Detailed Rationale

Crisil Ratings has downgraded its corporate credit rating on United India Insurance Company Ltd (United India Insurance) to ‘Crisil AA-/Negative’ from ‘Crisil AA/Negative’.

 

The rating action primarily takes into consideration the lack of improvement in the company’s solvency profile with the solvency ratio continuing to remain below the regulatory stipulation and the company’s weak underwriting performance which, in turn, continues to constrain its earnings profile thereby imposing pressure on its solvency position. The company’s underwriting performance remained weak with the combined ratio remaining high between 120% and 129% during the last 3-4 quarters. The average claims ratio during this period ranged between 92% and 96% during last few quarters (however in recent period claims ratio has reduced to 92.29% for nine months fiscal 2025 from 96.50% in fiscal 2024).   

 

The overall rating continues to take into consideration the company’s strategic importance to the government of India and expectation of strong support from it and its established market position in the insurance industry. With a track record of over 75 years, United India Insurance is one of the largest insurers in the industry based on the gross premiums written during the nine months ended fiscal 2025 which translates to a market share of 6.22%. These strengths are partially offset by the very low cushion in solvency ratio and dependence on equity infusion by the government, and weak underwriting performance, which continues to constrain earnings and solvency margin.
 

Following a sustained period of underperformance, the company has begun to exhibit signs of profitability in terms of investment income, reversing a negative trend that has persisted since the past 6-7 fiscals. Net profit was Rs 27 crore during the nine months ended fiscal 2025 as against net loss of Rs 804 crore during fiscal 2024. The lower accretion to networth has led to moderation in the capital position and has increased reliance on equity capital support from the government. As on December 31, 2024, the company’s reported networth was negative Rs 1,528 crore as against negative Rs 1,535 crore as on March 31, 2024. While some comfort is drawn from the availability of balance in fair value change account (FVCA), the ability to accelerate improvement in underwriting performance to prevent potential pressure on its solvency position remains a key monitorable.

 

Owing to lower accretions, the company’s solvency margin continued to remain under pressure.  The reported solvency margin stood at negative 0.91 time as on December 31, 2024. However, adjusted solvency (considering 100% of FVCA balance), stood at 0.34 time as on December 31, 2024 as against 0.37 time (after including balance of FVCA) as on March 31, 2024. As far as the historical trend of equity infusion is concerned, the government had infused Rs 100 crore in March 2022 and prior to that Rs 3,655 crore was infused between the fourth quarter of fiscal 2020 and the fourth quarter of fiscal 2021. However, since then, there has been no infusion in fiscals 2023, 2024 and 2025 (in any of the public sector general insurance companies).

Analytical Approach

Crisil Ratings arrived at United India Insurance's corporate credit rating (CCR), which is an indication of the company's ability to honour its debt and policy holders' obligations. For arriving at the CCR, Crisil Ratings has factored in expectation of strong government support, in addition to the standalone assessment of business, financial and management risk profiles of the company.

Key Rating Drivers & Detailed Description

Strengths:

• Strategic importance to the government of India and expectation of strong support from it: United India Insurance is expected to receive strong support from the government on a steady-state basis, driven by its established market position in the Indian non-life insurance sector, which makes it strategically very important to the government. The importance of the general insurance sector, especially government-owned insurers, can also be perceived in the context of the government’s plan to materially enhance insurance penetration over the long term. As a demonstration of their strategic importance to the government and the latter’s stance on extending timely support, public general insurers were allotted Rs 12,450 crore of capital by the government in July 2020 (including Rs 2,500 crore which had already been infused in March 2020). Oriental, National Insurance Company Ltd (National) and United India Insurance cumulatively received Rs 2,500 crore in fiscal 2020 and Rs 9,950 crore in fiscal 2021. Of this, United India Insurance received Rs 50 crore and Rs 3,605 crore, respectively. Eventually, in the fourth quarter of fiscal 2022, the three public general insurers received Rs 5,000 crore from the government – of which Rs 3,700 crore was infused in National, Rs 1,200 crore in Oriental and balance Rs 100 crore was infused in United India Insurance. However, the government has not infused any capital in fiscals 2023 and 2024. Along with the capital allocation, the government also announced its decision of shelving the merger process of Oriental with National and United India Insurance and focusing on improving the standalone financial risk profiles of these entities. Crisil Ratings will continue to monitor the developments in this aspect.

 

• Established market position: United India Insurance is one of the largest general insurance companies in India with a market share of 6.22% based on gross premiums originated upto December 2024. The company underwrote gross premium of Rs 14,318 crore in the nine months ended fiscal 2025, which a rise of just 1.9% on-year. However, despite a sectoral growth of 10.9% in health insurance premiums and 8.4% for motor insurance premiums written over the nine months of fiscal 2024, United India Insurance’s health insurance portfolio de-grew 7.7% and motor insurance portfolio grew 8.4% over the same period. Apart from health insurance, the company also underwrote Rs 690 crore of crop insurance business in the nine months ended fiscal 2025 as against Rs 687 crore during the same period in the previous fiscal. Other niche segments such as engineering, personal accident and liability have also grown at a good pace.

