Ceylinco Insurance PLC l Annual Report 2014 The Lion Rock of Sigiriya is a world famous icon, representing stability, strength and fortitude to the thousands who climb its towering heights. This mammoth rock was where King Kasyapa built a magnificent palace with a gateway in the form of an enormous lion.
To this day, the lion remains a deeply significant symbol of courage, perseverance and protection for every Sri Lankan wherever they may be.
Read the Ceylinco Insurance PLC Annual Report 2014 online At Ceylinco Insurance we have served the people of our nation with the finest in innovative insurance products and services for over 25 years. Yet our history can be traced as far back as 1939, when the Company was originally registered as The Ceylon Insurance Company, which was in fact, the first Ceylonese Company ever registered. This is the heritage of the pledge of trust that has made us one of the most distinguished insurance service providers in Sri Lanka today.
This report looks back over a challenging year in which strong industry competencies, good governance and visionary leadership guided our strategies as we complied with new industry regulations to segregate our business operations into two.
As always your company strongly believes in the passion and spirit of our nation; keeping our pledge to every Sri Lankan that we will deliver increasing value to our many stakeholders both now and in the years that lie ahead. 2 Ceylinco Insurance PLC Annual Report 2014
CONTENTS
Our Mission and Our Corporate Goals l 3 Financial Information Financial Highlights l 4-5 Report of Directors l 84-92 Corporate Information l 6 Actuarial Report - (General) l 93 Actuarial Report - (Life) l 94 Chairman’s Review l 8-12 Report of the Auditors l 95 Review of the Managing Director/Chief Executive Officer - Consolidated Statement of Financial Position l 96 (General Insurance) l 13-17 Consolidated Income Statement l 97 Review of the Managing Director/ Chief Executive Officer - Consolidated Statement of Comprehensive Income l 98 (Life Insurance) l 18-23 Consolidated Statement of Changes in Equity l 99-100 Board of Directors l 24-29 Consolidated Statement of Cash Flows l 101 Incorporating the Concept of Integrated Reporting l 30 Insurance Revenue Account - Company l 102 Objective of Integrated Reporting l 31 Supplementary Statement of Financial Position - Stakeholder Engagements and Relationships l 32-34 Life Division l 103 Notes to the Supplementary Statement of Financial Management Discussion and Analysis Position - Life Division l 104-107 Review of - Macro-Economic Environment /Insurance Notes to the Consolidated Financial Statements l 108-174 Industry/Financial Performance l 36-40 Quarterly Analysis - 2014 l 175 Our Operational Structure l 41 Quarterly Analysis - 2013 l 176 A Note on Segregation l 42-43 Ten Year Summary l 177-178 Sustainability Report l 44-46 Our Code of Ethical Marketing Communications l 47 Glossary of Financial and Insurance Terms l 179-181 Our Customers l 48-50 Notice of Meeting l 182 What our Customers say l 51-52 Our Employees l 53-54 Our Professional Contribution to the Industry l 55 Corporate Social Responsibility l 56-58 Rewards and Recognition l 59-61 Enterprise Risk Management (General Insurance) l 62-63 Enterprise Risk Management (Life Insurance) l 64-68 Reinsurance Arrangements l 69 Corporate Governance l 70-73 Report of the Audit Committee l 74-75 Report of the Remuneration Committee l 76 Report of the Investment Committee - (General Insurance) l 77-78 Report of the Investment Committee - (Life Insurance) l 79-80 Statement of Directors' Responsibility l 81 Financial Calender l 82 The strength of our Belief 3
OUR MISSION
Our Mission is to provide protection and financial security of the highest quality to society, whilst adding to shareholders’ wealth and recognising, rewarding and valuing the dignity of our staff.
OUR CORPORATE GOALS
To provide an attractive return on investment to the shareholders, whilst retaining adequate funds for growth and to achieve a high degree of stability which would enable us to hold true to our mission in all business conditions.
To be a leading provider of protection and financial security in Sri Lanka and selected international markets.
To develop highly satisfied and motivated employees at all levels, who will contribute effectively and efficiently towards achieving the overall objectives of the Company.
To contribute to the economic development of Sri Lanka and enhance the quality of life of its people. 4 Ceylinco Insurance PLC Annual Report 2014
FINANCIAL HIGHLIGHTS
Company Results for the Year 2014 2013 Rs.'000 Rs.'000 Change %
Gross Written Premium 24,167,388 22,691,190 6.51 Net Claims / Net Benefits (Excluding increase in Life fund) 10,153,758 9,399,054 8.03 Increase in Life Insurance Fund 7,256,468 7,654,622 (5.20) Investments and Other Income 8,346,526 8,004,763 4.27 Profit Before Taxation 3,165,499 2,260,496 40.04 Profit After Taxation 2,142,624 2,118,389 1.14
Position at the Year End Shareholders' Funds 17,724,731 15,884,426 11.59 Life Insurance Fund 60,021,879 52,765,411 13.75 Non - Life Insurance Contract Liabilities 8,745,212 8,045,773 8.69 Investments 66,342,604 58,979,912 12.48 Total Assets 90,507,325 82,214,055 10.09 Market Capitalisation (Rs. Mn) 31,103 29,358 5.94
Per Ordinary Share Rs. Rs.
Earnings (Basic) 81.1 80.2 Dividends - Proposed 20.0 16.0 Net Assets ( Shareholders' Equity) 671.0 601.4 Market Value at the Year End - Voting 1,378.8 1340.0 Market Value at the Year End - Non Voting 550.0 398.8
Ratios Return on Total Assets % ( Shareholders') 11.7 9.2 Return on Shareholders' Funds % 12.1 13.3 Dividend Cover (Times) 4.1 5.0 Price Earning (Times) - Voting 17.0 16.7 Price Earning (Times) -Non Voting 6.8 5.0 Dividend Payout Ratio 25% 20%
Premium Income Profit before Premium Income Premium Income Life & Non Life Taxtion Non Life Life Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn.
