Real life.
Real relationships.
AIA Insurance Lanka PLC
Annual Report 2013
aialife.com.lk
Living our brand promise as The Real Life Company
The year 2013 was a pivotal one for the AIA Group as it launched its new brand positioning and brand promise as
‘The Real Life Company’ across all of its operations in the Asia Pacific. We as part of the AIA Group are eagerly poised to
enter a refreshing new phase in our brand journey.
Core of the new brand promise as ‘The Real Life Company’ is being genuinely engaged in people’s lives, providing the
right financial solutions for them and their families in a constantly changing world. Our brand positioning is deeply rooted
in the operating philosophy – Doing the Right Thing, In the Right Way, With the Right People and every one of our staff’s
contribution is valued, since it is what will see the Company deliver on the brand promise and add real value to the lives of
our customers.
How do we plan to embark on this significant, sublime and progressive pathway? We have carefully mapped out our journey
with positive yet simple, meaningful steps. First is to increase the size and quality of our agency force and augment their
professionalism, expertise and understanding of real life needs of the society. We in Sri Lanka have proudly taken this
initial step to both consolidate and re-engineer our Distribution Channel infusing it with new blood and new direction whilst
developing our training to infuse the essence of what’s required to deliver on our promise. 2013 was a brilliant year for our
sales team which enabled AIA Sri Lanka to shine in the AIA world the very first year of Sri Lanka becoming a member of the
AIA Group.
Another vital step is to deepen our knowledge and understanding of our customers and use the insights we harness to
guide our business decisions. 2013 was no exception to the above and saw the introduction of 3 new needs based insurance
solutions to cater to the education and protection needs of the Sri Lankan customers. Research conducted across Asia and
most importantly, in Sri Lanka, on how people perceive living a healthy life was another important step which will help steer
us towards providing the right solutions that our people seek.
The geographic footprint of AIA Group spans 17 markets across Asia and is the world’s fourth largest listed life insurer by
market capitalization as at 20 September 2013 (Source: Bloomberg). AIA’s deep rooted Asian heritage was first established
over 90 years ago in Shanghai. Today AIA enjoys market leadership across the majority of its markets that extend from Hong
Kong, Thailand, Singapore, Malaysia, China, Korea, the Philippines, Australia, Indonesia, Taiwan, Vietnam, New Zealand,
Macau, Brunei, India, Myanmar to Sri Lanka.
Purpose
To play a leadership role in driving economic and social development in Sri Lanka.
Vision
To become the pre-eminent Life insurance provider in Sri Lanka.
Our history
AIA Company Limited (“AIA”), Hong Kong acquired the entirety of the shareholding in AIA Holdings Lanka (Private)
Limited, the majority Shareholder of AIA Insurance Lanka PLC (“AIA Insurance”), in December 2012. AIA also acquired
a direct 5% of the shareholding in AIA Insurance in December 2012.
Through a voluntary offer declared to acquire the remaining shares of AIA Insurance held by minority Shareholders,
AIA also acquired a further 4.88% direct holding in AIA Insurance in May 2013.
Consequent to the above acquisitions of indirect and direct shareholdings, AIA now owns an effective shareholding of
97.15% in AIA Insurance Lanka PLC.
Real life.
Real relationships.
No two people are ever quite the same. All of us travel different roads with
different hopes, different dreams and different destinations. Along the way we
all face the challenges of real life; the little problems that are easily overcome
as well as the greater anxieties that come to each of us, whoever we are.
Yet all successful human endeavour is driven by the spirit of confidence and
hope and in Sri Lanka as elsewhere, we are empowered by the strength of that
spirit that has seen us persist, endure and succeed.
AIA Insurance celebrates this spirit of persistent optimism as we protect
and support the thousands of customers across the island who place their
trust in us. Over 90 years of experience in Asia gives us the expertise and
understanding that enables real life relationships that are strongly rooted and
built to last. Because real life is fast, turbulent and unpredictable. And real life
never stops.
AIA Insurance. The Real Life Company.
Contents
Overview
Financial Highlights - Group
Milestones 2013
Chairman’s Review
CEO’s Review
3
4
6
8
Management Discussion and Analysis
About this Report
Economy
Social
Environment
GRI Compliance Index
12
18
39
61
63
Governance
Board of Directors
Directors’ Profiles
Senior Management Team
The Annual Report of the Board of Directors
on the Affairs of the Company
Corporate Governance
Risk Management Review
Audit & Compliance Committee Report
Remuneration Committee Report
Investment Committee Report
Actuary’s Report - Life Insurance
Actuary’s Report - Non-life Insurance
Statement of Solvency
Statement of Approved Assets
72
74
76
80
87
140
146
148
149
150
151
152
153
Financial Information
Financial Calendar
Chief Executive Officer’s and
Chief Financial Officer’s Responsibility
Directors’ Statement of Responsibility on
Financial Reporting
Independent Auditor’s Report
Statement of Financial Position
Income Statement
Statement of Comprehensive Income
Statement of Changes in Equity - Group
Statement of Changes in Equity- Company
Statement of Cash Flows
Long Term Insurance Statement of
Financial Position - Supplemental
Insurance Revenue Accounts
Notes to the Consolidated Financial Statements
and Significant Accounting Policies
Notes to the Financial Statements
156
157
158
159
160
161
162
163
164
165
166
167
168
192
Other Information
Quarterly Analysis 2013
220
Quarterly Analysis 2012
221
Decade at a Glance
222
Share Information
224
Distribution Network
227
Glossary229
Notice of Meeting
235
Notes236
Form of Proxy
239
Corporate Information
IBC
Annual Report 2013
Financial Highlights - Group
LKR
823Mn
LKR
2012 - LKR 1,204Mn
2012 - LKR 9,894Mn
MARKET CAPITALISATION
PROFIT BEFORE TAX
LKR
12,994Mn
LKR
4,585Mn
2012 - LKR 4,064Mn
2012 - LKR 12,630Mn
NET ASSETS
REVENUE
LKR
7,521Mn
16.64
LKR
2012 - LKR 28.26
499Mn
2012 - LKR 848Mn
EARNINGS PER SHARE
PROFIT AFTER TAX
11.00%
2012 - 20.87%
RETURN ON NET ASSETS
Financial Highlights - Group
20132012 201120102009*
Total Revenue
(LKR Mn)
12,994 12,630 12,933 15,187 9,655
Profit before tax
(LKR Mn)
823 1,204
1,049 894 958
GWP - Non-life
(LKR Mn)
2,673 2,400 2,692 2,847 2,504
GWP - Life
(LKR Mn)
6,863 6,496 7,846 7,784 4,632
Net assets
(LKR Mn)
4,585
4,064 3,585 3,267 2,579
Life Fund
(LKR Mn)
33,812 32,017 28,864 25,955 18,048
Return on net assets
( % )
11.00
20.87 19.31 18.37
28.32
Basic earnings per share
(LKR)
16.64
28.26 23.08 20.01 24.35
Market Capitalisation
(LKR Mn)
7,521
9,894 7,422 8,400 5,340
Note:* The results for the financial year 2009 are based on the accounting standards prevailed prior to 01 January 2012.
3
4
AIA Insurance Lanka PLC
Milestones 2013
AIA brand unveiled
We became AIA Insurance Lanka PLC overnight.
The transformation was evident at the head
office in Colombo and at Branch Offices and Area
Development Offices dotting the country. Changing
the corporate brand to AIA was a major milestone in
the Company’s history spanning 25 years.
Top performers recognised
Top sales performers were recognised at the
annual Graduation & Sales Convention. The Wealth
Planners who qualified to participate in the world’s
most prestigious insurance event, the Million
Dollar Round Table Conference as well as those
who received the LIMRA International Quality
Awards were also recognised. There were 17 MDRT
members and 19 IQA winners.
March
20 year bancassurance partnership with NDB
We entered into a 20-year bancassurance
partnership with NDB further strengthening the
close association the two entities have enjoyed
for over a decade. The link has enabled the NDB
financial conglomerate to offer life insurance
solutions to its customers.
Rewards for Life draw
For the second year in a row we held a lucky draw
to choose 100 policyholders and award laptops
under the Company’s initiative ‘Rewards for Life’.
Policyholders who had children aged 14 to 22 years
and had an active life policy with the Company for
more than 3 years were entitled to participate and
thousands applied.
April
iPoS launched
We became the first insurer in Sri Lanka to
introduce the iPoS System (Interactive Point of Sale)
for Wealth Planners who are equipped with iPads.
This advanced application offers a complete sales
process (from quotation to proposal submission) via
iPads making it possible for AIA Wealth Planners to
serve customers with amazing speed and efficiency
anytime, anywhere. This is a major change in the
insurance industry which enriches the customer’s
purchase experience.
May
A partnership with Commercial Bank
We entered into a Bancassurance partnership with
Commercial Bank to bring the bank’s customers
the opportunity to avail themselves of world class
needs based insurance solutions provided by AIA.
The bancassurance partnership was formalised
by the Memorandum of Understanding signed by
Shah Rouf, Chief Executive Officer of AIA Insurance
and Ravi Dias, Managing Director/Chief Executive
Officer of Commercial Bank.
AIA Poson Safety and Poson Vandana Train for
Pilgrims
For the 20th consecutive year we conducted the
Poson safety campaign facilitating the presence of
around 600 lifeguards from the Sri Lanka Police, the
Navy and the Life Saving Association of Sri Lanka, 7
lives were saved by lifesavers. AIA Insurance Poson
Vandana special train provided a free shuttle service
for thousands of pilgrims visiting Anuradhapura. This
special train service operated between Anuradhapura
and Mihinthale during Poson, providing free
transportation facilities to the devotees.
June
Annual Report 2013
Gordon Watson appointed as Chairman
The appointment of Gordon Watson as the
Company’s new Chairman of the Board of Directors
was announced. Gordon Watson is Regional Chief
Executive of AIA Group Ltd and is responsible for the
Group’s businesses operating in Hong Kong, Macau,
Korea, the Philippines, Australia, New Zealand, India,
Indonesia, Vietnam and Sri Lanka, as well as the
Group Corporate Solutions business and the Group’s
partnership distribution.
Promoting healthy living
100 employees including the top executives cycled
along Colombo’s busy streets waving red flags and
banners, to promote ‘Healthy Living’, setting an
example in fitness for the society, demonstrating
AIA’s operating principles designed to benefit not only
customers and employees but the nation as a whole.
Awards for our Annual Report
AIA Sri Lanka won 6 awards from the League of
American Communications Professionals (LACP) at
the 2012 Vision Awards Annual Report Competition.
AIA’s Annual Report was ranked No. 14 among the top
100 worldwide and was ranked No. 5 in the Asia Pacific
region. The report also won a Gold Award at ARC
Awards International presented by the International
Academy of Communications Arts & Sciences.
July
Placement for insurance studies
We partnered with Wayamba University of Sri Lanka
to offer a scholarship to the most outstanding
final year student in Insurance & Valuation at the
university. This year the scholarship was awarded
to Denushika Wijenayake who received a 6-month
internship programme at the Company together with
a monthly allowance.
Garth Jones visits Sri Lanka
Group Chief Financial Officer Garth Jones was in
Sri Lanka to participate in the Seminar on Risk Based
Capital organised by the Insurance Board of Sri Lanka
and Asia Insurance Review. Garth delivered the industry
Keynote Address at the strategic seminar attended by
regulators and industry leaders in the region
AIA unleashes its hidden talents
‘AIA’s Got Talent – the Sri Lankan Extravaganza’
showcased the hidden entertainment talents of AIA
employees. AIA’s Got Talent was happening in 16 AIA
countries across Asia, with the eventual winners being
chosen at a gala event in Hong Kong. The dance troupe
‘Beat Breakers’ were selected to fly the flag for AIA
Sri Lanka.
August
Group hosts ‘Invest Sri Lanka’ in Hong Kong
Extending a warm gesture of goodwill towards
Sri Lanka, AIA Group hosted officials from the
Colombo Stock Exchange (CSE) and Securities and
Exchange Commission (SEC) who were in Hong
Kong to conduct the ‘Invest Sri Lanka’ road show
to encourage investment in Sri Lanka’s equity and
listed debt market.
Higher Education Scholarships
Emeritus Professor J.B. Disanayake was the Chief
Guest when the 13th batch of Year 5 students to
benefit from our Higher Education Scholarships
received their initial monthly bursary. The
scholarships are granted to every student who
comes first in each of the 25 districts at the Year 5
scholarship examination. The 2006 batch entered
Advanced Level class in 2013 and the students
became entitled to receive the scholarship benefits.
Enhancing the Agency channel structure
In keeping with AIA Sri Lanka’s ambitious growth
plan, the Company launched a new agency
structure with a 5-member team in contrast
to the previous single distribution structure,
dramatically revamping it to a three-phase channel.
The new channel structure is strengthened by
two key support functions to facilitate seamless
planning, recruitment, monitoring, performance,
management and administration.
September
AIA and Union Bank enter into partnership
Union Bank joined hands with AIA Insurance to
bring bancassurance services to its customers
further strengthening our position as the pioneer
and leader of bancassurance in Sri Lanka.
November
Laugfs Supermarkets accept AIA life premiums
AIA Insurance entered into an agreement with the
Laugfs Supermarket chain to bring
customers the welcome convenience of paying
premiums at Laugfs supermarkets islandwide.
December
5
6
AIA Insurance Lanka PLC
Chairman’s Review
Gordon Timmins Watson
Chairman
Annual Report 2013
AIA is exceptionally wellpositioned to capture the
upside growth opportunities
in Sri Lanka and across the
region given the quality and
scale of our distribution
platforms, our depth of
experience derived from our
long history in Asia-Pacific, our
unrivalled financial strength
and our terrific people.
It has been over a year since AIA acquired one of
AIA is exceptionally well-positioned to capture the upside
Sri Lanka’s leading and most dynamic insurance
growth opportunities in Sri Lanka and across the region
companies. I am delighted to report, in my first year as
given the quality and scale of our distribution platforms,
Chairman, that AIA Sri Lanka has delivered a strong
our depth of experience derived from our long history in
performance, during what has been a relatively challenging
Asia-Pacific, our unrivalled financial strength and our
macro environment. Our success is a testament to the
terrific people.
dedication and hard work of our talented people, and
leaves us well placed for continued growth in 2014.
In closing, I would like to extend my sincere thanks to
our business partners, Wealth Planners and employees
I would like to acknowledge the work undertaken in 2013
including Financial Planning Consultants for their
by our leadership team and indeed all of our employees
contribution to AIA Sri Lanka’s success in 2013.
and agents to ensure the smooth integration of the
company into the AIA Group. I know that the entire AIA
In 2014, I look forward to continuing our journey towards
Group have been very impressed with AIA Sri Lanka’s
being the pre-eminent insurer in Sri Lanka.
business performance, strong agency development and
vibrant company culture.
An important milestone for AIA in 2013 was the launch of a
new brand position, The Real Life Company. With The Real
Life Company brand position, we are saying to our current
and potential customers that we are engaged in their lives,
and that we will help to provide the right financial solutions
for them and their families through life’s ups and downs.
The Real Life Company speaks to our long and remarkable
history; to the wealth of customer insights we have gained
along our journey and to the help we have provided to
millions of people around the Asia-Pacific region in good
times and in challenging times. This brand position is
very relevant in Sri Lanka, where we will maintain our
strong commitment to support the changing needs of our
customers while also contributing the country’s ongoing
social and economic development.
Gordon Timmins Watson
Chairman
7
8
AIA Insurance Lanka PLC
CEO’s Review
Shah Rouf
Chief Executive Officer
Annual Report 2013
I am pleased to report it has been another year of solid and
sustained performance and it has been an honour and a
fulfilling experience for me to lead an aspirational business
such as AIA Sri Lanka within the very dynamic AIA Group.
With the global economy showing little and mixed signs of
recovery, and most emerging markets and economies feel
the tapering of quantitative easing, Sri Lanka is showing a
relatively healthy GDP growth of 7.2%.
Our success in 2013 was due in large part to the focused
execution of strategic priorities which involved driving
sustainable and profitable business growth through geographic
expansion, strategic partnerships, product differentiation and
leveraging our strong brand promise.
We continued to invest in the growth of our Agency Direct
Sales Force (DSF) under the ‘Wealth Planner’ name, with 2013
seeing the most successful new agent recruitment drive so
far. The Agency DSF expansion has positively impacted top
line growth and will contribute more as new recruit profiles
mature. Our Bancassurance channel continues to deliver a
steady solid performance with our refined operating model, is
now embedded with existing and new partner banks.
This 2013 business year has again seen a combined robust
performance of our Life and Non-life insurance businesses,
particularly taking in to consideration the volatile market
pricing and context.
As per expectations, Company’s profit after tax (PAT) has
decreased to LKR 499Mn from LKR 840Mn prior year to
support the investment on brand migration. Our 2013
combined composite GWP performance increased to
LKR 9,536Mn versus LKR 8,896Mn the previous year, and
investment income improved to LKR 4,408 Mn vis-à-vis a prior
year performance of LKR 4,028Mn.
Life insurance is the larger of our composite segments and
achieved new business premium of LKR 2,057Mn and GWP
of LKR 6,863Mn. Through our expert long term investment
strategy and continued focus on expense control we have
created value for our Life funds to the benefit of both
shareholders and policyholders. We declared a Life surplus of
LKR 200Mn, in comparison to LKR 195Mn the previous year.
Our Non-life insurance performance in 2013 has been
commendable, delivering in a soft market a positive PAT of LKR
316 Mn in comparison to LKR 376Mn the prior year. Sri Lanka is
a soft highly price competitive market with the industry overall
reliant on investment income to offset underwriting losses. Our
Non-life insurance claims ratio has seen a marginal worsening
from 52% to 58% and our net combined ratio (NCR) from 97%
to 103%. Our focus over the last couple of years has been and
remains on quality underwriting and right pricing.
At AIA we believe our greatest assets are our people. During
2013 we continued to invest in our employees in the form of
training and professional development, ensuring our staff have
the necessary skills and competency to serve customers at
the highest level. One of the biggest endorsements of this has
been AIA being placed within the top 15 of the best companies
to work for in Sri Lanka during 2013. This is a study done in
collaboration with the Great Place to Work institute and the
Ceylon Chamber of Commerce.
The successful activation of our new Life policy administration
system in December 2013, whilst ensuring business continuity
during the transition, provides a clear example of how we
embrace challenges and change. In line with adopting the
latest technology, the launch of iPOS (interactive Point of
Sale) system and tool has enabled our Wealth Planners to
seamlessly integrate with our operations whilst providing
excellent presentations to customers and bridging the
information gap in real time.
The regulatory environment remains dominated by 2011
legislation changes. AIA Sri Lanka welcomes the Risk Based
Capital initiative of the IBSL and are strong advocates as we
believe this will inculcate an even larger degree of financial
stability within the industry and its players over the longer
term. Also as required, we are in the process ensuring a
smooth transition and implementation of Life and Non-life
insurance company segregation that will come in to effect in
2015.
With continuity and momentum as the key themes, we have
defined and set ourselves key strategic imperatives for 2014
which are largely a derivation and improvement on 2013,
where we will continue to focus on our growth strategy for
both Agency DSF and Bancassurance channels with wider and
improved reach across the island. Furthermore, we will drive
for innovation and value addition in terms of product range
and differentiation. A primary focus will be on the retention
of existing portfolios of customers and we will develop mass
market Corporate Solutions as we see this as becoming more
significant as the Sri Lankan economy deepens. In terms of
Non-life insurance, we shall strive for scale whilst maintaining
our prudent underwriting standards.
To this end, I am proud to share with you our brand promise;
‘The Real Life Company’. It is the essence of the kind of
Company we are, and it is a part of our DNA. The Real Life
Company speaks of our long and remarkable history, to the
wealth of customer insights we have gained along our journey
and to the help we have provided to millions of people around
the Asia Pacific Region in good times and in challenging
times. This encapsulates the kind of Company we want our
colleagues and Wealth Planners to help bring to life and how
we want to be perceived by our customers.
I would like to note my appreciation and gratitude to the Board
of Directors and all my AIA Sri Lanka colleagues for their
untiring efforts, dedication during 2013. In particular I would
like to acknowledge and congratulate our Wealth Planners and
Financial Planning Consultants for their contribution towards
our new business success. A special thank you also to all our
business partners including our broker and bank partners
for their support and commitment. Most importantly, my
utmost gratitude to our customers for their conviction and the
continued trust placed in us.
Shah Rouf
Chief Executive Officer
9
Real life.
Real relationships.
11
The sun’s up and it’s another glorious morning.
Whether you’re young or old, enjoy the days of
your life. We’re there for you through all of it.
Because we build real relationships for real life.
12 AIA Insurance Lanka PLC
Management Discussion
and Analysis
About this report…
The Annual Report 2013 takes an integrated reporting approach as a first step in our
journey towards delivering a complete integrated Annual Report.
The integrated Management Discussion and Analysis is structured on a triple bottom line
reporting encompassing the Company’s performance vis-à-vis the economy, society and
the environment.
This is the second consecutive year where we report our sustainable development
activities complying with the Global Reporting Initiative, version 3.1, considered the norm
for sustainability reporting across the world. In our second undertaking of sustainability
reporting, our disclosures represent an application level ‘C’ focusing on social, economic
and environmental performance indicators.
CEO’s Message
It is my pleasure to introduce the Management Discussion
and Analysis of AIA Insurance Lanka PLC for the financial
year 2013. I am glad to note that this report is structured
and presented in keeping with global best practices and
the highest standards of transparent reporting.
We live in an era of imagery, mass information and
awareness that does not always translate into real action
or reflect the priorities of individuals and their families. In
this context and especially at a time such as this what can
be more relevant and meaningful than being ‘The Real Life
Company’?
AIA Insurance Lanka PLC has commenced its journey as
The Real Life Company, to touch the lives of customers
and citizens of Sri Lanka and leave an indelible mark. The
Company’s business philosophy has transformed to walk
alongside real people as they go about living their real
lives. At the core is sustainability, to make sure that AIA
Sri Lanka is there with them throughout their lives, and
this essence is integrated and embedded in everything
we say and do at AIA Sri Lanka. This Annual Report and
indeed the Management Discussion and Analysis evidences
the Company’s response, actions and commitment to that
enduring business goal and to the overall engagement
model with all its stakeholders.
Although rapid changes in the economy posed challenges,
opportunities and risks, the focused leadership, timely
action, sound governance and sustainable business
practices ensured growth underpinned by a solid
foundation. Our distribution network connects Sri Lanka
closer to us via 83 branches and 17 area development
offices which affirm our strength in living the ideals of
a real life company by enabling easy access and close
customer reach.
As a responsible insurer and good corporate citizen, the
Company continued its efforts with initiatives targeting
green practices such as reusing and recycling paper,
saving energy, minimising printing, maintaining scanned
archives and eliminating waste. The wider community
support and involvement included, Poson safety
programme conducted for the 20th consecutive year,
higher education scholarships for year 5 highfliers, career
guidance training programme and workshop, health
ride, voluntary hospital cleaning project, scholarship for
outstanding performance in insurance studies, foster
parenting and our way of making kids smile - ‘Yes I can’.
All of these demonstrate the Company’s engagement and
involvement with society at large.
In 2013 the Company rolled out the Operating Principles
spanning the entire business. I am convinced that these
principles of - Doing the Right Thing, In the Right Way,
With the Right People - will further strengthen the
strong ethic and culture of AIA Sri Lanka and ensure the
sustainability and growth of the business in order to serve
the generations to come. The operating principles provide
our loyal and dedicated 4,813 Wealth Planners and 1,020
employees’ clarity of purpose second to none and will be a
key enabler as we pursue sustainable and balanced growth
in 2014 and beyond.
Creating value for Shareholders, meeting the needs
and going beyond the expectations of our Policyholders,
creating a rewarding workplace for colleagues and making
a difference to the wider community we operate in is the
value story of ‘The Real Life Company’ – AIA.
Shah Rouf
Chief Executive Officer
Annual Report 2013 13
Reporting preparation and process
Boundary of the report
Adoption on integrated reporting, implemented with an
extensive analysis capturing all the stakeholders of the
company. Details on operations and performance been
addressed in a greater extent with clear demarcations.
The content in the report is taken from different sources
by different business units, namely Human Resources,
Marketing, Finance, Distribution, Operation and logistics.
Each article prepared by the respective business
units underwent a thorough screening process by the
management before finalisation.
This report was prepared based on data for the period
from January 1 to December 31, 2013. The reports mainly
consist of operations of AIA Insurance Lanka PLC and
have not taken in to consideration the impact of its only
subsidiary (Rainbow Trust Limited) because of the limited
nature of its operations.
GRI Report application level
At AIA our initial undertakings represent an application
level of ‘C’. Over the years we have practiced and reported
our sustainability initiatives and this being our second
report complying with GRI guidelines of version 3.1, we
have not opted for an external assurance report.
The following diagram illustrates the standard GRI
application levels.
We value your feedback
For any clarification regarding our sustainability report
please contact the Finance Division AIA Insurance Lanka
PLC.
AI A Insurance Lanka PLC
No. 75, Kumaran Ratnam Road,
Colombo 02
Telephone: 2310000
Fax
: 2447620, 2310076
E-mail : [email protected]
Web
: www.aialife.com.lk
14 AIA Insurance Lanka PLC
Management Discussion and Analysis
Key forces driving the business
The triple bottom line model approached by us this year
depicts the connectivity of the environment to the society in
which AIA Sri Lanka exists with the key stakeholders being
Shareholders, Customers, Agency, Employees and Regulators.
relevant to all our stakeholders. Key stakeholders that fit
into our triple bottom line business model are illustrated in
the following diagram.
Collectively, we are passionate about building and
operating a sound, stable and growing business for the
benefit of all stakeholders. Sustainability is thus at the
heart of our business model – we understand the value of
a sustainable business where our customers, employees,
shareholders and other stakeholders know they are
associated with the “best”.
In reporting sustainability, we have focused on triple
bottom line and the key stakeholders of each segment.
Five of our key stakeholder groups are categorised as
having an impact on our economic bottom line.
In identifying the relevant stakeholders, we have noted
the increased influence and impact of the Regulator.
Throughout this integrated report we will be discussing
the engagement, concerns and the Company responses
Stakeholder Engagement
The Company follows informal and formal mechanisms to keep stakeholders informed and enable them to raise their
concerns on any aspect they consider material to them. We have created equal opportunities for mutual engagement with
all stakeholders. Table depicted below illustrates the engagement mechanism in practice.
Engagement topics
Stakeholder expectations
/ Concerns
Stakeholder
Model of engagement
Shareholder
• Annual Report and
Circulars
• Annual General Meeting
• Extraordinary General
Meetings
• Media updates
• Announcements made
to the Colombo Stock
Exchange
• Corporate website
Shareholders are kept informed of decisions requiring
Shareholder notification and / or approvals.
Equal opportunities are given to all Shareholders to
have an open dialogue to voice their views. We value
the principle of accountability and transparency in our
business operations to maximise Shareholder wealth
creation.
1.Dividend payouts
2.Right to receive
information
3.Company policies
are in line with
the regulatory
requirements
Customer
• Branches
• Surveys
• Call centre
• Online feedback
• Corporate website
• Town storming events
Customer centricity is taken as the life blood of the
Company and our service operations revolve around
satisfying customers to the best of ability.
Corporate website provides online feedbacks and
options to review the policy status without a hassle.
24x7 call centre operation assures quick support to the
customers who are in need.
Branches located islandwide and at other touch points
give customers easy access to pay their premiums and
make policy inquiries.
1.Brand loyalty
2.Effective and efficient
customer service
3.Security of their
funds
4.Equal opportunity in
all aspects
Annual Report 2013 15
Model of engagement
Engagement topics
Stakeholder expectations
/ Concerns
Employee
• Company conference
• Operational updates to
staff via emails
• Intranet site
• Company annual trip
• Special events such
as Children’s party,
sports competitions
etc.
A motivated and healthy workforce is critical to achieve
greater heights in the Company’s journey to go from
good to great. The Company endeavours to become an
employer with best practices in talent acquisition and
development, management of performance, rewards
and recognition towards achieving the business
objectives.
Periodic surveys and one-to-one discussions with their
immediate supervisors have enabled the employees to
voice their views and be aware of what is expected of
them.
1.Reward and
recognition
2.Financial stability
3.Work life balance
4.Learning and
development
5.Adherence to labour
rules and regulations
Environment
• Waste management
• Energy efficiency
• Company policies
• Educational
programmes
Concerns and care for the environment has
increasingly taken a prominent role in the overall
Company trajectory. Number of initiatives have been
carried out to minimise the harm to the environment
directly and indirectly affected due to the Company’s
operations. The Company has a Risk Management
policy which comprehensively covers environment
related issues with continuous awareness to employees
on how to treat environment and minimise harm.
Initiating 5S strategy across the Company, thorough
analysis on procurement procedures has enabled the
Company to minimise the direct and indirect impact on
the environment.
1.Minimising carbon
footprint
2.Preserving
environment and
creating awareness
Community
• Corporate website
• Press releases
• Sponsorships
• Public events
• Conferences
THe Company being a responsible corporate citizen, is
very much sensitive to address the issues in the society.
Number of CR endeavours carried out through the
year uplifted the well being of under privileged school
children and many others in the society who needed
much support. Among other programmes ‘Poson Safety’
‘Fire Cracker Safety’ practiced for a number of years are
comprehensive, sustainable and create a marked impact
on the lives we touch.
1.Improving
community life
2.Best practices in CR
Agency
• Annual Conference
• Competitions
• Corporate web site
• Company special
events
Agency is the pillar that holds the sales distribution
network of the Company. Our Wealth Planners are
equipped with state of the art technology and are
provided with some of the best trainings in the industry.
A number of Wealth Planners were added to the agency
force giving them an opportunity to experience a world
class agency operation while having the advantage in
selling Life and Non-life products.
1.Accessibility to
product information
2.Reward and
recognition
3.Operational codes of
conduct
Regulator
• Annual Report
• Mandatory
submissions
• Routine and nonroutine meetings and
correspondence
The insurance regulator is the key policy maker for
the industry. The Company adheres to the regulatory
requirements as specified and maintains healthy
dialogues and interactions with the regulators on
regulatory requirements and developments.
1.Guidance, directions
and cooperation
2.Adherence to laws,
rules and regulations
Stakeholder
16 AIA Insurance Lanka PLC
Management Discussion and Analysis
Wealth creation for Stakeholders
2013 2012
LKR ‘000 LKR ‘000
Restated
Net earned premium
Investment income and other income
Net claims and benefits
Cost of external services
Revaluation surplus
Value added
8,193,760 8,244,157
4,799,828 4,385,577
12,993,588 12,629,734
(6,750,179) (4,183,654)
(2,090,266) (1,566,142)
- 32,180
4,153,143 6,912,118
%
%
1 To employees
2 To intermediaries
3 To the Government as taxes, cess and levies
4 To the providers of capital
5 To the Life policyholders as Long Term fund
6 Retained within the business
- as amortisation of intangible assets
- as depreciation - in reserves
Distribution of value added - 2013
1,463,951 832,127 401,694 75,000 753,963 34
20
10
2
18
1,094,691 895,426 339,917 270,000 3,672,697 16
13
5
4
53
28,267 76,361 521,780 4,153,143 1
2
13
100 22,685 74,074 542,628 6,912,118 0
1
8
100
Distribution of value added - 2012
Annual Report 2013 17
How we respond
At AIA, we are sensitive to the changes taking place in the external environment and we continuously monitor the triple
bottom line impact on Company operations. Identified changes in each sector are addressed based on their magnitude
and instantaneous actions are taken to minimise the impact on Company as a whole. We ensure that any changes to our
operations have a nominal impact on our key stakeholders and serve to improve the quality of service we deliver.
Impacts, Risks and Opportunities
Impacts
Economy
Risks
Protection provided enhances
the financial stability of the
people and the economy
involved.
Unfair market conditions
may decrease investments
reducing wealth creation for
stakeholders.
Job opportunities created in
direct and indirect operations
uplift the employability levels
in the economy
Expected changes within the
industry impacting on the
market share.
Opportunities
Lower penetration in
insurance market open doors
for new opportunities
New competition with the
regulatory requirement to
segregate the composite
insurers.
Society
Environment
Number of CSR initiatives
conducted by the company
continues to improve the living
standard of the people. The
‘Poson Safety’ campaign saved
a number of lives during the
Poson season.
Low awareness with regard
to insurance need in the
country. Specially in the rural
areas insurance policies are
treated as an investment
where people expect a good
return at maturity rather than
protection from an insurance
cover.
Market potential for Life
insurance followed by proper
awareness programmes by the
Company.
Energy saving electronic
appliances and initiatives for
efficient power usage reducing
the carbon foot print of the
company
Adverse environmental
changes resulting in increased
natural perils.
Proper re-insurance
arrangements to mitigate the
risk.
Natural disasters expose the
company to more liabilities.
Prudent underwriting
practices and policies
implemented when writing
policies.
Implementing renowned
concepts like ‘5S’ improves
productivity and minimises
waste.
Fulfilling the social needs
such as addressing the
unemployability in the country,
basic needs such as drinking
water, education to the
children etc…
18 AIA Insurance Lanka PLC
Management Discussion and Analysis
Economy
The World Economy
Economic Growth
The prospect of continued weakness in the global economy
may have turned tide with global growth finally showing
signs of recovery. 2013 was the 5th year after the start of
the global financial crisis and the 3rd after the start of the
Euro zone financial crisis. The world economic growth
in 2013 was aided mainly by growth in higher-income
economies; notably, growth in the United States has shown
signs of strengthening. This in turn has helped developing
economies, including China and India, which have
managed the slow deceleration they experienced in the
past 2 years to increase growth moderately. These factors
point to increasing global growth.
However global growth in 2014 remains vulnerable to the
impact of the withdrawal of economic stimulus measures
in the US. The US Federal Reserve has already begun to
wind down its monthly bond-buying programme. The World
Bank highlights that as the Federal Reserve cuts back its
efforts to stimulate the US economy, it may result in higher
global interest rates which could hit developing economies
through affecting the flow of money in and out and lead to
more volatile international financial markets. However, the
steps taken by the Federal Reserve in December 2013 to
cut back its programme of buying financial assets did not
severely disturb the markets and leaves room for optimism.
Emerging Markets
Emerging markets have had a challenging year in 2013
with many countries facing volatile capital flows and rising
inflation and the need to manage uncertainties, in mainly
Asia Pacific bonds and currencies, with the lead up of the
quantitative easing by the Federal Reserve.
Recent increased growth in several developing countries
and the relatively high growth of China are encouraging.
Sri Lanka and other developing countries will have to
ensure domestic demand remains robust and work
towards attracting both foreign and domestic investments
to sustain output over the medium term in order to return
to pre-crisis growth.
The remnants of the fiscal crises in the Euro zone may
continue to pose threat to the global economy in 2014
through high levels of debt. Rising debt levels, higher
interest payment and lower investor confidence as well
as impacts from the US withdrawal of economic stimulus
measures could lead to higher global interest rates.
Therefore, the world economy in 2014 is expected to show
improved growth, not withstanding these risk factors.
The Sri Lankan Economy
Economic
Highlights
GDP Growth
364-day
Treasury bill
Equity Return
Exchange Rate
(USD)
Inflation
2009
2011
2012
2013
3.5%
8.0%
8.2%
6.4%
7.8%
(3Q 2013)
9.32%
125.2%
7.55%
96.0%
9.31%
-8.5%
11.69%
-7.1%
8.29%
4.8%
114.39
4.8%
111.11
6.9%
113.95
4.9%
127.05
9.2%
130.75
4.7%
Figure 1 – Source: CBSL & CSE
GDP growth
In 2013 Sri Lanka’s Gross Domestic Product showed an
improving trend as evidenced by the improvement in the
quarterly growth rates. The main support for growth has been
from the Industrial and Services sectors. The Agriculture
sector performance showed some improvement in the latter
part of 2013 as lagged effects of the drought conditions in
mid-2012 continued into early 2013. Robust growth in the
construction sector was witnessed over the year and this with
improved manufacturing sector growth contributed to the
improvement in the industrial sector. The services sector of
the economy which consists of 59.0% of the economy as at 3Q
2013 was the mainstay of economic growth in 2013. Historical
annual GDP growth rates are depicted in figure 3. The Central
Bank has forecast a growth rate of 7.2% for 2013, which
compares favourably against the growth of 6.4% in 2012.
Future
The World Bank forecasts that growth in global gross
domestic product (GDP) would be 3.2% in 2014, compared
to 2.4% in 2013, with the main improvement being from
developed economies. It also states that developing
economies may grow by 5.3% in 2014, compared to 4.8% in
2013.
2010
GDP - Quarterly Growth
Figure 2
Annual Report 2013 19
6.9%
6.4%
8.2%
3.5%
0.83
6.0%
8.0%
Monetary Policy Changes
As a result of the tight monetary policy stance in 2012,
private sector credit growth witnessed a decline from end
2012, as shown in figure 5, and is now at mid single digit
levels. Money supply has stabilised over the same period.
40.00%
35.00%
2008
2009
2010
2011
2012
2013
(Q1-Q3)
30.00%
25.00%
20.00%
15.00%
GDP - Annual Growth
10.00%
GDP - Annual Growth
5.00%
Figure 3
0.00%
(5.00%)
Inflation
(10.00%)
The inflation levels have decreased in 2013 due to the
reduction in certain food prices aided by the moderation of
commodity prices in the global market and improvement
in weather conditions in Sri Lanka. Monetary policy
decisions in early 2012 created an enabling environment
for lower and stable inflation. Notably, in early 2012 the
Central Bank tightened its key monetary policy stance by
the increase in market rates via the Repurchase rate and
the Reverse Repurchase rate of the Central Bank being
increased by 50 bps in February 2012 and 75 bps in April
2012.
Inflation levels are expected to remain at mid single digit
levels over the foreseeable future, notwithstanding supply
side factors including adverse weather conditions.
12%
10%
Annual
Average
8%
6%
Point to
Point Change
4%
2%
0%
Jan 10
Jul 10
Jan 11
Jul 11
Jan 12
Inflation
Jul 12
Jan 13
Jul 13
Jan 10
Jul 10
Jan 11
Jul 11
Jan 12
Jul 12
Jan 13
Jul 13
Jul 12
Jan 13
Jul 13
Net credit growth to the Private Sector
Credit growth to the Private Sector
Figure 5
28.00%
24.00%
20.00%
16.00%
12.00%
3.5%
Inflation continued its declining trend over 2013 as
reflected in figure 4, declining from 9.2% at end 2012 to
4.7% at end 2013, and now has been at single digit levels
for almost 5 years.
8.00%
4.00%
0.00%
Jan 10
Jul 10
Jan 11
Jul 11
Jan 12
M2b - growth
CSE-6ASPI
Figure
In December 2012, the Central Bank announced that
its tight monetary policy had achieved the expected
stabilisation objectives, and permitted the credit ceiling
imposed on licensed banks for 2012 to expire and
further reduced the policy rates by 25 bps to stimulate
the economy to return to a higher growth path whilst
maintaining inflation around the targeted levels.
The resultant increase in borrowing by the private sector
in 2013 as depicted in figure 5 was lower than anticipated
and the Central Bank continued its policies to encourage
private sector borrowing and spur economic growth, given
the low inflationary environment.
Total Employees- Gender Breakdown
Figure 4
The Monetary board has reduced policy rates by a total of
125-175 bps over the period Dec-2012 to Jan-2014 in its
efforts to encourage private sector credit expansion with
the aim of a spur in economic growth. Policy rates were
20 AIA Insurance Lanka PLC
Management Discussion and Analysis
reduced by 50 bps in May 2013 and the Statutory Reserve
Requirement (SRR) cut by 2 percentage points in June
2013 to reduce borrowing costs to banks and promote
lower lending rates to encourage growth in private sector
credit. Policy rates were further lowered by 50 bps in
October 2013 and finally the Standing Lending Facility Rate
(Reverse Repurchase) of the Central Bank cut by 50 basis
points to 8.00% in January 2014.
Interest rates
As a result of the loosening of the Monetary Policy stance,
the benchmark 364 day Treasury bill decreased by 340 bps
from 11.69% at end 2012 to 8.29% at end 2013 and has
declined even further due to the Monetary Policy action in
early January 2014. The movement in the 364-day Treasury
bill yields is shown in figure 7. The 5 year bond has
declined by 264 bps over 2013. Interest rates are expected
to remain low in the medium term. The Central Bank also
improved the yield curve by issuing long tenure bonds in
2013, with the longest tenure issued during the year being
the 30 year Treasury bond.
There was heightened activity in the listed debenture
market which had the added benefit that they were tax
free, the attractiveness of this to investors and issuers
is reflected by LKR 68 Bn being issued over the year
compared to only LKR 13 Bn issued in 2012.
During 2013, Bank of Ceylon, NSB and DFCC bank raised
USD 500 Mn, USD 750 Mn and USD 100 Mn respectively
by issuing long term bonds in the international market
while the Government issued a USD 1 Bn sovereign bond in
early January 2014. This has helped ease pressure on the
current account and the balance of payments. As a result
of the combination of favourable factors, there is now an
estimated balance of payments surplus of USD 991 Mn in
2013 compared to USD 151 Mn in 2012.
The LKR has depreciated by 2.8% during 2013 to LKR
130.75 as shown in figure 8 and despite the pressure for
the currency to appreciate is being maintained above
LKR 132 per USD against the backdrop of currency
movements of its Asian counterparts. Asian bond and
currency markets experienced a volatile period over 2013
with speculation and fears on the timing and magnitude of
tapering in the quantitative easing programme of the US
Federal Reserve.
140
135
130
125
120
115
110
105
100
14%
Jan 11
Jul 11
Jan 12
Jul 12
Jan 13
Jul 13
13%
12%
USD Exchange Rate
11%
Credit growth to the Private Sector
Figure
8
10%
3.5%
9%
8%
Fiscal discipline
7%
6%
Jan 10
Jul 10
Jan 11
Jul 11
Jan 12
Jul 12
Jan 13
Jul 13
Interest Rate-364-day-T-bill
Interest
Figure
7 Rate- 364-day T-bill
External reserves
The country’s gross official reserves were USD 7.2 Bn in
December 2013 which is sufficient to finance the equivalent
of 4.5 months of imports. The external reserves were
supported by a decline in the cumulative trade account
deficit due to the increase in exports which reflects gradual
recovery in export destination countries; the Euro zone and
the US, and the decline in imports. External reserves were
further supported by sustained worker remittances and
increased earnings from tourism.
The fiscal position improved in 2013, mainly reflecting the
increase in government revenue and also supported by
containment of government expenditure. The Government
is likely to achieve its fiscal deficit target of 5.8% of GDP
for 2013 mainly due to expenditure containment and this
will compare well against a budget deficit of 6.4% in 2012.
Major infrastructure development projects progressed
rapidly. Debt to GDP is estimated to decrease to 78.0% in
2013 from 79.1% reported in 2012.
Equity markets
The equity market exhibited another year of lackluster
performance over 2013 with declining market activity as
reflected by the ASPI performance in figure 9 and daily
average turnover of the Colombo Stock Exchange in figure
10. The ASPI however improved in performance towards
the latter part of the year and recorded a growth of 4.8%
for FY2013 with the index reaching 5,643.00. Market
Capitalisation stood at LKR 2,459.9 Bn at end December
Annual Report 2013 21
2013 with the Price to Earnings Ratio for the market at
15.9x.
9000
8000
Investor confidence
Sri Lanka witnessed the highest arrival of tourists in
its history in 2013, recording over 1.2 Mn arrivals. The
increased visibility of Sri Lanka as a tourist destination
and the general optimism in the country has resulted in
increased foreign investment targeting tourism.
7000
6000
5000
3.5%
4000
3000
2000
Jan 10
Jul 10
Jan 11
Jul 11
Jan 12
Jul 12
Jan 13
Jul 13
CSE - ASPI
Future outlook 2014
0.64
0.60
0.85
0.62
0.50
0.69
0.88
0.83
0.91
1.22
1.36
CSE-9ASPI
Figure
0.88
Sri Lanka’s ranks 85th in a global ‘ease of doing business’
ranking published by the World Bank and International
Finance Corporation, and the best ranked amongst all its
counterparts in South Asia. It should also be noted that the
international rating agencies have maintained Sri Lanka’s
sovereign ratings, Fitch Ratings of ‘BB-’ with ‘stable’
outlook, Moody’s rating of ‘B1’ with ‘stable’ outlook and
Standard & Poor’s rating of B+/B with ‘stable’ outlook.
Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13 Aug 13 Sep 13 Oct 13 Nov 13 Dec 13
Daily Average Turnover of the CSE
Daily 10
Average Turnover
Figure
CSE
The equity market has remained weak over the last few
years, attributed to several factors including the drain in
liquidity caused by the flood of IPOs, private placements
and rights issues in the market a few years ago as well as
less foreign investment at present due to global factors.
Net foreign investments into the Colombo Stock Exchange
in 2013 were LKR 22 Bn for 2013, less than the LKR 33 Bn
recorded in 2012.
The equity market is expected to remain volatile in the near
future with the long-term outlook remaining positive on the
back of the anticipated economic resurgence.
The Sri Lankan economy has a track record of resilience
which is reflected by an improvement in economic growth
from the lower growth in 2012 of 6.4% to 7.2% in 2013, as
estimated by the Central Bank. The pace of growth has
slowed during 2012 and 2013 when compared to the 8.0%+
GDP growth recorded immediately after the end of the
protracted 33 year internal conflict, and remains a healthy
rate of growth. The recent performance of the economy
is underpinned by loose monetary policy as well as slow
recovery of the global economy, with the need to increase
private sector credit up to target levels to stimulate
economic growth in the backdrop of low inflation levels
prevalent over the last 4 years. Inflation is expected to
continue to remain at mid single digit levels in 2014 which
will enable the Central Bank to increase its credit growth
to the targeted 16% levels and lower broad money growth
to the targeted 14% level and stimulate economic growth.
The activities are in the backdrop of the consolidation of
the banking and non banking sectors in the near future.
22 AIA Insurance Lanka PLC
Management Discussion and Analysis
Industry Review
Life Insurance industry
Industry performance
Overview
Sri Lankan insurance industry recorded another positive
year with growth in Gross Written Premium (GWP) for
both Life and Non-life Insurance sectors. The Sri Lankan
Insurance sector represents 1.15% of the nation’s Gross
Domestic Product [GDP] and accounts for LKR 301.9
Bn asset base which is 3.3% of the total assets of major
financial sectors.
Life GWP stood at LKR 37.5Bn as at end 2012, an increase
of 6.6% from LKR 35.2Bn in 2011. The top five Life GWP
generating companies have contributed for approximately
85% of the total Life Insurance GWP in 2012 depicting
evidence of an oligopolistic market.
Insurance penetration (Total Industry Premium as % of
GDP) of 1.15% is considerably lower than the Asian Region
average of 5.8% depicting the growth potential of the local
Insurance sector. (IBSL Annual Report – 2012)
The Sri Lankan insurance sector comprised of 22
insurance companies as at end 2012, of which 12 are
composite insurers, with 7 offering only Non-Life
insurance and 3 offering only Life insurance products as
depicted in figure 11 and including National Insurance
Trust Fund (NITF).
GWP
Figure 12
Life
3
12
Non-life
7
Source: IBSL Annual Report - 2012
Growth potential
Penetration of total insurance premium as a percentage
of GDP was 0.5% in Life Insurance sector in 2012 which
indicates the growth potential in Sri Lanka for insurance
penetration.
Figure 11
Total premium income of the Sri Lankan insurance sector
stood at LKR 87.2Bn as at end 2012 depicting a growth
of 11% from the premium income of LKR 78.5Bn in 2011.
The growth rate has declined from 18.5% in 2011 to 11% in
2012. Sri Lanka’s GDP growth rate has also declined from
8.4% in 2011 to 6.4% in 2012.
Premium Income and Penetration
2008
2009
2010
2011(a)
2012(b)
Long Term Insurance (LKR Mn)
23,613
24,005
31,152
35,162
37,469
General Insurance (LKR Mn)
34,558
33,548
35,101
43,329
49,683
Total Premium Income (LKR Mn)
58,171
57,553
66,253
78,491
87,152
Growth Rate in Total Premium (%)
12.10
(1.06)
15.12
18.47
11.03
Gross Domestic Product (LKR Bn)*
4,411
4,835
5,604
6,544
7,582
6.0
3.5
8.0
8.2
6.4
1.32
1.19
1.18
1.20
1.15
GDP Growth Rate (%)*
Penetration % (Total Industry Premium as % of GDP)
* Source: Central Bank of Sri Lanka Annual Report - 2012
(a) Reinstated audited figures
(b) Provisional figures
Annual Report 2013 23
Industry Vs Company performance
Following table depicts the Company performance in comparison to the industry.
LKR ‘000
Market size [GWP]
Market Growth rate
2009
2010
2011(a)
24,005
31,152
35,162
2012
37,469
1.66
29.77
12.87
6.56
AIA’s market share [GWP] LKR
4,632
7,784
7,846
6,496
AIA’s market share [GWP] %
19.30
24.99
22.32
17.34
Non Life Insurance industry
Industry performance
GWP of the Non Life sector (excluding SRCC & TC) was
LKR 49.7Bn as at end 2012, an increase of 14.7% from LKR
43.3Bn in 2011.
Growth potential
Similar to life penetration, the current Non Life penetration
is low. The total Non Life insurance premium as a
percentage of GDP was 0.7% 2012. This indicates the
immense growth opportunities untapped in the Sri Lankan
Non Life market.
The top five Non Life GWP generating companies have
contributed for approximately 72% of the total Non Life
Insurance GWP in 2012 while the other 12 companies
shared 28% of the market. It is noteworthy that there is a
dilution of the market oligopoly as in 2011 the top 5 Non
Life companies accounted for approximately 75% of the
total Non Life market.
GWP
Figure 13
Industry vs Company performance
Following table depicts the Company’s Non Life
performance in comparison to the industry.
LKR ‘000
2009
Market size [GWP]
33,548
Market Growth rate
AIA’s market share [GWP] LKR
AIA’s market share [GWP] %
2010
2011(a)
2012
35,101
43,329
49,683
(2.92)
4.63
23.44
14.67
2,504
2,491
2,456
2,143
7.46
7.10
5.67
4.31
24 AIA Insurance Lanka PLC
Management Discussion and Analysis
AIA Insurance’s (the Company) Response to key regulatory changes
The following table depicts the key regulatory developments and the Company’s response towards such developments.
Regulatory development
Segregation of business of composite insurers
Pursuant to section 53 of the Insurance Industry (Amendment) Act
No.3 of 2011, it is required that composite insurers segregate Life and
Non-life insurance businesses by February 2015 so that each class
of insurance business would, post segregation be carried on by two
separate companies (the Segregation).
The Insurance Board of Sri Lanka (the IBSL) by Guidelines issued as at
September 2013 requested all composite insurers:
1). to submit to the IBSL by 31 December 2013, the model of
Segregation proposed to be followed by such insurer.
2). where the model of Segregation requires the insurers to apply for
a separate insurance license for its segregated entities, apply to
the IBSL by 31 March 2014, for a separate license to carry on the
segregated business within a separate entity.
AIA Insurance’s response and approach
The Company as at present carries on business
as a duly licensed composite insurer engaged in
both Life and Non-life insurance business.
As such the Company engaged in continuous
dialogues with the IBSL and the industry
throughout 2013 to clarify matters in relation to
implementing the Segregation.
The Company’s proposed model of Segregation
submitted to the IBSL by 30 December 2013 is
undergoing review by the IBSL.
The Company awaits the response of the
IBSL to proceed with the action plans towards
completion of the Segregation by 01 January
2015 in compliance with the requirements of the
insurance laws, regulations and guidelines.
3). to comply with the Segregation to be in place by 01 January 2015.
Increase of Stated Capital
The IBSL by Rule No. 1 of 2013 mandated all insurers registered prior
to 30 June 2011 to increase the Stated Capital to LKR 500 Mn for each
class of business on or before 11 February 2015.
The Company’s present Stated Capital for its
composite insurance business is LKR 300 Mn.
The Company is required to increase its Stated
Capital to be compliant with the requirement of
the IBSL Rule.
The Company is confident that it is well
positioned to comply with this requirement by 11
February 2015.
Implementation of the Risk Based
Capital (RBC) model
The IBSL is in the process of introducing RBC requirements for the
insurance industry. The preliminary ‘road tests’ were concluded in
mid 2013. The road test was the platform to refine the RBC model
framework and to calibrate the risk parameters for the Sri Lankan
industry.
The final framework was launched in October 2013 and will be used
as the basis to draft the necessary Rules under the Regulation of
Insurance Industry Act No. 43 of 2000 (as amended) in order to
implement the RBC regime in Sri Lanka.
Insurers will be required to report under both the existing rules and
the proposed RBC rules during the parallel run period from 2014 to
2016.
The IBSL has indicated that it will allow voluntary early adoption of the
RBC with compulsory compliance required by year 2016.
AIA has been positively contributing to the
development of the implementation of the RBC
framework.
As a member of the RBC Joint Working
Committee, the Company played a significant
role in developing the local RBC model.
The Company pro-actively participated and
submitted full RBC calculations and data to the
IBSL during the road test period from September
2012 to June 2013.
The Company is confident of its ability to meet
the RBC requirements and is in the process
of preparing for early adoption of the RBC
framework.
Annual Report 2013 25
Regulatory development
RII Act - Compulsory Listing in a Licensed Stock Exchange.
Every Insurer who holds a license to engage in insurance business
as at February 2011, are required to be listed in a Licensed Stock
Exchange by February 2016. A Licensed Stock Exchange is defined in
the Regulations of Insurance Industry Act No.43 of 2000 (as amended)
as a Stock Exchange licensed under the Securities and Exchange
Commission of Sri Lanka (SEC) Act No. 36 of 1987
(as amended), which presently is the Colombo Stock Exchange (the
CSE).
Directive issued by the SEC on mandatory public float
AIA Insurance’s response and approach
The Company is already listed in the Main Board
of the CSE.
The Company is currently studying the
regulations vis-a-vis its applications post the
Segregation and has engaged in dialogues with
regulators to seek clarity where required.
The SEC issued a Directive dated 20 December 2013 (the Directive)
to all listed companies of the CSE imposing a continuous listing
requirement for public listed companies to maintain the prescribed
minimum public float, effective 01 January 2014.
The Company is listed on the Main Board of the
CSE with a total registered Shareholder base of
1779 as at 01 January 2014. The public holding
of the Company as at 01 January 2014 is 2.85%
distributed among minority Shareholders of the
Company.
As per the Directive, a Listed Entity on the Main Board of the CSE shall
maintain a minimum public holding of 20% of its total listed ordinary
voting shares in the hands of a minimum of 750 public Shareholders or
a market capitalisation of LKR 5 Bn of its public holding in the hands of
a minimum of 500 public Shareholders while maintaining a minimum
public holding of 10%.
The Company will take necessary actions to
ensure compliance to submit the status report of
compliance to the SEC and the CSE by 31 March
2014 and will engage in necessary reviews to
take steps towards compliance.
Listed Entities are required to submit a status report on or before 31
March 2014 to the SEC and to the CSE on the entities’ distribution of
shares as at 01 January 2014.
A company which is listed on the Main Board, but is however noncompliant with the Directive of SEC as at 01 January 2014, will be given
a period of 3 years to comply with the Directive on a staggered basis.
Such a company must have a public holding at a minimum level of 15%
in the hands of 500 public Shareholders by 31 December 2015 and full
compliance on or before 31 December 2016.
26 AIA Insurance Lanka PLC
Management Discussion and Analysis
Business Performance
Strategy
Strategic Initiatives
2013 was witness to the transition of AIA Sri Lanka post the
acquisition by AIA Group in December 2012 in adopting the
new brand and aligning the business to AIA. The Company
continued to build on its positive momentum laying a
firmer foundation for 2014 to continue to deliver long
term value to all stakeholders. The Company has made
significant strides in its growth ambitions to become the
pre-eminent Life insurer in Sri Lanka with the effective
execution of the key strategic priorities designed and
defined for 2014. The strategy execution and performance
amply demonstrates the strong leadership, personal
commitment of employees, Wealth Planners and Financial
Planning Consultants and the culture of the Company.
It has been a year of solid and sustained performance
in mixed market conditions. The journey was supported
by focused strategic initiatives and the results include a
noteworthy composite top-line, significant increase in net
recruitment and thereby the numbers of agents, greater
network reach and the continued Non-life underwriting
performance. The significant investments made by the
Company to expand the distribution footprint and to
enhance the AIA brand resulted in a lower bottom-line
performance during 2013 in line with the Company’s
expectations. These investments and efforts are expected
to reap rich dividends over the ensuing years resulting in
growth in the company’s performance.
The success of the Company’s performance over 2013 is
recognised within AIA Group as well with AIA Sri Lanka
being one of three businesses within the Group to be
awarded the winner’s in an intra-group championship
league tournament for delivering defined key performance
metrics each quarter.
The year in review for AIA Sri Lanka will bear testimony
to the successful delivery of all key strategic priorities of
2013 as defined in the Company’s business plan i.e Agency
growth, Bancassurance depth and breadth, Product realignment and AIA brand establishment.
Agency growth
The Company continued to invest in the growth of its
Wealth Planners and their Agency Direct Sales Force
(Agency DSF). 2013 witnessed an unprecedented record
increase in agent cadre and it is undoubtedly the most
successful agent recruitment drive recorded throughout
the Company’s 24 year history. The recruitment drive
was a focused effort to increase the number of agents
whilst ensuring that the quality of the recruits and their
experience are a criterion for selection. The Company
continued to expand the distribution footprint during 2013
by adding to and increasing the branch network to almost
100 by year-end.
Bancassurance depth and breadth
During 2013 2 new Bancassurance relationships were
forged with Commercial Bank and Union Bank further
expanding and establishing the strong Bancassurance
credentials and operations in the market, and adding to
the established long term partnership with NDB Bank. The
Company has built a strong foundation for a sustainable
distribution model with Financial Planning Consultants
stationed in partner bank branches ensuring business
generation and business conversion at acceptable levels
and appropriate solutions are designed to suit specific
customer needs.
Product re-alignment
The Company introduced new products namely Education
Plan, Protected Savings, FundBuilder 10 and Employee
Benefit Plan during the year to cater to identified needs
in the market and fill gaps in its product offering to
customers. Further, features of existing products too were
subject to detailed review for necessary changes to better
suit the market and customer needs.
AIA brand establishment
The AIA brand went live on 18 February 2013, with a
successful rebranding and positioning exercise covering
all of the branch locations spread across Sri Lanka and
with campaigns throughout the year. Rebranding resulted
in the establishment of a recognised brand quite quickly.
Above-the-line (ATL) and below-the-line (BTL) campaigns
resonated well among prospective market segments and
turned out to be one that leveraged on the wider Group’s
Pan-Asian expertise and achieved a total brand awareness
of more than 60% by year end.
In addition to the above stated key strategic priorities of
2013, strategic initiatives were deployed to complement
and progress the business objectives.
Right pricing Non-life Insurance
Non-life insurance continued to focus on improving bottom
line as opposed to market share to ensure sustainability
and viability of the stand-alone Non-life business model,
continuing initiatives that were launched with the strategic
review of mid-2010. This was underpinned by right pricing
initiatives for both the Motor and Medical classes. During
the year a significant push was made on Motor business
via agency channel with a focus on the quality of the
portfolio for an improved bottom line. In this footing Non-
Annual Report 2013 27
life insurance arm will strive to create value based on its
existing portfolio whilst leveraging the negotiations with
reinsures for a healthier bottom line going forward.
Outlook for 2014
Corporate Solutions
With a view to providing solutions to small, medium and
large corporates, a new distribution arm was launched
during 2013 as an initiative for furthering business growth
ambitions of the Company. Corporate Solutions channel is
expected to play a pivotal role in redefining our portfolios
and adding an array of fit-for-purpose Life insurance
solutions to Sri Lankan corporates and employee
segments.
Performance
Pre-eminent Life
Insurer in SL
Capability
Governance
Upgrading technology
Amidst all these developments, the Company successfully
upgraded the Life policy administration system
culminating in the system going-live in December 2013
to support existing and future growth plans. The project
that spanned over a period of 18 months was delivered by
a cross functional team of experts, ensuring the system’s
operational capability and seamless integration to the
business operations. The successful completion and
launch has equipped the Company to be able to swiftly
adapt business processes and product propositions and
better respond to market dynamic conditions.
The Company invested in the iPoS System (Interactive Point
of Sale) with a view to forging an immediate link between
the Company and the customer via the sales force on an
online real time basis. The system platform also facilitates
seamless information flow across the country and provides
information to employees and sales persons for informed
decision making. The Company envisages this innovation to
pave the way for a better customer experience.
Enhanced risk culture
It is noteworthy to mention that the Company took steps
in aligning the risk management framework with that of
AIA Group during 2013 and reviewed the risk management
framework and process in order to match the business
model with the environment and to facilitate better
business decisions. The Company has taken steps to
ensure it is able to adopt and comply with the recent
regulatory developments in terms of adoption of risk based
capital regime for solvency.
Figure 14
In our quest to become the pre-eminent Life insurer in
Sri Lanka, the Company will primarily focus and progress
three perspectives comprising of performance, governance
and enhancing the capability development as depicted in
figure 14 above.
As regards performance, the primary financial metrics and
secondary financial and performance related metrics will
stay in focus.
As regards capability, this is considered a key enabler to
achieving the Company’s vision. The focus during 2014
will be the Group’s individual performance development
dialogue and aligning to the overarching objective of the
Company. Further understanding the career aspirations
of individuals and reassessing the role fit will support
the effectiveness and culture within the Company. These
initiatives will lend support to embed the performance
based culture and the AIA operating principles of ‘doing
the right thing in the right way with the right people’.
As regards governance, this pertains to the oversight and
cascade of responsibilities and accountabilities to ensure
these are effective and operating at all levels across the
entire business.
28 AIA Insurance Lanka PLC
Management Discussion and Analysis
Life Operations
An exciting year commenced with many expectations
and hopes post the acquisition by AIA Group. The
changes predominantly spelt challenges but the team
at Life operations didn’t want to settle for anything less
than conquering the challenges. The journey towards
surmounting the challenges started with the issuance
of 10,000 life policies and recorded the highest number
of policies issued in a month remarking history in the
Company. Systematic planning, utilisation of available
resources and the commitment of our people, made the
Company rise up to the ordeals. The operating philosophy
‘Doing the right thing in the right way with the right people’
was applied in every operational area with great passion.
In the product offerings during the year, the emphasis
was to introduce products that enhanced protection.
The distribution team played a key role in the product
development process in providing technical input in
product design, communication material, negotiations
with Reinsurers and product training. Expansions of the
business together with expansions on Bancassurance
channel and partnerships created a high volume of
business transactions that were successfully delivered.
The prime focus of Life Operations was to support the
sales team in accommodating the business they bring to
the Company by performing accurate risk assessments
and ensuring business targets were achieved.
A number of product feature upgrades such as increase in
per life benefit limits, market limits, facultative limits, free
cover limits and non - medical limits were provided with
the support of our Reinsurers. These significant changes
resulted in a positive impact for product offering, making
it attractive for the customers and a convenient selling
proposition to the Wealth Planners.
Technology Advancements
The Company aimed to stay ahead of technological
developments and was proud to be the first Company in
the Insurance Industry to introduce electronic submission
of insurance proposals with the on-screen signature. The
proposals introduced by Wealth Planners using their iPads
were given priority in converting to policies to encourage
the Wealth Planners to be tech savvy and demonstrate their
professionalism in the minds of our potential clientele.
The Company strives to maintain long term relationships
with our Policyholders by safeguarding the trust and
confidence placed in us. It is important that a proposal
form is converted to a policy, a lapsed policy reinstated
The Company aimed to
stay ahead of technological
developments and was
proud to be the first
Company in the Insurance
Industry to introduce
electronic submission of
insurance proposals with
the on-screen signature.
and a claim processed within the shortest possible time
since it is only in such instances the Policyholders could
experience the promises made during the first point of
contact with the Wealth Planner or the Company.
Service delivery
A number of structured trainings were conducted for the
Regional and Life Operations staff to ensure a ‘pending
information free’ proposal forms reach the operational
process and a quality output is delivered in the shortest
time period to enrich the customer experience. Further, a
number of structural changes such as creation of a ‘Life
Payments Department’ to process all structured payments
in an efficient and effective manner, expansion of the Call
Centre to build close relationships with the Policyholders,
outsourcing the data entry operation, policy preparation
and dispatching of life policies were made as means of
cost saving and establishing a strong binding with our
Policyholders.
Laugfs Super Markets were added to our existing third
party premium collection portfolio which includes Cargills
Super Markets, Abans outlets and many Commercial
Banks providing convenience to our Policyholders in
premium payments. Technological developments were
made to enable on-line real time payment updating
mechanisms where premiums paid at third party outlets.
Annual Report 2013 29
In operations, process improvements are vital for its
success. A team representing all business units across
the Company was responsible in introducing a new
Life Administration System to bridge gaps and provide
much faster processing time and ease of use. Seven key
members from the Life Operations team were released
to this project and many members from Life Operations
continued to provide their valuable technical and
operational input throughout the year to see the birth of a
robust system.
