ICICI Lombard net profit falls 9.5% in Q4, blames Covid and accounting rule

ICICI Lombard general insurance has reported a 9.53 per cent year-on-year (YoY) drop in net profit in the January-March quarter of FY22, linking the decline to the third wave of Covid-19 and accounting principles that required the company to take the cost upfront.

The net profit of India’s largest private sector general insurer, in Q4FY22 totaled to Rs 313 crore compared to Rs 346 crore in the same period a year ago. For the full year, the company earned a net profit of Rs 1,271 crore, down 13.7 per cent from Rs 1,473 crore in FY21.

The company has proposed a dividend of Rs 5 per equity share for the financial year ended March 31, 2022, subject to approval of the members at the ensuing annual general meeting.

“There was a small impact of wave III of Covid in this quarter (Q4). Secondly, when we grow fast, the cost, as per the accounting policy, has to be taken upfront and the premium is accounted for over the entire period. So, if you have a very high growth in the last quarter, as we had this year, you will have the full cost being accounted for upfront but the earnings will happen over twelve months”, said Bhargav Dasgupta, MD and CEO, ICICI Lombard General Insurance.

Underwriting losses of the insurer also widened in the quarter to Rs 308.98 crore. In the year ago period, underwriting losses of the insurer was to the tune of Rs 91.29 crore.

Combined ratio, a measure of the money flowing out of an insurance company in the form of dividends, expenses, and losses, of the insurer stood at 103.2 per cent in Q4FY22 compared to 101.8 per cent in the year-ago period. For the full year, the combined ratio of the insurer stood at 108.8 per cent versus 99.8 per cent in FY21. Combined ratio below 100 per cent indicates that the company is making an underwriting profit, while a ratio above 100 per cent means that it is paying out more money in claims that it is receiving from premiums.

The company earned premium income to the tune of Rs 4,666 crore in the reporting quarter, up 34.15 per cent over the year ago period. In FY22, the gross direct premium income of the insurer was to the tune of Rs 17,977 crore, up 28 per cent over last year.

The company paid claims to the tune of Rs 1,915.21 crore in Q4FY22, up 15 per cent from Rs 1,665. 52 crore in the year ago period. In the preceding quarter (Q3FY22), it had paid claims to the tune of Rs 2,083.23 crore.

The impact of Covid claims on the insurer for the full year (FY22) is Rs 556 crore, of which Rs 27 crore came in the last quarter. “As an industry, we have taken a hit of over Rs 25,000 crore because of Covid claims. We have been adversely affected and never asked for any benefit from the government”, Dasgupta said. As of now, we are not looking at any price increase for the retail products, he added.

Solvency ratio of the insurer at the end of March quarter stood at 2.46x, much higher than the regulatory requirement of 1.5x.

Shares of the insurer closed 2.61 per cent higher at Rs 1,400.30 on the BSE.