Brokerages Trim Estimates But Retain ‘Buy’

Shares of ICICI Lombard General Insurance Co. declined after brokerages trimmed estimates despite the company’s fourth-quarter profit beating analysts’ estimates.

The brokerages were concerned over the hike in reinsurance pricing and the new expense of management regulations that could impact competition.

The general insurer’s quarterly net profit rose 40% year-on-year to Rs 437 crore. Its revenue rose 13% in the quarter, with net premiums rising 12% over the previous year.

The yearly after-tax profits rose 36%, and its combined ratio—incurred loss or claims and expenses divided by the premium earned—stood at 104.5% for FY23.

The company intends to bring down its combined ratio to 102% levels in the next two years, Gopal Balachandran, chief financial officer at ICICI Lombard, told BQ Prime. He has also guided for maintaining the return on equity in the range of 16–18% while continuing to outperform market growth in gross written premium, which has a CAGR of around 15% over the past 15 years.

With the revised regulations on the removal of individual limits on commission on different lines of business and an overall cap of 30% on the expense of management, Balachandran said that the company intends to focus on motor, health, and commercial lines of business, such as liability and indemnity, subject to the competitive intensity in the space.

Of the 28 analysts tracking the company, 22 maintain a ‘buy’, while four suggest a ‘hold,’ and two recommend a ‘sell’, according to Bloomberg data. The 12-month consensus price target implies an upside of 24.4%.

Here’s what brokerages have to say about ICICI Lombard’s Q4 FY23 performance: