CR-2022-Q2-1-ICRA-General Insurance

INDIAN GENERAL INSURANCE
INDUSTRY REPORT
Profitability to improve in FY2023 with

continuing growth momentum and better
underwriting performance
APRIL 2022
Karthik Srinivasan Sahil Udani

+91 22 6114 3444 +91 22 6114 3429
karthiks@icraindia.com sahil.udani@craindia.com
Mayank Chheda Niraj Jalan

+91 22 6114 3428 +91 33 7150 1146
mayank.chheda@icraindia.com niraj.jalan@icraindia.com
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Table of Contents
General Insurance outlook - Stable ....................................................................................................................................................................................................... 6
General Insurance Industry Outlook ..................................................................................................................................................................................................... 9
General insurance industry outlook ............................................................................................................................................................................................................................................. 10
ICRA’s Rated Universe .........................................................................................................................................................................................................................12

ICRA’s rated universe .................................................................................................................................................................................................................................................................... 13
Industry Performance Analysis and Outlook ........................................................................................................................................................................................14

Growth recovery to continue; structural challenges and economic uncertainty pose downside risk for FY2023 ....................................................................................................................... 15
Private players continue to gain market share ............................................................................................................................................................................................................................. 16
Health and fire segments fuel growth in FY2022 ......................................................................................................................................................................................................................... 17
Robust growth in health segment in 11M FY2022, though loss ratio remained higher amid the pandemic ............................................................................................................................... 18
Motor segment impacted by structural challenges; revision in motor-TP pricing to marginally support premium growth ....................................................................................................... 19
Recovery in economic activity and revision in premium rates led to higher growth in fire segment .......................................................................................................................................... 20
Crop segment growth impacted by change in regulations and lower participation of PSU insurers ........................................................................................................................................... 21
PSUs continue to have higher retention ratio; reinsurance premium impacted by decline in GIC’s share amid pandemic ........................................................................................................ 22
Potential for general insurance in India remains strong, given low penetration and density ..................................................................................................................................................... 23
Claims ageing increased in FY2021 amid operational challenges during the pandemic .............................................................................................................................................................. 24
Retail claims expected to remain high in FY2022 led by higher health claims post second wave ............................................................................................................................................... 25
Important regulatory/industry announcements .......................................................................................................................................................................................................................... 26
FINANCIAL PERFORMANCE & ANALYSIS ...............................................................................................................................................................................................29

Combined ratio of PSUs remains higher; claims soared in 9M FY2022 post second wave .......................................................................................................................................................... 30
Loss ratio in health and motor segments deteriorated in 9M FY2022 ......................................................................................................................................................................................... 31
Net profitability largely supported by investment income .......................................................................................................................................................................................................... 32
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Improvement in combined ratio to drive profitability in FY2023 ................................................................................................................................................................................................. 33
G-Secs dominate investments; equity mix remains higher for PSU insurers, exposing them to market volatility ...................................................................................................................... 34
Solvency ratio remains comfortable for private insurers, while PSUs’ solvency largely supported by GoI’s capital infusions .................................................................................................... 36
Direct business and brokers dominate distribution channel; PSU insurers source considerable business from individual agents ............................................................................................. 38
Comfortable liquidity profile; PSU insurers carry higher share of equity investments and cash and bank balances .................................................................................................................. 39
COMPANY FINANCIALS .......................................................................................................................................................................................................................40
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Table of Exhibits
EXHIBIT 1: Rating spread for subordinated debt programme .......................................................................................................................................................................................................... 13
EXHIBIT 2: ICRA’s rated universe ...................................................................................................................................................................................................................................................... 13
EXHIBIT 3: Trends in GDPI ................................................................................................................................................................................................................................................................. 15
EXHIBIT 4: Segment-wise GDPI trend ............................................................................................................................................................................................................................................... 15
EXHIBIT 5: GDPI share between private and public sector entities .................................................................................................................................................................................................. 16
EXHIBIT 6: GDPI trend for private and PSU insurers ......................................................................................................................................................................................................................... 16
EXHIBIT 7: GDPI trend by segment for PSUs ..................................................................................................................................................................................................................................... 17
EXHIBIT 8: GDPI trend by segment for private sector players .......................................................................................................................................................................................................... 17
EXHIBIT 9: GDPI trend for health & PA segment ............................................................................................................................................................................................................................... 18
EXHIBIT 10: Net loss ratio trends for the health & PA segment ....................................................................................................................................................................................................... 18
EXHIBIT 11: GDPI trend in motor segment ....................................................................................................................................................................................................................................... 19
EXHIBIT 12: Net loss ratio trends in motor segment ........................................................................................................................................................................................................................ 19
EXHIBIT 13: GDPI trend in fire segment ............................................................................................................................................................................................................................................ 20
EXHIBIT 14: Net loss ratio trends in fire segment ............................................................................................................................................................................................................................. 20
EXHIBIT 15: GDPI trend in crop segment .......................................................................................................................................................................................................................................... 21
EXHIBIT 16: Net loss ratio trends in crop segment ........................................................................................................................................................................................................................... 21
EXHIBIT 17: General insurance density and penetration .................................................................................................................................................................................................................. 23
EXHIBIT 18: Gross financial savings (as % of gross domestic product) ............................................................................................................................................................................................. 23
EXHIBIT 19: Ageing of claims of PSU players..................................................................................................................................................................................................................................... 24
EXHIBIT 20: Ageing of claims of select private players ..................................................................................................................................................................................................................... 24
EXHIBIT 21: Claims settlement ratio ................................................................................................................................................................................................................................................. 25
EXHIBIT 22: Claims settlement metrics ............................................................................................................................................................................................................................................. 25
EXHIBIT 23: Combined ratio – PSUs .................................................................................................................................................................................................................................................. 30
EXHIBIT 24: Combined ratio – Select private players........................................................................................................................................................................................................................ 30
EXHIBIT 25: Net loss ratio by segment – 9M FY2022 ........................................................................................................................................................................................................................ 31
EXHIBIT 26: Net loss ratio by segment – 9M FY2021 ........................................................................................................................................................................................................................ 31
EXHIBIT 27: Covid claims settled ....................................................................................................................................................................................................................................................... 31
EXHIBIT 28: Underwriting & investment income – PSU Insurers ...................................................................................................................................................................................................... 32
EXHIBIT 29: Underwriting & investment income – Private players .................................................................................................................................................................................................. 32
EXHIBIT 30: Profitability trend – PSU insurers .................................................................................................................................................................................................................................. 33
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EXHIBIT 31: Profitability trend – Select private players .................................................................................................................................................................................................................... 33
EXHIBIT 32: Aggregate investment book of PSU ............................................................................................................................................................................................................................... 34
EXHIBIT 33: Aggregate investment book of select private players ................................................................................................................................................................................................... 34
EXHIBIT 34: Fair value change account ............................................................................................................................................................................................................................................. 34
EXHIBIT 35: Tenor-wise distribution of investments – PSUs............................................................................................................................................................................................................. 35
EXHIBIT 36: Tenor-wise distribution of investments – Select private players .................................................................................................................................................................................. 35
EXHIBIT 37: Solvency ratio of PSU insurers ....................................................................................................................................................................................................................................... 36
EXHIBIT 38: Solvency ratio of select private players ......................................................................................................................................................................................................................... 36
EXHIBIT 39: FVCA to RSM for weak PSU insurers .............................................................................................................................................................................................................................. 37
EXHIBIT 40: Channel-wise GDPI – Select private insurers ................................................................................................................................................................................................................. 38
EXHIBIT 41: Channel-wise GDPI – PSUs ............................................................................................................................................................................................................................................ 38
EXHIBIT 42: Liquidity and liquidity buffer – Select private insurers .................................................................................................................................................................................................. 39
EXHIBIT 43: Liquidity and liquidity buffer – PSU insurers ................................................................................................................................................................................................................. 39
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GENERAL INSURANCE OUTLOOK - STABLE
With the resumption of economic activity after the waning of Covid-19 infections, the gross domestic premium income (GDPI) growth
recovered to an estimated 11% in FY2022, which was marginally above the upper band of ICRA’s expectation of 7-9%. ICRA expects the
industry GDPI to grow by 10-12% to Rs. 2.2 trillion in FY2023. The GDPI from the health segment and commercial lines (fire, marine and
engineering) is expected to grow at a higher rate than the motor segment. However, economic uncertainty due to structural challenges in
the automobile industry and rising commodity and oil prices amid the geopolitical crisis pose downside risk to FY2023 growth.
Click to Provide Feedback The combined ratio deteriorated across the industry in 9M FY2022 due to higher health claims. The combined ratio for the industry is
expected to improve in FY2023 driven by lower health claims and the expected improvement in risk pricing by the insurers. ICRA expects
the combined ratio for PSU insurers to improve to 124-126% in FY2023 from 127% (E) in FY2022 supported by various cost-cutting measures
directed by the Central Government and better claims performance, while select private players are expected to report a combined ratio
Industry GDPI growth recovered of 106-108% in FY2023. The Government of India (GoI) infused fresh equity capital of Rs. 5,000 crore in March 2022 to augment the solvency
strongly, led by growth in the health profile of weaker PSU insurers. ICRA expects the continuous government support in the form fresh capital infusion or regulatory
segment. forbearance to weak PSU insurers.
ICRA maintains a Stable outlook on the sector, given the expectation of better underwriting performance, which will lead to a comfortable
profitability and solvency profile for private sector insurers, and continuous Government support in the form of regulatory forbearance
and fresh equity infusions for PSU insurers.
Covid claims soared while motor claims
returned to normalcy in FY2022, • Strong recovery in GDPI growth in FY2022 post muted growth in FY2021 – With the resumption of economic activity after the waning
resulting in a deterioration in the of Covid-19 infections, the GDPI growth recovered to an estimated 11% in FY2022, which was marginally above the upper band of ICRA’s
combined ratio expectation of 7-9%. Increasing health insurance awareness following the onset of the Covid-19 pandemic and revision in premium
pricing in the fire segment aided the growth in FY2022. The GDPI of private sector insurers grew at a faster rate of 14% (E1) compared to
the growth of 5% (E) witnessed by public sector undertaking (PSU) insurers in FY2022. ICRA expects the industry GDPI to grow by 10-12%
to Rs. 2.2 trillion in FY2023, led by higher growth in the health and commercial business segments. The GDPI of PSU insurers is expected
to grow moderately at 4-6%, while private insurers are expected to capture market share by growing at a higher rate of 13-15% in FY2023.
The GDPI from the health segment and commercial lines (fire, marine and engineering) is expected to grow at a higher rate than the
motor segment. Further, the revision in the pricing of certain health products in late FY2022 and the proposed revision in the motor-TP
1 Estimate
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Weak underwriting performance of PSU premium are expected to support the premium growth for FY2023. However, economic uncertainty due to structural challenges in the
insurers resulting in weak solvency automobile industry and rising commodity and oil prices amid the geopolitical crisis pose downside risk to FY2023 growth.
profile, thereby requiring Government
• Health segment fuelled growth in FY2022 – The gross premium from the health segment experienced a steep year-over-year (YoY)
support in FY2023
growth of 26% in 11M FY2022 with growing awareness of medical insurance and increase in premiums amid the pandemic. The fire
segment premium increased by 8% in 11M FY2022 despite partial lockdowns across the country. Post the decline in FY2021, the motor
business reported muted growth of 4% in 11M FY2022 on the lower base due to structural challenges in the automobile industry. The
GDPI from the crop business declined by 20% in 11M FY2022 mainly due to the significant decline in the PSU business.
Uptick in economic activity and
• Combined ratio expected to improve in FY2023, though underwriting performance of PSU insurers to remain weak – The combined
increasing awareness of health
insurance expected to fuel growth in ratio across the industry deteriorated to 119% in 9M FY2022 from 112% in 9M FY2021 due to higher health claims. Covid claims accounted
FY2023 for 6% of the total number of health claims paid in FY2021 and are expected to form around 11-12% of the total number of health claims
paid in FY2022. With the resumption of economic activity and the relaxation in lockdown restrictions in FY2022, vehicle movements were
back to normal, resulting in higher claims because of road accidents. The combined ratio for the industry is expected to improve in FY2023
driven by lower health claims and the expected improvement in risk pricing by the insurers. ICRA expects the combined ratio for PSU
insurers to improve to 124-126% in FY2023 from 127% (E) in FY2022 supported by various cost-cutting measures directed by the Central
Rising yield scenario expected to impact
Government and better claims performance. However, PSU insurers are expected to continue to post net losses in FY2023 with negative
PSU insurers more, as they often sought
RoAE. With better risk pricing and underwriting practices, private players are expected to report a combined ratio of 106-108% in FY2023
sale of investments to book gains and
with RoAE of 12-14%.
restrict the net losses
• ICRA expects Government support in the form of regulatory forbearance or fresh capital in FY2023 – With the deterioration of the
combined ratio, the PSU insurers reported high net losses. To augment the solvency profile, the Government of India (GoI) infused fresh
equity capital of Rs. 5,000 crore in weaker PSU insurers in March 2022. Accordingly, ICRA expects the solvency position of PSU insurers
to improve to 1.67x or 1.39x as on March 31, 2022, considering 100% or 50% FVCA forbearance, respectively. ICRA expects the regulator
to continue to provide FVCA forbearance to weak PSU insurers in FY2023 and accordingly estimates the solvency of PSU insurers at 1.57x-
1.60x as on March 31, 2023 at 100% FVCA forbearance. If the FVCA forbearance is reduced to 50%, ICRA estimates incremental equity
capital requirement of around Rs. 350 crore for solvency of 1.30x or between Rs. 3,800 crore and Rs. 4,200 crore for solvency of 1.50x as
on March 31, 2023.
• Private players expected to have a comfortable solvency position – ICRA notes that the well-established private insurers have solvency
ratios comfortably above the regulatory minimum with better profitability, risk management and asset-liability management. Private
insurers reported a decline in the RoAE to 12.1% (16.1% in FY2021) while maintaining the solvency position at 2.21x as on December 31,
2021. Select private players are expected to report solvency of 2.07x-2.15x as on March 31, 2023. Further, as on December 31, 2021,
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select private players had equity capital buffer and can issue additional sub-debt of Rs. 3,271 crore, which could add 0.16x to the solvency
ratio as on March 31, 2023.
• Investments – The investment book of the sector (PSUs and select private players) increased 14% YoY to Rs. 3.47 trillion as on December
31, 2021, supported by the higher GDPI growth of select private players. Around 42% of the investments were held in the form of
Government securities (G-Secs) and quasi-sovereign securities, while equities stood at 17%. PSU insurers (30%) held a higher share in
equity investments compared to private players (6%). Given the inflationary scenario and the declining liquidity surplus in the system,
the Indian economy is poised for interest rate reversal, thereby impacting the valuation of the debt and equity investments held by the
insurers. PSU insurers are expected to be more affected as they often sought the sale of investments to book gains and restrict the net
losses. As on December 31, 2021, the market value of the debt securities held by PSU insurers was 3% higher than the book value
(compared to 1% for select private insurers), thereby providing a buffer to absorb the negative variance in the investment value in a
rising interest rate scenario.
• Important regulatory changes in the industry – The regulator (Insurance Regulatory and Development Authority of India – IRDAI) issued
The IRDAI (Surety Insurance Contracts) Guidelines, 2022 to promote and regulate the surety insurance business, which became effective
from April 1, 2022. The surety business will act as an additional revenue generator for general insurers, though the regulator has capped
the business. Further, ICRA believes the industry might need to resolve multiple challenges, viz. adequate pricing, reinsurance
arrangement and underwriting expertise, before significant scaleup is visible. In March 2022, the regulator also issued draft guidelines
for revision in motor third party (motor-TP) insurance premium, which was last revised in June 2019. With the marginal increase in the
premium rates for the goods carrying commercial vehicle segment (which forms a major share of the motor-TP premium), the proposed
revision is expected to marginally improve the motor-TP premium for FY2023. In addition the regulator released draft guidelines on the
remuneration and tenor for CEO and non executive directors. Minimum and maximum caps were placed on variable pay, with 50% of
the variable pay to be in the form of ESOPs. The maximum tenor of a CEO is to be capped at 15 years.
This ICRA paper, on the general insurance sector in India, analyses the performance of 18 general insurance companies collectively representing ~90% of the industry-wide gross direct premium
written (GDPW) during 9M FY2022. Of these companies analysed, four are from the public sector and 14 from the private sector. Our industry analysis does not include specialized insurers
such as Export Credit Guarantee Corporation of India Limited (ECGC) and Agriculture Insurance Company of India Limited (AIC of India). The industry performance encompasses all the players
in the general insurance industry, while the financial performance analysis section and outlook is pertaining to the 18 entities listed earlier
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General Insurance Industry Outlook
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GENERAL INSURANCE INDUSTRY OUTLOOK
General Insurance Industry Outlook for PSU Insurers – FY2023
FY2023 Outlook
(data reflects all four public sector general insurers, which accounted for entire public sector GDPI in 11M FY2022)
Underwriting
GDPI Combined ratio PAT/ ANW* Solvency ratio
losses
4-6% growth 124-126% Rs. 170 billion-Rs. 177 -13% to -18% 157-160%
GDPI growth is expected to As per ICRA’s estimates, the billion The elevated underwriting losses ICRA expects the solvency of PSU
remain moderate in FY2022 as combined ratio for PSU insurers are expected to be partially insurers at 1.57x-1.60x as on
PSU insurers are expected to
three of the four PSU insurers is expected to improve offset by investment income, March 31, 2023 at 100% FVCA
continue reporting underwriting
have a stretched solvency profile, moderately in FY2023 from 127% losses, given the high combined ratio though the PSU insurers are forbearance. If the FVCA
thereby restricting their growth- (E) in FY2022 supported by expected to report negative forbearance is reduced to 50%,
of >120% due to the weaker claims
related investments various cost-cutting measures return ratios ICRA estimates incremental
ratio
directed by the Central equity capital requirement
Government and better claims between Rs. 3,800 crore and Rs.
performance 4,400 crore for solvency of 1.5x
*Adjusted net worth – Net worth is adjusted by excluding the FVCA
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General Insurance Industry Outlook for Select Private Insurers– FY2023
FY2023 Outlook
(data reflects 13 private sector general insurers, which accounted for ~80% of the private sector GDPI in 11M FY2022)
*Net worth is adjusted by excluding the fair value change account (FVCA)
Underwriting
GDPI Combined ratio PAT/ ANW* Solvency ratio
losses
13-15% growth 106-108% Rs. 48 billion-Rs. 62 12-15% 207-215%