Operations staff was empowered to make decisions
within their authority limits whilst taking responsibility
and accountability. Individual talents were identified and
matching job roles were assigned to gain the maximum
output whilst ensuring job satisfaction. Employee
engagement was maximised through the launch of
‘Mission Vie Project’ where seven teams representing the
entire Life operations team were set up to achieve seven
key objectives within a time span of four years. Objectives
are depicted in the following chart.
persistency enhancement
managing pending requirements
promoting inflation guard feature
promoting standing order premium collection
management of surrenders
Maturity retention
scanning of all life documents
The Company was committed to creating and sustaining
a green environment. The 5s initiative was successfully
implemented throughout the Company. As part of the
‘Mission Vie Project’ scanning of all life insurance
documents from the inception commenced with the
objective of creating a paperless office. In addition the
introduction of the iPoS operation also laid a foundation
towards a paperless point of sale. The communication
network was expanded with more messages reaching
the Policyholders via SMS rather than on printed paper.
Further Staff were continuously made aware of the
importance of saving energy and water in their office
premises.
Life Operations contributed to achieving operational
excellence throughout the year and look forward to make
a remarkable contribution towards the growth of the
economy in the journey of becoming a pre-eminent Life
Insurer.
Non-life Operations
The Non-life business continued on a steady course in
spite of the immense pressure on pricing and escalation in
claims costs. In the area of Motor insurance the challenge
seemed to be controlling of process costs through
proactive involvement at all levels, with appropriate
stakeholder engagement, whilst in the Non-motor area it
was mainly the strict adherence to acceptance criteria and
good risk management. All of these proved successful for
the business unit at the final whistle.
Re-insurance change
One of the key milestones for Non-life in 2013 was
to ensure the year ended with the correct follow-on
re-insurance treaty which would ensure continuity of
business, post 30 November 2013. It was imperative that
such a treaty was in place in time to ensure seamless
transition from previous Shareholder’s re-insurance
arrangements to the current arrangement. This was
achieved well in advance of plan timeline.
Sales Distribution
In the area of sales distribution the Non-life Division
focused on profitable growth irrespective of business
channel. The agency channel more specifically the Direct
Sales Force (DSF) came up trumps in the achievement of
budgeted topline with other channels chipping in.
With a view to further strengthening distribution the
business unit embarked on a controlled expansion of
resources with profitable growth in mind. This initiative
was followed up with realigning of senior distribution
resources in order to strategically achieve the required
growth with the emphasis on profitability.
Claims management
Effective claims management was a prerogative for the
business unit in terms of actual control of claims costs
without compromising on the quality and efficiency and
service delivery. In the Motor area a greater efficiency was
achieved through the technology driven, state of the art
street to office automation of the claims assessment and
approval process. Whilst in the Non-motor area the focus
was the fast settlement of liable claims.
30 AIA Insurance Lanka PLC
Management Discussion and Analysis
The business recorded better settlement efficiency in
claims in comparison with previous years, an initiative
which will be carried forward for the ensuing years.
Customers
Enhancing the customer focus was positively approached
by formalising the customer complaints procedure. This
process is tracked on a regular basis by senior managers
with a view to track trends and eliminate customer
dissonance.
Key IT enhancements in year 2013
The core life policy administration system was replaced
in 2013 with a new system called ‘Integral Life’ from
CSC Technology Singapore Pte Limited, Singapore. The
system implementation was named ‘Project IRIS’ and was
successfully completed meeting its expectations. With the
newly implemented system platform, AIA
Sri Lanka is well equipped to facilitate efficient business
and service delivery in the life insurance business. As
such, the Company is proficient to step a mileage to offer
superior service to its customers even better.
The aggressive business expansion plans of the Company
demanded a greater stability and robustness of the IT
system platforms. Further more, it was time up to upgrade
the previous system infrastructure at a costly investment
due to technology obsolesces which had resulted over
time. Hence, after a careful evaluation process, it was
decided to replace the prevalent life system with Integral
Life System.
AIA group having chosen the Integral Life system as its
preferred system platform has endorsed the decision
taken by AIA Sri Lanka in year 2012.
Whilst ensuring the robustness of the core life policy
administration system, AIA Sri Lanka insistently embarked
itself in the Point-of-Sales systems space by introducing
iPoS. With the successful implementation of the iPoS
system, AIA empowered its Insurance Agency force
with the ability to electronically complete the insurance
proposal forms with a facility to capture on-screen
signature of the clients enabling the submission of the
entire document set to the Life Operational back-office
directly to commence the underwriting and policy issuance
processes. This process is electronically driven and
resulted in cost effectiveness, convenience, reliability and
speed to the entire functional process thereby moving on a
global platform of professionalism. The new breed of AIA
Wealth Planners carry AIA branded iPads with pride where
the iPoS system has made a paradigm shift in the way
insurance selling is carried out in Sri Lanka.
As a part of transition to the AIA Group, all IT systems
were modified to accommodate the brand change. This
process included the name change for all system interface
output and correspondence. Simultaneously, a mandatory
requirement to closely align to the AIA group systems
was delivered for the purpose of maintaining consistency
of best practices and corporate governance across the
Company.
Annual Report 2013 31
Financial Review
Group results
The Group completed the first year under the flagship of the
AIA brand and the results were commendable compared
to the previous year. Revenue increase of 2.9% to LKR
13.0Bn in 2013 (2012; LKR 12.6Bn) was heightened by the
Investment income performance for the year. Execution of
prudent investment strategies resulted in a positive growth in
Investment returns.
Company results
Profit
The Group recorded a post-tax profit of LKR 499.3Mn for
the year compared to LKR 847.9Mn in 2012.
Net profit after tax
(LKR Mn)
Growth
Figure 16
2012
2013
1,919
23%
2,729
42%
2,674
-2%
2,682
0%
3,836
43%
731
58%
600
-18%
692
15%
848
23%
499
-41%
Life
Non-Life
6,863
Growth
2011
6,496
Operating
expenditure (LKR
Mn)
2010
9,655 15,187 12,933 12,630 12,994
33%
57% -15%
-2%
3%
7,846
Growth
2009
2,847
Group Results
Revenue (LKR Mn)
2,673
Figure
NOn-Life15
GWP
2,400
Total Revenue
The combined GWP increased to LKR 9.5Bn in 2013
recording a growth rate of 7.2% over LKR 8.9Bn recorded
in 2012. This achievement is praiseworthy given the fact
that challenging market conditions affected the entire
insurance industry. Life insurance performance had
a direct impacted the disposable income in a slowing
economy and Non-life insurance performance was affected
by the increasing price competition.
2,692
2013
7,784
2012
2,504
2011
4,632
2010
Income statement analysis
Gross written premium
(LKR Mn)
2009
12,994
12,630
12,933
9,655
(LKR Mn)
15,187
Turbulent market conditions affected the performance on
the Group and resulted in a lower net earned premium to
LKR 8.2Bn. Lack lustre performance in the equity market
channelled the Company trajectory to invest on relatively
secure markets including government bonds.
Revenue increase of 2.9% to
LKR 13.0Bn in 2013 (2012;
LKR 12.6Bn) was heightened
by the Investment income
performance for the year.
Execution of prudent
investment strategies
resulted in a positive growth
in Investment returns.
2009
2010
2011
2012
2013
Total GWP
Staff Age Analysis of Employees (*excluding Consultants)
Figure 17
Gross written premium of Life and Non-Life businesses
recorded positive growths in 2013 to 5.7% and 11.4%
respectively.
32 AIA Insurance Lanka PLC
2012
Available-for-sale
Reinsurance Premium Ceded
Investment income
The Company reported a gross reinsurance premium of
LKR 948.0Mn in 2013 and it was LKR 814.4Mn in 2012.
Reinsurance premium ceded as a percentage of GWP
slightly increased to 9.9% in 2013 from 9.2% in 2012.
Investment Income
Figure
18
Change in unearned premium reserve
LKR 394.3Mn has been transferred to the unearned
premium reserve from premium income in the current
year. This is an accounting adjustment which is used to
match the premium income over the insurance cover
period. In 2012, LKR 162.4Mn was released to income
statement from the unearned premium reserve.
The Company reported a Net Earned Premium (NEP) of
LKR 8,193.7Mn in 2013 which was a decrease of 0.6%
compared to 2012. In 2012, the Company reported a NEP of
LKR 8,244.2Mn. Despite the growth in composite GWP by
7% NEP has slightly declined. This was driven by factors
such as product mix.
Investment Income
Investment income of the Company recorded a growth
of 9.4% compared to 2012. In 2013, investment income
increased by LKR 380.4Mn from LKR 4.0Bn in 2012 to LKR
4.4Bn in 2013. The detailed analysis of investment strategy
and investment performance is presented in page 35.
The company earned its investment income through
interest income, dividend income, unrealised gains/ losses
and realised gains/losses. Interest income is the prime
investment income source in both 2013 and 2012 which
accounted for LKR 3.9Bn in 2012 and increased to LKR
4.1Bn in 2013. The dividend income also increased by 46%
amounting to LKR 144.6Mn in 2013 (2012 – LKR 98.9Mn).
As the Company maintains its financial investments in
Fair Value through Profit or Loss (FVTPL), Loans and
Receivables, Available-for-sale clusters, the following
graph illustrates how each financial asset cluster
generated investment income in 2012 and 2013.
FVTPL
1968
1,565
268
172
2013
2,172
The Non-life business performance was satisfactory
compared to the previous year which recorded a historically
positive underwriting result. Soft market rates and the
relatively slow market movement in the motor vehicle
ownership restricted the plan achievement for the year.
2,290
Company trajectory to introduced new product suite in
2011 to the protection product portfolio, with four new
products on protection and saving introduced in 2013
further strengthened the selling capability of the Company
to face challenging market fluctuations.
(LKR(LKR
Mn) Mn)
Management Discussion and Analysis
Loans and receivables
Other Income
Other income increased by 10% over last year from LKR
357.5Mn in 2012 to LKR 393.0Mn in 2013. In 2013, 72% of
the other income was derived from policy loans and in 2012
it was 68%.
Net benefits and claims
Gross benefits and claims and net benefits and claims
of the Company increased by 65% and 61% respectively.
Gross claims have increased from LKR 4.4Bn in 2012 to
LKR 7.2Bn in 2013 where net claims also have increased
from LKR 4.2Bn in 2012 to LKR 6.8Bn in 2013.
Transfer to the long term insurance fund
In 2013 the Company transferred LKR 754.0Mn to the Long
term Insurance fund which belongs to life policy holders. In
2012, transferred amount was LKR 3.7Bn. The increase in life
benefits and claims was the main reason to reduce transfer
to the long term Insurance fund during the current year.
Net acquisition Expenses
Net acquisition expenses includes commissions paid to
intermediaries, franchise fee and reinsurance commission
on reinsurance premium paid. Gross acquisition expenses
of the Company increased by 0.7% compared to last year.
A change in Deferred Acquisition Cost and increase in
reinsurance commission resulted in the year on year
decrease of net acquisition expenses.
Expenses
The Company’s operating and administrative expenses
grew significantly in the year under review owing to brand
migration. The 43% increase in the expenses to LKR 3.8Bn
in 2013 (2012; LKR 2.7Bn) included one off expenses
utilised on the brand migration and other expenses on
aligning the business under new ownership. Continuous
efforts in effective cost management lead by the top
management on streamlining the procurement process,
adapting a new branch model resulted in significant cost
savings over the year.
Annual Report 2013 33
2,726
2,672
2,682
8.2%
3,836
AIA Insurance’s stability is reflected in the value of assets,
liabilities and shareholders’ equity which are presented in
the statement of financial position. During the year under
review AIA’s financial position became stronger and it
surpassed the LKR 44.2Bn milestone (2012- LKR 40.9Bn)
with total assets growing by 8% over the previous year. The
total asset base of life insurance business accounted for
LKR 35.4Bn in comparison with LKR 33.3Bn in 2012. The
Non-life business asset base was LKR 8.7Bn in comparison
with LKR 7.7Bn in year 2012.
2010
2011
2012
1,918
(LKR Mn)
8.0%
Analysis of Statement of Financial Position
2009
2013
Operating expenses
Financial Assets
Figure
19 expenses LKR Mn
Operating
Profit after tax
Post-tax profit of the Company recorded LKR 498.5Mn
compared to LKR 840.2Mn in 2012.
Life business surplus contribution for the year is LKR
200.0Mn compared to LKR195.Mn in 2012, backed by the
admissible assets after having adequately met the required
solvency margins and supported by prudent reserving.
Post-tax profit of the Non life business accounted for LKR
298.5Mn compared to LKR 645.2Mn in 2012.
A first and final dividend of LKR 2.00 per share totalling to
LKR 60.0Mn was proposed inline with the future growth
strategy.
Company
Results
Revenue (LKR Mn)
Growth
Operating
expenditure (LKR
Mn)
Growth
Net profit after tax
(LKR Mn)
Growth
Figure 20
2009
2010
2011
2012
Financial Assets accounted for 82% of the total asset base
which was LKR 36.4Bn (2012 – LKR 34.3Bn). The details
of investments and the performance is set out in the
investment review on page 35 to 36.
Fair value through profit or loss (FVTPL)
A financial asset is classified as fair value through profit or
loss if it is held for trading or is designated as such upon
initial recognition. Financial assets are designated at fair
value through profit or loss if the Company manages such
investments and makes purchase or sales decisions based
on their fair value in accordance with the AIA’s investment
strategy. AIA’s unit linked equity securities are classified as
FVTPL amounted to LKR 3.6Bn as at 31st December 2013
(LKR 3.0Bn -2012) and the chart below provides a sector
analysis of the equity investments.
2013
9,703 15,186 12,933 12,629 12,995
34%
57% -15%
-2%
3%
1,918
23%
2,726
42%
2,672
-2%
2,682
0%
3,836
43%
787
77%
602
-24%
694
15%
840
21%
499
-41%
FVTPL Investments by industry
Figure 21
Loans & receivables (L & R)
Loans & receivables are financial assets with fixed or
determinable payments that are not traded in an active
market. AIA’s investments in L & R category include
corporate debts, repurchase agreements and bank
deposits. The change in L & R investments over 2013 are
illustrated in the following graph.
34 AIA Insurance Lanka PLC
Management Discussion and Analysis
589
669
82%
Reinsurance assets
%
2013
Corporate
debt listed
Corporate
debt unlisted
Repurchase
agreements
6%
22%
33%
1%
0%
11%
45%
2012
Bank
deposits
L-R Investments by category
L & R investments by category
Figure 22
The total loans and receivables were LKR 18.6Bn as at
31st December 2013 and it was a 28% increase over the
previous year. The maturity profile of L & R investments
was changed from 92%-current and 8%-non current to
54%-current and 46%-non current due to expectation of
reduction in short term interest rates.
Available for sale financial assets (AFS)
AFS assets are financial assets that are not classified in
any of the previous categories. AFS debt securities include
Sri Lanka Government treasury bills and treasury bonds
with fixed interest rates.
In comparison with year 2012, current year AFS
investments recorded a decrease of LKR 2.5Bn which was
15%. The maturity profile of AFS investments was changed
from 41%-current and 59%-non current to 2%-current and
98%-non current due to expectation of reduction in short
term interest rates.
The accounting policies and detail notes with regard to the
above financial assets are presented in 170 & 172 to the
financial statements.
Property, Plant & Equipment (PPE)
Net book value of property, plant and equipment as at
31st December 2013 was LKR 303.5Mn in comparison with
the LKR 203.4Mn in previous year. Computer equipment
and furniture and fittings accounted for LKR 142.6Mn
and LKR 65.8Mn respectively for 31st December 2013 net
book value. The accounting policies and detailed notes
with regard to above property, plant and equipment are
presented in 172 & 173 to the financial statements.
Intangible Assets
Net book value of intangible assets as at 31st December
2013 was LKR 754.3Mn in comparison to the LKR 402.1Mn
in the previous year resulting mainly through acquisition
of new state of the art software/hardware solution for life
insurance business amounting to LKR 272.2Mn.
Reinsurance assets comprise of LKR 818.2Mn as
reinsurers’ share of outstanding claims and LKR 286.5Mn
as reinsurers’ share of policy liabilities as at 31st
December 2013. Adequate provision has been made in the
financial statements for reinsurance receivables where
recovery is considered doubtful. The total reinsurance
assets recorded an increase of 30% over the previous year
amounting to LKR 252.3Mn.
Life Insurance Fund
The Life insurance fund includes the reserves created
to satisfy future claim obligations and maturity value
payables to life insurance policyholders. Gross Life
insurance fund as at the 31st December 2013 was LKR
33.8Bn including claims payable in comparison with LKR
32.0Bn in previous year.
The Company has appointed Mr. Frank Munro as the
independent appointed actuary for the Life insurance
to conduct the valuation of the life fund and his report
appears on page 150 Adequate provisions, including those
for bonuses and dividends to life policyholders, solvency
margins and other required reserves have been made from
the life fund as recommended by the consultant actuary.
Non-life Insurance Fund
The Non-life Insurance Fund mainly consists of premium
reserves and claims reserves relating to the Nonlife Insurance business. Those are categorised as the
Unearned Premium Reserves, Reserves for Claims
Outstanding, Incurred But Not Reported (IBNR) Claims
Reserves and Incurred But Not Enough Reported (IBNER)
Claims Reserves.
The Gross Non-life insurance fund was LKR 2.8Bn as at
31st December 2013 in comparison with LKR 2.3Bn over
previous year recording a growth of 19%. AIA ensures
that adequate provisioning for claims outstanding
including IBNR are maintained. AIA has appointed M/s
NMG Financial Services Consulting Pte Limited. as the
independent actuary for Non-life business.
The growth of Life insurance and Non-life insurance funds
are detailed out in following table.
Fund
2009
2010
2011
2012
2013
Life (LKR Mn)
18,048
25,955
28,864
32,017
33,812
Non-life (LKR Mn)
Total (LKR Mn)
1,866
19,914
2,526
28,481
2,486
31,350
2,326
34,343
2,756
36,568
91%
91%
92%
93%
92%
9%
9%
8%
7%
8%
Mix
Life
Non-life
Figure 23
Annual Report 2013 35
4.01
2013
3.78
2012
5.62
4,538
4,017
Times
2011
4.09
2010
4.68
2009
3,547
As at 31st December 2013, the admissible assets in Nonlife insurance business amounted to LKR4,019.3Mn While
the total liabilities amounted to LKR 2,431.5Mn, resulting
an available solvency margin of LKR1,587.8Mn Since the
required solvency margin (RSM) in Non-life insurance
amounted to LKR 395.7Mn, the Company was able to
surpass the RSM by 4.01 times.
2,907
Shareholders’ equity of the Company has increased from
LKR 4,017.5Mn to LKR 4,538.5Mn in 2013 recording a
growth of 13%. The stated capital of AIA remained at LKR
300.0Mn during the year and growth of revenue reserves
were LKR 521.0Mn amounting to 14% growth over the
previous year, contributed mainly through profitability for
the year under review.
2,575
Non-life Insurance Solvency Margin
(LKR Mn)
Shareholders’ Equity
2009
2010
2011
2012
2013
Total Equity
Non-life insurance solvency margin
Equity24
performance
Figure
GI Solvency Ratio
Figure
26
Investment Performance
Solvency Margins
As a regulatory requirement of the Insurance Board of
Sri Lanka (IBSL). Also insurance companies are suppose to
maintain the stipulated solvency margins. AIA maintained
the required solvency margin throughout the year in both
life as well as non life insurance businesses. A healthy
solvency margin is an indicator of the financial stability.
Life Insurance Solvency Margin
1.51
1.50
1.79
2.53
2.89
Times
AIA recorded a solvency margin ratio of 2.89 times in life
insurance (2012- 2.53 Times) as at 31st December 2013, by
having an available solvency margin of LKR 3,421.6Mn Where
as the required solvency margin was LKR 1,182.2Mn The
total admissible assets of life insurance business were LKR
28,969.8Mn (2012- LKR 26,445.0Mn) and the total liabilities
amounted to LKR 25,548.2Mn (2012- LKR 23,615.0Mn)
2009
2010
2011
2012
2013
Life insurance solvency margin
Figure 25
Life Solvency Ratio
Investment Strategy
The Company maintains a prudent investment strategy
for its investments in line with the investment philosophy
and investment policy which are designed with the primary
objective of providing peace of mind and prosperity to its
policyholders, shareholders and other stakeholders. The
Company therefore focuses on a long term investment
strategy and ensures that its investments are made in high
grade financial instruments as regards the fixed income
investment strategy with duration strategy being the key
focus and in listed liquid blue chip counters as regards the
equity investment strategy with sound fundamentals being
the key focus.
Since mid 2012 the Company has not maintained an
exposure to quoted equity in its conventional Life
Policyholders fund and both Shareholder funds in line with
the risk appetite of the respective portfolios and against
a backdrop of volatile and weak equity performances.
Exposure into quoted equity is maintained at present in 2
unit linked funds that maintain exposure to equity in line
with their policyholder expectations and requirements and
prudent investment management has ensured that these
funds beat their dynamic benchmark over 2013.
The Company anticipated the decline in interest rates over
2013; notably a decline in the benchmark 364-day Treasury bill
yield by 340 bps to stand at 8.39% by year-end and the decline
36 AIA Insurance Lanka PLC
Management Discussion and Analysis
in the 5 year bond by 264 bps, and accordingly lengthened the
duration of the conventional Life Policyholders’ fund deploying
funds into longer tenure Treasury bonds as well as listed
corporate debt instruments. The Company was selective in its
exposure to listed corporate debt instruments choosing high
grade investments issued by licensed commercial banks and
sound non-bank financial institutions.
The asset allocations of the Company’s investments for the
Life and Non-Life businesses as at 31 December 2013 are
given in figures 27 and 28.
Detailed processes are in place to ensure adequate
oversight at Board of Directors and its sub-committee
level as well as at management level for the sake of good
governance.
Investment Performance
The investment performance as discussed below is a result
of the timely execution of investment strategy against the
backdrop of a steep decline in interest rates.
A combination of the lock-in of attractive interest rates
despite the steep decline in market interest rates coupled
with the increase in the portfolio size resulted in the
growth in investment income.
Although the volatility of the equity market continued into
2013, prudent decisions taken in relation to the unitlinked equity portfolios safe guarded and minimised the
impact and also ensured that the unit-linked policyholders
benefitted by the positive equity market returns. This
resulted in a turnaround in the portfolio equity returns in
2013 compared to the previous year which added to the
investment income for the year
Life Investment Portfolio - 2013 Asset Allocation
Figure 27
Life Insurance
GWP
6,863
2011
6,496
7,846
2010
2012
2013
4,632
7,784
Non-Life Investment Portfolio - 2013 Asset Allocation
(LKR Mn)
Top-line performance of the Life business was affected by
the decreasing wallet size of the customers in a slowing
economy of the country. Hence the GWP achievement of
the business segment is praiseworthy for 2013 of LKR
6.9Bn, 6% increase over 2012 GWP of LKR 6.5Bn.
Figure 28
2009
Prudent investment strategy and timely execution has
ensured satisfactory returns for the portfolios over 2013,
and has secured the foundation for sustained stable
income over the medium term. The Company is able to
thereby declare attractive policyholder dividends for 2013.
To ensure that the investment funds are managed within
a sound governance framework on par with international
best practice, the Company develops detailed investment
policy and individual investment mandates by which its
investment funds are managed.
Life GWP
Figure
Life GWP29
Product mix
The Conventional products accounted for 71% of Life
GWP on 2013, being the dominant product category in
the Company product mix. Category recorded a 22%
growth over 2012. The Company offer mix of Unit link and
Universal Life products to the customers and the focus
Annual Report 2013 37
four new products were introduced under the Universal
product belt. These new products contributed to the growth
of the 2013 GWP and accounted to LKR 39.2Mn of the total
GWP.
Claims and benefit
Claims and benefits increased significantly during the year
led by high surrenders and maturities.
A recent voluntary study involving a number of Sri Lankan
insurers including AIA revealed that customer persistency
may be higher in certain other Asian markets. This is in
line with AIA Sri Lanka’s experience compared with other
AIA Group companies in those markets. Policyholder
persistency is the result of a complex interaction between
customers’ understanding of the need for insurance,
affordability, economic and fund performance, to name
but a few and AIA will be working within our business and
the wider industry to increase customer persistency in this
regard.
Product mix comparison
Non-life Insurance
Figure 30
GWP
A number of Bancassurance partnership alliances were
attached to the operation in 2013 strengthening the
Banca operation. Strategic alliance with NDB bank was
incorporated in December 2012 and in 2013 the Company
signed with Commercial and Union bank.
2,673
2,400
2,692
2,847
2,504
The Company operation in Life Business is built upon
three distribution pillars, namely Agency, Bancassurance
partners and Corporate Solution channel. Out of these
three pillars Agency leads the distribution followed by
the Bancassurance partners and the Corporate Solution
channel. Agency channel accounts for 94% of the Company
Life GWP and the number of agents who have been
rebranded as the Wealth Planners in 2010 are increasing in
numbers and in quality.
The Non-life GWP achievement was directly affected by the
prevalent drop in the motor industry in 2013. However 2013
GWP achievement is praiseworthy and it recorded a growth
of 11% to LKR 2.7Bn compared to LKR 2.4Bn in 2012.
Company trajectory to focus on retail business via agency
force added more value to the bottom line results.
(LKR Mn)
Channel mix
2009
2010
2011
2012
2013
Non -Life GWP
NOn-Life32
GWP
Figure
Class mix
The largest contributor to the Non Life insurance GWP was
the Motor business which accounted for 56% of the total
GWP for 2013 (2012;58%). Motor volume increased in 2013
compared to the previous year and the Company effort to
meet the set target for the year was a challenging exercise.
The prevalent soft market rates and capture leasing insurer
has made it tough in retaining the Company position in the
market.
Channel mix
Figure 31
38 AIA Insurance Lanka PLC
Management Discussion and Analysis
Claims
Net claims paid for the year 2013 grew by 8% to LKR
1.1Bn compared to LKR 1.0Bn in 2012. The total claims
figure is driven by the Motor claims which accounted for
75% in 2013 and 74% in 2012. Marine claims recorded a
negative grow in the year under review compared to Fire
and Accident which recorded a growth of 54% and 13%
respectively.
Class mix
Figure 33
Fire class in non motor segment grew by 13% and
contribution to the total GWP increased to 21% in 2013
compared to 20% in 2012. Accident class contribution
followed by the Fire class recorded a 2% increase in
contribution to the overall GWP for 2013 with the highest
growth rate of 30% in GWP achievement compared to 2012.
Claims contribution
Channel mix
Figure 35
Tied Agents in Non-life insurance business is the key
selling arm among the other two channels namely Broker
and Bancassurance. Tied agents who were rebranded as
the Wealth Planners spread island wide, focus on retail
motor business. They have been the largest contributor to
the Company Motor business portfolio in 2013.
Agency channel contributions for the 2013 recorded at
47% compared to the 43% in 2012 and the other channels
recorded a negative growth in contribution. The Company
was able to achieve the majority of the GWP shortfall
through the dedication and commitment of the Non-life
distribution team.
Ratios
The Company challenge was to maintain a healthy
loss ratio throughout the year and control the Net
Combined Ratio as a whole. Prudent and effective claims
management processes implemented within the Company
helped in achieving a Loss ratio of 58.4% in 2013 compared
to 51.9% in 2012.
Motor loss ratio increased by 7% and this achievement is
commendable comparing the increase in motor accidents
and increase in spare parts prices witnessed in 2013. Fire,
and Accident classes recorded a growth in loss ratios as a
result of higher claims figures recorded for the year.
Combined Operating Ratio (COR)
Figure 34
2013
51.9%
Expense Ratio
45.5%
44.9%
Combined Operating Ratio (COR)
97.4%
103.3%
Figure 36
Channel mix
2012
Claims Ratio
58.4%
Annual Report 2013 39
Social
People Above All
Building an environment where high quality people are
excited to work and motivated to achieve, is our priority.
Our vision is to become the pre-eminent life insurance
provider in Sri Lanka. In Non-life insurance we strive to
be niche’ and profitable. The quality and professionalism
of our employees are paramount to us in ensuring that
we are well positioned to fulfil our ambitions, meeting our
customers’ needs and achieving sustained Shareholder
value. That is why people development is one of our key
strategic imperatives.
Our Operating Philosophy is “Doing the Right Thing, In
the Right Way, With the Right People”. This is central
to how we define ourselves and our behaviour in all our
interactions. It is supported by 12 guidelines we call our
Operating Principles, which set the tone for the way we
conduct our business and ensure that we operate within a
value system of the highest calibre.
We were successful in completing the full roll out
of Operating Principles, the guidelines that set the
foundation of our Group’s culture and our new brand
positioning ‘Real Life’ across the Company, through
workshops, storytelling and recognition programmes. Our
Group’s signature management development programme,
‘AIA Manager’ was a key feature of management content
development for 2013. The Organisation and People
Review (OPR), the talent management process included
mapping out career and development goals for 32 key
successors in the senior management. We aligned the
performance management processes by completing
the Job Evaluations and the Career Band mapping the
AIA way. Most of our main business divisions including
Agency and Bancassurance sales went through major
organisational restructuring to prepare for tomorrow’s
business ambitions. Amidst all this, AIA’s Got Talent went
in search of AIA Sri Lanka’s best of talents, reality show
style, creating a high level of staff interaction and fun.
The Company participated in the Employee Engagement
Survey conducted across our Group (by Gallup, a qualified
international research agency) with 100% participation and
53% engagement score - the third highest in our Group.
Our company was also adjudged to be within 15 Great
Places to Work for in Sri Lanka.
Strengthening Leadership Capabilities
Culture and Synergy
Enhancing People Development
Fostering an Engaging Workplace
“We want AIA employees to feel genuinely happy, to enjoy
the workplace and their colleagues when they come to
work every day.”
~ Mark Tucker
AIA Group Chief Executive and President1
Source: AIA Annual Planning Workshop (HR) 2013
Our people strategy focuses primarily on growing future
leaders from within, providing top-quality technical
development, engaging and enhancing performance
management.
“We can all make a difference to our own lives as well as
those of others. As Tony Fernandez (of Air Asia fame) said
at the recent AIA Leadership conference, we really only
have one life that we know of, so why not give it our best
shot and really live it? Why wait for things to happen when
we can make things happen?”
• “I feel connected and proud to be part of AIA”
• “I grow professionally and personally during my time
in AIA”
• “I respect and learn from my leaders”
2013 has been a year of transition for us at AIA Sri Lanka in
becoming a member of the AIA Group Hong Kong (our Group)
where HR played a key enabling role. Our aim was not just to
‘introduce’ the name AIA to our people but to build a foundation
upon which the best of AIA HR practices can flourish in Sri
Lanka in the years to come. In doing so, we carefully selected
critical aspects of the Human Capital Roadmap of our Group to
lay building blocks of AIA HR in Sri Lanka.
~ Gordon Watson
Regional Chief Executive / Chairman AIA Insurance Lanka PLC2
A Great Place to Work – 2013
A great workplace is a happy place to work with a culture
that encourages synergy and one where people truly aspire
to make a difference to themselves and to those around
them. It is a place where you trust the people you work
with, have pride in what you do, and enjoy the environment.
1. AIA new employee orientation presentation - 2013
2. “Turning Inspiration into Action” posted on AIA Wave - 2014
40 AIA Insurance Lanka PLC
Management Discussion and Analysis
The Company was among the best 15 companies to work
for in 2013. This study was done by Great Place to Work
Institute in partnership with Ceylon Chamber of Commerce
via an on line survey and a culture audit. Online survey took
measurements of credibility, respect, fairness, pride and
camaraderie while culture audit focussed on how we hire,
inspire, speak, listen, thank, develop, care, celebrate and
share in the work place. Some of the highly commended
best practices show cased during the study were our
unique recognition schemes, state-of-art employee
benefits, leadership development and employee led charity
programmes.
This endorsement stands as a testimony of the solidity of
the culture and togetherness in the Company even in a year
of major change.
continuously invest in measuring our people’s engagement
level as an important factor for our business.
Employee Engagement Survey
Our Employee Engagement Survey results speak volumes
of the success of our engagement initiatives in year 2013.
AIA Sri Lanka scored a Grand Mean of 4.14 out of 5 points
scale marking the 70th percentile on the global Finance
& Insurance (F&I) industry database and well above the
Group average.
The Employee Engagement Survey results highlighted
that we have built a strong foundation on role clarity of
expectations, providing right materials and equipment and
the opportunity for people to do their best.
Question
Mean Score Percentile
(Out of 5)
Ranking
Q01. Know what is
expected of me at work
4.58
93rd
Q03. At work, I have the
opportunity to do what I
do best every day
4.22
88th
* Survey was conducted by Gallup
* Percentile ranks are based on Grand Mean and ranked
against Gallup’s 2013 Finance & Insurance Workgroup
Database
In the Employee Engagement Survey 2013, a
strong Company Advocacy rate of 4.42 and a Brand
Ambassadorship score of 4.45, amplified our successful
efforts in taking the AIA brand to the employees.
Engagement & Communication
Engaging Employees in Business
“It is one thing to have a consistent and sustained set of
strategic priorities for a business and quite another to
make it happen. We build ownership and connection to our
strategic priorities by truly engaging our employees in the
journey and the celebration.”
~ Shah Rouf
Chief Executive Officer
The Company’s success is indeed dependent on the
quality of people working within the organisation. We
attach a great importance in measuring commitment
to deliver individual performance goals and the spirit of
‘engagement’ within the AIA community.
At AIA Sri Lanka we define engagement as the extent to
which each employee is connected to our Group’s vision
and purpose; knows ‘What’ one is doing to contribute to the
vision and knows ‘How’ one makes a difference. Hence we
We keep our employees up to date with business information
and Company activities as a way of engaging them to win
their contribution.
Annual Company Conference is the focal gathering held each
year hosted by the Chief Executive Officer to share with the
employees, the details of financial performance highlights
of the previous year, upcoming activities and celebrate
successes.
In 2013, a number of Town Hall meetings with Q&A sessions
were also conducted with the presence of our Group’s senior
management members in their visits to AIA Sri Lanka.
This facilitated close communications between employees
and the top management team and established a shared
understanding of the business priorities and how it links with
our Group.
Annual Report 2013 41
Talent Attraction and Retention
“Our people processes and employer brand have ensured
that we are successful not only in retaining our internal
talent but also in attracting the best from the market.”
~ Upul Wijesinghe
Deputy Chief Executive Officer
Our management attrition ratio was around 10% in 2013 with
no exits of critical talent. While providing positions for our
leaders from within, we also gave opportunities for the best
in the market to find their career path in our Company.
With the exponential business growth in 2013 we
strengthened our talent pool focussing mainly in
Bancassurance and Agency Direct Sales channels. In
our recruitment drive we increased the Bancassurance
headcount by 143. These employees were placed with our
existing and new Bancassurance partners.
1000
881
600
1020
800
2012
400
0
Permanent Fixed Term Insurance
Contract
Trainee
13
10
200
50
2013
50
Encouraging employees’ artistic and literary creativity
and representing the demographical presence of a ‘Y
Gen’ employee base, we produce an in-house publication,
titled ‘Round Up’. This journal features interviews with
employees, captures the important personal milestones
of their lives and provides news regarding successes. It
also recognises those who stepped up the career ladder
and provide information on health and other aspects of
interest. This magazine is also often commended by family
members of our people.
Our People at a Glance
21
Roundup
We even enriched our life insurance call centre with ‘new
blood’ to go the extra mile of support for our customers.
18
We re-introduced company’s intranet ‘Egoz’ with a new AIA
look and feel ensuring speedier and smoother dissemination
of information to our people at all levels. Egoz continues to
be our primary mode of internal communication keeping
employees updated current and real time, on business and
people, policies and announcements, achievements and
messages from the CEO.
936
Egoz
During the year, we also strengthened our Agency Direct
Sales channel with 100 placements establishing our footprint
through the expanded regional branch network.
803
There were also many other key information dissemination
methods used.
Career
guidance
trainees
Total
Total Employee Category Breakdown
Total Employee Category Breakdown(Excluding Consultants)
400
300
2012
20 years 21- 30
& below years
2013
41-50
years
51-60
years
1
1
25
19
121
31- 40
years
146
273
38
100
240
200
0
The online platform brings us closer together and fosters a
better sense of community among AIA people in all 17 AIA
countries.
480
500
20
Wave is our Group’s social network that empowers to
engage colleagues, enable collaboration and embrace
innovation within our Group. It encourages teams /
individuals to work together across our Group in a more
fun way and allows employees to stay connected to people
and information in an effective manner.
537
600
Wave
60 years
& above
Age Analysis
Staff Age Analysis of Employees (*excluding Consultants)
42 AIA Insurance Lanka PLC
Management Discussion and Analysis
At AIA, performance management is a core people
management process to align individual and team goals
with the organisation’s vision and strategic priorities.
We achieved great results together by being real in
setting performance expectations in terms of ‘results’
and ‘behaviours’. 80% of the performance evaluation is
based on the business goals which are stretched and
aligned to our vision and 20% of the evaluation is on the
expected behaviours of employees based on 3 critical
capabilities. This process also looks at career aspirations
and development needs in order to determine the kind
of support and environment employees need to perform
at their best. It is our way of ensuring that employees’
ambitions are in line with the Company’s success.
Gender Breakdown - 2012
‘Performance Development Dialogue (PDD)’, is the new
term that describes our performance management
process. This is not just to have a conversation on how
our employees are achieving results but also how our
managers can help employees to grow and develop through
coaching and feedback. Goal setting, mid-year review and
year-end review are the three formal milestones in this
process. But we also emphasise the importance of having
on-going performance dialogues throughout the year. This
is supported by our Human Resources Information System,
where all employees are able to record their performance
related information online.
Gender Breakdown - 2013
800
500
Permanent
669
600
589
700
Fixed Term
Contract
400
Insurance
Trainee
0
2012
Male
2013
Male
267
2012
Female
01
22
12
08
07
20
28
01
100
18
42
03
200
214
300
Career
guidance
trainees
2013
Female
Total employees - Gender Breakdown 2012 vs. 2013
Staff Age Analysis of Employees (*excluding Consultants)
Performance Development Dialogue
“We believe in measuring strength and growth within; our
new performance management tool has enabled us to
have meaningful discussions with our employees in getting
to this outcome.”
~ Kelum Senanayake
Director Operations
Source: AIA HR Guidelines, Principles and Standards
Handbook - 2013
The success of this process is demonstrated by each
manager taking responsibility to deliver employee
performance and support individual development through
a culture of open and candid discussions.
Annual Report 2013 43
Talent and Leadership Continuity
Reward
“In AIA, the pursuit of ambitious and sustainable growth
creates opportunity and a place for young leaders to
succeed.”
“We reward superior performance financially and
non-financially; this has ensured the success of our
Bancassurance sales team.”
~ Indika Prematunga
Chief Financial Officer
~ Amal Perera
Director Partnerships
Our talent management process titled the ‘Organisation and
People Review (OPR)’ is an annual occurrence which aims
to address capability requirements across the business by
providing a systematic means of assessing the Company’s
current and future leadership capability needs and ability
to meet them. The review encourages a proactive approach
to resourcing, development and succession planning to
ensure leadership continuity for the future.
Our total rewards philosophy is built upon the principles of
providing an equitable, motivating and market-competitive
remuneration package to foster a strong performanceoriented culture within an appropriate overall risk
management framework. It aims to ensure that individual
rewards and incentives relate directly to the performance
of individuals, the operations and functions in which they
work and the overall performance of the business entity.
The OPR takes into account the impacts of external
environmental conditions, AIA’s strategic priorities,
leadership requirements and resourcing challenges. It also
reviews current workforce capabilities to deliver business
goals and action plans to address capability deficiencies.
This process assists in the identification of individuals
with high potential to be developed for key management
positions and recognises common leadership development
needs and solutions.
Our total rewards comprise of both financial and nonfinancial aspects ranging from benefits and remuneration,
to career development and overall working experience,
offering the flexibility needed to realise career aspirations.
The scope and depth of total rewards is indicative of the
Company’s intent to nurture long-term and sustained
development of our people.
During the year, we had a healthy pool of senior leaders
who were ‘Operating well’ or ‘New’ in their positions or
have demonstrated readiness to take on bigger roles.
Regular follow ups on their development programmes were
conducted. Around 38% of the Executive Committee positions
are with ‘Ready Now’ Successors and 62% positions are with
‘Ready Later’ successors who will be groomed in about 1 – 2
years to take over higher responsibilities.
We conduct regular annual salary surveys to ensure that
our total compensation package remains competitive
and fair to attract, retain and motivate the type of people
the Company needs. We believe that both individual
and business performance should be recognised when
determining pay decisions. Salary reviews, variable pay,
and non-financial reward decisions are driven by talent /
performance discussions.
Employer Provider
Employee Provides
Financial Rewards
Fixed Pay
Variable Pay
Business
Goals
Benefits
Non-Financial Rewards
Performance and
recognition
Development and career
opportunities
Source: AIA HR Guidelines, Principles
and Standards Handbook - 2013
Work life
environment
Time
Talent
Effort
Contributions
Business
Results
44 AIA Insurance Lanka PLC
Management Discussion and Analysis
Job Evaluation
During 2013, we carried out a job evaluation project in
order to secure internal equity in rewards management.
All the jobs of the Company were reviewed and evaluated
by Mercer evaluation system which helped to benchmark
all the positions of the Company and align them with our
Group’s ‘Entity Career Band’ structure. This allows us to
compare job roles across the Company as well as within
the Group.
Once the job role is evaluated, the grade and salary range
is determined. We consider pay practices within and
outside the industry to ensure that we are competitive.
Recognition
“To us recognition symbolises pride – a ‘change over’ in the
magnitude of Project IRIS Life Insurance System, would
not have sustained if the people involved did not feel that
the Company recognises their efforts.”
~ Chandana Jayasooriya
Chief Information Officer
Our recognition framework is multi-tiered and allows
our managers at all levels to appreciate their people for
superior contributions to the Company.
Annual
Managing Director’s Special Award,
Living our Values Award
Short-term
Monthly
On the spot / peer to peer
appreciations
Splendour Recognition, Best
Quality Sales Award
Star Employee Award
Rainbow cards,
Esthuthi
The flagship occasion in the employee events calendar
is the ‘Annual Company Conference’; an event of
communication, recognition and camaraderie. At the
2013 Company Conference, 10 outstanding individual
performers were recognised with the most prestigious
‘Managing Director’s Special Award. We encourage people
to continuously ‘live’ our values and recognised those who
championed them. 114 of our people were recognised
during 2013 with the ‘Living Our Values’ award.
The ‘Splendour recognition scheme’ recognises significant
individual contributions of people working in project teams.
We launched the ‘Best Quality Sales Award’ in 2013 to
recognise the Bancassurance Sales Executives’ sales
achievements in every quarter.
The new monthly recognition scheme ‘Star Employee
Award’ was introduced to recognise demonstrations of
Operating Principles.
Managers are encouraged to reward outstanding
employees on the spot with ‘Rainbow Cards’, a pack
of cards readily available with our managers with a
personalised gift marked on each card.
Development
“Our Group Chief Executive Mark Tucker is quoted to have
said “… I was looking not just to grow business … but to
grow people”- This to me epitomises and encapsulates
how these two critical aspects comes together at AIA to
underpin sustainable success.”
~ Gavin D’ Rosairo
Chief Investment & Risk Officer
The learning architecture provides the parameters
where learning tools and resources can best support the
delivery of the Company’s strategic priorities enhancing
the development of organisational capabilities. As an
organisation known for people development we invest in
our people so that their skills are relevant in our business.
Our main focus for 2013 was to revalidate our learning
curriculum to support the Company’s strategic business
initiatives whilst drawing the best from our Group’s
Annual Report 2013 45
learning and development methodologies. As a result we
aligned our inductions and orientation programmes to that
of our Group.
The 2013 training calendar comprised of technical and
soft skill trainings which enhanced the capability of our
employees via internal as well as external programmes
helping them to gain more knowledge and exposure.
(LKR Mn)
A total of 20,559 training hours were recorded during 2013
as compared to a total of 15,467 hours in 2012.
2013
Internal
External
Foreign
No of training 2012 vs 2013
No of training 2012 vs 2013
(LKR Mn)
Following are some of our signature developmental
programmes of 2013.
AIA Operating Principles Workshop
We invested a great deal of time and energy to articulate
our Operating Philosophy – The ‘How’ and ‘What’ of, “Doing
the Right Thing, in the Right Way, with the Right People”.
Our 12 Operating Principles portray how we should interact
within our teams, with our customers, Shareholders, other
stakeholders and the community at large.
AIA Operating Principles were learnt workshop style, via
activity based experiential programmes helping our people
to understand and relate them to our day to day work.
We were fortunate to have the presence of AIA Group HR
Director Shu Khoo to launch the Operating Principles
during January 2013 at which 60 senior managers
participated. Subsequently 13 programmes covering 785
employees were conducted in different locations around
the country.
25
41
58
43
43
80
2012
Members of the management and supervisory cadre were
given the opportunity to attend various management and
development programmes overseas. During the year over
82 people attended programmes conducted at different
business units within our Group.
2013
Internal
External
37
82
257
180
932
2,523
2012
Foreign
No of participants 2012 vs 2013
(LKR Mn)
No. of Participants
Internal
External
14,807
2012
23,411
4,296
1,838
7,811
8,393
2013
Foreign
Total training investment 2012 vs 2013 (LKR’000)
No. of Participants
The AIA Manager Programme
AIA Manager programme was developed by our Group with
the assistance of an external consultant and was delivered
across all 17 AIA countries. 2 of our Managers were trained
and certified by our Group to facilitate the programme
locally.
46 AIA Insurance Lanka PLC
Management Discussion and Analysis
This two day experiential programme targeted managers
who lead teams at AIA. Its content helps them to
understand the AIA culture, our strategic priorities,
different personality types, and their role in leading a team
to achieve the Company’s objectives.
We successfully completed 6 programmes covering 109
managers during 2013. This knowledge sharing journey
will continue to improve the capabilities of the rest of the
management team.
Here are some of the highlights;
‘AIA’s got Talent – Sri Lankan Extravaganza’
‘AIA’s got Talent – Sri Lankan Extravaganza’ was this
year’s grand talent show that unearthed the hidden
artistic, dancing and musical talents of our people. The
event took two phases to select the best performers out
of 50 contestants. All the participants were adjudged by a
professional panel of renowned singers and dancers.
The grand finale was indeed a glittering event where our
teams / individuals showcased their best of best talents. 3
teams and an individual contestant competed in the dancing
category whilst 2 teams and an individual competed in the
singing category at the finals.
Team Beat Breakers was adjudged winners in the dancing
category and the duo P & P won the singing category
trophy. Beat Breakers was the winning team to fly the
flag of AIA Sri Lanka to compete with the 17 AIA countries
across Asia. Apart from these finalists, few others also got
the opportunity to perform at the Grand Finale.
E- Learning
This is a tool used to gain knowledge and gather
information outside a class room set up. During the year, 5
e-learning modules were successfully launched to all the
employees.
The Connection Beyond Just Work
It is not just work and more work at AIA – There is work, life
and family synergy, going hand in hand bringing a balance to
the busy lives of our employees.
We recognise that our employees’ quality output depends
on their ability to contribute outside work and involve their
families in it. The Company Sports Club consisting of 16
leaders voluntarily appointed year on year play a key role,
together with HR in creating this connection beyond work. In
the year 2013 many programmes were introduced to engage
and connect our people and their families with the Company.
Traditional Blessings to Start the Year
The first working day for 2013 began with a ceremonial
breakfast with traditional dances and lighting of the oil lamp.
Blessings from all 4 religions were evoked to bring strength
to achieve challenges of 2013. Upul Wijesinghe, Deputy CEO
addressed the employees and outlined the strategic path for
the year. A traditional breakfast was laid out with an exciting
spread to start the year in good spirits. The event proved to be
a wonderful platform for employees to wish each other, mix and
mingle.
Annual Report 2013 47
The winners were chosen from each age category on Arts and
Crafts by Mr. Jagath Raveendra a renowned artist in Sri Lanka.
All the children were recognised with certificates at the awards
ceremony by Shah Rouf the Chief Executive Officer.
Annual Trip for the Whole Family
During the year employees enjoyed a 5-star weekend with
their families. They had a choice of two luxury hotels Cinnamon Bey- Beruwala or Cinnamon Lodge - Habarana.
The employees were given the option of picking a weekend
from August to November. It was a great opportunity
for friends in the workplace to get together with their
families. The Sports Club ensured that everyone truly had
a wonderful weekend.
AIA Little Hands
‘AIA Little Hands’ was a colourful event held in November to
recognise the creative work of AIA kids. More than 70 wonderful
creations were received from the children of our employees.
There were drawings and crafts in different themes.
Kiddies Christmas Party
A fun filled kiddies’ party themed ‘A Merry Time’ was
held in December at 80 Club Colombo. The party made
a difference by having a number of games not only for
kids but also for the parents. It was an opportunity for
the parents and the kids to enjoy together. The spirit
of Christmas was alive throughout the party with the
presence of Santa, fun games, magic shows, love and
warmth.
48 AIA Insurance Lanka PLC
Management Discussion and Analysis
Bargains on Pay Day
Every month a ‘pay day operation’ was held where
our people had the opportunity to purchase essential
household items ranging from milk powder to spices at
surprisingly low prices. This benefit was appreciated and
accepted positively.
Fun Fair Offering Fantastic Bargains
Another event of December was the ‘Fun Fair’ which was
held for the first time and offered our people a range
of exciting bargains from reputed brands of household
products, mobile phones, high-tech items, food, stylish
ready-mades and shoes. It was a great opportunity for the
year-end holidays and enhanced the festive spirit with the
array of goods available under one roof.
Looking Ahead......
“In 2013, we continued to build on the strength of our
people with the best of class guidance of our Group. We
believe ours is a work environment where merit leads
to recognition and advancement. With performance,
capability and governance as our key theme, we continue
our journey saluting and engaging our people so that they
can say with pride... “the best of me is called and the best
of me is able to respond…everyday.”
~ Chathuri Munaweera
Director HR & Legal
Annual Report 2013 49
Agency Force
Nurturing the trust in the Agency Force
The agency force is a vital element in promoting
sustainable business practices. Our training and
development programmes have helped Wealth Planners to
keep ahead of market trends.
Awards for top performing Wealth Planners
The Company rewarded top performances at the annual
Graduation & Sales Convention for over 700 Wealth
Planners. Wealth Planners and Wealth Planners’ Managers
were bestowed with titles – Premier, Privileged and Senior
- based on a stringent appraisal process at the Graduation.
The Graduation Ceremony was followed by the spectacular
Sales Convention. Those who proved their high calibre by
qualifying to participate in the world’s most prestigious
event for insurance sales professionals – the Million Dollar
Round Table Conference as well as the Wealth Planners
who received the coveted LIMRA International Quality
Awards were recognised for their accomplishments. There
were 17 MDRT members and 19 IQA winners.
The highlights of the evening were the awarding of the
topmost awards amidst great fanfare and applause. Mrs
D.G.A. Swarna from Anuradhapura Region was adjudged
Best Wealth Planner – Life, for the fifth consecutive year.
She had also attained the commendable position of ‘Top of
the Table’ at the Million Dollar Round Table.
The Best Wealth Planners’ Manager - Life was Sanjeewa
Undatiyawala from Kalutara (Agency 2). The Best Wealth
Planner – Non-life Insurance was Mapa Herath attached
to the Kandy Regional Office while Upali Tennakoon from
Kurunegala Regional Office was adjudged the Best Wealth
Planners’ Manager - Non-life. The Best Distribution Unit
Head was Milanka Silva from Moratuwa Region 2. The Best
Area Development Manager was Bandara Yatigammana
from Mawanella.
Road to MDRT
MDRT is the highest ranking international recognition
a life insurance advisor can achieve. Sales Training and
Development initiated a concept “Road to MDRT” to help
eligible candidates to groom themselves to be eligible for
MDRT.
MDRT (Million Dollar Round Table) the premier association
of financial professionals, and is an international,
independent body with 38,000 members from 74 nations.
MDRT membership illustrates sales and financial advice
excellence on par with the best in the world. D.G.A Swarna,
became ‘Top of the Table’. To attain the status of ‘Top of
the Table’ a MDRT member has to obtain 6 times the base
requirement.
International Quality Award (IQA)
In a rare demonstration of collective excellence and
passion for customer care, a considerable number of our
Wealth Planners have qualified for the globally recognised
International Quality Award (IQA) from LIMRA, USA. IQA,
established to promote quality selling in the Life insurance
profession across the world is one of the most sought-after
awards in the insurance industry. To qualify for the award,
it is required to achieve over 90% persistency, (a measure
of customer loyalty and satisfaction) among several other
requirements.
50 AIA Insurance Lanka PLC
Management Discussion and Analysis
A 20 year tie up with NDB
National Development Bank PLC (NDB), one of Sri Lanka’s
highest capitalised private sector commercial banks
entered into a historic 20-year bancassurance partnership
with AIA Insurance. The bancassurance agreement further
strengthens the close association the two entities have
enjoyed for over a decade. The agreement was formalised
with the participation of the two CEOs, Shah Rouf of AIA
and Russel De Mel of NDB. Indrajit Wickramasinghe, COO
of NDB Bank and Amal Perera, Director Partnerships at
AIA were among those present.
Value-adding partnership with Commercial Bank
AIA Insurance entered into a Bancassurance partnership
with Commercial Bank to bring the bank’s customers
the convenience of insuring themselves, as an extension
of the comprehensive banking services offered. The
bancassurance partnership was formalised by the
Memorandum of Understanding signed by Shah Rouf, Chief
Executive Officer of AIA Insurance and Ravi Dias, Managing
Director/Chief Executive Officer of Commercial Bank. The
largest private bank in Sri Lanka and the only Sri Lankan
Bank to be listed two years consecutively in the world’s Top
1,000 Banks, Commercial Bank operates a network of 232
branches and service points in Sri Lanka and a network of
563 ATMs in Sri Lanka. The Bank also operates 18 outlets
in Bangladesh. The Bank has been adjudged the Best Bank
in Sri Lanka by Global Finance magazine for a record 15
consecutive years and has also won multiple awards as
the country’s best bank from ‘The Banker,’ ‘FinanceAsia,’
‘Euromoney’ and ‘Trade Finance’ magazines.
A bancassurance partnership with Union Bank
Union Bank joined hands with AIA Insurance to bring
bancassurance services to its customers. Union Bank
is one of the fastest growing banks, and supports the
development and growth of the Small and Medium
Enterprise (SME) sector with a range of comprehensive
financial solutions. The new partnership with AIA is
an important forward step in strengthening the bank’s
innovative range of technology-driven products and
services geared to achieve growth in its SME portfolio.
Premier agency through AIA way of life
With the completion of our first year as AIA Sri Lanka,
growth with sustainability has become the utmost priority
of the business. A lot of emphasis has been put into the
system to ensure quality in every step taken towards
becoming the pre-eminent agency force in the country.
AIA Group has identified ‘Premier agency’ as its number
one strategic priority and took many initiatives in 2013 to
create the environment for that purpose.
With one giant step forward in creating a paperless point
of sale, the introduction of iPad and iPos technology is
expected to play a major role in contributing to future
growth of AIA. Currently we possess around 700 Wealth
Planners and Wealth Planners’ Managers using the cutting
edge technology around the country with the expectations
of expanding the usage to over 4000.
Training and Development
Partnership with NDB
AIA Sales Training and Development through Centre for
Excellence
We truly believe in developing the competencies of our
Wealth Planners to support the customer in the decision
making process which resulted in a tremendous growth in
sales during the year.
Partnership with Commercial Bank
Partnership with Union Bank
In addition to the required product and service knowledge,
Wealth Planners were driven through a winning
behavioural change by Sales Training and Development
in the year 2013. Innovative professional development
programmes were implemented during the year, to
develop Wealth Planners to the expected “AIA” standard.
Annual Report 2013 51
During year 2013 , approximately 2400 new comers were
inducted to the regional level Induction training programmes.
In order to ensure the effective professional development of
the new comers in the first three months, the Induction was
structured in three stages as Induction 1,2 and 3.
Training Summary at a glance
300
250
261
Inductions for newly recruited Wealth Planners and
Wealth Planners’ Managers
200
- Knowledge to complete a sale using the iPos system
133
No of Programmes
3000
2597
2500
2000
1500
1000
500
0
Training for
Newly Recruited
WPs and WPMs
Training &
Development
for Existing
WPs and WPMs
Total
Training Hours
10000
9493
- Technical knowledge to use iPad system throughout the
Sales process and
Total
931
In order to enhance the technical savvy of the sales force
‘iPoS on iPad‘ a technical training programme series was
conducted to endow Wealth Planners with:
0
8000
6000
4000
4894
Today technology and innovation are the greatest tools in
selling. Advances of the technology used and the adoption
of the best suitable innovations make the sales process
effective and fast.
Training &
Development
for Existing
WPs and WPMs
50
1666
‘iPoS on iPad’ training
Training for
Newly Recruited
WPs and WPMs
100
4599
Approximately 90 Wealth Planners’ Managers received a
three month familiarisation programme and demonstrated
early success in their career change.
128
150
In order to consolidate the professional development and
business focus, newly recruited and promoted Wealth
Planners’ Managers are required to go through a series of
familiarisation programmes for three consecutive months,
one day a month.
Training for
Newly Recruited
WPs and WPMs
Training &
Development
for Existing
WPs and WPMs
2000
0
No of Participants
Total
52 AIA Insurance Lanka PLC
Management Discussion and Analysis
Training System Launch
Approximately 3,200 new recruitments and over 100
regional locations together contributed to create
thousands of training hours hence justified the need to
launch an internet based system in 2013.
This newly developed Sales Training system was
implemented to monitor and record all training activities.
The sales training system ensures,
- The timely nomination process
- Wealth Planners training records
- Budget and time management of the training
Club 21
To review the quarterly performance with a pledge
to perform better in the future with clearly set goals,
a training focused programme named ‘Club 21’ was
conducted at Zonal level for all the Wealth Planners’
Managers. Club 21 programme supported the distribution
by motivating the mangers to achieve their recruitment
targets. It contributed to the Company completing the year
with 1,382 net recruitments.
The uniqueness of the Club 21 is that it is a review as well
as learning.
Certificate from Wayamba University
The Department of Insurance and Valuation of the Faculty
of Business Studies and Finance of Wayamba University of
Sri Lank offers the ‘Certificate of Financial Management’
(CPFM) responding to a request of AIA Insurance to enhance
the competency of the Wealth Planners of the Company.
This Certificate course provides a basic understanding in
the areas of Preparation of Personal Financial Statements,
Personal Taxation, Risk Management, Time Value of Money
and Investment and Retirement Planning. Two batches
have successfully completed the course so far. The second
batch to complete the course requirements are awaiting in
anticipation of their certification in 2014.
Continuing Professional Development Training
A series of Continuing Professional Development
training programmes was conducted in order to enhance
Knowledge and Skills of high performing Wealth Planners
and Wealth Planners’ Managers.
“Growth Plan” related training played a major role to guide
the sales force through a planned and monitored progress
in achieving their goals.
Specially designed, unique and effective training material
for Orientation and Induction programmes were provided
to enhance the Wealth Planners selling knowledge and
Sales Kits to be used during the sales process as value
addition tools.
Zonal Top 100 programme was highly commended by
the Wealth Planners & Wealth Planners’ Managers who
participated because it was a unique activity based outdoor
learning experience for around 700 performers.
Exposure to Grow
The high level of exposure the AIA Group has opened up
to AIA Sri Lanka agency force is another avenue to expand
our future growth story.
AIA Presidents Club
AIA President’s Club is the most prestigious event in
the AIA calendar. Participation is exclusively for the top
Wealth Planners and Wealth Planners’ Managers in AIA.
10 high performing Wealth Planners and Wealth Planners
Managers qualified with their exclusive performance in
year 2013, to participate in this prestigious event which will
be held in Berlin.
Annual Report 2013 53
Annual Overseas Tours
The performance driven culture of AIA continues to
incentivize our agency force through annual overseas
tours for achieving the stated sales targets. 36 of life
Wealth Planners qualified for an all expenses paid tour
to Berlin, 41 of Wealth Planners to Dubai and around 90
Wealth Planners to Chennai in year 2014 based on their
performance achievements in year 2013.
Hall of Fame
Prestigious members of the Hall of Fame who have made
an indelible mark in the history of the Company were
commended for enhancing the image and reputation of the
Company. Their accomplishments are highlighted in the
Hall of Fame as an inspiration for up and coming Wealth
Planners. The Hall of Fame is a fitting tribute to exemplary
Wealth Planners and a lasting repository showcasing their
accomplishments that have enriched the Company.
DSF Non-life Training
Sales Training and Development conducted Licensing
programmes on a monthly basis to support the planned
new recruitments of the channel with a 85% pass rate. In
addition to the basic products & selling training for new
comers , the special leadership building programme which
was held in Kithulgala for regional OICs was a highlight of
the year.
54 AIA Insurance Lanka PLC
Management Discussion and Analysis
Our customer-centric endeavours
Our focus on engaging the customer is now more single-minded and stronger than ever before. This has resulted in
triggering a positive response at all touchpoints and we have been able to harvest excellent results.
100 lucky kids receive laptops
For the second consecutive year, 100 children of Life policyholders received laptops at a glittering presentation ceremony
after a lucky draw was held to select the recipients as part of the on-going customer engagement initiative. Press ads
featuring the children who received the laptops created an added interest to motivate current and potential policyholders.
The laptop winners were presented with a keepsake family photo to make their experience memorable.
Launch of iPoS
We became the first insurer in Sri Lanka to introduce the
iPoS System (Interactive Point of Sale) for Wealth Planners
equipped with iPads. The advanced application provides
a complete sales process on the iPad, making it possible
for AIA Wealth Planners to serve customers with amazing
speed and efficiency anytime, anywhere. This is a major
change in the insurance industry enriching the customer’s
purchase experience.
Commitment to Customer Satisfaction
An important aspect of our commitment to customer
satisfaction is our customer management strategy. This
has several important elements including continuous
process improvements, needs based products, customer
engagement & rewards and a systematic process of
obtaining and responding to customer feedback.
We carry out research studies to identify customer needs,
especially emerging requirements and have the following
on-going systems to track changing dynamics.
1. Transactional Net Promoter Score (T-NPS) – Evaluates
& measures customer recommendation levels at
relevant customer touch-points and necessary steps
are initiated to improve, if necessary.
2. Relationship Net Promoter Score (R-NPS) – Measures
customer loyalty level and benchmarks against key
competitors in the market. This is an annual exercise
and results are evaluated against pre-set targets.
3. Brand health and communication effectiveness –
Monthly tracking of Brand health. Findings are reviewed
and necessary actions are taken at functional level.
Major concerns are escalated to top management.
Annual Report 2013 55
4. Pre & Post communication evaluation – Identifies the
effectiveness of mass media communications reaching
different customer segments.
5. Strategic research – All key marketing decisions are
supported by research findings and customer insights.
Research is conducted in wide ranging areas of
customer need identification, market understanding,
brand strength & equity, concept testing, campaign
testing whenever a need arises.
Our needs based portfolio of products
Addressing the problem faced by anxious parents in an
increasingly competitive world, we launched an Education
Plan to reassure them. Parents who dream of a world
class education for their little one can ensure that the child
would receive a fund for higher education, even if they are
not around.
AIA also launched two other new products – FundBuilder10
and Protected Savings - that are both designed with builtin protection benefits to meet emerging customer needs
for secure fund building and safeguarding the future of
loved ones, in case the worst happens.
In 2013 we introduced three needs based products
designed to fulfil the emerging expectations of customers.
Our portfolio of products in brief
Name of product
Target market
Special Features
AIA PensionsPlus
For executives,
businessmen,
entrepreneurs & blue
collar workers who are
not eligible for a state
funded retirement income.
• A monthly pension up to a period of 10 – 30 years upon reaching the
retirement age.
• A monthly pension for the spouse or children should the unforeseen
occur.
• The retirement fund increases based on an annually guaranteed
rate of return
• An inbuilt life cover up to two times the annual basic premium.
• Ability to withdraw funds in an emergency
AIA Pensions
For individuals who seek
to build a substantial
retirement fund and have a
higher risk return appetite
• All features offered by AIA PensionsPlus with additional Investment
choice to invest the Pension Fund in investment options ranging
from Treasury Bills to the Stock Market.
AIA Education
Plan
Individuals who have
children and the need for
a guaranteed education
fund
• Inbuilt Life Cover of up to 15-165 times the annual basic premium
• A loyalty reward of 200% initial annual basic premium at the 10th
policy anniversary
• The education fund increases based on an annually guaranteed rate
of return
• A guaranteed education fund at maturity even if the main life has ceased
AIA Protected
Savings
Individuals who are
married and have children
and have the need for a
guaranteed savings fund
• Inbuilt Life Cover of up to 15-165 times the annual basic premium
• A loyalty reward of 200% initial annual basic premium at the 10th
policy anniversary
• The savings fund increases based on an annually guaranteed rate
of return
• A guaranteed savings fund at maturity even if the main life has ceased
AIA SavingsPlus
For individuals who
seek both insurance and
financial solutions under
one package
• An inbuilt life cover that’s worth up to 15 times the annual basic
premium
• Ability to ‘Top-up’ existing savings fund
• The fund increases based on an annually guaranteed rate of return
• A tax free maturity value maximising savings returns
• Ability to withdraw funds in an emergency
56 AIA Insurance Lanka PLC
Management Discussion and Analysis
Name of product
AIA SavingsPlan
AIA
InvestmentPlan
Target market
Special Features
For individuals who
seek both insurance and
financial solutions under
one package and have a
higher risk return appetite
to build a Savings Fund
• All features offered by AIA SavingsPlus with additional Investment
choices to build a fund.
Individuals who wish to
build a Savings Fund in a
short term
• A single premium unit linked product with flexibility to switch
between funds to maximise returns
• Opportunity to invest the Savings Fund in investment options
ranging from Treasury Bills to the Stock Market.
