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3 years ago
Fitch Rates Sri Lanka's Continental Insurance 'A-(lka)'/Stable
September 4, 2014 / 7:27 AM / 3 years ago

Fitch Rates Sri Lanka's Continental Insurance 'A-(lka)'/Stable

(The following statement was released by the rating agency) COLOMBO, September 04 (Fitch) Fitch Ratings Lanka has assigned Sri Lanka-based Continental Insurance Lanka Limited (CILL) a National Insurer Financial Strength Rating and a National Long-Term Rating of 'A-(lka)'. The Outlook is Stable. KEY RATING DRIVERS The ratings reflect CILL's satisfactory capitalisation in terms of regulatory solvency, relatively short operating history and modest market share. The ratings also reflect the recent capital infusion by its parent, Distilleries Company of Sri Lanka PLC (DCSL; AAA(lka)/Stable). CILL is fully owned by DCSL through holding company Melsta Corp Limited. CILL was established as a non-life insurer in 2010 and by 2013, even though the non-life industry is intensely competitive, it managed to account for a modest 2.5% of the non-life industry's gross written premiums. CILL's combined ratio of around 105% for 2013 compares well with its peers' and is satisfactory, especially given the company's short operating history. Fitch expects improvements to the ratio to be slow given the intense competition in the non-life industry. CILL regulatory solvency ratio was 1.7x in 1Q14, comfortably above the regulatory required level of 1x. This ratio is expected to improve with the recent capital infusion, and then trend down with the growth in business. Fitch expects the company to maintain the solvency ratio at above 2x. The company's ultimate parent DCSL is a well-established, leading alcoholic beverage manufacturer in Sri Lanka. The company benefits from group business and operational synergies. RATING SENSITIVITIES Key rating triggers for a downgrade include a sustained weakening in the combined ratio to above 110% or in solvency ratio to below 2x. A rating upgrade in the short term is unlikely. In the medium to long term, the company's ratings may be upgraded if it achieves increased scale while maintaining profitability and capitalisation at current levels. Contacts: Primary Analyst Nayantara Bandaranayake Analyst +94 112541900 Fitch Ratings Lanka Limited Level15-04, East Tower, World Trade Center Colombo 01, Sri Lanka Secondary Analyst Senior Director Jeffrey Liew +852 2263 9939 Committee Chairperson Chris Waterman Managing Director +44 20 3530 1168 Media Relations: Bindu Menon, Mumbai, Tel: +91 22 4000 1727, Email: bindu.menon@fitchratings.com. Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(lka)' for National ratings in Sri Lanka. Specific letter grades are not therefore internationally comparable. Additional information is available at www.fitchratings.com Applicable criteria, 'Insurance Rating Methodology', dated January 2013, and 'National Scale Ratings Criteria" dated 30 October 2013', are available at www.fitchratings.com. Applicable Criteria and Related Research: Insurance Rating Methodology here National Scale Ratings Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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