Fitch affirms HNB Assurance and HNB General Insurance ratings
02 Nov 2015 - {{hitsCtrl.values.hits}}
Fitch Ratings Lanka has affirmed HNB Assurance PLC’s (HNBA) National Insurer Financial Strength Rating and National Long-Term rating at ‘A(lka)’.
Fitch has also affirmed its subsidiary HNB General Insurance Ltd’s (HNB GI) National Insurer Financial Strength Rating and National Long-Term rating at ‘A(lka)’. The Outlook on the ratings is Stable.
The ratings reflect the Sri Lanka-based insurance group’s satisfactory capitalisation in terms of regulatory solvency ratio, its prudent policy towards investment and modest market share.
The ratings also reflect synergies that HNBA enjoys from using parent Hatton National Bank PLC’s (HNB, AA-(lka)/Stable) wider branch network, HNBA’s importance to the bank in providing bancassurance products and
HNB’s 60 percent stake in the insurance group.
HNBA was established in 2001 and operated as a composite insurer until end-2014. On 1 January 2015, the company transferred its non-life business to its fully owned subsidiary, HNB GI, while retaining the life business.
This was done to comply with a regulatory requirement for insurers to split their life and non-life businesses by 7 February 2015. The ratings of HNB GI take into account its status as a core operating entity of HNBA.
Fitch views the consolidated capital strength of HNBA as satisfactory. At 1H15, the life regulatory solvency ratio was 2.85x (2014: 2.29x, 2013: 2.04x). The non-life solvency ratio fell sharply to 1.61x in 1H15 (2014: 3.07x 2013: 3.89x) due to lower profitability resulting from intense competition. However, the solvency ratios for both life and non-life are comfortably above the regulatory minimum of 1.0x.
HNBA expects to strengthen HNB GI’s capitalisation via a capital infusion, which will shore up solvency until the subsidiary returns to profitability.
From 2016, insurers will
be required to report risk-based capital (RBC) positions. HNBA expects the life and non-life business segments to maintain RBC ratios of at least 170 percent. This compares with an expected regulatory minimum of 120 percent.
