ICICI Lombard keeps brokerages bullish with higher combined ratio

Synergy benefits from the Bharti AXA merger, scale benefits, and improvement in mix in the Health business should help to improve the combined ratio over the next couple of years, said Motilal Oswal

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Shares of ICICI Lombard General Insurance gained on July 19 as the insurer’s combined ratio improved to 103.8 percent for the June quarter as against 104.1 percent a year ago.

The combined ratio is the sum of incurred losses and operating expenses measured as a percentage of earned premium. Lower combined ratio means the company is doing better financially.

At 11:15am, the ICICI Lombard General Insurance stock was quoting Rs 1,363.20 on the NSE, about 0.85 percent higher than the previous close. It is about 1 percent away from hitting a new 52-week high.

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The private sector general insurance company reported a net profit of Rs 390.4 crore for the quarter, a jump of 12 percent on-year. Gross premium climbed 19.7 percent YoY to Rs 6,622.1 crore against Rs 5,530 crore in Q1 FY23.

Breaking down the numbers further, domestic brokerage Motilal Oswal Financial Services said the combined ratio was lower at 102.9 percent if the additional Rs 35 crore that the company had to pay up for settlement of cyclone claims is excluded. This was broadly in line with its estimate of 102.5 percent.

Motilal Oswal has a ‘buy’ rating on the stock with a target price of Rs 1,550. “Synergy benefits from the Bharti AXA merger (technology related), scale benefits, and improvement in mix in the Health business (higher share of retail health) should help to improve the combined ratio over the next couple of years,” it noted.

The management’s guidance for better performance has made foreign brokerages bullish, too.

Morgan Stanley has assigned an ‘overweight’ rating, with a target price set at Rs 1,550. “The management of ICICI Lombard maintains its guidance for a combined ratio of 102 percent for the FY25,” the broking firm said. The growth trajectory of the health business is expected to be sustained.

CLSA too has a ‘buy’ rating, with a target price of Rs 1,550. The company’s first-quarter combined ratio of 103.8 percent surpassed expectations, indicating a better-than-anticipated performance, it said.

However, it has warned that the ongoing floods in North India could pose a risk to the company.

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