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Result Highlights

* Net Earned Premium  – NEP at Rs.27.1bn was higher than our estimates of Rs. 26.4bn, growth of 16% yoy, backed by strong performance across all major segments with growth of 37% in Fire segment and 19% growth in Health business. Motor segment saw a decent growth of 14% yoy. On Sequential basis NEP was up by 3%.

* Claims – Claims at Rs. 24.7 bn were higher than our estimate of Rs. 18.7bn and incurred claims ratio increased by 2140bps to 91.2% in Q1 FY22 from a year ago. Loss ratio were higher for Motor OD by 520bps, Motor TP by 40bps and Health loss ratio doubled. For fire segment the ratio declined by 1370bps.

* Underwriting Performance – Underwriting loss at Rs. 5082mn against our estimate of underwriting loss of Rs. 1026mn on back of higher claims. Combined ratio was at 121.3% v/s 99.7% yoy and 101.8% qoq.  

* Profits – PAT stood at Rs. 1.5bn which was lower than our estimates of Rs3.4bn.  

* Solvency – Solvency Ratio stands strong at 276%.

Our view: We have cut FY22E EPS of ICICI Lombard by a massive 30% to factor in the weak performance during Q1 FY22. Health claim ratios doubled yoy to 150%+ during the quarter. We are presuming that there is no third wave and the claim ratios settle to FY21 levels during the remainder of current fiscal. For FY23E (combined for Bharti AXA) our EPS has been slightly revised upwards owing to stronger than expected performance by Bharti AXA in FY21. For FY22 we expect BAXA also to witness a sharp 52% fall in profits but expect to recoup most of it FY23 as synergies from the acquisition play out. Near term risks to the health portfolio will weigh on the stock price performance in the near term. However, over the longer term we believe a strong franchise with a potential to deliver a 18‐20% RoE and a sustained improvement in combined ratios can be added on declines. Retain our ADD rating with a 1‐year price target of Rs1,587.

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