This insurance company reinsures other insurance companies in India

We take insurance to mitigate risks and provide protection against potential losses or unexpected events. Health insurance covers medical expenses, while auto insurance protects against damage to vehicles. 

However, have you ever wondered how insurance companies themselves mitigate their risks? This is where reinsurers like GIC Re come into the picture. Reinsurers provide insurance to insurance companies. 

Let's figure out how it functions. The Insurers allocate a portion of the premiums they collect from policyholders to a reinsurance company. In return, the reinsurer agrees to shoulder the financial burden for losses that exceed certain predetermined limits. This arrangement sets a cap on the maximum potential loss for the insurer. 

However, the reinsurer faces the challenge of managing potentially massive amounts if a major disaster occurs. Reinsurers generate revenue through two primary avenues which are by underwriting policies profitably and investing the premiums they receive from insurers.

Business Overview 

The General Insurance Corporation of India (GIC Re) is an Indian company that specializes in providing reinsurance services to direct general insurance companies. It serves as a crucial intermediary in the insurance industry, enabling direct insurers to transfer a portion of their risks to GIC Re. 

As a reinsurer, it helps mitigate the financial impact of large-scale claims and catastrophic events for its clients. It plays a vital role in the stability and sustainability of the general insurance sector in India by providing risk management and underwriting support to insurance companies. 

It commands a significant market share of approximately 60%. It provides reinsurance coverage for a wide range of sectors, including fire, marine, motor, health, agriculture, aviation, and more. 

The entity is formed with the specific objective of overseeing, regulating, and conducting general insurance operations. Nevertheless, GIC Re holds the advantage of having the first right of refusal in reinsurance contracts.

Financial Overview

If we check the company’s financials, annual revenue experienced a decline of 5.8% YoY, from Rs 49257 Crore to Rs 46402 Crore in FY23. The operating profit of the company stands at Rs 6725 Crore, accompanied by an operating profit margin of 14%. Despite revenue declining by 5% the operating margins got doubled from 7% to 14% in FY23. Furthermore, the net profit of the company amounts to Rs 6312 Crore.

The company's return on capital employed (ROCE) and return on equity (ROE) are reported as 20.6% and 16.8%, respectively. 

Share Performance

Today, the stock commenced trading at Rs 186.25, down by 1.13% from the previous day's closing price of Rs 184.65. While writing this article the shares of the company are trading at Rs 186.25 on BSE. The stock's 52-week highs and lows are Rs 204 and Rs 112.95 respectively. Currently, its market capitalization stands at Rs 32675.70 Crore. 

Over the past three months, the stock has delivered an impressive return of 29%, while in the last one year, it has generated a return of 60%. 

In terms of ownership, the promoters hold 85.78% of the company's shares, while foreign institutional investors (FIIs) and domestic institutional investors (DIIs) hold 0.67% and 11.02%, respectively. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet, and is subject to changes. Please consult an expert before making related decisions.