Affirming Oriental Insurance’s rating, CRISIL says company targets 5-10% growt


Chennai, May 29 | Credit rating agency CRISIL Ratings Ltd affirming AAA/Stable rating for Oriental Insurance Company Ltd’s Rs.750 crore subordinated debt said the insurer plans to grow at 5-10 per cent this fiscal.

The rating agency said the insurer is predicting the growth over the near to medium term on the premise that the second wave of the pandemic should tail out by the end of Q1 2022.

The business growth will be driven by motor, health and fire segments. Oriental also plans to run down its loss making crop portfolio to about 10 per cent of the total premium base, CRISIL said.

The rating agency also reaffirmed the insurer’s corporate credit rating at AAA/Stable.

According to CRISIL, the rating on the hybrid instrument is centrally based on forbearance granted by Insurance Regulatory and Development Authority of India (IRDAI) to Oriental Insurance from adhering to provisions 3(vii) and 5(vii) of Insurance Regulatory and Development Authority of India (Other Forms of Capital) Regulations, 2015, for this specific subordinated debt issue of Rs. 750 crore.

The forbearance allows the company to service the interest or coupon payments to the investors in the issue throughout the life of the instrument, irrespective of solvency ratio.

IRDAI has also granted forbearance against provision 14 of the regulation and has allowed the company to issue subordinated debt to the extent of 25 per cent of its networth as on September 30, 2018, CRISIL said.

At a time when the central government is mulling to divest its stake in one of its three non-life insurance companies that includes Oriental Insurance, CRISIL said its ratings reflect the company’s strategic importance to, and expectation of strong support from, the Government of India (GoI), in addition to its established market position in the Indian general insurance industry.

The rating agency also added that it is monitoring the developments relating to privatisation plans of the central government.

CRISIL said the insurer’s strengths are partially offset by the low cushion in solvency ratio and capitalisation remaining dependent on equity infusion by the government.

The company’s underwriting performance remains modest, imposing pressure on overall profitability and solvency.

Last fiscal Oriental Insurance had settled about Rs.609 crore of Covid-19 claims. However, claims for non-Covid illnesses/ casualties were lower during the year, CRISIL said.

Owing to restricted public activity last fiscal, claims were lower in other segments.

For nine months ended December 31, 2020, the company reported an underwriting deficit of Rs 2,366 crore, which led to an overall loss of Rs 758 crore for the period. This modesty in earnings profile was partly offset by Rs 1,737 crore of investment income earned during the first nine months of fiscal 2021, said CRISIL.

According to the rating agency, for FY22 the growth in new business in segments like motor could be muted as new sales volumes in the auto sector will happen only at a gradual pace once the lockdowns across states are lifted.

Renewal premiums from the retail segment could also be impacted on account of job losses and pay-cuts.

For the health segment – which is the second largest after motor, growth prospects will remain strong driven by increased market awareness and demand for multiple covers.

In a scenario where pricing for Covid-19 policies is revised upwards, growth in this segment could be higher than that of last fiscal.

However, with increasing ticket size of Covid-19 claims, the impact of actual losses borne by the insurers after the second wave – on their underwriting performance and capital and solvency position, remains to be seen, CRISIL said.

Source: IANS

Next Story

Does MBA really help in getting a better job offer ?

Does MBA really help in getting a better job offer ?

Most students pursuing an MBA come with the sole objective of having a decent job offer or a promotion in the existing job soon after completion of the MBA. And most of them take loans to pursue this career dream. According to a recent survey by education portal  74% MBA 2022-24 aspirants said they would opt for education loans.

There are exceptional cases like those seeking master’s degree or may have a family business to take care of or an entrepreneurial venture in mind. But the exception cases are barely 1%. For the rest 99%, a management degree is a ticket to a dream job through campus placements or leap towards career enhancements. Stakes are high as many of them quit their jobs which essentially means loss of 2 years of income, apprehension and uncertainty of the job market. On top of that, the pressure to pay back the education loans. Hence the returns have to be high. There is more than just the management degree. Colleges need to ensure that they offer quality management education which enables them to be prepared for not just the demands of recruiters and for a decent job but also to sustain and achieve, all along their career path.

  • So, what exactly are the B Schools doing to prepare their students for the job market and make them industry ready ?
  •  Are B schools ready to deliver and prepare the future business leaders to cope up with the disrupted market ?  

These are the two key questions every MBA aspirant needs to ask, check and validate before filling the MBA application forms of management institutes. And worth mentioning that these application forms do not come cheap. An MBA aspirant who may have shortlisted 5 B Schools to apply for, may end up spending Rs 10,000.00 to Rs 15,000.00 just buying MBA / PGDM application forms.

While internship and placements data of some management institutes clearly indicates that recruiters today have specific demands. The skill sets looked for are job centric and industry oriented. MBA schools which have adopted new models of delivery and technology, redesigned their courses, built an effective evaluation process and prepared the students to cope with the dynamic business scenario, have done great with campus placements despite the economic slow down.

However, the skill set being looked for by a consulting company like Deloitte or KPMG may be quite different from FMCG or a manufacturing sector. Institutes need to acknowledge this fact and act accordingly.

  • Management institutes should ensure that students are intellectually engaged, self motivated and adapt to changes fast. In one word ‘VUCA ready’.
  • B Schools should encourage students to participate in national and international competitive events, simulations of business scenarios.
  • Institutes should have the right mix of faculty members with industry exposure and pure academics.

The placement records of 2021 across top management institutes indicated the fact that recruitment is happening, skilled talent is in demand and certain management institutions continued to attract recruiters even in the middle of an ongoing crisis.

It is time, all management institutes rise to the occasion, understand market realities and identify areas of improvement at both ends – students and faculty.

After all, the stakes are high at both ends. B Schools taking corrective measures will stay while those which are lagging will end up shutting down.

Author Name : Nirmalya Pal


Please enter your comment!
Please enter your name here