Seylan Bank records Rs. 1.2 b PAT
by Sapumali GALAGODA
Seylan Bank recorded a net profit of Rs. 1.2 billion for 2010, a 126
percent increase compared to Rs. 543 the previous financial year.
Pre-tax profit, at Rs. 1.9 b was up by 124 percent from 2009, the
highest ever profit earned by the bank since its inception.
Seylan Bank also created a new paradigm in financial reporting in Sri
Lanka with its Annual Report for 2010.
Titled The Business Case, it is dedicated to all the Bank’s
stakeholders and discusses how it has renewed stakeholder confidence and
made remarkable progress throughout year 2010.
Among the major factors fuelling the progress of Seylan was its
success in growing its deposit base to Rs. 109.9 b as well as other
strategic measures to improve efficiency.
Renewed focus on recovering non-performing loans and advances brought
a reduction in the NPL ratio, which dropped by approximately eight
percent as against the previous year.
These measures improved the key indicators. Return on Average Assets
increased to 0.87 percent in 2010 from 0.38 percent in 2009 while Return
on Equity improved to 10.88 percent from 6.20 percent and the Interest
rate increased to 6.00 percent compared to 5.18 percent a year earlier.
The Bank’s cost-to-income ratio increased from a marginal 67.82
percent to 68.69 percent, while the Capital Adequacy Ratio has remained
above 12 percent in both 2009 and 2010 which is well above the required
rate as stipulated by the Central Bank.
The Bank’s share price stabilised after the appointment of a new
Board headed by Chairman Eastman Narangoda in early 2009 and continued
gaining strength over the past year as the management implemented the
wide-ranging initiatives set out in the Bank’s aggressive strategic
The share price increased from Rs. 37 to Rs. 97.80 during the course
of the year.
Narangoda said, “The Board is pleased to report that Seylan Bank
achieved an after-tax profit of Rs. 1.2 b, an increase of 126 percent
compared to the financial year 2009 despite having made the highest
provisions for non-performing loans among Sri Lanka’s major banks (as
per the results for the first 9 months)”.
The Business Case, takes the reader through seven principal sections
the Preface, A Vote of Confidence, Tackling the Challenges, The
Challenges Within, Pro Bono Publico (for the good of the public),
Lessons Learned, Strategy Update and Benchmarks of Success.
Narangoda said that to increase overall efficiency while aligning
itself with the best industry standards and performance indicators, the
bank last week launched a Voluntary Retirement Scheme (VRS) open to 250
of its 3622 employees.
This was the first time in the history of banking in Sri Lanka that a
VRS was made available on an exclusively on-line basis, signifying the
adoption of new processes and more advanced technology across its
With the VRS, Seylan will roll out a series of strategic measures -
organisational restructuring, investment in advanced technology, and
employee job enrichment and engagement processes by benchmarking
international best practices from within and outside the country.
The Bank is currently rolling out a new product development process
as well as investing on more research to ensure the success of its
current portfolio of brands as well as intended new products and
services, said Narangoda.
The Bank is finalising an internal marketing program to further
revitalise its staff to deliver an even greater standard of customer
service and flexibility.
The Bank is also strengthening its international network to deliver
greater results on some of the growth segments identified by its recent
The network of branches will also be expanded to cater to the needs
of its islandwide customer base, he said.
Janashakthi posts Rs 6.8b revenue
Janashakthi Insurance PLC (JIPLC) recorded an impressive 17 percent
growth in net profit-after-tax reaching Rs. 770m and revenue of Rs. 6.8b
with a growth of 13 percent during 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 eight percent 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 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 encouraging, with a
significant growth of 18 percent over the previous year.
The introduction of our new investment linked policies and
availability of new business in the North and the 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 9 percent. 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 unremunerative.
Janashakthi’s Motor Insurance business - especially the star
performer the Full Option Policy - further reinforced by its innovative
Motor Vehicle Emergency Policy - continued to be the popular choice,
with revenue growth 11 percent, the highest among the three top
The company’s Gross Written Premium (GWP) reached Rs. 6.2 billion at
8 percent growth and the revenue was Rs. 6.8 billion at 13 percent
The total assets of the company stood at Rs. 11.8 billion while the
company life fund grew by approximately 18 percent to reach Rs. 3.8
The Company paid claims amounting to Rs. 3.1bn, which was 13 percent
higher than 2009.
Managing Director of Janashakthi Insurance PLC Prakash Schaffter
said, “We will focus our sights on growing our top line in 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.”
Janashakthi was Sri Lanka’s first private insurer to venture into the
South Asian market.
The Company 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 backed by an asset base of over Rs.11.8 billion, of
which Rs. 4.7 billion is in Government Securities.