Private insurers are expected to Though the claims ratio is billion Investment income is expected Select private players are
capture market share by growing expected to improve marginally, Better risk pricing and underwriting to be more than sufficient to expected to report comfortable
at a higher rate, given their agility the expense ratio is expected to practices are expected to restrict the absorb the limited underwriting solvency levels. As on December
in business acquisitions and the remain elevated with higher underwriting losses losses, thereby leading to 31, 2021, select private players
higher capital buffer growth-focused expenditure adequate net profits had equity capital buffer for
issuing additional sub-debt of Rs.
3,271 crore, which could add
0.16 to the solvency ratio
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ICRA’s Rated Universe
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ICRA’S RATED UNIVERSE
Nine General Insurance Companies Rated by ICRA
EXHIBIT 1: Rating spread for subordinated debt programme EXHIBIT 2: ICRA’s rated universe
Entity Long-term Rating Instruments

4
ICICI Lombard General Insurance Issuer rating /
[ICRA]AAA (Stable)
Company Limited subordinated debt
Bajaj Allianz General Insurance Company
[ICRA]AAA (Stable) Issuer rating
Limited
HDFC ERGO General Insurance Company Issuer rating /
[ICRA]AAA (Stable)
Limited subordinated debt
2 Issuer rating /
The Oriental Insurance Company Ltd [ICRA]AAA (Negative)
Subordinated debt
[ICRA]AAA (Stable) / Issuer rating /
Tata AIG General Insurance Company
1 1 [ICRA]AA+ (Positive) subordinated debt
Royal Sundaram General Insurance [ICRA]AA+ (Stable) Subordinated debt
Cholamandalam MS General Insurance

[ICRA]AA (Stable) Subordinated debt
Company Ltd.
AAA AA+ AA A+ National Insurance Company Limited [ICRA]A+ (Stable) Subordinated debt
Source: ICRA Research Source: ICRA Research
Eight companies in the general insurance sector are under coverage. ICRA has subordinated debt ratings (7 entities) and issuer ratings (5 entities) for the insurance companies. ICRA has both
issuer ratings and subordinated debt ratings for four entities.
As the insurance industry has a long gestation cycle and stringent capital requirements for growth, the companies relied on the parent sponsors for growth capital for an extended period.
The final ratings for all the companies under coverage are determined by parent strength and parent support. With the completion of the merger of Bharti AXA General Insurance Company
Limited (BAXA-GI) with ICICI Lombard General Insurance Company Limited, the rating for BAXA-GI’s subordinated debt programme was withdrawn in September 2021.
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Industry Performance Analysis and Outlook
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GROWTH RECOVERY TO CONTINUE; STRUCTURAL CHALLENGES AND ECONOMIC UNCERTAINTY POSE DOWNSIDE RISK FOR FY2023
EXHIBIT 3: Trends in GDPI EXHIBIT 4: Segment-wise GDPI trend
30% 2,000 1,856 1,851

26% 26% 1,787
1,800 1,615
25%
20% 1,600 1,415 191 137
227
20% 1,400 1,183 208
14% 14% 14% 15%
20% 14% 13% 1,200 176 586 662
15% 12% 516
11% 11% 11% 1,000 135 455
10% 14% 14% 8% 379
800 298
11% 4% 11% 11% 10% 600
5% 692 678 631
7% 400 593 644
5% 5% 4% 502
0% 4%
200
1% 108 117 159 201 201
- 95
-5% -2%
FY2017 FY2018 FY2019 FY2020 FY2021 11M FY22
FY2018 FY2019 FY2020 FY2021 11M FY22 FY2022 FY2023 (P)
(est.) Fire Motor total Health PA Crop
Industry growth (RHS) Public growth (RHS) Private growth (RHS) Engineering Marine Liablity Others Grand total
Source: ICRA Research, GI Council, IRDAI; figs in Rs. billion Source: ICRA Research, GI Council, IRDAI; figs in Rs. billion
The industry GDPI growth slowed down to 4% and stood at Rs. 1.86 billion in FY2021, affected by the pandemic. India experienced stricter nationwide and local lockdowns in FY2021, hindering
economic activity across the nation. The GDPI growth was largely affected by the decline in the motor and crop businesses in FY2021. With relaxation in lockdown restrictions, the growth
picked up in H2 FY2021. The private sector posted GDPI growth of 8% in FY2021, while the PSU GDPI declined by 2% in FY2021. The general insurance industry recovered strongly in FY2022
posting YoY growth of 11% (E) in the GDPI for the fiscal, backed by the strong growth in the health insurance and fire businesses.
The share of private players had increased steadily over the last five years. Post FY2018, PSU entities incurred higher underwriting losses and erosion in capital, constricting their growth.
Further, the Omicron-driven third wave of the pandemic struck the Indian economy in Q1 FY2022. However, it had a lower impact on businesses as the nation experienced localised lockdowns
compared to the national lockdowns in the previous two waves of the pandemic.
ICRA expects the industry GDPI to grow by 10-12% to Rs. 2.2 trillion in FY2023. PSU insurers’ GDPI is expected to grow moderately at 4-6% while private insurers are expected to capture
market share by growing at a higher rate of 13-15% in FY2023. The GDPI from the health segment and commercial lines (fire, marine and engineering) is expected to grow at a higher rate
than the motor segment. Economic uncertainty due to structural challenges in the automobile industry and demand pressures, given the inflationary environment, pose downside risk to the
growth in FY2023.
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PRIVATE PLAYERS CONTINUE TO GAIN MARKET SHARE
EXHIBIT 5: GDPI share between private and public sector entities EXHIBIT 6: GDPI trend for private and PSU insurers
100% 1,200
90%
1,000
80%
50% 52%
70% 58% 59% 61% 63% 800
60%
50% 600 1137 1169
1056
40% 930
400
30% 678 737 686 730 718 683
50% 48% 597 586
20% 42% 41% 39% 37% 200
10%
0% -
FY2017 FY2018 FY2019 FY2020 FY2021 11M FY22 FY2017 FY2018 FY2019 FY2020 FY2021 11M FY22
Public Private Public Private (including standalone health)
PSU insurers continue to lose market share due to pricing competition and low capital buffer owing to high underwriting losses, thereby restricting their investment in technology and
expansion of distribution channels. Growth was further hampered during the pandemic (-2% YoY to Rs. 718 billion in FY2021) as PSU insurers were slower to adjust to the online mode of
growth, while they were focused on conserving capital and improving their operating efficiency. Increasing health awareness, post the onset of the pandemic, facilitated higher health
insurance business for PSUs, thereby supporting the GDPI growth of 5% in 11M FY2022.
Private sector players had a high growth trajectory during FY2017 to FY2020. The GDPI growth for the private sector moderated to 8% in FY2021, as it has a high share of the motor insurance
business, which was impacted in FY2021 due to the pandemic. However, private sector players were able to adapt to the changing business dynamics at a faster pace compared to PSU
players. Private sector GDPI growth recovered to 14% in 11M FY2022, backed by the strong growth in the health and fire segments and improved growth in the motor segment. However,
the motor business remains affected due to the structural challenges in the automobile industry. The private sector, with a relative better risk framework, was able to increase the market
share in the commercial insurance business – fire, marine and engineering. In addition, it had a higher share in underwriting crop insurance in FY2021 and FY2022.
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HEALTH AND FIRE SEGMENTS FUEL GROWTH IN FY2022
EXHIBIT 7: GDPI trend by segment for PSUs EXHIBIT 8: GDPI trend by segment for private sector players
1,200 1,200 1,137 1,169

1,056
1,000 930
1,000 149 125
730 718 737 148
800 678 686 683 800 157
597 586 313 355
79 41 119 270
600 57 51 12 600
37 220
246 273 99 162
400 217 235 307 400
191 107 445 434
438
317 382
200 276 262 254 232 200 265
237 196
84 45 56 65 89 117 123
- 51 52 53 70 78 -
Fire Motor total Health PA Crop Fire Motor total Health PA Crop
Engineering Marine Liablity Others Grand total Engineering Marine Liablity Others Grand total
The motor and health segments drive the industry with a 36% and 34% share, respectively, in the total GDPI in 11M FY2022. The share of the motor segment has reduced over the years (42%
in FY2017) with the increasing share of the health segment (28% in FY2017) and the fire segment (11% in 11M FY2022 from 8% in FY2017).
Motor: The motor premium growth declined by 2% in FY2021 because of the pandemic while growth was subdued at 4% in 11M FY2022 due to demand and supply chain challenges across
the automobile industry. The impact on growth was more severe for PSU entities compared to the private sector players, partly due to the high underwriting losses in FY2019 and FY2020.
ICRA expects moderate business growth in FY2023, given the structural challenges in the automobile industry. However, some of the growth concerns are expected to get assuaged, given
the proposed hike by the regulator in the motor-TP insurance premium charged by insurers.
Health: The premium in the health segment, which grew by 12% YoY in FY2020 and FY2021, experienced a steep growth of 26% in 11M FY2022 (annualised) with growing awareness of
medical insurance and increase in the premiums amid the pandemic. Both the public and the private sector were able to register a strong growth of 23% and 29%, respectively, in 11M
FY2022.
Fire: The fire segment premium had seen a healthy growth of 35% and 27% YoY in FY2020 and FY2021, respectively. A large part of the increase was due to higher minimum reinsurance rack
rates, which brought about a price correction across the general insurance industry. In 11M FY2022, the GDPI from the fire segment grew by 8% despite partial lockdowns across the country.
The private sector had a higher growth due to the better-defined risk management of larger portfolios.
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ROBUST GROWTH IN HEALTH SEGMENT IN 11M FY2022, THOUGH LOSS RATIO REMAINED HIGHER AMID THE PANDEMIC
EXHIBIT 9: GDPI trend for health & PA segment EXHIBIT 10: Net loss ratio trends for the health & PA segment
140% 119%
800 723
700 637 120% 110% 100% 93% 93%
97%
568
600 509 100%
500 423 394
348 80%
400 334 309
257 60% 128%
120%
300 190 110% 107% 103% 101% 101%
129
40% 77% 76% 73% 79%
200 71%
288 328
233 252 259 20%
100 205
- 0%
PSU Private Total PSU (%) Private (%) Combined
Source: ICRA Research, GI Council, IRDAI; figs in Rs. billion Source: ICRA Research, GI Council, IRDAI; excluding standalone health insurers
The health insurance business can be classified into Government-sponsored health insurance, group health insurance (other than Government-sponsored) and individual health insurance.
In terms of contribution in FY2021, the share of the group business was the highest at 48% (51% in FY2020), followed by the individual business at 44% (39% in FY2020) and Government
business at 7% (10% in FY2020) (Source: IRDAI annual report 2021). Further, the personal accident (PA) business formed around 8% of the health GDPI in FY2021. The total lives covered
increased by 3% YoY to 51 crore in FY2021. Maharashtra, Tamil Nadu, and Karnataka covered ~55% of the total health premium in FY2021.
The health & PA business grew at a stable rate of 12% in FY2020 and FY2021. It witnessed robust growth of 26% in 11M FY2022 with growing awareness of medical insurance and increase in
the premiums for specific products amid the pandemic. The share of the private sector (including standalone health insurers) in health GDPI grew consistently to 55% in 11M FY2022 from
39% in FY2017 with higher focus on the individual and group businesses. While a large portion of the Government business is with PSU entities, the profitability of these products is low.
Hence, with declining Government business in FY2020 and FY021, the growth of PSU health businesses was lower compared to the private sector.
The loss ratios for PSU entities had been historically high but the same improved gradually due to the change in the product mix and pricing revisions. However, the net loss ratio across the
health segment increased significantly in 9M FY2022 because of the higher claims on account of the third wave. To contain the net loss ratio, insurers took steps by discontinuing Covid-
specific policies and increasing the premium rates from Q3 FY2022. ICRA expects the net loss ratio to be lower in FY2023 with the waning of severe Covid-19 infections.
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MOTOR SEGMENT IMPACTED BY STRUCTURAL CHALLENGES; REVISION IN MOTOR-TP PRICING TO MARGINALLY SUPPORT PREMIUM GROWTH
EXHIBIT 11: GDPI trend in motor segment EXHIBIT 12: Net loss ratio trends in motor segment
300 427 500
417 140%
380 386
250 400
330 120%
200 265 300 100%
150 264 265 266 261 245
237
200 80%
100
50 100 60%
- 1 0 40%
Private Motor OD Private Motor TP PSU Motor OD PSU Motor OD (%) PSU Motor TP (%)
PSU Motor TP Motor OD Total (RHS) Motor TP total (RHS) Private Motor OD (%) Private Motor TP (%)
Source: ICRA Research, GI Council, IRDAI; figs in Rs. billion Source: ICRA Research, GI Council, IRDAI
The motor insurance product is designed to protect vehicle owners against damages to their own vehicles (own damage (OD) category) and to pay for any third-party liability arising from
damage to someone else’s vehicle (TP category) in multiple scenarios like accidents, theft and natural calamities. The regulator has specified the minimum obligation with respect to the
motor-TP business to be carried by an insurer for each financial year vide IRDAI (Obligations of Insurers in respect of Motor Third Party Insurance Business) Regulations, 2015. Out of the 25
general insurers, 9 did not comply with the minimum obligation in FY2021.
The motor insurance segment has traditionally been the biggest segment for the general insurance industry, but its share declined gradually to 34% in FY2021 (36% in 11M FY2022) from 47%
in FY2017. The motor GDPI declined by 2% in FY2021 due to the pandemic-related lockdowns, resulting in lower economic activity and vehicle sales. Private sector motor GDPI grew by 2%,
while PSU motor GDPI declined by 9% in FY2021. The motor business recovered in 11M FY2022 with the relaxation in lockdown restrictions, though it reported muted growth of 4% due to
the structural challenges in the automobile industry. Two-wheeler demand remains subdued due to higher fuel prices and the price hikes undertaken by original equipment manufacturers
(OEMs) owing to rising input costs. Also, the lower disposable income of consumers of entry-level vehicles and weak rural demand are influencing the slump in demand. Further, ICRA expects
lower growth in passenger vehicle sales because of the lost production due to semi-conductor shortage. ICRA expects motor business growth to remain moderate in FY2023, given the
structural challenges and the risk of higher commodity prices. However, some of the growth concerns are expected to be assuaged though marginally, with the proposed hike by the regulator
in the motor-TP insurance premium charged by insurers.
PSU entities were struggling with high loss ratios on the motor-TP products due to weak underwriting and higher share in the commercial vehicle segment. In FY2021, the loss ratios for both
PSUs and the private sector players had declined because of restricted vehicle movement amid lockdowns, resulting in lower accident rates. The net loss ratio reverted to normal levels in
FY2022 with the increase in vehicle movement post relaxation in the lockdown restrictions.
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RECOVERY IN ECONOMIC ACTIVITY AND REVISION IN PREMIUM RATES LED TO HIGHER GROWTH IN FIRE SEGMENT
EXHIBIT 13: GDPI trend in fire segment EXHIBIT 14: Net loss ratio trends in fire segment
250 120%
201 201 91%