• A life cover of 110% of one-off investment
• Ability to top-up the existing investment
• A tax free maturity value
AIA Health
Insurance
AIA Fund Builder
10
For individuals who
are seeking long term
protection benefits
• Built in Life Cover
Individual who seek
both fund building and
protection needs
• Simple product structure
• Built in Critical Illness, Adult Surgery and per day Hospital Cash Benefit
• Ability to cover spouse and child under one policy
• Inbuilt natural & accidental death benefits
• In the event of death, the available fund balance and the Life Cover
will be paid.
• A loyalty reward of 200% initial annual basic premium at the policy
maturity
• The savings fund increases based on an annually guaranteed rate
of return
Additional Benefits
Additional Benefit
Description
Accident Benefit
Provides additional life cover in the event of accidental death. This benefit will also provide
the policyholder with financial assistance in the event of a Permanent Disability due to
accidents
Hospitalisation Benefit
Provides a daily cash payment of up to LKR 10,000 per day from the first day onwards if
the life assured is hospitalised for over three days. This sum is doubled if admitted to the
Intensive Care Unit.
Adult Surgery Benefit
Provides financial support for the life assured and spouse for over 250 surgeries performed
in Sri Lanka, India or Singapore
Critical Illness Cover
Financial assistance for life assured and spouse for 22 listed critical illnesses. Ability to
choose the cover up to a maximum of LKR 3 Mn
Income Protection Benefit
In the unforeseen event of the death of the main life assured or total permanent disability,
the dependents will be provided a monthly income during the term of the policy for a
maximum period of 10 years
Spouse Life Cover
Provides a life cover for spouse
Child Health Care Benefit
Financial Support for 250 listed surgeries performed in Sri Lanka, India or Singapore. In
addition, it also provides cash for hospitalisation and a special allowance if a parent stays
over with a child under 12 years of age.
Annual Report 2013 57
Non-life products for individuals
Product Name
Description
AIA Motor Insurance
AIA Motor Insurance offers an extensive range of benefits
and value additions from an attractive emergency travel
allowance to hospitalisation cover and a No Claim Bonus of
up to 65%
AIA Home Protect
A comprehensive Home Insurance plan to cover home and
belongings from a range of perils
AIA Home Insurance Plan
AIA Home Insurance Plan is a hassle-free way to protect
homes from many perils such as flood, fire, lightning,
burglary, and even malicious damage
AIA Title Insurance
An assurance for a clear title
AIA eTravel
A comprehensive travel insurance against;
• Emergency Medical Treatment
• Loss of Baggage
• Loss of Passport
• Emergency Financial Assistance
• Personal Liability
• Personal Accident
Insurance solutions for businesses
• AIA Employee Benefit Plan
• Surgical and Hospitalisation
• Workmen’s Compensation
• Asset Protection
Engineering Class
Fire Class
Miscellaneous Class
Marine Class
• eMarine
Continuous quality improvements
-
Net Promoter Score (NPS) – a process which
measures AIA and industry’s key competitors customer
satisfaction cum recommendation via direct customer
feedback. In 2012 we scored an NPS of 16 achieving
the status ‘ahead of upper quartile’ for the first time.
-
Customer Model Headings & Key Customer Parameter
Review – a framework with customer model heading
action plans to monitor customer related initiatives.
All key parameters and KPIs are measured and
reviewed at Executive Committee level and corrective
measures are taken.
-
Customer Feedback and Complaint Management
System – Customers can enter complaints via the
corporate website and all complaints are resolved by
teams assigned to the task. The system also enables
employees with intranet access to lodge a complaint
on behalf of a customer and progress the status of the
complaint being resolved.
-
Customer satisfaction measures – Regular surveys
conducted over the phone, at focus group discussions,
via letters on special occasions such as the completion
of the first policy year help to build and enhance the
rapport we have with our customers. Customers
selected at random are invited to sought after movies
or dramas.
-
Facilitating informed purchase decision – Our
improved website with enhanced product information
help customers to make an informed purchase
decision. Sales personnel too are trained and
equipped to provide customers with the advice to make
an informed decision.
58 AIA Insurance Lanka PLC
Management Discussion and Analysis
Corporate Responsibility
We are a responsible business with a strong belief in
adding value to the community and the environment we live
in. Our ‘people led’ Corporate Responsibility (CR) initiatives
contribute to build our people’s pride and emotional bond
towards the Company.
It is our Operating Principle to contribute positively to the
social and economic development of the community in
which we operate. During the year our community focus
was on ‘Education, Safety, Welfare and Healthy living’.
Company’s Employee Voluntary Leave Scheme provides an
opportunity for our people to give back to the community,
by engaging in charity activities.
Poson Safety Programme
Higher Education Scholarships for Year 5 Highfliers
The company presented scholarships to the students who
topped the batch in each of the 25 districts in Sri Lanka
in the year 5 government scholarship examinations. This
scholarship scheme was initiated in 1994 to motivate the
nation’s most promising children and inspire their academic
excellence. This is one of the Company’s most important CR
endeavours with a national relevance.
The chief guest at the presentation of the scholarship 2013
was Emeritus Professor J.B. Disanayaka, a leading authority
of the Sinhala language and prolific writer in Sinhala and
English. The number of scholarships offered since the
scheme commenced 20 years ago has grown to 475 with
this newest batch. The trust fund set up with LKR 10 Mn has
grown six-fold through prudent investments, ensuring the
continuity of the scheme.
Our nationally relevant signature CR endeavour – the Poson
safety programme was conducted for the 20th consecutive
year in 2013. Over a million pilgrims visit Anuradhapura
every year to commemorate the introduction of Buddhism to
Sri Lanka.
The Company facilitated the presence of around 600
lifeguards from the Police, Navy and the Life Saving
Association of Sri Lanka on site and also conducted an
extensive safety awareness campaign in the sacred city and
surrounding areas. Lifeguards deployed by the Company
rescued 7 pilgrims in danger of drowning while bathing in
the reservoirs and tanks.
In addition to ensuring the safety of pilgrims, the devotees
were also provided with a special free shuttle train service,
the Poson Vandana train, between Anuradhapura and
Mihintale for the 4th consecutive year.
This year for the first time, we also offered a wheel chair
service for the devotees who are elderly or feeble. A
pleasant surprise for those in need.
Scholarship for Outstanding Performance in
Insurance Studies
For the 4th consecutive year, we partnered with Wayamba
University of Sri Lanka to offer a scholarship for excellence in
insurance studies. In 2013, the scholarship was awarded to Ms.
Denushika Wijenayake, the most outstanding final year student
in Insurance & Valuation degree programme of the university.
She received a 6 month internship programme at the Company
supported further with a monthly allowance.
Annual Report 2013 59
AIA Career Guidance Training Programme - 2013
AIA Career Guidance Training programme provides
undergraduates an opportunity to work and learn in order
to prepare themselves to take up job roles in the corporate
world. During this year, we have given opportunities for 29
undergraduates.
The programme contains a 6 months ‘work and learn’
exposure, 2 skill development workshops and final
certification. This gives them the opportunity to receive
on the job exposure and development of their soft skills
to make them more employable. During the workshops
we covered areas such as skills to face a job interview,
leadership development, customer service skills,
developing career paths, business etiquette, professional
grooming, business communication and personal finance
literacy.
Voluntary Leave Scheme
Our Employee Voluntary Leave Scheme encourages our
people to give back to the community by engaging in
charity based activities. All employees are granted up to 2
days paid leave per annum to volunteer for the Company’s
charity programmes. During the year we have completed
over 500 hours of voluntary service.
AIA Voluntary Hospital Cleaning Project
Around 60 company employees got together and volunteered
to clean up the Lady Ridgway Childrens’ Hospital. Our
enthusiastic set of colleagues spent an entire day at the
hospital and painted the walls of the children’s wards and
cleaned the garden area of the premises.
AIA Career Guidance Workshop 2013
Our 7th Operating Principle ‘Enhancing AIA’s premier
reputation through each and every interaction’ was well
received via the AIA Career Guidance Workshop creating
opportunities for more than 100 undergraduates from
Kelaniya, Sri Jayewardenepura, Sabaragamuwa and
Wayamba Universities. The main focus of this programme
was also to develop their soft skills to meet the demand of
the job market. The workshop included sessions on how to
face job interviews and effectively leading self and others.
60 AIA Insurance Lanka PLC
Management Discussion and Analysis
Apart from this, they got involved in beautification of the
waiting areas and made it very attractive by pasting animated
stickers on the walls. This indeed demonstrated our brand
promise, The Real Life Company.
The confidential survey was in the form of a series of
statements requiring participants to rate themselves
depending on whether they agree or disagree with the
information sought. This included a number of statements
to evaluate perceptions, lifestyle, health level, attitude
towards health, exercise, food, medical check-ups, sleep,
pollution, impact of electronic devices on health and how
the Company can help people to lead healthier lives. Some
of the questions were aimed at ascertaining people’s
awareness of issues such as cancer and stress.
In Sri Lanka, some of our employees and Wealth Planners
were required to participate in the survey. The research
findings from 15 out of AIA’s 17 markets in pan Asia
including Sri Lanka shed light to interesting revelations
that would help improve healthy living.
AIA Foster Parenting
The Company organised this initiative with a view of providing
financial assistance through foster parenting for deserving
children to support their education in collaboration with the
Department of Probation and Child Care Services (DPCC),
Sri Lanka. Under this initiative, 40 students were financially
supported on a monthly basis for a period of one year. 38 of
our people contributed to this worthy cause.
Our Way of Making Kids Smile - ‘Yes I Can’
Developing people for tomorrow has always been one of
the hallmarks of the Company. This year we extended that
to the kids of the AIA family. The programme was aimed
at developing the thinking ability of our own kids via a very
interactive one day workshop.
During the first phase of the programme the little ones got
the inspirational thoughts on how changing lives can be
meaningful to the community.
During the second phase, kids applied what they learnt
during the first phase to inspire kids of the Sanhinda home.
Around 25 kids took part in this event. This was positively
commended by most of the parents.
Research into Healthy Living
Our Group conducted a survey across all AIA markets to
evaluate the healthy living index as a part of the Group’s
Healthy Living initiative.
The survey covered over 10,000 interviews of which over
300 were in Sri Lanka. The target group in each market
was the general population aged 18 to 65 years across
all income and education levels. The survey revealed the
drivers that made a big impact on people’s fitness and life
expectancy. This was of great relevance to Sri Lanka where
research findings reveal that people are living longer than
in most other Asian countries.
AIA Health Ride
The sight of over 100 employees of the Company led by the
Company’s top executives cycling along Colombo’s busy
streets waving red flags and banners, dressed in bright
red t-shirts, turned heads. They were promoting ‘Healthy
Living’ demonstrating our Group’s innovative Operating
Principle of ‘Being a role model for the industry’.
Annual Report 2013 61
Environment
Across pan Asia, AIA has a strong focus on managing risk
and protecting people – in good times and hard times.
This is an integral part of how we conduct our business.
As a result, concern and care for the environment has
increasingly become a core segment in our day-to-day
operations. This is reflected in our commitment to ecofriendly activities that help to manage and preserve the
earth’s precious resources for the future.
Eco-friendly practices
•
New recruits are made aware of the Company’s
environmental policy
•
All windows are tinted for energy conservation
•
Central air conditioners are switched off at 5 pm
•
Energy saving bulbs used in all AIA offices
•
LCD monitors used for energy conservation
•
Most of the staff are equipped with laptops
•
Eco-friendly disposal of electronic items.
•
Regular maintenance and service of the Company’s
fleet to reduce emission.
Educating new recruits & staff
New recruits are made aware of the Company’s
environmental policy at the induction stage. Eco-friendly
practices have been introduced as an important induction
module.
Employees are regularly exposed to messages that
motivate them to reduce the use of electricity and paper
through stickers on printers and e-mails.
Staff members are encouraged
- not to take printouts and e-mail instead;
- print on both sides of the paper;
- use tele-conferencing rather than fly;
- use of e-communications wherever possible.
Other environmentally friendly activities
As a multinational global company we are deeply
concerned with environmental issues from a worldwide
perspective and contribute in a consistent manner to
preserving the environment.
Reducing resource usage
•
A Company policy statement in place on the
environment
•
36,000 kg of paper recycled in 2013.
•
Inter-building 3-wheeler shuttle service minimises
fuel consumption.
•
Sending reminders to customers to pay premium by SMS.
•
‘Think before you print’ campaign, rationalised paper
usage and double sided printing to reduce paper
consumption.
•
Call conferencing to reduce air travel.
•
Replacing point of sale material with digital
presentations to customers, save paper usage.
•
Every quarter we monitor usage of our electricity,
water and other resources with the objective of
reducing usage as much as possible. We are
intensifying our water conservation efforts company
wide and aim to reduce water use. Our water
reduction target is part of our commitment to reducing
consumption.
•
We aim for our written communications to be concise,
recycle paper waste and use online tools as far as
possible. Through these endeavours we have managed
to reduce total paper consumption.
•
All waste paper, shredded paper and cardboard are
collected from each floor in a box placed for the
purpose and entrusted to a supplier who disposes
62 AIA Insurance Lanka PLC
Management Discussion and Analysis
the material in a responsible manner by supplying to
recycled paper manufacturers or incinerating. More
than 15,000 kg of paper is incinerated annually.
•
•
We have a garbage disposal system in the company
canteen with different garbage bins for wet garbage,
lunch sheets, paper and plastic. This trains our people
to be mindful of how garbage should be disposed of
in a systematic, eco-friendly manner that facilitates
recycling where possible.
The company uses around 200 toners, 400
printer ribbons, 30 printer cartridges and 40 refill
toners a year. These items are disposed of in an
environmentally friendly manner by the original
suppliers who collect, refill and recycle the
components. The suppliers are appointed on the
understanding that the IT waste would be recycled.
Providing drinking water for villagers
Clean water was made available to school children through
a tube well in the first phase of a CR project completed in
2011 to improve the infrastructure facilities of Rathugala
primary school in a remote part of Moneragala district.
The tube well provided drinking water not only to the
school children but the villagers as well. Once Rathugala
primary school was selected to benefit from this Corporate
Responsibility project the company entered into an
understanding with the Department of Probation and Child
Care Services coming under the Ministry of Education to
improve the infrastructure and welfare of the school.
Regional workshops to protect the environment
Regional workshops were held in Matale and in the
region for selected customers on how best to maintain
motor vehicles to help reduce environmental pollution,
enhance fuel efficiency and reduce carbon emission.
The workshops were conducted by a prominent motor
engine specialist, Lal Alawatta. This was part of the
company’s strategy of enhancing customer’s awareness on
environmental issues and best practices.
From a Group perspective
Because a clean environment is essential for the
health and well-being of everyone, AIA throughout
Asia implemented a series of environmentally friendly
initiatives. To help raise awareness about the growing
problem of electronic waste (e-waste) AIA in Hong Kong
and the Chinese University of Hong Kong (CUHK) cosponsored a landmark survey of 1,200 adults in Hong
Kong, where approximately 70,000 tonnes of electrical
and electronic waste are generated each year. Part of
a larger collaboration between AIA and CUHK to raise
awareness about e-waste, the survey was supported with
the launch of the WeCareAboutEwaste.com website and
the distribution of more than 3,500 “Breathe new life into
your old e-devices” posters. Collaborating with CUHK –
with its 20,000 students and eventual access to hundreds
of secondary schools – means we are not just helping
the next generation of business leaders to become more
environmentally conscious but also the generation after
that.
In China, AIA employees and their families helped plant
trees in the suburbs of Beijing for the fourth consecutive
year. In Hong Kong and in Macau employees are
encouraged to ‘go green” in their daily lives through
regular online “green” reminders.
In China, the new AIA Financial Centre will be the first
commercial building in Foshan to be certified a “green
building” by the well-recognised green building authority
Leadership in Energy and Environmental Design (LEED).
In Thailand, the two commercial buildings AIA is investing
in – the AIA Capital Centre (to be completed in 2014) and
AIA Sathorn Tower in Bangkok (to be completed in 2015) –
are both designed to meet “green building” certification by
LEED.
In 2012, the AIA Central headquarters building in Hong
Kong became the first Grade A commercial building to
receive the Silver Certification for Existing buildings:
Operations & Maintenance from LEED for its ongoing
environmentally friendly initiatives.
In every AIA office around the region, AIA regularly
encourages conservation activities, including electricity
and water conservation through the use of motionsensitive devices and the reduction of lift services after
office hours.
Annual Report 2013 63
GRI Compliance Index
64 AIA Insurance Lanka PLC
GRI Compliance Index
Annual Report 2013 65
66 AIA Insurance Lanka PLC
GRI Compliance Index
Annual Report 2013 67
68 AIA Insurance Lanka PLC
GRI Compliance Index
Annual Report 2013 69
Real life.
Real relationships.
71
Life is a series of moments….the happy times
and difficult ones. We’re there for you through
all of it.
Because we build real relationships for real life.
72 AIA Insurance Lanka PLC
Board of Directors
Gordon Timmins Watson
Chairman - Non Executive Director
Manoj Ramachandran
Non Executive Director
Mitchell David New
Non Executive Director
Ms. Sally Yuen Wai Wan
Non Executive Director
Annual Report 2013 73
Heerak Basu
Non Executive Independent Director
Deepal Sooriyaarachchi
Non Executive Independent Director
74 AIA Insurance Lanka PLC
Directors’ Profiles
Gordon Timmins Watson
Chairman - Non Executive Director
Mitchell David New
Non Executive Director
Appointed to the Board of Directors of the Company on 28
June 2013. Mr. Gordon Timmins Watson is the Regional
Chief Executive responsible for AIA Group’s businesses
operating in Hong Kong, Macau, Korea, Philippines,
Australia, New Zealand, India, Indonesia, Vietnam and
Sri Lanka as well as the Group Corporate Solutions
business, the Group’s partnership distribution and the
Vitality initiative.
Appointed to the Board of Directors of the Company on 28
June 2013. Mr. Mitchell David New is the Group General
Counsel for Hong Kong listed AIA Group Limited. He
has held various senior management positions in the
operations of leading multinational life insurers in Asia
and North America during his 18 years in the insurance
business. Prior to joining the insurance industry, Mr. New
practiced law at the Canadian law firm Fasken Martineau
where his clients included a number of domestic and
international banks, trust and insurance companies.
Mr. Watson’s deep and broad knowledge of the AIA Group
and its operations, together with his track record in
managing businesses and executing strategic change,
make him a valuable member of the Group Executive
Committee.
Mr. Watson has been with AIG / AIA for over 28 years in
various leadership positions New York, London, Africa, the
Middle East, Japan, Korea and Hong Kong.
Prior to rejoining AIA Group in January 2011, he was
Global Vice Chairman and Regional CEO of ALICO Japan
and Asia. In addition to overseeing the Japan operation –
ALICO’s largest region – Mr. Watson also had responsibility
for global marketing, distribution, strategy, corporate
solutions across 54 countries. Prior to this role, he was
ALICO’s Global Chief Operating Officer. Mr. Watson has also
played a key role in the completion of the sale of ALICO to
MetLife.
Before joining ALICO, Mr. Watson was the Deputy President
of AIA with responsibilities for Hong Kong, Singapore,
Thailand, Malaysia, Indonesia and Vietnam. Prior to this
role, he was President and CEO of AIG Life Korea. Under
his leadership, AIG Korea delivered strong results with
market share surpassing a number of foreign insurers.
Mr. Watson holds an MBA from University of Hull in the UK
and is a Fellow of the Chartered Insurance Institute and a
Fellow of the Chartered Institute of Marketing.
He is a graduate of the Faculty of Law at the University of
Western Ontario and holds a Masters Degree in Business
Administration and a Bachelor of Commerce Degree from
McMaster University.
He is a qualified Barrister and Solicitor and a member of
the Law Society of Upper Canada.
Manoj Ramachandran
Non Executive Director
Appointed to the Board of Directors of the Company on 04
December 2012. Mr. Manoj Ramachandran serves as the
Group Senior Regional Counsel of AIA Group where he
has responsibility for legal matters related to a number
of the markets of operation of the AIA Group. Prior to
joining the AIA Group Mr. Ramachandran served as the
Head of Legal, Asia, for Fidelity International, a global
investment management company. Mr. Ramachandran has
over 16 years experience in the financial services industry,
principally in the Asia-Pacific region. He graduated summa
cum laude from the University of California and also holds
a Juris Doctor degree. He is admitted as an Attorney-atLaw in the State of California, USA and as a Solicitor in
Hong Kong.
Annual Report 2013 75
Ms. Sally Yuen Wai Wan
Non Executive Director
Deepal Sooriyaarachchi
Non Executive Independent Director
Appointed to the Board on 06 February 2013. Ms. Sally
Yuen Wai Wan, is the Head of Group Financial Reporting
and Analysis of the AIA Group. She is responsible for
overseeing the AIA Group’s finance and accounting
activities, including external and internal reporting,
budgeting and forecasting, and the Group’s accounting
policy. She has more than 16 years experience in the
finance and accounting profession and her previous
experience includes working as the Chief Financial Officer
in Allianz Fire and Marine Insurance Japan Limited and
Manager in KPMG Hong Kong. She joined the AIA Group in
May 2007 as the Assistant Vice President of Group Finance,
before becoming the Head of Group Financial Reporting
and Analysis in 2008. Ms. Wan received a Bachelor
of Commerce in accounting and finance in 1997 from
University of New South Wales Australia and qualified as
Certified Practicing Accountant in 2000.
Appointed to the Board on 17 May 2005. Mr. Deepal
Sooriyaarachchi functioned as the Managing Director
until end February 2010 and continues as a Director from
March 2010 onwards. He is the Chairman of the Sri Lanka
Inventors Commission and is also a Director of Sampath
Bank, Panasian Power PLC and Hemas Manufacturing
(Pvt) Ltd. He is a member of the National Administrative
Reforms Commission (NARC). Presently he works as a
Management Consultant. He is a Fellow of the Chartered
Institute of Marketing, UK, Chartered Marketer and has a
Masters in Business Administration from the University of
Sri Jayawardenepura.
Heerak Basu
Non Executive Independent Director
Appointed to the Board of Directors of the Company on 05
December 2012. Mr. Heerak Basu serves as the Appointed
Actuary for Tata AIA Life Insurance Company Ltd, India.
Prior to joining Tata AIA Mr. Basu worked as a consulting
actuary with Watson Wyatt (now part of Towers Watson) in
Singapore consulting to countries in South East Asia. He
has also worked as an actuary with a multinational bank
in India and also with a Life insurer in the United Kingdom
where he started his career. Mr. Basu is a Fellow of the
Institute and Faculty of Actuaries of the United Kingdom
and a Fellow of the Institute of Actuaries of India. He also
holds a MA degree in Mathematics from the University of
Cambridge and a MBA from the University of Strathclyde.
76 AIA Insurance Lanka PLC
Senior Management Team
Annual Report 2013 77
1. Shah Rouf - Chief Executive Officer 2. Upul Wijesinghe - Deputy Chief Executive Officer/
Chief Agency Officer 3. Chandana Jayasooriya - Director Information Technology / Chief
Information Officer 4. Indika Prematunga - Chief Financial Officer 5. Chathuri Munaweera
- Director Human Resources & Legal 6. Kelum Senanayake - Director Operations 7. Amal
Perera - Director Partnerships 8. Gavin D’ Rosairo - Chief Investment & Risk Officer
4
2
7
3
8
1
6
5
78 AIA Insurance Lanka PLC
Senior Management Team
Shah Rouf
Chief Executive Officer
Indika Prematunga
Chief Financial Officer
Mr. Shah Rouf serves as the Chief Executive Officer of the
Company. He has also functioned as the Managing Director
of the Company from March 2010 to June 2013. He counts
over 20 years of experience in the industry, having held
senior management positions in both Life and Non-life
insurance in the UK, Middle East, India and continental
Europe. Prior to his appointment in the Company, he was
the CEO of Aviva Romania and Chief Distribution Officer,
Central and Eastern Europe for Aviva. He concluded his
academic studies at the London School of Economics and
has a BA (Hons) and a M.Sc. degree in Economics. He is an
Associate of the Chartered Insurance Institute, UK.
He heads the Finance Division of the Company as Chief
Financial Officer. He holds a BSc special degree in
Accountancy and Finance with a First Class honours and a
Masters in Business Administration from the Postgraduate
Institute of Management of the University of Sri
Jayawardenepura. He is a Fellow member of the Chartered
Institute of Management Accountants, UK (FCMA /CGMA)
and a finalist in the Chartered Institute of Marketing, UK.
He counts over 13 years of management experience in
many fields including insurance, finance, shipping and
telecommunication sectors.
Upul Wijesinghe
Deputy Chief Executive Officer/ Chief Agency Officer
He heads the Direct Sales Distribution Division of the
Company for Life insurance business. He also functions as
the Deputy Chief Executive Officer and Principal Officer. He
holds a Bachelor of Science degree with honours from the
University of Colombo and is an Associate of the Chartered
Insurance Institute, UK. He also holds a Postgraduate
Diploma in Actuarial Science. He is an Alumni of the
International Center for Management Development,
Switzerland. He was the President, Sri Lanka Insurance
Institute in 2002 and 2003. He counts over 24 years of
management experience in insurance.
Chandana Jayasooriya
Director Information Technology / Chief Information Officer
He heads the Information Technology function of the
Company. He holds a Masters degree in Information
Technology (MSc IT) from the Keele University, UK and
is an Associate of the Bankers Institute of Sri Lanka
(AIB). He is a passed finalist of Certified Information
Security Manager (CISM) from the Information Systems
Audit and Control Association (ISACA), USA and a Project
Management Professional (PMP) from the Project
Management Institute (PMI), USA. He is a member of the
Computer Society of Sri Lanka (CSSL) and Professional
Member of the British Computer Society (BCS). He counts
29 years of overall experience in information technology in
the banking and insurance sectors.
Chathuri Munaweera
Director Human Resources & Legal
She functions as Director Human Resources and Legal
and is the Company Secretary. She holds a Postgraduate
Certificate in Human Resource Management from the
University of Sri Jayawardenepura. She has a Bachelor
of Laws and a Master of Laws of the University of
Colombo and is an Attorney-at-Law. She has successfully
completed the International Diploma in Compliance of the
International Compliance Association, UK. She was the
Chairperson of the HR Sub Committee of the Insurance
Association of Sri Lanka for the years 2011 and 2012. She
counts over 17 years management experience in the fields
of human resources, corporate law, litigation, compliance,
company secretarial practice and business operations.
Kelum Senanayake
Director Operations
He is responsible for Operational functions of the Company
covering Life and Non-life insurance from underwriting,
servicing to claims management. He also oversees the
logistics management function. He holds a Diploma in
Business Management from World View Institute and
a Masters Degree in Business Administration from the
University of Western Sydney. He counts over 31 years of
management experience in Life and Non-life insurance
business management, infrastructure and operations.
Annual Report 2013 79
Amal Perera
Director Partnerships
As Director Partnerships, he is responsible for the
development and implementation of the Company’s
bancassurance and partnership distribution function. He is
also the appointed Company Spokesman.
He holds a Masters in Business Administration from
the Postgraduate Institute of Management (PIM) of the
University of Sri Jayawardenepura. He is a Chartered
Marketer and a member of the Chartered Institute of
Marketing, UK. He counts over 17 years of management
experience in the Company and has wide exposure in
the fields of product, marketing, strategy development,
corporate planning and sales.
Gavin D’ Rosairo
Chief Investment & Risk Officer
He leads the Investment and Risk functions of the
Company and supports the Chief Executive Officer on
strategy. He counts 13 years experience as a fund manager
managing both fixed income and equity investment
portfolios, and over 4 years experience in the insurance
industry in the areas of investments, risk, strategy
and finance. His academic and professional exposure
encompasses economics, investments, capital markets
and finance. He is an Associate member of the Chartered
Institute of Management Accountants (UK) and has a
Bachelors degree in Commerce from the University
of Sri Jayawardenepura with honours, specialising in
international trade.
80 AIA Insurance Lanka PLC
The Annual Report of the Board of Directors
on the Affairs of the Company
The Board of Directors (the Directors / the Board) of AIA
INSURANCE LANKA PLC (the Company / AIA
Sri Lanka) has pleasure in presenting their Annual Report
on the affairs of the Company in respect of the financial
year ended 31 December 2013 together with the audited
financial statements for the year ended 31 December 2013
of the Company and the Group.
The audited financial statements of the Company and of
the Group for the said year and the Report of the External
Auditors thereon are set out on pages 159 to 219 of the
Annual Report.
Vision
A statement of the Corporate Vision is given on the inner
cover of the Annual Report. The Company’s business
activities have been and are carried out within the
framework of the objectives of the Corporate Vision
Statement and in pursuance of the continued nurturing
of business and work practices of the highest ethical
standards.
Principal Activities of the Company
and of its Subsidiary
The principal activity of the Company which is insurance,
remained unchanged during the financial year under
review. Rainbow Trust Management Limited, which
remains a fully owned subsidiary of the Company,
continued to provide trustee services during the year under
review.
Voluntary Offer made by AIA
Company Limited in 2013
As at 01 January 2013 AIA Company Limited (AIA) based in
Hong Kong, effectively held (directly and indirectly together
with AIA Holdings Lanka (Private) Limited - AIAHL) 92.27%
of the issued and fully paid up shares of the Company.
AIA declared a Voluntary Offer (the Offer) on 26 February
2013 to acquire all the remaining issued and fully paid
up ordinary voting shares of the Company, that were not
directly or indirectly owned by AIA at the time of the Offer.
AIA and the Company announced the Offer via a joint
announcement to the market. The Offer was extended to
existing Shareholders (excluding AIAHL and AIA) via the
offer document. The Offer was closed on 09 April 2013
with AIA acquiring a further 4.88% direct shareholding in
the Company bringing AIA’s total effective holding in the
Company to 97.15%.
AIA is part of the AIA Group of companies. AIA Group
comprises of the largest independent publicly listed panAsian life insurance group in the world. It has presence in
17 markets in Asia-Pacific.
The public holding of the Company is 2.85% which is
distributed among the minority Shareholders of the
Company as at 31 December 2013.
The Company’s shareholding structure as at 31 December
2013 is as follows:
To the best of the knowledge of the Board, neither the
Company nor its aforementioned subsidiary engaged in
any activities which contravened relevant local laws and
regulations.
Review of Performance and Future
Developments
An overview of the Company’s and of the Group’s financial
and operational performance for the year ended 31
December 2013 and of future developments is contained
in the Chairman’s Review and the Chief Executive Officer’s
Review with a detailed review being provided in the
Management Discussion and Analysis segment on pages
12 to 62 of the Annual Report respectively. These reports
together with the audited financial statements, reflect the
state of affairs of the Company and of the Group as at 31
December 2013.
AIA Company Limited
100%
AIA Holdings Lanka (Private) Limited
9.88%
87.27%
AIA Insurance Lanka PLC
100%
Rainbow Trust Management Limited
Annual Report 2013 81
Corporate Name Change of the
Company
The corporate name of the Company was changed to
AIA Insurance Lanka PLC effective 15 February 2013
pursuant to becoming part of the AIA Group. The Company
secured the requisite statutory approvals and received the
Certificate of Incorporation issued by the Registrar General
of Companies confirming the name change.
Stated Capital & Reserves
The Company’s Stated Capital as at 31 December 2013,
was LKR 300,000,000 (Sri Lankan Rupees Three Hundred
Million) represented by 30,000,000 (Thirty Million) Ordinary
Shares.
The financial statements, duly signed by the Directors are
published on pages 160 to 219 and the External Auditors
Report thereon is provided on page 159 of the Annual
Report.
Financial Results
The results of the Group for the year ended 31 December
2013 and the state of Group’s affairs at that date are set
out in the financial statements on pages 160 to 219 of the
Annual Report.
Revenue
The Revenue of LKR 13 Bn comprises of income generated
from Life and General insurance businesses, and trustee
services.
There was no change in the Stated Capital during the year
under review.
Dividends
The total capital and reserves for the Group stood at LKR
4,585 Mn as at 31 December 2013 (LKR 4,064 Mn as at 31
December 2012), details of which are provided in notes 25
to 27 of the financial statements.
The Board of Directors has recommended a first and final
dividend of LKR 2/- per share for year 2013 for declaration
by the Shareholders. The Directors have confirmed that
the Company satisfies the solvency test requirement under
section 56 of the Companies Act No. 07 of 2007 for the
dividend proposed.
Shareholding
The Company had 1779 registered Shareholders, as at
31 December 2013. The distribution of shareholding, the
Public holding percentage and the details of the 20 largest
Shareholders, are given on page 225 of the Annual Report.
The dividend will be paid out of dividends received by the
Company. The dividend will not be subjected to withholding
tax.
Share Information
The significant accounting policies applied by the Group
in preparing its consolidated financial statements are
disclosed in pages 168 to 180 of this Annual Report. These
policies have been constantly applied except for the change
in accounting policy on defined benefit obligations in note
3.1.a to the financial statements on page 168.
Information relating to share valuation and share
performance is given on page 226 of the Annual Report.
Interim Financial Results
The interim financial results were prepared in conformity
with the Sri Lanka Accounting Standards (SLFRS / LKAS)
and submitted to the relevant regulators within specified
time lines.
Financial Statements contained in
the Annual Report
The financial statements of the Company and of the Group,
have been prepared in conformity with the requirements of
the Sri Lanka Accounting Standards (SLFRS / LKAS), the
Companies Act No. 7 of 2007 and to the extent applicable,
by the Regulation of the Insurance Industry Act No. 43 of
2000 (as amended).
Accounting Policies
Life Surplus and Policyholders’
Dividends
The Board of Directors received and adopted the Report
of the Company’s Chief Actuary Mr. Frank Munro, for Life
insurance recommending the dividends that are payable to
Policyholders and of the transfer of the surplus thereof to
the Income Statement. This is set out on page 150 of the
Annual Report.
Property, Plant and Equipment
As at the date of Statement of Financial Position, the net
book value of property, plant and equipment of the Group
amounted to LKR 303 Mn.
82 AIA Insurance Lanka PLC
The Annual Report of the Board of Directors
on the Affairs of the Company
During the financial year the capital expenditure on
property, plant and equipment for the Company and the
Group amounted to LKR 177 Mn.
The details of the Company’s property, plant and
equipment and the movement in their values during the
year are given in note 12 to the financial statements on
page 199 of the Annual Report.
Provisions
The Board of Directors has taken all reasonable steps to
ensure adequate provisioning for unearned premiums,
unexpired risks and claims, including for claims incurred
but not reported.
Market Value of the Company’s
Property, Plant and Equipment
The Board of Directors has also arranged for a Consultant
Actuary to value the General Insurance claims and
premium liabilities and for the Chief Actuary to review the
Life Fund valuations. (Please refer pages 150 to 151 for the
policies adopted for provisioning and the basis thereof).
The market values of the Company’s property, plant and
equipment are not materially different to the book values
as given in the notes to the financial statements on page
200 of the Annual Report.
As at the date of the Report, the Board of Directors is not
aware of any circumstances which would render inadequate
amounts provided for in the financial statements.
The Company owns 13.40 perches of freehold land at No.
76, Kew Road, Colombo 2 and 12.09 perches of freehold
land at No. 80, Kew Road Colombo 2. These properties
were subject to a valuation during the year 2007 and the
revaluation surplus of LKR 39.9 Mn has been included in
the accounts in that year. The Company’s policy is to revalue
properties once in every five years. The properties were
subject to a revaluation in 2012 in accordance with the
Company policy and the revaluation surplus of LKR 32.2
Mn was included in the financial statements of 2012. As
per the Valuer’s report for 2013 there is an increase in the
market value of the property of LKR 6.37 Mn. However this
increase has not been accounted for, based on prudence as
the Company’s policy is to revalue properties once in every
five years. The purpose of obtaining a letter confirming the
value at the end of every financial year is to ensure that
there is no decline in value that needs to be accounted for.
The details of the extents, locations, valuations of the
Company’s land holdings are given in note 12 to the
financial statements on page 200 of the Annual Report.
Investments
A detailed description of the investments held as at the
date of Statement of Financial Position is given in note 7 to
the financial statements on pages 195 and 197 respectively.
Donations
The Board of Directors having due consideration to the
best interests of the Company as a good corporate citizen,
resolved to ratify that a total sum of LKR 6.6 Mn which was
utilised as charitable donations for the year 2013. This
amount is within 1% of the average profits after tax for the
preceding three years.
No donations or any other form of payments or facilities
have been made to political parties or for politically
oriented purposes.
Reserves
The total reserves of the Group as at 31 December 2013,
amounted to LKR 4,285 Mn consisting of the Resilience
Reserve, Available for Sale Reserve, and Retained
Earnings, all being revenue reserves and a Revaluation
Reserve being a capital reserve. Movements in these
reserves are given in the Group Statement of Changes in
Equity set out on page 163 of the Annual Report.
Provision for Taxation
Provisions for Taxation for the Company and its subsidiary
have been computed at the rates given in note 36 to the
financial statements and are set out on page 215 of the
Annual Report.
Our People
2013 has been a year of transition for AIA Sri Lanka where
our people played a key role in ensuring its success.
During the year, the Company successfully implemented
the key people processes of the Human Capital Roadmap
of AIA Group, building a steady foundation upon which the
Company’s HR practices can be sustained in the future.
AIA Sri Lanka took part in the Employee Engagement
Survey conducted by Gallup Research Consultants with
100% participation to be among the third highest in the
engagement score within the AIA Group. The Company was
adjudged by another external research agency to be within
15 Great Places to work in Sri Lanka.
The Board of Directors are confident that the Company is
well placed to do, ‘the right thing the right way’ supported by
‘the right people’ to take the Company forward to its vision.
As at the date of the Statement of Financial Position, the
Company provided direct employment to 1020 and income
generation opportunity to 4,813 individuals.
Annual Report 2013 83
Outstanding Litigation
In the opinion of the Board of Directors and the Company’s
lawyers, pending litigation against the Company will not
have a material impact on the reported financial results or
future operations of the Company.
b) Directors’ dealings with the shares of the Company
i. Disclosures in respect of shares held during the year
ended 31 December 2013:
Events After the Balance Sheet Date
The Board of Directors have recommended a first and
final dividend of LKR 2/- per share for the year 2013 for
declaration by the Shareholders.
There have been no events subsequent to the Balance
Sheet date that would have any material effect on the
Company or the Group which would require adjustment or
disclosure in the financial statements.
The Directors have, in pursuance of section 200 of
the Companies Act No.7 of 2007, made appropriate
disclosures at Board Meetings regarding their interests
in the Company’s shares, including of acquisitions or
disposals of such shares.
ii. Disclosures in respect of shares of the Company which
have been acquired during the year:
None of the Directors who held Directorships of the
Company as at 31 December 2013 have acquired
shares of the Company during the year under review.
Corporate Governance and Internal
Controls
iii. Disclosures in respect of shares of the Company which
have been disposed during the year:
The Board of Directors of the Company, acknowledges the
responsibility of conducting the business activities of the
Company in conformity with accepted good governance
practices. Having reviewed the effectiveness of the internal
control systems, the Board of Directors is of the considered
view that the Company has taken necessary precautions to
safeguard the interests of its stakeholders.
c) Use of Company information by the Directors
Statutory Payments
The Board of Directors confirms that to the best of their
knowledge and belief, due payments to all relevant regulatory
and statutory authorities, have been paid or provided for by
the Company where necessary. A Statement of Compliance
by the Board of Directors in relation to statutory payments is
included in the Directors’ Statement of Responsibilities on
Financial Reporting, on page 158 of the Annual Report.
Interests Register
In compliance with the requirements of the Companies
Act No. 07 of 2007, the Company maintains an Interests
Register. The particulars of entries made in the Interests
Register during the financial year under review, are as
stipulated below:
a) Directors’ interests in transactions with the Company
Directors’ interests in transactions of the Company,
both direct and indirect, during the year under
review are included in note 39.3 in the related party
disclosures to the financial statements, set out on page
219 of the Annual Report. These interests have been
duly disclosed in compliance with the section 192(2) of
the Companies Act No 07 of 2007 and further declared
at Board meetings and captured herein as appropriate.
None of the Directors who held Directorships of the
Company as at 31 December 2013 have disposed their
shares in the Company during the year under review.
This information is recorded in the Interests Register
in pursuance of the provisions of section 197 of the
Companies Act No.7 of 2007.
Subject matter
of information
Date of
authorisation by
the Board
Authorisation granted
at a Board meeting / by
circular resolution
None
None
None
d) Details of remuneration and other benefits paid to the
Directors
The remuneration and fees of the Executive Director/s
is/are duly determined by the Company’s Remuneration
Committee and approved by the Board of Directors.
Efforts are made to secure a balance between the
suitability of the remuneration so determined and of its
fairness in relation to the Company’s interests.
Directors’ fees paid to Non-Executive Directors are made
in accordance with the specified scales of payments as
may be determined by the Remuneration Committee and
approved by the Board from time to time.
84 AIA Insurance Lanka PLC
The Annual Report of the Board of Directors
on the Affairs of the Company
Details of the Directors’ fees and emoluments paid
during the financial year 2013, which have been duly
approved by the Board of Directors, are stated below.
Disclosure of interests of the key management
personnel representing the senior management
team of the Company
The senior management team of the Company (the
key management personnel) consists of the Chief
Executive Officer, Deputy Chief Executive Officer / Chief
Agency Officer, Director Information Technology / Chief
Information Officer, Director Human Resources & Legal,
Director Operations, Chief Financial Officer, Director
Partnerships and the Chief Investment & Risk Officer.
Disclosures recorded in the Interests Register of the
Company of the key management personnel are those
on whom the Board of Directors via the Chief Executive
Officer, has entrusted senior managerial responsibilities
in the day-to-day business operations of the Company.
Such records in the interest register are as following :
Consolidated Fees
2013
LKR ‘000
* Directors' Emoluments
Directors' fees
2012
LKR ‘000
95,449
102,078
1,410
2,250
* The term “Director” referred under emoluments includes
the Chief Executive Officer as well.
e) Loans to the Directors
No loans have been granted to any Director of the
Company or of any related entity, during the year under
review.
The Company has not provided any guarantee or any
other form of security in connection with a loan made
by any person to a Director of the Company or of any
related entity.
f) Insurance and Indemnity coverage provided to
Directors and/or Officers of the Company and of its
subsidiary
The Directors’ and Officers’ Liability Insurance Policy
(D & O) effected for its past and present Directors
and Officers of the Company and of its subsidiary via
Insurance Policy bearing number 06-HO-DOL-1194337
was effective since 01 December 2011 upto 30
November 2012. An Extended Risk Policy (ERP) was
further granted to cover the respective Directors and
Officers of said entities till 31 December 2014.
In addition to the afore mentioned ERP in force till
December 2014, AIA Group wide D & O cover has also
been in effect to cover the Directors and Officers of
the Company, its holding Company and the subsidiary
respectively. This D & O cover was effected via
endorsement No.10 attaching to and forming part of
ACE elite IV Directors and Officers Insurance Policy No.
HCL0578667/12. The afore stated AIA Group cover is
yearly renewable and currently in force.
In terms of applicability, AIA Group D & O cover has got
two operating components. Together with the specific
cover worth USD 25 Mn and the Global access cover
worth USD 275 Mn, each business unit which includes
the Company and its subsidiary and the holding
Company has access to a comprehensive cover worth of
USD 300 Mn.
a) Interests in transactions with the Company
The key management personnel have made requisite
disclosures in interests in transactions both direct and
indirect, to the Board of Directors of the Company and
details arising from such disclosures are stated under
relevant related party disclosures of the Annual Report.
b) Dealings with the shares of the Company or interests
in shares of the Company
There have been no dealings in the shares of the
Company by key management personnel during the
period under review except for the disposal of the
following shares held by the key management personnel
named below, prior to 01 January 2013.
Name of key
Management
Personnel
Number of
shares as at
31 December
2012
Details of Disposal of shares
during the year
Upul
WijesingheDeputy Chief
Executive Officer
148
Disposed by accepting
the Voluntary Offer
extended by AIA
Company Limited
Chathuri
MunaweeraCompany
Secretary
618*
Disposed by accepting
the Voluntary Offer
extended by AIA Company
Limited. Proceeds were
deposited in a Company
Bank Account in order
to utilise same for any
corporate responsibility
activity to be initiated by
the Company.
* shares held in trust for the Company, being fractional
shares issued in the name of the Company Secretary
during the Bonus issue made prior to 2013.
Annual Report 2013 85
C) Details of the Emoluments paid to the Key
Management Personnel
Details of the remuneration paid to the key
management personnel are as follows:
2012
LKR ‘000
Emoluments paid
120,400
101,051
Related party dealings of the key management personnel
are further disclosed in notes to financial statements as
set out on page 218 of the Annual Report.
Directors’ Meetings
Set out below are the number of Directors’ meetings
(including meetings of the Sub Committees of the Board),
which have been held during the year under review and the
number of such meetings that have been attended by each
Director of the Company during the period, correlated to
the period during which each such Director actually held
office within the year under review:
Date of
Resignation/ Date
of ceasing to be a
Director
Date of
Appointment
Name of Director
Consolidated Fees
2013
LKR ‘000
Directors during the Year/Changes
Shah Rouf*
22-Jan-10
28-Jun-13
Deepal Sooriyaarachchi
17-May-05
-
Huynh Thanh Phong
04-Dec-12
21-Oct-13
Richard Bates
04-Dec-12
28-Jun-13
Manoj Ramachandran
04-Dec-12
-
Heerak Basu
05-Dec-12
-
Khor Hock Seng
05-Dec-12
06-Feb-13
Sally Yuen Wai Wan
06-Feb-13
-
Gordon Timmins Watson*
28-Jun-13
-
Mitchell David New
28-Jun-13
-
* Mr. Gordon Timmins Watson was appointed as the
Chairman/Director of the Company effective 28 June 2013.
* Mr. Shah Rouf Managing Director/Chief Executive Officer
stood aside from his Board position effective 28 June 2013
and continues as the Chief Executive Officer since then.
In accordance with Article 30 of the Articles of Association
of the Company, Messrs. Manoj Ramachandran and
Heerak Basu shall retire by rotation at the Annual General
Meeting and being eligible, are recommended by the Board
for re-election.
Director
Directors’ Meetings
Audit & Compliance
Committee Meetings
Investment Committee
Meetings
Remuneration
Committee Meetings
A
B
A
B
A
B
A
B
Shah Rouf*
2
2
-
-
4
4
-
-
Deepal Sooriyaarachchi
3
4
3
4
-
-
2
2
Huynh Thanh Phong
2
3
-
-
-
-
2
2
Richard Bates
1
2
-
-
-
-
-
-
Manoj Ramachandran
4
4
-
-
-
-
-
-
Heerak Basu
4
4
3
4
-
-
2
2
Sally Yuen Wai Wan
2
3
4
4
-
-
-
-
Gordon Timmins Watson
2
2
-
-
-
-
-
-
Mitchell David New
2
2
-
-
-
-
-
-
Gavin D’ Rosairo*
-
-
-
-
4
4
-
-
Benjamin Deng*
-
-
-
-
4
4
-
-
A = Number of meetings attended
B = Number of meetings held during the time the Director held office during the period
* Not a Director on the main Board
86 AIA Insurance Lanka PLC
The Annual Report of the Board of Directors
on the Affairs of the Company
Related Party Transactions
Group
The Directors also declare that in terms of the Rule 7.6
(xvi) and item 29 of Appendix 8A of the Listing Rules of the
Colombo Stock Exchange that there were no related party
transactions which exceeded the lower of 10% of equity or 5%
of the total assets of the Company as at 31 December 2013 to
be disclosed hereof.
Compliance in the Adoption of Code
of Best Practices on Related Party
Transactions (the Code)
2013
LKR ‘000
2012
LKR ‘000
Audit and related services
5,127
6,092
Non-Audit services
1,835
1,447
Messrs PricewaterhouseCoopers does not have any
relationship with the Company or with its subsidiary, other
than that of Auditors of the Company and its subsidiary.
The Company has not voluntarily adopted the Code introduced
by the Securities & Exchange Commission of Sri Lanka
effective from 01 January 2014. However the Company shall
continue to comply with Rule 7.6 (xvi) and item 29 of Appendix
8A of the Listing Rules of the CSE in respect of disclosures
pertaining to related party transactions until the requirement
to comply with the Code is made mandatory.
Annual Report
Going Concern
The Board of Directors has approved the audited financial
statements of the Company and the Group together
with the Reviews and other Reports which form part of
the Annual Report on 10 February 2014. An appropriate
number of copies of the Annual Report will be submitted to
the Colombo Stock Exchange, the Insurance Board of
Sri Lanka, the Sri Lanka Accounting and Auditing
Standards Monitoring Board and the Registrar General of
Companies, within applicable time frames.
The Board of Directors has, consequent to due inquiry and
having taken into account the financial position and future
prospects of the Company, a reasonable expectation that
the Company has adequate resources to continue to be in
operational existence for the foreseeable future. For this
reason, the Company continues to adopt the going concern
basis in the preparation of its financial statements.
Environmental Protection
The Company has used its best endeavours to comply with the
relevant environmental laws and regulations applicable in the
country. The Company has not, to the best of the knowledge
of the Board of Directors, engaged in any activity which is or
which would be harmful or hazardous to the environment.
Equitable Treatment to Stakeholders
The Board of Directors has constantly endeavoured to ensure
that operations are conducted in a manner which will secure
equitable treatment to all stakeholders of the Company.
Re-appointment of External Auditors
The present Auditors Messrs. PricewaterhouseCoopers
Chartered Accountants, who were appointed at the last
Annual General Meeting to hold office during the year
under review, having signified their willingness to continue
in office will be proposed for re-election and a resolution to
this effect will be proposed at the Annual General Meeting
to authorise the Directors to fix their remuneration.
External Auditor’s Remuneration
The remuneration paid to Messrs. PricewaterhouseCoopers
the present Auditors, for both Audit and Non Audit services
rendered for the year under review are stated below.
The information provided herein is in pursuance of the
requirements of the Companies Act No. 7 of 2007 and
the Listing Rules of the Colombo Stock Exchange. In the
preparation of this Report, recourse has also been made to
other recommended best practice reporting guidelines.
In terms of the applicable provisions of the Listing Rules of
Colombo Stock Exchange, the Board of Directors has duly
resolved to issue the Annual Report of the Company in CDROM format to all Shareholders.
Annual General Meeting
The Annual General Meeting will be held on Thursday, 27
March 2014, at 10.00 a.m, at “Ball Room 1”, Hilton-Colombo,
No. 2, Sir Chittampalam A Gardiner Mawatha, Colombo 2.
The Notice of the Annual General Meeting, setting out the
business which will be transacted thereat appears on page
236 of the Annual Report.
By order of the Board
Mitchell David New
Director
Colombo
10 February 2014
Heerak Basu
Director
Chathuri Munaweera
Company Secretary
Annual Report 2013 87
Corporate Governance
Corporate Governance is undoubtedly
one of the most important features
of a corporate which distincts it
from competitors in the eyes of
investors and other key stakeholders.
A corporate with high standards of
governance would necessarily provide
the comfort to stakeholders that the
conduct of its business is carried out
and maintained at a high ethical and
professional standard.
The Company as a licensed insurer listed in the Colombo
Stock Exchange (CSE) is subject to various statutory and
other requirements in relation to its governance and
operations. As such it is required to abide by the following
statutes. The list is not exhaustive.
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. The Companies Act No. 7 of 2007
Regulation of Insurance Industry Act No. 43 of 2000
(as amended)
National Insurance Trust Fund Act No. 28 of 2006 (as
amended)
Securities and Exchange Commission of Sri Lanka Act
No. 36 of 1987 (as amended)
Inland Revenue Act No. 10 of 2006 (as amended)
Shop and Office Employees Act
Employee Provident Fund Act (as amended)
Employers Trust Fund Act (as amended)
Payment of Gratuity Act (as amended)
Various other laws that govern the tax regime for
companies and individuals in Sri Lanka
Financial Transactions Reporting Act (as amended)
Prevention of Money Laundering Act
Exchange Control Act (as amended)
It is also required inter alia to comply with the following
rules, regulations and guidelines.
1. 2. 3. 4. 5. Circulars issued by the Insurance Board of Sri Lanka
(IBSL)
Directives issued by the IBSL
Guidelines issued by the IBSL
Listing Rules of the CSE
Rules, regulations and guidelines issued by the
Securities and Exchange Commission of Sri Lanka
Statement of Compliance
AIA Insurance Lanka PLC (the Company) has always been
recognised for its high standards of corporate governance and
continues to maintain and improve on them year on year. The
Company believes that the demonstration of transparency of
its business is a must for any stakeholder to reach informed
decisions about the Company. As such the corporate
governance report of the Company provides information above
and beyond the minimum requirements specified by applicable
legal and regulatory provisions.
The Company is compliant with the applicable provisions of the
Listing Rules of the Colombo Stock Exchange. The status of
compliance together with relevant commentaries is provided in
this Report.
In addition to the mandatory compliance requirements, the
Company complies substantially with the principles laid down
in the Code of Best Practice on Corporate Governance, jointly
issued by the Securities and Exchange Commission of
Sri Lanka and the Institute of Chartered Accountants Sri Lanka
in December 2013. A detailed analysis of the Company’s status
of compliance in relation to applicable principles is provided
within the report as a voluntary disclosure.
The Company continued its transition commenced in the latter
part of the year 2012 in becoming a fully integrated member of
the AIA Group Hong Kong. In line with this integration process,
various new policies were introduced to achieve a more
sustainable governance structure. Further information on this
is provided in page 95 of this Report.
Year 2013 has seen a year of change not only in the operations
of the business but also in the regulatory environment. The
Company’s responses to changing regulations are detailed in
page 24 of this Report.
The Company is committed to steadfastly ensure that its
operations are embedded within a sound corporate governance
culture which provides substantial assurances to all the
stakeholders of ethical and professional corporate performance.
AIA Insurance Lanka PLC
Governance Structure
The governance structure of the Company continued to be
strengthened during the year under review. The integration
process with the AIA Group evidenced changes in the
governance structure. As a result, a new independent
Compliance function was established to monitor
compliance with regulatory requirements as well as the
Group led corporate governance policies. Accordingly,
the new Compliance function was elevated to the second
line of defense where the first line remained as the line
management and the third line, Internal Audit.
88 AIA Insurance Lanka PLC
Corporate Governance
The corporate governance structure of the Company is graphically illustrated below.
Audit & Compliance
Committee
Code of
Conduct
Executive Committee
HR, Legal & Regulatory Affairs
Logistics
Third Line of Defence
Second
Line of
Defence
Internal
Distribution Oversight
Committees
1. Agency DSF Distribution
Review Committee
2. Banca Distribution Review
Committee
3. GI Distribution Review
Committee
Risk Oversight Committees
1. Operational Risk
Committee
2. Pricing Committee
3. Investment Operations
Committee
4. Health & Safety
Committee
5. BCM Committee
Listing
Rules
Finance and Actuarial Services
Internal Audit
IT
Marketing
Investments
First Line of Defence
GI Operations
Compliance Committees
GI Distribution
Life Operations
Business Oversight Committees
Life Distribution
Bancassurance
Risk Oversight Committees
Risk Management
Distribution Oversight Committees
Group
Policies
Committee
ToRs
IT
Policies
HR
Policies
Compliance
External Audit
Management Committee
Inland
Revenue
Act
Financial
Risk Committee
Labour
Laws
Investment
Committee
AML and
CTF laws
Chief Executive
Officer
Companies
Act
Remuneration
Committee
Other Rules &
Regulations
Board of Directors
Insurance Board of Sri Lanka, Registrar of Companies,
Department of Inland Revenue, & Other Regulators
Operating
Principles
Vision
RII
Act
Shareholders
External
Business Oversight
Committees
1. Customer Review Forum
2. Life Product Development
Committee
3. General Insurance
Management Committee
4. Corporate Solutions
Management Committee
5. Procurement &
Outsourcing Committee
Compliance Committees
1. Market Conduct
Committee
2. Anti Money Laundering
Committee
Annual Report 2013 89
Five new governance committees were established
to ensure that all areas of operations are well within
a structured framework of controls. Information on
governance committees are provided on page 92 of this
Report.
The Board of Directors
The Board of Directors has the overall responsibility of
the direction of the Company and engaged the services
of a Managing Director till 28 June 2013 to ensure that
the Company maintained its focus on given objectives
and strategic initiatives. The position of Chief Executive
Officer (CEO) was brought within the Articles of Association
of the Company with approvals duly received from the
Shareholders at the AGM held on 27 March 2013, giving
effect to the governance changes established post the
ownership change in 2012. The CEO dedicates himself
towards the day to day operations of the Company in
achieving its strategic and operational objectives. He is
answerable to the Board of Directors via the Chairman
of the Board. Further information about the Board of
Directors is given in the pages 72 to 75 of this Report.
The Board of Directors has delegated its authorities to
a number of Primary and or Sub Board Committees to
support the Board in the discharge of its governance and
oversight responsibilities. The governance and oversight of
audit & compliance and remuneration are thus supported
by the function of the Board’s Audit & Compliance
Committee and Remuneration Committee respectively.
These Board Committees report their activities on a
quarterly basis to the Board of Directors. The Investment
Committee and the Financial Risk Committee are the other
Committees appointed by the Board which too report their
activities to the Board on a quarterly basis. The reporting
by the Board Committees cover update of activities of
regular meetings and decisions taken or recommendations
made. The functions of the Board of Directors and Board
Committees are regulated primarily by the Articles of
Association, Board Terms of Reference, the respective
Board Committee Terms of Reference and where
applicable, rules, regulations and legislations in force.
The Audit & Compliance Committee
The Audit & Compliance Committee is a regulated
committee appointed by the Board carrying out objectives
as per the Listing Rules of the CSE and the Terms of
References of the Board. In addition to such objectives,
the Committee is also entrusted with ensuring that the
regulatory compliance requirements, Group compliance
and reporting requirements are also met. In addition,
the Committee has the responsibility in evaluating and
monitoring the risk management function of the Company.
The Audit & Compliance Committee adheres to a set of
Terms of References approved by the Board of Directors. It
meets at least once a quarter and conducts its meetings
according to a formal agenda. The following table provides
a synopsis of the functions carried out by the Committee
during the year 2013.
Routine Agenda Items
Special duties carried out
during the year
-Review of Chief Risk Officer’s -Continuous review
of progress of the
report on a quarterly basis
implementation of new life
-Review of Regulatory Review
policy administration system
Report on a quarterly basis
-Review of results and
-Review of Internal Audit
management comments
Report on a quarterly basis
in relation to the onsite
-Review of Interim Financial
inspection carried out by the
Statements on a quarterly
IBSL
basis
-Review of Annual Financial
Statements
-Approve the Internal Audit
Plan for the year
-Review independence of
External Auditor
-Conduct private meetings
with External Auditor and
Internal Auditor
-Review of Audit results
The information on the membership and their specific
duties are given in page 137 of this Report and the report of
the Committee is given in page 146 of this Report.
The Remuneration Committee
The Remuneration Committee is also a regulated
committee of the Board and is responsible for determining
the overall Remuneration Policy of the Company.
90 AIA Insurance Lanka PLC
Corporate Governance
The following table provides a synopsis of the functions
carried out by the Committee during the year 2013.
Routine Agenda Items
-Remuneration Policy
-CEO's compensation
-Bonus payments to
Executive Committee
-Review & approve
Director's fees
Special duties carried out
during the year
-Recommend the
introduction of the AIA
restricted Share unit
schemes in operation
within AIA Group to form
part of the total reward
strategy of the Company,
subject to approval of the
Controller of Exchange.
Further details in relation to the composition, duties and
responsibilities and other material information in respect
to the Remuneration Committee is given in page 138 of this
Report.
Further information on scope and functions of the
Investment Committee is detailed on page 138 of this
Report.
Financial Risk Committee
The Financial Risk Committee (FRC) is a Board appointed
Management Committee within the executive authority
of the CEO. It is responsible for financial and operational
risk management. The FRC provides the platform for the
Company to review and better align to the local Risk Based
Capital [RBC] regulations.
Following table provides a synopsis of the functions carried
out by the Committee during the year 2013.
Routine Agenda Items
-Credit Risk
-Market Risk
The report of the Remuneration Committee is given in page
148 of this Report.
-Liability Risk
The Investment Committee
-Concentration Risk
In addition to the mandatory Board Committees, the
Board of Directors has established the Investment
Committee including in its membership, experts with
international know how to oversee the investment
management function of the Company. This emphasizes
the due cognizance placed by the Board to ensure that the
investment function of the Company is well looked after
within a framework of specialism.
The following table provides a synopsis of the functions
carried out by the Committee during the year 2013.
Routine Agenda Items
Special duties carried out
during the year
-Economic and market review -Investment Mandates
-Investment Policy
and outlook
-Investment strategy
-Performance Review
-Asset exposures and profile
of the funds
-Portfolio information
including asset duration,
yields & capital movements
-Compliance to Investment
Mandate/Policy
-Exposure to counterparties/
investments
-Stock universe
-Operational Risk
-Liquidity Risk
-Foreign Exchange Risk
-Impairment Review
-Fund performance
-Maturity profile and
duration strategies of
funds
-Interest Rate Guarantees
Special duties carried out
during the year
-Updating the Liquidity Risk
Management Framework
-Updating the Capital Risk
Management Framework
-Liquidity Coverage Ratio
[LCR] was redefined and
LCR trigger levels along
with escalation process
and action plans were
updated
-Updating the FRC Terms of
Reference
-Reviewing the RBC results
during the IBSL RBC road
test
Further information on scope and functions of the FRC is
detailed on page 138 of this Report.
The Chief Executive Officer
The Articles of Association of the Company and the Board
Terms of Reference recognise the role and position of
the Chief Executive Officer (CEO) of the Company and
the duties and obligations of the role. They entrust such
responsibilities on the CEO as the senior most executive
officer of the Company. The CEO reports to the Chairman
and answerable to the Board via the Chairman on all
matters pertaining to the management of the Company’s
business, its direction and operations in accordance with the
policies and objectives set by the Board.
Annual Report 2013 91
The Executive Committee
The Management Committee
The Executive Committee falls within the purview of the
CEO, and discharges the management and governance
responsibilities of the Company as delegated by the
CEO. The CEO heads the Executive Committee. He leads
the collective decision making process of the Executive
Committee in relation to the day-to-day management
of the Company’s business and its operations within the
governance framework and objectives defined by the Board.
The Terms of Reference for the Executive Committee
provide for designated invitees to the Committee. Thus
when the Executive Committee functions together with
the designated invitees, it functions under the reference
of Management Committee. The Chief Actuary, Head of
Marketing, Heads of Sales and a number of other key senior
management members are considered as designated
invitees and their expertise of their specialised areas are
recognised as important to evaluate day-to-day functions of
the Company in the execution of the Company Plan.
The Executive Committee functions within its Terms of
Reference in collectively and individually supporting the
CEO in operational, business and strategic decisions and
the execution of the Company Plan.
The Management Committee meets every other week with
a structured agenda and reviews the performance of the
Company against the Company Plan.
Permanent members of the Executive Committee are;
1.
2.
3.
4.
5.
6.
7.
8.
Chief Executive Officer
Deputy Chief Executive Officer / Chief Agency Officer
Director Human Resources & Legal
Director IT / Chief Information Officer
Director Operations
Director Partnerships
Chief Financial Officer
Chief Investment and Risk Officer
Expertise of Management Committee
The Management Committee membership is well
represented ensuring the presence and participation of key
areas of operations of the Company. The expertise of the
Committee is graphically illustrated below.
92 AIA Insurance Lanka PLC
Corporate Governance
Other Governance Committees
Information on other governance committees are provided in the below table. Committee
Responsibility
Membership
ToR/
Charter
Number of
Meetings held
CEO (Chair)
ü
10
ü
4
ü
12
ü
3
ü
7
Committees operational throughout the year
1
Operational
Risk Committee
Responsible for reviewing, monitoring
and providing oversight to the key risks of
the business.
Key forum for the identification and
escalation of current and emerging key
risks of the business
2
Pricing
Committee
Responsible for providing oversight to
management decisions and activities
that may impact the Company’s revenue
stream, operating expense base or
capital base or result in a significant
operating expense or capital investment
commitment or lead to a potential
liability.
Members of the Management
Committee
The Risk function
Chief Financial Officer (Chair)
CEO
Nominated members of
management and functional
experts representing actuarial,
risk, legal functions; the budget
owner/ initiator of incentive/
benefit/ expense.
Responsibilities include reviewing,
evaluating, recommending and approving
margins, incentive schemes, marketing
expenses; evaluating and recommending
the pricing policy, underwriting policy
and claims policy.
3
4
5
Investment
Operations
Committee
Responsible for reviewing, monitoring
and providing oversight to the investment
portfolios, especially on investment
strategy, investment exposures and
investment performance.
Health & Safety
Committee
Responsible for providing oversight to the
physical safety and security within scope
of the Company’s business operations,
and carrying out measures to ensure that
relevant risks are identified, measured,
monitored and managed.
CEO (Chair)
Customer
Review Forum
Responsible for providing oversight to the
management of customer interactions
and customer feedback.
Responsible for reviewing customer
feedback, providing solutions for
issues, identifying and implementing
proactive measures to mitigate customer
dissonance and improve satisfaction and
identifying actions to improve agreed
customer experience measures.
Head of Marketing (Chair)
Chief Investment & Risk Officer
(Chair)
Nominated members of
management and functional
experts representing finance,
actuarial, risk and compliance
based on scope of the Committee.
