(The following statement was released by the rating agency)
Jan 15 -
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Summary analysis -- India International Insurance Pte. Ltd. ------- 15-Jan-2013
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CREDIT RATING: Country: Singapore
Local currency A-/Stable/--
Primary SIC: Fire, marine, and
casualty
insurance
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Credit Rating History:
Local currency Foreign currency
15-Jun-2010 A-/-- --/--
24-Jan-2007 BBB+/-- --/--
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Rationale
The ratings on Singapore-based India International Insurance Pte. Ltd. reflect the insurer's
strong capitalization and underwriting performance, and its good liquidity and conservative
investments. India International's small, albeit improving, share of Singapore's fragmented
non-life insurance market and the company's high use of reinsurance temper these strengths.
We expect India International's capitalization to remain strong relative to its risk profile
and the capitalization of the insurer's peers in Singapore in the next few years based on our
capital analysis. We expect the insurer's business and risk profile to remain relatively stable,
with single digit growth over the next one to two years.
We view India International's operating performance as strong despite some deterioration in
recent years due to losses in motor class and international hull businesses. The insurer's
overall underwriting performance is likely to remain profitable, with a combined ratio of no
more than 95% in 2012. This is despite a deterioration in the ratio in the first half of the
year. The insurer's expense ratio was low at 9.4% in 2011 and benefitted from reinsurance
commissions.
In our view, India International has a conservative and liquid investment portfolio. About
52% of the portfolio as of Dec. 31, 2011, is in cash. Bonds together with deposits held in
various Indian banks and higher-rated regional banks account for 26.8% of the portfolio. The
insurer is susceptible to volatility in foreign exchange rates, given that its deposits are
denominated in foreign currency. However, these assets provide a good match to India
International's claim liabilities arising from offshore businesses (usually denominated in U.S.
dollar).
We expect India International to maintain its competitive position with modest increases in
premiums. Nevertheless, the competitive advantage is likely to be limited in the saturated
non-life insurance market in Singapore. The insurer is the sixth-largest in the country, with a
3.1% market share in terms of total gross premiums for Singapore insurance funds in 2011 (3.6%
in 2010). India International is one of the largest marine hull underwriters in Singapore. The
insurer has grown its motor business in recent years.
India International's high reliance on reinsurance increases its credit risk, in our view.
The insurer retains only 46.2% of gross premiums, lower than its peers. Nevertheless, its higher
reinsurance usage has been for larger risks; i.e marine hull.
We expect India International to continue to prudently manage its expansion. The insurer has
a long history of writing offshore direct and inward facultative reinsurance businesses--mainly
from ASEAN (Association of Southeast Asian Nations) countries, Korea, and Taiwan--as well as the
marine hull and cargo business. Nevertheless, in our view, the offshore businesses carry higher
risk than the local business.
Enterprise risk management
India International's enterprise risk management is adequate in our view. The insurer's risk
management is rather traditional, but its risk control is adequate to meet its relatively simple
risk profile. While India International does not have a designated risk officer, the management
team meets regularly to review the business position based on the underwriting results. The
insurer deploys traditional methods of underwriting and manages risk through computer-controlled
aggregated risk limits. Claim management is also within the computer system, which provides
daily updates.
Outlook
The stable outlook reflects our expectation that India International's capitalization will
remain strong while the insurer continues to grow its business cautiously with a satisfactory
underwriting and overall operating performance.
We are unlikely to raise the rating on India International in the next 18 months.
Nevertheless, we could raise the rating if the insurer significantly improves its market
position in the local industry while continuing to report strong underwriting results and
capitalization. We may lower the rating if India International's underwriting performance and
business profile deteriorates significantly, affecting its capital position, while the insurer
grows its gross premiums written.
Related Criteria And Research
-- Refined Methodology And Assumptions For Analyzing Insurer Capital Adequacy Using The
Risk-Based Insurance Capital Model, June 7, 2010
-- Interactive Ratings Methodology, April 22, 2009
-- Group Methodology, April 22, 2009
Source: http://news.yahoo.com/text-p-summary-india-international-insurance-pte-ltd-092036149--sector.html
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