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Transformation through innovation 

* The Indian insurance industry is undergoing radical transformations. With new reforms and initiatives being introduced by the IRDAI, the general insurance industry is poised for robust growth, riding on tech-driven disruptions.

* ICICIGI through its annual report has re-iterated its future readiness to capitalize on this fast-growing general insurance industry.  

* Its core business strategy is built on five pillars, namely (1) enhancing market share (2) delivering customer service and technology (3) capturing newer market opportunities (4) robust risk management and (5) improving operating profitability.  

* With continued investments in building agency, ILOM has outgrown the industry in Retail Health MoM since Sep’22. The company’s flagship products “ICICI Lombard Complete Health Insurance” and “Health AdventEdge” have been revamped to attract new customers in the healthcare segment.  

* In FY23, ILOM introduced innovative telematic motor insurance solutions: Pay-As-You-Use - It offers customers the flexibility to choose their cover and premium depending on their usage, Pay-How-You-Use – This system incentivizes a customer for good driving behavior, Motor Floater - This enables customers owning multiple vehicles to take a single policy with a single renewal date and a comprehensive cover.  

* In terms of market share, ILOM has secured a leadership position in the marine segment among the private general insurers. This was achieved by leveraging innovation under the aegis of Marine VAS. In FY23, ILOM received its first patent for electrical monitoring device based on IoT technology.

* ILOM is the first insurance company to introduce SME-specific website and offer a complete end-to-end journey for SME products. During the year, ILOM reinforced its bancassurance channel through strategic collaborations with banks and introduced a comprehensive product suite across their 980+ branches.

* Valuation: Going ahead, the growth in the motor segment is likely to be back ended, as the company awaits the rationalization of pricing in the OD segment. Regarding the health segment, the benefits derived from price hikes and the enhanced efficiency of the agency channel are expected to translate into improved profitability. Management continues to guide for reaching a combined ratio of 102% and RoE of high teens by FY25. We believe these are achievable with a) scale benefits driving cost ratios lower, b) a better mix in the health segment with higher share of retail. We revise our target multiple up from 26x to 30x FY25E EPS as the concern around ICICI Bank stake sale should now be behind. We reiterate our BUY rating with a revised 1-year target price of INR1,550. 

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