ICICI Lombard General Insurance reported a challenging third quarter with net profit declining despite strong premium growth, reflecting the pressures facing the insurance sector amid rising claims and competitive dynamics.

Financial Performance Overview

The company's financial results for Q3 presented a mixed picture, with revenue growth offset by profitability challenges:

The 9% decline in net profit to ₹659 crore was primarily attributed to higher claims and deteriorating underwriting performance. Despite this setback, the company's gross direct premium income growth of 13.3% significantly outpaced the industry average of 11.5%, demonstrating strong market position and customer acquisition capabilities.

Underwriting Performance Concerns

The combined ratio, a critical profitability metric in insurance that measures the ratio of claims and expenses to premiums earned, worsened to 104.5% from 102.7% in the corresponding quarter of the previous year. This deterioration was primarily driven by pressure in the motor and health insurance segments, indicating challenging market conditions in these key business lines.

The worsening combined ratio above 100% suggests that the company paid out more in claims and expenses than it collected in premiums during the quarter, directly impacting profitability. Return on average equity also declined significantly to 16.5% from 21.5% year-on-year, reflecting the overall impact on shareholder returns.

Analyst Recommendations

Brokerage firms have provided measured assessments of the company's performance and outlook:

Goldman Sachs Analysis

Goldman Sachs maintained a neutral rating while reducing the target price to ₹1,925 per share, representing just 2% upside from current levels. The brokerage highlighted several key observations:

• Q3 GDPI growth of approximately 13% year-on-year exceeded industry trends
• Strong momentum observed in fire and health insurance segments
• Profitability pressure from the elevated combined ratio of 104.5%
• EPS estimates for FY26-FY28 adjusted by -6% to +1% range

The stock currently trades at approximately 30x FY27 P/E, close to its five-year average, with earnings CAGR expected to remain in high single digits over FY25-FY28.

Morgan Stanley Perspective

Morgan Stanley retained an equal-weight rating with a ₹2,035 target price, offering 8% upside potential. Key points from their analysis include:

• Q3 PAT missed both internal and street estimates
• Adjusted PAT (excluding one-offs) declined 3% year-on-year and 15% quarter-on-quarter
• Intense competitive pressure continues in the motor segment
• Expected GST rate cuts could support motor and health insurance growth in Q4
• Projected 13% GDPI growth for Q4 and FY27-FY28

Market Outlook

The results reflect broader challenges in the insurance sector, particularly in motor and health segments where competitive pressures and rising claims costs are impacting profitability. However, the company's ability to grow premium income above industry rates demonstrates its competitive positioning and market share gains.

Analysts expect potential regulatory support through GST rate cuts that could benefit motor and health insurance segments in the coming quarters. The company's strong premium growth trajectory, despite profitability pressures, indicates resilient business fundamentals and market demand for its insurance products.

ICICI Lombard General Insurance reported mixed quarterly results for Q3 FY26, with net profit declining despite robust premium growth. The general insurance company faced headwinds from higher claims and underwriting challenges that impacted overall profitability.

Financial Performance Overview

The company's financial metrics for the quarter presented a contrasting picture of growth and profitability challenges:

Premium Growth Outpaces Industry

Despite profitability challenges, ICICI Lombard demonstrated strong business momentum with gross direct premium income growing 13.3% year-on-year to ₹7,041.00 crore. This growth rate significantly outpaced the industry average of 11.5%, indicating the company's competitive positioning and market share gains during the quarter.

Underwriting Performance Under Pressure

The company's underwriting performance deteriorated during the quarter, with the combined ratio worsening to 104.5% from 102.7% in Q3 FY25. The pressure was particularly evident in motor and health insurance lines, which are key segments for the company. A combined ratio above 100% indicates that the company paid out more in claims and expenses than it collected in premiums, highlighting operational challenges.

Impact of GST Rationalization

Regarding GST rationalization measures, the company stated that benefits have been fully passed on to customers. In response to this regulatory change, ICICI Lombard has moved to recalibrate its cost structure to maintain operational efficiency and competitiveness in the market.