CGF’s underwriting performance to remain subdued: Fitch Ratings

The company incurred an underwriting loss of $358.4k (LKR107m) in 2023

Sri-Lanka-based Construction Guarantee Fund (CGF) is forecasted to have a weak underwriting performance on low business volume till 2025, according to Fitch Ratings.

CGF’s premium income went down by 87% in 2023 to $43.5k (LKR13m)  on low guarantee volume amidst a slow local construction sector, whilst claim and administration costs rose by 10% and 38% respectively on investment-related withholding tax hikes.

Fitch also calculated an incurred underwriting loss of $358.4k (LKR107m) for CGF in 2023, from a profit of $53.6k (LKR16m) in 2022.

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The company mentioned its majority of outstanding guarantees do not carry claim risk, instead, are classified as extensions of existing guarantees granted for administrative purposes.

Amidst its subdued underwriting results, Fitch sees CGF’s outlook as “stable” and could expect a positive rating through sustained improvement with its profile in terms of a larger operating scale, and diversifying into profitable and stable business lines.

(LKR1 = $0.0033)