ICICI Lombard General Insurance – T2FY22 results update – YES Securities

Recommendations for the sequential increase in the healthcare segment loss ratio only apply to 2HFY22

Highlights of the results

– Net premiums: Net premiums increased 3.1% quarter on quarter, driven by the crop segment, fire segment and healthcare segment

– Claims ratios: the claims rate for automotive construction increased by 400bp to 75%, the IRDA still not having made a price increase

– Expense control: The expense ratio increased by 120 basis points QoQ to 29.0%. We underline QoQ numbers because YoY numbers are not comparable due to merger with Bharti Axa

Our point of view – Advice for a sequential increase in the loss ratio in the healthcare segment only applies to 2HFY22, upgrade to BUY

Growth in the crops segment was 1074% QoQ as Bharti Axa resumed cultivation activities during the quarter: Sequential growth figures are calculated on the same basis as the merged ICICIGI entities. The fire segment and the health segment (including personal injury accidents) increased by 8.9% quarter on quarter and 3.4% quarter on quarter respectively. The automotive segment lagged, advancing 0.8% quarter on quarter.

The loss ratio for Motor OD, however, saw a drop of 500 basis points to 63% as ICICIGI continued to focus on profitable segments: On the Motor TP side, it has been 2 years since IRDA has made a price hike and now management expects one on April 1, 2022. The claims rate for the healthcare segment (including travel and medical assistance) has dropped 82% points to 71% so that the Covid claim indications have decreased. However, management has forecast an increase in the health claims rate in 2HFY22 due to non-Covid claims, which we believe will normalize downward after FY22.

Management said Bharti Axa’s crop portfolio has been performing well so far, but will monitor it before taking a final call: been continued without any new crop insurance contracts being added.

We put ICICIGI to “Buy” with a revised price target of Rs 1,843: we rate ICICIGI at 36x P / E FY23 for a FY21-24E EPS CAGR of 24%.

Shares of ICICI Lombard General Insurance Company Limited were last trading on BSE at Rs. 1,498.80 from the previous close of Rs. 1,506.25. The total number of shares traded during the day was 22,705 in more than 2,598 transactions.

The share hit an intraday high of Rs. 1,537.00 and an intraday low of 1,490.00. The net turnover during the day was Rs. 34,267,329.00.


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