1 RATED WITH CONFIDENCE Sri Lanka Insurance Corporation Ltd. Annual Report 2017 Sri Lanka Insurance Corporation Ltd. Annual Report 2017 About SLIC | Performance Reviews 2017 | Governance and Internal Controls | Financial Statements | Additional Information 2 Sri Lanka Insurance Corporation Ltd. Annual Report 2017 Rated with Confidence Trust is something that we pride ourselves upon. Whether it’s the value that has been given by our stakeholders, and our customers or the assurance that we have in a job well done, we have always taken care to maintain the quality that we offer along with transparency, accessibility and complete protection. This year has been a proactive testament to that fact with ratings that reflected our strength and solidity as well as the launch of Suraksha, which provides Sri Lankan students the extra cover that they need. As we head into another year of exceptional leadership, we are proud to be rated with confidence. AA+(Ika) Fitch Ratings Fitch Ratings Lanka has upgraded SLIC’s National Long Term Rating and National Insurer Financial Strength rating to AA+(lka) from AA(lka) with a stable outlook. ISO Quality Certificate SLIC was awarded the ISO 9001:2015 certification for its quality management, endorsing Sri Lanka Insurance’s commitment to correct governing procedures, accurate and efficient operational processors on par with international standards. CONTENTS ABOUT SLIC FINANCIAL STATEMENTS Company History 4 Annual Report of the Board of Directors of the Company 83 Vision and Mission 5 Statement of Directors’ Responsibility 87 Corporate Information 6 Chief Financial Officer’s Statement of Responsibility 88 SLIC Group 8 Certificate of Actuary of the Insurer 89 General Insurance Product Portfolio 10 Liability Adequacy Test 90 Life Insurance Product Portfolio 11 Certificate of Incurred But Not (Enough) Reported Claims 91 Independent Auditors’ Report 92 PERFORMANCE REVIEWS 2017 Statement of Financial Position 94 Financial Highlights 13 Statement of Profit or Loss and Other Comprehensive Income 96 Message from the Chairman 14 Statement of Changes in Equity 98 Executive Director’s Review 18 Statement of Cash Flows 102 Message from the Chief executive Officer 22 Segmental Review : Statement of Income 104 Financial Review 24 Segmental Review : Statement of Financial Position 106 Investment Review 32 Notes to the Financial Statements 108 Operations Review 35 Performance of Subsidiaries 43 ADDITIONAL INFORMATION SLIC Team 45 Statement of Financial Position of The Life Insurance 226 Corporate Social Responsibility 48 Notes to The Financial Statements - Life Insurance Fund 227 Ten Year Summary 238 GOVERNANCE AND INTERNAL CONTROLS Branch Offices 242 Corporate Governance 51 Notice of Annual General Meeting 248 Board of Directors 54 Note 249 Senior Management Team 58 Form of Proxy 251 Risk Management 67 Audit and Compliance Committee Report 78 Investment Committee Report 80 About SLIC | Performance Reviews 2017 | Governance and Internal Controls | Financial Statements | Additional Information 3 ABOUT SLIC Sri Lanka Insurance Corporation Ltd. Annual Report 2017 4 About SLIC | Performance Reviews 2017 | Governance and Internal Controls | Financial Statements | Additional Information COMPANY HISTORY Sri Lanka Insurance Corporation Ltd (SLIC) was established under the Insurance Corporation Act No. 02 of 1961 as a State Owned Corporation. Under the Conversion of Public Corporations or Government owned Business Undertakings into Public Companies Act, No. 23 of 1987, the SLIC was converted into a fully government owned, limited liability company in 1993, with 100% of shares vested with the Secretary to the Treasury. Under the privatisation programme of the then Government, the SLIC was privatised in 2003 and was under the private management for 6 years. SLIC was re-registered under the Companies Act No. 07 of 2007. Pursuant to the Supreme Court judgment on 04.06.2009 annulling the privatisation 99.97% shares were vested with the Secretary to the Treasury on behalf of the Government of Sri Lanka. SLIC’s total assets are worth of Rs. 190 billion and in the Sri Lankan insurance sector, it accounts for the largest Shareholders’ Fund of Rs. 61.5 billion and the highest Life Fund of Rs. 98.5 billion. As the pioneering insurer, SLIC has the most experienced technical knowledge base in the country. Its financial stability and strong re-insurance arrangements have resulted in many historical milestones in the Sri Lankan insurance arena such as the largest claim ever paid of Rs. 39.5 billion and the largest bonus ever declared to its life policyholders of Rs. 6.8 billion. The ethos and mandate promulgated at the inception by the state has been retained over the years. Today SLIC serves the people of Sri Lanka with expertise and several decades of trust. Sri Lanka Insurance Corporation Ltd. Annual Report 2017 About SLIC | Performance Reviews 2017 | Governance and Internal Controls | Financial Statements | Additional Information 5 VISION MISSION TO BE THE TRUSTED TO BE A CUSTOMER INSURER TO THE FOCUSED COMPANY