General Insurance Corporation of India (GICRE) Q2 FY23 Earnings Concall Transcript

General Insurance Corporation of India (NSE:GICRE) Q2 FY23 Earnings Concall dated Nov. 10, 2022

Corporate Participants:

Chandra S Iyer — Deputy General Manager

Devesh Srivastava — Chairman and Managing Director

Hitesh Joshi — General Manager

Analysts:

Vinay Sada — Ernst & Young — Analyst

Avinash — NK Global — Analyst

Sanketh Godha — Spark Capital — Analyst

Deepika Mundra — JPMorgan — Analyst

Anupam Jain — Individual Investor — Analyst

Deepak Sonawane — Haitong Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to General Insurance Corporation of India Limited Q2 FY ’23 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Mr. Vinay Sada from Ernst & Young. Thank you, and over to you.

Vinay Sada — Ernst & Young — Analyst

Thanks, Aman. Good morning to all the participants on the call, and thanks for joining this Q2 FY 2023 Earnings Call for General Insurance Corporation of India. Please note that we have mailed out the press release to everyone, and you can also see the results on our website as well as it has been uploaded on the stock exchanges. In case if you have not received the same, you can write to us, and we’ll be happy to send it over to you. Before we proceed with the call, let me remind you that the discussion may contain forward-looking statements that may involve unknown risks, uncertainties and other factors.

It must be viewed in conjunction with our businesses that could cause future results performance or achievement to differ significantly from what is expressed or implied by such forward-looking statements. To take us through the results of this quarter and answer our questions, we have with us the management of GIC represented by Mr. Devesh Srivastava, Chairman and Managing Director; and other top members of the management. We’ll be starting the call with a brief overview of the quarter one past and then we’ll begin with the Q&A session.

With that said, I’ll now hand over the call to Mr. Davesh Srivastava. Over to you, sir.

Devesh Srivastava — Chairman and Managing Director

Thank you, Vinay. Good morning, everyone. I’m pleased to announce the financial performance for the quarter ended September 30, 2022. Coming to the results. The underwriting performance was impacted on the back of challenging external environment. However, we continue taking necessary measures to bring down the incurred claims ratio and improve our overall profitability. Also, it has been a constant endeavor to bring our combined ratio below 100, and we are continuously taking appropriate steps to achieve the same. Let me now take you through some of the key highlights of the financial performance. The gross premium income of the company was INR8,100 crores for Q2 FY ’23 as compared to INR8,374 crores for Q2 FY ’22. The investment income increased to INR3,206 crores in Q2 FY ’23 as compared to INR2,669 crores in Q2 FY ’22. Incurred claims ratio increased to 97.5% in Q2 FY ’23 as compared to 92.2% in Q2 FY ’22.

Combined ratio in Q2 FY ’23 stood reduced at 117.89% versus 122.9% for Q2 FY ’22. The adjusted combined ratio, by taking into consideration the policyholders’ investment income, works out to 92.07% for H1 FY ’23 as compared to 104.4% in H1 FY ’22. Profit before tax increased to INR2,461 crores in Q2 FY ’23 as against INR1,213 crores in Q2 FY ’22. And profit after tax increased to INR1,859 crores in Q2 FY ’23 as gained INR1,010 crores in Q2 FY ’22. Solvency ratio increased to 2.25% as on 39, 2022 as compared to 1.88 on 2021. Net worth of the company, without fair value change account, increased to INR26,625 crores on INR39 2022 as against INR22,691 crores as on 39 2021. Net worth of the company, including fair value change account, increased to INR59,203 crores on INR39 2022, as against INR55,028 crores as on 39,2021.

On the premium breakup, domestic premium for H1 FY ’23 is INR13,422 crores, and the international is INR,699 crores. The percentage split is domestic 70% and international, 3%. There is a degrowth in the domestic premium by 14%, while the international book has decreased by 19%. We continue to strive to bring down the combined ratio and remain confident of improved performance going forward in the coming quarters. Having given the highlights.

We will now open the floor for questions from the interested parties. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Avinash [Phonetic] from NK Global. Please go ahead.

