GICRENSEQ1 FY23August 22, 2022

General Insurance Corporation of India

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6analyst exchanges

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Management on call

Devesh Srivastava

CHAIRMAN AND MANAGING DIRECTOR, GENERAL INSURANCE CORPORATION OF INDIA LIMITED

Hitesh Joshi

GENERAL MANAGER, GENERAL INSURANCE CORPORATION OF INDIA LIMITED

Jayashree Ranade

CHIEF FINANCIAL OFFICER, GENERAL INSURANCE CORPORATION OF INDIA LIMITED

Key numbers — 40 extracted

Rs. 11,021 crore

the key highlights of the financial performance. The gross premium income of the corporation was Rs. 11,021 crore for Q1 FY '23 as compared to Rs. 14,289 crore for the Q1 FY '22. The investment income stood at R

Rs. 14,289 crore

ce. The gross premium income of the corporation was Rs. 11,021 crore for Q1 FY '23 as compared to Rs. 14,289 crore for the Q1 FY '22. The investment income stood at Rs. 1,890 crore in Q1 FY '23 as compared to Rs.

Rs. 1,890 crore

e for Q1 FY '23 as compared to Rs. 14,289 crore for the Q1 FY '22. The investment income stood at Rs. 1,890 crore in Q1 FY '23 as compared to Rs. 1,794 crore in Q1 FY '22. Incurred claims ratio stood at 94.7% in

Rs. 1,794 crore

ore for the Q1 FY '22. The investment income stood at Rs. 1,890 crore in Q1 FY '23 as compared to Rs. 1,794 crore in Q1 FY '22. Incurred claims ratio stood at 94.7% in Q1 FY '23 as compared to 104.3% in Q1 FY '2

94.7%

90 crore in Q1 FY '23 as compared to Rs. 1,794 crore in Q1 FY '22. Incurred claims ratio stood at 94.7% in Q1 FY '23 as compared to 104.3% in Q1 FY '22. Combined ratio in Q1 FY '23 decreased to 110.97%

104.3%

to Rs. 1,794 crore in Q1 FY '22. Incurred claims ratio stood at 94.7% in Q1 FY '23 as compared to 104.3% in Q1 FY '22. Combined ratio in Q1 FY '23 decreased to 110.97% versus 123.36% for Q1 FY '22. The

110.97%

t 94.7% in Q1 FY '23 as compared to 104.3% in Q1 FY '22. Combined ratio in Q1 FY '23 decreased to 110.97% versus 123.36% for Q1 FY '22. The adjusted combined ratio, by taking into consideration the pol

123.36%

'23 as compared to 104.3% in Q1 FY '22. Combined ratio in Q1 FY '23 decreased to 110.97% versus 123.36% for Q1 FY '22. The adjusted combined ratio, by taking into consideration the policyholders' inves

97%

d combined ratio, by taking into consideration the policyholders' investment income, works out to 97% for Q1 FY '23 as compared to 112% in Q1 FY '22. The company recorded profit before ta

112%

consideration the policyholders' investment income, works out to 97% for Q1 FY '23 as compared to 112% in Q1 FY '22. The company recorded profit before tax of Rs. 988 crore in Q1 FY '23 as

Rs. 988 crore

Q1 FY '23 as compared to 112% in Q1 FY '22. The company recorded profit before tax of Rs. 988 crore in Q1 FY '23 as against loss before tax of Rs. 1,166 crore in Q1 FY '22, and profit after tax of

Rs. 1,166 crore

he company recorded profit before tax of Rs. 988 crore in Q1 FY '23 as against loss before tax of Rs. 1,166 crore in Q1 FY '22, and profit after tax of Rs. 689 crore in Q1 FY '23 against loss after tax of Rs. 77

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Guidance — 16 items

Devesh Srivastava

opening

“We are seeing gradual improvement in the external environment and remain confident of improved performance going forward as we expect the combined ratio to start moving downwards in the coming quarters.”

Hitesh Joshi

“We don't expect any more degrowth to be there, and we expect that portfolio will keep on improving going forward.”

