh from MP Global. Please go ahead.
Avinash Singh
Yeah, hi, good evening. Thanks for the opportunity. So my first question is on reinsure, you know, retention that you’ve explained in detail yet. I needed some clarification because the 65% retention, I mean, is pretty kind of low and particularly in your context because traditionally you have been highlighting your strategy is to retain more. I mean because you have the understanding of a risk and you have capital. So this is going down. And even if you were to kind of consider that, okay, nearly 20% of fire is almost totally kind of seeded, yet it seems that the retention has gone down or has gone higher in other segments and on net. I mean in this case of that higher reinsurance cover.
Typically one would expect the commission expenses to be lower but the commission expenses are still staying higher. So if you can sort of try to explain has commissions gone higher in certain segments or how are you sort of accounting the inward commission? I mean you know, efficient commission. So basically you know the higher reinsurance impact on commissions and how all sort of accounting and particularly have you changed kind of a retention in motor odntp. So you know this is basically question number one. Second in more on sort of a strategy.
I mean of course motor TP you have been writing profitably but at the same time because of no price hike and all you have been kind of also voicing that now kind of, you know, with the claim inflation continuing the kind of, you know, the prices are getting gradually inadequate in many lines, not all but in many lines but now you have kind of accelerated a rising of motor PP and again we have seen no price hike and yet I mean that your claims ratio is increasing but not typically what I would say a typical claim inflation would be closer to 8, 9% kind of a thing in motor. Yet I mean without price hike your team’s ratio increase at least at this point looks lower. So what sort of a strategy on motor CP that’s working right now? Thank you.
Kamesh Goyal
Thanks Avinash. So first of all there is no session to reinsurers in motor. As I explained earlier the commission ratio has increased essentially due to increase in two wheeler business as you know. And you can see our 17th of February where we have shown how increase in two wheeler business impacts your expense ratio because five year premium, the premium earning or in the first quarter is very little while the expense of five year commission gets expensed out. So if you look at that 17-2-25 example you’ll be able to see what impact it has. And I have also explained that our two wheeler component in overall motor business has increased to 31%. So that is unconditional.
Our strategy on retention continues to be what it is which basically is to keep increasing retention over a period of. Now what has happened as I explained you that if There was a 2000 crore claim of fire business in the first quarter in 2324 we had also received that claim amount. Now I don’t remember the exact but in 2324 we had also received a claim of about 400 crores where we had I think 50% share. Our FHIR premium again going by my memory was about 800 crores that year. And if 50% means 2200 crores so one claim took 25% of our gross fire premium. So when we write corporate business and large risk.
Our object is that one or two very large losses should not lead to burning of the treaty. You have to ensure that your treaty continues to be profitable. So because of this and as I already said that in the first quarter the fact that we grew by 40% and the first quarter is essentially about large corporate business. We got some very good and large shares as leaders as and otherwise in lot of corporate accounts. And we felt that it makes sense for us to retain that business a bit less. As year passes by, the corporate business will reduce and more and more retail business will actually come up where we will have a higher session.
So there has been no change in strategy and it’s a first quarter and you may want to look at. I mean as you track the sector very closely how many companies have been able to increase the fire business by 40%. This will give you an indication that when large corporate business happens and you grow so fast, how do you diversify your book? Also becomes interesting. As for the tp, I think I have already said that our loss ratio is the same as last year. And in terms of absolute reserve release there is actually no difference. It’s exactly the same amount as first quarter last year which we have for first quarter this year. So reserve release is not which has reduced our loss ratio. Lastly, I think everyone knows in the market if we go back to January to March 2024 when we were actually doing the we just started doing the pre IPO meetings at that time we had reduced the third party market share quite a lot.
Now again last year if you look at in the first quarter the TP market share had actually reduced. Then over the period of time we saw a bit increase in the TP market share. And this year in the first quarter we have been able to increase the book. And all this is based on our understanding of what our underwriting guidelines is. What happens in the market we can’t control that. But what we write is based on our understanding. As of now we have neither relaxed our underwriting guidelines nor made them stricter. We continue to keep looking for opportunities in the TP business and if we don’t see we actually degrow also in the TP business.