100% 83% 79%
200 84%
65% 69%
159
80%
150
117 117 123
108 60%
95 89
100 91% 91% 98%
65 40% 86%
45 56 68% 74%
67% 61%
51% 57% 57%
50 48%
84 78 20%
70
51 52 53
- 0%
PSU Private Total PSU (%) Private (%) Combined
Fire insurance products cover factories, buildings, offices, warehouses and other structures against losses due to fire. The fire segment accounted for 11% of the overall GDPI in FY2021 and
11M FY2022 (8% in FY2017). The total premium had grown 35% in FY2020 and 27% in FY2021 primarily due to the revision in the premium rates. GIC Re had increased the premium rates for
219 occupancies in January 2020. As a result, the industry also increased the premium rates, leading to better growth and profitability for the products. The increase in rates had helped the
PSU entities, especially in improving their loss ratios in the fire segment. Although the fire insurance segment was impacted during the pandemic, the recovery of economic activity, post
relaxation of lockdown restrictions, aided business growth of 8% in 11M FY2022.
The net loss ratio for the fire segment improved in FY2021 for both PSU and private players as the occurrence of natural calamities was lower and so was economic activity (due to the
lockdowns). With the normalisation of economic activity, the net loss ratio increased to FY2022 and ICRA expects the net loss ratio to increase marginally in FY2023 as the economy operates
at full capacity.
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CROP SEGMENT GROWTH IMPACTED BY CHANGE IN REGULATIONS AND LOWER PARTICIPATION OF PSU INSURERS
EXHIBIT 15: GDPI trend in crop segment EXHIBIT 16: Net loss ratio trends in crop segment
350 323 312 160%

280 140%
300 255 267
95 109%
120% 101% 97%
250 204 72 121 95% 93%
100% 87%
79
200 130
69 80%
150 148
157 60%
119 149
100 40%
99 125
122%
115%
120%
101%
102%
153%
109%
101%
78%
54%
86%
89%
95%
92%
87%
92%
61%
75%
50 79 20%
37 57 51 41
- 12 0%
Public Private AIC Total PSU (%) Private (%) AIC Combined
Crop insurance for the public and private sector players is primarily through the Pradhan Mantri Fasal Bima Yojana (PMFBY) or yield-based crop insurance and a small per cent would be
through weather-based crop insurance. The area insured under the PMFBY had declined to 23,933 thousand hectares in FY2021 2(kharif season) from 27,177 thousand hectares in FY2020
and to 14,855 thousand hectares in FY2021 (rabi season) from 15,756 thousand hectares in FY2020. The total districts under coverage had declined to 404 in FY2021 (though marginally up
from 390 in FY2020) from 463 in FY2019. Crop GDPI declined by 3% and 5% in FY2021 and 11M FY2022, respectively, led by the significant decline in the PSU business. Excluding the AIC
business, the crop business declined by 16% and 20% in FY2021 and 11M FY2022, respectively.
Prior to FY2017, AIC used to handle more than 50% of the total business volume. Post FY2017, private sector participation had increased quite rapidly while PSU insurers reduced their share
after experiencing a higher net loss ratio during FY2018-FY2020. PSU insurers incrementally entered into co-insurance arrangements with AIC. Private players have fared better with lower
net loss ratios of 78% in FY2021, though the change in the regulations and political influence have halted the growth in private crop insurance. The crop segment witnessed a change in the
guidelines w.e.f. April 2020 such as schemes being made voluntary for loanee farmers, each district/cluster to be mandatorily allotted for three years and restriction in subsidies to states
from the Centre. The retention in crop insurance is low with most companies having retention below 25%. The net loss ratio improved in FY2021 and 9M FY2022 because of the good kharif
season. Nevertheless, the crop segment remains contingent on climatic conditions, which are unpredictable and expose it to risk.
2 Source: https://pmfby.gov.in/adminStatistics/dashboard
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PSUS CONTINUE TO HAVE HIGHER RETENTION RATIO; REINSURANCE PREMIUM IMPACTED BY DECLINE IN GIC’S SHARE AMID PANDEMIC
EXHIBIT 17: Retention trend EXHIBIT 18: Reinsurance premium
Private PSU
95%
90%
83%
83%
100%
81%
79%
100%
73%
69%
69%
65%
65%
64%
62%
63%
80%
59%
58%
80%
55%
55%
49%
47%
60% 60%
27%
24%
23%
40% 40%
18%
20% 20%
0% 0%
Motor
Overall
Marine Cargo
Fire
Others
Engineering
Marine Cargo
Motor
Others
Overall
Engineering
Fire
FY2020 FY2021 FY2020 FY2021
Source: ICRA Research, IRDAI annual report; retention as percentage of gross premium Source: ICRA Research, IRDAI annual report, figs in Rs. billion
Private general insurance companies have lower retention ratios across all business segments compared to PSUs. The retention ratio remains the highest in the motor segment and the
lowest in commercial business (fire and marine), as motor has higher retail business with lower sum assured. The net retention of general insurance companies increased to 70.82% in FY2021
from 66.33% in FY2020. All segments, other than aviation and engineering, reported an increase in net retention in FY2021.
As on March 31, 2021, 10 foreign reinsurance branches (FRBs), in addition to GIC Re and including Lloyd’s, were operating in India. The percentage of the sum insured on each general
insurance policy to be reinsured with the Indian reinsurer was notified as 5% in FY2021. This has been reduced to 4% effective April 01, 2022, boosting the prospects of foreign reinsurers.
The total reinsurance premium declined by 5% in FY2021 to Rs. 581 billion, primarily due to the decline in the GIC business. GIC formed the bulk of the reinsurance premium collections at
79% of the total in FY2021 (82% in FY2020). The GIC business was affected by lower premiums from crop insurance, because of the changes in regulations, and from the aviation segment
due to the pandemic. In FY2021, the miscellaneous segment (which includes crop insurance, aviation, etc) was the largest reinsurance segment at 32% (41% in FY2020), followed by the fire
segment at 29% (23% in FY2020). ICRA notes that the other reinsurance companies grew their reinsurance premiums by 11% in FY2021 with higher growth in the fire business due to the
revision in premiums. Further, the reduction in the minimum obligation for reinsurance to Indian reinsurers to 4% from 5% is expected to support foreign reinsurers.
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POTENTIAL FOR GENERAL INSURANCE IN INDIA REMAINS STRONG, GIVEN LOW PENETRATION AND DENSITY
EXHIBIT 18: Gross financial savings (as % of gross
EXHIBIT 17: General insurance density and penetration
domestic product)
Word GI - FY2021 India GI

8.8 20 0.97 0.94 1.00 1.2 12.5 3
6000 10 0.93
2.4 2.0
5000 18 12 2.3
8 1 2.2 1.8 2.5
16 0.78 0.8 0.77 11.5
4000 1.8 1.9 1.9 1.5
4.1 6 14 0.7 0.7 0.72 0.8 11 2
3000 3.3 3.1 12
1.7 4 10.5
2000 1.2 1.0 10 0.6 1.5
1000 2 10
5392 1341 50 1159 92 19 449 8
0.4 9.5 1
0 0 6
9
Advanced EMEA
USA and Canada
Advanced Asia Pacific
Emerging Asia Pacific
India
World
Emerging EMEA
10.4
10.5
10.4
10.7
10.4
11.9
11.0
11.0
0.5
10.5
11.5
13.2
0.2
9.9
8.5
18
10
11
11
19
19
19
2
0 0 8 0
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
FY2019
FY2020
FY2018
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
FY2019
FY2020
FY2021
Density (USD) Penetration (%) Density ($) Penetration (%) (RHS) Gross Financial Savings % Insurance funds % (RHS)
Source: ICRA Research, IRDAI annual reports, RBI annual reports Source: ICRA Research, IRDAI annual reports, RBI annual reports
Despite the country’s strong demographic profile, general insurance density levels have been rising at very low growth rates (compound annual growth rate (CAGR) of 6.6% during FY2011-
FY2021). The GoI has, over the years, announced various initiatives aimed at improving the penetration and density levels. Of late, the GoI has been making encouraging announcements
pertaining to foreign ownership in insurance companies, net owned funds (NOF) requirements for reinsurance companies, 100% foreign direct investment (FDI) in insurance intermediaries,
and setting up of a common insurance portal for selling products.
ICRA expects these steps to gradually start impacting the penetration and density of the sector in a positive manner. However, ICRA also believes that if India is to match the penetration and
density levels of western economies, emphasis must be placed on compulsory insurance in sub-segments like health, PA, property, etc. At present, only motor-TP insurance is compulsory for
individuals. The awareness level for insurance products also remains low, with 1.5% of the gross national disposable income for FY2020, parked in insurance funds, while savings in currency
and deposits hover at more than 5%.
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CLAIMS AGEING INCREASED IN FY2021 AMID OPERATIONAL CHALLENGES DURING THE PANDEMIC
EXHIBIT 19: Ageing of claims of PSU players EXHIBIT 20: Ageing of claims of select private players
60% 60%
50% 50%
41% 42%
40% 40% 36%
33%
29% 30% 29% 29%
30% 27% 30% 63% 25% 63%
57% 57% 58% 23%
53%
48% 45% 46%
20% 18% 20%
38% 37%
34%
10% 10%
0% 0%
Unsettled < 3 months ratio 1 year and above unsettled ratio Unsettled < 3 months ratio 1 year and above unsettled ratio
Source: ICRA Research, GI Council, IRDAI Source: ICRA Research, GI Council, IRDAI
ICRA has delved deep into the ageing of claims data for the selected players to understand the number of claims yet to be settled over a one-year period. Typically, a large portion of these
claims are motor-TP claims, which take a long time to be settled because of the legal process. Claims in the 1 year and above bucket tend to be lower for select private players because of the
technology-enabled settlement process, leading to claims resolution in a shorter time.
Due to the operational challenges in claims settlement amid the lockdowns in FY2021, the one year and above unsettled claims increased to 42% for PSUs (33% in FY2020) and 29% for private
sector entities (25% in FY2020). Both PSU and private sector players have been increasingly relying on out-of-court settlements to speed up the closing and to avoid high interest costs. During
the pandemic, the courts were closed for a longer period, which led to a longer settlement cycle.
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RETAIL CLAIMS EXPECTED TO REMAIN HIGH IN FY2022 LED BY HIGHER HEALTH CLAIMS POST SECOND WAVE
EXHIBIT 21: Claims settlement ratio EXHIBIT 22: Claims settlement metrics
Source: ICRA Research, IRDAI annual report and handbook Source: ICRA Research, IRDAI annual report and handbook; number of claims in million
The claims settlement ratio for the general insurance industry stood at 85% for FY2021 compared to 86% in FY2020. PSU entities have had higher claim settlements compared to private
sector players over the three years till FY2020. The claims repudiation ratio reduced to 2.3% in FY2021 (3.5% in FY2020) due to the reduction in the repudiation at the PSU entities (2.2% in
FY2021 from 4.2% in FY2020). With the increase in business, the number of claims booked had been increasing over the last three years as had the number of claims paid during the year.
However, retail claims reduced in the motor and health segments in FY2021 due to restricted vehicle movement and postponement of health treatment amid the pandemic.
ICRA expects the general insurance industry to report a higher number of retail claims in FY2022 as the lockdown restrictions were relaxed in FY2022 and the second and third waves of the
pandemic had a severe impact on the affluent population (having higher insurance penetration). Further, with the recovery in economic activity, claims from the motor and commercial
segments are expected to normalise in FY2022 and FY2023.
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IMPORTANT REGULATORY/INDUSTRY ANNOUNCEMENTS
1. Surety Insurance Contracts
Considering it necessary to promote and regulate the sustainable and healthy development of the surety insurance business, IRDAI issued The IRDAI (Surety Insurance Contracts) Guidelines,
2022 that became effective from April 1, 2022.
A surety insurance contract is a contract to perform the promise or discharge the liability of a third person in case of his default. This will enable an insurance company to underwrite risks
related to the infrastructure projects of the government or private companies. Also, the surety bond can be used for gold imports. The surety bond will act as a substitute for bank guarantees
provided by banks. The insurers can work with banks and non-banking financial companies (NBFCs) to share risk information, technical expertise for monitoring projects, and cash flow among
others. The surety contracts shall not cover any financial guarantee to source financing.
The parties to a contract are the surety, the principal debtor and the creditor wherein the surety is the party giving the guarantee (general insurance company), the principal debtor is the
party on whose default the guarantee is given, and the creditor is the party to whom the guarantee is provided. The guarantee limit shall not be more than 30% of the contract value and
cannot be issued on behalf of its promoters/their subsidiaries, groups, associates and related parties.
The six types of surety contracts that a general insurer can enter into are advance payment bond, bid bond, contract bond, customs and court bond, performance bond, and retention money.
Underwriting requirements of surety insurance business:
• Solvency margin of not less than 1.25 times of the control level of solvency
• Premium of surety business including future premium instalments should not be more than 10% of the total gross written premium (GPW) for that year, subject to a maximum of Rs.
500 crore
• Board-approved underwriting philosophy on surety insurance business, adequate underwriting competence and skills, risk management and required infrastructure for underwriting the
surety insurance
• Develop risk assessment mechanism/internal risk management guidelines to evaluate technical/financial strength of principal before and after underwriting the surety insurance business
The challenge of this product for an insurance company includes a) adequate pricing as the product is without collateral, b) availability of recourse in the event of default by the contactor, c)
underwriting expertise in terms of risk assessment such as setting the maximum limit of accumulation of risks per contractor and its group companies/firms and maximum retention limit for
risk accumulation, and d) reinsurance arrangement, among others. The surety business will act as an additional revenue generator for general insurers. Further, the Indian Contract Act, 1872
and The Insolvency and Bankruptcy Code, 2016 should be revised to put surety bonds at par with bank guarantees in terms of the recourse available to the insurers.
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2. Revision in motor-TP premium
In March 2022, the Ministry of Road Transport & Highways proposed a hike in the motor-TP rates. The motor-TP premium rate is set to increase in FY2023 after a gap of two years. The
motor-TP rates were not revised in the last two years due to the pandemic. The motor-TP rates are regulated by IRDAI. It is mandatory for a vehicle owner in India to buy motor-TP insurance
unlike motor-OD insurance, which is optional coverage. ICRA notes that general insurers typically witness a major share of the motor-TP premium from the goods carrying commercial vehicle
segment.
Existing Rate Proposed Revised Rate % Increase

