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ICICIGI’s 2Q performance was steady despite a challenging business environment, with claims ratio at 72.7% (+0.7ppt yoy; Emkay estimate: 73.3%). Combined Ratio (CoR) was elevated at 107% vs our estimate of 105.1%, largely driven by higher expense ratio owing to the shift in business mix toward retail. PAT at Rs9.46bn grew ~16% yoy, higher than our estimate of Rs8.08bn, driven by strong investment income supported by the stake sale in NSE IPO. Motor OD Claims ratio increased yoy, led by the impact of floods across multiple states. Management stated the company has calibrated its operations to factor in the impact of the SC judgement related to the Motor TP segment and has integrated it into the regular course of the business. Going forward, Management expects a healthy business environment in the commercial lines segment and momentum to continue in the Motor segment. Amid the proposed distribution reforms, Management expects ICICIGI benefit given its disciplined approach toward acquisition and controlled costs (EoM below ~30%). We tweak our estimates to factor in the 2Q developments and raise Sep-27E TP by >5% to Rs2,000 from Rs1,900, while maintaining ADD.

Claims cost under control; higher expense ratio drives elevated CoR During 2Q, GWP at Rs77bn grew ~9% yoy, coming in higher than our estimated Rs69.8bn. Net Retention ratio at 80.7% increased by 5.4ppts yoy led by higher share of retail business. NEP at Rs66.5bn grew ~18% yoy, beating our estimate of Rs58.6bn. Claims ratio at 72.7% increased by 70bps yoy and was better than our estimated 73.3%. Expense ratio (including commission) increased by 130bps yoy to 34.3%, owing to higher contribution from the retail business; this was higher than our estimate of 31.6%. As a result, CoR increased to 107% (+190bps yoy), standing higher than our estimate of 104.9%. Overall, despite the elevated combined ratio, higher investment income resulted in PAT of Rs9.46bn (+16% yoy), beating our estimate of Rs8.08bn.

Commercial lines to see gradual improvement; continued momentum in Motor

The company saw improvement in claims ratios in the commercial lines segment from 1QFY27 to 2QFY27. Given the industry seeing large loss events in 1H in commercial lines, the environment in 2H is expected to improve on the back of a disciplined approach. Further, Management stated that on-ground momentum in the sale of new vehicles remains encouraging and is expected to continue over 4Q; however, growth is expected to moderate owing to a high base. In light of the proposed distribution reforms, Management believes ICICIGI stands to benefit on the back of its disciplined acquisition approach, led by its controlled EoM ratio that remains within current regulatory limits. With the regulator proposing a lower EoM cap, Management expects the competitive intensity in the market to improve, thus benefitting ICICIGI

We maintain ADD and increase Sep-27E TP by >5% to Rs2,000

To bake in the 2Q developments, we tweak our estimates; this results in a ~2% increase in FY27E PAT, while FY28E/29E PAT remains largely unchanged. We maintain ADD on ICICIGI and increase Sep-27E TP to Rs2,000 from Rs1,900, implying FY28E PER of ~31x.

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