Avinash Singh
Yeah, a quick follow up if I may. You’re now your group, I mean has got also the reinsurance license. So now what is going to be the kind of inward reinsurance extra react go digit does it remains unchanged or will large part of adding or rather in order will become a smaller portion of your business and go to it.
Kamesh Goyal
So avinash, we have three different CEOs, three different companies and three different set of shareholders. So I would expect we had a board meeting today. I think our board expects our management team to continue to look for opportunities inward facultative business. Because direct companies can only do facultative business. The reinsurance arm will have to focus on what they want to do. And our sense is that reinsurance companies focus more on the treaties. So first of all we don’t really see any competition. And secondly, as I said, all three companies are independent, different shareholders and different CEOs. Board as I said, has not asked them to say that you should not do this or you should do this because board also each board will look at what is good for that particular company. So just to conclude, we don’t expect any change in the strategy by digit General Insurance and how they write business. Whether Value Ethics has what do they do is up to them.
Avinash Singh
Thank you all the way.
Operator
Thank you. The next question is from the line of Sir Kasim from Ambed Capital. Please go ahead.
Supratim Datta
Thanks for the opportunity. My first question is on the combined ratio. Now I have to understand that you have indicated that we should not be looking at the IRDA prescribed combined ratio. But even if we look at the combined ratio based on nep, there has been a sequential increase in the combined ratio. Now I do understand that’s been happening because of the mix. But if I’m looking more medium term, wanted to understand that, you know, how are you looking at reducing this from on any basis now around 110 to maybe around 105 or lower, you know, what is the strategy and how should we see that play out over the next one, two or three years? And if you could give us some color on that, that would be helpful. Now on the second question now recently Allianz has formed a, or is in the work of forming a 5050 GV on the reinsurance side with Chio. Wanted to understand that, you know, how does that impact, you know, some of bodigit reinsurance treaties or facilities that they have, you know, and so if you could give us some color on that, that also will be very helpful. Thank you.
Kamesh Goyal
So thanks. So maybe let me answer the Allianz JIO jv which is happening on the reinsurance side. I think they had informed us when the news came. They have told us that from their perspective they would want to continue the relationship and as we discussed in February March renewal, February, March 26 renewal for next year we will sit with them and discuss. Having said that, our reinsurance arrangement with Allianz as a leader is for three years. So next year would be the third year in this arrangement. So ideally based on the contract, neither them nor we actually can change anything based on what they have told us. Our personal assessment is that reinsurance business would not really change our relationship with them in any manner.
Lastly, I would also say that I think each year and this year I think for example in FHIR we move from 19 to 21% in retention every year we try and increase the retention. So over a period of time it should not be too far in the future we should have the highest retention in fyre business and lead reinsurer would at best be equivalent to us. So no impact of that as of now on the combined ratio I think if you look at on the NEP basis it has gone up slightly and again two reasons on Indian combined because if you look at ifrs you can actually see our deferred acquisition cost has actually increased from 52 crores to 107 crores. But in this case in NEP why it has increased is one, I already said that our two wheeler business has increased a lot.
This obviously increases the commission output claims have not really changed. You’ll see that the management expenses have actually slightly reduced. And secondly also though it is only for first quarter but lot of corporate business is written on 1st of April. So when retention is less in the first quarter that still you see an impact of three months in the NEP calculation. Other than that we have not really seen any real change. Lastly, to a smaller extent our bank assurance business which is attachment business has also increased in proportion which obviously also impacts cost a bit. So overall this is really the answer to this. As you know we don’t really talk about what the future combined ratio etc. Is.
But again I think you have to really see what the play on the management expenses is commissions we already said and I’ll maybe repeat if you look at line by line commission ratio say of motor of other companies and on 17th of February we had also declared this compared it with one of the companies, there’s actually not much difference in acquisition cost of different companies. So loss ratio and management expenses is what is more in your hands. And there you can see a trajectory of the last two years, three years, whatever you may want to say. But thank you for your question.
Supratim Datta
Thank you. Just one follow up. So you know, given alliance would be the reinsured, they would be getting the data from you. So you know, how do you now plan to segregate that? Keep that aside.
