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Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

Hi Friends

I just have done the analysis of Insurance sector including four listed companies financial information.. I just want to get ur views and comments about the value at present and personality of the stock

I attached the Excel file and Image also, see weather will u be able to open up Excel file...

Your Comments are Welcome....    
Happy Trading..
INSURANCE SECTOR AttachmentInsurance Sector Analysis.xlsx
Pls See the Attachment
You don't have permission to download attachments.
(14 Kb) Downloaded 192 times

Last edited by CHRONICLE™ on Sun Jun 06, 2021 4:52 pm; edited 6 times in total (Reason for editing : image removed as it is oversized. please ensure width does not exceed 500 pixel)

2INSURANCE SECTOR Empty Re: INSURANCE SECTOR Mon Mar 14, 2011 2:57 pm


Director - Equity Analytics
Director - Equity Analytics

seyon wrote:Hi Friends

I just have done the analysis of Insurance sector including all four listed companies financial information.. I just want to get ur views and comments about the value at present and personality of the stock

I attached the Excel file and Image also, see weather will u be able to open up Excel file...

Your Comments are Welcome....

Income Statement Analysis Link

Happy Trading..

Now you will be able to see the Excel Analysis Link...

Rep from me for you good effort. This will go along with the post I made called "Hello JINS"

3INSURANCE SECTOR Empty Re: INSURANCE SECTOR Mon Mar 14, 2011 3:00 pm


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

slstock wrote:
seyon wrote:Hi Friends

Rep from me for you good effort. This will go along with the post I made called "Hello JINS"

Hi slstock

Thanks, How do u feel the personality of the JINS........

4INSURANCE SECTOR Empty Re: INSURANCE SECTOR Mon Mar 14, 2011 3:01 pm


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

Good work Seyon...keep it up. Thanks

5INSURANCE SECTOR Empty Re: INSURANCE SECTOR Mon Mar 14, 2011 3:05 pm


Director - Equity Analytics
Director - Equity Analytics

seyon wrote:
slstock wrote:
seyon wrote:Hi Friends

Rep from me for you good effort. This will go along with the post I made called "Hello JINS"

Hi slstock

Thanks, How do u feel the personality of the JINS........

JINS has to breakthrough at some point if CSE is following fundamentals at all. This has been stagnant for too long. I think investors are not very comfortable with the unpredictable Shafters business models. They are also so good at paying the waiting game So people did not chase this like crazy along with CSEC and CFVF. All are undervalued.

When it breaks through ( if it does) it can be like CFVF last year when they declared a unprecedented dividend of Rs 15.)

6INSURANCE SECTOR Empty Re: INSURANCE SECTOR Mon Mar 14, 2011 4:05 pm


Associate Director - Equity Analytics
Associate Director - Equity Analytics

+ from me too for the hard work.. appreciate.. Very Happy

7INSURANCE SECTOR Empty Re: INSURANCE SECTOR Mon Mar 14, 2011 4:48 pm


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

smallville wrote:+ from me too for the hard work.. appreciate.. Very Happy

Hi Mates

To be frank, I don't expect from you to give + points.... I need ur valuable comments and views of insurance sector. I just stated to study this industry... I need ur inputs also....

Thanks u all for giving + points....

Happy Trading

8INSURANCE SECTOR Empty Re: INSURANCE SECTOR Mon Mar 14, 2011 8:38 pm


Senior Equity Analytic
Senior Equity Analytic

Thanks for your excellent work. It would be more useful if u could add Aviva NDB and AMANA Takaful too.

9INSURANCE SECTOR Empty Re: INSURANCE SECTOR Mon Mar 14, 2011 9:15 pm


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

achala75 wrote:Thanks for your excellent work. It would be more useful if u could add Aviva NDB and AMANA Takaful too.

Thanks achala

I really forget about AVIVA NDB.. ATL of course is running at different segment. That is reason i did not include in my analysis... I just doing analysis of these 4

Pls give ur input also...........

Happy Trading

Last edited by seyon on Tue Mar 15, 2011 9:21 pm; edited 1 time in total

10INSURANCE SECTOR Empty Re: INSURANCE SECTOR Mon Mar 14, 2011 10:02 pm


Senior Equity Analytic
Senior Equity Analytic

I am very sorry Seyon . I have forgot Another Ins. co. That is Asian Alliance. It is an associate of Asia Capital. This Co. is performing well with an excellent management . I bilieve for a good analysis We should consider few other factors such as No. of Branches and % of Public Holding as those factors also has some influence to the price.

11INSURANCE SECTOR Empty Re: INSURANCE SECTOR Mon Mar 14, 2011 10:41 pm


Manager - Equity Analytics
Manager - Equity Analytics

Very good work frnd.I appreciate that. cheers

12INSURANCE SECTOR Empty Insurance sector sees profits grow 71% Tue Mar 15, 2011 8:05 am


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

Lion’s share: 5 out of 19 companies account for 89 share in profits
Penetration among lowest in Asia at 1.2%
March 14, 2011, 8:18 pm

The Central Bank says Sri Lanka’s highly concentrated insurance industry saw profits grow 71 percent during the first nine months of 2010 from a year earlier due to higher investment incomes, but there is room for more growth as the two largest companies account for 64 percent of total assets and the largest five companies account for 92 percent of total assets of the industry while the state-owned insurance company accounts for 41 percent of total assets. However, insurance penetration was still low compared to other Asian economies.

