The net profit of the Hatton National Bank Group Insurance subsidiary, HNB Assurance PLC fell 71 percent to Rs.15.5 million for the quarter ended March 31, 2015 (1Q15) from a year ago.
The performance weakened due to the rise in benefits, claims and expenses paid during the quarter.
Accordingly, expenses rose 17 percent year-on-year (yoy) to Rs.1.3 billion for the 1Q15.
The earnings per share lost 71 percent to 31 cents.
However, the top line measured by the total Gross Written Premium (GWP) rose by a healthy 20 percent yoy to Rs.1.37 billion.
The general insurance GWP rose 29 percent yoy to Rs.743 million while life insurance GWP rose 20 percent yoy to Rs.1.37 billion.
Meanwhile the other incomes of which a larger chunk consists of interest and dividend income grew by 2 percent yoy to Rs. 202.3 million.
“The strong growth seen in both lines of business is very promising as our focused efforts to develop identified areas are beginning to meet expectations. We believe that both companies are now well positioned to maximize the potential market opportunities and expand their presence, while creating sustainable value to all stakeholders.” Acting CEO Niranjan Manickam said.
HNB Assurance became a group of companies as a result of its composite insurance business being split in to life and general businesses following the insurance regulator’s instructions.
As a result the company spun off its general insurance business in to a 100 percent subsidiary, HNB General Insurance Limited on March 20, 2014.
Now the company has a stated capital of Rs.1 billion and has received an insurer financial strength and national long term rating of ‘A’ from Fitch, in line with the parent company.
It is estimated that companies with higher exposure to life segment may see superior bottom line growth supported by a smaller base going forward as the life segment growth will outperform the general insurance with the increasing income levels of the people.
However in 2014, life sector growth slowed down to 9 percent from 10 percent a year ago.
Sri Lanka’s life insurance penetration stands woefully low at just above 0.5% of GDP (based on GWP). According to the independent researcher, Capital Alliance Research this is expected to grow 16 percent every year (CAGR) to reach 0.9 percent by 2018.
Life insurance GWPs in the Sri Lankan insurance industry stood at just above Rs.40 billion by end 2013.
According to analysts, the future for life insurers could become promising due to a combination of factors which includes rise in per capital income levels, lower interest rates, ageing population and longevity as they will remain as a part of the workforce for a longer period.
Health insurance is also another area which could take off with the increasing consciousness on maintaining good health and the growing private health care facilities in the country.
Meanwhile Sri Lanka’s general insurance penetration is also at 0.61 percent of GDP against the region’s 1.9 percent. General insurance segments growth slowed down in 2014 to 4 percent from 9 percent in 2013.
In 2014 the total insurance market grew by just 6 percent.
Sri Lankan insurance sector in recentl times has been undergoing some drastic changes, mostly driven by the regulator and one such requirement is to move in to a Risk Based Capital (RBC) model.
HNB Assurance is ready to move into RBC model with effect from January 1, 2016.
According to the company’s ex-CEO, Manjula De Silva, the company would look at facilitating the entry of a strategic investor who may be able to add value to the business by providing access to technical expertise and global best practices.
As of March 31, 2015 Hatton National Bank PLC held 59.99 percent stake in the company being the single largest shareholder.