Avinash — NK Global — Analyst

Yeah, hi good morning sure so two questions. The first one is on international business. I mean you have been speaking for many years that we would improve and tend to be developed deified and hence, the overseas business. But the records at that is the listing — the international business continues to be a drag on overall profitability, particularly, I mean, if you sort of include kind of overly outlooking channel business that we get from overseas, of course, we have higher commission costs there as well. And of course, probably in those markets, we don’t have the understanding standing which you have in the domestic were kind of lease by margin. So overseas business continue to remain a drag, and that of course, evident given now that are, I would say that maybe a strong improvement Y-o-Y in terms of underwriting as a domestic bites is concerned, but we make the challenge.

So what sort of a thought poses there and what you about a realistic outlook there that, okay, if that business makes sense or is, I mean, good enough for you to be just in India because I mean India senior diversified countries. So I mean, they’re not really are stepping consents and risk assets. So that’s one question, particularly, what is the space there and what the realistic outlook on foreign business — that’s one is on your rating on the AM Best probably, if I recall correct, we had downgraded the outlook from time to negative. So some comments around the auditors of the reason. So if you can descale on that.

Devesh Srivastava — Chairman and Managing Director

Avinash, to take your question on international business, yes, I do agree that international business has not been doing well in the earlier quarters, but there is a reason behind it. There have been hurricanes and other acts of God, which have actually impacted all reinsurers in the globe. We are not the only ones. But first, let aside to understand why does the reinsurer do international business in the first place. Otherwise, we could easily have had a German reinsurer being only German business and the U.K. reinsurer being only U.K. business. The basic tenant of reinsurance is spread. As I always say, spread essentially as a thumb rule is that the premiums of America will offset your claims from Australia.

In our own case, in GIC, we are doing business with over 160 countries. And why do we do that because of the spread — you do mention about our cloud and our muscle in the domestic market. Yes, we can write pretty much the entire domestic market. We have a cloud there. But then it will make our portfolio very, very volatile. The reason why we do international business and have a long-term vision of making it 50-50, at most 50% domestic and 50% foreign is that we need spread, which is a basic tenant of reinsurance. Now in the international business, we have seen these losses coming, which has also resulted in the market hard man. Now the 1st January renewals are almost at the dose step, and we have seen a distinct hardening in the market. Of course, the proof of the porting will finally emerge in the 1st of January itself.

But till then, we are seeing these trends emerge, and this is going to impact us very positively as we get a higher premium for the same exposure. So this is something that is now ongoing. Second point you raised about the rating mix. The outlook was primarily because of an audit qualification that we had on our 31st March balance sheet in which the statutory auditors had mentioned that the figures are not sustainable, which as you see in the 30th September balance sheet, which we have pretty much diluted because they also understood that it is not such sweeping statement that will be made that figures are not as sustainable. Our figures are pretty much there.

They have all been reconciled and booked and that is a continuous process, which is also in sync with the trade of reinsurance because here everything functions with a lag. The direct insurance companies and the reinsurers always have a lag. And that is why the figures also tend to follow the flag, which was the reason for the qualification, which now stands considerably diluted.

Avinash — NK Global — Analyst

Yes. So just again, a follow-up on the first one. Again, I do affect the need of a wide geographic diversification, and that’s why your interest business is typically global understand. I understand there have been some challenges. But here, a couple of points again. I mean VBI compare you versus the top five semana Americans. The giving the cost of acquisition that you have a materially higher in overseas market was domestic. It means that you are not getting the prices correct because, I mean, if I were to look the starting from 2017 to now you’re in two FY ’23, almost versus last six years, continuously, the overseas business has been running if 20% plus coming.

That is not the case side more to use the other peers who are kind of room diversified. So it means that, I mean, for the kind of site costs you incur to source this overseas does. The pricing is not coming right for you as compared to others. So how are you going to solve even if market harder. So others will also see improvement, you will see some improvement. But the performance or combined is a gap between you, what is the other global will remain still wide. So I mean that is what my question is that, okay, why in that kind of the gap existing. I mean how can we expect to be competitive in the overseas market?

Devesh Srivastava — Chairman and Managing Director

Sure, Avinash. I mean to answer your question again, you start to the year 2017, I mean these last five years have exactly been the worst five years, possibly in the history of reinsurance. So it is a series that’s how it is. And secondly, being a subscription market, we are not really at a disadvantage. But to give you a deeper insight and request the General Manager, Mr. Hitesh Joshi, to come in here.

