Sri Lanka Insurance Corporation Ltd. Annual Report 2015 1 Sri Lanka Insurance Corporation Ltd. Annual Report - 2015 OUR LEGACY ENSUES. Sri Lanka Insurance Corporation Ltd (SLIC) had a promising year in comparison to the previous one. Your Company is a reputed giant with a history and heritage built on dependence, quality and remarkable team spirit. Since its inception in 1962, SLIC has built upon its legacy as a trend setting and trail blazing enterprise hailed as the trusted insurer of the country. Our destined pathway is a road towards a brighter horizon. One abundant with innovation, purpose and customer oriented focus, always augmenting value, always etching our success story with each day that unfolds. Our valued stakeholders can rest assured that our astounding journey continues, availing more opportunities... And more goals to sedulously fulfill. A legacy is measured by greatness, solidarity and unprecedented evolution. Your Company continues to build upon that legacy. And will continue to do so in the years to come. CONTENTS Vision and Mission 03 The Company 04 Financial Highlights 05 Chairman’s Message 06 Managing Director’s Review 08 Joint Managing Director’s Review 10 Operations Review 12 Corporate Governance 32 Board of Directors 34 Senior Management Team 37 Organizational Structure 40 Risk Management 42 Audit and Compliance Committee Report 49 Financial Report Annual Report of the Board of Directors of the Company 53 Certificate of Actuary of the Insurer 57 Liability Adequacy Test 58 Certificate of Incurred But Not (Enough) Reported Claims 59 Independent Auditors’ Report 60 Statement of Financial Position 62 Statement of Profit or Loss and Other Comprehensive Income 64 Statement of Changes In Equity 66 Statement of Cash Flows 70 Segmental Review: Statement of Income 72 Segmental Review: Statement of Financial Position 74 Notes to the Financial Statements 76 Additional Information Statement of Financial Position of the Life Insurance 170 Notes to the Financial Statements Life Insurance Fund 171 Ten Year Summary 180 Branch Offices 184 Corporate Information 187 Notice of Annual General Meeting 188 Notes 189 Form of Proxy 191 VISION To be the trusted insurer to the nation. MISSION To be a customer focused company 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. 03 Sri Lanka Insurance Corporation Ltd. Annual Report - 2015 THE COMPANY Sri Lanka Insurance Corporation Ltd was established under the provisions of Insurance Corporation Act No. 2 of 1961 as a State Owned Corporation. In 1993, the Corporation was converted to a fully government-owned limited liability company of which the sole shareholder of 100% shares was the Secretary to the Treasury, under the Conversion of Public Corporations or Government owned Business Undertakings into Public Companies Act, No. 23 of 1987. Under the privatization programme of the Government, the company was privatized in 2003 and was under the private management for a brief period of six years. The Corporation was re-registered under the companies Act No. 7 of 2007. Pursuant to the Supreme Court Judgment on 04th June 2009, annulling the privatization, 99.97% shares are vested with the Secretary to the Treasury on behalf of the Government of Sri Lanka. Sri Lanka Insurance Corporation has a distinct profile characterized by total assets worth of Rs. 166.9 billion, the highest Shareholders’ Fund worth of Rs. 63.6 billion and the highest Life Fund worth of Rs. 77.8 billion. As the pioneering insurer, Sri Lanka Insurance Corporation has the most experienced technical knowledge base in the country. The company’s financial stability and strong re-insurance arrangements have paved the way for it to mark 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 policy holders of Rs.5.4 billion. The ethos and mandate promulgated at the inception by the state has flourished over the years and today Sri Lanka Insurance Corporation serves the people of Sri Lanka with merits, expertise and several decades of trust. 04 Sri Lanka Insurance Corporation Ltd. Annual Report - 2015 FINANCIAL HIGHLIGHTS 2015 2014 Rs. Mn Rs. Mn Total Revenue 31,157 29,302 Gross Written Premium 24,521 20,666 Net Earned Premium 20,393 17,805 Profit Before Taxation (PBT) 4,821 4,373 Profit After Taxation (PAT) 3,439 3,257 Total Assets 166,947 162,192 Return on Assets (%) 2 2 General Insurance General Insurance Fund 14,917 13,196 Net Claims Ratio (%) 65 63 Expense Ratio (%) 28.52 40.43 Life Insurance Life Insurance Fund 77,858 74,706 Expense Ratio (%) 35 46 Face Value Bonus 5,385 4,764 Ratings Fitch Ratings AA (lka) AA (lka) National Insurer Financial Strength AA (lka) AA (lka) National Long-Term Rating Outlook Stable Stable Rs.3.4billion Rs.166billion Profit for the Year Over Total Assets Over Rs.77billion Rs.5.3billion Size of