Buy ICICI Lombard General Insurance Ltd For Target Rs.1,843 - Yes Securities
Guidance for sequential rise in health segment loss ratio applies only to 2HFY22
Result Highlights
* Net premiums: Net premiums rose 3.1% QoQ, driven by the crop segment, fire segment and health segment
* Loss ratios: Motor TP loss ratio rose 400 bps to 75% with IRDA still not having effected a price hike
* Expense control: Expense ratio rose 120 bps QoQ to 29.0%. We highlight QoQ numbers as YoY numbers are not comparable due to merger with Bharti Axa
Our view –
Guidance for sequential rise in health segment loss ratio applies only to 2HFY22, Upgrade to BUY
The growth in the crop segment was 1074% QoQ as Bharti Axa resumed crop business during the quarter:
The sequential growth figures are calculated on comparable merged entity figures of ICICIGI. The fire segment and health segment (including personal accident) grew 8.9% QoQ and 3.4% QoQ, respectively. Motor segment dragged, inching up 0.8% QoQ.
Loss ratio for Motor OD, however, saw 500 bps decline to 63% as ICICIGI continued to focus on profitable segments:
On the Motor TP side, it has been 2 years since IRDA has effected a price hike and now, management expects one on 1st April 2022. Loss ratio for health segment (including Travel and PA) plummeted 82% points to 71% as Covid claim intimations declined. However, management guided for a rise in health loss ratio in 2HFY22 due to non-Covid claims, which we think will normalize lower post FY22.
Management stated that the Bharti Axa crop portfolio was performing well so far but would monitor it before taking a final call:
The Crop insurance contracts signed by Bharti Axa are in 2 states for a duration of 3 years ending FY23 and these are the contracts that have been continued with no new crop insurance contracts being added.
We upgrade ICICIGI to ‘Buy’ with a revised price target of Rs 1843:
We value ICICIGI at 36x FY23 P/E for an FY21-24E EPS CAGR of 24%
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