Goods Carrying Commercial Vehicles (other than 3-wheelers)
Public Private Public Private Public Private
GVW not exceeding 7,500 kg 15,746 8,438 16,049 8,510 1.9% 0.9%
Exceeding 7,500 kg but not exceeding 12,000 kg 26,935 17,204 27,186 17,352 0.9% 0.9%
Exceeding 40,000 kg 41,561 24,825 44,242 25,038 6.5% 0.9%
Given the ongoing issues in the motor segment such as high petrol/diesel prices and semiconductor shortage among others, a major hike in the motor-TP rates would have further adversely
impacted vehicle demand. Hence, the proposed hike in motor-TP rates was nominal. Further, to support the use of environment-friendly electric vehicles, a discount of 15% on the existing
rate is being proposed. Also, a discount of 7.5% on motor-TP premium rates for hybrid electric vehicles is proposed.
3. IRDAI – Draft guidelines on remuneration and tenure of NEDs and MD/ CEO/ WTDs of Private insurers
In January 2022, IRDAI announced the draft guidelines related to the remuneration of Non-Executive Directors (NED), chief executive officers (CEOs) /whole time directors (WTDs) / managing
directors (MDs) of private sector insurers. The IRDAI draft guidelines also included a cap on the tenure and age limit of the MD & CEO and WTDs which was in-line with the existing RBI
guidelines. The purpose of the guideline is to ensure that there is no excessive risk taking due to inappropriate compensation structures or incentive plans. The detailed guidelines are as
below.
NEDs –
• Remuneration - The fixed remuneration of NEDs shall not be more than Rs. 20 lakh per annum for each director excluding chairman. The remuneration of the chairman may be decided
by the company’s Board of Directors. In addition to the remuneration to NEDs, the insurers may pay sitting fees and reimburse their expenses for participation in the Board and other
meetings. NEDs will not be eligible for ESOPs and a prior IRDAI approval will be required for any allotment of sweat equity.
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• Tenure and age limit - A NED can be on the board of an insurer for a maximum of 8 years, continuously or otherwise. After serving 8 years on the board, the person will be considered
for re-appointment only after a minimum gap of three years. The maximum age limit of NEDs including the chairman will be 75 years.
WTD/CEO/MD –
• Remuneration – The remuneration structure to include fixed pay (including perquisites) and variable pay. If the annual remuneration of the MD/ CEO/ WTDs individually is more than
Rs. 1.5 crore (payout in any name), then the additional amount will be borne by the Shareholders’ account. The variable pay to be at least 50% of the remuneration subject to maximum
300% of the fixed pay. The insurance company is required to lay down the performance parameter (weightage to quantitative of 70% and qualitative factors of 30%) to determine the
variable pay. The variable pay should be reduced and can be reduced to zero if there is,
» deterioration in the financial performance of the insurer, or
» misconduct of the CEO/WTD/MD result in high losses for the insurer or significant adverse outcomes for its customers or other stakeholders, or
» fraud, gross negligence or material failure of risk management controls, including serious breach of internal rules or regulations have been observed, regardless of the scale of the
damage.
Limit Payout
Variable pay is up to 200% of the fixed pay Minimum of 50% of the variable pay should be through non-cash instruments (ESOPs)
Variable pay is above 200% of the fixed pay Minimum of 70% of the variable pay should be through non-cash instruments
A minimum of 50% of the variable pay must be deferred on ‘no faster than pro-rata’ basis (should not be frontloaded) in three years. However, if the variable pay is below Rs. 15 lakh,
then deferment may not be required. Also, the remuneration deferred will be subject to malus/clawback arrangement in case of weak performance.
• Tenure and age limit - The MD & CEO or WTD can hold the position for a maximum of 15 years. The individual will become eligible for re-appointment as MD&CEO or WTD at the same
insurer after a minimum gap of 3 years. While a promoter or major shareholder (with stake of > 5%) can hold the position of MD & CEO or WTD for a maximum of 12 years. IRDAI may
extend the tenure of promoter or major shareholder acting as MD & CEO or WTD to 15 years in extraordinary circumstances. The maximum age limit to continue as MD & CEO or WTD
is 70 years.
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FINANCIAL PERFORMANCE & ANALYSIS
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COMBINED RATIO OF PSUS REMAINS HIGHER; CLAIMS SOARED IN 9M FY2022 POST SECOND WAVE
EXHIBIT 23: Combined ratio – PSUs EXHIBIT 24: Combined ratio – Select private players
140% 133% 132% 128% 140% 140% 140%

130%
5% 123% 8% 8% 117%
120% 8% 120% 7% 120% 106% 111%
25% 22% 8% 8% 120% 101% 102% 105% 104% 103% 120%
26% 19%
100% 21% 24% 100%
24% 100% 30% 29% 100%
25% 24% 28% 28% 27%
80% 80%
80% 80%
60% 60%
100% 94% 104% 98% 101% 60% 60%
40% 88% 85% 40% 79% 76% 76% 80%
76% 73% 74%
20% 40% 20% 40%
0% 20% 0% 20%
-20% 0% -20% 0%
FY2017 FY2018 FY2019 FY2020 FY2021 9M FY21 9M FY22 FY2017 FY2018 FY2019 FY2020 FY2021 9M FY21 9M FY22
Claims Ratio Expense Ratio Claims Ratio Expense Ratio

Net Commission Expenses / NPE Combined ratio (RHS) Net Commission Expenses / NPE Combined ratio (RHS)
Source: Company disclosures, ICRA Research Source: Company disclosures, ICRA Research
PSU players have been experiencing a higher combined ratio due to price competition, weak underwriting practices and systems and presence in Government schemes. It gets aggravated
with higher retention by PSUs, leading to higher claims and commission expenses. However, PSUs have been focusing on rationalising the operating expenses, primarily employee benefit
expenses and branch networks. Select private players continue to grow their distribution channels and invest in technology, leading to higher operating expenses.
The combined ratio for the overall industry (PSUs and select private players) improved to 112% in FY2021 from 119% in FY2020 supported by the lower net loss ratio in FY2021. The net loss
ratio remained lower at 81% in FY2021 compared to 87% in FY2020 with lower claims in the motor and commercial segments. Overall economic activity was hampered by stricter lockdowns
in FY2021, leading to lower claims from the fire and marine businesses. In addition, vehicle movement was restricted, leading to fewer road accidents. The improvement in the net loss ratio
in FY2021 was more optical for PSUs compared to select private players.
The combined ratio across the industry deteriorated to 119% in 9M FY2022 from 112% in 9M FY2021 due to higher claims. The general insurance industry experienced higher claims in the
health segment during and after the second wave of the pandemic. Non-Covid health claims also soared in FY2022 because of increasing morbidity post Covid infection. Further, with the
relaxation in lockdown restrictions, vehicle movement normalised, resulting in higher claims in the motor segment.
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LOSS RATIO IN HEALTH AND MOTOR SEGMENTS DETERIORATED IN 9M FY2022
EXHIBIT 25: Net loss ratio by segment – 9M FY2022 EXHIBIT 26: Net loss ratio by segment – 9M FY2021 EXHIBIT 27: Covid claims settled
140% 122% 140% 140% 123% 140% 30.0 300.0

250
120% 120% 120% 88% 120% 25.0 250.0
93% 27.5
100% 84% 100% 100% 79% 100%
77% 79% 76% 80% 81% 78% 76% 20.0 200.0
68% 74% 72%
80% 80%
Number
Amount
80% 62% 60% 80%
33% 50% 15.0 150.0
60% 60% 60% 60%
10.0 78.3 77 100.0
40% 40% 40% 40% 50 45
20% 20% 5.0 8.5 7.8 50.0
20% 20% 6.2
5.0
0% 0% 0% 0% - 0.0
ENGINEERING
TP
MARINE
FIRE
MOTOR
CROP
OD
OTHERS
CUMULATIVE
HEALTH
MARINE
ENGINEERING
TP
FIRE
MOTOR
CROP
OD
OTHERS
HEALTH
CUMULATIVE
FY21 Q1 FY22 Q2 FY22 Oct 21 to Total
Feb 22
PSU Private Combined sector (RHS) PSU Private Combined sector (RHS) Number of Covid claims (in lakhs) Amount of covid claims (Rs. Billion)
Source: Company disclosures, ICRA Research Source: Company disclosures, ICRA Research Source: Company disclosures, ICRA Research
The cumulative net loss ratio for the combined sector (PSUs + select private players) deteriorated to 93% in 9M FY2022 from 76% in 9M FY2021. The net loss ratio of PSU insurers deteriorated
to 102% in 9M FY2022 from 85% in 9M FY2021, while it deteriorated to 79% in 9M FY2022 from 74% in 9M FY2021 for select private players. The industry witnessed higher net loss ratios
from the health and motor segments in 9M FY2022.
As per the insurance regulator, general insurers settled 27.5 lakh Covid-related health claims, amounting to Rs. 250 billion between March 2020 and February 2022. The industry settled
claims amounting to Rs. 78 billion in FY2021, while Covid claims touched Rs. 77 billion in Q1 FY2022 only. As the second wave receded, the claims burden of insurers also fell. Covid claims
accounted for 6% of the total number of health claims paid in FY2021 and are expected to increase to 11-12% of the total number of health claims paid in FY2022.
With the resumption of economic activity in FY2022, private and commercial vehicle movement was back to normal and even surpassed the pre-Covid level (with higher restrictions for public
transport), leading to higher claims because of road accidents.
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NET PROFITABILITY LARGELY SUPPORTED BY INVESTMENT INCOME
EXHIBIT 28: Underwriting & investment income – PSU Insurers EXHIBIT 29: Underwriting & investment income – Private players
200.0 40.0% 200.0 40.0%
29.4% 27.5%
26.6% 25.4% 21.4%
150.0 22.6% 30.0% 150.0 21.7% 21.5% 22.3% 30.0%
20.4% 19.7% 19.3% 21.0%
18.5%
100.0 20.0% 100.0 12.6% 20.0%
158 156 9.4% 10.7% 8.7% 11.0%
132 153 145 8.4% 8.0%
50.0 4.8% 97 111 10.0% 50.0 10.0%
-5.9% -2.4% 0.6% 69 76 86 107 122 88 107
-5.2% -6.4%
- 0.0% - (15) (16) 0.0%
-9.8% (26) (22) (30) (32) (51)
(50.0) (82) -10.0% (50.0) -3.9% -3.9% -10.0%
(126) -4.8% -5.6% -5.7%
(157) (135) (137) -8.1%
(185) (187) -10.8%
(100.0) -20.0% (100.0) -20.0%
-17.9%
(150.0) -23.5% -21.7% -30.0% (150.0) -30.0%
-27.9%
(200.0) -31.9% -33.4% -32.4% -40.0% (200.0) -40.0%
FY2017 FY2018 FY2019 FY2020 FY2021 9M FY21 9M FY22 FY2017 FY2018 FY2019 FY2020 FY2021 9M FY21 9M FY22
Total Underwriting surplus /(loss) (Rs Bn) Investment income (Rs Bn)
Total Underwriting surplus /(loss) (Rs Bn) Investment income (Rs Bn)
Underwriting surplus (loss)/NPE Net investment income/NPE Underwriting surplus (loss)/NPE Net investment income/NPE
PAT/NPE PAT/NPE
Source: Company disclosures, ICRA Research; Amount in Rs. billion; net investment income includes realised gains Source: Company disclosures, ICRA Research; Amount in Rs. billion; net investment income includes realised gains
PSU insurers have frequently been reporting underwriting losses higher than the investment income, leading to net losses. Of the four public insurance companies, only one (The New India
Insurance Company Limited) has been reporting net profits for the last many years. The Central Government has directed the public sector general insurance firms to rationalise their branches
and reduce avoidable expenses to improve their operating profitability. With a higher combined ratio, the underwriting loss/ net premium earned (NPE) increased to -27.9% in 9M FY2022
from -17.9% in 9M FY2021, while investment income grew to only 22.6% from 20.4% during this period, thereby leading to higher net losses.
With better underwriting capability and risk pricing, select private players have been restricting the underwriting losses below the investment income, thereby earning operating profits. They
had a higher share in the health segment in 9M FY2022 and witnessed a considerable increase in the underwriting losses, though the same remained below investment income. Underwriting
losses/NPE grew to -10.8% in 9M FY2022 from -3.9% in 9M FY2021, while investment income grew to 22.3% in 9M FY2022 from 21.5% in 9M FY2021. As the insurance market matures, ICRA
expects more private sector insurers to start reporting underwriting profits, driven by improved risk pricing and leveraging of technology.
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IMPROVEMENT IN COMBINED RATIO TO DRIVE PROFITABILITY IN FY2023
EXHIBIT 30: Profitability trend – PSU insurers EXHIBIT 31: Profitability trend – Select private players
140% 133% 20.0% 140% 20.0%
132% 17.5%
128% 16.1% 18.0%
127%
130% 126% 10.0% 130% 14.6%
123% 13.8% 14.6% 16.0%
10.1% 120%
124% 14.0%
120% 0.0% 120% 12.1%
11.3%
11.7% 12.0%
110% -10.0% 110% 10.0%
-6.0% -13.0% 108%
111% 110% 8.0%
100% 106%
-15.1% -17.8% -20.0% 100%
102%
105% 104% 6.0%
-19.1% -18.1% 101%
4.0%
90% -37.4% -30.0% 90%
2.0%
80% -40.0% 80% 0.0%
FY2018 FY2019 FY2020 FY2021 9M FY22 FY2022 FY2023 (P) FY2018 FY2019 FY2020 FY2021 9M FY22 FY2022 FY2023 (P)
(est.) (est.)
Combined ratio (RHS) RoAE Combined ratio (RHS) RoAE
Source: Company disclosures, ICRA Research; Amount in Rs. billion Source: Company disclosures, ICRA Research; Amount in Rs. billion
The industry’s combined ratio is expected to improve in FY2023, driven by lower health claims and the expected improvement in risk pricing by the insurers. Insurers have revised the premium
for certain health insurance products from H2 FY2022, while the regulator has also issued draft guidelines for a revision in the motor-TP premium for FY2023.
As per ICRA’s estimates, the combined ratio for PSU insurers is expected to improve moderately to 124-126% in FY2023 from 127% (E) in FY2022 supported by various cost-cutting measures
directed by the Central Government, and better claims performance. While the underwriting performance is expected to remain weak, the same would be partially offset by investment
income. PSU insurers are expected to continue to post net losses in FY2023 with negative RoAE. With better risk pricing and underwriting practices, private players are expected to report a
combined ratio of 106-108% in FY2023 with RoAE of 11.7-14.6% in FY2023.
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G-SECS DOMINATE INVESTMENTS; EQUITY MIX REMAINS HIGHER FOR PSU INSURERS, EXPOSING THEM TO MARKET VOLATILITY
EXHIBIT 32: Aggregate investment book of PSU EXHIBIT 33: Aggregate investment book of select private players
2,000 10.0% 2,000 1,818 10.0%
1,655 1,690
1,536 1,499 1,553
1,268 1,335 1,393 8.0% 1,379 8.0%
1,500 1,220 1,500 7.8% 7.3% 7.2%
1,158 7.1%
7.3% 6.0% 946 6.7% 6.7% 6.0%
7.5% 6.8% 6.6% 6.6% 6.4%
1,000 6.4% 1,000 768
5.8%
4.0% 4.0%
500 500
2.0% 2.0%
- 0.0% - 0.0%
Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Dec-20 Dec-21 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Dec-20 Dec-21
Equity Shares GOI Securities Equity Shares GOI Securities

