Fitch Ratings has upgraded Sri Lanka-based Continental Insurance Lanka Limited’s (CILL) National Insurer Financial Strength Rating and National Long-Term Rating to ‘A(lka)’ from ‘A-(lka)’. The outlook is stable.
The upgrade reflects the non-life operator’s improving underwriting performance, satisfactory capitalisation, improving market franchise and prudent investment policy.
The company continued its disciplined approach to underwriting, which has resulted in an improved non-life combined ratio of below 100% for the last two years (2016 and 2015: 98%). CILL started booking net profit from 2012 - its third year of operation.
CILL has satisfactory capitalisation, as measured by its risk-based capital (RBC) ratio of 274%, compared with a regulatory minimum of 120%.
The rating upgrade also factors in Fitch’s expectation of RBC being maintained comfortably above 200% in the medium term.
Management expects capitalisation to further improve amid continued profitability and low dividend pay outs.
CILL’s franchise continues to improve and is supported by its expanding branch network and association with its corporate group -Melstacorp PLC and Distilleries Company of Sri Lanka PLC (DIST, AAA(lka)/Rating Watch Negative (RWN)). CILL’s market share by gross written premiums (GWP) improved to 4.3% at end-2016, from 3.6% at end-2015. Management expects further growth to moderate from the previous high levels, given the higher GWP.
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