GIC Q4 PAT down 19.7% at Rs 603 cr on provisioning for IL&FS exposure

State-owned reinsurer General Insurance Corporation on Thursday reported a 19.7 per cent decline in its profit after tax (PAT) in the March quarter (Q4) and a 31.30 per cent fall in the financial year 2018-19 (FY19) on account of accelerated provisioning for exposure to IL&FS and tax provisions on profits made from sale of investments after the change in law.

The reinsurer's PAT in Q4 stood at Rs 603.37 crore, compared to Rs 751.60 crore in the year ago period. The PAT for the entire FY19 stood at Rs 2,224 crore, compared to Rs 3,233 crore for FY18.

GIC had an exposure of Rs 788 crore in the IL&FS group companies and it has provisioned Rs 437.71 crore for the same. The reinsurer's management is confident that no additional provisioning will be required for its exposure to the beleaguered group. The exposure to IL&FS group is only in the holding companies and not in any special purpose vehicles (SPVs).

Moreover, the management said they have an exposure of around Rs 80-90 crore in Reliance Home Finance. They also have some exposure to Reliance Capital, but are not too concerned about it as of now. Reliance Home Finance and Reliance Commercial Finance were downgraded to the default category recently.

The increase in tax provision on profits made from sale of investments was to the tune of Rs 800 crore. In FY18, GIC's tax provision was Rs 434.68 crore.

The gross premium collected in Q4 of FY19 stood at Rs 8,089 crore, compared to Rs 8,525 crore in the year ago period. In FY19, the reinsurer's gross premiums grew  6 per cent to Rs 44,238 crore from Rs 41,799 crore in FY18.

The combined ratio of the reinsurer, a measure of profitability for general insurers, stood at 105.9 per cent in FY19. The adjusted combined ratio, after considering policyholder’s investment income, stood at 94 per cent for FY19.

The incurred claims ratio for Q4FY19 stood at 74.8 per cent, compared to 94.5 per cent in Q4FY18. Similarly, the incurred claims ratio of the company stood at 89.5 per cent in FY19, while it was 91.8 per cent in FY18.

Although the company made an underwriting profit of Rs 101 crore in Q4FY19, compared to a loss of Rs 1,169 crore in Q4FY18, the reinsurer's underwriting loss increased 47 per cent to Rs 2,211 crore.

The investment income of the company stood at Rs 1,598.89 crore in Q4FY19, compared to Rs 1,780.17 crore in the year ago period. Investment income in FY19 increased 18.7 per cent to Rs 6,401 crore, compared to Rs 5,392 crore in FY18.

The solvency ratio of the company improved to 2.06 at the end of FY19 from 1.72 previous year. The regulator-mandated solvency ratio is 1.5.