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Detailed Rationale CRISIL Ratings has reaffirmed its ‘Provisional CRISIL AAA (SO)’ rating on the Class A pass-through certificate (PTC) notes to be issued by ‘India Endowment Policy Trust’.
The trust is yet to issue instruments under this transaction, pending completion of the ongoing dematerialisation process for Class A PTC notes. As on date, premium payments under all schemes assigned to the trust have been made to Life Insurance Corporation of India (LIC) on a timely basis. CRISIL Ratings will continue to monitor developments with regard to the execution of legal documents, listing, and issuance of instruments under this transaction on an ongoing basis.
Analytical Approach This securitisation transaction is backed by assigned endowment and money back insurance policies, originally issued by LIC. The rating is based on the credit profile of LIC, LIC’s claim processing capabilities, the payment mechanism and soundness of the transaction’s legal structure.
The transaction envisages issuance of Class A PTC notes under a master trust structure, where these notes would be backed by assigned LIC policies. Each Class A PTC note would be allocated certain assigned policies by the trust, under the master trust programme. The insurance policies, backing the issued notes, are not fungible and cannot be cross utilised. The investor in these notes would continue to pay premiums for the allocated insurance policies. Either upon maturity of these policies or in an unfortunate event of death of the original insured, the claim proceeds from LIC would be used to repay the investors. The transaction provides a tail period of 2 months: difference between the legal final maturity of the issued Class A notes and the maturity of the last LIC policy allocated to the notes. The trust currently houses 154 endowment and money back policies, using which the Class A PTC notes would be issued. The stated 154 policies have been operational for at least 3 years. For policies which are lapsed, no premiums will be payable till the date of encashment.
The Class A PTC notes are entitled to receive the paid-up premium and bonus declared up to the maturity of the underlying policies. The future bonus payments to be made by LIC are variable and are expected to be declared by LIC on a yearly basis. A lower bonus rate in the future can result in lower value accrual to the Class A PTC notes and thus the due amount to the Class A PTC notes is linked to future bonus yet to be declared by LIC. Class A PTC notes investors’ decision to surrender the underlying insurance policies, a delay in receipt of death claims from LIC or a refused or reduced death claim due to unnatural death or other reasons are among the operational issues which can impact the corpus available to make payments to investors in Class A PTC notes; these aspects are not covered by the rating. |
Key Rating Drivers & Detailed Description The following aspects provide support to the transaction and have been factored in by CRISIL Ratings in its ratings analysis:
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Liquidity : Strong The underlying policies are issued by LIC, which is the largest insurer in India with a strong credit profile and maintains substantial liquid investments. |
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Additional disclosures for Provisional ratings: The provisional rating is contingent upon execution of the following documents:
Additional documents executed for the transaction, if any, should also be provided. The provisional rating shall be converted into a final rating after receipt of transaction documents duly executed within 90 days from the date of issuance of the instrument.
The final rating assigned post conversion shall be consistent with the available documents. In case of non-receipt of the duly executed transaction documents within the above-mentioned timelines, the rating committee of CRISIL Ratings may grant an extension of up to another 90 days for the conversion to a final rating.
Rating that would have been assigned in absence of the pending steps/ documentation: In the absence of documentation considered while assigning provisional rating as mentioned above, it is likely that CRISIL Ratings would not have assigned any rating.
Risks associated with provisional nature of credit rating: A prefix of 'Provisional' to the rating symbol indicates that the rating is contingent upon occurrence of certain steps and / or execution of certain documents by the issuer / originator / settlor, as applicable. In case the documents received and/or completion of steps deviate significantly from the expectations, CRISIL Ratings may take an appropriate action including placing the rating on watch or a rating/outlook change. In the absence of the documentation / pending steps, the rating on the instrument is not likely to have been assigned ab initio. |
About the Pool The pool consists 154 endowment and money-back policies issued by Life Insurance Company of India and assigned to India Endowment Policy Trust by the original insured. The details of these policies are as follows:
Counterparty details
About the Settlor ACESO is the settlor in this transaction. The company is a market maker company in India, providing solutions to LIC Policy holders to monetize their policies. ACESO and its associate companies have facilitated in monetizing endowment policies worth over Rs. 250 Million. ACESO has secondary insurance policy management servicing capabilities to administer and manage policies. It was incorporated in the year 2018 and is managed by a group of professionals who have been in this business for nearly 2 decades. ACESO is an associate company of Goldstar Group having multiple business interest in Gold Jewellery, Diamonds, IT solutions, Real estate, Financing through a duly registered non-banking financial company (NBFC), Dravya Finance Pvt Ltd. Key management personnel at ACESO are: Mr. Ketan B Mehta (Promoter Director, Chartered Accountant), Mr Alkesh Shah (Promoter Director, also a Promoter and Vice Chairman of Goldstar Jewellery Ltd) and Mr. Himanshu Ashar (Promoter, Chartered Accountant). |
Key Financial Indicators
*ACESO is the settlor in this transaction and in case of its non-performance no effect is envisaged on the credit rating of the proposed transaction. |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
*Indicates door to door tenure and would vary depending on the tenure of the underlying policies ^This is the maximum maturity value that is expected to accrue to the Class A PTC holders after accounting for paid up premium, future premium payments, vested bonus already declared and future bonus that could be declared by LIC |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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