How to Analyse a General Insurance Company

In FY26, New India Assurance wrote ₹47,174 crore of gross premium — roughly 1.6 times the GDPI of ICICI Lombard — and earned a return on equity of 6.08% (New India Assurance FY26 investor presentation). ICICI Lombard, the smaller book, earned 17.8% (ICICI Lombard Q4 FY26 concall). One company is over one-and-a-half times the size of the other and produces a third of the return. The reason is one number, and it is not in the revenue line. New India's combined ratio for FY26 was 122.57%; ICICI Lombard's was 102.4% (both from the same filings). (Illustration of how to read the numbers, not a view on either stock.)

That gap is the entire subject of this article. A general insurer collects premium today and pays claims later, and the test of whether it is a good business or a bad one is whether the premium it collected covers the claims and costs it eventually pays. The combined ratio measures exactly that, and almost everything else — growth, size, market share — is noise around it. An insurer can grow premium 20% a year and destroy value the whole time, because growth bought by underpricing risk simply books a larger loss that surfaces two years later when the claims come in.

Here is the homely version. A general insurer is a bucket with a hole in the bottom. Premium pours in the top; claims and expenses leak out the bottom. The combined ratio is the ratio of leak to inflow. Below 100, the bucket fills and the insurer makes money on the underwriting itself. Above 100, the underwriting loses money — and the only thing keeping the company profitable is the interest earned on the water sitting in the bucket while it waits to leak out. That water has a name: the float. Most of India's general insurers, including the largest, run the bucket above 100 and live entirely off the float.

This is how to read a general insurer the way an underwriter does: the combined ratio and its two halves, the float that decides whether a losing underwriter still makes money, the solvency cushion that decides whether it survives, and the one multiple that actually values the business.

A boundary first, said plainly: from the outside you cannot reserve a loss book yourself, and the reported combined ratio depends on reserving judgments you cannot fully audit. What you can do is read the direction of these numbers and check whether management's account of them survives the Q&A.

Why does a general insurer make money on the float, not the premium?

A general insurer does two jobs bolted together, and confusing them is the first beginner error. It underwrites — prices and pools risk, collecting premium and paying claims — and it invests the premium it holds before claims are paid. The underwriting business is measured by the combined ratio; the investing business by the float and its yield.

The trap is that a bad underwriter can look like a fine business as long as its investment income covers the underwriting loss. New India is the clean example: combined ratio 122.57% means it paid out ₹122.57 in claims and costs for every ₹100 of premium earned — an underwriting loss every quarter of FY26 — yet it still reported a profit, because it sat on ₹98,045 crore of investment assets that threw off ₹11,112 crore of investment income for the year (New India Assurance FY26 investor presentation). The float carried the company.

So the question is never "is this insurer profitable?" Almost all are, on paper, because the float is large. The question is "where does the profit come from — disciplined underwriting, or a big investment book papering over a leaky one?" The first compounds. The second is one bad bond market away from trouble.

The combined ratio is the whole game

Everything routes back here, so spend the most time on it. The combined ratio has two parts, and you must read both:

The loss ratio (also reported as the incurred claims ratio, or ICR) is claims paid and reserved, as a percentage of premium earned. The expense ratio is commissions and operating costs, as a percentage of premium. Add them. Below 100 means the underwriting made money before a rupee of investment income; above 100 means it lost money.

What "good" looks like depends on the line. A standalone health insurer like Star Health runs a loss ratio in the high 60s and a combined ratio that can dip below 100 — Star reported 98.8% for FY26, improved from 101.1% in FY25, with the loss ratio at 68.7% (Star Health Q4 FY26 concall). A multi-line public insurer carrying motor third-party and crop risk runs structurally higher: New India's motor and health lines pushed its combined ratio above 122%. The whole industry sat at 119.3% in 9M FY26, private players at 111.5%, and the motor line alone at 128.1% (ICICI Lombard Q4 FY26 concall, citing industry figures). Against that, a sustained sub-103 number is rare. ICICI Lombard's own ten-year average combined ratio is 102.9%, versus an industry average of 115.3% over the same decade (ICICI Lombard Q4 FY26 concall) — that 12-point gap, compounded over ten years, is the entire difference between a great underwriter and an average one.

Where to find it: the combined ratio and its split are almost never in the headline income statement. They live in the investor presentation and the concall, sometimes buried in a single slide. Worse, insurers report on two bases — 'n' and '1/n', depending on how they amortise long-term health and motor premium — and a careless reader compares one company's 'n' to another's '1/n'. ICICI Lombard's FY26 combined ratio was 102.4% on an 'n' basis and 103.4% on a '1/n' basis (ICICI Lombard Q4 FY26 concall): a full point apart, same company, same year. Always check which basis you are reading.

