Rationale/Description of Key Rating Drivers/Rating sensitivities:

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1 Rating Rationale Reliance Nippon Life Insurance Co. Ltd. 1 OCT 2018 Brickwork Ratings reaffirms the Enterprise-wide Risk Management (EWRM) and Financial Strength rating of AAA efs for Reliance Nippon Life Insurance Company Limited Rating Re-affirmed On a review, Brickwork Ratings () has reaffirmed the EWRM and Financial Strength Rating of AAA efs for Reliance Nippon Life Insurance Company Limited ( RNLICL or the Company ) (erstwhile Reliance Life Insurance Company Limited) Insurance Companies with this rating are considered to have the Highest Degree of EWRM capabilities and Financial Strength to meet ongoing policyholder obligations. Rationale/Description of Key Rating Drivers/Rating sensitivities: has principally relied upon the audited financial results of the Company up to FY18, available public information, and information/clarifications provided by the Company s management. The rating reaffirmation has factored, inter alia, strong parentage (Reliance ADA Group and Nippon Group) and promoter support in the form of capital infusion, experienced management, comfortable solvency position, improving persistency ratio and strong systems & processes. The rating is, however, constrained by the highly competitive nature of the industry, fall in new business, and higher expense ratio in comparison to its peers. However, there is improvement in expense ratio and the company is within the regulatory prescribed norms for the previous Financial Year Analytical Approach The rating has factored the stand-alone strength of RNLICL as per criteria given at the end. However, has taken note of the two large share-holders of the company, their financial strength and support provided to RNLICL. has also taken note of the technical and managerial support from Nippon Life Insurance Company largest Japanese life insurance company by revenue. Background 1 1 OCT 2018

2 Reliance Nippon Life Insurance (erstwhile Reliance Life Insurance) took over AMP Sanmar Life Insurance Company in 2005 and renamed it as Reliance Life Insurance Company Limited in 2006, and is headquartered in Navi Mumbai. It belongs to the Anil Ambani promoted Reliance Group. It is a subsidiary (previously an associate Company) of Reliance Capital Limited (RCL) which sold an additional 23% stake in the Life Insurance Company in FY16 to Nippon Life Insurance post which RCL held 51% stake in the Life Insurance Company. It was renamed as Reliance Nippon Life Insurance Company Limited (RNLICL) and Nippon Life Insurance now holds a total of 49% stake in it. Business Operations RNLICL offers various products targeted at individuals and at group business. It includes wide range of products like Unit Linked Plans, Traditional Endowment, Term and Group plans, education plans, child plan, health plan, retirement plan, Saving & Investment plan etc. It has started targeting on bigger ticket size clients and also the number of individual policy sold has declined. It has started selling Micro Insurance group policy, where the number of people covered are higher and the sum assured per individual are lower. Financial Performance For FY18, total premium income stood at Rs. 4,069 Crores compared to Rs. 4,027 Crores in FY17, a marginal Y-o-Y increase. It reported profits of Rs Cr in FY18 compared to loss of Rs Cr in FY17. The Company has shown marginal improvement in its expense ratio over the last three years. The overall expense ratio was at 0.25x in FY18. The Company has taken several initiatives like productivity improvement and cost optimization to further lower the expense ratio. Capital adequacy RLICL has shareholder s fund of Rs. 1, Crores as of March 31, 2018 compared to Rs Crores as of March 31, 2017, a marginal decrease due to decline in fair value account. It has maintained adequate capital over the years, and has retained solvency ratio above the regulatory requirement of 1.50x. As of March 31, 2018, solvency stood at 2.33x compared to 2.72x as of March 31, Enterprise Wide Risk Management RLICL has taken steps to strengthen implementation of Enterprise Risk Management. The Company monitors market risk, credit risk, information technology risk, insurance risk and operational risk at organization level through dashboards and risk reports. The Company has tried to quantify risk in the form of economic capital by undertaking the above risks monitoring. Both Risk and Actuarial teams are involved in this strategic initiative. The Company has defined its risk management framework based on COSO ERM framework. The company has automated key processes across Compliance, Audit & Risk for integrated assessment and effective monitoring. Going forward, the Company intends to automate other processes in areas of ALM as well. 2 1 OCT 2018

