ICICI Lombard General Insurance Company Limited (ICICIGI) Earnings Call Transcript & Summary

I think just to kind of give a quick overview of the sector, while the sector has been at the hands of private companies for the last 23 years, but the existence of this sector has been for the last 6 decades plus because, largely, it has been at the hands of 4 state-owned companies who have been there for the last, as I said, 6 decades, but largely in the hands of private space for the last 23 years. If you look at, ICICI Lombard entered the space pretty much around the time when it opened up to private participation. But we were #6 to get a license in the private space when we started operations. But by the year 2004, we gained private market leadership, and that's a position that we have held on for the last 19 years as we speak. Not only have we been able to retain private market leadership for the last 19 years, over the last few years, we have been able to now get to a #2 position in the overall market, unlike #5 when we were there, as I said, when we attained market leadership on the private side, so #2 in the overall market. With the rough market share of about 8.2%, 8.3% in terms of premium and if you look at the market, they roughly have about close to about 30, 31 players who either entered the market around the time of 2000, 2001 or entered the market largely around 2008, 2009, which was a time when the market was deregulated from price for most of the lines or some of them entered the market over the last 5, 6 years. So in all, roughly about 30, 31 players who are operating in the market. If you look at the overall market size in terms of premiums, roughly, I would say, anywhere between USD 30 billion in terms of overall revenues. Four key revenue streams that the market operates at is motor, health, commercial lines, I'm putting all the corporate insurances into one basket of commercial lines, and maybe crop insurance. Those are the 4 key lines of revenue streams for the overall industry. Motor insurance, by far, used to be the largest contributor for the last, I would say, 21 out of 23 years. They, in the past, contributed to almost about 40% to 45% of the overall industry revenues. But over the heightened competitive intensity in the last few years, the share of motor has come down closer to 30%, 35%. On the contrary, health insurance, again, consequent to the onset of COVID, has now possibly displaced motor as the largest contributor to revenues of almost about 35%. And in the last couple of years, they have been kind of growing faster than even the rest of the lines. Crop insurance roughly contributes anywhere between 5% to 10% of the overall industry revenues. And the rest, balance is contributed by commercial lines. In terms of distribution, it's a multi-distribution channel approach that the market exhibits as in to say that policies get sourced through point of dealership, particularly for motor. It also gets sourced through agency or individual agents or tied agents when it comes to getting sourcing done through -- for auto or health. It also gets policies sourced through bank/financial institution partnerships, again, for different lines of businesses. And to a limited extent, there are policies also getting sourced through various website offerings as well, website/other online forms of sourcing. So predominantly, it's a multi-distribution kind of a setup. In terms of the way the market has responded to outcomes, many players in the market got very, very aggressive over the last several years, as I said, once the market got deregulated. Now this gets largely reflected in the form of the combined ratios for the overall industry. If you look at the industry combined ratios, it's currently operating at levels which are between 115% to 117%, which is definitely at elevated levels. ICICI Lombard historically generally has been operating at least 10 percentage points better than the industry combined, ideally higher. But in the past, we have generally operated at a combined closer to the 100% levels. Recently, consequent to the transaction that we did with acquiring the general insurance business of Bharti AXA and the investments that we are doing to foster growth, our combined ratio issue currently stands between 103% to 104%. And to the market, we have talked about bringing down that combined down to 102% by the end of the next financial year, which is FY '25. And from there on, we obviously want to further bring down the stated combined ratio objective. So that's where we are in terms of the combined ratio trajectory. But more than that, if you had to look at over a longer-term cycle, because as a company, we have largely advocated profitable growth as a team in terms of the underwriting performance, which is why we prefer to look at outcomes over longer periods. So if you look at the last 15-year cycle, industry has still compounded on revenues by 15%, 16% despite the various price revision that I talked about. Industry is still compounded by about 15%, 16% on revenues. On profitability, I'm not able to give you a number because industry reported losses. So -- and even in the year when they reported a profit, the profit CAGR can be at best a low single-digit number, about 2%, 2.5% over, let's say, a 13-year cycle. For ICICI Lombard, the revenues compounded by 12%. It is actually shared lower than the industry compounding on revenues. But that's again a conscious choice that we have made because in segments which we're very, very aggressive, we obviously have been a bit guarded. However, segments which were our preferred segments of liking of underwriting, we have actually disproportionately grown the market, so which is why our share of compounding revenues have been lower than the market at 12%. However, our profits have compounded over the last 15 years by 20% plus, consistently over the last 15 years. So hence, we contribute a very, very large proportion of the overall industry profits to whatever extent if one was to really look at it. Generally, the philosophy, as I said, is to stay prudent when it comes to writing risks and also when it comes to, let's say, providing for claims or loss reserves because some of the businesses take longer term for the claims to develop. And therefore, in such periods of uncertain loss development, ICICI Lombard has generally tried to be more prudent and conservative. So that's been, if I were to kind of, in a nutshell, put across in terms of how the industry has largely evolved, the various players and the nuances around the various products and the way we have kind of largely gone about underwriting businesses. But we'll be happy to take any further specific questions that you may have.

