Shares of ICICI Lombard will take the centre stage on April 18 after its financials for the fourth quarter of FY24 stayed in line with expectations. Although the private life insurer achieved healthy premium growth for the fiscal year 2023-24, brokerages collectively anticipate a slowdown in growth beginning FY25. Nonetheless, analysts view the management's guidance for an enhanced combined ratio as a significant positive factor.
CLSA, for instance, downgraded ICICI Lombard to 'underperform' with a target price of Rs 1,760 per share, expecting the premium growth to slow down by 15 percent in FY25. "Overall, FY24 showed a strong year with 18 percent on-year growth in premium," it said.
Stock up 16% YTD, but rally likely to dwindle from hereon
The brokerage sees the strong rally in ICICI Lombard to fizzle out as well. So far this year, the shares have rallied over 16 percent, outperforming the 2 percent gain in the benchmark Nifty 50 index.
Also read: ICICI Lombard Q4 net profit rises 19%, insurer declares final dividend of Rs 6 per share
Morgan Stanley analysts also shared a similar view, as they expect the stock to stay rangebound with a positive bias for the near-term. The brokerage has an 'overweight' rating on ICICI Lombard, with a target price of Rs 1,850 per share.
In the March-ended quarter, ICICI Lombard's net profit rose 19 percent on-year to Rs 519.5 crore, led by a healthy premium growth and investment income. Net premium income, too, increased 17.23 percent to Rs 4,368 crore in Q4FY24.
Moving forward, analysts at Jefferies expect health and commercial lines to drive premium at a compounded annual growth rate (CAGR) of 17 percent over FY24-27. The brokerage has a 'buy' call on ICICI Lombard with a target price of Rs 1,950 per share.
Combined ratio improvement a key positive
An important metric stood out to be the combined ratio of the insurer as it reached 102.2 percent in Q4FY24 compared to 104.3 percent a year ago.
Combined ratio measures profitability and operational efficiency of an insurer's underwriting activities. It is measured by adding the company's loss ratio, including claim payments as well as expense ratio, such as commissions, administrative expenses, and other operating costs.
Also read: Buy ICICI Lombard General Insurance Company; target of Rs 1950: Sharekhan
Typically, combined ratio below 100 percent indicates that the insurance company is earning more in premiums than it is paying out in claims and expenses, suggesting profitable underwriting. Conversely, a combined ratio above 100 percent indicates that the company is paying out more in claims and expenses than it is earning in premiums, signaling an underwriting loss.
Going ahead, ICICI Lombard has guided combined ratio to further trim by 50 basis points (bps) to 101.5 percent in FY25.
Analysts at Jefferies believe that easing competitive intensity in the insurance sector can help bring down combined ratio to 101 percent by FY26.
Those at HSBC also remain optimistic about management's positive guidance about bringing down combined ratio going ahead. "The optimism in combined ratio guidance on the back of strong growth will bring pricing disciple in the market. We see sharp improvement in combined ratio in Q4 results to be a key positive," they said, sharing a 'buy' rating on ICICI Lombard, with a target price of Rs 1,990 per share.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