Read the two halves separately, because they fail differently. A rising loss ratio means claims are running hotter than priced — a pricing problem. A rising expense ratio means the company is buying growth with commissions — a distribution problem. Star Health's FY26 improvement came from both halves: loss ratio down 2 points and expense ratio down 30 basis points to 30.1% (Star Health Q4 FY26 concall). When only the expense ratio improves while the loss ratio creeps up, be careful — the company may be cutting commissions to flatter the headline while the risk book deteriorates underneath.

GWP and GDPI growth: necessary, but the easiest number to fake

Gross written premium (GWP), or gross direct premium income (GDPI), is the top line — total premium booked. It is the number to trust least in isolation, because it is the easiest to manufacture: cut prices, loosen underwriting, and premium grows while next year's loss ratio is quietly seeded.

ICICI Lombard makes the point against itself. It grew GDPI just 7.0% in FY26 versus industry growth of 9.2% — deliberately slower than the market (ICICI Lombard Q4 FY26 concall), framed as discipline: "Our disciplined focus on profitable growth has helped us deliver consistent outcomes over time" (same call). An insurer willing to grow below the industry to protect its combined ratio is telling you something an insurer chasing 25% growth is not. So read GWP growth next to the combined ratio, never alone. Fast premium growth with a deteriorating loss ratio is the most reliable early warning in the sector.

A related number is the retention ratio — net written premium divided by gross, i.e. how much risk the insurer keeps versus cedes to reinsurers. Very low retention means the insurer is really a fronting operation passing risk on; very high retention on a volatile line means one catastrophe year can blow a hole in the book. Read it as how much of the risk on the cover actually sits on this balance sheet.

Float and investment yield: the engine room

The float is the pool of premium an insurer holds before paying claims, invested in bonds and equities. It is the source of the investment income that, for most Indian general insurers, is the profit.

Size it relative to the book. ICICI Lombard ran investment assets of ₹584.21 billion at March 2026 — an investment leverage of 3.48x against equity — that threw off ₹47.42 billion of investment income in FY26, up from ₹42.50 billion (ICICI Lombard Q4 FY26 concall). Over ten years it realised an average yield of 8.7% on that book (same call). New India's float is far larger in absolute terms — ₹98,045 crore — and its ₹11,112 crore of investment income is what dragged a 122% combined ratio up to a reported profit (New India Assurance FY26 investor presentation).

Here is the discipline: when a general insurer reports a profit, decompose it. How much came from underwriting (combined ratio below 100) and how much from the float (investment income covering a combined ratio above 100)? An insurer earning its return from underwriting can underwrite well in any rate environment. One earning its return from the float is, underneath, a leveraged bond fund with an insurance licence, its profit rising and falling with markets it does not control. The yield is real; the question is what it is compensating for.

Solvency: the cushion that decides survival

Solvency is the regulatory capital cushion — available capital divided by the required capital, where IRDAI sets the floor at 1.50x. Below it, the regulator steps in; well above it, the insurer can absorb a bad claims year or a market drawdown without raising capital.

The level and the trend both matter, and they sort the sector neatly. ICICI Lombard sat at 2.67x at March 2026 (ICICI Lombard Q4 FY26 concall). GIC Re, the reinsurer, ran 3.87x (GIC Re Q3 FY26 data, Inve data). Star Health was at 2.15x in Q2 FY26 (Inve data, Q2 FY26). And New India — the largest, with the worst combined ratio — ran 1.84x at March 2026, down from 1.91x a year earlier (New India Assurance FY26 investor presentation). That is comfortably above the 1.50x floor, but it is the thinnest cushion of the four, and it is falling, on the book with the heaviest underwriting losses. A solvency ratio drifting toward the floor on a 120%+ combined-ratio book is the combination to watch: the underwriting loss is eroding the very cushion that lets the company keep writing.

Read solvency as the answer to one question: if a bad year arrives — a flood, a spike in motor claims, a market crash that marks down the investment book — does this insurer absorb it, or does it have to raise capital and dilute you at the worst possible moment?

How do you value a general insurer?

Now the multiple. You do not value a general insurer the way you value a bank or a manufacturer, and the reason follows directly from everything above.

The right anchor is price-to-book against the return on equity it sustainably earns — and the word doing the work is "sustainably." Because so much of an Indian general insurer's reported ROE comes from the float, you have to ask what the ROE would be on normalised underwriting. An insurer earning 18% ROE with a 102% combined ratio is earning most of it from skill — that return is durable and deserves a premium book multiple. An insurer earning 6% ROE with a 122% combined ratio is earning it from a large investment book offsetting an underwriting loss — that return is lower-quality, more cyclical, and deserves a far lower multiple even though both are "profitable."