Devesh Srivastava

“So, by that trend, going forward, yes, there will be a day when the obligatory cessions will come to a naught.”

Devesh Srivastava

“But until that happens, it will continue to be something that will come to GIC, and there will be other ways because capacity is required.”

Devesh Srivastava

“The way the risks are now being identified and ways and means being sought to mitigate it, insurance and reinsurance will be required.”

Yazer K.M.

“What steps will be taken by the company to reduce these values because still it is in a higher rate, right?”

Yazer K.M.

“What steps will be taken by the management to increase the valuation?”

Jayashree Ranade

“Going forward, definitely whenever the opportunity comes, based on the market movements, the stocks which rise above the book value will be liquidated or will be replaced with the good stocks.”

Jayashree Ranade

“I'm sure as the market goes up, this provision will also have a reversal effect going forward.”

Arjun N.

“Sir, the impact of floods have already been factored in this loss ratios which happened across states in this last 2 months or will it be in the next quarter?”

Risks & concerns — 8 flagged

Sir, just wanted to understand that we have seen a sharp decline in the crop segment.

— Arjun N.

First, your reason as to why the decline and the impact of Beed model and adoption, et cetera?

— Arjun N.

Sir, the overall decline of GWP, what would be the 5% to 4% cession.

— Arjun N.

Sir, the impact of floods have already been factored in this loss ratios which happened across states in this last 2 months or will it be in the next quarter?

— Arjun N.

But in Q4 and even in Q3 FY '22, we were kind of cautious on that, specifically in U.S.

— Deepak Sonawane

See, reinsurance is a long-term business, and never forget the fact that we are in the business of risk.

— Devesh Srivastava

So, we cannot shy away from risk, we have to embrace it.

— Devesh Srivastava

Is it something that is perennially risk making, or is it something that has a very low possibility or a probability of having a loss?

— Devesh Srivastava

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Q&A — 6 exchanges

Sir, just wanted to understand that we have seen a sharp decline in the crop segment. If you can point out the reason for this. Is it because of the new Beed model that is being implemented? How many states are adopting to this model? What would be the impact? First, your reason as to why the decline and the impact of Beed model and adoption, et cetera? Your commentary on that would be helpful.

Devesh Srivastava

Arjun ji, I will just like to give first overview and then I will request the General Manager in charge of crop to step in. If you recall, about 4 or 5 quarters ago, crop was a very heavy percentage in our portfolio, and the demand was that we should trim it, get it to more manageable levels and contain the high combined ratio that crop was facing. So, this is the point where we started doing a lot of pruning of the portfolio, and today, we are at a point when our crop portfolio is about 25% of our total book in the Q1 that we have closed, which is where we would want to be. Now obviously, the

Sir, I’m having 3 questions. One, regarding the provision for investment loss. What steps will be taken by the company to reduce these values because still it is in a higher rate, right? Then regarding the second question, this is regarding the net commission ratio. Compared to the competitors, I think it's really high because some of the competitor I look, it's just about 5 percentage. And finally, regarding the performance of company for the investor. What steps will be taken by the management to increase the valuation?

Devesh Srivastava

So, Yazer, your first question pertains to the investment bit. Now what exactly was it? Can you specify it again, please? Sir, regarding the provision for investment loss, right, last quarter, it was thousands of crore. This quarter also, we have hundreds of crore for the provision loss, for the provision for investment loss. So, to reduce the value, any steps taken by the management? So, I'll request our CFO, Ms. Jayashree Ranade to step in here. Yes, this quarter also, we have recorded around Rs. 163 crore of provision for investments. This is basically the provision which we are incorporati

Sir, the impact of floods have already been factored in this loss ratios which happened across states in this last 2 months or will it be in the next quarter?

Devesh Srivastava

The impact of floods? See Arjun ji, the IBNRs already take care of this. When we close the quarter, the actual valuation is done about the IBNR, which is incurred but not reported, and an additional reserve is made for incurred but not enough reported. And they take into consideration all the events that have taken place which may affect our book, and reserving is made for that accordingly. So, the figures that you have are inclusive of the IBNR and IBNER figures. Sir, the foreign loss ratios or the incurred losses that we haven't disclosed has improved significantly. If you can give light on

So, my first question is on growth, basically on foreign book. So, like 2 or 3 quarters back, we were quite optimistic on foreign motor, right? But in Q4 and even in Q3 FY '22, we were kind of cautious on that, specifically in U.S. motor. So, is this trend continuing even in Q1, I mean, the 21% degrowth we have reported? Is it from that angle should we look at?

