General Insurance Corporation of India (GICRE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to General Insurance Corporation of India Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Nikita Atri from EY. Thank you, and over to you, Ms. Atri.

Thank you, Ranju. Good morning to all the participants on the call, and thank you for joining Q1 FY '27 Earnings Call for General Insurance Corporation of India. Please note that we have mailed out the press release and presentation to everyone, and now you can see the results on our website, and it has been uploaded on the stock exchange as well. In case you've 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 that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our businesses that could cause future results, performances or achievements to differ significantly from what is expressed or implied by such forward-looking statements. To take us through the results for the quarter and answer our questions, we have with us Mr. Hitesh Joshi, Chairman and Managing Director; and other top members of the management at GIC. We will be starting the call with a brief overview of the quarter gone by, which will then be followed by the Q&A session. With that said, I'll now hand over the call to Mr. Joshi. Over to you, sir.

Good morning, ladies and gentlemen, and thank you for joining us for GIC's earnings call covering the first quarter FY '27. As we begin FY '27, the global reinsurance industry continues to demonstrate resilience supported by strong capitalization and sustained demand for risk aspect solutions while evident market capacity has resulted in increased competition across certain segments, particularly within property catastrophe reinsurance segment, underlying industry fundamentals remain supportive and continue to provide opportunities for profitable growth. In this environment, portfolio quality and prudent risk at allocation remain key determinants of performance. Reinsurers continue to focus on maintaining risk-adjusted returns through selective underwriting and active portfolio management, while investment income remains in menu contributor to overall profitability. Against this backdrop, VAC remains well positioned to navigate evolving market conditions supported by a diversified profile and strong financial foundation. We continue to focus on delivering profitable growth while creating long-term value for our states. We now look at some of the key highlights of our financial performance. Gross premium income for Q1 FY '27 stood at INR 13,436 crores compared to [ INR 12,388.01 crores ] in the corresponding period of the previous year. Investment in income for the quarter stood at INR 2,255 crores [indiscernible] INR 33.24 crore in the corresponding period last year. Income in ratio for the quarter was 85.04% is a 90.42% in the corresponding quarter of the previous year. Combined ratio for the pipe stood at 104.88% compared to 106.94% in the corresponding period last year. Profit before tax stood at INR2,490.25 crores for quarter 1 FY '27. Profit of tax was INR 1,922.04 crores for the quarter. Solvency ratio improved to 4.32% as on 30th June 2026 as compared to 3.85% as on 30 June 2025. [indiscernible] delivered a marked improvement across key underwriting metrics lower client experience and an improved combined ratio contributed to a meaningful reduction in underwriting losses, where the improvement in operating performance reflects the continued benefits of portfolio actions undertaken over recent years and demonstrates the resilience of our business across market cycles as we progress through FY '27. Our priorities remain centered on maintaining portfolio quality, prudent deployment of capital and disciplined risk selection. While competitive intensity has increased across certain markets, we remain focused on opportunities that meet our return expectations and support sustainable value creation over the long term. With a healthy solvency position, diversified portfolio and strong financial foundation, we believe GCB is well positioned to deliver consistent performance, while continuing to support the risk protection requirements of clients across domestic and international markets. Thank you. With that, we now open the floor for questions and answers.

[Operator Instructions] The first question comes from the line of Avinash Singh with Emkay Global. .

One question on domestic gas market. So what we have seen on the fire or other or commercial side, there have been -- in the primary market there will a steep price decline. How the cause of this, of course, either these support capacity and the kind of a pricing level are far, far lower. Now can you comment on the prevailing market condition, if we were to segregate the insurance players, I say, like GITR and then you have many of the foreign globally. So branch will maybe of store and the new shops in Yet City. Which of these players have been very, very green that has led to this situation? . And secondly, on that, if experience in terms of the natural [indiscernible] continues to be benign. That has been a case for the last 1, 2 years that has led to this pricing. Do we expect this in condition to further derate. And second, if you can provide some updates I mean, rough assessment kind of -- are the losing from recent lodging activity, particularly in the labor and all that is going to to cause kind of losses to some of the reinsurers or -- so what will be your assessment of the recent flow digit losses in some of the tenets?