Hitesh Joshi — General Manager

Is, the first thing I think probably you can readily recognize from the figures that there is a clear degrowth in the international gross premium figures. And I think that growth is fairly substantial. Secondly, this growth is not fully apparent even if the premium is flat for international, there is — in real terms, there is a degrowth because there is exchange rate depreciation. So I mean, I’m also essentially responding to your first question, where you said what are we doing about international? There is a distinct big growth, and that big-growth is not fully apparent because of depreciation. Coming to the deductions, I don’t think that we are at a disadvantage as have already mentioned that it is a subscription market.

So deductions are same for usually all the participants on a given placement. If you compare it with India, I think probably the comparison with India is not appropriate. Reinsurance is essentially intermediary-driven business, globally, and it will continue to be so due to the petal circumstances of delayed opening of the market and broker share — I mean brokers have given a bigger role over last opening up during the last couple of decades. So the broker loan is in the revolution. Once the booker fully holds, probably one can expect that even domestic market intermediary cost will match international cost to a fairly high degree — does it answer?

Avinash — NK Global — Analyst

Yes. partly, sir, I mean my concern over — I mean your overseas combine it vis-a-vis the Munich race or over the last five years. The gap is substantial, and that is where…

Hitesh Joshi — General Manager

Let me tell you in more things. The point is it is not absolutely not at all track to compare us with the over and all these buses because there is a fundamental difference in the portfolio composition. I think this has been discussed in earlier earnings call also and 11 discussions and group meetings with the investors that their portfolios is essentially driven by the donut-market economies where there is no investment income, and there is a better price adequacy, better sophistication in rating. So what we essentially need to see is that for any B, what is the percentage composition of portfolio from South Asia. TMs predominantly Asia and Africa. So the dynamics of Asian-African rating will impact us more than they will be impacted.

Avinash — NK Global — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of Sanketh Godha from Spark Capital. Please go ahead.

Sanketh Godha — Spark Capital — Analyst

Thank you for the opportunity. Sir, you alluded to the point that the substantial rate farming in the overseas market probably happening in Jan 2022 at only please, Saijust wanted to understand what kind of price hardening you are going to witness from the initial detection quarter how with the customer?

Hitesh Joshi — General Manager

There is a confidence of factors and almost all — each of the factors is porting to a very significant handling. And incidentally, at the same time, the alternative capital is withdrawing. So by and large, if you see the kind of press probably they are — they are avoiding mentioning a particular rate in terms of hardening because when there is a very significant hardening, there will be tricks and what do you say, structuring and all kinds of tools will be deployed by the buyers and brokers to reduce the cost.

So if — at the risk of getting it wrong, if I hope to put a figure, the industry participants are putting the hardening between, say, 25% to 50%. But the real hardening will be reduced. Real hardening will be less because the buyers will end up retaining more, they will structure the program differently. — and all tools which are available to retain the risk more and reduce the cost will be deployed.

Sanketh Godha — Spark Capital — Analyst

Okay. But sir, even if I assume that the one portion of restructuring will happen in the contract either by higher ratings or higher deductible, then should it could be either stating that the 45% to 50% will trickle down to at least 15% to 25% when it comes to signing of the contract.

Hitesh Joshi — General Manager

I would believe that it should be between 25 to 50 only on a risk-adjusted basis. Or is not written by them is outside the industry. But the hardening will be to this extent. Because as less, they will reduce their incremental budget. But the hardening has to be essentially between 25 and 50…

Sanketh Godha — Spark Capital — Analyst

Sir, I assume if it’s somewhere in between like like 30%, is it — and given our combined is almost closer to INR125 to 150 in the overseas business in ’23. And assume same amount of cash events happen next year also. So with this kind of a price on this adjusted basis, do you believe that we might be at 100 combined next year some of the OC business saying a lot of cash, what you have business today happens actively.

Hitesh Joshi — General Manager

I think one can expect that, but I would not like to into it fully.

Sanketh Godha — Spark Capital — Analyst

Okay. Okay, sir. Fair point. And sir, can you actually quantify the amount of cat losses you witnessed both in domestic and average market in the current quarter? I believe that is one of the reasons why you have higher combined in the current quarter compared to previous quarter. So if you can quantify the exact loss, how much you have incurred both in overseas and domestic markets.

