Genpact Earnings Call Insights: Refinancing of July, Economic Solvency

On Friday, Genpact Ltd. (NYSE:G) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared with analysts and investors.

Refinancing of July

Niccolo Dalla Palma – Exane: I have two questions. The first one concerns the range indicated during the meeting of net profit of EUR 1.5 billion, EUR 1.8 billion. Could you provide further details of the underlying assumptions for this range which was given again for whether it was based on operating results; whatever you can tell us in order to further clarify this figure would indeed be welcome? Also, in the light of the fact, that during the call you indicated that Q1 probably a more normal quarter. Should we see this as a run rate level that you’re comfortable with? The second question concerns the refinancing of July. You had already clarified in the previous conference call that you expect to refinance the EUR 750 million subordinate. Meanwhile, there were indications that you’re thinking of EUR 1 billion over to 30 years. Can you provide us an update on this and why are you thinking of issuing a slightly greater value compared to what is maturing?

Unidentified Company Speaker: Addressing your first question, first of all, there was a mention in a media-related type of environment. Anyway, (indiscernible) that EUR 1.8 billion remains end of year target and Q1 figures more than confirm this and that EUR 1.5 billion was to be considered as a worst case scenario. This is how you should see this range. Coming to the subordinated bond refinancing issue, we are working along these lines in the next few days, probably complete this deal. The authorization for an amount which is certainly necessary for reimbursing the maturing loan had the purpose of optimizing the other existing issue on the market.

Economic Solvency

Alberto Villa – Intermonte: I have several questions. First, could you give us an update on the economic solvency at the end of March? Has there been any development in economic solvency and Solvency I after the 1st of March, given the fact that markets has been developing less favorably than was the case at the end of the first quarter. My second question concerns the combined ratio in Eastern Europe, which had quite a considerable, which was impacted quite considerably by an increase in the expense ratio I guess, related to a different portfolio mix, which is more Non-Motor, if I’m mistaken, so I guess that is the reason. But what is the level that the expense ratio can reach currently being at 37%, so what is the level at the end of this quarter, can you give us some indication to this effect? And my last question concerns, the Life new business APE, how structural is the increase in France, is there a strongly one-off effect, as related to any specific reason there or is it something that we could see going forward in the next few quarters? Thank you.

Unidentified Company Speaker: On economic solvency, we estimate it to be at 130 at the end of April, so there has been a reduction. And Solvency I is estimated at a 131.2 again, this is closely related of course to a financial market performance and in particular the spread of the Italian government bonds. So, economic solvency at the end of the quarter was – can you repeat that, 130 at the end of the first quarter, and at the end. Actually we are at around 137 now. Coming to our combined ratio in Eastern European countries; as I mentioned in my presentation, this is mostly affected by acquisition costs. A strategic choice was made there of increasing in specific business areas, in particular those related to the Russian business, and given the high profitability as we hope we shall see – we are confident we shall see in the bottom line for the (business) idea of increasing the percentage of this business through a more aggressive policy, which indeed lead to a one point increase, because we are actually – we would like that to be the combined ratio for the year-end too. So, we believe that based on this we can have a better result in terms of margin. Concerning APE in France, they are significantly affected by our retention policy as described in my presentation, which is aimed at improving the quality of the retained portfolio. This is our main objective. So, that really includes – that certainly includes a one-off component.