General Insurance Corporation of India

NSE: GICRE | BSE: 540755 | ISIN: INE481Y01014
|Momentum Trap

HDFC Securities
GICRE is India's largest reinsurer but continues to make high underwriting losses (FY20 COR: 113.8%). A calibrated approach to underwriting is expected to change this over FY21-23E. While we are not fully convinced about the pathway to underwriting profitability, inexpensive valuations- FY22E P/ABV of 0.6x result in our BUY recommendation with a TP of Rs 185. We estimate an FY22E adj. RoE at 7.4%, and value GICRE at 0.7x FY22E ABV less 10% discount. We continue to rate GICRE a BUY with a TP of Rs 185 (Mar-22E P/ABV of 0.6x). Higher losses in agriculture and aviation led to increased 4QFY20 claims ratio of 89.1%, +1,917/-1,788bps YoY/QoQ. This resulted in underwriting losses of Rs 7.2bn. Investment income was hit by higher provisions of Rs 3.8bn bringing yield down to 7.7%. 4QFY20 APAT was Rs 12.2bn (+37.5% YoY). NEP: Led by healthy growth in property/health i.e., 71.7/17.5% YoY, 4QFY20 NEP grew 43.6% YoY to Rs 76.6bn. For FY20 the company delivered an NEP of Rs 443.5bn (+16.0% YoY).
General Insurance Corporation of India's price crossed above SMA100 today
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