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Healthy business momentum; positive outlook

ICICI Lombard General Insurance (ICICI’LGL) is a private general insurance company offering various types of insurance products covering travel, home, health and motor segments.

* In Q4FY24, gross direct premium income (GDPI) grew 22% YoY to Rs. 6,073cr driven by robust growth in motor insurance (+27.4% YoY) and health travel and PA (+23.7% YoY). Net premium income grew 17.2% YoY.

* PAT grew 18.9% YoY to Rs. 520cr driven by improved loss ratio and combined ratio, and lower operating expenses.

* Strong distribution network and leading market position helped ICICI’LGI clock substantial growth in premium income. The trend is expected to continue. Loss ratio and combined ratio is expected to come down in the near term, resulting in higher profitability. Hence, we maintain a positive outlook on the stock and retain our BUY rating with a rolled over target price of Rs. 1,898 based on 5.8x FY26E BVPS.

Robust demand across segments boosted premium income

In Q4FY24, ICICI’LGI’s GDPI was Rs. 6,073cr, up 22% YoY, higher than the industry growth of 9.5%. It was driven by robust growth in the motor insurance business (+27.4% YoY) and health travel and PA business (+23.7% YoY). Similarly, net premium income grew 17.2% YoY. Intense growth in new private car segment (~23% YoY) and new two-wheeler segment (~11% YoY) boosted the motor business. The healthcare business also delivered a strong growth momentum backed by a +31.7% YoY growth in group health business and +21.8% YoY growth in retail health business in Q4FY24. The digital business grew 29.5% YoY and contributed 6.8% to the overall business.

Improvements in loss ratio supported PAT growth

Operating expenses decreased 41.8% YoY to Rs. 652cr owing to lower sales promotion expenses. Underwriting loss also narrowed 7.5% YoY to Rs. 232cr. Loss ratio or incurred claim ratio fell to 68.6% vs 74.2% in Q4FY23 on account of higher net premium income. Similarly, combined ratio slipped 20bps YoY to 102.2%. Investment income grew 24.3% YoY and, as a result, PAT rose 18.9% YoY to Rs. 520cr.

Key concall highlights

* For FY25, the management guided that the private-car-sales segment would grow mid-single digit and the two-wheeler segment grow by 8-10%. Demand from the infra sector would aid the commercial vehicle business and help grow the segment in double digits.

* At 2.62, solvency ratio remained at the higher end in Q4FY24 vs the statutory requirement of 1.5 and 2.51 in Q4FY23.

Outlook and valuation

ICICI’LGI delivered healthy business momentum with robust growth in premium income and controlled combined ratio in Q4FY24. The trend is expected to continue driven by robust distribution network, enhanced digitalisation, favourable macro environment and strong leading market position. The recent tie-up with Policybazaar should further result in synergies and support the business growth going forward. Loss ratio and combined ratio is expected to come down in the near term, resulting in better profitability. Hence, we maintain a positive outlook on stock and retain our BUY rating with a rolled-over target price of Rs. 1,898 based on 5.8x FY26E BVPS.

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