Softlogic Life to buy back Rs. 6 b worth shares

Ashok Pathirage  

Fernanda Lima 

Softlogic Life, the second largest life insurer in the Sri Lankan market, has announced a Rs. 6 billion share buyback, pending shareholder approvals.

The buyback price is Rs. 102.40 per share for up to 58,593,750 shares of the current 375,000,000 shares in issue. The company aims to optimise capital and enhance shareholder value, leveraging its strong financial performance and a favourable low-interest-rate environment.

Over the past decade, Softlogic Life has achieved a 26% CAGR in gross written premiums, significantly surpassing the industry average of 14%. For the past five years, it has consistently maintained a Return on Equity above 20% and boasts a Capital Adequacy Ratio of 367%, well above the regulatory requirement of 120%.

The company’s diversified distribution approach plays a crucial role in its profitability, particularly its agency distribution, which has an over 50% rider attachment ratio which is more than five times the Asian region average. With an 83% first-year retention ratio and an average policy value of Rs. 176,872, Softlogic Life significantly outperforms industry benchmarks.

The share buyback decision was based on the “appraisal value” method to reflect the true financial health and potential of the company in line with global industry practices and ensure a transparent and equitable valuation for shareholders. The strong company performance and the strategic opportunity to capitalise on the low-interest-rate environment, which allows for significant gains on liquidating Government securities, underpin this decision. The company expects its capital position to moderate but remain robust, supporting future growth.

Softlogic Life Chairman Ashok Pathirage said: “With more than Rs. 51.7 billion in assets under management and continued bottom line growth over the past year, Softlogic Life has already demonstrated remarkable strength and stability. The company’s announcement of a Rs. 6 billion strategic share buyback underscores our confidence and demonstrates our commitment to efficient capital management. Softlogic Life’s exceptional strategies, financial performance, and strong market position over the past decade has provided a solid foundation for this buyback and reflect our team’s dedication to delivering sustained value to shareholders. This, yet again, reinforces the company’s status as one of the strongest players in the industry protecting over 1.3 million lives.”

Overall, this move underscores Softlogic Life’s commitment to efficient capital management and reflects its confidence in the company’s long-term growth prospects. This approach aims to maximise Return on Equity and deliver enhanced value to shareholders, aligning with the company’s long-term business focus and valuation strategy.

Expressing her views, LeapFrog Investments Partner and Co-head – Asia Financial Services Fernanda Lima said: “Softlogic Life’s strategic decision to execute this share buyback signals confidence in the company’s intrinsic value and aligns with our shared goal of maximising long-term shareholder value. As an investment firm committed to fostering growth and value in our portfolio companies, we view this move as a clear indication of the company’s continuing ability to command a strong leadership position, and a broader sign of confidence in the Sri Lankan life insurance industry as a whole. Softlogic Life’s impressive track record, including a 26% CAGR in gross written premiums and a consistently high Return on Equity, reflects its strong operational performance and market leadership.”