GICRENSEQ2 FY23November 14, 2022

General Insurance Corporation of India

5,867words

101turns

7analyst exchanges

3executives

Download PDF ↗GICRE stock page →

Management on call

Devesh Srivastava

CHAIRMAN & MANAGING DIRECTOR, GENERAL INSURANCE CORPORATION OF INDIA LIMITED

Hitesh Joshi

GENERAL MANAGER, GENERAL INSURANCE CORPORATION OF INDIA LIMITED

Chandra S Iyer

GENERAL INSURANCE CORPORATION OF INDIA LIMITED

Key numbers — 40 extracted

Rs. 8,100 crore

e of the key highlights of the financial performance. The gross premium income of the company was Rs. 8,100 crores for Q2 FY23 as compared to Rs. 8,374 crores for Q2 FY22. The investment income increased to Rs.

Rs. 8,374 crore

formance. The gross premium income of the company was Rs. 8,100 crores for Q2 FY23 as compared to Rs. 8,374 crores for Q2 FY22. The investment income increased to Rs. 3,206 crores in Q2 FY23 as compared to Rs. 2

Rs. 3,206 crore

rores for Q2 FY23 as compared to Rs. 8,374 crores for Q2 FY22. The investment income increased to Rs. 3,206 crores in Q2 FY23 as compared to Rs. 2,669 crores in Q2 FY22. The incurred claims ratio increased to 97

Rs. 2,669 crore

crores for Q2 FY22. The investment income increased to Rs. 3,206 crores in Q2 FY23 as compared to Rs. 2,669 crores in Q2 FY22. The incurred claims ratio increased to 97.5% in Q2 FY23 as compared to 92.2% in Q2 F

97.5%

res in Q2 FY23 as compared to Rs. 2,669 crores in Q2 FY22. The incurred claims ratio increased to 97.5% in Q2 FY23 as compared to 92.2% in Q2 FY22. Combined ratio in Q2 FY23 reduced to 117.89% versus

92.2%

. 2,669 crores in Q2 FY22. The incurred claims ratio increased to 97.5% in Q2 FY23 as compared to 92.2% in Q2 FY22. Combined ratio in Q2 FY23 reduced to 117.89% versus 122.19% for Q2 FY22. The adjusted

117.89%

eased to 97.5% in Q2 FY23 as compared to 92.2% in Q2 FY22. Combined ratio in Q2 FY23 reduced to 117.89% versus 122.19% for Q2 FY22. The adjusted combined ratio by taking into consideration the policyho

122.19%

in Q2 FY23 as compared to 92.2% in Q2 FY22. Combined ratio in Q2 FY23 reduced to 117.89% versus 122.19% for Q2 FY22. The adjusted combined ratio by taking into consideration the policyholders investmen

92.07%

ed combined ratio by taking into consideration the policyholders investment income works out to 92.07% for H1 FY23 as compared to 104.4% in H1 FY22. Profit before tax increased to Rs

104.4%

consideration the policyholders investment income works out to 92.07% for H1 FY23 as compared to 104.4% in H1 FY22. Profit before tax increased to Rs. 2,461 crores in Q2 FY23 as again

Rs. 2,461 crore

7% for H1 FY23 as compared to 104.4% in H1 FY22. Profit before tax increased to Rs. 2,461 crores in Q2 FY23 as against Rs. 1,213 crores in Q2 FY22. And profit after tax increased to Rs. 1,859 c

Rs. 1,213 crore

H1 FY22. Profit before tax increased to Rs. 2,461 crores in Q2 FY23 as against Rs. 1,213 crores in Q2 FY22. And profit after tax increased to Rs. 1,859 crores in Q2 FY23 as against Rs. 1,010 c

Advertisement

Guidance — 20 items

Binay Sarda

opening

“We will be starting the call with a brief overview of the quarter gone past, and then we will begin with the Q&A session.”

Devesh Srivastava

opening

“We continue to strive to bring down the combined ratio and remain confident of improved performance going forward in the coming quarters.”

Avinash

“I mean, how can we expect you, you know, to be competitive in the oversea market?”

Hitesh Joshi

“Once the broker role fully evolves, one can probably expect that even domestic market intermediary cost will match international cost to a fairly high degree.”

Devesh Srivastava

“Because when there is a very significant hardening, there will be tricks and what do you say, structuring and all kinds of tools will be deployed by the buyers and brokers to reduce the cost.”

Devesh Srivastava

“So, if at the risk of getting it wrong, if I have to put a figure, the industry participants are putting the hardening between say 25 to 50%, but the real hardening will be reduced.”

