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Motor segment drives growth but OEM sales slowdown is a monitorable

Our view – Sequential rise in combined ratio driven by catastrophe events

Combined Ratio – CoR worsened 220 bps on sequential basis, while management maintained guidance: The combined ratio for the company was 104.5% for 2QFY25 compared with 102.3% for 1QFY25. Management stated that catastrophes caused the CoR to worsen by 1.9% points than it otherwise would have been and that there is no reason to alter CoR guidance. Management had previously guided for CoR to reach 101.5% in the exit quarter of FY25. It may be noted that the motor industry CoR has worsened from 121% to 125.6% on YoY basis, driven by loss ratio for the motor industry worsening from 84.5% in 1QFY24 to 87.6% in 1QFY25. At the same time, the retention ratio for the company in the motor segment has improved 2-4%.

GDPI Growth – ICICIGI continued to outpace the industry, driven by the motor segment, which is, however, seeing an OEM sales slowdown: In 2Q, GDPI for the company grew 10.4% YoY compared with 2.0% for the industry. The Motor segment GDPI grew by 16.1% YoY whereas the Health Segment GDPI grew by 12.3% YoY. Within the Motor segment, new vehicle GDPI growth was flat for the quarter whereas, renewals grew 26%, driving overall growth for the segment. However, management expects single digit growth in the second half from a vehicle sales perspective. We maintain ADD rating on ICICIGI with an unchanged price target of Rs 2350: We value ICICIGI at 41x FY26 P/E for an FY24-27E EPS CAGR of 19%. At our target, the implied FY26E P/B is 7.2x for an FY25/26/27E RoE of 17.5/17.7/17.5%. (See Comprehensive con call takeaways on page 2 for significant incremental colour.) Other Highlights (See “Our View” above for elaboration and insight)

* Net premiums earned: Net premiums earned grew 11.6%/16.7% QoQ/YoY, driven higher sequentially by growth in Fire and Crop segments.

* Loss ratios: Overall loss ratio has improved by -260 bps QoQ to 71.4%, where except Motor OD and Health all segments have evolved positively QoQ

* Expense control: Expense ratio rose 300bps QoQ to 29.8% where opex rose 6.1% QoQ and commission and brokerage rose 5.0% QoQ

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