Lanka Rating downgrades IFS Rating of Sanasa Life Insurance Company PLC, Outlook "Negative"

The rating reflects Sanasa Life Insurance Company PLC ("SLC" or "the Company") weakening fundamentals, marked by a declining market share, compromised profitability, and deterioration of capital resulting in reduced capital adequacy and risk absorption capacity. The Company has been subject to certain regulatory directives, such as to reconstitute its board and management team to improve its corporate governance practices including appointment of new Chairperson of the Board. The regulator has also instructed the Company to discontinue one of its leading insurance selling products and apply for a new product with better features and enhanced regulatory requirements. This has significantly impacted the business and financial profile of the Company. As of 1QCY25, SLC's market share declined to ~2.3% (CY24: ~3.6%). This reduction is primarily attributable to a strategic shift in the product mix, with the Company transitioning away from their main insurance selling product towards more traditional life insurance offerings. Consequently, the Company reported a ~38% decline in Gross Written Premiums (GWP), amounting to LKR~1.2bn in 1QCY25, compared to LKR~1.9bn in 1QCY24. During the same period, SLC paid net claims totaling LKR~636.6mn (CY24: LKR~3,792.3mn; CY23: LKR~2,438.4mn), driven primarily by an increase in surrender claims. This led to a rise in the combined ratio to ~106.6% in 1QCY25 (CY24: ~97.1%), indicating underwriting losses as SLC reported a net loss of LKR~5.9mn in 1QCY25. The Company's Gross Written Premium (GWP) increased by ~30.2% to LKR~6.6bn in CY24 (CY23: LKR~5.1bn). Despite this growth, the Company reported a net loss of LKR~80.6mn in CY24, primarily attributable to higher net claims and benefits, increased contract liabilities, and elevated operating expenses. The Company’s capital position remains under pressure with the Capital Adequacy Ratio (CAR) declining to ~120%, barely meeting the regulatory minimum requirement of 120% CAR, in 1QCY25 (CY24 CAR: ~169%). It is significantly below the industry average of ~330% and depicts immediate need of capital infusion.
The assigned 'Negative Outlook' reflects expected decline in key performance indicators due to portfolio mix, ongoing regulatory concerns, and revamp of corporate governance and operational frameworks.
The rating is contingent upon SLC’s ability to improve its business and financial profile by regaining market share, reverse losses trend and fortify its capital position. Any further deterioration in these key indicators would result in further downgrade of rating. Meanwhile, strengthening risk management practices, operational controls and compliance with regulatory requirements will have a positive impact on the rating.

About the Entity
Sanasa Life Insurance Company PLC (“SLC” or “the Company”) was incorporated in 2006 as Seemasahitha Sanasa Rakshana Samagama under the Companies Act No. 17 of 1982 and re-registered in 2008 under the Companies Act No. 07 of 2007. The Company is licensed to operate as a life insurer under the Regulation of Insurance Industry Act No. 43 of 2000 and was listed on the Colombo Stock Exchange in 2021.SLC holds interests in one subsidiary. It owns ~53% of Sanasa General Insurance Company Limited (general insurance). The Board comprises four Non-Executive/Independent Directors and four Non-Executive/Non-Independent Directors. The Chairman, Prof. Aminda Methsila Perera, serves as an Independent Director. Mr. Nuwanpriya Gunawardena was appointed Chief Executive Officer on December 6, 2025.