A.M. Best Downgrades Credit Ratings of United India Insurance Company Limited

A.M. Best has downgraded the Financial Strength Rating (FSR) to B (Fair) from B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bb+” from “bbb” of United India Insurance Company Limited (United) (India). The outlook of the FSR has been revised to stable from negative, while the outlook of the Long-Term ICR remains negative.

The Credit Rating (rating) downgrades reflect United’s diminished risk-adjusted capitalization and its marginal enterprise risk management (ERM). The negative Long-Term ICR outlook reflects the downside risks to United’s risk-adjusted capitalization and operating performance.

The ratings reflect United’s balance sheet strength, which A.M. Best categorizes as strong, as well as its adequate operating performance, neutral business profile and marginal ERM.

United’s capital position has decreased to a lower-than-expected level of INR 90 billion (USD 1.4 billion) as of March 2018 (compared with INR 95 billion in the prior year). Subordinated debt of INR 9 billion helps to maintain United’s risk-adjusted capitalization at a strong level. However, the non-renewal of quota-share reinsurance for health and motor third-party business, as well as continued underwriting losses are expected to further reduce United’s capital position and risk-adjusted capitalization. Lastly, rising equity investment leverage is leaving the company’s risk-adjusted capitalization more vulnerable to equity market fluctuations.

The marginal ERM assessment reflects United’s inadequate capability to manage its reserves, as continued adverse developments have contributed to United’s capital erosion. Frequent changes in senior leadership raises the execution risk the company faces in implementing its turnaround strategy. It also raises concerns about the company’s ability to respond to challenges in India’s fast-growing non-life market in a timely and effective manner. Lastly, A.M. Best is concerned about United’s ability to provide timely and accurate information.

Further negative rating actions could occur if the company fails to maintain its risk-adjusted capitalization at a strong level due to adverse equity market movement or unfavorable reserve developments. Negative rating actions also could occur as a result of weakening operating performance.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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