After leadership in General, SLIC now looks to Life dominance

Having regained leadership status in General business after eight years, Sri Lanka Insurance Corporation (SLIC) is now bracing itself to dominance in Life insurance.

Last year SLIC increased its Gross Written Premium (GWP) on Non-Life insurance by 5.7% or Rs. 496 million to Rs. 9.266 billion. This gave SLIC a market share of 24.82% ahead of Ceylinco Insurance, which managed to have a share of 24.70%.

The latter’s General business grew by only 1.5% or Rs. 143 million to Rs. 9.22 billion. Ceylinco Insurance overtook SLIC in General business eight years ago and lost the crown in 2010 to SLIC.

Managing Director and CEO Mohan de Alwis told the Daily FT that as per provisional data, SLIC had maintained its leadership in General business in the first quarter of 2011 as well.

He said that regaining leadership in 2010 was due to innovative strategies and products launched and not necessarily on account of Government directive that State business must be placed with either SLIC or National Insurance Trust Fund (NITF).

De Alwis said that strategic partnerships with DIMO, Senok Automobile, Central Finance, Alliance Finance, etc., boosted motor insurance business especially in the luxury and high value vehicles segment. SLIC has also got SriLankan Airlines’ part of retention fleet business after the national carrier opted earlier to insure it outside.

As opposed to 14% increase last year, a growth of over 20% in motor segment in SLIC General insurance portfolio is planned for 2011 with the influx of vehicles as a result of reduction of duties and permit holder imports.

The strategic reorganisation of branch network and select expansion has proved beneficial to SLIC. New branches in north have opened new opportunities whilst focus is also on the Eastern Province. Growing presence in north and east has boosted business in addition to reactivating lapsed and old policies with staff engaged in more personalised customer service.

“We endeavoured to reorganise branch operations to make them operationally efficient and profitable. The strategy included combining branches and rationalising non profitable branches,” de Alwis said.

At present SLIC’s branch network stands at 122 with plans to increase it to 130 in the short-term.

With the dawn of peace, SLIC opened five branches in the north (Jaffna, Kilinochchi, Chankani, Nelliady and Mannar) while its footprint will be expanded to reach Chavakacheri, Mullaitivu and Kankasanthurai. In the east too the company plans to open three branches, with Akkaraipattu likely to be the first.

Commenting on the captive State business, Managing Director said: “We are not entirely banking on the directive, nor are we dependent on it.” He cited new business generated in motor segment via strategic ties up as a case in point.

He also maintained that when it came to infrastructure projects, SLIC hadn’t won all, but indeed had lost out due to others bidding with cheaper quotes. “We bid for all projects with expressed reinsurance undertaking,” he added.

De Alwis also said that SLIC was setting its sights on regaining leadership in Life insurance. “Last year we made good progress with GWP in Life growing by a high 24.6% or Rs. 1.2 billion to cross the Rs. 6 billion mark. Overall the industry’s GWP on Life grew by 31%.”

SLIC’s rank in life is third with a share of 19.29%; behind Ceylinco (28.2%) and Aviva NDB (25%) hence the State giant faces an uphill task as it has to capture lot of ground.

However, SLIC is confident given the progress achieved overall, measures put in place last year as well as those being planned into the future.

“So far this year we have progress further and the momentum will continue in Life with greater focus on value-added products,” the Managing Director said.

According to him, one of the handicaps of SLIC is the lack of more attractive retirement plan solutions. “We are working on a transparent unit-linked pension plan, which we hope to launch later this year,” de Alwis revealed.

As per provisional data, SLIC’s Life business had grown by over 20% in the first quarter and forecast is a 25 to 30% growth during the full year. “With the revamp of the branch network, a motivated sales force and the launch of value added products, we hope to leapfrog in Life business in 2012,” he added.

For 2010, SLIC declared the highest-ever bonus worth Rs. 3.4 billion for Life policy holders.

In SLIC’s 2010 Annual Report, de Alwis said that the future looked positive for the insurance industry and that he expected the Life insurance to record a growth of around 25% in 2011. “Though Life insurance penetration still remains low in Sri Lanka, there is tremendous market potential and therefore high growth rates are feasible,” the SLIC Managing Director and CEO opined.

It was pointed out that the health insurance sector was seen as a growing market and many corporates were showing a keen interest in facilitating health covers.

“With the new infrastructure projects taking place in the economy and other investment opportunities opening up, together with positive macroeconomic conditions, we expect that there would be substantial growth opportunities in the General insurance sector, although this is a very price sensitive market,” he said.

“A growth of over 20% in motor segment in our General insurance portfolio is planned for 2011 with the influx of vehicles as a result of reduction of duties and permit holder imports,” he added.

As the largest composite insurance provider, SLIC’s combined GWP amounted to Rs. 15.2 billion, up by 12.5% as against zero growth in the previous three years. “This was a major shift in the business model and we expect it to improve further in the future,” SLIC Managing Director and CEO de Alwis had said in the 2010 Annual Report.

SLIC Group, which has Lanka Hospitals Corporation Plc and Litro Gas Terminal Lanka as subsidiaries, achieved a consolidated profit before tax of Rs. 15.1 billion (up 431% over 2009) and after tax profit of Rs. 13.2 billion highest by a financial entity in the country aided by an unprecedented Rs. 22.5 billion in investment income.

As the industry’s biggest, SLIC holds Rs. 88.9 billion worth of assets and also holds the highest Life fund of Rs. 49.5 billion. SLIC is also the only insurance company to be awarded AAA by RAM Ratings and the first local insurer to get AA- rating from Fitch in addition to being the only ISO 9011:2008 certified insurer. It won the ‘Best Insurance Company of the Year 2010 – Sri Lanka’ at the World Finance Awards 2010 held in London.