General Insurance Corporation of India

IPO Note: General Insurance Corporation of India Industry: Insurance Reco: Subscribe Date: October 05, 2017 Issue Snapshot Company Name General Insurance Corporation of India Issue Opens October 11, 2017 to October 13, 2017 Price Band Rs. 855 to Rs. 912 Bid Lot The Offer Discount Issue Size IPO Process 16 Equity Shares and in multiples thereof. Public issue of 124,700,000 Equity shares of Face value Rs. 5 each, (Comprising of fresh issue of 17,200,000 Equity Shares (Rs. 1541.5 cr*) and Offer for Sale of 107,500,000 Equity Shares (Rs. 9634.3 cr*) by Selling Shareholder). Rs. 45 per shares to retail investors and eligible employees Rs. 10465.0 11175.8 Crore 100% Book Building Face Value Rs. 5.00 Exchanges BRLM NSE & BSE Citigroup Global Markets India Private Limited, Axis Capital Limited, Deutsche Equities India Private Limited, HSBC Securities and Capital Markets (India) Private Limited and Kotak Mahindra Capital Company Limited Registrar Objects of the Offer Offer for Sale Karvy Computershare Private Limited The Company will not receive any proceeds from the Offer for Sale by the Selling Shareholder (107,500,000Equity Shares by President of India). Fresh Issue Augmenting the capital base of the Corporation to support the growth of their business and to maintain current solvency levels; and General corporate purposes. Issue Break up Issue Size Allocation Equity Shares* QIB 50% 62,282,641 HNI 15% 18,684,792 RII 35% 43,597,849 Total Public 100% 124,565,283 Employee 134,717 Total 124,700,000 *Based on higher price band @ Rs. 912 Company Highlights General Insurance Corporation (GIC) is the largest reinsurance company in India in terms of gross premiums accepted in FY17, and accounted for approximately 60% of the premiums ceded by Indian insurers to reinsurers during FY17, according to CRISIL Research. The company is also an international reinsurer that underwrote business from 162 countries as at 31 March 2017. According to CRISIL Research, it ranked as the 12th largest global reinsurer in 2016 and the 3rd largest Asian reinsurer in 2015, in terms of gross premiums accepted. GIC provides reinsurance across many key business lines including fire (property), marine, motor, engineering, agriculture, aviation/space, health, liability, credit and financial and life insurance. GIC has diversified its business geographically to grow the underwriting business and profitability as well as to maintain a balanced portfolio of risks. Its gross premiums on a restated consolidated basis from the international business in FY17, FY16 and FY15 were Rs. 10300.4 crore, Rs. 8339.69 crore and Rs. 6609.45 crore, respectively, and its gross premiums have grown at a CAGR of 24.84% from FY15 to FY17. In FY17, FY16 and FY15, its gross premiums for risks outside of India were 30.53%, 45.00% and 43.28%, respectively; of its total gross premiums. The company develops its overseas business through home office in Mumbai, branch offices in London, Dubai and Kuala Lumpur, a representative office in Moscow, a subsidiary in the United Kingdom (that is a member of Lloyd s of London) and a subsidiary in South Africa. 1

In FY17, the total life insurance premium market in India was around Rs.4.18 lakh cr, while the non-life insurance premium market was around Rs.1.27 lakh cr. According to CRISIL Research, the size of the Indian reinsurance market was estimated to be approximately Rs.38,800 cr in FY17. The reinsurance market in India has grown at a CAGR of 15% over the last 10 years. The reinsurer posted a gross premium of Rs.33,741 cr in FY17 and Rs.17,325 cr in Q1FY18. Around 70% of the gross premiums were from domestic business and around 30% from international business. GIC