So starting with your market segment is in terms of Indian reinsurance, the foreign reinsurer branches, maybe the Gift city players and the cross-border reinsurers. Given that the global capacity is ample and fairly supplies, the aggressive stance of the reinsurer is all around. There may be some loans to a particular reinsurance approach. But overall, almost all players have displayed competitive behavior. So that is the first question you put. . Second question is that what we expect in terms of the price deterioration or competitiveness? We believe that to the extent the players in the Gift City will try to scale up their operations, their competitive behavior may continue. But as you also pointed out that there are flood losses. We have to see how soon the figures come in how claims develop and what will be the experience of the players all around and whether they react to the client experience, whether the claims quantum is enough to influence their ever I think these are the levers which we need to watch before we conclude anything. Coming to the third point regarding the quantum of flats, as we usually tell you that it takes a little bit of time before the figures travel to us. In terms of our experience, it has been our stance that whatever might be the market losses, our losses from cat events tend to be around 30% to 40%. So if there is any estimate available with anyone for any flood event, we could be having a participation of 30% to 40%. does it help?

Yes, yes. One follow-up, if I may. Now if I see in this quarter, you have kind of grown and retained life insurance piece meaningfully. Now historically, I mean, you have been typically more of a general insurance side earlier than life but last 5, 6 years, you have been going in life as well. But on the life side, including that unfortunate OVD or Cobalt. The life side, you have not been kind of making much kind of a profit. Now in this backdrop, what has led to this kind of a growing so much in life has the pricing environment been supportive? Or is it that, okay, in order to gain market share, you have gone a bit steadier. So if it can help us understand your strategy around lies?

I agree with you that we -- for us, life is a focus area and will continue to grow. Coming to the performance and results, I think it is probably too short a period to judge on this portfolio. We have during various rings call and also other interactions have indicated the reasons, particularly the results strengthening carried out. So I would suggest that the light portfolio niche to be watched over a period of a couple of years because, ultimately, it remains -- continues to remain competitive and 1 is to watch a particular segment over a cycle rather than a couple of years.

[Operator Instructions] Next question comes from the line of Sanketh Godha with Avendus Spark.

My first question is on overseas combined issues. Probably having from and for the first time, probably you report today underwriting profit with 95% combined actual bulk of the improvement happened in higher segment, which is a dominant piece in your own business. So just wanted to understand what material changed in overseas business, which led to little bit improvement in the 1 segment, whether this is structural and given you even alluded to the form of pricing competition on the market, you still sort onesie included by number. So I just wanted to understand color here. .

Hello. This is Sanjay Mokashi, Chief Underwriting Officer. On foreign portfolio, our focus has been specific more because it has not produced desired results in the past. Also, we are looking at our portfolio class by class. We are also looking at our underwriting guidelines, our underwriting approach, if anything needs to be changed in terms of our past experience. But having said that, I would add that quarter not to be an indication of the entire efforts that we are putting in improvement of the portfolio. [indiscernible].

[Operator Instructions]

[indiscernible] for that interruption. And I'm not sure where we lost the line. But just to recap quickly. As I mentioned that our focus has been on foreign portfolio, which has not performed to our expectations, and we are looking at every portfolio carefully and taking necessary action. Having said that, I would suggest that 1 quarter result may not give an entire picture of what has changed in the portfolio. there is some amount of seasonality in foreign portfolio. And I would suggest that let us wait for further quarters to develop. -- to look at exactly the -- how the portfolio is developing in terms of our expectations. .

Understood, sir. Yes, sir. But just a follow-up, sir, given we were at 120 percentage in last year in portfolio, given we started at minus 95%. Is it fair to say that it could be at least 10, 15 percentage improvement in the combined ratio, even first quarter is not to represent 2 compared to what we experienced last year. .

Although we have taken measures on both property and motor, which are our significant portfolios. -- even aviation, although it is not a significant proportion of our foreign portfolio -- we are looking at it very closely and taking necessary action in terms of how we can improve the quality of the portfolio. I would still say that the first quarter may also involve some accounting entries as well that may not be exactly resulting in the outcome that we expect. We expect the foreign portfolio to increase significantly. At this stage, we would refrain from putting a number to it. Although over 3 to 5 years, we have set goals for ourselves. .

Understood, sir. Sir, but given the prudence probably is largely the reason why the overseas business did not grow in the current year because there was an expectation that the rating upgrade probably the fall business will do well in the current year. But in the quarter, we had declined by 6% -- so anything to read there? .

Yes, it is a reflection of how we are looking at our portfolio. I had mentioned just in the previous quarter results also, that particularly in motor we have taken corrective measures in respect of contracts which were not developing in the desired way. We have taken some hard decision in motor. We are also training our aviation portfolio we are having a close look at our overseas cargo cargo portfolio -- having said that, property being having the maximum share in the portfolio, that is also a focus area. So yes, we will improve our portfolio, but I would suggest that we will for further quarters. .

