ICICI Lombard Q4FY26: Profit up 7%, investment hit

Q4FY26 result snapshot: better underwriting, weaker investment

ICICI Lombard General Insurance reported an overall positive set of Q4FY26 operating metrics, led by premium growth and improved cost trends. But investment income came in weaker than expected, which dragged net profit below street estimates. The quarter also saw mark-to-market pressure across equity and bond holdings, with unrealised gains turning negative. For investors, the quarter reinforced a familiar pattern in general insurance: underwriting discipline matters, but quarterly earnings can still swing sharply with market-linked investment performance.

Premium growth accelerated in Q4

In Q4FY26, gross written premium (GWP) grew 17% year-on-year to ₹8,070 crore. Net earned premium (NEP) rose 11% year-on-year to ₹5,790 crore. For FY26, NEP increased 13% year-on-year to ₹22,260 crore. The company also ended FY26 with 7% growth in gross direct premium income (GDPI), while the Q4 GDPI growth was stronger at 17%.

Reuters also highlighted strong demand in retail health insurance during the quarter. It reported retail health insurance premiums surged 55.6% year-on-year, while the corporate health segment grew 9.9%. Motor insurance, which accounts for nearly half of total premiums, grew 6.24% in Q4 on strong vehicle sales.

Combined ratio improves, but stays above 100%

Underwriting profitability improved in Q4FY26, with the combined ratio improving 130 basis points year-on-year to 101.2%. Even with this improvement, the ratio remained above 100%, implying underwriting operations were still marginally loss-making. The underwriting loss was ₹280 crore in Q4FY26 versus a loss of ₹210 crore in Q4FY25.

For the full year, the combined ratio was 103.4% (adjusted to 102.4% allowing for 1/n), compared with 102.8% in FY25. Earlier in the year, the company had reported a combined ratio of 104.5% in Q3FY26, improved from 105.1% in the previous quarter but worse than 102.7% a year earlier.

Operating expenses trend improves

ICICI Lombard’s cost metrics showed improvement in the quarter. Expenses of management (EOM) to net written premiums (NWP) stood at 30.4%, which the note characterised as a good operating expense trend. Commission to NWP declined by 420 basis points quarter-on-quarter, offering additional support to operating profitability.

Investment income misses, mark-to-market hurts

The key disappointment in Q4FY26 was investment performance. On the investment side, unrealised gains on the book turned negative to ₹1,000 crore amid weakness in equity and bond markets. Total investment income on policyholders’ accounts was ₹830 crore, described as below expectations. For shareholders’ accounts, investment income was ₹240 crore, again a miss due to mark-to-market losses.

The company also took a ₹50 crore impairment charge on its equity portfolio, which contributed to the earnings miss. Despite the volatility, absolute investment yield for FY26 was 8.5%, compared with 8.4% in FY25.

Equity allocation raised in a weak market

A notable portfolio change was the increase in equity allocation during a bearish phase. ICICI Lombard aggressively raised equity allocation to 19% of the investment book in March 2026, from 14% in September 2025. The investment book grew 9% year-on-year to ₹58,420 crore.

The disclosed portfolio mix was 40.8% corporate bonds, 35% government securities (G-sec), and 18.7% equity and equity exchange traded funds (ETFs). This allocation helps explain why mark-to-market movements in both equity and bond markets influenced quarterly investment income.

Profit and RoE: Q4 up, but below expectations

Q4 net profit grew 7% to about ₹550 crore (Reuters reported profit after tax at ₹547 crore) but missed estimates due to lower investment income and the impairment charge. For FY26, net profit grew 11% year-on-year to ₹2,770 crore.

A weak investment quarter lowered return ratios. Return on equity (RoE) was 13.3% for Q4FY26 compared with 14.5% in Q4FY25. For FY26, RoE was 17.8% versus 19.1% in FY25. Excluding wage code impact, RoE was 18.1% for FY26. Separately, the company had flagged an impact of ₹55 crore due to the new labour code in Q3FY26.

Market reaction: stock fall and brokerage resets

After the March-quarter numbers, ICICI Lombard shares fell 4.2% to an intra-day low of ₹1,745.60, following weaker-than-expected earnings. The stock’s April 14 close was ₹1,784.85, and the market capitalisation cited was ₹88,974 crore. The company also disclosed operating profit for the period fell 26% year-on-year to ₹416 crore, as a 25% increase in claims-related costs largely offset higher net premium.

Brokerage actions reflected valuation sensitivity. Morgan Stanley downgraded the stock to ‘equal-weight’ from ‘overweight’ and cut its target price to ₹1,855, citing limited upside at the valuation of 26 times FY26 earnings estimates. Nuvama Institutional Equities cut its target price by 12.5% to ₹2,100 while retaining a ‘buy’ rating, pointing to softer premium growth drivers such as a slowdown in new vehicle sales and deferred accounting on long-term products.

Dividend and key watchpoints investors flagged

The board recommended a final dividend of ₹7 per share (70% of face value) for the financial year ended March. Separately, the watchlist section also noted FY25 total dividend was ₹12.5 per share.

Investors tracking risk factors also highlighted a pending ₹19,000 crore GST demand, which was stated as currently stayed by the Bombay High Court. While AM Best’s commentary noted ongoing tax disputes have not yet had a major impact on finances, such issues remain important balance sheet watchpoints.

Key numbers table

Why this quarter matters

The quarter matters because it shows a clear split between core insurance operations and investment-linked earnings. On one hand, premium growth accelerated in Q4 and underwriting metrics like the combined ratio improved sharply year-on-year. On the other, the miss on investment income and negative mark-to-market movement reduced reported profitability, despite higher premiums.

It also shows how asset allocation decisions can influence quarterly performance. The increase in equity exposure to 19% of the investment book by March 2026 came during a weak market phase, and the quarter captured the downside of that timing through mark-to-market losses. For long-term investors, the data points to the need to track both combined ratio trends and the volatility of quarterly investment income.

Conclusion

ICICI Lombard’s Q4FY26 results delivered stronger premium growth and better expense trends, but weaker investment income and market volatility led to an earnings miss. Investors will likely watch whether underwriting improvement sustains and how investment income behaves with changes in equity and bond markets, alongside updates on the company’s tax matters and capital allocation decisions.