the Life Fund Over Total Bonus Issued for the Year Over 05 Sri Lanka Insurance Corporation Ltd. Annual Report - 2015 CHAIRMAN’S MESSAGE “Sri Lanka Insurance Corporation being the valedictorian of financial stability in the insurance industry has a distinct profile characterised by total assets worth of Rs. 166.9 billion the highest Shareholders’ Fund worth of Rs. 63.6 billion and the highest Life Fund worth of Rs. 77.8 billion.” Our Legacy Ensues their reach a few years ago. More businesses through the year, with a growth of 17 percent Sri Lanka Insurance Corporation had a are being established to provide goods and to Rs. 122 billion, according to the IBSL promising year in 2015 in comparison to the services to meet these demands. These new figures. previous one. Your Company is a reputed giant opportunities for growth are expanding with a history and heritage of trust, built on the domestic markets of many developing Life Insurance GWP grew by 20 percent to Rs. dependability, quality and remarkable team and emerging economies, and creating 54 billion, with general insurance contributing spirit. Since its inception in 1962, SLIC has new potential for insurance, whereas older, the balance 69 billion, a growth of 15 percent built on its legacy of trust, reliability and a trail more established markets in the region are over the previous year’s figures. The total blazing enterprise hailed as the trusted insurer somewhat saturated from the standpoint of assets of insurance companies grew by 10.4 of the country. Our destined pathway is a road insurance penetration. percent to Rs. 465 billion as at 31st December towards a brighter horizon. One abundant with 2015 over the Rs. 421 billion recorded in the innovation, purpose and customer oriented Future Outlook same period last year. focus, always augmenting value, always Customer demand is changing in step with etching our success story with each day that new marketing opportunities. Customers have Total investment in government debt securities unfolds. become more discerning and seek technology- during the year represented 44.73 percent of driven insurance solutions that are convenient the total assets of the life insurance business Our valued stakeholders can rest assured to obtain. Insurers who are already established which amounted to Rs. 137 billion, and that of that our astounding journey continues, in certain markets will be required to change general insurance business amounted to Rs. 38 availing more opportunities and more goals existing distribution models and adopt more billion, representing 24 percent. to sedulously fulfill. A legacy is measured daunting sales approaches that leverage the by greatness, consistency, solidarity and Internet, mobile platforms and other newly General GWP was sensitive to vehicle import unprecedented evolution. Your Company evolving technologies. tax rates and the resulting movement in new continues to build upon that legacy; may we registrations, and grew by 11.7 percent in continue to do so in the years to come. The Insurance Industry in Sri Lanka the first half of 2005 (2014: 3.7 percent), with motor business recording a 16 percent The Sri Lanka insurance sector has expanded growth (2014: 5.4 percent), in the similar The Insurance Industry steadily over the past decade, except in 2009, period driven by the government’s favourable Global when premiums contracted due to a slowdown tax policy towards small cars. A wage increase The global insurance market is evolving and in the global and local economies due to the for civil servants and lower fuel prices in 2015 changing. More people are investing in homes, global financial crisis. The industry maintained also spurred demand for cars. However, the vehicles, and other luxuries , which have a stable outlook for 2015 as accorded by Fitch growth rate for motor insurance slowed down now become utilities, which were beyond Ratings and continued its growth momentum 06 Sri Lanka Insurance Corporation Ltd. Annual Report - 2015 dramatically in the first quarter of 2016 as the During the year under review Life insurance business plan for 2016 will focus on both government curtailed new vehicle imports by GWP grew by 29 percent leading to a notable distributor and consumer marketing in order to duty measures and stopped duty free vehicle gain in the market share while general gain the market leadership in the life insurance concessionary permits in December 2015. GWP grew by 12 percent taking us over the industry. We have been the leader in the motor composite GWP growth of 19 percent. category for the 6th consecutive year in 2015 Falling interest rates and lower capital gains after regaining the market leadership position on equities during the year affected insurance Further, we have taken measures to in 2010.