Fitch Ratings Lanka has affirmed Sri Lanka-based HNB Assurance PLC’s (HNBA) National Insurer Financial Strength (IFS) Rating and National Long-Term Rating of ‘A(lka)’.
Fitch has also affirmed its 100% owned subsidiary HNB General Insurance Limited’s (HNBGI) National IFS Rating and National Long-Term Rating at ‘A(lka)’. The Outlook on the ratings is Stable.
The ratings reflect the insurance group’s strong capitalisation, strong domestic business profile, good financial performance and earnings as well as prudent investment policy.
We see HNBA, a life operator, and its non-life subsidiary, HNBGI, as having strong domestic business profiles, supported by association with the group’s parent, Hatton National Bank PLC (HNB, AA-(lka)/Stable), with whom the insurance group shares the ‘HNB’ brand name. The ratings also reflect synergies gained from using the wider branch network of HNB as well as the insurance group’s importance to the bank in providing bancassurance products and HNB’s 60% stake in the insurance group.
The agency expects the capitalisation of HNBA and HNBGI to remain satisfactorily above the regulatory minimum risk-based capital (RBC) ratio of 120%. HNBA’s RBC ratio was 358% at end-2017, while HNBGI’s was 178%. Management expects to maintain HNBA’s RBC ratio at over 300% and HNBGI’s at over 170% in the medium term.
Changes in the Inland Revenue Act, which come into effect from April 1, 2018, are likely to lower HNBA’s profitability, as its life operations will be liable to pay an effective 28% tax rate on its life business surplus.
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