Finance

Fitch upgrades Sri Lanka Insurance Corp’s rating to ‘AA+(lka)’

Friday August 11, 2017 10:37 pm

ECONOMYNEXT – Fitch Ratings has upgraded Sri Lanka Insurance Corporation Limited’s (SLIC) National Insurer Financial Strength (IFS) rating and National Long-Term Rating to ‘AA+(lka)’ from ‘AA(lka)’ and assigned a Stable Outlook.

The rating agency said in a statement it also confirmed SLIC’s international IFS rating at ‘B+’ with a Stable Outlook.

“The one-notch upgrade of SLIC’s ratings reflects Fitch’s more positive view of the state’s 99.9% ownership in the company following a recent proposal to exempt SLIC from the regulatory requirement that all insurers must be listed. As a result, there will be no dilution of the state’s ownership.”

The full statement follows:

Fitch Ratings-Colombo/Hong Kong-11 August 2017: Fitch Ratings has upgraded Sri Lanka Insurance Corporation Limited’s (SLIC) National Insurer Financial Strength (IFS) rating and National Long-Term Rating to ‘AA+(lka)’ from ‘AA(lka)’ and assigned a Stable Outlook The agency has also affirmed SLIC’s international IFS rating at ‘B+’ with a Stable Outlook.

KEY RATING DRIVERS

The one-notch upgrade of SLIC’s National Long-Term Rating and National IFS rating reflects Fitch’s more positive view of the state’s 99.9% ownership in the company following a recent proposal to exempt SLIC from the regulatory requirement that all insurers must be listed. As a result, there will be no dilution of the state’s ownership.

The ratings are also supported by its sound profitability and healthy capitalisation. SLIC’s ratings also reflect its established franchise and market position in Sri Lanka. Offsetting these strengths are significant investments in non-core subsidiaries and a high equity exposure, which weighs on its risk-based capital. The IFS rating was affirmed as the rating remains constrained by Sri Lanka’s sovereign rating (B+/Stable).

Fitch views SLIC as being important to the government of Sri Lanka due to its ownership and the company’s strategic importance as the largest state-owned insurer. The strategic investments that SLIC undertake in line with government policy are a rating weakness. The company continues to operate as a composite insurer.

SLIC’s regulatory risk-based capital (RBC) ratios improved to 434% for life and 198% for non-life by end-March 2017 from 427% and 186% at end-2016, respectively. These ratios were well above the regulatory minimum of 120% for each business and compared well against those of its peers. Management expects to maintain RBC ratios above 200% in the medium to long term.

Pre-tax operating ROA including realised and unrealised gains (2016: 8.1%, 2015: 2.9%) has been consistently high even after adjusting for dividends received from subsidiaries.

The combined ratio for the non-life business improved to 96% in 1H17 after worsening to around 99% in 2016 (2015: 93%) due to high competition. Losses stemming from a severe tropical storm in May 2016 were largely manageable as a result of sound reinsurance arrangements in place. The country faced a similar flood in May 2017, but losses were much lower than in 2016 because the 2016 flooding affected mainly industrial zones in the island.

SLIC has a high risk appetite, which is evident from its large equity investment that exposes the company to market volatility. SLIC’s total investment in equities (including non-core subsidiaries) was 93% of shareholders’ equity at end-2016 (end-2015: 96%). The government has announced that it plans to dispose some of these non-core investments, which were funded by profit retention, and include interests in the gas, healthcare, leisure and banking sectors.

The company’s dividend payout ratio increased to 79% in 2016, largely due to a high extraordinary dividend received from SLIC’s subsidiary Litro Gas Lanka Ltd. However, excluding subsidiary dividends, SLIC’s dividend payouts have increased due to higher dividend expectations from the government.

SLIC is the oldest operating insurer in the country and is supported by an extensive network of branches and strategic business units. The company’s asset base of LKR175 billion at end-2016 accounted for around 35% of the insurance sector’s assets. SLIC has the second-highest market share in life and non-life businesses as measured by gross written premiums (GWP).

RATING SENSITIVITIES

If the sovereign ratings are upgraded in the future, and the constraints on SLIC’s IFS rating are relieved, Fitch would take similar rating action on SLIC’s IFS rating.
Conversely, a downgrade of Sri Lanka’s ratings will lead to downgrade of SLIC’s IFS rating.

SLIC’s National Long-Term Rating and National IFS rating may be further upgraded if it is able to maintain sizeable market share and significantly reduce its non-core investments.

