BUILDING ON THE STRONG FOUNDATION www.srilankainsurance.com ANNUAL REPORT 2012 BUILDING ON THE STRONG FOUNDATION SRI LANKA INSURANCE CORPORATION LTD. | ANNUAL REPORT 2012 This Sri Lanka Insurance Corporation Ltd. Annual Report has been produced by Smart Media The Annual Report Company whose greenhouse gas emissions resulting from the designing, photography, production, project management, usage of paper and printing are offset using verified carbon offsets. BUILDING ON THE STRONG FOUNDATION Having laid our foundation in 1962, we have been steadily building our ‘Edifice of Insurance’ through commitment to trust, integrity, quality and innovation. We are on the cusp of entering a new era of growth SRI LANKA INSURANCE CORPORATION LTD. | ANNUAL REPORT 2012 BUILDING ON THE STRONG FOUNDATION 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. v BUILDING ON THE STRONG FOUNDATION Contents Management Reports 1.0.0 00 Chairman’s Message 1.1.0 00 Managing Director/Chief Executive Officer’s Review 1.2.0 00 Executive Director’s Statement 1.3.0 00 Management Discussion and Analysis 1.4.0 00 Sustainability Report 2.0.0 00 We’re Committed to Doing Things today to Build a better Tomorrow 2.1.0 00 Customers 2.2.0 00 Employees 2.3.0 00 Business Partners 2.4.0 00 Government 2.5.0 00 Economy and the Community 2.6.0 00 Environment 2.8.0 00 Awards and Accolades 2.9.0 00 Events 2012 2.10.0 00 Global Reporting Initiative (GRI) G3 Index 2.11.0 00 Corporate Governance - Board at the Helm of Stewardship 3.0.0 00 Board of Directors 3.1.0 00 Senior Management Team 3.2.0 00 Organisational Structure 3.3.0 00 Enterprise Risk Management 4.0.0 00 Audit And Compliance Committee Report 5.0.0 00 vi BUILDING ON THE STRONG FOUNDATION Financial Reports 6.0.0 000 Annual Report of the Board of Directors of the Company 6.1.0 000 Statement of Directors’ Responsibility 6.2.0 000 Chief Executive Officer’s and Chief Financial Officer’s Responsibility Statement 6.3.0 000 Certificate of the Actuary of the Insurer 6.4.0 000 Certification of Incurred but Not (Enough) Reported Claims 6.5.0 000 Independent Auditors’ Report 6.6.0 000 Balance Sheet 6.7.0 000 Statement of Income 6.8.0 000 Statement of Changes in Equity 6.9.0 000 Cash Flow Statement 6.10.0 000 Balance Sheet - Segmental Review 6.11.0 000 Statement of Income - Segmental Review 6.12.0 000 Balance Sheet - Life Insurance 6.13.0 000 Notes to the Financial Statements - Life Insurance 6.14.0 000 Notes to the Financial Statements 6.15.0 000 Supplementary Information 7.0.0 000 Ten Year Summary 7.1.0 000 Glossary 7.2.0 000 Branch Offices 7.3.0 000 Corporate Information 7.4.0 000 Notice of Annual General Meeting 7.5.0 000 vii BUILDING ON THE STRONG FOUNDATION | MANAGEMENT REPORTS Management Reports 1.0.0 1.1.0 Chairman’s Message ri Lanka Insurance Corporation (SLICL) completed the year 2011 with further impressive progress in its achievements and marked the dawn S of another important year for our Company, the 50th Anniversary which signifies a half century of togetherness of all our stakeholders. Our Company has been growing strongly reflected in improved financial performance and with the pride of our legacy as the insurance giant and our new look, refurbished Rakshana Mandiraya along with enhanced customer care services, especially the re-launching of our very own 24/7 customer care centre and revamped website witness that we are renewed everyday. The main elements reckoned for the overall success story of our Company are reliability, solidity, customer focus and good governance. Company assets reached Rs. 102.2 billion and we have the highest Shareholders’ Fund worth of Rs. 24.6 billion, the highest Life Fund worth of Rs. 55.8 billion, local as well as international accolades and accreditations received including the World Quality Commitment Award received in Paris. 1.1.1 The Economy We are pleased that the continuing progress in the economic front in the ambiance of peace and political stability, particularly the implementation of several key development initiatives by the Government has resulted in raising growth rate of the Sri Lankan economy further during the year 2011. As reported by the Central Bank of Sri Lanka, the Sri Lankan economy registered another impressive growth performance of 8.3% following almost a similar achievement (8%) in the previous year, expanding opportunities for the insurance sector also to grow faster. The unemployment rate has declined to 4.2% from 4.9% in 2010. The rate of inflation has remained at single digit level with a slight upward movement, from 6.2% in 2010 to 6.7% in 2011. In the context of evolving macroeconomic situation, 1 BUILDING ON THE STRONG FOUNDATION | MANAGEMENT REPORTS Chairman’s Picture 2 BUILDING ON THE STRONG FOUNDATION | MANAGEMENT REPORTS “Lifter ........................................... ....................................................... ....................................................... ....................................................... ....................................................... ....................................................... ....................................................... ....................................................... ..........................................” 