No, I mean I think just recently, if I look at kind of recent results, right, from a motor standpoint, I mean, you've seen improvement of combined ratios of that. So what's happening essentially is competitive intensity kind of coming down. Like how should I think about that, a, in the short term? And then what does that mean from a long-term growth perspective for the segment?

Yes. So let's go back a little bit, right? So if you look at motor, I would say for the overall market, is a largely commoditized offering. Everybody wants to kind of get a share of market because they believe -- as I said, it was, by far, the largest contributor to revenues, and therefore, everyone wanted to grab a share. So that segment has always been very, very competitive in terms of pricing. But again, the approach that Lombard has been taking is obviously we have kind of used data and analytics to our advantage. And we have ended up doing selection of risks, which clearly has been viable from our own underwriting outcomes. The extent of competitive intensity, I would say, got a little bit more elevated during COVID time because of multiple reasons. One, the available asset pool for motor insurance got significantly shrunk. You had global chip shortages contributing to that reduction in asset pool. You equally had general lower demand insofar as customers are concerned because they clearly wanted to keep the discretionary spend put to backseat. And equally, I think the regulator also enabled or rather facilitated customers to be given an extended time period for renewing their policies. Now all of this obviously resulted into a reduced asset pool for which everyone was competing. At the same time, we also saw a significant benefit in the form of lower claims because, again, for understandable reasons, during COVID, there was hardly any vehicles plying on the road. So therefore, the competitive intensity got a lot more elevated. That's the reason why, if you look at the combined ratios for the market in the context of motor, we have generally seen it operating between 124%, 125%. From there on, if you were to look at the latest numbers, which are available for the industry in terms of the Q1 numbers, because Q2, I'm not able to give you the industry numbers because many companies have not yet announced results, so Q1, with whatever numbers have come through, directionally, there seems to be an improvement in the overall motor combined. So for example, Q1 last year, the previous year, the industry combined on motor was 125%. That came down to about 120%. So directional change, but is the change in line with our preference? Definitely not. Obviously, the market has to possibly improve further by another at least 10, 15 percentage points before which we can completely go all out and use the levers that we have created in terms of distribution, technology and service to, let's say, maybe grab a higher share of market. Until that point of time, obviously, we will take a calculated/guarded call in terms of writing that risk. Having said that, what we have seen over the last 12 months, specifically to answer your point, we do see instances of many companies in the market possibly calibrating growth relative to the growth percentages that each of these companies have been exhibiting. So hence, which is why if you would have seen possibly the extent of gap between ICICI Lombard's growth number in motor and, let's say, the industry growth numbers in the last 2 years was significantly elevated, the gap was very high. But sequentially, if you were to look at over the last 6 months, but specifically in that context, the gap has pretty much got narrowed to as close to the industry numbers. And that's why in the last couple of earnings calls, we have been talking our growth number in the context of motor by the end of this year to mirror industry growth numbers, unlike possible gaps that existed between industry growth numbers and ICICI Lombard's growth number in the last couple of years. What also could further add to this is this whole change in the expense of management guidelines that has come into pause from the current financial year. It's called the EOM, expense of management. Now there, I think, again, it's just 1 quarter number that's available for the market. But I'm sure the regulator is watching each companies in terms of their expenses of management. At least based on first quarter numbers, 1/2 of the industry players have their limits, which are higher than the stated threshold. So I'm sure the regulator will watch out this space for the next 3, 4 quarters and obviously make the right recommendations/directions to the respective companies who are consistently exceeding possibly the threshold on EOM. Once that happens, then all the more the reason that the focus will shift more into service. And generally, we have seen ICICI Lombard as a key beneficiary of market share gain during periods when the market moves more towards better pricing cycles.

And from a growth standpoint, how do I think about that moving forward for the segment for you?

So again, I think rather than talking specifically about individual segments, again, if you look at it over the last 23 years, this market, on an aggregate basis, all lines put together, despite softness in pricing that I spoke about that existed, has still compounded at 15%, 16%. And if you look at as a country, we are at the cusp of we're at a per capita level of $2,000. And the global study that Swiss Re had done, which is one of the global reinsurance majors, when they had looked at different economies in terms of growth prospects at various thresholds of per capita across different economies, a country which is at a $2,000-plus per capita tends to, from a longer-term perspective, have a growth in the general insurance space at least 2, 2.5x real GDP of the country. I'm sure all of you are exposed to what should be the real GDP. But we believe in a market, which was very, very competitive, but still the market has compounded 15%, 16%, there is no reason why this market should not continue to grow in that range of 15% to 20%. And within that, our stated objective is to have at least 100 to 200 basis point alpha over the market growth numbers. That could come through growth in motor. It could come through growth in, let's say, health or, let's say, it should -- could come through growth in commercial lines or any other white spaces opportunities as well.