This is exactly why the market pays such different multiples for ICICI Lombard and New India despite New India's larger top line. The combined ratio tells you the quality of the ROE, and quality of ROE is what a price-to-book multiple is really pricing. So the valuation workflow is: (1) start with the combined ratio to judge how much of the ROE is underwriting versus float; (2) ask whether that combined ratio is sustainable or a good-year fluke by looking at the multi-year average — ICICI Lombard's ten-year 102.9% is the gold standard precisely because it held across cycles; (3) only then put a P/B on the normalised, underwriting-led ROE. P/E is a weaker lens here because a single year's earnings swing wildly with the investment book and with reserving — a bad market year can halve reported PAT while the underlying business is unchanged.

A worked case: said versus did at Star Health

Take one company through one year, with management's own words against the result.

Star Health is a standalone health insurer — no motor, no crop, just retail and group health. Its whole investment case rests on the loss ratio, because health claims are the dominant cost. Through FY26, management said repeatedly that its cohort-based repricing and severity-management efforts would improve the loss ratio. The said: "our loss ratio improvement continued for the third [consecutive quarter]" (Star Health Q4 FY26 concall). The did: retail loss ratio improved 0.8%, then 1%, then 3% year-on-year across Q2, Q3 and Q4 FY26, landing at 64.8% in Q4 (same call). The full-year combined ratio improved 2.3 points to 98.8%, dropping below the magic 100 line, and full-year PAT rose 16% to ₹911 crore (same call). One analyst on the call called the loss-ratio improvement "a positive surprise, very positive surprise" — which tells you the delivery beat even the people paid to model it.

That is what a kept guidance looks like in this sector: a specific, falsifiable claim about the loss ratio, made quarter after quarter, that the next quarter's number confirmed. Contrast it with the harder-to-trust version — an insurer guiding to combined-ratio improvement "over the medium term" while the loss ratio creeps up and the expense ratio does the heavy lifting. The difference between those two is the difference between a business improving its underwriting and one managing its optics. Tracking which insurers actually deliver the combined-ratio improvement they guide to, quarter after quarter, across a portfolio, is the kind of thing Inve's Promise Tracker is built to surface — each forward commitment pinned to the quarter it was made, with a verdict as later calls come in. (Illustration, not a view on the stock — and a read on how management communicated through one year, not a lifetime verdict.)

Red flags specific to general insurers

• Premium growing fast while the loss ratio creeps up. The classic underpricing tell — buying market share with risk that surfaces as claims two years later. Growth that outruns the industry while the combined ratio deteriorates is the pattern to fear most.
• Profit that is entirely float, on a 110%+ combined ratio. A reported profit built only on investment income, sitting on top of a heavy underwriting loss, is a leveraged bond fund wearing an insurer's clothes. It works until rates or markets turn.
• Solvency drifting toward 1.50x on a loss-making book. The underwriting loss eating into the cushion that permits more underwriting. A capital raise — and dilution — is on the horizon.
• Reserve releases flattering the loss ratio. An insurer can lower this year's loss ratio by releasing reserves set aside in prior years. It looks like underwriting improvement; it is a one-off. Watch for loss-ratio improvement with no operational explanation on the call.
• The 'n' vs '1/n' switch. Management quoting whichever basis flatters the quarter, or comparing across the two without flagging it. A point of combined ratio can hide in the basis.

Frequently asked questions

The craft comes down to refusing to be impressed by size or by a profit line. New India writes roughly 1.6 times the premium of ICICI Lombard and earns a third of the return, because the premium it writes loses money on the way through the bucket and only the float redeems it. So invert the question you bring to an insurer's results. Don't ask "did it grow, and did it make a profit?" Ask: if this insurer were underwriting at a loss and hiding it behind a big investment book, what would the numbers look like — and does this combined ratio rule that out? A combined ratio above 110 with a profit driven entirely by investment income does not rule it out; it is the pattern itself.

And the owner's question, the one to sit with before you buy a share of any general insurer: across the next full cycle — a bad monsoon, a motor-claims spike, a market that marks down the float — can this company still collect more in premium than it pays in claims and costs? If the honest answer leans on the investment book rather than the underwriting, you have bought a bond fund, not an insurer. The combined ratio is where you find out which one you own. Browse the AI-summarised concalls to see how each management explains its combined ratio quarter to quarter — the explanation is often more revealing than the number.

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