GIC Re’s NSE windfall masks weaker Q2 as flood claims, health push weigh

A one-time gain of ₹1,082 crore from selling part of its stake in the National Stock Exchange (NSE) cushioned General Insurance Corp. of India’s (GIC Re) earnings for the July-September quarter, as flood and cyclone claims pushed up losses in its core reinsurance business.

The state-owned reinsurer’s standalone net profit fell 14.3% from a year earlier to ₹2,455.62 crore in the quarter.

Without the NSE gain, pre-tax profit would have been about ₹2,020 crore, nearly 42% below the year-ago figure. The gain from the offer-for-sale in NSE’s initial public offering helped lift investment income by11.8% to ₹4,238.26 crore. Standalone total income was ₹13,469.45 crore in the September quarter, up 13.8% from ₹11,831.26 crore a year earlier.

The valuation was at cost when it was unlisted and the remaining stake is now valued at market price, the company said at an earnings call on Friday, adding that

Chairman and managing director Hitesh Joshi said the unrealised gain on those shares would go to the fair value change account. “It will not get reflected in the investment income,” he said.

The share of premium paid out as claims rose to 87.39% from 81.5% a year earlier, and the combined ratio, which measures claims and expenses against premium, rose to 110.23% from 109.15%. The underwriting loss for the first half widened 38% to ₹1,709.06 crore.

“We have provided something like ₹450-500 crore for the Gujarat flood,” Joshi said, adding that insurers report losses to it with a lag.

He said GIC Re did not yet have a firm estimate of losses from the cyclones in eastern India. “Whatever might be the industry figure getting reported, we could be having a loss of 25%-30% of that.”

Abroad, GIC Re added reserves in the motor and cargo segments for an American contract it exited in December 2021. “It is conservative accounting,” chief underwriting officer Sanjay Mokashi said.

On a full-year combined ratio target of 105%, Joshi said, “We would like to believe that it is achievable, but then we have still two full quarters to run, and also the Q3, which remains exposed to catastrophe activity globally.”

Health has overtaken fire as the reinsurer’s largest business, accounting for 27% of gross premium in the first half against 21% in FY26, while fire shrank to 25% from 32%. Mokashi attributed the growth to a few large contracts under which GIC Re takes a fixed share of insurers’ policies.

“We got better signings from standalone health insurance companies this year,” he said. “As far as health is concerned, yes, there are pressures on pricing, but our focus has been more on the retail segment rather than the group segment.”

Accounting standards

GIC Re’s reported numbers will also change once it shifts to Indian Accounting Standards (Ind AS), new accounting rules for insurers. Joshi said the combined ratio, the measure investors track today, will no longer be a useful yardstick because Ind AS calculates profit differently. The biggest change, he said, will come from how GIC Re values money it has set aside for future claims. Today it records the full amount it expects to pay.

Under Ind AS, it will record what those future payments are worth today, since the money earns returns until the claims are settled, which usually makes the liability smaller on paper. GIC Re will also begin giving guidance on natural catastrophe losses from FY28.

Overseas, stiff competition continued to hold back growth, extending a trend from the April-June quarter. International premium was flat at ₹4,909.16 crore in the first half, after falling 5.8% in the first quarter, when Joshi had flagged that abundant capacity was intensifying competition, especially in property catastrophe reinsurance. Its combined ratio improved to 108.24% from 119.87%.

“This is encouraging progress, although the portfolio has yet to achieve underwriting profitability,” Joshi said.

“The competitive pressures are expected to remain for another year,” Mokashi said, citing abundant capital in global markets.

GIC Re is counting on the 1 January renewals, when most overseas contracts are priced. Joshi noted that “the loss trends during the last 2-3 years have been below the long-term average”. “So, all these factors will be considered at the January renewal pricing and maybe April renewal pricing,” he said.

GIC Re shares ended at ₹342.90 on the BSE on Friday, up ₹4.50, or 1.33% from the previous close in a positive market.