Sri Lanka Insurance ‘AA(lka)’ rating confirmed

May 22, 2012 (LBO) – Fitch Ratings has confirmed an ‘AA(lka)’ rating of state-run Sri Lanka Insurance (SLIC), the island’s largest insurer by assets, with a stable outlook, saying capitalization was strong, profits high and solvency ratios have improved. The regulatory solvency ratio for its life business had improved to 11.55 times by end-December 2011 from 7.73 times in 2010 and for non-life to 2.21 times from 2.11 times, Fitch said.

Return on assets was also high at 6.9 percent compared with a peer group of 4.3 percent.

But the insurer had high exposure to equities of 38 percent of book value of assets.

“SLIC’s somewhat aggressive investment strategy, as evidenced by large equity exposures, remains a rating concern due to associated profit volatility on some of these assets,” Fitch Ratings said.

Due to its 99.9 percent state ownership it had also taken strategic stakes in line with state policy.

The firm had 102 billion rupees in assets, accounting from 39 percent of sector total, making it the largest insurance fund in Sri Lanka.

The full statement is reproduced below

Fitch Affirms Sri Lanka Insurance at ‘AA(lka)’/Stable

Fitch Ratings-Colombo/Mumbai/Singapore-21 May 2012: Fitch Ratings Lanka ha