25,000 3,500 15,000 15,000
3,000 20,000 12,000 12,000 2,500 15,000 9,000 9,000 2,000
10,000 1,500 6,000 6,000 1,000 5,000 3,000 3,000 500
0 0 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 The strength of our Belief 5
Non - Life Insurance Life Insurance Results for the Year 2014 2013 Change % 2014 2013 Change % Rs.'000 Rs.'000 Rs.'000 Rs.'000
Gross Written Premium 12,164,864 11,568,284 5.16 12,002,524 11,122,906 7.91 Net Claims / Net Benefits (5,259,911) (4,641,733) 13.32 (4,893,847) (4,757,321) 2.87 Increase in Long Term Insurance Funds 7,256,468 7,654,622 (5.20) Investments and Other Income 1,520,514 1,298,423 17.10 6,826,012 6,706,340 1.78 (including reinsurance commission) Transfer to Retained Earnings 1,362,987 1,240,387 9.88 Profit Before Taxation 3,165,499 2,260,496 40.04 Profit After Taxation 2,142,624 2,118,389 1.14
Position at the Year End Shareholders' Equity 17,724,731 15,884,426 11.59 Long Term Insurance Fund 60,021,879 52,765,411 13.75 Non-Life Insurance Contract Liabilities 8,745,212 8,045,773 8.69 Investments 9,132,948 8,228,140 11.00 57,209,656 50,751,772 12.72 Total Assets 26,980,768 24,624,378 9.57 70,971,670 63,946,011 10.99
Non - Life Insurance Life Insurance Results for the Year 2014 2013 2014 2013 Rs.Mn Rs.Mn Rs.Mn Rs.Mn
Available Solvency Margin 2,843 2,442 20,615 20,933 Required Solvency Margin 1,958 1,842 2,043 1,630 Solvency Ratio (Times) 1.45 1.33 10.09 12.85
Composite of Total Gross Written Premium
50% 50% LIFE GENERAL INSURANCE INSURANCE
+7% +14 % +40% Gross Written Premium (Growth) Increase in Life Insurance Fund Profit Before Taxation Increase
Rs. 24.1 Billion Rs. 60 Billion Rs. 3.2 Billion 6 Ceylinco Insurance PLC Annual Report 2014
CORPORATE INFORMATION
Registered Office Consulting Actuaries Mr. D.H.J. Gunawardena F.C.M.A. (U.K.) “Ceylinco House” Life Insurance (“Independent” Non - Executive Director) No. 69, Janadhipathi Mawatha, Towers Watson Singapore Pte. Limited, Mr. P.A. Jayawardena F.C.A., F.C.M.A., Colombo 1, Sri Lanka. No. 135, Cecil Street, F.M.A.A.T. (S.L.) #09-01, Singapore 069536. Company Registration Number - Director / Chief Financial Officer PQ 24 (Life Insurance) General Insurance (Executive Director) Legal Form M/s. K. A. Pandit A Quoted Public Company with limited Consultants & Actuaries, Mr. N.D. Nugawela F.C.I.C. liability, incorporated in Sri Lanka in 1987. 2nd. Floor - “Churchgate House”, - Director / Chief Operations Officer Licensed as a Company authorized to carry Veer Nariman Road, (General Insurance) on insurance business, under the Control of Fort, Mumbai - 400 001, India. (Executive Director) Insurance Act No. 25 of 1962 as amended Board of Directors by Act No. 42 of 1986 (Presently replaced Mr. T.N.M. Peiris B.A. (Econ.) (Hons.), Mr. J.G.P. Perera Pg. Dip. M.CIM. (U.K.), by Regulation of Insurance Industry Act No. F.C.A., F.C.M.A., F.C.I.C. F.C.I.M. (U.K.) 43 of 2000). - Director (Finance) / Head of Finance - Chairman (Executive Director) Main Place of Business (Non-Executive Director) Life Insurance Mr. U. Witharana A.C.A., M.B.A., F.C.M.A. “Ceylinco Life Tower”, Mr. A.R. Gunawardena F.C.I.C. - Director / Chief Financial Officer No. 106, Havelock Road, - Managing Director / Chief Executive Officer (General Insurance) Colombo 5, Sri Lanka. (General Insurance) (Executive Director) Telephone : 2461000 (Executive Director) Gen. C.S. Weerasooriya (Retd.) Call Centre : 2461461 (Hotline) Mr. R. Renganathan F.C.A., F.C.M.A. (“Independent” Non-Executive Director) Fax : 2437613, 2555959 - Managing Director / Chief Executive Officer E-mail : [email protected] (Life Insurance) Mr. S.R. Abeynayake F.C.A., M.B.A. (Sri J.), Website : www.ceylincolife.com (Executive Director) F.C.M.A. - Director / Deputy Chief Financial Main Place of Business Mr. H.D.K.P. Alwis F.C.I.C. Officer (Life Insurance) General Insurance - Director / Deputy Chief Executive Officer (Executive Director) “Ceylinco House”, (General Insurance) No. 69, Janadhipathi Mawatha, (Executive Director) Mr. S.H.J. Weerasuriya B.Sc. (Lond.), M.I.C.E., Colombo 1, Sri Lanka. F.I.E. (S.L.), F.S.S.E. (S.L.), C. Eng. Telephone : 2485757-9 Mr. E.T.L. Ranasinghe M.B.A., Dip.M., (Non Executive Director) Call Centre : 2393939 F.C.I.M. (U.K.), Chartered Marketer - appointed with effect from 17th. February, 2015, Fax : 2485701 - Director / Deputy Chief Executive Officer pending I.B.S.L. approval. E-mail : [email protected] (Life Insurance) Website : www.ceylinco-insurance.com (Executive Director) Company Secretary F.C.I.S. (U.K.), The Stock Exchange Listing Dr. W.C.J. Alwis B.Sc., F.I.I.I., F.C.I.I. (Lond.), Mrs. T.N. Jasenthuliyana F.C.P.M., F.C.C.S. The Ordinary Shares (Voting and Non F.I.o.D. (U.K.) Voting) of the Company are listed with the - Director (Technical) / Chief Technical Officer Bankers Colombo Stock Exchange of Sri Lanka. (Executive Director) Bank of Ceylon Principal Activities Mr. P.D.M. Cooray LUTCF (U.S.A.), C.I.A.M., Commercial Bank of Ceylon PLC Underwriting all classes of General C.I.I. (AWARD) Deutsche Bank AG (Custodian Bank) Insurance and Life Insurance. - Director / Head of Human Resources & DFCC Vardhana Bank Training (Life Insurance) Hatton National Bank PLC Auditors Hongkong & Shanghai Banking Ernst & Young, (Executive Director) Corporation Ltd. Chartered Accountants, Mr. K.I. Dharmawardena Attorney-at- Law National Savings Bank No. 201, De Saram Place, (“Independent” Non - Executive Director) Nations Trust Bank PLC Colombo 10. Mr. P.M.B. Fernando F.C.P.M., Dip. Elect. Eng., NDB Bank PLC Dip. Comp. System Design, Pan Asia Banking Corporation PLC Dip. Bus. Mgmnt., Dip. Mkt. Mgmnt. People’s Bank - Director / Chief Information Officer Sampath Bank PLC (General Insurance) Seylan Bank PLC (Executive Director) Standard Chartered Bank - resigned with effect from 17th. February, 2015 Union Bank of Colombo Limited The strength of our Belief 7
IT TAKES PERSEVERANCE TO GET TO THE TOP For us, getting to the top and staying there is a primary goal. The strength of our belief makes us the paradigm of excellence that others follow. 8 Ceylinco Insurance PLC Annual Report 2014
THE PASSION AND SPIRIT OF OUR NATION CHAIRMAN’S REVIEW
