By Chandeepa Wettasinghe
Ceylinco Insurance PLC announced that they have formed two new companies named Ceylinco Life Insurance Limited and Ceylinco General Insurance Limited to take up its life and general operations, respectively, to conform to the amended Insurance Industry Act No. 3 of 2011.
Shareholders, led by the second largest owner Global Rubber Industries (Private) Limited (GRI), had refused to approve the move and a lengthy legal battle had ensued.
Mirror Business inquired Ceylinco Insurance CEO Ajith Gunawardene whether the shareholder approval was finally received in making the decision.
“We don’t need shareholder approval, we got orders from three courts,” he said.
GRI had insisted that Ceylinco Insurance will become a shell company, with the shareholders not being informed of what would happen in the subsidiaries.
The disclosure on the Colombo Stock Exchange said that the parent Ceylinco Insurance PLC will be suspended from conducting insurance operations with effect from June 1.
GRI had requested the management to retain one of the insurance operations under the parent, much like other insurance companies had done within the past year.
Gunawardene refused to comment on whether the shareholders would have control over the subsidiaries.
Ceylinco Insurance (Non-Life) CFO Upul Witharana, however, said that Ceylinco Insurance will own 100 percent of the shares in the new companies.
“The shareholders of the parent will not be getting any new shares, but there won’t be any dilution, because Ceylinco Insurance owns 100 percent of the shares,” he said.
According to the amended Act, all insurance companies, after segregation, which had to be completed this January, are required to list on the Colombo Stock Exchange by January 2016. Witharana said that they have not yet contemplated the future action.
“It’s a requirement by IBSL and SEC but we only formed these companies on June 1. We will list but we haven’t decided on the details,” he said.
Mirror Business inquired whether the existing shareholders of Ceylinco Insurance would get the first opportunity to subscribe to the shares of the subsidiaries upon listing.
“That hasn’t been decided yet. Those criteria will have to be agreed on,” he said.
GRI and its associates own 29 percent of the shares in Ceylinco Insurance, which is just below the 30 percent required for a mandatory offer. According to the latest interims, Ciesot (Private) Limited, said to be an employee share option scheme owned 22.86 percent of the shares.
However, Ciesot divested 10 percent of the shares last month, which were picked up by the third largest shareholder and a collection of local and foreign investors.