Ceylinco Life stronger at end of challenging 2015

Life insurance market leader Ceylinco Life ended 2015, a year it describes as one of ‘unusual challenges’, with a characteristically strong performance that kept it at the top for the 12th successive year. In this interview Managing Director and CEO R. Renganathan elaborates on the company’s performance:  

Q: Ceylinco Life is now a standalone life insurance company following the segregation of life and general insurance by law. How has this affected your business?

A: Our business is as strong as ever! We have the same products, the same sales team, the same senior executive team, and above all, the same passion, commitment and professionalism that made us the number one life insurer in Sri Lanka in 2004, a position we have defended and strengthened for the past 12 years. Ceylinco Life is one of Sri Lanka’s most powerful and trusted brands, and will remain so. The segregation of life and general insurance has no adverse impact on how we operate as a business. In fact we were always in favour of the segregation.

Q: Does your financial performance in the last year support this assertion?

A: The figures speak for themselves. Ceylinco Life ended 2015 with total income of Rs. 19.89 billion, a growth of 7%. Of this, premium income accounted for Rs. 13.4 billion, making the company the largest life insurer in the market for the 12th consecutive year. The growth in premium income was more than 12%, which is very satisfactory. We recorded net profit of Rs. 2.060 billion for the year and transferred Rs. 1.8 billion to shareholders.

Q: How did the company’s investment income grow in the last financial year?

A: Investment and other income remained flat at Rs. 6.74 billion, which is not surprising in the context of the interest rates in effect. However, Ceylinco Life’s investment portfolio increased by a solid 17.35% in value to Rs. 67.1 billion, while total assets grew by a noteworthy Rs. 9.1 billion or 12.9% to Rs. 80.2 billion. We pay a lot of attention to the prudent management of our investment portfolio, which is one of the strengths of the company.

Q: What sectors are your funds invested in?

A: At the end of 2015, we had invested more than half of our funds, 53% to be precise, in Government Securities. The rest of the investment portfolio comprised of Licensed Private Banks –18%; State Banks – 2%; Real Estate – 7%; Corporate Debt – 19% and Others (1%). These investments are made in conformity with the investment guidelines stipulated under the Regulation of the Insurance Industry Act No 43 of 2000 and are subject to regular monitoring by the Insurance Board of Sri Lanka.

Q: How did your Life Fund grow in 2015?

A: Our Life Fund posted net growth of Rs. 7.99 billion to reach Rs. 68.01 billion at the end of 2015. This represents a growth of 13.31%. Ceylinco Life was, in fact, the fastest company in the local life insurance industry to reach a Life Fund of Rs. 60 billion, a feat we achieved in 2014.

Q: What kind of growth did the company achieve in new business in the last year?

A: We sold 170,007 new policies in 2015 averaging 14,166 a month, which is quite satisfactory in the context of the conditions that prevailed. Sales of retirement plans grew by a noteworthy 30% per in 2015, which is something we are most pleased about. Overall, 2015 was a tough but memorable year for the company, particularly because we achieved our results in the face of unusual challenges, including an attempt to take over the company, which we were able to overcome without losing our focus on operational performance. Our 2015 results can therefore be viewed as a measure of the company’s strength and resilience, and its unwavering attention to business fundamentals.

Q: How did policyholders benefit from the company’s success?

A: Benefits to policyholders totalled Rs. 5.9 billion in 2015, which was a 21.7% improvement over the previous year. This included ‘Avurudu cash’ bonuses to more than 14,000 policyholders apart from the Rs. 2.9 billion in annual bonuses declared. The annual bonus pay-out in 2015 was the highest in Ceylinco Life’s history, and surpassed the previous year’s by Rs. 500 million.

Q:  So it would appear that Ceylinco Life emerged stronger in many aspects at the end of 2015?

A:There is a lot of truth in the saying ‘That which does not kill us, makes us stronger’. The challenges we faced did not deter our performance, and we certainly did end the year stronger than when we began it. One indicator of the strength of an insurance company is its solvency ratio, which is computed on the basis of admissible assets over total liabilities. Ceylinco Life maintained its solvency ratio at eight times the legal requirement in 2015. 

The solvency margin is one of the most important key performance indicators for a life insurance business because it represents a company’s ability to meet the obligations arising from its life insurance contracts. The prevailing insurance regulations require insurance companies to maintain a solvency margin of not less than 5% of their statutory liabilities at all times.

Q: Any other memorable achievements in 2015?

A: There were several. One of them was the reaffirmation by World Finance, the respected UK-based magazine, of Ceylinco Life as the ‘Best Life Insurance Company in Sri Lanka’ for a second consecutive year. This followed an in-depth assessment of key performance indicators. This prestigious award is based on scores accorded to the company on multiple parameters pertaining to long term insurance. 

These include underwriting process/process efficiency; policy maintenance – the process of reviewing clients’ policies, appropriateness of coverage and cost per policy; exposure to risk; customer retention rate; time taken to settle claims; new customer acquisition rate and financial stability – premium income, life fund and market share.