poor results, other income added to cover up the operational loss
As I can see ICICI Lombard has always reported loss at operational level in March quarters for 3 years, 2021, 2022 and 2023.
Is this common with all insurance companies OR Is this specific to ICICI Lombard?
Also, they report high Other Income in March quarter to cover up this loss. What is this Other Income and Is it always reported in March Quarter? My initial understanding was that this could be income from the Investment Portfolio of any insurance business, but I may be wrong. I am understanding this business only for last few months/quarters.
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If you see the other income section in the financial statement, the other income is coming through “contribution from shareholders funds towards excess Expenses of Management (EoM)”
Insurers have set EoM levels as a percentage of the premiums they collect. This means that if premium collections are low, the allowable EoM levels will also be limited.
This excess expense should be charged to Shareholders account and thus you see this entry.
Investment income is not part of other income but still it also doesn’t show the true profit. An insurer may decide to go slow on volume because of low insurance rate; the earned premium may not be sufficient to cover the claims for that year and insurer might have to sell some investment to cover the claims.
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ICICI Bank board has approved to raise shareholding in ICICIGI by 4%. Earlier it was assumed that they will take take shareholding below 30% which would lead to a 18% stake sale.
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Can anybody please explain this decision by ICICI? I am not able to understand the rational behind this decision. Why they have decided to increase the stake, while they are supposed to reduce it?
Also, why market has reacted so positively to this move?
Per RBI guidelines banks can have less than 30 % or 51% stake (or more) in their listed entities. In my opinion ICICI Bank was not able to exit as valuations were not decent, so they decided to acquire 4% of equity to comply with RBI rules.
Any alternate view is welcome.
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This actually strenthens ICICI bank a bit more as its now a subsidiary of ICICI Bank.
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I have a query on Combined Ratio (CR) being reported by General Insurance companies.
CR = Loss Ratio (LR) + Expense Ratio (ER)
LR = Claims Incurred (Net) / Premiums Earned (Net)
ER = (Net Comm. + Exp. of Mgmt) / Net Premiums Written
The denominators of LR & ER are different. However they are being summed to report CR. This is resulting in under-reporting of CR. As per Investopedia definition, the denominator of ER should also be Premiums Earned (Net).
Please check if I am making sense.
The company announced their FY24 results and they are as follows:
1/5: ICICI Lombard reports impressive FY2024 results! GDPI increased by 17.8% to ₹247.76 billion, outpacing industry growth of 12.8%. Excluding crop and mass health, GDPI growth was 17.1%.
2/5: Combined ratio improved to 103.3% (102.5% excluding CAT losses), compared to 104.5% in FY2023. This marks increased efficiency and better risk management.
3/5: Profit before tax (PBT) grew by 21.0% to ₹25.55 billion in FY2024. In Q4, PBT surged 21.9% to ₹6.98 billion. The Board proposes a final dividend of ₹6.00 per share.The overall dividend for FY2024 including proposed final dividend is ₹ 11.00 per share.
4/5: Return on Average Equity (ROAE) was 17.2% for FY2024, with Q4 at 17.8%. Although slightly lower than FY2023’s 17.7%, still a strong performance.
5/5: Solvency ratio stands at 2.62x as of March 31, 2024, up from 2.51x last year, well above the 1.50x regulatory requirement.
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