Got it. Got it. Just on the -- sorry, just delving on more on the motor vehicle, it's also a big chunk of the industry. I mean, obviously, broader vehicle sales are not being that great, right, given the messaging in that side. So from that perspective, I mean, should I assume that growth moving forward will be muted because of this as well as such?

So let's take -- so what's effectively happening is I think that demand on private car is pretty much back, not only in the context of the festive season, but even otherwise, I think what we have seen is when you look at private car sales, seems to be kind of doing quite well. I think in the context of 2-wheeler is where maybe the 2-wheeler volumes, as you rightly mentioned, is still not pretty much in line with what one would have seen during pre-COVID time periods. But at least when we kind of hear from the OEMs or even we kind of hear from the ground from our frontline distribution, clearly, the signs that we get is maybe another 2 to 4 quarters from now, the 2-wheeler demand also should kind of look up nicely. And we are kind of well positioned, and that has been one of our segments where we have enjoyed market-leading market shares. So hence, actually, we are well positioned to capitalize on that opportunity as well as it comes back. Commercial vehicles in general has been doing very well because it largely mirrors economic activities. And as a country, I think we seem to be kind of doing reasonably well. And therefore, to that extent, when you look at even the commercial vehicle volumes have been generally, as I said, looking up nicely. Some months, here and there, obviously, I think the numbers could kind of get impacted. But the trend line or the momentum seems to be very, very positive, so which is why -- so the growth should kind of continue to be reasonably good. The second element to look for is pricing. The point that I made on industry combined at 120% cannot be a sustainable proposition. Something has to kind of give in, right? So therefore, to that extent, one should definitely see, let's say, an improvement in price. Now price could happen on both counts. It could happen in the context of the own damage pricing. So when you look at the motor insurance, it has got 2 risks that we cover. One is any damage that happens to the vehicle, which is the own damage covers and, let's say, a risk that we cover for third-party accidents as well. On own damage is where bulk of the price discounting has been playing out in the market. And that's a place where we could possibly see -- I'm not saying necessarily the market has suddenly started to change. But given the trajectory that one is seeing, there could be some improvements in pricing on the own damage side. On third party, for the -- that's the segment which is driven by price restriction, as in the regulator in consultation with the government fixes the price that companies can charge for insurance of third-party risk. So it is not free to price. Still pricing -- price notification happens every year. Last 3 years, we have not seen a meaningful price revision. Hardly, there has been a price change. So therefore, even that could come through. We don't know. We'll wait and see how that plays out. So hence, it could be a market growth that could be driven even by price change. But the flip side to it is also that on motor third party, there has been this law change of 6 months limitation, motor vehicle segment, right? So once that happens -- but we'll have to see how that plays out on the ground because already we have seen, as we have been discussing on the calls, conflicting judgments by different high courts. The matter is currently at the Supreme Court, who will -- which will finally give its verdict on that law of 6 months limitation. If that comes through, again, it's a positive from an underwriting perspective, at least for ICICI Lombard. But it is quite possible that they may not give so much of a price change because the possible fraudulent intimations of losses, they may come down. But we'll have to wait and see how that plays out in terms of the price change. But despite that, if you look at the average claim payout, because these third-party claims are effectively compensating for a victim's loss or a pedestrian's loss of income, there, the courts have generally been more and more favorable in favor of those victims. So therefore, the cost of claims are definitely going up. And hence, our ask from the industry standpoint is to seek a price change. So we'll see how much of a balance does one strike between a price revision vis-à-vis, let's say, no price change at all. So we'll wait for that to happen, but it is possible that the growth in -- for the way ahead could also be driven by price change as well. Three -- I think the last point that I will make and then maybe I'll pass it to others. And three, I would say, in general, I think the fact that people are moving up the value curve, the proportion of customers who are -- who, in the past, would have opted for an entry car compared to what it is today, is definitely seeing a change. I think more and more customers are willing to go up the value curve and seek, let's say, an asset buy, which is slightly higher in value. And therefore, to that extent, that will also result into a better yield when it comes to, let's say, average premium per policy that one issues. So that also should kind of aid growth when you look at it in the longer-term context. So all of this hopefully kind of points out to a better growth outcome, which is why I said without getting into specific segments in terms of how the growth could play out, larger market, definitely one sees a 15% to 20% growth. Sorry.

So sir, on motor only, you mentioned the discounting [indiscernible] in this profitable market even the growth [indiscernible]...