Hitesh Joshi — General Manager

For we have provided $50 million on Joshi and there is one more typhoon, we have provided $20 million. There is also another cycle on Kona. We have provided something like $15 million.

Sanketh Godha — Spark Capital — Analyst

So that event is closer to the overseas cedes closer to $85 million to $90 million. That’s the way I need to understand that there…

Hitesh Joshi — General Manager

Correct.

Sanketh Godha — Spark Capital — Analyst

Okay. And domestic, sir, given backorders — so any provisioning there?

Hitesh Joshi — General Manager

Do we take there is some results strengthening then for the agri for previous years. Otherwise, current underwriting year for Agri is going better than what is reflected in the figures.

Sanketh Godha — Spark Capital — Analyst

No, the reason why I’m asking that is that if I look at motor combined from the MC business, it has substantially decorated. Actually, it is substantially higher even compared to 1Q. So just wondering, is it easy because of the flu situation which played out during the second quarter.

Hitesh Joshi — General Manager

I don’t think that will be so meaningful. We are also further dipping. I mean we have further billing — I mean digging into the components, but essentially, it is obligatory.

Devesh Srivastava — Chairman and Managing Director

See some case in our water portfolio, domestic motor portfolio. A large part of it — a very, very large part of it is all obligatory session with the motor OD premiums seeing a southward trend, the incurred claims for the current motor portfolio in the industry is running it at 130-plus…

Hitesh Joshi — General Manager

Which is getting reflected in our book as well.

Sanketh Godha — Spark Capital — Analyst

Got it. Got it. And second fundamental question, what I have said in the future of crop business See, I think this is the last year of the contract, which was entered in 2020, three years is getting over. So I don’t know the real indication that the entire structure of the contract will get changed from next coming forward. So — and if it moves towards 80-20 rule on big farm alone, 10, sorry, then should we — is it safe to assume that crop as a business or you potentially can become zero going ahead, at least domestic crop PMSBY least…

Hitesh Joshi — General Manager

No, what will become.

Devesh Srivastava — Chairman and Managing Director

It becomes a 10…

Hitesh Joshi — General Manager

No, I think they will still need to — for the purpose of solvency and better risk management, they will continue to buy. The degree of reinsurance required will of course go down, but it will not finish…

Sanketh Godha — Spark Capital — Analyst

No, you might get obligated part other than the obligated part, me, if there is no insurance cost, there is no extra cost for the primary company. Do you see a reason for the primary company to come and reinsure with you still say it is 810…

Hitesh Joshi — General Manager

Some of them still do. Some of them still buy cover. So some of — I mean regional is still…

Devesh Srivastava — Chairman and Managing Director

All by me.

Hitesh Joshi — General Manager

Most are buying it.

Sanketh Godha — Spark Capital — Analyst

Okay. Okay, sir. Okay. But I’m asking a hypothetical perfect, but I think every impact country moves to INR81. I assume people still buy the cover. What is your size assuming the same area gets — in the yield of the top is similar compared to what it is today, then to what extent the premium could fall sir?

Devesh Srivastava — Chairman and Managing Director

Okay. See, crop insurance is something that really requires a very high degree of reinsurance. So even if you are talking about the hypothetical case in which the entire country moves to 80, 110, which is, I mean, highly, highly, highly integrable if you ask us, the point will remain that the numbers are so large that reinsurance will still be sought. And therefore, if you feel that the premiums of reinsurance and crop are going to become zero at a future date, I really wouldn’t subside to that view.

Sanketh Godha — Spark Capital — Analyst

And my point was except that as you did almost domestic crop last year of sorry, last year, you did entire drop of last year almost of INR7,900 crores or INR8,000 crores. So that number, if it remains same in the current year, with the R80 rules, that INR8,000 crores can potentially become maybe INR1,000 or INR2,000 crores or definitely, it will not remain as big as it was in FY…

Devesh Srivastava — Chairman and Managing Director

One point I was not. Now see the domestic, it is INR3,000 crores for that 39 results that we have published…

Sanketh Godha — Spark Capital — Analyst

Okay. Exact part. And another data keeping question, if I have is how our investment deal in the current quarter was on the higher side. Can you break down that the entire investment income of — into capital gains, dividends and interest income. And just tell us how to see the investment income in subansecondhalf?

