Key highlights from ICICI Lombard General Insurance Company Limited (ICICIGI) Q4 FY23 Earnings Concall
Management Update:
- [00:04:22] During 4Q23, ICICIGI said it experienced robust growth in its commercial lines segment, driven by a 15.9% increase in the SME segment.
- [00:05:17] ICICIGI’s motor segment saw a de-growth of 11.5%, while the health segment grew at 31.1%. The company’s retail health insurance premiums sourced through the IL TakeCare app grew by 50.4% QonQ.
- [00:08:26] ICICIGI said its gross direct premium income for FY23 was INR210.25 billion, a growth of 17% against the industry growth of 16.4%. On the retail side of the business, GDPI of the motor segment grew by 3.7%, excluding the one-off transaction.
Q&A Highlights:
- [00:13:18] Swarnabha Mukherjee of B&K Securities asked what has caused the degrowth in motor premiums, and is there an adverse one-off impact for motor TP in 4Q23. Gopal Balachandran CFO said the motor own-damage growth numbers are in line with industry trends, ICICIGI is writing motor insurance through a combination of new and older segments, and the current year’s motor third-party loss ratio stands at 72%.
- [00:17:09] Swarnabha Mukherjee of B&K Securities enquired is there an impact on the one-off transaction due to the higher commission ratio in 4Q. Gopal Balachandran CFO replied the commission rate is not one-off, but the amount of commissions received can vary from quarter to quarter depending on the performance of certain portfolios.
- [00:18:58] Avinash Singh from Emkay Global asked if a customer renews their health insurance policy directly, are they entitled to the benefit of a direct distribution. Bhargav Dasgupta MD answered that the regulator is making insurance regulations more principle-based and giving companies more flexibility in how they manage their business, including offering lower commissions on online policies. It’s too early to tell how the market will adjust, but it gives companies more freedom in planning their strategies.
- [00:20:15] Avinash Singh from Emkay Global enquired why does the reported 31% expense of management not match up with the close to 4% of gross premium charged to shareholders account. Gopal Balachandran CFO replied that the expense of management ratio for 4Q and FY24 is within the threshold of compliance set by the regulation. However, INR900 crores is reflected in the P&L disclosures due to the requirement of the regulation that excess expenses must be separately disclosed as part of the P&L numbers.
- [00:29:07] Prayesh Jain from Motilal Oswal asked that when the one-off transaction happened in Feb., where the income from it is listed. Gopal Balachandran CFO said the one-off transaction in 4Q will be reflected in the overall underwriting result when viewed in aggregate.
- [00:29:18] Prayesh Jain from Motilal Oswal asked if there is any seasonality in motor TP loss ratios. Gopal Balachandran CFO clarified that there is no seasonality to motor third-party loss ratios due to a Supreme Court judgment.
- [00:29:54] Prayesh Jain from Motilal Oswal enquired about the decline in the costs of advertising, publicity, sales promotion, and employee remuneration and what cost is expected next year. Gopal Balachandran CFO said that ICICIGI plans to reduce its overall cost from 104 to 102 over the next two years by looking at every element of cost, such as costs of doing business and investments. The company continues to make investments in its health agency platform, digital projects, and technology transformation projects.
- [00:33:46] Shreya Shivani at CLSA asked if the reinsurance added to gross direct premiums higher in 4Q seasonally. Bhargav Dasgupta MD replied that reinsurance inward may be affected by seasonality, but profitability and growth should be kept in mind when making decisions.
- [00:35:57] Nidhesh Jain with Investec asked about the combined ratio and the impact of the one-off transaction on the combined ratio. Gopal Balachandran CFO said the transaction had no material impact on the overall combined ratio as it was commercially viable.
- [00:36:09] Nidhesh Jain of Investec enquired about the health agency GDPI in absolute terms for FY23 and 4Q23. Gopal Balachandran CFO said the total health GDPI for FY23 was INR47.82 billion and for FY22 it was INR34.87 billion. The health agency GDPI for FY23 stands at about INR5.6 billion.
- [00:38:35] Madhukar Ladha of Nuvama asked if the investment income in Q4 improved significantly and did the drop in unrealized gains from INR550 crores to INR213 crores between Q3 and Q4 result from an increase in realized gains in this quarter, leading to a strong investment income performance. Gopal Balachandran CFO said there was a slight increase in capital gains for 4Q23 compared to 4Q22, due to higher interest rates.
- [00:42:40] Supratim Datta from Ambit Capital asked about the investment opportunities ICICIGI is looking at in the retail health side. Bhargav Dasgupta MD said the company has made investments in health retail this year and are seeing positive results. ICICIGI plans to keep investing in this area, and may look into acquisitions if it provide with access to a new distribution or business at a reasonable price.
- [00:43:04] Supratim Datta from Ambit Capital queried about the URR ratio for FY23, and how it should be interpreted in comparison to previous years. Bhargav Dasgupta MD said URR is mostly a function of earning premiums over the contract period. It may be affected by seasonal businesses and cyclicality, but there are no one-offs that affect it.
- [00:50:21] Sanketh Godha at Avendus Spark asked about the retail and group health loss ratio for 4Q23 and FY23. Gopal Balachandran CFO said the health GHI and retail indemnity loss ratios for 4Q were 93.2% and 61%, respectively. On a full-year basis, the ratios stand at 95% and 64%. Price increases are applied to renewals, though future losses must factor in health inflation. It is expected that the retail health indemnity book will operate with a loss ratio range of 65-70%.
- [00:52:36] Gaurav Singhal from Aspex Management asked about the avg. maturity for the investment book. Bhargav Dasgupta MD clarified that at the end of FY23, the duration of the book was 4.99 and the yield was 7.2%. This was slightly lower than what it was at the end of nine months because some money was sitting in cash instead of being invested in long duration bonds.