Debentures / Bonds Infrastructure / Social sector
Debentures / Bonds Infrastructure / Social sector Other Approved Securities Other securities
Other Approved Securities Other securities TOTAL Yield on investments (RHS)
Source: Company disclosures, ICRA Research; Amount in Rs. billion Source: Company disclosures, ICRA Research; Amount in Rs. billion
The investment operations of insurance companies in India are governed by IRDAI regulations. The EXHIBIT 34: Fair value change account
investment book for the sector (PSUs and select private players) increased 14% YoY to Rs. 3.47 trillion as
on December 31, 2021. Around 42% of the investment book comprised G-Secs and quasi-sovereign 44% 41% 50%
40% 40%
34% 36%
securities, while equities stood at 17%. 30% 40%
26% 19% 30%
The investment book of PSUs increased by 10% YoY to Rs. 1.65 trillion with investment in G-Secs stable at 16%18%
8% 20%
44% while equity securities reduced marginally to 30% (31% as on December 31, 2020). PSU insurers have 1% 1% 1% 1%1% 1% 10%
0% 0% 0% 0% 0% -1%
a legacy of equity investments, the valuation of which has grown significantly, leading to huge unrealised 0%
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
gains. PSU insurers held FVCA balance (which represents unrealised gain/(losses) arising due to changes -10%
in the fair value of listed equity shares and derivative instruments) of Rs. 318 billion as on December 31,
2021, representing around 19% of the total investments. However, the share of FVCA in the total
FVA as % of invt - Pvt FVA as % of invt - PSU
investments of PSU insurers has been declining from a high of 44% with the reducing share of equity in
total investments. Source: Company disclosures, ICRA Research
Given the weak solvency profile of PSU insurers, the GoI has approved the use of the FVCA balance for the calculation of their solvency profile.
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The investment book of select private sector players increased by 17% YoY to Rs. 1.82 trillion as of December 31, 2021. Unlike PSU insurers, the equity share for select private players remained
low at ~6% as on December 31, 2021. The share of G-Secs remained high at 41% of the total investments as on December 31, 2021, up from 36% as on March 31, 2020. In terms of risk
appetite, while a few players have exposure to (permitted) lower-rated categories, most non-G-Sec debt exposures are to issuers with strong group backing.
Since the NBFC liquidity crisis in 2019, the share of investments in G-Secs improved while the share of investments in corporate bonds and infrastructure declined. As on December 31, 2021,
investments in corporate bonds and the infrastructure sector stood at 18% compared to 22% as on March 31, 2020 for PSU insurers, while it stood at 42% compared to 48% during this period
for select private players. Of the total debt securities, AAA/sovereign rated instruments formed around 82% for select private players and 95% for PSU insurers as on December 31, 2021.
Hence, insurers carry very low stressed exposures on their balance sheets.
EXHIBIT 35: Tenor-wise distribution of investments – PSUs EXHIBIT 36: Tenor-wise distribution of investments – Select private players
100% 100%
8% 11% 8% 8% 8%
10% 10% 12%
17% 16% 80% 80% 27% 26% 22%
29% 25% 26%
33% 28% 60% 60%

32% 30% 29% 35% 41%
30%
40% 40%
31% 33%
20% 20% 20% 20% 22%
20% 18% 17%
11% 12% 10% 10% 13% 15% 12% 12%
0%
0%
Mar-19 Mar-20 Mar-21 Dec-21
Mar-19 Mar-20 Mar-21 Dec-21
<1 Year 1 - 3 Years 3 - 7 Years 7 - 10 Years 10 - 15 Years 15 – 20 Years
<1 Year 1 - 3 Years 3 - 7 Years 7 - 10 Years 10 - 15 Years 15 – 20 Years
Source: Company disclosures, ICRA Research, Amount in Rs. billion Source: Company Disclosures, ICRA Research, Amount in Rs. billion
With bottomed interest rates and the expected reversal, private insurers reduced the share of long duration securities (above 7 years) to 29% as on December 31, 2021 from 35% as on March
31, 2020. Hence, the weighted average duration for select private insurers is expected to reduce as on March 31, 2022 compared to March 31, 2021. However, PSU insurers have increased
the share of long duration securities to 38% as on December 31, 2021 from 26% as on March 31, 2020, though the same declined marginally from 40% as on March 31, 2021. As on December
31, 2021, the market value of debt securities held by PSU insurers was 3% higher than the book value (compared to 1% for select private insurers), thereby providing a buffer for absorbing
the negative variance in the investment value in the rising interest rate scenario.
The yield on investments has been on a declining trend, given the falling interest rate scenario till 2021. Despite the high investment in equity shares, PSU insurers earned adequate yield on
investments (excluding realised gains) indicating high equity dividends. Private players with more active and better debt management earn higher yield on investments. With higher equity
investments and high FVCA, PSU insurers book gains from the sale of investments in order to restrict the overall net losses. Realised gains stood at 3.9% and 3.8% in FY2021 and 9M FY2022,
respectively for PSU insurers compared to 1.1% and 1.7%, respectively, for select private players. ICRA expects investment income to moderate slightly in FY2023 with a decline in realised
gains amid the rising interest rate scenario.
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SOLVENCY RATIO REMAINS COMFORTABLE FOR PRIVATE INSURERS, WHILE PSUS’ SOLVENCY LARGELY SUPPORTED BY GOI’S CAPITAL INFUSIONS
EXHIBIT 37: Solvency ratio of PSU insurers EXHIBIT 38: Solvency ratio of select private players
2.30
2.30 2.21
2.30 2.10 2.15
2.07 2.03 2.04
2.10 1.91 2.10
2.07
1.90 1.90
1.65 1.67
1.70 1.56 1.60 1.70
1.50 1.50
1.57
1.30 1.30
1.10 1.01 1.10
0.92
0.90 0.90
0.70 0.70
Mar-18 Mar-19 Mar-20 Mar-21 Dec-21 Mar-22 Mar-23 (P)* Mar-18 Mar-19 Mar-20 Mar-21 Dec-21 Mar-22 Mar-23 (P)*
(est.)* (est.)*
PSU Regulatory minimum Select Pvt players Regulatory minimum
ICRA notes that the well-established private insurers have solvency ratios comfortably above the regulatory minimum with better profitability, risk management and asset-liability
management.
Due to the weak underwriting performance, the solvency profiles of PSU insurers, except New India Assurance Company Limited, remain weak and are supported through capital infusions
by the GoI and regulatory forbearance. For the computation of the solvency ratio as on March 31, 2021, all four PSU insurers have been allowed to amortise their pension liability towards
OMOP over a period not exceeding five years from FY2019-20. Three of the four PSU insurers have been allowed to consider 65% of the FVCA as on March 31, 2021.
Over the last five years till FY2021, the GoI has infused around Rs. 15,000 crore of equity capital across all PSU insurers. The GoI equity infusion in weak PSU insurers in FY2020 and FY2021
was driven by the depleting FVCA reserves and the pandemic-led uncertainty. Further, due to the weak solvency profile as on December 31, 2021, the GoI infused Rs. 5,000 crore in three
weak PSU insurers in March 2022. Considering the said infusion, the solvency of PSU insurers is expected at 1.12x as on March 31, 2022 without regulatory forbearance. Assuming 100% FVCA
forbearance, the solvency is expected to improve to 1.67x as on March 31, 2022.
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As on December 31, 2021, weak PSU insurers had considerable FVCA balance as it formed EXHIBIT 39: FVCA to RSM for weak PSU insurers
around 92% of the required solvency margin (RSM). Hence, ICRA expects the regulator to
provide FVCA forbearance for the calculation of the solvency ratios of weak PSU insurers. 100% of FVA/RSM
158% 180%
ICRA estimates the solvency of PSU insurers at 1.57x to 1.60x as on March 31, 2023 at 100%
160%
FVCA forbearance. If the FVCA forbearance is reduced to 50%, ICRA estimates incremental GoI infused equity in FY2020 and FY2021
140%
equity capital requirement of around Rs. 350 crore for solvency of 1.3x and between Rs. 114%
120%
3,800 crore and Rs. 4,200 crore for solvency of 1.5x as on March 31, 2023. 92%
80% 100%
It should be noted that the solvency ratio of the PSU and private insurers includes the 80%
subordinated debt issuance in the past couple of years. The total subordinated debt 60%
outstanding of three of the four PSU insurers and select private insurers stood at Rs. 2,545 40%
crore and Rs. 1,603 crore, respectively, which added 0.12x and 0.09x to the solvency ratio, 0% 20%
respectively, as on December 31, 2021. The regulator has capped the sub-debt issuance by 0%
insurers based on the share capital, including the share premium and the net worth. Based -20%
on December 31, 2021, the select private players have capital buffer to issue additional sub- Mar-18 Mar-19 Mar-20 Mar-21 Dec-21
debt of Rs. 3,271 crore, which could add 0.16x to the solvency as on March 31, 2023, while
Source: Company disclosures, ICRA Research
only one PSU insurer has capital buffer to issue additional sub-debt of Rs. 679 crore.
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DIRECT BUSINESS AND BROKERS DOMINATE DISTRIBUTION CHANNEL; PSU INSURERS SOURCE CONSIDERABLE BUSINESS FROM INDIVIDUAL AGENTS
EXHIBIT 40: Channel-wise GDPI – Select private insurers EXHIBIT 41: Channel-wise GDPI – PSUs
100% 3% 5% 4% 100%
8% 8% 4% 2% 2% 2%
36% 33% 30% 26% 28% 29% 29% 30% 31%
80% 27% 28% 27% 80% 29% 32%
60% 60% 23% 22% 23%

20% 19% 26%
29% 29% 32% 34% 37% 30%
35% 39% 2% 2% 2%
40% 40% 1% 1% 1%
10% 1%
9% 8% 7% 6%
6% 5%
20% 11% 11% 11% 12% 11% 20% 43% 43% 42% 39% 41% 40%
10% 9% 35%
16% 16% 15% 15% 16% 13% 12%
0% 0%
Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Dec-20 Dec-21 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Dec-20 Dec-21
Individual agents Corporate Agents-Banks Corporate Agents -Others Individual agents Corporate Agents-Banks Corporate Agents -Others
Brokers Micro Agents Direct Business Brokers Micro Agents Direct Business
Referral (B) Referral (B)
The share of individual agents remains low for select private players compared to PSU insurers. However, the share of individual agents for PSU insurers is also on a declining trend but
remains high at 35%. Select private insurers have witnessed a consistent increase in the share of the brokers channel, partly due to the Motor Insurance Service Provider (MISP) guidelines,
which would have led to dealers signing up as insurance brokers. Further, the direct business channel has been a major distribution source for PSUs and private players in the health, fire and
crop segments. The companies largely source the motor business through brokers or corporate agents and the non-motor business from their employees. The share of the bancassurance
channel remains high at 8-12% for select private insurers compared to 1-2% for PSU insurers, as banks are allowed to distribute products of more than one insurance company and private
insurers tie up with banks due to their wide distribution reach. The leading general insurers are investing in the development of their infrastructure such as social media, website development
and tie-ups with e-commerce companies. ICRA believes that the general insurance companies are likely to leverage alternate channels such as digitalisation or online distribution, virtual sales
office and point of sale.
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COMFORTABLE LIQUIDITY PROFILE; PSU INSURERS CARRY HIGHER SHARE OF EQUITY INVESTMENTS AND CASH AND BANK BALANCES
EXHIBIT 42: Liquidity and liquidity buffer – Select private insurers EXHIBIT 43: Liquidity and liquidity buffer – PSU insurers
200,000 1.80 200,000 1.67 1.80

