Superior insurance franchise in India with long term tailwinds

Another example of a high quality financials is ICICI Lombard, the leading private general insurer in India, which we have owned in our Global Emerging Markets portfolios since 2020. The company has a strong track record with book value per share¹ compounding (including dividends) at 19% annually for the past fifteen years. 

There are several supportive factors for this holding. Firstly, general insurance penetration in India is one of the lowest globally. Even among emerging markets, the country’s $20 premium per capita is but a fraction of peers like Mexico ($122) and Thailand ($129). The industry has attractive long term growth potential and visibility.

Secondly, similar to the banking industry, private operators in the market have been consistently gaining share over State-Owned Enterprises (SOEs). While the latter still control a significant part of the market (over 40% premium share), years of underinvestment and mis-management have led to stretched balance sheets which restrict their ability to grow. We believe the SOEs will continue to be market share donors in the long run, benefitting the best private insurers like ICICI Lombard. 

The company demonstrates strong risk-awareness and agility. Management has only operated in segments where they can generate attractive returns and we back the management to continue doing so while growing and avoiding excessive risks.