SLIC’s ‘strong’ competitive position to continue : RAM
View(s):The Sri Lanka Insurance Corporation (SLIC) will maintain its strong competitive position, supported by its brand and the introduction of new products and channel distribution, according to ratings agency RAM.
The agency also noted; “SLIC continued to maintain its strong competitive footing, commanding a market share of 25.6% in the general insurance segment in FY Dec 2011 (FY Dec 2010: 24.82%); further strengthening its position as the largest player in the segment. Its share of the life-insurance segment remained relatively unchanged at 19% (fiscal 2010: 19.29%), ranking as the third-largest life insurance player”.
RAM made these comments as part of a recent ratings announcement, wherein it also stated that it had upheld SLIC’s “long- and short-term claims-paying ability ratings at AAA and P1 respectively; the outlook on the long-term rating is stable”.
The ratings agency also added that its ratings of SLIC were further supported by “financial flexibility derived from state ownership, systemic importance as the country’s second largest premium underwriter, and healthy capitalisation levels”.
However, also indicated was “state linkage also exposes SLIC to the risk of investing in businesses which are non-synergistic with its core business, leading to additional risks. That said, we note increasing contributions to profitability from non-core segments, with energy and healthcare making up 31.78% and 3.16% of Group pre-tax profit in fiscal 2011, somewhat mitigating our concerns”.
Additionally, RAM revealed that “SLIC’s investment composition remained unchanged in fiscal 2011, the bulk of which consists of government securities; these accounted for 47.15% of the Company’s investment portfolio as at end-FY Dec 2011. Equity investments accounted for 36.13% of the composition (LKR 27.6 billion) in fiscal 2011, which was relatively higher than peers’ thus exposing SLIC to volatilities in the share market. That said, we note that around 48% of the equity investments are long-term strategic interests”.
(JH)
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