Rationale

 The rating action factors in the strong parentage of SBI General Insurance Company Limited (SBI General) with State Bank of India {SBI; rated [ICRA]AAA (Stable)} 1holding a 69.00% equity stake as on September 30, 2024. The rating considers the shared brand name, the strategic importance of SBI General to SBI, the demonstrated capital support since inception and the representation on SBI General’s board of directors, which strengthens ICRA’s expectation of adequate and timely capital support if required. The rating derives comfort from SBI General’s comfortable capitalisation with a reported solvency of 2.26 times as on September 30, 2024 (compared to the required regulatory level of 1.50 times), supported by the capital infusion by the shareholders in Q1 FY2024 and further aided by the Rs. 700-crore sub-debt raised in Q4 FY2024. The rating also reflects SBI General’s position in the general insurance space as the seventh largest private insurance company in India, with a market share of 4.4% 2 in H1 FY2025, and its diversified distribution network. SBI General’s net profitability has declined since FY2022 due to underwriting losses (average combined ratio of 109.6% during FY2022-FY2024), given the ramp-up in the retail health and motor segments, which entail higher upfront costs in distribution as well as reserving for future claims, while the benefit of the improved scale will emerge in later years. This has resulted in a moderate return on equity (RoE) with an average RoE of 5.5% during FY2022-FY2024. Going forward, the company’s ability to improve its underwriting performance and scale up the retail health and motor segments would be critical for enhancing its profitability profile. SBI General has a high share in the crop segment, though on a declining trend (24.2% of gross direct premium income (GDPI) in H1 FY2025), which is driven by tenders and may lead to volatility in the top line. The Stable outlook factors in the expectation that the company will continue to receive support from SBI, if required, and will maintain the solvency level above the negative triggers