General Insurance Corporation of India (GICRE) has seen a significant surge in its stock value recently. In just one week, it gained 19%, and over the last 15 days, it has soared by more than 40%, adding nearly Rs 25,000 crore to its market capitalization. Let’s take a look at the driving forces behind this massive rally.
Investor Engagement & Credit Rating Upgrade
GIC Re's CMD, N Ramaswamy, shared in an interview with CNBC-TV18 that various factors have contributed to this growth. Key among them is the increased understanding of the company’s operations among investors, following non-deal roadshows.
Another major factor is the company’s recent credit rating upgrade, which has been instrumental in securing large international orders. AM Best rated GIC Re's financial strength as B++ (good) and upgraded the outlook to "positive" from "stable". Additionally, they gave a bbb+ (good) rating for long-term issuer credit, also with an improved outlook to "positive". Furthermore, GIC Re was awarded an aaa.IN (exceptional) NSR rating, maintaining a “stable” outlook.
The following Mutual Funds have included GICRE in their portfolios. The percentage of shareholding indicates the proportion of GICRE ownership held by the given mutual fund.
GIC Re's Strategic Focus
The company's strategy involves a selective approach to reinsurance activities, both domestically and globally, with a focus on enhancing operational performance and bottom-line growth. Ramaswamy projects an annual growth of about 10% and foresees substantial support from the Indian reinsurance sector, estimating a growth range of 15-20%. He underscored the strategic significance of concentrating on the Indian market, which is expanding rapidly, in contrast to slower-paced regions like Europe and the US. Consequently, GIC Re plans to maintain its current focus, with a 70:30 ratio favouring Indian market operations for the foreseeable future.
Financial Highlights and Forecasts
GIC Re projects a 5-6% increase in Net Earned Premium (NEP) in the second half of FY24. In terms of investment returns, Ramaswamy mentioned that the company's portfolio is heavily weighted towards fixed-income assets, constituting 72%, while equities make up 17-18%. The stability in returns is expected from the fixed-income segment, while the equity market is poised for a growth of 7-8% in the same fiscal year.
Despite the increased underwriting losses in the marine cargo sector and the Sikkim catastrophe provisions, Ramaswamy remains optimistic about the second half of FY24.
Ramaswamy expects the fire and health portfolios to show significant growth. He also sees potential in the life insurance segment, which the company has recently started to focus on more.
Conclusion: GIC Re's Steady Path Forward
GIC Re's impressive stock surge is a testament to its strategic focus, operational adjustments, and market responsiveness. Although the stock has yet to reach its IPO price of Rs 456 per share (adjusted for a 1:1 bonus), GIC Re's ongoing focus on these key areas positions it well for sustained growth and enhanced market standing.
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