maintain a diversified investment portfolio to generate investment returns to support their liabilities for the reinsurance that GIC underwrite and to create shareholder value. GIC have an Indian investment portfolio, which includes fixed income debt securities including Government securities, equity securities including exchange traded funds, and other investments, but does not include fixed term deposits for the business written outside of India at their branches. As at June 30, 2017 and March 31, 2017, Indian investment assets on a standalone restated basis had a carrying value of Rs. 419,298.52 million and Rs. 391,262.72 million, respectively, and a fair value of Rs. 739,025.61 million and Rs. 691,625.84 million, respectively. GIC s investment income from their Indian investment assets on a restated standalone basis in FY17, FY16 and FY15 was Rs. 45,156.11 million, Rs. 41,749.92 million and Rs. 41,760.64 million, respectively, and has grown at a CAGR of 3.99% from FY15 to FT17. GIC s yields (without unrealized gains) from Indian investment assets on a standalone restated basis in FY17, FY16 and FY15 were 12.35%, 12.91% and 14.08%, respectively. In the three months ended June 30, 2017, GIC s investment income and yields (without unrealized gains) from Indian investment assets on a restated standalone basis was Rs. 10,467.90 million and 10.33%, respectively. In addition to Indian investment assets, GIC hold fixed term deposits at banks outside of India for their overseas business (written outside of India at their branches) from which GIC earned Rs. 997.61 million in interest income in FY17. View GIC is a leader in India reinsurance industry with a trusted brand and 44 years of experience. It is a significant global player with growing international presence. GIC is looking to grow their international business and will be expanding in the life reinsurance space globally by building relationships in new markets such as SAARC, China, South East Asia, Latin America and Africa. It has diversified product portfolio with a robust and comprehensive risk management framework. Gross premium earned by the company in FY17 rose by 82% to Rs 33,740.8 cr, from Rs 18,534 cr in FY16 due to new Pradhan Mantri Fasal Bima Yojana. 40% of this growth came from new crop insurance scheme while the international business and other segments contributed the rest (The agriculture premium segment is expected to grow at 15-20% going forward). In FY17, GIC reported a rise in most of the premiums earned across various business segments. The consolidated fire insurance business premium rose by 20.67% to Rs 5,595.89 cr as compared to Rs 4,637.2 cr in FY16; marine insurance business and life insurance business premiums slightly fell to Rs 910.39 cr and 239.14 cr y-o-y respectively. The consolidated premium for the miscellaneous insurance business doubled to Rs 19,629.27 cr from Rs 9,540.99 cr in FY16. Despite the country s size and growth profile, India continues to be an underpenetrated market with a non-life insurance penetration of only 0.77% in 2016, as compared to 1.81% in China, 1.7% in Thailand, 1.67% in Singapore and 1.62% in Malaysia and a global average of 2.81% in 2016. The untapped opportunity and low penetration in general insurance provides ample scope for GIC to grow its portfolio at a rapid pace. On performance front, its gross premiums have grown at a CAGR of 48.65% from FY15 to FY17. The company posted an 11.7% increase in the consolidated net profit to Rs 3,004.21 cr in FY17 as compared to Rs 2,689.58 cr in FY16. In Q1FY18, it has posted net profit of Rs. 682.67 cr. GIC attained a very healthy solvency Ratio of 2.41x in FY17 (1.83x in Q1FY18) compared to the IRDAI prescribed control