The Hindu Business Line : SBI Life gets AAA/Stable from Crisil

The rating factors in the advantages of the distribution model and the product strategy of SBI Life. It also takes into account the flexibility available for further capital infusion into the company through the parent, State Bank of India. These rating strengths are, however, partially offset by SBI Life’s weak earnings profile and limited track record, Crisil said.

SBI Life is a joint venture between the State Bank of India and the France-based Cardiff. The company has been selling its products through the vast branch network of SBI.

ULIPs share

Crisil believes that the proportion of investment-linked products (ULIPs) in SBI Life’s portfolio (65 per cent), is significantly lower than that of the company’s peers. Going forward, the company’s product and distribution strategy is expected to play an important role in determining its profitability. The company’s success in managing growth over the long term will also be a key factor, said the rating agency.

The rating could be revised downward if, in Crisil’s opinion, there is a diminution in the strategic importance of SBI Life for SBI.

This would translate into a potential reduction in the likelihood of support to SBI Life, it said.

Strengths

Mr U.S. Roy, CEO and MD, SBI Life, said that the life insurer’s strong parentage, claim payment ability and management stability were perceived as strengths.

He said the rating could also aid in improving the valuation of the company.

State Bank of India is considering setting up a holding company for its insurance and mutual fund ventures. According to analyst estimates, the value of the company could be in excess of $10 billion, while SBI Life has been valued at $6-7 billion

Q1 profit

SBI Life showed a profit of Rs 4.75 crore in the first quarter of the current fiscal, higher than the net profit of Rs 3.88 crore for the entire fiscal of 2006-07.

Among the other insurers, ICICI Prudential has been assigned “AAA” by Fitch Ratings in 2006.

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