It's across. It's across board. I would say it's companies which have got licensed recently, two, let's say, mid-sized companies as well as well-established large multiline players, all the 3 categories of players have been aggressive in display over the last, I would say, 2 to 3 years. But the good part is if you look at directionally each of these companies, whether it is the newly licensed companies or the mid-sized ones and some of the large-sized multiline players, their growth numbers on a month-on-month basis seems to be kind of reflecting a better than -- or maybe lower than what higher growth that they have exhibited in the past, which is the point that I made. I think the relative gap between our numbers and industry growth numbers have significantly got narrowed now. And that's the reason why I said our expectation is by the end of this year, we will be closer to the market numbers.

And the way to regain our market share in motor vehicle pricing cycle, that is when we...

So that's true in any of the segments that we have seen historically because what we have done even in this period when we have possibly kind of shared a little growth to competition, we have not shied away from continuing to stay invested in expanding distribution. For example, the number of dealership touch points where we would have gotten access in terms of the sourcing point where you get the policies issued, that has gone up even in the last 2, 3 years. The number of agents, which is a distribution that we have been investing even on the health side, but even on motor agency is a channel that we are actively investing insofar as driving the growth is concerned. Website, we have been kind of investing a lot in advertising and sales promotion, and that's the segment that has been growing quite well in terms of the opportunity. And more importantly, claim service because, consistently, if you would have read our annual reports, you will see year-on-year, there is an improvement in our Net Promoter Score or customer satisfaction score. And you should do your own independent channel checks in terms of what has been the customer response to our claim service proposition. All of this is kind of aiding, as I said, the growth momentum.

So the pricing cycle, right, I think if I remember right, for 2019, we've been expecting it to turn constructive, right? So the site progression has been [ very poor ]. I mean...

As I said, motor as a segment has been there for the last 15 years. The point that you're making on 2019 is absolutely right because in the year 2019, 2020, motor OD had touched a combined ratio of about 110% to 115%. At those levels, we were not comfortable. Forget about the current combined ratio scenario, right? So it was about 110% to 115%. In quarter 4 of that year, we had exhibited a single-digit price revision. But we could not live through the price increase because COVID once again had happened. So obviously, at post-COVID, nobody talked about the price change, which is why in the recent years and again in quarter 4 of the last financial year, we effected a small single-digit price change, again, to kind of test the waters in terms of the market. I would not say at a large scale, there has been, let's say, any kind of a price revision. But the directional momentum that the industry seems to be taking either through some form of price rationalization or through, let's say, more the expense of management cash generation, directionally, things seems to be looking up better, which is what gives us the confidence to believe that we should grow in line with the market.

So the commercial lines, right, I think fire, Y-o-Y basis, is slowing down a bit compared to historical growth rates.

Fire as a line of business is, again, an expected outcome because I don't know whether you heard our April earnings call. In that call, we had talked about a couple of changes that were happening particularly for this year. Is the 2, 3 years preceding that -- 2, 3 years preceding the current year, reinsurers had increased rates, saying that in case if primary companies want to avail reinsurance capacity, they have to be at a particular base price, which is why if you remember, in those years, the growth of fire, which used to be normally mid-teens, grew at almost about 25%, 30%. And in those years, our growth was upwards of 35%, 40%, exactly for the point that you made, whenever price improves, we have been key beneficiaries of market share. But this year, the regulator has come back and said you cannot have those base levels pricing stipulated as a part of your reinsurance contract and which is why we had expected pricing to kind of get a bit corrected. But unlike a retail consumer line where you can possibly see a sudden drop in pricing, these are higher exposure segments where you cannot see a sudden drop in price. Otherwise, you will end up having a huge loss to your net account. So that's the reason we have talked about the single-digit price revision in the range of 5% to 7%. And therefore, to that extent, we had said the growth will get a bit calibrated for the current year. The other impact of the development in the market also was, in the past, we used to talk about 1 or 2 catastrophic events in a year. Today, unfortunately, we have to come to the market and talk about 1 or 2 catastrophic events every quarter. I don't know whether it is climate change or consequent to any other impact. But what this has done is, again, when globally reinsurers had renewed their reinsurance program, which typically happens on an annual basis, one has seen a significant increase in reinsurance rates. For example, for our own reinsurance catastrophic protection, our rates went up by almost about 40% to 60%. But for many of our competitors, the rates went up higher because they were exhibiting a much adverse outcome to the reinsurers, and therefore, their price point of increase was much higher than our 40% to 60% price increase. So in some sense, it didn't offset because it now depends on how much of a price change you are able to pass on to the customer at the point of renewal or how much are you able to keep it on the net account. That's a call that each company will have to take. But on balance, what we had indicated was this year will be more a period of tepid growth when it comes to fire insurance, broadly a drop of 5% to 7% because of the reinsurance-based pricing being done a little bit. But on balance, largely a tepid year insofar as outcome is concerned, which is why when you look at the first half numbers, your observation is right. In property insurance, the growth has to be relatively lower than, let's say, what one has seen in historical periods. Looking at what could happen, given that these events are now much more frequent, I'm sure there is every reason for us to kind of reprice it properly. Otherwise, I mean, these are commercially high exposures, we need to make sure that we price for some of these risks properly.

