General Insurance Corporation Of India

Ladies and gentlemen, good day, and welcome to GIC Re Q2 FY '26 Earnings Conference Call.

As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded.

I now hand the conference over to Ms. Nikita Atri from EY. Thank you, and over to you, ma'am.

Thank you, Hamzad. Good afternoon to all the participants on the call, and thanks for joining Q2 FY '26 Earnings Call for General Insurance Corporation of India. Please note that we have mailed out the press release and presentation to everyone and you can now see the results on our website. It has been uploaded on the exchanges as well. In case you have not received the same, you can write to us, and we'll be happy to send it over to you.

Before we proceed with the call, let me remind you that the discussion may contain forward- looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our businesses that could cause future results, performances or achievement to differ significantly from what is expressed or implied by such forward-looking statements.

To take us through the results for the quarter and answer our questions, we have with us Mr.

Hitesh Joshi, Executive Director, Additional Charge of CMD and other top members of the management at GIC. We will be starting the call with a brief overview of the quarter gone by, which will then be followed by a Q&A session.

With that said, I'll now hand over the call to Mr. Joshi, over to you, sir.

Good morning, ladies and gentlemen. Thank you for joining today's earnings call. I welcome you all, and I'm pleased to provide an overview of GIC's financial performance for the Q2 FY '26.

Against this environment, GIC Re has maintained a disciplined approach anchored in selective underwriting, calibrated portfolio management and a stable risk appetite posture. This is reflected in our Q2 FY '26 performance, where the combined ratio improved to 109.15% year- on-year, reflecting firmer pricing and a more favorable claims experience in core segments.

Catastrophic events and secondary perils remain key focus areas, and we continue to refine our models and exposure frameworks accordingly, supported by strong capital adequacy, robust risk systems and enhanced analytical capabilities, we are well positioned to manage cyclical shifts while preserving long-term profitability. With clear strategic priorities and disciplined

execution, we remain confident in our ability to address evolving competitive landscape and capitalize on emerging opportunities.

We will now move to a review of our financial performance for the quarter, followed by question-and-answer session. Gross premium income for Q2 FY '26 stood at INR9,601.70 crores compared to INR8,413.49 crores in the corresponding quarter of the previous year. Investment income for the quarter stood at INR3,791.67 crores as compared to INR3,483.32 crores.

Incurred claim ratio for the quarter was 81.5% as against 93.6% in the corresponding quarter of the previous year. Combined ratio stood at 109.15% compared to 114.05% in the same quarter last year. Adjusted combined ratio was 84.04% for half year FY '26 as against 88.86% in the previous year.

Profit before tax stood at INR3,472.76 crores for quarter 2 FY '26 as compared to INR2,281.12 crores. Profit after tax rose to INR2,866.79 crores as compared to INR1,860.75 crores. Solvency ratio improved to 3.85 as of September '25 compared to 3.42 as at September '24.

Net worth excluding fair value change was INR46,669.38 crores as at September end '25 as against INR39,481.33 crores as at September end '24. While net worth, including fair value change, stood at INR88,709.19 crores as at September end '25 compared to INR90,917.70 crores.

On the premium breakup, domestic premium for first half FY '26 was INR17,080.66 crores and the international premium was INR4,909.05 crores, the percentage split was domestic 78% and international 22%. The domestic premium witnessed a growth of 4.6%, while the international premium grew by 9.4%.

This quarter reaffirms the strength of our strategic direction and our disciplined approach to navigating marketing conditions. As we move forward, we remain focused on executing our strategy with rigor and delivering sustainable value to our stakeholders.

Thank you. We can move to the question-and-answer session.

Thank you. We will now begin the question and answer session. The first question is from the line of MW Kim from JPMorgan.

This is MW Kim from JPMorgan. I would like to ask about the company's capital deployment plan for next 12 or the 24 months. As suggested in the first half of '26, underwriting performance for major non-life insurers, the domestic underwriting is approaching to the peak of deterioration, signaling potential for the premium highs in the motor and the health lines.

The overseas market is showing some softening, but the risk reward profile remains attractive with a much lower combined ratio outlook compared to the domestic market. So my question is, what do you see as the optimal underwriting mix between domestic and overseas business? So that's my first question.

And my next question concerns the risk management. Recently, the company got another the year of the A- rating from the AM Best indicate relatively strong capital base and good risk management practices.

So compared to the last 2, 3 years, has the company made an improvement in its risk management approach? If this is the case, can you share a little bit more detail? And finally, one more question is about what are the company's expectation for January 2026 linear season and the outlook for the global reinsurance pricing cycle?