Invitees - representatives from
NDB Wealth Management Ltd
[External AMC]
Director Human Resources
& Legal, Director IT, Director
Operations and nominated
members of management
representing different locations.
Director - Operations
Deputy CEO
Nominated members of
management and functional
experts representing
distribution, marketing and
customer management and
operations.
Annual Report 2013 93
6
ToR/
Charter
Number of
Meetings held
Chief Actuary (Chair)
Nominated members of
management and functional
experts representing marketing
and customer management,
actuarial, life operations,
distribution, sales training,
risk, compliance, legal, IT and
finance.
ü
10
ü
16
ü
12
ü
12
ü
11
Committee
Responsibility
Membership
Life Product
Development
Committee
Responsible for identifying, developing/
modifying, launching and withdrawing
Life product propositions.
Responsible for reviewing and updating
of the product development process,
reviewing product propositions, ensuring
that products are developed within
relevant Group, Company and regulatory
requirements and processes.
7
Procurement &
Outsourcing
Committee
Chief Financial Officer (Chair)
Responsible for oversight to the
procurement and outsourcing activities of
CEO
the Company.
Nominated members of
Responsibilities include setting out
management and functional
procurement guidelines for the Company,
experts representing actuarial,
selecting and approving of Company
risk, legal functions; the budget
procurements within threshold limits,
owner, beneficiary department,
evaluating contractual terms and
and technical support divisions.
conditions vis-à-vis impact on capital
resources.
8
Life Distribution
Review Forum
Responsible for providing oversight to
sales and performance of the Agency
Direct Sales Force (agency channel).
Deputy CEO (Chair)
Senior management of the direct
sales force distribution channel
Responsibilities include the setting
of goals of the Agency Direct Sales
Force together with the stipulated key
performance indicators and defined
performance metrics.
9
Bancassurance
Sales Review
Committee
Responsible for providing oversight
to sales and performance of the
bancassurance distribution channel.
Responsibilities include the setting of
goals of the bancassurance distribution
together with the stipulated key
performance indicators and defined
performance metrics.
10
GI Distribution
Review Forum
Responsible for providing oversight to
sales and performance of the General
insurance distribution. Responsibilities
include the setting of goals of the General
insurance distribution together with the
stipulated key performance indicators
and defined performance metrics.
Director Partnerships (Chair)
Senior management of
bancassurance channel and
selected members of sales team
DGM Bancassurance & General
Insurance Distribution (Chair)
Channel heads and Unit
managers of General insurance
distribution Channel
Invitees - Nominated members
of management and functional
experts representing operations,
actuarial, finance and
distribution based on scope of
the committee
94 AIA Insurance Lanka PLC
Corporate Governance
Committee
Responsibility
Membership
ToR/
Charter
Number of
Meetings held
CEO (Chair)
ü
1
ü
7
ü
7
ü
1
ü
1
Committees commenced operations during the year 2013
11
Business
Continuity
Management
Committee
Responsible for ensuring the BCM
programme of the business is complete
and effective. The committee monitors
risks pertaining to business continuity
and identify/ recommend procedure and
controls for mitigating the risks.
Director HR & Legal
Director IT
Director Operations
CFO
Chief Investment & Risk Officer
Head Risk Management &
Engineering Claims
Head of Marketing
12
13
14
General
Insurance
Management
Committee
Responsible for implementing the
business plan for the General insurance
(GI) business ensuring that decision
making with regard to GI business
remains consistent with the overall
objective of optimising top line and
profitability of the GI business. These
responsibilities include monitoring the
distribution performance, monitoring key
risks and agreeing on action plan.
CEO (Chair)
Corporate
Solutions
Management
Committee
Responsible for implementing the
business plan for the Corporate Solutions
business developing and growing
the Corporate Solutions channel and
business line. These responsibilities
include monitoring the distribution
performance, monitoring key risks and
agreeing on action plan.
CEO (Chair)
Market Conduct
Committee
Responsible for implementing the penalty Voting Members
table and actions to be effected according
Chief Investment and Risk
to the penalty table in substantiated
Officer (Chair)
intermediary mis-conduct incidents.
Director Operations
Senior management of GI
business
Senior management of CS
and nominated members of
management and functional
experts representing finance,
actuarial, marketing, risk and
strategy.
General Counsel Corporate Law
& Regulatory Affairs
Non-voting membersCompliance function
15
Anti-money
laundering
Committee
Responsible for reviewing and approving
high risk transactions, as per anti-money
laundering practices of the group.
Director Operations (Chair)
Head of Investment Operations
Chief Compliance Officer
MLRO
During the year under review the Company took many novel initiatives towards advancement of corporate governance and
transparency. Some of the material changes are highlighted in this Report.
Annual Report 2013 95
Establishment of a dedicated
Compliance function as a second line
of defence
The Company believes in building a culture that
encourages ethical conduct, compliance with laws,
regulations and ethical standards and procedures. The
Compliance function is responsible in promoting and
establishing a culture of compliance within the Company.
The position of the Chief Compliance Officer (CCO) is
identified in the overall compliance of the Company
recognising the statutory / regulatory purposes of the
role arising from the insurance regulations and Financial
Intelligence Unit (FIU) established under the Central
Bank of Sri Lanka. The insurance regulations recognise
the function of a CCO and the FIU recognises role and
the responsibility of the CCO to ensure compliance in
terms of the Anti-Money Laundering regulations arising
out of the Financial Transactions Reporting Act No. 6
of 2006. The CCO’s function is also responsible to the
Group’s Compliance function on matters arising from the
operations of the Company.
The Compliance function of the Company maintains the
second line oversight responsibility on the following areas.
The Sales Compliance
Sales Compliance focuses on improving the quality of
selling as well as the product development process. During
the year under review, the Compliance function adopted
the AIA Group’s Market Conduct Guidelines for sales
intermediaries as a part of the sales training process. The
Market Conduct Committee is a disciplinary committee
established in 2013, to take appropriate disciplinary
actions relating to market misconduct incidents committed
by sales intermediaries. To support this, a Penalty table
which details out the type of market misconduct incident
and the relevant penalty for such incident was introduced.
The Compliance function collates market conduct statistics
on a monthly basis to identify agents’ behaviours and
patterns of conduct. All these initiatives have placed a solid
foundation in improving the quality of sales process and
behaviours of sales intermediaries.
Another area of focus of sales compliance is in relation
to the product development process. The Compliance
function acts as the oversight function of the product
development process to ensure that all key actions prior
to the product launches are completed. All product and
marketing materials including agents’ training materials
are reviewed by the Compliance function to ensure that the
Company adheres to regulatory and Group requirements
ensuring customer fairness and reasonable expectations
of policyholders.
Investment Compliance
Insurance entities invest policyholders’ money in various
investment instruments ranging from government
securities, corporate debts, equities, etc to provide
a return for the policyholders. Ensuring a robust
governance framework on how the investments are
managed in the Company, ultimately results in increase
in wealth as well as protection for the money invested.
Investment Policy and the Investment Mandates provide
the scope and boundary of investment management.
The investment compliance program focuses on how
the investment management and operations are carried
out, what controls and procedures are in place, how to
ensure adherence to the laid down procedures and the
implementation of best practices. One of the key controls
in investment management is to identify and monitor the
persons who are privy to investment information known
as Investment Access Persons so that such persons
do not gain an undue advantage as a result of having
access to sensitive information. During the year, Code of
Ethics for Investment Access Persons was adopted and
trainings were provided across the Company. In addition,
the personal trading of the Investment Access Persons
is monitored by the Compliance function. Another key
milestone achieved during the period was the monitoring
and compliance with AIA Group’s Restricted List for
securities and the introduction of the Restricted List of
Investment Committee members. In terms of investment
operations, on day-to-day basis, the violations caused
against the investment parameters are monitored. The
Compliance function ensures that all such violations /
breaches are addressed in a timely manner to close any
weaknesses / issues by relevant parties.
Anti-Money Laundering and Counter
Terrorist Financing
AIA Group is committed to ensure that all its business
units take action to prevent businesses from being used
as conduits for money laundering and terrorist financing
activities. In line with Group requirements and local
regulations the Company has given special emphasis
to “Know Your Customer”, “Know Your Transaction”
principles, and the due diligence concept which form the
core part of the Anti-Money Laundering (AML) /Counter
Terrorist Financing (CTF). The Company has adopted a
Risk Based Approach as the basis on which acceptance
of customer policies are made and to perform customer
due diligence and ongoing monitoring of customers in
response to combating of money laundering and terrorist
financing. The risk identification and assessment process
involves evaluating risk factors including the background
of the customer, product, transaction or service used by
that customer. In addition a Risk Assessment Matrix is
created to determine the risk profile of a customer, which
96 AIA Insurance Lanka PLC
Corporate Governance
is followed by all operations of the Company. Education
and awareness programmes have been conducted for
operational staff to maintain accuracy of all procedures.
The Company has taken all reasonable endeavours to
ensure compliance with all applicable economic sanctions,
laws and regulations via screening exercises. Prospective
customers (including the proposed insured, owners /
controllers of legal entities, etc) are screened against
the Global Watch Lists (“GWLs”) and Politically Exposed
Persons (PEP) lists provided by Bankers Accuity. It is the
Company’s policy to reject the business or to freeze the
customer’s transaction in the event of confirmed matches
against the sanctions lists. In addition, where a high risk
customer is identified, a Risk Assessment Form is filled
and submitted to the AML Committee for consideration
and opinion on further action via the Money Laundering
Reporting Officer (MLRO). The Chief Compliance Officer
is responsible to ensure that the Company reports
transactions that exceed the stipulated threshold as well
as suspicious transactions to the Financial Intelligence
Unit.
Regulatory Compliance
The emphasis of regulatory compliance revolves
around ensuring compliance with the regulatory and
legislative requirements of the regulators such as the
Insurance Board of Sri Lanka, Central Bank of Sri Lanka,
Department of Inland Revenue and such other regulatory
bodies. In addition, timely identification of regulatory
developments and changes is an essential part of the
regulatory compliance programme of the Company whilst
assessing the readiness of the Company to meet such
changes. During the year under the review, the Company
developed an escalation protocol to identify new regulatory
development and changes.
Records Management
The AIA Group Records Management sets out minimum
standards on how records should be created, organised,
secured, maintained, and disposed in a way that enhances
AIA Group’s business, facilitating and sustaining day-today operations and complying with applicable laws and
regulations. Records Retention Schedules are planned
for all departments. Further, appropriate measures have
been taken to safeguard Company records in the event
of a disaster. For instance, offsite storage facilities are in
place to keep custody of duplicate information to ensure
continued operation at any situation. Records Management
ensures all confidential records are securely maintained,
controlled and protected to prevent unauthorised access.
Data Privacy
Data Privacy is the relationship between collection and
dissemination of Personal Data and the associated
regulatory/legal issues. Privacy concerns exist wherever
Personal Data is collected, used, stored, transferred or
disposed in digital form or otherwise. The protection of
Personal Data encompasses data and information security,
software, hardware and human resources. The Company
is in the process of implementing the requirements of
the Data Privacy Policy of AIA Group. One of the key
developments during the year was to introduce Personal
Information Collection statement to new employees at
the time of recruitment which stipulates why personal
information is collected and how such information is used.
Anti-Fraud, Anti- Corruption and Whistle
Blowing programme
Anti-Fraud, Anti-Corruption and Whistle Blowing
programs are key parts of the Financial Crime compliance
programme of the Company. During the year AIA Groups’
Anti-Fraud Policy and Anti-Corruption Policy was
implemented within the Company. Whistle Blowing Policy of
the Company took a new dimension with the introduction of
“Whistle Blowing Hotline” which is a tri-lingual telephone
service where any person can report a financial crime.
This is a group wide initiative of AIA and the service is
provided by an independent firm which guarantees utmost
confidentiality. In addition, employees are encouraged to
directly access AIA ethics website to file reports against any
financial crime activity taking place.
Raising awareness of compliance
Raising awareness of compliance is a key component
in establishing a culture of compliance in the Company.
During the year the Compliance function with the
support of the HR function, rolled out the following 5
Group e-learning modules which were mandatory for all
employees.
1. Anti-Money Laundering and Counter Terrorist
Financing Compliance Programme
2. AIA Data Privacy Compliance Programme
3. Social Media and E mail Awareness
4. AIA Anti-Corruption Compliance Programme
5.
IT Security Awareness Training
Employees were expected to study the contents of the
e-learning module and answer the questions in order to
secure the certification. The Compliance function also
provides training and education on compliance for all new
employees as part of the induction and familiarisation
programmes.
Annual Report 2013 97
Risk Management
information on the system implementation project is
captured on page 30 of this Report.
The governance structure of the Company recognises
the three lines of defence model under risk management
framework. Accordingly, the line management is
considered as the first line of defence while the risk
management and compliance function act as the second
line. The Internal Audit function is identified as the third
line of defence. Further information on how the risk
management function and the three lines of defence
model supplement the corporate governance structure is
provided under the Risk Management Review on page 140
of this Report.
The Company believes that a ‘state of the art’ IT structure
is an inevitable tool in the way forward for insurance
business in Sri Lanka and has implemented many IT based
services to its stakeholders such as Wealth Planners
and end customers. The SMS alert system and the iPOS
system are the first ever fully paperless Point Of Sale (POS)
systems introduced during the year. Further information on
IT related developments and activities are given in page 30
of this Report.
In achieving the benefits of technology it is important that
our systems are dependable and governed in a sustainable
manner. Different systems deployed for different functions
must interface accurately in order to provide a seamless
service to the stakeholders. Such seamless operations
ensure accuracy of data and information captured and
generated through these systems. The Company has
deployed a comprehensive IT governance framework which
is graphically illustrated below.
IT Governance and Implementation of
new life policy administration system
One of the key development projects for the Company
during the year was the implementation of a new life policy
administration system. The project continued throughout
the year and was successfully sanctioned for operations
in December 2013. The new system provides additional
benefits to policyholders as well as the Company with a
higher level of dependability and adaptability. Further
Information Security
O t h e r S y st e m s
S u p p or
t Systems
Di Act
re iv
ct e
or
y
l
ai
m
E-
Life
Quotation
Supp
S y ste m s
re
p o r t S y st e m s
Sup
h
Ot
Co
o r t S y s te m s
ems
re S y ste m s
y st
Co
s
SMS
IT Governance
Disaster Recovery
r
em
Claims
Management
System
S ys
t
Motor
Document
System
Complaint
Management
s
Life
Document
Management
System
Finance
(SAP)
Motor Frontend
system
Ot h e
Sales Activity
Management
Life
General
Insurance
Insurance
(Integral Life)
(I90)
p o r t S yst e m
iWealth
Planner
Sup
S
er
HRIS
e S y ste m
Cor
s
e S y ste m
Cor
s
IT Risk Management
iPoS
98 AIA Insurance Lanka PLC
Corporate Governance
Regulatory Interactions
Shareholder Interactions
The Company’s interactions with regulators were
maintained at high ethical standards where proactive
engagements were encouraged and indeed adopted.
The year 2013 was a year with higher shareholder
interactions than the usual which primarily resulted from
the Voluntary Offer.
During the year under review, the Company actively
engaged in correspondences with the Securities and
Exchange Commission of Sri Lanka [SEC] in relation to the
Voluntary Offer made by AIA Group Limited to the minority
Shareholders of the Company.
Key shareholder communications during the year are
summarised below.
Date
The IBSL conducted an Onsite Inspection at the Company
which the Company welcomed as a positive initiative by
the regulator. The scope of the inspection was designed to
assess the risk profile of the Company’s operations using
the CARAMELS framework. Thus the focus was on Capital,
Assets, Reinsurance, Actuarial Liabilities, Management,
Earnings, Liquidity and Subsidiaries. There were extensive
document reviews and one to one interviews with key
Executive Committee members and Internal and External
Auditors.
22.01.2013
Circular to Shareholders to approve
the corporate name change and
the amendments to the Articles
of Association (AOA) via circular
resolutions
31.01.2013
Circular to Shareholders confirming
the approvals received adopting the
corporate name and the changes to
the AOA
26.02.2013
Joint announcement circulated to the
Shareholders by the Offeror Company
and Offeree Company declaring the
Voluntary Offer
04.03.2013
Dispatch of Annual Report 2012 to the
Shareholders consisting the ordinary
and special resolutions to be passed
20.03.2013
Dispatch of Independent advisors’
opinion to Shareholders on Voluntary
Offer
The report addressed the areas relating to;
a) Compliance with the RII Act and IBSL requirements
b) Internal controls
c) Best Practices
The Company provided its comments for the matters
highlighted in the report and further actions are being
taken with regards to the recommendations made.
The Company organised a seminar for the insurance
industry with the support of the IBSL on the
implementation of Risk Based Capital, bringing down
international expertise which AIA Group possesses in the
subject, to Sri Lanka.
The Company actively engaged in discussions with
the IBSL with respect to key regulatory changes being
implemented during the year. Material changes included
the segregation of composite insurance companies and
the Company made its representation through the industry
body, the Insurance Association of Sri Lanka, as well as
individually with respect to matters which are sensitive
for the Company. Further information on Company’s
responses to changing regulations are covered on page 24
of this Report.
Overview of material regulatory communications is
provided on page 108 to 113 of this Report.
Subject
The Company is required to comply with the continuing
listing rules specified under Section 7 of the Listing Rules
of the CSE.
Annual Report 2013 99
The status of Compliance with Section 7 of Listing Rules of the Colombo Stock Exchange
At a glance
The Company is compliant with the applicable requirements of the Section 7 of the Listing Rules (continuing listing
requirements) and a status of compliance at a glance is graphically illustrated below.
Complied
b
Not Applicable
7.1
a
c
7.2
7.2
7.3
7.3
7.4
a
b
7.5
a
b
c
d
7.6
i
ii
iii
7.7
7.7
7.8
7.8
7.9
7.9
7.10 a
b
c
7.11 1
2
3
7.12 a
b
d
Not Complied
e
f
g
iv
v
vi
vii
viii
ix
x
xi
xii
xiii
xiv
xv
xvi
1.a
1.b
1.c
2.a
2.b
3.a
3.b
3.c
3.d
4
5.a
5.b
5.c
6.a
6.b
6.c
A detailed commentary on the requirements to be complied under Section 7 of the Listing Rules of the Colombo Stock
Exchange is given below.
Requirement
7.1
Status of
Compliance
Comment
Dividend Payment
Announcement to the Exchange
7.1.a
7.1.b
The Entity shall, immediately upon
authorising a dividend distribution, make
an announcement to the Exchange with
specified information.
Complied
Unless the Entity’s Articles of Association
provides otherwise, upon the Board
of directors’ authorising a dividend
distribution, the Shareholders must
approve such distribution by an ordinary
resolution.
Complied
The announcement (with required information) was made
with respect to the dividend payment for the year 2012, on
07 February 2013.
The announcement for the dividend payment for the year
2013 was made on 11 February 2014.
Shareholder approval for the dividend distribution for the
year 2012 was obtained by way of an ordinary resolution
at the Annual General Meeting held on 27 March 2013 as
required by the Articles of Association of the Company.
The Board of Directors have authorised the dividend
distribution for the year 2013 at the meeting held on 10
February 2013. An ordinary resolution is proposed for the
Annual General Meeting to be held on the 27 March 2014
to obtain Shareholder approval for same.
100 AIA Insurance Lanka PLC
Corporate Governance
Requirement
Status of
Compliance
Comment
7.1.c
Date of dispatch of dividend payment
when the approval of the shareholders
is required; the date of dispatch of the
dividend payment shall be within seven (7)
Market Days from and excluding the date
on which the related resolution is passed
by the shareholders at a meeting. The
Entity shall promptly notify the Exchange
of the date of dispatch of the dividend
payment.
Complied
The dividend payment was made on 08 April 2013 which
was within the specified time period and the CSE was
notified of the date of dispatch on 07 February 2013.
7.1.d
Date of dispatch of dividend payment
when the approval of the shareholders is
not required; the date of dispatch of the
dividend payment shall be within seven (7)
Market Days from the ‘XD’ date.
Not
Applicable
This requirement is not applicable to the Company as the
Shareholder approval is required for dividend distribution
as per the Articles of Association.
7.1.e
Once a dividend distribution has been
announced an Entity shall not alter the
dividend per share without consulting the
Exchange.
Not
Applicable
This requirement is not applicable to the Company as the
dividend per share approved by the Shareholders at the
Annual General Meeting held on 27 March 2013 was not
altered afterwards.
7.1.f
Solvency Certificate
Complied
The Company has forwarded a certified copy of the
Solvency Certificate issued by the External Auditors of the
Company to the CSE on 14 March 2013.
The Entity shall forward to the Exchange a
certified copy of the certificate of solvency
issued by a firm of auditors as soon as the
same is issued and in any event prior to
dispatching the dividend payment.
7.1.g
Dividend distribution by way of a scrip
dividend
Not
Applicable
This requirement was not applicable for the Company as
there was no scrip dividend declared for the year 2013.
7.2
RESOLUTIONS
Complied
Details of resolutions proposed and passed during the
year are provided on page 98 of this Report and the CSE
was notified as required.
Complied
Details of circulars dispatched to the Shareholders during
the year are provided on page 98 of this Report and were
submitted to the CSE as required.
Complied
The Company has submitted the quarterly Financial
Statements to the CSE in line with the requirements
specified in terms of the formats, number of copies and
within the specified time limits.
The Exchange must be notified at the
same time as shareholders regarding any
resolution to be voted on at any members’
meeting. The Exchange shall be notified
immediately after the meeting whether the
resolution was passed or not.
7.3
CIRCULARS TO SHAREHOLDERS
Fifty (50) copies of circulars to shareholders
should be sent to the Exchange at the same
time as they are dispatched to the holders
of Listed Securities.
7.4
INTERIM FINANCIAL STATEMENTS
7.4.a
A Listed Entity shall give to the Exchange,
an Interim Financial Statement prepared
on a quarterly basis, as soon as the
figures have been approved by the board of
directors of the Entity and in any event not
later than forty five (45) days from the end
of the first, second and third quarters and
two (2) months from the end of the fourth
quarter.
Annual Report 2013 101
Requirement
7.4.b
A Listed Entity shall ensure that the
Financial Statements fulfill the specified
requirements.
Status of
Compliance
Complied
7.5
CIRCULATION OF ANNUAL REPORT
7.5.a
A Listed Entity shall ensure that the annual Complied
report is issued to the Entity’s shareholders
and given to the Exchange within a period
not exceeding five (05) months from the
close of the financial year of the Listed
Entity. The Audited Financial Statements
shall be published in accordance with the
Sri Lanka Accounting Standards.
7.5.b
A Listed Entity may issue its annual report
in a CD-ROM to its shareholders provided
that the Entity complies with the specified
requirements.
Complied
Comment
The Quarterly Financial Statements of the Company
complied with the specified requirements including but
not limited to statements to the effect that such financial
statements are not audited and carried signatures of two
Directors.
The financial year of the company closes on 31 December
and the Annual Report for the year 2012 was issued to the
shareholders within the stipulated time lines and required
copies were submitted to the CSE. The Audited Financial
Statements published within the Annual Report were
prepared in accordance with the Sri Lanka Accounting
Standards.
The Annual Report for the year 2012 was issued in a
CD-ROM. The Company has complied with the specified
requirements applicable for such issuance as follows.
Provided printed copies to Shareholders upon written
requests.
A designated person was made available to attend to
requests for printed copies of the Annual Report.
Printed copies of the Annual Report forwarded to
Shareholders who have requested for the same within 8
market days from the date of receipt of such request.
A note with required statements/information sent to the
Shareholders along with the CD-ROM.
7.5.c
The Entity shall give to the Exchange thirty Complied
five (35) copies of the annual report in
printed form and one (1) copy in a CD-ROM.
7.5.d
If an Entity prior to circulating the annual
report, files copies of financial statements
with the Registrar General of Companies
in compliance with Section 170 (1) of
the Companies Act, the Entity shall also
simultaneously submit such financial
statements to the Exchange.
7.6
CONTENTS OF ANNUAL REPORT
Complied
The Company has submitted the required number of
copies of the Annual Report of year 2012 to the CSE in the
required formats.
The Company has submitted its financial statements
with the Registrar General of Companies and the CSE as
required.
A Listed Entity must include in its annual report and accounts, inter alia;
i
Names of persons who during the
financial year were directors of the
Entity.
Complied
This information is provided on page 87 of this Report.
ii
Principal activities of the Entity and
its subsidiaries during the year and
any changes therein.
Complied
The principle activities of the Company have been to
engage in general and long term insurance business as
per the license issued by the IBSL. There was no change
to the activities during the year under review. Further
details of the activities of the Company are highlighted in
the pages 82 in this Report.
102 AIA Insurance Lanka PLC
Corporate Governance
Requirement
Status of
Compliance
Comment
iii
The names and the number of shares
held by the 20 largest holders of
voting and non-voting shares and the
percentage of such shares held.
Complied
This information is provided on page 225 of this Report.
iv
The Public Holding percentage.
Complied
This information is provided on page 224 of this Report.
v
A statement of each director’s
holding and Chief Executive Officer’s
holding in shares of the Entity at the
beginning and end of each financial
year.
Complied
This information is provided on page 85 of this Report.
vi
Information pertaining to material
foreseeable risk factors of the Entity.
Complied
This information is captured in Management Discussion
and Analysis in page 12 of this Report.
vii
Details of material issues pertaining
to employees and industrial relations
of the Entity.
Complied
The Company did not have any material issues pertaining
to employees and industrial relations during the year
under review. Further information on HR practices of the
Company is provided on page 39 of this Report.
viii
Extents, locations, valuations and
the number of buildings of the
Entity’s land holdings and investment
properties.
Complied
This information is provided on page 84 and 200 of this
Report.
ix
Number of shares representing the
Entity’s stated capital.
Complied
This information is provided on page 224 of this Report.
x
A distribution schedule of the number Complied
of holders in each class of equity
securities, and the percentage of
their total holdings in specified
categories.
This information is provided on page 225 of this Report.
xi
Specified ratios and market price
information.
Following information are provided on page 223 of this
Report.
Complied
1. Dividend per share
2. Dividend pay out
3. Net asset value per share
4. Market value per share
- highest and lowest values recorded during the
financial year
- value as at the end of financial year
xii
Significant changes in the Entity’s
or its subsidiaries’ fixed assets and
the market value of land, if the value
differs substantially from the book
value.
Complied
There was no significant changes in the Company’s or its
subsidiary’s fixed assets. Further information on this is
provided on page 200 of this Report.
xiii
Specified information,
Not
Applicable
This requirement is not applicable as the Company did
not raise funds during the year from any of the specified
methods.
Not
Applicable
The Company did not operate any Employee Share Option
Schemes in relation to shares of the Company.
In the event during the year the Entity
has raised funds either through a
public issue, Rights Issue, and private
placement.
xiv
Employee Share Option Schemes.
Annual Report 2013 103
Requirement
Status of
Compliance
Comment
xv
Disclosures pertaining to Corporate
Governance practices in terms of
Rules 7.10.3, 7.10.5 c. and 7.10.6 c. of
Section 7 of the Rules.
Complied
These disclosures are provided in pages 105, 106 and 107
of this Report.
xvi
Specified information on Related
Party transactions exceeding 10% of
the Equity or 5% of the total assets
of the Entity as per Audited Financial
Statements, whichever is lower.
Complied
This information is provided on page 217 of this Report.
Complied
The Company actively encourages the dematerialisation of
shares in line with the guidelines of the SEC.
Complied
The Company has procedures in place to make these
immediate disclosures. However, there were no such
disclosures made during the year as none of the Directors
disclosed any dealings of shares of the Company.
Complied
The Company has procedures in place to make these
notifications as and when required.
Specified details of investments in a
Related Party and/or amounts due
from a Related Party to be set out
separately.
7.7
SECURITIES CERTIFICATES
Listed Entities shall issue Definitive
Certificates in respect of Securities which
are listed in the Exchange.
7.8
DISCLOSURES OF DEALINGS BY
DIRECTORS
A Listed Entity shall make an immediate
announcement to the Exchange of
disclosures made by a director in terms
of Section 200 of the Companies Act, of
any acquisition or disposal of a relevant
interest in shares issued by the Entity.
7.9
LOSS OF CERTIFICATES
The entities shall inform the CDS as and
when a report is lodged with the Entity on
any loss of certificates or when the Entity
discovers a forgery in a certificate of the
Entity.
7.10
CORPORATE GOVERNANCE
Compliance
7.10.a
Complied
A Listed Entity shall publish in the annual
report relating to the financial year
commencing on or after 01st April 2007 a
statement confirming that as at the date of
the annual report they are in compliance
with the Corporate Governance Rules and if
they are unable to confirm compliance, set
out the reasons for its inability to comply.
7.10.b
A Listed Entity shall comply with these
Corporate Governance Rules with effect
from the financial year commencing on or
after 01st April 2008 and the annual report
must contain the relevant affirmative
statements.
Complied
The Company is compliant with the Corporate Governance
Rules of the Listing Rules. The statement is published in
page 87 of this Report.
The Company is in compliance with the Corporate
Governance Rules and respective affirmative statements
and the statement of compliance is provided in this
Report.
104 AIA Insurance Lanka PLC
Corporate Governance
Requirement
Status of
Compliance
Comment
Not
Applicable
The Company has not requested for any exemption nor
did the CSE grant any exemptions for the Company with
respect to the Corporate Governance Rules in full or in
part.
7.10.1.a Two or such number equivalent to one
third of the total number of Directors,
whichever is higher should be NonExecutive Directors. directors whichever is
higher.
Complied
There are six members in the Board of Directors all of
whom are Non-Executive Directors.
7.10.1.b The total number of directors is to be
calculated based on the number as at the
conclusion of the immediately preceding
Annual General Meeting.
Complied
As at the last Annual General Meeting held on 27 March
2013, there were seven members in the Board. Therefore,
the requirement under rule 7.10.a is fully complied with.
7.10.1.c
Any change occurring to this ratio shall be
rectified within ninety (90) days from the
date of the change.
Complied
During the year the number of Directors has been reduced
from seven to six. Relevant disclosures were made to the
regulators in this connection as applicable.
7.10.2
INDEPENDENT DIRECTORS
7.10.2.a Two or one third of the Non-Executive
Directors appointed to the Board of
Directors, whichever is higher shall be
“independent”.
Complied
There are six members in the Board of Directors and two
are classified as Independent Non-Executive Directors.
7.10.2.b The board shall require each nonexecutive director to submit a signed
and dated declaration annually of his/
her independence or non-independence
against the specified criteria.
Complied
7.10.c
Where a Listed Entity is required by
any law applicable to such Listed Entity
to comply with rules on Corporate
Governance promulgated under such law,
the board of directors of the Exchange
may exempt such Listed Entity from
the requirement to comply with these
Corporate Governance Rules either in full
or in part.
Such Listed Entity shall make disclosures
of compliance with Corporate Governance
Rules applicable to that sector and the
annual report must contain the relevant
affirmative statements.
7.10.1
NON – EXECUTIVE DIRECTORS
Details of Independent, Non-Executive Directors as at 31
December 2013 are given in page 72 of this Report.
The Board has obtained signed and dated declarations
from each Non-Executive Director on their independence
or non-independence against the said criteria upon their
appointment to the Board and also on an annual basis in
terms of declaration specified in Appendix 7A of the CSE
Listing Rules.
Annual Report 2013 105
Requirement
7.10.3
Status of
Compliance
Comment
DISCLOSURES RELATING TO DIRECTORS
7.10.3.a The board shall make a determination
annually as to the independence or nonindependence of each Non-Executive
Director based on such declaration and
other information available to the board
and shall set out in the annual report
the names of directors determined to be
‘independent’.
Complied
The Board of Directors determined the independence or
non-independence of each Non-Executive Director. The
names of such Independent Non-Executive Directors
served on the Board during the financial year under review
are given below with their tenure as a member of the
Board.
During the year Messrs. Deepal Sooriyaarachchi and
Heerak Basu were declared as Independent NonExecutive Directors. Mr. Heerak Basu is an employee of
a company within the AIA Group but the Board is of the
view that this is not a disqualification to be classified as an
Independent Non-Executive Director on the Board of the
Company within the criteria defined for independence in
terms of the Listing Rules and the written clarifications of
the CSE.
Mr. Heerak Basu functioned as an Independent NonExecutive Director of the Company with effect from 05
December 2012 and Mr. Deepal Sooriyaarachchi was
declared as an Independent Director with effect from 15
August 2012. Both these Directors continue to function in
the same capacity to date.
7.10.3.b In the event a director does not qualify as
‘independent’ against any of the criteria
set out below but if the board, taking
account all the circumstances, is of the
opinion that the director is nevertheless
‘independent’, the board shall specify
the criteria not met and the basis for its
determination in the annual report.
Complied
No such determination has been made by the Board
during the year under review.
7.10.3.c
Complied
A brief resume of each Director is given on page 74 of this
Report.
7.10.3.d Upon appointment of a new director to its
board, the Entity shall forthwith provide
to the Exchange a brief resume of such
director for dissemination to the public.
Such resume shall include information on
the matters itemised in paragraphs (a), (b)
and (c) above.
Complied
The Company had 03 new appointments to the Board
during the year under review and has provided a brief
resume of such appointed Directors to the CSE as
required.
7.10.4
Complied
The two Directors who are classified as ‘Independent’
fulfill the criteria specified in determining their
independence.
In addition to disclosures relating to the
independence of a director set out above,
the board shall publish in its annual
report a brief resume of each director on
its board which includes information on
the nature of his/her expertise in relevant
functional areas.
CRITERIA FOR DEFINING
‘INDEPENDENCE’
106 AIA Insurance Lanka PLC
Corporate Governance
Requirement
7.10.5
Status of
Compliance
Comment
REMUNERATION COMMITTEE
7.10.5.a COMPOSITION
Complied
The remuneration committee shall comprise;
of a minimum of two independent nonexecutive directors (in instances where an
Entity has only two directors on its Board);
The Remuneration Committee consists of three NonExecutive Directors two of whom are independent NonExecutive Directors.
The Company has a separate Remuneration Committee.
Mr. Huynh Thanh Phong was the Chairman of the
Remuneration Committee till his resignation from the
Board. Mr. Mitch New was appointed as the Chairman of
the Committee since August 2013. Mr. Phong and Mr. New
were both Non-Executive Directors of the Company.
or of non-executive directors a majority
of whom shall be independent, whichever
shall be higher.
One non-executive director shall be
appointed as Chairman of the committee
by the board of directors.
7.10.5.b FUNCTIONS
Complied
The Remuneration Committee recommends to the Board
the remuneration payable to the Chief Executive Officer
based on the performance ratings obtained at the annual
performance appraisal, the market standard applicable
to foreign and local Chief Executive Officers and the
value of the role to the Company. The Board placing due
consideration of such criteria, makes the final decision.
Complied
Names of the Directors who are members of the
Remuneration Committee are given on page 138 of this
Report. A statement of the remuneration policy is given
under the Remuneration Committee report on page 148 of
this Report. Disclosure of remuneration paid to Directors
is given on page 86 of this Report. Additional information
on Remuneration Committee is provided on page 138 of
this Report.
Complied
The Audit Committee of the Company is named as Audit
& Compliance Committee and consists of three NonExecutive Directors two of whom are Independent NonExecutive Directors.
The Remuneration Committee shall
recommend the remuneration payable to the
executive directors and Chief Executive Officer
of the Listed Entity and/or equivalent position
thereof, to the board of the Listed Entity
which will make the final determination upon
consideration of such recommendations.
7.10.5.c
DISCLOSURE IN THE ANNUAL REPORT
The annual report should set out the names of
directors (or persons in the parent company’s
committee in the case of a group company)
comprising the remuneration committee,
contain a statement of the remuneration
policy and set out the aggregate remuneration
paid to executive and non-executive directors.
7.10.6
AUDIT COMMITTEE
7.10.6.a COMPOSITION
The audit committee shall comprise;
of a minimum of two independent nonexecutive directors (in instances where a
Entity has only two directors on its board);
or
of non-executive directors a majority of
whom shall be independent, whichever
shall be higher.
One non-executive director shall be
appointed as Chairman of the committee
by the board of directors.
The Chief Executive Officer and the Chief
Financial Officer of the Listed Entity shall
attend audit committee meetings.
The Chairman or one member of the
committee should be a Member of a
recognised professional accounting body.
The Company has a separate Audit & Compliance
Committee.
The Chairman, Mr. Heerak Basu is an Independent NonExecutive Director.
The Chief Executive Officer and the Chief Financial Officer
are considered as permanent invitees for the meetings of
the Committee.
Mr. Sally Wan, a member of the Audit and Compliance
Committee is a member of the Australian Society of
Certified Practicing Accountancy.
Annual Report 2013 107
Requirement
7.10.6.b FUNCTIONS
Status of
Compliance
Complied
Overseeing of the preparation,
presentation and adequacy of disclosures
in the financial statements of a Listed
Entity, in accordance with Sri Lanka
Accounting Standards.
Oversees the Company’s compliance with financial
reporting requirements, information requirements of the
Companies Act and other relevant financial reporting
related regulations and requirements.
Oversees the processes to ensure that the Company’s
internal controls and risk management are adequate,
to meet the requirements of the Sri Lanka Auditing
Standards.
Overseeing the processes to ensure that
the Entity’s internal controls and risk
management are adequate, to meet the
requirements of the Sri Lanka Auditing
Standards.
Assesses the independence and performance of the
Company’s External Auditors.
Makes recommendations to the Board pertaining to
appointment, re-appointment and removal of External
Auditors and to approve the remuneration and terms of
engagement of the External Auditors.
Assessment of the independence and
performance of the Entity’s external
auditors.
To make recommendations to the board
pertaining to appointment, re-appointment
and removal of external auditors and to
approve the remuneration and terms of
engagement of the external auditors.
DISCLOSURE IN THE ANNUAL REPORT
Further information about the Committee and its functions
are given on page 137 of this Report.
Complied
The names of the directors comprising the
audit committee should be disclosed in the
annual report.
Audit & Compliance Committee Report is given on page
146 of this Report.
The annual report shall contain a report
by the audit committee, setting out the
manner of compliance by the Entity in
relation to the above, during the period to
which the annual report relates.
7.11.1
The names of the Directors who are members of the Audit
& Compliance Committee are given on page 137 of this
Report.
The Committee determined the independence of the
External Auditors and the basis of such determination is
referred in the Audit & Compliance Committee Report on
page 146 of this Report.
The committee shall make a determination
of the independence of the auditors
and shall disclose the basis for such
determination in the annual report.
7.11
The Terms of Reference of the Committee captures the
required functions in addition to many other functions
assigned by the Board. Accordingly, the Committee,
Oversees the preparation, presentation and adequacy of
disclosures in the financial statements of the Company in
accordance with the Sri Lanka Accounting Standards.
Overseeing of the Entity’s compliance
with financial reporting requirements,
information requirements of the
Companies Act and other relevant
financial reporting related regulations and
requirements.
7.10.6.c
Comment
RE- PURCHASE / REDEMPTIONS /
MINORITY BUYOUTS
Not
Applicable
The Company did not take any actions relating to repurchase its own shares or redemptions of shares or
minority buyouts. Therefore, this requirement was not
applicable for the Company during the year under review.
RATINGS / REVISIONS IN RATINGS
ASSIGNED TO DEBT SECURITIES
Not
Applicable
The Company does not have any debt securities listed in a
Stock Exchange; hence this requirement is not applicable.
7.11.2
7.11.3
7.12
7.12.a
7.12.b
108 AIA Insurance Lanka PLC
Corporate Governance
Status of Compliance with Section 7 of Listing Rules of the Colombo Stock Exchange
No of requirements
58
Complied
47
Not complied
0
Not Applicable
11
Complied
47
Not Applicable
11
Not Complied
0
In addition to the mandatory disclosures required by applicable rules and regulations, the Corporate Governance Report of
the Company covers a wider area of disclosures. These disclosures are provided in the report on a purely voluntary basis to
assist the stakeholders to grasp a deeper understanding on the operations of the Company.
The Company is required to make disclosures and announcements and submit reports to various regulators on a routine
basis and as and when required. A synopsis of such announcements and submissions are listed below.
Details of Material Communications with Regulators and Colombo Stock Exchange
The Registrar of Companies
Routine Submissions
01
Submission
Specified deadline
for submission
Actual Date of
Submission
Status of
Compliance
Annual Return of the Company
13 May 2013
09 May 2013
Complied
Non-Routine Submissions
Date
Submission
Details
Applicable Rule
01
01 February
2013
Filing of Form 3
Notifying the name change of the Company
Section 8(2) of the
Companies Act No.
7 of 2007
02
01 February
2013
Filing of Form 39
Notifying the special resolution with the receipt of approval
from Shareholders to changes in Articles of Association
The Companies Act
No. 7 of 2007
03
04 March
2013
Registration
of Financial
Statements
Annual Report of the Company containing the financial
statements for the year ended 31 December 2012
Section 170 of the
Companies Act No.
7 of 2007
04
06 March
2013
Filing of Form 20
Resignation of Mr. Khor Hock Seng from the Board of
Directors and appointment of Ms. Wan Yuen Wai Sally as
Director
Section 223(2) of
the Companies Act
No. 7 of 2007
05
02 April 2013
Filing of Form 39
Notifying the special resolution with the receipt of approval
from Shareholders for changes in Articles of Association
The Companies Act
No. 7 of 2007
06
09 July 2013
Filing of Form 20
Resignation of Messrs. Shah Jahan Rouf and Richard Allan
Bates from the Board of Directors and appointment of
Messrs. Gordon Timmins Watson and Mitchell David New
as Directors
Section 223(2) of
the Companies Act
No. 7 of 2007
07
12 November
2013
Filing of Form 20
Resignation of Mr. Huynh Thanh Phong from the Board of
Directors
Section 223(2) of
the Companies Act
No. 7 of 2007
Annual Report 2013 109
The Colombo Stock Exchange
Routine Submissions
Submission
Specified deadline
for submission
Actual Date of
Submission
Status of Compliance
01
Unaudited Interim Financial Statements for
Q4 of 2012
28 February 2013
07 February 2013
Complied
02
Unaudited Interim Financial Statements for
Q1 of 2013
15 May 2013
07 May 2013
Complied
03
Unaudited Interim Financial Statements for
Q2 of 2013
15 August 2013
13 August 2013
Complied
04
Unaudited Interim Financial Statements for
Q3 of 2013
15 November 2013
14 November 2013
Complied
Non-Routine Submissions
Date
Submission
Details
Applicable Rule
01
22 January
2013
Copy of the circular
Informing the corporate name change &
change of particular sections of Articles of
Association
Section 7.2 & 7.3 of
the listing rules of
the CSE
02
31 January
2013
Notification to CSE
Confirming the receipt of approval received
from Shareholders
Section 7.2 & 7.3 of
the listing rules of
the CSE
03
07 February
2013
First and final dividend
announcement for the year
2012
First and final dividend of LKR 2.50/- per
share on 30,000,000 (thirty million) ordinary
shares in issue subject to the approval of
the Shareholders of the company at the AGM
scheduled for 27th March 2013
Section 7.1. (a) of the
listing rules of the
CSE
04
07 February
2013
Reconstitution of the Board
of Directors
Appointment of Ms. Sally Yuen Wai Wan to the Section 8.1 (a) of the
listing rules of the
Board of Directors in place of Mr. Khor Hock
CSE
Seng effective 06th February 2013
05
18 February
2013
Notification of the name
change of the Company
Receipt of the Certificate of Incorporation
issued by Registrar of Companies
Section 8 (1) of the
Companies Act No. 7
of 2007
06
26 February
2013
Joint Announcement on
Voluntary Offer
Filing the Joint Announcement on Voluntary
Offer
Section 8.1 of the
listing rules of the
CSE
07
11 March
2013
Notification to CSE
Informing the payment of first & final
dividend to all shareholders including the
reserve account holders
Listing Rules of CSE
08
14 March
2013
First and final dividend
announcement for the year
2012
Copy of the certificate signed by the Board of
Directors approving the dividend payment
Listing Rules of CSE
09
20 March
2013
Notification to CSE
The views, comments and advice of the board
of directors of AIA Insurance Lanka PLC and
independent advisor’s report on the Voluntary
Offer by AIA Company Limited to purchase
all the remaining ordinary shares of AIA
insurance Lanka PLC
Listing Rules of CSE
110 AIA Insurance Lanka PLC
Corporate Governance
Non-Routine Submissions
Date
Submission
Details
Applicable Rule
10
28 March
2013
Announcement made to
the CSE in compliance with
Listing Rules
Resolutions that were circulated to the
Shareholders via the Notice of meeting dated
06 February 2013 included in the Annual
Report 2012 which was dispatched to them
on 04 March 2013
Section 7.2 of the
listing rules of the
CSE
11
29 June 2013
Reconstitution of the Board
of Directors
1. Appointment of Gordon Timmins Watson
as the Chairman of the Company, subject
to the approval of the IBSL of his position
of Director
Section 8.1 (a) of the
listing rules of the
CSE
2. The step down of former Chairman Mr.
H.T. Phong from his position as Chairman
facilitating the appointment of the new
Chairman
3. Shah Rouf the Chief Executive Officer/
Managing Director of the Company
whilst continuing in the position of Chief
Executive Officer, stepped down from his
position as a Board member
4. Resignation of Richard Bates and
appointment of Mitchell David New as a
Director of the Board
5. Upul Wijesinghe, the former Deputy
Managing Director taking over the
position as Deputy chief Executive Officer
12
13 August
2013
Notification to CSE
Confirming the receipt of approval from IBSL
for appointment of Messrs. Gordon Timmins
Watson & Mitchell David New as Directors of
the Company
Listing Rules of CSE
13
12 November
2013
Reconstitution of the Board
of Directors
Resignation of Mr. Hyung Thanh Phong
effective 21 October 2013
Section 8.1 (a) of the
listing rules of the
CSE
Annual Report 2013 111
The Insurance Board of Sri Lanka
Routine Submissions
Submission
01
Quarterly Return
For Q4 2012
For Q1 2013
For Q2 2013
For Q3 2013
Specified deadline for
submission
Actual Date of
Submission
Status of Compliance
On or before 15 February
On or before 15 May
On or before 15 August
On or before 15 November
15 February 2013
14 May 2013
14 August 2013
14 November 2013
Complied
Complied
Complied
Complied
02
Annual Statutory Return for the year
2012
On or before 30 June
01 July 2013
Not Complied
The Company missed the
deadline by one day due to the
due date falling on weekend.
03
Actuarial Abstracts
On or before 30 June
01 July 2013
Not Complied
The Company missed the
deadline by one day due to the
due date falling on weekend.
04
Compliance Certification
For Q4 2012
For Q1 2013
For Q2 2013
For Q3 2013
On or before 15 February
On or before 15 May
On or before 15 August
On or before 15 November
15 February 2013
15 May 2013
14 August 2013
14 November2013
Complied
Complied
Complied
Complied
Advertising Certification
For Q4 2012
For Q1 2013
For Q2 2013
For Q3 2013
On or before 15 February
On or before 15 May
On or before 15 August
On or before 15 November
15 February 2013
15 May 2013
14 August 2013
14 November 2013
Complied
Complied
Complied
Complied
Statement of Facultative
Reinsurance arrangements
For Q2 2013
For Q3 2013
On or before 15 August
On or before 15 November
14 August 2013
14 November 2013
Complied
Complied
05
06
07
Statement of Reinsurance
arrangements and submission of
copies Reinsurance Treaties for the
year 2013
As soon as possible but
before 15 March
15 February 2013
Complied
08
Further Returns and Risk
Assessment Summary for the year
2012
On or before 31 March
28 March 2013
Complied
09
Management Letter issued by
External Auditors
One week from the date of
receipt of the report
14 June 2013
Complied
10
Circular 29 certification by External
Auditors
On or before 30 June
01 July 2013
Not Complied
The Company missed the
deadline by one day due to the
due date falling on weekend.
11
Audited Annual Financial
Statements
On or before 30 June
04 March 2013
Complied
12
Biannual Compliance Certification
for six months ended on 31
December 2012
15 February
15 February 2013
Complied
112 AIA Insurance Lanka PLC
Corporate Governance
The Insurance Board of Sri Lanka
Non-Routine Submissions
Date
Submission
Details
Applicable Rule
01
05 February
2013
Prior approval letter
Approval regarding a person sought to be appointed,
elected or nominated as a Director
Section 33(B) (1) of
the Regulation of
Insurance Industry
Act No. 43 of 2000
02
07 February
2013
Interim financial
statements
Interim financial statements for the 04 quarter ended
31 December 2013
The Regulation of
Insurance Industry
Act No. 43 of 2000
03
18 February
2013
Name change of the
Company
Notification of the Name change of the Company
The Regulation of
Insurance Industry
Act No. 43 of 2000
04
04 March
2013
Annual Report
Annual Report for the year ended 31 December 2012
Section 47(2) of
the Regulation of
Insurance Industry
Act No. 43 of 2000
05
18 March
2013
Approval regarding a
person sought to be
appointed, elected or
nominated as a Director
Re-election of Messrs. Deepal Sooriyaarachchi and
Richards Bates as Directors of the Company
Section 33(B) (1) of
the Regulation of
Insurance Industry
Act No. 43 of 2000
06
07 May 2013
Interim financial
statements
Interim financial statements for the quarter ended 31
March 2013
The Regulation of
Insurance Industry
Act No. 43 of 2000
07
26 June 2013
Approval regarding a
person sought to be
appointed, elected or
nominated as a Director
Appointment of Messrs. Gordon Timmins Watson
and Mitchell David New effective 28 June 2013, as
Directors
Section 33(B) (1) of
the Regulation of
Insurance Industry
Act No. 43 of 2000
08
26 June 2013
Governance Changes
1. Appointment of Gordon Timmins Watson as the
Chairman of the Company, subject to the approval
of the IBSL of his position of Director
2. The stand aside of former Chairman Mr. H.T.
Phong from his position as Chairman facilitating
the appointment of the new Chairman
3. The stand aside of Shah Rouf from the position
of Managing Director of the Company whilst
continuing in the position of Chief executive Officer
4. Resignation of Richard Bates and appointment of
Mitchell David New as a Director of the Board
5. Upul Wijesinghe, the former Deputy Managing
Director taking over the position as Deputy chief
Executive Officer
The Regulation of
Insurance Industry
Act No. 43 of 2000
09
13 August
2013
Interim financial
statements
Interim financial statements for the quarter ended 30
June 2013
The Regulation of
Insurance Industry
Act No. 43 of 2000
10
12 November
2013
Interim financial
statements
Interim financial statements for the quarter ended 30
September 2013
The Regulation of
Insurance Industry
Act No. 43 of 2000
11
30 December
2013
Proposal on Company
Segregation model
The proposal of the Company on the model to be
adopted for segregation of long term and general
insurance business
As per the guidelines
on segregation of
insurance companies
Annual Report 2013 113
The Department of Inland Revenue
Routine Submissions
Submission
Specified deadline for submission
Actual Date of Submission
Status of
Compliance
01
Income Tax
30th November of the following year
30th November of the following year
Complied
02
Value Added Tax
15th of the Following month
15th of the Following month
Complied
03
Withholding Tax
15th of the Following month
15th of the Following month
Complied
04
Stamp duty – life / GI
/ Salaries
01st Instalment – 15th January
02nd Instalment – 15th April
03rd Instalment – 15th July
04th Instalment – 15th October
01st Instalment – 15th January
02nd Instalment – 15th April
03rd Instalment – 15th July
04th Instalment – 15th October
Complied
Complied
Complied
Complied
05
Nation Building Tax
20th of the following month
20th of the following month
Complied
06
PAYE Tax
15th of the Following month
15th of the Following month
Complied
Non-Routine Submissions to Regulators
Submission
01
CESS – Life / GI IBSL
02
Annual Payment IBSL
03
Specified deadline for submission
01st Instalment – 30th January
02nd Instalment – 30th April
03rd Instalment – 30th July
04th Instalment – 30th October
Actual Date of Submission
Status of
Compliance
01st Instalment – 30th January
02nd Instalment – 30th April
03rd Instalment – 30th July
04th Instalment – 30th October
Complied
Complied
Complied
Complied
14th March
Complied
Road Safety –
National Council of
Road Safety
15th of the Following month
15th of the Following month
Complied
Motor Tax – Luxury
and Semi Luxury Tax
- Commissioner of
Motor Traffic
15th of the Following month
15th of the Following month
Complied
114 AIA Insurance Lanka PLC
Corporate Governance
Code of Best Practice for Corporate Governance
The Company has not formally adopted the Code of Best Practice for Corporate Governance issued jointly by the Securities
and Exchange Commission of Sri Lanka and the Institute of Chartered Accountants Sri Lanka in its previous version issued
in the year 2008 or the latest version issued in December 2013. However, the Company as a good practice in Shareholder
communications, continued to make voluntary disclosures of compliance in terms of the said Code during the past years.
Going ahead with the same practice, the Company provides below a glance of its status of voluntary compliance with the
Principles of Corporate Governance stipulated in the Code in its latest version, December 2013.
Complied
Partially Complied
Not Complied
Principle
Not Applicable
Status of Compliance
Principle A.1
A.1.1
A.1.2
A.1.3
A.1.4
A.1.5
A.1.6
A.1.7
Principle A.2
A.2.1
Principle A.3
A.3.1
Principle A.4
A.4
Principle A.5
A.5.1
A.5.2
A.5.3
A.5.4
A.5.5
A.5.6
A.5.7
A.5.8
A.5.9
Principle A.6
A.6.1
A.6.2
Principle A.7
A.7.1
A.7.2
Principle A.8
A.8.1
A.8.2
Principle A.9
A.9.1
A.9.2
Principle A.10
A.10.1
Principle A.11
A. 11.1
A.11.2
Principle B.1
B.1.1
B.1.2
B.1.3
B.1.4
B.1.5
Principle B.2
B.2.1
B.2.2
B.2.3
B.2.4
B.2.5
B.2.6
B.2.7
B.2.8
B.2.9
Principle B.3
B.3.1
Principle C.1
C.1.1
C.1.2
C.1.3
C.1.4
C.1.5
Principle C.2
C.2.1
C.2.2
C.2.3
C.2.4
C.2.5
C.2.6
C.2.7
D.1.5
D.1.6
D.1.7
G.1.5
G.1.6
G.1.7
A.7.3
A.9.3
Principle C.3
C.3.1
Principle D.1
D.1.1
D.1.2
D.1.3
D.1.4
Principle D.2
D.2.1
D.2.2
D.2.3
D.2.4
Principle D.3
D.3.1
D.3.2
D.3.3
D.3.4
Principle D.4
D.4.1
D.4.2
Principle D.5
D.5.1
Principle E.1
E.1.1
Principle E.2
E.2
Principle F.1
F.1
Principle F.2
F.2
Principle G.1
G.1.1
G.1.3
G.1.4
G.1.2
A.5.10
Total number of requirements
90
Not applicable
03
Fully Complied
Total number of applicable requirements
87
Partially Complied 7%
Fully complied
75
Partially complied
06
Not complied
06
Not Complied
86%
7%
Annual Report 2013 115
Although the Company has not formally adopted the Code, it complies substantially with the requirements of the Code. A
detailed discussion on each requirement under the relevant principle against the status of compliance is given below.
Principle / Requirement
Section 1
The Company
A
DIRECTORS
Principle
A.1
THE BOARD
Every public company should be
headed by an effective Board,
which should direct, lead and
control the Company.
Commentary
Status of
Compliance
The Articles of Association of the Company specified that a
minimum of 5 and a maximum of 7 members should comprise
the Board of Directors of the Company. The Board is accountable
to the Company, its Shareholders and the stakeholders at large
that the business is conducted in an appropriate manner and the
financial and non-financial targets of the Company are achieved.
The Board Terms of Reference stipulates the specific duties of the
Board. Following are some key matters which come under review
and approval of the Board;
Complied
- Company strategy and business plan
- Financial reporting and controls
- Financial performance
- Shareholder dividends
- Policyholder dividends and surplus transfers from the Longterm Insurance Fund
- Changes to the Company’s capital structure
- Company’s risk profile and risk map
- Regulatory compliance
- Constitution and performance of the Board Committees
A.1.1
The Board should meet
regularly. Board meetings
should be held at least once
in every quarter of a financial
year, in order to effectively
execute board’s responsibilities,
while providing information to
the board on a structured and
regular basis.
At least one Board meeting was held each quarter. Additional
meetings were convened when necessary. Decisions were also
approved through circular resolutions when deemed appropriate
as provided for in the Articles of Association of the Company.
During the year 2013, the Board has maintained an excellent
record of attendance at the meetings. The attendance of
Directors at the Board meetings during the year is detailed under
the Directors’ report on page 85 of this Report.
Complied
116 AIA Insurance Lanka PLC
Corporate Governance
Principle / Requirement
A.1.2
Commentary
Complied
The Board’s role is to provide
entrepreneurial leadership
of the Company within a
framework of prudent and
effective controls which
enables risk to be assessed and
managed. In performing its role,
the Board should be responsible
for matters including:
• ensuring the formulation
and implementation of a
sound business strategy;
Status of
Compliance
The Board provides guidance and direction to the management
to form the Company’s strategic and business plan which is
reviewed and approved by the Board.
Accordingly, the Board of Directors reviewed and approved the
strategic and business plan 2014 - 2016.
• ensuring that the Chief
Executive Officer (CEO) and
management team possess
the skills, experience and
knowledge to implement the
strategy;
The CEO is not a member of the Board. He is vested with the
executive management responsibility of the Company and
heads the Executive Committee. He reports to the Board via
the Chairman of the Board. The Executive Committee members
possess relevant skills, qualifications as well as decades of
experience in their respective functional areas.
• ensuring the adoption of
an effective CEO and Key
Management Personnel
succession strategy;
The HR function of the Company maintains an effective
succession strategy for the senior management. During the year
under review a comprehensive evaluation of the succession plan
via a methodology called “Organisation and People Review,”
was conducted mapping 32 key succession roles. The Board of
Directors reviews the succession plan through CEO.
• ensuring effective systems
to secure integrity of
information, internal
controls, business continuity
and risk management;
The Board sanctioned an effective risk management model during
the year under review and the risk management of the Company
is constantly being monitored by the Audit and Compliance
Committee. Quarterly reports from the Chief Risk Officer are
reviewed by the Audit and Compliance Committee of the Board.
• ensuring compliance with
laws, regulations and ethical
standards;
The Board receives a Regulatory Review Report from the
management quarterly, through the Audit and Compliance
Committee. This Report captures the Company’s status of
compliance with the relevant laws and regulations as well
as updates on changing regulations and plans for ensuring
compliance. Further, the Audit and Compliance Committee is
sanctioned with the responsibility in reviewing and approving the
regulatory compliance monitoring plan developed, refreshed and
implemented each year.
Annual Report 2013 117
Principle / Requirement
A.1.3
A.1.4
A.1.5
Commentary
• ensuring all stakeholder
interests are considered in
corporate decisions;
The Board believes that all stakeholders must be considered
in corporate decisions and that it is a vital requirement for the
sustainability of the business.
• recognising sustainable
business development
in Corporate Strategy,
decisions and activities;
The Board recognises sustainable business development and
ensures same by reviewing and approving the three year rolling
business plan each year.
• ensuring that the Company’s
values and standards are set
with emphasis on adopting
appropriate accounting
policies and fostering
compliance with financial
regulations; and
The Board ensures that the Company sets and maintains high
values and standards in accounting policies and encourages and
mandates compliance with all the applicable financial regulations.
• fulfilling such other Board
functions as are vital,
given the scale, nature and
complexity of the business
concerned.
The Board Terms of Reference (BTOR) captures the high level
responsibilities, accountabilities and functions of the Board.
The BTOR is aimed at having in place a healthy and effective
management process within the Company ensuring that
the functions and decisions of the Company are taken with
transparency and in fairness to all stakeholders.
The Board collectively, and
Directors individually, must act
in accordance with the laws of
the Country, as applicable to
the business enterprise. There
should be a procedure agreed
to by the Board of Directors, to
obtain independent professional
advice where necessary, at the
Company’s expense.
The Board conducted its business in compliance with the laws
and regulations applicable to a listed insurance company.
All Directors should have access
to the advice and services of
the Company Secretary, who
is responsible to the Board in
ensuring that Board procedures
are followed and that applicable
rules and regulations are
complied with. Any question of
the removal of the Company
Secretary should be a matter for
the Board as a whole.
The members of the Board have unfettered access to the
Company Secretary regarding any matter relevant to the
Company.
All Directors should bring
independent judgment to
bear on issues of strategy,
performance, resources
(including key appointments)
and standards of business
conduct.
Executive responsibilities of the Company were vested upon
the CEO who is directly responsible for day-to-day business
operations of the Company and achievement of the key strategic
objectives.
Status of
Compliance
Complied
The Board members collectively and/or individually are permitted
to obtain independent professional advice from third parties at the
expense of the Company, as deemed necessary. Such third parties
include but are not limited to Company’s external lawyers and
auditors.
Complied
The Company Secretary possesses the required qualifications
and expertise and advises the Board on matters concerning
the Companies Act and other relevant rules, regulations and
regulatory guidelines. All governance activities are coordinated
by the Company Secretary on behalf of the Board. The Company
Secretary is accountable to the Board through the Chairman.
The Company Secretary is provided with adequate resources to
perform her role.
Non-Executive Directors do not have any business interest that
could materially interfere with the exercise of their independent
judgment.
Complied
118 AIA Insurance Lanka PLC
Corporate Governance
Principle / Requirement
Commentary
Status of
Compliance
A.1.6
Every Director should dedicate
adequate time and effort to
matters of the Board and the
Company, to ensure that the
duties and responsibilities
owed to the Company are
satisfactorily discharged. It must
be recognised that Directors
have to dedicate sufficient time
before a meeting to review Board
papers and call for additional
information and clarification,
and after a meeting to follow
up on issues consequent to
the meeting. This should
be supplemented by a time
allocation for familiarisation with
business changes, operations,
risks and controls.
The Board members dedicate adequate time for the affairs of
the Company by attending Board Meetings, Board Committee
meetings and making decisions via circular resolutions.
Additional meetings and discussions are held with the
management whenever deemed necessary.
Complied
A.1.7
Every Director should receive
appropriate training when first
appointed to the Board of a
company, and subsequently as
necessary. Training curricula
should encompass both general
aspects of directorship and
matters specific to the particular
industry/company concerned.
A Director must recognise that
there is a need for continuous
training and an expansion of the
knowledge and skills required
to effectively perform his duties
as a Director. The Board should
regularly review and agree the
training and development needs
of the Directors.
The Company does not provide formal training to Directors. The
Board members are however updated with relevant information
pertaining to the Company, its business and regulatory and
market environment at the time of appointment and also from
time to time where developments take place.
Principle
A.2
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER (CEO)
Complied
The roles and responsibilities of the Chairman and the CEO are
segregated and clearly defined in the Board Terms of Reference
guaranteeing a balance of power and division of duties in strategic
and operational decisions of the Company.
There are two key tasks at the
top of every public company –
conducting of the business of the
Board, and facilitating executive
responsibility for management
of the Company’s business.
There should be a clear division
of responsibilities at the head of
the Company, which will ensure
a balance of power and authority,
such that no one individual has
unfettered powers of decision.
Connected papers with relevant information relating to the
matters to be discussed at Board meetings are delivered to
the members with sufficient time and in advance to allow
them to review and call for any additional information and/or
clarifications.
Information on the Board meetings and attendance of members
for each meeting including Committee meetings are given in page
85 of this Report.
The CEO’s priority is the management of the Company in
accordance with the mandate defined by the Board. He is
accountable for the achievement of the financial and non-financial
objectives as stipulated in the Company plan.
Partially
Complied
Annual Report 2013 119
Principle / Requirement
Commentary
Status of
Compliance
A.2.1
A decision to combine the
posts of Chairman and CEO in
one person should be justified
and highlighted in the Annual
Report.
No such decision is taken.
Complied
Principle
A.3
CHAIRMAN’S ROLE
The Chairman is responsible for the leadership of the Board,
managing of Board Meetings and the business undertaken
thereat.
Complied
A.3.1
The Chairman’s role in
preserving good Corporate
Governance is crucial. As the
person responsible for running
the Board, the Chairman should
preserve order and facilitate
the effective discharge of Board
functions.
The Chairman, together with the Company Secretary is
responsible in ensuring all relevant issues are on the Board
agenda and Directors receive appropriate information and
documentation in a timely manner, thus facilitating the Directors
to contribute at the deliberations.
Complied
The Chairman should conduct
Board proceedings in a proper
manner and ensure, inter-alia,
that:
• the effective participation
of both Executive and
Non-Executive Directors is
secured;
The Chairman ensures that all the members of the Board have
adequate opportunity to participate in the meeting discussions
and make note of the deliberations they made. As the Board
comprises of expertise from diverse avenues, it is considered
that participation of all the members regardless of their status
as Executive or Non-Executive add much value to the prudent of
decisions made.
• all Directors are encouraged
to make an effective
contribution, within their
respective capabilities, for
the benefit of the Company;
The Chairman, having a sound understanding of the expertise
of each Director always encourages the members to contribute
to the deliberations ensuring that the Company is benefitted
from the knowledge, skills and the experience of each and every
Director.
• a balance of power between There was only one Executive Director in the Board until 28
Executive and Non-Executive June 2013 being the Managing Director. All the other members,
including the Chairman were Non-Executive Directors.
Directors is maintained;
With effect from 28 June 2013, there are no Executive Directors in
the Board.
• the views of Directors on
issues under consideration
are ascertained; and
The Chairman ensures that each matter being considered
within the Board is deliberated by all the Directors. He actively
encourages the members to deliberate on the matters.
