ICICI Lombard share price: Why this stock fell 15% today; target prices

ICICI Lombard General Insurance Company Ltd shares plunged 15 per cent on Thursday after the insurer's June quarter profit after tax (PAT) and Combined Operating Ratio (CoR) fell short of analyst estimates, with brokerages saying the Q1 performance reflected industry-wide headwinds.

ICICI Lombard's Q1 profit fell 46 per cent YoY, hit by weak underwriting performance and lower-than-expected investment income. Excluding the losses in the fire segment and additional claim reserving in lieu of the Supreme Court (SC) verdict in motor TP business, the combined ratio was at 102.3 per cent.

Following its Q1 results, ICICI Lombard shares declined 14.86 per cent to hit a low of Rs 1,544.40 apiece. With this the stock is down 17.85 per cent year-to-date.

MOFSL said competitive intensity remains high in the motor OD segment, and the company is following a conservative reserving approach in the segment after the Supreme Court judgement, which has impacted claims during the quarter. The commercial lines segment is facing heightened competition, but ICICI Lombard is well-positioned to capture profitable business within the segment, the brokerage said.

"We downgrade our rating to Neutral with a target of Rs 1,960 (based on 28x FY28E EPS) as the offset on the higher COR in the quarter can only come from 1) a tariff hike in Motor TP business, 2) commission alterations in the overall Motor business, and 3) realignment of Motor OD profitability. The visibility on each of these factors is bleak," MOFSL said.

Given potential industry-wide constraint in underwriting Motor TP, Nuvama has cut FY27 and FY28 profit estimates by 21.1 per cent and 11.7 per cent. 

"We assign an FY27E PE multiple of 25 times, yielding a target of Rs 1,660 (earlier Rs 2,350). Downgrade to ‘REDUCE’. AT CMP, it trades at FY27E PE of 36.1x," it said.

Nuvama said gross direct premium income (GDPI) and gross written premium moderated to just 7.5 and 10 per cent YoY, as growth slowed in fire business due to competitive pricing. 

"The fire line industry-wide fell 27.8 per cent in Q1 with ICICIGI declining more sharply (~32 per cent) as it prioritised underwriting discipline over volume. Management attributed the fire pricing pressure to a relative soft reinsurance renewal cycle," Nuvama said.

SC's June ruling recognises homemakers' unpaid domestic work as a distinct compensable head, retroactively raising likely payouts on insurers' existing open Motor TP claims reserves, Nuvama noted.