Care Rating Nepal assigned ‘CARE-NP BB+ to Sanima General Insurance Limited

CRNL has assigned ‘CARE-NP BB+  (Is)’ rating to Sanima  General  Insurance  Limited  (SGIC). Issuers with  this  rating  are  considered  to  offer  moderate  risk  of  default  regarding  timely  servicing  of  financial obligations, in Nepal.

The rating assigned to SGIC is constrained by short track record of its operation, competition from other insurance  companies  coupled  with  relatively  small  market  share  in  the non-life  insurance  industry and moderate financial risk profile with high expense ratio leading to high combined ratio. Further, the rating is constrained by lower reported solvency ratio vis-à-vis the regulatory requirement and concentration in motor  segment. The rating,  however,  derives  strength  from SGIC’s association  with  strong  promoter group,  experienced  board &management  team and  diversified  investment  book  with  fair  return  on investment. Ability of SGIC to maintain growth in income while maintaining quality of the portfolio and ability to maintain minimum regulatory solvency ratio will be key rating sensitivities.

SGIC started its commercial operation from July 11, 2018 and operated only for 6 days during FY18 as general insurer. Currently there are 20 non-life insurance companies operating in Nepal sharing total Rs. 25 Bn of Gross Premium Written (GPW) during FY19; where SGIC shares only 0.77% of total GPWand ranks 20th position reflecting low market share in the industry.Due to large number of non-life insurance companies  and  limited  market,  there  is  high  competition  among  the  companies  to  add  new  and  retain existing  customers.  Further,  with  motor  segment  being  major  revenue  source  of  non-life  insurance companies  in  Nepal,  slowdown  in  automobile  industry  and  changes  in  regulations  related  to  bank financing of vehicles could impact growth in this segment. Additionally, the current outbreak of Covid-19 could have a negative impact on overall growth of industries in Nepal including construction, automobile industry which could impact the business of non-life insurance companies.

About the Company

Sanima  General Insurance Limited (SGIC) is  a general (non-life) insurance company. The  company has started  its  operation  from  July  11,  2018.  The  company  has  been  offering  a  range  of  general  insurance covers for businesses & individuals and has a comprehensive range of general insurance products for Fire, Marine,  Motor,  Engineering,  Miscellaneous  and  Agriculture  etc.  SGIC  is  promoted  by  Sanima  Group, which  is  promoted  by a  group of Non-Resident Nepalese (NRN). Sanima  Group has investments  across different   sectors   including Commercial   Bank,   Life   Insurance   Company,   Merchant   Banking   and hydropower companies. SGIC  has  network  of  18  branches  (including  head  office),  10  sub  branches  supported  by  93  employees and  208  insurance  agents  as  on  Mid-January  2020.  SGIC  has  assets  base  of  Rs.  877  Mn  as  on  July  16, 2019 which witnessed 20.65% growth over FY18. The capital structure of the company comprises of Rs. 700Mn as paid up capital from the  promoter group and the  Rs. 300 Mn is  proposed to be issued to the public through IPO.

Source: careratingsnepal.com