Ratings agency Fitch has announced that it is upholding HNB Assurance's (HNBA's) "A(lka)" National Long Term rating and National Insurer Financial Strength rating, both with stable outlooks.
According to Fitch's Rating Action and Commentary (RAC), these ratings were upheld due to the insurer's "adequate risk-based capital position, conservative investment strategy and stable profitability progression. The ratings also factor in Fitch's expectations of continued support from HNBA's parent - Hatton National Bank PLC (HNB; 'AA-(lka)'/Stable), given the latter's majority ownership in HNBA (60%) and the perceived strategic importance of the insurance subsidiary. However, the ratings are constrained by HNBA's modest market share and increased competition in the local market."
Also noted; “The company will maintain its sound operational and financial performance with emphasis on profitability and a conservative investment strategy amid improving macro-economic conditions."
Further elaborated, HNBA's investment strategy utilises "relatively low exposure to the equity market" and government securities accounting for 70% of life investments and 62% of non-life investments.
Additionally revealed; "HNB and HNBA share the common brand, and the latter contributed to 4.9% of the HNB group's profit in 2010 (2009: 4.4%). HNBA benefits from its parent's distribution network of 208 branches, as well as from cross-selling opportunities with over 40% of non-life premiums being derived via its ties with HNB."
It also emerged that, while "HNBA's regulatory solvency ratio decreased sharply at end-December 2010 (2.0x for non-life and 1.1x for life at end-2010, marginally above the regulatory 1x),"
Also highlighted as positives: "HNBA's stable profitability, lack of debt leverage and high rate of capital retention (average dividend payout of 23% over the last three years), and [a] return on average equity and return on average assets of 26.2% and 5.9% in 2010 [which is] at the median level of the top seven players."