"Overall profits of the insurance sector increased 71 percent during the first nine months of 2010, mainly due to higher investment income. The majority of companies made overall profits. This included the five largest companies which accounted for over 89 percent of the profits of the sector. A few small and mainly recently established entities recorded losses, the Central Bank said in its report ‘Financial System Stability Review 2010’.

"The underwriting profits of the insurance company sector increased by 14 percent in the first nine months of 2010 as some of the large companies incurred underwriting profits. The majority of companies made underwriting profits. However, the intense price competition particularly in general insurance in the nascent economic recovery conditions that prevailed in the first nine months of 2010 affected underwriting performance. The return on equity (ROE) of insurance companies (general insurance) increased to 11.2 percent in the first nine months of 2010 from 8.7 percent in the first nine months of 2009," it said.

In terms of the Regulation of Insurance Industry Act, insurance companies are required to invest a minimum of 20 percent of technical reserves of general insurance and 30 percent of long-term funds (for life insurance) in government securities. "All insurance companies complied with this regulation. On an industry-wide basis, 23 percent of general insurance assets and 46 percent of long-term insurance assets were invested in government securities at end September 2010. The share of equity investments amounted to 13 percent for general insurance and 12 percent for long-term insurance," the Central Bank said.

Total investment income of insurance companies grew by 96 percent in the first nine months of 2010 due to the favourable conditions in the capital market.

Consequently, the ratio of investment income to net premium income rose to 57 percent at September 2010 from 34 percent at end September 2009. Investments in equities increased by 39 percent, while government securities increased by 9 percent in the first nine months of 2010. The share of government securities and equities in the total assets of the insurance companies was 38 percent and 12 percent, while corporate debt securities amounted to 4 percent.

Sri Lanka has 19 insurance companies registered by the Insurance Board of Sri Lanka (IBSL). Twelve companies are composite insurers offering both general and long-term (life) insurance, while five companies are engaged only in general insurance business and two companies conduct only long-term insurance business. Seven of the composite insurance companies are listed on the Colombo Stock Exchange and six companies have foreign collaboration. One insurance company was suspended from engaging in new business, the Central Bank said.

"The insurance industry is highly concentrated, with the two largest companies accounting for 64 percent of total assets and the largest five companies accounting for 92 percent of total assets as at end September 2010. The state-owned composite insurance company accounts for 41 percent of total assets and 42 percent of composite insurance assets. All the major players are composite insurers. There were 48 insurance brokering companies, mainly involved in general insurance business and about 37,000 insurance agents who play a key role in marketing life insurance products, at the time of renewal of registration for 2010," the Central Bank said.

It said the insurance company sector accounted for about 3 percent of financial sector assets. Insurance penetration (total premium as a percentage of GDP) measures the level of insurance activity relative to the size of the economy. Insurance penetration in Sri Lanka was 1.2 percent in 2009 consisting of 0.7 percent in general insurance and 0.5 percent in long-term insurance business. Insurance density (the ratio of premiums to total population) was 24.4, with general insurance density being 14.3 and long term

insurance being 10.1. Sri Lanka’s position vis-a-vis other Asian countries with respect to insurance penetration and density is shown in Table 5.5. Insurance penetration and density in Sri Lanka is low in comparison to other Asian countries and therefore there is great scope for the expansion of the industry.

Total assets of insurance companies amounted to Rs.209 billion as at end September 2010 registering an increase of 16 per cent from the end of 2009. The total assets of the long-term insurance business stood at Rs.140 billion at end September 2010, accounting for 67 per cent of total insurance company assets. The total assets of the general insurance business amounted to Rs.69 billion at end September 2010, accounting for 33 per cent of the total assets of the industry.

The GWP for long-term insurance (which accounted for 44 per cent of total GWP) grew by 22 per cent to Rs.21 billion. The GWP for general insurance (which accounted for 56 per cent of total GWP) increased by 8 percent to Rs.27 billion.

13INSURANCE SECTOR Empty Re: INSURANCE SECTOR Tue Mar 15, 2011 8:18 am


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

achala75 wrote:I am very sorry Seyon . I have forgot Another Ins. co. That is Asian Alliance. It is an associate of Asia Capital. This Co. is performing well with an excellent management . I bilieve for a good analysis We should consider few other factors such as No. of Branches and % of Public Holding as those factors also has some influence to the price.

Thanks achala for ur input... I just analyze both the company operation ( Asian Alliance and AVIVA NDB), they do not do the retail insurance business like JINS,CINS and UAL. These two companies mainly concentrate on reinsurance business from the local insurance companies and target to corporate clients.....

JINS, CINS and UAL are the main players and contributes in retail insurance business, we must have to study more on these companies...

When i see u all comments, It seems u are not interested in investing in the insurance business....

Appreciate comment on this.....

Happy Trading...

14INSURANCE SECTOR Empty Re: INSURANCE SECTOR Tue Mar 15, 2011 8:24 am


Stock Analytic
Stock Analytic

Nice Work........... cheers

15INSURANCE SECTOR Empty Re: INSURANCE SECTOR Tue Mar 15, 2011 1:48 pm


Senior Equity Analytic
Senior Equity Analytic

Dear Seyon,In fact I have good number of shares of one of those companies u mentioned in your original post.All are expecting a dividend announcement from that company. However I like to read your genuine analysis.

