ICICI Lombard's pre-tax profit up 7% in Q4 on improved loss ratio

Private sector non-life insurer ICICI Lombard reported a 7.27 per cent growth in pre-tax profit for the quarter ending March 2020 (Q4FY20) at Rs 371 crore. This was largely on account of an improvement in loss ratio across corporate segments such as fire insurance, and the no-loss situation in the crop insurance business as it generally shied away from the segment.

The insurer reported a net profit of Rs 282 crore in Q4FY20 compared to Rs 228 crore, registering a growth of 23.8 per cent on account of lower tax outgo for the quarter at Rs 88.7 crore (Rs 118 crore in Q4FY19).

The company's underwriting losses narrowed down to Rs 29.42 crore in Q4FY20, from Rs 49.70 crore a year ago. ICICI Lombard also reported lower underwriting losses for the full year (FY20) at Rs 105.15 crore compared to Rs 169.65 crore in FY19. 

The combined ratio of the company, a measure of profitability of non-life insurers, stood at 100.1 per cent in Q4FY20, compared to 99 per cent in Q4FY19. A combined ratio of below 100 indicates that insurer is making underwriting profits.

The gross premium earned by the company was down eight per cent, at Rs 3,181 crore in Q4FY20, mainly due to a decline in crop insurance business. The management said it will be cautious with crop insurance business in FY21 as well. In FY20, the premium earned by the company was down 8 per cent to Rs 13,313 crore from Rs 14, 488 crore in FY19.

ICICI Lombard made underwriting profits in segments like fire, marine, and group health, while it booked underwriting losses in the motor segment and retail health. Given that the third-party hikes for FY21 have been put on hold by the insurance regulator because of the covid-19 disruption, the loss ratios in the segment may shoot up in the future if insurers resort to heavy discounting in the own damage segment. Also, with social distancing being the new norm, the use of private vehicles may see rise and could result in a higher number of accidents and, therefore,  more claims for insurers.

In the light of the covid-19 disruption, the company has assessed and provided for impairment of Rs 119 crore for the quarter ended March 31, 2020 and Rs 120 crore for the year ended March 31, 2020 on investment assets as per its policy.

The company has maintained a healthy solvency ratio at 2.17x as of March 31, 2020 as against 2.18x at December 31, 2019 and higher than the minimum regulatory requirement of 1.50x. Solvency ratio was 2.24x at March 31, 2019.

It did not declare any dividend at end of the March quarter as the insurance regulator had instructed the companies to take a conscious call on the dividend payment to conserve capital in light of the current situation.