Rationale
The rating
reaffirmation considersthe strong parentage of Bharti AXA Life Insurance
Company Limited (BAXA-LI) with the Bharti Group and the AXA Group1 (AXA)
holding 51% and 49%, respectively, as on March 31, 2022. Within the Bharti
Group, BAXA-LI is owned by Bharti Life Ventures Private Limited, which, in
turn, is owned equally by Bharti Enterprises Holding Private Limited (BEHPL;
rated [ICRA]A1+) and Bharti Overseas Private Limited. ICRA notes the strong
track record of capital infusion over the past few years (Rs. 1,020 crore
during FY2019-FY2022), shared brand name, and technical and operational support
from the promoters. BAXA-LI's foreign parent (AXA) also provides support in the
reinsurance, product development, and actuarial functions. In ICRA's opinion,
this reiterates BAXA-LI's strategic importance to its promoters. The rating is,
however, constrained by the company's modest scale of operations with a market
share of 0.62% in APE2 terms as of March 2022 (0.57% as of March 2021). Also,
its financial performance remains weak with a net loss of Rs. 235 crore in 9M
FY2022 mainly due to the low operating efficiency, initial new business strain
and higher claims, which were adversely impacted on account of the Covid-19
pandemic. BAXA-LI's weak financial indicators resulted in dependence on the
parent's fund-raising ability to support its solvency and growth requirements.
However, ICRA does note the gradual improvement in the embedded value (EV),
which increased at a compound annual growth rate (CAGR) of 29.2% during FY2018
to 9M FY2022 to Rs. 1,755 crore. ICRA has considered the strong financial
flexibility available to BAXA-LI through its sponsor entities. BEHPL holds an
18.14% stake in BAL and BAXA-LI's capital requirements remain marginal compared
to the Group's liquidity or investment capacity. Further, the key operating
entity of the group - BAL demonstrated strong operating performance as
evidenced by the strong debt servicing indicators, high operating income and
the consistent average revenue per user (ARPU) uptick. BAL's market
capitalisation also increased significantly to ~Rs. 3.2 trillion as on March
31, 2022 from ~Rs. 1.2 trillion as on March 31, 2019. Going forward, continued
support from the sponsors, an improvement in the market share, persistency and
operating efficiency, and the ability to scale up the bancassurance business
and further diversify the product mix would remain key rating monitorables.
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