RAM Ratings Lanka puts AAI on positive Rating Watch

RAM Ratings Lanka has placed the BB+ claims-paying ability rating of Asian Alliance Insurance PLC (“AAI” or “the Company”) on Rating Watch, with a positive outlook. The Rating Watch is triggered by the Company’s announcement of a LKR 812.5 million rights issue, which is expected to strengthen AAI’s capitalisation and enhance its financial performance, through greater investment income.

Presently, AAI’s claims-paying ability rating is underpinned by its healthy franchise in the life segment and moderate underwriting standards. However, it is moderated by its small stature relative to its competitors. The Rating Watch will be resolved once the Company successfully concludes its rights issue and RAM Ratings Lanka completes the annual review of AAI’s claims-paying ability rating, which is currently ongoing.

RAM Ratings Lanka’s Rating Watch on claims-paying ability ratings highlights a possible change in the insurer’s rating. It focuses on identifiable events such as mergers, acquisitions, regulatory changes and operational developments that place a rating under special surveillance by RAM Ratings Lanka. In a broader sense, it covers any event that may result in changes in risk factors relating to the overall capacity of an insurer to meet its financial obligations to policy/contract holders.

Ratings will appear on RAM Ratings Lanka’s Rating Watch when some of the above events are expected to or have occurred. Appearance on RAM Ratings Lanka’s Rating Watch, however, does not inevitably mean that the existing rating will be changed. It only means that a rating is under evaluation by RAM Ratings Lanka and a final affirmation is expected to be announced. A “positive” outlook indicates that a rating may be raised while a “negative” outlook indicates that a rating may be lowered. A “developing” outlook refers to those unusual situations in which future events are unclear that the rating may potentially be raised or lowered.