A.M. Best Assigns Rating to Life Insurance Corporation of India.

OLDWICK, N.J. -- A.M. Best Co. has assigned a public data rating of B (Fair) to Life Insurance Corporation of India (LICI).

The rating reflects A.M. Best's view that India's economic and fiscal situation could have a negative impact on the financial strength of the company. The Indian government owns LICI and has provided a guarantee in respect of policyholder liabilities. A.M. Best expects no significant improvement in the company's weak risk-adjusted capitalisation, reflecting the low absolute level of shareholders funds, mainly due to its policy of distributing the majority of its bottom line profits to shareholders.

A.M. Best believes LICI benefits from a good financial performance with a bottom line profit of INR 5.5 billion (USD 133 million) in 2004 (an 11% increase over 2003), driven mainly by an excellent investment yield of 9.6% in 2004 due to the relatively high interest rates and realised capital gains from the bond and equity portfolio. However, this is partially offset by LICI's relatively high expense levels (approximately 30% of net written premiums).

In A.M. Best's opinion, LICI enjoys an excellent business position as the country's government-owned life insurer and expects gross premiums written to increase by approximately 10% to INR 695 billion (USD 16 billion) in 2005, following the 16% increase in 2004. A.M. Best expects the privatisation of the life insurance industry in India to be a potential future threat but believes it will not have a material impact for a number of years due to the strict rules the government has set forth.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.