Devesh Srivastava — Chairman and Managing Director

Just take up your question. Again, you want the investment increase to open…

Hitesh Joshi — General Manager

Two to 10 men division increased EBITA…

Sanketh Godha — Spark Capital — Analyst

In test capital gain and dividend probably if you can give that breakup, it will be using, sir. For Q2 stand-alone, right?

Chandra S Iyer — Deputy General Manager

Yes. I’m Chandra here. So this income that we have on investment, about INR2,100 crores is on — from interest and INR600-odd crores is from dividends and the profit on the sale of securities is another INR2,000 crores. So rounding off kind of. So that’s the breakup.

Sanketh Godha — Spark Capital — Analyst

Okay. Okay. But is this number you’re saying, is it for one edge right now or you’re saying it for the second quarter?

Chandra S Iyer — Deputy General Manager

As of late half…

Sanketh Godha — Spark Capital — Analyst

For six months, right? — and finally, sir, what is regulator thinking on obligated past — it has been reduced from five to four. Do you see this number to come down to three, that will be gradually almost even you might be having an actual restriction with the regulator, if you can give the thought process on how connected our current state is looking at the obligation business?

Devesh Srivastava — Chairman and Managing Director

Sanket, probably it was a huge number, almost 30% once upon a time, it has come down. Going forward, obviously, probably will become Zean fine day. But that find a is not yet here upon us. It is something that the data is on completing and the final decision raise with the government of India.

Sanketh Godha — Spark Capital — Analyst

Got it. Perfect. Yes, that’s it from my side.

Operator

Thank you. The next question is from the line of Deepika Mundra from JPMorgan. Please go ahead

Deepika Mundra — JPMorgan — Analyst

Hi, sir most of my questions have been answered. However, if I just look at your segmented disclosure, the fire segment, there seems to be significant amount of underwriting loss that’s potentially because of the CAT events. But could you give us a sense as to how much of the fire portfolio is domestic versus international? And in both, what is the type of pricing action or price hardening that you are seeing…

Devesh Srivastava — Chairman and Managing Director

The breakup is something I’ll give you in a moment. But before that, see, international portfolio, we have already spoken about it. that the hurricane — especially hurricane Ian has played a very major part in for the hardening of the market. And as my colleague mentioned, we have also provided very generously product. For Hurricane Ian, we have provided almost $50 million. Now your second question was also about the domestic rates. Now on the domestic rates GIC has already put in place the IIB rate for sessions to DITs, which has held pretty well.

And that has seen that the rates have not only stabilized, but the market has stabilized to a very great extent. And at the time the market get on to something that’s more realistic in terms of rates. Otherwise, it was really going down south before that. So that step taken by GIC has helped the Indian non-life insurance market in a very big way, I would say. And as for the breakup is approximate would be how much time. Domestic. Okay. 57 is domestic and the balance of 43% is for.

Deepika Mundra — JPMorgan — Analyst

In terms of the premium?

Devesh Srivastava — Chairman and Managing Director

In terms of the premium, the total gross premium for fire, which is about INR6,800-odd crores is INR57, 43…

Operator

Thank you — the next question is from the line of Anupam Jain as an Individual Investor. Please go ahead.

Anupam Jain — Individual Investor — Analyst

Yeah. Hi, sir. Thanks for the opportunity. I just wanted to understand what is the trend right now that is panning out in the noisy…

Devesh Srivastava — Chairman and Managing Director

Upon, if you talk about the trends, then it has a very large brush he wants me to paint the canvas with. Let me try and tell you my thoughts about it. See, first, start with the process that what is the raw material that we deal with. For us, the raw material Alis risk because we are the risk managers. And where are those risks coming from when industries and individuals identify those risks and then want to mitigate it. In our case, we have seen that, let’s say, a decade or maybe 1.5 decades ago, there was no such post as a Chief Risk Officer in any company. Today, no company was it sold can afford not to have a Chief Risk Manager. And what is the job of a Chief Risk Manager to go around identifying risk and then ensure that they are mitigated. So for us, the raw material, the feed is now coming in copies quantities.

