In the previous financial year, crop insurance business yielded good results for General Insurance Corporation of India (GIC Re), which has fixed a price band of Rs 855-912 per share for its Rs 11,370-crore IPO, says chairman and managing director Alice G Vaidyan. The IPO opens on October 11 and closes on 13. Excerpts:
GIC Re will get around Rs 1,568.64 crore from its fresh issue portion, How do you plan to utilise the net proceeds?
That is only for augmenting our capital base, to support the Indian market growth that’s why we are raising the capital. Another reason is also to maintain our solvency level, last year our solvency was 2.41 and had come down from previous year due to the crop insurance scheme, so we need to maintain minimum solvency level requirement, we want it to be maintained at around 2 and we need capital to support the growth of the market.
Crop insurance was biggest business for GIC Re last year, will it continue to be major contributor going forward?
Going forward crop may not be the biggest segment. Property insurance has always been a major component of our book. Last year, crop insurance had shot up to a very high level; so going forward growth will be more stable for crop insurance; it might achieve 15-20% growth only. So, I think, after crop stabilises it might be not the only major component in our book.
How do you plan to become more profitable going forward? Where do you see your combined ratio, which was 100.16% in the last fiscal?
We are already on track. Last year, it was around 100% and even in the first quarter of current financial year, both domestic and international are within 100%. Though the point is that we have investment income to fall back on, but as a reinsurer I set higher standards for GIC Re and we want to adhere to that. We don’t want investment profits to subsidise our operating profits. Going forward we are technical pricing in a big way, we will come out of all loss making treaties, we will diversify in international markets and this is our singular focus in GIC that we should have a combined ratio within 100%.
What are your plans for global markets?
We already have five branches in global markets and we are also writing businesses in 161 countries. So we look forward to diversify into more markets. We are looking at ASEAN and Latin American markets where we don’t have much exposure. I spoke to the Lloyd’s syndicate also, and once that work goes through, we can write business from all the markets where Llyods is working.
Which was a loss-making segment for GIC Re?
Motor insurance has been biggest loss-making segment of the market, so far market corrections are happening and premiums are going up and changes are coming around. So we think that the, market will turnaround and will turn profitable in short to medium term.
Which are the most profitable segments for GIC Re and where did margins improve?
Reinsurance is also about balancing good and bad year and also good and bad portfolios. So one line of business may do well in one year and one might not do well, so as I said its all about balancing it rightly. In last financial year, crop insurance business was good, while we had some losses from property insurance. But otherwise most of the portfolio for us were profitable. One can have margins in any segments if underwriting has been done properly, so for us marine, aviation has been profitable. But as I said, the property has been overall profitable but last year only we had some losses.