A.M. Best Affirms Ratings of General Insurance Corporation of India

HONG KONG--(BUSINESS WIRE)--

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating of “a-” of General Insurance Corporation of India (GIC) (India). The outlook for both ratings is stable.

The ratings reflect GIC’s strong capitalization, stable expense ratio and established market presence.

GIC’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), remains strong and is supportive of its current ratings. GIC’s underwriting leverage stood at 0.53 times for fiscal year 2008-09. In A.M. Best’s opinion, the major risk component affecting the company’s risk-adjusted capitalization is investment risk, as GIC invested approximately 42% of its invested assets in the Indian equity market. Going forward, A.M. Best believes that movement in the Indian equity market will cause GIC’s risk-adjusted capitalization to be volatile.

GIC maintains a stable expense ratio with a five-year average of 26%. This ratio is attributable to the company’s low management expense ratio (management expenses/net premium ratio) of below 1% and a stable commission structure.

As the sole domestic reinsurer in India, GIC’s business profile remains strong, with the company maintaining its leading business position in the domestic reinsurance market. In recent years, GIC also has been directing more resources in expanding its overseas markets. In fiscal year 2008-09, business from overseas markets contributed to 38% of the company’s total gross premium written (GPW) as compared to 22% in fiscal year 2006-07. GIC has targeted to underwrite 50% of its GPW from foreign markets by fiscal year 2014-15.

Offsetting rating factors are the company’s poor underwriting performance and its reliance on investment income to generate profits.

GIC has recorded underwriting losses in the past five years, with a five-year average combined ratio of 109%.

The company is heavily reliant on investment income to offset its underwriting losses.

However, the performance of investment income is dependent on the Indian equity market.

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.