Kamesh Goyal
So I think we continue to send them the same data because data doesn’t have any names so nobody can identify risk as to which risk we are writing, which we are not underwriting. And as I also said, maybe I should repeat that in our case we decide what risk to write, at what rate, et cetera. Allianz doesn’t have any access to any of the data, which we do. Secondly, I’ll also say this having worked there for a long, long time, if Allianz will tell us and they’ll be happy to do this in writing that reinsurance and direct data is not shared and I know it is not shared and if somebody signs this as a part of the contract, we would anyway have no concerns.
But as of now we don’t share with them any data which is about individual risk and things like that. We are the only company where Allianz Reinsurance is a leader. They have been with us from day zero. Our combined ratio has been very good. We probably would be amongst there. I don’t have figures for others but in Asia we would be the top two or top three most profitable direct players. If I am on their side, I would actually be concerned that how do I retain digitized by rather than have been on the digit side and be worried as to what they would do.
Supratim Datta
Thank you.
Kamesh Goyal
Thank you.
Operator
Thank you. The next question is from the line of Prayesh Jain from Motila Lusal Financial Services. Please go ahead.
Prayesh Jain
Yeah, on the next of two wheeler going up structurally, how has been the trend with respect to loss ratios of two wheeler passenger car and commercial vehicles in the last two, three years? Various parameters around quality of vehicles going up, quality of roads going better. But on the other hand the value of the vehicles have gone up which could lead to higher claim cost. This structurally helped us understand how has how are things changed between three years back to today in different categories of vehicles?
Kamesh Goyal
Sure. Your voice was but I think you want to understand as to how the mix change is leading to the change in the loss ratios, etc. Maybe I’ll two, three things in if you look at motor and if you go back five, six years before motor was, and some of this I’m now giving, not some, I’m giving all these numbers from my memory. So could be a bit up and down here. Motor used to be 75% of our total premium. Last year motor reduced to about 57 within motor of 75%. More than 2/3 of the business used to come from commercial vehicle. Now last year I think we already said this, that our mix and this again I’m giving by memory was within motor was about 39 or 40%, was private car 29% I think was CV and about 29% was about two wheeler in the first quarter.
As I already mentioned, two wheeler is 21, 31, CV is about 28 and private car is now the largest 41. And within that also we also spoke about how industry mix is 40% OD, 60% TP and for us it is 37 and 63. So there is not really much difference. Secondly, I will say within motor we look at overall business. So where as I already said in the initial remarks that when we are writing a comprehensive policy, we look at profitability of OD and TP combined and we look at loss ratio plus commission ratio at all times from our ROE perspective. So we don’t really drive only loss ratio, we not only drive only commission, we look at a combination of both and then look at what makes sense from a ROE perspective. As for other lines of business, I think if you look at last six, seven years of our fire and other lines loss ratio, you will actually see that loss ratio is very steady.
And even if for last year, those last year has not fully matured, even if you look at last year with the premium rates etc. Had fallen and loss ratios are pretty okay, health loss ratios had gone up 23, 24 which reduced last year. And as I already said, if you look at a mix of retail and group, we should be amongst the best companies even on a health loss ratio. So this is something which one has to look at on a continuous basis from a ROE steering perspective. I think predicting loss ratios in future is like predicting the stock market. I think we don’t do either, we don’t predict either the loss ratios or this, but our focus is to deliver a decent ROE to our shareholders and you can actually see how we can move. Our company can move from fast growth if we see opportunities on a quarter to quarter basis.
And Commercial 9 is a good example in the first quarter if Motor opportunity comes. In the past we have seen us when nobody would write TP that we would write a lot of tp. When everyone started writing tp, we let go TP also. So we don’t have a strategy to say we will do this, we will not do this. Our strategy is wherever we see opportunity will go whole hog. If we don’t see an opportunity, that is fine too. We go and find it somewhere else. And despite all these circumstances, we are still able to grow more than the industry.