3 BUILDING ON THE STRONG FOUNDATION | MANAGEMENT REPORTS the interest rates, particularly the Treasury Bills and Treasury Bond rates, the prime lending rates and the average deposit rates also moved upwards with further increases during the first few months of2012 . 1.1.2 Company Performance SLICL achieved a Gross Written Premium (GWP) of Rs. 6.7 billion for life and Rs. 11.6 billion for non-life and a combined net profit before tax of Rs. 7.8 billion in 2011. The combined GWP grew by 20.2% led by 25.2% growth in non-life insurance business. The market leadership position in non-life insurance that we regained in 2010 was further strengthened in the year under review. This is all the more significant considering that the competition within insurance industry in the country has become more intense with the entry of new players and aggressive marketing and sales strategies. SLICL is the leader in the motor insurance and we have gained a market share of 25.58%. Our market leadership in non-life insurance not only cuts across motor but also across all other classes. Whilst the industry accounts for a motor ratio (ratio of motor business to the total non-life insurance business) of 73%, ours stands at a healthy 57%. We have made continued progress in strengthening our life insurance business as well. 1.1.3 Recognitions Our strength drew international accolades in 2011 as well. SLICL once again was shone at the ‘World Quality Commitment Awards’ when the Company bagged the prestigious International Gold Star Award for Quality at the International Quality Convention in Paris, on 24th October 2011. ‘World Quality Commitment Award’ was awarded in recognition of implementing and promoting quality culture within the organisation in terms of excellence in leadership within each designated sector, increased market share, improved results and sustainability. SLICL’s AAA claims paying rating has been confirmed by RAM Ratings with a stable outlook, based on 4 BUILDING ON THE STRONG FOUNDATION | MANAGEMENT REPORTS its competitive position, state ownership and capitalisations. Fitch Ratings London upgraded National Long-Term Rating and Insurer Financial Strength Rating from AA- (lka) to AA(lka) in 2011. 1.1.4 Future Outlook As Sri Lanka takes full advantage of the ongoing economic development process with widespread expansion in economic activity carving industry, agriculture and services including tourism and commercial activities, the future looks positive and challenging. Simultaneously SLICL is committed and striving to cater to the people of Sri Lanka across every stratum of demography and geography through insurance solutions that embrace people. Garnering fifty years of experience and strength in the insurance sector, national well-being has been at the pinnacle of SLICL’s fifty years legacy and we are looking forward to pursue a strategy of a qualitative portfolio of investments as a propagator of economic development of the country. We are committed to further strengthen SLICL adapting to changing market conditions and further improving customer service and productivity. 1.1.5 Appreciation In conclusion, as we celebrate the 50th Anniversary of the Company, I place on record sincere appreciation to Madam Sirimavo Bandaranaike, Sri Lanka’s Matriarch and her Finance Minister, Mr. T.B. Illangaratne, essentially a man of the soil, for setting up the Company in the early 1960’s. Also, as we celebrate the Golden Jubilee of the Company, I recall the famous quotation ‘to equal a predecessor one must have twice they worth’; I convey my heartfelt appreciation to all the Chairmen since inception with my special appreciation to my immediate predecessor, Mr. Gamini S. Senarath for his excellent leadership. 5 BUILDING ON THE STRONG FOUNDATION | MANAGEMENT REPORTS Further, I wish to thank all my colleagues on the Board, Managing Director/Chief Executive Officer and his staff, field sales personnel, strategic sales partners, insurance brokers and all other stakeholders for their unstinted support to make 2011, as another year of success. I am positive that our Company