JM Financial has placed a ‘Buy’ recommendation on ICICI Lombard General Insurance Co Ltd, with a target price of ₹2,450, indicating an upside potential of 17% over the next 6-12 months. ICICI Lombard, one of India’s leading private general insurers, is poised for consistent growth with strong moats in the health and motor insurance segments.
Key Investment Rationales
- Consistent Growth in Key Segments: ICICI Lombard continues to grow its presence in health, motor, and fire insurance, achieving premium growth of 17% year-on-year. The company has maintained a leadership position across these segments despite regulatory changes, demonstrating its resilience and adaptability.
- Underwriting and Solvency Strength: ICICI Lombard has successfully managed its underwriting exposure and catastrophe risks, maintaining a high solvency ratio of 256%, well above the regulatory requirement. This strong capital position, coupled with growth in underwriting, has led to consistent returns on equity (RoE) of over 17% annually.
- Motor Insurance Recovery: The motor insurance segment has shown signs of recovery after a period of industry-wide sluggishness. ICICI Lombard’s return to growth in this segment, driven by its distribution through agents, bancassurance, and digital channels, is expected to boost its overall performance in FY25.
- Efficient Operations and Digital Outreach: ICICI Lombard’s emphasis on digital capabilities, deep distribution channels, and operational efficiency has strengthened its market leadership. The company remains well-positioned to deliver 17%+ earnings growth over the medium term, aligning its operations with regulatory guidelines.
Financial Summary (FY23A-FY26E):
- Gross Premiums: ₹256 billion (FY24A) to ₹357 billion (FY26E)
- Net Profit: ₹19 billion (FY24A) to ₹29 billion (FY26E)
- EPS: ₹38.9 (FY24A) to ₹59.0 (FY26E)
- RoE: 18% (FY24A) to 19% (FY26E)
- P/E: 8.1x (FY24A) to 6.3x (FY26E)
- Book Value (BV): ₹263 (FY24A) to ₹339 (FY26E)
Key Risks
- Heightened Competition: The general insurance industry is highly competitive, and ICICI Lombard could face pricing pressures from peers.
- Regulatory Risks: Changes in regulations affecting pricing, solvency, and underwriting practices could impact ICICI Lombard’s growth and profitability.
Disclaimer: Investments in the stock market are subject to market risks. The views and recommendations provided in this article are based on analysis from JM Financial and do not constitute investment advice. Investors are advised to perform their own research and consult with financial advisors before making any investment decisions. Past performance is not indicative of future results, and the author and publication are not responsible for any losses incurred based on this information. Please read all scheme-related documents carefully before investing.
