ICICI Lombard General Insurance Company increased its net profit by 40% year on year to Rs 437 crore in the March quarter of fiscal year 2022–23, exceeding Bloomberg’s expectation of Rs 394 crore. In the previous fiscal year, the company’s net profit was Rs 313 crore.
The non-life insurer’s total revenue in the fourth quarter was Rs 5,255.58 crore, a 13.3 percent increase year on year. The solvency ratio was 2.5 times, which was more than the regulatory norm of 1.5 times.
Here’s what brokerages had to say about the firm and the stock after the fourth-quarter results:
Jefferies: Jefferies, a global research and brokerage business, was upbeat but warned about the effect of the EOM (expense of management) regime’s increase in reinsurance costs in FY24.
According to the brokerage, ICICI Lombard’s stock sale and CEO changeover may restrict its re-rating potential. Given the concerns, the brokerage firm maintained its “buy” recommendation but reduced the stock’s price objective to Rs 1,560.
Morgan Stanley: Morgan Stanley was similarly upbeat about the quarter’s greater-than-expected earnings, which it attributed to a reduced underwriting loss and increased investment income.
The brokerage firm has given the stock an “overweight” rating and set a target price of Rs 1,400, which would represent a 26.8 percent upside potential from the close on April 18.
UBS: UBS Securities is apprehensive about ICICI Lombard. It said that the company’s premium growth was slower than the industry’s, although the combined ratio remained high. It was, however, upbeat about management’s projection to achieve a 102 percent combined operating ratio (COR) by FY25. UBS Securities also assigned the shares a “buy” rating with a price objective of Rs 1,455.
JP Morgan: According to JP Morgan, ICICI Lombard’s product mix would continue to move towards the health market as a result of distribution investments. In that category, the firm is expected to profit from the health pricing cycle, which is expected to continue robustly given medical inflation.
However, JP Morgan thinks that the firm will encounter competition in the auto insurance area and that the property and casualty insurance vertical will likely remain profitable. The brokerage also questions management’s target of a 102 percent combined operating ratio by FY25.
The company has assigned the non-life insurer a “neutral” rating and reduced its target price to Rs 1,160.