The Long-Term Issuer Credit Rating of Oriental Insurance Company Limited decreased from bbb+ to bbb- and the financial strength rating of the firm was downgraded by AM Best from B++ to B+ of AM BEST. There was a revision of the outlook of financial strength rating from stable to negative, whereas the outlook of the Long-Term Issuer Credit Rating is still negative.
The balance sheet strength of Oriental Insurance Company Limited was reflected by the credit ratings, which was categorized by AM BEST as very strong, neutral business profile, marginal enterprise risk management, as well as, marginal operating performance was reflected by the credit ratings.
The ratings of Oriental Insurance Company were downgraded following a deterioration in the view of AM BEST of the operating performance, as well as, enterprise risk management of Oriental. Particularly, the firm noted a huge underwriting loss of INR 38bn which is equivalent to USD 549 million in fiscal-year 2019, this was equal to 32 percent of its capital base in the former year, as an outcome of reserve strengthening from the motor 3rd-party business, as well as, the persistence of poor performance from its health portfolio. It was reported by the firm that a combined ratio of 136 percent for fiscal-year 2019 and a 5-year average combined ratio of 132 percent (fiscal-year 2015 to fiscal-year 2019). Investment income, inclusive of a significant realized gain after selling its equity investments, was not sufficient for offsetting the poor technical performance. This resulted in a resulting in a loss (after-tax) of INR 2.9bn which was equivalent to USD 42M for fiscal-year 2019.
The marginal assessment on enterprise risk management sheds lights on the inability of the firm for controlling its underwriting performance, in addition to the non-positive impact on its earnings, as well as, balance sheet strength.