Abstract

Purpose This study aims to analyse the following: first, the financial performance of General Insurance Re (GIC Re) using performance ratios (PRs); second, the uniformity of different financial performance indicators of GIC Re; third, the internal growth capacity of GIC Re; and finally, the likelihood of GIC Re going into financial distress. Design/methodology/approach As a sample, GIC Re, the lion shareholder in Indian Reinsurance Industry has been considered in the present study. All the necessary data have been extracted from the secondary sources over a time period of 16 years. The financial performance of GIC Re is assessed using five standard ratios, and the uniformity of different financial performance indicators of GIC Re has been examined using Kendall’s Coefficient of Concordance (W). To assess the internal growth capacity of GIC Re internal growth rate has been used, and the likelihood of GIC Re going into financial distress is analysed using multivariate discriminant approach, namely, modified Altman’s Z-score model and logit analysis technique, namely, Ohlson’s O-score model. Findings The results exhibit that financial performance of GIC Re is somewhat satisfactory over a few considerable areas. However, no notable degree of uniformity has been observed amongst the varied financial performance indicators, namely, performance ratio, expense ratio, return on assets, risk retention ratio and combined ratio of GIC Re. The results also reveal GIC Re is lacking ability of growing internally. Moreover, there remains a significant possibility of GIC Re going into financial distress in the near future and so. Originality/value This study is one of the first empirical research studies in India that examines the financial performance of GIC Re from different perspectives.

Highlights

  • Reinsurance has been practised as a commercial endeavour for centuries, across the globe (Kramer, 2020)

  • The results reveal General Insurance Re (GIC Re) is lacking ability of growing internally

  • This study aims to analyse: First, the financial performance of GIC Re using performance ratios (PRs)

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Summary

Introduction

Reinsurance has been practised as a commercial endeavour for centuries, across the globe (Kramer, 2020). It has evolved from a risk management tool to a value-added component of the insurance process. Natural catastrophes such as earthquake, flood, tsunami, hurricane and so on, bring in sudden and significant financial losses and affects the insurance industry severely. Such financial losses are so substantial that it might cripple an insurance company and compel into bankruptcy. The full terms of this licence maybe seen at http:// creativecommons.org/licences/by/4.0/legalcode

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