16INSURANCE SECTOR Empty Insurance industry bounces back Tue Mar 15, 2011 9:42 pm


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

Insurance industry bounces back

Jan 26, 2011, by HT Media

Sri Lanka, Jan. 26 -- Retention of existing policies:

The insurance industry has bounced back from its stagnant position and is expected to record a double-digit growth this year.

Manjula de Silva

The overall industry showed clear signs of recovery in the previous year from its stagnant position in 2009.

"This growth momentum is seen both in the life and general insurance sectors and augurs well for the insurance industry," Insurance Association of Sri Lanka President and HNB Assurance Managing Director Manjula de Silva told Daily News Business.

"Growth can be seen in all the classes of the general sector particularly in the motor business. The contributory factors for the growth are in the reduction of motor vehicle import duties and bank interest rates."

"This positive impact has spurred further growth," he said.

Leasing has become a popular financing tool and this has generated motor business. Due to this a significant flow of business comes from financial institutions. The marine insurance also recorded a slight growth with the external trade activities picking up. These trends will strengthen this year consolidating industrial growth," he said.

The life sector could see a recovery in two ways. There is greater willingness on the part of people to purchase insurance policies and there is a significant growth in new policies.

This could be attributed to the increase in the level of disposable income. The stable economic and political environment has also helped in new business growth.

"We see an improvement in the retention of existing policies. The clients are more inclined to pay their insurance premium on time. The lapse in policies due to non-payment is on the decline. This trend could be seen across the industry and this will ensure continuity in growth and strengthening this year. The insurance industry will return to strong growth levels by the end of the year as witnessed during 2008," he said. Published by HT Syndication with permission from Daily News Sri Lanka. For any query with respect to this article or any other content requirement, please contact Editor at

Read more:


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

Sat, 2011-03-05 01:20 — editor

By Santhus Fernando
Colombo, 05 March, (

Sri Lanka’s Janashakthi Insurance PLC recorded an impressive 17% growth in net profit-after-tax reaching Rs. 770 mn and revenue of Rs. 6.8 billion with a growth of 13% during the financial year 2010.

Chairman of Janashakthi Insurance PLC W.T Ellawala said, “Rising above the challenges, Janashakthi achieved a total gross premium of Rs. 6.158 Billion which is an 08 per cent increase over 2009. The contribution of the General Insurance business was Rs. 4.5 Billion and from Life Insurance Rs. 1.68 Billion. I see this as a very positive trend amidst the challenges of an excessively competitive industry”.

“A substantial part of our financial success came from the prudent and efficient management of our investment portfolio. We invested in a range of long and short-term instruments including gilt-edge securities and equity. This was as a result of our investment committee taking advantage of the bullish sentiment that prevailed at the Colombo Stock Exchange during 2010. During the year, we disposed of some of our strategic quoted equity investments, booking substantial profits that contributed significantly to the result for the year.”

Our strength was endorsed by RAM Ratings which upgraded our claims-paying ability rating to A- : the outlook is stable. The rating upgrade was premised on our strong performance since the previous review, underpinned by our ability to improve our expense ratio and maintain a better claims ratio than most peers in the general segment.

The expansion of Life business during 2010 was most encouraging, with a significant growth of 18% over the previous year. The introduction of our new investment linked policies and availability of new business in the North and East have contributed to this beneficial result.

The General sector growth in 2010 fell below our expectations and failed to match the previous year’s increase of 09 per cent. This may be ascribed to a variety of reasons the most important being the entry of several new players offering very low premium rates albeit unviable and unsustainable in the longer term. Another reason was the strategic decision to discontinue certain accounts which have consistently proved to be un-remunerative.

Janashakthi’s Motor Insurance business especially the star performer the Full Option Policy - further reinforced by our innovative Motor Vehicle Emergency Policy - continued to be the popular choice, with revenue growth 11 per cent, the highest among the three top insurers.

The company’s Gross Written Premium (GWP) reached Rs. 6.2 billion at 8% growth and the revenue was Rs. 6.8 billion at 13% growth. The total assets of the company stood at Rs. 11.8 billion while the company life fund grew by approximately 18% to reach Rs.3.8 billion. The Company paid claims amounting to Rs. 3.1Bn, which was 13% higher than 2009.

“2011 ushers in a time of renewed hope and encouragement, flowing from the resilience that Janashakthi Insurance has reflected on all aspects of our business”, the Chairman concluded.

Managing Director of Janashakthi Insurance PLC Prakash Schaffter said, “We will focus our sights on growing our top line in the year 2011, whilst ensuring that business written adds to the bottom line. The current and projected rates of growth for the country’s economy portend significant expansion in the insurance sector. Janashakthi is well poised with its extensive branch network and focused distribution strategy to capitalise on this. Claims control will continue, as in the past, to pose a major challenge”.

He went on to say that the Company’s enhanced Management Information Systems and fully fledged Data Ware house System will give an edge to concentrate on the more profitable customer segments and to weed out the less beneficial business. “The control of expenses during the year under review gives us cause for satisfaction. This is a continuation of the virtually zero rate of expenses growth in the previous two financial years. We are confident that we will be able to contain expense growth rates to single digit figures during the year 2011 as well. We also succeeded in curtailing headcount increase of office staff to almost zero level.

