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Sri Lanka Equity Forum » Stock Market Talk » Insurance Sector

Insurance Sector

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1Insurance Sector  Empty Insurance Sector on Mon Mar 14, 2011 2:51 pm

seyon


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..



Last edited by Quibit on Tue Oct 22, 2019 6:28 pm; edited 5 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 on Mon Mar 14, 2011 2:57 pm

Slstock

Slstock
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 on Mon Mar 14, 2011 3:00 pm

seyon


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 on Mon Mar 14, 2011 3:01 pm

StocksWatch

StocksWatch
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Good work Seyon...keep it up. Thanks

5Insurance Sector  Empty Re: Insurance Sector on Mon Mar 14, 2011 3:05 pm

Slstock

Slstock
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 on Mon Mar 14, 2011 4:05 pm

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
+ from me too for the hard work.. appreciate.. Very Happy

7Insurance Sector  Empty Re: Insurance Sector on Mon Mar 14, 2011 4:48 pm

seyon


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 on Mon Mar 14, 2011 8:38 pm

achala75


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 on Mon Mar 14, 2011 9:15 pm

seyon


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 on Mon Mar 14, 2011 10:02 pm

achala75


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 on Mon Mar 14, 2011 10:41 pm

kuk83

kuk83
Manager - Equity Analytics
Manager - Equity Analytics

Very good work frnd.I appreciate that. cheers

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

seyon


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 on Tue Mar 15, 2011 8:18 am

seyon


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 on Tue Mar 15, 2011 8:24 am

cse.investor

cse.investor
Stock Analytic
Stock Analytic
Nice Work........... cheers

15Insurance Sector  Empty Re: Insurance Sector on Tue Mar 15, 2011 1:48 pm

achala75


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 on Tue Mar 15, 2011 9:42 pm

seyon


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 htsyndication@hindustantimes.com

Read more: http://news.reportlinker.com/n05135572/Insurance-industry-bounces-back.html#ixzz1GgY4CGJw

seyon


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

Sat, 2011-03-05 01:20 — editor

By Santhus Fernando
Colombo, 05 March, (Asiantribune.com):

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 on Tue Mar 15, 2011 10:11 pm

achala75


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 on Thu Mar 17, 2011 9:16 pm

seyon


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.


seyon


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."

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