GIC Re, India’s largest re-insurer, has prepped itself for a possible offer-for-sale (OFS) by the Government, with the likelihood of a credit rating upgrade by AM Best seen acting as a tailwind.
Currently, the Government has 85.78 per cent stake in the company. For a company to be listed and continue to be listed, it must have a minimum public shareholding of 25 per cent.
In a reply to a question on the possibility of the Government diluting its stake in GIC Re, Chairman & Managing Director Ramaswamy N, said: “ We are ready, but it’s not our call. There are two ways of doing it. We can issue more equity so that the Government’s share comes down. But, currently, we don’t need capital. From a solvency perspective, we are in a very good position. So we will not be issuing equity.”
“What will happen is the government will bring down its stake possibly via OFS route....As a company, we are ready for the process.”
In fact, GIC Re has conducted multiple road shows. In October 2023, it held a domestic road show, engaging with investors, analysts and other stakeholders, showcasing its growth story, profitability track record and diversified business.
The solvency ratio, which is a measure of capital adequacy, of the corporation rose to 3.36 per cent as of June-end 2024 from 2.88 per cent as of June-end 2023. Insurance regulator IRDAI has set a minimum solvency ratio of 1.50 for insurers.
Ramaswamy expects 15-16 per cent growth in gross premium in FY25. Last year, GIC Re’s gross premium was at ₹37,182 crore.
“This year, hopefully, we will be close to about ₹42,000-43,000 crore (in gross premium collection). That is a substantial growth for us. We are confident of achieving it,” he said.
Rating upgrade possibility
Referring to the need for a good credit rating for writing international business, the GIC Re chief said: “This year, we are hoping to be back to “A-” credit rating from “BBB”. Our profitability and combined ratio are good.
“Last year, they (AM Best, world’s largest credit rating agency specialising in the insurance industry) gave us a double push – the outlook on the rating improved from “BBB+ with negative outlook” to “BBB+ with positive outlook”. We did not go to stable, we came directly to positive. Now, we are only one notch below “A-”.
The corporation, which got listed on the exchanges on October 25, 2017 via an initial public offer aggregating ₹11,176 crore, has shared its financial performance data with the credit rating agency for a possible rating upgrade.
Once the company’s rating is upgraded, it expects to start growing its international book from January 1, 2025.