Devesh Srivastava

Deepak ji, it's not the motor alone, there has been a pruning in all the portfolio. Motor certainly has contributed to it. It has come down by about 20% from the quarter 1 of last year. So, what you're talking about, the U.S. motor, is something that obviously is continuing. I would request Hitesh ji to add something to it. It is the same thing. Essentially, we are taking a step back in preparation for taking a step forward. So, a bit of consolidation, we are getting familiarized with this particular segment of the U.S. market, which is a very peculiar model in terms of the way underwriting an

My question is like as you said that, you had claims after a lag, are we done mostly with the COVID claims? Or are there still to go? As you said, normally, you get claims from the PSU insurance with a lag of 1 quarter or 2 quarters? That is first question. Also, as you said, you are repricing your premiums. So, has it been done, it has taken effect? Or with every quarter, we will see some improvement in the premium pricing? Can you comment on this?

Devesh Srivastava

Manoj ji, the lag that we spoke about was true for the market. It is not a public sector or a private sector thing, because when 30/6 happens and the accounts are closed for Q1, the private sector or the public sector put together, that means the non-life insurance market will report it 45 days from then. So, that means those figures will appear to us in quarter 2, which is 30th September figures. So, that lag is something that is a part of the way the business is conducted globally. It's not something that is here in India, but globally, this is how it all happens, that the lag effect does ta

So, thanks, everyone, for your time today in the afternoon. As is very evident, we have been working on a very well thought of and chartered path, wherein we intend to get our combined within controls, get it as close to 100% in the shortest possible time. And going forward, we shall continue to make our portfolio healthier so that you have a more solid balance sheet for GIC, which is what a reinsurer is all about. And in the long term, we emerge as a much more healthier and a much better company than we were yesterday. This endeavor shall continue, and thank you again for your time today. Goo

Management

Speaking time

Devesh Srivastava

Moderator

Manoj Sah

Arjun N.

Yazer K.M.

Deepak Sonawane

Hitesh Joshi

Binay Sarda

Jayashree Ranade

Management

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Opening remarks

Binay Sarda

Thanks, Tanvi. Good evening to all the participants on the call and thanks for joining this Q1 FY '23 earnings call for General Insurance Corporation of India. Please note that we have mailed the press release to everyone and you can also see the results on our website as well as it has been uploaded on the stock exchange. In case if you have not received the same, you can write to us and we'll be happy to send it over to you. Before we proceed with the call, let me remind you that the discussion may contain forward- looking statements which may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our businesses that could cause future result, performance or achievement to differ significantly from what is expressed or implied by such forward-looking statements. To take us through the results and answer our questions, we have with us the management of GIC represented by Mr. Devesh Srivastava, Chairman and Managing Director and other top

Devesh Srivastava

Thank you, Binay ji. Good evening, everyone. I'm pleased to announce the financial performance for the quarter and full year ended June 30, 2022. We would like to reaffirm that we are continuously taking all necessary measures to improve our overall profitability, and it has been our constant endeavor to bring down the combined ratio below 100. We continue to be selective with the sole focus on underwriting profitability. Let me now take you through some of the key highlights of the financial performance. The gross premium income of the corporation was Rs. 11,021 crore for Q1 FY '23 as compared to Rs. 14,289 crore for the Q1 FY '22. The investment income stood at Rs. 1,890 crore in Q1 FY '23 as compared to Rs. 1,794 crore in Q1 FY '22. Incurred claims ratio stood at 94.7% in Q1 FY '23 as compared to 104.3% in Q1 FY '22. Combined ratio in Q1 FY '23 decreased to 110.97% versus 123.36% for Q1 FY '22. The adjusted combined ratio, by taking into consideration the policyholders' investment i

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