Home / Financial Services/ Fitch assigns Co-operative Insurance first-time ‘BBB+’ rating; Outlook Stable

Fitch assigns Co-operative Insurance first-time ‘BBB+’ rating; Outlook Stable

Comments / {{hitsCtrl.values.hits}} Views / Wednesday, 12 September 2018 00:00

Fitch Ratings has assigned Sri Lanka-based Co-operative Insurance Company Ltd. (CICL) a National Insurer Financial Strength (IFS) Rating and National Long-Term Rating of ‘BBB+(lka)’. The Outlook is Stable. 

Key rating drivers 

The rating reflects the non-life insurer’s modest domestic business profile, supported by its association with co-operative societies, good capitalisation and a somewhat conservative investment policy. CICL’s rating is also supported by its consistently strong financial performance and earnings. 

Fitch Ratings views CICL as a niche player in the domestic market with a modest non-life market share by gross written premium (GWP) of 3.2% at end-2017 (2016: 3.0%). The insurer is 99.9% owned by 203 co-operative societies that together represent several multi-purpose co-operative organisations and rural banks. 

CICL’s rating also factors the insurer’s access to a sizable potential customer base within the co-operative movement and the access to potential customers from using the service centres owned by the co-operative societies. In 2017, almost one-third of the insurer’s policyholders were from the co-operative movement. 

Fitch sees CICL’s capitalisation as good. The insurer’s capitalisation, as measured by its risk-based capital (RBC) ratio, was 183% at end-June 2018 (2017: 180%; 2016: 139%) against the 120% regulatory minimum. However, we expect capitalisation to remain constrained around this level over the medium term because of the insurer’s expansion plans, occasional appetite for high-risk investments as well as a possible infusion of capital to its life subsidiary, Cooplife Insurance Limited (Cooplife) should the need arise. Fitch expects the company to maintain the RBC ratios for its non-life and life operations above 180% in the medium term. 

CICL maintained strong financial performance and earnings by consistently generating high pre-tax operating return on assets, including realised and unrealised gains (2017: 9.5%, 2016: 5.5%). The company’s modest marketing spend and the use of relatively low-cost distribution channels means its expense ratio of 30% in 2017 (2016: 34%) is lower than that of the industry (2017: 34%, 2016: 35%). The lower expense ratio and disciplined underwriting practices led to a Fitch calculated combined ratio of 95% in 2017 (2016: 101%, 2015: 98%), which compares favourably with the industry. 

CICL has a moderately conservative investment policy, with considerable exposure to good credit quality fixed-income securities and a modest exposure to equities. More than 80% of CICL’s invested assets were in fixed-income securities at end-2017; out of which, 37% was invested in fixed deposits, 28% in listed debentures and 23% in government securities. Over 70% of the fixed-income portfolio was invested in assets rated ‘A-(lka)’ and above. Its equity investments were mainly its investment in Cooplife, which accounted for 14% of invested assets at end-2017. 

Rating sensitivities 

The rating could be downgraded following a weakening of CICL’s combined ratio to above 115% for a sustained period or its RBC ratio is consistently below 165%. 

An upgrade could occur if the company continues to expand its market franchise, while sustaining its combined ratio at below 100% and RBC ratio well above 190%.

Share This Article


1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.


Today's Columnists

In the desert of Tamil films, actor Sivaji Ganesan was an oasis

Saturday, 22 September 2018

‘Indian Film,’ first published in 1963 and co-authored by former Columbia University Professor Erik Barnouw and his student Dr. Subrahmanyam Krishnaswamy, is considered a seminal study of the evolution and growth of Indian cinema. The book is cit

Imran may turn blind eye to blasphemy law and persecution of Ahmadiyyas

Saturday, 22 September 2018

There are clear signs that Pakistan’s freshly minted Prime Minister, Imran Khan, will make a sincere effort to reduce corruption and maladministration in the domestic sphere. In foreign affairs he is likely to make a brave attempt to mend fences wi

The rate of exchange, capital flight and the Central Bank

Friday, 21 September 2018

The Central Bank (CBSL) exists for the sole purpose of price stability. Its controls on the financial system and monetary policy exist to maintain price stability. As put forth many times by the Governor, the failing of the CBSL to control inflation

Red flag over the Sri Lankan Navy

Friday, 21 September 2018

Shocking story Rusiripala, a former banker in Sri Lanka, who has taken to writing in Daily FT, is perturbed by the red flag I have raised (Daily FT article 18 September) over the shocking charge that our Navy had operated a ransom gang that had abduc

Columnists More