Ramaswamy Narayanan, chairman and managing director, GIC Re
The revision of the Long-Term ICR outlook to positive from negative reflects an improvement in AM Best’s view of GIC Re’s balance sheet strength and ERM fundamentals
`With positive Credit Rating outlooks,Ramaswamy Narayanan, chairman and managing director, GIC Re, hoped that the 16th largest global reinsurer will be now in a position to get quality business from the overseas markets
Singapore:
After almost three years, AM Best has revised the outlook of state owned GIC Re to positive from stable for the Financial Strength Rating (FSR) and to positive from negative for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the FSR of B++ (Good) and the Long-Term ICR “bbb+” (Good)
Additionally, AM Best has assigned the India National Scale Rating (NSR) of aaa.IN (Exceptional) to GIC Re. The outlook assigned to the NSR is stable.
With positive Credit Rating outlooks,Ramaswamy Narayanan, chairman and managing director, GIC Re, hoped that the 16th largest global reinsurer will be now in a position to get quality business from the overseas markets.
“We will now make efforts to regain our A- rating,” said Ramaswamy.
These Credit Ratings (ratings) reflect GIC Re’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management (ERM),said AM Best revised rating note.
In addition, the ratings factor in a neutral impact from the company’s ownership by the government of India.
The revision of the Long-Term ICR outlook to positive from negative reflects an improvement in AM Best’s view of GIC Re’s balance sheet strength and ERM fundamentals.Both GIC Re’s risk-adjusted capitalisation and regulatory solvency position have shown sustained improvement over the past three years, added AM Best.
GIC Re’s shareholders’ equity increased 74% to Rs 675 billion (USD 8.2 billion) in fiscal year (FY) 2023 from Rs 388 billion in FY 2020, supported by fair value gains in GIC Re’s investment portfolio and an increase in retained earnings, said AM Best.
Conversely, capital requirements arising from underwriting and investment activities have grown at a much slower pace, driven by management actions to improve the company’s capital adequacy,observed the rating the company.
In addition, AM Best views the negative pressure on GIC Re’s ERM assessment to have been alleviated through prompt remedial actions and ongoing initiatives to improve internal financial controls.
Moreover, AM Best views the company’s operating performance as adequate, supported by a five-year average return-on-equity ratio of 5.3% (FY 2019-2023).
Consolidated pre-tax profits (prior to the contribution to catastrophe reserves) showed an improvement in FY 2023 to Rs 89 billion (FY 2022: Rs39 billion), having benefitted from the company’s better underwriting and investment results during the year.
GIC Re’s underwriting performance improved slightly in FY 2023 compared with FY 2022, although it remained technically unprofitable.
The improvement was driven by more favourable loss experience in GIC Re’s domestic property, agriculture and health reinsurance segments, although offset by heightened losses to its overseas property catastrophe treaties and motor portfolio. Investment income, including realised gains on equity investments, remained a key contributor of overall earnings and has historically made up for the lack of technical profits.
GIC Re’s business profile is assessed by AM Best as favourable.
The company is the 16th-largest reinsurer globally and third largest in Asia based on gross premium written, according to AM Best’s most recent annual ranking of the top 50 global reinsurers.
GIC Re is a leading reinsurer in India, with a domestic market share averaging between 60-70% in recent years.
The company benefits from mandatory domestic reinsurance cessions, which is at 4% for FY 2024, and also a right of first refusal that provides it with preferential access to domestic reinsurance placements. The company’s underwriting portfolio is generally well-diversified by lines of business and geography.
Earlier, AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of The New India Assurance Company Limited (New India) (India).
Additionally, AM Best has assigned the India National Scale Rating (NSR) of aaa.IN (Exceptional) to New India. The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect New India’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, favourable business profile and marginal enterprise risk management (ERM). In addition, the ratings factor in the neutral impact from New India’s ultimate majority ownership by the Government of India.