News Reinsurance14 Nov 2017

India:GIC Re nearly doubles interim after-tax gains

14 Nov 2017

State-controlled reinsurer GIC Re has posted after-tax profits of INR18,092.2 million (US$276.3 million) for the half year ended 30 September 2017, 89.3% higher than the INR9,558.1 million figure for the corresponding period last year.

In a statement, the company says that gross direct premium income increased by 51.4% from INR161.2 billion in the six months to 30 September 2016 to INR244.0 billion for the half year to September 2017. Agriculture was the fastest growing class of business with premium soaring by 96.2 % to INR110.9 billion for the half year ended 30 September 2017.

The reinsurer, which was listed on the stock exchanges last month, posted underwriting profit of INR917.5 million for the half year to 30 September 2017, a turnaround from an underwriting loss of INR4,737 million for the corresponding period last year. The combined ratio was 99.4% for the half year ended 30 September 2017 as compared to 99.1% for the half year ended 30 September 2016. However, in comparison with the year ended 31 March 2017, the combined ratio showed an improving trend.

Investment Income increased by 25.3% to INR24,2 billion for the half year ended 30 September 2017 as compared to INR19.3 billion for the corresponding half last year.

Ms Alice G Vaidyan, Chairman and Managing Director of GIC Re, said that Pradhan Mantri Fasal Bima Yojana, the government-backed agriculture insurance scheme, had been a key driver of premium growth. She added that agriculture insurance does present exposure accumulation potential and thus insurers in India have sought to reinsure more with market retention dropping to about 70%. This has benefited GIC Re in terms of expanding the reinsurance market and diversifying the agriculture risk book pan-India. In addition, the company has been entrusted with the added responsibility of a being nominated as Technical Support Unit for agriculture insurance by the Indian government-- this will act as a repository of historical data

The obligatory cession on the non-life insurance business continues to be stipulated at 5% by the insurance regulator. Order of preference continues to be in force, underlining the pivotal position of GIC Re in the Indian insurance industry. However, the obligatory share in the insurer's domestic book and thus also its overall risk book is consistently decreasing. This has a positive side in terms of the company's ability to provide support to the market on its terms rather than “one size fits all” terms stipulated by the regulator encompassing all the insurers irrespective of profitability.

Ms Vaidyan said: “There is consistent improvement in our operating parameters. Our combined ratio has shown a consistently improving trend during the last three years. We have achieved underwriting profitability. This is particularly important in the context of our significant business being sourced from India and the Indian market not quite showing very healthy underwriting performance. Hence, the challenge for us remains working against the market trends.”

Going forward, she said that there are expectations of some hardening of reinsurance rates next year due to the impact of the hurricanes in the US. While insurance losses are expected to be $100 billion, she said that GIC Re's exposure is very low and may account for only $15 million in the balance sheet on a net basis.

GIC Re has a 60% market share in India and expects to maintain market leadership, she said. In the six months to 30 September, GIC Re generated 78.8% of its gross premium at home and 21.2% from international business.

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