RAM reaffirms SLIC AAA/P1 ratings

RAM Ratings Lanka has reaffirmed Sri Lanka Insurance Corporation Ltd's long and short-term claims-paying ability ratings at AAA and P1.

The outlook on the long-term rating is stable.

SLIC's ratings are upheld by the company's strong competitive position, financial flexibility derived from state ownership and systemic importance as the country's second largest premium underwriter.

The ratings are also supported by SLIC's healthy capitalization.

SLIC is the oldest insurer in Sri Lanka and the second-largest in terms of premiums underwritten; the Company accounted for 22.30% of the industry's composite gross written premiums ("GWP") as at end-December 2010. It is the largest insurer in terms of assets, accounting for 40.04% of the industry's asset base at the same date.

Given SLIC's systemic importance and its ownership by the Government of Sri Lanka ("GOSL"), RAM Ratings Lanka opines that state support will be readily extended if needed.

Meanwhile, SLIC's strategic direction will be broadly in line with the government's long-term economic development plans, particularly with regards to investments. While this emphasises SLIC's importance to the government, it also exposes SLIC to the risk of investing in businesses which are non-synergistic with SLIC's business.

During 2010 SLIC acquired controlling stakes in two entities operating in the energy industry for a total consideration of Rs 7.04 billion. SLIC has maintained its strong competitive position, with a slight decline in market share against the backdrop of intense competition from smaller players.