Fitch affirms People’s Insurance at ‘A+(lka)’; Outlook Stable | Daily News

Fitch affirms People’s Insurance at ‘A+(lka)’; Outlook Stable

Fitch Ratings has affirmed Sri Lanka-based People’s Insurance PLC’s National Insurer Financial Strength (IFS) Rating at ‘A+(lka)’. The Outlook is Stable.

The affirmation reflects the insurer’s ‘Moderate’ business profile, satisfactory financial performance and capitalisation as well as its conservative investment policy.

Fitch views People’s Insurance’s business profile as ‘Moderate’ compared with that of other domestic non-life insurers due to its substantive business franchise and competitive advantages, helped by its association with the strong ‘People’s’ brand. This is somewhat counterbalanced by its limited business diversification, moderate operating scale and business risk profile. People’s Insurance continued to generate the majority of its gross premiums from the group, mainly through referrals from its immediate parent, People’s Leasing & Finance PLC (PLC, A+(lka)/Stable), though the insurer has been gradually expanding its non-group business exposure over the past years.

Fitch expects the growth of the insurer’s motor insurance premiums, which accounted for over 85% its total gross written premiums, to slow in light of the government’s restrictions on motor vehicle imports to control currency depreciation. In addition, we believe rising price competition, fuelled by constrained business growth, and softer investment yields will pressure earnings to some extent.

However, this should be mitigated by fewer motor insurance claims due to a drop in traffic accidents following the implementation of pandemic-related travel restrictions.

The lower amount of claims saw People’s Insurance’s combined ratio drop to 78% in 1H20 (2019: 97%), despite a contraction in gross written premiums, but we expect the ratio to revert to historical levels or above in the near-term as claims gradually pickup.