ICICI Lombard profit seen dipping 3% on higher claims; PB Fintech PAT may rise nearly 50%
ICICI Lombard may face pressure on profitability from higher claims, while PB Fintech is expected to post a sharp rise in profit.
ICICI Lombard is expected to see a 3% dip in profit as higher claims weigh on its quarterly performance. PB Fintech, meanwhile, could report nearly 50% growth in PAT, according to estimates.
NEW DELHI, ICICI Lombard: Life insurers are likely to report uneven growth in the July-September quarter, with Life Insurance Corporation of India (LIC) and ICICI Prudential Life expected to post low double-digit growth in annualised premium equivalent (APE), according to a Q2FY27 sector preview by Elara Securities dated October 7.
The brokerage said demand remains soft. HDFC Life is expected to rebound from a flat base, while Max Financial Services, referred to in the note as AMLI, is likely to lag peers. In general insurance, ICICI Lombard is expected to report a muted quarter on higher loss ratios, while PB Fintech is seen continuing its strong run.
Life insurers: LIC, ICICI Pru Life seen expanding margins
Elara expects value of new business (VNB) margins to stay under pressure year-on-year. It cited moderation in retail protection and the loss of GST input tax credit as the main drags. These are partly offset by rider attachments and a favourable yield curve.
ICICI Prudential Life (about 200 basis points) and LIC (about 400 basis points) are expected to see margin expansion, while others face pressure. Elara’s estimates for the quarter:
LIC: APE growth of about 13% and VNB growth of about 37%, with margin rising to 23.4% from 19.3% a year ago. The brokerage expects a rebound in individual APE on a favourable base and a continued shift towards non-participating products.
ICICI Prudential Life: APE growth of about 11% and VNB growth of about 20%, with margin rising to 26.5% from 24.4%. Elara attributed this to a higher retail term mix, and said commentary on the MD and CEO transition would be closely watched.
HDFC Life: APE growth of about 9% and VNB growth of about 10%, with margin broadly flat at 24.3%. Elara expects the HDFC Bank channel to rebound on a favourable base, and the product mix to tilt towards ULIPs.
SBI Life: APE growth of about 8% and VNB growth of about 6%, with margin easing to 27.4% from 27.9%. Elara expects moderation in lumpy group business and a rising share of traditional products.
Max Financial Services: APE growth of about 6% and VNB growth of about 4%, with margin easing to 25.0% from 25.5%. Elara pointed to a likely slowdown in the proprietary agency channel and moderation in retail protection growth.
The brokerage expects retail term growth to moderate across the sector. It said the individual product mix is likely to stay stable or shift slightly towards ULIPs for ICICI Prudential Life, Max Financial and HDFC Life, while SBI Life should see a rising share of traditional products.
Also Read: IRDAI Chief Rules Out Glide Path Sought by Brokers on Commission Caps
Industry data cited in the note showed the average sum assured per policy for private insurers at INR 4.1 million in Q2FY27, which covers only July-August. This compares with INR 2.4 million in Q2FY24. Elara said the increase is driven by rider and protection sales, and that ICICI Prudential Life continues to lead among listed peers on this measure.
Guaranteed returns on non-participating products were broadly stable between August 12 and September 16. Aditya Birla Sun Life’s Assured Savings Plan and Canara HSBC’s iSelect Guaranteed Future Plus saw marginal increases of 0.13 and 0.16 percentage points respectively.
ICICI Lombard – General insurance: crop premium erosion, higher claims weigh on ICICI Lombard
Elara expects ICICI Lombard’s gross direct premium income to be flat year-on-year. Crop insurance premiums eroded materially during July-August, falling to INR 0.1 billion from INR 6 billion a year earlier, which was about 13% of gross direct premium income. Retail health remains strong.
Net earned premium is expected to grow in the mid-teens, at about 15.6%. Investment income should get a cushion from capital gains of about INR 3.8 billion on the sale of its NSE stake in the NSE IPO.
The combined ratio is seen at 107.2%, against 105.1% a year ago. The loss ratio, driven by motor and catastrophe events, is expected to rise about 110 basis points, and the expense ratio about 100 basis points. Profit after tax is estimated to fall about 3% year-on-year to around INR 8 billion.
On third-party reserving, Elara said it does not expect another material increase following the Supreme Court ruling, as the proposed consultation paper offsets the impact. It said the combined ratio is likely to stay elevated unless inward reinsurance rises sharply to cushion the loss of crop premium.
PB Fintech to post another strong quarter; distribution reforms a risk
Elara expects PB Fintech (Policybazaar) to report revenue growth of about 32% to roughly INR 21 billion, on continued momentum in retail health and protection. Profit after tax is estimated to rise about 49% year-on-year to around INR 1.9 billion. Operating margin is seen improving about 320 basis points to roughly 9%.
Advertising spend is expected to moderate from the previous quarter, which included a Paisabazaar campaign.
The brokerage also flagged proposed distribution reforms. With the IRDAI chairman meeting insurers, Elara said management commentary on the subject would be worth watching, as the reforms would structurally change how business is done. If implemented in their current form, it said, they would benefit manufacturers rather than distributors, posing a risk for intermediaries such as PB Fintech.
ICIC Lombard: Elara’s ratings
As of October 6 pricing, Elara carries “Buy” ratings on HDFC Life (target price INR 740), LIC (INR 635), SBI Life (INR 2,400) and PB Fintech (INR 1,400). It rates ICICI Prudential Life (INR 625), Max Financial Services (INR 1,750) and ICICI Lombard (INR 1,925) as “Accumulate”.
