Fitch rates HNB Assurance at ‘A(lka)

Fitch rates HNB Assurance PLC’s (HNBA) National Insurer Financial Strength rating and National Long-Term rating at ‘A(lka)’. The outlook is stable.

The ratings reflect HNBA’s comfortable capitalisation, both in terms of regulatory solvency and Fitch’s risk-based capital computations, as well as its sustained profitability and modest market share.

The ratings also reflect Fitch’s expectation of support from HNBA’s parent - Hatton National Bank PLC (‘AA-(lka)’/Stable), if required.

HNBA is 60% owned by HNB and is strategically important to its parent in providing additional product range to its customer base and expanding its bank assurance channel.

Regulatory solvency ratios improved to 2.89x and 3.15x for life and non-life businesses, respectively, in 2011 (2010: 1.13x and 2.01x) following a rights issue during the year. These ratios are in line with peers and supported by the company’s healthy profitability and conservativeinvestment policies. Although the solvency ratios are likely to decline marginally in 2012 with growth in premium levels, Fitch expects them to be sustained above 2010 levels.

Fitch notes that as HNBA is a relatively new entrant in the local insurance industry which is dominated by a few large companies, increasing its marketshare has been challenging for the company. Market share in life and non-life premiums, although increasing, remained below 5% in 2011.