Rationale

 The rating considers Aditya Birla Sun Life Insurance Company Limited’s (ABSLI) strong promoter profile with Aditya Birla Capital Limited1 (ABCL) holding a 51.0% stake and Sun Life Financial Inc. holding a 49.0% stake as on September 30, 2024 through its Indian subsidiary – Sun Life Financial (India) Insurance Investments Inc. (Sun Life India). The rating factors in ABSLI’s strategic importance to ABCL, as demonstrated by regular equity infusions, the representation on ABSLI’s board of directors and the shared brand name. This strengthens ICRA’s belief that ABCL will provide capital support to the company as and when required. ABSLI’s reported solvency stood at 1.88 times as on September 30, 2024, supported by regular capital infusions from the shareholders and the issuance of subordinated debt. While the company’s accounting profitability remained moderate, its return on embedded value (RoEV) was healthy at 18.8% in FY2024 (22.6% in FY2023). Moreover, the embedded value (EV) increased at a compound annual growth rate (CAGR) of 22.1% during FY2020-FY2024 to Rs. 11,539 crore as on March 31, 2024 (Rs. 12,368 crore as on September 30, 2024). The value of new business (VNB) increased to Rs. 697 crore in FY2024 from Rs. 126 crore in FY2020, though it declined on a sequential basis from Rs. 800 crore in FY2023, mainly due to the change in the product mix. While ABSLI recorded a healthy growth in individual business in H1 FY2025, its ability to continue growing this business will be a driver of its overall profitability as VNB growth will depend largely on annual premium equivalent (APE) growth and operating efficiency. The profitability and solvency may also remain susceptible to changes in the actuarial assumptions, leading to long-term changes in the reserving requirements. The rating is constrained by the company’s moderate market share of 3.1% in 8M FY2025 (2.8% in FY2024 and 2.3% in FY2020) on the basis of individual APE2 and 2.5% on an overall new business premium (NBP) basis (2.1% and 1.4% in FY2024 and FY2020, respectively). Additionally, the non-participating (non-par) segment has the largest share of 74.7% in ABSLI’s individual NBP in FY2024. The Stable outlook factors in the expectation that the company will continue to receive support from ABCL, if required, and will maintain its solvency level above the negative rating trigger.