[indiscernible]

So again, let me take the second part first, right? Second one is relatively easier one now. So when you look at corporate health, the point that I made at the beginning that we went a little slow in terms of compounded revenues being lower than market compounding in revenues. One of the segments, which went very aggressive on pricing, was corporate health, as we have spoken in the past. Historically, we used to have a double-digit market share of almost 11%. Because of price aggression by many players in the market, our market share came down to less than 5%. As markets corrected, again, we were able to regain ground. And today, if you look at publicly when some of these audits/reports have been published, clearly, there has been realization that many companies in the market have lost significant amount of underwriting losses. That's the reason why each of these companies now have given public instructions to their operating offices to get better on underwriting. What does this do? This again kind of opens up windows of risks, which, otherwise, we would not have touched in the past at a price that we are comfortable with. And that's the reason now when you look at, let's say, the half year numbers, for example, though we desist from talking half year or yearly, ideally, we want to look at all cycles. But since we are specifically talking about specific periods, if you look at half year, health as a category, not just corporate health, retail plus corporate put together, industry has grown at about 24%, 25%. Our growth has been about 31%. So we have been a significant beneficiary of market share. And in the context of corporate health, the market share accretion has been aided by all factors. Why all factors? There has been an improvement in price. Equally, some of the corporates have now started to look at incremental hiring, and therefore, it is a growth aided by volume change as well. And also what we find is some of the companies are willing to now take an extended or an enlarged protection for its employees. So therefore, the -- some insured coverage that they normally take for their employees, some corporates have also shown signs of increase in coverage. And finally, as I said, because the market in general has improved on price, we have also been gainers of market share, which is why on balance, the corporate book has been a beneficiary of all of these changes. I am not saying this 31% growth rate will sustain. It will definitely get moderated because no corporate will allow a very large proportion of price increase to kind of sustain for an unduly long period of time. So obviously, this growth will get moderated. How much? Very difficult to predict. Now come -- let's come to...

Sorry. Before you go to the next, do you see competition increasing over [ time potentially ]?

Yes, because this has been also a segment -- as I said, even in the past, this segment has been very, very competitive. And two, it is quite possible that some of the companies are using corporate yield as a lever also to manage their expense of management because this typically comes with a slightly lower cost of acquisition as compared to some of the other lines. The other line that some of the companies are willing to maybe also write a lot more is maybe crop insurance, which also comes with a relatively lower cost of acquisition or maybe some government-sponsored mass health programs. Now these are all chunky premiums that come at one go, and possibly, the cost of acquisition is lower. But to take an exposure on crop insurance, for example, could be a slightly risky proposition because these are high exposure segments. And unless and until you don't write the segment properly, you can actually run balance sheet risk writing some of this portfolio. But corporate health, which is the reason why I said a 31% kind of a growth may not necessarily sustain. It will slightly get moderated. There could be, let's say, increased competitive intensity. Then the call for us is something similar to what we have done in the past. We will obviously kind of wait for -- and that's the reason why the portfolio on the corporate health side for us has been generally mid to small corporates, which kind of ensures that we don't write chunky premiums even on the corporate health front and largely write more accounts, which we are kind of comfortable in terms of underwriting practices.

And do you think combined ratio will not be impacted as well because...

Combined ratio is quite okay for us because, in general, on the corporate book, which has a combination of both large corporates, slightly large corporates and, let's say, most small and mid-companies, the SME customers, both of that put together on an average, the loss ratio will range between 94%, 95%. And because ICICI Lombard tends to go direct in working with corporates, my relative cost of acquisition is a low single-digit number. So on balance, my combined ratio will be between 100% to 101% at any given point of time.

So that -- you don't see that...

That should -- because, as I said, I think we will obviously operate at those thresholds. Accounts which don't meet those underwriting filters, we will be happy to kind of wait for. A good part of this business is we are on the block each year. I mean it's a 1-year risk, right? So even for one -- some reason, let's say, you have not been able to kind of price for that risk to our liking, we can always go back and get the risk back. But our experience on the corporate side is, generally, a corporate don't place only their health insurance risk with their insurance partner. They also place their property, marine, liability, et cetera, et cetera, risks also with an reinsurance partner. And therefore, when they see their overall experience of working with ICICI Lombard, they have clearly seen a satisfying experience, which is why, particularly in the commercial lines, our customer retention rates are upwards of 90% plus. So we tend to see a longevity of the customer stay on for a long period of time. What we are able to hold on is maybe a price differential up to 5%. We can command a premium up to 5% given the service, brand, et cetera, et cetera. Anything beyond that in the concept of corporate health could be a difficult thing to sustain.

