Valuation and Risks: We have valued the stock based at 7.55x 1-yr forward P/BV mean at 0.8 x discount and has arrived at a price target of Rs. 1155 with potential downside of 13% and we rate it SELL'.

In Q4FY20, Gross Direct Premium Income (GDPI) dropped 8.7% YoY, negatively impacted by de-growth of 4.1% YoY in Motor GDPI. Net premium increased 6.7% YoY, owing to Fire segment (+89.0% YoY). ROE increased 130bps YoY, supported by PAT (+23.8% YoY). The company's strong distribution network should help the company to withstand the challenging times. Hence, we maintain our HOLD rating with a revised target price of Rs. 1,321 based on 7.0x FY22E BVPS. GDPI declines on weak Motor segment...

Over FY21E we expect lockdown and partial working conditions to result in lower new motor vehicle policy sales, lower renewals, and also lower motor CORs. We expect health premiums to grow with some increase in claims, but over time we expect higher pricing power in health to protect profitability. Overall projecting FY21E remains a challenge but we believe this period should be better for company profitability. Additionally, changing regulations in motor are expected to drive down both claims and tariffs, creating supernormal profitability in the short term. We believe that this period (of super-normal profitability) will be short lived, as we expect IRDAI to clamp down on TP pricing restricting profitability. We believe market is not factoring this risk, and post recent run-up in share price we downgrade ICICIGI to a SELL with a reduced TP of Rs 1,042 (Mar-22E P/E of 26.2x and a P/ABV of 5.5x). ICICIGI reported an in-line ex. crop 4QFY20 NEP growth of 13.8% YoY to Rs 23.6bn. Underwriting profits were at Rs (1.3)bn (vs. exp. of Rs 0.1bn) as calc. COR increased to 104.1% (+439/467bps YoY/QoQ). Lower post prov. investment yield of 6.7%, meant a 12.6% lower than estimated APAT of Rs 2.8bn (+23.8/-4.1% YoY/QoQ).

With a long run-way of growth, improving regulatory environment, and strong innovation opportunities, we remain positive on the general insurance sector. Regulatory crack-down on motor TP pricing is key risk. Pvt. multi-line insurers Mar-20/FY20 GDPI grew -16.2/+11.7% YoY to Rs 67.1/911.8bn. Decline in Mar-20 was along expected lines as new policy sales have declined as a result of the lockdown and renewals have been impacted by the forbearance (until 15-May-20) given by IRDAI on premium payments, and extra time (until June-20) allowed for claiming deduction under the IT Act, for the purchase of health cover.

We will be reviewing our numbers and recommendations once we have a better understanding of the Covid-19 situation. ICICIGI: GDPI (ex-crop) increased 13.3% YoY to Rs 10.4bn. Growth momentum (ex crop) improved from -2.0/12% YoY seen in Dec-19/Jan-20. Health and Motor OD business reported growth (ahead of industry) of 12.4% and 12.7% respectively. FY20TD GDPI for ICICIGI stands at Rs 125.7bn (-7.5% YoY), with ex-crop GDPI is healthy at Rs 121.7bn (+13.9% YoY). We have a SELL on ICICIGI with a TP of Rs 1,170 (Mar-22E P/E of 26.0x and a P/ABV of 5.7x). ICICIGI is currently trading at a FY21/22E P/E of 26.6/22.3x and P/ABV of 4.9/4.0x. NIACL: GDPI grew to Rs 19.3bn, +24.2% YoY (ex. crop at Rs 18.6bn, +26.0% YoY) led by growth primarily in health business. Growth in retail business segments such as motor TP/health improved moderately to 20.7/30.3% YoY. FY20TD GDPI for NIACL stands at Rs 246.9bn (+15.6% YoY), ex-crop GDPI at Rs 219.1bn (+12.7% YoY). We have a SELL on NIACL with a TP of Rs 130 (0.65x Mar-22E ABV (less 5% discount for expected 10.4% supply). NIACL is currently trading at a FY21/22E P/E of 7.4/6.2x and P/ABV of 0.4/0.4x. Bajaj Allianz General Insurance (BAGIC): GDPI slipped by 1.4% YoY in Feb-20 to Rs 7.0bn, (ex-crop GDPI at Rs 6.6bn +1.6% YoY) led by sharp decline in crop business (-32.2% YoY). Motor OD GDPI declined 8.6% YoY vs. industry decline of 2.7% YoY. FY20TD GDPI for BAGIC stands at Rs 120.5bn (+20.1% YoY), while GDPI (ex-crop) is Rs 89.4bn...

