Press Release - MARCH 20, 2020

AM Best Withdraws Credit Ratings of National Insurance Company Limited

 Yuan Tian
Senior Financial Analyst
+65 6303 5016

Myles Gould
Director, Analytics
+65 6303 5020

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


AM Best has affirmed the Financial Strength Rating of C (Weak) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “ccc” of National Insurance Company Limited (National) (India). The outlook of these Credit Ratings (ratings) is negative. Concurrently, AM Best has withdrawn these ratings as the company has requested to no longer participate in AM Best’s interactive rating process.

The ratings reflect National’s balance sheet strength, which AM Best categorizes as weak, as well as its marginal operating performance, neutral business profile and weak enterprise risk management. The ratings also factor in a neutral impact from the company’s ultimate ownership by the Government of India.

National’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), deteriorated to a very weak level at fiscal year-end 2019 due to a combination of significant reserve strengthening for motor third-party liability business and continued large underwriting losses from several other product lines. Capital and surplus declined significantly by 51% to INR 28 billion (USD 401 million) as of March 31, 2019, from INR 57 billion (USD 880 million) in the same prior-year period. Furthermore, during the first quarter of fiscal-year 2020 (period ended June 30, 2019), the company’s capital and surplus declined further to INR 23 billion (USD 318 million). National’s net underwriting leverage and equity investment leverage as of fiscal year-end 2019 surged to a very unhealthy level of 1,091% and 385%, respectively. As of fiscal year-end 2019, the company’s local solvency margin fell to 1.04 times, which is significantly below the regulatory control level of 1.5 times.

National’s prospective balance sheet strength position, including its risk-adjusted capitalization, remains highly reliant on the timing and magnitude of potential capital support from the Government of India. AM Best notes that the Government of India continues to embark upon a plan aimed at restructuring state-owned general insurance companies, including National. At this stage, AM Best has insufficient detail on these planned actions to be able to incorporate this into its rating assessment of National.

AM Best views the company’s operating performance as marginal, as evidenced by a five-year average return-on-equity ratio of -6.7% (2015-2019). Underwriting performance has been persistently loss-making, with a five-year average combined ratio of 134.7% (2015-2019) and a very weak combined ratio of 142.8% for fiscal-year 2019. Operating results have been dependent on investment income in recent years, which includes material realized and unrealized gains. Inadequate pricing on key lines of business and reserve strengthening over the past three fiscal years have been the primary drivers of the company’s poor underwriting results.

The negative outlooks reflect AM Best’s expectation of continued pressure on National’s balance sheet strength and operating performance fundamentals over the near term.

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 AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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