Thank you, Kim. I will first talk about the optimum international domestic portfolio mix. It is very difficult to say what is optimum, because the pricing environment during the last 2 to 3 years has been fairly dynamic. Indian market has its own pricing dynamism. From a medium- term perspective, GIC's objective has been to achieve domestic versus foreign of 60 to 40.

That is what guidance we have been giving to the analyst and the market. But then we have to recognize that Indian market is growing at a much better pace than the international market. And while there is a commonality in the reinsurance market, there is also something unique about the Indian market in terms of reinsurance price adequacy.

So we would choose to react to the price adequacy evaluation and our cycle management and our portfolio optimization. While we will try to move towards 60-40, we would not be really drawn towards 60-40 in a very major way. We will continue to choose our way through risk selection to move in this broader direction of 60-40.

Your second question was regarding the improvement that we have carried out in our risk analysis. We would like to say that it is a continuous process as to how the loss trends are evolving, whether it is in domestic market or regional market or international markets. Also the attritional versus CAT and also the pricing trends.

So whatever algorithms we have in our internal pricing evaluation and pricing tools, we keep on refining it. If you have anything more specific, maybe we can discuss it, maybe we can take it offline as to what we are doing internally.

Coming to January '26 renewal, given that we are coming off from the January '23 unprecedented hardening that the reinsurance market witnessed across the globe, a very, very significant hardening, which was not witnessed in the last at least maybe 2 to 3 decades. So coming from that huge price correction, the softening is going on.

At the same time, we believe that underwriting discipline is being maintained by the market. So there will be softening and there can be pockets where there can be a little divergent trend. And again, the client experience, the particular loss history of a client will be a major factor in how the account will be treated. I hope I have answered and maybe you can have a follow-up question, if you like.

Yes. Thank you so much for the detailed explanation. Answers are very helpful. Yes.

The next question is from the line of Avinash Singh from Emkay Global.

Couple of questions, sir. The first one is, if I look at life, particularly domestic side, the combined ratio in this half is still 114%-odd. Now is it an outcome of that the pricing environment? Or is it due to the payouts or some adverse kind of development as far as mortalities is concerned in this year?

So that is on life, because I mean at 114%, 115% and particularly when life is not something that you have been very, very kind of a big aggressive, this 114% looks a bit on the higher -- reasonably on the higher side. So that's on life.

The other question is on -- I mean, if this obligatory season is to go, then how do you see your domestic business resetting? will there be a reset once and then you come back to normal growth or you are confident of kind of maintaining your current domestic business, even if the obligatory season has to be abolished?

Thank you, Avinash ji. Coming to the life -- the combined ratio that you are talking about 114%, I think this has been touched in quarter 1 also. And it is -- thanks to reserve strengthening, and I will request Mr. Sindhi to fill in the details, who is our Actuary for life.

Yes. So good afternoon. So I'm Appointed Actuary Life. Yes. So your concern is correct, it is 114%. The primary reason is strengthening of our resource. And last time also, we discussed that. And you will see a similar kind of trend, loss ratio about 100% in the coming 2 or 3 quarters.

The reason being we priced some of the products long time back.

And post COVID, we started doing the analysis, experience analysis. So some of our businesses are not as per our expectation, as per what we estimated the mortality. So obviously, we have to strengthen our resource.

So as far as -- if I go a little bit detail, as far as earned premium is concerned, there is 11% growth compared to last year because last year, it was INR880 crores around. Now it is around INR975 crores. Similarly, as far as paid claims are concerned, again, there is a growth, obviously, we are writing more business.

So obviously, we are expecting more paid claims to be coming in. So while the ratio is going above 100%, the reason we have started strengthening our resource based on our experience.

And this will continue for -- we hope it will continue for another 2 or 3 quarters. So that's the main reason of loss ratios being 114% for domestic business.

And sir, if you can clarify the adverse mortality experience than your kind of a built-in expectation, is it coming in retail protection or is it part of, I mean credit life or group protection? So...

Yes. So again, if we just go a little bit detail, again, we just divide our business into a long-term business and the short-term business. So short-term business, obviously, it is like a 1-year term insurance kind of a business like a nonlife business. Now here the main -- the reason is it is coming from the long-term business. Long term means it's an individual kind of a business. For example, companies have been writing individual term insurance and dormant and other kind of plans, it's on a long-term basis.

So we already gave those rates. And obviously, we expected that our experience would be better, but now we can't change it. That is number one. And when I talk about long term, it consists of not only long-term business individual, but it consists of credit business also. As you also know, the credit life business it's a long-term business, the term holding from 5 years to 20 years.

