Fitch affirms HNBA at 'A(lka)'; Outlook stable

Fitch Ratings Lanka has affirmed HNB Assurance PLC's (HNBA) National Long-Term rating and its National Insurer Financial Strength (IFS) rating at 'A(lka)' with Stable Outlooks.

The ratings reflect HNBA'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 percent) 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.

The Stable Outlook reflects Fitch's expectation that HNBA's capital will improve with the announced Rs. 390.6m equity likely to be infused by May 6 (38 percent of total equity at end December 2010) and that the company will maintain its sound operational and financial performance with emphasis on profitability and a conservative investment strategy amid improving macro-economic conditions.