Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA/Stable’ Corporate Credit Rating (CCR) on IFFCO Tokio General Insurance Company Limited (IFFCO Tokio).

 

The rating continues to reflect an expectation of strong support from IFFCO Tokio’s domestic parent, Indian Farmers Fertiliser Cooperative Limited (IFFCO; 'Crisil AA+/Stable/Crisil A1+'), driven by a strong written articulation from IFFCO to maintain majority stake in IFFCO Tokio and aid the company on an ongoing basis and in the event of distress. IFFCO’s management remains committed to ensuring that IFFCO Tokio maintains a comfortable level of cushion in solvency ratio over regulatory stipulation at all times. IFFCO Tokio is also expected to receive strong financial, managerial and operational support from its foreign parent, Tokio Marine Asia Pte Ltd (Tokio Marine Asia; a part of the Tokio Marine group). Currently the solvency for the company stands at 1.84 times.

 

The rating also factors in IFFCO Tokio’s longstanding presence in the Indian general insurance industry, adequate risk management practices, healthy investment quality and comfortable liquidity. These strengths are partially offset by modest underwriting performance.

 

IFFCO Tokio is among top 10 private general insurance companies in India, with a market share of 2.7% (based on gross direct premium written in India in nine months ended fiscal 2025). Against an industry growth of 7.8% for the first nine months for fiscal 2025, the company’s gross direct premium de-grew at 17.2% primarily due to change in geographic mix of the motor portfolio, strong competition impacting crop business, termination of loss-making mass health business and conscious effort by the management to limit its loss-making group health business. The company focussed on the profitable segments in motor insurance and limited their exposure in health insurance which led to divergence in trends from the overall industry. As of December 2024, share of motor and health stood at 48% and 9% respectively as compared to 45% and 16% respectively during the same period previous fiscal. During the same period, other segments such as retail health, engineering, marine and other miscellaneous have reported good growth, though on a small base.

Analytical Approach

Crisil Ratings has assessed the standalone business, financial and management risk profiles of IFFCO Tokio and then, a notch up has been applied to indicate the company’s strategic importance to its majority parent (IFFCO) and support expected thereof.

Key Rating Drivers & Detailed Description

Strengths:

Expectation of strong support from parent companies, IFFCO and Tokio Marine Asia: IFFCO Tokio derives strong managerial, operational and funding support from parent companies, IFFCO and Tokio Marine Asia. Strong managerial support is reflected in the significant representation of the parent companies on the company's board and their high involvement in its functioning. IFFCO's position as India's leading fertiliser manufacturer and its extensive cooperative network benefits IFFCO Tokio not only in terms of low cost of operations but also greater opportunities for entering highly under-penetrated rural markets. The company also benefits from the Tokio Marine group's association with established Japanese companies in India and strong risk management capabilities. Both parent companies are committed to provide strong financial support to IFFCO Tokio; this can be evidenced from Rs 500 crore of capital infusion by IFFCO and Tokio Marine into IFFCO Tokio in the second quarter of fiscal 2023. Additionally, Rs 400 crore was infused in fiscal 2022 by IFFCO and Tokio Marine. The company is expected to continue receiving additional capital from the parent companies over the medium term to support its growth plans, if required.

 

Longstanding presence in the Indian general insurance industry: IFFCO Tokio, one of India’s first private sector general insurance companies, has been in the industry for over two decades. It is the eighth-largest private insurer (excluding standalone health insurers) in India, with a market share of 2.7% based on gross direct premiums written as of 9M2025 as compared to 3.6%, a year earlier. The company underwrote gross direct premium of Rs 6,311 crore in 9M2025, registering a degrowth of 17% year on year against industry-level growth of 8%. The degrowth primarily stemmed from slowdown in key segments such as crop, motor and health insurance businesses.

 

Business mix has remained dominated by the motor segment to the extent of 48% based on gross direct premiums in nine months ended fiscal 2025. The share of health segment decreased to 9% in nine months ended fiscal 2025 as compared to 16% during the same period previous fiscal owing to management’s strategy to reduce the loss-making group and mass health business. The share of crop segment stood at 12% during the same period. Over the last few years, the company has strengthened its distribution network by venturing into newer geographies. This enabled the company to cater to the large untapped market for general insurance products and has helped it in sustaining its portfolio diversity.