• the Board is in complete
control of the Company’s
affairs and alert to
its obligations to all
shareholders and other
stakeholders.
The Board had four physical meetings during the year. Board
circulars were also used at many occasions to provide timely
information to the Board and to seek Board input to the strategic
and or material decisions to be taken by the management.
In addition to the formal communications, the Chairman and the
members of the Board, regardless of their status of independence
or Non-Independence kept constant communications with the
management of the Company.
120 AIA Insurance Lanka PLC
Corporate Governance
Principle / Requirement
Commentary
Status of
Compliance
Principle
A.4
FINANCIAL ACUMEN
The Board comprises of members who have extensive exposure
in business management, financial and or insurance expertise
globally as well as dedicated to the Asia Pacific region. This
brought a much valued Asian experience to the Company.
Complied
Principle
A.5
BOARD BALANCE
As explained above, the Board had only one Executive Director
until 28 June 2013 and all the other members are Non-Executive
Directors. After 28 June 2013 the Board does not have any
Executive Directors. Therefore, no individual or small group can
dominate the Board’s decisions.
Complied
A.5.1
The Board should include NonExecutive Directors of sufficient
calibre and number for their
views to carry significant weight
in the Board’s decisions. The
Board should include at least
two Non-Executive Directors or
such number of Non-Executive
Directors equivalent to one third
of total number of Directors,
whichever is higher.
As explained above, the Board had only one Executive Director
until 28 June 2013 and all the other members are Non-Executive
Directors. After 28 June 2013 the Board does not have any
Executive Directors.
Complied
A.5.2
Where the constitution of the
Board of Directors includes only
two Non-Executive Directors, both
such Non-Executive Directors
should be ‘independent’. In all
other instances two or one third
of Non-Executive Directors
appointed to the Board of
Directors whichever is higher
should be ‘independent’.
The Board consisted of required number of Directors as
stipulated by the Articles of Association of the Company. The
Company ensured compliance throughout, of the required ratio of
independent Directors who were drawn from and out of the NonExecutive Directors of the Board during the period under review.
Complied
A.5.3
For a Director to be deemed
‘independent’ such Director
should be independent of
management and free of any
business or other relationship that
could materially interfere with
or could reasonably be perceived
to materially interfere with the
exercise of their unfettered and
independent judgment.
The Board is of the view that the independent Directors fulfill the
criteria considered for determination of ‘Independence’ in terms
of the Listing Rules of the CSE, based on the disclosures duly
made to the regulators and in the Annual Report of the Company
in relation to the basis for classifying them as independent in
terms of the said criteria.
Complied
A.5.4
Each Non-Executive Director
should submit a signed and
dated declaration annually
of his/her independence or
non-independence against the
specified criteria.
Independent Directors have submitted the signed and dated
declarations confirming their status as ‘Independent’ against the
specified criteria.
Complied
The Board should ensure the
availability within it of those with
sufficient financial acumen and
knowledge to offer guidance on
matters of finance.
It is preferable for the Board to
have a balance of Executive and
Non-Executive Directors such
that no individual or small group
of individuals can dominate the
Board’s decision-taking.
Mr. Heerak Basu and Mr. Deepal Sooriyaarchchi were classified as
the independent Directors from and amongst the Non-Executive
Directors of the Board and they continue in their office as at date.
Annual Report 2013 121
Principle / Requirement
Commentary
Status of
Compliance
A.5.5
The Board should make a
determination annually as
to the independence or nonindependence of each NonExecutive Director based on
such a declaration made of
decided criteria and other
information available to the
Board. The Board should specify
the criteria not met and the
basis for its determination in the
annual report, if it determines
that a Director is independent
notwithstanding the existence of
relationships or circumstances
which indicate the contrary and
should set out in the Annual
Report the names of Directors
determined to be ‘independent’.
Based on the declarations made by Messrs. Heerak Basu and
Deepal Sooriyaarachchi and the Board’s due considerations on
the criteria of independence the Board determined that the two
Directors were ‘Independent’ for the purposes of the regulatory
requirements.
Complied
A.5.6
If an alternate Director is
appointed by a Non-Executive
Director such alternate director
should not be an executive of
the Company. If an alternate
Director is appointed by an
independent Director, the
person who is appointed
also should meet the criteria
of independence and the
provision on minimum number
of independent Directors also
should be satisfied.
There were no appointments made to the Board in the capacity of
alternate Director during the year under review.
Complied
A.5.7
In the event the Chairman and
CEO is the same person, the
Board should appoint one of the
independent Non- Executive
Directors to be the “Senior
Independent Director” (SID) and
disclose this appointment in the
Annual Report.
The Chairman and the CEO is not the same person; hence this
requirement does not arise.
Not
Applicable
A.5.8
The Senior Independent Director There was no requirement for the Company to appoint a Senior
Independent Director; hence this requirement does not arise.
should make himself available
for confidential discussions
with other Directors who may
have concerns which they
believe have not been properly
considered by the Board as
a whole and which pertain
to significant issues that are
detrimental to the Company.
Not
Applicable
122 AIA Insurance Lanka PLC
Corporate Governance
Principle / Requirement
Commentary
Status of
Compliance
A.5.9
The Chairman should hold
meetings with the NonExecutive Directors only, without
the Executive Directors being
present, as necessary and at
least once each year.
As explained earlier, the Board did not have any Executive
Directors from 28 June 2013. Therefore, this requirement is met
for all the meetings held after 28 June 2013 in the ordinary cause
of business.
Complied
A.5.10
Where Directors have concerns
about the matters of the
Company which cannot be
unanimously resolved, they
should ensure their concerns
are recorded in the Board
Minutes.
The Board always took decisions unanimously after individual
concerns been addressed via extensive discussions and
deliberations.
Complied
Principle
A.6
SUPPLY OF INFORMATION
The Management ensures that the Board is provided with all and
timely background information in relation to any decision to be
taken by the Board.
Complied
A.6.1
Management has an obligation
to provide the Board with
appropriate and timely
information, but information
volunteered by management
may not be enough in all
circumstances and Directors
should make further inquiries
where necessary. The Chairman
should ensure all Directors
are properly briefed on issues
arising at Board meetings.
The Chairman ensures that all Directors are briefed on issues
arising at Board Meetings. Board members are constantly
apprised of the industry trends, market dynamics and information
pertaining to same.
Complied
A.6.2
The minutes, agenda and papers
required for a Board Meeting
should ordinarily be provided to
Directors at least seven (7) days
before the meeting, to facilitate
its effective conduct.
The Directors receive comprehensive reports of all Board papers
and any other additional information requested by the members
of the Board, well in advance of the Board meetings.
Complied
APPOINTMENTS TO THE BOARD
The appointment of Board members is specified in the Articles
of Association of the Company. The Company Secretary provides
guidance on the procedure and ensures that the said procedure is
followed to the letter.
Principle
A.7
The Board should be provided
with timely information in a form
and of a quality appropriate to
enable it to discharge its duties.
There should be a formal and
transparent procedure for the
appointment of new Directors to
the Board.
Board meetings were conducted based on a formal agenda which
covers the main routine business and regulatory functions as well
as special business matters and responsibilities of the Board.
In addition to the Articles of Association, the appointments of
Board members shall comply with the provisions of the RII
Act. The Company Secretary ensures that such procedure is
accurately followed.
Complied
Annual Report 2013 123
Principle / Requirement
Commentary
Status of
Compliance
A.7.1
The Company does not have a Nomination Committee.
A Nomination Committee
should be established to make
recommendations to the Board
on all new Board appointments.
Terms of Reference for
Nomination Committees are set
out in Schedule A. The Chairman
and members of the Nomination
Committee should be identified
in the Annual Report.
A.7.2
The Nomination Committee or
in the absence of a nomination
committee, the Board as
a whole should annually
assess Board-composition to
ascertain whether the combined
knowledge and experience of
the Board matches the strategic
demands facing the Company.
The findings of such assessment
should be taken into account
when new Board appointments
are considered and when
incumbent Directors come up
for re-election.
The Board is satisfied with its composition and is of the
considered view that the combined knowledge of the Board
matches the strategic demands of the Company.
Not
Complied
Complied
Being an insurance company, the Board viewed the necessity
of having actuarial experience in addition to financial expertise
within the Board; hence it is always ensured that a qualified
actuary is present within the composition of the Board.
The combined experience and qualifications of the Board
members cover a wide area of business administration including
finance, marketing, law, business management, insurance and
actuarial science. The spread of combined experience and
qualifications of the Board is graphically illustrated below.
Management
Insurance
Marketing
Law
Finance
Accounting
Actuary
A.7.3
Upon the appointment of a
new Director to the Board, the
Company should forthwith
disclose to shareholders:
The necessary communications were made in respect to new
Board appointments to the shareholders via disclosures made to
the CSE. Accordingly, following Board appointments were notified
with brief resumes and other required information.
• a brief resume of the
Director;
Ms. Sally Yuen Wai Wan – appointed on 06 February 2013
• the nature of his expertise in
relevant functional areas;
• the names of companies
in which the Director
holds directorships or
memberships in Board
committees; and
• whether such Director can
be considered ‘independent’.
Mr. Gordon Watson – appointed on 28 June 2013
Mitchell New – appointed on 28 June 2013
Complied
124 AIA Insurance Lanka PLC
Corporate Governance
Principle / Requirement
Commentary
Status of
Compliance
Principle
A.8
RE-ELECTION
The Articles of Association of the Company requires that 1/3rd
of the Directors retires and are eligible to be re-elected by the
Shareholders at the Annual General Meeting. The Directors to
so retire in a year shall be those who have served the longest in
office since their last election. However, as between persons who
were appointed Directors on the same day, those to retire shall
unless they otherwise agree among themselves, be determined
by lot.
Complied
A.8.1
Non-Executive Directors should
be appointed for specified
terms subject to re-election
and to the provisions in the
Companies Act relating to the
removal of a Director, and their
re-appointment should not be
automatic.
Non-Executive Directors are required to submit themselves
for re-election as per the Articles of Association. All the
appointments to the Board are primarily governed by the
Companies Act No. 7 of 2007.
Complied
A.8.2
All Directors including the
Chairman of the Board,
should be subject to election
by shareholders at the
first opportunity after their
appointment, and to re-election
thereafter at intervals of no
more than three years. The
names of Directors submitted
for election or re-election
should be accompanied by a
resume minimally as set out
in paragraph A.7.3 above, to
enable shareholders to make
an informed decision on their
election.
Directors and Chairman are appointed by the majority
Shareholder/s and are not required to be elected by all the
Shareholders at the first opportunity after their appointment
according to the Articles of Association. However, they are
required to submit themselves for re-appointment by rotation at
the AGM as per the provisions of the Articles of Association of the
Company.
Complied
Principle
A.9
APPRAISAL OF BOARD
PERFORMANCE
The Company does not have a formal procedure for the evaluation
of Board performance.
Not
Complied
All Directors should be required
to submit themselves for reelection at regular intervals
and at least once in every three
years.
Boards should periodically
appraise their own performance
in order to ensure that Board
responsibilities are satisfactorily
discharged.
A.9.1
The Board should annually
appraise itself on its
performance in the discharge of
its key responsibilities.
As the Company does not have a formal procedure for the
evaluation of the Board performance, this requirement does not
apply.
Not
Complied
A.9.2
The Board should also
undertake an annual
self-evaluation of its own
performance and that of its
Committees.
Same as above.
Not
Complied
Annual Report 2013 125
Principle / Requirement
Commentary
Status of
Compliance
A.9.3
The Board should state how
such performance evaluations
have been conducted, in the
Annual Report.
Same as above.
Not
Complied
Principle
A.10
DISCLOSURE OF INFORMATION
IN RESPECT OF DIRECTORS
Shareholders are kept updated of the new appointments to the
Board by way of disclosures made to the CSE with brief resumes
of each newly appointed Director duly disclosed.
Complied
Brief resume capturing the material information of each Director
who is functioning in the Board as at the date of this Report is
given in following sections of this Report.
Partially
Complied
Shareholders should be kept
advised of relevant details in
respect of Directors.
A.10.1
The Annual Report of the
Company should set out the
specified information in relation
to each Director.
• name, qualifications and brief profile – Page 74
• the nature of his/her expertise in relevant functional areas –
page 74
• whether Executive, Non-Executive and/or independent
Director – page 72
• names of other companies in which the Director concerned
serves as a Director.– page 74
• number/percentage of Board meetings of the Company
attended during the year – page 85
• names of Board Committees in which the Director serves as
Chairman or a member – page 138
• number/percentage of committee meetings attended during
the year – page 85
Principle
A.11
APPRAISAL OF CHIEF
EXECUTIVE OFFICER (CEO)
Performance of the CEO is assessed by the Board.
Complied
The Board should be required,
at least annually, to assess the
performance of the CEO.
A. 11.1
At the commencement of
every fiscal year, the Board
in consultation with the CEO,
should set, in line with the
short, medium and long-term
objectives of the Company,
reasonable financial and nonfinancial targets that should be
met by the CEO during the year.
The CEO’s financial and non-financial objectives are set at the
beginning of each year by the Board in consultation with the CEO.
Complied
A.11.2
The performance of the CEO
should be evaluated by the Board
at the end of each fiscal year to
ascertain whether the targets
set by the Board have been
achieved and if not, whether the
failure to meet such targets was
reasonable in the circumstances.
CEO’s performance is evaluated at the end of the year by the
Chairman. A performance rating is obtained and submitted to
the Remuneration Committee which in turn recommends the
compensation, perquisites and allowances of the CEO to the
Board. The Board after consideration of the recommendation
takes the final decision.
Complied
126 AIA Insurance Lanka PLC
Corporate Governance
Principle / Requirement
B
DIRECTORS’ REMUNERATION
Principle
B.1
REMUNERATION PROCEDURE
Companies should establish a
formal and transparent procedure
for developing policy on executive
remuneration and for fixing
the remuneration packages of
individual Directors. No Director
should be involved in deciding his/
her own remuneration.
Commentary
Status of
Compliance
The Remuneration Committee is responsible for defining the
Remuneration Policy of the Company. None of the Directors are
involved in deciding his/her own remuneration.
Complied
Details of the Remuneration Committee are given on page 138 of
this Report.
Complied
To avoid potential conflicts
of interest, the Board of
Directors should set up a
Remuneration Committee to
make recommendations to the
Board, within agreed terms of
reference, on the Company’s
framework of remunerating
executive directors.
The Board has established a Remuneration Committee to inter
alia review and recommend the Remuneration Policy. The
Committee carries out its duties and functions within the Terms
of Reference set up by the Board and places its recommendations
for the approval of the Board.
B.1.2
Remuneration Committees
should consist exclusively of
Non-Executive Directors, and
should have a Chairman, who
should be appointed by the
Board.
There are three members from the Board of Directors appointed
as members of the Remuneration Committee. All the members of
the Committee are Non-Executive Directors.
Complied
B.1.3
The Chairman and members of
the Remuneration Committee
should be listed in the Annual
Report each year.
The details of membership of the Remuneration Committee and
its Chairman are given in page 138 of this Report.
Complied
B.1.4
The Board as a whole, or where
required by the Articles of
Association the shareholders,
should determine the
remuneration of Non-Executive
Directors, including members of
the Remuneration Committee,
within the limits set in the
Articles of Association.
The Board is ultimately responsible in approving the
remuneration and fees of Directors.
Complied
B.1.5
The Remuneration Committee
should consult the Chairman
and/or CEO about its proposals
relating to the remuneration of
other Executive Directors and
have access to professional
advice from within and outside
the Company, in discharging
their responsibilities.
The Remuneration Committee is provided with the proposal for
the Remuneration Policy by the Chief Executive Officer and Head
of HR.
Complied
B.1.1
The Remuneration Committee Report is given in page 148 of this
Report.
The Committee has the liberty to seek professional advice from
within and outside the Company in making decisions in relation to
the remuneration or fees of Directors.
Annual Report 2013 127
Principle / Requirement
Commentary
Status of
Compliance
Principle
B.2
The majority of Directors did not get any remuneration from
the Company. However, the Company continues to remunerate
selected Non-Executive Directors where the Board is of the
opinion that such payment is necessary to attract the individual
Director. Reviews of Directors fees / remunerations are subject to
market surveys conducted by external market research agencies.
Complied
THE LEVEL AND MAKE UP OF
REMUNERATION
Levels of remuneration of
both Executive and NonExecutive Directors should be
sufficient to attract and retain
the Directors needed to run
the Company successfully.
A proportion of Executive
Directors’ remuneration should
be structured to link rewards
to corporate and individual
performance.
B.2.1
The Remuneration Committee
should provide the packages
needed to attract, retain and
motivate Executive Directors of
the quality required but should
avoid paying more than is
necessary for this purpose.
The Remuneration Committee provides its recommendation
to the Board in relation to compensation packages needed to
attract Executive Directors where such positions exist within the
Company.
Complied
B.2.2
The Remuneration Committee
should judge where to position
levels of remuneration of the
Company, relative to other
companies.
The Remuneration Committee is provided with necessary
information regarding the remuneration levels of the industry
based on external market surveys and such information are
reviewed by the Committee when determining the Remuneration
Policy of the Company. The Company convenes at least two market
compensation surveys a year.
Complied
B.2.3
The Remuneration Committee
should be sensitive to
remuneration and employment
conditions elsewhere in the
Company or Group of which
it is a part, especially when
determining annual salary
increases.
The Remuneration Committee considers the employment conditions
and levels of remuneration applied in the market before determining
salary increases, based on market surveys conducted. The
Committee did not have any other member companies to consider
in setting salary increases for the Company for the financial year
2012/13. However, the best practices in deciding the total rewards
of its parent Shareholder AIA Group is considered and adopted as
appropriate.
Complied
B.2.4
The performance-related
elements of remuneration of
Executive Directors should
be designed and tailored to
align their interests with those
of the Company and main
stakeholders and to give these
Directors appropriate incentives
to perform at the highest levels.
Performance related elements of the remuneration package of
Executive Directors where such positions exist, is directly linked
to the overall achievement of the Company’s strategic objectives
and individual performance objectives.
Complied
B.2.5
Executive share options should
not be offered at a discount.
The Company does not have any share option schemes of its own
shares at present.
Not
Applicable
128 AIA Insurance Lanka PLC
Corporate Governance
Principle / Requirement
Commentary
Status of
Compliance
B.2.6
The Remuneration Committee substantially follows the provisions
in the Code. Annual performance related incentives for the CEO
and the members of the Executive Committee have direct links to
the overall achievement of the objectives of the Company as well
as achievements of individual objectives.
Complied
In designing schemes
of performance-related
remuneration, Remuneration
Committees should follow the
provisions set out in the Code.
The Company does not have any share option schemes at present.
B.2.7
Remuneration Committees should
consider what compensation
commitments (including pension
contributions) their Directors’
contracts of service, if any, entail
in the event of early termination.
The Remuneration Committee is empowered through the
Remuneration Policy to determine the terms and conditions,
financial package and retirement plan of the Executive Directors
and such decisions are reviewed and approved by the Board of
Directors.
Complied
B.2.8
Where the initial contract does not
explicitly provide for compensation
commitments, Remuneration
Committees should, within legal
constraints, tailor their approach
in early termination cases to the
relevant circumstances.
Remuneration for Non-Executive Directors where applicable
is determined in line with market practices. There are no early
termination commitments for Non-Executive Directors.
Complied
B.2.9
Levels of remuneration for
Non-Executive Directors should
reflect the time commitment
and responsibilities of their role,
taking into consideration market
practices.
As explained above the remuneration for Non-Executive Directors
where applicable are determined in line with market practices.
Complied
DISCLOSURE OF
REMUNERATION
This statement is given in page 148 of this Report.
Complied
Information of the members of the Remuneration Committee is
provided in page 138 of this Report.
Complied
Principle
B.3
Remuneration for Non-Executive Directors does not include share
options.
The Company’s Annual Report
should contain a Statement of
Remuneration Policy and details
of remuneration of the Board as
a whole.
B.3.1
The Annual Report should set
out the names of Directors
(or persons in the parent
company’s committee in the
case of a group company)
comprising the remuneration
committee, contain a statement
of remuneration policy and set
out the aggregate remuneration
paid to Executive and NonExecutive Directors.
The statement of Remuneration Policy and the Report of the
Remuneration Committee is given in page 148 of this Report.
Aggregate of the remuneration paid to Directors are given in page
84 of this Report.
Annual Report 2013 129
Principle / Requirement
Commentary
C
RELATIONS WITH SHAREHOLDERS
Principle
C.1
CONSTRUCTIVE USE OF THE
ANNUAL GENERAL MEETING
(AGM) AND CONDUCT OF
GENERAL MEETINGS
Boards should use the AGM to
communicate with shareholders
and should encourage their
participation.
Status of
Compliance
Complied
The Company had its last AGM on the 27 March 2013 where the
Board and the Chairman encouraged and had formal and informal
discussions with the Shareholders.
The Board of Directors encourages its Shareholders to attend
and actively participate at the AGM. The Chairman of the Board of
Directors invites the External Auditors and lawyers to be present
at the AGM to answer any queries raised by shareholders.
C.1.1
Companies should count all
proxy votes and should indicate
the level of proxies lodged on
each resolution, and the balance
for and against the resolution
and withheld, after it has been
dealt with on a show of hands,
except where a poll is called.
The resolutions proposed at the AGM were passed unanimously.
The count of proxies were taken but was not necessary to declare
at the AGM as the resolutions were passed unanimously.
Complied
C.1.2
Companies should propose a
separate resolution at the AGM
on each substantially separate
issue and should in particular
propose a resolution at the AGM
relating to the adoption of the
report and accounts.
The Company proposes separate resolutions on each significant
issue.
Complied
C.1.3
The Chairman of the Board
should arrange for the
Chairmen of the Audit,
Remuneration and Nomination
Committees to be available to
answer questions at the AGM if
so requested by the Chairman.
The Chairman of the Board of Directors arranges the Chairmen
and/or members of the Board Sub-Committees to be available at
the AGM to answer queries raised by shareholders.
Complied
C.1.4
Companies should arrange
for the Notice of the AGM and
related papers to be sent to
shareholders as determined by
statute, before the meeting.
The Company circulates the Notice of AGM, summary of the
procedures governing voting at the AGM and the Annual Report
together with any other relevant and required documents to
the Shareholders 15 working days prior to the AGM as per the
requirements of the Companies Act and Articles of Association of
the Company.
Complied
C.1.5
Companies should circulate with
every Notice of General Meeting,
a summary of the procedures
governing voting at General
Meetings.
The form of Proxy captures the summary of procedure governing
voting at the AGM.
Complied
COMMUNICATION WITH
SHAREHOLDERS
The Board has implemented effective communications with
Shareholders through the Company Secretary and via disclosures
made to the CSE.
Principle
C.2
The Board should implement
effective communication with
shareholders.
There was a separate resolution proposed for the adoption of the
report and the accounts.
There were no physical General Meetings held during the year
under review except the AGM.
Complied
130 AIA Insurance Lanka PLC
Corporate Governance
Principle / Requirement
Commentary
Status of
Compliance
C.2.1
There should be a channel
to reach all shareholders
of the Company in order to
disseminate timely information.
The Board ensured that all Shareholders were provided with
timely information via Shareholder circulars as and when
applicable and via constant communications through public
disclosures.
Complied
C.2.2
The Company should disclose
the policy and methodology
for communication with
shareholders.
The Company does not have a specific policy for Shareholder
communications other than the requirements specified on
relevant laws, rules and regulations. However, the Company
continued with media releases on all material activities of the
Company throughout the year under review.
Partially
Complied
C.2.3
The Company should disclose
how they implement the above
policy and methodology.
As the Company does not have a specific policy or methodology
for Shareholder communications this requirement does not arise.
Not
Complied
C.2.4
The Company should disclose
the contact person for such
communication.
The contact person for Shareholder communication is the
Company Secretary.
Partially
Complied
C.2.5
There should be a process to make All the material communications from the Shareholders receive
all Directors aware of major issues consideration and approval of the Board prior to circulation.
and concerns of shareholders, and
this process has to be disclosed by
the Company.
C.2.6
The Company should decide the
person to contact in relation to
shareholders’ matters.
The Company Secretary is the person to contact in relation to
Shareholders’ matters.
Complied
C.2.7
The process for responding to
shareholder matters should be
formulated by the Board and
disclosed.
The Board instructs the Company Secretary to respond to
Shareholders as and when required. The Company Secretary is
responsible to carry out such instructions from the Board.
Complied
Principle
C.3
MAJOR AND MATERIAL
TRANSACTIONS
The Company did not carry out any Major Transactions as defined
in the Companies Act No. 7 of 2007, during the period under
review.
Complied
There was no such transaction took place during the year under
review except the matters relating to the Voluntary Offer made
by the majority Shareholder to acquire the total shareholding of
the Company. The Company discharged its obligations towards
its Shareholders within the requirements as specified in relevant
laws, rules and regulations.
Complied
Directors should disclose to
shareholders all proposed
material transactions, which if
entered into, would materially
alter/vary the Company’s net
assets base or in the case of a
Company with subsidiaries, the
consolidated group net asset base.
C.3.1
Directors should disclose to
shareholders the purpose and all
material facts of such transaction
and obtain shareholders’ approval
by ordinary resolution at an
extraordinary general meeting.
It also applies to transactions
or series of related transactions
which have the purpose or effect
of substantially altering the
nature of the business carried on
by the Company.
Partially
Complied
Annual Report 2013 131
Principle / Requirement
D
ACCOUNTABILITY AND AUDIT
Principle
D.1
FINANCIAL REPORTING
The Board should present a
balanced and understandable
assessment of the Company’s
financial position, performance
and prospects.
Commentary
Status of
Compliance
The Directors take responsibility for preparation of the financial
statements in accordance with the Sri Lanka Financial Reporting
Standards. They are also responsible for maintaining proper
accounting records which are intended to disclose, with
reasonable accuracy, the financial position of the Company.
Complied
Some of their specific responsibilities with regard to financial
statements include;
• Selection of suitable accounting policies and bases, applying
them consistently and making disclosure in the financial
statements.
• Present information in a relevant, reliable and comparable
manner.
• State that the Company has complied with the applicable Sri
Lanka Financial Reporting Standards, subject to any material
deviations disclosed and explained in the financial statements.
• After making adequate inquiries, make a declaration that
the Company has adequate resources to continue as a going
concern.
D.1.1
The Board’s responsibility
to present a balanced and
understandable assessment
extends to interim and other
price-sensitive public reports
and reports to regulators, as
well as to information required
to be presented by statutory
requirements.
The Annual Report and Interim Financial Statements, which
are principle tools of communication with shareholders, consist
of the Company’s financial position and the operating results
with comprehensive details over and above the statutory
and regulatory requirements are published and circulated to
shareholders within the required time period.
The statutory accounts comply with the requirements of the
Sri Lanka Financial Reporting Standards and the requirements of
the CSE and the Companies Act.
Copy of the Annual Report for the year 2012 has been uploaded to
the Company’s website for the benefit of the stakeholders.
Media releases were published in leading newspapers providing
financial results and other important developments of the
Company. In terms of the Listing Rules of the CSE, soft copies of
the financial statements were also provided to the CSE in order to
publish them in the CSE website for the benefit of investors.
A negative assurance audit was carried out by external auditors
on the financial statements for the half year ending 30th June
2013.
Complied
132 AIA Insurance Lanka PLC
Corporate Governance
Principle / Requirement
Commentary
Status of
Compliance
D.1.2
The Directors’ Report given in page 80 of the report contains the
following declarations as required by the Code.
Complied
The Directors’ Report, which
forms part of the Annual Report,
should contain declarations by
the Directors.
the Company has not engaged in any activity which contravenes
laws and regulations
the Directors have declared all material interests in contracts
involving the Company and refrained from voting on matters in
which they were materially interested
the Company has made all endeavours to ensure the equitable
treatment of Shareholders
the business is a going concern, with supporting assumptions or
qualifications as necessary
they have conducted a review of the internal controls, covering
financial, operational and compliance controls and risk
management, and have obtained reasonable assurance of their
effectiveness and successful adherence therewith.
D.1.3
D.1.4
The Annual Report should
contain a statement setting
out the responsibilities of the
Board for the preparation
and presentation of financial
statements, together with a
statement by the Auditors about
their reporting responsibilities.
Further, the Annual Report
should contain a Report/
Statement on Internal Control.
Statement setting out the responsibilities of the Board for the
preparation and presentation of financial statements is given in
page 158 of this Report.
The Annual Report should
contain a “Management
Discussion & Analysis”.
This requirement is captured in page 12 of the report and it
contains inter alia the following matters as specified by the Code.
Complied
The statement by the Auditors about their reporting
responsibilities is given in page 159 of the report.
The report / statement on Internal Control is given in page 83 of
this Report.
Complied
industry structure and developments
opportunities and threats
risks and concerns;
internal control systems and their adequacy
social and environmental protection activities carried out by the
Company
financial performance
material developments in human resource
prospects for the future
D.1.5
The Directors should report that
the business is a going concern,
with supporting assumptions or
qualifications as necessary.
This declaration is made under the Director’s Report in page 86 of
this Report.
Complied
Annual Report 2013 133
Principle / Requirement
Commentary
Status of
Compliance
D.1.6
This is a very remote risk to the Company.
In the event the net assets of
the Company fall below 50%
of the value of the Company’s
shareholders’ funds, the Directors
shall forthwith summon an
Extraordinary General Meeting
of the Company to notify
shareholders of the position and
of remedial action being taken.
D.1.7
The Board should adequately
and accurately disclose the
related party transactions in its
Annual Report.
The Company has not adopted the Code of Best Practices for
Related Party Transactions issued in December 2013. The
Company will be taking steps to adopt the same in the future
where such adoption becomes mandatory. The Company has
complied with the disclosure requirements on related party
transactions as specified in Listing Rules of CSE.
Partially
Complied
Principle
D.2
INTERNAL CONTROL
The Board ensures the maintenance of sound system of risk
management and internal control through the Risk management
function and Internal Audit function respectively.
Complied
The Board should have a
process of risk management
and a sound system of
internal control to safeguard
shareholders’ investments and
the Company’s assets.
Complied
The risk management function has a direct link with the risk
management function of the AIA Group for knowledge and best
practice framework. The Chief Risk Officer provides quarterly
reports to the Audit and Compliance Committee.
The Internal Audit function directly reports to the Audit and
Compliance Committee. Head of Internal Audit has direct unfettered
access to the Board through Audit and Compliance Committee.
D.2.1
The Directors should, at least
annually, conduct a review of the
risks facing the Company and
the effectiveness of the system
of internal controls.
Internal audits are carried out according to an annual risk
based audit plan which is approved by the Audit and Compliance
Committee. Progress against the annual audit plan as well as
results of audits are continuously monitored by the Audit and
Compliance Committee.
Complied
The Committee had private meetings with Internal Auditors
without any management representative to ensure independence
and the Committee constantly reviews the resource adequacy for
the Internal Audit function.
Internal Audit function submits quarterly reports to the Audit and
Compliance Committee with outcome of the audits completed
thereby allowing the Committee to review the effectiveness of the
Company’s system of internal controls quarterly. The Committee
in tern submits its views to the Board.
D.2.2
Companies should have an
internal audit function.
The Company has an Internal Audit function.
Complied
D.2.3
The Board should require the
Audit Committee to carry out
reviews of the process and
effectiveness of risk management
and internal controls, and to
document to the Board and Board
takes the responsibility for the
disclosures on internal controls.
The Audit and Compliance Committee reviews the process and
effectiveness of the risk management and internal controls
and reports to the Board. The Board takes the responsibility for
disclosures on internal controls.
Complied
134 AIA Insurance Lanka PLC
Corporate Governance
Principle / Requirement
Commentary
D.2.4
There should be a Statement of
Internal Control by the Board.
The Board complied substantially with the requirements in
Not
implementing and monitoring effective risk management and internal Complied
control procedures. However, a statement of Internal Control in line
with this Code is not published within the Annual Report.
Principle
D.3
AUDIT COMMITTEE
The Company achieves this through its Audit and Compliance
Committee. The Company’s Audit Committee is named thus
as the Committee is entrusted with reviewing of the status of
regulatory compliance and risk management of the Company.
D.3.1
The Audit Committee should
be comprised of a minimum of
two independent Non-Executive
Directors (in instances where a
Company has only two directors
on its Board) or exclusively
by Non-Executive Directors,
a majority of whom should be
independent, whichever is higher.
There are three members in the Audit and Compliance Committee Complied
and all of them are Non-Executive Directors.
The duties of the Audit
Committee should include
keeping under review the
scope and results of the audit
and its effectiveness, and the
independence and objectivity of
the Auditors.
The duties of the Audit and Compliance Committee are detailed in
page 137 of this Report.
D.3.3
The Audit Committee should
have a written Terms of
Reference, dealing clearly with
its authority and duties.
The Committee has a Terms of Reference and it captures the
duties and responsibilities of the Committee.
D.3.4
DISCLOSURES
The disclosures required by the Code are given in the report as follows. Complied
D.3.2
The Board should establish formal
and transparent arrangements for
considering how they should select
and apply accounting policies,
financial reporting and internal
control principles and maintaining
an appropriate relationship with
the Company’s Auditors.
Status of
Compliance
Complied
Two out of the three members are Independent Directors and one
of them is the Chairman of the Committee.
Complied
All the non-audit services of the Auditors were pre-approved by
the Committee.
Complied
Names of the Directors comprising the Audit and Compliance
Committee – This is given in page 137 of this Report
Determination of the independence of the Auditors – Information
on this determination is given within the Report of the Audit and
Compliance Committee given in page 146 of the Report.
Report of the Audit and Compliance Committee – This is given in
page 46 of the Report.
Principle
D.4
CODE OF BUSINESS CONDUCT
& ETHICS
Companies must adopt a Code
of Business Conduct & Ethics for
Directors and Key Management
Personnel and must promptly
disclose any waivers of the Code
for Directors or others.
The Company has a Business Ethics Code which requires all
employees to maintain highest standards of integrity and honesty
in performing duties. In addition to the above, a separate Code of
Ethics and Standards of Conduct is available for the members of
the sales force and they are required to make a pledge to uphold
this code of ethics and standards of conduct.
Complied
Annual Report 2013 135
Principle / Requirement
Commentary
Status of
Compliance
D.4.1
The Company has a Business Ethics Code and several policies
which forms part of its standing instructions which all the
employees are covered with. Such Ethics code and policies cover
the areas of;
Complied
All Companies must disclose
whether they have a Code of
Business Conduct & Ethics for
Directors and Key Management
Personnel which covers specific
areas
• conflict of interest;
• bribery and corruption;
• entertainment and gifts;
• accurate accounting and record-keeping;
• corporate opportunities;
• confidentiality;
• fair dealing;
• protection and proper use of company assets;
• compliance with laws, rules and regulations (including insider
trading laws); and
• encouraging the reporting of any illegal or unethical
behaviour.
D.4.2
The Chairman must affirm in the
Company’s Annual Report that
he is not aware of any violation of
any of the provisions of the Code
of Business Conduct & Ethics.
This affirmation is given in page 06 of this Report.
Complied
Principle
D.5
CORPORATE GOVERNANCE
DISCLOSURES
The extent to which the Company adheres to the Corporate
Governance Principles mandated by regulatory requirements is
specified in this Report.
Complied
The Company has not formally adopted the Code but the
Company’s status of compliance against the principles of the
Code is discussed here as a good governance practice.
Complied
92.27% of the voting rights of the Company was controlled by AIA
Group Limited as at the 01 January 2013. After the conclusion
of the Voluntary Offer to the minority Shareholders, AIA Group
Limited controls 97.15% of voting rights of the Company.
Complied
Directors should be required to
disclose the extent to which the
Company adheres to established
principles and practices of good
Corporate Governance.
D.5.1
The Directors should include in
the Company’s Annual Report a
Corporate Governance Report,
setting out the manner and
extent to which the Company
has complied with the principles
and provisions of this Code.
2
Shareholders
E
INSTITUTIONAL INVESTORS
Principle
E.1
SHAREHOLDER VOTING
Institutional shareholders
have a responsibility to make
considered use of their votes
and should be encouraged to
ensure their voting intentions
are translated into practice.
The Annual Report and Interim Financial Statements being the
main communication to the Shareholders, the Company ensured
that all the material decisions are disclosed to the CSE in order
that the Shareholders are made aware of such developments.
136 AIA Insurance Lanka PLC
Corporate Governance
Principle / Requirement
Commentary
Status of
Compliance
E.1.1
As explained above the majority shareholding of the Company
is vested with one major Shareholder. The rest of the public
shareholding comprises of minority stakes of institutional as
well as individual Shareholders. Please refer page 225 for largest
Shareholders.
Complied
A listed company should
conduct a regular and
structured dialogue with
shareholders based on a mutual
understanding of objectives.
The Board welcomed any suggestion or comment from the public
shareholders regardless of whether such shareholder is an
institutional or an individual investor.
Principle
E.2
EVALUATION OF GOVERNANCE
DISCLOSURES
This Corporate Governance Report adequately discloses the
corporate governance structure of the Company.
Complied
The Annual Report contains sufficient information about the
Company to make informed decisions regarding investing /
divesting decisions.
Complied
All Shareholders receive equal treatment from the Company and
equally encouraged to participate, to engage in discussions and to
vote at the AGM.
Complied
When evaluating Companies’
governance arrangements,
particularly those relating
to Board structure and
composition, institutional
investors should be encouraged
to give due weight to all relevant
factors drawn to their attention.
F
OTHER INVESTORS
Principle
F.1
INVESTING/ DIVESTING
DECISION
Individual shareholders,
investing directly in shares
of companies should be
encouraged to carry out
adequate analysis or seek
independent advice in investing
or divesting decisions.
Principle
F.2
SHAREHOLDER VOTING
G
SUSTAINABILITY REPORTING
G.1
Principles of Sustainability Reporting
G.1.1
Principle 1 – Economic
sustainability
This principle is captured and information with respect to the
Company’s actions during the year provided on page 18 of this
Report.
Complied
G.1.2
Principle 2 – The Environment
This principle is captured and information with respect to the
Company’s actions during the year provided on page 61 of this
Report.
Complied
G.1.3
Principle 3 – Labour Practice
This principle is captured and information with respect to the
Company’s actions during the year provided on page 39 of this
Report.
Complied
G.1.4
Principle 4 – Society
This principle is captured and information with respect to the
Company’s actions during the year provided on page 58 of this
Report.
Complied
Individual shareholders should
be encouraged to participate in
General Meetings of companies
and exercise their voting rights.
Annual Report 2013 137
Principle / Requirement
Commentary
Status of
Compliance
G.1.5
Principle 5 – Product
Responsibility
This principle is captured and information with respect to the
Company’s actions during the year provided on page 54 of this
Report.
Complied
G.1.6
Principle 6 – Stakeholder
identification, engagement &
effective communication
This principle is captured and information with respect to the
Company’s actions during the year provided on page 14 of this
Report.
Complied
G.1.7
Principle 7 – Sustainable
reporting and disclosure should
be formalised as part of the
Company’s reporting processes
and take place on a regular
basis.
This principle is captured and information with respect to the
Company’s actions during the year provided on page 12 of this
Report.
Complied
The sustainability reporting of the Company is in compliance with
the Global Reporting Initiative Guidelines.
Information on Board Committees and other Committees as appointed by the Board
Board Sub-Committees
Audit & Compliance Committee
Chairman
Heerak Basu (Independent Non-Executive Director)
Members
Deepal Sooriyaarachchi (Independent Non-Executive Director)
Sally Wan (Non-Executive Director)
Secretary
Thusara Ranasinghe
Agenda
Available
Invitees
CEO
Chief Financial Officer
Chief Actuary
Internal Auditor
External Auditors
Other Officials as required
Frequency of
Meetings
Quarterly
Professional Advice
Available
Terms of Reference
Available
138 AIA Insurance Lanka PLC
Corporate Governance
Objectives
- To review and make recommendations to the Board with regard to the approval of the annual
report and accounts of the Company, including of the interim financial statements
- To review and report to the Board on the effectiveness of the systems of internal controls and risk
management
- To review the quality of internal and external audits and to secure the timely implementation of
audit recommendations
- To ensure that the Internal Audit function is adequately resourced and has an appropriate
standing and to also ensure co-ordination between the Internal and External Auditors
- To determine the fees to be paid to the External Auditors’ and to make recommendations to the
Board with regard to their appointment and also with regard to their ceasing to hold office.
-To review reports from the External Auditor on significant issues arising from the audit of the
Company’s financial statements and on the Company’s internal control environment, as well as to
review regular updates on related matters
-To review the effectiveness of the corporate compliance framework with financial services and
other relevant legislation.
-To review the scope of each annual audit and its cost effectiveness with the External Auditors and
the Management
-To perform an independent supervisory role in securing corporate compliance with the
Regulation of the Insurance Industry Act and related regulations as well as with other applicable
statutes and regulations
Remuneration Committee
Chairman
Mitchell New (Non-Executive Director)
Members
Heerak Basu (Independent Non-Executive Director)
Deepal Sooriyaarachchi (Independent Non-Executive Director)
Secretary
Chathuri Munaweera
Agenda
Available
Invitees
CEO
Director HR
Frequency of
Meetings
As and when required
Professional Advice
Available
Terms of Reference
Available
Objectives
- To review and approve the remuneration policy applicable to employees of the Company
- To recommend to the Board the remuneration to be paid to Directors, including the CEO, their
perquisites and allowances
- To review and to approve the grant of employees’ stock options (if and when applicable) subject to
the approval of the Board
Annual Report 2013 139
Board appointed sub committee comprising of Non-Board Members
Investment Committee
Chairman
Shah Rouf (CEO)
Members
Benjamin Deng (Head of Derivatives & Analytics from AIA Group investment function)
Gavin D’Rosairo (Chief Investments & Risk Officer)
Secretary
Zarah Juriansz
Agenda
Available
Invitees
Chief Financial Officer
Chief Actuary
Independent Consultant Actuary
Other Officials as required
Frequency of
Meetings
Quarterly
Professional Advice
Available
Terms of Reference
Available
Objectives
- To set policy guidelines for the management of investment portfolios
- To monitor investment performance and recommend appropriate investment strategies
- To ensure that portfolios are managed to achieve their investment objectives whilst adhering to
the regulatory requirements
- To review the Company’s Investment Policy and place the same before the Board for its approval
thereof
- To implement the investment policy as approved by the Board
- To apprise the Board periodically on the committee’s activities
- To liaise with the Insurance Regulator in connection with regulations pertaining to investments
and to provide information to define the framework for the management of insurance portfolios
Board Appointed Management Committee
Financial Risk Committee
Chairman
Indika Prematunga
Chief Financial Officer
Members
Shah Rouf
CEO
Frank Munro
Chief Actuary
Gavin D’Rosairo
Chief Investment & Risk Officer
Secretary
Tharaka Abeynanda
Agenda
Available
Invitees
Manager Investments
Manager- Enterprise Risk Management
Frequency of
Meetings
Quarterly
Professional Advice
Available
Terms of Reference
Available
Objectives
-To oversee the aggregate financial risk exposure of the business
-To manage the optimisation of capital and the risk and return profile of the business
140 AIA Insurance Lanka PLC
Risk Management Review
2013 was a year of transition for AIA Sri Lanka with every
aspect of the business being aligned to AIA Group, and
Risk Management was no exception. The challenge for
the Risk Function was to ensure a smooth transition to
AIA Group’s risk frameworks whilst ensuring that the risk
dialogues, risk culture, risk awareness, risk ownership,
risk forums, risk governance and best practices which were
embedded within AIA Sri Lanka over the years continue
with no disruption or diminution in effectiveness. It was also
vital that risk management continued to perform its role of
“critical friend” adding business value to the entity.
With the view of achieving the above objectives, AIA
Sri Lanka has put in place a risk management framework
and a risk management process that runs across different
levels of management and functions. Risk management
framework outlines the scope, boundaries and limitations
that the business unit needs to stay within whilst operating
its business. Risk management process is a mechanism
which operates in different cycles with different frequencies,
and is able to run independently, and to continuously feed
information to the decision making process.
In this context maintaining the risk management
frameworks and quarterly risk assessment process with
sufficient flexibility to adapt to the changing environment
was a priority for AIA Sri Lanka Risk Function during 2013.
The change in ownership necessitated changes to the risk
management framework and the focus and operations of the
Risk Function, and the ensuing segments capture in essence
the key features of AIA Sri Lanka’s risk management during
2013.
The core business of any insurer is to accept, pool and
effectively manage risks to the benefit of policyholders
and shareholders. Effective risk management therefore is
at the heart of an insurer’s business and operation, and is
the key driver in creating value to all stakeholders. This is
recognised and appreciated at AIA Sri Lanka and as such,
effective risk management is woven into the fabric of the
Company as an integral part of the culture lending support
to ensure financial stability and long-term sustainability of
the business.
This risk report will discuss AIA Sri Lanka’s risk
management framework and processes, highlight the
key activities completed during 2013 to further embed
risk management within AIA Sri Lanka and provide a brief
overview of the work envisioned to be carried out during
2014. Note 5 - “Risk Management” on page 181 in the notes
to the financial statements of this Annual Report provides
a comprehensive view and insight into the insurance and
financial risks of AIA Sri Lanka.
Risk management framework
AIA Insurance Lanka PLC’s risk
Insurance Lanka PLC’s risk management framework is
management objectives can be outlined AIA
founded on seven broad themes or core principles i.e.
as:
•
Embed the culture of risk management throughout the
business with clear understanding of risk appetites
and accountability to operate within these
•
Allocate capital where it will make the highest returns
on a risk adjusted basis
•
Maintain sufficient capital buffer to ensure that AIA
Sri Lanka fulfills its obligation to customers, investors
and regulators
•
Ensure the business has internal readiness in terms
of resources and processes to mitigate the negative
impacts emanating from inadequate or failed internal
processes, people and systems, or from external
events
1.
2.
3.
4.
5.
6.
7.
Three lines of defence
First line ownership of risk management
Governance committee oversight
Risk appetite statements
Risk policies and risk standards
Delegated limits of authority
Risk governance and risk reporting
Annual Report 2013 141
2013…
BU Governance Committee Structure
•Shift away from UK’s
Solvency II based
framework
Financial Risk Policies
Business Risk Policies
LI
Risk Policy
GI
Risk Policy
Liquidity
Capital
Risk Policy Risk Policy
Credit
Risk Policy
Market
Risk Policy
Risk Appetite
DLoA
Risk Management Framework Policy
Operational Risk Policy
Operational
Risk Event
Reporting
Risk Standards
1. Three lines of defence
The three lines of defence model is a structure and framework for risk
management within the organisation that is designed to ensure clear ownership
of roles in risk management. Each outer line of defence ramparts the inner line of
defence, to provide assurance to management that the framework is effective and
is free from material weaknesses.
First line of defence – is line management who are directly involved in the day-to-day
decision making and running of the business. Within the three lines of defence model
the first line is responsible to identify, measure, manage, monitor and report risks
within the business, and especially for their respective functional units.
Second line of defence – comprises the independent Risk Function and independent
Compliance Function. The Risk Function is responsible to review and challenge first
line’s activity and provide “critical friend” support to the first line. The Risk Function
is part of the management team, and maintains a degree of independence from
first line activity in order that the review, challenge and support role of the second
line is made effective. The Compliance Function’s prime responsibility is to ensure
compliance with regulatory and with AIA Group standards pertaining to investments,
sales, market conduct and ethics.
Third line of defence – is the independent internal audit function that provides
independent assurance to the Board of Directors.
2. First line ownership of risk management
The first line ownership in risk management is arguably the most critical
component in a business’ risk management framework as first line functions are
best placed to identify and manage risks.
At AIA Sri Lanka, the responsibility in managing risks pertaining to the business is
assumed by line management or the first line of defence.
Therefore, the first line is entrusted with ownership of and responsibility to
implement risk policies and risk standards, risk appetite statements and running of
the governance committee structure in an effective manner.
First line ownership of risk management is evidenced in the local standard owner’s
governance certificate, and is established via first line’s active participation in the
risk governance and risk reporting processes such as the quarterly risk assessment,
quarterly Financial Risk Committee (FRC), monthly Operational Risk Committee (ORC),
functional key risk registers and weekly operational risk event reporting.
•Incorporate “AIA
Sri Lanka customer
model” within Risk
Function scope
•Align definitions to
AIA Group
2013…
•Second line enhanced
with independent
Compliance Function
•Compliance Function
independently
assesses compliance
regulatory and with
AIA Group standards
2013…
•Maintained risk
frameworks in
transition year
•“first line ownership
of risks” not disrupted
throughout the
transition
142 AIA Insurance Lanka PLC
Risk Management Review
3. Governance committee oversight
The governance committee oversight is an important part of risk governance
within the business as it facilitates management oversight over the various
aspects and functioning of the business operations and exposures.
The governance oversight structure is built on defined governance committees
and these encompass committees at Board of Directors’ level and management
level. Approved and effective Terms of Reference that define the scope and
functioning of the respective committee are available for all committees of the
Company.
The committees meet at regular intervals and the frequency is stipulated
in the respective Terms of Reference. Frequency ranges from quarterly
to weekly depending on the specific oversight requirement, with standard
agendas to support its effectiveness. Details of the Company’s governance
committees are described in the Corporate Governance report on page 92 of
this Annual Report.
4. Risk appetite statements
The risk appetite statements communicate the parameters and boundaries within
which the business unit has opted to operate in relation to the identified risks.
At AIA Sri Lanka, the risk appetite framework has expressed the business
unit’s appetite in terms of capital risk, liquidity risk, credit risk and market
risk. The exposures and management information pertaining to these four
risk aspects are within scope of identified governance committees based on
the required technical expertise to provide oversight and input. Management
information to review and monitor the risks is provided to these governance
committees that convene as per their defined frequency of review.
5. Risk policies and risk standards
Risk policies and risk standards are the foundation for a robust risk
management culture within the organisation as these help raise the level
of awareness of risk management within the business and help maintain
constant focus on key controls. Risk policies and risk standards define the
minimum level of controls that are recommended to ensure that inherent
risks of the function or activity are managed effectively.
At AIA Sri Lanka, risk policies are owned by the Board of Directors and are
delegated to the Chief Executive Officer to implement and operationalise.
Risk standards sit underneath the risk policies to address a component
of activity, action or function that falls within the ambit of the risk policy.
Risk standards are cascaded to Local Standard Owners (LSOs) to own and
implement based on their respective functional responsibility. Therefore
at AIA Sri Lanka, Executive Committee members take ownership for risk
standards in line with their responsibility for that activity, action or function.
2013…
•Risk Management
Committee transformed
to Operational Risk
Committee and Asset
Liability Committee
transformed to
Financial Risk
Committee to align to
AIA group structure
and facilitate focus on
different types of risks
•ToR’s of governance
committees refreshed to
cater to new framework
•Market Conduct
Committee and Anti
Money Laundering
Committee constituted
in line with Compliance
Function requirements
2013…
•Risk appetite
statements refreshed
to suit new risk world,
and in anticipation of
shift to RBC solvency
regime
2013…
•Risk policies and risk
standards refreshed
to suit the new
framework, and to
avoid overlap with
scope of Compliance
Function
Annual Report 2013 143
Risk
Management
Framework
Life
Insurance Risk
Policy
General
Insurance Risk
Policy
Capital Risk
Policy
Liquidity Risk
Policy
Credit Risk
Policy
Market Risk
Policy
RCSA
LI Product
Development &
Pricing
GI Product
Development &
Pricing
Capital
Liquidity
Credit &
Collateral
Market
Financial
Reporting
Regulatory
LI Technical
Provisions
GI Technical
Provisions
Foreign
Exchange
Tax
IT & BP
LI Operations
GI
Operations
Procurement
& Outsourcing
People
External
Auditor
Brand &
Communications
LI In-force &
Customer
Management
Asset Valuation
& Matching
Strategy &
Planning
Investment
Management
Distribution
6. Delegated limits of authority
The delegated limits of authority framework communicate the authority, responsibility and
accountability for business decisions and resources of the Company. This is a key enabler to
a robust governance and internal control environment within the Company.
At AIA Sri Lanka, the business maintains current and effective delegated limits of authority
document that cascades the limits of authority within the Company to an appropriate level
of management and functional oversight.
The delegated authority to the Chief Executive Officer flows through the Terms of Reference
from the Board of Directors and this in turn is delegated in an appropriate manner to the
Executive Committee by the Chief Executive Officer.
7. Risk governance and risk reporting
The risk governance and risk reporting within the Company is crucial to ensure that the
process of risk escalation is both effective and independent.
The primary independent report from the Risk Function is the comprehensive CRO
Report that is prepared and submitted every quarter to the Board Audit and Compliance
Committee. The CRO Report covers all relevant information and details to provide an
independent overview of the key risks of the business and an independent review of
the effectiveness of the business unit’s risk management and reporting processes and
frameworks.
Risk management process
Risk management processes at AIA Sri Lanka are designed to provide insight into risks
emanating from the external environment and from within the organisation so that the Company
is able to act early and decisively to mitigate or manage these risks. These processes are
cascaded across the organisation encompassing all levels of management, and the different
components of the risk framework.
Operational Risk
Policy
Unit Pricing
144 AIA Insurance Lanka PLC
Risk Management Review
CRO Report
EC
Actions List
Every week Operational
Risk Event
Reporting
EC Summary
Report
Every month
- ORC
CRO Report
Functional KRR
Functional KRI’s
LSO Governance
Certificate
KCI Risk
Assessment
BU KRR
[Top 10]
CRO Report
Every other
month
- Functional
Risk Meetings
Every quarter FRC
CRO Report
ORC MI
FRC MI
FRC
Actions List
CRO Report
Every quarter
- Risk
Assessment
Operational risk event reporting
Operational risk event reporting process feeds information pertaining to operational
risk events into the business unit’s decision making process and is elementary in
identifying the Company’s status in terms of controls that prevent operational risk
events and their effectiveness. The robustness of the process lies in the simplicity of
reporting which takes place every week, the outcome of which is reviewed and followed
up by the Risk Function and reported to the Executive Committee.
2013…
•Operational risk event
reporting re-designed
to harmonise with the
classifications and
definitions of AIA group
Monthly Operational Risk Committee meeting
Operational Risk Committee is the primary management level forum dedicated
solely for the review and discussion on the risks faced by the business unit. The ORC
convenes every month, is chaired by the Chief Executive Officer and comprises Executive
Committee members.
The Risk Function coordinates and maintains minutes of the Operational Risk Committee,
with the business unit’s Chief Risk Officer functioning as the secretary to the committee.
The Risk Function compiles the standard defined Operational Risk Committee
management information deck to support an effective review and discussion. The
committee allocates adequate time and focus to monitor progress of actions to mitigate
and manage the key risks of the business unit.
Functional risk assessment and functional
risk review meetings
Functional risk assessment is important to ensure risk management is appropriately
cascaded throughout the business unit by engaging management at all levels to
participate in the risk management framework and processes. This helps raise the
level of risk awareness, risk consciousness and appreciation of the individual’s role in
managing risks of the business.
The risks faced by each function may differ from one function to another, and the
bottom-up functional risk assessment process provides the opportunity to the first line
to identify their operational level risks. The functional risk assessment is implemented
via the functional risk review meetings, which is chaired, convened and coordinated
2013…
•ORC convened on
10 occasions during
the year with active
engagement and
participation by
members
•ORC management
information refreshed
to suit ORC needs and
requirements
2013…
•Two new functional key
risk registers added
given the business
needs
Annual Report 2013 145
by the Executive Committee member responsible for the functional area. This forum takes
ownership for the functional key risk register and the functional key risk indicator tracker.
Quarterly risk assessment
Quarterly risk assessment is a bottom-up risk assessment of the business unit by way of appraising
adherence to minimum controls stipulated in the individual local risk standards, risk reporting
processes, robustness of the control framework and the effectiveness of governance around the
functional areas that fall within scope of each risk standard.
To accomplish the above task, each local standard owner is expected to complete key control
assessments which are designed primarily to test compliance with the standards and other
criteria mentioned earlier, the outcome of which is the risk rating to each of the risk standards.
The assessment, rating and justification is reviewed and challenged by the Risk Function and any
gaps identified are addressed. Actions emanating from the risk assessment are followed up until
closure by the Operational Risk Committee.
2013…
•Quarterly risk
assessment
completed for 2013
•Key control
indicators aligned
to the new risk
policies and risk
standards
In tandem with the risk standards assessment, the first line LSOs complete the sign-off every
quarter of their governance certificate to evidence completion of the risk assessment, adherence
to risk reporting processes and to sign-off on the robustness of the control framework to support
the risk standard.
Based on and supported by the individual LSO risk assessment and governance certificates, the
business unit completes its risk assessment for the business as a whole taking in to consideration
all macro and micro level risks that affect the going concern of the business. The business unit risk
assessment covers an assessment of risk in terms of the strategic plan, risk exposures, key business
projects and business processes.
Quarterly Financial Risk Committee meeting
Whilst the overall task of managing risks rests with the ORC, Financial Risk Committee looks into
specific risks of capital, credit, liquidity and market risks with expertise specifically into those
areas. FRC adopts the risk appetites for capital and liquidity risks and monitors the exposures
against the agreed limits.
Outlook for 2014
2014 will witness the completion in the transition of AIA Sri Lanka’s risk management frameworks
and risk management processes in aligning to AIA Group.
As of the date of this Annual Report, the Company has completed adopting the AIA Group’s Risk
and Control Self-Assessment (RCSA) process to replace the existing quarterly risk standard risk
assessment, and the Governance Committee structure has undergone review and changes with a
view to segregating between “Committees” set up to ensure governance oversight and “Steering
Groups” set-up to oversee efficient execution of projects, processes or business strategies.
Areas of focus over 2014 will encompass financial and insurance risk aspects predominantly and
will lead to strengthening of the FRC’s role and scope in risk management within AIA Sri Lanka.
Focus will also continue on strengthening engagement and interactions with customers to ensure
that Policyholder Reasonable Expectations (PRE) and Treating Customers Fairly (TCF) are better
embedded within the business operations of AIA Sri Lanka.
As regards risk management, challenges in 2014 will be no less than those in 2013. The business sets
itself ambitious targets in expansion and breaking new grounds in insurance which would necessitate
the assistance and support of the “critical friend” within the organisation more than ever. With the
strong risk culture and framework embedded in the business, AIA Sri Lanka is confident that the
challenges would be met and overcome with success.
2013…
•FRC convened on
3 occasions during
the year with active
engagement and
participation by
members
•FRC management
information
refreshed to shift
away from UK’s
Solvency II focus
to RBC Solvency
regime focus
146 AIA Insurance Lanka PLC
Audit & Compliance
Committee Report
This Report provides details of the Audit and Compliance
Committee (the Committee) of AIA Insurance Lanka PLC
and the responsibilities entrusted upon the Committee by
the Board of Directors (the Board) during the year under
consideration.
Objective
The purpose of the Committee is primarily to assist the
Board in discharging its responsibilities for overseeing the
preparation, presentation and the integrity of disclosures
of the Company’s financial statements as a public listed
Company in accordance with the applicable accounting
standards upheld, to overlook the compliance of the
Company in terms of financial reporting requirements
required by any other applicable laws and regulation to
assess the effectiveness of the control environment and
ensuring the objectivity and independence of external and
internal auditors. In addition the Committee is entrusted
with the duties on regulatory compliance related matters
such as monitoring the status of regulatory compliance
of the Company, the effectiveness of compliance
monitoring programs and successful implementation of
new regulatory requirements. Apart from the above, the
Committee also has the responsibility on overview of risk
and governance framework of the Company as well. The
Committee functions according to the Terms of Reference
approved by the Board of Directors.
Composition
The membership of the committee at present is detailed
below.
1. Mr. Heerak Basu – Chairman (Independent NonExecutive Director)
2. Mr. Deepal Sooriyaarachchi – Member (Independent
Non-Executive Director)
3. Ms. Sally Wan – Member (Non-Executive Director)
Mr. Richard Bates functioned as a member of the
Committee until 06 February 2013 and Ms. Sally Wan was
appointed as a member of the Committee in place of Mr.
Richard Bates with effect from 06 February 2013.
Ms. Sally Wan is a member of the Australian Society of
Certified Practicing Accountants. The members of the
Committee who have been drawn from and out of the
non executive Directors serving on the Board possess the
required knowledge and expertise to perform their duties
on the Committee.
Meetings
The Committee held four formal meetings during the year
under review and the Chief Executive Officer and the Chief
Financial Officer attended these meetings as permanent
invitees. The Internal and External Auditors attended
the four meetings. The Committee had private meetings
with Internal and External Auditors without the presence
of any management staff. Other members of the senior
management attended as invitees as and when required.
Apart from the formal meetings there were numerous
communications between the Chairman, Members of the
Committee and Members of the Executive Committee of
the Company.
Functions and Proceedings
The Committee recommends the quarterly financial
statements, annual accounts and connected documents
for approval of the Board as and when due. It focuses on a
fair presentation and disclosure, reasonability of estimates
and judgmental factors and appropriateness of significant
accounting policies adopted in preparation of financial
statements. The Committee also reviews the annual
plans of the Company’s internal audit function and the
Company’s Regulatory Monitoring function.
In addition to the routine functions, the Committee had
actively reviewed the implementation of the new life policy
administration system by the Company during the year
2013. This project was completed in December 2013 and
the Committee received comprehensive updates from the
Management throughout. The Insurance Board of
Sri Lanka (the IBSL) conducted an onsite inspection
during the year 2013 and the Committee having been
provided with regular updates by the management on the
regulatory inspection, closely reviewed the process and
monitored the final outcome of same and made necessary
recommendations to the Board giving due cognizance to
the findings of the audit. Further, the Committee reviewed
the proposals of the Company submitted to the IBSL
in relation to the model to be adopted for fulfillment of
statutory requirement to segregate the Company’s Life and
Non-life insurance businesses.
The Board receives a copy of the minutes of each meeting
of the Committee.
The External Auditors were given adequate access by the
Committee to ensure independence and objectivity. The
Management Letter issued by the External Auditors for the
year 2012 was received by the Committee. The Committee
Annual Report 2013 147
also reviewed the comments and undertakings by the
Management with regards to recommendations made by
External Auditors.
carrying out their duties independently with the support
and facilitation of the management during the period under
consideration.
Internal Control and Compliance
Having duly noted the willingness of the External Auditors
to continue in office, the Committee recommends to the
Board that Messrs. PriceWaterhouseCoopers, Chartered
Accountants be re-appointed as Statutory Auditors of
the Company for the financial year ending 31 December
2013, subject to the approval of the Shareholders at the
forthcoming Annual General Meeting. The Committee
will approve the terms of engagement of the auditors
for 2014 subject to the approval of their re-appointment
by the Shareholders of the company, and necessary
recommendations to be made to the Board as regards for
their remuneration for 2014.
The Committee is satisfied that the internal controls and
procedures in place for assessing and managing risks
are adequately designed and operate effectively and is of
the view that they provide reasonable assurance that the
Company’s assets are safeguarded and that the financial
statements of the Company are reliable.
Reports on all internal audit assurances carried out
during the period were tabled and reviewed by the
Committee. Progress on implementation of internal
audit recommendations were regularly analysed by the
Committee to ensure operating of effective internal control
and enhancement of the overall control environment.
The Committee reviews the Quarterly Regulatory Review
Reports submitted and observes that the Company’s
regulatory compliance framework provides reasonable
assurance that all relevant laws, rules, regulations, code
of ethics and standard of conduct have been followed. In
addition, other assurance reports pertaining to Control
Exceptions, Fraud and Malpractice and Anti-Money
Laundering and other significant matters were tabled
and reviewed by the Committee. The Committee further
appraised the action in place to control any issues
identified in these reports.
The Committee received the quarterly reports from the
Chief Risk Officer which dealt with the key risks faced by
the business in achievement of its objectives and reviewed
the mitigating actions continuously.
Independence of the External
Auditors and their Appointment
During the year under review Messrs.
PriceWaterhouseCoopers, Chartered Accountants
functioned as the Statutory Auditors of the Company.
The Committee had continued communications with the
Auditors.
The Committee is of the view that Messers.
Pricewaterhousecoopers, Chartered Accountants who
are the present External Auditors of the Company do not
have any other relationship with the Company. Its parent
company and its subsidiary other than that of the External
Auditors of the respective entities and they have been
The Committee has conducted its affairs in compliance
with the applicable requirements specified in the Listing
Rules of the Colombo Stock Exchange.
Heerak Basu
Chairman, Audit and Compliance Committee
10 February 2014
148 AIA Insurance Lanka PLC
Remuneration
Committee Report
The Remuneration Committee of AIA Insurance Lanka PLC
is appointed by the Board of Directors from and amongst
the Directors of the Company.
Composition
The Remuneration Committee comprises of three Non
Executive Directors, two of whom are classified as
independent Directors in terms of the requirements of the
Corporate Governance provisions stipulated in the Listing
Rules of the Colombo Stock Exchange.
As at 31 December 2013, the Committee comprised of the
following Directors.
1. Mitchell David New (Non-Executive Director /Chairman
of the Committee)
2. Deepal Sooriyaarachchi (Independent/ Non-Executive
Director/ Committee Member)
3. Heerak Basu (Independent/ Non-Executive Director/
Committee Member
During the year under review Director Mr. Huynh Thanh
Phong also held responsibilities as the Chairman of the
Committee.
Scope and Objectives
The overall Objectives and Functions of the Remuneration
Committee are:
1. to review and to approve the Remuneration Policy of
the Company;
2. to recommend to the Board of Directors, the
remuneration to be paid to the Chief Executive Officer
and fees payable to the Directors, their perquisites and
allowances;
3. to review and to approve the grant of employees’ stock
options (if and when such schemes are applicable)
subject to the necessary approvals including the
approval of the Board of Directors.
