ICICI Lombard Premium Jumps, But Net Profit Dips on Higher Claims
Overview
ICICI Lombard General Insurance's gross premium income surged 13.3% in Q3 FY26, surpassing industry growth, primarily driven by a strong health segment. However, net profit declined 3.3% due to increased claims, particularly in the motor segment, leading to a higher combined ratio. Analysts suggest focusing on premium growth.
Premium Growth Outpaces Industry
ICICI Lombard General Insurance Co. Ltd. reported a robust 13.3% year-on-year growth in gross domestic premium income (GDPI) for the December quarter (Q3 FY26). This acceleration marks the first time in the fiscal year that the company's growth rate has exceeded the industry's 11.5% expansion.
The health segment, encompassing personal accident and travel insurance, was the primary engine of this GDPI surge, posting a remarkable 41% increase. This growth is largely attributed to a rebound in retail health policies, which benefited from the removal of goods and services tax (GST).
Consequently, the health segment's share in GDPI expanded from 23% to 29% year-on-year. Conversely, the motor segment's contribution slightly decreased from 50% to 48% of the total GDPI.
Profitability Pressured by Claims
Despite the strong premium growth, ICICI Lombard's normalized net profit saw a 3.3% decline, falling to ₹700 crore. This dip occurred after accounting for a ₹55 crore provision related to the wage code implementation.
The pressure on profits stems from a deterioration in the combined ratio, which rose to 103.5% (excluding the wage code impact) from 102.7% a year earlier. The loss ratio worsened significantly, climbing from 65.8% to 68.7%, primarily driven by a sharp increase in the motor segment's loss ratio.
ICICI Lombard managed to partially offset this by reducing its expense ratio from 36.9% to 34.8%, keeping operating expenses in check despite higher commission costs.
Outlook and Valuation
An underwriting loss of ₹354 crore was recorded for the quarter, up from ₹152 crore in the previous year, indicating an underwriting loss from core insurance operations. However, the company anticipates that the health segment, particularly retail health which grew 90% in Q3, will continue to drive GDPI and potentially improve loss ratios.
Management commentary suggests that investors should focus on the GDPI growth momentum rather than the modest dip in net profit. The stock, trading at ₹1,885, reflects a price-to-earnings multiple of 28 times based on FY27 consensus estimates, which is considered more palatable after its recent decline from September 2024 highs. The general insurance sector is viewed as a proxy for economic growth and increasing consumer demand for financial protection.
