The most effective activator for activating Microsoft Office 2021, 2019, 2016, 2011 and Microsoft Windows 10, 11, 8. The official repository on the git hub portal github download kmspico 11. License key management is free of charge.

Fitch revises two Sri Lankan insurers’ National IFS Ratings

Fitch Ratings has revised the National Insurance Financial Strength Ratings (IFS) of two Sri Lankan insurers following the recalibration of the agency's Sri Lankan national rating scale.

Full Statement

The recalibration reflects changes in the relative creditworthiness among Sri Lankan issuers, following Fitch's downgrade of the country's sovereign rating to 'CCC' from 'B-' on 27 November 2020. Rating revisions are used to modify ratings for reasons that are not related to changes in credit quality, but to reflect changes in the national rating scale.

The National IFS Ratings of the two Sri Lankan insurers were revised as follows:

- Sri Lanka Insurance Corporation Limited revised to 'AA(lka)'/Stable from 'AAA(lka)'/Stable.

- National Insurance Trust Fund Board revised to 'A+(lka)'/Stable from 'AA-(lka)'/Negative.

National scale ratings are a risk ranking of issuers in a particular market designed to help local investors differentiate risk. Sri Lanka's national scale ratings are denoted by the unique identifier '(lka)'. Fitch adds this identifier to reflect the unique nature of the Sri Lankan national scale. National scales are not comparable with Fitch's international rating scales or with other countries' national rating scales. Other Sri Lankan insurers' National IFS Ratings, which are not mentioned in this commentary, have not been affected by the recalibration exercise because, in our view, the rating relativities of these insurers are unaffected.

KEY RATING DRIVERS

Sri Lanka Insurance Corporation Limited (SLIC)

SLIC's National IFS Rating continues to mirror its 'Favourable' business profile, and capital position and financial performance that are better than that of the industry. The rating also factors in the insurer's high exposure to equity investments, non-core subsidiaries as well as sovereign-related investments, which increase its investment and asset risks due to the sovereign's weakened credit profile. SLIC's sovereign investment-to-capital ratio was 125% at end-1H20 (2019: 88%).

Fitch regards SLIC's business profile as 'Favourable' compared with that of other Sri Lankan insurance companies due to its leading business franchise, participation in well-diversified and stable business lines, and large domestic operating scale. SLIC was Sri Lanka's second-largest life and non-life insurer based on gross premiums in 2019.

SLIC's regulatory risk-based capital (RBC) ratios of 451% for its life and 203% for its non-life segments at end-1H20 were well above the industry averages and the 120% regulatory minimum.

Fitch expects the potential pressure on earnings from rising price competition, fueled by constrained business growth and softer investment yields, to be somewhat mitigated by lower claims from motor insurance lines due to a drop in traffic accidents following the implementation of pandemic-related travel restrictions. SLIC has consistently maintained its non-life combined ratio below 100% (1H20: 96%; 2019: 95%) for the past five years, buoyed by its scale advantages and prudent underwriting practices.

National Insurance Trust Fund Board (NITF)

NITF's National IFS Rating reflects its 'Favourable' business profile and strong financial performance. The positive factors are offset partly by its inconsistent risk-management practices, which in turn increase the volatility in its capital position and earnings.

NITF's RBC ratio temporarily increased to 519% by end-1H20 (end-2019: 263%) along with a temporary improvement in earnings, evident from a reduction in its combined ratio to 48% in 1H20 from 89% in 2019. The improvements were due mainly to increased premium retention and reduced claims during the pandemic-induced lockdown. Fitch believes the insurer's capitalisation and earnings will normalise in the medium term due to a gradual pick-up in claims and the renewal of its reinsurance arrangements, which will reduce NITF's premium retention. Fitch expects the large payment of levies to the state (three-year average payout: 115%) to keep NITF's capitalisation in check.

We also expect the claims ratio of the Agrahara insurance scheme, which provides medical insurance for public-sector employees and their families and accounted for 29% of NITF's gross premiums in 1H20, to increase after the government's decision to expand coverage and benefits, if the additional risks are not adequately priced. However, we expect NITF's low operating costs and modest claims from the insurer's strike, riot, civil commotion and terrorism (SRCCT) programme to reinforce profitability.

Fitch believes constant delays in the renewal of NITF's reinsurance arrangements will weaken the insurer's risk-mitigation practices and credit profile. Fitch noted some delays in the government's approval for the renewal of NITF's reinsurance cover in 2020 and in the past. The insurer purchased reinsurance for its SRCCT programme and inward reinsurance covers in 2H20.

NITF's portfolio is entirely invested in government securities and its sovereign investment-to-capital ratio was 148% at end-1H20 (2019: 215%).

NITF's 'Favourable' business profile assessment reflects its substantive business franchise, which is supported by its full state ownership and role in implementing government policies. NITF is the only domestic reinsurer and a state mandate requires all domestic non-life operators to cede 30% of their reinsurance to NITF.

RATING SENSITIVITIES

SLIC

Factors that could, individually or collectively, lead to negative rating action/downgrade:

- Significant weakening in SLIC's business profile, for instance due to a weaker franchise, operating scale or business risk profile.

- Deterioration in the RBC ratio to below 350% for the life and 200% for the non-life businesses for a sustained period or a significant increase in non-core investments.

- Deterioration in the non-life combined ratio to well above 100% for a sustained period.

Factors that could, individually or collectively, lead to positive rating action:

- Significant reduction in SLIC's investment and asset risks on a sustained basis while maintaining its 'Favourable' business profile and capitalisation at current levels.

NITF

Factors that could, individually or collectively, lead to negative rating action/downgrade:

- Deterioration in the RBC ratio to below 250% for a sustained period.

- Deterioration in risk-management practices, for instance, due to persistent delays in renewing reinsurance arrangements.

- Deterioration in the combined ratio to above 103% for a sustained period.

- Significant weakening in NITF's business profile, such as a large reduction in government-related business.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

- Improvements to its risk-management practices, including the timely purchase of adequate reinsurance covers while our assessment of the insurer's capitalisation and business profile remains unchanged.

Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments
Top
0
Would love your thoughts, please comment.x
()
x