A.M. Best Affirms Ratings of General Insurance Corporation of India (GIC Re) (24th February 2017)
A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of General Insurance Corporation of India (GIC Re) (India). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect GIC Re’s adequate risk-adjusted capitalization and good business profile in its domestic market. GIC Re is the largest domestic reinsurer in India and benefits from the obligatory cessions of direct insurers in India. In addition, GIC Re has a geographically diversified underwriting portfolio.
An offsetting rating factor is the potential strain on GIC Re’s risk-adjusted capitalization due to increasing underwriting leverage, partly attributable to rapid growth in crop premiums. As part of a new nation-wide effort by India’s government to extend insurance coverage to farmers, crop insurance now makes up a substantial proportion of the market. Although the scheme is government-subsidized, its profitability in the long run remains to be seen. Additionally, recent regulatory changes that facilitate the entry and operations of foreign reinsurers also could increase competition for GIC Re in its domestic market.
Positive rating momentum could result if GIC Re is able to improve consistently its underwriting performance while maintaining its risk-adjusted capitalization. Negative rating momentum could result from material deterioration in risk-adjusted capitalization or performance.
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Care Reaffirms Rating To The Claim Paying Ability Of General Insurance Corporation Of India (GIC Re) (20 April 2017)
CARE affirms AAA (In) claims paying ability rating of General Insurance Corporation of India (GIC Re).
The rating factors in GIC Re’s 100% ownership by Government of India (GoI), GIC Re’s strategic importance as the dominant national reinsurer, good solvency position and comfortable liquidity profile. Ownership by GOI, solvency position and profitability are key rating sensitivities.
The solvency position continues to remain strong, with GIC Re reporting a ratio of 3.48 times as on March 31, 2016. The solvency ratio does not take into account the unrealized gains in the fair value change account in GIC Re’s balance sheet that stood at Rs.23,451 crore as on March 31, 2016.
GIC Re’s liquidity position is comfortable with liquid assets to technical reserves to around 2.67x as on March 31, 2016 as compared to 2.52 times as on March 31, 2015. The provisions of Insurance Act and guidelines issued by IRDAI determine the broad composition of GIC Re’s investments. Government securities and other approved securities continue to form the largest component of investments, accounting for 36% of the investment book (at book value). Share of investments in equity stood at around 23% of the investment book (at book value) as on March 31, 2016. Substantial portion of GIC Re’s investment is readily marketable thereby extending it ample liquidity support. Cash and equivalents comprise of 12% of GIC Re’s total assets as on March 31, 2016.
Around 45% of GIC Re’s total Gross Premium Written (GPW) is sourced from overseas business with a view to reduce dependence on domestic business given the possible entry of the foreign players in re-insurance business in India and increased retentions by the domestic insurers. GIC Re’s risk exposures is diversified and comprise treaty cessions through obligatory route as well as non-obligatory cessions, facultative covers for domestic as well as overseas insurers, excess of loss cover, market surplus treaties etc.
Loss ratio for the company decreased marginally in FY16 compared to FY15. This was because the loss ratio in fire, motor and health segment declined significantly during FY16. Overall, the company reported an underwriting loss of around Rs.1183 crore in FY16 as against underwriting loss of Rs.1394 crore in FY15. However, the company booked investment income to the tune of Rs.4152 crore (P.Y.: Rs.4256 crore) which enabled GIC Re to report a PAT of Rs.2848 crore (P.Y.: Rs.2694 crore) for FY16. In H1FY17, the company reported PAT of Rs.956 crore.