General Insurance jumps 7% to extend rally, stock up 70% this year

The sharp rally in GIC Re stock can be attributed to the company's strong financial performance, credit rating upgrade, and strong outlook.

Shares of General Insurance Corporation of India (GIC Re) continued their stellar run on November 30, rising around 7.5 percent. The stock has rallied over 35 percent in seven days and over 50 percent in just 15 days. The company's market capitalisation has soared to Rs 55,834 crore.

The surge can be attributed to the company's impressive financial performance, credit rating upgrade and strong outlook.

The reinsurer’s management recently conducted non-deal road shows following which the investors have started understanding the company’s operations and business. With a strong FY23 financial performance, GIC Re has received a credit rating upgrade which is helping the company bag large international orders.

On the financial strength scale, AM Best assigned a B++ (good) rating to GIC Re, and revised the outlook to “positive” from “stable”. It also assigned a bbb+ (good) rating to long-term issuer credit, accompanied by an upgraded outlook to “positive”. GIC Re also received an aaa.IN (exceptional) NSR rating with a stable outlook.

All these factors have led to a spike in the share price, GIC Re CMD N Ramaswamy said in an interview to CNBC-TV18.

At 1.25 pm, GIC Re was trading at Rs 318.85 on the National Stock Exchange (NSE), up 4.7 percent from the previous close. The stock has gained 40 percent in the last month and nearly 70 percent in 2023, outperforming benchmark Nifty 50.

Despite the rally, GIC Re stock is still away from its IPO price of Rs 456 a share (1:1 bonus adjusted).

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Another potential factor behind the sharp rally in GIC Re's stock could be the low public float. The government holds an 86 percent stake in the company and LIC 9 percent, leaving 5 percent public float. Often, stocks with such low public float show large moves on low volumes.

Recently, there has been some buzz around the government diluting its stake in GIC Re through an offer for sale (OFS). Ramaswamy said that while an OFS was inevitable to maintain a 25 percent public float, as mandated, the timing would depend on investor appetite and prevailing stock price.

"The company stands ready to assist any prospective investor with due diligence. As of now, there's no indication from the government about an imminent OFS," he said.

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The CMD expects a 10 percent on-year growth. Strong international orders were expected on the back of an upgraded credit rating. Ramaswamy foresees a 15-20 percent growth in the Indian reinsurance market supporting topline growth for GIC Re in India.

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