“We will continue to look at the development of selected new policies both in Life Insurance and General Insurance, after a comprehensive market study of customer needs and the identification of specific target segments. Our New Products Development process has been strengthened and the teams formed to develop the various new products launched have proved to be innovative”, Schaffter added.

With its inherent financial strength and stability, Janashakthi currently enjoys an enviable reputation decorated with many significant achievements and industry records created within a very short span of time. It was the first and only insurer to acquire a State-owned insurance company and swiftly went on to become Sri Lanka’s third largest General insurer within just one decade of operation.

Janashakthi was also Sri Lanka’s first private insurer to venture into the South Asian market. The Company has also gone on record as having made the highest pay out in relation to Tsunami claims, in excess of Rs. 5 Billion.

Janashakthi Insurance has the highest stated capital among quoted insurance companies amounting to over Rs.1.49 Billion, which is over 7.5 times the statutory requirement. The company is also backed by an asset base of over Rs.11.8 Billion, of which Rs. 4.7 Billion is in Government Securities. Janashakthi Insurance PLC has reached the Rs. 06 Billion annual revenue mark in the quickest time among all Insurance Companies and has an extensive branch network of over 98 locations island-wide.

Last year Janashakthi Insurance clinched dual honours for two consecutive years at the glittering 19th World Brand Excellence Awards. It was bestowed with the prestigious “Award for Banking and Financial Services” and the “Award for Overall Brand Leadership” which was as a total endorsement of its endeavours in brand building and brand management efforts.

Clinching triple honours at the glittering SLIM Awards 2010, Janashakthi became Sri Lanka’s only insurance company to win the highest number of awards in the service category at this event. Adding yet another to its haul was a Silver Award in the Insurance Category for the third consecutive year at the National Business Excellence Awards 2010

With its growing array of local and global awards, Janashakthi continued to create value for customers. It created yet another revolution in Sri Lanka’s insurance industry with the launch of the country’s first-ever 24-hour vehicle breakdown policy. This much acclaimed industry first – “Full Option Vehicle Emergency Policy” is operative 24 hours a day and 365 days of the year.

Its ‘Janashakthi Life Unlimited’ policy goes on record as being the only life insurance policy in Sri Lanka or perhaps in the world, which gives customers a lifetime hospitalisation cover even after the policy matured, thus challenging the world and norms of life insurance. Janashakthi Golden Bond was an investment lead policy which gave customers unmatched returns when compared with similar Life Investment products available in the market.

Janashakthi’s commitment to supporting sports continued with its unique Rural Athlete Sponsorship Program for the third consecutive year. The results can be seen from the surge of outstanding performances by all athletes being supported by Janashakthi. It parallely supports sailing, squash, cricket and hockey, among other sports.

It is also active in a wide range of areas of social responsibility such as installing signage at the National Eye Hospital, Point Pedro Base Hospital and Anuradhapura General Hospital, the 24-hour Vehicle Breakdown Assistance Service in Anuradhapura and Kandy during the Esala Perahera season and at Mihintale during Poson Poya. Added to this is street signage across the country including Jaffna, programmes for the safety of people at pedestrian crossings, Tsunami-aid programs, safe bottle lamp projects, AN1H1 and Dengue awareness projects, etc.

Good corporate governance has established the image of the company as a socially responsible entity delivering greater and consistent value to customers, employees, shareholders and the country at large during the 16 years of its service to the nation.

Janashakthi’s Board of Directors consists of eminent professionals, with proven track records in the business world including W.T.Ellawala (Chairman), C.T.A. Schaffter (Deputy Chairman) & Prakash Schaffter (Managing Director). The rest of the board comprises L.C.R. de Wijetunga, Deshmanya Dr. Nihal Jinasena, Eardly Perera, Miss. Anushya Koomaraswamy, Ramesh Schaffter and Mrs. Manjula Mathews.

- Asian Tribune -

18INSURANCE SECTOR Empty Re: INSURANCE SECTOR Tue Mar 15, 2011 10:11 pm


Senior Equity Analytic
Senior Equity Analytic

I agree with most of the points mentioned in above post. JINS is the most undervalued stock in the sector. Their creative new products are very attractive. The new NORTH and EAST market will enhance not only genaral ins. such as vihicle,fire etc but also most importatly Life ins. With JINS' rapid expansion of branch network especialy in North and East they have lot of scope to grow fast. I will definetly hold my JINS shares.
This is only my views and I may be wrong.

19INSURANCE SECTOR Empty Ceylinco Life annual bonuses top Rs.1.5 bn Thu Mar 17, 2011 9:16 pm


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

This would give us the insurance industry on growing stage, when we look at the investment in assets as per the IBSL guidelines are very much attractive when comparing with last year.. As a results companies earning high investment income.... These nature we could see from most of the insurance companies....

do more study in insurance companies, there will be hidden potential benefit......

Ceylinco Life annual bonuses top Rs.1.5 bn
March 16, 2011, 7:16 pm

Life insurance leader Ceylinco Life has announced that 310,000 policyholders will receive a record Rs. 1.59 billion in annual bonuses this year, from the surplus generated by its Life Fund in 2010, the insurance company said in a statement.

