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Insurance Article

ICICI Lombard Now Holds More Value for the Parent

March 07 2019

Today, ICICI Lombard contributes 8% to the overall valuation of its parent firm ICICI Bank, higher than the life insurance arm ICICI Life Pru

An enormous increase in the market capitalisation of ICICI Lombard, since its listing in September 2017, has considerably reduced the valuation gap between the general insurance company with its life insurance counterpart ICICI Pru Life, the parent entity of both which is ICICI Bank.

While ICICI Lombard was valued at ₹30,000 crores at the time of its listing in September 2017, value of ICICI Pru Life Insurance was pegged at ₹48,000 crores at the time of its IPO in September 2016. Back then ICICI Lombard contributed only 5% to ICICI Bank's total valuation, while ICICI Pru Life contributed 7-8%.

However, things have changed drastically over the years. While today market capitalisation of ICICI Lombard stands at ₹43,951 crores, for ICICI Pru Life it's ₹49,118 crores. The rise in valuation of ICICI Lombard has also benefitted investors who have been handsomely rewarded, 41%, since the company's listing.

Also, while ICICI Pru Life traded at nearly 30% premium over ICICI Lombard in 2017, the same has shrunk to only 10%, which has increased the relevance of the latter to the overall valuation of its parent firm, ICICI Bank.

While ICICI Pru Life’s contribution to the parent company's valuation is still at 7-8%, it has increased to 8% for ICICI Lombard, the performance of which has benefitted from the company's robust fundamentals.

Along with strong fundamentals, several factors have played a vital role in increasing ICICI Lombard's valuation. It must be noted that though the equity markets are an important source of investment for general insurers, most products of ICICI Lombard are delinked from equities.

Also, the third-party motor vehicle insurance norms implemented in September last year have contributed to the revenue growth of ICICI Lombard. Experts predict the 2019-20 outlook for the general insurer more promising compared to its life insurance counterpart, with its net profit to compound by over 25% in the FY 18-21 period.

*Source:Business Standard

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