Buy ICICI Lombard; target of Rs 1500: Motilal Oswal

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Motilal Oswal's research report on ICICI Lombard

Underwriting loss was at INR2.9b in 3QFY23 compared to a loss of INR1.5b in 2QFY23 vs our estimates of INR2.4b, owing to low premium and investment income. Claims ratio declined to 70.3% from 72.8% in 2QFY23 as loss ratio in Motor OD, Motor TP, and Health segment was lower. Claims ratio increased 70bp on a YoY basis. Policyholders' investment income stood at INR5.8b, lower than our expectation of INR6.5b, owing to weaker-than-expected yields. The Combined ratio stood at 104.4% v/s 104.5%/105.1% in 3QFY22/ 2QFY23. The solvency ratio stood was flat at 2.5x. PAT for the quarter stood at INR3.5b vs our estimate of INR4.5b, a growth of 11% YoY. For 9MFY23, NEP grew 14%, while the Combined ratio stood at 104.6% vs. 111%. PAT growth over the period was 3% YoY. We cut estimates by 14%/11%/10% for FY23/FY24/FY25 but retain our BUY rating and target price as we roll forward valuations from 35x FY24 to 32x FY25.

Outlook

We have cut our earnings estimate by 14%/11%/10% for FY23/FY24/FY25. However, we retain our BUY rating and one-year target price of INR1,500 as we roll forward our valuations from 35x FY24 to 32x FY25.

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ICICI Lombard - 18 -01-2023 - moti