The bonus payments to policyholders whose policies were active as at December 31st 2010, exceeds that of the previous year by Rs. 200 million and reflects a 14.4 per cent increase. The value of the Life Fund of Ceylinco Life stood at Rs. 31.868 billion as at December 31st 2010.

The bonus certificates will be posted to policyholders commencing 20th March 2011, the company said. Policyholders can also enter a draw at which 500 winners will receive a range of valuable Ceylinco Life branded gift items, by sending their details to the company using pre-paid envelopes enclosed with the bonus certificates.

"Year after year, Ceylinco Life has consistently delivered more than its promise to hundreds of thousands of policyholders," the company’s Director/Deputy Chief Executive Officer Thushara Ranasinghe said. "This year’s annual bonus payout is evidence of our continued commitment to this important aspect."

"Apart from the increase in the total value of bonuses, the number of recipients has increased significantly," he said. "This is a reflection of our success in another aspect — taking life insurance to a wider segment of the population."

Ceylinco Life also rewards longstanding policyholders through its ‘Avurudu Bonus’ scheme during the festive season every year. This year too, such cash bonuses are to be home delivered to longstanding life policy holders in April.

Ceylinco Life’s policy of declaring bonuses from the very first year of issue of a policy, enables even a policyholder who obtained a policy in December 2010 to receive a bonus allotment as at 31st December of the same year.

Sri Lanka’s most successful life insurer, Ceylinco Life has now retained market leadership in the industry for the seventh consecutive year. The company also offers its policyholders multiple benefits such as ‘Pranama’ scholarships for policyholders’ children, ’65-plus’ free medical cover, ‘Aloka’ educational grants for children of deceased policyholders in the low income segment and free medical check-ups.


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

ri Lanka’s insurance industry is a fraction of the country’s financial sector but growth prospects are encouraging with markets in the North and East open after a thirty year conflict. However, the industry could face some regulatory risks, RAM Lanka Ratings said.

"The Sri Lankan insurance sector has been gradually recovering from the economic slump in 2008/09. Premiums in the general segment, which had contracted in 2009, staged a strong rebound in the first half of 2010. Similarly, the life-insurance industry had picked up pace, recording a double-digit growth in premiums over the same period as opposed to the relative standstill a year earlier. Notably, the growth has been supported by the general improvement in macroeconomic conditions," RAM Ratings said in a report titled ‘Insurance Sector Update: Bright Prospects despite Regulatory Changes’.

"Going forward, RAM Ratings Lanka envisages the industry to keep up this positive trend, supported by more robust economic growth and greater penetration in the northern and eastern regions of the country," the ratings agency said.

The insurance sector accounted for a relatively small portion of the domestic financial industry, making up only 3.2% of the entire system’s financial assets as at end-December 2009. Moreover, the insurance penetration rate is also lower than those of other Asian countries, with total premiums per capita coming up to a mere USD30.10 as of end-December 2009 (end-December 2008: USD29.40).

"We observe that several new players entered the insurance arena last year. At the same time, the more established players have shifted from price-based competition to focus more on service quality," RAM Ratings said.

"With the industry poised for growth, the Insurance Board of Sri Lanka (IBSL) is in the process of enforcing a new regulatory framework. Through these initiatives, the regulator intends to bring the local insurance sector more in line with international norms; they would also support a more vibrant investment market. RAM Ratings Lanka envisages the changes in classification to improve the existing players’ solvency margins, as many of them presently exclude these investments.

"Meanwhile, the IBSL has also permitted foreign-currency investments. These moves will provide insurers more avenues for investment. Over the medium term, the regulator intends to implement risk-based capital supervision - currently practiced by banks.

"While these changes are viewed positively, we note that the new regulations will expose insurers to operational and foreign exchange risks," the ratings agency said.

"In terms of financial performance, insurance companies have been shifting their investments to the booming equity market to maintain their investment income as interest rates taper.

"Traditionally, investment income has mainly stemmed from fixed-income securities, buoyed by the previously high interest rates. As such, insurance companies have been able to maintain their financial performance.

"With regulations permitting a wider range of investments, investment appraisal and monitoring will play a greater role within each company. In the medium term, overheads may experience upward pressure as insurance companies seek to expand their branch networks into the northern and eastern provinces of Sri Lanka."


Equity Analytic
Equity Analytic

Insurance industry not a level playing field - Ceylinco

MONDAY, 18 APRIL 2011 00:00

By Jithendra Antonio

While many local insurers companies continue to compete on price rather than service, Sri Lanka’s insurance market leader Ceylinco Insurance had said that Sri Lanka’s insurance business arena is not a level playing field, with favouritism towards public sector institutions.

“What disappointed us and the majority in the industry was that the playing field was made distinctly uneven with two companies getting most favoured treatment through a circular issued by the Treasury,” Ceylinco Insurance PLC Chairman, Godwin Perera in his annual review for 2010 pointed out.

Furthermore, Ceylinco Insurance PLC (General) Managing Director/CEO Ajith Gunawardena in the Chief Executive Officers’ review stresses that stringent demarcations and wholesome advantages to public sector institutions has undermined the wellbeing of the industry at large.

Speaking to Mirror Business, Ajith Gunawardena said, the government through the treasury had issued a circular (a few months ago), highlighting that the insurance business of state-owned subsidiaries should be given to the state-owned insurer. “This is not fair to the industry,” Gunawardena added.