That is a very healthy trend. And then I’ll give you one more example, the coal. See, insurance has always been a push product. But ComEd ensured that what decades of advertisement could not do for the nonlife insurance industry, how did that. It put the purchase of a health insurance cover as something mandatory or almost something to be very seriously considered in every household that yes, this was I mean expenditure. That is worthwhile. So as we go forward, we are seeing more and more trend of people wanting to buy insurance as a good as a product to maintain their lifestyle, which for us is a very good sign. Covid is just a green food, but going forward, it’s a very good sign for us.

So by that, if you talk about these trends, the trends are very good as far as our raw material, the feed, the income that is able to us as penetration grows. The second thing we spoke about earlier was the hard now of the market, which is you could say an icing on the key.

Anupam Jain — Individual Investor — Analyst

Like when the hardening could be like change, then the trend could be — basically, the reinsurance market is kind of facing headwinds in development in the market basically won.

Devesh Srivastava — Chairman and Managing Director

See, these trends normally last three to five years, — it is not something that is a switch that can be switched on and switched off. There are a lot of factors that go into hardening. As my colleague mentioned earlier as well, hardening comes from a variety of factors, which includes the inflation that the west is seeing, which includes the way the dollar is going. And many of the such factors, Kovit, of course, has been a factor to that as well. And of course, the ads.

Anupam Jain — Individual Investor — Analyst

Yes. But we are definitely not in U.S. markets or in developed markets for sale.

Devesh Srivastava — Chairman and Managing Director

Yes, we are — as we have said that 30% of our book is the international book. 70% is domestic currently.

Anupam Jain — Individual Investor — Analyst

Yes. But you said Asia recap, is that a tire on?

Devesh Srivastava — Chairman and Managing Director

Yes.

Anupam Jain — Individual Investor — Analyst

Majority.

Devesh Srivastava — Chairman and Managing Director

That is where our footprint is very deep and very strong.

Anupam Jain — Individual Investor — Analyst

So you are also in U.S. you’re also in developed market also. You’re not only in Asia Acadia.

Devesh Srivastava — Chairman and Managing Director

Not at all, not at all pretty much. When we say that we have provided for Hurricane in which hit the product cost, we provided a $50 million reserve for it, which shows you how much we are entering in the U.S. market.

Anupam Jain — Individual Investor — Analyst

Okay. And second question would be on investment income. So you give a breakup of like INR6,000 crores. For H1, So for H2, will that be sustainable also?

Chandra S Iyer — Deputy General Manager

Can you please repeat? I didn’t get it very clearly.

Anupam Jain — Individual Investor — Analyst

Yes. You gave a breakup of INR6,000 crores on an H1 basis. Can that be sustainable on a two basis also.

Devesh Srivastava — Chairman and Managing Director

Timing out.

Chandra S Iyer — Deputy General Manager

Yes, sir. We expect it to continue because the current interest rate regime is supporting our investment income.

Anupam Jain — Individual Investor — Analyst

So we can go on up for trajectory, maybe?

Chandra S Iyer — Deputy General Manager

Yes, yes.

Anupam Jain — Individual Investor — Analyst

Okay. And other question would be how is the underlying losses that you are going to get panned out? How is that going to like your — from a year or two, I think so there’s a change in shift that we are avoiding to underwriting businesses that we don’t want to do. How is that going to pan out for GITR specifically?

Devesh Srivastava — Chairman and Managing Director

Pam, I’m not very clear, you’re saying that what are we trying to avoid?

Anupam Jain — Individual Investor — Analyst

Yes. Basically, we are trying to avoid to teen business that we don’t want to do.

Devesh Srivastava — Chairman and Managing Director

Yes, that’s correct. Yes. Yes.

Anupam Jain — Individual Investor — Analyst

So what is the trend on that?

Devesh Srivastava — Chairman and Managing Director

So that is the trend that continues. It is not again something that it will reverse. When you were set out on a path to get your combined at 100 or as close to 100 or below 100 as possible. you set for yourselves certain goals and when you work assiduously towards it, exactly what we are doing. So the portfolio pruning, trying to get better risk returns is something that’s ongoing.

