Not a detailed analysis on the earnings impact but the following points build onto the thesis I already have -
Bharti AXA works at a loss ratio of ~78% (including crop vertical) and a combined ratio of ~120%
The equity dilution will be < 10% for existing shareholders post the share swap
GDPI of combined entity goes up by ~23% due to the merger, ~18% if one totally discounts the crop vertical
Investment Book increases by ~18% post merger
Reading between the lines, ICICI Lombard is likely to optimize the cost structure of the combined entity and unlock serious savings. From the investor presentation of Nov -
“Significant headroom for operating leverage and cost effectiveness over time”
“No capital raise is required for solvency purpose”
Over a period of 18-24 months, I would expect the combined entity to report a combined ratio < 105% on a conservative note. In terms of deal making, ICICI Lombard management has been street smart as usual.
The discretionary nature of the business building expenses is the ace in the pack which many analysts do not appear to understand all that well. You can see this in HDFC Life financials too, due to this discretionary expense the PAT ends up being understated by at least 300 Cr per year in my assessment. Anyone who has spent time in the field as a salesman in the financial services segment in India will know exactly what I am talking about. EPS accretion is not the optimal lens to view this deal or this business for that matter.
Disclosure: Invested for self and customers, I am a SEBI registered IA