One Goal. One Team. SRI LANKA INSURANCE CORPORATION LTD. ANNUAL REPORT 2019 Contd. Sri Lanka Insurance Corporation Ltd. Annual Report 2019 2 Sri Lanka Insurance Corporation Ltd. Annual Report 2019 1 One Goal. One Team. The secret to our success is actually not a secret. Your company has been laying the foundation for greatness since inception and our generous asset base,and exceptional ratings have given us the stability as well as the flexibility to deliver ultimate value to our stakeholders. This mission, fortified and carried out by our professional and like-minded team has been the engine that has accelerated our growth as well as our plans for the future. A group effort that unites us in delivering our best to Sri Lanka. At SLIC; we are focused on one goal, as one team, to continue our strategy to be the strongest and the premier insurance provider in the nation. Contd. Sri Lanka Insurance Corporation Ltd. Annual Report 2019 2 CONTENTS SRI LANKA INSURANCE CORPORATION FINANCIAL REPORTS 04 – About this Report 108 – Annual Report of the Board of Directors of the Company 05 – About Sri Lanka Insurance Corporation 112 – Statement of Directors’ Responsibility 06 – SLIC Group 113 – Chief Financial Officer’s Statement of Responsibility 08 – Highlights 114 – Certificate of Actuary of the Insurer 10 – Message from the Chairman 115 – Liability Adequacy Test 12 – Chief Executive Officer‘s Review 116 – Certificate of Incurred But Not (Enough) Reported Claims 117 – Independent Auditors’ Report STRATEGIC REPORT 120 – Statement of Financial Position 16 – Operating Environment 122 – Statement of Profit or Loss and Other Comprehensive Income 18 – Strategy 124 – Statement of Changes in Equity 20 – Business Model 130 – Statement of Cash Flows 22 – Stakeholders 132 – Segmental Review: Statement of Income 24 – Materiality 134 – Segmental Review: Statement of Financial Position 136 – Notes to the Financial Statements MANAGEMENT DISCUSSION AND ANALYSIS SUPPLEMENTARY INFORMATION 26 – Financial Capital 36 – Institutional Capital 262 – Statement of Financial Position of the Life Insurance 40 – Customer Capital 263 – Notes to the Financial Statements - Life Insurance Fund 48 – Business Partner Capital 274 – Ten Year Summary 50 – Employee Capital 278 – Branch Network 58 – Social and Environmental Capital 284 – Notice of Annual General Meeting 285 – Notes GOVERNANCE AND INTERNAL CONTROLS 286 – Corporate Information 287 – Form of Proxy 64 – Board of Directors 68 – Leadership Team 80 – Corporate Governance Report 84 – Audit and Compliance Committee Report 86 – Statement of Internal Control 87 – Investment Committee Report 2019 89 – Compliance Management 97 – Risk Management Sri Lanka Insurance Corporation Ltd. Annual Report 2019 SRI LANKA INSURANCE 3 CORPORATION 4 – About this Report 5 – About Sri Lanka Insurance Corporation 6 – SLIC Group 8 – Highlights 10 – Message from the Chairman 12 – Chief Executive Officer‘s Review One Goal. One Vision. Sri Lanka Insurance Corporation Ltd. ABOUT THIS REPORT Annual Report 2019 4 The Sri Lanka Insurance Corporation continues its practice of Integrated Annual Reporting for the second consecutive year in 2019, to disclose the strategies, governance and business performance during the year, and to also discuss prospects for future value creation. REPORT BOUNDARY AND COMPLIANCE This Annual Report for Sri Lanka Insurance Corporation covers the 12-month period from 1 January 2019 to 31 December 2019. The overall boundary of this Annual Report comprises Sri Lanka Insurance Corporation and its subsidiaries, identified as “SLIC” or “Company” individually and “Group” collectively. Respective entities are identified where applicable. SLIC’s business comprises two segments: General Insurance and Life Insurance. The two segments are treated and identified separately or as part of the overall business where appropriate and identified as such. The information contained herein is in compliance with all applicable laws, regulations, and standards. In preparing this Report, we have drawn on concepts, principles, and guidance given in the following where applicable: zz Global Reporting Initiative (GRI) Sustainability zz Reporting Guidelines GRI Standards zz International Integrated Reporting Framework (IIRC) PRECAUTIONARY PRINCIPLE SLIC applies a stringent precautionary principle with regards to social and environmental sustainability. We recognise the impact that our operations can have on the society and environment we operate in, and take all necessary actions and precautions to address and minimise such risks. QUERIES We welcome your comments and questions about this Report B A Ruwani Dharmawardana, Company Secretary/DGM – Compliance Sri Lanka Insurance Corporation Ltd. “Rakshana Mandiraya”, No. 21, Vauxhall Street, Colombo 02. Phone: +94 11 235 7741 Sri Lanka Insurance Corporation Ltd. Annual Report 2019 5 ABOUT SRI LANKA INSURANCE Corporation As Sri Lanka’s national insurance services provider and the country’s pioneer in insurance, Sri Lanka Insurance Corporation (SLIC) is backed by decades of industry expertise and the most