level of 1.5x. Its average ROE for last 3 years is 16.61% and post issue ROE will be around 15%. GIC has no listed peers to compare with. On the valuation front, at the higher price band ofrs. 912, the issue is priced at P/E of 25.5x FY17 post issue EPS. (According to the management, the company has price-to-book value of 1.5-1.6 times as compared to global average of 1.0-1.5 times, while the price-to-earnings is 24 times as compared to global average of 45 to 50 times.) Thus, the issue appears to be attractively priced considering strong financial track record, healthy balance sheet and bright prospects of the overall general insurance sector in the future. Hence, we recommend our investors to SUBSCRIBE the issue from a medium to long term perspective. 2

Consolidated Financial Statement (In Rs. Cr.) FY14 FY15 FY16 FY17 Q1FY18 Balance sheet Sources of funds Share Capital 430.0 430.0 430.0 430.0 430.0 Net Worth 13,654.1 16,024.2 18,417.8 19,968.7 20,686.8 Fair Value Change Account 20,531.9 28,147.6 23,456.7 30,037.2 31,972.8 Total 34,186.0 44,171.8 41,874.5 50,005.9 52,659.6 Application of funds Investments 46,679.2 56,757.7 55,686.0 66,212.0 70,208.4 Loans 424.1 393.8 365.8 322.1 297.5 Fixed Assets 118.1 142.9 175.9 169.4 168.2 Goodwill on Consolidation - 37.9 37.9 37.9 37.9 Current Assets 16,750.0 17,575.4 19,826.6 30,321.9 37,592.6 Current liabilities and provisions 29,809.0 30,744.7 34,228.2 47,073.6 55,661.1 Net Current Assets (13,059.0) (13,169.3) (14,401.7) (16,751.7) (18,068.4) Total 34,186.0 44,171.8 41,874.5 50,005.9 52,659.6 Profit & Loss Account Operating Profit/(Loss) (a) Fire Insurance 13.8 1318.1 732.2 637.0 268.9 (b) Marine Insurance 451.5 (121.8) 406.7 210.5 226.0 (c) Miscellaneous Insurance 1131.1 326.3 381.3 1404.3 (203.5) (d) Life Insurance 7.0 38.6 70.0 (109.7) 26.9 Income from Investments Interest, Dividend & Rent - Gross 673.2 746.7 892.8 1019.9 248.4 Profit on sale of Investments 309.5 555.3 543.6 618.5 104.0 Other Income 110.0 234.8 242.6 18.1 2.2 Total Income 2696.1 3098.1 3269.2 3798.7 672.9 Provision for Doubtful Debt, Loans & Investment 124.9 110.7 42.0 260.0 96.8 Amortisation & Diminution of Investments 131.2 76.9 154.6 74.2 5.2 Other Expenses 137.5 80.0 51.2 48.0 13.2 Total Expenses 393.6 267.6 247.7 382.2 115.2 Profit Before Tax 2302.4 2830.5 3021.4 3416.5 557.7 Provision for Taxation (1.7) 2.9 33.2 41.2 0.3 Profit After Tax 2319.4 2801.1 2689.6 3004.2 554.2 Share of Profit in Associate Companies 113.7 89.9 133.8 136.4 74.4 Adj. Profit 2433.1 2891.0 2823.4 3140.6 628.7 3

(In Rs. Cr.) FY14 FY15 FY16 FY17 Q1FY18 CashFlow Statement Net cash from operating activities 2,923.4 2,634.9 6,012.8 8,081.7 3,215.5 Net cash from investing activities (2,539.0) (2,676.7) (3,567.8) (4,534.2) (1,952.7) Net cash from financing activities (686.7) (387.4) (649.9) (1,035.1) 0.0 Net increase/(decrease) in cash and cash equivalents 29.8 (515.2) 2,030.5 2,452.1 1,227.1 Cash and cash equivalents at the beginning of the year 8,234.3 8,264.1 7,748.9 9,779.4 12,231.4 Cash and cash equivalents at end of the year 8,264.1 7,748.9 9,779.4 12,231.4 13,458.5 Comparison with listed industry peers There are no listed reinsurance companies in India. Accordingly, it is not possible to provide an industry comparison in relation to the Company. Top ten clients (direct insurers and reinsurers) in terms of gross premiums (amt in Rs. millions) Name of Company Gross Premiums Agriculture Insurance Company of India Limited 41454.8 National Insurance Company Limited 29505.9 ICICI Lombard General Insurance Co. Limited 26152.9 United India Insurance Company Limited 22333.5 The New India Assurance Company Limited 17780.3 HDFC ERGO General Insurance Company Limited 15646.0 Reliance