CRISIL has assigned a ''financial strength rating'' of ''AAA / Stable'' to SBI Life Insurance Company Ltd (SBI Life), reflecting the highest degree of financial strength to meet policyholder obligations.

The rating is centrally based on the strong support that SBI Life derives from its parent, State Bank of India, which has a CRISIL rating of ''AAA/Stable/P1+''. It also factors in the distribution advantages and distinctive product strategy of SBI Life, and the flexibility available for further capital infusion into the company. These rating strengths are, however, partially offset by SBI Life''s weak earnings profile and limited track record.

This is CRISIL''s first rating of a life insurance company. In developed markets, a majority of life insurers are rated.

"We see this rating as the first indication of what is clearly a positive trend," said S Venkataraman, director, CRISIL Ratings. "Life insurance is a critical element of life planning for an increasing number of people in India. As more life insurers come forward to get themselves rated, the public will be better informed in taking these vital long-term decisions."

SBI holds a 74-per cent stake in SBI Life and extends strong financial support to SBI Life through regular capital infusion; CRISIL''s rating factors in SBI Life''s flexibility to raise capital from its promoters, SBI and Cardif S A (Cardif). Cardif is the life insurance company of BNP Paribas, a European leader in banking and financial services.

SBI also extends operational support by allowing SBI Life to sell products through the SBI group''s vast network of more than 14,500 branches. This ''bancassurance'' channel, which accounts for about 40 per cent of SBI Life''s premium receipts, places the company in the unique position of being able to tap the vast potential of the Indian life insurance market by selling directly to SBI''s large customer and employee base.

SBI Life also offers creditor guarantee protection products, addressing the bank''s large portfolio of borrowers. Moreover, the proportion of investment-linked products in SBI Life''s premium receipts, at 65 per cent, is significantly lower than that of the company''s peers; this contains the potential fall in premium levels if equity markets perform poorly. CRISIL believes that these factors position SBI Life favourably for gaining market share in the medium to long term.

The rating strengths are partially offset by SBI Life''s weak earnings profile, a situation that any recent entrant in life insurance faces. 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 monitorable.

Outlook: Stable
CRISIL expects that SBI Life will continue to receive strong financial and operational support from SBI over the medium to long term. The rating could be revised downward if, in CRISIL''s opinion, there is a diminution in the strategic importance of SBI Life for SBI, translating into a potential reduction in the likelihood of support to SBI Life.

About SBI Life
SBI Life, a joint venture between SBI and Cardif, the life insurance company of BNP Paribas, commenced operations in 2001. The venture aims to harness the SBI group''s vast branch network, and Cardif''s strong product expertise.

For the year ended 31March 2007, SBI Life had a market share of 3.4 per cent of first-year premiums earned by the industry, and 12.9 per cent of first-year premiums earned by private sector life insurance companies.

SBI Life is the first private sector life insurance company to report net profits; it reported a profit after tax of Rs.20.3 million for the year ended March 31, 2006. It reported net total premiums of Rs.29.23 billion, and a net profit of Rs.38.3 million, but suffered a net underwriting loss of Rs.0.43 billion for the year ended March 31, 2007. The company earned premiums of Rs.6 billion for the four months ended July 31 2007, as against Rs.4.07 billion for the corresponding period of the previous year.