1.57
180,000 1.26 1.60 180,000 1.48 1.60
1.42 1.37
160,000 1.32 160,000
1.20 1.26 1.40 1.26 1.40
1.18 1.19
140,000 140,000
1.20 1.20
120,000 120,000
1.00 1.00
100,000 100,000
0.80 0.80
80,000 80,000
0.60 0.60
60,000 126,366 60,000
108,132
154,040
167,864
126,633
134,535
144,219
135,563
170,013
171,271
40,000 0.40 0.40
73,177
91,629
40,000
20,000 0.20 20,000 0.20
- - - -
Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Dec-21 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Dec-21
Total liquid assets Total liquid assets / total outflows (RHS) Total liquid assets Total liquid assets / total outflows (RHS)
Source: Company disclosures, ICRA Research ; Amount in Rs. crore Source: Company disclosures, ICRA Research; Amount in Rs. crore
Liquid assets3 across the sector was comfortable and adequate to cover the short-term maturing debt. The general insurance industry by regulations is not heavily leveraged (subordinated
debt can be raised at lower of 25% of paid-up capital including general reserve or 50% of the net worth). The liquidity cover of select private players had shown a steady improvement, though
the same reduced marginally in 9M FY2022 due to the higher reserving requirement because of the pandemic. The liquidity cover of PSU insurers remained consistently higher than select
private players because of the higher net receivables from other insurers. However, the timely receipt of such receivables remains critical for the liquidity management of PSU insurers.
Further, PSU insurers carry 8-12% of the liquid assets as cash and bank balances compared to 2-3% for select private players. As PSU insurers carry a higher share of equity investments, the
sharp decline in the equity market prices in March 20200 led to a drop in the liquidity cover. Though it recovered in FY2021, it dropped in 9M FY2022 because of the pandemic-related higher
reserving requirement. With stubbornly high underwriting losses, the PSUs have to rely on booking gains from the sale of investments to limit the impact on the bottom line.
3 Liquid assets are calculated by applying haircuts on the various investment classes (20% on equity, 10% on bonds, 7% on social and infrastructure debt, 1.5% on govt bonds, and 20% on all other investments) +
cash balance + net due from insurance entities; total outflow is calculated as total technical reserves + total debt maturing in 1 year; the liquid asset cover is taken as a median of the entities in the respective
universe
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COMPANY FINANCIALS
ICRA LIMITED
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Annexure 1: Combined Financial Indicators for 18 Insurers
Rs. billion All Players (18) Public Sector Players (4) Private Sector Players (14)
Year-ending Period Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21
Months 12 12 12 9 12 12 12 9 12 12 12 9
Gross Direct Premium Written 1,499.9 1,635.8 1,689.2 1,337.7 716.9 765.4 752.1 586.8 783.0 870.4 937.1 750.9
Net Premium Earned 1,068.6 1,134.3 1,243.7 971.8 564.1 586.7 647.0 497.5 504.5 547.6 596.7 474.3
Net Claims Incurred 924.7 969.9 954.1 873.3 575.1 568.9 546.0 498.1 349.6 401.1 408.1 375.1
Net Commission Expenses 55.1 52.8 64.4 44.0 44.1 46.8 52.5 35.6 11.1 6.1 11.9 8.4
Total Management Expenses 240.6 303.4 325.2 234.3 121.7 150.9 157.6 94.9 118.9 152.5 167.6 139.3
Total Underwriting Surplus (207.4) (217.0) (166.9) (188.0) (185.3) (187.4) (135.0) (137.2) (22.1) (29.6) (31.9) (50.8)
Net Investment Income 155.7 174.9 195.8 154.7 78.1 82.1 91.0 70.0 77.6 92.8 104.8 84.7
Operating Income Before Realised Gains (51.7) (42.1) 28.9 (33.3) (107.2) (105.3) (43.9) (67.2) 55.5 63.2 72.9 33.9
Total Realised Gains 86.5 85.2 71.0 63.6 77.9 70.9 54.3 41.2 8.7 14.3 16.8 22.4
Operating Income 34.8 43.1 99.9 30.3 (29.3) (34.4) 10.3 (26.0) 64.2 77.5 89.6 56.3
Total Other Income/ Expenses and provisions (11.0) (33.9) (29.0) (9.9) (4.2) (20.1) (20.5) (4.7) (6.7) (13.8) (8.4) (5.2)
Profit Before Tax 23.8 9.2 71.0 20.4 (33.6) (54.5) (10.2) (30.7) 57.4 63.7 81.2 51.1
Tax Provision 17.3 21.4 24.8 14.4 (0.7) 2.5 4.5 0.8 18.0 18.9 20.3 13.6
Profit After Tax 7.1 (12.2) 46.2 6.1 (32.9) (57.0) (14.7) (31.5) 40.0 44.8 60.9 37.6
BALANCE SHEET – LIABILITIES Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21
Paid-up Capital 85.7 117.8 219.0 199.0 12.7 37.7 137.2 137.2 73.0 80.1 81.7 61.7
Fair Value Change Account (FVCA) 362.8 86.9 297.9 345.2 359.1 102.3 279.6 318.9 3.8 (15.4) 18.3 26.3
Total Reserves 767.4 447.1 704.1 781.3 563.7 217.2 388.8 401.1 203.6 229.9 315.3 380.2
Reported Net Worth 853.1 564.9 923.1 980.3 576.5 254.9 526.1 538.3 276.6 310.0 397.0 442.0
Adjusted Net Worth (excl Fair Value Change) 490.3 478.0 625.2 635.1 217.4 152.6 246.5 219.4 272.9 325.4 378.8 415.7
Total Reserve for Unexpired Risk 559.1 595.2 659.4 668.7 276.6 285.4 308.6 315.6 282.5 309.8 350.8 353.0
Estimated Liability in Respect of Outstanding Claims 1,308.9 1,521.2 1,747.0 1,911.8 697.7 791.8 890.3 930.0 611.3 729.3 856.7 981.8
Total Technical Reserves 1,868.0 2,116.3 2,406.4 2,580.4 974.3 1,077.2 1,199.0 1,245.6 893.7 1,039.1 1,207.5 1,334.8
Subordinated debt 42.1 45.8 45.8 41.5 25.5 25.5 25.5 25.5 16.6 20.4 20.4 16.0
Total Current Liabilities 541.4 699.4 670.3 651.1 292.2 365.2 310.8 279.9 249.2 334.3 359.5 371.2
Total Liabilities 3,304.6 3,426.5 4,045.6 4,253.3 1,868.4 1,722.7 2,061.3 2,089.4 1,436.2 1,703.8 1,984.4 2,164.0
BALANCE SHEET – ASSETS Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21
Total Loans 6.0 6.7 6.9 6.1 6.0 6.7 6.9 6.1 0.0 0.0 0.0 0.0
Total Investments 2,550.1 2,599.8 3,225.4 3,472.4 1,392.5 1,220.3 1,535.5 1,654.6 1,157.6 1,379.5 1,689.9 1,817.9
Cash & Bank Balances 177.0 198.9 235.6 158.0 152.0 167.3 204.5 139.5 25.0 31.7 31.1 18.5
Net Fixed Assets 33.7 38.7 40.0 41.3 17.3 17.3 17.4 17.7 16.4 21.3 22.5 23.5
Total Advances and Other Assets 537.8 582.4 537.8 575.5 300.6 311.1 296.9 271.4 237.3 271.3 240.9 304.1
Total Assets 3,304.7 3,426.5 4,045.6 4,253.3 1,868.4 1,722.7 2,061.3 2,089.4 1,436.3 1,703.8 1,984.4 2,164.0
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All Players (17) Public Sector Players (4) Private Sector Players (13)
KEY FINANCIAL INDICATORS Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21
Months 12 12 12 9 12 12 12 9 12 12 12 9
Insurance Profitability
Net Claims Incurred / NPE (Claims Ratio) 91.3% 87.4% 81.1% 90.6% 103.5% 98.2% 87.9% 101.4% 76.4% 75.7% 73.4% 79.5%
Management Expenses / NPE (Expense Ratio) 22.5% 26.7% 26.2% 24.1% 21.6% 25.7% 24.4% 19.1% 23.6% 27.8% 28.1% 29.4%
Net Commission Expenses / NPE 5.2% 4.7% 5.2% 4.5% 7.8% 8.0% 8.1% 7.2% 2.2% 1.1% 2.0% 1.8%
Combined Ratio (A) 119.0% 118.9% 112.4% 119.3% 132.9% 131.9% 120.4% 127.6% 102.2% 104.6% 103.5% 110.6%
Net Investment Income/NPE (B) 14.9% 14.8% 15.2% 15.9% 13.5% 13.1% 12.6% 14.2% 16.7% 16.6% 18.0% 17.6%
Operating Ratio (A-B) 104.0% 104.1% 97.2% 103.4% 119.4% 118.8% 107.7% 113.4% 85.5% 88.1% 85.5% 93.0%
Trading gains / NPE 8.5% 7.7% 6.0% 6.6% 14.0% 12.2% 8.7% 8.4% 1.9% 2.7% 3.0% 4.7%
Investment Income / NPE (including Realised Income) 23.5% 22.4% 21.2% 22.4% 27.5% 25.4% 21.4% 22.6% 18.5% 19.3% 21.0% 22.3%
Overall Profitability
Underwriting surplus (loss)/NPE -20.5% -19.6% -14.2% -19.5% -33.4% -32.4% -21.7% -27.9% -4.8% -5.6% -5.7% -10.8%
PAT/ Average Assets Deployed 0.3% -0.4% 1.3% 0.2% -2.3% -3.7% -0.9% -2.4% 3.1% 2.9% 3.3% 2.5%
PAT/ Total Asset Base 0.2% -0.4% 1.2% 0.2% -2.2% -3.5% -0.8% -2.4% 2.8% 2.6% 3.1% 2.3%
PAT/ Reported Net Worth 0.8% -2.2% 5.0% 0.8% -5.7% -22.4% -2.8% -7.8% 14.5% 14.4% 15.3% 11.3%
PAT/ Adjusted Net Worth 1.4% -2.6% 7.4% 1.3% -15.1% -37.4% -6.0% -19.1% 14.6% 13.8% 16.1% 12.1%
PBT/NPE 2.4% 0.8% 6.0% 2.1% -6.0% -9.4% -1.6% -6.2% 12.6% 12.0% 14.6% 10.8%
PAT / NPE 0.7% -1.1% 3.9% 0.6% -5.9% -9.8% -2.4% -6.4% 8.7% 8.4% 11.0% 8.0%
Capacity
NPE / Reported Net Worth 125.3% 200.8% 134.7% 132.2% 97.8% 230.1% 123.0% 123.2% 182.4% 176.6% 150.3% 143.1%
NPE / Adjusted Net Worth 218.0% 237.3% 198.9% 204.0% 259.5% 384.4% 262.5% 302.3% 184.9% 168.3% 157.5% 152.1%
Technical Reserves/Reported Net Worth 219.0% 374.6% 260.7% 263.2% 169.0% 422.5% 227.9% 231.4% 323.1% 335.2% 304.1% 302.0%
Technical Reserves /Adjusted Net Worth 381.0% 442.7% 384.9% 406.3% 448.1% 705.8% 486.4% 567.6% 327.5% 319.3% 318.8% 321.1%
Net Claims Incurred / Reported Net Worth 108.4% 171.7% 103.4% 118.8% 99.8% 223.1% 103.8% 123.4% 126.4% 129.4% 102.8% 113.2%
Net Claims Incurred / Adjusted Net Worth 188.6% 202.9% 152.6% 183.3% 264.5% 372.8% 221.5% 302.7% 128.1% 123.2% 107.7% 120.3%
Liquidity
Cash + Liquid assets/ Technical Reserve 146.0% 132.2% 143.8% 140.7% 158.5% 128.8% 145.1% 144.0% 132.3% 135.8% 142.5% 137.6%
Technical Reserves/ Liquid Assets 68.5% 75.6% 69.5% 71.1% 63.1% 77.6% 68.9% 69.4% 75.6% 73.6% 70.2% 72.7%
FVCA / Tech Reserves 19.4% 4.1% 12.4% 13.4% 36.9% 9.5% 23.3% 25.6% 0.4% -1.5% 1.5% 2.0%
ICRA LIMITED
Page | 42
Annexure 2: Entity-wise Financial Indicators
Rs. billion New India United National
Months 12 12 12 9 12 12 12 9 12 12 12 9
P&L Statement
Gross Direct Premium Written 266.1 297.2 315.7 270.0 164.2 175.2 167.0 110.0 151.8 153.1 141.9 100.7
Net Premium Written 221.2 244.9 269.7 219.3 137.9 137.4 140.8 93.8 96.5 94.5 126.4 92.5
Net Commission Expenses 22.0 22.9 24.7 16.2 7.3 7.6 9.2 6.6 8.2 8.0 9.7 6.2
Total Underwriting Surplus (52.5) (41.0) (37.0) (43.9) (50.2) (44.0) (32.2) (30.6) (44.6) (57.6) (28.5) (26.4)
Net Investment income 31.9 34.5 36.6 29.8 19.0 19.7 21.1 14.5 14.1 13.5 16.7 13.4
Operating Income Before Realised Gains (20.6) (6.5) (0.4) (14.1) (31.3) (24.3) (11.1) (16.1) (30.5) (44.0) (11.8) (13.0)
Operating Income 7.8 28.9 29.0 11.3 (17.1) (12.2) (4.2) (11.1) (15.2) (38.1) (1.3) (6.6)
Profit Before Tax 6.4 16.4 20.4 8.2 (18.8) (14.9) (9.8) (11.9) (17.0) (41.1) (5.6) (6.8)
Tax Provision 0.7 2.2 4.3 1.1 0.0 0.0 0.0 0.0 (0.0) 0.0 (0.0) 0.0
Profit After Tax 5.8 14.2 16.0 7.1 (18.8) (14.9) (9.8) (11.9) (17.0) (41.1) (5.6) (6.8)
BALANCE SHEET - LIABILITIES Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21
Paid-up Capital 8.2 8.2 8.2 8.2 1.5 2.0 38.1 38.1 1.0 25.0 56.8 56.8
Fair Value Change Account (FVCA) 222.6 102.5 186.6 200.7 34.5 (6.2) 27.4 36.8 26.1 (16.6) 17.9 27.7
Total Reserves 372.0 251.5 356.3 378.5 62.5 6.9 30.6 28.1 26.8 (63.3) (33.0) (28.9)
Reported Net Worth 380.2 259.7 364.5 386.8 64.0 8.9 68.7 66.2 27.8 (38.3) 23.8 27.9
Adjusted Net Worth (excl Fair Value Change) 157.6 157.3 177.9 186.1 29.4 15.1 41.3 29.4 1.7 (21.8) 5.9 0.2
Estimated Liability in Respect of Outstanding Claims 231.1 259.7 299.8 316.3 182.8 212.9 235.4 241.0 158.8 178.7 198.4 204.7
Total Technical Reserves 337.5 376.6 424.5 443.8 252.2 282.3 306.6 309.7 206.8 224.4 258.1 265.6
Subordinated debt - - - - 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0
Total Liabilities 794.7 746.1 901.9 922.2 377.1 360.0 438.6 439.7 324.3 308.9 378.3 379.2
BALANCE SHEET - ASSETS Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21
Total Loans 2.8 3.1 3.2 3.2 1.4 1.8 1.9 1.1 0.4 0.4 0.3 0.3
Total Investments 591.9 513.8 663.6 716.1 316.6 279.3 339.3 363.3 236.9 220.5 292.8 306.2
Net Fixed Assets 5.2 4.9 4.2 4.4 2.5 2.7 2.6 2.8 3.7 3.7 5.1 5.4
Total Assets 794.7 746.1 901.9 922.2 377.1 360.0 438.6 439.7 324.3 308.9 378.3 379.2
ICRA LIMITED
Page | 43
New India United National
Months 12 12 12 9 12 12 12 9 12 12 12 9
Net Commission Expenses / NPE 9.9% 9.4% 9.1% 7.4% 5.3% 5.6% 6.5% 7.0% 8.5% 8.5% 7.7% 6.7%
Combined Ratio (A) 123.6% 116.4% 113.3% 120.0% 136.9% 132.0% 122.7% 132.7% 145.4% 160.8% 121.1% 128.6%
PAT/ Average Assets Deployed 1.1% 2.4% 2.4% 1.4% -5.7% -4.2% -2.6% -4.0% -5.6% -13.3% -1.7% -2.5%
PAT/ Total Asset Base 1.0% 2.2% 2.2% 1.3% -5.5% -4.1% -2.4% -4.0% -5.7% -12.6% -1.6% -2.6%
PAT/ Reported Net Worth 1.5% 5.5% 4.4% 2.4% -29.4% -166.4% -14.3% -24.1% -61.0% 107.2% -23.6% -32.5%
PAT/ Adjusted Net Worth 3.7% 9.0% 9.0% 5.1% -63.8% -98.4% -23.8% -54.2% -982.2% 188.8% -95.3% -5268%
PBT/NPE 3.0% 7.0% 7.8% 3.8% -14.3% -10.8% -7.1% -12.4% -16.3% -42.4% -5.0% -7.4%
PAT / NPE 2.7% 6.0% 6.1% 3.3% -14.3% -10.8% -7.1% -12.4% -16.3% -42.4% -5.0% -7.4%
Capacity
NPW / Reported Net Worth 58.2% 94.3% 74.0% 75.6% 215.6% 1538.9% 205.1% 189.0% 347.2% -246.6% 531.6% 442.4%
NPW / Adjusted Net Worth 140.3% 155.7% 151.6% 157.1% 468.5% 909.6% 340.9% 426.0% 5588.3% -434.4% 2143.8% 71764%
Technical Reserves/Reported Net Worth 88.8% 145.0% 116.5% 114.7% 394.2% 3161.6% 446.5% 468.1% 743.9% -585.5% 1085.2% 952.6%
Technical Reserves /Adjusted Net Worth 214.1% 239.5% 238.7% 238.5% 856.6% 1868.8% 742.3% 1054.8% 11972.9% -1031.5% 4376.5% 154538%
Net Claims Incurred / Reported Net Worth 53.9% 82.8% 60.6% 74.2% 224.1% 1561.9% 179.2% 189.5% 411.4% -267.4% 407.6% 443.0%
Net Claims Incurred / Adjusted Net Worth 130.0% 136.8% 124.2% 154.3% 486.9% 923.2% 297.9% 427.0% 6621.0% -471.2% 1643.7% 71859%
Liquidity
FVCA / Tech Reserves 66.0% 27.2% 44.0% 45.2% 13.7% -2.2% 8.9% 11.9% 12.6% -7.4% 6.9% 10.4%
Solvency ratio (times) 2.1 2.1 2.1 1.8 1.5 0.3 1.0 0.7 1.0 0.1 0.6 0.1
ICRA LIMITED
Page | 44
Rs. billion Oriental Bajaj Allianz ICICI Lombard
Months 12 12 12 9 12 12 12 9 12 12 12 9
P&L Statement
Net Commission Expenses 6.6 8.2 9.0 6.7 3.7 0.9 0.5 (1.0) 2.2 3.6 6.0 4.7
Total Underwriting Surplus (38.1) (44.8) (37.3) (36.2) 0.2 -0.1 2.4 0.2 -1.7 -1.1 (1.9) (9.9)
Operating Income Before Realised Gains (24.9) (30.4) (20.7) (23.9) 11.3 12.6 15.7 10.8 12.3 16.1 17.2 7.7
Operating Income (4.9) (13.0) (13.2) (19.5) 12.4 15.4 18.1 14.7 16.6 19.3 20.1 13.3
Total Other Income/ Expenses and provisions 0.6 (2.0) (1.9) (0.6) (0.9) (1.6) (0.4) (0.1) (0.6) (2.3) (0.5) (0.6)
Profit Before Tax (4.3) (15.0) (15.1) (20.2) 11.5 13.8 17.7 14.6 16.0 17.0 19.5 12.7
Tax Provision (1.4) 0.3 0.1 (0.3) 3.7 3.8 4.4 3.7 5.5 5.0 4.8 3.1
Profit After Tax (2.9) (15.2) (15.3) (19.8) 7.8 10.0 13.3 10.9 10.5 11.9 14.7 9.6
Paid-up Capital 2.0 2.5 34.2 34.2 1.1 1.1 1.1 1.1 4.5 4.5 4.5 4.9
Fair Value Change Account (FVCA) 75.9 22.6 47.7 53.7 0.8 -3.1 3.9 4.8 3.4 -4.3 6.8 6.4