Prayesh Jain
Second question is, in the health segment, you know where you alluded to the fact that, you know the pricing segments have to come back, but has it come back? And do you think that, you know, it would be like this year given that UN regulations are still yet to be met this year, the pricing pressure will continue. And probably early next year the conference might come on the brutal pricing
Kamesh Goyal
. Sorry, I have not been able to hear you at all in this. What exactly? Maybe I don’t know if you’re speaking too close to the microphone, but your voice is echoing when we are hearing.
Prayesh Jain
I don’t know if somebody else has. Is this better? You could understand it. Hello. Is it better, sir?
Kamesh Goyal
Yeah, now much better.
Prayesh Jain
Yeah. So what I was asking was, sir, in the health loss in the health segment, you alluded in the opening remark that the semblance has to come back in terms of group health pricing. Do you think that this is still a year away or, you know, at least this year you might not see that given that, um, regulations are still yet to be met by quite a few companies and only next year probably will see some semblance coming to the pricing or how do you see the trends happening there?
Kamesh Goyal
As I said that companies which were aggressive last year are not aggressive this year. Secondly, honestly, we don’t really try to guess this because we are continuously quoting for this business. The day our conversion ratio starts going up, we know there is some improvement in the market in terms of pricing, our number of quotes we are giving, the premium for which we are quoting, all of that is on an increasing trend. The only trend which is reducing is conversion ratio. And as pricing increases, the conversion ratio automatically improves. And that will be a clear sign to us that the market is turning. So instead of actually thinking about when will it change and try to predict, we just keep quoting and whenever market improves, we start seeing growth.
Prayesh Jain
Right? But we haven’t seen any trends reversal in your conversions yet, right?
Kamesh Goyal
As I said, one or two accounts we have seen but broadly no.
Prayesh Jain
All I said that’s all from my side. Thank you so much.
Operator
Thank you. The next question is from the line of Nitesh Jain from Investec. Please go ahead.
Nidhesh Jain
Thanks for the opportunity. The first question is again on retention. So you mentioned that some of the business that we retained last quarter we should have seeded and we seeded that in this quarter. So can you give some more context to that? And secondly why are we seeding the two wheeler business? That I think is quite granular and we can keep that on our balance sheet.
Kamesh Goyal
So Nitesh, I thought I said that in motor we have not done any reinsurance. So I don’t know where did you hear that we have done reinsurance two wheeler business. Again just to repeat we will have 4% session in motor to GIC. The rest we retain. So no change in strategy on that at all. On the corporate side I also tried to explain that when you get and I’ll take now say specific example, obviously no names. So this year we have written lot of power plants, some as a leader also now in power plants, fire risk, if it’s a thermal plant etc. Fire risk could be a bit less. But you could have always machinery breakdown claims.
Now we have seen a lot of these machinery or turbines are manufactured by one manufacturer in India from they’re imported from one particular country. Any delay in spare parts, things like that can significantly increase your loss. So as I explained that in case of a digit Also we saw 400 crore roughly claim in 2324 our retention was 50. It was 200 crore claim. One claim which was equivalent to 25% of the yearly fire business. Now when you look at diversification you also have to see it from a reinsurance and treaty perspective that one or two large claims don’t burn you. The slowly and steadily more experience you get, more you try and diversify the book.
Now I also said this. This year when the fhir growth for us is strong we also have got larger shares in some of the risk and we decided that due to risk diversification it will be better if we retain less. I also said that nitesh that as we go forward our expectation is that our retentions will increase. We would expect us to definitely come back to last year’s retention because overall our retentions have increased by 2% and if retail business proportion increases then the retentions will further go up. So this is just 1/4 which it is happening now what exactly we see then water philosophy is as I said it’s just based on diversification and not taking a concentrated debt on the a risk to maximize your reinsurance commission.
Because as everyone knows that our treaties are fairly large in terms of capacities, they are fairly flexible in terms of underwriting, guidelines, etc. So we from day zero of philosophy has been to try and preserve this flexibility and the size of our TT capacity which as I said again we increased this year. I don’t think any amongst the larger players anyone would have increased and not to go for maximum reinsurance commission. That is not part of our strategy.
