ICICI Lombard General Insurance (ICICIGI) has just rolled out its Q2 FY25 results, and the numbers tell a compelling story of resilience and outperformance. While the broader general insurance industry seemed to be tapping the brakes, ICICIGI hit the accelerator, posting a robust 20.2% YoY growth in Profit After Tax (PAT) to ₹6.94 billion. This performance wasn’t just a fluke; it was powered by significant market share gains in its core Motor and burgeoning Retail Health segments.
But the headline profit growth only scratches the surface. The real test for any insurer is its underwriting discipline, especially when faced with natural calamities. Despite taking a ₹0.94 billion hit from catastrophe (CAT) losses this quarter, the company’s underlying profitability improved. So, how did they manage to grow faster than the market while keeping risks in check? Let’s break down the engine room of ICICI Lombard’s performance.
In a quarter where the general insurance industry’s growth slowed to a mere 2.0%, ICICI Lombard’s Gross Direct Premium Income (GDPI) grew by a commendable 10.4%. The outperformance is even more stark for the first half of the financial year (H1 FY25).
Metric | ICICI Lombard Growth | Industry Growth |
---|---|---|
Q2 FY25 GDPI | +10.4% | +2.0% |
H1 FY25 GDPI | +15.5% | +7.0% |
This isn’t just broad-based growth; it’s a story of strategic focus and execution in key areas. The two main growth engines firing on all cylinders were:
However, it wasn’t all smooth sailing. The Group Health segment saw growth moderate to just 1.0% due to intense competitive pricing. This highlights a key challenge for the company: balancing growth with profitability in a price-sensitive corporate segment.
For an insurance company, profit from writing policies (underwriting) is the holy grail. The key metric to watch here is the Combined Ratio, which measures total expenses (claims + costs) as a percentage of premiums. A ratio below 100% signifies an underwriting profit.
Combined Ratio | Q2 FY2025 | Q2 FY2024 | Change (Higher is worse) |
---|---|---|---|
Reported | 104.5% | 103.9% | +0.6% |
Ex-CAT Loss | 102.6% | 102.8% | -0.2% (Improvement) |
At first glance, the combined ratio seems to have worsened slightly. However, the devil is in the details. The quarter was impacted by ₹0.94 billion in catastrophe losses (floods in various parts of India). When we strip out this impact, the underlying combined ratio actually improved to 102.6%. This subtle but crucial improvement shows that the company’s core underwriting and cost management are moving in the right direction.
Management confidently reiterated their guidance to bring the combined ratio down to 101.5% by Q4 FY25, signaling their belief in continued operational efficiencies.
Despite no regulatory hikes in Third-Party (TP) premium rates for three years, ICICI Lombard has managed its motor loss ratios commendably.
The health segment presents a mixed picture, reflecting the company’s strategic pivots.
The strong top-line growth and stable underwriting performance translated directly into robust bottom-line results. Investment income also provided a healthy tailwind.
Profitability (₹ billion) | Q2 FY2025 | Q2 FY2024 | Growth % | H1 FY2025 | H1 FY2024 | Growth % |
---|---|---|---|---|---|---|
Profit Before Tax (PBT) | 9.19 | 7.64 | +20.3% | 16.93 | 12.84 | +31.9% |
Profit After Tax (PAT) | 6.94 | 5.77 | +20.2% | 12.74 | 9.68 | +31.7% |
The Return on Average Equity (ROAE) for H1 FY25 stood at an impressive 20.3%, a significant improvement from 18.0% in the previous year. This level of return, combined with strong growth, solidifies ICICI Lombard’s position as a high-quality stalwart in the financial services space. The company also rewarded shareholders by increasing its interim dividend to ₹5.50 per share from ₹5.00 last year.
ICICI Lombard’s Q2 performance is a textbook example of strong execution in a challenging environment. It has successfully navigated industry-wide slowdowns and competitive pressures by focusing on profitable segments.
Classification: Stalwart. As a market leader demonstrating consistent, profitable growth that outpaces the industry, and delivering a high ROAE, ICICI Lombard fits the bill perfectly.
Key Positives to Cheer:
Key Risks to Monitor:
Overall, ICICI Lombard’s quarter was impressive. It is not just growing; it is growing profitably and strategically. Investors will be keenly watching its ability to deliver on its combined ratio guidance, which remains the key catalyst for future earnings trajectory and valuation.