SINGAPORE--(BUSINESS WIRE)--A.M. Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” of United India Insurance Company Limited (UIIC) (India). The outlook of the FSR remains stable.
The revised outlook reflects the continued deterioration in UIIC’s underwriting performance. While its overall results remain positive, the company has consistently failed to meet its own projections in underwriting performance. Another negative Credit Rating (rating) factor is UIIC’s high market risk from its equity portfolio, exposing the company’s capital and surplus to the high volatility of India’s stock market. In particular, UIIC’s capital and surplus dropped 14% during fiscal year 2016, largely driven by the decline in fair value of its equity investment.
Nevertheless, the company’s balance sheet remains strong and is supported by solid risk-adjusted capitalization, as measured by Best’s Capital adequacy Ratio (BCAR), the good liquidity of its investment portfolio and its adequate reinsurance program.
Further negative action could occur if no significant improvement in underwriting materializes or if there is material deterioration in risk-adjusted capital due to negative fair value movements. A revision to a stable outlook could occur if the company can significantly improve and sustain underwriting performance while maintaining its solid risk-adjusted capitalization.
Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.
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