Nidhesh Jain
Sure, understood. So second question is on EOM limit. So with the rising share of two wheeler and strong growth in two wheeler business, how should we see the EOM limit which I think we have to comply by the end of this year.
Kamesh Goyal
So on the eom I had tried to cover this in my first call and I’ll repeat some of the things I said. First of all, I think the intention of IIDA to reduce the cost of insurance which overall cost of insurance for customer is very, very good. The idea, their objective of bringing EOM guidelines was to reduce these expenses. What we have seen in the last two years is that overall expenses have actually gone up instead of going down. The challenge is essentially in each line of business because even if you look at larger companies last year almost all of them would have seen a decent increase in their expenses of management. And you should look at top four companies to see that they also saw increase in their overall eum.
Digit probably would be one of those exceptions where the overall EM went down. The challenge is that present EUM is an overall business. If it becomes for each line of business then the impact of guidelines will be there. As far as digit is concerned in the glide path. I think we had given the full glide path nitesh in the first quarter of first year and second year. We also know that in the last year from post October the calculation for GWP was also changed. Now we’ll again brief you on how we are going on the UN on that basis and on management expenses. We are the industry best.
So it’s not that we are spending money on ourselves. Commissions are driven more by the market and as I said iida my assessment is IADA will not let the present guidelines to be in this shape which have increased the overall un. My sense is two years have happened, they will see what is happening and they will take corrective steps to achieve the objective of reducing this purely, purely in digit. We had said this also times management tells the board that they don’t write any business purely from an EOM perspective. If it is loss making, if it is profitable, they definitely write that business.
And whatever the market commission is, they pay that. So EOM as of now from a business clearing perspective is not in this shape. Management team is definitely under I would say strong guidance of the board that the management expenses which is in their hands should not increase. So that is something which has to keep reducing which where I think as I said our management team has demonstrated in the year five or year six when the EM guidelines came and the management expenses and equation cost have become separate that our company has the best in class management expenses and erm. Includes both.
Nidhesh Jain
Yes. Thank you sir. That’s it. From my side. Thank you.
Kamesh Goyal
Thank you.
Operator
Thank you. The next question is from the line of Deepanjan Ghosh from Citigroup. Please go ahead.
Dipanjan Ghosh
Hi sir. Good evening. Just few questions. One, you know the retail side of the businesses. If you kind of go line by line across products or channels and then look at the gross commission ratio on a more subsequent or sub channel basis. How are each of these channels or products have been behaving in a more granular fashion. And are you seeing improvement in the overall commission ratio numbers across the industry in any such specific product for distribution cohort output? Second, on the group inside of the business, two questions. One, if you can get some color on the piece of business between larger corporates and smaller corporates where is the comparative intensity? Still elevated. And you mentioned on the benefit base businesses. Again when you can just quantify the growth number. Those are all.
Kamesh Goyal
Sorry, growth number for what?
Dipanjan Ghosh
Dependent for the bank based. I mean the defined benefit business on the bank channels.
Kamesh Goyal
Sorry, your voice is not clear here, Deepanjan.
Dipanjan Ghosh
I basically was trying to understand the growth in the non employer employee group health business.
Kamesh Goyal
Sure, sure. So non employer employees roughly about 20% of our group business. And there the growth rate is I would say significantly more than the non employed employee which is actually degrowing. Secondly, on the small corporate and large corporate. We are growing on both. Dipanjan. But retail business is lot more fragmented. It comes every month. We have started seeing decent increase in conversion ratio in retail already from January. But this increase will happen over a period of one year. So as the pricing came within our range of risk appetite, we started seeing significantly higher increase.
In case of retail property business or retail corporate business, larger port rate obviously is more driven around first quarter. As for commissions etc. I think at a broad level because each even within the motor or retail lines, two wheeler commercial vehicle within commercial vehicle, goods carrying auto rickshaws, all of that are very different dynamics. What we can say is that commissions are quite high in motor business when it comes to say auto rickshaws or it comes to school bus or it comes to I would even say goods carrying vehicles up to two and a half ton. But commissions on comprehensive high tonnage vehicles. So if you go above 40 tons, comprehensive cover for goods carrying above 40 tons, we have seen a bit of a pullback in that.