As our company reaches one of the stands strong and tall and firmly There are other stakeholder too who most significant and irreversible rooted, a veritable giant in the are today enjoying the shade of this moments in our history I can do industry, with branches ( both literally tree. no better than quote to you this and metaphorically) spreading not statement attributed to that iconic only across the island but even Our customers - who through our business magnate, investor and overseas. portfolio of comprehensive and philanthropist – Warren Buffet . innovative products which are I would be failing in my duty if I do regularly refined and improved, are “Someone is sitting in not at this stage pay tribute to the able to have peace of mind with the the shade today because two Managing Directors/CEOs – assurance that they can significantly Ajith Gunawardena and Rajkumar mitigate any financial deprivation someone planted a tree a Renganathan who during the last 27 due to the loss of life or illness, or long time ago.” years diligently nurtured, nourished, the loss or damage to property and strengthened and most importantly, possessions. Added to this is the You dear Shareholders are today protected this tree during times heartfelt relief given through the sitting in the shade of financial of turbulence. The most severe swift settlement of claims. It is a security and increasing returns on turbulance was during the year under promise which we have unswervingly your investment because someone a review when an attempt was made fulfilled year after year. long time ago ( in 1939 to be precise ), by a nexus to take control of the planted a tree in the form of a solidly legitimate Trust which holds shares Our employees - who enjoy the based insurance company which on behalf of our employees. security of their jobs which are was the first Ceylonese insurance enriched with regular training and company and the first company to From the roots of this giant tree enhanced with schemes of rewards be registered under the Companies there will now grow two other trees, and recognition thereby transforming Ordinance of 1938, appropriately one bearing the fruits of General their jobs into lucrative professional being allocated Registration No. PB1. Insurance and the other bearing careers. the fruits of Life Insurance. I have That tree has through the years no doubts whatsoever that these Adding significantly to the comfort withstood many a storm. Some of two trees will immediately bear rich and security of this shade is cyclonic proportions. Yet today it harvests. the unique benefit through the The strength of our Belief 9
Read the Chairman’s Review online 10 Ceylinco Insurance PLC Annual Report 2014
CHAIRMAN’S REVIEW
by the International Integrated MARKET LEADERSHIP Reporting Council (IIRC) You dear Shareholder will I am sure join me in congratulating Team Therefore since detailed reviews of Ceylinco for once again retaining +6.5% the Macro-Economic Environment, the position of Market Leader in the Total Gross Written Premium our Stakeholder Relationships and insurance industry. This Leadership our Financial Performance are dealt position was first won in 2004 and Rs. 24.16 Bn. with comprehensively elsewhere we have held it without a break since I will not repeat them here. I will then. It is truly an unmatched and only confine myself to some of the unmatchable record. highlights. INTERNATIONAL AND LOCAL OUR PERFORMANCE – GROSS RECOGNITION WRITTEN PREMIUM (GWP) Complementing the Market It was management ‘guru’ Peter Leadership position I am privileged to Drucker who said that “Business has announce to you that our Company only two functions – Marketing and Ceylinco Insurance Employees Share been recognized both internationally Innovation.” We as a company have Ownership Trust (CIESOT) which and locally by many prestigious always made these two functions our holds shares for the sole benefit of institutions such as – main focus. This is why in an industry the employees. These shares are conspicuous by its aggressive Global Banking & Finance Review allocated annually among eligible competitiveness and despite the (UK) – ‘Best Insurance Company in Sri employees according to a pre unethical sales tactics resorted to at Lanka’. defined criteria which is based on times by certain competitors, we have their seniority and designation. regularly achieved excellent GWP World Finance (UK) – ‘Best Life Accordingly the dividends received growth. The year under review is no Insurance Company in Sri Lanka’. by the Trust is distributed among the exception. I am pleased to announce eligible employees, thus motivating that we achieved a total GWP of Sri Lanka Institute of Marketing / them by creating a sense of Rs.24.16 Billion which represents Nielsen Lanka – ‘People’s Insurance ownership of the company. a 6.51% increase over the previous Brand of the Year’ (This award has been won for the 8th successive year) In complying with the CSE Listing financial year. The General Division Rules relating to Employee Share GWP was Rs.12 Billion representing Global Commerce Excellence Awards Schemes, CIESOT will be dissolved a 5.16% increase over the previous organized by Central Bank of in 2015 and the benefits will be financial year and the Life Division Sri Lanka - ‘Ceylinco Insurance distributed to all eligible employees GWP was Rs.12 Billion representing recognized for its Outstanding who are the beneficiaries as per the an 8% increase over the previous Contribution to the Sri Lankan Trust Deed. financial year. Economy’. And finally, resting under the shade OUR PERFORMANCE – PROFIT Business Today (Sri Lanka) – ‘Ceylinco of this giant tree are the deserving BEFORE TAXATION (PBT) Insurance as the only Insurance sectors of our community spread As a result of this GWP and through Company amongst the Top 25 across the country who through prudent financial management, our Companies in Sri Lanka’ (This award our carefully planned and equally company was able to record a PBT has been won for the 3rd successive carefully implemented CSR projects of Rs.3.2 Billion which represents a year). have benefited in many facets of most impressive 40% growth over healthcare and education. the previous financial year. LMD (Sri Lanka) - ‘Ceylinco Insurance as the Highest Ranked Insurance PROPOSED DIVIDEND INTEGRATED REPORTING Company’ (This has been won for the With this outstanding performance it I am pleased to be able to announce 21st successive year). to you that for the first time this gives me great pleasure to propose Annual Report has incorporated the on behalf of the Board of Directors a SEGREGATION concept of Integrated Reporting. This Dividend of Rs.20/- per share. This Section 53 of the Regulation of is in compliance with the guidelines surpasses any previous dividend Insurance Industry (Amendment Act of Integrated Reporting as published paid. No 3 of 2011 made it mandatory for The strength of our Belief 11