3 Claim Analysis In FY18, Total Claims paid was Rs. 25,259 Crores as against Rs. 22,012 Crores paid in FY17. Net benefits paid during the same period were Rs. 2,971 Crores and Rs. 3,127 Crores respectively. Net Benefits paid as a percentage of Net premium was 73% in FY18 compared to 78% in FY17. Substantial part of benefits paid in each period is by way of policy surrenders. Investment Portfolio The quality and yield on the investment made by the life insurers is important to understand their ability to meet policyholder s obligations. IRDA has laid down certain guidelines to be followed by life insurers for Investment Management. The investment risk in case of linked business is transferred to the policyholders whereas for the non-linked business the risk is retained by the insurance company. The Asset under Management (AUM) as of March 31, 2018 stood at Rs. 19,094 Crores, an increase from the March 31, 2017 AUM of Rs. 17,253 Crores majorly due to increased investments in other investments. Asset Liability Management In linked insurance business all the investment risk is borne by policyholders. This does not require monitoring on ALM front. However, in case of traditional (non linked) business the investment risk is completely or partly borne by the insurance company. Hence, the Asset Liability Management is an important factor for traditional insurance business. RLICL s ALM Policy demonstrates significance of liquidity and funds management for effective supervision of its balance sheet, related earnings and cash-flows. The policy also seeks to address structural mismatches in the assets and liability maturity ladder, typical to the insurance industry in India. The objective of asset/liability management process at RLICL includes providing acceptable earnings and return on capital with acceptable and controllable levels of Market Risk, Credit Risk, Insurance risk and Catastrophic Risk. The Asset Liability Management policy of RLICL falls under the authority of the Executive Control Committee which is approved by the Board of Directors, which in turn assigns authority for its formulation, administration and revision to the Asset Liability Management Committee. Responsibilities and duties of this Committee range from developing ALM framework to overseeing and maintenance of management information systems. The committee reviews the liquidity position (maturity analysis of liability, investments and shares), interest rate risk analysis, market analysis and other risk analysis, and other reports as deemed appropriate. 3 1 OCT 2018

4 Key Parameters- Reliance Nippon Life Insurance Co. Ltd Parameters FY2017 FY2018 First year premium Single premium Gross premium written 4, , Net benefits paid 3, , PAT Total net worth 1, , Total policyholder's liability 8, , Total investments 17, , Total assets 18, , th month persistency ratio Regulatory Solvency ratio (times) Rating History for the last three years (including withdrawn/suspended ratings) Sl. No. 1 Instrument/Facility Current Rating (Year 2018) Rating History Enterprise Wide Risk Management Type (Long Term/Short Term) Long Term Amount (Rs Crs) - Rating FY17 FY16 FY OCT 2018

5 Hyperlink/Reference to applicable Criteria General Criteria Approach to Financial Ratios Insurance Companies Analytical Contacts Media MSR Manjunatha Head- Ratings & Administration Relationship Contact Phone: For print and digital media The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by. alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media. Note on complexity levels of the rated instrument: complexity levels are meant for educating investors. The complexity levels are available at Investors queries can be sent to info@brickworkratings.com. About Brickwork Ratings Brickwork Ratings (), a SEBI registered Credit Rating Agency, has also been accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a Nationalized Bank, as its promoter and strategic partner. has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations. has rated debt instruments/bonds/bank loans, securitized paper of over 5 1 OCT 2018

6 9,30,000 Cr. In addition, has rated about 5000 MSMEs. Also, Fixed Deposits and Commercial Papers etc. worth over 19,700 Cr have been rated. Brickwork has a major presence in rating of nearly 100 cities. DISCLAIMER Brickwork Ratings () has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented as is without any express or implied warranty of any kind. does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and shall not be liable for any losses incurred by users from any use of this report or its contents. has the right to change, suspend or withdraw the ratings at any time for any reasons. 6 1 OCT 2018