According to industry sources, Icra would mainly look into the financial activities of the insurance company, which had reported highest-ever post-tax profits of Rs 147.50 crore for financial year 1997-98.

The rating firm would also examine the financial strength of the company as well as its ability to meet its liabilities.

Although rating for insurance firms is not mandatory, National Insurance is the third GIC subsidiary to opt for the same, the earlier two being new India Insurance and Oriental Insurance.

According to sources, the other purpose for National to opt for rating is to examine the extent of provisioning made by the insurance major.

Depending upon the extent of provisioning, the profit of the insurance company would be determined. "Rating would help the company strike a right balance between provisioning and profits," thesource said.

During financial year 1997-98, the insurance company achieved premium income of Rs 1,636.54 crore, which was higher by 12.36 per cent over the previous year.

In a comparative estimate of the four insurance companies as regards yield on investments, the yield of National was 12.8 per cent compared with 12.5 per cent of New India, 12.6 per cent of United India, and 12.65 per cent of Oriental Insurance.

The total assets of the company during financial year 1997-98 had increased by Rs 452.13 crore, aggregating to Rs 3,249.6 crore. Increase in capital and funds were to the tune of Rs 202.51 crore, and amounted to Rs 1,514.53 crore, the source said.