Combined ratio was at 97.9% and investment earnings (total) was up 33% y-o-y.
For Q3FY21, ILOM’s profit of Rs 3.1 bn, up 7% y-o-y, fell quick of estimates due to greater commissions. This reflects uptick in premiums & reduced re-insurance coverage – whilst GDPI rose by 9%, NWP rose 21% – advantage of this will play out in the future. IBank has temporarily slowed cross-sell of wellness-insurance coverage & normalisation will be important. Expansion of agency force & new banca tie-ups can aid. We trim estimates a bit, but remain with Buy contact with target price tag of Rs 1,780.
Higher commission fees for premium-development & reduced wellness enterprise drag profit: During Q3, ICICI Lombard saw some uptick in GDPI development to 9% and net premium written development enhanced to 21% y-o-y. This was driven by development in retail enterprise, reduced reinsurance specifically due to reduced wellness-insurance coverage enterprise origination by ICICI Bank. The upfront expense of commission rose by 191% y-o-y–towards new enterprise and reduced commission on reinsurance presented on wellness-enterprise. This was the important explanation for miss in earnings. Combined ratio was at 97.9% and investment earnings (total) was up 33% y-o-y.
Drivers of development for FY22-23: We think that ICICI Lombard’s organic development in FY22 would be led by normalisation of enterprise activity as nicely as ramp-up of partnerships with banks like Standard Chartered, Yes Bank, Karur Vysya Bank along with a handful of NBFCs/ SFBs. Still normalisation of bancassurance partnership with ICICI Bank on wellness-advantage side is important – we anticipate it to play out by H2FY22. Growth in retail wellness insurance coverage enterprise will be driven by (i) expansion in agency force – up 17% because Mar-20 and (ii) roll-out of goods and tech-platforms towards this segment. Its development in SME segment also continues to hold-up – up 36% y-o-y in Q3. A important positive improvement can be hike in motor TP insurance coverage premiums (by IRDAI) just after nil hike in FY21.
Trim earnings: Mgmt clarified that the merger with Bharti Axa is moving in line with expectations, and we recognize it may be consummated by H12021. We trim standalone EPS forecasts by 2-4% factoring in tad slower premium. This also drives modest reduce to TP to Rs 1,780 (from Rs 1,850) primarily based on 44x Dec-22 PE.