The commercial -- I mean the most important factor will be that these corporates have the benefit of a banking relationship in the period?

Not necessarily. It is a consequence of both. It is definitely, of course, a relationship that the bank takes. The bank is definitely a very, very important distribution partner for us. But historically, what ICICI Lombard has done over the years is we have kind of largely created our own relationship managers, who are employees of ICICI Lombard, who go and directly work with the corporates, which is why they like the value proposition that we've been able to extend to them. Where the bank really helps and facilitates us is the access that we're able to get into a corporate in accounts where we may not have directly had the relationship in the past. So that definitely helps us. Even on the SME front, it definitely aids and assists us insofar as building those businesses are concerned, and that's doing very well insofar as the bank partnership is concerned. But given the nature of the business that we are into, there are multiple customer touch points at which you have to be present yourself. And that's the reason why the bank is very, very important. Their relative share, if you were to look at in terms of their overall contribution, has been in that range of 5% to 7% of the annual revenues.

Of -- in commercial lines?

Of the overall business.

And sir, how is loss ratio trending for this one, which I think seems to be coming down basically?

Loss ratio, generally, as I said, corporate health will obviously stay around those levels. In 1 quarter, you may see something up and down. But on an average, I think on the corporate health book, it will be a loss ratio between 94% to 95%. Now coming finally on the retail side. I think retail, I think, again, is kind of doing very well. If you see, that's an area where we have been talking over the last 2, 3 years, specifically of accelerated investments in building the agency franchise. The outcomes that we had narrated to the market at the time when we've been making the investments was obviously we wanted to get to a particular scale. We wanted to gain market share not only at an industry level, but also try and grow faster than even the stand-alone health companies. We had also talked about adding about 1,000 people at that point of time. And we had said each of these 1,000 people, once they are onboard, they will be able to manage anywhere between 15 to 20 agents each, for those 1,000 set of employees. The good part is, today, when we look at it, I think we have been able to get those agents -- I mean, employees onboard who are our health sales managers. It is also not just a one-off investment. It's a continuing investment as we speak. We have also been able to onboard the desired number of agents at least for the 1,000 employees whom we added. But new employee additions that we are doing, obviously, it will take some more time for the further agency distribution to happen. But one of the other outcomes in terms of us growing faster than the market, whether you take the FY '23 full year numbers or even if you take the first half year numbers, we have grown faster than the market, which is why we have been able to possibly make a small change in the overall market share in the context of individual health. We used to be a sub-3% market share, afterward, 2.9%. Currently, we are at anywhere closer to 3.1% or thereabouts. So hence, we have been able to make a change in market share. And in the last 12 months, in many of the months, our growth has also been faster than the stand-alone health companies. But that's something early days in all of this. We will have to kind of sustain this for a very long period of time.

In terms of monetizing the new agency or network that you're building out, where are we investing in? Is it starting -- getting started to benefit from that?

It will be an ongoing one. So which is why I think if you ask me whether any of this will start playing out in terms of economies of scales or expense ratios, from a market perspective, you will not be able to see that because, of course, my investments done 2 years back is giving me, let's say, incremental revenues. But I'm continuing to make incremental investments in adding my headcount, and that's the reason most of my employee or headcount addition is predominantly happening in frontline distribution, largely to build, I would say, the health agency distribution. And therefore, also the other number that you will be -- or the metric that you will be able to see is the number of agent count that one is kind of seeing it on a regular basis. So that's something that you will be able to see from a market perspective besides, of course, the growth in revenues that -- in which should be available...

Sir, what is the investment or how -- what is our combined ratio before we started and now in the retail segment?

So combined ratios for us will continue to stay elevated until the time it's an ongoing investment. But we are extremely satisfied with the way how the loss experience is playing out because if you look at my current combined ratio, just on the retail health side, loss ratios are fine at the range that we are comfortable, which is between 65% to 70%. The expense ratios currently is upwards of 45% plus, which is why my combined ratio is more than 110%. But that's primarily because of the investments that I'm doing on headcount, all of it, which comes and hits me today. The benefits will come through over a period of time. So of the book that we have invested 2 years back, they are giving the underwriting outcome, which is within our expectation. But as I said, it will not necessarily get reflected in the expense ratio because it's a continuing investment.

And there is an issue around claims ratio across the industry in the health side of things.

We haven't specifically heard in our context. I think you should do your own independent channel checks.

All right. You see...

