Fitch assigns HNB Assurance 'A(lka)' rating

Fitch Ratings has assigned HNB Assurance Ltd a National Insurer Financial Strength (IFS) rating of 'A(lka)' and a National Long-term rating of 'A- (A minus)(lka)'. The outlooks for both ratings are Stable.

HNB Assurance Ltd is 60%-owned by Hatton National Bank Ltd (HNB), the second-largest private bank in Sri Lanka, rated National Long-term Issuer Default (IDR) 'AA-' (AA minus). HNB Assurance Ltd's ratings incorporate limited implicit support from HNB.

HNB Assurance Ltd's current market position is modest, ranking as the sixth-largest non-life player in Sri Lanka with a 2.4% market share in 2006, and the seventh-largest life assurer, with 2.9% market share at the same date.

HNB Assurance Ltd plans to double its turnover in 2007-10. This is an ambitious target, even allowing for continued double-digit inflation. To achieve these targets, HNB Assurance Ltd will increase its branch network and the company will look to diversify its client base away from bank customers.

HNB Assurance Ltd has been consistently profitable since its launch in 2001, with the non-life combined ratio only exceeding 100% in the exceptional year of 2004. This performance supports the ratings, although the agency notes that fresh challenges may arise as the business looks to expand.

Fitch assesses HNB Assurance Ltd's capitalisation as currently very strong, although declining as premiums written increase. Nevertheless, its level of capitalisation at September 2007 remains in excess of that which the agency deems adequate for its rating level.