Fitch affirms Sri Lanka Insurance national ratings

Fitch Ratings has affirmed the ratings of Sri Lanka Insurance Corporation Ltd's ("SLIC") ratings at National Insurer Financial Strength 'AA-(AA minus)(sri)' and National Long-term 'A+(sri)'. The Outlooks on the ratings are Stable.

Fitch believes the efforts of SLIC's management to transform the company from a former State-owned monopolist to an efficient operator in an increasingly competitive Sri Lankan insurance market are showing signs of success.

SLIC was privatised in May 2003 and sold to a consortium led by the Distilleries Company of Sri Lanka.

Although SLIC lost its long-standing position as the largest writer of premiums in the Sri Lankan market in 2004, more significant in terms of its rating have been the improvements in both profitability and capitalisation since 2002.

This has been achieved by more profit-focused underwriting, reduction in headcount, increased automation and the rationalisation of existing, and the introduction of new, life and non-life policies.

SLIC is being advised on reinsurance, underwriting, product development and actuarial issues by ING.

When Fitch first rated SLIC in May 2004, credit was given in the ratings for Fitch's belief in management's plan to turn the company around.

Much of that expectation has now been realised and SLIC has made good progress, especially in tackling the market-wide problem of high lapse rates on long-term policies.

Nevertheless, there is still some way to go in the transformation of the company, especially in the roll-out of IT systems, improving financial reporting and eradicating audit qualifications.