Shares of ICICI Lombard were in focus as global brokerage Jefferies maintained a buy rating and saw the stock up about 29% from current market prices.

Jefferies stock has a target price of Rs 1,620. Shares of ICICI Lombard rose to Rs 1,270 at 9.31 am, up 0.5% from the previous close on the BSE.

The foreign brokerage has a “buy” rating on the stock. It thinks ICICI Lombard’s risk-reward looks more favourable as it outperforms its private peers in terms of premium growth.

One of the pressures ICICI Lombard faces in FY22 is slowing premium growth and loss of market share, the brokerage said.

“In FY22, it grew 5% compared to private peers’ 11% growth and outperformed private peers in 11 out of 12 months. In four months in FY23, year-on-year Up 28% (a low base helps) is in line with its private peers, which have grown faster over the past two months,” Jefferies said.

The brokerage added that adding new products, expanded distribution, and digital partnerships will help the growth.
Jefferies also identified two key issues that ICICI Lombard needed to monitor. First, ICICI Bank has until September 23 to dilute its stake from 48% to 30%. Second, succession at the CEO level needs to be resolved within 12-14 months, according to the company’s indicative norms. Bhargav Dasgupta, MD and CEO of ICICI Lombard General Insurance Company since May 2009, may need to complete his 15-year retirement in May 2024.

The brokerage also noted that it expects ICICI Lombard to improve its consolidated operating ratio (CoR), a measure of general insurance underwriting profitability, from 109% in FY22 to 101% in FY25.

CoR is important because if the ratio exceeds 100%, the company is paying more for the claims it gets from premiums and making less profit.

Jefferies believes this will allow ICICI Lombard’s earnings to grow at a CAGR of 24% in FY23-25. The company reported that its net profit for the April-June quarter rose about 80% to Rs 349 crore, compared to Rs 194 crore a year earlier.