But you could also have some geography related issues there. But depend on all this has been happening for some years already and this is what the way forward is. So when we think about the business, whether it is motor or retail, non motor also, especially commercial lines, fire engineering, etc. We obviously try and steer it based on what our preferred risk are and for each risk what the expected loss ratio is. And if you add loss ratio plus commission, where you are likely to lead. Now we have seen some increase in some cases where I think things have started coming within our band and we are seeing growth. And while at the same time in TP would have degrown in one or two segments also where market maybe became a bit more aggressive compared to where we are.
So this is something which will keep happening. But again going back by my senses, for three years there has not been a meaningful increase or no increase at all in third party business. So companies which had become aggressive in TP business at this stage in 21 and or 22, 23, my sense is sooner rather than later as their losses start developing. I would expect in the next 12 to 18 months some semblance of this has to come. Last year I think couple of companies have seen results strengthening in TP. And as we go forward, I believe this year one company has done it in the first quarter. So as we see some of these trends emerging, my sense is people will start realizing and taking corrective action on the TP business also. Exactly when I have no idea.
Dipanjan Ghosh
One small follow up. The reason I asked up segment and sub channel is, you know, while the public projects will be out in some time, it’s fair to assume that you know on a YY basis your gross commission numbers are marginally down.
Kamesh Goyal
Gross commission numbers are down.
Dipanjan Ghosh
The flat is to down.
Kamesh Goyal
No, I’m not really able to. I think maybe you might have to speak a bit away from the mic or remove you from the speakerphone. Deepanjan,
Dipanjan Ghosh
I was asking that on a yoy basis. If I compare 1Q to 1Q would it be fair to assume that your gross commission ratio is flattish to down? No. I think you should again see it on the each line of business.
Kamesh Goyal
The results will be up soon. My sense is that in motor and again I’m not seeing it line by line. It’s not right now with me in motor it might have increased because of two wheeler mix. And Deepanjan, you might again remember this was discussed on 17th of February that two wheeler typically has the highest commission ratio then CV and then so as this mix changes that will also change. But this again has to be seen in line with the loss ratio in commercial business though the premium rates have increased compared to last year in fire engineering etc. Overall I would say the commissions wouldn’t have increased much. 1% here and there could happen. But we have not really seen increase in commission because reinsurance commissions, etc. For the industry have been more or less flat.
Dipanjan Ghosh
Thank you sir. All the best. Thanks.
Operator
Thank you. Maybe we can take one last question. Anshiman. Okay sir, if somebody else has has a question. Yeah. The next question is from the line of Devansh Panjavi from Banyan Tree Advisors. Please go ahead.
Divij Punjabi
Yeah. Hi. Thanks for the opportunity. I just had two questions. One was on the side of investment philosophy that we have in the equity investments. So just wanted to understand how we think about equity investments as this has increased as a percentage of the overall investment book. And second is I think in the last few quarters we had mentioned that in the commercial lines of other commercial lines of business we are experimenting in certain new lines. So just wanted to understand the strategy over there, medium to long term and if you can just comment on what is driving growth over there.
Kamesh Goyal
Thanks Dinesh. So in investment equity we feel that taking equity to 10% of the set allocation is definitely desirable. And if you see from December 31, 2024, our equity allocation, if I remember often was about 3.4 3.5%. This increased to 6.4% as of 31 March. After 31 March in this quarter, as overall assets AUM has increased, but the asset allocation has remained more or less stable. So 6.4 and 6.3. But 10% is something which we definitely want to do. And also suggested that why? What is the pros and cons one will have to look at when you go beyond 10. And the idea is if you prepare for a stock market, if it drops by 2025 percent, the losses will pass through your solvency. So if you go above 10% then you should be prepared to hold lot more capital to maintain that volatility. And beyond 10, 11% one will have to look at what the play will be on excess capital which you will hold and how this will impact your roe.
