ICRA Reaffirms Credit Rating of Non-Convertible Securities of ICICI Prudential; More than 1% of stock market gains

ICRA Limited reaffirmed the credit rating of the non-convertible securities of ICICI Prudential Life Insurance Company Limited. The rating of the subordinated debt program Rs1,200.00cr has been reaffirmed at ICRA AAA (Stable).

At the start of trading on Monday, ICICI Prudential Life Insurance Company Ltd was trading at Rs 660.10 per coin, up Rs 8.35 or 1.28% from its previous close of Rs 651.75 per coin on the ‘ESB.

“The rating takes into account the strong support of the sponsors of ICICI Prudential Life Insurance Company Limited (ICICI Pru), ICICI Bank Limited (rated [ICRA]AAA (Stable)) and Prudential Corporation Holdings Limited. The existence of a common brand name reinforces ICRA’s assumption that ICICI Pru is likely to receive timely and adequate support from both sponsors, ”the company shared the rationale for the ICRA rating in a document tabled Thursday.

Additionally, ICICI Pru’s comfortable solvency levels (194% as of June 30, 2021) act as a buffer to absorb vulnerability to losses and volatility in capital markets. ICRA also welcomes the diverse product offering and distribution network of ICICI Pru and expects it to maintain a healthy position in the market, enabling operational efficiency and a healthy value of the margins of the companies. new business (VNB). ICRA also notes ICICI Pru’s strong investment portfolio with very low credit risk and its ability to generate adequate income and earnings.

ICRA notes that ICICI Pru will likely experience higher claims and that the growth of the business could be affected in the short term due to the Covid-19 pandemic. ICICI Pru’s profitability was affected by Covid claims which were consistent with industry experience, although it continued to record healthy VNB margins in FY21 and Q1. fiscal year 22. The company created a Covid reserve of Rs498cr as of June 30, 2021 in addition to the net claims incurred of Rs500cr at T1FY22, thus covering approximately five times the net Covid claims incurred during fiscal year 2021 (Rs198cr).

ICRA notes that the overall impact of Covid claims on the solvency profile remains manageable. ICRA also notes that the slowdown in savings activities in the past was due to the predominance of Unit-Linked Insurance Plan (ULIP) activity in its product line, which is more sensitive to market volatility. Since then, the company has focused more on diversification into the high net worth and mass client segments, improving the mix of savings and untied protection. Maintaining resilient growth in a downturn in the capital market and increasing the protection portfolio, while maintaining the death claims settlement ratio and overall profitability are key controllable ratings.

The rating also takes into account the main characteristics of the subordinated debt instrument:

  • The interest service is conditioned on the maintenance by the company of a solvency ratio higher than the levels stipulated by the regulator.
  • In the event that interest payments were to result in a net loss or an increase in net loss, prior regulatory approval would be required to service the debt.

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