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Government planning to reduce its stake in GIC, India’s largest reinsurance company


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GIC Re, India’s largest re-insurer, is gearing up for a possible stake sale by the Government. This move could be supported by a likely credit rating upgrade from AM Best, a major global credit rating agency for the insurance industry.

Government’s Stake and Public Shareholding Requirements

The Government currently owns 85.78% of GIC Re. However, for any company to be listed and remain on the stock exchange, it must have at least 25% of its shares held by the public. This means the Government may need to reduce its stake in the company to comply with these regulations.

Ready for the Next Steps

Ramaswamy N, the Chairman and Managing Director of GIC Re, mentioned that the company is prepared for the Government’s decision, although it’s not up to them to decide. He explained that while issuing more equity could reduce the Government’s stake, GIC Re doesn’t need additional capital at the moment since their financial health is strong. This leaves the Government’s stake reduction likely to happen through an Offer-for-Sale (OFS).

Engaging with Investors

To prepare for this potential OFS, GIC Re has been actively engaging with investors and other stakeholders. In October 2023, the company conducted a domestic roadshow where it highlighted its growth, profitability, and diverse business operations.

Financial Strength and Growth Prospects

GIC Re’s solvency ratio, a measure of its financial stability, increased to 3.36% by the end of June 2024, up from 2.88% the previous year. This is well above the minimum requirement of 1.50% set by the Insurance Regulatory and Development Authority of India (IRDAI).

Ramaswamy also shared optimistic growth projections, expecting a 15-16% increase in gross premium for the financial year 2025. Last year, the gross premium was ₹37,182 crore, and this year, the company is aiming to reach around ₹42,000-43,000 crore.

Anticipated Credit Rating Upgrade

A higher credit rating is crucial for GIC Re’s international business. The company is hopeful of regaining an “A-” rating, up from its current “BBB” rating. Last year, AM Best improved GIC Re’s outlook from “BBB+ with a negative outlook” to “BBB+ with a positive outlook,” skipping the stable phase. Now, the company is just one notch below the “A-” rating.

Looking Forward

GIC Re, which went public in October 2017 with an initial public offering (IPO) worth ₹11,176 crore, has provided its financial performance data to AM Best in hopes of securing this upgrade. If successful, the company plans to expand its international operations starting January 1, 2025.

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