According to both Godwin Perera and Ajith Gunawardena, Ceylinco Insurance had once again retained market leadership for the seventh successive year. “We were not deterred by competition. In fact, it made us stronger and more determined to succeed.” Perera says in his review.

While the country has a total of 17 insurance players to date, industry sources claim a large portion of Insurance premiums are generated from Sri Lanka’s largest state-owned subsidiaries and state assets such as Sri Lanka Telecom, Ceylon Petroleum Corporation, Ceylon Electricity Board, Sri Lankan Airlines, Litro Gas, Sri Lanka Ports Authority, Sate-owned banks such as Bank of Ceylon, National Savings Bank, People’s Bank and also the MP’s insurance policies.

The move by the treasury to place all insurance business of government assets with Sri Lanka Insurance Corporation, large chunks of insurance and reinsurance premium money will clearly pour into the state-owned insurance arm.

Sri Lanka’s government in mid 2009, regained overall control of previously state-owned Sri Lanka Insurance Corporation (SLIC), after a landmark judgment of Supreme Court delivered on 4 June 2009, where the shares of SLIC were reverted back to the Treasury Secretary. The Harry Jayawardena-led Sri Lanka Insurance was transferred back to the state while SLIC on January 2011 paid Rs. 6.7 billion in monetary terms to Harry Jayawardena-controlled Distilleries Company of Sri Lanka (DCSL), though the Supreme Court in its judgment said that the purchase price of 6.5 billion Rupees be repaid in Treasury Bonds with interest, within a period of two weeks.

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22INSURANCE SECTOR Empty Re: INSURANCE SECTOR Sun May 01, 2011 6:12 am


Associate Director - Equity Analytics
Associate Director - Equity Analytics

23INSURANCE SECTOR Empty Re: INSURANCE SECTOR Sun May 15, 2011 8:43 am


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

Life Insurance penetration up in 2010

During 2010, 503,543 life insurance policies were issued, giving a penetration rate of 10.9 percent.

This shows an improvement when compared with the rate of penetration in 2009, which was 10.4 percent 464,249 life insurance policies issued during 2009.

There were 19 insurance companies (insurers) registered with the IBSL at the end of 2010. Twelve of them were composite companies (dealing in both General and Long Term Insurance); five of them engaged in General Insurance and two companies engaged only in Long Term (Life) Insurance.

The overall Gross Written Premium (GWP) Income for Long Term Insurance and General Insurance was Rs. 68,493.345 million compared with the previous year's Rs. 57,252 million, which reflects a growth of 19.63 percent.

General Insurance has demonstrated a progress of its overall Gross Written Premium Income during 2010 when compared to 2009. Long Term Insurance also showed a progress of its overall Gross Written Premium Income during the first half of 2010 when compared to 2009.

The overall Gross Written Premium Income of General Insurance amounted to Rs. 37,342.19 million (2009 - Rs. 33,485 million) while the overall Gross Written Premium Income of Long Term Insurance amounted to Rs. 31,151.155 million (2009 - Rs. 23,767 million).

Total Assets of the insurance companies have increased to Rs. 222,242.799 million at the end of 2010. Total Assets valued at the end of 2009 was Rs. 181,044.917 million.

In terms of Section 25 of the Act, 20 percent of assets of the Technical Reserves of General Insurance should be invested in Government Securities.

Similarly, 30 percent of the assets of Long Term Insurance Fund should be invested in Government Securities.

This is a mandatory requirement that all insurance companies have to comply with, which is monitored by the Insurance Board of Sri Lanka (IBSL).

IBSL was set up to develop, supervise and regulate the insurance industry in Sri Lanka in terms of the Regulation of Insurance Industry Act, No. 43 of 2000.

The investment in Government Securities represents 50.19 percent (Rs. 70,059.073 million) of the total assets of Long Term Insurance and 23.70 percent (Rs. 19,584.153 million) of the total assets of General Insurance at the end of 2010. This is in excess of the requisite amount of investment in Government Securities by the Act.

Insurance Broking Companies and Insurance Agents, as intermediaries, make a significant contribution to the insurance industry.

In Sri Lanka, there are approximately 37,000 Insurance Agents, who have been appointed by and registered with insurance companies and insurance broking companies. Insurance Agents play a vital role mainly in marketing life insurance products.

Forty-one insurance broking companies, registered with the IBSL in terms of Section 82 of the Act, were engaged in insurance broking business.

Insurance Broking Companies mainly concentrated on General Insurance and their Total Gross Written Premium generated from both General Insurance and Long Term Insurance amounted to Rs. 9,539.66 million during 2010, compared with 2009's Rs. 8,885.67 million, which reflected a growth of 7.36 percent.

Gross Written Premium (GWP) Long Term Insurance and General Insurance Business (Rs. million)

Year 2006 2007 2008 2009 2010 Total Assets (Rs.'000) 117,658,799; 134,876,221; 155,993,677; 181,044,917; 222,242,799 Total Assets of the Insurance Companies at the end of each year.

Year 2006, 2007, 2008, 2009, 2010 No. of new Life Policies issued during the year 409,933; 527,385; 555,886; 464,249; 503,543 Life Insurance Penetration 8.8; 9.6; 10.4; 10.4; 10.9 as a percentage of the total population.

