Fitch affirms SLIC and changes ‘Outlook’ to ‘Positive’

Fitch Ratings has affirmed Sri Lanka Insurance Corporation Ltd's (SLIC) National Insurer Financial Strength (IFS) rating at 'AA-(AA minus)(lka)' and National Long-term rating at 'A+(lka)'. The ‘Outlooks’ for both ratings have been changed to ‘Positive’ from ‘Stable.’

Fitch said the positive outlooks reflect SLIC's progress in reforming the company since privatisation in 2003. Fitch believes that the changes made to the company's systems, products, controls and management during this time have allowed SLIC to better exploit its good market position in Sri Lanka. Should SLIC leverage this improvement to revive its market share while maintaining profitability, a ratings upgrade could be considered in 2008 or 2009.

Fitch has been tracking management's attempts to improve SLIC's internal systems and efficiency since March 2004. The agency considers that premiums and claims processes and management have improved over this period, as have accounting systems and controls, management structures and corporate efficiency. The impact of these improvements on results has, however, been mixed. Recent profitability has been consistent, but market share in both life and non-life continued to decline during 2006, from 24% to 23% and 30% to 26% respectively, although the non-life market share revived to 29% in the period from Q1 to Q3 2007, Fitch said.

“Fitch views SLIC's reinsurance programme as comprehensive and a major strength of the rating. The dilution of the Sri Lankan regulator's proposals for a national reinsurance fund have considerably reduced Fitch's concern as to the future security offered by SLIC's reinsurance programme,” the statement said.