NATION. THAT IS TRUSTED, WHICH CONSTANTLY INNOVATES IN PROVIDING INSURANCE SERVICES OF BEST VALUE TO OUR CUSTOMERS, WHILST REWARDING OUR EMPLOYEES AND ADDING VALUE TO OUR SHAREHOLDERS. Sri Lanka Insurance Corporation Ltd. Annual Report 2017 6 About SLIC | Performance Reviews 2017 | Governance and Internal Controls | Financial Statements | Additional Information CORPORATE INFORMATION Name of the Company & Registered Office Corporations or Government owned Business Under-takings into Sri Lanka Insurance Corporation Ltd. Public Companies Act, No. 23 of 1987. Under the privatization No. 21, Vauxhall Street, Colombo 2. programme of the Government, the company was privatized in Tel : +94 11 2357457 2003 and was under the private management for a brief period of Fax : +94 11 2447742 6 years. The Corporation was re-registered under the Companies Web : www.srilankainsurance.com Act No. 7 of 2007. Pursuant to the Supreme Court Judgment on 04th June 2009, annulling the privatization, 99.97 per cent shares Company Registration Number are vested with the Secretary to the Treasury on behalf of the The Company was incorporated on 3rd February 1993 under the Government of Sri Lanka. Companies Act No.17 of 1982 bearing No. N(PBS/CGB)/ 159 and re-registered under the Companies Act No.07 of 2007 on Tax Payer Identification Number (TIN) 17th April 2008 bearing No. PB 289. 294001590 Board of Directors VAT Registration Number Mr. Asela S. Padmaperuma resigned w.e.f 21.06.2017, Mr. D. B. 294001590-7000 Aruna P. S. Siriwardhana resigned w.e.f 10.10.2017, Mr. T. M. R. Bangsa Jayah resigned w.e.f 12.10.2017 and Vidya Jyothi Prof. Company Secretary L. G. Chandrasena resigned w.e.f 08.11.2017. B. A. Ruwani Dharmawardana LLB, Attorney at Law, MBA, Accordingly Mr. Nilu D. Wijedasa was appointed to the Board ACISI (UK), PGDBM, DHRM(UK) w.e.f 11.10.2017, Mr. M. Saadi A. Wadood was appointed to the Board w.e.f 11.10.2017, and Mr. Keerthi B. Kotagama was Subsidiaries appointed to the Board w.e.f 08.01.2018 Management Services Rakshana (Pvt) Ltd. The Lanka Hospitals Corporation PLC The Board of Directors as of the reporting date is as follows: Litro Gas Lanka Ltd. Mr. Hemaka D.S. Amarasuriya - Executive Chairman Litro Gas Terminal Lanka (Pvt) Ltd. Mr. Keerthi B. Kotagama - Executive Director Canwill Holdings (Pvt) Ltd. Mr. Nilu D. Wijedasa - Non Executive Director Canowin Hotels and Spas (Pvt) Ltd (Formerly known as Mr. P. Algama - Non Executive Director Sri Lanka Insurance Resorts and Spas (Pvt) Ltd.) Mr. Pradeep A. Liyanamana - Non Executive Director Mr. M Saadi A. Wadood - Non Executive Director Sub-Subsidiaries Lanka Hospitals Diagnostics (Pvt) Ltd. Legal Form Helanco Hotels & Spa (Pvt) Ltd. Sri Lanka Insurance Corporation Ltd was established under Sinolanka Hotels & Spa (Pvt) Ltd. the provisions of Insurance Corporation Act No. 2 of 1961 as a State Owned Corporation. In 1993, the Corporation was Auditors converted to a fully Government-owned limited liability Company Auditor General of which the sole shareholder of 100 per cent shares was the Secretary to the Treasury, under the Conversion of Public Sri Lanka Insurance Corporation Ltd. Annual Report 2017 About SLIC | Performance Reviews 2017 | Governance and Internal Controls | Financial Statements | Additional Information 7 Bankers Bank of Ceylon People’s Bank Commercial Bank of Ceylon PLC Hatton National Bank PLC Nations Trust Bank PLC Standard Chartered Bank Sampath Bank PLC Seylan Bank PLC National Savings Bank Regional Development Bank Lankaputhra Development Bank Pan Asia Bank PLC Development Finance Corporation of Ceylon PLC (DFCC) Actuary-Life Willis Towers Watson Consulting (Singapore) Pte Ltd. 63, Chulia Street #09-01, OCBC Centre East, Singapore 049514 Actuary-Non-Life M/s NMG Financial Services Consulting 30, Hill Street, #03-02A, Singapore 179360 Sri Lanka Insurance Corporation Ltd. Annual Report 2017 8 About SLIC | Performance Reviews 2017 | Governance and Internal Controls | Financial Statements | Additional Information SLIC GROUP As end December 2017, the Government of Sri Lanka remained fully owned subsidiaries and 3 partially owned subsidiaries. the majority shareholder of SLIC with 99.97% of shares of the The SLIC Group’s fully owned subsidiaries are Litro Gas Company vested with the Secretary to the Treasury, on behalf of Terminal Lanka (Pvt) Ltd., Canowin Hotels and Spas (Pvt) Ltd. the Government of Sri Lanka. The SLIC Group comprises of 3 and Management Services Rakshana (Pvt) Ltd. The partially The SLIC Group Structure Sri Lanka Insurance Corporation Ltd 100% The Lanka Hospitals Litro Gas Lanka Ltd. Litro Gas Terminal Corporation PLC Lanka (Pvt) Ltd. 54.61% 99.94% 100% SLIC is the largest SLIC is the primary Litro Gas Terminal is a fully shareholder of Lanka shareholder of Litro Gas owned subsidiary of SLIC Hospitals with 54.61% of Lanka with 99.94% and is involved in storing shares. Lanka Hospitals is shareholding. Litro Gas LP Gas for domestic, a public quoted company Lanka is the leading commercial and bulk involved in providing LP Gas importer and customers.