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    ICICI Lombard

    ICICIGI
    Financial Services·15 Apr 2025
    Management Summary

    ICICI Lombard delivered a strong Q4 and FY25, with GDPI growth surpassing the industry average and significant improvements in profitability and capital adequacy. The company's combined ratio improved despite broader industry deterioration, driven by disciplined underwriting and operational efficiencies. While facing challenges in the Motor segment due to competitive pressures and muted sales, the company's Health segment showed robust growth, and digital initiatives continued to expand customer engagement. Management remains focused on profitable growth and achieving long-term ROE targets.

    Highlights

    5

    • Company GDPI grew 8.3% for FY25 to ₹26833 crores, outperforming industry growth of 6.2%.

    • Combined ratio improved from 103.3% in FY24 to 102.6% in FY25 (on 'n' basis), demonstrating underwriting discipline.

    • PAT grew 30.7% to ₹2508 crores in FY25, reflecting strong profitability.

    • Return on Average Equity (ROAE) was 19.1% in FY25, up from 17.2% in FY24, indicating enhanced shareholder value creation.

    • Solvency ratio stood at 2.69x as of March 31, 2025, significantly above the regulatory minimum of 1.50x.

    Concerns

    4

    • Industry Combined ratio worsened to 113.2% for 9M FY25, primarily due to the Motor segment's 123.8% ratio.

    • Motor segment growth was lower at 0.1% for Q4 FY25 due to muted vehicle sales and continued pricing pressures.

    • Q4 FY25 saw de-growth in Two-wheeler (1.9%) and Tractor (4.6%) segments, indicating softer rural demand.

    • Investment income for Q4 FY25 de-grew to ₹877 crores from ₹954 crores in Q4 FY24, mainly due to lower capital gains of ₹6 crores.

    Key financials

    Metrics

    13

    Periods

    5

    Headline

    2
    • Solvency Ratio (Mar 31, 2025)
      2.69 x
    • Yield to Maturity of Investment Book
      7.5%

    Q4 FY25

    5
    • GDPI
      ₹6,211 Cr
      YoY+2.3%
    • PAT
      ₹510 Cr
      YoY-1.9%
    • ROAE
      14.5%
    • Investment Income
      ₹877 Cr
    • Capital Gains
      ₹6 Cr

    FY25

    4
    • GDPI
      ₹26,833 Cr
      YoY+8.3%
    • PAT
      ₹2,508 Cr
      YoY+30.7%
    • ROAE
      19.1%
    • Investment Income
      ₹4,250 Cr

    FY25, 'n' basis

    1
    • Combined Ratio
      102.6%

    FY25, 1/n basis

    1
    • Combined Ratio
      102.8%

    Segment breakdown

    Motor
    ₹10,740 Cr GDPI (FY25)10% GDPI (Q4 FY25)10.8% Market Share (FY25)
    Health
    ₹6,950 Cr GDPI (FY25)25% Retail Health Growth (FY25, 1/n)25.1% Retail Health Growth (Q4 FY25, 1/n)18.5% Group Health Employer-Employee Growth (FY25)
    Commercial Lines
    ₹6,995 Cr GDPI (FY25)2.8% GDPI (Q4 FY25)
    Digital Assets
    ₹265.32 Cr Business Done (FY25)₹92.77 Cr Business Done (Q4 FY25)15.8% Growth (FY25)
    List

    Capital allocation

    1
    high confidence
    CategoryHeadline
    Dividend

    ₹7/share (final)

    Guidance & targets

    5
    CategoryTargetPriority
    Profitability
    Return on Average Equity (ROAE)
    16-18%
    		Medium
    Profitability
    Expense of Management (EoM)
    less than 30.0%
    		High
    Profitability
    Motor Loss Ratio
    65-67%
    		High
    Volume
    Motor New Sale Growth
    mid-single digit, maybe double digit
    		Medium
    Market Share
    Company Growth vs Industry
    outperformance
    		Medium

    Overall GI Industry Growth post 1/n normalization

    H2 FY26 (when 1/n normalizes from October)
    CurrentSubdued in H1 FY26 due to 1/n accounting norm
    TargetOptimistic for full year FY26, with company outperforming industry

    Why it matters

    To assess the true underlying growth trajectory of the industry and the company's ability to gain market share once the accounting impact subsides.

    First 2 quarters, you are absolutely right, Neeraj, in terms of the impact of 1/n will obviously play out. So maybe to that extent, industry growth could be a little subdued. But on a full year basis, we are very optimistic.

