New Delhi: Citssing poor investment performance, global rating agency AM Best has downgraded the financial strength rating of LIC's overseas entity-Life Insurance Corporation (International), or LICI Bahrain, to fair from good--B from B++. LICI's long-term issuer credit rating was also downgraded to "BB" from "BBB."
As LICI is an offshore subsidiary of LIC of India, AM Best has placed these credit ratings concurrently under review with negative implications.
Explaining the reasons for the downgrading, AM Best said in a statement, "LICI's consolidated risk-adjusted capitalisation, as measured by Best's Capital Adequacy Ratio (BCAR), was significantly lower than previously anticipated at year-end 2018, following worse-than-expected results for that year driven by poor investment performance."
"The company is furthermore in breach of its regulatory solvency requirement in the United Arab Emirates," the rating agency added.
Top officials of LIC could not be contacted in this regard, while a source blamed slack monitoring of performance, caused by top-level vacancies at the subsidiary, for the rating downgrade.
"The post of Chief Executive of Bahrain was lying vacant for quite some time after its incumbent Rajesh Kandwal was called back to India as his term ended last year. It was recently that two officials were sent to look after the operation from its Mumbai head office," the source said.
The ratings also reflects LICI's balance sheet strength, which AM Best categorises as weak, as well as operating performance, neutral business profile and marginal enterprise risk management (ERM). The rating agency expects that LICI could benefit from support from LIC to replenish its capital base.
