The ratings reflect Nationalís strong risk-adjusted capitalization, diversified business portfolio, consistent investment income and its leading position in the
Nationalís risk-adjusted capitalization level, as measured by Bestís Capital Adequacy Ratio (BCAR), remained strong, which was attributable to its large absolute capital size and the increasingly substantial holding of good quality fixed-income assets. Moreover, the company had achieved consistent and favorable investment income from dividend and interest. Furthermore, Nationalís auto tie-ups business had contributed approximately 20% of the companyís total premium and experienced strong growth. The partnering strategy with motor dealers increased the companyís distribution reach and leveraged the customer relationship. In the motor business, National had the largest market share among insurers in
These positive ratings factors are partially offset by the fierce competition in the
National was under pressure from other government-owned and private competitors with regard to pricing and growth opportunities. The companyís capitalization experienced volatility due to the significant exposure of its investments in the equity market. Current adverse market conditions pose a significant threat to the companyís overall capitalization level. Additionally, National had shown persistently negative underwriting results for several years; therefore, the combined ratio is unlikely to drop below 100% in the intermediate term. Nationalís overall operational performance will remain highly reliant on the net investment returns.
Future positive rating actions could result from better motor performance, improvement of loss experience in the health business or strengthening of capitalization in conjunction with growth of business. Conversely, downward rating actions could occur if the motor and health business deteriorate, or there is a significant decline in the companyís investment asset value.
The methodology used in determining these interactive ratings is Bestís Credit Rating Methodology, which provides a comprehensive explanation of A.M. Bestís rating process and contains the different rating criteria employed in the rating process. Bestís Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.
This rating announcement has been issued by
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