In an interview with CNBC-TV18, Narayanan reaffirmed GIC Re’s commitment to achieving a 10% growth in gross premium for the year, targeting ₹41,000 crores, building on the ₹37,000 crores achieved in the previous year.
Although the first half saw modest top-line growth of 1% and net earned premium growth of 2%, Narayanan expressed confidence in meeting these ambitious goals by the year-end.
Underwriting losses are projected to decline from ₹4,000 crores to ₹3,000 crores, reflecting improved operational efficiency, while operating profits are expected to remain stable around ₹4,100 crores, Narayanan stated.
He acknowledged the challenges posed by market fluctuations, especially in equity trading, which have impacted investment income. However, he underscored the resilience of the core business, attributing slower growth in some segments to temporary pricing pressures that are expected to stabilise in the coming quarters.
Citing the company’s robust fundamentals and improving market perception, he acknowledged the possibility of government further diluting its stake to 75% in 2025. In September 2024 the government had diluted 3.5% stake in the company to around 82%.
Below is verbatim transcript of the interview:
Q: For FY25, you had mentioned a couple of things. First, that you wanted to have a top line growth of 10% for the full financial year and a net earned premium growth of around 5-6%. For the first half, your top line growth has only been 1% and net earned premium has grown by 2%. Now, do you expect second half of the year to be that good for you to cover the remaining ground and achieve what you have guided for? And what do you expect in the second half going forward?
Narayanan: We ended last year with about ₹37,000 crores of gross premium and we had said 10%. So, we expect to be writing about ₹41,000 crores of total premium this year. Till September, we did about ₹20,800 crores of premium. So, we are well on target of reaching ₹41,000 crore. Same with earned premium. So, I think from a business perspective, yes, we are very confident of doing a 10% growth compared to last year. And that will reflect well on our bottom line as well.
Q: Your underwriting losses, they have come down. And your operating profit as well is up. Could this pace of improvement with regards to both your underwriting losses as well as your operating profit continue? And could you give us a number with regard to underwriting losses? What does it come down to?
Narayanan: Last year we finished with about ₹4,000 crores of underwriting losses. We expect that to come down to about ₹3,000 crores this year. And that is based on the kind of losses that we’ve been seeing in the market. We are, of course, monitoring it closely, but we believe total underwriting losses should come down to about ₹3,000 crores. Now, on the investment side, we’re still seeing how things would change because on the fixed income side, of course, our investment income has gone up. But one important piece of our total investment income is the profit that we gain from trading or selling of stocks. We have not done as much as we wanted to or as much as we normally do every year, simply because markets have been down in the last few months. We will see how the markets change in the next three months to decide how much of profits we will book on that side. So that will really depend on the market changing for the better. And based on that, our profit figures could change. At this point, we are maintaining that our overall profits will remain at last year’s figures, simply because our investment income could come down because of the profit on sale of equity.
Q: Just to reiterate that point, the underwriting losses come down to ₹3,000 crores from ₹4,000 crores, and last year operating profit was around ₹4,100 crores. So, for this year, it stays in that vicinity or does it go up? If yes, by how much?
Narayanan: It will stay around ₹4,100 crore. The overall PBT and PAT will remain at the same levels as last year.
Q: Since you mentioned in your previous answer that the markets were down and that resulted in some fluctuations, was that the reason as well that some of your segments also saw negative growth in the second quarter? And do you expect that kind of pain to continue in the remaining two quarters as well?
Narayanan: No, not in the business. I think business is doing fine. I think it was only property where the pricing really went down because insurance companies on the direct side were trying to ramp up their market share. But I think we’ve had a good amount of discussions with them trying to guide them on the pricing. And most companies have seen that the pricing that they have been doing is really not sustainable. So, going forward from 1st of January, we expect those pricings to stabilise. Otherwise our growth in the business will continue at whatever levels we had indicated earlier.
The only reason for profits not going up in spite of underwriting losses coming down is because like I said, we have not really booked too much of profits on sale of equity. We are waiting for the right space in the market before we do that. So, depending on how those things change in the next three months, our investment income could go up. If that happens, the profits could go up. Otherwise, it will stay at last year’s levels.
Q: The government of India, well, they pared off some stake, 3.5% in September earlier this year. The holding has come down to around 82%. You’re sounding very optimistic about business, which could be a good time for them to go ahead and reduce stake further. Have you heard from them? By when do you think that stake could come down to 75%? Could give us a timeline. And should we expect something in 2025 with regard to the government pulling down their stake further?
Narayanan: It could happen. Initially, when the government brought down their share, we thought they would actually come down to about 75% levels, but they decided not to do the entire dilution at one stage. So now, yes, it could. The price of GIC has gone up in the last month or so. And the stock looks good, the performance looks good. The way we see it in the short to medium term, this company should do very well because the business is really doing well. So, with all that, the government could take a call to reduce their stake to 75%. I don’t think they have any dates in mind. They’ve not told us anything on that. But yes, it could happen in 2025.
Q: With regards to reinsurance treaties as well as rates getting revised upwards. How much will it be? For which segments, and if you could tell us the impact on the financials of your company?
Narayanan: On the reinsurance side, there are two things that are happening. One, is the international business where really the change has happened, the renewals have taken place on 1st of January, but there the prices have kind of remained soft. I mean, the loss ratios have been better out there. But when it comes to India, the Indian renewals happen on 1st of April. And the change that you were talking about is basically on the direct side. If you had seen from 1st of April, 2024, for the last nine months, the property business, the rates went through a lot of changes. They really went down because people were trying to ramp up their market shares at very difficult and unsustainable pricing. But I think going forward from 1st of January, we expect this pricing to stabilise, prices to go up on the property front because currently the pricing that has been done by the industry was not really sustainable. So, I think these prices will go up on the property front.
And the changes on our financials, I think our financials will look good. The way we are seeing it, our combines should improve this year compared to last year. Last year, we ended with about 112% of combined across both domestic and international. I think this year the combined will come down to 110%.