Remuneration Policy of the Company
The Remuneration Policy sets out a total reward
framework which allows the Company to align itself with
the best people reward and recognition practices of the
AIA Group and reward superior performance and high
potential in a market competitive manner within the
Company’s capacity to pay. In setting its guidelines, the
policy endeavours to be in line with the local statutory and
regulatory obligations.
Proceedings & Reporting
The Remuneration Committee is empowered to invite the
Chief Executive Officer and Director Human Resources
to its meetings to offer support in its discussions
and considerations and to seek external independent
professional advice on matters within the purview of the
Committee. Neither the Chief Executive Officer nor any
other Directors are involved in the Committee meetings
when determinations are made in relation to own
remunerations of the respective Directors or the Chief
Executive Officer.
The Remuneration Committee meets not less than two
times a year. The Committee reports on its deliberations,
activities, matters reviewed, recommendations and
decisions reached to the Board of Directors of the
Company for advice, approval and or ratification. In 2013,
the Committee held two meetings in order to discharge its
businesses.
Disclosures
The Remuneration Committee makes disclosures in the
Annual Report as required by the Listing Rules of the Stock
Exchange.
Mitchell David New
Chairman, Remuneration Committee
10 February 2014
Annual Report 2013 149
Investment Committee
Report
The Investment Committee of AIA Insurance Lanka PLC is
appointed by the Board of Directors of the Company and
comprises of 03 members. The functions of the Investment
Committee are defined in the Terms of Reference for the
Investment Committee.
Scope and Objectives
The Investment Committee bears oversight responsibility
as regards investments and investment management
by the Company and designs the Investment Policy and
investment governance framework of the Company.
The objectives of the Investment Committee include:
Members
The following members served on the Investment
Committee during the year.
Period
Member
Shah Rouf (Chairman from
5 December 2012)
• Monitor investment performance and recommend
appropriate investment strategies
To
05 December 2012
To date
Gavin D’ Rosairo (Chairman
from 14 August 2012 to 4
December 2012)
Benjamin Deng
• Define framework and set policy guidelines for the
management of investment portfolios
From
14 August 2012
To date
05 December 2012
To date
05 May 2011
To date
Zarah Juriansz (Secretary
from 5 May 2011)
Meetings and Attendance
• Ensure that the portfolios are managed to achieve their
investment objectives whilst adhering to the regulatory
requirements
The Investment Committee meets at least 4 times during
the year and the Chief Financial Officer, Chief Actuary and
the Fund Manager attends the meeting on invitation by the
Committee.
• Design and review the Company’s investment policy
and place same before the Board of Directors for
approval
The Investment Committee convened on 04 occasions
during 2013 and given below is the members’ attendance
at the meetings.
• Implement the investment policy as approved by the
Board of Directors
Attendance
• Apprise the Board of Directors periodically on the
Committee’s activities
• Liaise with the Insurance Regulator in connection with
regulations pertaining to investments and provide
information to help define the framework of investment
management of insurance portfolios
The Committee has the authority to seek external
professional advice on matters falling within the purview of
the Committee and is also authorised to invite professional
advisers or others with relevant experience to assist it in
its duties.
Member
Shah Rouf
Gavin D’Rosairo
Benjamin Deng
06-Feb
2013
07-May
2013
06-Aug
2013
07-Nov
2013
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
Reporting
The Investment Committee reports at every meeting of the
Board of Directors of the Company on its deliberations,
activities, matters reviewed, recommendations made and
decisions reached.
Shah Rouf
Chairman, Investment Committee
07 February 2014
150 AIA Insurance Lanka PLC
Actuary’s Report
Life Insurance
Annual Report 2013 151
Actuary’s Report
Non-life Insurance
22nd January 2014
To the shareholders of AIA Insurance Lanka PLC
Actuarial invesgaon of AIA Insurance Lanka PLC's Policy Liabilies as at 31 December 2013
In accordance with the engagement leer dated 28 October 2013, NMG Financial Services
Consulting (“NMG”, “we”, “us”) has conducted an investigation into the valuation of the general
insurance Policy Liabilities as required under paragraph 3 of the Solvency Margin (General Insurance)
Rules 2004, and confirms that the valuation is in accordance with the requirements stipulated in the
Insurance Regulations. We have examined the actuarial assumptions used in determining the loss
reserves for AIA Insurance Lanka PLC (AIA). We have based our analysis on both gross and net of
reinsurance bases in Sri Lanka Rupee currency.
We have also been asked by AIA to calculate a level of prudential margin for the Claim Liabilities.
There are no established requirements in Sri Lanka to calculate these items as at 31 December 2013.
However, AIA guidelines dictate that the margin, together with the Central Estimate of Claim
Liabilities, should produce a 75% probability of adequacy of the Claim Liabilities and we have
estimated the margin as such. This is also in line with the incoming RBC requirements in Sri Lanka.
In our opinion, the policy liabilities as at 31 December 2013 based on the data provided by AIA:
are computed in accordance with generally accepted loss reserving standards and principles;
and
make a reasonable provision for all unpaid insurance losses and external claim management
expenses of the Company. In particular, we have assumed that Unallocated Loss Adjustment
Expenses (“ULAE”) represent 5% of the net Central Estimate of the Claim Liability. In making
these assumptions, we have assumed that the Company would continue as a going concern
over this period.
We have calculated the Unexpired Risk Reserve at both the Central Esžmate and at the 75%
probability of adequacy. The 75% Unexpired Risk Reserve on a net of reinsurance basis is less than
the net Unearned Premium Reserve amount. Therefore the Company is holding the Unearned
Premium Reserve as the Premium Liability as at 31 December 2013.
We have not been advised, at this stage, of AIA's reinsurance arrangements as of 1 January 2014
onwards. Our calculation of the Premium Liability assumes that a similar programme will be
adopted with high quality reinsurers, and we therefore have not considered the non-recoverability
from reinsurers.
Yours sincerely,
Mahew Maguire
Partner, NMG Consulng
T: +65 6325 9855 E: [email protected]
www.NMG-Group.com
65 Chulia Street #37-07/08, OCBC Centre, Singapore 049513
152 AIA Insurance Lanka PLC
Statement of Solvency
The statement of solvency for Non-life insurance and Life insurance has been prepared in accordance with the solvency
margin (General insurance) rules - 2004 and solvency margin (Long Term Insurance) rules - 2002 as amended from 1 April
2011 and is in line with the formats stipulated by the Insurance Board of Sri Lanka. Accordingly Government securities have
been marked to market.
Life*
As at 31 December
2013
LKR Mn
2012
LKR Mn
1. Value of Admissible Assets 28,970 26,445
2. Value of liabilities
2.1 Policy liabilities
23,645 22,400
2.2 Other liabilities
1,903 1,215
3. ASM (Value of Admissible Assets minus amount of liabilities)
3,422 2,831
4. Factor
5%5%
5. RSM (Required Solvency Margin) 1,182 1,120
6. Solvency Ratio (ASM/RSM)
2.89 2.53
* Includes conventional, non-unit and guaranteed unit-fund.
Non-life
As at 31 December
1. 2. 3. 4. 5. Value of Admissible Assets Amount of Total Liabilities
(i) Technical Reserves (Gross minus reinsurance) (ii) Other Liabilities Available Solvency Margin (Line 01 minus Line 02) Required Solvency Margin Solvency Ratio (Line 03 divided by Line 04)
2013
LKR Mn
2012
LKR Mn
4,019 3,547
1,702 729 1,588 396 4.01 1,516
667
1,364
361
3.78
Annual Report 2013 153
Statement of Approved Assets
Determined as per section 25(1) of regulation of Insurance Industry Act of No 43 of 2000 and the determination made by the
Insurance Board of Sri Lanka in terms of the said Act as amended in March and October 2011, stipulates that Government
Securities be marked to market. Accordingly the requirements as per the amendments made to the Act have been complied
with.
Life*
As at 31 December
1. 2. 3. 4. 5. Approved Assets maintained in Long Term Insurance Business
Long Term insurance fund
Excess in Approved Assets over Long Term Insurance fund
Approved Assets as a % of Long Term Insurance fund
Ratio Required
* Includes conventional, non-unit and guaranteed unit-fund.
Non-life
As at 31 December
2013
LKR Mn
2012
LKR Mn
28,970 26,428 2,542 109.6%
100%
26,445
24,345
2,101
108.6%
100%
2013
LKR Mn
2012
LKR Mn
3,625 1,702 1,923 213.0%
100%
3,183
1,516
1,668
210.0%
100%
1. 2. 3. 4. 5. Approved Assets maintained in General Insurance Business
Technical Reserve (Gross minus reinsurance)
Excess in Approved Assets over Technical Reserve Approved Assets as a % of Technical Reserve
Ratio Required
Note: The Statement of Solvency and Approved Assets have been certified by the External Auditors of the Company.
Real life.
Real relationships.
The catch is taken and the batsman must
change! Life is full of ups and downs and we’ll
be there for you through all of it.
Because we build real relationships for real life.
156 AIA Insurance Lanka PLC
Financial Calendar
Interim Results for 2013
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Audited Financial Statements
2012
2013
Dividends
2012 - First and Final Dividend
2013 - First and Final Dividend
Annual General Meetings
2012, 27th AGM
2013, 28th AGM
07 May 2013
12 August 2013
11 November 2013
10 February 2014
06 February 2013
10 February 2014
27 March 2013
27 March 2014
27 March 2013
27 March 2014
Annual Report 2013 157
Chief Executive Officer’s and Chief Financial Officer’s
Responsibility
The financial statements are prepared in accordance with
Sri Lanka Accounting Standards (SLFRS & LKAS) and the
requirements of the Companies Act No. 7 of 2007 and
Regulation of Insurance Industry Act No 43 of 2000 (as
amended). They have been prepared under the historical
cost convention, as modified by the revaluation of land and
buildings, available-for-sale financial assets, and financial
assets and financial liabilities at fair value through profit
or loss.
The Accounting Policies used in the preparation of the
financial statements are appropriate and have been
consistently applied during the year under review except
for the change in accounting policy on defined benefit
obligations as described in note 3.1.a in the financial
statements on page 168.
The Board of Directors and the management of the
Company accept responsibility for the integrity and
objectivity of these financial statements to the best of our
knowledge.
Material estimates and judgments of complexity have been
made on a prudent and reasonable basis and have been
discussed with and approved by the Audit and Compliance
Committee and discussed with the External Auditors of the
Company in preparation and presentation of the financial
statements in order to reflect a true and fair view.
The form and substance of transactions, reasonably
represent the Company’s state of affairs. To ensure this,
the Company has taken proper and sufficient care in
maintaining systems and designing and ensuring the
effectiveness of key controls as specified in AIA Finance
Controls Self Assessment together with all other internal
controls and maintenance of accounting records, for
safeguarding the assets and for preventing and detecting
frauds as well as other irregularities, which are reviewed,
evaluated and updated on an ongoing basis. The Internal
Auditors have conducted periodic audits to provide
reasonable assurance that the established policies and
procedures of the Company were consistently followed.
However, there are inherent limitations that should be
recognised in weighing the assurances provided by any
system, processes and internal controls and accounting.
The financial statements were audited by M/s
PricewaterhouseCoopers Chartered Accountants, the
External Auditors of the Company. The audit opinion issued
by the External Auditors is provided on page 159.
The Audit and Compliance Committee of the Company
meets periodically with the Internal Auditors and External
Auditors to review the manner in which the auditors carry
out their responsibilities in performing their duties and
to discuss audit findings, and any deficiencies in internal
controls that may impact the accuracy and completeness
of the financial reporting process.
The Audit and Compliance Committee has reviewed and
recommended the scope and fees of audit and non audit
services, provided by the External Auditors for approval of
the Board of Directors to ensure that the provision of such
services do not impair the auditor’s independence and
objectivity.
To ensure independence, the independent auditors and the
internal auditors have full and free access to the members
of the Audit and Compliance Committee to discuss any
matter of substance.
Shah Rouf
Chief Executive Officer
Indika Prematunga
Chief Financial Officer
10 February 2014
158 AIA Insurance Lanka PLC
Directors’ Statement of Responsibility on Financial Reporting
The Directors are responsible for the preparation of the
consolidated financial statements of the Company and of its
subsidiary in accordance with applicable laws and regulations.
These responsibilities differ from the responsibilities of the
External Auditors, which are set out in their Report on page
159 of this Annual Report.
The Directors have also taken reasonable steps to establish
and maintain appropriate systems of internal controls to
safeguard the assets of the Group and to prevent and detect
frauds and other irregularities. They have also ensured that
proper records are maintained and that the information
generated is reliable.
In preparing these financial statements the Directors are
required to:
The Directors are responsible for providing the External
Auditors with every opportunity to undertake whatever
inspections they consider appropriate to enable them to form
their opinion on the consolidated financial statements.
• select appropriate accounting policies and bases and
apply them consistently subject to any material departures
being disclosed and explained;
• make judgments and estimates that are reasonable and
prudent;
• ensure financial statements have been prepared in
accordance with applicable accounting standards; and
• adopt the going concern basis in preparing the financial
statements.
The Companies Act No. 07 of 2007 (the Act) requires the
Directors to prepare financial statements of the Company and
of its subsidiary complying with the requirements of the Act
for each financial year comprising of:
• an Income Statement (Statement of Comprehensive
Income), which presents a true and fair view of the income
and expenditure of the Company and of its subsidiary for
the financial year under review;
• a Balance Sheet (Statement of Financial Position), which
represents a true and fair view of the state of affairs of
the Company and of its subsidiary as at the end of the
financial year under review.
The financial statements of the Group are prepared in
conformity with the requirements of the Sri Lanka Financial
Reporting Standards (SLFRS / LKAS), the Companies Act No.
7 of 2007, to the extent applicable the Regulation of Insurance
Industry Act No. 43 of 2000 (as amended) and the Listing Rules
of the Colombo Stock Exchange.
The Directors are satisfied that all statutory and regulatory
payments in relation to all relevant statutory and regulatory
authorities which were due and payable by the Company and
its subsidiary as at the Balance Sheet date, have been paid or
where relevant, provided for.
The Directors confirm to the best of their knowledge and
belief that:
1. the consolidated financial statements of the Company
and its subsidiary which are prepared in accordance with
SLFRS / LKAS and other applicable rules and regulations
and recommended best practices, give a true and fair view
of the state of affairs as at 31 December 2013 and the
profits and cash flows for the financial year then ended.
2. all financial and non–financial requirements stipulated
under the Companies Act No. 7 of 2007 pertaining to
Directors’ duties and responsibilities have been complied
with wherever applicable; and
3. the segment headed “Management Discussion and
Analysis” included in this Annual Report presents a fair
review of the progress and performance of the business
and the financial standing of the Company and its
subsidiary.
By Order of the Board
The Directors, having reviewed the business plan for Life and
Non life Insurance businesses for the period 2014-2016, are of
the considered view that the Company and its subsidiary have
adequate resources to continue in operation.
The Directors agree with the Long Term Conventional and
Unit-linked insurance business provisions for the Company
as proposed and recommended by the Chief Actuary following
his annual investigation of the Life insurance business.
The actuarial valuation takes into account all liabilities
including contingent liabilities and is based on assumptions
recommended by the Chief Actuary.
Chathuri Munaweera
Company Secretary
Colombo
10 February 2014
Annual Report 2013 159
Independent Auditor’s Report
To the shareholders of AIA Insurance
Lanka PLC
Report on the financial statements
We have audited the accompanying financial statements of
AIA Insurance Lanka PLC (“Company”), the consolidated
financial statements of the Company and its subsidiary
which comprise the statements of financial position as at
31 December 2013 and the statements of comprehensive
income, changes in equity and cash flows for the year then
ended, and a summary of significant accounting policies
and other explanatory information.
Management’s Responsibility for the
Financial Statements
Management is responsible for the preparation and fair
presentation of these financial statements in accordance
with Sri Lanka Accounting Standards. This responsibility
includes: designing, implementing and maintaining
internal control relevant to the preparation and fair
presentation of financial statements that are free from
material misstatement, whether due to fraud or error;
selecting and applying appropriate accounting policies; and
making accounting estimates that are reasonable in the
circumstances.
Scope of Audit and Basis of Opinion
Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted
our audit in accordance with Sri Lanka Auditing Standards.
Those standards require that we plan and perform the
audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the
accounting policies used and significant estimates made
by management, as well as evaluating the overall financial
statement presentation.
We have obtained all the information and explanations
which to the best of our knowledge and belief were
necessary for the purposes of our audit. We therefore
believe that our audit provides a reasonable basis for our
opinion.
Opinion
In our opinion, so far as appears from our examination, the
Company maintained proper accounting records for the
year ended 31 December 2013 and the financial statements
give a true and fair view of the Company’s state of affairs as
at 31 December 2013 and its profit and cash flows for the
year then ended in accordance with Sri Lanka Accounting
Standards.
In our opinion, the consolidated financial statements give a
true and fair view of the state of affairs as at 31 December
2013 and the profit and cash flows for the year then ended,
in accordance with Sri Lanka Accounting Standards, of the
Company and its subsidiary dealt with thereby, so far as
concerns the shareholders of the Company.
Report on other legal and regulatory
requirements
These financial statements also comply with the
requirements of Section 151 (2) and Sections 153 (2) to 153
(7) of the Companies Act, No. 7 of 2007.
The accounting records of AIA Insurance Lanka PLC have
also been maintained by the management in the manner
required by the rules made by the Insurance Board of
Sri Lanka established under the Regulation of Insurance
Industry Act, No. 43 of 2000 so as to clearly indicate the
true and fair view of the financial position of the insurer.
Chartered Accountants
Colombo
10 February 2014
160 AIA Insurance Lanka PLC
Statement of Financial Position
Group
As at 31 December
2013
2012
Note
LKR’000
LKR’000
2013
LKR’000
Company
2012
LKR’000­­­
Assets
Financial assets
7
36,426,146 34,313,626 36,426,146 34,313,626
Trade and other receivables
8
2,583,929 2,501,741 2,583,844 2,501,545
Reinsurance assets
9, 17
1,104,650 852,306 1,104,650 852,306
Investment in subsidiary
10
- - 1,000 1,000
Investment in associate
11
63,814 63,277 19,384 19,384
Property, plant and equipment
12
303,473 203,439 303,473 203,439
Intangible assets
13
754,328 402,105 754,328 402,105
Other fund assets
14
181,806 188,826 181,806 188,826
Other assets
15
1,989,940 1,783,880 1,989,695 1,783,848
Cash and cash equivalents
16
797,306 683,910 793,810 680,549
Total assets
44,205,392 40,993,110 44,158,136 40,946,628
Liabilities
Insurance liabilities
17
36,568,193 34,342,829 36,568,193 34,342,829
Retirement benefit obligations
18
214,627 249,732 214,627 249,732
Deferred tax liability
19
104,068 4,950 104,068 4,950
Other fund liabilities
20
181,806 188,826 181,806 188,826
Trade and other payables
21
970,910 810,285 970,910 810,355
Provisions
22
1,258,996 820,589 1,258,561 820,358
Current income tax liabilities
23
185,512
435,413 185,574
435,183
Deferred revenue
24
80,493 74,508 80,493 74,508
Bank overdraft
16
55,454 2,425 55,454 2,425
Total liabilities
39,620,059 36,929,557 39,619,686 36,929,166
Equity
Stated capital
25
300,000 300,000 300,000 300,000
Capital reserves
26
72,096 72,096 72,096 72,096
Revenue reserves
27
4,213,237 3,691,457 4,166,354 3,645,366
Total equity
4,585,333 4,063,553 4,538,450 4,017,462
Total equity and liabilities
44,205,392
40,993,110 44,158,136 40,946,628
The notes on the pages 168 to 219 are an integral part of these financial statements.
I certify that the financial statements have been prepared in compliance with the requirements of the Companies Act No 7 of 2007.
Indika Prematunga
Chief Financial Officer
The financial statements on page 160 to 219 were authorised for issue by the Board of Directors on 10 February 2014 and were
signed on its behalf.
Mitchell David New Heerak Basu
Director
Director
Annual Report 2013 161
Income Statement
GroupCompany
For the financial year ended 31 December
2013
2012
2013
2012
Note
LKR’000LKR’000LKR’000LKR’000
Restated
Restated­­­
Insurance premium revenue
28
9,122,132 8,990,899 9,122,132 8,990,899
Reinsurance premium ceded 29
(928,372)
(746,742)
(928,372)
(746,742)
Net earned premium 8,193,760 8,244,157 8,193,760 8,244,157
Asset management fees and related income
370 1,675 - Investment income
30
4,406,163 4,026,090 4,407,981 4,027,595
Other income
31
393,295 357,812 392,963 357,456
Total revenue
12,993,588 12,629,734 12,994,704 12,629,208
Net benefits and claims
32
(6,750,179)
(4,183,654)
(6,750,179) (4,183,654)
Transfer to the Long Term insurance fund
(753,963)
(3,672,697)
(753,963) (3,672,697)
Net acquisition expenses
33
(832,127)
(895,426)
(832,127)
(895,426)
Operating and administrative expenses
34
(3,836,333)
(2,682,251)
(3,835,940) (2,681,787)
Share of profit from associate
2,395 8,358 - Profit before tax
35
823,381 1,204,064 822,495 1,195,644
Tax expenses
36
(324,088)
(356,157)
(323,994)
(355,429)
Net profit for the year
499,293 847,907 498,501 840,215
Attributable to;
- Owners of the parent
499,293 847,907 498,501 840,215
- Non controlling interest
- - - Net profit for the year
499,293 847,907 498,501 840,215
Basic earnings per share (in LKR)
37
16.64 28.26 16.62 28.01
Dividend per share (in LKR)
38
2.50 9.00 2.50 9.00
The notes on the pages 168 to 219 are an integral part of these financial statements.
162 AIA Insurance Lanka PLC
Statement of Comprehensive Income
GroupCompany
For the financial year ended 31 December
2013
2012
2013
2012
Note
LKR’000
LKR’000
LKR’000
LKR’000­­­
RestatedRestated
Profit for the year
499,293 847,907 498,501 840,215
Other comprehensive income
Changes in fair value of available for sale financial assets
846,115 (767,686)
846,115
(767,686)
Transfer to Long Term insurance fund
(802,854)
703,193 (802,854)
703,193
Remeasurement of retirement benefit obligations
54,226 (67,459)
54,226
(67,459)
Revaluation of land
12
- 32,180 - 32,180
Total other comprehensive income for the year net of tax
97,487 (99,772)
97,487
(99,772)
Total comprehensive income for the year
596,780 748,135 595,988 740,443
Attributable to;
- Owners of the parent
596,780 748,135 595,988 740,443
- Non controlling interest
- - - Total comprehensive income for the year net of tax
596,780 748,135 595,988 740,443
Items disclosed in the statement above are disclosed net of tax.
The notes on the pages 168 to 219 are an integral part of these financial statements.
Annual Report 2013 163
Statement of Changes in Equity - Group
Capital reserve Revenue reserves
Stated Revaluation
Resilience
Available Retained Total
capital
reserve
reserve
for sale
earnings
equity
Note
LKR’000LKR’000LKR’000LKR’000LKR’000LKR’000­­­
Balance as at 1 January 2012
Net profit for the period
Other comprehensive income
Changes in fair value of available
for sale financial assets
Changes in fair value of available
for sale financial assets transferred
to the Long Term insurance fund Remeasurement of retirement
benefit obligations
Revaluation of land
12
300,000 - 39,916 - 289,000 - 36,734 - 2,919,768 847,907 3,585,418
847,907
- - - (767,686)
- (767,686)
- - - 703,193 - 703,193
- -
- 32,180 - -
-
-
(67,459)
-
(67,459)
32,180
Transactions with owners:
Final dividend paid for 2011
38
- - - - (270,000)
(270,000)
Balance as at 31 December 2012 - restated 300,000 72,096 289,000 (27,759)
3,430,216 4,063,553
Net profit for the period
Other comprehensive income
Changes in fair value of available
for sale financial assets
Changes in fair value of available
for sale financial assets transferred
to the Long Term insurance fund
Remeasurement of retirement
benefit obligations
Transactions with owners:
Final dividend paid for 2012
38
Balance as at 31 December 2013
- - - - 499,293 499,293
- - - 846,115 - 846,115
- - - (802,854)
- (802,854)
- - - - 54,226 54,226
- 300,000 - 72,096 - 289,000 - 15,502 (75,000)
3,908,735 (75,000)
4,585,333
The group equity is fully attributable to the owners of the parent and hence non controlling interest is not applicable in the
consolidated Statement of Changes in Equity.
The notes on the pages 168 to 219 are an integral part of these financial statements.
164 AIA Insurance Lanka PLC
Statement of Changes in Equity- Company
Capital reserve Revenue reserves
Stated Revaluation
Resilience
Available Retained Total
capital
reserve
reserve
for sale
earnings
equity
Note
LKR’000LKR’000LKR’000LKR’000LKR’000LKR’000­­­
Balance as at 1 January 2012
Net profit for the period
Other comprehensive income
Changes in fair value of available
for sale financial assets
Changes in fair value of available
for sale financial assets transferred
to the Long Term insurance fund
Remeasurement of retirement
benefit obligations
Revaluation of land
12
Transactions with owners:
Final dividend paid for 2011
38
Balance as at 31 December 2012 - restated
Net profit for the period
Other comprehensive income
Changes in fair value of available
for sale financial assets
Changes in fair value of available
for sale financial assets transferred
to the Long Term insurance fund
Remeasurement of retirement
benefit obligations
Transactions with owners:
Final dividend paid for 2012
38
Balance as at 31 December 2013
300,000 - 39,916 - 289,000 - - - - - - - - -
- 32,180 - -
- -
(67,459)
-
(67,459)
32,180
- 300,000 - 72,096 - 289,000 - (27,759)
(270,000)
3,384,125 (270,000)
4,017,462
- - - - 498,501 498,501
- - - 846,115 - 846,115
- - - (802,854)
-
(802,854)
-
-
-
- 54,226 54,226
- 15,502 (75,000)
3,861,852 (75,000)
4,538,450
- 300,000 - 72,096 - 289,000 The notes on the pages 168 to 219 are an integral part of these financial statements.
36,734 - 2,881,369 840,215 3,547,019
840,215
(767,686)
-
(767,686)
703,193 - 703,193
Annual Report 2013 165
Statement of Cash Flows
GroupCompany
For the financial year ended 31 December
2013
LKR’000
2012
LKR’000
Cash flows from operating activities
Premiums / fees received from customers
Reinsurance premium (net of commission) paid
Benefits and claims paid
Reinsurance receipts in respect of claims and benefits
Cash paid to and on behalf of employees
Interest received
Payments to agents
Brand change expenses
Other operating cash payments
Cash flow from operating activities Taxes paid
23
Policy loans granted
Policy loan repayments
Net cash flow (used in) / from operating activities
9,643,479 (586,762)
(6,945,611)
224,614 (1,340,994)
264,565 (1,055,497)
(174,250)
(1,864,861)
(1,835,317)
(310)
(591,724)
541,365 (1,885,986)
9,226,364 (580,306)
(4,420,942)
148,452 (868,085)
205,479 (988,459)
- (1,818,068)
904,435 (12,936)
(763,045)
564,372 692,826 Cash flows from investing activities
Purchase of liquid investments
Purchase of other investments
Proceeds from sale of liquid investments
Proceeds from sale of other investments
Investment expenses
Interest received
Dividend received
Purchase of intangible assets
13
Purchase of property, plant and equipment
12
Proceeds from sale of property, plant and equipment
Net cash flow from / (used in) investing activities
(1,870,095)
(54,834,692)
2,691,877 53,066,738 (104,516)
3,437,270 137,307 (327,208)
(176,623)
1,295 2,021,353 (1,448,480)
(27,926,783)
2,009,985 24,837,091 (110,769)
2,610,558 100,710 (288,336)
(36,196)
7,661 (244,559)
38
(75,000)
(270,000)
(75,000)
(270,000)
Net cash flow (used in) financing activities
Increase in cash and cash equivalents Cash and cash equivalents and bank overdrafts
at beginning of the year
16
(75,000)
60,367 (270,000)
178,267 (75,000)
60,232 (270,000)
177,280
681,485 503,218 678,124 500,844
Cash and cash equivalents and bank overdrafts
at the end of the year
741,852 681,485 738,356 678,124
Note
Cash flows from financing activities
Final dividend paid for the previous year
16
The notes on the pages 168 to 219 are an integral part of these financial statements.
2013
LKR’000
2012
LKR’000­­­
9,643,001 9,224,857
(586,762)
(580,306)
(6,945,611) (4,420,942)
224,614 148,452
(1,340,994)
(867,713)
264,233 205,139
(1,055,497)
(988,459)
(174,250)
(1,864,496) (1,817,610)
(1,835,762)
903,418
- (12,890)
(591,724)
(763,045)
541,365 564,372
(1,886,121)
691,855
(1,870,095) (1,448,480)
(54,834,692) (27,926,783)
2,691,877 2,009,985
53,066,738 24,837,091
(104,516)
(110,769)
3,437,270 2,610,558
137,307 100,710
(327,208)
(288,336)
(176,623)
(36,196)
1,295
7,645
2,021,353 (244,575)
166 AIA Insurance Lanka PLC
Long Term Insurance
Statement of Financial Position - Supplemental
As at 31 December
Assets
Financial assets
Available for sale
Investments in debt securities
Loans and receivables
Investments in debt securities
Fair value through profit or loss
Investments in equity securities
Trade and other receivables
Reinsurance assets
Investments in associate
Other assets
Cash & cash equivalents
Total assets
2013
LKR ‘000
2012
LKR ‘000­­­
13,050,679 15,236,430
14,839,401 11,233,006
3,569,011 3,039,186
1,775,296 1,805,752
89,239 98,378
6,171 6,171
1,591,117 1,284,375
521,517 547,711
35,442,431 33,251,009
Liabilities
Insurance liabilities
33,812,294 32,017,218
Deferred tax liability
124,756 Trade and other payables
690,265 502,028
Provisions 681,010449,460
Current income tax liability
76,320 281,098
Deferred revenue
6,298 Bank overdraft
51,488 1,205
Total liabilities
35,442,431 33,251,009
Annual Report 2013 167
Insurance Revenue Accounts
For the financial year ended 31 December
2013
2012
LKR ‘000
LKR ‘000
Restated
Non-life insurance
Gross written premium 2,673,009 2,400,300
Net earned premium (net of premium ceded to reinsurers)
Net benefits and claims Net acquisition expenses Operating and administrative expenses excluding non technical expenses
Other technical income
Net underwriting result
1,880,651 (1,097,830)
(16,131)
(829,977)
2,152 (61,135)
1,967,791
(1,020,360)
(137,875)
(729,454)
40,411
120,513
Investment income and other income excluding other technical income
Non technical expenses
Profit before tax
635,437 (288,272)
286,030 586,636
(26,655)
680,494
Key ratios - Non-life insurance
Net loss ratio
Net expense ratio
Net combined ratio
58.4%
44.9%
103.3%
51.9%
45.5%
97.4%
6,863,047 6,495,863
Net earned premium (net of premium ceded to reinsurers)
Investment income and other income
Net benefits and claims Transfer to Long Term insurance fund
Net acquisition expenses Operating and administrative expenses
Tax expenses
Surplus transfer to shareholders’ fund 6,313,109 4,163,355 (5,652,349)
(753,963)
(815,996)
(2,717,691)
(336,465)
200,000 6,276,366
3,758,004
(3,163,294)
(3,672,697)
(757,551)
(1,925,678)
(320,150)
195,000
Long Term insurance business
Gross written premium
168 AIA Insurance Lanka PLC
Notes to the Consolidated
Financial Statements and Significant Accounting Policies
1.
General information
AIA Insurance Lanka PLC (the Company) was
incorporated as a company with limited liability in Sri
Lanka on 12 December 1986 under the Companies
Act No. 17 of 1982 and re- registered under the
Companies Act No. 07 of 2007 which came to effect
from 3 May 2007. The address of its registered office is
No.75, Kumaran Ratnam Road, Colombo 02, Sri Lanka
under the Company registration number PQ 18.
These policies have been consistently applied to
all periods presented, except for the change in
accounting policy on defined benefit obligations
(note 3.1.(a)).
3.1
(a) Amended standards adopted by the Group
The Company is listed on the Main Board of the
Colombo Stock Exchange under the stock code
“CTCE N000”.
The Company’s parent entity is AIA Holdings
Lanka (Private) Limited. and the ultimate parent
entity is AIA Group Limited, incorporated in Hong
Kong, persuant to the acquisition effective from 05
December 2012.
AIA Insurance Lanka PLC Group (‘the Company’
and its subsidiaries together forming ‘the Group’)
underwrite Life and Non-life insurance risks
associated with death, disability, health, property and
liability. The Group also provides the services in the
capacity of a trustee for various funds.
Group consolidated financial statements for the year
ending 31 December 2013 have been authorised for
issue by the Board of Directors on 10th February 2014.
Changes in accounting policies
LKAS 19, ‘Employee benefits‘ was revised with
effect from 01 January 2013. Accordingly, the
changes on Group’s accounting policies have
been as follows;
To recognise actuarial gains and losses
from experience adjustments and changes
in actuarial assumptions in the other
comprehensive income in the period in which
such gains / losses arise. Prior to the change in
Accounting policy, the experience adjustments
and changes in actuarial assumptions were
charged/credited to the Income Statement.
The revised accounting policy is stated in
note 3.12 on page 176 and the changes have
been made effective on retrospective basis in
accordance with LKAS 8, ‘Accounting policies,
changes in accounting estimates and errors’.
Impact of change in accounting policy on the
financial statements are as follows.
Group
2.
Basis of preparation
Amounts in LKR ‘000
The consolidated financial statements of the Group
have been prepared in accordance with Sri Lanka
Accounting Standards (SLFRS/ LKAS) effective
after 01 January 2012 as issued by the Institute of
Chartered Accountants of Sri Lanka (ICASL).
Profit after tax- prior
to the change
Remeasurement of
retirement benefit
obligations
Profit after tax- after
the change
The consolidated financial statements have been
prepared under the historical cost convention, as
modified by the revaluation of land and buildings,
available for sale financial assets, and financial
assets and financial liabilities at fair value through
profit or loss.
The consolidated financial statements are
presented in Sri Lankan Rupees (LKR) and all
values are rounded to the nearest thousand (LKR
000), except where otherwise indicated.
3.
Summary of significant accounting policies
The significant accounting policies applied by
the Group in preparing its consolidated financial
statements are depicted in notes 3.2 to 4.3.
2013
2012
Company
2013
2012
553,519
780,448
552,727
772,756
(54,226)
67,459
(54,226)
67,459
499,293
847,907
498,501
840,215
(b) New standards and interpretations issued but
not yet effective and not adopted
SLFRS 9, ‘Financial instruments’, addresses the
classification, measurement and recognition of financial
assets and financial liabilities. SLFRS 9 requires
financial assets to be classified into two measurement
categories, those measured at fair value and those
measured at amortised cost. The determination
is made at initial recognition. The classification
depends on the entity’s business model for managing
its financial instruments and the contractual cash
flow characteristics of the instrument. For financial
liabilities, the standard retains most of the LKAS 39
requirements. The main change is that, in cases where
Annual Report 2013 169
the fair value option is taken for financial liabilities, the
part of a fair value change due to an entity’s own credit
risk is recorded in Statement of Other Comprehensive
Income rather than the Income Statement, unless this
creates an accounting mismatch. The Group is yet
to assess SLFRS 9’s full impact and intends to adopt
SLFRS 9 no later than the accounting period beginning
on or after 01 January 2015.
3.2.2Associates
SLFRS 10, ‘Consolidated financial statements’ builds
on existing principles by identifying the concept of
control as the determining factor in whether an
entity should be included within the consolidated
financial statements of the parent company. The
standard provides additional guidance to assist in
the determination of control where this is difficult
to assess. The Group is yet to assess SLFRS 10’s
full impact and intends to adopt SLFRS 10 no later
than the accounting period beginning on or after 01
January 2014.
Associates are all entities over which the Group
has significant influence but not control, generally
accompanying a shareholding of between 20%
and 50% of the voting rights. Investments in
associates are accounted for using the equity
method of accounting. Under the equity method,
the investment is initially recognised at cost, and
the carrying amount is increased or decreased to
recognise the Group’s share of the profit or loss
of the investee after the date of acquisition. The
Group’s investment in associates includes goodwill
identified on acquisition.
SLFRS 12, ‘Disclosures of interests in other entities’
includes the disclosure requirements for all
forms of interests in other entities, including joint
arrangements, associates, special purpose vehicles
and other off balance sheet vehicles. The Group is
yet to assess SLFRS 12’s full impact and intends to
adopt SLFRS 12 no later than the accounting period
beginning on or after 01 January 2014.
The Group determines at each reporting date
whether there is any objective evidence that the
investment in the associate is impaired. If this
is the case, the Group calculates the amount
of impairment as the difference between the
recoverable amount of the associate and its
carrying value and recognises the amount adjacent
to share of profit from associate’ in the Income
Statement.
Profits and losses resulting from upstream and
downstream transactions between the Group and
its associate are recognised in the Group’s financial
statements only to the extent of unrelated investor’s
interests in the associates. Unrealised losses
are eliminated unless the transaction provides
evidence of an impairment of the asset transferred.
Accounting policies of associates have been
changed where necessary to ensure consistency
with the policies adopted by the Group.
3.3
Foreign currency translation
The Group’s consolidated financial statements are
presented in Sri Lankan Rupees (LKR) which is
also the Company’s functional currency. That is the
currency of the primary economic environment in
which the Group operates.
Transactions in foreign currencies are initially
recorded at the functional currency rate prevailing
at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies
are retranslated at the functional currency rate
of exchange ruling at the Balance Sheet date. All
differences are taken to the Income Statement.
SLFRS 13, ‘Fair value measurement’, aims to improve
consistency and reduce complexity by providing a
precise definition of fair value and a single source of
fair value measurement and disclosure requirements
for use across SLFRSs. The Group is yet to assess
SLFRS 13’s full impact and intends to adopt SLFRS
13 no later than the accounting period beginning on
or after 01 January 2014.
3.2Consolidation
3.2.1Subsidiaries
Subsidiaries are those entities (including special
purpose entities) which the Group controls by having
the power to govern the financial and operating
policies. Subsidiaries are fully consolidated from the
date of acquisition, being the date on which the Group
obtains control, and continue to be consolidated until
the date when such control ceases. The financial
statements of the subsidiaries are prepared for
the same reporting period as the parent company,
using consistent accounting policies. All intra-group
balances, transactions, unrealised gains and losses
resulting from intra-group transactions and dividends
are eliminated in full.
170 AIA Insurance Lanka PLC
Notes to the Consolidated
Financial Statements and Significant Accounting Policies
3.4 Financial instruments
3.4.1 Financial assets
3.4.1.1Initial recognition and measurement
The Group classifies its financial assets into the
following categories;
which are managed and their performance
evaluated on a fair value basis, in accordance
with a documented risk management or
investment strategy.
a. Financial assets at Fair Value Through Profit or
Loss (FVTPL),
b. Loans and Receivables (LR),
c. Held To Maturity (HTM) and
d. Available For Sale (AFS).
The classification is determined by management
at initial recognition on the trade-date, the date
on which the Group commits to purchase or sell
the asset, and recognise initially at fair value plus
transaction cost except in the case of financial
assets at fair value through profit or loss which is
recognised at fair value.
Loans and Receivables (LR)
Loans and receivables are non-derivative financial
assets with fixed or determinable payments that are
not quoted in an active market other than those that
the Group intends to sell in the short term or that it
has designated as at fair value through profit or loss or
available for sale. Receivables arising from insurance
and reinsurance contracts are also classified in this
category and are reviewed for impairment as part of
the impairment review of loans and receivables.
After initial measurement, such financial assets
are subsequently measured at amortised cost
using the Effective Interest Rate method (EIR),
less impairment. Amortised cost is calculated by
taking into account any discount or premium on
acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included in
other income in the Income Statement.
Held To Maturity investments (HTM)
Non-derivative financial assets with fixed or
determinable payments and fixed maturities are
classified as held to maturity when the Group
has the positive intention and ability to hold them
to maturity. After initial measurement, held to
maturity investments are measured at amortised
cost using the EIR, less impairment. Amortised cost
is calculated by taking into account any discount
or premium on acquisition and fees or costs that
are an integral part of the EIR. The losses arising
from impairment are recognised in the Income
Statement. The Group did not have any held to
maturity investments during the years ended 31
December 2012 and 2013.
3.4.1.2Subsequent measurement
Financial assets at Fair Value Through Profit or
Loss (FVTPL)
Financial assets at fair value through profit or loss
include financial assets held for trading and those
designated at fair value through profit or loss at
inception.
Investments typically bought with the intention
to sell in the near future are classified as held
for trading. When the Group is unable to trade
these financial assets due to inactive markets
and management’s intention to sell them in the
foreseeable future significantly changes, the Group
may elect to reclassify these financial assets in rare
circumstances. The reclassification to loans and
receivables, available for sale or held to maturity
depends on the nature of the asset. This evaluation
does not affect any financial assets designated at
fair value through profit or loss using the fair value
option at designation.
For investments designated as at fair value through
profit or loss at the inception, the following criteria
must be met:
a. The designation eliminates or significantly
reduces the inconsistent treatment that would
otherwise arise from measuring the assets or
liabilities or recognising gains or losses on a
different basis; or
b. The assets and liabilities are part of a group
of financial assets, financial liabilities or both
The Group classified the investments in equity
securities and unit trusts in the Non-life insurance
fund, Life shareholders fund and Unit linked funds
as financial assets at fair value through profit or
loss hence those financial assets are managed and
performance is evaluated on the fair value basis.
Available For Sale financial assets (AFS)
Available for sale investments are financial assets
that are intended to be held for an indefinite period
of time, which may be sold in response to needs for
liquidity or changes in interest rates, exchange rates
or equity prices or that are not classified as loans
Annual Report 2013 171
and receivables, held to maturity investments or
financial assets at fair value through profit or loss.
d. The disappearance of an active market for that
financial asset because of financial difficulties;
or
After initial measurement, available for sale
financial investments are subsequently measured
at fair value with unrealised gains or losses
recognised as other comprehensive income in the
available for sale reserve until the investment is
derecognised except in the case of AFS assets of the
Life policyholders fund which is transferred to the
Long Term insurance liability through Statement of
Other Comprehensive Income.
e. Observable data indicating that there is a
measurable decrease in the estimated future
cash flow from a group of financial assets since
the initial recognition of those assets, although
the decrease cannot yet be identified with the
individual financial assets in the Group, including:
3.4.1.3Derecognition of financial assets
Financial assets are derecognised when the rights
to receive cash flows from them have expired or
where they have been transferred and the Group
has also transferred substantially all risks and
rewards of ownership.
The Group, assesses at each Balance Sheet date
whether a financial asset or group of financial
assets is impaired.
The Group first assesses whether objective evidence
of impairment exists individually for financial assets
that are individually significant, and individually
or collectively for financial assets that are not
individually significant. If it is determined that no
objective evidence of impairment exists for an
individually assessed financial asset, whether
significant or not, the asset is included in a
group of financial assets with similar credit risk
characteristics and that group of financial assets is
collectively assessed for impairment. Assets that are
individually assessed for impairment and for which
an impairment loss is, or continues to be, recognised
are not included in a collective assessment of
impairment. The impairment assessment is
performed at each Balance Sheet date.
Objective evidence that a financial asset or group
of assets is impaired includes observable data
that comes to the attention of the Group about the
following events:
a. Significant financial difficulty of the issuer or
debtor;
b. A breach of contract, such as a default or
delinquency in payments;
c. It becoming probable that the issuer or debtor
will enter bankruptcy or other financial
reorganisation;
adverse changes in the payment status of
issuers or debtors in the Group; or
-
national or local economic conditions that
correlate with defaults on the assets in the
Group.
Assets carried at amortised cost
If there is objective evidence that an impairment
loss on assets carried at amortised cost has been
incurred, the amount of the impairment loss is
measured as the difference between the asset’s
carrying amount and the present value of estimated
future cash flows (excluding future expected credit
losses that have not been incurred) discounted at
the financial asset’s original effective interest rate.
The carrying amount of the asset is reduced and the
loss is recorded in the Income Statement.
If, in a subsequent period, the amount of the
impairment loss decreases and that decrease can
be related objectively to an event occurring after
the impairment was recognised, the previously
recognised impairment loss is reversed. Any
subsequent reversal of an impairment loss is
recognised in the Income Statement, to the extent
that the carrying value of the asset does not exceed
its amortised cost at the reversal date.
Available for sale financial assets
The Group assesses at each date of the
consolidated Statement of Financial Position
whether there is objective evidence that a financial
asset or a group of financial assets is impaired.
In the case of equity investments classified as
available for sale, a significant or prolonged decline
in the fair value of the security below its cost is an
objective evidence of impairment resulting in the
recognition of an impairment loss. In this respect,
a decline of 20% or more is regarded as significant,
and a period of 12 months or longer is considered
to be prolonged. If any such quantitative evidence
exists for available for sale financial assets,
the asset is considered for impairment, taking
qualitative evidence into account.
3.4.1.4Impairment of financial assets
-
172 AIA Insurance Lanka PLC
Notes to the Consolidated
Financial Statements and Significant Accounting Policies
The cumulative loss measured as the difference
between the acquisition cost and the current fair
value, less any impairment loss on that financial
asset previously recognised in profit or loss
is removed from equity and recognised in the
consolidated Income Statement. Impairment losses
recognised in the consolidated Income Statement
on equity instruments are not reversed through the
consolidated Income Statement. If in a subsequent
period the fair value of a debt instrument classified
as available for sale increases and the increase can
be objectively related to an event occurring after
the impairment loss was recognised in profit or
loss, the impairment loss is reversed through the
consolidated Income Statement.
are recognised in the Income Statement when the
liabilities are derecognised as well as through the
Effective Interest Rate method (EIR) amortisation
process.
3.4.2.3Derecognition of financial liabilities
A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires.
When an existing financial liability is replaced by
another from the same lender on substantially
different terms, or the terms of an existing liability
are substantially modified, such an exchange
or modification is treated as a derecognition
of the original liability and the recognition of a
new liability, and the difference in the respective
carrying amounts is recognised in the Income
Statement.
3.4.2 Financial liabilities
3.4.2.1Initial recognition and measurement
Financial liabilities within the scope of LKAS 39
are classified as financial liabilities at fair value
through profit or loss, loans and borrowings, or
as derivatives designated as hedging instruments
in an effective hedge, as appropriate. The Group
determines the classification of its financial
liabilities at initial recognition.
Amortised cost is calculated by taking into account
any discount or premium on acquisition and fees or
costs that are an integral part of the EIR.
3.4.3 Offsetting of financial assets
Financial assets and liabilities are offset and the
net amount reported in the consolidated Statement
of Financial Position only when there is a legally
enforceable right to offset the recognised amounts
and there is an intention to settle on a net basis,
or to realise the asset and settle the liability
simultaneously.
3.4.2.2Subsequent measurement
3.5
Property plant and equipment
The measurement of financial liabilities depends on
their classification as follows:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or
loss include financial liabilities held for trading
and financial liabilities designated upon initial
recognition as at fair value through profit or loss.
Property, plant and equipment is stated at cost or
revalued amount less accumulated depreciation
and any accumulated impairment in value.
Impairment reviews take place when events or
changes in circumstances indicate that the carrying
value may not be recoverable.
Subsequent costs are included in the asset’s
carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future
economic benefits associated with the item will
flow to the Group and the cost of the item can be
measured reliably. All other expenses on repairs
and maintenance are charged to the Income
Statement during the financial period in which they
are incurred.
The Group has adopted a policy of revaluing
the assets held at valuation every five years.
Revaluation is performed on freehold land by a
All financial liabilities are recognised initially at fair
value and includes directly attributable transaction
costs.
The Group’s financial liabilities include trade and
other payables, bank overdrafts.
Gains or losses on liabilities held for trading are
recognised in the Income Statement.
The Group has not designated any financial
liabilities upon initial recognition as at fair value
through profit or loss.
Loans and borrowings
After initial recognition, loans and borrowings are
subsequently measured at amortised cost using
the effective interest rate method. Gains and losses
Annual Report 2013 173
method for an intangible asset with a finite useful
life are reviewed at least at each financial year end.
Changes in the expected useful life or the expected
pattern of consumption of future economic benefits
embodied in the asset is accounted for by changing
the amortisation period or method as appropriate
and are treated as changes in accounting estimates.
The amortisation expense on intangible assets with
finite lives is recognised in the Income Statement in
the expense category consistent with the intangible
asset.
professionally qualified valuer. Increases in the
carrying amount arising on revaluation of land and
buildings are credited to the revaluation surplus in
shareholders’ equity. Decreases that offset previous
increases of the same asset are charged against
revaluation reserve directly in equity. All other
decreases are charged to the Income Statement.
Items of property, plant and equipment are
derecognised upon replacement, disposal or
when no future economic benefits are expected
from its use. Gains and losses on disposals are
determined by comparing the proceeds with the
carrying amount. These are included in the Income
Statement in other income. When revalued assets
are derecognised, the amounts included in the
revaluation surplus are transferred to retained
earnings.
Land is not depreciated. Depreciation on other
assets is calculated using the straight line method
to allocate their cost or revalued amounts to their
residual values over their estimated useful lives as
follows:
No. of years
Contractual relationships
Computer software
Intangible assets with indefinite useful lives are
tested for impairment annually either individually or
at the cash generating unit level. Such intangibles
are not amortised. The useful life of an intangible
asset with an indefinite life is reviewed annually
to determine whether indefinite life assessment
continues to be supportable. If not, the change in
useful life assessment from indefinite to finite is
made on a prospective basis.
Gains or losses arising from derecognition of an
intangible asset are measured as the difference
between the net disposal proceeds and the carrying
amount of the asset and are recognised in the
Income Statement when the asset is derecognised.
3.7
Cash and cash equivalents
In the consolidated Statement of Cash Flows, cash
and cash equivalents include cash in hand, deposits
held at call with banks, other short-term highly
liquid financial instruments and bank overdrafts.
In the consolidated Statement of Financial Position,
bank overdrafts are shown as a separate liability.
3.8
Stated capital
Shares are classified as equity when there is
no obligation to transfer cash or other assets.
Incremental costs directly attributable to the issue
of equity instruments are shown in equity as a
deduction from the proceeds, net of tax.
No. of years
Plant and machinery
5
Computer equipment
3-5
Furniture and fittings
5
Motor vehicles
4
The assets’ residual values and useful lives are
reviewed at the end of each reporting period and
adjusted if appropriate.
3.6
Intangible assets
Intangible assets consist primarily of acquired
computer software and contractual relationships,
such as access to distribution networks.
Intangible assets acquired separately are measured
on initial recognition at cost. Following initial
recognition, intangible assets are carried at
cost less any accumulated amortisation and any
accumulated impairment losses.
The useful lives of intangible assets are assessed to
be either finite or indefinite.
Intangible assets with finite lives are amortised over
the useful economic life on straight line method
and assessed for impairment whenever there is an
indication that the intangible asset may be impaired.
The amortisation period and the amortisation
Estimated useful lives of the finite intangible assets
are as follows :
5 - 20
2-5
174 AIA Insurance Lanka PLC
Notes to the Consolidated
Financial Statements and Significant Accounting Policies
3.9 Insurance contracts
3.9.1 Life insurance contract liabilities
Life insurance liabilities are recognised when
contracts are entered into and premiums are
charged. These liabilities are measured by using
the net premium method. The liability is determined
as the sum of the discounted value of the expected
future benefits, claims handling and policy
administration expenses, policyholder options and
guarantees and investment income from assets
backing such liabilities, which are directly related
to the contract, less the discounted value of the
expected theoretical premiums that would be
required to meet the future cash outflows based
on the valuation assumptions used. The liability is
either based on current assumptions or calculated
using the assumptions established at the time the
contract was issued, in which case a margin for
risk and adverse deviation is generally included. A
separate reserve for longevity may be established
and included in the measurement of the liability.
At each reporting date, an assessment is made of
whether the recognised Life Insurance liabilities
are adequate, net of related PVIF by using an
existing liability adequacy test as laid out under
gross premium valuation method. The liability value
is adjusted to the extent that it is insufficient to
meet future benefits and expenses. In performing
the adequacy test, current best estimates of
future contractual cash flows, including related
cash flows such as claims handling and policy
administration expenses, policyholder options
and guarantees, as well as investment income
from assets backing such liabilities, are used.
A number of valuation methods are applied,
including discounted cash flows, option pricing
models and stochastic modelling. Aggregation
levels and the level of prudence applied in the
test are consistent with gross premium valuation
method requirements. To the extent that the test
involves discounting of cash flows, the interest
rate applied may be prescribed by gross premium
valuation method regulations or may be based
on management’s prudent expectation of current
market interest rates. Any inadequacy is recorded
in the Income Statement, initially by impairing PVIF,
subsequently, by establishing a technical reserve
for the remaining loss. In subsequent periods, the
liability for a block of business that has failed the
adequacy test is based on the assumptions that are
established at the time of the loss recognition. The
assumptions do not include a margin for adverse
deviation. Impairment losses resulting from liability
adequacy testing can be reversed in future years if
the impairment no longer exists, as allowed under
gross premium valuation method.
3.9.2 Non-life insurance contract liabilities
Non-life insurance contract liabilities are
recognised when contracts are entered into and
premiums are charged. These liabilities are known
as the unearned premium reserve, unexpired risk
reserve and outstanding claims provision, which
are based on the estimated ultimate cost of all
claims incurred but not settled at the Balance
Sheet date, whether reported or not, together with
related claims handling costs and reduction for the
expected value of salvage and other recoveries.
Delays can be experienced in the notification and
settlement of certain types of claims, therefore
the ultimate cost of these cannot be known with
certainty at the Balance Sheet date. The liability
is calculated at the reporting date using a range
of standard actuarial claim projection techniques,
based on empirical data and current assumptions
that may include a margin for adverse deviation.
The liability is not discounted for the time value of
money. No provision for equalisation or catastrophe
reserves is recognised. The liabilities are
derecognised when the contract expires, discharged
or cancelled. The provision for unearned premiums
represents premiums received for risks that have
not yet expired.
Generally the reserve is released over the term
of the contract and is recognised as premium
income. At each reporting date the Group reviews
its unexpired risk and a liability adequacy test is
performed as laid out under note 4.1.5 to determine
whether there is any overall excess of expected
claims and deferred acquisition costs over unearned
premiums. This calculation uses current estimates
of future contractual cash flows after taking account
of the investment return expected to arise on assets
relating to the relevant Non-life insurance technical
provisions. If these estimates show that the carrying
amount of the unearned premiums (less related
deferred acquisition costs) is inadequate, the
deficiency is recognised in the Income Statement by
setting up a provision for liability adequacy.
3.9.3 Salvage and subrogation reimbursements
Some insurance contracts permit the Group to sell
(usually damaged) property acquired in settling a
claim (for example, salvage). The Group may also
have the right to pursue third parties for payment of
some or all costs (for example, subrogation).
Annual Report 2013 175
Estimates of salvage recoveries are included
as an allowance in the measurement of the
insurance liability for claims, and salvage property
is recognised in other assets when the liability
is settled. The allowance is the amount that can
reasonably be recovered from the disposal of the
property.
Reinsurance assets are reviewed for impairment
at each reporting date or more frequently when an
indication of impairment arises during the reporting
year. Impairment occurs when there is objective
evidence as a result of an event that occurred after
initial recognition of the reinsurance asset that the
Group may not receive all outstanding amounts
due under the terms of the contract and the event
has a reliably measurable impact on the amounts
that the Group will receive from the reinsurer. The
impairment loss is recorded in the Income Statement.
Ceded reinsurance arrangements do not relieve the
Group from its obligations to policyholders.
Reinsurance liabilities represent balances due
to reinsurance companies. Amounts payable are
estimated in a manner consistent with the related
reinsurance contract.
Premiums and claims are presented in the financial
statements on a gross basis for ceded reinsurance
contracts.
Reinsurance assets or liabilities are derecognised
when the contractual rights are extinguished or expire
or when the contract is transferred to another party.
Subrogation reimbursements are also considered
as an allowance in the measurement of the
insurance liability for claims and are recognised
in other assets when the liability is settled. The
allowance is the assessment of the amount that can
be recovered from the action against the liable third
party.
3.9.4 Insurance receivables
outstanding claims provision or settled claims
associated with the reinsurer’s policies and are in
accordance with the related reinsurance contract.
Insurance receivables are recognised when due
and measured on initial recognition at the fair
value of the consideration received or receivable.
Subsequent to initial recognition, insurance
receivables are measured at amortised cost, using
the effective interest rate method. The carrying
value of insurance receivables is reviewed for
impairment whenever events or circumstances
indicate that the carrying amount may not be
recoverable, with the impairment loss recorded in
the Income Statement.
Insurance receivables are derecognised when the
derecognition criteria for financial assets are met.
3.9.5 Deferred acquisition costs (DAC)
Those direct and indirect costs incurred during
the financial period arising from the writing or
renewing of insurance contracts are deferred to
the extent that these costs are recoverable out of
future premiums. All other acquisition costs are
recognised as an expense when incurred.
DAC are amortised over the period in which
the related revenues are earned. DAC are also
considered in the liability adequacy test for each
reporting period.
DAC are derecognised when the related contracts
are derecognised.
3.11 Current and deferred income tax
The tax expense for the period comprises current
and deferred tax. Tax is recognised in the Income
Statement, except to the extent that it relates to
items recognised in other comprehensive income
or directly in equity. In this case, the tax is also
recognised in other comprehensive income or
directly in equity, respectively.
The current income tax charge is calculated on
the basis of the tax laws enacted or substantively
enacted at the end of the reporting period in the
countries where the Company’s subsidiaries and
associates operate and generate taxable income.
Management periodically evaluates positions taken
in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation
and establishes provisions where appropriate.
Deferred income tax is recognised, using the
liability method, on temporary differences arising
between the tax bases of assets and liabilities and
their carrying amounts in the consolidated financial
3.10 Reinsurance contracts
The Group cedes insurance risk in the normal course
of business for all of its businesses. Reinsurance
assets represent balances due from reinsurance
companies. Amounts recoverable from reinsurers
are estimated in a manner consistent with the
176 AIA Insurance Lanka PLC
Notes to the Consolidated
Financial Statements and Significant Accounting Policies
statements. However, if the deferred income tax
arises from initial recognition of an asset or liability
in a transaction other than a business combination
that at the time of the transaction affects neither
accounting nor taxable profit or loss, it is not
accounted for. Deferred income tax is determined
using tax rates (and laws) that have been enacted
or substantively enacted by the end of the reporting
period and are expected to apply when the related
deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised to the
extent that it is probable that future taxable profit
will be available against which the temporary
differences can be utilised. The tax effects of carryforwards unused losses or unused tax credits are
recognised as an asset when it is probable that
future taxable profits will be available against which
these losses can be utilised.
Deferred income tax assets and liabilities are offset
when there is a legally enforceable right to offset
current tax assets against current tax liabilities and
when the deferred income tax assets and liabilities
relate to income taxes levied by the same taxation
authority on either the taxable entity or different
taxable entities where there is an intention to settle
the balances on a net basis.
Deferred tax related to fair value re-measurement
of available for sale investments and cash flow
hedges, which are charged or credited directly in
other comprehensive income, is also credited or
charged directly to other comprehensive income and
subsequently recognised in the consolidated Income
Statement together with the deferred gain or loss.
The liability recognised in the consolidated
Statement of Financial Position in respect of
defined benefit plans is the present value of the
defined benefit obligation at the end of the financial
reporting period, together with adjustments
for actuarial gains or losses from experience
adjustments and changes in actuarial assumptions
and past service costs. The defined benefit
obligation is calculated annually by a qualified
actuaries using the projected unit credit method.
The present value of the defined benefit obligation
is determined by discounting the estimated future
cash outflows using interest rates of high quality
corporate bonds that are denominated in the
currency in which the benefits will be paid and that
have terms to maturity that approximate the terms
of the related liability.
Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions
are charged or credited to the equity in the
Statement of Other Comprehensive Income in the
period in which they arise.
Past service costs are recognised immediately in
income, unless the changes to the defined benefit
plan are conditional on the employees remaining
in service for a specified period of time (the vesting
period). In this case, the past service costs are
amortised on a straight-line basis over the vesting
period.
The Company and employees contribute to
the Provident Fund in terms of the Employees’
Provident Fund Act, No. 15 of 1958 as amended.
Contributions in respect of permanent and
contractual employees are remitted to the
Central Bank of Sri Lanka. The Company also
contributes to the Employees Trust Fund in terms
of the Employees Trust Fund Act, No. 46 of 1980
as amended. The Group has no further payment
obligations once the contributions have been paid.
The contributions are recognised as employee
benefit expenses when they are due. Prepaid
contributions are recognised as an asset to the
extent that a cash refund or a reduction in the
future payments are available.
3.12 Employee benefits
The Group has both defined benefit and defined
contribution plans.
A defined benefit plan is a post employment
benefit plan that defines an amount of benefit that
an employee will receive on retirement, usually
dependent on one or more factors such as age,
years of service and compensation.
A defined contribution plan is a post employment
benefit plan under which the Group pays fixed
contributions into a separate entity. The Group has
no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient
assets to pay all employees the benefits relating to
employee service in the current and prior periods.
3.13Provisions
Provisions are recognised when the Group has
a present obligation (legal or constructive) as a
result of a past event, and it is probable that an
outflow of resources embodying economic benefits
will be required to settle the obligation and a
Annual Report 2013 177
reliable estimate can be made of the amount of the
obligation. Where the Group expects some or all of
a provision to be reimbursed, the reimbursement is
recognised as a separate asset but only when the
reimbursement is virtually certain. The expense
relating to any provision is presented in the Income
Statement net of any reimbursement. If the effect
of the time value of money is material, provisions
are discounted using a current pre-tax rate that
reflects, where appropriate, the risks specific to the
liability. Where discounting is used, the increase
in the provision due to the passage of time is
recognised as a borrowing cost.
Life gross written insurance premiums are
recognised either where the policy is issued or the
instalment falls due.
Gross Non life reinsurance premiums written,
comprise the total premiums payable for the whole
period of cover provided by contracts entered
into the period and are recognised on the policy
inception date. Premiums include any adjustments
arising in the accounting period in respect of
reinsurance contracts incepting in prior accounting
periods.
Unearned premiums are those proportions of
premiums written in a year that relate to periods
of risk after the Balance Sheet date. Unearned
premiums are calculated on a monthly pro rata
basis. The proportion attributable to subsequent
periods is deferred as a provision for unearned
premiums.
3.14Leases
The determination of whether an arrangement is,
or contains, a lease is based on the substance of
the arrangement at the inception date, whether
fulfilment of the arrangement is dependent on the
use of a specific asset or assets or the arrangement
conveys a right to use the asset, even if that right is
not explicitly specified in an arrangement.
Finance leases which transfer to the Group
substantially all the risks and benefits incidental to
ownership of the leased item, are capitalised at the
commencement of the lease at the fair value of the
leased property or if lower, at the present value of
the minimum lease payments. Lease payments are
apportioned between finance charges and reduction
of the lease liability so as to achieve a constant rate
of interest on the remaining balance of the liability.
Finance charges are recognised in finance costs
in the Income Statement. As at the Balance Sheet
date, the Group does not have any finance lease
contracts.
Operating lease payments are recognised as an
operating expense in the Income Statement on a
straight-line basis over the lease term.
3.15 Revenue recognition
3.15.1 Insurance related revenue
The premium income is recognised on accrual basis
and net of reinsurance premium.
Non-life gross insurance written premiums comprise
the total premiums received or receivable for the
whole period of cover provided by contracts entered
into during the accounting period and are recognised
on the date on which the policy is issued. Premiums
include any adjustments arising in the accounting
period for premiums receivable in respect of
business written in prior accounting periods.
3.15.2 Fee income
Trust management fees and service charges are
recognised on an accrual basis. If the fees are for
services provided in future periods then they are
deferred and recognised over those future periods.
3.15.3 Investment income
Interest income
Interest income is recognised on the time
proportionate basis using EIR irrespective of the
classification under LKAS 39. The amortisation of
discount/ premium is also treated as an interest
income.
Dividend income
Dividend income is recognised when the right to
receive payment is established, irrespective of its
classification of FVTPL or AFS, which is the exdividend date for equity securities.
Unrealised gains
Unrealised gains on AFS securities are recognised
in the Statement of Other Comprehensive Income
until such instrument is derecognised or impaired.
Unrealised gains on financial assets at FVTPL, are
recognised in the Income Statement.
Realised gains
Realised gains and losses recorded in the Income
Statement on investments include gains and losses
on financial assets.
178 AIA Insurance Lanka PLC
Notes to the Consolidated
Financial Statements and Significant Accounting Policies
3.16 Benefits, claims and expenses recognition
3.16.1 Gross benefits and claims
Sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial
reporting purposes.
Gains and losses on the sale of investments are
calculated as the difference between net sales
proceeds and the original or amortised cost and are
recorded on occurrence of the sale transaction.
Gross benefits and claims for Life insurance
contracts include the cost of all claims arising
during the year including internal and external
claims handling costs that are directly related
to the processing and settlement of claims and
policyholder bonuses declared on DPF contracts,
as well as changes in the gross valuation of
insurance and liabilities with DPF. Death claims
and surrenders are recorded on the basis of
notifications received. Maturities and annuity
payments are recorded when due.
