Buy ICICI Lombard General Insurance Ltd For Target Rs.1,825 - Yes Securities
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Commercial lines delivering on both growth and loss ratio augurs well
Result Highlights
* Net premiums earned: Net premiums earned rose 1.9% QoQ, driven by the group health segment and commercial lines
* Loss ratios: Overall loss ratio improved 20 bps QoQ to 69.6%, with motor TP and fire segment evolving positively on sequential basis
* Expense control: Expense ratio rose 250 bps QoQ to 31.5% as opex and commissions rose 14.6% and 41.2% QoQ, respectively
Our view – Commercial lines delivering on both growth and loss ratio augurs well
The growth in the health plus segment, fire segment and marine segment was 5.4%, 16.3% and 10.6% QoQ, respectively while motor de-grew -2.8% QoQ: After the second wave, ICICI had gone back to group health corporate clients and had effected price increases of 15-20% and higher in some cases. 90% of these corporate customers have been retained at the higher price as they are willing to pay a higher price for better service. The competitive intensity in Motor OD is very high and chip shortage also continues to be an issue for OEM sales. There has been price aggression in the Motor OD segment from 1QFY22 itself. ICICIGI does not expect this to correct this financial year but from the next financial year. ICICIGI expects to outgrow the motor segment market from 4QFY22 onwards.
Loss ratio for Motor TP and Fire segments declined 390 bps and 2490 bps QoQ, to 71% and 40%, respectively: Loss ratio for Motor OD, however, jumped 900 bps QoQ to 72%. There is a rise in claims frequency compared with 1HFY22, when it was lower due to the lockdown. Management remained hopeful that a price hike for Motor TP from the regulator will transpire in the next financial year. Health plus loss ratio rose 370 bps QoQ to 75%. There has been an elevated frequency in Non-Covid cases, particularly due to Dengue and Malaria and also a rise in elective surgeries but all these are seeing a decline in 4QFY22.
We maintain ‘Buy’ rating on ICICIGI with a revised price target of Rs 1825: We value ICICIGI at 36x FY23 P/E for an FY21-24E EPS CAGR of 24%.
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