    How to verify

    key_financials.metrics[label='GDPI (FY25)']

    Risks & concerns

    7
    RiskSeverity

    Geopolitical developments

    Ongoing geopolitical developments may pose risk to both global growth and the Indian economy. — Management acknowledged

    medium

    Muted vehicle sales and pricing pressure in Motor segment

    Motor segment growth was lower due to muted vehicle sales and continued pricing pressures, leading to a worsening industry Combined Ratio. — Management acknowledged

    medium

    Impact of 1/n accounting norm

    The 1/n accounting norm, effective Oct 1, 2024, impacted industry growth and comparability, particularly affecting the Health Benefit segment through Banca channel. — Management acknowledged

    medium

    Industry Combined Ratio deterioration

    The Combined ratio for the industry worsened to 113.2% for 9M FY25, primarily due to the Motor segment, indicating broader market challenges. — Management acknowledged

    medium

    Motor TP price hike uncertainty

    Despite industry hopes, there is no news on a Motor Third Party price hike, which could necessitate more work on risk selection for profitable growth. — Management acknowledged

    medium

    PSU aggression in Motor segment

    PSUs have shown significant aggression and gained market share in the Motor segment in Q3/Q4, increasing competitive intensity. — Management acknowledged

    medium

    Sustained low-interest rate regime

    If low interest rates sustain, reinvestment of incremental cash flows will be at lower rates, requiring the market to work harder on pricing to maintain ROE. — Management acknowledged

    medium

    Q&A highlights

    8

    “Motor per se, we are expecting on the new sale mid-single digit, maybe just about double digit growth... Health double digit growth... Overall, Commercial, we would like to believe that we should be back to a double digit growth at the industry level.”

    Analyst sought clarity on growth expectations given the new accounting norm, and management provided segment-wise outlooks for the coming year.

    asked by Prayesh Jain, Motilal Oswal Financial Services Limited

    3 min read7 chapters

    Detailed Narrative

    01

    Robust Financial Performance and Capital Adequacy in FY25

    ICICI Lombard reported a strong FY25, with Gross Direct Premium Income (GDPI) growing by 8.3% to ₹26833 crores, surpassing the industry's 6.2% growth. Profit After Tax (PAT) increased significantly by 30.7% to ₹2508 crores, and Return on Average Equity (ROAE) improved to 19.1% from 17.2% in FY24. The company maintained a healthy solvency ratio of 2.69x as of March 31, 2025, comfortably above the regulatory minimum of 1.50x.

    02

    Improved Combined Ratio Amidst Industry Headwinds

    Despite the overall industry Combined Ratio worsening to 113.2% for 9M FY25, particularly in the Motor segment, ICICI Lombard successfully improved its Combined Ratio from 103.3% in FY24 to 102.6% in FY25 on an 'n' basis. This improvement was attributed to the company's focus on driving profitable growth opportunities, underwriting discipline, and operational efficiencies, with a long-term ROE target of 18-20%.

    03

    Mixed Segmental Growth and Market Share Gains

    The Motor segment's GDPI grew 11.5% for FY25 to ₹10740 crores, increasing the company's market share to 10.8%. However, Q4 FY25 saw muted growth of 0.1% in Motor due to softer rural demand and de-growth in two-wheeler and tractor segments. The Health segment's GDPI grew 12.6% for FY25 to ₹6950 crores, with Retail Health (on a 1/n basis) growing 25.0% and gaining market share from 3.0% to 3.3%.

    04

    Impact of 1/n Accounting Norm and Regulatory Landscape

    The new 1/n accounting norm, implemented from October 1, 2024, affected reported growth rates and comparability, notably leading to a 10.5% de-growth in the Health Benefit business through the Banca channel for the year. Regulatory changes in Q4 FY25, such as capping senior citizen health premium increases to 10% and introducing the BIMA-ASBA facility, are expected to enhance affordability and operational ease for policyholders.

    05

    Digital Transformation and Enhanced Customer Experience

    ICICI Lombard's 'One IL One Digital' initiative significantly boosted digital engagement, resulting in a 2x increase in unique customer visits and 37% growth in fresh transactions. The IL TakeCare App surpassed 14.9 million downloads, contributing ₹265.32 crores in business for FY25. Customer experience was further improved by reducing average claim settlement periods for Motor OD to 5 days and Health claims to 3 days in FY25.

    06

    Investment Performance and Capital Gains Dynamics

    The company's investment income for FY25 increased to ₹4250 crores from ₹3610 crores in FY24. However, Q4 FY25 saw a decline in investment income to ₹877 crores from ₹954 crores in Q4 FY24, primarily due to significantly lower capital gains of ₹6 crores compared to ₹156 crores in the prior year's quarter. The investment book maintains a healthy yield to maturity of approximately 7.55% and holds around ₹1800 crores in mark-to-market unrealized gains.

    07

    Outlook on Industry Competition and Profitability

    Management anticipates mid-single to double-digit growth in Motor and double-digit growth in Health for the coming year. They observed 'some semblance' of pricing discipline returning in the Fire segment. Despite competitive intensity from PSUs in the Motor segment, the company remains committed to profitable growth and adhering to Expense of Management guidelines, with FY26 being the deadline for industry-wide compliance, which is expected to foster better market discipline.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.