Non-life insurance and health claims include all
claims occurring during the year, whether reported
or not, related internal and external claims handling
costs that are directly related to the processing and
settlement of claims, a reduction for the value of
salvage and other recoveries, and any adjustments
to claims outstanding from previous years.
Deferred income tax liabilities are recognised for all
taxable temporary differences.
Deferred income tax assets are recognised for all
deductible temporary differences, carry forward of
unused tax credits and unused tax losses, to the
extent that it is probable that taxable profit will be
available against which the deductible temporary
differences, and the carry forward of unused tax
credits and unused tax losses can be utilised.
Deferred income tax assets and deferred income
tax liabilities are offset, if a legally enforceable right
exists to set off current tax assets against current
income tax liabilities and the deferred income taxes
relate to the same taxable entity and the same
taxation authority.
4.
Critical accounting estimates and the use of
judgment
The Group makes estimates and assumptions
that affect the reported amounts of assets and
liabilities within the next financial year. Estimates
and judgments are continually evaluated and based
on historical experience and other factors, including
expectations of future events that are believed to be
reasonable under the circumstances.
3.16.2 Reinsurance claims
Reinsurance claims are recognised when the
related gross insurance claim is recognised
according to the terms of the relevant contract.
3.17Taxes
The tax expense for the period comprises current
and deferred tax. Tax is recognised in the Income
Statement, except to the extent that it relates to
items recognised in other comprehensive income
or directly in equity. In this case, the tax is also
recognised in other comprehensive income or
directly in equity, respectively.
3.17.1 Current income tax
Current income tax assets and liabilities for the
current and prior periods are measured at the
amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws
used to compute the amount are those that are
enacted or substantively enacted by the Balance
Sheet date.
3.17.2 Deferred tax
Deferred income tax is provided using the liability
method on temporary differences at the Balance
4.1 Insurance contracts
4.1.1 Product classification
SLFRS 4, Insurance Contracts, requires contracts
written by insurers to be classified either as
insurance contracts or investment contracts,
depending on the level of insurance risk. Insurance
contracts are those contracts that transfer significant
insurance risk, while investment contracts are those
contracts without significant insurance risk.
Accordingly, the company performs a product
classification exercise covering its portfolio
of contracts to determine the classification of
contracts to these categories. Product classification
requires the exercise of significant judgment to
determine whether there is a scenario (other than
those lacking commercial substance) in which an
insured event would require the company to pay
significant additional benefits to its customers.
In the event the Company has to pay significant
additional benefits to its customers, the contract is
accounted for as an insurance contract.
Annual Report 2013 179
The judgments exercised in determining the level of
insurance risk deemed to be significant in product
classification affect the amounts recognised in the
consolidated financial statements as insurance
and investment contract liabilities and deferred
acquisition and origination costs.
But Not yet Reported (IBNR) at the Balance Sheet
date. It can take a significant period of time before
the ultimate claims cost can be established with
certainty and for some type of policies.
The ultimate cost of outstanding claims is
estimated by using a range of standard actuarial
claims projection techniques, such as Chain Ladder
and Bornheutter-Ferguson methods.
The main assumption underlying these techniques is
that a company’s past claims development experience
can be used to project future claims development
and hence ultimate claims costs. As such, these
methods extrapolate the development of paid and
incurred losses based on the observed development
of earlier years and expected loss ratios. Historical
claims development is mainly analysed by accident
years as well as by significant business lines. No
explicit assumptions are made regarding future rates
of claims inflation. Instead, the assumptions used are
those implicit in the historical claims development
data on which the projections are based.
In addition to the allocated loss adjustment
expenses which form a part of the claim provision,
a provision is added to allow for the Company’s
overhead costs of the claim settlements to arrive at
the central estimate of claims reserves. The central
estimate of claim reserves are then projected to
secure an overall level of sufficiency of not less than
75% statistical confidence.
Central estimate of premium liability, which is
equivalent to the Unexpired Risk Reserve (URR) on
central estimate basis is calculated using a trended
ultimate loss ratio for each significant business line
and the Unearned Premium Reserve (UPR) that the
Company currently holds. A provision is added on
top of the central estimate of URR to account for
claim handling expenses and other management
expenses. This estimate is then projected to secure
an overall level of sufficiency of not less than 75%
statistical confidence as the final URR. Company
reserves for the higher amount of UPR or the URR.
4.1.2 Life insurance liabilities
SLFRS 4 permits a wide range of accounting
treatments to be adopted for the recognition and
measurement of insurance contract liabilities,
including liabilities in respect of insurance
contracts the Company calculates insurance
contract liabilities for traditional Life insurance
contracts using a net level premium valuation
method, whereby the liability represents the
present value of estimated future policy benefits to
be paid, less the present value of estimated future
net premiums to be collected from policyholders.
This method uses best conservative assumptions
for mortality, morbidity, expected investment yields,
policyholder dividends, surrenders and expenses
set at the policy inception date. These assumptions
remain locked in thereafter, unless a deficiency
arises on liability adequacy testing. Interest rate
assumptions can vary by product. Mortality,
surrender and expense assumptions are based on
actual experience, modified to allow for variations
in policy form. The company exercises significant
judgment in making appropriate assumptions.
For contracts with an explicit account balance,
such as universal life and Unit-linked contracts,
insurance contract liabilities represent the
accumulation value, which represents premiums
received and investment returns credited to the
policy less deductions for mortality and morbidity
costs and expense charges, plus a non-unit
reserve to ensure the contracts are self-financing.
Significant judgment is exercised in making
appropriate estimates of gross profits, which are
also regularly reviewed by the Company.
The judgments exercised in the valuation of
insurance contract liabilities affect the amounts
recognised in the consolidated financial statements
as insurance contract benefits and insurance
contract liabilities.
4.1.3 Non-life insurance liability
For Non-life insurance contracts, estimates have
to be made both for the expected ultimate cost
of claims reported at the Balance Sheet date and
for the expected ultimate cost of claims Incurred
4.1.4 Acquisition expenses
The Company defers its direct acquisition cost in the
Non-life insurance business and the Life insurance
business over the period of cover or the period of
underlying instalments of the respective policies
on a consistent basis in line with the basis used to
defer the premium income until the policy is being
in force. Deferred acquisition costs are assessed for
180 AIA Insurance Lanka PLC
Notes to the Consolidated
Financial Statements and Significant Accounting Policies
recoverability in the year of policy issue to ensure
that these costs are recoverable out of the estimated
future margins to be earned on the policy.
For example, a market is inactive when there is
a wide bid-offer spread or significant increase
in the bid-offer spread or there are few recent
transactions.
Changes in the fair value of financial assets held
to back the Company’s Unit-linked contracts result
in a corresponding change in insurance contract
liabilities. For discounted cash flow analysis,
estimated future cash flows and discount rates are
based on current market information and rates
applicable to financial instruments with similar
yields, credit quality and maturity characteristics.
Discount rates are influenced by risk free interest
rates and credit risk. Changes in assumptions about
these factors could affect the reported fair value of
financial instruments.
The carrying value less impairment provision
of trade receivables and payables are assumed
to approximate their fair values. The fair value
of financial liabilities for disclosure purposes is
estimated by discounting the future contractual
cash flows at the current market interest rate
that is available to the Group for similar financial
instruments.
The Group classifies fair value measurements using
a fair value hierarchy that reflects the significance
of the inputs used in making the measurements.
The fair value hierarchy has following levels,
Level I - quoted prices (unadjusted) in active
markets for identical assets or liabilities
Level II - inputs other than quoted prices included
within Level 1 that are observable for the asset or
liability, either directly (ie as prices) or indirectly (ie
derived from prices)
Level III - inputs for the asset or liability that are not
based on observable market data
The information regarding fair value hierarchy is
given in the note 7.5 to the financial statements.
4.1.5 Liability adequacy testing
The Group evaluates the adequacy of its insurance
contract liabilities at least annually. Liability adequacy
is assessed by portfolio of contracts in accordance
with the Group’s manner of acquiring, servicing and
measuring the profitability of its insurance contracts.
The Group performs liability adequacy testing
separately for each lines of business.
For traditional Life insurance contracts, insurance
contract liabilities, reduced by deferred acquisition
costs and value of business acquired on acquired
insurance contracts, are compared with the
gross premium valuation calculated on a best
estimate basis, as of the valuation date. If there is
a deficiency, the unamortised balance of value of
business acquired on acquired insurance contracts
are written down to the extent of the deficiency. If,
after writing down deferred acquisition costs for the
specific portfolio of contracts to nil, a deficiency still
exists, the net liability is increased by the amount of
the remaining deficiency.
Significant judgment is exercised in determining
the level of aggregation at which liability adequacy
testing is performed and in selecting best estimate
assumptions. The judgments exercised in liability
adequacy testing affect amounts recognised in the
consolidated financial statements as commission
and other acquisition expenses, deferred
acquisition costs and insurance contract benefits
and insurance and investment contract liabilities.
4.2
Determining the fair value of financial assets
The Group determines the fair values of financial
assets traded in active markets using quoted
prices as of each reporting date. The fair values
of financial assets that are not traded in active
markets are typically determined using a variety of
other valuation techniques including the present
value of cash flows.
A financial instrument is regarded as quoted in
an active market if quoted prices are readily and
regularly available from an exchange, dealer,
broker, industry group, pricing service or regulatory
agency, and those prices represent actual and
regularly occurring market transactions on an
arm’s length basis. If the above criterias are not
met, the market is regarded as being inactive.
4.3
Valuation of retirement benefit obligations
The cost of defined benefit plans is determined using
actuarial valuations. The actuarial valuation involves
making assumptions about discount rates expected
rates of return on assets, future salary increases and
staff turnover. Due to the long-term nature of these
obligations, such estimates are subject to significant
uncertainty. Details of the key assumptions used in
the estimates are contained in Note 18.
Annual Report 2013 181
5.
5.1
Risk management
Financial risk management
The primary source of financial risk to an insurer
arises from its investment exposures and
investment activities and as such, the investment
portfolios maintain a prudent approach in its
investment strategy and investment exposures to
ensure that investment returns are optimised on
a risk adjusted basis and to ensure the Company
operates within its defined risk appetite.
Risk appetite statements communicate the
parameters and boundaries within which the
business unit has opted to operate in relation to the
identified financial risks. In the Company, the risk
appetite framework has expressed the business
unit’s appetite as regards capital risk, liquidity
risk, credit risk and market risk. The exposures
and management information pertaining to these
four risk aspects are within scope of identified
governance committees of the business based on
the required technical expertise to provide effective
oversight. Management information is submitted
periodically to review and monitor these risks at
these governance committees that convene as per
their defined frequency of review.
Management of financial risks come under the
purview of the Financial Risk Committee, which
approves the risk appetites and monitors the overall
exposure of the Company to financial risks.
Total investments of the Company are managed
separately through segregated funds with due
consideration to their respective risk profiles,
stakeholders and objectives.
The following is a high level summary of the
investment exposures by the Company’s investment
portfolios. The Company keeps investment
exposures within the pre-determined strategic
asset allocation limits, which are defined in order
to generate superior investment returns without
excessive exposure to high risk assets.
In the case of Unit-linked funds, the policyholder is
the decision maker on asset allocation due to the
investment choice provided to the policyholder to
choose the preferred Unit-linked fund/s to direct
policy premium according to their risk appetite. As
such the Unit-linked business’ investment portfolios
will maintain an exposure to equity investments
even during periods of volatile equity markets as
long as policyholders opt to remain invested in the
Unit-linked Growth Fund and Unit-linked Balanced
Fund. Policyholders opt to invest in these two funds
to primarily benefit from “Rupee Cost Averaging”
over the long term investment horizon.
Equity risk of the Unit-linked business is managed
by close monitoring of the asset class parameters
in each Unit-linked fund and by investing in equity
in line with the equity investment philosophy of the
Company. The management believes that superior
investment returns in equity investments can be
secured over the long term investment horizon by
investing in fundamentally sound liquid blue-chip
counterparties.
5.1.1 Liquidity risk
Liquidity risk is the risk that liabilities cannot
be met in a timely and cost effective manner as
they fall due. Liquidity issues may arise from
uncertainty in the value and timing of liabilities
(for example, increased claims or redemptions) as
Life *
LKR’000
Government securities
Reverse repurchase agreements
Corporate debt
Fixed deposits
Equity
Total
13,913,201
4,825,615
8,721,024
2,941,356
3,569,011
33,970,207
Non-life
LKR’000
%
%
41
14
26
9
10
100
* Including life shareholder assets
NB: The amounts stated above are inclusive of accrued interest where applicable.
713,046
1,256,672
1,365,338
3,335,056
Total
LKR’000
21
38
41
100
14,626,247
6,082,287
8,721,024
4,306,694
3,569,011
37,305,263
%
39
16
23
12
10
100
182 AIA Insurance Lanka PLC
Notes to the Consolidated
Financial Statements and Significant Accounting Policies
well as uncertainty in the ability to monetise assets
to meet obligations. Where as the liquidity risk
over any time period is fundamentally the same
(for example, the risk of not being able to meet
liabilities cost effectively, as they fall due), there are
differences in how the risk is managed over short
and long time horizons. In practice, liquidity risk is
considered in two components: short term or cash
management liquidity and long term liquidity.
Controls in place to mitigate liquidity risk
-
Management of liquidity risk is governed by the
Liquidity Risk Management Policy which is a
component of the Company’s risk management
framework and are incorporated in the
Investment Mandates of the business.
The Company defines liquidity risk appetite
in terms of Liquidity Coverage Ratio which is
defined for each core portfolio of the business.
The actual exposure against appetite is
reported to and monitored by the Financial Risk
Committee.
-
The Company maintains a cash flow maturity
profile within the investment portfolios of the
Company in tandem with risk appetite of each
portfolio and cashflow needs.
-
Minimum liquidity levels are defined for each
investment portfolio based on past experience
with stresses for scenarios and based on
business plan projections. The management
performs a bi-annual review of the minimum
liquidity levels for each investment portfolio.
-
The minimum liquidity levels are incorporated
into the investment mandate of each portfolio
and are monitored on a daily basis.
Liquidity risk over the various time horizons can be
defined as follows:
-
Short term liquidity risk
The risk of an adverse financial outcome
arising from having insufficient liquid resources
to meet day-to-day cash requirements over
the ensuing months. The adverse outcome
may include financial losses caused by having
to realise assets at sub-optimal prices, or the
cost of drawing on emergency bank facilities.
The adverse outcomes may also be reputational
or business related, such as poor customer
service from delayed payments and/or negative
perceptions around drawing on emergency
lines.
-
Long term liquidity risk
The risk of unexpected and potentially adverse
business conditions, which may affect the
ability to meet future liabilities when they fall
due. Typically, the longer term assessment
should consider a period of up to three years.
However, this will be dependent on the nature
of the assets and liabilities within the business.
The following table depicts the maturity profile
of the investment portfolio which is designed and
managed to meet the required level of liquidity
as and when liquidity outgo arises taking into
consideration the time horizon of the financial
liabilities of the business.
Annual Report 2013 183
As at 31 December 2013
No stated
maturity
LKR ‘000
< 1Yr
1Yr - 5 Yrs
5Yrs - 10 Yrs
> 10Yrs
LKR ‘000
LKR ‘000
LKR ‘000
LKR ‘000
201,285
3,263,852
2,279,779
7,794,130
-
13,539,046
4,825,615
2,756,689
3,523,657
25,000
3,749,678
-
1,200,000
-
-
4,825,615
8,473,335
2,781,689
-
-
-
-
3,569,011
3,569,011
324,998
111,707
497,807
8,718,101
112,401
6,924,910
21,404
6,050,861
8,994,130
89,239
1,449,007
5,107,257
324,998
89,239
1,449,007
245,512
497,807
35,795,259
< 1Yr
1Yr - 5 Yrs
5Yrs - 10 Yrs
> 10Yrs
Life *
LKR ‘000
LKR ‘000
LKR ‘000
LKR ‘000
Debt securities
Available for sale
Government securities
6,251,253
5,860,042
2,078,995
1,665,230
-
15,855,520
10,101,896
498,092
691,223
599,980
25,000
500,000
-
-
-
10,101,896
1,598,072
716,223
-
-
-
-
3,041,669
3,041,669
119,433
120,549
579,297
18,361,743
106,861
6,591,883
25,175
2,604,170
1,665,230
98,378
1,634,647
4,774,694
119,433
98,378
1,634,647
252,585
579,297
33,997,720
Life *
Debt securities
Available for sale
Government securities
Loans and receivables
Reverse repurchase agreements
Corporate debt
Fixed deposits
Equity securities
At fair value through profit or loss
Other loans and receivables
Premium receivables
Reinsurance assets
Policy loans
Other receivables
Cash and cash equivalents
Total
LKR ‘000
* Including life shareholder assets.
As at 31 December 2012
Loans and receivables
Reverse repurchase agreements
Corporate debt
Fixed deposits
Equity securities
At fair value through profit or loss
Other loans and receivables
Premium receivables
Reinsurance assets
Policy loans
Other receivables
Cash and cash equivalents
* Including life shareholder assets.
No stated
maturity
LKR ‘000
Total
LKR ‘000
184 AIA Insurance Lanka PLC
Notes to the Consolidated
Financial Statements and Significant Accounting Policies
As at 31 December 2013
Non-life
Debt securities
Available for sale
Government securities
Loans and receivables
Reverse repurchase agreements
Corporate debt
Fixed deposits
Other loans and receivables
Premium receivables
Reinsurance assets
Other receivables
Cash and cash equivalents
< 1Yr
1Yr - 5 Yrs
5Yrs - 10 Yrs
LKR ‘000
LKR ‘000
LKR ‘000
No stated
maturity
LKR ‘000
Total
LKR ‘000
150,826
541,651
-
-
692,477
1,256,672
1,288,301
-
-
-
1,256,672
1,288,301
514,498
32,870
240,549
3,483,716
13,710
555,361
3,250
3,250
1,015,410
1,015,410
514,498
1,015,410
49,830
240,549
5,057,737
As at 31 December 2012
Non-life
Debt securities
Available for sale
Government securities
Loans and receivables
Reverse repurchase agreements
Corporate debt
Fixed deposits
Other loans and receivables
Premium receivables
Reinsurance assets
Other receivables
Cash and cash equivalents
< 1Yr
1Yr - 5 Yrs
5Yrs - 10 Yrs
LKR ‘000
LKR ‘000
LKR ‘000
No stated
maturity
LKR ‘000
Total
LKR ‘000
577,744
332,163
-
-
909,907
1,823,499
45,000
221,840
-
-
-
1,823,499
45,000
221,840
453,526
14,682
98,827
3,235,118
19,789
351,952
6,884
6,884
753,927
753,927
453,526
753,927
41,355
98,827
4,347,881
Annual Report 2013 185
5.1.2 Credit risk
Credit risk is the risk of adverse financial impact
resulting from fluctuations in credit quality of third
parties including default, rating transition and
credit spread movements. Credit risk categories
include default risk, spread risk and rating
migration risk, each of which is defined below.
-
Spread risk
The risk of an adverse financial outcome
arising from changes in the level or volatility of
third party credit spreads. Credit spread moves
can be caused by credit concerns (improving
or worsening) on the issuer or from market
factors (such as risk appetite and liquidity
within the market).
-
Default risk
The risk of an adverse financial outcome arising
from one or more third party default events. A
default event includes a delay in repayments or
interest payments, restructuring of borrower
repayments/interest schedule, bankruptcy
and repudiation/moratorium (for example, for
sovereign counterparties).
-
Rating migration risk
The risk of an adverse financial outcome arising
from a change in third party credit standing.
As well as having a potential knock-on effect
on spreads, rating movements can trigger
solvency and accounting impacts (for example,
where rules are based on counterparty ratings)
and can drive management actions and the
realisation of losses (for example, where
Investment Mandates set counterparty and
portfolio limits based on ratings).
Controls in place to mitigate credit risk
-
The management of credit risk is governed by
the Credit Risk Management Policy which is
embedded within the Investment Policy and
incorporated in the Investment Mandates of the
business.
-
Single counterparty exposures are monitored
based on the counterparty exposure
in comparison to the net assets of the
counterparty
-
All investments are denominated in LKR and
the Company does not maintain any investment
exposures to assets held overseas.
-
Minimum investment grade rating criteria
been implemented for determining investment
decisions.
-
The Company maintains a predominant
exposure to government securities and high
grade corporate debt thus prudently managing
credit default risk from these investments
-
The following proportions were held by the
respective portfolios in government securities
and corporate debt as at 31 December 2013:
Government
securities
Corporate
debt and
fixed
deposits
Life conventional fund
63%
37%
Life, excluding
conventional fund and
linked funds
62%
38%
Non-life insurance fund
59%
41%
-
The exposure to asset classes with high risk
such as equity is maintained at a minimum
level in portfolios with management discretion.
There were no exposures to equity in Life
conventional fund and Non-life insurance fund
as at the Balance Sheet date.
-
The Company places corporate debt investment
exposures with counterparties with “A” (lka)
and above as assigned by Fitch Ratings Lanka
-
Rating movements on the Company’s
corporate debt investments are monitored on
a monthly basis by the Investments Operations
Committee.
-
All Company investments are maintained with
the custodian bank Deutsche Bank
-
Government securities, including collateral
from reverse repurchase agreements are held
at Lanka Secure, which is maintained by the
Central Bank of Sri Lanka
-
All reverse repurchase agreements maintain its
exposure to government securities.
-
The Company has a Collateral Management
Policy and maintains a haircut of at least
10% on investments in reverse repurchase
agreements. (Refer the table; collateral
adequacy on page 187 of the Annual Report).
-
The Company carries out investment
transactions through/with Investment
Committee approved intermediaries.
186 AIA Insurance Lanka PLC
Notes to the Consolidated
Financial Statements and Significant Accounting Policies
As at 31 December 2013
Life *
Risk free
LKR '000
Available for sale
Government securities
13,539,046
-
-
-
-
-
-
13,539,046
4,825,615
18,364,661
* Including life shareholder assets.
554,038
5,580
559,618
5,075,320
2,227,651
425,204
7,728,175
3,398,015
63,358
3,461,373
211
211
-
324,998
89,239
1,449,007
245,512
3,454
2,112,210
4,825,615
8,473,335
2,781,689
324,998
89,239
1,449,007
245,512
497,807
32,226,248
Risk free
LKR '000
AAA
LKR '000
AA
LKR '000
A
LKR '000
BB
LKR '000
F1
LKR '000
Non rated
LKR '000
Total
LKR '000
15,855,520
-
-
-
-
-
-
15,855,520
10,101,896
25,957,416
* Including life shareholder assets.
100,000
53,264
153,264
580,000
377,637
504,401
1,462,038
899,980
238,586
3,233
1,141,799
-
118,092
118,092
119,433
98,378
1,634,647
252,585
18,399
2,123,442
10,101,896
1,598,072
716,223
119,433
98,378
1,634,647
252,585
579,297
30,956,051
Risk free
LKR '000
AAA
LKR '000
AA
LKR '000
A
LKR '000
Non rated
LKR '000
Total
LKR '000
692,477
-
-
-
-
692,477
1,256,672
1,949,149
404,428
3,729
408,157
883,873
208,000
1,091,873
28,010
28,010
514,498
1,015,410
49,830
810
1,580,548
1,256,672
1,288,301
514,498
1,015,410
49,830
240,549
5,057,737
Loans and receivables
Reverse repurchase
agreements
Corporate debt
Fixed deposits
Premium receivables
Reinsurance assets
Policy loans
Other receivables
Cash and cash equivalents
AAA
LKR '000
AA
LKR '000
A
LKR '000
BB
LKR '000
F1
LKR '000
Non rated
LKR '000
Total
LKR '000
As at 31 December 2012
Life *
Available for sale
Government securities
Loans and receivables
Reverse repurchase
agreements
Corporate debt
Fixed deposits
Premium receivables
Reinsurance assets
Policy loans
Other receivables
Cash and cash equivalents
As at 31 December 2013
Non - life
Available for sale
Government securities
Loans and receivables
Reverse repurchase agreements
Corporate debt
Fixed deposits
Premium receivables
Reinsurance assets
Other receivables
Cash and cash equivalents
Annual Report 2013 187
As at 31 December 2012
Non - life
Available for sale
Government securities
Loans and receivables
Reverse repurchase
agreements
Corporate debt
Fixed deposits
Premium receivables
Reinsurance assets
Other receivables
Cash and cash equivalents
Risk free
LKR '000
AAA
LKR '000
AA
LKR '000
A
LKR '000
Non rated
LKR '000
Total
LKR '000
909,907
-
-
-
-
909,907
1,823,499
2,733,406
60,000
3,223
63,223
60,000
88,326
148,326
45,000
101,840
298
147,138
453,526
753,927
41,355
6,980
1,255,788
1,823,499
45,000
221,840
453,526
753,927
41,355
98,827
4,347,881
Life*
Collateral adequacy
2013
LKR ‘000
Carrying value of investments in reverse repurchase agreements
Fair value of collaterals **
Excess value of collaterals
Margin
Non-life
2012
LKR ‘000
4,825,615
5,741,030
915,415
19%
10,101,896
12,031,195
1,929,299
19%
2013
LKR ‘000
2012
LKR ‘000
1,256,672
1,591,534
334,862
27%
1,823,499
2,201,494
377,995
21%
* Including life shareholder assets
** The collaterals against the investments in reverse repurchase agreements are valued inclusive of interest receivable.
The following table reflects the credit ratings of the
financial assets of the business.
5.1.3.1Interest rate risk
The risk of an adverse financial impact due to
changes in the absolute level of interest rates, in
the shape or curvature of the yield curve or in any
other interest rate relationship including volatility
and spread between different yield curves.
The following table summarises the nature of the
interest rate risk associated with financial assets.
5.1.3 Market risk
Market risk is the risk of adverse financial impact
resulting from fluctuations in the level or volatility
of prices of financial instruments and other market
factors including interest rates, inflation and foreign
exchange rates. Market risk categories include
interest rate risk, equity risk, foreign exchange risk,
inflation risk, property risk, commodity risk and
other risks arising from alternative investments
(for example, hedge funds and private equity). The
Company’s primary sources of market risks are
interest rate risk and equity risk.
Although credit and liquidity risks are defined and
managed as separate risks, the assessment of
market risk does consider the interdependence
between market risk, credit and liquidity risks (for
example, market losses caused by illiquidity issues,
sovereign default or a default of a systemically
important counterparty) and also the capital risk
arising from market risk.
As at 31 December 2013
Fixed
interest
LKR '000
Variable
interest
LKR '000
1,529,761
29,539,685
-
80,000
-
164,758 1,694,519
- 29,619,685
324,998
324,998
89,239
89,239
208,258
31,069,446
288,258
* Including life shareholder assets
289,549
497,807
868,544 32,226,248
Life*
Financial assets
Loans and deposits
Debt securities
Premium receivable
Reinsurance assets
Cash and cash
equivalents
Non interest
bearing
LKR '000
Total
LKR '000
188 AIA Insurance Lanka PLC
Notes to the Consolidated
Financial Statements and Significant Accounting Policies
As at 31 December 2013
Fixed
interest
Non-life
LKR '000
Financial assets
Loans and deposits
Debt securities
Trade receivable
Reinsurance assets
Cash and cash
equivalents
Variable
interest
LKR '000
Non interest
bearing
LKR '000
Total
LKR '000
13,779
3,237,450
-
-
36,051
49,830
- 3,237,450
514,498
514,498
1,015,410 1,015,410
3,251,229
41,615
41,615
198,934
240,549
1,764,893 5,057,737
5.1.3.4Sensitivity analysis on market, equity and
interest rate risk
The sensitivity analysis for interest rate risk
illustrates how changes in the fair value or
future cash flows of a financial instrument at
the reporting date will fluctuate in response to
assumed movements in market interest rates. The
management monitors the sensitivity of reported
fair value of financial instruments on a regular
basis by assessing the projected changes in the fair
value of financial instruments held by the portfolios
in response to assumed parallel shift in the yield
curve by +/- 100 basis points.
The sensitivity analysis for equity risk illustrates
how changes in the fair value of equity securities
at the reporting date will fluctuate in response to
assumed changes in equity market prices. The
management monitors movements in the fair value
of equity securities on a regular basis by assessing
the projected changes in the fair value of equity
securities held by the portfolios in response to
assumed equity price movements of +/- 10%.
The sensitivity analysis given in the following tables
reflect the impact on the Company’s profit before
tax and hence the net asset value, arising from 100
basis points parallel shift in the interest rates and
arising from a 10% change in equity prices.
5.1.3.2Equity risk
Equity risk is the risk of adverse financial impact
due to equity market dynamics (for example,
individual spot or derivative price moves, index
moves, volatility and correlation changes, etc.). This
risk applies to direct equity (the holding of equities,
embedded equity options in liabilities) and to
indirect equity (management fees on equity funds)
positions.
5.1.3.3Foreign exchange risk
The risk of adverse financial impact due to changes
in the spot/forward price levels, volatility and
correlations of currency exchange rates.
The Company does not maintain foreign currency
denominated assets in its investment portfolios
and as such is not exposed to foreign exchange risk
related to investments.
The foreign currency exposures arising from operations
are managed through a natural hedging mechanism by
maintaining dollar denominated bank account which is
used to fund foreign currency payments.
Evaluating the impact of market risk, credit risk
and liquidity risk are inbuilt into the investment
decision making process. The market risk, credit
risk and liquidity risk of the investment portfolios
are monitored every month by the Investment
Operations Committee, a management level
governance oversight committee responsible to
oversee investments. The Board of Directors level
governance oversight committee responsible to
oversee investments is the Investment Committee
which is a sub-committee of the Board of Directors.
The Investment Committee monitors the market
risk, credit risk and liquidity risk of the investment
portfolios every quarter.
The capital risk of the Company is monitored by
the Financial Risk Committee that convenes on a
quarterly basis. The Financial Risk Committee also
reviews the liquidity risk, credit risk and market risk
of the investment portfolios.
2013
Life
Impact to;
2012
Profit
Profit
Net asset before Net asset before
value
tax
value
tax
LKR '000 LKR '000 LKR '000 LKR '000
Interest rate risk
+ 100 basis points
Government securities
- 100 basis points
Government securities
(5,326)
-
(5,483)
-
5,445
-
5,620
-
Equity market risk
10% increase in equity
market prices
10% decrease in equity
market prices
-
-
248
248
-
-
(248)
(248)
Annual Report 2013 189
2013
Interest rate risk
+ 100 basis points
Government securities
- 100 basis points
Government securities
(8,690)
-
(7,976)
-
8,873
-
8,173
-
For Life business only Life shareholders fund
assets are considered in line with the accounting
treatment as movement in asset values of Life
policyholders fund and Unit-linked funds are
charged to their respective policy liability and does
not impact the profit before tax and net asset value
of the Company.
The proportion of investments in Government
securities, corporate debt and fixed deposits by the
respective portfolios are given in the table on page
185.
The exposure to asset classes with high levels of
volatility such as equity is maintained at minimum
levels in portfolios except in the case of Unit-linked
portfolios of growth fund and balanced fund where
equity investments are maintained inline with
policyholder expectations and risk appetite.
Life conventional fund, Life shareholders’ fund,
Non-life insurance fund and non unit fund all held
zero exposure as at 31 December 2013 to dealing
equity investments inline with investment strategy
and risk appetite.
The Company does not maintain any investments
in commodities and any investments in derivative
instruments, structured investment instruments or
alternative investments.
Controls in place to mitigate market risk
-
Profit
Net
Profit
Net asset before
asset
before
value
tax
value
tax
LKR '000 LKR '000 LKR '000 LKR '000
Non - life
Impact to;
2012
The management of market risk is governed
by the Market Risk Management Policy which
is embedded within the Investment Policy and
incorporated in the Investment Mandates of the
business.
-
The Company has defined the appetite for
interest rate risk in terms of its impact on the
Risk Based Capital solvency which is reviewed
on a monthly basis and is rebased and approved
at Financial Risk Committee every quarter.
-
Also the Company sets itself a target asset
duration based on the liability profile of the
Company, in order to minimise the adverse
impact from varying interest rates.
-
Monitoring of the equity exposures against the
risk limits and benchmarks that are defined
and refreshed on a periodic basis, depending
on the risk appetite and the market conditions.
Review of interest rate risk exposure against
the risk appetites is included in the investment
approval process of the Company.
-
All investments are denominated in LKR and
the Company does not maintain any investment
exposure to assets held overseas.
Fixed income investments are maintained mainly in
government securities which eliminate the credit
risk premium volatility from the asset price and
in high grade securities with relatively high credit
ratings by Fitch Ratings Lanka.
5.2 Insurance risk
5.2.1 Life insurance
Frequency and severity of claims
For contracts where death is the insured risk, the
most significant factors that could increase the
overall frequency of claims are epidemics such
as AIDS, SARS and a human form of avian flu or
widespread changes in lifestyle, such as eating,
smoking and exercise habits, resulting in earlier or
more claims than expected. For contracts where
survival is the insured risk, the most significant
factor is continued improvement in medical science
and social conditions that would increase longevity.
At present, these risks do not vary significantly
in relation to the location of the risk insured by
the Company. However, undue concentration by
amounts could have an impact on the severity of
benefit payments on a portfolio basis.
For contracts with fixed and guaranteed benefits
and fixed future premiums, there are no mitigating
terms and conditions that reduce the insurance
risk accepted. The Company manages these risks
through its underwriting strategy and reinsurance
arrangements.
The underwriting strategy is intended to ensure that
the risks underwritten are well diversified in terms
of type of risk and the level of insured benefits.
Medical selection is also included in the Company’s
190 AIA Insurance Lanka PLC
Notes to the Consolidated
Financial Statements and Significant Accounting Policies
premium mode. From this investigation, crude
persistency rates are derived, allowing for all
of paid-up, lapse, surrender and revivals. Next,
the twenty four months weighted rates are
assessed and smoother assumptions are set.
underwriting procedures, with premiums varied
to reflect the health condition and family medical
history of the applicants. The Company has a
retention limit of LKR 1 Mn on any single life
insured. The Company reinsures the excess of the
insured benefit over LKR 1 Mn for standard risks
(from a medical point of view). Medically impaired
lives are charged higher insurance premiums.
Sources of uncertainty in the estimation of future
benefit payments and premium receipts
Uncertainty in the estimation of future benefit
payments and premium receipts for Long term
insurance contracts arises from the unpredictability
of long term changes in overall levels of mortality
and the variability in contract holder behaviour.
The Company uses appropriate base tables of
standard mortality according to the type of contract
being written. An investigation into the actual
experience of the Company over the last five years is
carried out and statistical methods are used to adjust
the crude mortality rates to produce a best estimate
of expected mortality for the future. Where data is
sufficient to be credible, the statistics generated by
the data are used without reference to a regulatory
table. Where this is not the case, the best estimate
of future mortality is based on standard regulatory
tables adjusted for the Company’s overall experience.
For contracts that insure survival, an adjustment
is made for future mortality improvements based
on trends identified in the continuous mortality
investigations performed by independent actuarial
bodies. The Company maintains voluntary
termination statistics to investigate the deviation of
actual termination experience against assumptions.
Statistical methods are used to determine
appropriate termination rates. An allowance is then
made for any trends in the data to arrive at a best
estimate of future termination rates.
c. Investment returns
d. Renewal expense level and inflation
Internal investigations covering five year
period are conducted by claim type, subdivided
by age. From these investigations crude
incidence rates are derived. Next, A/E ratios
are calculated and accordingly percentage
of standard mortality table is used for final
assumption.
b.Persistency
An internal investigation is conducted by
entry year and product type, subdivided by
Renewal expense levels are set by way of an
expense investigation into the expenses of the
Company over the last calendar year, with each
expense being classified as acquisition/renewal
and then being assigned a driver based on how
it may develop into the future. The expense
assumptions are verified for reasonableness
against the latest three year business plan.
Inflation margins are set based on an analysis of
historic data, comparing the risk free rate of return
with the relevant inflation index.
Change in assumptions and sensitivity analysis
The main insurance risks to the Life business are
claims and expense levels. A sensitivity analysis
was conducted in 2013 with 2 stresses, 110%
claims experience and 110% expense levels. In both
cases the impact to the policyholder liabilities of
assuming such a change was reflective of future
conditions was considered.
Increasing claim rates by 10% would lead to an
increase in policy liabilities of LKR 160 Mn, 0.72%
of the policy liability. Increasing expense rates by
10% would lead to an increase in policy liabilities of
LKR 11Mn, 0.05% of the policy liability. The increase
due to expenses is lower because the net premium
policyholder liability already allows for very prudent
expense levels.
Process used to decide on assumptions
a. Mortality / Morbidity
Investment returns are set based on a risk-free
basis by considering the valuation date forward
rates of government securities in the local
market.
5.2.2Non-life
Claim liability
In estimating the Central Estimate of Claim Liabilities
(CE-CL), the Chain Ladder and BornheutterFerguson on paid and reported methods is applied
for each class of business. This involves taking a view
and making assumptions on the future development
of settlement and reporting trends for each policy
year. Hence, the major assumption to be tested is an
increase or decrease of future development trends.
Annual Report 2013 191
The central estimate of the claim reserves are then
projected to secure an overall level of sufficiency of
not less than 75% confidence. In assessing the claim
liability at the 75% confidence level, we have derived
a new set of Provision of Risk Margin for Adverse
Deviation (PRAD), which was based on a Stochastic
Chain Ladder approach.
The variables tested were Claims Handling
Expenses (CHE), PRAD loadings and Loss
Development Factor (LDF) and the impact of those
on the 75% IBNR is given below.
It was found that a +/-10% change in the LDF has a
+/-14.41% impact on the 75% IBNR.
And it was found that a 200% increase in the PRAD
loading increases the 75% IBNR by 33.5% and a
50% decrease in the PRAD loading reduces the 75%
IBNR by 16.7%.
A 5% provision has been added to allow for the
claims handling expenses such as annual salary and
related overhead costs of the claims department.
Sensitivity of this assumption is given below.
A +/-10% change in the claims handling expenses
has a +/-1.5% impact on the 75% IBNR.
Premium liability
Trended Ultimate Loss Ratio (ULR) for each class
has been applied to the UPR to determine the
central estimate of the URR. A 5% provision for
claims handling expenses and a 15% provision
of UPR for management expenses have been
added on top of the central estimate of the URR.
Hence, claim handling expenses, the management
expenses and PRAD loadings are important
assumptions for the calculation of the provision for
unexpired risks and premium liability.
There is no impact to the premium liability in
stressing the expense variables since the UPR is
higher than the stressed URR and company holds
the UPR. However, we observe that the premium
liability is affected by a two-fold increase in the
PRAD loadings and it is a 2.5% increase.
5.3
Capital management
The focus of capital management is to maintain
a strong capital base to support the business and
business growth, and to satisfy regulatory capital
requirements at all times. In view of this the
Company has established the following objectives,
policies and approach.
-
To ensure financial and operational stability
of the business, thereby providing a degree of
confidence to policyholders.
-
To allocate capital efficiently and support the
growth of the business by ensuring that returns
on capital employed meets the requirements of
capital providers and of shareholders.
-
To maintain financial strength to support
new business growth and to satisfy the
requirements of the policyholders, regulators
and stakeholders.
-
To maintain healthy capital ratios in order
to support business objectives and optimise
shareholder value.
The responsibility for capital management is
entrusted to Chief Financial Officer (CFO) and as
such the CFO is a key participant in discussions and
decisions that impacts asset-liability management,
strategic asset allocation and solvency management.
The Company’s approach to managing capital
involves managing assets, liabilities and risks in
a coordinated and concerted manner, assessing
shortfalls between reported and required capital
levels on a regular basis and taking appropriate
actions to influence the capital position of the
Company in light of changes in economic conditions
and risk appetites. The capital requirements are
forecasted on a periodic basis, and assessed
against both the forecasted available capital and the
expected internal rate of return.
The Capital Risk Management Policy sets out the
risk appetite for capital management, crisis action
plan and contingency funding plan for the Company.
The Company has complied with the minimum
regulatory requirements as prescribed by the
regulator, the Insurance Board of Sri Lanka by
maintaining the margins well above the prescribed
levels for both Life and Non-life businesses. In
this respect the Company manages its capital
to be on par with minimum required regulatory
capital position. Management considers the
quantitative threshold of 100% sufficient to optimise
shareholders’ return while providing adequate
capital to write insurance business for both Life
insurance and Non-life insurance.
192 AIA Insurance Lanka PLC
Notes to the Financial Statements
6 Segment information
Operating segments are reported in a manner consistent with the internal reports provided to the chief operating decision
maker. The chief operating decision maker who is responsible for the allocation of resources and assessing performance of the
operating segments, has been identified as the Executive Committee that makes strategic decisions.
The Executive Committee considers the business from products and services perspective. Accordingly the Group is organised
into three operating segments as follows
1. The Life insurance segment offers a range of protection, Unit-linked and universal Life products.
2. The Non-life insurance segment comprises both Non-life insurance and healthcare. Non-life insurance products offered
include motor, household, commercial and business interruption insurance. Non-life healthcare contracts provide medical
cover to policyholders.
3. The trust management services are provided by a fully owned subsidiary, Rainbow Trust Management Limited.
The Executive Committee assesses the performance of the operating segments based on the measure of profit or loss.
6.1Segmental Income Statement
For the financial year ending 31 December 2013
Trust
Life
Non-life managementConsolidation
insurance insurance
servicesadjustments
Group
LKR’000LKR’000LKR’000LKR’000LKR’000
Insurance premium revenue
Reinsurance premium ceded Net earned premium
6,566,650 (253,541)
6,313,109 2,555,482 (674,831)
1,880,651 - - - - 9,122,132
- (928,372)
- 8,193,760
Asset management fees and related income
Investment income
Other income
Total segment revenue
- 3,808,401 354,954 10,476,464 - 599,580 38,009 2,518,240 370 - 332 702 - 370
(1,818) 4,406,163
- 393,295
(1,818) 12,993,588
Net benefits and claims
Transfer to the Long Term insurance fund
Net acquisition expenses
(5,652,349)
(753,963)
(815,996)
(1,097,830)
- (16,131)
- - - - (6,750,179)
- (753,963)
- (832,127)
Depreciation and amortisation Other operating and administrative expenses
- (2,717,691)
(104,628)
(1,013,621)
- (393)
- (104,628)
- (3,731,705)
Share of profit from associate
Profit before tax
Tax expenses
Profit for the year ended 31 December 2013
-
- - 2,395 2,395
536,465 (336,465)
286,030 12,471 309 (52)
577 (42)
823,381
(324,088)
200,000 298,501 257 535 499,293
Annual Report 2013 193
6.1Segmental Income Statement (contd.)
Trust
For the financial year ending 31 December 2012
Life
Non-life managementConsolidation
insurance insurance
servicesadjustments
Group
LKR’000LKR’000LKR’000LKR’000LKR’000
Insurance premium revenue
Reinsurance premium ceded Net earned premium
Asset management fees and related income
Investment income
Other income
Total segment revenue
6,495,863 (219,497)
6,276,366 -
3,490,753 267,251 10,034,370 2,495,036 (527,245)
1,967,791 -
536,842 90,205 2,594,838 - - - 1,675 - 356 2,031 Net benefits and claims
Transfer to the Long Term insurance fund
Net acquisition expenses
Depreciation and amortisation
Other operating and administrative expenses
Share of profit from associate
(3,163,294)
(3,672,697)
(757,551)
-
(1,925,678)
- (1,020,360)
- (137,875)
(96,758)
(659,351)
- - - - - (464)
- - - - - (1,505)
- (1,505)
8,990,899
(746,742)
8,244,157
1,675
4,026,090
357,812
12,629,734
- (4,183,654)
- (3,672,697)
- (895,426)
- (96,758)
- (2,585,493)
8,358 8,358
Profit before tax
515,150 680,494 1,567 6,853 1,204,064
Tax expenses
(320,150)
(35,279)
(294)
(434)
(356,157)
Profit for the year ended 31 December 2012
195,000 645,215 1,273 6,419
847,907
Management considers its external customers to be the individual policyholders, as such the Group is not reliant on any
individual customer.
6.2Segmental Statement of Financial Position
Trust
As at 31 December 2013
Life Non-life management Consolidation
insurance insurance
servicesadjustments
Group
LKR’000LKR’000LKR’000LKR’000LKR’000
Assets
Financial assets
Trade and other receivables
Reinsurance assets
Investment in subsidiary
Investment in associate
Property, plant and equipment
Intangible assets
Deferred tax assets
Other fund assets
Other assets
Cash and cash equivalents
Total assets
31,459,091 1,775,296 89,239 - 6,171 - 39,223 - - 1,551,894 521,517 35,442,431 4,967,055 808,548 1,015,411 1,000 13,213 303,473 715,105 20,688 181,806 437,801 272,293 8,736,393 - 85 - - - - - - - 245
3,496 3,826 Liabilities
Insurance liabilities
Retirement benefit obligations
Deferred tax liabilities
Other fund liabilities
Trade and other payables
Provisions
Current income tax liabilities
Deferred revenue
Bank overdraft
Total liabilities
33,812,294 - 124,756 - 690,265 681,010 76,320 6,298 51,488 35,442,431 2,755,899 214,627 -
181,806 280,645 577,551
109,254 74,195 3,966 4,197,943 - - - - -
435 (62)
- - 373 - 36,568,193
- 214,627
(20,688)
104,068
- 181,806
- 970,910
- 1,258,996
- 185,512
- 80,493
- 55,454
(20,688) 39,620,059
- - - - 35,442,431 300,000 72,096 4,166,354 4,538,450 8,736,393 1,000 - 2,453 3,453 3,826 (1,000)
300,000
- 72,096
44,430 4,213,237
43,430 4,585,333
22,742 44,205,392
Equity
Stated capital
Capital reserves
Revenue reserves
Total equity
Total equity and liabilities
- - - (1,000)
44,430 - - (20,688)
- - - 22,742 36,426,146
2,583,929
1,104,650
63,814
303,473
754,328
181,806
1,989,940
797,306
44,205,392
194 AIA Insurance Lanka PLC
Notes to the Financial Statements
6.2Segmental Statement of Financial Position (contd.)
As at 31 December 2012
Trust
Life Non-life management Consolidation
insurance insurance
servicesadjustments
Group
LKR’000LKR’000LKR’000LKR’000LKR’000
Assets
Financial assets
Trade and other receivables
Reinsurance assets
Investment in subsidiary
Investment in associate
Property, plant and equipment
Intangible assets
Deferred tax assets
Other fund assets
Other assets
Cash and cash equivalents
Total assets
29,508,622 1,805,752 98,378 - 6,171 - - - - 1,284,375 547,711 33,251,009 4,805,004 695,816 753,928 1,000 13,213 203,439 402,105 189 188,826 499,473 132,838 7,695,831
-
196 - - - - - - - 106 3,361 3,663 Liabilities
Insurance liabilities
Retirement benefit obligations
Deferred tax liability
Other fund liabilities
Trade and other payables
Provisions
Current income tax liabilities
Deferred revenue
Bank overdraft
Total liabilities
32,017,218 - - - 502,028 449,460 281,098 - 1,205 33,251,009 2,325,611 249,732 5,139 188,826 308,349 370,899 154,085 74,508 1,220 3,678,369 - - - - 4
230 230 - - 464 - 34,342,829
- 249,732
(189)
4,950
- 188,826
(96)
810,285
- 820,589
- 435,413
- 74,508
- 2,425
(285) 36,929,557
Equity
Stated capital
Capital reserves
Revenue reserves
Total equity
Total equity and liabilities
33,251,009
300,000 72,096 3,645,366 4,017,462 7,695,830 1,000 - 2,199 3,199 3,663 (1,000)
300,000
-
72,096
43,892 3,691,457
42,892 4,063,553
42,607 40,993,110
All the Group’s business segments operate in one main geographical area, hence they do not qualify for secondary reporting.
- (23)
- (1,000)
43,893 - - (189)
- (74)
- 42,607 34,313,626
2,501,741
852,306
63,277
203,439
402,105
188,826
1,783,880
683,910
40,993,110
Annual Report 2013 195
7 Financial assets
Financial assets are summarised by measurement category in the table below.
As at 31 December
Note
Fair value through profit or loss
7.1
Available for sale
7.2
Loans and receivables
7.3
2013
Group/ Company
2012
Carrying value
Fair value Carrying value
Fair value
LKR’000LKR’000LKR’000LKR’000
3,569,011 14,231,523 18,625,612 36,426,146 3,569,011 14,231,523 19,494,726 37,295,260 3,041,669 3,041,669
16,765,427 16,765,427
14,506,530 14,204,699
34,313,626 34,011,795 The fair values of the loans and receivables have been estimated by comparing current market interest rates for similar
instruments with the rates offered when the loans were first recognised, together with appropriate market credit adjustments
except for the loans and receivables considered to be current of which, fair value approximates the carrying value.
7.1Financial assets at fair value through profit or loss
Group/Company
As at 31 December
2013
2012
LKR’000
LKR’000
Investments in equity securities - listed
3,569,011 3,569,011 Financial assets at fair value through profit or loss
Current
Non current
3,569,011 3,041,669
- 3,569,011 3,041,669
3,041,669
3,041,669
Equity securities classified at fair value through profit or loss are designated in this category upon initial recognition.
There are no non-derivative financial assets held for trading.
7.2Available for sale financial assets
Group/Company
As at 31 December
2013
2012
LKR’000
LKR’000
Government securities
14,231,523 16,765,427
14,231,523 16,765,427
Available for sale financial assets
Current
Non current
352,111 6,828,997
13,879,412 9,936,430
14,231,523 16,765,427
At the reporting date there were no available for sale assets that were overdue but not impaired.
196 AIA Insurance Lanka PLC
Notes to the Financial Statements
7 Financial assets (contd.)
7.3Loans and receivables
Group/Company
As at 31 December
2013
2012
LKR’000
LKR’000
Corporate debt -listed
Corporate debt -unlisted
Reverse repurchase agreements
Bank deposits
8,393,335 1,563,072
80,000 80,000
6,082,287 11,925,395
4,069,990 938,063
18,625,612 14,506,530
Loans and receivables
Current
Non current
10,127,277 13,381,550
8,498,335 1,124,980
18,625,612 14,506,530
The Group holds collaterals for the reverse repurchase agreements. Generally the collaterals are pledged with an excess of
10% or more of the amortised value of the reverse repurchase agreement in terms of face value of the security pledged.
The fair value of those collaterals held are as follows;
Group/Company
As at 31 December
2013
2012
LKR’000
LKR’000
Financial assetNature of the collateral
Reverse repurchase agreements- Government treasury bills
1,040,378 3,508,815
- Government treasury bonds
6,292,185 10,723,874
7,332,563 14,232,689
7.4Movement in the Group’s financial assets are summarised by measurement category:
Fair value through profit Available for
Loans and
or loss
sale receivables Total
LKR’000LKR’000LKR’000LKR’000
Balance as at 01 January 2013
Purchases
(Sales)/ (maturities)
Realised gains/(losses)
Amortisation of discount /(premium)
Fair value gains/ (losses) recorded in the Income Statement
Fair value gains/ (losses) recorded in the Statement of
Other Comprehensive Income
Balance as at 31 December 2013
3,041,669
16,765,427
14,506,530 34,313,626
1,591,228 15,749,612 39,363,947 56,704,787
(1,187,864) (19,599,616) (36,281,460) (57,068,940)
98,911 13,313 - 112,224
- 325,887 1,036,595 1,362,482
25,067 - - 25,067
- 976,900 3,569,011 14,231,523 - 976,900
18,625,612 36,426,146
Annual Report 2013 197
7 Financial assets (contd.)
7.5Determination of fair value and fair value hierarchy
Group/Company
As at 31 December
2013
2012
LKR’000
LKR’000
Level 1
Financial assets at fair value through profit or loss
Equity instruments - listed Level 2
Available for sale financial assets
Government securities 3,569,011 3,041,669
14,231,523 16,765,427
17,800,534 19,807,096
8 Trade and other receivables
GroupCompany
As at 31 December
2013201220132012
LKR’000
LKR’000
LKR’000
LKR’000­­­
Policy loans
Agent loans
Staff loans
Trade receivables
Amounts receivable from reinsurers
1,634,647 134,242 106,281 582,473 57,643 2,515,286 1,449,008 189,315 84,981 853,092 25,974 2,602,370 1,634,647
134,242
106,281
582,277
57,643
2,515,090
(Less) Provision for impairment
- Agent loans
(4,930)
(4,226)
-Trade receivables
(13,596)
(9,319)
(18,526)
(13,545)
(4,930)
(13,596)
(18,526)
(4,226)
(9,319)
(13,545)
1,449,008 189,315 84,981 853,177 25,974 2,602,455 2,583,929 2,501,741 2,583,844 2,501,545
Trade and other receivables
Current
Non current
984,158 1,599,771 2,583,929 708,385 1,793,356 2,501,741 984,073 1,599,771 2,583,844 708,189
1,793,356
2,501,545
The Group holds the collaterals against the agent loans and staff loans amounting LKR 109,600,000 and 52,950,000 respectively
as at 31 December 2013 (2012 - LKR 190,400,000 and LKR 62,000,000).
8.1 Movement in trade and other receivables:
Group
Company
LKR’000
LKR’000
Balance as at 01 January 2013
Revenue receivable from customers
Collection of cash from customers
Foreign exchange revaluation difference
Loans granted during the period
Loan repayments during the period
Amortisation of discount/ (premium) and deferred benefits
Movement in impairment allowance
Balance as at 31 December 2013
2,501,741
3,719,309 (3,482,822)
2,548 1,020,261 (1,178,447)
6,318 (4,979)
2,583,929 2,501,545
3,718,924
(3,482,326)
2,548
1,020,261
(1,178,447)
6,318
(4,979)
2,583,844
198 AIA Insurance Lanka PLC
Notes to the Financial Statements
8 Trade and other receivables (contd.)
8.2 The reconciliation of the provision for impairment losses on assets classified as loans and receivables is as follows:
Group/Company
LKR’000
Balance as at 01 January 2013
Additional provision for impairment during the period
Reversal of provision for impairment
Write off of loans and receivables
Balance as at 31 December 2013
13,545
5,042
(61)
18,526
A specific impairment provision has been made against each of the individually impaired financial assets for the full amount of
impairment.
9 Reinsurance assets
Group/Company
As at 31 December
2013
2012
LKR’000
LKR’000
Reinsurers’ share of outstanding claims and expenses
Reinsurers’ share of policy liabilities
Total assets arising from reinsurance contracts
818,171 286,479 1,104,650 585,460
266,846
852,306
Reinsurance assets
Current
Non current
1,104,650 -
1,104,650 852,306
852,306
As per the contractual arrangements, the reinsurer is committed to reimburse the losses only upon payment of the claims to
the clients and hence no reinsurance asset is past due which may lead to a provision for impairment.
Amounts due from reinsurers in respect of claims already paid by the Group on the contracts that are reinsured are included in
trade and other receivables (Note 8).
The Group does not hold any collateral as security against potential default by reinsurance counterparties.
10 Investment in subsidiary
Company
As at 31 December
2013
2012
Number of
LKR’000
LKR’000
Shares
Rainbow Trust Management Limited
100,000 100,000 1,000 1,000 The Company holds 100% of the share capital of Rainbow Trust Management Limited throughout all periods presented.
1,000
1,000
Annual Report 2013 199
11 Investment in associate
Group
Company
LKR’000
LKR’000
As at 01 January 2013
Share of profit - net of tax
Dividend received
As at 31 December 2013
63,277 2,556 (2,019)
63,814 Investment in associate as at 31 December 2013 include goodwill of LKR 11,276,669 (2012 - LKR 11,276,669).
The Group’s interest in its associate, Serendib Land PLC which is a listed company is given below:
19,384
19,384
Assets
Liabilities
Revenue Profit/ (Loss)
%
LKR’000LKR’000LKR’000LKR’000
Interest held
As at 31 December 2012
As at 31 December 2013
257,845 258,776 24,059 24,606 12,600 13,140 35,811 9,332 22
22
The fair value of the investment in associate is LKR 88,844,800 (2012 - LKR 145,301,632) which is based on the quoted market
price prevailed at the date of the Statement of Financial Position.
The profit of the associate for the year ending 31 December 2012 include a fair value gain of LKR 17,777,834 on its investment
property and reversal of deferred income tax of LKR 8,316,000 on account of the change in fair value of investment property and
changes in effective tax rate.
12 Property, plant and equipment
Group
Plant and Computer
Furniture
Motor
Freehold land
machinery
equipment
and fittings
vehicles
Total
LKR’000LKR’000LKR’000LKR’000LKR’000LKR’000
Cost/ revaluation
(Less) Accumulated depreciation
Net book value as at 01 January 2013
89,180 - 89,180 29,082 (28,120)
962 Net book value as at 01 January 2013
Additions
Disposals
Depreciation charge
Accumulated depreciation in disposals
Net book value as at 31 December 2013
89,180 - - - - 89,180 Cost/ revaluation
(Less) Accumulated depreciation
Net book value as at 31 December 2013
89,180 - 89,180 Property, plant and equipment includes fully depreciated assets still in use, the gross carrying value of which amounted to LKR
548,276,216 (2012 - LKR 481,046,728) as at the date of Statement of Financial Position.
962 - - (123)
-
839 29,082 (28,243)
839 346,819 (303,827)
42,992 243,434 (185,418)
58,016 42,992 144,083 (12,786)
(44,356)
12,654 142,587 58,016 32,330 (2,838)
(24,401)
2,742 65,849 477,154 (334,567)
142,587 272,699 (206,850)
65,849
129,006 (116,717)
12,289 12,289 210 - (7,481)
- 5,018 129,219 (124,201)
5,018 837,521
(634,082)
203,439
203,439
176,623
(15,624)
(76,361)
15,396
303,473
997,334
(693,861)
303,473
200 AIA Insurance Lanka PLC
Notes to the Financial Statements
12 Property, plant and equipment (contd.)
Company
Plant and Computer
Furniture
Motor
Freehold land
machinery
equipment
and fittings
vehicles
Total
LKR’000LKR’000LKR’000LKR’000LKR’000LKR’000
Cost/ revaluation
(Less) Accumulated depreciation
Net book value as at 01 January 2013
89,180 - 89,180 29,082 (28,120)
962 346,546 (303,554)
42,992 243,214 (185,198)
58,016 129,006 (116,717)
12,289 837,028
(633,589)
203,439
Net book value as at 01 January 2013
Additions
Disposals
Depreciation charge
Accumulated depreciation in disposals
Net book value as at 31 December 2013
89,180 -
-
-
-
89,180 962 -
-
(123)
-
839 42,992 144,083
(12,786)
(44,356)
12,654 142,587 58,016 32,330 (2,838)
(24,401)
2,742 65,849 12,289 210
-
(7,481)
-
5,018 203,439
176,623
(15,624)
(76,361)
15,396
303,473
Cost/ revaluation
(Less) Accumulated depreciation
Net book value as at 31 December 2013
89,180 -
89,180 29,082
(28,243)
839 476,894 (334,307)
142,587 272,478 (206,629)
65,849
129,219 (124,201)
5,018 996,853
(693,380)
303,473
Property, plant and equipment includes fully depreciated assets still in use, the gross carrying value of which amounted to LKR
547,795,346 (2012 - LKR 480,565,858) as at the date of Statement of Financial Position.
The Freehold land at No.76 and 80, Kew Road, Colombo 2 was last revalued on 30 November 2012 by independent valuer, Mr.
B. L. Ariyatillake - Chartered Valuer approved by IBSL. Valuation was made on the basis of open market value. The revaluation
surplus was credited to other reserves in shareholders’ equity (Note 26)
If stated on historical cost basis, the value of the land would be LKR 17,084,105 (2012 - LKR 17,084,105)
12.1 Capital commitments - Property, plant and equipment
Capital expenditure on property, plant and equipment approved by the Board of Directors is as follows.
As at 31 December
2013
2012
LKR’000
LKR’000
Approved and contracted forproperty, plant and equipment
78,234
59,288
Annual Report 2013 201
13 Intangible assets including intangible insurance assets
Group / Company
Deferred acquisitionContractual Computer
costrelationships
software
Total
LKR’000LKR’000LKR’000LKR’000
Cost
(Less) Accumulated amortisation Net book value as at 01 January 2013
206,942 (121,736)
85,206 262,480 - 262,480 415,018 (360,599)
54,419 884,440
(482,335)
402,105
Net book value as at 01 January 2013
Acquisition cost for the period
Additions
(Less) Amortisation charge
Net book value as at 31 December 2013
85,206 280,211 - (213,805)
151,612 262,480 - 45,386 (13,124)
294,742 54,419 -
281,822 (28,267)
307,974 402,105
280,211
327,208
(255,196)
754,328
Cost
(Less) Accumulated amortisation Net book value as at 31 December 2013
295,539 (143,927)
151,612 307,866 (13,124)
294,742 696,840 (388,866)
307,974 1,300,245
(545,917)
754,328
The useful life of assets relating to contractual relationships are determined by contract type and lie within individual contract
terms.
Deferred acquisition costs are amortised on the same basis of amortising the unearned premiums through out the term of the
Non-life insurance policy.
Intangible assets includes fully amortised assets still in use, the gross carrying value of which amounted to LKR 323,218,269
(2012 - LKR 318,151,316) as at the date of Statement of Financial Position.
13.1 Disclosure on reporting of amortisation of intangible assets
The amortisation charge of the intangible items is shown in the following categories of expenses in the Income Statement.
Item
Line item in Income Statement
Deferred acquisition cost
Net acquisition expenses
Contractual relationships
Operating and administrative expenses
Computer software
Operating and administrative expenses
13.2 Capital commitments - intangible assets
Capital expenditure on intangible assets approved by the Board of Directors is as follows.
As at 31 December
2013
2012
LKR’000
LKR’000
Approved and contracted for intangible assets
46,642 34,931
202 AIA Insurance Lanka PLC
Notes to the Financial Statements
14 Other fund assets
As at 31 December Government securities
Unit trusts
Eagle Income Fund
Eagle Growth Fund
Eagle Gilt Edged Fund
Other assets
Cash at bank
Total
Group / Company
2013
2012
Carrying Carrying
value
Cost
value
Cost
LKR’000LKR’000LKR’000LKR’000
173,389
164,047 171,186 164,952
- 1,873
2,788
59
3,697
181,806
- 1,889 2,785 59 3,697 172,477 12,986 1,683 2,659
- 312 188,826 12,516
1,889
2,647
312
182,316
Carrying value of investments in Government securities and unit trusts are reported at cost plus accrued interest and market value
respectively.
15 Other assets
GroupCompany
As at 31 December
2013201220132012
LKR’000
LKR’000
LKR’000
LKR’000­­­
Inventory
Investment debtors
Interest and dividend receivable
Advance company tax recoverable
Withholding tax recoverable
Deposits
Prepayments and advances Capital work in progress
Other receivables
9,945 44,634 1,306,964 66,397 389,203 16,566 151,405 4,826 - 1,989,940 4,835 10,234 791,564 66,397 643,718 15,663 124,895 126,402 172 1,783,880 9,945 4,835
44,634 10,234
1,306,964 791,564
66,397 66,397
389,169 643,686
16,566 15,663
151,194 124,895
4,826 126,402
- 172
1,989,695 1,783,848
16 Cash and cash equivalents
GroupCompany
As at 31 December
2013201220132012
LKR’000
LKR’000
LKR’000
LKR’000­­­
Cash at bank and in hand
Bank overdrafts
797,306 (55,454)
741,852 683,910 (2,425)
681,485 Cash and cash equivalents include the bank overdraft for the purpose of Statement of Cash Flows.
793,810 (55,454)
738,356 680,549
(2,425)
678,124
Annual Report 2013 203
17 Insurance liabilities and related reinsurance assets
Group/Company
As at 31st December 2013
2012
GrossReinsurance
Net
Gross Reinsurance
Net
Note
LKR’000LKR’000LKR’000LKR’000LKR’000LKR’000
Long term policy liability
17.1 33,635,105 Life claims provision
17.2
177,189 Total life insurance contracts
33,812,294 Unearned premium reserve
17.3
Claims reported and loss
adjustment expenses
17.4
Claims incurred but not reported 17.4
Total Non life insurance contracts
Total insurance contract liabilities
- 33,635,105 89,239 87,950 89,239 33,723,055 31,812,108 205,110 32,017,218 - 31,812,108
98,378 106,732
98,378 31,918,840
1,375,107 286,479 1,088,628 1,257,580 266,846 990,734
1,008,512 372,280 2,755,899 540,010 188,922 1,015,411 468,502 183,358 1,740,488 822,944 245,087 2,325,611 392,150 94,932 753,928 430,794
150,155
1,571,683
36,568,193 1,104,650 35,463,543 34,342,829 852,306 33,490,523
17.1 Long Term policy liability
Group/Company
Gross Re insurance
Net
LKR’000LKR’000LKR’000
Balance as at 01 January 2013
Expected increase in the policy liability during the year
Actual experience variance
Movement in inadmissible assets Solvency margin & surplus with the market movements
Movement in AFS reserve transferred to Long Term insurance fund
Balance as at 31 December 2013
31,812,108 1,811,203 (1,012,133)
(493,595)
714,668 802,854
33,635,105
-
-
31,812,108
1,811,203
(1,012,133)
(493,595)
714,668
802,854
33,635,105
17.2 Life claims provision
Gross Re insurance
Net
LKR’000LKR’000LKR’000
Balance as at 01 January 2013
Provisions for claims intimated during the period
Liabilities released for benefits paid to clients
Balance as at 31 December 2013
205,110 6,376,535
(6,404,456)
177,189 98,378
280,722
(289,861)
89,239 106,732
6,095,813
(6,114,595)
87,950
204 AIA Insurance Lanka PLC
Notes to the Financial Statements
17 Insurance liabilities and related reinsurance assets (contd.)
17.3 Provision for unearned premium and unexpired risk
GrossReinsurance
Net
LKR’000LKR’000LKR’000
Balance as at 01 January 2013
Written premiums transferred to unearned premium reserve
Released to income statement during the period
Increase/(decrease) in unexpired risk provision during the period
Balance as at 31 December 2013
1,257,580 2,654,713 (2,537,186)
-
1,375,107 266,846 990,734
625,110 2,029,603
(605,477) (1,931,709)
- 286,479 1,088,628
These provisions represent the liability for short-term insurance contracts for which the Group’s obligations are not expired at
year end. The unexpired risk provision relates to the casualty insurance contracts for which the Group expects to pay claims in
excess of the related unearned premium provision.
