Captains Speak

Published: Dec 29, 2021
Updated: Dec 29, 2021

ICICI Lombard General Insurance: Vaccines will boost hospitality biz

Better days are ahead for ICICI Lombard General Insurance Company, which has managed to maintain its profits in Q3FY21 mainly from capital gains. Though its sales and promotional expenses are expected to go up, it is expected to have a meaningful and positive impact on its topline as well as on margins. Also, the recent hike in the FDI limit to 74% may help unlock further value in the near-to-medium term in this stock.

Maintains Bhargav Dasgupta, Managing Director and CEO, “Our gross direct premium income (GDPI) is in line with industry growth. The company continues to aim at growing business by creating long-term value for all stakeholders through a focus on sustained profitability and prudent risk selection. The company remains excited about the long-term growth potential of the industry as well as its business prospects.”

Reviewing the performance of the company during Q3FY21, Mr Dasgupta says that the gross direct premium income (GDPI) rose 9.3% yoy, positively impacted by the property and casualty (P&C) segment (25.7% yoy) and the motor segment (14.3% yoy). The profit at net level advanced 6.6% yoy to Rs 314 crore owing to capital gains of Rs 108 crore (vs Rs 17 crore in Q3FY20) and lower claims incurred (-2.3% yoy). “Though we may see an increase in sales and promotional expenses owing to pressure from the competition, we expect the margins to improve from the current levels,” he says.

MOTOR SEGMENT UP

During the quarter (October to December 2020), the company reported a gradual increase in GDPI at Rs 4,034 crore (+9.3% yoy), while ex-crop GDPI grew 9.9% yoy to Rs. 4,033 crore. The motor segment GDPI increased at 14.3% yoy to Rs 2,396 crore due to the recovery in sales of motor vehicles. The P&C segment climbed 25.7% yoy to Rs 948 crore owing to the increase in marketshare in fire, engineering and marine insurances. The worst-hit segment was health, travel and PA, declining 16.0% yoy to Rs 689 crore. “However, over the upcoming quarters, we expect vaccines to catalyse economic activities in travel and hospitality,” says Mr Dasgupta.

The net premium earned rose 6.3% yoy to Rs 2,611 crore; 39% of which comes from the P&C segment. The management has been cautious with motor insurance, maintaining a loss ratio at 63.6% for 9MFY21. The loss ratios for health and P&C in 9MFY21 were 77.3% and 66.4% respectively (vs. 69.6% and 57.8% respectively in 9MFY20). The combined ratio was 99.1% (-140 bps yoy) for 9MFY21, while excluding the impact of cyclone and flood losses it was 97.7% (-180 bps yoy). The OpEx+Commission ratio dropped to 32.4% for Q3FY21 (vs 33.9% in Q2FY21). PAT grew 6.6% yoy to Rs 314 crore owing to capital gains of Rs 108 crore (vs Rs 17 crore in Q3FY20) and lower claims incurred (- 2.3% yoy). For Q3FY21, the ROAE of 17.6% (vs 20.3% in Q3FY20) includes the upfront expense of acquisition cost. The solvency ratio rose to 2.8x as on Dec 31, 2020 (vs 2.2x in Dec 2019) against the regulatory requirement of 1.5x.

FOCUS ON HEALTH BIZ

Mr Dasgupta adds that on the retail side of the business, SME & Agency channel and health indemnity continued to grow faster and remain areas of focus. To harness the potential of these segments, the company has been expanding the distribution network so as to increase penetration in tier 3 and tier 4 cities. Individual agents (including POS) were 44,539 as on December 31, 2019 as against 32,254 as on December 31, 2018. In addition to the bancassurance tieup with Standard Chartered Bank announced in the previous quarter, the company has entered into a bancassurance tie-up with Karur Vysya Bank in Q3FY2020.