RAM said SLIC's strategic direction was in line with the government's long term economic development plans particularly regarding investments.
"While this emphasises SLIC’s importance to the government, it also exposes SLIC to the risk of investing in businesses which are non-synergistic with SLIC’s business," RAM said.
During 2010 SLIC had acquired controlling stake in two entities operating in the energy industry (former Shell Gas units) for 7.04 billion rupees.
The company had a market share of 24.82 percent in the general segment during fiscal 2010 down from 26.1 percent in 2009 emerging as the largest player in the segment.In the life-insurance segment, SLIC’s market share dipped to 19.29 percent from 20.19 percent in 2009, and was ranked as the third-largest life insuer.
"Looking ahead, SLIC is expected to maintain its strong competitive footing, supported by its brand name, the introduction of new products, RAM said.
SLIC’s investment portfolio amounted to 56.89 billion rupees at the end of December 2010 the largest in the domestic industry.
SLIC’s total exposure to equity securities increased to 40.53 percent as at end-December 2010 from 29.87 in 2009.
"That said, our concerns are mitigated given that the current market value of the portfolio is almost three times the cost (the portfolio is valued at lower of cost or market value)," RAM said.
RAM said its liquidity position is considered to be adequate; its ratio on liquid assets to total insurance funds had amounted to 0.88 times as at end-December 2010, which is in line with its peers.
The company’s claims ratio in the general segment improved recording an underwriting profit of 1.23 billion rupees compared with a loss of 974 million rupees in 2009.
Underwriting losses in life increased from 927.52 million in 2009 to 1.14 billion rupees during December 2010.
"This is primarily attributed to the high incidence of maturity claims, in line with the Company’s relatively old life insurance portfolio," RAM said.
Overall, the underwriting performance turned around to show a technical profit of 87.15 million rupees in against a loss of 1.86 billion in 2009.
SLIC’s overall performance was boosted by massive gains of 22.54 billion on its investment portfolio. The Company’s pre-tax profit surged to 15.03 billion during 2010, from 2.83 billion rupees a year earlier.
SLIC;s shareholders funds increased to 18.03 billion rupees at by end-Dec 2010.