'Retail health is a good area to be in, mainly because loss ratios are decent at around 50-60 per cent.'
Ramaswamy Narayanan, chairman and managing director (CMD), General Insurance Corporation of India (GIC Re), in an interview with Aathira Varier/Business Standard in Mumbai, outlines the company's diversification plans to grow its premium while mitigating the impact of growing natural catastrophes on its book.
The public float for a listed company should be 25 per cent. Is there a plan by the government to divest more in the company to meet the minimum public norms?
We did a series of roadshows when we met people in the market. They sat up and took notice of the fact that our performance was good.
From then, I think to a great extent the stock started moving up. We also did some international roadshows.
They wanted a really big chunk, something which represents maybe half or one per cent of the company stock.
We have to meet the minimum public shareholding of 25 per cent. Currently, it is about 14 per cent.
So, that is where the interest came from and it is clear that it will be an offer for sale (OFS) by the government because we don't need capital. Our solvency is at a very good position.
Where do you see your premiums in FY25?
We plan to finish at around Rs 42,000-43,000 crore for FY25, up 15-16 per cent from last year at Rs 37,000 crore, driven by the health segment to a great extent.
Retail health is something where you would normally not see too much reinsurance support since ticket size is small.
But that is where we have looked to grow and we have managed that growth. Group health is not something where we have appetite.
How do you see growth in the health portfolio amid rising claims and medical inflation?
Retail health is a good area to be in, mainly because loss ratios are decent at around 50-60 per cent.
There will be acquisition costs of about 40 per cent. So, you are still making profits and for an insurance company, it is an area where they are doing well.
Yes, there is medical inflation. It is all a question of how you price it. Once you price it well, there is a good chance for that portfolio to do well.
What are your diversification plans?
About 30 per cent of our business is property due to the high value risk; about 10 per cent is agriculture; 15-16 per cent is motor; and the remaining is smaller business.
Typically, our health portfolio used to be about 4-5 per cent which has now grown to about 24 per cent.
In property, within India, we are ensuring that we have exposures from all parts of the country. We are also looking to diversify outside the country.
It will depend on our credit rating. If I write in India and get a loss here, at least I have premiums from outside the country which I can pay.
If the losses happen outside the country, I have the Indian premiums to pay.
How does the international business currently look like for GIC Re?
This time, the domestic business grew stronger than the international book and we also stopped underwriting some international businesses in marine and motor portfolios.
Going forward, we are looking to expand international business. It is difficult to write business internationally, without an 'A-' rating. It becomes more expensive.
This is because in most markets, the regulators would want an 'A-'.
The combined ratio currently stands at 109 per cent, how do you see it, going forward?
We plan to take it down to 105-106 per cent in 2-3 years through the kind of business we are writing.
It is the way we are diversifying our book; we are basically writing businesses which are profitable but we are also diversifying from the core business of property.
Health is a totally non-correlating kind of a class. So, the idea is to diversify your book.
At the same time, the business that you are diversifying into should be profitable.
Just diversifying for the sake of it will never work.
There has been a rise in cases of natural catastrophes, what has been the impact on your book?
Last year, my foreign portfolio was good because there were hardly any events but India had about nine catastrophic events.
Almost five of them were major, which really made a dent in our book.
If I include the payouts as well as the provisions that I made for these events, it was about Rs 3,360 crore - nearly 10 per cent of the total earned premiums.
Last year, I finished with a combined ratio of 111 per cent. If these events had not happened, my combined ratio would have been 101 per cent. Climate change is a reality.
I think things will only become worse, going forward. Idea is to understand that risk and provide for it and manage that risk.
Diversify within the book and diversify outside the class.
How is the provisioning for these events?
In FY23, we put about Rs 512 crore. In FY24, we put nearly Rs 570-580 crore.
So currently, we have about Rs 1,100 crore in that kitty. We have also internally decided that we will wait till it reaches around Rs 3,000 crore before utilising it.
There are standard operating procedures in place and will be decided by the board.
It is not going to be used for small losses which come up.
Feature Presentation: Aslam Hunani/Rediff.com
