Buy ICICI Lombard with 1450 rupee target: Motilal Oswal

ICICI Lombard Research by Motilal Oswal: As OPEX expanded at 9% compared to an 11% growth in NEP, the underwriting loss for ICICIGI was INR1.5 billion in 2Q.

ICICI Lombard Research by Motilal Oswal: As OPEX expanded at 9% compared to an 11% growth in NEP, the underwriting loss for ICICIGI was INR1.5 billion in 2Q as opposed to INR1.9 billion in 1QFY23. Claims ratio increased to 72.8% in 2Q vs. 72.1% in 1QFY23 as higher claims in the Motor OD and the Health sector offset the advantages of lower loss ratios in Motor TP and Fire.

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ICICI Lombard Research: Key Points

ICICI Lombard report ratio increased by 300bps year over year.
Due to greater rates, investment income, at INR8.7 billion, exceeded their projection of INR7.4 billion.
The combined ratio was 105.1% as opposed to 105.3%/104.1% in the 2QFY22 and 1QFY23.
In 1QFY23, the solvency ratio was 2.6x; today it is 2.5x. PAT was INR4.6b after adjusting for a tax reversal of INR1.3b (est. INR3.8b). The reported PAT was INR5.9b.

ICICI Lombard Outlook: Highlights

They increased their earnings forecast for FY23 and FY24 by 11% and 4%, respectively. Higher investment income will offset a higher underwriting loss.
They expect the company to deliver a premium/PAT CAGR of 18%-26% and a RoE of 19% in FY24 over the course of FY22 to FY25.
With a one-year TP of INR1,450 (35x FY24E P/E), they keep their Buy recommendation.

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