Understood, sir. And I just want to understand that your domestic clearly reopen the tire market. I'm hoping -- I'm assuming that it will have declined for us to -- in domestic business. But we still reported 12.3% growth for the quarter and between to be driven by largely health. And when I see the combined ratio also -- and to some extent, it seems to have deteriorated either because of motor [indiscernible]. So just wanted to understand your strategy that help what exactly businesses you are writing, whether profitability will be bad in the China business. I'm conscious in if you can even see a color, what kind of combined would be there in the invested business from a caliper it has deteriorated in copper on sequential year-on-year basis, sir? .

Yes, you have rightly observed that. Health, we have grown in other than property segment, property being the way on the direct side there is heavy competition in the property segment. In other segment, too, there is -- there are competitive pressure, but our focus has been in growing other than property segment in this particular year. And as far as health is concerned, our focus is more on the retail health segment rather than the corporate or group health segment, where we believe the profitability line. The nature of health folios such that there is a significant portion of obligatory there. So obligatory portion will reflect the market growth. And the nonobligatory portion is -- gets influenced by certain major contracts. If we win those contracts, you will see a spike in our health portfolio. And if we don't win that contract, you might see a dip in that particular portfolio. So health, we have been able to write certain contracts, which the target has which show the growth segment. And as I mentioned, that we have been focusing on the retail health -- in water, yes, there has been a deterioration in domestic motor put -- it is largely from the cities that we have written in the past, there are competitive pressures on the motor segment. but it is developing to the extent to our expectations.

Understood, sir. And just last 2 points. One, today morning, I give a advisory to reissuance market that you can do to such discounts like like 99 percentage to the of -- so given there is an advisory from regulator in the morning in their website. Is it fair to say that some some discipline probably in domestic fire market can come back EBIT? .

Sir, City has issues direct are on 22nd July as well in Property segment, where they have flagged the rates being quoted on the direct side -- we are in touch with insurance market with the insurers. And we are having conversation with them as to what measures they are taking in response to IRD a directive like it is only a guidance. So let us see how the impact will be over next 2 to 3 quarters. .

Understood, sir. And lastly, you just did have answered this question. On domestic, we quoted in the quarter 1 with 1.5 combined. How do you see full year to play out, it could be repeat last year or you think it could be similar given you have cat events and also what are you retrading for the industry standout part?

The major renewals in the domestic segment are on first April. And we have used whatever then enters reinsurance tools we have, whereby we support the domestic insurers as well as we protect the interest of all our stakeholders. So yes, on 1 hand, there are competitive pressures in the market. On the other hand, we have taken certain measures on the reinsurance side and let us see how the results pan out. .

[Operator Instructions] Next question comes from the line of Kartik [indiscernible], an individual Investor.

I have a couple of questions last growth. I mean, what's the growth that you're expecting for the domestic and international now considering the fact -- I mean, a lot of portfolio pruning and all that you're doing. And next question is like, see, we are continuously seeing the losses in life. I mean, when now we're going to see a turnaround in that portfolio. .

In terms of -- yes, Kartika, I am Sanjay Mokashi, Chief Underwriting Officer. In terms of growth, we have set a target of, say, roughly about 10% -- it varies for domestic and foreign in foreign, we would expect a more pronounced growth than the domestic market. That is about growth, but we will also be managing the cyclical. There are soft cycle and taking a review midyear this year as to what should be our weather growth target needs to be relooked and needs to be revised based on our experience midyear. In terms of losses in life, as our CMD are in his opening remarks mentioned or in 1 of the answers to 1 of the questions you mentioned, that Lipa results need to be seen over over a cycle rather than for a short period of time. Our strength remains what we have earlier advised that in domestic market, despite the competitive pressure, our goal will be to maintain our market share. And on foreign side, to the extent we have got our rating back and we are in touch with all the cedents and markets where we lost our business, which we had prior to rating downgrade. So we'll be trying to inch up on all those aspects. At the same time, the pruning will continue -- and our guidance on overall underwriting performance improvement remains. .

I completely understand on the following part. At 1 point of time, we had almost like INR 18,000 crores of premium coming from foreign portfolio. So that -- I mean, is it possible to reach that maybe in a couple of years? .

