ICICI Lombard: Should investors rejoice over faster Q3 premium growth or worry about the net profit decline?

Subscribe to enjoy similar stories. ICICI Lombard General Insurance Co. Ltd’s shares fell on Wednesday, despite the sharp acceleration in its gross domestic premium income (GDPI) growth rate to 13.3% in the December quarter (Q3FY26).

This is the first time in FY26 that the company’s growth rate exceeded the industry’s 11.5% growth. Nearly 70% of the incremental GDPI came from the health segment (including personal accident and travel), which increased 41%, largely due to a pickup in retail health that benefited from the removal of goods and services tax (GST). The health segment’s share in GDPI increased from 23% a year ago to 29% in Q3, whereas the motor segment’s share decreased from 50% to 48%.

Despite strong GDPI growth, normalized net profit (on 1/n basis) fell 3.3% year-on-year to ₹700 crore after adjusting for ₹55 crore provision towards the impact of the wage code that became effective from 21 November. 1/n basis is the accounting practice of spreading the premium equally over the years in case a policy is issued for a tenure of more than a year. The net profit decline may be attributed to the worsening of the combined ratio, which is the sum of loss ratio (claims paid as a percentage of net premium) and expense ratio (expenses as a percentage of net premium).

Q3 combined ratio was 103.5% (excluding the wage code impact) versus 102.7% a year ago, with the loss ratio rising sharply from 65.8% to 68.7% as the motor segment loss ratio deteriorated from 56% to 65% (sum of own damage and third party). ICICI Lombard was able to mitigate the impact of a higher loss ratio by bringing down the expense ratio from 36.9% to 34.8%. This was aided by a tight leash on other operating expenses that stayed largely flat even as