Summary of earnings call for Go Digit General Insurance Ltd published on 31 Jul, 2025
Go Digit General Insurance Limited
Q1 FY26
Call date · July 28, 2025
1 · Management Commentary
Key Positives
- Profit before tax (PBT) increased from INR 101 crores to INR 161 crores; PAT at INR 138 crores.
- ROE (PAT basis) improved to 3.4% (vs. 3.3% YoY); net worth up 33% YoY to INR 4,100 crores.
- AUM grew by INR 3,100 crores YoY to INR 20,861 crores; solvency ratio strong at 227%.
- Customer base increased to 7.1 crores; partner network expanded.
- Strong growth in Fire business (40% vs. industry 17%) and other corporate lines (23%).
- Management expenses (excluding commissions) declined YoY.
Key Negatives
- Net retention ratio dropped to 65.4% (vs. 76.2% YoY), impacting combined ratio optically.
- Combined ratio (without 1/n) increased to 107.5% (vs. 105.4% YoY).
- Expense to GWP ratio rose to 31.4% (vs. 30.9% YoY), mainly due to higher 2-wheeler business.
- Health and travel segment growth lagged, especially in employer/employee group health.
- Group health pricing remains volatile; conversion ratios yet to improve meaningfully.
Forward Guidance
- Expect retention in corporate business to normalize to previous levels in coming quarters.
- Capex plans not specifically disclosed.
- Continue to target 10% equity allocation in AUM; further increase subject to capital considerations.
- Focus on expanding commercial lines (fire, engineering, liability, surety bonds).
- No change in reinsurance or inward reinsurance strategy; treaties and flexibility preserved.
- Management expects to be a top 10 insurer in fire by GWP this year.
- Ongoing discipline in management expenses; EoM compliance to be monitored as per regulatory changes.
- Transparency and additional IFRS disclosures to be provided as requested by investors.
2 · Q&A Highlights
Q 1 (Retention & Combined Ratio): Why has the retention ratio dropped sharply, and what is the outlook for combined ratio improvement?
A (Management):
• Drop in retention is a one-quarter effect due to higher cession in large fire/corporate risks and strong 2-wheeler growth; expect retention to revert to normal levels.
• Combined ratio increase is optical; profitability unaffected. Focus remains on improving management expenses and prudent underwriting.
Q 2 (Motor Segment Strategy): How is the company managing claim inflation in motor TP without price hikes, and what is the outlook for motor mix?
A (Management):
• No cession in motor; higher commission ratio due to 2-wheeler growth.
• Underwriting guidelines unchanged; focus on ROE across OD/TP.
• Motor mix shifting towards 2-wheelers (31%) and private cars (41%).
Q 3 (Health Segment & Group Pricing): What is the outlook for group health pricing discipline and conversion ratios?
A (Management):
• Aggressive pricing by peers has reduced; expect discipline to return as conversion ratios improve.
• No significant trend reversal yet; continue to quote actively and monitor market.
Q 4 (Reinsurance Arrangements & Allianz JV): Will the Allianz-Jio reinsurance JV impact Digit’s treaties or data sharing?
A (Management):
• No expected impact; existing 3-year treaty with Allianz remains unchanged.
• Data shared is non-identifiable; strict separation between direct and reinsurance arms.
Q 5 (Expense of Management (EoM) Regulation): How is Digit positioned for EoM compliance, especially with rising 2-wheeler share?
A (Management):
• Digit’s management expenses are industry-best; commissions market-driven.
• EoM compliance monitored; expect regulatory adjustments to address industry-wide cost increases.
Q 6 (Investment Philosophy): What is the approach to equity allocation in the investment book?
A (Management):
• Targeting up to 10% equity allocation; further increases depend on capital and solvency considerations.
• Equity seen as incremental yield, not core to insurance returns.
Q 7 (Growth in Commercial Lines): What is driving growth in commercial lines and reinsurance accepted?
A (Management):
• Growth led by fire, engineering, liability (D&O, cyber, public liability), and surety bonds.
• Reinsurance accepted up due to higher premium rates and increased capacity, especially in property.
Q 8 (Commission Trends by Channel/Product): Are commission ratios improving across products/channels?
A (Management):
• Commission ratios high in 2-wheeler and certain CV segments; flattish to slightly up in motor due to mix.
• Commercial lines commissions largely stable; reinsurance commissions flat.
3 · Other Key Numbers
- PBT: INR 161 crores
- PAT: INR 138 crores
- Tax rate: 13.9%
- ROE (PAT basis): 3.4% (not annualized)
- Net worth (June 2025): INR 4,173 crores
- Net worth (March 2025): INR 4,033 crores
- AUM: INR 20,861 crores
- Solvency ratio: 227%
- Number of customers: 7.1 crores
- Loss ratio (Q1 FY26): 70.3% (vs. 70.5% YoY)
- Expense to GWP ratio: 31.4% (vs. 30.9% YoY)
- GWP growth: 12.1% (14.5% ex-1/n)
- Fire business growth: 40% (industry: 17%)
- Motor mix: 41% private car, 31% 2-wheeler, 28% commercial vehicle
- Equity allocation in AUM: 6.3% (vs. 6.4% March 2025)
- Investment income: INR 372 crores (capital gain: INR 10.2 crores; fixed income yield: 1.8%)
- Deferred acquisition cost (IFRS): INR 107 crores (vs. INR 52 crores YoY)
- Discount rate for IFRS: 6.3% (vs. 6.8% March 2025)
- Reinsurance accepted: INR 475 crores (+47% YoY)
- Non-employer-employee group health: ~20% of group business; growing faster than employer-employee
- Management expenses (ex-commission): Down 9–10% YoY
- Combined ratio (without 1/n): 107.5% (vs. 105.4% YoY)
- Reserve release (TP): Same as Q1 FY25
- Retail health <10% of total health portfolio
- Leverage: 5.0
- Capital gain: INR 10.2 crores
- AT1 bonds allocation: Slightly reduced
- Government securities allocation: Slightly reduced
- IFRS ROE (fully taxed): 4.8% (not annualized)
Note: This is an AI generated summary of the earnings call. There may be inaccuracies in the summary. Please refer to the original transcript before making investment decisions.