General Insurance Co Limited 12080.6 The Oriental Insurance Company Limited 8831.7 Iffco-Tokio General Insurance Company Limited 8358.4 Bajaj Allianz General Insurance Company Limited 7906.6 Business Segment Segment FY15 FY16 FY17 India Outside India India Outside India India Outside India Fire (Property) 11.0% 20.1% 11.4% 23.7% 8.0% 16.3% Marine 2.7% 4.6% 2.0% 3.5% 1.3% 2.1% Miscellaneous 19.8% 5.5% 17.8% 6.4% 15.2% 4.4% Motor Engineering 2.9% 2.3% 2.6% 2.2% 1.3% 1.3% Agriculture 4.0% 0.2% 6.8% 0.2% 28.4% 0.5% Aviation 1.0% 3.5% 0.1% 2.4% 0.3% 1.7% Health 8.6% 5.2% 8.9% 4.6% 9.5% 2.9% Liability 0.6% 0.2% 0.5% 0.3% 0.5% 0.2% Credit 0.9% 0.1% 0.9% 0.1% 0.6% 0.1% Others 4.4% 1.5% 3.0% 1.4% 3.5% 1.0% Life 0.9% 0.3% 1.0% 0.3% 1.1% 0.0% Total 56.7% 43.3% 55.0% 45.0% 69.5% 30.5% 4

(amounts in Rs. millions except ratios) FY14 FY15 FY16 FY17 Q1FY18 Source of Gross Premiums Indian Sourced Directly 79,982.16 94,165.64 212,757.01 % of total Indian Gross Premiums 92.35% 92.37% 90.77% Sourced by Brokers 6,624.86 7,779.89 21,646.40 % of total Indian Gross Premiums 7.65% 7.63% 9.23% Total Indian premiums 86,607.02 101,945.53 234,403.39 International Sourced Directly 9,091.03 9,840.00 14,147.43 % of total International Gross Premiums 13.75% 11.80% 13.73% Sourced by Brokers 57,003.51 73,556.94 88,857.08 % of total International Gross Premiums 86.25% 88.20% 86.27% Total International premiums 66,094.54 83,396.94 103,004.50 Total 152,701.56 185,342.47 337,407.91 Key Financial Indicators Gross Premiums 152,701.6 185,342.5 337,407.9 173,253.5 Net Premiums 139,389.0 164,704.1 303,003.3 171,416.4 Earned Premiums 135,947.8 153,382.4 263,746.9 129,225.6 Incurred Claims 119,113.3 129,659.1 215,293.1 106,518.9 Net Commission 27,955.7 35,145.4 53,642.8 26,857.3 Underwriting Profit (loss) -13,926.0-11,213.3-8,065.9-4,960.5 Expenses of Management 1,651.5 1,900.1 2,513.8 566.5 Combined Ratio 108.9% 107.0% 100.2% 98.4% Incurred Claims Ratio 87.6% 84.5% 81.6% 82.4% Net Commission Ratio 20.1% 21.3% 17.7% 15.7% Profit after Tax 28,909.8 28,234.2 31,406.2 6,286.7 Net Worth 152,367.0 174,135.3 195,136.9 201,432.1 Solvency Ratio 2.9 3.3 3.8 2.4 1.8 Return on Equity 19.0% 16.2% 16.1% 3.1% Operating profit ratio 12.1 11.2 9.7 7.1 1.9 Liquid assets to liabilities ratio 35.4 34.7 42.2 39.6 36.5 Net earnings ratio 18.4 20.7 17.1 10.4 3.7 NPA ratio 0.9 0.7 1.1 0.8 0.7 Earning Per share 28.3 33.6 32.8 36.5 7.3 Net Asset Value per share 148.0 177.2 202.5 226.9 234.2 Claims Claims Paid (net) 107,534.67 122,593.85 115,755.33 130,024.24 63,478.84 Claims Outstanding at beginning of Fiscal year 185,230.60 198,849.76 195,207.88 209,111.66 294,184.45 Claims Outstanding at end of Fiscal year 198,768.87 195,369.16 209,111.67 294,380.55 337,224.54 Incurred Claims 121,072.94 119,113.25 129,659.12 215,293.13 106,518.93 Claim Settlement Ratio 69.08% 78.88% 80.07% 93.65% 69.48% 5

Research Team Name Designation Email ID Contact No. Paras Bothra President Equity Research paras@ashikagroup.com +91 22 6611 1704 Krishna Kumar Agarwal Equity Research Analyst krishna.a@ashikagroup.com +91 33 4036 0646 Partha Mazumder Equity Research Analyst partha.m@ashikagroup.com +91 33 4036 0647 Arijit Malakar Equity Research Analyst amalakar@ashikagroup.com +91 33 4036 0644 Kapil Jagasia Equity Research Analyst kapil.j@ashikagroup.com +91 22 6611 1715 Tirthankar Das Technical & Derivative Analyst tirthankar.d@ashikagroup.com +91 33 4036 0645 Ashika Stock Broking Limited ( ASBL ) or Research Entity has started its journey in the year 1994 and is engaged in the business of broking services, depository services, distributor of financial products (Mutual fund, IPO & Bonds). This research report has been prepared and distributed by ASBL in the sole capacity