So obviously, if we combine both, our experience has not been favorable so far. So obviously, we don't have any other option rather except strengthening our results. So that's the main primary reason for that. And this will continue for next 2 or 3 quarters. That's what we're expecting. Got it, sir. Got it.

Avinashji, I come to your second question regarding obligatory. The first thing, we would like to say that is not expected that this entire obligatory would be removed by the regulatory in one go, it is a broad expectation. Secondly, in view of the emerging IFRS and RBC regimes, we can expect that there will be better capital planning and deployment and usage of reinsurance by the market.

So if any reduction in obligatory is likely to result into diversion of business rather than say, elimination of business for us, some of it -- I mean quite a substantial part of it may come to us on a voluntary basis.

Apart from that, as we have been mentioning that since we got our rating restoration of A- in October '24, which we could not fully avail of during our January '25 renewal, which we hope to leverage during January '26 renewal.

So I think reset will be a very strong and harsh word to frame the situation which might emerge due to any change in obligatory. We are fairly confident that we'll sail through smoothly due to any change in this. Thank you.

The next question is from the line of Harsh Shah from Merisis Advisors.

Sir, I would like to understand about your outlook on different segments, like where do you see fire? And I wanted to specifically ask about health because of the reduction in the GST. So how do you see the premiums coming in from health, life going forward? And your outlook in totality of gross premium, that how do you expect the gross premium to grow in, say, next 2 years ahead from now?

I would like to say that broadly our growth in the segment should mirror the market growth to a great extent, health is a class, which doesn't necessarily require reinsurance, but there can be treaties, which are trying to optimize the capital structure of a particular insurance company.

I will hand over to Mr. Sanjay Mokashi, our Chief Underwriting Officer, to talk in more detail.

Yes, Mr. Harsh Shah, this is Sanjay Mokashi here. You asked about fire insurance. Yes, this particular component is a major component in our business mix. So our growth will also depend upon fire segment, but it will come largely from the foreign fire.

As Mr. Joshi, while answering previous question mentioned that we got our rating restored to a A- AM Best last year. So we could not -- since the rating was restored in October, we could not fully leverage that rating during last renewal season. But for 1/1 renewal season coming renewal season, we're expecting -- we are expecting that we will see growth.

Of course, this will be a measured growth. There won't be any change in terms of our risk selection, our underwriting approach to it. This also is a comment in totality for what growth we are expecting. You mentioned about health and Mr. Joshi mentioned that health is going to be a driver of insurance growth in the domestic market, but it may not essentially drive our growth.

It will entirely depend upon what kind of reinsurance requirement the insurance companies may have going forward.

Okay. Understood, sir. And how do you see combined ratio going forward, sir, maybe FY -- give you just a ballpark number for FY '26, '27?

I think whatever we have guidance given earlier that broadly remains. The direction we have chosen is maintained, and we continue to stick to the same guidance.

The next question is from the line of Karthikeyan K, an Individual Investor.

So I have like a couple of questions. One is, see, we have a good solvency ratio and our risk management, everything has improved. So what's the outlook? I mean, is there any chance for upgrade going forward in the next year?

Are you talking about upgrading our credit rating from A to A+? Yes, something like that, yes.

I think it will be a while before we can pitch for that because it involves a certain more stringent evaluation of the entire operations, right from, say, balance sheet to P&L to competitive position to the ERM framework. So going by where we stand today, I think we are decently positioned to avail and exploit the opportunities available on the international business.

So presently, it is not really a target for us because it requires, as I said, also higher capital adequacy. So the solvency that you are seeing is essentially based on the framework as prescribed by IRDAI, which is a formula-based solvency calculation. If you really go to how the international credit rating agencies evaluate the balance sheet, they are already on a mark-to- mark basis.

So while our solvency might materially change due to our various operations, the underlying economics and driver of the risk-based capital doesn't show up so much volatility in our solvency. So I'm not sure whether -- I mean I've communicated adequately. But the point is that IRDAI formula is based on book value and rating agencies already look at market value, so they will not react to higher solvency as per the domestic regulatory regime.

But if we include the fair value changes -- fair value of all the market holdings, solvency will be much more higher, right, from current 3.85%?

Absolutely. That is from the Indian regulatory position and evaluation as per IRDAI regulations.

But rating agencies are already factoring that in. Global rating agencies already factoring mark- to-market of the entire portfolio.

