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FOR IMMEDIATE RELEASE
HONG KONG - OCTOBER 16, 2014 12:13 PM (EDT)
A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of "bbb+" of United India Insurance Company Limited (UIIC) (India). The outlook for both ratings is positive.
The ratings reflect UIIC's solid risk-adjusted capitalization, improved operating performance, as well as its strong market profile.
UIIC's risk-adjusted capitalization level, as measured by Best's Capital Adequacy Ratio (BCAR), remains solid and supportive of its ratings. In fiscal year 2013-14, UIIC had posted an after-tax profit considerably higher than the average of past few years, mainly due to the improvement in underwriting and the continuous excellent investment results.
Despite intense competition from public and private insurers, UIIC ranked third among non-life insurance companies based on gross direct premium written in India.
Offsetting these positive rating factors are UIIC's unsatisfactory underwriting results and high market risk from its equity exposure.
Although UIIC's underwriting performance gradually improved over the past few years, the company still recorded underwriting losses in each year during that period. The company remained heavily reliant on investment income for a positive bottom line.
UIIC has substantially reduced its equity exposure over the years. However, the company is still holding a significant portion of its investment in equities, which are exposed to local stock market volatility. Deterioration of the Indian investment market climate could have a direct negative impact on UIIC's capitalization level.
Future positive rating actions could occur if UIIC is able to significantly improve and sustain the underwriting performance while maintaining its solid risk-based capitalization. Conversely, negative rating actions could occur if the company's risk-adjusted capitalization declines to a level below A.M. Best's expectations due to material deterioration in operating performance or aggressive business growth.
The methodology used in determining these interactive ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This rating announcement has been issued by A.M. Best Asia-Pacific Limited, which is a subsidiary of A.M. Best Company. A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.