Fitch rates Senkadagala Finance’s proposed debt ‘BBB+(lka)’
Fitch Ratings Lanka has assigned Senkadagala Finance Company Ltd’s
(SFC) proposed senior unsecured redeemable listed debentures of up to Rs
1 billion a ‘BBB+(lka)’ rating. The agency has simultaneously affirmed
SFC’s National Long-Term rating at ‘BBB+(lka)’. The outlook is stable.
SFC’s ratings reflect its long operating history and sustained strong
capital structure, as well as its relatively sound credit control
systems and processes.
The ratings are, however, constrained by SFC’s evolving economies of
scale and relatively low market share in core operations in relation to
some of its larger peers. The proposed debt issue has a five-year
tenure, and Fitch expects it to be raised at a fixed coupon rate,
enabling SFC to minimise interest rate risk on its loan book.
The debenture will be utilised to finance lending operations as well
as to settle existing debt, and is expected to be listed on the Colombo
SFC is a mid-sized registered finance company (RFC) with an asset
base of Rs 6.2bn at December 31,2010.
It operates through a network of over 30 outlets, employing over 200
staff. At end-March 2010, SFC accounted for a share of 3 percent of
local RFC sector assets. The Balasuriya family, who owns 90 percent of
SFC’s equity, established the company in 1968.
HNB Assurance records 20% growth in PAT
HNB Assurance PLC has recorded a 15 percent growth in its turnover
and a 20 percent growth in its profit after tax, for the year ended
December 31. Its Gross Written Premium (GWP) rose to Rs. 2,428 million
with General Insurance by 19 percent to reach Rs. 1,344 million and Life
Insurance by 10 percent to register Rs.1,084 million.
This is the first time in the Company’s nine-year history that GWP
measures crossed the Rs.1 billion mark.
“Taking advantage of the much improved external environment, the
Company achieved commendable growth rates in turnover and profit,
managing the challenges that were unique to the industry” Chairman HNB
Assurance PLC said Rienzie T. Wijetilleke.
Managing Director Manjula de Silva said, “A very encouraging
development witnessed in 2010 is the phenomenal growth achieved by the
Company’s bancassurance channel which generated a GWP of Rs.158 million
from life insurance recording a growth rate of 78 percent over the
previous year. The number of bancassurance units operating from HNB
branches with a dedicated staff member from HNB Assurance attached to it
grew from 74 to 98 at end 2010.
The contribution made by the bancassurance channel grew to 15 percent
of the total Life GWP.
The channel contributed Rs.551 mn of General GWP as well accounting
for a share of 41 percent of General Insurance business.”
Insurance industry poised for growth - Ram Ratings
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
According to a report by RAM Rating on the insurance sector the life
insurance industry has picked up pace recording a double digit growth in
premiums compared to the relative standstill a year earlier.
RAM Ratings Lanka envisages the industry to keep up this positive
trend, supported by more robust economic growth with greater penetration
in the North and East.
The insurance penetration rate is lower than those of other Asian
countries with total premium per capita at $ 31.10 as of end 2009.
Several new players entered the industry last year while the more
established players have shifted from price based competition to focus
more on service quality.
With the industry poised for growth the Insurance Board of Sri Lanka
(IBSL) is in the process of enforcing a new regulatory framework.
Mainly composite insurance companies will be required to split their
existing life and general businesses into separate legal entities.
Listing on the Stock Exchange will be made mandatory, with the
incumbents and new entrants given five and three years to comply.
In addition, the rules on solvency margins have been revamped to
broaden the classification of assets recognised as admissible.
Through these initiatives the regulator intends to bring the local
insurance sector more in line with international norms. It will also
support a more vibrant investment market.
The changes in the classification will improve the existing players
solvency margins as many of them presently exclude these investments,
states the report.
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.
The new changes are viewed positively but the new regulations will
expose insurers to operational and foreign exchange risks.
The industry’s general insurance claims have remained relatively
stable at around 62 percent for the general segment.
The general insurance companies have been incurring underwriting
losses and have been relying on investment returns for profits.
Meanwhile, the report states that most general insurance companies in
other South Asian markets are also reporting underwriting losses.
Claims in the general segment are expected to increase due to the
heavy floods in 2010 and early this year.
The impact on the insurers bottom lines may be offset by an expansion
in premiums supported by the more conducive economic climate.
The life segment has experienced an increase in claims among RAM
Ratings rated companies as well as listed companies.
This is mainly due to policy lapses brought by harsh economic
Unlike the general segment most like insurers at present are earning
underwriting profits as the life market has yet to mature and claims
will only arise over the long-term.
Given the low penetration rate in the life insurance market, we
believe that there is room for growth claims in this segment will ease
over the medium-term, as the sector expands against the backdrop of the
improving economic conditions while replenishing maturing contracts.
