Janashakthi Insurance premium income hits record Rs. 7.13 b

Janashakthi Insurance PLC, Sri Lanka’s third biggest insurer, posted a total income of Rs. 7.27 billion rupees, while total Gross Written Premium income rose 16.0 per cent to Rs. 7.13 billion for the year- ending December 31, 2011, the best ever performance of the company.

Non-life insurance business rose 18.0 per cent to Rs. 5.256 billion during the period under review.

Operating amidst challenging economic and market conditions, Janashakthi posted a healthy Rs. 636 million in post-tax profits, largely driven by growth in the Non Life segment.

“I see this as a very positive trend amidst the challenges of an excessively competitive industry,” said Chairman W.T. Ellawala referring to Sri Lanka’s competitive 22-player insurance industry.

Profitability came under pressure during the year under review, due to falling interest rates and sluggish returns from quoted equity portfolio. Capital Gains from Equities amounted to Rs. 109 million, down from a high of Rs. 290 million generated in the prior year, due to reduced market prices and revised year end valuations on a mark to market basis. This is due to adverse market movement during the year.

Janashakthi, being the third-largest insurer in the island, saw its investment portfolio increase by 20.0 per cent to Rs. 8.054 billion. The exposure to government securities was at 41%. This is a reduction from a high of 59% in the prior year, due to the acquisition of higher yielding Corporate Bonds and Bank Investments.

Managing Director Prakash Schaffter said the management team focused on writing business at a profit, as opposed to focusing on topline growth.

“We have refrained from quoting rates that are uneconomical and do not add to our bottomline. This has resulted in some degree of trade off between a lower top line and a higher bottom line, in keeping with our focused strategy of bottomline growth,” Schaffter said.

Nevertheless, Janashakthi’s flagship product, the motor segment, continued to drive up company profitability.

Motor Gross Written Premium notched a 13.0 per cent growth of Rs. 3.838 billion over Rs. 3.397 billion written in 2010. The sector benefited largely from a government policy directive to ease imports and custom duties that created a demand for reconditioned and new vehicles.

Gross Written Premiums from the non-motor gross gained 34.0 per cent to Rs. 1.418 billion, as against Rs. 1.685 billion written in 2010. This is in excess of the market growth rate of 12.0 per cent. During the year, the sales team focused on growing the profitability of the non-motor business, which showed positive results across all classes, particularly the fire and marine segments.

Life Gross Written Premium segment grew at a modest rate 11.0 per cent to reach Rs. 1.872 billion by year end.

Janashakthi maintained a moderate General underwriting policy during the year, reducing its underwriting claims ratio to 63.0 per cent, said Ellawela. In 2010, the group underwriting claims ratio was nearly 70.0 per cent. Strict cost control and management measures were deployed across the company to prune operating expenses.

During the year under review, Janashakthi expanded its exposure to dairy and farming industry by offering a crop insurance policies for different types of commodities. The livestock insurance policy, has limited market share, but gives the group a stepping stone to serve a new customer segment that forms part of the national economy.

A new Janashakthi Hotel Plus policy was introduced during the year, which merged many of the policies that cater to the booming leisure industry. With the rapid growth in tourism, the policy should gain ground in the coming months.

Going forward, Janashakthi plans to extend its reach deeper into the north and east, taking advantage of the vast post-war development activities that is flouring in the region. Janashakthi has been in the area since 2002, and currently have 12 branches servicing the local communities. “We hope to add Mullaittivu and some other locations to our branch network to kick off operations in towns, as the regions economy prospers,” Schaffter said.

In the coming months, Sri Lankan insurance market faces challenging times as high interest rates and a credit squeeze that could slow economic growth. Sri Lanka’s insurance penetration continues to remain just under 11.0 per cent for 20 million people.

“The challenge before us it to innovate insurance products, especially in the areas of pension and health insurance that caters to the growing aging population,” said Ellawela.

He also drew attention to the need to manage a growing number of claims that is challenging the way Sri Lankan insurers do business. Road accidents remain the biggest source of insurance claims, which has been compounded by a growth in new motor registrations.

“As we have more motor vehicles on our roads, there will be more road accidents leading to higher claims. The industry has to work together to improve road safety and control the incidents of road accidents,” Ellawela said.

Janashakthi ended 2011 controlling 12.0 per cent of the industry’s gross written premium business. In the Life insurance segment, Janashakthi remains the fifth largest with six per cent of gross written premium.

Janashakthi also continued with an active role in nation building during the year. The Rural Athlete Sponsorship Program remained as the flagship project. The company’s efforts to beef-up corporate governance and sustainability was recognised with an award at the recent Sustainability Awards.

The company also invested in improving its call centre as a means of upgrading customer service quality to consistently higher standard.

The Vehicle Emergency Product, available not only to Janashakthi customers, but also to any other motorist, is an extension of this effort by Janashakthi to add value to customers. Janashakthi is now in its 18th year and looks forward to a brighter future of service to Sri Lanka consumers and to continuing efforts of nation building.