August 11, 2017 / 9:37 AM / 10 months ago

Fitch Upgrades Sri Lanka Insurance Corp's National Ratings

(The following statement was released by the rating agency) COLOMBO/HONG KONG, August 11 (Fitch) Fitch Ratings has upgraded Sri Lanka Insurance Corporation Limited's (SLIC) National Insurer Financial Strength (IFS) rating and National Long-Term Rating to 'AA+(lka)' from 'AA(lka)' and assigned a Stable Outlook The agency has also affirmed SLIC's international IFS rating at 'B+' with a Stable Outlook. KEY RATING DRIVERS The one-notch upgrade of SLIC's National Long-Term Rating and National IFS rating reflects Fitch's more positive view of the state's 99.9% ownership in the company following a recent proposal to exempt SLIC from the regulatory requirement that all insurers must be listed. As a result, there will be no dilution of the state's ownership. The ratings are also supported by its sound profitability and healthy capitalisation. SLIC's ratings also reflect its established franchise and market position in Sri Lanka. Offsetting these strengths are significant investments in non-core subsidiaries and a high equity exposure, which weighs on its risk-based capital. The IFS rating was affirmed as the rating remains constrained by Sri Lanka's sovereign rating (B+/Stable). Fitch views SLIC as being important to the government of Sri Lanka due to its ownership and the company's strategic importance as the largest state-owned insurer. The strategic investments that SLIC undertake in line with government policy are a rating weakness. The company continues to operate as a composite insurer. SLIC's regulatory risk-based capital (RBC) ratios improved to 434% for life and 198% for non-life by end-March 2017 from 427% and 186% at end-2016, respectively. These ratios were well above the regulatory minimum of 120% for each business and compared well against those of its peers. Management expects to maintain RBC ratios above 200% in the medium to long term. Pre-tax operating ROA including realised and unrealised gains (2016: 8.1%, 2015: 2.9%) has been consistently high even after adjusting for dividends received from subsidiaries. The combined ratio for the non-life business improved to 96% in 1H17 after worsening to around 99% in 2016 (2015: 93%) due to high competition. Losses stemming from a severe tropical storm in May 2016 were largely manageable as a result of sound reinsurance arrangements in place. The country faced a similar flood in May 2017, but losses were much lower than in 2016 because the 2016 flooding affected mainly industrial zones in the island. SLIC has a high risk appetite, which is evident from its large equity investment that exposes the company to market volatility. SLIC's total investment in equities (including non-core subsidiaries) was 93% of shareholders' equity at end-2016 (end-2015: 96%). The government has announced that it plans to dispose some of these non-core investments, which were funded by profit retention, and include interests in the gas, healthcare, leisure and banking sectors. The company's dividend payout ratio increased to 79% in 2016, largely due to a high extraordinary dividend received from SLIC's subsidiary Litro Gas Lanka Ltd. However, excluding subsidiary dividends, SLIC's dividend payouts have increased due to higher dividend expectations from the government. SLIC is the oldest operating insurer in the country and is supported by an extensive network of branches and strategic business units. The company's asset base of LKR175 billion at end-2016 accounted for around 35% of the insurance sector's assets. SLIC has the second-highest market share in life and non-life businesses as measured by gross written premiums (GWP). RATING SENSITIVITIES If the sovereign ratings are upgraded in the future, and the constraints on SLIC's IFS rating are relieved, Fitch would take similar rating action on SLIC's IFS rating. Conversely, a downgrade of Sri Lanka's ratings will lead to downgrade of SLIC's IFS rating. SLIC's National Long-Term Rating and National IFS rating may be further upgraded if it is able to maintain sizeable market share and significantly reduce its non-core investments. The company's National Ratings and IFS may be downgraded if there is: - significant weakening in SLIC's market position - deterioration in the non-life combined ratio to well above 100% on a sustained basis - weakening in SLIC's importance to the government, increased state pressure for higher dividend payouts leading to weaker capitalisation, or a significant increase in non-core investments. Contact: Primary Analyst Jeffrey Liew (International Ratings) Senior Director +852 2263 9939 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central Hong Kong Kanishka de Silva (National Ratings) Analyst +94 112541900 Fitch Ratings Lanka Limited Level15-04, East Tower, World Trade Center Colombo 01, Sri Lanka Secondary Analyst Kanishka de Silva (International Ratings) Analyst +94 112541900 Jeffrey Liew (National Ratings) Senior Director +852 2263 9939 Committee Chairperson Siew Wai Wan Senior Director +65 6796 7217 Media Relations: Bindu Menon, Mumbai, Tel: +91 22 4000 1727, Email: Additional information is available on SLIC has a 1.78% equity stake in Fitch Ratings Lanka Ltd. No shareholder other than Fitch, Inc. is involved in the day-to-day rating operations of, or credit reviews undertaken by, Fitch Ratings Lanka Ltd. Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here National Scale Ratings Criteria (pub. 07 Mar 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below