Annual Report 2007 Anchor of Trust Eagle Insurance PLC – Annual Report 2007 Our Vision To be a World-Class provider of Financial Solutions for Protection and Wealth Creation Our Mission We will be the most sought after Insurer and Fund Manager in Sri Lanka for security, return optimisation and excellence in service, achieving leadership in identified segments of the market Our Core Values Accepting risk with responsibility Being ethical Innovation Dedication to customers ® Designed & Produced by eMAGEWISE (Pvt) Ltd Encourage everyone to contribute and excel Photography by Taprobane Street Digital Plates by Imageline (Pvt) Ltd Printed by Printcare Corporate Information Name of the Company Eagle Insurance PLC Eagle profile Company Registration No - PQ 18 Legal Form Eagle Insurance took wing as a composite insurer • Public Company with limited liability. • Incorporated in Sri Lanka on 12th December 1986 under the within the Sri Lankan insurance landscape in the late Companies Act No. 17 of 1982. • Re-registered under the Companies Act No. 07 of 2007. 1980s. Over the years, the Company’s • A composite Insurance Company licensed by the Insurance Board of Sri Lanka. far-sightedness, good governance practices, ethics • The shares of the Company are listed on the Colombo Stock Exchange. Accounting Year and innovation have helped it to soar to new heights. 31st December Subsidiaries The dynamism and creativity of the Eagle family have Name of the Company Holding Principal Activity • Eagle NDB Fund Management been the engine of its evolution into a highly Company Limited 100% Fund Management • Rainbow Trust successful Company in the insurance and financial Management Limited 100% Trust Management and Administration services sector. Registered Office/Head Office “Eagle House” History No. 75, Kumaran Ratnam Road Colombo 02 Eagle Insurance commenced operations as CTC Telephone : 2310000 Fax : 2447620, 2310076 Eagle Insurance Company Ltd., with Ceylon Tobacco E- Mail : [email protected] Web : www.eagle.com.lk Company (a member of BAT Industries, UK) as the Company Secretary Ms C Munaweera - LLB, Attorney-at-Law Company's main shareholder. Consultant Actuary – Life insurance Mr. K K Wadhwa In 1999, BAT Industries divested its financial services 321-B, Pocket 2 Mayur Vihar, Phase 1 businesses to Zurich Financial Services Group based Delhi - 110091 in Switzerland, as part of its global strategy. Thus, Consultant Actuaries – General insurance Watson Wyatt Insurance Consulting (Private) Limited Eagle became part of a global financial services No. 135, Cecil Street # 09 - 01, group, with the National Development Bank (NDB) - Singapore 069536 Lawyers Sri Lanka's leading development bank - being the Julius & Creasy Attorneys-at-Law & Solicitors major local shareholder. No. 41, Janadhipathi Mawatha Colombo 01 2003 was another landmark in Eagle’s history as the Auditors Ernst & Young NDB bank, through its investor company, the Capital Chartered Accountants No. 201, De Saram Place Anchor of Trust Development and Investment Company PLC (CDIC) Colombo 10 Company Registrars acquired majority shareholding of Eagle Insurance. SSP Corporate Services (Private) Limited No. 101, Inner Flower Road Life, is built on partnerships – partnerships of trust. There are people who are The Bank of Ceylon also became a key shareholder of Colombo 03 Telephone : 2573894 / 2576871 anchors of trust. Everyone has at least one. At Eagle, the purpose of our Eagle Insurance with its stake in CDIC. Bankers existence is to be that anchor, to be the first in trust for all our stakeholders Standard Chartered Bank In 2006, once again Eagle became a member of a Bank of Ceylon which is why today we have garnered a reputation as one of Sri Lanka’s most Commercial Bank of Ceylon Limited global insurance group. Aviva plc, UK's largest Hatton National Bank PLC trusted corporates. Our prudent, professional management, our demonstrated The Hongkong & Shanghai Banking Corporation Limited insurer became the major shareholder of the People’s Bank responsibility towards stakeholders and good governance strengthen the bonds Sampath Bank Limited Company. Nourished by the unique combination in NDB bank we build. A solid solvency rate and years of being beside you, earning your trust, ownership of Aviva and NDB, Eagle Insurance looks Custodian Banks place us in good stead of enhancing our position. The Hongkong & Shanghai Banking Corporation Limited forward to soaring greater heights. Bank of Ceylon Eagle Insurance PLC Annual Report 2007 Financial Highlights 2007 2006 2005 2004 2003 Total Revenue (Rs. mn) 5,875 4,813 4,277 3,728 3,347 Profit before Tax (Rs. mn) 546 539 528 263 318 Net Assets (Rs. mn) 2,025 1,743 1,467 