Okay. So even if we adopt the IFRS 17 and that's the new accounting standard, so even then we will not be able to be gearing up for an upgrade? No, no. Okay. That is all -- yes please go ahead. No, you are saying something, I mean?

So all the factors, as I said, balance sheet, P&L, competitive position and ERM framework are adequately factored in by the rating agency. And that is independent of the local regulator evaluation.

Okay. Got it, sir. So the next question, see, we have increased the operation expenditure this specific quarter and even for the half year. Now any specific reasons for the increase? I mean, did we do any capital -- I mean any major expenditure for...

Yes. There is one particular demand on the value-added tax in a foreign jurisdiction on our branch, which we feel is absolutely unjustified, and we are going into appeal. So that is the figure which is distorting to the extent of something like INR60 crore, that is jacking up our EOM to that extent. Okay. Got it, sir. Got it.

So it is a one-off thing, and it will be appealed.

Okay. So last question I have is like the growth in terms of the GST reduction all that, so where do we see growth in H2, I mean the later -- second half of the current financial year?

I would like to say that whatever GST impact is there will be more visible -- more visible on the direct side and it will be factored in there. And whatever is the RI growth that we will be mirroring the RI growth of the market, broadly speaking.

Okay. So you're not expecting any bump or any increase this second half of the year in terms of gross premium?

If there is a bump in the direct side, it will definitely result into some domino effect on reinsurance side.

The next question is from the line of Devesh Advani from Reliance General Insurance.

Actually, I wanted to know about the fair value change numbers for Q2 F '26 versus Q2 F '25?

Can you make it more elaborate, what exactly...

Actually, as in the net worth including fair value change, what is that for the current quarter or for the H1 F '26? Like last year, it was INR40,117-odd crores for fair value change.

For the quarter, it is INR42,039.82 crores. Okay.

As at quarter end, this is the figure, INR42,039.82 crores.

The next question is from the line of Karthikeyan K, an Individual Investor.

Sir, one follow-up. I mean, that I have is like the commission right for this quarter has increased.

So is it because of health improving -- the combined improving in the health? Is that the reason why the commissions increased? Mr. Mokashi will respond. Thank you.

Yes, Mr. Karthikeyan, commission increase is not because of health. It is actually because of some of the entries, reversal entries or adjustment entries that we have carried out during this quarter and also previous quarters. But if you see they will get evened out during the rest of the year. That's, in a way, nature of our business and accounting.

Okay. So the 25% premium that will not be showing up for the next coming quarters, right? That will get even out? Yes. Yes, please.

See, Mr. Karthikeyan, the core commission level doesn't fluctuate so much. It is the commission entries on account of profit commission and sliding commission, which is adjusted after a lag for previous years that is booked in the current quarter. So any volatility in that is not because of underlying business changes, but because of certain accounting entries getting booked after a lag.

The next question is from the line of Harsh Shah from Merisis Advisors.

Sir, just a follow-up. I just wanted to confirm that in think in Q1 -- sorry, Q4 FY '25, you had guided for 34% growth. Is that correct? Or I'm mistaken here?

Sorry, I didn't catch properly. In Q4 of FY '25, what happened?

You -- have you guided for 34% year-on-year growth for FY '26 as well? Or am I mistaken here? 34%? No, no, I don't think. That kind of growth cannot be imagined. That is -- you're seeing 34%, is it? Yes.

No, no. No way.

Okay. So can you just provide a number sir, here, please?

See, the thing is, as we have been mentioning that as far as Indian market is concerned, our growth will mirror the growth of the Indian reinsurance market. And what we talked about earlier that in October '24, we got a rating restoration. So we'll be able to leverage it.

So on a relatively, say, if I might use the word small base of say 22% of foreign business, it might see a double-digit growth. But then that January business will get booked over a period of next 6 to 8 quarters. So it may not be so very visible, even if there is a very significant to say, growth. It takes time to get growth, and it shows in the accounting figures with a particular lag.

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thank you all for being present for this call. As we have been mentioning that there are certain structural changes, which we embarked on following our rating downgrade in July 2020 and which bore fruit by way of a restoration of rating in a period of just over 4 years.

The same path that we have followed -- we have charted out for ourselves in terms of underwriting discipline, pricing adequacy, portfolio rebalancing and the cycle management will continue to stick to this path, which we have convinced given the trajectory of the financial performance that we have witnessed during the last 4 years.

It is creating value. It will continue to create value and we'll keep on evolving. We will keep on responding by way of evolution of our underwriting processes, and we hope to deliver growing value. Thank you.

Thank you. On behalf of EY, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.