No, I'm sure -- no, I'm just kind of responding to your comment. But I'm saying you should do your own independent channel checks on other players in the market. At least what we get to hear is possibly, there have been challenges in some of the customer satisfaction experiences of players. I think if you look at -- which is the reason why, in our annual report, we put out the Net Promoter Score or customer satisfaction scores. Consistently, we have been able to see an improvement in pretty much every line -- most of the retail lines, which majority of the market will be interested in. So we've actually seen an improvement. And our general philosophy is that is there in our tagline as well, which is Nibhaye Vaade, which is a promise to pay a claim to a genuine customer. So hence, we will go all out and make sure that the claim is serviced when it comes to meeting a genuine customer expectation. At the same time, the industry also is fraught with frauds. So hence, we have to, I mean, strike a balance between the 2 and make sure that when it comes to, let's say, frauds, we have to obviously kind of live up to [ fill its ends ]. And obviously, we will stick to our stand of not necessarily paying a fraudulent claim for sure. And that's the reason, again, not only in the health context, but even otherwise, we have been having a fraud control unit way back since 2006, 2007, when the regulator had made it mandatory for every company to have a fraud management framework from 2013. So hence, we have experiences over the last 17 years in terms of, not to demean any of the cities, but we know which state or which city kind of exhibits what type of frauds. And therefore, we can kind of calibrate the growth opportunity across different segments of business.

From the ICICI Bank relationship perspective, on the retail health side, if we think about that, is there any traction coming back? Or...

The traction is already back. I mean, again, just to kind of -- I'm sure you are aware of the industry, but just to kind of refresh, as I said, in general, forget just health. The overall contribution of ICICI Bank, as I said, given the nature of the business, has been between 5% to 7% of our annual revenues across all lines of businesses put together. Within that, in the past, the bank had also distributed health benefit offering through to, let's say, the mortgage loan customers of the bank. There -- and when you talk to them, they would pretty much say the same. Their general thought process have been whenever a customer takes an insurance cover, he or she possibly should be able to get the benefit of that insurance. In the case of a critical illness or a benefit offering, it obviously kind of pays for a list of named critical illnesses. And in case, for whatever reason, if a customer experience an ailment, which is beyond the named critical illness, the policy by design will not pay for it. And hence, you had to kind of not pay for these losses, which is something the bank was not comfortable with. And hence, they had kind of stopped distributing health benefit offering way back in Q3 of 2021. And if you recollect at that point of time, that kind of subsisted as an impact for almost about 12 months. Not only were we impacted at that point of time because of this decision, but equally, we were also impacted by a relative slowdown in credit disbursements. In general, I think the credit disbursement by many financial institutions were lower, a consequence of COVID. So we got impacted on both fronts, which is where health in general for us was a degrowth in those periods. But today, if you were to look at, bank is distributing the health indemnity plan. An indemnity by its inherent nature kind of pays for any hospitalization expenses, leave aside moral hazard or any fraud-related insurances. So hence, that's the bank -- which is why if you look at the overall contribution of the bank, so it continues to be in that range of 5% to 7%.

So it used to be 5% to 7% even in FY '21...

It used to be -- so generally, it has been in the range of 5% to 7% even at the time when the bank was holding, which is 74% stake, even when the bank had 48% or what it is holding currently at about 48%. And publicly, they have also made their intent to acquire another up to 4%. So they would obviously go up to 42%. That's a call that the bank has to make. Even at that point of time, given the nature of the business, it's likely to stay around those ranges.

Can this increase? Is there any other area where you can have...

Which is what I'm saying. I think the ability to leverage the franchise is something that we do irrespective of the shareholding percentage because I said the bank is a very, very important distribution partner. But it's the nature of the business that kind of leads to this outcome.

Which products incrementally can actually be...

Health is a great product to kind of work on. SME insurances, as I said, they can kind of give a lead. Commercial lines, definitely, they can kind of give a lead to some of these insurances. So hence -- home insurance, again, the banks can play a very, very important role in kind of contributing to that opportunity as well. Liability, retail liability, again, could be an offering that could kind of be aided by bank distribution. So there is enough and more avenues to do, which the bank can contribute. But the point that I'm trying to make is because your customer access points is multiple, you will have your point of sourcing revolve around those multiple distribution touch points. And even as a company, we don't want to have -- also have a situation where there's a very large concentration only with one distribution partner.

And then -- so from a dealership standpoint, let's just assume that the current spread will remain moving forward as well...

In terms of...

The overall business essentially could...

That's very difficult to predict because, for us, what we have also been doing is while, for us, dealership is very important. Equally, we have been investing in, as I said, motor agency. And if you have been hearing our calls, we have been saying, historically, dealership used to contribute 80%, 85% of our motor insurance. Today, it's about 60%, 65%. So hence, agency proportion is slightly increased. Equally, we are also building our own icicilombard.com, which is the website offering.

