AM Best Affirms Credit Ratings of The New India Assurance Company Limited.
ENPNewswire-September 6, 2021--AM Best Affirms Credit Ratings of The New India Assurance Company Limited
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Release date- 03092021 - AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of 'bbb+' (Good) of The New India Assurance Company Limited (New India) (India).
The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect New India's balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, favourable business profile and marginal enterprise risk management (ERM). The ratings also factor in a neutral impact from the company's ultimate majority ownership by the Government of India.
New India's balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which remained at the strongest level in fiscal year 2021, as measured by Best's Capital Adequacy Ratio (BCAR). In addition, a large absolute capital base of INR 376.8 billion (USD 5.1 billion) at the end of fiscal year 2021 continues to enable the company to provide significant underwriting capacity and insure large risks domestically and overseas. Nevertheless, New India is exposed to high market risk arising from a notable allocation to domestic equity investments, with market value fluctuations amid the COVID-19 pandemic having resulted in elevated volatility in the company's reported shareholders' equity in recent years. The company is also subject to moderate reserving risk due to its exposure to long-tail motor third-party liability insurance business in India.
The company's operating performance is assessed as adequate. New India has reported positive operating results over the past five years, with an average return-on-equity ratio of 3.9% (fiscal years 2017-2021). However, underwriting losses have remained persistent and significant in size as a result of stiff market competition in many lines of business in India and restrictive tariff rates for motor third-party liability insurance. Investment income, including interest and dividend income, as well as realised gains from the sale of equity investments, has been crucial in offsetting underwriting losses, which has enabled the company to report positive earnings over the past five years. In the near-to-medium term, AM Best expects the ongoing COVID-19 pandemic and challenging market conditions to continue to pressure the company's...
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