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FOR IMMEDIATE RELEASE
HONG KONG - NOVEMBER 20, 2014 12:09 PM (EST)
A.M. Best has revised the outlook to stable from positive and affirmed the financial strength rating (FSR) of B++ (Good) and the issuer credit rating (ICR) of "bbb+" of The Oriental Insurance Company Limited (Oriental) (India).
The revised outlook follows Oriental's worse than expected underwriting performance, in particular the deteriorating performance in the health portfolio.
Oriental's overall underwriting results remained unsatisfactory in fiscal year 2013-14, attributed to the worsening loss experience in the health portfolio and various large losses in fire class. Although Oriental has launched various initiatives to improve the health portfolio's underwriting results, its near-term performance in this segment is expected to remain unfavorable given the intensified market competition and inflationary pressure. Also, Oriental's equity exposure remained high on a market-value basis, with equity accounting for half of the total investments. Adverse movement in the equity market could have negative impact on Oriental's operating results and capitalization level.
Partially offsetting these negative factors are Oriental's strong risk-adjusted capitalization, solid business profile and consistently favorable investment performance.
Oriental continues to maintain strong risk-adjusted capitalization, as reflected by its Best's Capital Adequacy Ratio (BCAR). Given its moderate business growth forecast, the company's capitalization level is also expected to remain solid in the near term. With 67 years of operations in India, Oriental has an extensive distribution network across the country and possesses a well-established market presence. It is the fourth largest non-life insurer in India by direct premium written in the country. Oriental has consistently produced a favorable investment return in the past five years, making a significant contribution to its bottom line.
Future positive rating actions could occur if Oriental could substantially improve its underwriting performance while maintaining its strong risk-adjusted capitalization. Conversely, downward rating actions could occur if the company's operating results deteriorate materially, resulting in a significant decline in its risk-adjusted capitalization level.
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.