Shares of ICICI Lombard General Insurance Company fell over 4 percent in early deals on April 19, a day after the company disclosed its last financial year's March quarter (Q4FY23) scorecard.
The company's net profit for Q4FY23 stood at ₹437 crore, up 40 percent year-on-year (YoY) against ₹312.5 crore in the same quarter last year.
Net earned premium for the quarter under review stood at ₹3,726 crore, up 12 percent YoY against ₹3,317.78 crore in Q4FY22.
The combined ratio for the quarter stood at 104.2 percent against 103.2 percent YoY.
(The combined ratio is a key metric which indicates the profitability and financial health of an insurance company. It is shown as the sum of operating expenses and incurred losses divided by the earned premium.)
Shares of the company have been volatile in the last one year. They hit their 52-week highs of ₹1,410.55 on BSE on April 21, 2022; they are now 20 percent down from that level.
They hit their 52-week low of ₹1,049.10 on March 16, 2023.
Brokerages retain views but trim estimates
Top brokerage firms have mostly retained their views on the stock with some minor tweaks in estimates after the company's March quarter numbers.
Motilal Oswal Financial Services has retained its buy call on the stock with a target price of ₹1,400 and said the company delivered a better-than-expected performance in Q4FY23 on underwriting performance.
It, however, marginally lowered its PAT estimates by 4 percent each for FY24 and FY25 while its estimates for premium remains unchanged for both financial years.
"Going ahead, growth in the motor segment is likely to be back-ended with the company waiting for the rationalisation of pricing in the OD (own damage) segment. On the health segment, the benefits of price hikes and improving the efficiency of the agency channel should translate into improved profitability," said Motilal Oswal.
Moreover, the brokerage firm believes the synergy benefits from the Bharti AXA merger (technology-related), scale benefits, and improvement in health business (higher share of retail health) should aid in improving the combined ratio and RoE (return on equity) over the next couple of years.
Brokerage firm Emkay Global Financial Services also maintained its buy call on the stock with a target price of ₹1,400.
"Our FY24/25 estimates remain broadly unchanged; we reiterate our buy on the stock, with a revised target price of ₹1,400 per share (implied FY25 price-to-earnings ratio at 27 times and price-to-book-value at 5 times)," said Emkay.
It said ICICI Lombard had a satisfactory performance in Q4FY23, with the combined ratio (CoR) at 104.2 percent coming in line with its estimates.
"The reaffirmation of guidance of 102 percent CoR by FY25, despite the dynamic regulatory and insurance market environment, was majorly reassuring. Overall, Q4 marks a good finish to a decent FY23, in which a CoR of 104.5 percent was worse than the company’s own track record, albeit commendable amid the difficult external conditions," said Emkay.
Emkay believes the company will continue its strategy of growing above the market in selected business segments.
The brokerage firm underscored that the hardening of reinsurance prices and the regulatory nudge with regard to freeing up prices in commercial lines will have some bearing on profitability in these segments, but the company's management remains confident of achieving its FY25 CoR guidance.
"With investments in distribution channels, prudent underwriting practices, rationalisation of cost, and innovation of new products, ICICI Lombard is on the right growth track," said Emkay.
Brokerage firm Nuvama Wealth Management has maintained a 'hold' call on the stock and reduced its target price by 6.3 percent to ₹1,200. The brokerage firm also trimmed its FY24 and FY25 APAT (adjusted profit after tax) estimates by 0.4 percent and 5.7 percent, respectively.
"While industry growth in the motor has improved, heightened competitive intensity may persist, especially in the absence of commission caps beginning FY24. Reinvestment of synergy benefits is weighing on the business’s interim RoE profile," Nuvama said.
Disclaimer: The views and recommendations given in this article are those of the broking firms. These do not represent the views of MintGenie.