A.M. Best has affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of General Insurance Corporation of India (GIC Re) (India). The outlook for both ratings is stable.
The outlook for both ratings is stable.
The ratings reflect GIC Re's solid risk-adjusted capitalization, consistently favorable investment results and its strong presence in the Indian and overseas reinsurance markets. GIC Re's capital and surplus increased by approximately 20% for fiscal year 2013-2014. The growth was supported by the company's consistent and favorable investment results. GIC Re's risk-adjusted capitalization level remains strong and is supportive of its current rating level.
GIC Re had a strong presence in India's insurance market as the sole national re insurer, and continues to expand its business overseas, including Asia, Europe and Africa. Approximately half of the premium is generated abroad for fiscal year 2013-2014.
Offsetting these positive rating factors are GIC Re's high exposure to equity market volatility, increasing catastrophe exposures and unsatisfactory underwriting performance. Equity investment risk remains one of the key components in GIC Re's risk-based capital requirement. Equity investments were approximately 80% of its reported surplus. The adverse movement in India equity market can have material impact on GIC Re's Best's Capital Adequacy Ratio (BCAR) score.
GIC Re's catastrophe exposure has increased in recent years as a result of the growth in its domestic and overseas business. In the past five years, catastrophe losses had added volatility to the underwriting performance of the company.
Future upward rating actions could occur if GIC Re demonstrates the ability to achieve consistently favorable underwriting performance and strengthen its investment and catastrophe risk management capability. Conversely, downward rating actions could occur if the company's risk-adjusted capitalization declines materially as a result of unsatisfactory operating performance or a decline in its fair value change account.
CARE affirms AAA (In) Claims Paying Ability rating to General Insurance Corporation of India (GIC Re)
The rating factors in GIC Re’s 100% ownership by Government of India (GOI), GIC Re’s status in the Indian Insurance industry as the sole national reinsurer, good solvency position and adequate liquidity. Ownership by GOI, solvency position and profitability are key rating sensitivities.
GIC Re was incorporated in November 1972, as a part of Government of India’s (GoI) move to nationalize the general insurance business. It is wholly owned by GoI and it is the sole national re insurer. Apart from the domestic operations, GIC Re has overseas offices viz: Representative Office Moscow and Branch Offices in London, Dubai and Kuala Lumpur.
GIC Re also has presence in Bhutan through its joint venture, GIC Bhutan Re (GIC Re holds 26% stake) and in South Africa through its wholly owned subsidiary. GIC Re reported a PAT of Rs.2,253 crore on Gross Premium Written of Rs.14,680 crore in FY14 (refers to the period April 01, 2013 to March 31, 2014) as against a PAT of Rs.2,345 crore on Gross Premium Written of Rs.15,086 crore during FY13. In H1FY15, the company reported a PAT of Rs.1,610 crore on Gross Premium Written of Rs.7,275 crore.
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