A recent Indian Supreme Court ruling on motor accident compensation, coupled with pricing pressures, has raised the risk of further provisioning and earnings downgrades, analysts said.
Mumbai:Shares of ICICI Lombard General Insurance logged their steepest fall in six years on Thursday, shedding $987 million in market value, as a quarterly profit slump deepened concerns that regulatory changes and rising competition will hit the insurer’s earnings.
The stock closed 10.5% lower at Rs1,623.80 , its lowest since March 2025, and was the top loser on the financials index, which settled 0.5% lower.
Nearly 13 million shares changed hands in the stock’s busiest session in six years.
The insurer, a unit of ICICI Bank, reported a near halving of first-quarter profit on Wednesday on higher claim provisions, fire insurance losses and weaker investment income.
Analysts said the tepid earnings highlighted a difficult operating environment, shifting focus to margin pressures amid intense competition.
A recent Indian Supreme Court ruling on motor accident compensation, coupled with pricing pressures, has raised the risk of further provisioning and earnings downgrades, analysts said.
ICICI Lombard’s underwriting performance worsened to the weakest since April-June 2022, when the COVID-19 pandemic weighed on the sector, Emkay Global said, slashing its target price on the shares to Rs1,900 from Rs2,100 rupees.
Analysts, on average, rate ICICI Lombard shares “buy” with a target price of Rs1,977.50, as per data compiled by LSEG.
Claims paid by ICICI Lombard rose nearly 21% to Rs 35.16 billion $364.94 million), including two large fire insurance losses worth 630 million rupees.
The firm booked a charge of Rs 1.65 billion after India’s top court raised compensation benchmarks in motor accident cases.
“The company has taken into account all its motor third-party exposure and has taken a conservative stance by creating the additional claims reserve,” said Shivaji Thapliyal, an analyst at Yes Securities.
Jefferies said higher provisions on new motor third-party policies could keep loss ratios elevated even if future premium increases provide some support and cut its fiscal 2027-29 earnings estimates for ICICI Lombard by 5% to 10%.
Citi also lowered its earnings forecasts, citing rising claims costs, competitive pricing and weaker investment income.
($1 = 96.3450 Indian rupees)
Reuters