ICICI Lombard Q1 Result Review - Focus Remains On COR Improvement Over Growth: ICICI Securities

ICICI Securities Report

ICICI Lombard General Insurance Company Ltd.’s strategy remains that of profitable growth. This can entail profits over market share in motor (YoY 400/146 basis points lower loss ratio/market share in motor in Q1 FY24) with higher-than-industry growth in health (12/131 bps gain in retail/group health market share YoY in Q1 FY24).

However, combined operating ratio improvement is notable (102.9%) adjusted for Catastrophic losses in Q1 FY24).

Maintain 'Buy' with a target price of Rs 1,633 based on 35 times FY25E earnings per share of Rs 46.6.

Key elements of our forecast include:

1. 16.5/14.6% gross direct premium income growth in FY24E/FY25E,

2. gradual improvement in COR from 104.5% in FY23 to 103.6% in FY24E and 102.7% in FY25E,

3. investment leverage at 4.1 times levels, and

4. investment yields of ~8% in FY24E/ FY25E.

This leads to an earnings compound annual growth rate of 15% and return on equity improvement from 17.7% in FY23 to 19% between FY24-25.

Risks to earnings include

1. Prolonged competitive pressures resulting in less attractive balance between growth and COR;

2. continued pricing pressure in motor segment; and

3. regulatory disruptions creating near-term headwinds.

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