Devesh Srivastava

“Real hardening will be less because the buyers will end up retaining more.”

Devesh Srivastava

“They will structure the program differently, and all tools which are available to retain the risk more and reduce the cost will be deployed.”

Devesh Srivastava

“What is not written by them is outside the industry, but the hardening will be to this extent.”

Sanketh Godha

“Sir, assume it is somewhere in between like 30%, and given our combined is almost closer to 125 to 130 in the overseas business in 1H FY23, and assume same amount of CAT events happen next year also.”

Risks & concerns — 15 flagged

But, you know, the record suggest that this is since the listing, the international business continues to be a drag on overall profitability, particularly, I mean, if we sort of include kind of, you know, overly a broking channel business that we get from overseas.

— Avinash

So, overseas business continue to be remained a drag, and that, of course, is evident even now that I would say that okay, very, very strong improvement YoY in terms of underwriting as far as domestic business is concerned, but overseas business remains a challenge.

— Avinash

So, I mean, there is not really as such, you know, consensus on risk assets.

— Avinash

But then it will make our portfolio very, very volatile.

— Devesh Srivastava

My concern, I mean, your overseas combined ratio vis-à-vis the say Munich, Swiss over the last 5, 10 years, the gap is substantial.

— Avinash

So, if at the risk of getting it wrong, if I have to put a figure, the industry participants are putting the hardening between say 25 to 50%, but the real hardening will be reduced.

— Devesh Srivastava

They will structure the program differently, and all tools which are available to retain the risk more and reduce the cost will be deployed.

— Devesh Srivastava

I would believe that it should be between 25 to 50 only on a risk adjusted basis.

— Devesh Srivastava

So, with this kind of a price like on risk adjusted basis, you believe that we might be at 100 combined next year from the overseas assuming same amount of cash what you have witnessed today happens next year too.

— Sanketh Godha

No, I think they will still need to for the purpose of solvency and better risk management, they will continue to buy.

— Hitesh Joshi

For us, the raw material clearly is risk, because we are the risk manager.

— Devesh Srivastava

In our case, we have seen that, let's say, a decade or maybe a decade and a half ago, there was no such post as a Chief risk Officer in any company.

— Devesh Srivastava

Today no company worth its salt can afford not to have a Chief risk Manager.

— Devesh Srivastava

And what is the job of a Chief risk Manager?

— Devesh Srivastava

To go around identifying risk and then ensure that they are mitigated.

— Devesh Srivastava

Advertisement

Q&A — 7 exchanges

So, two questions. The first one is on international business. I mean, you have been speaking for many years that this will improve and you have the reasons to be geographically diversified and hence, the overseas business. But, you know, the record suggest that this is since the listing, the international business continues to be a drag on overall profitability, particularly, I mean, if we sort of include kind of, you know, overly a broking channel business that we get from overseas. Of course, we have higher commission costs there as well. And of course, probably, in those markets, we don't

Devesh Srivastava

Avinash, to take your question on international business, yes, I do agree that international business has not been doing well in the earlier quarters, but there is a reason behind it. There have been hurricanes and other acts of God which have actually impacted all reinsurers on the globe. We are not the only ones, but first let us try to understand why does the reinsurer do international business in the first place. Otherwise, you could easily have had a German reinsurer doing only German business and the UK reinsurer being only UK business. The basic tenet of reinsurance is spread. As I alwa

Sir, you alluded to the point that there is a substantial rate hardening in the overseas market probably happening in Jan 2023. Sir, just wanted to understand what kind of price hardening you are going to witness from the initial discussion what you have with the customers?

Devesh Srivastava

There is a confluence of factors and almost all of the factors is pointing to a very significant hardening. And incidentally, at the same time, the alternative capital is withdrawing. So, by and large if you see the kind of press, probably, they are avoiding mentioning a particular rate in terms of hardening. Because when there is a very significant hardening, there will be tricks and what do you say, structuring and all kinds of tools will be deployed by the buyers and brokers to reduce the cost. So, if at the risk of getting it wrong, if I have to put a figure, the industry participants are

Most of my questions have been answered. However, if I just look at your segmental disclosure, the fire segment there seems to be, you know, significant amount of underwriting loss. That's potentially because of the CAT events, but could you give us a sense as to how much of fire portfolio is domestic versus international? And in both, what is the type of pricing action or price hardening that you have seen?

