Company Overview

General Insurance Corporation of India (GIC) (NSE: GICRE)  was formed in pursuance of Section 9(1) of GIBNA.It was incorporated on 22 November 1972 under the Companies Act, 1956 as a private company limited by shares.GIC was formed for the purpose of superintending, controlling and carrying on the business of general insurance.As soon as GIC was formed, GOI transferred all the shares it held of the general insurance companies to GIC.Simultaneously, the nationalised undertakings were transferred to Indian insurance companies.1

As GIC Re spreads its wings to emerge as an effective reinsurance solutions partner for the Afro-Asian region and has started leading the reinsurance programmes of several insurance companies in SAARC countries, South East Asia, Middle East and Africa. To offer its international clientele an easy accessibility, efficient service and tailor made reinsurance solutions; GIC has opened liaison/ representative/ branch / subsidiary offices in UK, Russia, UAE, Malaysia, South Africa and Brazil. GIC also has an offshore branch in GIFT City, Gujarat.

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Product and Services

The company provides insurance in follwing categories.

  • Fire
  • Marine Hull & Offshore Energy
  • Marine Cargo
  • Aviation
  • Liability Business
  • Agriculture Reinsurance
  • Health
  • Motor
  • Other Miscellaneous

Industry Overview

General Insurance Industry

The gross direct premium underwritten by non-life insurance companies increased by 11.7% to Rs 1.89 Lakh Crore compared to Rs 1.69 Lakh Crore in Financial Year 2018-19. Currently motor insurance accounts for 38-40% of market share of new premiums in non-life industry and muted auto sales is likely to negatively impact motor insurance business in near future. Gross direct premium underwritten by the general insurers witnessed a growth of 9.5% to Rs 1.64 Lakh Crore as compared to Rs 1.50 Lakh Crore in Financial Year 2018-19 while gross direct premium underwritten by standalone private health insurers increased by 26.9% to Rs 14,409.98 Crore or compared to Rs 11,354.01 Crore in Financial Year 2018-19. 2

The insurance business is expected to witness muted growth in the first quarter of Financial Year 2020-21 due to the extended lockdown. However, the segment could witness an increased interest in the health policies owing to the ongoing Covid-19 pandemic which has raised risk awareness level. Moreover, the industry is likely to benefit from near-term combined ratio improvement due to lower accident rate on motor as people stay indoors and make fewer health claims.

Life Insurance Industry

The domestic life insurance industry registered a growth of 20.6% for new business premium in 2019-20, generating a revenue of Rs 2.58 Lakh Crore compared to Rs 2.14 Lakh Crore in the previous year. The business of life insurers got impacted in the last quarter of the fiscal year owing to the disruption caused by the spread of corona virus (Covid-19) and the subsequent lockdown enforced by the government to contain its spread.

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Business Overview

The Corporation’s gross premium income during the year 2019-20 is Rs 51,030.13 Crore and the income from investments was Rs 7,125 Crore. Underwriting results show an overall loss of Rs 6,366 Crore in 2019-20 compared to an underwriting loss of Rs 2,211.46 Crore in the previous year. The ratio of total business expenses to the earned premium i.e. Combined Ratio stood at 114.4 %. The Solvency Margin of the Corporation as on 31st March 2020 was 1.53.

Fire

GIC Re’s Earned premium for Fire Business for the year 2019-20 is Rs 9,056.89 Crore as compared to Rs 8,036.77 Crore in the previous year.

The Domestic Earned premium has increased by 44.09% to Rs 3,191.40 Crore from Rs 2,214.89 Crore in the previous year. The Foreign Earned premium grew by 0.75% to Rs 5,865.49 Crore from Rs 5,821.88 Crore in the previous year.

The overall incurred claims stood at Rs 8,111.16 Crore compared to Rs 8,294.28 Crore last year, which is an increase of almost 2.21%

The fire portfolio made an underwriting loss of Rs 1,969.74 Crore as compared to the loss of Rs 2,439.30 Crore in the previous year. The combined ratio for fire stood at 119.10% as against 130.40% for last year.

Marine Hull & Offshore Energy

The performance of the sub-class for the year has been steady in line with the global market trend. The premium income for the financial year is at Rs 978.99 Crore as compared to Rs 1027.87 Crore in the previous year. The drop in premium of around 4.8 percent is in view of its scaling down GIC Re’s participation on few contracts having unsatisfactory experience. The year ended with marginal underwriting loss of Rs 74 Lakh which is -0.1% of earned premium.

Despite the global economic slowdown and trade barriers affecting the global shipping industry and shipyards, GIC Re has maintained a steady volume of business largely due to the growth in the Energy portfolio. The portfolio continues to grow at the rate of 10%.

Marine Cargo

GIC has achieved gross premium income of Rs 1130.31 Crore this year as against Rs 744.95 Crore last year with significant growth of 51.7%. This growth has come out due to the diversification of the portfolio into new territories mainly USA and to a smaller extent in Europe and South America. In the domestic market, GIC Re continues to be a leader across most of the domestic Companies reinsurance treaties. As the domestic market leader, GIC Re has pushed for underwriting discipline in the terms, clauses and conditions on the treaty contracts as well as on facultative business. This is reflected in the excellent performance which shows an underwriting profit for Cargo business of Rs 142.97 Crore.

