ICICI Lombard General Insurance - Q2FY21 Result Update - YES Securities

Key highlights of Q2 FY21 performance

- Gross Written Premium - GWP came at Rs. 32.5bn growing by 7% on YoY basis backed by strong performance across all major segments with growth of 62% in Fire segment, 11% in Motor OD, 7% in Motor TP, and 8% in Health business. However, on sequential basis GWP declined by 4% on account of soft performance in Fire business.

- Net Earned Premium - NEP at Rs.24.6bn was higher than our estimates of Rs. 22.5bn. NEP grew by 4.5% yoy and 6% on sequential basis.

- Claims - Claims at Rs. 16.5 bn were higher than our estimate of Rs. 16bn, however incurred claims ratio improved by 740bps to 67.2% in Q2FY21 from a year ago. Motor OD and Motor TP saw significant decline of 1290bps and 2500 bps in Loss ratios respectively on YoY basis. Although, health claims elevated by 1090 bps during the same period.

- Underwriting Performance - Underwriting loss at Rs. 34mn against our estimate of underwriting profit of Rs. 203mn with combined ratio remaining stable at 99.7% in Q2FY21.

- Operating Profit - Operating profit at Rs. 4.1 bn was lower than our estimate of Rs. 4.5bn. Expenses of management increased by 280bps on YoY basis on back on higher sales promotion (53% yoy) even though employee cost declined 13% on sequential basis owing to leave encashment provision in Q1 FY21 amounting to Rs325mn.

- Net Profit - PAT stood at Rs. 4bn which was in line with our estimates in spite of operating profit coming in lower than our expectations. During the Q2 FY21, the Company has reversed previously assessed impairment of Rs703mn as underlying securities were sold, and the resultant losses were recognized.

Q2 FY21 results in line with estimates, fairly priced at FY23E P/E of 28x, Retain ADD

We believe that the claim ratios in health and motor TP segments could see an increases in H2 FY21. However, the trajectory of premium should be strong especially in the motor segment with festive season kicking in. For ICICI Lombard, the performance could be relatively better than the industry in the motor TP segment owing to its relatively lower exposure to the CV segment. With relatively younger business of retail health, outperformance cannot be ruled out for this segment as well. We have revised our EPS estimate upwards by 5%, 3% and 2% for FY21, FY22 and FY23 respectively. At FY23E P/E of 28x, we find the valuations fair and retain our ADD rating on the stock with a Target price of Rs. 1,410.

Shares of ICICI Lombard General Insurance Company Ltd was last trading in BSE at Rs.1254.95 as compared to the previous close of Rs. 1256.45. The total number of shares traded during the day was 7380 in over 983 trades.

The stock hit an intraday high of Rs. 1265 and intraday low of 1241.3. The net turnover during the day was Rs. 9240850.

Source : Equity Bulls

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