ICICI Lombard falls 4% on lower-than-expected earned premium; here’s what brokerages say

Shares of ICICI Lombard General Insurance Company slipped over 4 percent in early trade on April 19, as the company’s lower-than-expected net earned premium in the March quarter disappointed the Street.

The non-life insurer’s net earned premium for the quarter rose 12.3 percent year-on-year to Rs 3,726 crore but missed the analysts’ estimate of Rs 4,011 crore. In addition to that, the Street was also sceptical of the management’s guidance to achieve a 102 percent combined operating ratio by FY25. The company’s combined operating ratio was at 104.2 percent in the quarter under review.

At 10.41 am, shares of ICICI Lombard were trading with a cut of 3.45 percent at Rs 1,088.35 on the National Stock Exchange.

The company, however, reported a better-than-expected bottomline, as net profit jumped 40 percent on-year to Rs 437 crore, beating Bloomberg’s estimate of Rs 394 crore.

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The non-life insurer’s total income in the fourth quarter came in at Rs 5,255.58 crore, a 13.3 percent on-year growth. The solvency ratio was 2.5 times, above the minimum regulatory requirement of 1.5 times, the company said on April 18.

Here’s what brokerages have to say about the company and the stock  post-Q4 results:

Global research and broking firm Jefferies was positive but cautioned to watch for the impact of the rise in reinsurance cost under the EOM (expense of management) regime in FY24.

The brokerage believes ICICI Lombard‘s stake sale and CEO succession may limit its re-rating potential. Factoring in the risks, the brokerage house retained its “buy” rating but cut the price target for the stock to Rs 1,560.

Morgan Stanley was also positive about better-than-expected profit for the quarter, which it attributed to lower underwriting loss and higher investment income.

The brokerage firm has an “overweight” rating for the stock, with a target price of Rs 1,400, reflecting an upside potential of 26.8 percent from the April 18 close.

Also Read: ICICI Lombard General Q4 profit rises 40% to Rs 437 crore

UBS Securities has a cautious stance on ICICI Lombard. It said premium growth for the company was slower than the industry, while the combined ratio remained elevated. However, it was positive on the management’s guidance to deliver a 102 percent combined operating ratio (COR) by FY25. Pricing that in, UBS Securities also gave a “buy” rating for the stock, with a price target of Rs 1,455.

JP Morgan said ICICI Lombard’s product mix will continue to shift towards the health segment following the investments in its distribution. In that segment, the company is likely to benefit from the health pricing cycle which remains strong considering medical inflation.

However, JP Morgan also believes that the company will face competition in the motor insurance segment, while the property insurance and casualty insurance vertical is likely to deliver low profitability. The brokerage is also sceptical of the management’s guidance of achieving a 102 percent combined operating ratio by FY25.

The firm has given a “neutral” rating for the non-life insurer and slashed its target price for the stock to Rs 1,160.

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