restful time of retirement. To fill Whatever may be the changes ahead this vacancy the Board unanimously let me assure you that the brand recommended the appointment of Mr S.H.J. Weerasuriya as a Non- ‘Ceylinco’ will always stand for the Executive Director. We await the approval of this appointment by protection and financial security of the Insurance Board of Sri Lanka. I must mention that if and when the highest quality to customers, the this approval is given our company addition to the wealth of shareholders will be able to fully comply with the Colombo Stock Exchange Listing and the recognition, rewarding and Rule 7.10.1(a) which stipulates that 1/3 of the members on the Board valuing of the dignity of our staff. should be Non-Executive Directors.
MY CONGRATULATIONS AND MY THANKS I would like to start with the this company to segregate into two Awards. Our Director and Chief institution which directly regulates separate companies, one exclusively Technical Officer Dr. Jagath Alwis our industry, the Insurance Board handling General Insurance and was the recipient of the ‘Personality of Sri Lanka (IBSL) and very sincerely the other exclusively handling of the Year’ Award. I extend to him thank Ms. Indrani Sugathadasa for Life Insurance. The deadline for my most sincere congratulations the efficient regulatory services segregation was 11th February 2015. for bringing this honour not only to provided by her and the Directorate This company had during the year our company but also to the entire specially regarding the segregation under review, taken decisive steps insurance industry of Sri Lanka. May of all composite insurance companies regarding the process of segregation I mention in passing that Ceylinco such as ours. Her re-appointment and we would have completed this Insurance is the only company in Sri was a clear proof of her integrity, process well before the due date Lanka to have previously won three professionalism and untarnished had it not been for factors beyond awards at the Asia Insurance Industry reputation regarding which this the control of this company. I am Awards – the first for CSR and the company and indeed the entire hopeful that the segregation process other two for Product Innovation. industry had no doubts whatsoever. would have been completed by the One of these being for the flagship I offer her my congratulations and time this Report reaches your hands. brand of the General Insurance once more pledge the loyal support A more detailed Note on Segregation Division, VIP On-the- Spot. and co-operation of this company. is found elsewhere in this Report and I urge you to read this. CHANGES IN THE BOARD OF DIRECTORS Whatever may be the changes ahead Mr. P.M.B.Fernando, Director (Chief let me assure you that the brand Information Officer – General ‘Ceylinco’ will always stand for the Division) resigned from the Board protection and financial security of in February 2015, for reasons of ill- the highest quality to customers, the health. A highly qualified IT expert, addition to the wealth of shareholders he joined the company in January and the recognition, rewarding and 1993 and was appointed to the Board valuing of the dignity of our staff. in October 2008. He was responsible for rapidly putting into operation the DR. JAGATH ALWIS - ASIA very efficient and effective advances INSURANCE INDUSTRY AWARD’S the company made in IT software ‘PERSONALITY OF THE YEAR’ development. I extend to him the I am proud to be able to announce to sincere thanks of the entire Board Rs. 20 you that this year saw our company of Directors for his contribution Per Share receiving yet another unique honour towards the success of this company from the Asia Insurance Industry and wish him a most pleasant and Proposed Dividend 12 Ceylinco Insurance PLC Annual Report 2014
CHAIRMAN’S REVIEW
I offer a special word of thanks to I offer my most sincere thanks Dr. Wickrema Weerasuriya, Insurance to the two Managing Directors/ Ombudsman for his diligence, CEOs, Mr. Ajith Gunawardena and patience and impartiality in dealing Mr. Rajkumar Renganathan for with grievances of customers having once again demonstrated thereby restoring the confidence of their unique leadership qualities these customers in the insurance and unflinching tenacity of purpose industry. There is no doubt that he by which they not only steered this has been able to accomplish all his company through unpredictable tasks so well because of his multi and stormy weather to a safe haven –faceted professional skills and but also to the retention of market expertise. I also congratulate him on leadership. his appointment as a Special Advisor to the Prime Minister, The Hon. Ranil It is my very pleasant duty to thank Wickremesinghe. the Board of Directors who through their high caliber professionalism, I now pay tribute to our customers long years of experience and whose continuous and ever absolute devotion to duty, have increasing loyalty, will always be helped this company overcome the reciprocated by this company by numerous challenges faced through offering them innovative, value the year and contributed towards its added products combined with the unassailable position in the industry. highest form of service excellence, particularly by the fast settlement of And finally I come to you our claims. Shareholders to whom this Report is presented. I offer you my most I thank each and every member of our abundant thanks for the steadfast staff for their sincere commitment loyalty and trust, which has been to fulfill their responsibilities even extended to us through the years. when faced with unanticipated stress This trust and loyalty will always be and challenges. Their performance valued by us and will not be betrayed. has resulted in another year of outstanding success. Our employees are not mere statistics in our payroll. Till we meet again. They are members of the ‘Ceylinco Family’ and as such we respect them and care for them.
