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Lanka Rating Agency
Press Release

Date
07-Aug-23

Analyst
Tharika Prabashwari Kodikara
tharika@lra.com.lk
+94 114 500099
https://lra.com.lk

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This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to LRA

LRA Assigns Initial Instrument Rating to Sanasa Life Insurance Company PLC - LKR 200mn Senior Unsecured Redeemable Debentures

Rating Type Debt Instrument
Current
(07-Aug-23 )
Action Initial
Long Term BBB
Outlook Positive
Rating Watch -

The rating of the debenture highlights the unsecured senior structure, where the debenture will rank after all the claims of the secured creditors and preferential claims under any statutes governing the Company, but in pari passu to the claims of unsecured creditors of the Company. Consequently, the debt instrument is rated equivalent to the entity rating. Sanasa Life Insurance Company PLC (herein referred to as "SLC" or "the Company") operates with a large customer base as a provider of microinsurance to the Sanasa Societies as well as individual and corporate customers. SLC mainly focuses on providing insurance services to members of SANASA societies island-wide and individual and corporate of whom the majority are in the rural sector. The rating factors in SLC’s robust Gross Written Premium (GWP) growth of ~131% in CY22 to LKR~2,568mln from LKR~1,111mln in CY21, respectively, vis-à-vis the industry average growth of ~8.5% in the same period. SLC’s GWP mostly consists of society income. The Company has also reached out to new customer segments outside Sanasa. Consequently, the market share of the company increased to ~2% in CY22 from ~1% in CY21. Also, the Company has recorded net underwriting surpluses throughout the years supported by premium growth. The net underwriting surpluses increased from LKR~764mln in CY21 to LKR~1,100mln in CY22. The claims ratio of the Company, however, climbed to ~51% in CY22 as compared to ~24% in CY21. Increase in market share along with reducing claim ratio remains crucial. The investment book of the Company stood at LKR~1,695mln in CY22, vis-à-vis LKR~1,794mln in CY21; investment strategy reflects inclination the towards government securities, as investments in government securities have increased rapidly in CY22 with a share of ~33% of the total portfolio. Going forward, effective investment & liquidity management would be a key monitoring factor for the rating. SLC’s capital adequacy is deemed average; it was maintained above the minimum of ~120% and stood at ~257% in CY22. Sustenance of adequate capital amid increasing business volumes would remain critical.
The rating is dependent upon sustained improvement in the business and financial risk profile of the Company. The strong solvency profile of the Company, indicated through its ample reserves, places comfort in the rating. An improvement in investment performance and capital generation would be considered positive for the ratings and vice versa.

About the Entity
Sanasa Life Insurance Company PLC is registered under the name of Seemasahitha Sanasa Rakshana Samagama as a public limited liability company in 2006, and was incorporated in Sri Lanka under companies act No 17 of 1982 and re-registered under the companies act No 07 of 2007 in 2008. SLC is authorised to carry out Life insurance business under the regulation of Insurance Industry Act. No 43 of 2000. SLC got listed on Colombo Stock Exchange in 2021.

About the Instrument
Sanasa Life Insurance Company PLC raised a debenture of LKR 200Mn rated, senior, unsecured, redeemable debenture at a par value of LKR 100/-. The debenture has two types, namely Type A (75%) and Type B (25%). Type A Debenture coupons are paid semi-annually at the fixed rate of 9.05% p.a. (AER – 9.25%) and Type B Debenture coupons are paid semi-annually at a fixed rate of 9.28% p.a. (AER – 9.50%).

The primary function of LRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. LRA comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. LRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.