ICICI Lombard reported a 15.5% rise in Q2 net profit to ₹946 crore, beating the ₹770 crore consensus estimate. This performance was powered by investment income, which rose 29% to ₹1,554 crore, with capital gains more than doubling to ₹453 crore. The board approved an increased interim dividend of ₹7 per share. However, the profit growth masks a sharp deterioration in the company's core underwriting business.
The insurer's combined ratio, a key measure of underwriting profitability where anything above 100% indicates a loss, worsened to 107% from 105.1% a year ago. This drove a 79% year-on-year jump in the underwriting loss to ₹318 crore. The primary driver was a 240-basis-point increase in the Expenses of Management ratio to 36.3%, reflecting higher operational costs. The picture is slightly weaker under the new '1/n' accounting basis, with the combined ratio also at 107%.
Sector pressure and company discipline
The entire general insurance industry is under pressure, with the industry combined ratio for the motor segment deteriorating significantly to 131.4% in Q1 FY27 from 125%. ICICI Lombard's motor combined ratio was far better at 108.3%, and the gap between the company and the industry widened to 23.1 percentage points. Management attributes this to stronger pricing, claims management, and underwriting discipline. It expects motor loss ratios to stay in the 65-67% range and retail health loss ratios in the 65-70% range.
For investors focused on the insurance sector, the sustainability of ICICI Lombard's earnings is now in question. The stock's valuation has historically been sensitive to the combined ratio; shares fell 15% after the Q1 combined ratio worsened to 107.2%. Current profits are being generated by the investment book, not the underwriting engine. The company's ability to improve its expense ratio and navigate claims inflation in its fast-growing health segment, which saw H1 growth of 26.8%, will determine whether the core business can return to profitability and support the stock's premium.