experienced insurance sector technical knowledge base in the country. The long history of SLIC in driving the development and advancement of the insurance industry in Sri Lanka has recorded many landmark achievements, such as the largest claim ever paid of Rs. 39.5 Bn, and the largest bonus ever declared to its policyholders of Rs. 8.2 Bn. SLIC’s total assets are worth Rs. 212 Bn. and in the Sri Lankan insurance sector, accounts for the largest Shareholders’ Fund of Rs. 62 Bn. and the highest Life Fund of Rs. 117 Bn. SLIC continues to be the trusted national insurer of the people of Sri Lanka as it strives to enhance its service reach and service quality to serve the people of Sri Lanka better each year. Our Vision What do we aspire to be? Our Vision zz To be the Nation’s first choice for Risk Protection and Life Investment Optimisation Our Mission Why are we in business? Our Mission zz We provide risk protection and life investment optimisation, that will deliver value to our customers zz Through a team of committed professionals, whose contribution we recognise and value zz Leading to superior shareholder value, whilst being a responsible corporate citizen Sri Lanka Insurance Corporation Ltd. SLIC GROUP Annual Report 2019 6 As at the end of December 2019, the Government of Sri Lanka was the majority stakeholder of SLIC, holding 99.97% of shares of the Company vested with the Secretary to the Treasury, on behalf of the Government of Sri Lanka. THE SLIC GROUP STRUCTURE Sri Lanka Insurance Corporation Ltd. The Lanka Hospitals Corporation PLC Litro Gas Lanka Ltd. Litro Gas Terminal Lanka (Pvt) Ltd. 51.34% 99.94% 100% SLIC is the largest shareholder of SLIC is the primary shareholder Litro Gas Terminal is a fully-owned Lanka Hospitals with 51.34% of of Litro Gas Lanka with 99.94% subsidiary of SLIC and is involved shares. Lanka Hospitals is a public shareholding. Litro Gas Lanka is in storing LP Gas for domestic, quoted company involved in providing the leading LP Gas importer and commercial and bulk customers. healthcare services to the public. distributor in Sri Lanka. Lanka Hospitals Diagnostics (Pvt) Ltd. 100% Sri Lanka Insurance Corporation Ltd. Annual Report 2019 7 The SLIC Group encompasses three fully-owned subsidiaries and three partially-owned subsidiaries. The fully-owned subsidiaries of the Group are Litro Gas Terminal Lanka (Pvt) Ltd., Canowin Hotels and Spas (Pvt) Ltd., and Management Services Rakshana (Pvt) Ltd. The partially-owned subsidiaries are Litro Gas Lanka Ltd. (99.94% ownership), The Lanka Hospitals Corporation PLC (51.34% ownership), and Canwill Holdings (Pvt) Ltd. (45.95% shareholding). Management Services Rakshana Canowin Hotels and Spas (Pvt) Ltd. Canwill Holdings (Pvt) Ltd. (Pvt) Ltd. 100% 45.95% 100% Management Services Rakshana was A fully-owned subsidiary of SLIC, set up as a fully-owned subsidiary to the Company owns and manages SLIC has a 45.95% stake in Canwill provide payroll management services the rest-stop facility on the Holdings (Pvt) Ltd., which is in the for SLIC and is not involved in the Southern Expressway that provides business of managing/ investing in provision of any services or products miscellaneous services to commuters hotel projects. for the external market or external who use the Expressway. parties. Sinolanka Hotels & Spa (Pvt) Ltd. Helanco Hotels & Spa (Pvt) Ltd. 100% 100% Sri Lanka Insurance Corporation Ltd. HIGHLIGHTS Annual Report 2019 8 2019 2018 Rs. Mn. Rs. Mn. Results for the Year Total Revenue 48,609 44,380 Gross Written Premium 33,794 31,738 Net Earned Premiums 29,772 28,004 Investment and Other Income 18,837 16,375 Profit Before Tax (PBT) 8,205 7,150 Profit After Tax (PAT) 7,029 5,245 Benefits/Claims, Operating, Admin & Other Expenses 28,816 29,147 General Insurance General Insurance Fund 16,648 17,806 Net Claim Ratio 61 66 Expense Ratio 35 30 Life Insurance Life Insurance Fund 116,767 105,459 Expense Ratio 46 51 Face Value Bonus 8,244 7,697 Total Assets 211,700 198,658 FITCH Rating AAA(lka) AA+(lka) RS. 212BN TOTAL ASSETS RS. 7BN RS. 8.2BN PAT BONUS DECLARED (PROFIT AFTER TaX) RS.117BN AAA(1KA) LIFE FUND FITCH Sri Lanka Insurance Corporation Ltd. Annual Report 2019 9 THREE YEAR STRATEGY PLAN WILL HELP TO POSITION SLIC FOR FUTURE SUCCESS SLIC SERVES OVER 1.9 MN MOST VALUABLE GENERAL POLICYHOLDERS AND GROWING INSURANCE BRAND BY BRAND FINANCE 2019 AWARDED FOR BUSINESS EXCELLENCE AT NATIONAL BUSINESS EXCELLENCE AWARDS AWARDED COMMENDATION CERTIFICATE FOR YEAR AT NATIONAL QUALITY AWARDS SLIC CUSTOMER MOBILE APP Welcome To MOBILE APP REDESIGNED SLIC WEB PORTAL PUTS SLIC’s SERVICES AT CUSTOMERS’ Username FINGERTIPS Password Remember me Forgot Password? LOGIN FULLY AUTOMATED SALES FORCE OPERATION THROUGH BCONNECT AND FIRE APP RS. 3.9 MN. INVESTED IN STAFF TRAINING AND DEVELOPMENT Message from the Chairman Contd. Sri Lanka Insurance Corporation Ltd. MESSAGE FROM THE CHAIRMAN Annual Report 2019 10 I assumed duties as the Chairman of the personnel, including health ministry Sri Lanka Insurance Corporation (SLIC), employees, police, security forces, health on December 26 2019.