Press Release - NOVEMBER 29, 2018
A.M. Best Affirms Credit Ratings of The Oriental Insurance Company Limited
FOR IMMEDIATE RELEASE
SINGAPORE - NOVEMBER 29, 2018
The Credit Ratings (ratings) reflect Oriental’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The negative outlook of the Long Term ICR reflects the continued downside risk on Oriental’s risk-adjusted capitalization and concerns over its underwriting performance.
Oriental’s balance sheet strength remains very strong and is supported by solid risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s underwriting leverage is low compared with its major non-life insurer peers in India. However, it has been on an increasing trend. The high proportion of equity investments relative to its capital also leaves the company susceptible to stock market volatility. The company also incurred a substantial reserve charge during the previous fiscal year ending March 2017.
In terms of performance, Oriental’s operating ratio has improved to 105% in the 12 months to 31 March 2018, compared with 137% the year before. This was supported by a lower combined ratio of 119%, as the company reduced loss ratios in several major lines of business, as well as expense ratios. Nonetheless, underwriting losses continue to be sizable relative to capital, and there remains a reliance by the company on capital gains.
Negative rating actions could occur if no significant improvement in underwriting materializes or if there is a material deterioration in Oriental’s risk-adjusted capitalization due to negative fair value movements or increases in underwriting leverage. A revision of the Long-Term ICR outlook to stable could occur if the company can substantially improve and sustain its underwriting performance while maintaining its risk-adjusted capitalization.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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