Fitch Affirms India 's ICICI Prudential Life Insurance at IFS 'AAA( ind )'

Fitch Affirms India 's ICICI Prudential Life Insurance at IFS 'AAA( ind )'


National Insurer Financial Strength (IFS) rating
'AAA( ind )'

Fitch Ratings-London/Mumbai: Fitch Ratings has affirmed India-based ICICI Prudential Life Insurance Co. Ltd.'s (ICICI Prudential Life) National Insurer Financial Strength (IFS) rating at 'AAA( ind )' with Stable Outlook.

The rating continues to reflect the ongoing operational and capital support received from the company's strongly rated shareholders, the currently very strong capitalization, the important market position built by the company in the last seven years and the company's strong focus on introduction of best business practices. However, at the same time, the company faces challenges because of its relatively short track record and it is yet to become profitable. As the majority of its business is unit-linked, Fitch believes that ICICI Prudential Life continues to have significant exposure to investment market volatility, both in terms of fee income and levels of new business.

ICICI Prudential Life was formed in 2000 as a 74%/26% joint venture between the Indian development financial institution ICICI Ltd (later merged with ICICI Bank Ltd; rated international Long-term Issuer Default rating (IDR) 'BBB ', Stable Outlook (BBB minus)) and Prudential Plc of the UK (Prudential Plc, rated Long-term IDR 'AA', Stable Outlook). Fitch maintains its view that ICICI Prudential Life benefits from the capital and other resources and expertise of its shareholders.

Fitch views that, even though the company has yet to record life technical profits, it is only a matter of time before the portfolio of existing business will start to release profits. More than 90% of premiums are from unit-linked business, which forms the core of ICICI Prudential's business. As the company continues to build a substantial portfolio of policies, it will benefit from a future stream of income in the form of charges. Investment performance is crucial for these future profits, as the charges on these policies are typically expressed as a percentage of the fund value. High lapses can also have a negative impact on profits, especially at early durations before heavy acquisition costs are recouped. Fitch also notes that unit-linked products are less capital intensive than traditional life and annuity products.

The Indian life assurance market is dominated by the state company, Life Insurance Corporation of India (LIC), which had a monopoly until 2000. In that year, the market was deregulated and ICICI Prudential Life was established as a joint venture between Prudential Plc and ICICI Ltd (later merged with ICICI Bank Ltd) of India . The top five players in the Indian life insurance market are LIC, ICICI Prudential Life, Bajaj Allianz Life, SBI Life and HDFC Standard Life. ICICI Prudential Life has established a leading position in linked-life business. As a result of its success in this segment, it has been the market leader amongst the private insurance companies over the past six years


Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA( ind )' for National ratings in India . Specific letter grades are not therefore internationally comparable.

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