Total Reserves 102.5 22.1 34.9 23.3 50.5 55.3 74.1 84.7 52.0 52.5 76.6 89.4
Subordinated debt 7.5 7.5 7.5 7.5 - - - - 4.9 4.9 4.9 2.6
Total Loans 1.4 1.4 1.4 1.4 - - - - - - - -
Net Fixed Assets 5.9 6.0 5.5 5.2 3.4 4.3 4.3 4.2 4.7 6.8 6.3 5.9
Total Assets 372.3 307.7 342.4 348.3 197.2 218.7 259.7 278.2 334.0 370.4 393.0 500.4
ICRA LIMITED
Page | 45
Oriental Bajaj Allianz ICICI Lombard
Months 12 12 12 9 12 12 12 9 12 12 12 9
Net Commission Expenses / NPE 6.1% 7.4% 8.2% 7.2% 4.8% 1.1% 0.7% -1.8% 2.3% 3.8% 5.6% 5.0%
Combined Ratio (A) 135.3% 140.8% 133.8% 139.9% 96.6% 100.8% 96.9% 100.0% 98.8% 100.4% 99.8% 111.0%
Underwriting surplus (loss)/NPE -36.0% -40.9% -34.7% -41.3% 0.3% -0.1% 3.2% 0.4% -2.0% -1.1% -1.9% -10.2%
PAT/ Average Assets Deployed -1.2% -4.9% -5.4% -9.3% 4.3% 4.9% 5.7% 5.6% 3.4% 3.4% 3.9% 2.9%
PAT/ Total Asset Base -1.0% -4.5% -5.2% -9.0% 4.0% 4.5% 5.2% 5.3% 3.2% 3.2% 3.8% 2.6%
PAT/ Reported Net Worth -2.8% -61.9% -22.1% -46.0% 15.1% 17.7% 17.7% 17.0% 18.5% 20.9% 18.2% 13.6%
PAT/ Adjusted Net Worth -10.3% -760.7% -71.2% -694.2% 15.3% 16.8% 18.6% 18.0% 19.7% 19.5% 19.8% 14.5%
PBT/NPE -4.1% -13.7% -14.1% -23.0% 16.4% 16.8% 23.8% 25.2% 19.1% 18.0% 19.5% 13.1%
PAT / NPE -2.8% -13.9% -14.2% -22.6% 11.1% 12.2% 17.9% 18.8% 12.5% 12.7% 14.7% 9.9%
Capacity
NPW / Reported Net Worth 103.8% 446.4% 159.3% 213.0% 150.6% 142.1% 98.6% 88.4% 168.6% 169.0% 131.7% 134.6%
NPW / Adjusted Net Worth 378.8% 5484.4% 513.9% 3214.2% 152.9% 134.7% 104.0% 93.7% 179.3% 157.2% 143.7% 144.3%
Liquidity
FVCA / Tech Reserves 42.7% 11.7% 22.7% 23.7% 0.7% -2.5% 2.8% 3.2% 1.5% -1.8% 2.7% 2.0%
ICRA LIMITED
Page | 46
Rs. billion HDFC Ergo Iffco Tokio Reliance
Year-Ending Period Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21
Months 12 12 12 9 12 12 12 9 12 12 12 9
P&L Statement
Net Commission Expenses -1.5 (2.1) (2.0) (2.3) 2.1 1.7 2.1 2.6 (0.1) (2.2) (1.8) (0.2)
Total Underwriting Surplus -0.8 (3.4) (2.4) (5.0) -3.0 -3.8 (2.7) (7.1) (4.6) (5.2) (6.5) (3.9)
Operating Income Before Realised Gains 5.8 4.6 7.9 3.4 2.6 2.9 4.9 (0.9) 2.3 2.5 1.9 3.3
Operating Income 6.6 5.4 9.1 4.7 2.8 3.3 5.4 1.2 2.7 4.1 4.1 4.3
Profit Before Tax 4.7 4.6 7.9 4.3 2.4 2.7 4.1 1.1 2.1 3.0 3.2 3.1
Tax Provision 0.8 1.3 2.0 1.1 0.6 0.6 0.9 0.2 0.0 0.4 1.1 1.2
Profit After Tax 3.8 3.3 5.9 3.2 1.8 2.0 3.2 0.9 2.1 2.6 2.1 2.0
Paid-up Capital 6.1 6.1 7.1 7.1 2.7 2.7 2.7 2.8 2.5 2.5 2.5 2.5
Fair Value Change Account (FVCA) -0.3 (0.8) 0.3 0.6 0.0 0.0 (0.0) 0.0 -0.4 -1.0 0.0 0.6
Total Reserves 13.5 21.6 25.4 29.2 19.8 21.8 25.0 29.9 13.1 15.0 18.1 20.6
Subordinated debt 3.5 5.0 5.0 5.3 - - - - 2.3 2.3 2.3 2.3
Total Loans - - - - - - - - - - - -
Net Fixed Assets 2.1 2.8 2.7 2.8 0.6 0.7 0.9 1.4 0.3 0.4 0.5 0.9
Total Assets 115.3 170.6 193.2 205.6 103.0 124.6 143.0 154.4 107.8 127.9 154.8 168.0
ICRA LIMITED
Page | 47
HDFC Ergo Iffco Tokio Reliance
Months 12 12 12 9 12 12 12 9 12 12 12 9
Net Commission Expenses / NPE -3.5% -4.4% -3.0% -4.6% 5.1% 3.5% 4.0% 6.0% -0.3% -5.6% -4.3% -0.6%
Combined Ratio (A) 98.7% 105.3% 103.2% 110.7% 106.7% 107.8% 103.9% 116.0% 111.9% 113.7% 112.9% 108.5%
PAT/ Average Assets Deployed 3.6% 2.4% 3.3% 2.2% 1.9% 1.8% 2.4% 0.8% 2.1% 2.2% 1.5% 1.7%
PAT/ Total Asset Base 3.3% 1.9% 3.1% 2.1% 1.7% 1.6% 2.2% 0.8% 2.0% 2.0% 1.3% 1.6%
PAT/ Reported Net Worth 19.6% 11.8% 18.2% 11.9% 7.9% 8.3% 11.5% 3.7% 13.5% 14.8% 10.1% 11.4%
PAT/ Adjusted Net Worth 19.3% 11.5% 18.3% 12.1% 7.9% 8.3% 11.5% 3.7% 13.2% 14.0% 10.1% 11.7%
PBT/NPE 12.3% 10.3% 12.4% 8.4% 5.8% 5.8% 8.4% 2.7% 6.0% 7.3% 8.8% 8.1%
PAT / NPE 10.1% 7.3% 9.2% 6.3% 4.4% 4.4% 6.5% 2.2% 6.0% 6.4% 5.7% 5.1%
Capacity
Liquidity
FVCA / Tech Reserves -0.4% -0.8% 0.3% 0.6% 0.0% 0.0% 0.0% 0.0% -0.5% -1.3% 0.0% 0.5%
ICRA LIMITED
Page | 48
Rs. billion Tata AIG Chola MS Royal Sundaram
Months 12 12 12 9 12 12 12 9 12 12 12 9
P&L Statement
Net Commission Expenses 0.3 -0.3 2.8 1.4 0.1 0.5 0.5 0.8 1.4 1.5 1.4 1.1
Total Underwriting Surplus -4.9 -4.2 (5.0) (6.5) (2.3) (2.5) (2.9) (3.1) (1.8) (2.7) (2.2) (2.6)
Operating Income Before Realised Gains 1.1 4.1 5.0 2.3 2.8 3.3 3.8 2.2 1.8 1.1 1.9 0.6
Operating Income 1.6 4.9 6.4 5.1 3.0 5.1 5.2 2.9 2.0 1.5 2.6 1.6
Total Other Income/ Expenses and provisions 0.0 0.0 (0.5) (0.3) (0.5) (2.5) (1.4) (2.1) (0.2) (1.1) (0.4) 0.1
Profit Before Tax 1.3 4.6 5.9 4.7 2.5 2.5 3.7 0.8 1.8 0.4 2.1 1.6
Tax Provision 0.2 1.2 1.4 1.2 0.7 1.1 0.9 0.2 0.6 0.2 0.5 0.4
Profit After Tax 1.1 3.3 4.5 3.6 1.8 1.5 2.8 0.6 1.2 0.2 1.6 1.2
Paid-up Capital 9.1 9.9 9.9 9.9 3.0 3.0 3.0 3.0 4.5 4.5 4.5 4.5
Fair Value Change Account (FVCA) 0.4 -3.3 4.9 9.7 0.1 (0.3) 0.3 0.3 (0.1) (1.1) 0.8 1.6
Total Reserves 11.3 12.2 24.8 33.2 11.7 12.8 16.1 16.8 6.9 6.1 9.6 11.6
Subordinated debt 1.8 3.6 3.6 3.6 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.3
Total Loans - - - - - - - - - - - -
Net Fixed Assets 1.9 2.1 2.4 2.7 0.7 0.7 0.7 0.8 0.3 0.3 0.3 0.2
Total Assets 124.1 135.2 178.2 211.4 90.9 105.4 125.1 133.1 57.8 67.7 75.4 81.0
ICRA LIMITED
Page | 49
Tata AIG Chola MS Royal Sundaram
Months 12 12 12 9 12 12 12 9 12 12 12 9
Net Commission Expenses / NPE 0.6% -0.6% 4.8% 2.8% 0.4% 1.5% 1.6% 3.4% 6.2% 6.4% 6.6% 7.0%
Combined Ratio (A) 107.6% 109.6% 103.1% 111.6% 104.6% 107.5% 107.3% 113.0% 108.1% 111.1% 110.2% 117.5%
PAT/ Average Assets Deployed 1.1% 2.6% 2.9% 2.6% 2.1% 1.5% 2.5% 0.7% 2.3% 0.4% 2.2% 2.1%
PAT/ Total Asset Base 0.9% 2.4% 2.6% 2.4% 2.0% 1.4% 2.3% 0.6% 2.1% 0.4% 2.1% 2.0%
PAT/ Reported Net Worth 5.5% 15.1% 12.9% 11.0% 12.2% 9.5% 14.7% 4.2% 10.7% 2.3% 11.3% 10.0%
PAT/ Adjusted Net Worth 5.6% 13.2% 15.0% 14.2% 12.3% 9.3% 14.9% 4.2% 10.6% 2.1% 11.9% 11.1%
PBT/NPE 2.9% 9.4% 12.0% 9.9% 8.2% 7.4% 11.7% 3.2% 8.3% 1.8% 10.0% 9.8%
PAT / NPE 2.4% 6.9% 9.1% 7.5% 5.9% 4.3% 8.8% 2.4% 5.5% 1.1% 7.5% 7.4%
Capacity
Liquidity
FVCA / Tech Reserves 0.5% -4.1% 4.7% 7.9% 0.2% -0.4% 0.3% 0.3% -0.3% -2.3% 1.4% 2.8%
ICRA LIMITED
Page | 50
Rs. billion SBI General Bharati AXA Shriram General Insurance
Year-ending Period Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Mar-19 Mar-20 Mar-21 Dec-21
Months 12 12 12 9 12 12 12 12 12 12 9
P&L Statement
Gross Direct Premium Written 47.1 68.0 82.6 59.7 22.6 31.3 31.6 23.6 24.7 21.4 12.7
Net Premium Written 25.6 35.7 41.1 27.5 15.2 20.0 19.5 21.8 23.1 19.9 11.7
Net Claims Incurred 17.2 21.6 25.9 27.2 10.8 14.3 11.6 14.1 14.8 16.8 10.5
Net Commission Expenses (0.1) (1.1) (1.5) (1.1) 0.5 1.1 0.8 0.8 1.2 1.1 0.6
Total Management Expenses 5.9 9.1 10.3 9.2 5.2 7.4 8.1 2.8 4.7 4.0 3.1
Total Underwriting Surplus 0.8 0.7 0.2 (4.8) (2.5) (4.5) (2.1) 2.9 2.0 (0.5) (0.5)
Net Investment income 4.2 5.0 5.7 4.4 2.7 3.3 3.7 6.6 7.2 7.0 5.4
Operating Income Before Realised Gains 5.0 5.8 5.8 (0.3) 0.2 (1.2) 1.6 9.5 9.2 6.5 4.9
Total Realised Gains 0.4 0.4 1.3 1.8 0.2 0.6 0.5 0.5 1.2 1.4 1.4
Operating Income 5.5 6.1 7.2 1.4 0.4 (0.5) 2.1 10.0 10.4 7.9 6.3
Total Other Income/ Expenses and provisions (0.8) (0.5) (0.0) (0.1) (0.3) (1.9) (0.9) 0.0 (0.4) (0.2) (0.2)
Profit Before Tax 4.7 5.6 7.2 1.4 0.0 (2.4) 1.2 10.0 10.0 7.7 6.2
Tax Provision 1.4 1.5 1.7 0.4 - - 0.0 3.4 2.6 1.8 1.5
Profit After Tax 3.3 4.1 5.4 1.0 0.0 (2.4) 1.2 6.6 7.4 5.9 4.7
BALANCE SHEET - LIABILITIES Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Mar-19 Mar-20 Mar-21 Dec-21
Paid-up Capital 2.2 2.2 2.2 2.2 16.2 20.1 20.6 2.6 2.6 2.6 2.6
Fair Value Change Account (FVCA) (0.0) (0.8) 0.8 1.3 (0.0) (0.0) 0.1 (0.0) (0.3) (0.1) 0.1
Total Reserves 16.0 19.2 26.0 27.6 (11.0) (13.4) (12.2) 16.8 17.0 18.8 20.5
Reported Net Worth 18.2 21.3 28.2 29.7 5.2 6.6 8.4 19.4 19.6 21.4 23.1
Adjusted Net Worth (excl Fair Value Change) 18.2 22.1 27.4 28.4 5.2 6.6 8.3 19.4 20.0 21.5 23.0
Total Reserve for Unexpired Risk 17.2 22.6 28.7 25.7 7.5 9.3 10.4 12.3 12.6 11.1 9.0
Estimated Liability in Respect of Outstanding Claims 24.5 29.7 34.7 41.0 20.9 24.2 26.9 58.0 62.7 72.8 76.4
Total Technical Reserves 41.7 52.3 63.5 66.7 28.4 33.4 37.3 70.3 75.4 83.9 85.4
Subordinated debt - - - - 2.2 2.6 2.6 - - - -
Total Current Liabilities 13.9 19.4 22.2 21.4 10.5 15.4 18.0 5.1 6.5 6.3 5.1
Total Liabilities 73.8 92.9 113.8 117.9 46.3 58.0 66.2 94.7 101.5 111.6 113.6
BALANCE SHEET - ASSETS Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Mar-19 Mar-20 Mar-21 Dec-21
Total Loans - - - - - - - - - - -
Total Investments 63.6 74.3 95.8 101.0 38.8 47.7 55.3 89.4 95.1 105.4 108.3
Cash & Bank Balances 1.8 2.1 4.3 0.8 1.1 2.4 0.4 0.6 0.3 0.2 0.4
Net Fixed Assets 0.9 1.1 2.1 2.2 0.2 0.2 0.2 0.5 0.5 0.5 0.4
Total Advances and Other Assets 7.5 15.4 11.6 13.8 6.1 7.7 10.4 4.3 5.6 5.5 4.5
Total Assets 73.8 92.9 113.8 117.9 46.3 58.0 66.2 94.7 101.5 111.6 113.6
ICRA LIMITED
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SBI General Bharati AXA Shriram General Insurance
KEY FINANCIAL INDICATORS Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Mar-19 Mar-20 Mar-21 Dec-21
Months 12 12 12 9 12 12 12 12 12 12 9
Net Claims Incurred / NPE (Claims Ratio) 72.0% 71.1% 74.1% 89.2% 77.0% 78.3% 63.3% 68.3% 65.0% 78.5% 76.2%
Management Expenses / NPE (Expense Ratio) 23.2% 25.5% 25.2% 33.4% 34.4% 36.7% 41.6% 13.0% 20.5% 20.1% 26.8%
Net Commission Expenses / NPE -0.3% -3.0% -3.6% -4.1% 3.5% 5.4% 4.0% 3.7% 5.4% 5.5% 5.5%
Combined Ratio (A) 94.9% 93.6% 95.7% 118.5% 115.0% 120.4% 108.8% 85.0% 90.9% 104.2% 108.4%
Net Investment Income/NPE (B) 15.0% 15.0% 16.3% 14.4% 19.3% 17.9% 20.2% 32.2% 31.6% 32.3% 38.9%
Operating Ratio (A-B) 79.9% 78.6% 79.4% 104.2% 95.7% 102.5% 88.7% 52.8% 59.3% 71.9% 69.5%
Trading gains / NPE 1.8% 1.2% 3.8% 5.8% 1.3% 3.3% 2.7% 2.2% 5.4% 6.7% 10.2%
Investment Income / NPE (including Realised Income) 16.9% 16.2% 20.1% 20.2% 20.6% 21.2% 22.9% 34.4% 37.0% 39.0% 49.1%
Underwriting surplus (loss)/NPE 3.4% 2.5% 0.5% -15.6% -18.2% -24.4% -11.6% 14.0% 8.7% -2.4% -3.4%
PAT/ Average Assets Deployed 5.1% 5.0% 5.3% 1.2% 0.1% -4.7% 1.9% 7.4% 7.6% 5.6% 5.6%
PAT/ Total Asset Base 4.5% 4.4% 4.8% 1.2% 0.1% -4.2% 1.8% 7.0% 7.3% 5.3% 5.5%
PAT/ Reported Net Worth 18.3% 19.3% 19.3% 4.5% 0.6% -36.8% 14.4% 34.2% 37.8% 27.6% 27.0%
PAT/ Adjusted Net Worth 18.3% 18.6% 19.9% 4.7% 0.6% -36.8% 14.5% 34.1% 37.1% 27.5% 27.1%
PBT/NPE 19.7% 18.6% 20.6% 4.4% 0.2% -13.3% 6.6% 48.6% 44.1% 36.0% 44.8%
PAT / NPE 14.0% 13.6% 15.6% 3.3% 0.2% -13.3% 6.6% 32.2% 32.7% 27.7% 33.8%
Capacity
NPW / Reported Net Worth 140.5% 167.4% 145.9% 123.3% 293.1% 303.1% 232.4% 112.4% 117.4% 92.9% 67.4%
NPW / Adjusted Net Worth 140.3% 161.1% 150.1% 129.0% 291.2% 302.9% 233.8% 112.2% 115.5% 92.5% 67.8%
Technical Reserves/Reported Net Worth 229.0% 245.3% 225.4% 224.4% 549.8% 505.7% 445.3% 362.2% 383.8% 391.6% 369.7%
Technical Reserves /Adjusted Net Worth 228.5% 236.1% 231.9% 234.7% 546.2% 505.3% 448.1% 361.6% 377.5% 389.8% 371.8%
Net Claims Incurred / Reported Net Worth 94.5% 101.2% 91.9% 122.1% 208.2% 216.7% 138.5% 72.5% 75.2% 78.5% 60.8%
Net Claims Incurred / Adjusted Net Worth 94.3% 97.3% 94.5% 127.7% 206.9% 216.6% 139.4% 72.4% 74.0% 78.1% 61.2%
Liquidity
Cash + Liquid assets/ Technical Reserve 156.9% 146.1% 157.7% 152.6% 140.6% 149.8% 149.3% 128.0% 126.7% 125.8% 127.3%
Technical Reserves/ Liquid Assets 63.7% 68.4% 63.4% 65.5% 71.1% 66.7% 67.0% 78.1% 79.0% 79.5% 78.6%
FVCA / Tech Reserves -0.1% -1.6% 1.3% 2.0% -0.1% 0.0% 0.1% 0.0% -0.4% -0.1% 0.1%
Solvency ratio (times) 2.3 2.3 2.0 1.9 1.8 1.6 1.6 3.5 3.7 3.6 4.7
ICRA LIMITED
Page | 52
Rs. billion Universal Sompo Future Go Digit
Months 12 12 12 9 12 12 12 9 12 12 12 9
P&L Statement
Net Commission Expenses 0.7 0.5 0.4 0.5 0.7 0.9 0.8 0.1 0.2 (0.2) 0.7 1.1
Total Underwriting Surplus 0.4 0.1 (1.8) (0.6) (1.6) (1.5) (2.1) (2.0) (3.3) (3.5) (4.3) (5.1)
Operating Income Before Realised Gains 2.2 2.1 0.6 1.2 1.0 1.7 1.5 0.9 (2.7) (1.8) (1.4) (2.1)
Total Realised Gains (0.0) (0.0) 0.0 0.3 0.1 0.4 0.6 0.4 (0.0) 0.1 0.2 0.1
Operating Income 2.2 2.1 0.6 1.4 1.1 2.1 2.0 1.3 (2.7) (1.7) (1.2) (2.0)
Total Other Income/ Expenses and provisions (0.1) (0.1) (0.3) (0.2) (0.1) (0.4) (0.2) 0.0 (0.0) (0.0) (0.0) (0.0)
Profit Before Tax 2.1 2.0 0.3 1.2 1.0 1.7 1.8 1.3 (2.7) (1.8) (1.2) (2.0)
Tax Provision 0.7 0.5 0.2 0.3 (0.2) 0.7 0.5 0.4 (0.0) 0.0 0.0 0.0
Profit After Tax 1.4 1.5 0.1 0.9 1.2 1.0 1.3 1.0 (2.7) (1.8) (1.2) (2.0)
BALANCE SHEET – LIABILITIES Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21 Mar-19 Mar-20 Mar-21 Dec-21
Paid-up Capital 3.7 3.7 3.7 3.7 8.1 9.0 9.0 9.0 6.7 8.2 8.2 8.4
Fair Value Change Account (FVCA) 0.0 (0.1) 0.0 0.0 (0.1) (0.2) 0.0 (0.0) (0.0) (0.2) 0.5 0.8
Total Reserves 5.2 6.3 6.5 7.3 (0.3) 0.6 2.3 3.3 (2.0) 3.0 4.1 6.2
Subordinated debt - - - - - - - - - - - -
Total Loans - - - - - - - - - - - -
Net Fixed Assets 0.4 0.4 0.3 0.2 0.2 0.2 0.4 0.5 0.1 0.9 1.0 1.2
Total Assets 28.9 37.3 47.3 49.5 44.7 54.6 63.0 65.4 17.6 38.9 60.0 85.3
ICRA LIMITED
Page | 53
Universal Sompo Future Go Digit
Months 12 12 12 9 12 12 12 9 12 12 12 9
Net Commission Expenses / NPE 4.9% 3.4% 3.1% 4.6% 4.3% 4.1% 3.6% 0.4% 1.8% -1.3% 2.6% 3.9%
Combined Ratio (A) 94.6% 96.3% 116.9% 101.0% 106.9% 103.3% 107.7% 110.5% 124.1% 117.3% 109.4% 113.6%
Trading gains / NPE -0.2% -0.1% 0.3% 2.7% 0.5% 1.8% 2.6% 2.0% -0.1% 0.5% 1.0% 0.5%
Underwriting surplus (loss)/NPE 3.4% 1.0% -14.0% -6.1% -10.4% -7.3% -9.7% -11.2% -65.3% -28.2% -22.0% -21.1%
PAT/ Average Assets Deployed 4.6% 4.6% 0.2% 2.5% 3.0% 2.0% 2.3% 2.0% -25.3% -6.3% -2.5% -3.9%
PAT/ Total Asset Base 4.7% 4.0% 0.2% 2.4% 2.6% 1.8% 2.1% 2.0% -15.4% -4.5% -2.1% -3.1%
PAT/ Reported Net Worth 15.3% 15.1% 0.9% 10.8% 15.1% 10.3% 11.8% 10.3% -56.5% -15.7% -10.0% -18.0%
PAT/ Adjusted Net Worth 15.3% 15.0% 0.9% 10.9% 14.9% 10.0% 11.8% 10.3% -56.5% -15.5% -10.4% -19.1%
PBT/NPE 16.5% 15.2% 2.3% 12.9% 6.5% 8.7% 8.3% 7.3% -54.3% -14.1% -6.3% -8.2%
PAT / NPE 10.9% 11.5% 0.7% 9.5% 7.5% 5.0% 6.2% 5.4% -54.3% -14.1% -6.3% -8.2%
Capacity
Liquidity
FVCA / Tech Reserves 0.1% -0.4% 0.1% 0.1% -0.3% -0.7% 0.0% 0.0% 0.0% -1.0% 1.4% 1.5%
ICRA LIMITED
Page | 54
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ICRA LIMITED
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INDIAN GENERAL INSURANCE