 

Adequate risk management practices: IFFCO Tokio has a comprehensive risk management policy and framework to ensure all material risks that may affect the company are identified, assessed and monitored periodically and reported to the management in a structured manner. In addition, the company has laid down adequate controls to mitigate business risks such as the risk of loss due to inadequate pricing, reserving or reinsurance protection. The company is also undertaking multiple steps such as having a quick claims settlement platform, intended to speed up claims settlement. The risk management committee, comprising the chief risk officer and other senior executives, meet regularly to identify and assess enterprise level risks including business risks and take necessary corrective actions. The committee also continuously reviews the investments, reinsurance securities, adequacy of reserve and solvency ratio to ensure financial stability. IFFCO Tokio is expected to benefit from its adequate risk management practices and continue maintaining a stable financial risk profile.

 

Healthy investment quality and comfortable liquidity: The company has ~100% of its investment book in government securities (G-secs) or corporate securities rated ‘AAA’ as on December 31, 2024. In addition, liquidity is comfortable, with a large proportion of liquid investments, G-secs accounted for 54% of the investment portfolio based on market value as on December 31, 2024. The portfolio quality is expected to remain healthy, supported by its conservative approach towards risk in the investment portfolio.

 

Weakness:

Modest underwriting performance: IFFCO Tokio has shown slight decline in the underwriting performance during the nine months ended fiscal 2025, evident by the combined ratio increasing to 119.4% as compared to 114.6% during the same period in the previous fiscal. The underwriting losses inched up slightly due to some uptick in the expense and claims ratio. As a result, the company reported an underwriting loss of Rs 836 crore in 9M2025 as compared to Rs 717 crore during the same period in the previous fiscal. Nonetheless, despite a modest underwriting performance, overall earnings profile remains supported by healthy investment income. The company reported investment income of Rs 968 crore in 9M2025 as compared to Rs 924 crore during the same period last fiscal resulting in overall profit after tax of Rs 102 crore in 9M2025 as compared to Rs 167 crore in 9M2024. Over the medium to long term, IFFCO Tokio’s robust risk management practices are expected to gradually boost the underwriting performance of the company.

Liquidity: Strong

Liquidity, in relation to the scale of business, has been strong. Apart from adequate reserving against anticipated claims, liquidity is supported by a highly liquid investment portfolio. As on December 31, 2024, G-secs formed 54% of the investment portfolio with a majority of other investments remaining in debt securities. As a philosophy, the company continues to maintain negligible investments in equity. Also, the majority of the company's investment in corporate debt securities are rated AAA. As on December 31, 2024, liquid assets stood at Rs 9,403 crore, which is adequate against the technical reserves maintained by the company as on that date. Investments cover on networth has also been comfortably above 300% over the last many years. More so, given the constant support from the parent companies – as demonstrated in the past, flexibility to raise timely, need-based funds from them remains high.

Outlook: Stable

IFFCO Tokio is strategically important to the parent entities and will receive strong financial, managerial, and operational support on an ongoing basis and in the event of distress. The company will benefit from its longstanding presence in the Indian general insurance industry and continue to maintain its market share, while sustaining adequate risk management practices, healthy investment quality and comfortable liquidity.

Rating sensitivity factors

Upward factors

• An upward revision in the rating of IFFCO – the parent entity
• Sustained improvement in underwriting profitability, reflected in the combined ratio at below 100% consistently
• Ability to maintain adequate cushion in solvency ratio above regulatory minimum on sustained basis

 

Downward factors

• Diminution in the extent of support available from parent companies
• Significant increase in IFFCO Tokio's underwriting losses with combined ratio increasing and remaining beyond 120% or a substantial decrease in its investment income, thereby adversely impacting its capitalisation such that solvency ratio declines to 1.55 times.
• Prolonged deterioration in the market position

About the Company

IFFCO Tokio is among top 10 private general insurance companies in India and has been in this business for almost two decades. IFFCO (India’s largest fertiliser manufacturer) and Tokio Marine Asia (a part of the Tokio Marine group; Japan’s oldest and largest general insurance group) have ownership of 51% and 49%, respectively, in IFFCO Tokio, as on December 31, 2024.

Any other information: Not Applicable