Buy Stock: ICICI Lombard Marks 18% Healthy Premium Growth, Offering 45% Dividend: Motilal Oswal

Top brokerage firm Motilal Oswal recommends investors to buy the stock of ICICI Lombard. The company has recently announced an interim dividend of Rs. 4.50 per equity share, that is dividend at the rate of 45% of face value of Rs. 10 each.

Stock To Buy: Target Price

The Current Market Price (CMP) of ICICI Lombard is around Rs. 1150. Motilal Oswal has estimated a Target Price for the stock at Rs. 1450. This stock has the potential to give a 26% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 56,669 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 1150
Target Price	Rs. 1450
Potential Upside	26.00%
52-week high share price	Rs. 1,548.25
52-week low share price	Rs. 1,071

Healthy premium growth

Total GWP grew 18% YoY, but fell 4% QoQ to Rs. 53b. However, NEP grew 18% YoY and 11% QoQ to Rs. 38.4b, with NEP-to-GWP ratio at 72% v/s 63% in 1QFY23. NEP grew 18% YoY and 11% QoQ to Rs. 38.4b. NEP for the Health/Motor/Crop/Fire business grew 32%/6%/4x/8% YoY. Total investment income (shareholders + policyholders) grew 27% QoQ and 19% YoY to Rs. 8.7b. The jump was primarily driven by higher interest accrual income on the back of rising interest rates in the economy.

Stock Valuation

According to Motilal Oswal, "We expect strong premium growth for ICICIGI, led by strength in new Auto sales, investments in the Health distribution channel, and expected results from past investments in technology. Earnings growth will accrue from synergies from its merger with BAXA and improvement in the loss ratios for the Health segment. We raise our FY23/FY24 earnings estimate by 11%/4%, led by higher investment income, offset by a higher underwriting loss. During FY22-25, we see the company delivering a premium/PAT CAGR of 18%/26% and a RoE of 19% in FY24."

Loss ratio rises, lower OPEX ratio

ICICIGI reported a loss ratio of 72.8% in 2Q v/s 72.1% in 1QFY23. The benefit of a lower loss ratio in Motor TP/Fire (down 730bp/17.3%) was offset by higher claims in Motor OD/Health (up 70bp/8.1%). Claims ratio increased by 300bp YoY. Commission ratios increased by 130bp QoQ to 3.5% owing to a higher share of the Retail business, where commission ratios are higher. Expense ratio fell to 28.8% from 29.9% QoQ, led by a flattish employee cost and a 5% QoQ fall in sales promotion expenses.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.