| The New India Assurance Company Limited | ||
| Rating Reaffirmed | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to annexure for Details of Instruments & Bank Facilities |
| Detailed Rationale |
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CRISIL has reaffirmed its 'AAA/Stable' rating on The New India Assurance Company Limited (New India Assurance), indicating that the company has the highest degree of financial strength to honour its policyholders' obligations. |
| Key Rating Drivers & Detailed Description |
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Strengths * Leadership position in the Indian General Insurance Industry New India Assurance has maintained its leadership position in the Indian general insurance industry with market share remaining sufficiently above that of other peers; based on gross direct premium (domestic) in fiscal 2019 ' the company held 14.06% of market share. Its market share has further increased to 16.8% during the period ended May 2019. Further, New India is the only Indian general insurer with sizeable international presence, spread across 22 countries; 10.1 % of its annual gross direct premium originates from outside India. CRISIL believes that New India Assurance will continue to benefit from its long, established track record and superior market reach. While CRISIL continued to believe that post completion of proposed merger of the other three public insurers, the combined entity will have a market share of close to 30%, double the size of New India, the latter's status as a GoI-owned entity will enable it to sustain its market position in the Indian general insurance sector by increasing its market share, especially in the mid and small-corporate sector, despite intensified competition. * Healthy capitalisation and solvency ratio Capital position of New India has remained healthy reflected in its large net worth of Rs. 14,306 crore as on March 31, 2019. Networth adjusted for un-booked appreciation in equity investments (reflected in its fair-value change account) is even stronger at Rs 36,567 crore. The strong capital position results in a healthy solvency ratio (available solvency margin/required solvency margin) of 2.13 times which is among the highest in the domestic non-life industry. The solvency ratio, after adjusting for un-booked appreciation in equity investments in available solvency margin, is substantially higher at 5.65 times. Capitalisation should remain healthy over the medium term. Capital position of New India, in the normal course of business, is expected to remain comfortable ' supported by healthy accretions and substantial balance in fair value change account. * Sound asset quality Asset quality has remains sound. More than 94% of its debt investments were in securities rated 'AA' or higher as on March 31, 2019. The company has made required provision for the investments in securities that got downgraded in fiscal 2019 and accounted for less than 0.5% of total investments based on market value on the same date. The company has made the required provisions against these investments. Investment profile is additionally supported by more than half the book being parked in government securities (central and state). Market value of investments as on March 31, 2019 stood at Rs 69,074 crore. * Strategic importance to, and expectation of continued support from the Government of India New India Assurance is strategically important to GoI because of its dominant market position (over 30 million policies) and because it is the flagship Indian general insurer in the international markets, with a desk at the prestigious Lloyd's syndicate in London. The importance of the general insurance sector, especially GoI-owned insurers such as New India Assurance, can be seen in the context of GoI's plan to materially enhance insurance penetration over the long term. General insurance companies, especially government-owned entities, are systemically important and will receive support from the government in the event of strain on their credit risk profiles. Weaknesses * Modest underwriting performance New India Assurance's underwriting performance, after improving over the last two fiscals, moderated in fiscal 2019 owing to multiple one time occurrences. Global and domestic catastrophic events, climatic challenges and implementation of area correction factor in two states leading to increased claims in crop insurance segment, increase in claims ratio in the personal accident segment and transitioning to 1/365 accounting method for unexpired risk reserves for foreign business; were a few such events. Additionally, higher claims in the motor own damage segment further added pressure. On the expenses side, the company made adjustments to employee gratuity and pension schemes for employees which added to the expense ratio. This led to a significant increase in total underwriting deficit which stood at Rs 5,236 crore for the year, corresponding to a combined ratio of 124%. However, the combined ratio should improve gradually over the medium term, supported by its efforts to improve performance of its health insurance portfolio and increase in tariffs in the motor third-party business. Further, revision in pricing and diversification across states, in the crop segment will also benefit the company as the share of crop business in the total premium underwritten grows. |
| Liquidity |
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The company's liquidity is comfortable, with a large proportion of liquid investments. On March 31, 2019, government securities (G-secs) accounted for 52% of its investment portfolio based on market value. Additionally, a cash and bank balance of over Rs 9,500 crore and a substantial balance of Rs 22,261 crore in fair value change account, enhance the company's liquidity position. |
| Outlook: Stable |
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New India Assurance should continue to benefit from its leadership position in the Indian general insurance industry and maintain its market share, healthy capitalisation, sound asset quality, and comfortable liquidity over the medium term. New India Assurance will also receive support from GoI, in the unlikely event of financial distress. The outlook may be revised if substantial underwriting losses adversely impact profitability. Sizeable changes, if any, in the extent of ownership or strategic importance of New India Assurance to GoI may also result in a revision in outlook. |
| About the Company |
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The New India Assurance Company Limited (New India Assurance) is India's largest non-life insurance company with the Governent of India (GoI) holding 85.54%. New India was established in 1919 by Sir Dorabji Tata and nationalised in 1973. Post nationalisation, it became one of the four subsidiaries of the General Insurance Company of India (GIC). But when GIC became a re-insurance company as per the IRDA Act 1999, its four primary insurance subsidiaries New India Assurance, United India Insurance, Oriental Insurance and National Insurance got autonomy. |
| Key Financial Indicators | ||||||||||||||||||||||||
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
| Annexure - Details of Instrument(s) | ||||||||||||||
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Links to related criteria |
| Rating Criteria for General Insurance Companies |
| Criteria for Notching up Stand Alone Ratings of Entities Based on Government Support |
| For further information contact: | ||||||
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