State-owned insurers rally up to 11%; GIC Re, New India hit 52-week highs

In an exchange filing on Thursday, GIC Re said that the global rating agency AM Best has revised the credit rating outlooks of GIC Re to positive from stable

Shares of state-owned insurance companies were in demand and rallied up to 11 per cent on the BSE in Friday’s otherwise subdued market.

The share price of New India Assurance Company (New India) (up 11 per cent at Rs 194.55) and General Insurance Corporation of India (GIC Re) (up 8 per cent at Rs 287.05) hit their respective 52-week highs.

Shares of Life Insurance Corporation of India was up 4 per cent to Rs 642.80. In comparison, the S&P BSE Sensex was down 0.06 per cent at 65,976 at 10:02 AM.

In the past two weeks, the stock price of GIC Re has surged 27 per cent. In an exchange filing on Thursday, GIC Re said that the global rating agency AM Best has revised the credit rating outlook of GIC Re to positive from stable.

Outlining the particulars, the rating agency has revised the outlook to positive from stable for the Financial Strength Rating (FSR) and to positive from negative for the Long-Term Issuer Credit Rating (Long-Term ICR).

It also affirmed the FSR of B++ (Good) and the Long-Term ICR “bbb+” (Good) of GIC Re.

AM Best has also assigned the India National Scale Rating (NSR) of aaa.IN (Exceptional) to GIC Re. The outlook assigned to the NSR is stable.

Earlier on October 20, AM Best had affirmed the FSR of B++ (Good) and the Long-Term ICR of “bbb+” (Good) of New India.

New India has also been assigned the NSR of aaa.IN (Exceptional) with a stable outlook.

According to AM Best, these ratings reflect these companies balance sheet strength, which it assesses as strong, as well as adequate operating performance, favourable business profile and appropriate enterprise risk management (ERM).

In addition, the ratings factor in a “neutral impact from these companies' ownership by the government of India.

New India’s balance sheet strength assessment is underpinned by its risk-adjusted capitalisation, which remained at the strongest level in fiscal-year 2023, as measured by Best’s Capital Adequacy Ratio (BCAR).

AM Best views the company’s investment portfolio to have moderate risk.

Although a large portion of investments are held in domestic government and corporate bonds, which are well-rated on the local scale, the balance sheet remains subject to volatility arising from the company’s allocation to domestic equity investments.

The majority of New India’s reinsurance assets are of good credit quality, notwithstanding that the company maintains a reinsurance counterparty concentration to the domestic reinsurer, GIC Re.

New India’s favourable business profile assessment reflects its market position as the largest non-life insurer in India by gross premiums written.

The company’s underwriting portfolio is moderately diversified by lines of business and distribution channels, although with an elevated concentration in health insurance.

International geographical diversification is supported by the company’s overseas operations, through its foreign branches, agency offices and subsidiaries.

The domestic market continues to present significant growth opportunities for New India, although AM Best considers high market competition, particularly in the health and motor businesses, to be an offsetting factor, the rating agency said in release.