I now thank all our Agents and Insurance Brokers who have steadfastly continued to support us J.G.P. Perera by bringing in significant business. Chairman
To our Reinsurers and Reinsurance 10th. March, 2015 Brokers I extend a very special word of appreciation. They are our close, trusted and respected business partners. Throughout the year under review they have been totally loyal to us and offered a unique service without which we would not have been able to achieve the success we did. The strength of our Belief 13 DELIVERING INCREASING VALUE MANAGING DIRECTOR/ CHIEF EXECUTIVE OFFICER’S REVIEW (GENERAL INSURANCE)
“Believe wholeheartedly in of the trust to the status prior to a prices towards the end of the year, what you do; and always do previous interim order, issued by the it certainly was an optimistic mood, the right thing... no one can Supreme Court. It was no easy task, looking forward towards better times but we never gave up, as CIESOT ahead. Sri Lanka was expected to stand in your way”. had been created to reward our record a GDP growth of 7.4%, with - Anonymous loyal employees: the lifeblood of our most monetary policies remaining We have proved this maxim beyond inimitable organisation. My thanks unchanged due to several reasons. an iota of a doubt and stand go out to the Employees Union and all However, towards the year end, the triumphant, at the conclusion of the members of our staff, who stood sense of uncertainty was a visible another successful year. The year with us, as one family, giving their factor, with the entire country under review – 2014, was full of unstinted support. My sincere thanks engulfed by the heat of the election, challenges, which included legal is also extended to our dynamic as the presidential election campaign battles, as well as other obstacles, team of legal counsel, friends and gathered momentum. but nothing could hinder us in our each and every person who stood relentless forward march. At the end firmly by us in this unprecedented We welcome the new President, of a lengthy legal battle for CIESOT, situation. the Prime Minister and the new justice prevailed, with the Supreme government, and it is our fervent belief Court of Sri Lanka affirming that MACRO OUTLOOK that they will drive the economy in the CIESOT is a properly constituted With the global economy gradually right direction, with an environment Trust, reinstating the status quo improving and the declining oil conducive to business. With the 14 Ceylinco Insurance PLC Annual Report 2014
MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER’S REVIEW - (GENERAL INSURANCE)
Ceylinco Insurance - General paid Ceylinco Insurance – General reached claims to the value of Rs.5,653 a mammoth premium income of million during 2014, to 139,652 customers: on average, your Rs.12,165 million by the end of 2014. Company settled nearly 200 motor claims and over 180 non-motor This represents a growth of 5% year claims each and every day. Thus, we on year, while the increase in Rupee have done our best to maintain the fastest claim settlement process in terms amounted to Rs.597 million. the business, which is the hallmark of our gold standard service, and Moreover, the profitability of the continue to strive to further improve Company after tax stands at Rs.2.1 our processes and standards. billion, while the consolidated profit With our constant yearning to take the benefits of insurance to after tax recorded Rs.2.9 billion. the masses of Sri Lankans across the island, identifying new and innovative distribution channels, we advent of the new government, we Your Company managed to retain added another product, which offers have seen a total change of attitude its market leadership position for a worldwide death and disablement towards Sri Lanka in the international the 11th consecutive year, against cover to the existing product offer sphere, where relations with several all odds; considering the situation to Dialog Mobile Users, thus taking countries and global bodies have that prevailed throughout the year, insurance even closer to the less improved significantly. These events and despite the uneven playing affluent. unfolding in many capitals across the field in the industry, and even globe will create a better atmosphere with the heavy price undercutting HUMAN RESOURCES to bring in more FDI's to Sri Lanka, as practiced by certain competitors, in As always, your Company continues we strongly believe that a country's a clandestine effort to grab our loyal to place its trust in a loyal and foreign policy should be linked with its clientele. dedicated workforce, that is as economic and trade policies. The new dynamic as they are committed. In government's policy of devolving of If share price is any indication of a order to maintain such exceptional economic power enabling the average company's performance and the levels of service and to continue to Sri Lankan to enjoy the benefits of prudent policies it adopts, Ceylinco inspire of invaluable staff members, the country's post war boom will no Insurance should be well positioned they are exposed to regular training doubt augur well for all industries. in the top, as our share was traded at Rs.1,379/- as at 31st December sessions both in Sri Lanka and abroad. Accordingly, 21 individuals were sent COMPANY PERFORMANCE 2014, while at its highest point, it for overseas training during 2014, Ceylinco Insurance – General reached was traded at Rs.1,499/-. while a mammoth 1,925 underwent a mammoth premium income of rigorous and continuous training in Rs.12,165 million by the end of 2014. ADDING NEW VALUE Sri Lanka. This represents a growth of 5% year on Your Company extends considerable year which is well above the industry efforts to add more value to REGULATORY OBLIGATIONS average, while the increase in Rupee our customers, keeping their As a Company, we welcome the terms amounted to Rs.597 million. convenience in mind. With this in implementation of the Risk-Based Moreover, the profitability of the mind, the claim settlement process Capital Model, which is being Company after tax stands at Rs.2.1 was further streamlined, with spare implemented now, and which will billion, while the consolidated profit parts delivered to the place of repair, come into effect in 2016. With after tax recorded was Rs.2.9 billion. through special arrangement with the parallel run in place, once The General Division contributed spare parts suppliers. This will no implemented, this will give much Rs.780 million to the overall profit of doubt, further reduce the time taken impetus to the industry, especially the Company, with the Life Division for repairs, and will be a welcome with reinsurers, while we will also contributing Rs.1.36 billion. move for our customers. align with developed markets. The strength of our Belief 15
Read the Managing Director/ Chief Executive Officer’s Review (General) online 16 Ceylinco Insurance PLC Annual Report 2014
MANAGING DIRECTOR/CHIEF EXECUTIVE OFFICER’S REVIEW - (GENERAL INSURANCE)
EXPANSION Ceylinco Insurance - General paid During the year under review, the claims to the value of Rs.5,653 million City Office of Ceylinco Insurance – General, embarked on a huge during 2014 to 139,652 customers: expansion drive, opening 37 new VIP Centres in the suburbs of Colombo. on average, your Company settled This was supplemented by 29 VIP Centres, which opened in the out- nearly 200 motor claims and over 180 stations, increasing our network to 400 in total, easily becoming the non-motor claims each and every day. largest General Insurance Network in the country.