Year 2006, 2007, 2008, 2009, 2010 Total Gross Written Premium generated from both General and Long Term Insurance Businesses (Rs.'000) 6,171,604; 7,551,357; 8,975,654; 8,885,672; 9,539,661.

24INSURANCE SECTOR Empty Re: INSURANCE SECTOR Sun May 15, 2011 8:49 am


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

The Immeasurable Benefits Of Insurance

Unforeseen losses or tragedies are things that can rarely be avoided and for many years the world had no means of mitigating the effect of such losses. It was only during the past 300 years or so that insurance was thought of as an easy and simple way of ensuring that the effect of a loss is greatly reduced even though the subject matter of the loss can never be restored.
Imagine that you are the owner of a factory worth Rs. 10 million and somebody tells you that if you are willing to pay Rs. 10,000 each year, they would build you a new factory if the existing one was destroyed – would you not jump at that offer? You have the guarantee and are able to sleep peacefully in the knowledge that a fire can never destroy your factory and render you penniless.
Take your own life and those of your dependants; you could protect your dependants and insulate them from the tragedy that would result if you were taken away. By paying as little as Rs. 2,000 a year which is less than Rs. 200 monthly, you could guarantee that your family would receive Rs. 1 million in the event of your death (provided you are 25 or 30 years old at the time of taking out the policy). This is what insurance costs. But the public generally feels the money spent on insurance premia could be put to better use. However when tragedy strikes, only regret follows.
Insurance is an intangible product. It cannot be touched, tasted or felt. But the enormous benefit it brings to society at an affordable cost is immeasurable. Insurance is a rudimentary form of protection which existed even in the times of the Phoenicians who were great traders. The need for insurance was felt in order to encourage trading hundreds of years ago.
The Phoenicians transacted insurance to encourage traders to venture out on the high seas to distant lands carrying goods for sale and bringing back other goods. If the vessel was lost at sea, both the owners of the goods as well as the vessel were compensated by means of a contribution made by those whose voyages were successful.
Where personal insurance is concerned, changing lifestyles have brought about a greater need for insurance. For instance, in the West, children no longer take care of their aging parents nor have they done so for many years. This means that parents have to save for their retirement. In the East, it used to be the custom that children took care of their parents who had looked after them when they were young. A man’s wife usually stayed at home, ran the house and looked after his parents. This custom is also fast dying because often the wife is also employed outside the home. Young couples often feel that they have their own careers to advance and taking care of aging parents is a burden. Thus the need for every individual to have insurance and a pension is becoming increasingly important in Sri Lanka.
The need for insurance increased with the advent of the industrial revolution where people were working more in factories and other industries and giving up their traditional farms and regular means of livelihood. In those days if a factory worker died, his family was left destitute and they usually ended up in the ‘poor house’. Both widow and children went into virtual slavery. No father wanted to leave behind this legacy and insurance therefore began in the form of mutual societies, where a group of persons contributed to a common pool out of which death claims were paid. However the system did not survive for long as the pool was soon exhausted and survivors were not able to realize claims when their turn came.
Life insurance as we know it began with mutual societies, where groups of people in common professions paid a regular sum of money into a common fund for meeting claims following the unforeseen deaths of their members. As the fund grew and its membership increased, the fund was able to withstand occasional losses and also build up its resources. In this way, mutual insurance companies began to be formed. It was only much later that shareholders joined together to establish insurance companies.
The Tooley Street fire in London was another eye opener. Until then fire insurance had not been considered necessary but when the Tooley Street fire resulted in tremendous losses in the city of London it created the need for fire insurance.
It will be seen that all these ventures were targeted towards one objective which was to meet unforeseen losses or the damage from unforeseen events. Insurance therefore even in its rudimentary form provided the means for commerce to progress, and for families to ensure that they were not left destitute following the death of the bread winner.
Insofar as insurance as an industry is concerned, no theory or principle is written in stone except for perhaps the basic tenets such as:
Uberimma fide is the duty cast on the applicant and the insurer to observe utmost good faith in all their dealings.
Indemnification stipulates that you cannot benefit from your loss and you are only entitled to be placed in the same position after the loss as you were before the loss. Subrogation is where you transfer your rights after your claim has been met to enable the insurer to sue the wrong doer in your name.
Contribution is when each insurer pays only his proportionate share in the event you have insured with more than one insurer.
Insurable Interest stipulates that in order to insure a person or property you must stand in a relationship to such that you will benefit from its safety or be prejudiced by its loss.
Let us now take some of the main classes of insurance with which the public are familiar and see how each of them helps society not only to exist but to progress in the present day.
There are many ways in which insurance benefits society:

1. Mortgage insurance

For example a man takes a loan on his house, which he mortgages to the bank. If he dies before the repayment of the loan, the bank would then seize the house and sell it. Insurance however steps in and provides a policy called Decreasing Term Policy whereby should the borrower die at any time, the insurance company pays off the outstanding loan and the house reverts to the heirs without any encumbrance.

2. Personal loans

Banks cover personal loans and all other types of lending by taking out short term insurance for the duration of borrowing.

3. Micro insurance

This is an excellent example of insurance helping the poorer sections of society to borrow without fear of being unable to repay in the event of death. Micro finance organizations give out small loans to large numbers of people and simultaneously take out insurances on the lives of the borrowers so that the loan is repaid in the event of the death of a borrower.

