ICICI Lombard General Insurance Company Limited Q4 FY24 Earnings Conference Call Insights

Key highlights from ICICI Lombard General Insurance Company Limited (ICICIGI) Q4 FY24 Earnings Concall

• Auto Industry Trends
  • Private car sales robust at 4.2 million units, aided by improved supply and sustained demand.
  • Shift in customer preference towards SUVs, contributing 49% of private car sales.
  • Two-wheeler sales grew 25% in Q4 FY2024 to 4.5 million units, surpassing FY2020 levels.
  • Commercial vehicle sales at 1.7 million units, driven by infrastructure and core sectors.
• Health Insurance
  • Remained the largest product segment for the industry.
  • Group health business primarily drove growth in number of lives covered.
• Industry Performance
  • General insurance industry GDI growth of 12.8% for FY2024, 14.8% excluding crop and mass health.
  • Industry combined ratio improved to 112.2% for 9M FY2024 from 116.2% in 9M FY2023.
  • Motor combined ratio improved to 118.2% for 9M FY2024 from 121.9% in 9M FY2023.
• Regulatory Changes
  • Denotification of tariffs, allowing insurers to design products based on underwriting policies.
  • Revised compliance and measurement of rural, social sector, and motor third-party obligations.
  • BIMA SUGAM digital public infrastructure for insurance democratization.
• Strategic Partnership
  • Announced strategic tie-up with PolicyBazaar.
  • Aimed at leveraging strengths of both institutions to create superior customer value proposition.
• FY2024 Financial Performance
  • Gross direct premium income (GDPI) grew 17.8% to INR247.76 billion, higher than industry growth of 12.8%.
  • GDPI growth excluding crop and mass health at 17.1%, higher than industry growth of 14.8%.
  • Q4 FY2024 GDPI growth of 22%, higher than industry growth of 9.5%.
  • Motor segment GDPI grew 12.3% to INR96.34 billion in FY2024.
  • Health segment GDPI grew 29.1% to INR61.71 billion in FY2024.
  • Profit before tax grew 21% to INR25.55 billion in FY2024.
  • Profit after tax grew 11% to INR19.19 billion in FY2024.
• Future Focus Areas
  • Leverage multi-product, multi-distribution strategy through effective data utilization, digital advancement, and new product launches.
  • Focus on scaling up profit pool while continuing to grow as OneIL OneTeam.
• Growth Outlook
  • Health segment expected to drive majority of growth in FY2025 and FY2026.
  • Growth in health segment likely to moderate from over 25-30% levels witnessed previously.
  • Regulatory reforms, government’s infrastructure push, and job creation to aid growth opportunities across segments.
• Motor TP Reserving
  • Higher reserve releases observed in accident years 2018-2020 from motor TP segment’s reserving triangles.
  • Reserving philosophy remains unchanged; loss experience guided to be in 65-70% range for motor TP.
  • Risk selection to be driven by lack of motor TP pricing increase so far.
  • Aim to maintain the TP loss ratio in the range of 65-70% on a full-year basis.
• Combined Ratio Outlook
  • Q4 FY2024 combined ratio at 102.2%, targeting further 50 bps improvement to 101.5% for FY2025.
  • Factoring in increased frequency of catastrophic events while providing combined ratio guidance.
  • Exceptional catastrophic event impact in FY2024 higher than factored.
  • Directionally aiming to reduce the combined ratio over time.
  • Optimistic based on early signs of improvement in the market’s combined ratio, particularly in the motor segment.
• Motor Third-Party (TP) Regulations
  • New regulations seem more stringent than the previous regime.
  • Company is confident of fulfilling the obligations under the new norms.
  • As a multi-line, well-distributed franchise, the company believes it can achieve the regulator’s objectives.
• Synergies from Integration
  • Excited about potential synergies from the integration of businesses.
  • Expects benefits in terms of top-line growth and cost control.
  • Overall performance and efficiency will be reflected in the quarterly results.
• Health Loss Ratios
  • Group Health Insurance (GHI) loss ratio for Q4 FY23: 93.2%, and for Q4 FY24: 88.1%.
  • Full-year GHI loss ratio for FY23: 95.2%, and for FY24: 93.7%.
  • Retail health indemnity loss ratio for Q4 FY23: 61%, and for Q4 FY24: 64.6%.
  • Full-year retail health indemnity loss ratio for FY23: 64.1%, and for FY24: 65.4%.
  • Comfortable operating in the 65-70% range for retail health loss ratios.
• Capital Utilization
  • Operating at significantly higher solvency ratios and improved ROE (17-18%).
  • Considering better utilization of capital while maintaining a prudent approach.
  • Growth opportunities and consumption of capital will depend on the transition to risk-based capital regime.
• Distribution Channel Investments
  • Committed to expanding across multiple distribution channels, including dealerships, agencies, digital, and bank partnerships.
  • Significant focus on growing the agency channel, particularly for retail health and motor segments.
  • Digital channel contribution currently at 6-7% of overall revenues, with strong year-over-year growth.
  • Continuous investments planned across all channels, with digital expected to gain maximum traction.