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 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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