ICICI Lombard General: EOM compliance a moat; Retail Health a WIP

15 Feb 2024 , 01:25 PM

Analysts of IIFL Capital Services hosted the management of ICICI Lombard (ILOM) at IIFL’s Investor Conference in Mumbai. ILOM’s investment in the Retail Health is a gradual work-in-progress. As a result, growth in the segment will also accelerate gradually with management remaining confident on building a sustainable portfolio and over time, grow faster than SAHI’s on the new business front. ILOM is positioned well on the employer-employee segment of Group Health from a capabilities perspective, although pricing might be a concern. Management believes that the current industry combined ratios are not sustainable at these levels, and ILOMs compliance with the new EOM regulations is an advantage within a largely non-compliant sector. Analysts of IIFL Capital Services continue to forecast 14%/23% GDPI/EPS Cagr over FY24-26. It is trading at 32x FY25 P/E, below its historical average. Maintain BUY. 

Strong Corporate Health Portfolio; Retail Health a gradual play: 

Employer-Employee segment continues to be the heart of ILOMs Health portfolio. Strong demonstration on the claims front during COVID enabled ILOM to retain a large part of this business despite price hikes. Bancassurance business has also fared well post COVID, with lending activities picking up. ILOM’s investment in Retail Health is a gradual workin-progress. Focus remains on building a sustainable portfolio and over time, grow faster than SAHI’s on the new business front. 

Weakness in Motor offset by multi-dimensional business model: 

While ILOM has witnessed minor market share loss in the Motor segment, it continues to remain the second largest player within this segment. The presence of a multi-dimensional and multi-channel business model has helped ILOM navigate this business cycle. ILOM continues to remain and confident within this segment, with easing of pricing pressure and strength on the EOM & combined ratio front enabling growth. 

Commentary on regulatory changes: 

i) The new EOM guidelines are more principle based in nature, requiring a gradual improvement plan for non-compliant companies. Management believes that the current industry combined ratios are not sustainable at these levels, and ILOMs compliance with the new EOM regulations is an advantage. ii) Management does not see the probable implementation of a composite license scheme as a threat, as Health and life are different business requiring different architectures