Lastly, I think our philosophy on equity is that equity is cherry on the cake. It is not the cake for us because we are not nobody is giving us money or capital to run an alpha sort of a scheme. What we are trying to do is run an insurance company. If equity and debt have a difference of 5% over five or 10 years in terms of yield and we are at 10% in terms of our asset allocation, it can give us half a percent additional yield. That is how we look at equity till 10%. Once we reach that number, then obviously, as I said, we’ll revisit as to what the capital requirement is and what our expectation is. But as of now, that is how we want to see our investment philosophy on the commercial lines. I think right now we are writing fire engineering.
Engineering is essentially projects where we are seeing good traction in power projects. A bit on the roads, but not much beyond. The third is marine. Where I said this book is not really growing much. Fourth is liability. Liability is something which we are growing well in terms of D and O cyber public liability has become compulsory. There were some changes in the Public Liability Act, a bit on the surety bonds. So this is something which we are already doing on this. So our focus is to really drive this commercial line. Thanks Dinesh.
Operator
We’ll take last question. I think Sanket has messaged us that he has a question. So we’ll take from him as the last question. And please be in touch then with the investor relations team. We’ll be happy to answer any questions that you may have on the results. Sanket, you may want to go ahead. Thank you. The last question is from the line of Sanket Goda from Evindis Park. Please go ahead.
Sanketh Godha
Thanks Kamesh. Thanks for the opportunity. Your absolute opex. If I see outside commissions it has declined by 10 percentage year on year. I just wanted to check whether they still juice left over to optimize on the non commission OPEC. Because there is a huge divergence means 12% growth and 9 10% decline in the OPEX. If you just wanted to understand how much juice is left over and what impact it should have an improvement in the OR going ahead. So that’s one thing. And the second question I had is on the reinsurance accepted number it Is due by 47 percentage to 475 crore. Just wanted to understand the color in which these segments have grown. Whether it is the same higher or there are other opportunities which led to this growth. And even in second half last year you did lot of help in reinsurance acceptance. Whether it can and also to some extent crop those numbers can be repeatable for the full year or not. Those are two migrations.
Kamesh Goyal
Thanks Sangeet. On the management expenses, if you look at then the growth is coming due to price hike. So basically in commercial if you see in fire business and I’m just giving a number this is the premium rates would have gone up by between 50 to 20% for example. So your management expenses have actually not increased but the price increase has happened. This obviously will reduce the management expenses. And if the same thing happens in motor, the same thing will get repeated in motor also. So whenever the price hike happen, good companies should see reduction in the management expenses.
Secondly and I think I am looking at a CEO also saying this, I think management expenses are a bit high so they should try and reduce it further. But on the other point which was relating to reinsurance accepted et cetera, what happens is when the premium rates go up. So suppose last year there was a risk with a premium rate of 100 rupees. Now we were accepting 10% of that which becomes 10 rupees now our capacities have gone up this year. The risk is good and the premium rate now has become instead of 100, say 125 or 120 and we have actually taken instead of 10%, 12% so the premiums actually increased by 40% in that risk because the increase in premium rate and increasing capacity. So that typically will play out more on the property side in this.
But as we go through our results in detail and go line by etc. We can, we’ll be happy to have a discussion around that. Fundamentally there has not been any change either in our reinsurance acceptance or in our reinsurance session at all. I would just request everyone to just keep in mind when you grow so fast, especially in one quarter which is coming from large corporate business and you know that getting entry into large corporates becoming leaders is not easy. In fact some of you in our discussion have said that you feel how a new company can go and become leaders in that.
So all this actually is showing that we are really getting into this. My personal. This is no guidance. My personal wish is that we should be a top 10 insurer. Even in Fyre there’s no reason for us not to be in the top 10 in gross written premium. High time I think for us to get in there and I think Jaslene is listening to this.
Sanketh Godha
That answers my question. Thank you very much.
Operator
Thanks everyone for joining the call. Appreciate your time and patience and look forward to continuously staying in touch. Anything else you want us to do on the IFRS results? I don’t want to take a name but somebody one of the people had analyst had said that we should share more information. Anything you feel we should be doing, you can rest assured that we’ll include it in our second quarter itself. Transparency is our core value. Whatever we can talk give transparency in our results, we’ll be more than happy to do that. Thanks again for joining us. Good night. Thank you. On behalf of ICIC securities limited that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.