In terms of financial performance, insurance companies have been
shifting investments to the booming equity market to maintain investment
income as interest rates taper.
Traditionally investment income has mainly stemmed from fixed income
securities buoyed by the previously high interest rates.
With regulations permitting a wider range of investments, investment
monitoring and appraisal with 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 in the North
and East of Sri Lanka, states the report.
Ceylinco Life posts premium income of Rs. 8.8b
Ceylinco Life ended FY 2010 with total income of Rs. 12.2 billion and
Gross Written Premium income of Rs. 8.786 billion. consolidating its
position as Sri Lanka’s largest life insurer.
Noteworthy improvements in all key performance indicators pertaining
to long-term insurance generated solid overall business growth for the
company, notwithstanding the fact that disposable incomes in most target
segments remained flat during the year, the company said.
Ceylinco Life’s Life Fund grew by a healthy 20.5 percent to Rs.
31.868 billion, following a net transfer of Rs. 5.418 billion during the
year, while Investments grew by 25.7 percent to Rs. 29.376 billion.
Total assets increased by 20.6 percent to Rs. 36.956 billion as at
Ceylinco Life Managing Director and CEO R. Renganathan said: “One of
the most noteworthy aspects of our performance is the fact that we
substantially further increased our solvency ratio, which at the end of
2010 was an extraordinary nine times more than the minimum stipulated by
The valuation of the Life Insurance Fund as at December 31 was done
by M/s Towers Watson Risk Consulting (Pvt) Ltd, according to which Rs.
600 million was recommended to be transferred from the surplus on Life
Insurance business to the Shareholders’ Fund for 2010.
Consequently, Rs. 591 million was contributed to the Rs. 939 million
consolidated net profit of the company after deducting expenses
attributable to shareholders, Renganathan said. A computation of the
excess of admissible assets over statutory liabilities, the Solvency
Margin is the best indicator of an insurance company’s ability to meet
the obligations arising from its insurance contracts at any time, he
In other key indicators, the company’s premium income recorded a
growth of 17 percent over 2009, while total income increased by 12.5
percent. Investment and Other income improved by 3 percent to Rs. 3,454
The company sold 157,682 new life policies in the year reviewed
despite the non-conducive socioeconomic environment, and had paid Rs.
2,757 million in customer benefits.
The investment portfolio, valued at more than Rs. 29 billion as at
December 31, comprised Government Securities (38 percent); Licensed
Private Banks (17 percent); State Banks (22 percent); Real Estate (12
percent); Corporate Debt (7 percent) and Others (4 percent).
“We conform strictly with the investment guidelines stipulated under
the Regulation of the Insurance Industry Act No. 43 of 2000 for
investments pertaining to Life Funds,” Renganathan said.
“These investments are subject to regular monitoring by the Insurance
Board of Sri Lanka, the Government appointed regulator for the
Describing the company’s performance in 2010 as “characteristically
consistent,” he said: “There have been no shortcuts or cutting corners.
No expedient quick-fixes or gimmicks to stay ahead of the competition.
We have simply moved forward with our tried and tested approach to
business, and overcome challenges.”
Dr Ranee Jayamaha and Dr Willie W. Gamage on HNB Board
The Board of Hatton National Bank PLC has appointed Dr Ranee Jayamaha
and Dr Willie W.
Gamage as Independent Non-Executive Directors from March 31.
Dr Jayamaha is currently an Advisor to President Mahinda Rajapaksa.
She had been the Deputy Governor in charge of Financial System
Stability of the Central Bank of Sri Lanka from 2004 up to her
retirement in May 2009.
She has over 37 years of extensive experience in the fields of
economics, banking, finance, regulations and administration, having held
a number of positions in the Central Bank and outside. Dr Jayamaha has
authored several articles for local and international journals and more
recently, she had been providing advisory services to a number of
financial institutions and the Central Banks in the Region.
She holds a Bachelor of Arts (Hons) Degree from the University of
Ceylon Peradeniya, M.Sc in Economics from the University of Stirling,
U.K. and a Ph.D in Monetary Economics from the University of Bradford,
Dr Willie W. Gamage currently serves as the Secretary to the Ministry
of State Resources and Enterprises Development, while serving as the
Chairman/CEO of the Strategic Enterprise Management Agency (SEMA).
He has over 30 years’ experience in public, private and
non-governmental organisations in formulating and implementing projects
on poverty alleviation, economic development, promoting alternative
energy generation and enhancing capacities in public enterprises.
He holds a B.Sc in Economics and Management from the University
College of London, U.K., Masters in Business Studies from the University
of Colombo and a Ph.D from the Rajarata University.