Sri Lanka Insurance Corp., retained its national ratings, but the firm needs to clean up its financial reporting and IT system, Fitch Ratings said Tuesday. Sri Lanka Insurance Corp., retained its national ratings, but the firm needs to clean up its financial reporting and IT system, Fitch Ratings said Tuesday. Giving a ‘stable’ rating outlook, Fitch kept SLIC’s national long-term rating at A+ (sri) and its national insurer financial strength rating at AA- for the second year running.
SLIC got top marks for tackling the market-wide problem of high lapses on long-term policies – a legacy inherited during its pre-privatisation days.
“There is still some way to go in the transformation of the company, especially in the roll-out of IT systems, improving financial reporting and eradicating audit qualifications,” the rating agency said in a statement.
The country’s top insurer also easily cleared the tsunami related losses, indicating its financial strength and depth of its reinsurance cover.
Gross Tsunami-related losses were Rs. 2,188 million of which Rs. 1,212 million (56 percent) had been paid by August 2005.
In addition, Rs. 162 million of ex-gratia payments were made (mainly in respect of motor policies). Rs. 2,004 million or 92 percent of the gross loss had been claimed back from reinsurers, 54 percent of which had been received by August 2005.
“A further positive ratings factor is that early indications are that reinsurance terms and conditions are likely to remain broadly unchanged for 2006, notwithstanding the Tsunami-related claims of 2005.”
Following its privatisation in May 2003, SLIC lost its monopoly as the largest writer of premiums in Sri Lanka the following year.
But its profitability and capitalisation has seen a remarkable improvement post-privatisation with the help of Dutch group ING. ING has partnered SLIC’s new owners, the Distilleries Group to advice on reinsurance, underwriting, product development and actuarial issues.
Underwriting is now more profit oriented, staff levels reduced, automation increased and writing new life/non-life policies are more streamlined.
In 2004, SLIC realised net income of Rs. 632 million (2003: Rs. 1,533 million). The lower profitability in 2004 reflects a decline in realised capital gains to Rs. 209 million from Rs. 1,254 million in 2003 (Rs. 800 million of which related to SLIC’s sale of its 20 percent stake in Commercial Bank of Ceylon).
Fitch says SLIC’s capital position continued to strengthen in 2004 and is now assessed as very strong in the context of the local market.
At December 2004, SLIC received 31 percent of Sri Lankan non-life premiums (2003: 36 percent) and 27 percent of life premiums (2003: 31 percent).
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