SL life insurance segment to maintain ‘strong competitive footing’ : RAM
View(s):While Sri Lanka’s general insurance segment continues to come under pressure due to competitive forces, a consequence of the short-term nature of this segment’s insurance policies, the area of life insurance will maintain its “strong competitive footing”because of its long-term nature, according to the local unit of Malaysia-based ratings agency RAM.
RAM’s comments about the local insurance industry was as a part of its rating declaration for state-run Sri Lanka Insurance Corporation (SLIC), wherein it upheld SLIC’s long- and short-term claims-paying ability at “AAA”, with a stable outlook, and “P1″, respectively. Further, RAM attributed this rating to “SLIC’s strong competitive position, financial flexibility derived from state ownership, systemic importance as the country’s second largest premium underwriter as well as the healthy capitalisation levels”.
Of SLIC’s performance, RAM indicated that it had “maintained its strong competitive position as the second-largest premium writer in life (stepping up from being third in 2011) and leading the general segment premiums”. It also added that the insurer “accounted for 22.51 per cent of the industry’s composite gross written premiums (‘GWP’) as at end-December 2012. Further, it is the largest insurer in terms of assets, accounting for 40.04 per cent of the industry’s asset base at the same date. Given SLIC’s systemic importance and its ownership by the Government of Sri Lanka (‘GOSL’), RAM Ratings Lanka opines that state support will be readily extended if needed”.
RAM also stated; “While the company maintained strong market position in the general segment, competition from smaller players eroded its footing from 25.61 per cent in 2011 to 24.47 per cent in 2012 in the general segment while the life segment continues to chart robust market standing at 19.78 per cent in 2012 (2011: 19.19 per cent). However we note that this was common among all large players”.
Meanwhile, RAM also highlighted SLIC’s investment portfolio, stating “SLIC’s investment composition remained unchanged in fiscal 2012. Bulk of the investments consists of government securities accounting for 57.46 per cent of the investment portfolio as at end-FY Dec 2012 (end-FY Dec 2011: 47.15 per cent). Meanwhile, equity investments reduced to 24.17 per cent of the investments as at end-December 2012 from a higher 36.13 per cent last year amidst the moderate performance of the equity market.” (JH)
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