Company Overview:
Go Digit offers motor insurance, health insurance, travel insurance, property insurance, marine insurance, liability insurance and other insurance products which the customers can customize to meet his or her needs. The company’s digital full-stack insurance combines insurance and technology to simplify enrolment, claims processing, underwriting, policy administration, data insights and fraud detection. The company’s Gross Written Premium (GWP) grew by 37.5% from FY22 to FY23, making it the fastest-growing insurer among private non-life insurers. Private non-life insurers (excluding standalone health insurers) grew by 20.1% overall during the same period. The company is the largest digital full-stack insurance player in India catering for 82.5% of the GWPs in 9MFY24 at Rs 66.8 bn and 82.1% in FY23 at Rs 72.4 bn respectively. The company’s goal is to make purchasing non-life insurance products easy and straightforward for customers.
Key Highlights:
1. Focus on accuracy of assessment and pricing of risk: The company’s automated underwriting models use rule engines and granular-level risk segmentation with more variables and a higher level of granularity. This sets them apart from other models since they take into account the extent of claims and the no-claim bonus (NCB) while pricing private car portfolios rather than just using two NCB levels. Predictive underwriting models help to identify low-risk customers and set appropriate pricing using variables such as fuel, vehicle make, model, odometer reading, vehicle location, coverages, sourcing channel, past claim history, and usage. This lowers the loss ratio and generates favorable economics, subject to the facts and assumptions assumed to work in tandem with the market environment.
2. Efficient, scalable operating platform: The company’s distribution strategy focuses on generating premium revenue while leveraging technology to create a cost-efficient and scalable business model. By using technology to support partners, the company can onboard and work more efficiently, reducing the need for extensive operations to support the distribution network. This approach has allowed to scale rapidly and achieve a commission ratio of 35.4%, 38.7%, 40.2%, 38.9% and 39.1% for and FY21, FY22, FY23, 9MFY22 and 9MFY23 respectively.
3. Strong, stable portfolio returns generated by a conservative investment approach: The company invests profits from insurance operations in securities issued in the Indian market. As of Dec’23, over 97.3% of the assets were invested in Indian government securities or corporate bonds. According to the IRDAI Investment Regulations, the company must invest at least 30% of its assets in Indian government securities and not more than 70% of its assets in corporate bonds, with 15% in the housing and infrastructure sector.
Valuation: The company is valued at a P/B multiple of 4.1x/4.3x of its lower/ upper price band based on 9MFY24 earnings on post-issue capital while on P/E, the company is valued at 138x/145x of its lower/ upper price band base. The company is a market leader (6% market share) in incremental growth in motor insurance. The company has been slowly gaining strength in the other insurance product & the overall market share of the company is at 3%. Going ahead, we expect the company to do well as the scope of general insurance is huge due to low penetration in India. We recommend Subscribe for long term.
Click here to download Go Digit General Insurance Limited IPO Note by SBI Securities
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