General Insurance - Improving Trends In The Motor Segment: Motilal Oswal

Motilal Oswal Report

The motor insurance premium clocked an 11% compound annual growth rate over FY21-24. For motor own damage/ Motor third party, the three-year CAGR stood at 12%/10%. The passenger vehicle/two-wheeler sales, within the auto industry, registered a three-year CAGR of 16%/5%. 

Numerous trends are emerging in the motor insurance space, such as:

1. the rising share of electric vehicles;

2. improving loss ratios in the third party segment; and

3. the changing product mix among vehicles.

We conducted channel checks to get a perspective on these trends.

1. The underwriting experience of EVs is still evolving, and the current profitability of the segment is healthy. Battery costs have been an issue, but as technology evolves, the impact will subside.

2. Motor third party loss ratios are improving fundamentally and are likely to improve further. However, this might restrict the possibility of a price hike in the segment.

3. ICICI Lombard General Insurance Company Ltd.’s motor market share has improved to 11%+ in FY25 year-to-date from 9.8% in H1 FY24. The loss ratio trajectory has been consistently improving and for FY24, the loss ratio for motor own damage/motor third party was 63.5%/66.8% (versus 72.6%/72.2% in FY23).

We remain positive on ICICI Lombard as it improves its market share in the auto segment. We reiterate our Buy rating with a one-year target price of Rs 2,100 (premised on 35 times FY26E earnings per share).

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