IGI Logo

Market leadership with long term growth opportunity

About the stock: ICICI Lombard is among the leading multi-line players in the general insurance space with ~8.3% market share on an overall basis.

The motor segment is a key contributor and forms 44% of total premium

The general insurer is among the most profitable and consistent in terms of return ratios with RoE of ~16-20% for a sustainable period

Key triggers for future price performance:

Indian non-life insurance is highly under penetrated with non-life penetration (premium as percentage of GDP) at just 1% as on FY21 compared to world average of 4.1% and advance EMEA average of 3.3%. India has a large proportion of young population with ~65% population below the age of 35 years, which should induce huge demand potential

ICICI Lombard is the largest motor insurer in the private space with 11.7% market share as on January 2022 while it is second largest on an overall basis. Muted auto volume and Covid led to moderation in premium growth. However, with a pick-up in volumes and increase in TP rates, premium trajectory is expected to pick up ahead

ICICI Lombard has seen over 23% growth in individual agents in the past five years till FY21. Total agent including PoS has increased from 59545 in March 2021 to 81969 in December 2021. The insurer has been expanding its distribution network to increase penetration in tier 3 and tier 4 cities on account of increased opportunity in individual health indemnity segment

ICICI Lombard has shown consistency on the profitability front even though premium growth in the past few years was impacted due to various reasons. We expect gross premiums to show better growth of ~18% in FY22E-24E due to various positive levers in the motor and health segments

What should investors do? Muted business growth in the past two years and higher claims led by Covid, resulted in the recent underperformance. However, long term sustainable growth opportunity and market leadership along with focus on digital adoption provides a good opportunity to invest

We initiate coverage on the stock with a BUY rating

Target Price and Valuation: We value ICICI Lombard at 3x FY24E premium (50% weight) and 1.5x FY24E float (50% weight) to arrive at a TP of | 1550 per share.

Alternate Stock Idea: Apart from ICICI Lombard, we like Star Health Insurance.

Market leader in the retail health insurance segment with 32%+ market share, as of December 2021

BUY with target price of | 800

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer