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A general insurance company has maintained steady growth, and analysts are betting on its healthy solvency ratio, strong distribution network and increasing market share in the fire segment. That at a time when the Street is anticipating healthy growth for the industry, thanks to increasing demand.

ICICI Lombard has withstood higher expenses on account of the COVID pandemic eating into its profitability, with a persistent focus on growth and digitalisation.

Investors are gung-ho on the stock, which has outperformed its peers at a time when the bulls struggle against a prolonged phase of correction. Analysts see up to 42 percent upside in it.

According to Motilal Oswal Financial Services, ICICI Lombard is investing in growth amid favourable industry dynamics. The company is set to reap the benefits of its move to increase its agency representatives base by 1,000 in a bid to expand growth opportunities in the health segment, according to the brokerage.

The general insurance industry is set to clock a compound annual growth rate (CAGR) of 12 percent in premium over the next decade on account of healthy auto sales, strong momentum in health insurance demand and growing commercial insurance lines, the brokerage added.

The brokerage sees ICICI Lombard's stronger correlation with auto sales, investments into the health distribution channel, synergies from its merger with Bharti Axa and the outcome of its investments in technology as key earnings triggers for the company.

It highlighted that the stock is trading near an all-time low one-year forward valuation. "The stock should re-rate towards its historic valuation as it delivers profitable growth and clarity emerges on the stake sale," Motilal Oswal added.

What helps ICICI Lombard stand out among peers

It is the company's digital initiatives that keep it ahead of its peers.

Mobile app Take Care is user friendly, serving customers with key functionalities such as a quick and easy claim process, online policy renewal and access to cashless hospital network for better customer engagement, according to LKP Securities.

ICICI Lombard scores over its peers on the profit market share and the RoE profile. It has managed its investment book exceedingly well. It has leveraged the diversity in its product mix using technology and distribution to post superior RoE with higher solvency.

LKP values ICICI Lombard at 43x times its estimated earnings for the year ending March 2023.

As of March 31, 2022, the company's solvency ratio — a key metric for insurers to determine their ability to meet their long-term debt obligations — stood at 2.46 times, as against 2.45 times at the end of the previous quarter.

That is much higher than the regulatory requirement of 1.5 times.

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