HDFC Securities: High Combined Operating Ratio Dents GIC’s Q1 Profitability 
An agent selling insurance products to customers. (Photographer: Brendon Thorne/Bloomberg)

HDFC Securities: High Combined Operating Ratio Dents GIC’s Q1 Profitability 

BQ Blue’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages. These reports offer BloombergQuint’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

HDFC Securities Report

General Insurance Corporation of India Ltd. is India’s largest reinsurer but continues to make significant underwriting losses (Q1 FY21 combined operating ratio: 112.9%).

A calibrated approach to underwriting is expected to change this over FY21-23E.

We estimate an FY22E adjusted return on equity is at 9.8%, and value GIC at 0.7 times FY22E adjusted book value less 10% discount for an additional 10.8% stake to be sold by Government of India.

Q1 FY21 highlights: Led by steep decline of 65.7% in crop and 30.6% in motor YoY, net written premium declined 25.6% YoY to Rs 146.6 billion.

Combined operating ratio (calculated) increased 1,021 basis points YoY to 112.9% as incurred claim ratio (ICR) increased 725 basis points YoY to 94.9%, and commission ratio increased 282 basis points YoY to 17.5%.

This was mainly due to high losses in property and motor segments.

Click on the attachment to read the full report:

HDFC Securities GIC Reinsurance Q1FY21 Results Update.pdf

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