The company’s National Ratings and IFS may be downgraded if there is:

– significant weakening in SLIC’s market position
– deterioration in the non-life combined ratio to well above 100% on a sustained basis
– weakening in SLIC’s importance to the government, increased state pressure for higher dividend payouts leading to weaker capitalisation, or a significant increase in non-core investments.
(COLOMBO, August 11, 2017)

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Weather and Climate

Water levels rising in Sri Lanka Kalu, Nilwala river basins: Irrigation Department

Sri Lanka Navy assisting in rescue operations (Pic courtesy SL Navy)

Monday June 3, 2024 2:17 pm

ECONOMYNEXT – Sri Lanka’s Irrigation Department has issued warnings that water levels in the Kalu and Nilwala river basins are rising and major flooding is possible due to the continuous rain. People living in close proximity are advised to take precautions.

“There is a high possibility of slowly increasing prevailing flood lowline areas of Kiriella, Millaniya, Ingiriya, Horana, Dodangoda, Bulathsinhala, Palinda Nuwara and Madurawala D/S divisions of Ratnapura and Kalutara Districts, up to next 48 hours,” it said issuing a warning.

“In addition, flood situation prevailing at upstream lowline areas of Ratnapura district will further be prevailing with a slight decrease.

“The residents and vehicle drivers running through those area are requested to pay high attention in this regard.

“Disaster Management Authorities are requested to take adequate precautions in this regard.”

The island is in the midst of south western monsoon.

DMC reported that 11,864 people belonging to 3,727 families have been affected due to the weather in Rathnapura, Kegalle, Kilinochchi, Jaffna, Mullaitivu, Kalutara, Gampaha, Colombo, Galle, Matara, Hambantota, Puttalam, Kurunegala, Kandy, Nuwara Eliya, Anuradhapura, Polonnaruwa, Badulla, Moneragala, and Trincomalee districts.

Meanwhile, the Meteorology Department stated that showers are expected on most parts of the island today.(Colombo/June3/2024)

Politics

UNP gen secy defends call for postponing Sri Lanka poll, claims opposition silent

The UNP party headquarters in Pitakotte/EconomyNext

Monday June 3, 2024 1:59 pm

ECONOMYNEXT — United National Party (UNP) General Secretary Palitha Range Bandara has defended his call for postponing Sri Lanka’s presidential election by two years, claiming that his proposal was not undemocratic nor unconstitutional.

Speaking to reporters at the UNP headquarters Monday June 03 morning, Bandara also claimed that neither opposition leader Sajith Premadasa nor National People’s Power (NPP) leader Anura Kumara Dissanayake have spoken against his proposal.

“I have made no statement that’s undemocratic. My statement was in line with provisions of the constitution,” the former UNP parliamentarian said.

He quoted Section 86 of Chapter XIII of the constitution which says: “The President may, subject to the provisions of Article 85, submit to the People by Referendum any matter which in the opinion of the President is of national importance.”

Sections 87.1, 87.2 also elaborates on the matter and describes the parliament’s role, said Bandara.

“I spoke of a referendum and parliament’s duty. Neither of this is antidemocratic or unconstitutional. As per the constitution, priority should be given to ensuring people’s right to life,” he said.

“Some parties may be against what I proposed. They may criticse me. But what I ask them is to come to one position as political parties and make a statement on whether they’re ready to continue the ongoing economic programme,” he added.

Bandara claimed that, though thee has been much criticism of his proposal for a postponement of the presidential election, President Wickremesinghe’s rivals Premadasa and Dissanayake have yet to remark on the matter.

“I suggested that [Premadasa] make this proposal in parliament and for [Dissanayake] to second it. But I don’t see that either Premadasa nor Dissanayake is opposed to it. To date, I have not seen nor heard either of them utter a word against this. I believe they have no objection to my proposal which was made for the betterment of the country,” he said. (Colombo/Jun03/2024)

Accidents

300 of 100,000 trees in Colombo considered high risk: state minister

Monday June 3, 2024 1:05 pm

ECONOMYNEXT – Trees in Sri Lanka’s capital Colombo are being monitored by the municipal council, Army and Civil Defense Force as the severe weather conditions continue, State Minister for Defense Premitha Bandara Tennakoon said.

“Within the Colombo Municipal Council city limits, there are 100,000 trees. Of these, around 300 are considered high risk,” Tennakoon told reporters at a media conference to raise awareness about the current disaster management situation.

Not all trees required to be cut down he said. “We can trim some of the branches and retain them.”

The problem was that buildings in the vicinity of the tree had cut branches on one side, causing it to become unbalanced, the minister said.

New laws would be brought in so provincial/municipal institutions could strengthen enforcement of building codes.

“We don’t have a single institution that can issue a warning about a tree. Not one to tell us what trees can or cannot be planted near a road.

“Trees should be suitable for the area. Some trees have roots that spread and damage roads, buildings. When the roots can’t go deep, they tend to topple over.

“Now Environment Day is coming up, and anyone can go plant a tree by the road. We have to take a decision about this. We have to enforce laws strongly in future.” (Colombo/June3/2024)