The local unit of the Hong Kong stock exchange listed Asian life insurance giant, AIA Group Limited, AIA Insurance Lanka PLC (AIA) saw its net profits for the quarter ended December 31,2014 falling by 57.8 percent to Rs. 153.8 million (Rs.5 a share) from a year ago, interim financials showed.
The performance was impacted by higher operating and administrative expenses, acquisition expenses and Rs.79 million transferred to the long term insurance fund as opposed to Rs.498.1 million transferred back to the income statement a year ago.
The total revenue comprising of premiums, investment income and other related incomes rose by 8.9 percent year-on-year (yoy) to Rs. 3.54 billion. The total Gross Written Premiums (GWPs) rose by 6.7 percent for the financial year 2014 to Rs. 10.21 billion amid tougher market conditions.
The life business GWPs rose 5.97 percent to Rs. 7.27 billion while non-life GWPs grew 10.5 percent to Rs. 2.95 billion.
With the lowering interest rates, an independent researcher, Capital Alliance (CAL) forecasted the demand for investment and annuity products to become higher in the future and projects a 16 percent population to be able to afford life insurance by 2018 compared to 11 percent in 2013.
Sri Lanka’s life insurance penetration is 0.48 percent (based on GWPs), which is low compared to regional peers which is 1.82 percent.
“CAL expects Sri Lanka’s life insurance GWP to be US $ 663 million by 2018 (16 percent Compound Annual Growth Rate),” CAL said in its recent research paper on the Lankan insurance sector.
The insurance regulator is still silent on action to be taken in relation to foreign-owned insurers listing their entities separately beginning of next year.
At the beginning of 2015, adhering to the regulator’s call, the company spun off its general insurance business to ‘AIA General Insurance Lanka Limited’, a company formed in March 2014.
Meanwhile during the December quarter, the company paid Rs. 1.8 billion as claims and benefits, down from Rs.2.1 billion in the corresponding quarter last year.
Since the acquisition of the company from its local owners back in December 2012, AIA has been seeing higher operating and administrative costs and such costs have risen 8.25 percent yoy to Rs. 1.18 billion in the December quarter.
During the FY 2013, AIA management spent heavily on re-branding the company from the earlier known AVIVA NDB Insurance PLC after the company was taken over from Aviva Asia Holdings Private Limited and NDB Capital Holdings PLC in a deal worth US $ 109 million in December 2012
Meanwhile for the year ended December 31, 2014 AIA group posted a net profit of Rs.352.4 million, down 29.4 percent.
Total revenue rose 9.2 percent to Rs. 14.19 billion and investment income rose to Rs. 4.7 billion from Rs.4.4 billion a year ago.
Operating and administrative expenditure rose 7.3 percent to Rs. 4.13 billion.
For the year, AIA group paid net clams and benefits amounting to Rs. 7.99 billion, up from Rs.6.75 billion.
In January 2015, the company announced a scrip dividend of Rs.7.07 per share for the FY ended December 2014 and the shareholders received one ordinary share for every forty shares held in February.
AIA Group jointly has 97.15 percent stake in AIA Lanka as of end December 31, 2014.