Release Date: October 18, 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 GDPI growth of 10.4% in Q2 FY25, significantly outperforming the industry growth of 2%.
- The company's motor segment registered a robust growth of 16.1% in Q2 FY25, compared to the industry growth of 6.2%, maintaining its market share leadership.
- The health segment grew by 12.3% in Q2 FY25, driven by a 41.4% growth in the retail health segment, surpassing the industry growth of 17.7%.
- Investment income increased to INR 22.52 billion in H1 FY25 from INR 18 billion in H1 FY24, reflecting strong investment performance.
- Profit after tax grew by 31.7% to INR 12.74 billion in H1 FY25, demonstrating strong financial performance and profitability.
Negative Points
- The commercial lines segment experienced a modest growth of 1.2% in Q2 FY25, lagging behind the industry growth of 2%.
- The combined ratio increased to 104.5% in Q2 FY25 from 103.9% in Q2 FY24, impacted by catastrophic losses.
- Banca business declined by 2.6% in Q2 FY25 due to lower credit disbursement growth from key partners.
- The group health employer-employee segment showed only a 1% growth in Q2 FY25, a significant drop from 34.6% in Q1 FY25, due to increased competitive intensity.
- The motor industry's combined ratio worsened from 121% to 125.6%, indicating increased loss ratios and expense pressures.
Q & A Highlights
Q: The net commission rate for the quarter seems elevated compared to last year. Is this due to higher sales in the retail segment or a change in commission structure? Also, will the combined ratio guidance of 101.5% for Q4 '25 hold despite catastrophic losses?
A: The net commission ratio is influenced by the business mix, with growth in profitable segments like motor and retail health. We remain committed to managing expenses within a 30% limit. Despite the impact of catastrophic events, we maintain our guidance for the combined ratio, monitoring industry trends closely.
Q: Can you provide insights into the growth in the motor segment, particularly the new versus old business, and the outlook for H2?
A: In Q2, new business growth was flat, while the renewal book grew by 26%. We expect single-digit growth in vehicle sales for H2, driven by festive season demand. Despite muted industry growth, we remain optimistic about leveraging our distribution and service strengths.
Q: With industry combined ratios worsening, how sustainable is ICICI Lombard's performance in the motor segment? Also, is there any regulatory action expected regarding expense and commission ratios?
A: We focus on risk selection and efficient customer service to maintain performance. While industry ratios have worsened, we expect regulatory actions to ensure compliance with expense norms, though the timing is uncertain.
Q: Can you explain the factors behind the improvement in motor OD loss ratios and the sustainability of the TP loss ratio guidance?
A: The OD loss ratio improvement is due to effective claims management and leveraging our TPA network. We aim to maintain a motor loss ratio between 65% to 67%, with TP at 65% to 70%, despite no recent TP price hikes.
Q: What is the impact of rising CAT losses on reinsurance pricing, and how might this affect the industry?
A: CAT losses may lead to higher reinsurance pricing, prompting the industry to adjust pricing strategies. We expect disciplined market behavior to emerge, benefiting companies with strong risk selection capabilities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