4. Marine insurance

A businessman is able to import goods without fear of losses arising from the perils of the sea because of marine insurance. When a company wishes to import goods they open a letter of credit through the bank in the name of the exporter and his bank. The exporter places the goods on the vessel and obtains a bill of lading, goes to his bank, presents the documents and withdraws the money which is due to him on the strength of the letter of credit. In this way, payment is made immediately the goods are placed on the vessel even before they are received by the buyer. Now what happens if the ship meets with a calamity and the goods are lost at sea? When the letter of credit is opened, the buyer and his bank would have obtained insurance for the value of these goods from the time they are placed on board the vessel, in order to ensure there is adequate compensation in the event of a calamity during the sea voyage. In the absence of insurance both the importer and his bank would face losses and it is only through the intervention of marine cover that it is possible to conduct trade without any loss or hindrance.

5. Hull insurance

Ships which ply the seas are covered under marine hull insurance policies. This cover provides owners of these vessels the security to conduct their business with the knowledge that if their vessels are lost at sea, they would be fully compensated.

6. Fire insurance

This is another important means of protection provided not only to householders but to businessmen as well. Insofar as the householder is concerned, his home is probably all that he has and in developed countries it is purchased with a loan from a bank or lending society. In the event a house is destroyed as a result of a fire or natural perils such as storms, tempests, earth quakes, typhoons, hurricanes, tidal waves and tsunamis, etc., the owner is left homeless and the lending agency has lost its money. Once again, with the intervention of insurance the home owner/lending agency will be reimbursed the amount insured and the lending agency will take its money, giving the balance to the home owner who can then take a fresh loan for a new house because he has honored his debt. If there were no insurance, both the lender and the borrower would have suffered a serious loss. This principle is also extended to businesses, from small factories to oil rigs. All of them can venture into trade without fear, only because they know that they have a ‘fall back’ position in their insurance policy which will come to their aid should the need ever arise.

7. Consequential loss

When a fire or similar peril occurs not only is the property lost but also the profit or rental which would have been earned from the damaged building. The consequential loss policy provides cover not only in respect of the profit that would have been earned but also in respect of all standing charges which will continue even though the business does not function until it is revived.

8. Motor insurance

Third party motor insurance was made compulsory throughout most countries in order to protect other users of the road from death or bodily injury caused by a motor vehicle in motion. It is only because of motor insurance that one is able to drive a motor car freely on the streets, with the full knowledge that in the event of an accident the repair costs would be reimbursed by the insurer. In Sri Lanka motor insurance forms almost 60% of the premia earned in the insurance business. Unfortunately in developed countries such as the US and the UK, enormous damages are claimed sometimes out of proportion to the loss and in many ways claims under motor insurance for bodily injury have become a big business.

9. Cash in transit insurance

A business house moves cash between various locations and also from the bank to its offices and vice versa. The threat of robbery always accompanies these transfers and cash in transit or money in transit insurance cover protects businesses against such losses, thereby enabling them to move their cash around without fear.

10. Burglary

All of us face losses through burglary, whether we are house holders or business people. The losses can be big or small but burglary presents an ever-present danger. Some countries are more prone to losses in this way than others and even in a particular country or city certain areas are more likely to be burgled.

11. Professional indemnity

This cover protects professionals such as doctors, lawyers, architects, engineers and accountants, etc., from legal liability claims made by their clients for negligence or error. The claims can run into large sums and prudent professionals therefore take out adequate protection, which includes their legal expenses. In some countries, certain classes of professionals such as doctors, accountants and lawyers are compelled by law to take out professional indemnity covers.

12. Directors’ and officers’ liability

The new Company’s Act imposes heavy penalties on directors and senior officers of companies in the event of being found guilty of negligence in their duties. Independent directors on the boards of companies are reluctant to take up office unless the company provides them with some form of protection and companies would not be able to attract directors of quality unless they provide this insurance cover.

13. Personal accident insurance

We are all prone to meet with accidents and the consequences could be disastrous to our lives and livelihoods. Personal accident insurance provides cover for death by accident and this is extended to cover loss of limbs, eyes, etc. Weekly benefits are possible during the period of disability to cover loss of income particularly of self-employed persons.

14. Sickness insurance

The cost of medical care in private hospitals is astronomical. Unfortunately most people in Sri Lanka wait until they are old and reaching retirement age to think of sickness insurance. Sickness insurance must be taken at a young age to provide adequate protection for the family should the need for expensive medical treatment arise.

15. Critical illness

Critical illness insurance in Sri Lanka is comparatively new and provides substantial benefits in the event of the contraction of specified critical illnesses such as cancer, nephritis, paralysis, etc.

Although initially insurance was started to support sea trade and subsequently to protect families, it has now diversified so much that it is unrecognizable. Insurance has kept innovating different types of polices to meet the changing needs of society and this has kept this industry alive. From the rudimentary insurance practices by the Phoenicians to modern day insurance for rockets and space craft, it has come a long way but still maintains the basic principle of providing protection for a very large sum of money through the payment of a very small premium. Insurance is a prime need in today’s society and the price of imprudence can be very high.

25INSURANCE SECTOR Empty Re: INSURANCE SECTOR Sun May 15, 2011 12:14 pm


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics


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