Nto in a couple of years because the -- because of the significant softening trends, the same exposure is coming at a lesser premium. But maybe not in 2 years may be 3 or 4 years. But then while we have the broader targets and goals and direction, -- we are not really keen on pursuing those targets at the cost of overall risk return optimization. We are very much focused on return on equity and shareholder value creation. All these targets will be directional, but not driving our digital making. .

Got it. And sir, the credit rating upgrade to EA, any time line you have in mind? .

That is difficult to say because there are very, very many factors in terms of the business model, the global softening trends and where we end up in terms of the our financial and business competitive position also, there are 2 major developments which are in the offering, the IFRS and RBC -- so it is not really possible to give any time lines. But if things go all right, probably 1 can expect in a period of, say, something like 4 to 5 years.

Okay. And you had mentioned some interviews like say, you're focusing on the company has to focus on specialty insurance, I mean, rather than going for a fire a property in the international market. how big is an opportunity the specialty part? And can you elaborate on that part? .

See, if -- as a global reinsurer, I think the entire global markets are available. It is basically approaching those markets and picking and choosing 1 service selection 1 park and building a risk portfolio, which is so very material because if you look at, say, JSE's market a globally, it will be fairly small because this market is essentially dominated by, say, Europe and U.S. So given the market share that JD has on the international book, the scope is tremendous. -- all the classes, specialty classes, casualty, but it also requires a gain different level of skill set. So we have to have a calibrated approach and that is what we are planning to pursue. .

Okay. Sir, one final question, the presentation or whatever is put on the website, right? The investment slide that is showing the March rate rather than the June in data.

Correct. if there is a mistake, we'll take a look at it. .

I mean that's fine, but I just want to know what's the current investment book like, I mean, from debt equity and money market and other parts, what's the current size of the book by end of June. is at. .

73.4% is in the fixed income securities first. About 17% in equity and around 8.7% or something in money market instruments. .

What's the quantum of the book, I mean, it was like [ INR 1,700 crores ] in the end of March. .

INR 120,000-odd crores on book value basis. Market value is INR 152,000 crores -- INR 157,000 crores.

Essentially, the share of debt in our book on book in basis doesn't fluctuate much because it is a fairly stable book. And we are not planning to reduce our equity share in a very major way, which continues to be around 17%.

Next question comes from the line of [ Geni Shah ], an Individual Investor. .

Yes, I have a few questions. One, first, is with regard to the Gujarat flood, basically, you mentioned that there could be -- the numbers are still coming. Is there anything we just provided right now in the numbers in the Q1 results. That is the first question. Second is, it is a bit on the growth and the profitability, you're trying to balance both of it -- but it seems like -- I mean, a couple of years for the last couple of years, you've been setting the target, especially on how the business mix looks like in terms of an international use aspire to be 50-50. But it looks like we are still on the downstream part of -- at least on the international side. and there are headwinds to go up in that number. Profitability, obviously, I mean, it's been -- the job has been much better than expected, and I congratulate on that -- but looking at this current environment, your aspiration to reduce the combined ratio by 1 percentage point every year. How feasible that looks like in this year and the next year for the profitability to perform in the business. And the third is on the obligate part, as seen this quarter, the obligatory portion has been around of the domestic book. Is it the new norm that we are looking at that the obligatory side of the book is going to see lower contribution although I've also observed that has come with a little bit of a higher combined ratio on the domestic side, usually have been around 102, 103. This time, it old 107. So -- if you can give a little understanding about these 3 aspects, how are these going to shape up in this year and maybe next couple of years for you in this?

So to start with Gujarat Swad, our provisioning is INR 400 crores plus -- INR 442 crores -- INR 440 crores. That is the provision we have made in Q1. Thank you for recognizing that there are better profitability trends than your expectation. 50-50 that we talk about domestic services, international is fairly a long-term goal. Given that -- the domestic market continues to be the growth driver globally compared to the -- in comparison to the other global markets. So as you rightly recognized and we agree fully that it is an uphill task. So 50-50 is absolutely long-term call, what we are presently targeting with a medium term in view is 60-40. But again gain, I mean, this is our goal will be 60-40, but as I said, that domestic market outgrows the global market, so it will be a tough job. So we continue to try to optimize the risk written balance, and that is where our entire energy is devoted. As I said that these targets are just targets, they can't drive the decision making boepoint. Now coming to the 1% improvement, we have further tail down, and we are now differentiating between domestic book and foreign book. And we would like to have, say, combined ratio target for domestic book at something like 103 and the foreign book at 95%, in line with the global market. So that is where the we -- that is what we should be targeting. That is the global trend in terms of the ritual .