AM Best upgrades credit ratings of GIC Re, shifts outlook to stable

Global credit rating agency AM Best has upgraded and revised the credit rating outlooks for Indian public sector reinsurer, General Insurance Corporation of India (GIC Re), to stable from positive.

Specifically, AM Best has upgraded the reinsurer’s Financial Strength Rating to A- (Excellent) from B++ (Good), and the Long-Term Issuer Credit Rating to “a-” (Excellent) from “bbb+” (Good).

AM Best has also affirmed the India National Scale Rating (NSR) of aaa.IN (Exceptional) with a stable outlook.

According to the rating agency, the upgraded ratings reflect GIC Re’s “very strong” balance sheet strength, its adequate operating performance, a favourable business profile, and appropriate enterprise risk management.

The ratings also factor in a neutral impact from the reinsurer’s ownership by the government of India.

GIC Re has also seen a significant increase in shareholders’ equity in recent times, driven by investment fair value gains, and an increase in retained earnings.

AM Best stated, “Prospectively, we expect GIC Re’s risk-adjusted capitalisation to be maintained at the strongest level over the medium term. Notwithstanding, the company’s exposure to market risk remains a partially offsetting balance sheet factor, given its relatively high allocation to domestic equity investments.

“AM Best views GIC Re’s operating performance as adequate, supported by a five-year average return-on-equity (ROE) ratio of 6.5% (FY 2020-2024). In fiscal year 2024, GIC Re reported a ROE ratio of 9.5% based on consolidated profits, although its underwriting performance remained unprofitable with an elevated combined ratio.”

Investment income is a key contributor to overall earnings for GIC Re, and historically has made up for the lack of technical profits.

According to AM Best’s most recent annual ranking of the top 50 global reinsurers, GIC Re is the 10th largest non-IFRS 17 reinsurer globally.

GIC Re has a domestic market share averaging between 60-70% in recent years, benefitting from mandatory domestic reinsurance cessions of 4%, a right of first refusal that provides it with preferential access to domestic reinsurance placements.

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