Fitch Ratings has stated that the underwriting profitability of Sri Lanka – based HNB Assurance (HNBA) and its non – life subsidiary HNB General Insurance (HNBGI) is expected to gradually improve. This improvement will be driven by enhanced claims management and a diversified portfolio beyond motor and health.
In 2023 and the first half of 2024, HNBA and HNBGI witnessed remarkable premium growth. In H1 2024, life insurance premiums rose by 24% (compared to 23% in 2023), outstripping the sector average of 17%. Non – life premiums also grew, increasing by 14% in H1 2024 (after an 18% growth in 2023), which was well above the industry’s 6% growth during the same period. HNBGI’s strategic focus on non – motor insurance led to a more balanced split between motor and non – motor segments in H1 2024. The combined ratio in H1 2024 improved to 108% from 111% in 2023, with a lower claims ratio of 68%.
However, underwriting profitability still faces pressure. There are increased claims in the health segment and new requirements for motor insurance premiums allocation to a state – owned insurer. Despite this, the consolidated net profit rose 14% year – over – year to LKR 474 million in H1 2024, with a three – year average return on equity of 19%. Capitalisation levels for HNBA and HNBGI are robust, although risk – based capital ratios have declined from 2023 due to market and premium concentration risks. Fitch anticipates that improving underwriting results will stabilise non – life capital levels in the medium term, and the group’s investment and liquidity risks have decreased since the sovereign rating upgrade in September 2023.
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