Devesh Srivastava

Ma'am, the breakup is something I will give you in a moment, but before that, see, international portfolio we have already spoken about it, that the hurricane, especially, Hurricane Ian has played a very major part in further hardening of the market. And as my colleague mentioned, we have also provided very generously for it. For Hurricane Ian, we have provided almost $50 million. Now your second question was also about the domestic rates. Now the domestic rates have GIC has already put in place the IIB rates for sessions to GIC treaties which has helped pretty well. And that has seen that the

I just wanted to understand what is the trend right now that is panning out in general insurance industry?

Devesh Srivastava

Anupam, if you talk about the trends, then it is a very large brush you want me to paint the canvas with. Let me try and tell you my thoughts about it. See, first, start with the process that what is the raw material that we deal with. For us, the raw material clearly is risk, because we are the risk manager. And where are those risks coming from? When industries and individuals identify those risks and they want to mitigate it. In our case, we have seen that, let's say, a decade or maybe a decade and a half ago, there was no such post as a Chief risk Officer in any company. Today no company w

Sir, I have two questions. First is on the provisioning that we have created as of June. That is around 160 crore for your legacy equity portfolio, for negative mark-to-market. So, have we done some kind of reversal in this quarter against this provision?

Chandra S Iyer

Can you please repeat the question, because I am not clear? Ma'am, last quarter you tell that we have created around 160 crore provisioning against a negative mark-to-market on equity portfolio that has been lying with us, I mean, since last three or four years. So, coming to this quarter, have we reversed any of this amount? No, we are maintaining the similar provision. Maybe a couple of crores more, but the 1,600 crores is the same provision. I don't think we can reverse it. It continues. Once it is done, it is done. It can only increase. It can't go down. Unless market improves. There is no

Sir, I just wanted to understand the future tax rate because we paid, we had 30% tax rate in Q1. Now we have 24%. And honestly, the marginal tax rate for the country if you don't take any benefits, it's 25.2. So, I just wanted to understand how much of a MAT credit is leftover? And when we will move to 25.2? And how you see for the full year the tax rate to be?

Devesh Srivastava

For the current year basically, we have already moved to the lower rate. So, current if we see that this is coming around 25.168%. There is no MAT credit. So, we have taken full benefit of MAT last year itself. So, current rate is basically 25%. It's coming because 22% is the rate with the surcharge and fees. Sir, so for the full year, we can expect that number to be around 25, right, sir? 25%. It will be around 25% because 22% is the rate, 2% is the surcharge, and 1.68% is something around 1.68 is fees.

Thank you. Thank you everyone for your interest. As we had stated earlier, and we continue to maintain that stand that we are on a path of getting our entire business on a much more stronger footing. That endeavor is continued and shall continue in the future as well. The market is offering us a lot of good opportunity as we see them coming, and we hope to do even better as we move forward. Thanks again, and good bye everyone. Have a lovely day ahead.

Management

Speaking time

Devesh Srivastava

Sanketh Godha

Hitesh Joshi

Anupam Jain

Moderator

Chandra S Iyer

Avinash

Deepak Sonawane

Deepika Mundra

Binay Sarda

Advertisement

Opening remarks

Binay Sarda

Thanks, Aman. Good morning to all the participants on the call, and thanks for joining this Q2 FY2023 Earnings Call for General Insurance Corporation of India. Please note that we have mailed out 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 exchanges. In case if you have not received the same, you can write to us, and we will 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 that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our businesses that would cause future results performance or achievements to differ significantly from what is expressed or implied by such forward- looking statements. To take us through the results of this quarter and answer our questions, we have with us the management of GIC represented by Mr. Devesh Srivastava – Chairman and Mana

Devesh Srivastava

Thank you, Binayji. Good morning everyone. I am pleased to announce the financial performance for the quarter ended September 30, 2022. Coming to the results, the underwriting performance was impacted on the back of challenging external environment. However, we continue to take necessary measures to bring down the incurred claims ratio and improve our overall profitability. Also, it has been our constant Endeavor to bring a combined ratio below 100, and we are continuously taking appropriate steps to achieve the same. Let me now take you through some of the key highlights of the financial performance. The gross premium income of the company was Rs. 8,100 crores for Q2 FY23 as compared to Rs. 8,374 crores for Q2 FY22. The investment income increased to Rs. 3,206 crores in Q2 FY23 as compared to Rs. 2,669 crores in Q2 FY22. The incurred claims ratio increased to 97.5% in Q2 FY23 as compared to 92.2% in Q2 FY22. Combined ratio in Q2 FY23 reduced to 117.89% versus 122.19% for Q2 FY22. The

Advertisement

← All transcripts GICRE stock page →

General Insurance Corporation of India

Market Movers