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Transformation through innovation

* ICICI Lombard (ICICIGI), through its annual report, has reiterated its future readiness to capitalize on thisfast-growing general insurance industry. Its core business strategy is built on five pillars, namely, 1) improving market share; 2) delivering customer service &technology; 3) capturing newer market opportunities & reaching the underserved; 4) robust risk management; and 5) improving operating profitability.

* ICICIGI has outgrown the industry in Retail Health; this growth is likely to accelerate due to the adoption of newly launched products, such as Max Protect Health Insurance, with “no limit” in-patient and AYUSH hospitalization coverage, with an “unlimited sum insured” option for covering the increasing medical costs and modern treatments up to INR10m.

* During the year, ICICIGI has carried out technological improvements such as: ‘Cloud Calling’, a feature for reshaping the customer communication during the motor claims process, and expediting the claims settlements. ‘InstaSpect’, a feature for quicker and hassle-free service delivery, and an efficient claims settlement process. ‘Self-inspection feature’ on the IL TakeCare App, where an AI/ML solution helps in auto-approval of policies depending on the damages detected.

* Motor Nil Endorsements: Customers can now make policy changes via IVR without speaking to a CRM, thereby reducing waiting time.

* ICICIGI is the first insurance company to introduce an SME-specific website and offer a complete end-to-end journey for SME products. ICICIGI strengthened its bancassurance channel during the year by adding 80 new partnerships.

* During FY24, premiums grew 22% YoY to INR256b, fueled by 28% YoY growth in the health segment, 36% YoY growth in the engineering segment, and ~3x jump in the crop segment. The claims ratio stood at 70.8% vs. 72.4% in FY23, led primarily by the motor segment. The combined ratio was 103.3% vs. 104.5% in FY23. The solvency ratio improved further to 2.62x at the end of FY24 from 2.57x at the end of FY23. The RoE, however, was lower at 17.2% in FY24 vs. 17.7% in FY23.

* Valuation: Going forward, growth in the Motor segment is likely to be back-ended, with the company waiting for price rationalization in the OD segment. In the Health segment, the benefits of price hikes and improving the efficiency of the agency channel should translate into better profitability. Scale benefits, a favorable product mix (higher share of retail health), and improvements in efficiencies across channels should help ICICIGI improve its combined ratio and RoE over the next couple of years. We reiterate our BUY rating with a TP of INR2,100 (premised on 35x FY26E EPS).

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