Hitesh Joshi — General Manager

I think it is — it will be a different answer in terms of the different segments. So for example, motor domestic, we will have a different take and a motor foreign will have a different thing. Similarly, for a fire, we have kind of presently price adequacy because of IIB, but fire foreign is a totally different ball game. So taking the holistic view, I think whatever pruning we have done during last two years plus, we can say that we have probably reached a point where we are happy with where we are, and there note there will not be most likely in a very significant pruning of portfolio — now probably, we are very close to the UPM and now we’ll be focusing on profitable growth.

Anupam Jain — Individual Investor — Analyst

Okay. That will be our portion

Operator

Thank you. The next question is from the line of Deepak Sonawane from Haitong Securities. Please go ahead.

Deepak Sonawane — Haitong Securities — Analyst

Yeah. Hello, sir and thank you for the opportunity. So I have two questions. First is on the provision that we have created as of June. That is around INR160 crores for our legacy equity portfolio, right, for negative mark-to-market. So have you done some kind of reversal in this quarter for providing.

Devesh Srivastava — Chairman and Managing Director

Suggest us a moment just on.

Deepak Sonawane — Haitong Securities — Analyst

Yes. Sure, sir.

Chandra S Iyer — Deputy General Manager

Can you please repeat the question because I’m not clear.

Deepak Sonawane — Haitong Securities — Analyst

Last quarter, you did that. We have created around INR150 crores provisioning against a negative mark-to-market on equity portfolio that has been lying with us, I mean, in the last three or four years. So coming to this quarter, have you reversed any of this amount?

Chandra S Iyer — Deputy General Manager

No, we are maintaining a similar provision, maybe a couple of crores more, but the INR1,500 crores is the same provision.

Hitesh Joshi — General Manager

I don’t think we can reverse it.

Chandra S Iyer — Deputy General Manager

It is done.

Hitesh Joshi — General Manager

It can only increase. It can’t go on…

Chandra S Iyer — Deputy General Manager

List market improve. There is no significant change in that. The provision remains the same.

Deepak Sonawane — Haitong Securities — Analyst

Okay. Okay. And my second question is in our rail portfolio, we have reported kind of a very good underwriting performance in Q2. But I could see that if this underling performance has been because of a kind of lag effect that to be witnessed every time? I mean the culling that is being reported implemented by direct insurance to us.

Devesh Srivastava — Chairman and Managing Director

Because the combined, which is how we measure our performance has come down from INR138 last year, September 12 now. Obviously, that last year was pretty much COVID affected.

Deepak Sonawane — Haitong Securities — Analyst

Okay. Okay, thank you.

Operator

Thank you. We have a follow-up question from the line of Sanketh Godha from Spark Capital. Please go ahead.

Sanketh Godha — Spark Capital — Analyst

Thank you, thank you for the opportunity. Sir, I just wanted to understand the future tax rate because we paid — we had 20% tax rate in Q1. Now we have 24 percentage. And honestly, the marginal tax rate for the country, if you don’t take any benefit at 35.2%. — this I just wanted to understand how much of mastered is left over and when we will move to 25.2%. And how you see for the full year the tax rate to be?

Devesh Srivastava — Chairman and Managing Director

For the current year, basically, we have already moved to take a lower rate. So currently, if you see that this is coming around 25.16%. This is. So we have taken full very bit of math last year itself. The current rate is basically 25%. It’s coming because of 22% rate in the sub charge and sales.

Sanketh Godha — Spark Capital — Analyst

Okay. So sir, for the full year, we can expect that number to be around 25…

Devesh Srivastava — Chairman and Managing Director

It will be around 25% because of 32% is rate percentage surcharge and 1.6 percent is something around 68.

Sanketh Godha — Spark Capital — Analyst

Yes okay sir that’s it from my side thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference back to the management for their closing remarks. Thank you, and over to you.

Devesh Srivastava — Chairman and Managing Director

Thank you. Thank you, everyone, for your interest. As we had stated earlier, and we continue to maintain that stand that we are on a path of getting our entire business on a much more stronger footing that endeavor has continued and shall continue in the future as well. The market is offering us a lot of good opportunities as we see them coming, and we hope to do even better as we move forward. Thanks again, and goodbye, everyone. Have a lovely day ahead.

Operator

[Operator Closing Remarks]