 

Weaknesses:

• Reported solvency continues to remain below regulatory stipulation resulting in increased dependency on equity infusion by the government: Capitalisation and the solvency position of United India Insurance remains strained. Reported solvency ratio, excluding the balance in FVCA, has remained below 1.5 times for over 19 quarters now. However, IRDAI’s exceptional approval has allowed United India Insurance (along with Oriental and National) to include the balance in the FVCA in the available solvency margin for calculating solvency. The reported solvency margin stood at negative 0.91 time as on December 31, 2024. However, adjusted solvency (considering 100% of FVCA balance), stood at 0.34 time as on December 31, 2024, as against 0.37 time (after including 75% balance of FVCA) as on March 31, 2024. Because of negative accrual to networth, the company’s networth also declined from negative Rs 1,141 crore to negative Rs 1,528 crore between December 2023 and December 2024. Nonetheless, United India Insurance’s capitalisation and solvency position are expected to remain dependent on equity support from the government and the company’s fair value change balance. Additional comfort is drawn from regulatory relaxations allowed by the government to the company, in terms of including fair value change balance in its solvency reporting. While the company has been taking measures to restore its solvency position to above 1.5 times, the traction is slow and has been disrupted by factors such as the Covid-19 pandemic. In the meantime, continued weakness in underwriting and overall profitability leading to further moderation in capital and solvency position of the company, remain key rating sensitivity factors.

 

• Weak underwriting performance, albeit improving: Underwriting performance had moderated after fiscal 2017. After recognition of additional reserving requirement in motor third party business in fiscal 2017, the company’s underwriting performance has remained volatile. However, in fiscal 2024, the company reported an underwriting loss of Rs 4,250 crore which has improved from an underwriting loss of Rs 6,286 crore for the previous year. Correspondingly, the combined ratio for fiscal 2024 stood at 125.7% as against 140.7% for fiscal 2023. For the nine months ended December 31, 2024, the company’s combined ratio improved to 120.5% from 124.1% for the corresponding period of the previous fiscal. Excluding the impact due to wage revision in fiscal 2023 (combined ratio – 140.7%), the company has shown improvement in the overall underwriting performance, but it has remained high at 125.7% for fiscal 2024 resulting in weak underwriting performance of the portfolio. Continuous deterioration in the company’s underwriting performance, straining its earnings profile and capitalisation, has remained a key rating sensitivity factor.

 

• Weak earnings profile putting pressure on capital position: Earnings remain weak, constrained by modest underwriting performance and inadequate, though stable, investment income. Despite investment income of Rs 3,712 crore for fiscal 2024, the company reported a net loss of Rs 804 crore, against a loss of Rs 2,829 crore in the previous fiscal. For the nine months of fiscal 2025, the company earned Rs 2,584 crore from investments compared to Rs 2,584 crore earned in the corresponding period of the previous fiscal. With higher underwriting loss of Rs 2,580 crore, net profit for the nine months of fiscal 2025 was Rs 27 crore against a loss of Rs 409 crore for the corresponding period of fiscal 2024. Ability to improve underwriting performance such that overall profitability is revived, and capital position and solvency are sustained at strong levels, will remain monitorable.

Liquidity: Superior

Almost 99% of the debt investments as on December 31, 2024, were in securities rated ‘AA’ or higher or in sovereign securities. Government securities accounted for 74.5% of the investment in debt portfolio based on market value as on December 31, 2024. Liquid assets to technical reserves ratio[1] was adequate at 59% as on December 31, 2024.

[1] Liquid assets = Cash balance + investments in liquid mutual funds + government securities

Technical reserves = Reserve for unexpired risks, premium deficiency and outstanding claims

Outlook: Negative

United India Insurance should maintain its competitive position in the Indian general insurance industry and will continue to receive support from the government in the unlikely event of financial distress. However, its underwriting performance and overall profitability are expected to remain weak thereby constraining its capitalisation and solvency ratio.

Rating sensitivity factors

Upward factors:

• Substantial and sustained improvement in the reported solvency ratio such that it stays above 1.5 times on steady-state basis (excluding all forbearances)
• Significant and sustained improvement in underwriting performance and overall profitability of the company, leading to significant improvement in the capital position

 

Downward factors:

• Lack of improvement in underwriting performance on sustained basis, leading to an adverse impact on overall profitability and solvency margin (excluding balance in FVCA) remaining below 1.5 times for a prolonged time period
• Any change in the stance of support from the government or significant dilution of stake by it

About the Company

United India Insurance is the fifth-largest non-life insurance company wholly owned by the government of India. The company commenced operations in 1938. After nationalisation of the general insurance business in 1972, it became one of the four subsidiaries of General Insurance Company of India (GIC). In December 2000, the subsidiaries of GIC were restructured as independent companies and GIC became a national reinsurer. United India Insurance has its head office in Chennai and has over 1,357 offices across the country.

Key Financial Indicators

As on/For the period ended March 31,	Unit	2024	2023
Gross direct premium written	Rs crore	19,853	17,644
Profit/ (loss) after tax	Rs crore	(804)	(2,829)
Combined ratio	%	125.7	140.7
Solvency ratio	Times	-0.59	-0.29
Adjusted solvency margin#	Times	0.37	0.35

#includes 100% of balance in fair value change account

 

As on/for the period ended December 31,	Unit	2024	2023
Gross direct premium written	Rs crore	14,318	14,055
Profit/ (loss) after tax	Rs crore	27	(409)
Combined ratio	%	120.5	124.1
Solvency ratio	Times	-0.91	-0.48
Adjusted solvency margin^	Times	0.34	0.89

^includes 100% of balance in fair value change account

Any other information: Not applicable