General Insurance Corporation jumps 8.5% as Q4 net profit grows 98% YoY

Shares of General Insurance Corporation of India (GIC RE) surged as much as 8.5 per cent to Rs 165.75 on the BSE on Thursday after the company's net profit jumped 98 per cent to Rs 1,197 crore in Q4FY20 compared to 603 crore in the same period a year ago due to lower tax provisions.

The reinsurer’s pre-tax profit for the March quarter stood at Rs 1,101 crore compared to Rs 1,194 crore in Q4FY19.

Besides, Combined Ratio of the reinsurer for FY20 stood at 114 per cent compared to 106 per cent in FY19. If the combined ratio is less than 100, then insurer is making underwriting profits. The company recorded underwriting losses to the tune of Rs 6,367 crore in FY20 compared to a loss of Rs 2,211 crore in FY19.

The insurer reported a 14 per cent increase on gross premium to Rs 9,217 crore from Rs 8,089 crore while for the full year, gross premium rose 15.35 per cent to Rs 51,030 crore in FY20 from Rs 44,238 crore in FY19. Among various business segments, life insurance reported a 75 per cent jump in premium, while fire segment reported a 17 per cent jump in premiums, marine recorded a 19 per cent jump and premiums in the miscellaneous segment rose 14 per cent in FY20.

At the end of March quarter, the solvency ratio of GIC Re stood at 1.53. The regulatory requirement is 1.5.

“FY20 has seen the insurance industry register severe claims world-wide as well as in India. The explosion of the Covid-19 pandemic has further aggravated the situation leading to an impact on the financial markets and the economy in general”, said Devesh Srivastava, Chairman and Managing Director of GIC Re.

"With retail health expected to be the biggest beneficiary during the ongoing pandemic, initial signs were visible in May, with premiums up 23% YoY. Group business was up 4% YoY. Standalone health insurers continue to be stiff competition for general insurance (GI) firms, with premiums up 35% YoY vs 12% YoY for GI firms. Increasing awareness and new product launches remain key for growth in the segment," notes Ritika Dua and Pratik Poddar of Elara Capital in a sector report dated June 18.

As per their analysis, general insurance industry reported a 9% YoY decline in premiums in May, and an 8% decline, excluding crop insurance. Fire and health continue to support, up 22% YoY and 9% YoY, respectively while motor and crop remain a drag, with premiums down 23% YoY and 48% YoY, respectively. MoM trends were encouraging for motor, up 57%, along with retail health, up 17% MoM and 23% YoY.

At 10:11 am, the stock was trading 7 per cent higher at Rs 163.45 apiece, as against 0.38 per cent, or 134 points, decline in the benchmark S&P BSE Sensex. The stock has zoomed 87 per cent from its March low of Rs 81.7 per share, which was also its 52-week low, till Wednesday.