A.M. Best Assigns Ratings to The Oriental Insurance Company Limited.

OLDWICK, N.J. -- A.M. Best Co. has assigned a financial strength rating of B++ (Very Good) and an issuer credit rating of "bbb+" to The Oriental Insurance Company Limited (Oriental) (India). The outlook on both ratings is stable.

The rating reflects the company's excellent business profile, good operating performance and solid risk-adjusted capitalisation; however, these factors are partially offset by the pressure exerted by Oriental's high exposure to the Indian equity market and the insufficient analysis conducted by the company with regards to its catastrophe probable maximum loss (PML) exposure.

A.M. Best believes that Oriental's business profile is excellent as the second-largest non-life insurer in India with an estimated market share of approximately 17% in 2006. Approximately 40%-45% of Oriental's business portfolio is focused on motor segments (third party liability and own damage); however, the remainder of the portfolio is well diversified.

In A.M. Best's opinion, Oriental's current and prospective operating performance is likely to remain good, though it is entirely reliant upon strong projected investment returns of approximately 8% (including gains) over the next two years. Underwriting performance is forecast to remain poor, with a combined ratio of approximately 120%. The main contributor for Oriental's very high loss ratio of approximately 90%-95% over the next two years will likely remain the motor third party liability segment. Pre-tax profits are expected to be within the range of INR 2-3 billion (USD 45-67 million) in 2007 and 2008, compared to an estimated INR 3.3 billion (USD 74 million) by year-end 2006.

A.M. Best believes that Oriental's risk-adjusted capitalisation, however solid, is under pressure due to the company's high exposure to the Indian equity market. Approximately 50% of the company's invested assets are at market value in domestic equities and, in A.M. Best's view, expose Oriental to a high level of credit risk and the inherent volatility associated with stock markets in spite of the company's compliance with the regulatory investment guidelines. Furthermore, in A.M. Best's opinion, Oriental has conducted an insufficient analysis with regards to its catastrophe probable maximum loss (PML) exposure.

A.M. Best believes that Oriental's absolute level of capital is likely to grow by approximately 4% over the next two years compared to an estimated INR 53 billion (USD 1.2 billion) by year-end 2006.

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

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.