of a Research Analyst (Reg No. INH000000206) of SEBI (Research Analyst) Regulations 2014. ASBL is a wholly owned subsidiary of Ashika Global Securities (P) Ltd., a RBI registered non-deposit taking NBFC Company. Ashika group (details is enumerated on our website www.ashikagroup.com) is an integrated financial service provider inter alia engaged in the business of Investment Banking, Corporate Lending, Commodity Broking, Debt Syndication & Other Advisory Services. There were no significant and material disciplinary actions against ASBL taken by any regulatory authority during last three years. Disclosure ASBL or its associates, its Research Analysts (including their relatives) may have financial interest in the subject company(ies). However, the said financial interest is not limited to having an open stock market position in /acting as advisor to /having a loan transaction with the subject company(ies) apart from registration as clients. 1) ASBL or its Research Analysts (including their relatives) do not have any actual / beneficial ownership of 1% or more of securities of the subject company(ies) at the end of the month immediately preceding the date of publication of this report or date of the public appearance. However ASBL's associates may have actual / beneficial ownership of 1% or more of securities of the subject company(ies). 2) ASBL or their Research Analysts (including their relatives) do not have any other material conflict of interest at the time of publication of this research report or date of the public appearance. However ASBL's associates might have an actual / potential conflict of interest (other than ownership). 3) ASBL or its associates may have received compensation for investment banking, merchant banking, and brokerage services and for other products and services from the subject companies during the preceding 12 months. However, ASBL or its associates or its Research analysts (forming part of Research Desk) have not received any compensation or other benefits from the subject companies or third parties in connection with the research report. Moreover, Research Analysts have not received any compensation from the companies mentioned herein in the past twelve months. 4) ASBL or their Research Analysts have not managed or co managed public offering of securities for the subject company(ies) in the past twelve months. However ASBL's associates may have managed or co managed public offering of securities for the subject company(ies) in the past twelve months. 5) Research Analysts have not served as an officer, director or employee of the companies mentioned in the report. 6) Neither ASBL nor its Research Analysts have been engaged in market making activity for the companies mentioned in the report. Disclaimer The research recommendation and information herein are solely for the personal information of the authorized recipient and does not construe to be an offer documents or any investment, legal or taxation advice or solicitation of any action based upon it. This report is not for public distribution or use by any person or entity, where such distribution, publication, availability or use would be contrary to law, regulation or subject to any registration or licensing requirement. We will not treat recipients as customer by virtue of their receiving this report. The report is based upon the information obtained from public sources that we consider reliable, but we do not guarantee its accuracy or completeness. ASBL shall not be in anyways responsible for any loss or damage that may arise to any such person from any inadvertent error in the information contained in this report. The recipients of this report should rely on their own investigations. 6