AM Best upgraded GIC Re’s Financial Strength Rating to A- (Excellent) from B++ (Good) and the Long-Term Issuer Credit Rating to “a-” (Excellent) from “bbb+” (Good)
Singapore: After downgrading GIC Re’s rating four years ago, AM Best on Friday has upgraded it that will help the state owned reinsurer to increase its international exposure in coming renewals.
GIC Re is the largest reinsurer in India, with a domestic market share averaging between 60-70% in recent years but had reduced its international exposure after its rating was downgraded.
AM Best assesses GIC Re’s business profile as favourable. The company is the 10th largest non-IFRS 17 reinsurer globally according to AM Best’s most recent annual ranking of the top 50 global reinsurers.
AM Best upgraded GIC Re’s Financial Strength Rating to A- (Excellent) from B++ (Good) and the Long-Term Issuer Credit Rating to “a-” (Excellent) from “bbb+” (Good).
In addition, AM Best has revised the Credit Rating (rating) outlooks to stable from positive. Furthermore, AM Best has affirmed the India National Scale Rating (NSR) of aaa.IN (Exceptional) with a stable outlook.
Just before Monte Carlo Rendezvous in early September, N Ramaswamy, CMD , GIC Re had said,“ With the various measures taken by us, we remain fairly optimistic about a rating upgrade. We have done a lot of good work in all areas of our operations and this is showing up in positive results. A boost in our international credit rating will definitely help us access and write good quality business internationally.”
The ratings reflect GIC Re’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, favourable business profile and appropriate enterprise risk management. In addition, the ratings factor in a neutral impact from the company’s ownership by the government of India, said AM Best.
The rating upgrades reflect an improvement in GIC Re’s balance sheet strength fundamentals. GIC Re’s risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), has exhibited an improving trend over the past four years, and remained at the strongest level in fiscal year 2024.
This is supported by a significant increase in shareholders’ equity over this period, driven by investment fair value gains, and an increase in retained earnings. Prospectively, AM Best expects GIC Re’s risk-adjusted capitalisation to be maintained at the strongest level over the medium term.
The company’s exposure to market risk remains a partially offsetting balance sheet factor, given its relatively high allocation to domestic equity investments.
AM Best views GIC Re’s operating performance as adequate, supported by a five-year average return-on-equity (ROE) ratio of 6.5% (FY 2020-2024). In fiscal year 2024, GIC Re reported a ROE ratio of 9.5% based on consolidated profits, although its underwriting performance remained unprofitable with an elevated combined ratio. Investment income, including realised gains on equity investments, is a key contributor of overall earnings and historically has made up for the lack of technical profits.
The company benefits from mandatory domestic reinsurance cessions of 4%, 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.