The segregation of the industry, for a premium income of Rs.35.9 REINSURANCE ARRANGEMENTS which commenced almost three billion, recording a growth of 4.9% As always, your Company works years ago, has culminated, with year on year. Meanwhile, Non Motor only with the best Reinsurers in the the deadline being the 15th of Premiums reached Rs.22.2 billion, world, and in this vein, we continue February 2015, for companies to and grew by a mere 0.7% year on our business with highly rated fully implement the process. We too year. Several reasons contributed to reinsurers, ensuring greater financial opted to follow the Holding Company this lacklustre performance, with the stability. Accordingly, our ability and Subsidiary Model, which most presidential election being the more to meet any emergency, natural or suited our operation; a decision we salient. man-made, remains unaffected. The arrived at, after careful evaluation of world’s best insurance companies all concerns, particularly guidelines As I have continuously mentioned and reinsurance brokers continue issued by the Insurance Board over the years, the uneven playing to work with Ceylinco Insurance, Of Sri Lanka for compliance in conditions in the insurance arena, as the clear leader in the Sri implementation of the Risk Based with certain distinct advantages Lankan insurance sphere, while we Capital model. provided to government insurers, remain far ahead of the stipulated still paints a negative picture, while I reinsurance requirements demanded As for the other major regulatory feel that the vibrancy of the industry by the regulator. requirement, which remains in the will definitely be boosted if these are pipeline, we welcome the necessity relaxed. Although changing global weather for all insurance companies to be patterns remain a concern, your listed, as per the Act. However, we As for Institutional Agents, we Company is well equipped to meet feel that the proposed exceptions welcome the regulation to have any catastrophe of any magnitude, for foreign companies must be re- them, but also encourage a change in as our reinsurance arrangements and visited, as eventually, they will be regulations, to enable them to work reserves far outweigh any possible operating in the same market with for more than one company. This consequences, while prudent the local players, but with distinct will give customers more options, methodologies are practiced in risk advantages. while increasing competitiveness, minimization and control. which will no doubt, auger well for a INDUSTRY dynamic industry. REGIONAL PRESENCE The performance of the General Our ambitions to become a relevant Insurance Industry was not much of With the industry gaining maturity, regional player in the insurance arena a reason to celebrate, as the industry and thus forming a significant part remain poignantly at the forefront, recorded a modest growth of 3.9%, in the financial sector in the country, with our presence being consolidated as at the end of 2014, compared the time is right for the industry to in several markets through strategic with 2013, with the total premium seek a separate classification under alliances, including the Middle East, income recorded at Rs.58.1 billion. ‘Insurance’, rather than being tagged which includes the United Arab Once again, Motor Insurance was under ‘Banking and Finance’ at the Emirates, Bahrain, Kuwait, Oman and the largest component in the CSE and other related bodies. Qatar, and an associate company premium composition, accounting and a subsidiary in Nepal and the Maldives respectively. Your Company The strength of our Belief 17
plans aggressive expansion in these unrelentingly continue to make our courage, determination, and above existing markets in the coming year, contribution to the industry, as its all resilience, especially during the while venturing into unexplored torchbearer, and to the populace and last year, I could always count on to territory in the near future. the nation, at large. deliver results, no matter what. Their efforts have once again, stood us at ACCOLADES THANK YOU the very zenith. And last, but by no Over two and half decades, Ceylinco Now, the honour is mine again to means least, I thank our incredibly Insurance has been at the forefront thank all our stakeholders, who loyal clients, whose continued of new innovations and dynamic continue to impel us forward in support and belief towards Ceylinco solutions, setting the benchmark every aspect of the industry, and Insurance truly humbles me. Your ever higher for the competition to whose faith continues to ensure a faith in us enables us to move follow, and benefitting the Sri Lankan magnificent performance every year mountains, and continue on our populace immensely, allowing them without fail. forward march undeterred: thank to reach ever higher towards their you. potential. Ceylinco Insurance also Firstly, I must thank His Excellency, enjoys the honour of being voted the President and the Government 2015 will also bring a fresh set of for by the people, as ‘The People’s of Sri Lanka, for providing fresh challenges and hurdles, but we Insurance Company’, consecutively, perspective to the Sri Lankan anticipate them without fear, and for the past eight years. Ceylinco economy, compelling it forward, eagerly promise you that we have Insurance was also, once again towards a setting more favourable far to go, and it is only together that honoured to be the highest ranked for business. The new face of we can make the journey. We remain insurance company in the "LMD 100", government certainly augurs well poised to scale the greatest heights. and the only Insurance Company, for foreign direct investment and among the Top 25 Companies in Sri growing the local economy. My Lanka for 2014, as announced by sincerest thanks are also extended “Business Today”. to the Chairperson and officials of the Insurance Board of Sri Lanka, for their guidance and heartfelt FUTURE OUTLOOK A.R. Gunawardena support, as a true partner, which has The future looks extremely positive, Managing Director / Chief Executive provided invaluable support to our as far as your Company is concerned, Officer (General Insurance) as more value will be added to efforts to reach the apex. My deep appreciation is also expressed to our shareholders, as the holding 10th. March, 2015 company will have a diversified set all our Reinsurers and Reinsurance of industries under its umbrella, Brokers of worldwide fame and with four insurance companies, repute, whose strength we count hydro power companies, education on, and who have never let us down. service providers and health sector My thanks also go out to all our companies. However, we will insurance agents and brokers, whose integrity has helped us achieve amazing things over the years. And to all my colleagues on the board, I express my profound thanks, for I have always been able to count on their unreserved support and advice, making for a great team at the helm, able to navigate the choppiest of waters towards safe harbour. +5% I am proud to say a mammoth Thank You to all the employees of Gross Written Premium Ceylinco Insurance, who I consider General Insurance members of one family, whose faith, Rs. 12,165 Mn. 18 Ceylinco Insurance PLC Annual Report 2014 A PLEDGE OF TRUST
MANAGING DIRECTOR/ CHIEF EXECUTIVE OFFICER’S REVIEW (LIFE INSURANCE)
Our Life Fund recorded a net growth of Rs.7.3 billion or 13.75 per cent to Rs.60.02 billion at the end of the year. I am pleased to note that Ceylinco Life was the fastest among Sri Lanka’s life insurers to achieve a Life Fund of Rs.60 billion.
