ICICI Lombard shares: Outperform rating maintained after Q2 results; check stock reaction

ICICI Lombard General Insurance Company Ltd shares fell on October 15 as elevated catastrophe losses and underwriting pressure weighed on the insurer's second-quarter performance, despite a rise in profit and investment income.

Macquarie maintained its 'Outperform' rating on ICICI Lombard, with a 12-month target price of Rs 1,820, implying an upside of around 6.9% from the October 14 closing price of Rs 1,715.70.

The insurer's combined ratio climbed 190 basis points year-on-year (YoY) to 107% in Q2 FY27, with the quarter bearing the brunt of "natural catastrophe losses worth Rs 1.2bn". Excluding these losses, the combined ratio would have stood at 105.3%, up 150 basis points from a year earlier. The overall loss ratio also increased by 60 basis points YoY and sequentially, although it improved during the quarter in the group health segment.

ICICI Lombard shares were trading lower on Thursday, after opening at Rs 1,779.70 and touching a high of Rs 1,785. The stock hit a low of Rs 1,691, down 1.44% from its previous close of Rs 1,715.70.

The company's profit increased 15% YoY, supported by better-than-expected performance on the combined ratio and a nearly 29% rise in investment income. Investment gains stood at Rs 4.5 billion in Q2 FY27, compared with Rs 2.4 billion in the year-ago quarter.

Premium growth, however, remained below the industry's pace. Gross direct premium income rose 3% YoY, against industry growth of 7%. Excluding crop and mass health insurance, the company's premium growth accelerated to 13.9%, outperforming the broader market. Growth was supported by its motor insurance business and gains in fire and retail health lines.

The company's competitive positioning could also benefit from changes to commission caps and expense-of-management rules. These changes are expected to support industry volumes, with companies that have maintained regulatory compliance potentially better placed to gain market share.

The flashnote also highlighted management's expectation that the pressure on the combined ratio could ease as operating efficiencies improve. Management sees no need for a further reserve build following the Supreme Court judgment concerning unpaid domestic labour claims in the motor third-party segment.