Rationale

 ICRA assigns a rating of [ICRA]AA+ (pronounced ICRA double A plus) to the subordinated debt programme of PNB MetLife India Insurance Company Limited (PNB MetLife). The outlook on the long-term ratings is Stable. The assigned rating and outlook take in to account the strong promoter profile of Punjab National Bank (PNB, rated [ICRA]AA+(Stable)) holding 30.00% stake and MetLife International Holdings LLC (MIHL, part of MetLife Inc. – rated Moody's A3) holding 32.05% stake1 in the PNB MetLife India Insurance Company Limited (PNB MetLife) as on September 30, 2021. ICRA notes on the strategic importance of PNB MetLife to MetLife Group, as demonstrated by the significant amount of investment done by the MetLife Group since inception of PNB MetLife. Further, MetLife Group has entered into an agreement with certain existing shareholders of PNB MetLife in October 2021, to acquire around 15% additional stake in the company, thereby increasing its overall stake to around 47% and reinforcing its view on the long-term profitability of the entity. ICRA believes that the sharing of promoters' brand names and the representation of promoters in the PNB MetLife's board of directors, indicates a high probability of a timely capital infusion, if required. ICRA also notes the strategic and operational support provided by the promoters including product strategy. PNB MetLife's solvency levels are comfortable (180% as on September 30, 2021), and act as a buffer to absorb the vulnerability related to claims and capital market volatility. ICRA also takes comfort from PNB MetLife's diversified product offering and healthy profitability with value of new business (VNB) margin of 21.7% in FY2021, though net profit was impacted in Q1 FY2022 due to higher Covid related death claims, which were in-line with the industry. The company has created additional mortality provision of Rs. 240 crore as on September 30, 2021. However, the ratings are constrained by the moderate scale of operations with market share of 0.72% in FY2021 in terms of new business premium (NBP). PNB MetLife's premium growth over the last five years has been in line with the industry, however the share of protection and pension business increased to 26% and 7% respectively as on March 31, 2021 (16% and 3% respectively as on March 31, 2017). ICRA also notes that PNB MetLife, like industry, might experience higher claims and business growth might get impacted in the near term due to the Covid-19 pandemic. ICRA notes that the overall impact of Covid claims on the solvency profile remains manageable.