Brokerages remained divided on ICICI Lombard General Insurance Co. after its June-quarter FY27 earnings, with Citi and Morgan Stanley maintaining a cautious stance following a weaker-than-expected performance, while Macquarie retained its positive view, on the back of the insurer's conservative reserving approach despite near-term headwinds.
Analysts broadly agreed that the quarter was impacted by two large fire insurance claims and the Supreme Court's ruling on motor third-party claims, both of which weighed on profitability. However, the debate centred on whether these pressures are temporary or indicative of broader structural challenges facing the non-life insurance sector.
While Citi warned of increasing competitive intensity and the possibility of a prolonged de-rating, Macquarie said the company's focus on quality over growth and prudent reserve creation should support the franchise over the longer term.
Here's What Brokerages Said After The Results:
Citi
- Maintained Sell and raised the target price to Rs 1,755 from Rs 1,735.
- Described the June quarter as weak and said a multi-year de-rating cannot be ruled out.
- Sees structural challenges in the multi-line non-life insurance business.
- Flagged sustained competitive pressure from multiple new entrants.
- Said the company's distribution and service moats are gradually declining.
- Does not see any meaningful rationale for price hikes in the key motor third-party segment.
Morgan Stanley
- Maintained Equal-weight with a target price of Rs 1,920.
- Called the June quarter weak and said the earnings outlook remains uncertain.
- Said two large fire losses and an adverse Supreme Court judgment resulted in prudent reserve creation, hurting profits.
- Added that the court ruling could have further material implications.
- Noted that core operating performance was also muted.
- Sees downside risk to earnings estimates.
Macquarie
- Maintained Outperform with a target price of Rs 2,430.
- Said multiple headwinds converged during the quarter.
- Noted that fire losses and the Supreme Court judgment weighed on earnings.
- Said the company is prioritising quality over growth as competition intensifies.
- Believes conservative reserve creation offers protection going forward.
ICICI Lombard Q1 Show
ICICI Lombard reported a 46% year-on-year (YoY) decline in standalone net profit to Rs 403 crore in the June quarter, even as net premium earned rose 16% to Rs 5,950 crore.
Gross Direct Premium Income increased 7.5% YoY to Rs 8,318 crore, although growth lagged the general insurance industry's 10.9% expansion during the quarter.
The company's combined ratio deteriorated to 107.2% from 102.9% a year earlier. ICICI Lombard attributed the increase to two large fire insurance claims worth Rs 63 crore, which added around one percentage point to the combined ratio, and a Supreme Court judgment on the Motor Third-Party portfolio, which led to an additional Rs 165 crore in claim reserves and increased the combined ratio by another 2.8 percentage points.
Investment income declined to Rs 1,174 crore from Rs 1,288 crore a year earlier, while return on average equity fell to 9.6% from 20.5%. Excluding the impact of the fire losses and additional Motor TP provisions, the company said its RoAE would have been 13.6%.
ICICI Lombard Share Price
In the previous session, ICICI Lombard shares settled 1.44% higher at Rs 1,814 apiece. In comparison, BSE Sensex ended 0.17% higher at 77,185.43 levels.
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