A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of “a-” of The New India Assurance Company Limited. Best said the “ratings reflect New India’s strong risk-adjusted capitalization, its prominent business profile in the Indian insurance market and management’s commitment to improve the company’s underwriting performance. New India’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), weakened in fiscal year 2010-2011 predominantly as a result of the poor performance by the Indian Motor Third Party Insurance Pool (IMTPIP). New India’s adjusted capital and surplus was INR 226 billion ($4.96 billion) for the financial year ended 31 March 2011.” Best added that it “believes that New India’s capitalization is adequate for its current rating level. The report also noted that “New India’s business profile remains strong, with the company maintaining its leading business position in the domestic market, as well as its continued growth in overseas business. Market share of private insurers in India has stabilized at 41 percent over the last three fiscal years. New India continues to lead the market in generating premiums from fire, marine and health insurance. New India’s gross premium written from its Indian and overseas non-life insurance operations grew by 17.5 percent and 12.7 percent, respectively, in fiscal year 2010-2011, resulting in total gross premium written growth of 16.1 percent.” Best also observed that New India’s “overall net loss ratio deteriorated to 100.8 percent in fiscal year 2010-2011, predominantly as a result of an extra IBNR provision established for IMTPIP, and to a lesser extent, various natural catastrophic losses from its overseas operations during the year.” Best added that nonetheless the loss ratios for other lines of business have improved,” and Best believes that the “measures taken by New India are effective to gradually improve its underwriting performance going forward.” As offsetting factors Best cited New India’s “persistent poor underwriting performance, high expense ratio, and the high exposure to equity market volatility. New India’s expense ratio was 36 percent in fiscal year 2010-2011, which shows a 2.3 percent improvement compared to the previous year. The growth in net premium offsets expense inflation due to wage revision. At the current expense ratio level, Best expects New India’s combined ratio will stay above 110 percent in the next two fiscal years. New India will continue to rely on investment income to offset its underwriting losses.” Best explained that “New India has 56 percent of its invested assets in its equity portfolio on a market value basis. This has exposed the company to market volatility in recent years; however, Best is of the opinion that the company is well capitalized to absorb this market volatility.”
A.M. Best Co. has affirmed the financial strength rating of ‘A’ (Excellent) and issuer credit rating of “a” of Bermuda-based PMG Assurance Ltd., both with stable outlooks. The ratings reflect PMG’s “excellent capitalization, historically strong operating performance and strategic position as the captive insurance company for Sony Group,” said Best. As partial offsetting factors Best cited “PMG’s exposure to potentially large natural catastrophe losses.” The report explained that PMG’s role is “to meet certain global insurance requirements of Sony’s group members. The company’s strengths are derived from its underwriting focus, long-standing customer relationships and conservative operating strategy. PMG’s results have varied in recent years. While it has benefited from rate increases, the company experienced several catastrophe-related incidents in 2011 that had a significant impact on its capitalization. PMG was able to withstand this adverse claim experience at the current rating level. Best also indicated that PMG’s management has assurred it that Sony is committed to “maintaining prudent capital levels. PMG could experience negative rating movement if capital levels do not continue to support its rating level. Positive rating movement is possible for PMG’s ratings if the overall risk profile of Sony improves in the near term.”
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