1,077 983 Life Fun (Rs. mn) 12,306 10,508 9,238 7,985 6,613 Assets under Management (Rs. mn) 20,553 17,970 15,980 14,275 12,733 Return on Net Assets (%) 27.0 30.9 36.0 24.4 32.4 Basic Earnings per Share (Rs.) 17.57 17.45 17.18 8.46 10.61 Market Capitalisation (Rs. mn) 4,523 4,065 2,550 2,200 2,400 TOTAL REVENUE PROFIT BEFORE TAX Contents Rs. 5,875 mn Rs. 546 mn (Rs. mn) (Rs. mn) 1 Financial Highlights 2 Chairman’s Review 5 7 6 9 8 4 8 , 3 4 Managing Director’s Review 5 2 5 5 3 5 8 Board of Directors 1 7 8 , 7 4 2 8 10 Top Management Team , 2 7 4 7 8 4 , 1 3 13 Management Discussion & Analysis 3 , 3 3 3 6 27 Sustainability Report 2 65 Risk Management 71 Enterprise Governance 84 Statement of Solvency 03 04 05 06 07 03 04 05 06 07 85 Statement of Approved Assets NET ASSETS LIFE FUND 88 Directors’ Report Rs. 2,025 mn Rs. 12,306 mn 92 Chief Executive Officer’s and Chief Financial Officer’s (Rs. mn) (Rs. mn) Responsibility Statement 5 93 Audit & Compliance Committee Report 2 0 , 6 3 2 0 94 Remuneration Committee Report 4 3 , 7 , 8 2 7 1 0 95 Actuary’s Report - Life 1 6 8 5 4 , 3 , 0 2 1 96 Actuary’s Report - General insurance 5 , 1 8 7 9 3 9 3 7 , 8 97 Statement of Directors’ Responsibilities 1 0 7 , 9 6 , 1 98 Statement of Directors and Company Secretary 6 for the Annual Report 2007 99 Independent Auditors’ Report 100 Balance Sheet 03 04 05 06 07 03 04 05 06 07 101 Statement of Income 102 Group Statement of Changes in Equity ASSETS UNDER MANAGEMENT RETURN ON NET ASSETS 103 Company Statement of Changes in Equity Rs. 20,553 mn 27.0% 104 Cash Flow Statement (Rs. mn) (%) 105 Insurance Revenue Accounts 3 0 106 Industry Segment Data - Balance Sheet 2007 5 . 5 6 , 0 4 3 . 0 7 107 Industry Segment Data - Balance Sheet 2006 9 2 . 2 9 0 , 3 0 8 0 7 3 5 . 108 Industry Segment Data - Statement of Income 2007 9 1 , 7 7 4 5 3 . 2 2 , 1 3 109 Industry Segment Data - Statement of Income 2006 4 4 7 2 , 1 2 110 Industry Segment Data - Cash Flow Statement 2007 1 111 Industry Segment data - Cash Flow Statement 2006 112 Long Term Insurance Balance Sheet - Supplemental 113 Notes to the Supplemental Long Term Insurance Balance Sheet 03 04 05 06 07 03 04 05 06 07 115 Accounting Policies EARNINGS PER SHARE MARKET CAPITALISATION 120 Notes to the Financial Statements Rs. 17.57 Rs. 4,523 mn 140 Quarterly Analysis 2007 (Rs.) (Rs. mn) 141 Quarterly Analysis 2006 3 142 Decade at a Glance 2 5 5 , 7 5 6 4 8 144 Share Information 5 4 . 0 1 . , . 7 7 4 7 1 146 Milestones 2007 1 1 148 Distribution Network 0 0 5 1 0 0 5 6 , 0 . 149 Introduction to Insurance Accounting 4 , 2 2 0 6 , 2 1 4 2 150 Glossary of Insurance Terms . 8 153 Notice of Meeting 155 Form of Proxy 03 04 05 06 07 03 04 05 06 07 1 Eagle Insurance PLC Annual Report 2007 Chairman’s Review Dear Shareholder, Eagle Insurance has once again demonstrated its characteristic resilience to the challenging macro economic conditions and has achieved an impressive growth. We made good progress towards our strategic aim of growing in profitable markets. Our results are proof that we are heading in the right direction towards our desired market segments. Our timely entry into the bancassurance market has been a resounding success resulting in growth far exceeding expectations. This was further enhanced by the strategic partnership we entered into with Sampath Bank – the fourth largest private commercial bank in Sri Lanka. Eagle has contributed to Aviva’s ambition to be the world’s most trusted savings, investments and insurance provider. Our growing customer base and the solid financial strength stand testimony to this fact. Aviva group set up its Asia Pacific Regional Office in mid 2007, in keeping with its focus to build a multinational business through four strong regions. The regional base is aimed at supporting the fast growing markets in the Asia Pacific region. Eagle Insurance is an integral part of the new Aviva Asia Pacific region. Economy 2007 was a year that was highly challenging for the macro We made good progress economic environment both for the country and the industry. Overall economic activity slowed down owing to the sharp towards our strategic aim of increase in the operational cost of business. The main reasons growing in profitable were twofold. They were in the form of high inflation and a significant rise in interest rates. Investor sentiment weakened markets. Our results are proof further due to the deteriorating security situation in the country. that we are heading in the However, the high interest rate environment presented the Company with the opportunity of boosting investment returns as right direction towards our a major part of our insurance funds are invested in fixed income desired market segments.