Whilst growth in the next year could see some contraction vis a vis 2019-20 on account of the global lockdown due to the pandemic, GIC is hopeful of continuing the profitability of the portfolio.

Aviation

The earned premium for 2019-20 is Rs 1041.90 Crore as against Rs 772.56 Crore for 2018-19. The main contributor to the increase in premiums is the rate increase which the market is witnessing after years of uneconomic soft pricing conditions. Withdrawal from the Aviation market by some (re)insurers following a string of loss pay-outs has led to reduction of available capacity, which in turn has contributed to the rate increase. However, there is continuing concern on the increasing cost for repair of modern aircraft equipment. The Incurred loss for GIC for the year is Rs 1201.63 Crore. The major claims during the year were from the Falconeye 1 Vega satellite loss, Chinasat 18, Ukraine International Airlines and Pegasus Airlines loss.

Liability

Despite soft market, the market continued to experience a growth in Liability business, mainly due to increase in awareness of the corporate sector and various new covers available in the market. GIC Re has shown a growth of 14.90% as compared to 2018-19. Obligatory cessions continue to remain at 5% with no capping limits of cession.

Agriculture Reinsurance

The total Reinsurance premium for Agriculture portfolio has increased from Rs 13,289 Crore in 2018-19 to Rs 15,453 Crore in 2019-20. Out of GIC Re’s total Agriculture RI premium in 2019-20, Indian market premium is Rs 14,778 Crore while Rs 675 Crore is written from rest of the world.

Health

GIC Re Health portfolio comprises mostly of Obligatory cessions, some selective domestic treaties and selective Pradhan Mantri Jan Arogya Yojana Abhiyan Schemes besides business written by the Foreign branches.

Motor

GIC Re’s motor portfolio comprises of both domestic and foreign business with current composition at 70.6 % and 29.4 % respectively. The Gross motor premium during the fiscal year was Rs 9,440.01 Crore as against Rs 8,349.68 Crore in the corresponding previous year, registering a growth rate of 13.1 %.

Life Reinsurance

GIC Re recorded an impressive growth of 75.6% in life reinsurance business in 2019-20, with gross premium increasing to Rs 955.57 Crore from Rs 544.10 Crore in 2018-19. Earned premium for 2019-20 also grew significantly by 63%, increasing to Rs 792.4 Crore from Rs 486 Crore in the previous year.

Investment

The book value of investment of the Corporation stood at Rs 58,756.58 Crore from Rs 52,923.35 Crore showing an increase of Rs 5,833.23 Crore representing a growth of 11.02% over the previous year. The realizable value of investments is at Rs 73,652.99 Crore as on 31st March 2020 showing an appreciation of 25.35% over book value. Income from investments stood at Rs 6,787.10 Crore with a mean yield on funds at 12.16%. The net non-performing assets percentage was at 0.63%.

Recent developments

GIC Re reports Q3 net profit of 087 cr 3

February 11, 2021; State run re-insurer General Insurance Corporation of lndia (GICRe) reported a net profit of Rs 987.42 crore for the third quarter of the fiscal as against a net loss of Rs 1,069.64 crore for the same period last fiscal.

For the quarter ended December 31, 2020, GIC Re reported gross premium written of Rs 11,668.51 crore, a 1.1 per cent increase over Rs 11539.96 crore reported for the year-ago period.

Underwriting loss for the third quarter 2020-21 is recorded at Rs 1,022.64 crore as against underwriting loss of Rs 2,749.44 crore in the corresponding period last fiscal.

The solvency ratio increased to 1.53 as on December 31, 2020 as compared to 1.51 a year ago.

The combined ratio stood at 108.5 per cent at the end of the third quarter this fiscal versus 130.4 per cent a year ago, "As compared to the second quarter, there is a growth in business volume during the third quarter of 2020-21," GIC Re said in a statement on Thursday.

It added that though the Covid-19 pandemic continues to influence the insurance industry, the severity of the impact is gradually reducing and is reflected in the results of the industry.

'Signals a turnaround'

"GIC Re's financials for the nine months ended December 31, 2020 have shown indications of positivity and signals turnaround in the near future," it further said, adding that the underwriting performance is expected to show better trends going forward.

GIC Re's international business has shown a growth rate of 23 per cent.

Centre considering United India, GIC Re for privatisation

The government is considering the privatisation of United India Insurance and debating whether reinsurer General Insurance Corp. of India (GIC Re) should also be divested, people aware of the matter told ET. The finance ministry and Niti Aayog will together finalise the general insurer that will be considered for privatisation, a senior government official said. 4

References

  1. ^ https://www.gicofindia.com/en/about-us/history-in-brief
  2. ^ https://www.bseindia.com/bseplus/AnnualReport/540755/67700540755.pdf
  3. ^ https://www.gicofindia.com/images/GIC_Re_Reports_Q3_net_profit_of_Rs_987_Crores.jpg
  4. ^ https://economictimes.indiatimes.com/markets/stocks/news/centre-considering-united-india-gic-re-for-privatisation/articleshow/81081798.cms
Tags: IN:GICRE
Created by Asif Farooqui on 2021/04/26 22:53
     

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