We see opportunities in home, health insurance: Bhargav Dasgupta, ICICI Lombard

ICICI Lombard, India's largest private-sector general insurer, is selling about 19 per cent stake, valuing the company at Rs 30,000 crore. In an interview with Shilpy Sinha, CEO Bhargav Dasgupta said a 50 per cent jump in the valuation in less than four months is based on the feedback the bankers have given the management after their interactions with investors globally. Edited Excerpts:

How would you explain the surge in valuation from Rs 20,300 crore in May to Rs 30,000 crore in less than four months?
The earlier transaction was between existing shareholders. It was a private transaction between two shareholders. If you look at that valuation, it was based on prior year's numbers. There was no liquidity and there was a lock-in.

All these factors were considered. For our current issue, the valuation is based on the feedback our bankers have given us, based on their interaction with investors globally.

The company is valued around 10 times the book while most Asian peers are commanding 3 times the book. Are investors comfortable with this kind of valuations?
There are many features that are unique to India. One of the fundamental differences in India is growth. Most investors are looking at the PE ratio rather than price-tobook ratio. In those markets, investment returns are low, so growth in profitability is also lower than what we see here.

India is very unique market. First, by statute, it is a cash-before-cover market. Second, a large part of the third-party motor business does not have a timeline, which means the tail is very long. When you do the reserving as per the standards in India, you reserve for future claims on nominal basis based on what claims would be in the next 5-10 years.

It creates a large amount of investment leverage. That's why our investment leverage ­ or investment to net-worth is four times. The returns we get on this float are significantly higher than those in the global market. People are realising the growth opportunity of the sector.

Where do you see growth coming from?
We believe that growth in motor insurance will be 15-20 per cent. The next big segment is health, where 80 per cent spend out of pocket, according to Crisil data. Health has grown by 20-25 per cent and we believe it will continue to grow. In the industrial segment, penetration levels of property, cyber laws, and liability are not at same level as those in developed markets.

We see opportunities in every segment. We see opportunity in home insurance. If you compare with China, our insurance density is 110th of the Chinese market. In the last 8 years, since prices were detariffed, we have seen growth of 17-18 per cent.There is no reason why we will not see growth going forward.

Do you have a timeline in mind to report underwriting break-even?
We cannot give forward-looking guidance. We are putting risk controls. Directionally, we will be there.Any insurance company should bring it below 100 per cent without compromising on the reserving.

Is ICICI Bank planning to sell products of other insurers?
It is for ICICI Bank to respond. ICICI Bank contributes 6 per cent of total turnover. It reflects the quality of distribution we have built. We believe that in general insurance you need to diversify products, and diversify channels for different customer segments.