ICICI Lombard drops 15% as fire losses, court ruling hit profit
ICICI Lombard shares slumped to a two-year low after a 46% plunge in first-quarter profit exposed underlying underwriting vulnerabilities and slowing premium growth.
Shares of ICICI Lombard General Insurance fell 15% to ₹1,544.40 on the BSE on Thursday, marking the stock's worst single-day drop in over six years. The selloff followed the company's report of a 46% decline in first-quarter net profit to ₹403 crore, down from ₹747 crore in the same period last year. The stock is now trading more than 25% below its November 2025 peak.
The earnings collapse was driven by two specific factors outlined in a regulatory filing. The insurer took a ₹63 crore hit from two large fire losses, which alone added one percentage point to its combined ratio. Additionally, a Supreme Court judgment forced ICICI Lombard to increase claim reserves in its motor third-party portfolio by ₹165 crore, adding 2.8 percentage points to the combined ratio.
However, the headline numbers mask a deeper concern regarding the company's underlying profitability. Even excluding the fire losses and the motor third-party provisions, the combined ratio remained elevated at 102.3%, indicating the core underwriting business is paying out more than it earns in premiums. Motilal Oswal Financial Services noted the adjusted profit would have been ₹580 crore, blaming "weak underwriting performance and lower-than-expected investment income."
Top-line growth also signalled competitive headwinds for the private sector insurer. While net premium earned rose 16% year-on-year to ₹5,950 crore, gross direct premium income increased just 7.5% to ₹8,318 crore. This lagged the broader general insurance industry's expansion of 10.9% during the quarter, suggesting ICICI Lombard is losing market share to rivals.
The fundamental solvency of the business remains intact, with the ratio standing at 2.71 times the minimum regulatory requirement of 1.50x as of June 30. Still, the earnings shock prompted immediate downgrades from analysts tracking the sector. Motilal Oswal downgraded the stock to 'Neutral' with a target price of ₹1,960, while Emkay cut its target by 10% to ₹1,900 but maintained its 'Add' rating, citing a difficult operating environment and intense competition.