Profitability to improve in FY2023 with

Karthik Srinivasan Sahil Udani

Mayank Chheda Niraj Jalan

ICRA’s Rated Universe .........................................................................................................................................................................................................................12

Industry Performance Analysis and Outlook ........................................................................................................................................................................................14

FINANCIAL PERFORMANCE & ANALYSIS ...............................................................................................................................................................................................29

COMPANY FINANCIALS .......................................................................................................................................................................................................................40

*Adjusted net worth – Net worth is adjusted by excluding the FVCA

13-15% growth 106-108% Rs. 48 billion-Rs. 62 12-15% 207-215%

Entity Long-term Rating Instruments

Royal Sundaram General Insurance [ICRA]AA+ (Stable) Subordinated debt

Cholamandalam MS General Insurance

Source: ICRA Research Source: ICRA Research

30% 2,000 1,856 1,851

Public Private Public Private (including standalone health)

1,200 1,200 1,137 1,169

PSU Private Total PSU (%) Private (%) Combined

201 201 91%

PSU Private Total PSU (%) Private (%) Combined

350 323 312 160%

FY2020 FY2021 FY2020 FY2021

Word GI - FY2021 India GI

Advanced Asia Pacific

Emerging Asia Pacific

Underwriting requirements of surety insurance business:

Existing Rate Proposed Revised Rate % Increase

140% 133% 132% 128% 140% 140% 140%

Claims Ratio Expense Ratio Claims Ratio Expense Ratio

140% 122% 140% 140% 123% 140% 30.0 300.0

Combined ratio (RHS) RoAE Combined ratio (RHS) RoAE

Equity Shares GOI Securities Equity Shares GOI Securities

33% 28% 60% 60%

PSU Regulatory minimum Select Pvt players Regulatory minimum

60% 60% 23% 22% 23%

200,000 1.80 200,000 1.67 1.80

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