How much is that contributing?

So on a revenue term, it contributes about 6% to 7%. That is all lines put together. But in volume terms, it will contribute about 10% to 12% because it's a relatively smaller-sized ticket policies, so 10% to 12% of policies. So that's equally important. So hence, that mix should undergo -- you'll also see some bit of website-based sourcing as well. Commercial lines, in general, economic activities are doing very well. So that will continue to gain market share. So direct -- that is predominantly direct because we're doing through our own relationship team. So that would kind of see a mix change. So very difficult to kind of tell you what would undergo what change, but what -- all that I can see, for us, each of these channels are very, very important. So we will continue to be a multi-distribution, multiproduct company, capturing the opportunity of, as I said, customers at different touch points.

All right. And from an online standpoint, do you see yourself, I mean, say, impaneling into stock-like policies? Those are all...

That's a strategic call that we took 13 years back. So as of now, no change in that thinking.

And what about the [ mass account ]...

The [ mass account ], all of us have a vested interest because we all have stake in the platform. And therefore, it is in our own interest that we get the platform successful. As of now, there is no specific time period within which it has been stated that the platform will come up and live. But given the regulatory focus that they have been putting on this, I'm sure it will see coming up pretty quickly.

One of the reasons for delay is because we [ sort of paused ] like a few months now.

If you remember, I think we had kind of talked about it even at that point of time, saying that it will take -- it will not be something that can happen at the earliest. It will take its own time to kind of put those in practice, which is exactly what has -- how it has got played out. As I said, there is definitely a clear regulatory push, and the intent is very, very clear. As I said, it should kind of come up in a period of time.

And open architecture, how does that impact the business?

Open architecture on distribution is always fantastic. For example, on bank partnerships, there is already an open architecture, right? In the past, there was a restriction of a bank not being able to impanel more than 3 life, 3 general and 3 stand-alone health companies. From there on, last year, if you remember, I think while the Chairman has been doing a phenomenal job in terms of opening up multiple aspects, including distribution on the bank side, today, that limit has been enhanced to 9 each. So a bank can technically partner with 9 insurance, 9 GI, 9 stand-alone health and 9 life companies. Very unlikely of a bank to partner with so many companies. But what it does is, in some of the bank partner where we would not have been able to get an access to in the past because there are already 3 players, maybe we will now be getting an opportunity to get into that in some of the banks.

But then that can go against you...

But if you look at today, we are pretty much there in every other bank partnership. In many of the bank partnerships, we would not have been #1 to get an access even in the past regime. We would have been #2 or #3. But over a period of time, we have been able to become a #1 partner for that bank part. So no distribution is sacrosanct to say that it will necessarily stay with you for life. It is the capability that you create on product distribution and service is what creates a differentiation for the relationship to subsist. And that's what's -- actually the bank, so distributed exclusive only ICICI Lombard products.

I had one last question. From an industry standpoint, I think AUM, like broader industry impact, what do you see on that? Because essentially, [ there's a change ] happening obviously...

So the regulator will obviously watch out for this development over the next 2 to 3 quarters because it has been the very first year of change. If you look at the first quarter reported numbers, half of the insurance players are more than the stated threshold on AUM. But the regulator, obviously, is also not going to make any knee-jerk reactions. They're going to observe the development over the next 3, 4 quarters. And then I'm sure they will kind of send the right message into companies which are sustainably operating at thresholds which are higher than the stated levels. So hence, we could expect action from them. That is what we get to hear when we talk to the regulator.

Okay. And then as for the last question for me, how about medium-term combined ratio and ROE for the business for like 2 to 3 years...

As I said, the next year objective is clearly to get down to 102% by end of FY '25, which will broadly translate into an ROE profile of anywhere between 18% to 20%. And from there on, obviously, the objective is to get it -- the combined closer to the 100% threshold, which then kind of goes back to our stated delivery of sustainable ROE of 20% plus.

Okay. I mean because, historically, that's not happened. So what do you think is the sense as far as actually...

Historically, ICICI Lombard has always operated a 100% combined and 20% ROE until the time we acquired the transaction.

Exactly. I think that was one of the biggest interest from your perspective to that...

So directionally, they are pretty much on course to the objective that we have laid out, where we had kind of said that the combined, which used to be at a peak of 105%, we had said we will realize the benefit of synergies and see a decline in the combined, which is we are pretty much on course and on path to that combined objective that we laid out. And this, again, 102% is something that we had talked about even about 2 years back, saying that by end of FY '25, we would want to get to that objective of combined of 102%. As we speak, we are pretty much on trajectory. If market improves, it could actually get accelerated. But at this point of time, we are not changing any of the thought process around that. Okay. Thank you so much.