ICICI Lombard General Insurance Company has attracted renewed confidence from Motilal Oswal, which has reaffirmed its BUY rating on the stock, maintaining a 12-month target price of Rs 2,200, implying a potential 21% upside from current levels. The insurance giant has demonstrated robust growth in Net Earned Premiums (NEP) and navigated a volatile regulatory and investment environment effectively, although near-term profit miss from investment income slightly weighed on bottom-line performance. The research house expects ICICI Lombard’s profitability to improve steadily, led by disciplined underwriting, portfolio diversification, and cost rationalization.
Solid Premium Growth Amid a Sluggish Industry Backdrop
Despite headwinds across the general insurance sector, ICICI Lombard delivered a 10% YoY increase in Gross Written Premium (GWP) to Rs 69 billion in Q4FY25, outperforming the industry’s growth rate of 6.2%. Excluding the accounting impact of 1/n regulations for long-term insurance products, growth stood at a stronger 11% for FY25. The NEP rose 20% YoY in Q4FY25 to Rs 52.3 billion, with FY25 NEP clocking in at Rs 198 billion. This surge was supported by 18% growth in the motor insurance segment and 26% growth in health insurance (including personal accident).
Combined Ratio Better Than Expected Despite High Claims
The combined ratio stood at 102.5% in Q4FY25, outperforming expectations by 90 basis points and showing slight improvement from Q3FY25’s 102.7%. Lower-than-estimated operating expenses (12.1%) and commission ratio (18.7%) contributed to the beat, even though the claims ratio climbed to 71.6%, up from 68.6% in the previous year. On a full-year basis, the combined ratio for FY25 settled at 102.8% (vs. 103.3% in FY24). After excluding natural catastrophe (NATCAT) losses of Rs 940 million, the ratio improves further to 102.4%.
Profit Miss Driven by Investment Income Shortfall
Q4FY25 profit after tax (PAT) declined 2% YoY to Rs 5.1 billion, missing estimates by 12%. While core underwriting losses improved to Rs 2.1 billion (from Rs 2.3 billion YoY), total investment income dropped by 14% YoY to Rs 9 billion, dragging overall profitability. Nevertheless, FY25 PAT surged 31% YoY to Rs 25.1 billion, supported by higher NEP and improved operating efficiency. For FY26 and FY27, Motilal Oswal forecasts PAT to grow 14% and 16%, respectively, reaching Rs 33 billion by FY27.
Motor Segment to Drive Future Growth
ICICI Lombard has realigned its motor portfolio with a granular segmentation approach and increased focus on older vehicles and commercial vehicles. The company is aiming for double-digit motor segment growth, with the share of private cars/2-wheelers/CVs standing at 53.4%/25.4%/21.2% in FY25. The loss ratio in motor own-damage (OD) rose sharply to 68.4% in Q4FY25, while motor third-party (TP) loss ratio declined to 72% (from 73.4%). ICICI Lombard has guided for a TP loss ratio of 65-67% in the absence of price hikes, focusing on improved risk selection.
Health Insurance Gaining Momentum in Retail
The insurer has aggressively gained market share in retail health insurance, with strong growth led by new customer acquisition and inflation-linked premium revisions. The loss ratio in retail indemnity remained stable at 64.8% in Q4FY25 (vs. 64.4% YoY), while the corporate health loss ratio rose to a concerning 97.2%. Despite regulatory and structural changes, the company remains optimistic about double-digit growth in the health segment, particularly in the retail channel.
Commercial Lines Expected to Rebound in FY26
FY25 was marked by weakness in the commercial lines segment due to low capex and weak fire pricing. However, initial signs of recovery were visible in April 2025 fire insurance renewals. With capex cycles picking up and pricing improving, the segment is poised for strong rebound in FY26.
Valuation Rationale and Investor Takeaways
Motilal Oswal has retained FY26 and FY27 EPS estimates despite marginal downward revisions to investment income forecasts. The stock currently trades at a 1-year forward P/E of 31.6x and P/B of 5.5x, with estimated EPS of Rs 67 by FY27 and BVPS at Rs 382.6. The solvency ratio improved to 2.69 in Q4FY25, reflecting a healthy capital buffer. The insurer’s management has also revised its long-term RoE target to 18-20%, signaling confidence in operational sustainability.
Stock Levels and Investment View
Current Market Price (CMP): Rs 1,823 Target Price (TP): Rs 2,200 Upside Potential: +21% 12M Forward P/E: 31.6x FY27 EPS Estimate: Rs 67.0 BUY Rating Reaffirmed
Conclusion
ICICI Lombard has navigated a tough operating environment with admirable discipline, maintaining growth in key business segments while keeping a close watch on underwriting quality and cost efficiency. As the commercial line outlook improves and retail health gains further traction, the company appears well-positioned for sustained profitability. With a stable capital position, refined pricing strategies, and prudent risk management, ICICI Lombard offers a compelling investment opportunity for long-term investors.
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