I have great pleasure in welcoming you to the 49th Annual General Meeting ofyour Company.
I am addressing you all at a time when the nation has valiantly emerged from the secondwave of Corona virus. Having made good progress on vaccination the general expectation isnow towards very muted third wave if at all it strikes. There is good news on theeconomic front in terms of recovery from the shrinkage of economic output of last yearwhich bore the full impact of the pandemic.
Your company is now entering the golden jubilee year half a century of its existence.This is also time when the Corporation has witnessed a full circle from being at the coreof nationalization to opening up and now a reasonable balance between public and privatesector market participation.
The business model hitherto characterized by underwriting losses gettingcross-subsidised by investment income is changing to underwriting profitability willdictate goals as the market further matures. Indian economy will continue to be animportant part of the Asian economic growth engine and its knock-on effect on insurancewill be experienced by the industry. Insurance under-penetration of the Indian market willcertainly provide the tailwinds.
Macro-economic and Industry overview
Indias real gross domestic product (GDP) at current prices stood at ` 135.13 lakhcrore in FY 2020-21 as per the provisional estimates of annual national income for2020-21.
Health and fire insurance segments witnessed decent growth while the motor was impacteddue to the nationwide lockdown. The growth in fire segment can be attributed to upwardrevision in the premium rates while growing demand for health covers on the back ofCovid-19 pandemic boosted the health segment.
On the domestic front GIC Re has been prudently participating in the IndianAgriculture insurance industry with implementation of the Pradhan Mantri Fasal Bima Yojanascheme (PMFBY) in 2016. PMFBY scheme is a yield index-based product and RestructuredWeather Based Crop Insurance product is a weather index product. GIC Re has beencautiously underwriting both domestic and foreign business with a keen interest toincrease the premium volume while simultaneously controlling the combined ratio.
The Aviation sector globally has been majorly impacted by the COVID-19 pandemic withflight operations being grounded for the most part of the year 2020-21. This situation isreflected in drop of GIC Res premium income by 17.2% for the Financial Year.
The climate change is still posing a serious concern for most of the insurers. Amid thesecond wave of the COVID-19 pandemic India witnessed some cyclones like Tauktae YaasAmphan and Nisarga leaving behind a trail of destruction across several Indian states.
Economy activity picked up from the fourth quarter of the financial year on the back ofrobust fiscal and monetary stimulus vaccination drive and low inflation. During the yearstock market indices reflected continuous increase from their historic low levels of March2020 and the interest rates remained subdued.
Economic growth picked up during the year and the global GDP surpassed its pre-pandemiclevel mainly aided by strong policy support and ongoing vaccine deployments leading toresumption of economic activities especially in the service sectors. As per the OECDEconomic Outlook the Organization for Economic Cooperation and Development projected thatthe Global GDP would grow by 5.7% in 2021 and 4.5% in 2022. The recent moderation in somecountries due to the impact of delta variant and supply side constraints are expected tounwind over time and lead to faster recoveries in 2022.
The gross direct premium underwritten by non-life insurance companies in Indiaincreased by 5.2% to ` 1.99 Lakh Crore in FY 2020-21 compared to ` 1.89 Lakh Crore in FY2019-20. Your company has booked Gross premium during Financial Year 2020-21 of `47014.38 Crore. The underwriting loss for the Financial Year was ` 5488.45 Crore asagainst ` 6367.18 Crore in the previous year. Profit before tax for the Financial Yearwas ` 3163.38 Crore (as against Loss before tax of ` 447.97). Your company reported aProfit after Tax of` 1920.44 Crore for the Financial Year as against Loss afterTax of ` 359.09 Crore during the previous year. I am pleased to inform that the investmentperformance of your company during Financial Year 2020-21 has been very strong with thebook value of Investments growing by 17% to ` 68798.54 Crore while the Fair Value ofInvestments Assets increasing by 30% to ` 95989.39 Crore over the previous year. Incomefrom investment (including Profit on Sale of investments) during the year was ` 8820.86Crore registering a growth of 23.8% over the previous year. The yield on average level ofinvestments improved from 12.16% in the last financial year to 13.24% in 2020-21. Thecompany has been working towards underwriting profitability and has taken major steps inthis regard for some segments in the domestic property class through adoption of InsuranceInformation Bureau published burn costs. Alongside we did major rebalancing of our riskportfolio by streamlining our Agri book. We are also upgrading our risk assessmentprocesses towards this goal of underwriting profitability. GIC Re continued to maintainits leadership in the domestic market which contributed 64% of the premium income forFinancial Year 2020-21. Your company has a Net worth (including fair value of investments)of ` 49643.19 Crore and total assets ` 134661.22 Crore while the Solvency ratioincreased to 1.74 as at 31.03.2021 from 1.53 as at 31.03.2020.
A.M. Best in their August 2021 report has maintained its "stable" outlook forthe global reinsurance on the back of positive pricing momentum along with marketdiscipline. However there remains risks associated with property catastrophe eventsuncertainty around coronavirus-related losses low interest rates and shrinking reserverelease. The market hardening is likely to continue in the foreseeable future and takecare of the lower investment income on the back of falling reinvestment rates.
The Indian Insurance industry is expected to achieve high single digit growth despitehiccups due to the ongoing Covid-19 pandemic which has affected consumer sentiment. Withthe second Covid wave behind us and economic recovery back on track insurance industrycan be expected to recover in tandem. The market will continue to be led by Health Motorand Agri classes of business. Owing to greater awareness and risk aversion together withsignificant segment can be expected to grow well in the medium term. The life and healthinsurance have grown significantly during Corona pandemic and brings about a major shiftin the perception among consumers and in the delivery modes by insurance providers.Technology has also driven shift on the back of ongoing pandemic with innovative productofferings and rise in demand for standardized product will aid future growth of theindustry.
GIC Re having had phenomenal growth during last few years is in a consolidation modeas reflected in rebalancing the risk portfolio for agriculture insurance. The continuedand enhanced focus on the bottom line is expected to bear fruit after a lag given thevery nature of the reinsurance operations.
Last few years have put stress on underwriting performance of the reinsurance industryowing to record level of catastrophe activities and Covid-19 pandemic and currenthardening of rates can be expected to continue in the near term.
In India the equity market made a sharp V-shaped recovery. India remained a preferredinvestment destination in FY 2021-22 with foreign investments pouring into equity marketsand augured well for quicker recovery in emerging economies. As the market conditionsgradually improve reinsurers with financial strength and reputation can leverage theirmarket position to take advantage of growing markets.
The future of the Indian Insurance Industry is bright. Demographic factors such asyoung insurable population growing middle class and growing awareness of the need forprotection and retirement planning will support the growth of insurance sector in India. Iassure you that your company has been fully geared up to support the Indian and Worldinsurance industry and would continue to focus on achieving underwriting surplus in thenearest future. Profitable diversified growth will be our focus in the coming years.
I take this opportunity to thank all stakeholders Board members customersintermediaries and colleagues for their continued support and co-operation during theyear.
Chairman and Managing Director