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Exceptional performance: outpacing industry growth

ICICI Lombard General Insurance (ICICI’LGI) is a private general insurance company that offers various insurance products, including travel, home, health, and motor insurance.

* In Q1FY25, Gross direct premium income (GDPI) grew 20.4% YoY to Rs. 7,688cr, driven by strong growth in motor and health segments. Net premium earned rose 15.9% YoY to Rs 4,504cr.  

* GDPI market share improved to 10.6% in Q1FY25 vs 8.6% in Q4FY24.

* ICICI’LGI demonstrated strong operating performance this quarter and gained market share. Introduction of new products and the upcoming festive season are expected to drive its performance. Hence, we maintain our positive outlook and retain our BUY rating on the stock, with a target price of Rs. 2,331 based on 7.1x FY26E BVPS. 

Preferred segments drove premium income

In Q1FY25, ICICI’LGI’s GDPI grew 20.4% YoY to Rs. 7,688cr vs the industry's 13.3% YoY growth, driven by stronger contribution from the preferred segments. The motor segment rose 26.3% YoY, outpacing the industry's 12% YoY growth and securing a leading industry position, due to robust expansion in the existing business and an increased share of Motor Own Damage (OD) in the overall product mix. The health segment experienced strong growth, rising 28.5% YoY vs the industry's 16.6% YoY growth. Shifting consumer preference towards better servicing capabilities, influenced by changes in pricing sentiment, drove growth in the health segment. Additionally, the launch of a new health insurance solution boosted retail health business growth in Q1FY25 and is expected to continue driving growth. Pricing pressures remained a significant challenge for the fire segment and would require close monitoring

PAT remained elevated with controlled loss ratio and Opex 

In Q1FY25, operating profit grew 51.4% YoY to Rs. 501cr, supported by a 15.9% YoY rise in net premium earned, a 31.3% YoY increase in investment income mixed with lower other expenses (-23.2% YoY). However, this growth was offset by a 15.7% YoY increase in incurred claims to Rs. 3,334cr. The loss ratio declined to 74% in Q1FY25 vs. 74.1% in Q1FY24, due to lower loss ratios from motor and crop segments, but was offset by a higher loss ratio from the health and crop segments. As a result, the combined ratio declined to 102.3% in Q1FY25 vs 103.8% in Q1FY24. Profit after tax (PAT) grew 48.7% YoY to Rs. 580cr. 

Key concall highlights 

* In Q1FY25, long-term insurance products were introduced for private car and two-wheeler segments, in line with the operational guidelines of the Master Circular. It is expected that these new offers would further improve performance.

* In Q1FY25, 69.9% of agency and direct-motor claims were serviced through the Preferred Partner Network (PPN), up from 56.3% a year ago.

* ICICI Lombard has recently launched a new health insurance product called 'Elevate'. This innovative product uses AI to provide personalised solutions for active lifestyles and medical emergencies. 

Outlook and valuation  

In Q1FY25, ICICI’LGI’s product mix seemed well-positioned to cater to the industry requirement. Its enhanced market share showcases the demand for and acceptance of products by customers. The higher loss ratio for some segments was attributed to seasonality and is expected to a decline in the near future, leading to profitable growth. Hence, we maintain our positive outlook and retain our BUY rating on the stock, with a target price of Rs. 2,331 based on 7.1x FY26E BVPS. 

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