... Fund's (CGF) performance exhibits a strong correlation with government construction activity, as the company offers guarantees and related services to small- and medium-sized contractors involved in government projects. The government's weak fiscal position has resulted in fewer new construction contracts, the suspension of existing projects and payment delays to contractors. This has affected CGF through a drop in premium income and a higher risk of claims by employers. Underwriting Pressure: Fitch Ratings expects underwiring performance to remain weak over 2024-2025 on low business volume. Premium income plummeted by 87% to LKR13 million in 2023 on low guarantee volume amid a sluggish local construction sector, while claim costs increased by 10% and administration costs rose by 38% on investment-related withholding tax hikes. Consequently, Fitch calculates CGF to have incurred an underwriting loss of LKR107 million in 2023, from a profit...
