| The New India Assurance Company Limited | ||
| Rating Reaffirmed | ||
| Rating Action | ||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||
| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its corporate credit rating (CCR) on The New India Assurance Company Limited (New India Assurance) at ‘CRISIL AAA/Stable’.
The rating is driven by the company’s leadership position in the Indian general insurance industry, its sound investment portfolio, healthy capitalisation and solvency position, and the strategic importance to and support derived from the parent, the Government of India (GoI). These strengths are partially offset by the company’s modest underwriting performance.
Based on Gross Direct Premium in India during the nine months ended December 31, 2023, New India Assurance remained the largest general insurance company in the country, with a market share of 13.3%. For the first nine months of fiscal 2024, the company’s claims ratio increased to 98.1% from 94.7% for the corresponding period of the previous fiscal, due to losses related to catastrophic events. However, the expense ratio including commission paid remained almost flat at 22.6%, resulting in a combined ratio of 120.6% for the first nine months of fiscal 2024 vis-à-vis 116.4% for the corresponding period of the previous fiscal.
The company’s underwriting performance remains modest, as reflected in underwriting deficit of Rs 5,303 crore for the nine months ended December 31, 2023. Nonetheless, overall profitability remained stable with net profit at Rs 775 crore, supported by healthy income from investments.
The financial risk profile of New India Assurance remains strong, supported by its healthy capitalisation and solvency ratio. On December 31, 2023, the company had healthy networth of Rs 20,754 and comfortable solvency ratio of 1.72 times. In addition, the company had a substantial balance of Rs 23,936 crore in its fair value change account.
The rating also factors in the strategic importance of New India Assurance to and expectation of strong support from GoI. |
Analytical Approach For arriving at the corporate credit rating, CRISIL Ratings has assessed the standalone business, financial and management risk profile of New India Assurance and applied its notch-up criteria to indicate the company's strategic importance to and the support expected from GoI. |
Key Rating Drivers & Detailed Description Strengths:
New India Assurance has maintained its leadership position in the Indian general insurance industry. Based on Gross Direct Premium (domestic) in the nine months ended December 31, 2023, the company held 13.3% market share.
Having underwritten a Gross Written Premium of Rs 31,425 crore for the first nine months of fiscal 2024, the company registered on-year growth of 10.5% as against the industry growth of ~14%. It is the only Indian general insurer with an international presence; with presence in 25 other countries, close to 10% of its annual gross written premium originates outside India.
New India Assurance will continue to benefit from its long, established track record and superior market reach. Its status as a GoI-owned entity will enable it to sustain its market position in the Indian general insurance sector. In the wake of Covid-19, the awareness and demand of health insurance products has increased, resulting in robust growth in this segment. Based on gross premiums written in the first nine months of fiscal 2024, 45% of the company’s premium portfolio comprised health insurance premiums, followed by motor premium (27%) and fire insurance (17%).
The company is revising the prices of its health insurance products upward, as many peers did in fiscal 2023. This will keep health the largest portfolio in the company’s book over the medium term. The motor segment is also expected to grow, driven by motor sales and the launch of new products.
Capital position of New India Assurance has remained healthy, as reflected in its large networth of Rs 20,754 crore as on December 31, 2023. Networth adjusted for un-booked appreciation in equity investments (reflected in its fair value change account) was even stronger at Rs 44,690 crore. The strong capital position results in a comfortable solvency ratio (available solvency margin/required solvency margin) of 1.72 times. The ratio has consistently remained well above the regulatory requirement of 1.5 times. The solvency ratio, after adjusting for un-booked appreciation in equity investments, is substantially higher at 4.12 times. The capital position is expected to remain comfortable in the normal course of business, supported by healthy accretions and substantial balance in the fair value change account.
The quality of investments remains sound. As on December 31, 2023, more than 99.4% of the company’s debt investments were in securities rated 'AA' or higher and almost 55% had a residual maturity of more than three years. Gross non-performing assets stood at 0.73% on December 31, 2023. The investment profile is also supported by more than half the book being parked in government securities (central and state). Market value of the investments as on December 31, 2023, was Rs 84,091 crore.
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.
Weakness:
New India Assurance's underwriting performance remains modest. For the first nine months of fiscal 2024, the company's claims ratio was 98.1%, up from 94.7% for the corresponding period of the previous fiscal because of higher losses due to occurrence of natural calamities. The expenses ratio increased marginally to 22.6% during the first nine months of fiscal 2024 from 21.7% for the corresponding period of the previous fiscal. The combined ratio inched up to 120.6% from 116.4%, largely driven by the increase in claims. This corresponded to an increase in underwriting deficit to Rs 5,303 crore for the first nine months of fiscal 2024 from Rs 3,703 crore in the year-ago period. While the underwriting performance remains modest for now, the combined ratio should improve gradually over the long term, supported by the company’s efforts to improve performance in core verticals such as motor and health and to diversify into retail segments. |
Liquidity: Superior The company has adequate liquidity, with a large proportion of liquid investments. On December 31, 2023, government securities accounted for ~38% of its investment portfolio based on market value. Additionally, cash and bank balance of over Rs 11,356 crore and a substantial balance of Rs 23,936 crore in the fair value change account enhanced the company's liquidity position. |
Outlook: Stable New India Assurance should continue to benefit from its leadership position in the Indian general insurance industry and maintain its market share, healthy capitalisation and sound quality of investment portfolio over the medium term. New India Assurance will also receive support from GoI, in the unlikely event of financial distress. |
Rating Sensitivity factors Downward factors
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About the Company New India Assurance is India’s largest non-life insurance company with the 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). 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.
New India Assurance is the only Indian general insurance company that has a strong presence in India and good reach overseas. In India, the company operates through 31 regional offices, 469 divisional offices, 564 branch offices (including 27 direct agent branches), 816 micro-offices, 1 auto hub, 7 large corporate and brokers' offices and 1 office at International Financial Services Centre (IFSC) in Gujarat International Finance Tec-City. It is present in 25 other countries through 19 branch offices, 7 agencies, 3 subsidiary companies, 1 representative office and 3 associates. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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