ICICI Lombard Shares End At Record High On Improving Growth Outlook
A person is seen filling insurance papers in this photograph. (Photographer: Akio Kon/Bloomberg)

ICICI Lombard Shares End At Record High On Improving Growth Outlook

Shares of ICICI Lombard General Insurance Ltd. rose to a record in intra-day trade after Chief Financial Officer Gopal Balachandran said its growth outlook is improving.

Balachandran’s remarks came at an investor call hosted by the brokerage Jefferies India on Nov. 25. He cited an uptick in motor premiums, demand for health insurance and tariff hikes in fire segment as key drivers for the improved outlook.

However, he said higher claims in health insurance, competition in motor insurance and second wave of Covid-19 infections are key pressure points. Despite the challenges, the company expects to achieve a combined ratio of 100% and a return on equity of 20%.

Pent-up auto demand, rise in personal mobility needs and renewals recovery have strengthened the company’s motor premium growth even as it had to let go of a few OEM partnerships, he said.

“We believe benefits may show improvement for the rest of H2FY21 with credit demand improving,” Jefferies India analyst Prakhar Sharma wrote in a note.

Balachandran said the insurer will push for growth in the retail indemnity space and is working through innovations like OPD, supervised home treatment, ILTakecare App etc. for the same. “Although its share in retail indemnity is sub-optimal at ~3%, its growth needs to be tightly managed given intense competition from standalone health insurers,” Sharma wrote.

The company said synergies in the deal with Bharti Axa will be realised over a 12-24-month period after its consummation. “This deal remains a key monitorable in assessing ICICI Lombard’s capacity to turn around an ailing business,” according to Sharma.

Jefferies expects ICICI Lombard to deliver annualised growth of 13% in net premiums and 17% in profit without balance sheet risks. It has maintained its ‘Buy’ rating on the stock and raised its price target to Rs 1,630 from Rs 1,570.

Also read: A Hike In Health Insurance Premiums Fails To Deter Demand

Upside Scenario:

  • Price target: Rs 1,820
  • Gross premium CAGR of 15%.
  • Net premium CAGR of 14%.
  • Average combined ratio of 99%
  • Average investment yields of 6.7%.

Downside Scenario:

  • Price target of Rs 1,110
  • Gross premium CAGR of 13%
  • Net premium CAGR of 12%
  • Average combined ratio of 100%
  • Average investment yields of 6.3%

Shares of ICICI Lombard ended 5.4% higher - the biggest single-day advance in seven months at Rs 1,457.05. The stock has risen for the third straight session.

Out of the 24 analysts that track the general insurer, 16 have a ‘Buy’ recommendation, three suggest ‘Hold’ while five have a ‘Sell’ call. The stock crossed its 12-month Bloomberg consensus price target of Rs 1,420.3 in today’s trading session.

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