‘Nothing endures but on the merits or otherwise of this Shareholders who have been kind change’ wave of change is, however, both enough to read my remarks in annual premature and beyond the scope of reports that precede this one would - Heraclitus (540 BC – 480 BC) this review. know that we have consistently been in favour of this segregation. It is also I have chosen ‘Change’ as the theme no secret that operationally, the Life of and preamble for my comments and General Divisions of Ceylinco CHANGE on your company’s performance in Insurance have been as independent As I write this, our country is grappling 2014 because change is upon us of each other as two units of a with a change in its political culture, as well. This will be our last annual single business entity could be. Your made more dramatic by the speed report as a single corporate entity, as company was, therefore the most with which it has come upon us, and we are required by law to segregate prepared of the major players to the speed with which its proponents our Life and General Insurance segregate as required by law. seek to take it forward. Commenting businesses from 2015 onwards. The strength of our Belief 19
Read the Managing Director/ Chief Executive Officer’s Review (Life) online 20 Ceylinco Insurance PLC Annual Report 2014
MANAGING DIRECTOR/ CHIEF EXECUTIVE OFFICER’S REVIEW - (LIFE INSURANCE)
and support managements that have The Life Division recorded total built our companies into what they income of Rs.18.54 billion for the are today. year ending 31st December 2014, PERFORMANCE which was an improvement of 5.5 per The Life Division recorded total income of Rs.18.54 billion for the cent over the previous year. Within year ending 31st December 2014, which was an improvement of 5.5 per this, Gross Written Premium income cent over the previous year. Within at Rs.12 billion reflected a growth of this, Gross Written Premium income at Rs.12 billion reflected a growth of 7.9 per cent, and was an emphatic 7.9 per cent, and was an emphatic reaffirmation of your company’s reaffirmation of your company’s status as the country’s largest life status as the country’s largest life insurer for the 11th consecutive year. insurer for the 11th consecutive year. We sold 139,777 new policies in 2014 at an average of 11,648 per month, marginally lower than the monthly average of the previous year. However, improved sales of While we await the licence from It must also be stressed at this retirement plans contributed to the the Insurance Board of Sri Lanka, a point, that while we fully respect growth in premium income reported group of shareholders has chosen the legitimate aspirations of our above. to challenge the process. I will, shareholders, we will always have a however, refrain from commenting greater obligation -- to safeguard the Investment income improved by 1.78 on the larger agenda that is using interests of our policyholders. It is per cent in year to Rs.6.83 billion, the issue of segregation as leverage. after all, their money that we manage while the Division’s investment I must censure in the strongest and invest in order to offer them the portfolio appreciated by 12.72 per possible terms, the attempts that protection of life insurance and the cent in value terms to Rs.57.2 billion, have been made to usurp the rights of benefits of our custodianship of their a noteworthy growth in the context employees to shares held in trust for funds. To this end, we will always of the generally lower rates of return them, with the connivance of certain defend the integrity of the company on interest bearing assets during the unscrupulous elements in positions and its long term responsibilities, year. Total assets of the Life Division of power. Thankfully, some of these even if it means incurring the grew by Rs.7.1 billion or 11.14 per elements have since been engulfed displeasure of some shareholders cent to Rs.71.07 billion. by the wave of change I referred to driven by self-serving agendas. earlier, and the company’s position At the end of the year under review, of the subject of these shares has On the same note, I would also the Division’s investment portfolio been vindicated by a court of law. like to state for the record, that comprised of Government Securities Ceylinco Insurance is an indigenous (50 per cent); Licensed Private These efforts by a group of company, built from scratch by Sri Banks (15 per cent); State Banks (9 shareholders with parochial rather Lankans into an industry leader per cent); Real Estate (9 per cent); than collective interests at heart that has won international and Corporate Debt (14 per cent) and could have seriously distracted local acclaim. Its financial stability Others (3 per cent). As always, these a lesser company from its focus and operational credentials are investments are made in conformity on performance in the year under acknowledged. It is regrettable that with the investment guidelines review. Ceylinco Insurance, however, the so-called ‘reforms’ promoted by stipulated under the Regulation of is made of sterner stuff and is no some in official positions, seem to be the Insurance Industry Act No 43 stranger to adversity. The results of intended more to facilitate transfer of of 2000 and are subject to regular the Life Division in 2014 reviewed ownership to local ‘money bags’ or monitoring by the Insurance Board of here, are evidence of this fact. foreign interests, than to strengthen Sri Lanka (IBSL). The strength of our Belief 21
