A.M. Best Revises Outlook to Negative for Issuer Credit Rating of The Oriental Insurance Company Limited

OLDWICK, N.J.--(Business Wire)--
A.M. Best Co. has revised the outlook to negative from stable and affirmed the
issuer credit rating (ICR) of "bbb+" of The Oriental Insurance Company Limited
(Oriental) (India). Concurrently, A.M. Best has affirmed Oriental`s financial
strength rating of B++ (Good). The outlook for this rating remains stable.

The revised outlook for the ICR reflects the adverse impact of the economic
turmoil on Oriental`s adjusted capital and surplus, which decreased by 38% in
2008-09 due predominantly to decreases in the company`s fair value reserves
account. Despite the improvement of adjusted capital and surplus following the
recovery of the Indian equity market in the first quarter of 2009, A.M. Best
remains concerned with the variation in capitalization, which is largely the
result of the volatile equity market. Over 50% of Oriental`s invested assets are
in Indian equities.

The ratings also reflect Oriental`s poor underwriting performance, whereby the
average combined ratio was 113.7% for the five years to fiscal year 2008-09.
Over the past three years, the combined ratio continuously trended upward and
was 134% in fiscal year 2008-09.

Finally, the influx of competitors since the liberalization of the Indian
insurance market in 1999 has increasingly exerted pressure on the market share
of public sector insurers. The market share of private companies in terms of
direct premiums written was approximately 41% as of March 31, 2009. It will be a
challenge for Oriental to maintain its market share and to make an underwriting
profit in this competitive market environment.

On a positive note, Oriental has a strong presence in the Indian insurance
market. In terms of direct premiums written, the company has maintained its
position as one of the top four general insurers, with a market share of 13% in
fiscal year 2008-09. The company`s market share, along with that of other public
sector insurers, has generally exhibited a significant negative trend over the
past few years. However, this negative trend is showing signs of easing,
following the creation of the commercial motor third party liability pool.

The ongoing organizational transformation exercise is expected to improve the
efficiency and effectiveness of Oriental, which will increase its
competitiveness. While significant short-term improvements in operating results
are not expected, A.M. Best believes that the transformation process provides
Oriental with the foundation for future profitability.

For Best`s Credit Ratings, an overview of the rating process and rating
methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any
additional methodologies and factors that may have been considered, can be found
at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating
organization dedicated to serving the financial and health care service
industries, including insurance companies, banks, hospitals and health care
system providers. For more information, visit www.ambest.com.

A.M. Best Co.
Analysts
Philip Chung, CFA, +852-2827-3409
philip.chung@ambest.com
or
Billy Wong, CFA, +852-2827-3414
billy.wong@ambest.com
or
Public Relations
Jim Peavy, +(1) 908 439 2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, +(1) 908 439 2200, ext. 5378
rachelle.morrow@ambest.com

Copyright Business Wire 2009