ICICI Lombard - Q3FY21 Result Report - YES Securities

PAT below estimates

- Gross Written Premium - GWP came at Rs. 41.1bn against our expectation of Rs. 40.3bn, a growth of 9% on YoY and 26.3% on sequential basis.

- Net Earned Premium - NEP at Rs.26bn was lower than our estimates of Rs. 30.5bn, growth of 6% yoy, backed by strong performance across all major segments with growth of 66% in Fire segment, recovery in Marine segment with 16% growth and 13.5% growth in Health business. On Sequential basis NEP grew by 6%.

- Claims - Claims at Rs. 17.2 bn were lower than our estimate of Rs. 21.4bn and incurred claims ratio improved by 580bps to 65.9% in Q3FY21 from a year ago.

- Underwriting Performance - Underwriting loss at Rs. 1,345mn against our estimate of underwriting loss of Rs. 45mn on back of higher management expenses and commissions with combined ratio at 97.9% in Q3FY21.

- Investment Income - Income on Investments grew by 31% on YoY basis to Rs. 4.4bn which was higher our estimates.

- Operating Profit - Operating profit at Rs. 3.1bn was lower than our estimate of Rs. 4.0bn. Expenses of management increased by 88bps on YoY basis.

- Profits - PAT stood at Rs. 3.1bn which was below our estimates due to lower NEP and higher overall expenses.

- Solvency - Solvency Ratio stands strong at 276%.

- Change in forecasts - EPS for 9MFY21 stands at Rs.24.8, which is 75% of our estimate of Rs. 33.2 for FY21.

- Valuations - The stock currently trades at FY23E P/E of 31x.

Our view: With economic recovery the commercial lines of businesses would pick up, while Motor business strength should continue on back of improving auto sales. Fire segment growth would slow down owing to the base effect, health business slowdown should continue as ICICI Bank restricts sale of benefit based products. In terms of claims, sequential growth in Q4 could be higher as severity and frequency in Motor and health are likely to increase, which could be partially offset by premium growth. Combined ratios trajectory should be steady in the near term. We have revised our estimates on premium growth as trajectory in Q3 has been better than initially forecasted, which has resulted in our earnings estimates moving higher by 3-4%. We value the stock at 31x FY23E P/E (Combined with BAXA) resulting in fair value of Rs1,557. Retain ADD rating.

Shares of ICICI Lombard General Insurance Company Ltd was last trading in BSE at Rs.1509.45 as compared to the previous close of Rs. 1524.85. The total number of shares traded during the day was 22362 in over 2508 trades.

The stock hit an intraday high of Rs. 1559 and intraday low of 1505. The net turnover during the day was Rs. 34206667.

Source : Equity Bulls

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