Our Life Fund recorded a net growth who excel at the Year 5 scholarship It is important to note that many of of Rs.7.3 billion or 13.75 per cent examination receive Rs. 90,000, the new buildings being constructed to Rs.60.02 billion at the end of payable in instalments over five years for branch offices will have features the year. I am pleased to note that under the Pranama scheme. Students such as solar power for electricity Ceylinco Life was the fastest among who excel at the G.C.E. (O/L) receive generation, rainwater harvesting Sri Lanka’s life insurers to achieve a Rs.72,000, payable monthly over and natural lighting, making them Life Fund of Rs.60 billion. two years, while students placed environment friendly. 1st in their districts at the G.C.E. It was, overall, a tough year due to Advanced Level examinations receive THE COMMUNITY pressures on disposable income in scholarships worth Rs.126,000 each, A distinguishing feature of the Life our target customer segments and the payable over a three year period. Division’s approach to business lower rates of return on investments, Students placed 2nd, 3rd and 4th has always been its focus on good but our unwavering focus on in their districts at this examination corporate citizenship. We have business fundamentals and prudent are awarded Rs. 10,000 each. Ten longstanding commitments in the investment enabled the Life Division national merit awards of Rs.35,000 areas of community health and to post an impressive performance, each are presented to those who educational infrastructure, on which as already explained, without have excelled at the national level, in I have reported for several years. being distracted by challenges or sports, aesthetics or invention. While these projects continued in the extraneous matters. More than year under review, we also supported anything else, shareholders will BRANCH NETWORK several special projects worthy of appreciate that these results are an I am happy to report that the Life mention here. These included: irrefutable indication that Ceylinco Division maintained the momentum Life continues to enjoy the trust of its strategy of investing in • The donation to Ward 6A of and confidence of policyholders and acquiring land and construction the Professorial Surgical Unit prospective customers. of its own buildings as part of its of the National Hospital of Sri branch development plan in the year Lanka (NHSL) of a surgical High BENEFITS TO POLICYHOLDERS reviewed. Among the highlights of Dependency Unit constructed, Our policyholders received more than 2014 was the commencement of furnished and equipped by the Rs.5 billion in benefits in 2014. This construction of a new four-storey, Life Division. The unit is equipped included an ‘April bonanza’ (Avurudu 11,000 square foot building on with two ICU beds with their own Cash Bonus) of Rs.49.5 million to company-owned land in Trincomalee; multi parameter monitors, syringe 14,570 policyholders; maturity and the purchase of a property of 51.22 pumps, infusion pumps and other survival benefits and claims. perches with two buildings that suction apparatus, an air purifier The cash bonuses alone, in the form provide 17,000 square feet of space and its own oxygen supply of immediately encashable cheques, at Kotahena for our Colombo North and oxygen cylinder bank. It made some policyholders richer by office; the start of construction of provides intensive post-operative as much as Rs.250,000. Our annual a new four–storey building on 17 care to patients who undergo bonus payout based on valuation of perches of company-owned land in complex gastrointestinal, hepato- 2014 amounted to Rs.2.448 billion Bandarawela and the opening of a pancreatico-biliary and other and benefited 318,100 policyholders. branch in a graceful traditional Sri general surgical procedures. Lankan residence on 52.5 perches of Another important benefit that is land at Mount Lavinia. New buildings • The donation of a fully-equipped exclusive to policyholders of Ceylinco were declared open in Batticaloa and furnished Intensive Care Unit Life is the ‘Pranama’ scholarships and Ratnapura, a foundation stone (ICU) that will serve as a dedicated scheme. The Life Division presented has been laid for a building in Dengue High Dependency ward 156 ‘Pranama’ scholarships worth Wennappuwa, and land has been for children at the Jaffna Teaching over Rs.8 million to young achievers purchased for the construction of a Hospital, the leading hospital in Sri Lanka in the year reviewed. building in Horana. We also relocated in the Northern Province of the With these scholarships, we have our branches at Akuressa and country. The Unit of 650 square now presented a total of 1770 Kadawatha to improve access for and feet is located within Ward 11, scholarships worth more than provide more space to customers in the Professorial Paediatric Unit Rs. 91 million since the inception of these areas. of the hospital. It comprises of the programme in 2002. Students five ICU beds, each allocated 22 Ceylinco Insurance PLC Annual Report 2014
MANAGING DIRECTOR/ CHIEF EXECUTIVE OFFICER’S REVIEW - (LIFE INSURANCE)
an area of 130 square feet. The toured Japan as a reward for their Of the three new retirement schemes, beds are equipped with bed-head loyalty to Ceylinco Life. Another 40 Flexi Plan 1 can be commenced with panels with wall oxygen, bedside people from 10 policyholder families as little as Rs.1,000, with payments cupboards, over-bed tables, saline toured China, while 200 people made monthly, quarterly, half-yearly stands and bystander reclining from 50 policyholder families visited or annually for a term of five years or chairs. The unit is also equipped Singapore. Nearly 2,000 others from more. Flexi Plan 2 requires a single with five multi-parameter 500 policyholder families spent a payment of Rs.100,000 or more, monitors with a centralised day on the rides and slides of Leisure and matures in 10 years or later as system, five infusion pumps, five World. This benefit of this promotion per the customers wish, while Flexi syringe pumps, three portable is two-fold; it brings in significant Plan 3 also commences with a single suction apparatus units and an air numbers of new policyholders and payment of Rs.100,000 or more, but purifying unit. motivates existing policyholders to can be structured for five to nine keep their policies active. years. • The donation of a portable ventilator to Wards 49 and 47B of For the eighth edition of th