The combined ratio worsened to 98.7% compared with 95.9% in Q3FY19 mostly due to roll out of long term insurance policies. The de-growth in the Crop segment and higher loss ratio in the Motor OD segment would affect the profitability in the short term. Hence, we...

Improvement in Underwriting Performance and Increase in Fire and Retail Health GDPI Worked in Favour.

We expect changing regulations in motor to drive down both claims and tariffs, creating supernormal profitability in the short term. We believe that this period (of super-normal profitability) will be short lived, as we expect IRDAI to clamp down on TP pricing restricting profitability. We believe market is not factoring this risk, accordingly we rate ICICIGI a SELL with a reduced TP of Rs 1,126 (Dec-21E P/E of 26x and a P/ABV of 5.7x). ICICIGIs 3QFY20 saw NEP growth of 16.4% YoY (ex crop 22.2% YoY, +10.3% vs. est.) to Rs 24.5bn, decline in COR (calc.) to 99.5% was also better than est., but investment yield of ~7.3% (-80/-114bps YoY/QoQ), weighed on APAT, which at Rs 2.94bn grew +23.0/-14.9% YoY/QoQ, (-2.6% vs. est.)

Improvement in Underwriting Performance and Increase in Motor-TP and Motor-OD GDPI Worked as a Charm.

ICICIGI is best positioned to benefit from changing regulations in motor which will drive down both claims and tariffs. However, we expect high competitive intensity and lower motor TP tariffs (de-tariffication/price reduction) to restrict underwriting margins and investment profits. Accordingly, we rate ICICIGI a SELL with a TP of Rs 1,060 (Sep-21E P/E of 26x and a P/ABV of 5.6x). ICICIGIs 2QFY20 saw an NWP decline of 2.1% YoY to Rs 21.7bn, increase in COR (calc.) to 103.7% (+184bps YoY) as expenses increased while claims ratio declined, and lower investment yields of ~8.4% (-121/-111bps YoY/QoQ).

Slow start to the year but fundamentals intact ICICI Lombard General Insurance is a private general insurance company, listed on 27th Sept 2017. The company offers various insurances covering...

Improvement in underwriting performance and increase in investment leverage to drive growth.

ICICI Lombard reported GDPI growth of 17.2% in FY2019 (excluding crop segment 20.5%) as against Q4FY19 growth of 29.4% due to positive regulation changes on Motor-TP business and 50% growth in number of agents by the end of the year including point-of-sale (POS) agents.

ICICI Lombard General Insurance Company Ltd Q2FY19 results Comment Revenue rose by 20.44% to Rs. 2222.02 Cr in Q2FY19 when compared to the previous quarter. Also, it grew by 22.71% when compared with Q2FY18.

We like the ICICIGI franchise given its granular retail portfolio, strong underwriting and robust return ratios. The 4th largest non-life insurer is on track to leverage its presence in 90% of the districts across India through on-boarding of experienced agents, scaling up of its digital assets and making further improvements to its best-in-class claims management process. Thus, ICICI Lombard is positioned to be a major beneficiary of the...

Revenue grew by 1.56% to Rs. 1844.89 Cr in Q1FY19 when compared to the previous quarter. ICICI Lombard General Insurance Company Ltd Q1FY19 results Comment

We met the management of ICICI Lombard to get an insight into the general insurance sector and the company's positioning, business model and growth prospects. It was founded as a JV between ICICI Bank and Fairfax Financial Holdings in 2000. ICICI Lombard is the largest private player and overall fourth largest player in the general insurance industry in terms of gross direct premium income (GDPI) as on FY18. It has a market share of ~8.2% on overall basis. The company offers a comprehensive and well diversified range of products, including motor...

ICICI Lombard General Insurance Company Ltd (ICICI Lombard), is the largest private-sector non-life insurer in India in terms of gross direct premium income (GDPI), as on FY17. The company offers a comprehensive and well-diversified range of products including motor, health, crop/weather, fire, personal accident, marine, engineering and liability insurance through multiple distribution channels. The company has wide distribution network across the country strengthened by the wide reach of ICICI bank network (4850 branches)....

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