Financial News Update: Fitch Ratings has affirmed Continental Insurance Lanka Limited’s (CILL) National Insurer Financial Strength (IFS) Rating at ‘A(lka)’. The Outlook is Stable. The affirmation reflects CILL’s moderate business profile, satisfactory financial performance and capital position, as well as its prudent investment mix.
Fitch views CILL’s business profile as moderate compared with that of other domestic non-life insurers, due to its adequate business franchise supported by its steadily improving marketshare. Fitch’s business profile evaluation also factors in the insurer’s risk appetite that is on a par with that of domestic peers, as well as its moderate operating scale and business diversification. CILL is the seventh-largest among Sri Lanka’s 14 non-life insurers, with a distribution strength of over 50 branches.
CILL’s regulatory capitalisation (measured as its risk-based capital (RBC) ratio) was satisfactory at 242% at end-September 2019 (2018: 250%). Fitch believes that the insurer’s RBC ratio will
drop slightly with the adoption of the new accounting standard for lease contracts, SLFRS 16, the local equivalent of IFRS 16.
Fitch believes that CILL will continue to maintain a satisfactory financial performance, supported by its disciplined approach to underwriting and cost-rationalisation initiatives. The insurer managed to keep its ‘combined ratio’ at 96% in 9M19, well below the industry average of around 100%. CILL’s solid underwriting performance and investment income helped keep its return on equity high at 21% in 9M19 (2018: 21%).
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