A.M. Best Affirms Rating of New India Assurance Company Limited

Business Wire, Oct 26, 2004

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A (Excellent) of New India Assurance Company Limited (New India). The outlook remains stable. E[acute accent]The rating reflects the company's excellent risk-adjusted capitalisation, prospective improvements in underwriting performance and its leading business profile in the direct insurance market in India.

A partially offsetting factor is the company's reliance on investment income to counterbalance underwriting losses. E[acute accent]A.M. Best believes New India's risk-adjusted capitalisation is excellent and anticipates that it will remain sufficient to absorb likely growth in net premiums to year-end March 2005 of just under 10%. The absolute level of capital and surplus increased by 71% to INR 97.8 billion (USD 2.2 billion) in the year to March 2004. This was largely due to a 153% increase in the fair value change account to INR 58.4 billion (USD 1.3 billion), reflecting the change in market value of the company's investments. A.M. Best believes that New India is likely to maintain its leading business position as the largest direct insurer in India (market share of approximately 25% as of March 2004), despite increased competition from overseas companies. E[acute accent]From year-end March 2005, improvement in underwriting performance is likely to lead to less pronounced reliance on investment income. A.M. Best anticipates a combined ratio of just over 100% at year-end March 2005, a reduction from 118.3% the previous year. The company experienced a large one-off increase in expenses of INR 5.25 billion (USD 119.4 million) at year-end March 2004 from a voluntary retirement scheme, which is projected to reduce expenses longer term through lower staff costs. The absence of these costs at year-end March 2005 is likely to lead to a reduction in the company's expense ratio to slightly below 30%, down from 42.7% at year-end March 2004. The company's loss ratio is likely to remain stable at close to the March 2004 level of 75.6% (down from 81.9% at year-end 2003), although the anticipated removal of motor tariff rates over the coming two years is likely to lead to improvement in the company's loss ratio for year-end 2006-2007. E[acute accent]For current Best's ratings, independent data and analysis on more than 3,000 individual property/casualty companies, groups and industry composites, please visit http://www.ambest.com/pc. E[acute accent]A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.