ICICI Lombard shares rise 5% after strong Q4 results; why are brokerages divided over the stock?

Shares of ICICI Lombard General Insurance Company Ltd (ICICI Lombard) surged more than 5 per cent during the trading session on Monday after the company announced a strong quarter for the ended on March 31, 2023. The stock was hovering around its 52-week high levels.

ICICI Lombard General Insurance on Wednesday reported a 19 per cent rise on a year-on-year (YoY) basis in the net profit at Rs 520 crore for the fourth quarter ending on March 31, 2024. Its net profit came in at Rs Rs 437 crore in the corresponding quarter a year ago.

The private sector non-life insurer's net premium written in the March 2024 quarter increased 18 per cent to Rs 4,767 crore from Rs 4,047 crore on YoY basis The gross direct premium income grew 22 per cent to Rs 6,073 crore for the reporting quarter, up 9.5 per cent YoY.

ICICI Lombard clocked strong 17.3 per cent YoY growth in GWP. Furthermore, CoRs improved to 102.2 per cent, down 191 basis points YoY resulting in improved underwriting losses at Rs 231 crore A strong investment yield of 7.3% aided by capital gains led to APAT growth of 18.9% YoY to Rs 520 crore, said Nuvama Institutional Equities.

"Management cited a much-improved competitive environment, and mildly improved its guidance to an exit CoR of 101.5 per cent for FY25E. We believe management is being cautious and are revising our FY25E/26E APAT by 3.4 per cent/3.9 per cent, lifting our target price to Rs 1,790 (from Rs 1,720 earlier)," it said maintaining a 'hold' rating on the stock.

Shares of ICICI Lombard General Insurance Company rose more than 5.27 per cent during the trading session on Thursday to Rs 1736, commanding a total market capitalization of more than Rs 85,000 crore. The scrip had previously settled at Rs 1,649.05 in the previous trading session on Tuesday.

Going ahead, growth in the Motor segment is likely to be back-ended, with the company waiting for the rationalization of pricing in the OD segment. In the Health segment, the benefits of price hikes and improving efficiency of the agency channel should translate into better profitability, said Motilal Oswal Financial Services.

"Scale benefits, a favorable product mix (higher share of retail health), and improvements in efficiencies across channels should help ICICIGI improve its combined ratio and RoE over the next couple of years. The management continues to guide for better performance and also expects improvement in the combined ratio by FY25," it said with a 'buy' tag and a target price of Rs 2,100.

The company board also proposed a final dividend of Rs 6 per share for the financial year 2023-24, subject to the approval of shareholders in the ensuing annual general meeting of the company. The overall dividend for year ending March 31, 2024 stood at Rs 11, including the final dividend.

ICICI Lombard’s earnings were in line with estimates. A better pricing environment, coupled with reserve releases in the year, led to a lower claim ratio, a positive takeaway going forward, said Kotak Institutional Equities. "The recent stock price rally and rich valuations factor in incremental trends, ignoring low moats in the industry," it said retaining 'reduce' rating with a fair value of Rs 1,550.