People’s Insurance eyes non-captive market post IPO

By Shehan Dain

People’s Insurance Ltd. (PIL) has put down its game plan post the Initial Public Offering (IPO) to garner non-captive market share, a senior official said.

PIL Managing Director D.P. Kumarage told the Daily FT that the management has proposed to take full use of the island-wide branch network of its immediate holding company People’s Leasing and Finance Plc (PLF) and parent company People’s Bank to strategically capture its non-captive market share.

“We want to expand our business. We have not used our island-wide branch network of People’s Bank fully yet and also we have not gone to non-captive business, so we will go into that. PLF has 90 branches and we have made use only about 70 branches for the captive business. In the non-captive business we have not made use of even 10 branches. We need to increase that and our intention is during the first half of the next financial year we will be bringing at least 50 branches under the non-captive business,” he said.

People’s Insurance has achieved a post-tax profit of Rs. 371 million during the first 10 months of this year backed by an outstanding underwriting profit of Rs. 208 million during the same period. The assets as at end October 2015 stood at Rs. 5.2 billion while the investment portfolio exceeded Rs. 4 billion.

People’s Insurance successfully completed its last financial year wherein the profit after tax increased by 21% to reach Rs.450 million supported by the outstanding growth in underwriting profit of Rs. 152 million and significantly increased fair value gains from listed shares. The financial position was strong with total assets of Rs. 4.8 billion and net assets of Rs. 1.4 billion which is an increase of 18% over the previous year.

When asked if there would be additional costs which would incur due to the expansion, he said that once PLF branches reach their critical mass, the company wishes to open up new branches in strategic locations to stay ahead its peers in the operational cost platform.

“Our expense ratio is very low because we are operating through a window. When the window is not possible to operate any further within a branch only then we will think of having a separate branch. We will operate along the same model when it comes to expenditure.”

Taking a positive stance on regulatory sentiments to consolidate the insurance market, Kumarage said that with the composite companies being separated, smaller companies may find it difficult to compete with larger companies. “They will not be able to compete with the Gross Written Premium (GWP) and they won’t have the capacity to increase their equity. So automatically there will be consolidation taking place.”

PIL also hopes to increase market share in the motor segment while focusing on growing non-motor general insurance products which are expected to be in demand with the growth market trajectory.

Elaborating on PLI’s stance to consolidate, he highlighted that the company has no immediate interest to merge or acquire any entity as its still concentrating on a growth strategy. However he noted that if the price is reasonable PLI might consider the option.

Pix by Sameera Wijesinghe

People’s Insurance’s Rs. 750 m IPO to open on 16 December

Subsequent to CSE approval, People’s Insurance Ltd. will open its IPO on 16 December and is expected to raise Rs. 750 million by offering 50 million ordinary shares of the company at Rs. 15 per share.

The IPO shareholder percentage is measured at 25% while People’s Leasing and Finance will own 75% of the company’s equity stake amounting to 150 million shares.  The issue closing date is scheduled on 7 January or the earliest day on which the issue becomes oversubscribed.

Acuity Partners Ltd., NDB Investment Bank Ltd. and People’s Bank – Investment Banking Unit are acting as the Joint Financial Advisors and Managers to the Issue whilst People’s Bank is the Bankers to the Issue. F. J. & G De Saram functions as the Lawyers to the Issue whilst SSP Corporate Services Ltd. functions as the Registrars to the Issue.

According to the Regulation of Insurance Industry (Amendment) Act No. 3 of 2011, every insurance company in existence when the said Act came into operation is required to have itself listed on a stock exchange within five years from the effective date of the said Act. Accordingly, the company’s shares have to be listed before 7 February 2016.

Hence People’s Insurance will be the first general insurance company in Sri Lanka to adhere to the listing requirement under the amended RII Act.