ICICI Prudential Life, ICICI Lombard and SBI Life are well to known to everyone. You must also have invested in them. Have you invested in General Insurance Corporation of India (GIC)? GIC is one of the largest and oldest reinsurer which provides reinsurance across business lines including life insurance, credit and financial, health, agriculture, fire, liability, engineering and motor insurance. GIC can be termed as the sole national reinsurer. The presence of GIC in the local, as well as international market, is very significant.
If you are looking forward to invest in GIC then you need to be aware of few things as discussed below:
Price Earning and Price to Book Value:
Rs 912 stock is available at P/BV of 1.6 times and P/E of 23 times based on FY 17 EPS at the upper price band. GIC looks fairly valued when compared with 46 times P/E ratio of ICICI Lombard.
During 2016-17 the combined ratio of the company was 99.7 %. Although GIC’s share has been increasing big time in the agriculture sector and years of high combined ratio they have managed to bring the combined ratio below 100%. Taking the sum of incurred losses and expenses and then dividing them by earned premium, the combined ratio is calculated.
A huge jump in the agriculture reinsurance premium from Rs 644 crore in March 2015 to Rs 9,725 crore in March 2017 has been witnessed by this corporation. On account of Pradhan Mantri Fasal Bima Yojana (PMFBY), there has been a growth in the agriculture premium. In 2016 PMFBY was approved under which premium of 2 percent to be paid by farmers for all kharif crops and 1.5 percent for all rabi crops. The government pays the rest of the premium.
GIC’s gross premium has seen a CAGR of 48.6% over FY 15-17 also driven by 64.5% CAGR in domestic premium. GIC has high growth of non-life and life insurance businesses and also being a leader in the market, it should grow at a steady rate in coming years. 30% of the GIC business comes from the International market which not only mitigates its risks but also provides ground for further expansion.
GIC should remain strong in the coming years owing to a) expanding reinsurance market in India b) sustained brisk growth in Indian non-life insurance industry and c) tapping of new global markets including the largest ones. The combination of better pricing in the domestic market and likely inroads into the global market, there shall be an improvement of the combined ratio in the medium term and also save for any untoward loss. GIC is reasonably valued at 3.6 xs P/BV on a post-money basis at the IPO price of Rs 912.
Amongst the financial services especially listed banks, the GIC will be next to State Bank of India. It has a net worth of close to Rs 50,000 crore and total assets of Rs 100,000.
You can certainly invest in an insurance company holding such a good reputation and it will be a smart investment and you can be benefited to a great extent. So, investing in General Insurance Corporation of India is a good idea.