17.4 Claims and loss adjustment expenses
GrossReinsurance
Net
LKR’000LKR’000LKR’000
Balance as at 01 January 2013
- Notified claims
-Incurred But Not Reported (IBNR)
822,944 245,087 1,068,031 392,150 94,932 487,082 430,794
150,155
580,949
Provisions for claims intimated during the period
Liabilities released for benefits paid to clients
Increase/ (decrease) in provision for IBNR
Net movement during the period
1,398,961 (1,213,393)
127,193 312,761 249,222 (101,363)
93,991 241,850 1,149,739
(1,112,030)
33,202
70,911
Balance as at 31 December 2013
- Notified claims
- Incurred but not reported
1,008,512 372,280 1,380,792 540,010 188,922 728,932 468,502
183,358
651,860
Annual Report 2013 205
17 Insurance liabilities and related reinsurance assets (contd.)
17.5 Development claim tables
In addition to scenario testing, the development of insurance liabilities provides a measure of the Group’s ability to estimate
the ultimate value of claims. The top half of each table below illustrates how the Group’s estimate of total claims outstanding
for each accident year has changed at successive year ends. The bottom half of the table reconciles the cumulative claims to
the amount appearing in the consolidated Statement of Financial Position. An accident year basis is considered to be most
appropriate for the business written by the Group.
Insurance claims — gross
Reporting year
200820092010201120122013
LKR’000LKR’000LKR’000LKR’000LKR’000LKR’000
Estimate of ultimate claims costs:
– At end of reporting year
– One year later
– Two year later
– Three year later
– Four year later
– Five year later
1,519,840 1,389,499 1,376,046 1,390,307 1,385,749 1,472,659 1,240,745 1,165,674 1,149,045 1,137,262 1,135,463 -
2,072,298 1,876,844 1,842,802 1,841,240 -
-
1,736,109 1,569,501 1,583,155 -
-
-
1,386,105 1,294,317 -
-
-
-
1,426,920
-
Current estimate of cumulative claims
Cumulative payments to date
1,472,659 1,126,168 1,135,463 1,116,857 1,841,240 1,794,823 1,583,155 1,398,589 1,294,317 1,119,087 1,426,920
929,879
Liability recognised in the Statement of
Financial Position
346,491 18,607 46,417 184,567 175,230 497,041
Reserve in respect of prior years
Total reserve included in
Statement of Financial Position
112,440 458,930 477,537 523,955 708,521 883,751
458,930 477,537 523,955 708,521 883,751 1,380,792
Insurance claims — net
Reporting year
200820092010201120122013
LKR’000LKR’000LKR’000LKR’000LKR’000LKR’000
Estimate of ultimate claims costs:
– At end of reporting year
– One year later
– Two year later
– Three year later
– Four year later
– Five year later
971,575 901,929 900,732 898,838 893,008 902,301 986,804 906,544 899,904 892,657 890,860 -
1,707,454 1,590,341 1,573,683 1,569,366 -
-
1,547,183 1,422,008 1,431,331 -
-
-
1,217,619 1,125,790 -
-
-
-
1,176,482
-
Current estimate of cumulative claims
Cumulative payments to date
902,301 846,362 890,860 872,882 1,569,366 1,532,096 1,431,331 1,356,717 1,125,790 1,053,419 1,176,482
878,054
Liability recognised in the Statement of
Financial Position
Reserve in respect of prior years
Total reserve included in
Statement of Financial Position
55,940 15,140 17,979 71,080 37,270 89,058 74,614 126,328 72,371 200,942 298,428
353,432
71,080 89,058 126,328 200,942 273,313 651,860
206 AIA Insurance Lanka PLC
Notes to the Financial Statements
18 Retirement benefit obligations
The Group has a retirement benefit scheme for the gratuity liability of its employees which is wholly unfunded. There is no
change in the scheme for the retirement gratuity obligations during the financial year.
The retiring gratuity is a statutory requirement in Sri Lanka under the Payment of Gratuity Act No 12 of 1983.
Group/Company
As at 31 December
2013
2012
LKR’000
LKR’000
Amount of liability recognised in the Statement of Financial Position
Amounts recognised in the consolidated Income Statement
Amounts recognised in the Statement of Other Comprehensive Income
214,627 47,591
(75,314)
249,732
(71,051)
67,459
The movement in the defined benefit obligation is as follows:
Group/Company
LKR’000
Balance as at 01 January 2013
249,732
Current service cost
26,364
Interest cost
21,227
47,591
Remeasurements:
(Gains)/ losses from change in financial assumptions
(17,412)
Experience (gains) / losses
(57,902)
(75,314)
Benefits paid
(7,382)
Balance as at 31 December 2013
214,627
The principal actuarial assumptions used in determining the retirement benefit obligation are as follows:
2013
2012
% per annum % per annum
Future salary increases
14.00
16.00
Discount rate
10.00
8.50
Member withdrawal rate
10.00
10.00
Sensitivity analysis of key actuarial assumptions used
Group/Company
Future salary increases
discount rate
Member withdrawal rate
1% increase 1% decrease 1% increase 1% decrease 1% increase 1% decrease
LKR’000LKR’000LKR’000LKR’000LKR’000LKR’000
The effect on;
- The current service cost
- Interest cost
2,071 -
(1,841)
-
(1,970)
-
2,267 -
(550)
-
630
-
Amounts for the current and previous four periods are as follows:
20132012201120102009
Defined benefit obligation
The below table provides the expected maturity analysis of defined benefit obligations.
As at 31 December 2013 (LKR ‘000)
Defined Benefit obligation
214,627 Less than 1 year
1,192
249,732 1-5 years
41,187
152,358 Above 5 years
172,248
144,561 154,836
Total
214,627
Annual Report 2013 207
19 Deferred tax liability
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation
authority on the taxable entity.
Group/Company
As at 31 December
2013
2012
LKR’000
LKR’000
Deferred tax assets:
Deferred tax asset to be recovered after more than 12 months
Deferred tax asset to be recovered within 12 months
60,095 - 60,095 189
189
Deferred tax liabilities:
Deferred tax liability to be recovered after more than 12 months
(164,163)
(5,139)
Deferred tax liability to be recovered within 12 months
- (164,163)
(5,139)
Total
(104,068)
(4,950)
The closing balance of deferred tax liability relates to the following;
Accelerated depreciation for tax purposes
(33,379)
(4,950)
Deferred tax on post employment benefit obligations
60,095
Movement in fair value of AFS reserves
(130,784)
(104,068)
(4,950)
Note
LKR’000
The net movement on the deferred income tax account is as follows:
As at 01 January 2013
Amounts recorded in the Income Statement
36
Amounts recorded in Other Comprehensive Income
As at 31 December 2013
(4,950)
52,754
(151,872)
(104,068)
208 AIA Insurance Lanka PLC
Notes to the Financial Statements
20 Other fund liabilities
A brief description and the movement of each fund is given below.
20.1 Claims fund - Non-life insurance
This fund consists of amounts received by AIA Insurance Lanka PLC from Zurich Group Reinsurance on portfolio transfer (on a
clean-cut basis). These funds are invested in Government securities and they are to be utilised upon settlement of claims.
Group/Company
LKR’000
Balance as at 01 January 2013
42,020
Capital withdrawals
(26,392)
Investment income
3,861
Balance as at 31 December 2013
19,489
20.2 Scholarship fund
This fund is created to ensure continuity of the payments committed to Policyholders’ children who have been awarded
scholarships under the Company’s Life policy scholarship schemes. The fund invests 100% in Eagle Mutual funds.
Group/Company
LKR’000
Balance as at 01 January 2013
4,342
Capital withdrawals
(162)
Investment income
481
Balance as at 31 December 2013
4,661
20.3 Agents superannuation fund
This fund is created for the benefit of the Agency Force. The fund accumulates contributions from both the Company and
Agents, based on a qualifying performance criteria which is a fixed percentage linked to their commissions. The fund invests
100% in Government securities.
Group/Company
LKR’000
Balance as at 01 January 2013
142,464
Capital deposits
53,677
Capital withdrawals
(56,447)
Investment income
17,962
Balance as at 31 December 2013
157,656
Total other fund liabilities
As at 31 December 2013
As at 01 January 2013
181,806
188,826
Annual Report 2013 209
21 Trade and other payables
GroupCompany
As at 31 December
2013201220132012
LKR’000
LKR’000
LKR’000
LKR’000­­­
Policyholders’ advance payments
Agency commission payable
Franchise fee payable
Government taxes and levies
Reinsurance payable
Other creditors
249,028 286,052 79,600 35,221 210,259 110,750 970,910 239,351 201,804 88,132 34,175 167,270 79,553 810,285 249,028 286,052 79,600 35,221 210,259 110,750 970,910 239,351
201,804
88,132
34,172
167,271
79,625
810,355
946,857
24,053 970,910 766,251 44,034 810,285 946,857 24,053 970,910 766,321
44,034
810,355
Trade and other payables
Current
Non current
22Provisions
GroupCompany
As at 31 December
2013201220132012
LKR’000
LKR’000
LKR’000
LKR’000­­­
Provisions for accrued expenses
Operating lease payable
1,257,279 1,717 1,258,996 804,674 15,915 820,589 1,256,844 1,717 1,258,561 804,443
15,915
820,358
Provisions
Current
Non current
1,256,254 2,742 1,258,996 820,341 248 820,589 1,255,819 2,742 1,258,561 820,110
248
820,358
22.1 Movement in the provisions:
Group
Company
LKR’000
LKR’000
Balance as at 01 January 2013
Provisions during the year
Payments during the year
Reversals during the year
Balance as at 31 December 2013
820,589 1,592,642 (970,300)
(183,935)
1,258,996 820,358
1,592,088
(969,950)
(183,935)
1,258,561
23 Current income tax liabilities
Group
Company
LKR’000
LKR’000
Balance as at 01 January 2013
Provision
Payments
(Over)/under provisions and set off against ESC & WHT
Balance as at 31 December 2013
435 ,413
185,630 (310)
(435,221)
185,512
435 ,183
185,575
(435,184)
185,574
210 AIA Insurance Lanka PLC
Notes to the Financial Statements
24 Deferred revenue
24.1 The Group defers the commission income from reinsurance and coinsurance arrangements.
Group/Company
As at 31 December
2013
2012
LKR’000
LKR’000
Deferred reinsurance commission Reinsurance recovered in advance on waiver-of-premium (WOP) claims
74,195 6,298 80,493 74,508
74,508
24.2 Movement in deferred revenue:
Group/Company
LKR’000
Balance as at 01 January 2013 Reinsurance commission deferred during the period
Reinsurance commission released to income statement
Reinsurance recovered in advance in WOP claims
Balance as at 31 December 2013 74,508
184,289
(184,602)
6,298
80,493
The expected realisation of the deferred revenue is as follows:
Current
Non current
Balance as at 31 December 2013
80,493
80,493
25 Stated capital
As at 31 December
2013
2012
No. of shares
LKR’000 No. of shares
LKR’000
Fully paid ordinary shares
30,000,000 300,000 30,000,000 300,000
26 Capital reserves
Revaluation reserve
Revaluation reserve consists of the net surplus on the revaluation of property, plant and equipment as described in Note 12.
Group/Company
2013
2012
LKR’000
LKR’000
Balance as at 01 January
Revaluation surplus arising during the year
Balance as at 31 December
72,096 - 72,096 39,916
32,180
72,096
Annual Report 2013 211
27 Revenue reserves
27.1 Resilience reserve
A resilience reserve of LKR 65 Mn was established in 2004 with funds appropriated from profits in order to strengthen the capability
of the Company to meet temporary variations in asset values of the business. This reserve has been further strengthened by
appropriation from profits.
GroupCompany
As at 31 December
2013201220132012
LKR’000
LKR’000
LKR’000
LKR’000­­­
289,000 - 289,000 Balance as at 01 January
Appropriation from profits
Balance as at 31 December
289,000 - 289,000 289,000 - 289,000 289,000
289,000
27.2 Available for sale reserve
GroupCompany
As at 31 December
Balance as at 01 January
Movement during the year
Balance as at 31 December
2013
LKR’000
(27,759)
43,261 15,502 2012
LKR’000
36,734 (64,493)
(27,759)
2013
LKR’000
(27,759)
43,261
15,502 2012
LKR’000­­­
36,734 (64,493)
(27,759)
27.3 Retained earnings
GroupCompany
As at 31 December
2013
LKR’000
2012
LKR’000
2013
LKR’000
2012
LKR’000­­­
AIA Insurance Lanka PLC
Rainbow Trust Management Limited.
Serendib Land Company PLC
Total revenue reserves
3,861,852 2,453 44,430 3,908,735 3,384,125 2,199 43,892 3,430,216 3,861,852 -
-
3,861,852 3,384,125
3,384,125
4,213,237 3,691,457 4,166,354 3,645,366
28 Insurance premium revenue
Group/Company
For the financial year ended 31 December 20132012
LKR’000
LKR’000
Life insurance
Gross written premium
6,863,047 6,495,863
Change in unearned premium reserve
(296,397)
6,566,650
6,495,863
Non-life insurance
Gross written premium
2,673,009 2,400,300
Change in unearned premium reserve
(117,527)
94,736
2,555,482 2,495,036
9,122,132 8,990,899
212 AIA Insurance Lanka PLC
Notes to the Financial Statements
29 Reinsurance premium ceded
Group/Company
For the financial year ended 31 December 20132012
LKR’000
LKR’000
Life insurance
Reinsurance premium
(253,493)
(219,497)
Change in reinsurance on unearned premium (48)
(253,541)
(219,497)
Non-life insurance
Reinsurance premium
Change in reinsurance on unearned premium (694,464)
19,633 (674,831)
(928,372)
(594,947)
67,702
(527,245)
(746,742)
30 Investment income
GroupCompany
For the financial year ended 31 December
Financial assets at fair value through profit or loss
Dividend income
Unrealised gains/ (losses)
Realised gains/ (losses)
Loans and receivables
Interest income
Available for sale financial assets
Interest income
Dividend income
Realised gains/ (losses)
2013201220132012
LKR’000
LKR’000
LKR’000
LKR’000­­­
142,764 25,067 98,911 86,847 202,116 (117,654)
144,003 25,067 98,911 87,949
202,115
(117,654)
1,967,874 1,565,237 1,967,874 1,565,237
2,158,234 - 13,313 4,406,163 2,311,687 10,520 (32,663)
4,026,090 2,158,234 579 13,313 4,407,981 2,311,687
10,924
(32,663)
4,027,595
Interest income includes the interest from Government securities amounting to LKR 3,304,265,247 (2012- LKR 3,502,008,769).
Notional withholding tax included in the interest income is LKR 330,426,524 (2012- LKR 350,200,877)
31 Other income
GroupCompany
For the financial year ended 31 December
Interest income on other loans and receivables
Policy loans
Other loans
Gain on disposal of property, plant and equipment
Other technical income
Other non technical income
Interest income on cash and cash equivalents
2013201220132012
LKR’000
LKR’000
LKR’000
LKR’000­­­
284,099 24,219 1,069 24,236 39,723 19,949 393,295 242,540 29,584 7,009 50,749 10,584 17,346 357,812 284,099 24,219 1,069 24,236 39,724 19,616 392,963 242,540
29,584
6,993
50,749
10,584
17,006
357,456
Annual Report 2013 213
32 Net benefits and claims
Group/Company
For the financial year ended 31 December
2013
2012
LKR’000
LKR’000
Gross benefits and claims
Gross benefits and claims paid- Life insurance
Change in claims provision during the year - Life insurance
Gross benefits and claims paid- Non-life insurance
Change in claims provision during the year - Non-life insurance
Reinsurance recoveries on benefits and claims
Reinsurance recoveries on paid claims- Life insurance
Change in reinsurance on claims provision during the year- Life insurance
Reinsurance recoveries on paid claims- Non-life insurance
Change in reinsurance on claims provision during the year- Non-life insurance
Net benefits and claims
(5,781,886)
27,921
(1,163,725)
(312,761)
(7,230,451)
(3,231,824)
(30,915)
(1,196,247)
65,839
(4,393,147)
110,755 (9,139)
101,915 276,741 480,272 (6,750,179)
94,777
4,668
60,698
49,350
209,493
(4,183,654)
33 Net acquisition expenses
Group/Company
For the financial year ended 31 December
2013
2012
LKR’000
LKR’000
Gross acquisition expenses
Gross acquisition expenses- Life insurance
Franchise fees - Life insurance
(852,546)
(33,228)
(803,335)
(7,370)
Gross acquisition expenses- Non-life insurance
Change in gross deferred acquisition expenses- Non-life insurance
(214,133)
35,072 (212,035)
(18,273)
Franchise fees - Non-life insurance
Change in franchise fees - DAC - Non-life insurance
(10,652)
(7,890)
(1,083,377)
(10,392)
(24,369)
(1,075,774)
Reinsurance commission
Reinsurance commission- Life insurance
69,778 53,155
Reinsurance commission- Non-life insurance
181,159 147,025
Change in deferred acquisition expenses (RI)- Non-life insurance
313 (19,832)
251,250 180,348
(832,127)
(895,426)
214 AIA Insurance Lanka PLC
Notes to the Financial Statements
34 Operating and administrative expenses
GroupCompany
For the financial year ended 31 December
2013201220132012
NoteLKR’000LKR’000LKR’000LKR’000­­­
Employee benefit expenses
34.1
Administration and establishment expenses
Selling expenses Amortisation of intangible assets
Depreciation
Other expenses
34.2
(1,463,951)
(1,094,691)
(836,155)
(672,467)
(1,278,255)
(670,126)
(28,267) (22,685)
(76,361)
(74,074)
(153,344)
(148,208)
(3,836,333)
(2,682,251)
(1,463,951)
(835,826)
(1,278,255)
(28,267)
(76,361)
(153,280)
(3,835,940)
34.1 Employee benefit expenses
Salaries and bonus
Contribution to defined contribution plans
Contribution to defined benefit plans
18 Staff welfare
Staff training
Others
(712,792)
(71,598)
(47,591) (42,845)
(33,964)
(555,161)
(1,463,951)
(712,792)
(647,874)
(71,598)
(66,139)
(47,591) 71,051
(42,845)
(59,233)
(33,964)
(30,221)
(555,161)
(361,903)
(1,463,951) (1,094,319)
(647,887)
(66,139)
71,051 (59,234)
(30,225)
(362,257)
(1,094,691)
(1,094,319)
(672,375)
(670,126)
(22,685)
(74,074)
(148,208)
(2,681,787)
34.2 Other expenses
GroupCompany
For the financial year ended 31 December
2013201220132012
LKR’000
LKR’000
LKR’000
LKR’000­­­
(Increase) /decrease in provision for bad and doubtful debts
Other technical expenses
Investment expenses
Other non technical expenses
(4,981)
(24,263)
(121,588)
(2,512)
(153,344)
15,268 (46,277)
(109,648)
(7,551)
(148,208)
(4,981)
(24,199)
(121,588)
(2,512)
(153,280)
15,268
(46,277)
(109,648)
(7,551)
(148,208)
35 Profit before taxation
Profit before taxation for the year is stated after charging the following expenses:
GroupCompany
For the financial year ended 31 December
Auditors’ remuneration
- Audit
- Non Audit
Directors’ emoluments
Directors’ fees
Premium paid for Directors and Officers Liability Policy
Legal fees
Donations
Provision/(reversal) of bad and doubtful debts
201320122013
20112
LKR’000
LKR’000
LKR’000
LKR’000­­­
5,127 1,835 95,449 1,410 1,420 5,185 6,630 4,981 6,092 1,447 102,078 2,250 1,810 2,822 2,986 (15,268)
4,940 1,835 95,449 1,410 1,420 5,185 6,630 4,981 5,922
1,447
102,078
2,250
1,810
3,124
2,985
(15,268)
Annual Report 2013 215
36Taxation
GroupCompany
For the financial year ended 31 December
2013201220132012
NoteLKR’000LKR’000LKR’000LKR’000­­­
Current tax
Current tax (expense)/ income
Adjustments of prior periods recognised in the period
Notional tax unutilised during the year
Deferred tax
Deferred tax (expense)/ income
19
Amount of previously unused tax losses
Total tax expense
36.1
The applicable tax rate was 28% (2012 -28%)
(185,673)
(5,407)
(185,762)
(376,842)
(435,881)
(14,514)
133,327 (317,068)
(185,575)
(5,411)
(185,762)
(376,748)
(435,153)
(14,514)
133,327
(316,340)
52,754
- 52,754 (324,088)
(1,633)
52,754 (37,456)
(39,089)
52,754 (356,157)
(323,994)
(1,633)
(37,456)
(39,089)
(355,429)
GroupCompany
For the financial year ended 31 December
2013201220132012
LKR’000
LKR’000
LKR’000
LKR’000­­­
36.1 Reconciliation of tax charge
Profit before tax
823,381 1,204,064 822,495 1,195,644
Applicable tax rate28%28%28%28%
Tax at applicable rate
230,547 337,138 230,299 334,780
Add / (less) tax effect of the following items:
Expenses not allowable for tax purposes
Realised / unrealised gains and losses not subject to tax
Brought forward tax losses set off against taxable income
Dividend income included in the accounting profit
Tax free interest income
Insurance related items not subject to tax - Long Term insurance
Under provision of income tax in previous year
Other income of associate not subject to income tax
Un-utilised notional tax for the year
Movement in deferred tax asset / liability
Tax charge for the year
49,766 (32,215)
(30)
(40,136)
(48,221)
26,097 5,406 (134)
185,762 (52,754)
324,088 8,318 (7,998)
(30,588)
(27,684)
-
156,695 14,514 - (133,327)
39,089 356,157 49,752 (32,215)
- (40,136)
(48,221)
26,097 5,410 - 185,762 (52,754)
323,994 9,790
(7,998)
(30,430)
(27,684)
156,695
14,514
(133,327)
39,089
355,429
The Group has utilised the tax losses brought forward from previous financial periods in full as at 31 December 2012.
Notional tax credit for withholding tax on Government securities
The Inland Revenue Act No.10 of 2006 as amended by subsequent legislation provides that a company which derives interest income
from secondary market transactions in Government securities (on or after 01 April 2002 would be entitled to a notional tax credit
being one ninth of the net interest income) provided such interest income forms part of the statutory income of the Company.
216 AIA Insurance Lanka PLC
Notes to the Financial Statements
36.1 Reconciliation of tax charge (contd.)
The notional tax credit available for set off against future tax liability of the Company is as follows.
Financial year
Notional tax credit available
LKR’000­­­
2003
123,980
2004
68,027
2005
74,741
2006
100,114
2007
122,511
2008
171,156
2009
238,462
2010
269,058
2011
289,244
2012
350,201
2013
330,427
2,137,921
Set- off against tax liability upto Y/A 2012/2013
(886,411)
Balance available for set-off against future tax liability
1,251,510
37 Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year.
GroupCompany
For the financial year ended 31 December 2013201220132012
Restated Restated
Profit attributable to the Company’s equity holders (LKR’000)
Weighted average number of ordinary shares in issue (’000)
Basic earnings per share (LKR)
499,293 30,000 16.64 847,907 30,000 28.26 498,501 30,000 16.62 840,215
30,000
28.01
38 Dividend per share
The dividends paid in 2013 and 2012 were LKR 75Mn (LKR 2.50 per share) andLKR 270Mn (LKR 9 per share) respectively. A
dividend in respect of 2013 of LKR 2.00 per share, amounting to a total dividend of LKR 60 Mn, is to be proposed at the Annual
General Meeting on 27 March 2014. These financial statements do not reflect this dividend payable.
Name of the Company and relationship
Rent paid
Group recharges Group agency events
Dividend (paid) / received
Allocation of overheads
- - - - - - - - - 2,019
- - - (13,140)
426
1,615
- - (12,600)
- - - (3,750)
- (15,749)
- (68,244)
- - (65,455) (235,639)
- - -
- - - - - - - - (14,626)
- - - - - - - - - (7,036)
- - - - - - - - - (1,218)
- - -
-
-
-
-
For the financial year ended 20132012201320122013201220132012201320122013201220132012
31 December
LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000 LKR ‘000
Nature of transaction
Rainbow Trust AIA Holdings Lanka
AIA Shared Services
AIA Information
Management Limited
Serendib Land PLC
(private) Limited
AIA Company Limited
AIA Group Limited
(Hong Kong) Limited
Technology
(Guangzhou) Co.Ltd
Subsidiary
Associate
Immediate parent
Parent
Ultimate parent
Fellow subsidiary
Fellow subsidiary
39 Related party disclosures
Details of significant related party disclosures are as follows:
Transactions with the parent and related entities
Annual Report 2013 217
218 AIA Insurance Lanka PLC
Notes to the Financial Statements
39.1 Transactions with key management personnel of the Company or parent and their close family members
The key management personnel of the Company are the members of its Board of Directors and those of its Parent.
a) Key management personnel compensation
Directors compensation
For the financial year ended 31 December20132012
LKR ‘000
LKR ‘000
Directors remuneration
Short term employee benefits Other long term benefits Premiums paid for Directors and Officers Liability policy *
Directors’ fees
49,946 38,011 - 1,420 1,410 90,787 82,799
15,888
3,391
1,810
2,250
106,138
Other key management personnel emoluments
For the financial year ended 31 December20132012
LKR ‘000
LKR ‘000
Emoluments
Short term employee benefits Other long term benefits Termination benefits Premiums paid for Directors and Officers Liability policy *
120,400 - - - - 120,400 101,051
- 101,051
* The insurance policy covers past and present Directors and Officers of the Company and its subsidiaries.
b) No loans have been granted to Directors during the year. A sum of LKR 878,478.02 was granted to other Key Management
Personnel excluding Executive, Non-executive Directors and Managing Director.
c) Other Transactions
Business transactions of Key Management Personnel
For the financial year ended 31 December 20132012
LKR ‘000
LKR ‘000
Premium paid on insurance policies taken by directors
in their individual capacity
Claims paid
181 - 181 778
(37)
741
Annual Report 2013 219
39.3 Transactions with other related parties
Transactions by Key Management Personnel with other companies
(Directors of the Company who are also Directors of the related entities which had transactions with the Company during the
year).
Company
AIA Company Limited
Details of financial dealings
Mr. Gordon Timmins Watson is a Director of AIA Company Limited. This Company
has Intra- Group master services agreement & SOW relating to Group distribution
organised events with AIA Insurance Lanka PLC.
39.4 Post employment benefit plans of the Company and its related parties
2013
2012
LKR ‘000
LKR ‘000
Contributions made by the Company to the provident fund in respect of
Key Management Personnel compensation*
Contributions made by the Company to the Trust Fund in respect of
Key Management Personnel compensation * Includes the contributions in respect of Directors emoluments only.
5,994 -
1,498
7,492 -
40 Contingent liabilities
40.1 Outstanding tax assessments
The Company has been issued with an assessment
by the Department of Inland Revenue on the 23rd of
July 2005 under the Value Added Tax Act, in relation to
the taxable period ending 31 December 2003 for LKR
43.3Mn. The Company has filed an appeal in August
2005 on the basis that the underlying computation
includes items which are exempt/out of scope of the
VAT act. The appeal made by the Company was with the
Board of Review which was subsequently transferred
to the newly appointed Tax Appeals Commission in
2012. The hearing of this case by the Tax Appeals
Commission was held during 2012, with the final
hearing on the 15th of November 2012. The Company
is awaiting the final decision.
Additionally the Company has received VAT
assessments to the value of LKR 1.6 Mn from the
Department of Inland Revenue, in relation to which
appeals have been filed.
The Company has received an income tax assessment
for the year of assessment 2010/2011 from the
Department of Inland Revenue, disallowing the
management expenses of the Life business and part
of the investment management expenses and also
on the basis that no credit could be allowed for the
withholding tax paid at source.
As required by section 56(2) of the Companies Act No.
07 of 2007, the Board of Directors have confirmed that
the Company satisfies the solvency test in accordance
with section 57 of the Companies Act No. 7 of 2007, and
has obtained a certificate from the auditors, prior to
declaring a final dividend of LKR 2.00 per share for this
year to be paid on first quarter 2014.
Company disagreed with this assessment and an appeal
has been filed following due process. Based on the
information available and expert advice received, the
Directors are confident that the ultimate resolution of the
above contingency is unlikely to have a material adverse
effect on the financial position of the Company. Hence no
provision has been made in the financial statements.
In accordance with the LKAS 10, ‘Events after the
Balance Sheet date’, the final dividend declared has
not been recognised as a liability in the financial
statements as at 31 December 2013.
40.2 Pending litigation
In the opinion of the Directors and the Company’s
lawyers, pending litigation against the company will
not have a material impact on the reported financial
results or future operations of the Company.
41 Events after the Balance Sheet date
The Board of Directors of the Company have
recommended a declaration of a final dividend of
LKR 2.00 per share for the financial year ended
31 December 2013, subject to approval by the
shareholders.
220 AIA Insurance Lanka PLC
Quarterly Analysis 2013
Group Statement of Income
1st quarter
Jan - Mar 13
LKR ‘000
2nd quarter
Apr - Jun 13
LKR ‘000
3rd quarter
Jul - Sep 13
LKR ‘000
4th quarter
Total
Oct - Dec 13 Jan - Dec 13
LKR ‘000
LKR ‘000­­­
Insurance premium revenue
Reinsurance premium
Net earned premium
2,270,388 (218,030)
2,052,358 2,322,067 (231,192)
2,090,875 2,319,458 (229,611)
2,089,847 2,210,219 (249,539)
1,960,680 Asset management fees and related income
Investment income
Other income
Total revenue
73 1,154,965 93,129 3,300,525 67 1,358,702 86,073 3,535,717 117 732,295 87,454 2,909,713 113 370
1,160,201 4,406,163
126,639 393,295
3,247,633 12,993,588
Net benefits and claims Transfer to Long Term insurance fund
Net acquisition expenses
(1,329,155)
(702,788)
(230,795)
(1,330,983)
(965,147)
(205,505)
(1,997,169)
415,824 (212,686)
(2,092,872)
498,148 (183,141)
(6,750,179)
(753,963)
(832,127)
Operating and administrative expenses
Share of profit from associate
(872,887)
612 (951,969)
620 (919,717)
(152)
(1,091,760)
1,315 (3,836,333)
2,395
Profit before taxation
Income tax expenses
165,512 (133,476)
82,733 (91,996)
195,813 (83,993)
379,323 (14,623)
823,381
(324,088)
Net profit for the period
32,036 (9,263)
111,820 364,700 499,293
Company Statement of Income
1st quarter
Jan - Mar 13
LKR ‘000
2nd quarter
Apr - Jun 13
LKR ‘000
3rd quarter
Jul - Sep 13
LKR ‘000
9,122,132
(928,372)
8,193,760
4th quarter
Total
Oct - Dec 13 Jan - Dec 13
LKR ‘000
LKR ‘000­­­
Gross written premium
Reinsurance premium
Net written premium
2,270,388 (218,030)
2,052,358 2,322,067 (231,192)
2,090,875 2,319,458 (229,611)
2,089,847 2,210,219 (249,539)
1,960,680 9,122,132
(928,372)
8,193,760
Investment income
Other income
Total revenue
1,154,965 93,047 3,300,370 1,358,702 85,985 3,535,562 734,112 87,368 2,911,327 1,160,202 4,407,981
126,563 392,963
3,247,445 12,994,704
Net benefits and claims Transfer to Long Term insurance fund
Net acquisition expenses
Operating and administrative expenses
(1,329,155)
(702,788)
(230,795)
(872,840)
(1,330,983)
(965,147)
(205,505)
(951,891)
(1,997,169)
415,824 (212,686)
(919,664)
(2,092,872)
498,148 (183,141)
(1,091,545)
(6,750,179)
(753,963)
(832,127)
(3,835,940)
Profit before taxation
Income tax expenses
164,792 (133,918)
82,036 (91,857)
197,632 (83,719)
378,035 (14,500)
822,495 (323,994)
Net profit for the period
30,874 (9,821)
113,913 363,535 498,501
Annual Report 2013 221
Quarterly Analysis 2012
Group Statement of Income
1st quarter
Jan - Mar 12
LKR ‘000
2nd quarter
Apr - Jun 12
LKR ‘000
3rd quarter
Jul - Sep 12
LKR ‘000
4th quarter
Total
Oct - Dec 12 Jan - Dec 12
LKR ‘000
LKR ‘000­­­
Insurance premium revenue
Reinsurance premium
Net earned premium
2,260,821 (191,826)
2,068,995 2,175,292 (184,042)
1,991,250 2,214,677 (206,508)
2,008,169 2,340,109 (164,366)
2,175,743 Asset management fees and related income
Investment income
Other income
Total revenue
219 827,803 88,250 2,985,267 84 746,914 89,220 2,827,468 1,167 1,411,693 83,012 3,504,041 205 1,675
1,039,680 4,026,090
97,330 357,812
3,312,958 12,629,734
Net benefits and claims Transfer to Long Term insurance fund
Net acquisition expenses
(966,131)
(928,917)
(242,821)
(884,353)
(852,170)
(223,626)
(1,095,335)
(1,396,600)
(188,648)
(1,237,835)
(495,010)
(240,331)
(4,183,654)
(3,672,697)
(895,426)
Operating and administrative expenses
Share of profit from associate
(688,911)
6,465 (670,907)
553 (645,737)
706 (676,696)
634 (2,682,251)
8,358
Profit before taxation
Income tax expenses
164,952 (101,603)
196,965 (96,971)
178,427 (75,339)
663,720 (82,244)
1,204,064
(356,157)
Net profit for the period
63,349 99,994 103,088 581,476 847,907
1st quarter
Jan - Mar 12
LKR ‘000
2nd quarter
Apr - Jun 12
LKR ‘000
3rd quarter
Jul - Sep 12
LKR ‘000
Company Statement of Income
8,990,899
(746,742)
8,244,157
4th quarter
Total
Oct - Dec 12 Jan - Dec 12
LKR ‘000
LKR ‘000­­­
Gross written premium
Reinsurance premium
Net written premium
2,260,821 (191,826)
2,068,995 2,175,292 (184,042)
1,991,250 2,214,677 (206,508)
2,008,169 2,340,109 (164,366)
2,175,743 8,990,899
(746,742)
8,244,157
Investment income
Other income
Total revenue
827,803 88,195 2,984,993 746,914 89,162 2,827,326 1,411,693 82,888 3,502,750 1,041,185 4,027,595
97,211 357,456
3,314,139 12,629,208
Net benefits and claims Transfer to Long Term insurance fund
Net acquisition expenses
Operating and administrative expenses
(966,131)
(928,917)
(242,821)
(688,533)
(884,353)
(852,170)
(223,626)
(670,732)
(1,095,335)
(1,396,600)
(188,648)
(645,702)
(1,237,835)
(495,010)
(240,331)
(676,820)
Profit before taxation
Income tax expenses
158,591 (101,458)
196,445 (96,906)
176,465 (75,079)
664,143 (81,986)
1,195,644 (355,429)
Net profit for the period
57,133 99,539 101,386 582,157 840,215
(4,183,654)
(3,672,697)
(895,426)
(2,681,787)
222 AIA Insurance Lanka PLC
Decade at a Glance
For the financial year ended 31 December 2013201220112010200920082007200620052004
Income Statement
(Values are to the nearest rupees thousand)
Non-life insurance
Insurance premium revenue
Reinsurance premium ceded
Net earned premium
2,555,482 2,495,036 2,768,002 2,875,293 2,097,232 2,012,145 1,651,978 1,273,874 1,115,238 1,044,658
(674,831) (527,245) (522,272) (829,396) (825,280) (878,831) (838,644) (684,575) (649,459) (640,176))
1,880,651 1,967,791 2,245,730 2,045,897 1,271,952 1,133,314 813,334 589,299 465,779 404,482
Investment income and other income
Net claims
Net acquisition expenses
Operating and administrative expenses
Special Tsunami relief expenses
Finance costs
Profit / (loss) before taxation
637,589 627,047 586,458 987,601 (1,097,830) (1,020,360) (1,454,983) (1,619,182)
(16,131) (137,875) (149,720) (101,011)
(1,118,249) (756,109) (801,357) (1,015,769)
- - - - - - - - 286,030 680,494 426,128 297,536 Long Term insurance
Annualised new premium 2,976,393 2,611,006 2,888,782 3,094,196 1,680,094 1,695,791 1,635,644 1,248,905 1,009,258 Insurance premium revenue
Reinsurance premium ceded
Net earned premium
6,566,650 6,495,863 7,846,447 7,783,925 4,632,490 4,342,218 3,788,103 3,150,042 2,832,541 2,500,131
(253,541) (219,497) (260,263) (235,913) (219,738) (216,400) (214,786) (177,449) (152,449) (132,080)
6,313,109 6,276,366 7,586,184 7,548,012 4,412,752 4,125,818 3,573,317 2,972,593 2,680,092 2,368,051
Investment income and other income
Net claims and benefits Net acquisition expenses
Transfer to Long Term insurance Fund
Operating and administrative expenses
Tax expenses
Surplus transfer to shareholders’ fund 4,163,355 (5,652,349)
(815,996)
(753,963)
(2,717,691)
(336,464)
200,000 Total business (Group)
Insurance premium revenue
Reinsurance premium ceded to reinsurers
Net earned premium
Other revenue
Benefits, claims and expenses
Operating and administrative expenses
Share of profit from Associate
Special Tsunami relief expenses
Finance costs
Profit before taxation
Tax expenses
Net profit for the year
9,122,132 8,990,899 10,614,449 10,659,218 6,729,722 6,354,363 5,440,081 4,423,916 3,947,779 3,544,789
(928,372) (746,742) (782,535) (1,065,309) (1,045,018) (1,095,231) (1,053,430) (862,024) (801,908) (772,256)
8,193,760 8,244,157 9,831,914 9,593,909 5,684,704 5,259,132 4,386,651 3,561,892 3,145,871 2,772,533
4,799,828 4,385,577 3,100,643 5,593,015 3,970,095 2,006,186 1,488,191 1,251,534 1,130,653 955,790
(8,336,269) (8,751,777) (9,211,705) (11,564,185) (6,778,405) (5,095,597) (3,918,659) (3,107,160) (2,729,582) (2,534,076)
(3,836,333) (2,682,251) (2,673,751) (2,728,980) (1,918,854) (1,564,900) (1,410,067) (1,167,303) (1,018,972) (838,152)
2,395 8,358 2,163 - - - - - - - - - - - - - - - (89,000)
- - - - - - - - - (3,886)
823,381 1,204,064 1,049,264 893,759 957,540 604,821 546,116 538,963 527,970 263,209
(324,088) (356,157) (356,812) (293,591) (227,015) (141,101)
(19,035)
(15,495)
(12,593)
(9,545)
499,293 847,907 692,452 600,168 730,525 463,720 527,081 523,468 515,377 253,664
3,758,004 (3,163,294)
(757,551)
(3,672,697)
(1,925,678)
(320,150)
195,000 2,514,477 (2,468,068)
(943,840)
(4,195,094)
(1,870,474)
(268,185)
355,000 4,604,047 (2,504,366)
(939,902)
(6,399,723)
(1,710,006)
(270,269)
327,793 621,252 (902,653)
13,423 (472,438)
- - 531,536 3,396,840 (1,758,839)
(567,052)
(3,563,284)
(1,445,233)
(155,184)
320,000 331,981 (938,076)
14,347 (402,238)
- - 139,328 1,633,746 (1,435,078)
(558,772)
(2,178,018)
(1,157,021)
(150,675)
280,000 230,996 222,713 184,125 240,162
(581,669) (430,829) (252,243) (312,811)
38,223 27,299 42,301 36,833
(376,987) (323,431) (304,952) (277,692)
- - - (89,000)
- - - (3,886)
123,897 85,051 135,010 (1,912)
783,197
1,222,411 999,717 920,132 690,128
(1,105,713) (1,058,236) (917,336) (564,232)
(471,145) (375,530) (349,501) (321,321)
(1,798,355) (1,269,864) (1,252,803) (1,372,545)
(1,020,515) (833,680) (705,584) (550,081)
- - - 400,000 435,000 375,000 250,000
The numbers for the period 2013 -2011 are based on the Sri Lanka Financial reporting standards (SLFRS) effective from 01.01.2012 and 2010 -2004 are based on SLAS.
Annual Report 2013 223
As at 31 December
2013201220112010200920082007200620052004
Statement of Financial Position
(Values are to the nearest rupees thousand)
Group
Assets
Investments
Investments - Unit linked
Property, plant and equipment
Other assets
Total assets
Equity and liabilities
Equity
Stated capital
Revaluation reserve
Special reserve Fund
Resilience reserve
General reserve
Retained earnings
Total equity
28,949,638 26,222,740 24,835,175 22,861,118 17,760,977 14,834,964 12,753,342 11,467,119 9,970,620 8,646,435
7,476,508 8,090,885 6,632,277 5,151,489 1,346,150 473,706 241,130 48,436 - 303,473 203,439 209,786 240,562 237,772 376,872 403,431 386,671 296,332 244,336
7,475,773 6,476,046 5,473,419 5,570,890 5,096,277 4,105,475 3,570,828 3,028,835 2,391,279 2,983,017
44,205,392 40,993,110 37,150,657 33,824,059 24,441,176 19,791,017 16,968,731 14,931,061 12,658,231 11,873,788
300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 300,000 200,000
72,096 72,096 39,916 39,916 39,916 39,916 39,916 - - - - - - - - 315,510 279,820 268,036 235,588
289,000 289,000 289,000 289,000 289,000 289,000 237,000 161,500 135,000 65,000
- - - - - - 955,000 720,000 541,000 516,000
3,924,237 3,402,457 2,956,502 2,638,079 1,950,561 1,595,036 177,806 281,915 223,231 60,302
4,585,333 4,063,553 3,585,418 3,266,995 2,579,477 2,223,952 2,025,232 1,743,235 1,467,267 1,076,890
Liabilities
Insurance provision - Conventional
Insurance provision - Unit linked
Provision for Life Fund solvency
Insurance provision - Non-life
Other liabilities
Total liabilities
26,174,239 23,892,127 22,195,937 20,824,542 16,686,639 13,989,661 12,063,506 10,453,542 9,238,184 7,985,381
7,638,055 8,125,091 6,668,504 5,130,753 1,361,066 494,760 242,897 54,507 - - - - - 175,000 175,000 - - - 2,755,899 2,325,611 2,486,262 2,526,085 1,865,820 1,447,620 1,088,994 1,122,631 858,759 1,512,900
3,051,866 2,586,728 2,214,536 2,075,684 1,773,174 1,460,024 1,548,102 1,557,146 1,094,021 1,298,617
39,620,059 36,929,557 33,565,239 30,557,064 21,861,699 17,567,065 14,943,499 13,187,826 11,190,964 10,796,898
Total equity and liabilities
44,205,392 40,993,110 37,150,657 33,824,059 24,441,176 19,791,017 16,968,731 14,931,061 12,658,231 11,873,788
Long Term - supplemental
Assets
Investments
Investments - Unit linked
Other assets
Total assets
25,757,878 23,223,489 20,385,777 19,062,239 14,886,512 12,555,930 11,000,554 9,992,944 8,713,775 7,502,053
7,476,508 8,090,885 6,632,277 5,151,489 1,346,150 473,704 241,130 48,436 - 2,208,045 1,936,635 3,019,814 2,859,079 2,741,474 2,028,136 1,794,460 1,229,112 965,998 947,165
35,442,431 33,251,009 30,037,868 27,072,807 18,974,136 15,057,770 13,036,144 11,270,492 9,679,773 8,449,218
Liabilities
Insurance provision - Long Term
Insurance provision - Unit linked
Other liabilities
Total liabilities
26,174,239 23,892,127 22,195,938 20,634,162 16,686,639 13,989,661 12,063,506 10,453,542 9,238,184 7,985,381
7,638,055 8,125,091 6,668,504 5,130,753 1,361,066 494,760 242,897 54,507 - 1,630,137 1,233,791 1,173,426 1,307,892 926,431 573,349 729,741 762,443 441,589 463,837
35,442,431 33,251,009 30,037,868 27,072,807 18,974,136 15,057,770 13,036,144 11,270,492 9,679,773 8,449,218
The numbers for the period 2013 - 2010 are based on the Sri Lanka Financial reporting standards (SLFRS) effective from 01 January 2012 and 2009 - 2004 are based on SLAS.
Investor Information
Financial year
201320122,011 2010200920082007200620052004
Return on net assets
(%)
11.00 20.87 19.31 18.37 28.32 20.85 26.03 30.03 35.12 23.56
Net assets per share
(LKR)
152.84 135.45 119.51 108.90 85.98 74.13 67.51 58.11 48.91 35.90*
Market price per share - 31 December (LKR)
250.70 329.80 247.40 280.00 178.00 115.00 150.75 135.50 85.00 110.00
Basic earnings per share
(LKR)
16.64 28.26 23.08 20.01 24.35 15.46 17.57 17.45 17.18 8.46*
Price earnings ratio
(times)
15.06 11.67 10.72 14.00 7.31 7.44 8.58 7.77 4.95 13.01*
Market capitalisation
(LKR Mn)
7,521 9,894 7,422 8,400 5,340 3,450 4,523 4,065 2,550 2,200
Dividend per share
(LKR)
2.50 9.00 9.00 9.00 12.50 3.00 9.50 8.25 4.17 5.34*
Dividend payout ratio
%
15.02
31.85
38.99 44.97
51.33 19.40 54.07
47.28
24.27
63.12
Employee Information
Revenue per employee
(LKR Mn)
13.88 15.71 16.58 19.47 12.28 10.02 9.21 9.06 9.57 8.30
Net profit per employee
(LKR’000)
533 1,055 887 769 929 640 826 986 1,153 565
Number of permanent employees (nos.)
936
804
780 780
786 725 638 531 447 449
* Adjusted for subsequent bonus issues.
** Adjusted as stipulated by SLAS 12 (revised - applicable w.e.f. 01/01/2006).
224 AIA Insurance Lanka PLC
Share Information
Shareholdings
As at 31 December 2013 there were 1,779 registered Shareholders.
Distribution of Ordinary Shares
Resident
Non-Resident
Total
No. of No. of
No. of No. of
No. of No. of
Shareholding Shareholders
Shares
% Shareholders
Shares
% Shareholders
Shares
%
1 - 1,000
1001 - 10,000
10,001 - 100,000
100,001 - 1,000,000
Over 1,000,000
Total
1,605
358,960
1.19
157
406,599
1.36
4
80,396
0.27
-
-
-
1 26,182,162 87.27
1,767 27,028,117 90.09
The percentage of shares held by the public 2.85%.
Categories of Shareholdings
8
3
-
-
1
12
1,570
6,196
-
-
2,964,117
2,971,883
0.01
0.02
-
-
9.88
9.91
1,613
360,530
1.20
160
412,795
1.38
4
80,396
0.27
-
-
2 29,146,279 97.15
1,779 30,000,000 100.00
Resident
Non-Resident
Total
Categories ofNo. of No. of
No. of No. of
No. of No. of
Shareholders Shareholders
Shares
% Shareholders
Shares
% Shareholders
Shares
%
Individual
Institutional
Total
1,710
772,327
2.57
57 26,255,790 87.52
1,767 27,028,117 90.09
10
7,522
2 2,964,361
12 2,971,883
0.03
9.88
9.91
Substantial Shareholdings
Name of the Shareholder
No. of Shares
%
AIA Holdings Lanka (Private) Limited
AIA Company Limited
26,182,162
2,964,117
87.27
9.88
107,672
100,592
2013
2012
2011
74,372
2010
2009
61,547
36,497
51,722
2008
2007
2006
2005
32,147
31,747
13,197
2001
2004
10,497
2000
Value of LKR. 1,000 invested at AIA IPO
18,297
10,297
1999
Value of LKR 1,000 invested at AIA IPO
2002
11,177
8,597
1998
8,843
1996
1997
12,570
8,655
1995
9,350
1992
1994
6,800
2,750
1991
1993
2,800
1990
1989 1,000
30,000
IPO 1,000
60,000
2003
90,000
54,122
120,000
128,012
LKR
150,000
1988 900
105,032
1,720
779,849 2.60
59 29,220,151 97.40
1,779 30,000,000100.00
Annual Report 2013 225
20 largest Shareholders
The 20 largest Shareholders as at 31 December 2013 are given below.
Name of the Shareholder
AIA Holdings Lanka (Private) Limited
AIA Company Limited
Mr. R Srikantha Rasaratnam
Miss. A S Gunaratne
Mr. N W H D Gunaratne
Mr. Chandra Jayaratne
Dawi Investment Trust (Pvt) LTD
Mr. Aravinthan Sivarajah
Waldock Mackenzie LTD / Mr. Chamila Damion Kohombanwickramage
Mr. Varatharajah Selvaratnam
Mr. Sivagnanam Sathasivam
Mr. S K Kader / Mrs. N M Kader
Mr. P K C P Samarasinghe
Mr. J B Hirdaramani
Mrs. Thevarajah Sithamparam
Mr. N S J Nawaratne
Waldock Mackenzie LTD / Dr. Hennedige Srinath Dilanjan Soysa
Mr. R T Manatunga / Mrs. C N C Manatunga
Mr. A P Perera
Dr. H R Wickremesinghe / Mr. V K Wickremesinghe
Others
Total
31 December 2013
No. of Shares
26,182,162
2,964,117
37,498
15,000
15,000
12,898
10,000
9,650
9,482
7,498
7,498
7,498
7,255
7,048
6,998
6,600
6,510
6,000
6,000
5,600
29,330,312
669,688
30,000,000
%
87.27
9.88
0.12
0.05
0.05
0.04
0.03
0.03
0.03
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
97.72
2.28
100.00
The 20 largest Shareholders as at 31 December 2012 are given below.
Name of the Shareholder
AVIVA NDB Holdings Lanka (Private) Limited (Now known as AIA Holdings Lanka (Private) Limited)
American International Assurance, Company Limited (Now known as AIA Company Limited)
Corporate Holdings (Private) Limited
HSBC- Mr. Rajaratnam Senathirajah
Union Investments (Private) Ltd
Colonial Motors Ltd
Jacey Trust Services (Private) Limited
Merchant Bank of Sri Lanka Limited/ Union Investments Ltd.
Union Assurance PLC/ NO-01A/ C
Mr. S K Hathiramani
Mr. R Srikantha
Mr. W R H Perera
Waldock Mackenzie LTD / Mr. Chamila Damion Kohombanwickramage
Mr T Rodrigo / Mrs. V N Rodrigo
Mr. K H Udeshi
Waldock Mackenzie LTD / Mr. K H Udeshi
Dr. H G P A Ratnaweera
The Ceylon desiccated coconut and Oil company (Pvt) Ltd
Mr. D Wickremesinghe
Mr. J Nawinne
Others
Total
* No. of shares referred above are ordinary shares
31 December 2012
No. of Shares
26,182,162
1,500,000
155,442
150,000
111,300
90,750
84,400
83,700
53,499
38,672
37,498
30,598
30,487
22,300
20,578
19,700
16,999
15,000
15,000
15,000
28,673,085
1,326,915
30,000,000
%
87.27
5.00
0.52
0.50
0.37
0.30
0.28
0.28
0.18
0.13
0.12
0.10
0.10
0.07
0.07
0.07
0.06
0.05
0.05
0.05
95.57
4.43
100.00
226 AIA Insurance Lanka PLC
Share Information
Share Valuation
Share Performance
The market value of the Company’s ordinary shares as at 31
December 2013 was LKR 250.70 (31 December 2012 - LKR 329.80)
2013
Record of script Issues
No. of transactions
Year of Issue
Type of Issue
No. of shares traded
Ratio
Total value of shares traded (LKR.)
2,167,581
All Share Price Index - 31 December
5,912.78
5,643.00
AIA Share Price - 31 December (LKR.)
250.70
329.80
AIA Share Price - High (LKR.)
375.00
448.90
AIA Share Price - Low (LKR.)
250.70
141.10
Earnings per share (LKR.)
16.64
28.26
P/E Ratio (times)
15.06
11.67
152.84
135.45
11.00
20.87
Bonus
1:4
AIA market cap. (LKR. Mn)
1996
Bonus
1:4
CSE market cap. (LKR. Mn)
1997
Bonus
1 : 15
2005
Bonus
1: 2
Net assets per share (LKR.)
Return on net assets (%)
120
110
100
ASPI
90
80
AIA
70
60
50
Dec 13
Nov 13
Oct 13
Sep 13
Aug 13
Jul 13
Jun 13
May 13
Apr 13
40
Mar 13
75,653,276 1,061,285,435
2,459,897
1995
Feb 13
3,703,103
9,894
CSE Turnover (LKR. Mn)
Jan 13
234,800
7,521
1:5
Dec 12
5,522
213,827
Bonus
Indexed to 31 December 2012
1,389
199,835
1994
Vs AIAShare Price
CSE IndicesCSE
vsIndices
AIA Share
Price
2012
Annual Report 2013 227
Distribution Network
Head Office
AIA Insurance Lanka PLC
No 75 Kumaran Ratnam
Road Colombo 2
Tel : 011 231 0300 / 231 0000
Fax : 011 231 0076
E-mail : [email protected]
Web : www.aialife.com.lk
Hotline : 011 231 0310
Fax : 011 471 5892
Non-life Insurance Division
UPTO Building
No 95 Sir Chittampalam A
Gardiner Mw, Colombo 2
Tel : 011 231 0400
Fax : 011 231 0011
Battaramulla
1006/4/A Pannipitiya Road
Battaramulla
Tel : 011 288 9809-11
Fax : 011 552 5394
Batticaloa
42/1 Trincomalee Road
Batticaloa
Tel : 065 222 7975
Fax : 065 222 7988
Chilaw
109/1 Colombo Road Chilaw
Tel : 032 222 1217
Fax : 032 222 3027
AIA Life Link
No 1 Kumaran Ratnam Road
Colombo 2
Tel : 011 231 0310
Fax : 011 471 5892
Colombo Main
101/1 Sir Chittampalam A
Gardiner Mw, Colombo 2
Tel : 011 231 0262 / 231 0293
Fax : 011 231 0259
AIA Distribution Network
Branch Office Network
Ambalangoda
118A/2/1 GMA Building
Galle Road Ambalangoda
Tel : 091 225 8969
Fax : 091 225 8994
Colombo Region 1
101/1 Sir Chittampalam A
Gardiner Mw, Colombo 2
Tel : 011 231 0781
Fax : 011 231 0259
Ambalantota
143 Main Street Ambalantota
Tel : 047 222 3359 / 437 9672
Fax : 047 222 5022
Ampara
149 Nidahas Mw Ampara
Tel : 063 222 3664 / 222 3663
Fax : 063 222 2554
Anuradhapura
523/7 Maithripala
Senanayake Mw
Anuradhapura
Tel : 025 222 0858 / 223 4150
Fax : 025 222 3102
Avissawella
93/1/1 Rathnapura Road
Avissawella
Tel : 036 223 2597
Fax : 036 223 3550
Badulla
King City 18/1/2
Dharmadutha Road Badulla
Tel : 055 222 2848 / 223 0772
Fax : 055 222 5780
Bandarawela
3/126 DFCC Building
Main Street Bandarawela
Tel/ Fax : 057 222 4869
/ 223 3288
Colombo Region 2
101/1 Sir Chittampalam A
Gardiner Mw, Colombo 2
Tel : 011 231 0289 / 231 0489
Fax : 011 231 0259
Colombo Region 3
101/1 Sir Chittampalam A
Gardiner Mw, Colombo 2
Tel : 011 231 0264 / 231 0272
Fax : 011 231 0259
Colombo Region 4
100 Kumaran Ratnam Road
Colombo 2
Tel : 011 231 0006 / 231 0350
Fax : 011 231 0120
Colombo Region 5
101/1 Sir Chittampalam A
Gardiner Mw, Colombo 2
Tel : 011 231 0010 / 231 0250
Fax : 011 231 0259
Colombo Region 6
101/1 Sir Chittampalam A
Gardiner Mw, Colombo 2
Tel : 011 231 0249 / 231 0265
Fax : 011 231 0259
Colombo Region 8
100 Kumaran Ratnam Road
Colombo 2
Tel : 011 231 0721
Fax : 011 231 0120
Dambulla
734/1 Anuradhapura Road
Dambulla
Tel : 066 228 3335
Fax : 066 228 3336
Kandana
No 48/04/1/1 Negombo Road
Kandana
Tel/Fax : 011 2 226 320
/ 011 2 226 146
Embilipitiya
1st Floor Lakmini
Supermarket Building
51 Main Street Embilipitiya
Tel : 047 223 0416
Fax : 047 226 1919
Kandy
Commercial Bank Building
6th Floor
90-92 Kotugodella Veediya
Kandy
Tel : 081 222 2321 / 220 0100
/ 220 0101 / 222 2322
Fax : 081 223 2668
Galle
32 Old Matara Road
Pettigala Watta Galle
Tel : 091 224 6733 / 223 2261
Fax : 091 223 2261
Galle City
No 30-1/1
Sri Dewamitta Road Galle
Tel : 091 2226 227
Fax : 091 2226 228
Gampaha
85 Bauddhaloka Mw
Gampaha
Tel : 033 222 1177 / 222 6840
/ 222 7393 / 223 4808
Fax : 033 223 4700
Gampola
8/38/b/1/1 Nawalapitiya
Road, Gampola
Tel : 0812-353173/273
Fax : 0812-353173
Homagama
113/A/1 Avissawella Road
Homagama
Tel : 011 285 7155
Fax : 011 285 7160
Horana
135 Panadura Road Horana
Tel/ Fax : 034 226 2359
Ja-ela
112/C Negombo Road Ja ela
Tel/Fax : 011 224 8222 / 224
8223 / 224 8224
Jaffna
62/6 Stanley Road Jaffna
Tel/ Fax : 021 222 1215
/ 222 1216
Kalmunai
45 Batticaloa Road Kalmunai
Tel : 067 222 5262
Fax : 067 2225 262
Kalutara
183 1/1 Main Street Kalutara
Tel : 034 222 2820 / 222 9783
Fax : 034 223 5150
Karapitiya
461 Hirimbura Road
Karapitiya Galle
Tel : 091 222 6830
Fax : 091 224 6627
Kegalle
447/8 Main Street Kegalle
Tel : 035 222 3141 / 222 2835
Fax : 035 223 1780
Kilinochchi
470/2 Kandy Road Kilinochchi
Tele : 021 228 5514
Fax : 021 228 5513
Kiribathgoda
412/2 Gaala Junction
Kandy Road Kiribathgoda
Tel : 011 290 1660 / 290 1664
Fax : 011 290 1666
Kuliyapitiya
149/7 Main Street Kuliyapitiya
Tel : 037 228 4222
Tel/ Fax : 037 228 1867
Kurunegala
110/1 Noel Seneviratne Mw
Colombo Road Kurunegala
Tel/ Fax : 037 222 3540
/ 222 7707/ 222 9998
Maharagama
201 Wattegedera Junction
High Level Road Maharagama
Tel : 011 283 7611
Fax : 011 283 7488
Matale
181 Nimali Bldg
Trincomalee Street Matale
Tel/ Fax : 066 223 2401-3
Matara
24 E H Cooray Building
3rd Floor
Anagarika Dharmapala
Mawatha Matara
Tel : 041 222 2844 / 222 0674
/ 222 6344
Fax : 041 222 7344
228 AIA Insurance Lanka PLC
Distribution Network
Matara City
192 / 2
Anagarika Dharmapala
Mawatha Matara
Tel : 0412237041
/ 0412237042
Fax : 0412237042
Minuwangoda
Sanasa Super Complex First
Floor Veyangoda Road
Minuwangoda
Tel : 0112299364 / 2299374
Moneragala
308A Kachcheri Junction
Wellawaya Road Moneragala
Tel : 055 227 6496
Fax : 055 227 6211
Moratuwa
529/1 Galle Road
Rawathawatte Moratuwa
Tel/ Fax : 011 264 8020
/ 264 8021 / 264 8022
Mount Lavnia
230, Galle Road,Mt. Lavinia
Tel : 011 271 0267 (Gen)
Fax : 011 271 0268
Negombo
349/17 Main Street Negombo
Tel/ Fax : 031 222 2266
/ 223 5115
Nelliady
109/1 Jaffna Road
Nelliady Jaffna
Tel/ Fax : 021 226 2806
Nuwara Eliya
3rd Floor No 86
Kandy Road Nuwara Eliya
Tel/ Fax : 052 222 3478
Polonnaruwa
68/1 Batticaloa Road
Polonnaruwa
Tel/ Fax : 027 222 3108
Puttlam
17/1 Kurunegala Road
Puttalam
Tel : 032 226 6955
/ 032 226 7112
Ratnapura
23A Bandaranayake Mw
Ratnapura
Tel : 045 222 4417
Fax : 045 222 2601
Trincomalee
5A Main Street Trincomalee
Tel/ Fax : 026 222 7949
/ 222 6095-6
Vavuniya
66 Station Road
Vairavapuliyankulam Vavuniya
Tel : 024 222 5672
Tel/ Fax : 024 222 5673
JAFFNA
KILINOCHCHI
Wattala
No 329/1 Elmo Tower
Negombo Road
Kerangapokuna Wattala
Tel : 0112 945 272 / 1
Tax : 011 294 5271
Welimada
No 232 Nuwaraeliya
Welimada
Tel : 0572 246 8778 / 77
Fax : 057 224 5177
Wennappuwa
Chilaw Road Wennappuwa
Tel/ Fax : 031 22 55 510
/ 22 55 600
Area Development Office
Network
Akuressa
95 1/1 1st Floor Matara Road
Akuressa
Tel : 041 228 4544
Angunakolapelessa
No. 1 Pragathi Building
Middeniya Road
Angunakolapelessa
Tel : 047 222 9130
Baddegama
Hikkaduwa Road Baddegama
Tel : 091 229 2150
Bandaragama
No 45/1 1st floor Horana
Road Bandaragama
Tel : 0382 289 664
Dehiattakandiya
New Town Dehiattakandiya
Tel / Fax : 027 225 0447
Kadawatha
No 468/03
Kandy Road Kadawatha
Tel : 011 292 0270
Kamburupitiya
Pathirana Building
2nd Floor Kirinda Road
Kamburupitiya
Tel : 041 229 4477 / 229 4818
VAVUNIYA
TRINCOMALEE
ANURADHAPURA
DAMBULLA
POLONNARUWA
BATTICALOA
CHILAW
KURUNEGALA
KULIYAPITIYA
KALMUNAI
MATALE
KEGALLE
AMPARA
KANDY
GAMPOLA
NEGOMBO
NUWARA ELIYA
JA-ELA
GAMPAHA
WATTALA
BADULLA
MAHARAGAMA
KIRIBATHGODA
HOMAGAMA
WELIMADA
MONERAGALA
COLOMBO
AVISSAWELLA
BANDARAWELA
KOTTE
HORANA
MORATUWA
RATNAPURA
KALUTARA
AMBALANGODA
EMBILIPITIYA
BADDEGAMA
GALLE
ANGUNAKOLAPALASSA
AMBALANTOTA
MATARA
Branch Office Network
Mahiyanganaya
11-12 1st Floor Kala Stores
Sorabora Junction
Girandurukotte Road
Mahiyanganaya
Tel : 055 225 7774
Mathugama
60 Neboda Road, Mathugama
Tel : 034 224 9418 / 224 9955
Mawanella
2nd floor
No 257 New colombo Kandy
Road Mawanella
Tel : 035 322 0550
Middeniya
Weeraketiya Road Middeniya
Tangalle
08 A Medaketiya Road Tangalle
Tel : 047 721 1580
Panadura
721/2/1 Galle Road
Nalloruwa Panadura
Tel : 038 223 4634
Piliyandala
20B Park Road Piliyandala
Tel : 011 303 4090
Tangalle
8A Medaketiya Road
Tangalle
Tel : 047 224 0166 / 721 1580
Thissamaharama
No 173/1
Iresha Building
Kachcheriyagama
Thissamaharama
Tel : 047 223 9096
Warakapola
3rd Floor Udawatte Tower
Warakapola
Tel : 035 226 7724 / 226 7166
Weliweriya
342A New Kandy Road
Weliweriya
Tel : 033 352 6888
Wellawaya
Aluth Ella Road Wellawaya
Tel : 055 227 4303 / 227 4302
Annual Report 2013 229
Glossary
Actuary
A person who provides
solutions to insurance
related problems using
applied mathematics (in
particular, probability)
to provide solutions to
insurance-related problems.
Actuarial techniques
are used to design new
insurance products and to
assess the profitability of
new and existing business.
Agent
An individual who is an
independent contractor
authorised to carry out
transactions on behalf
of another, such as the
sale of insurance policies.
Insurance agents usually
earn commission or a fee
on the sale of a policy. In
Sri Lanka they are tied
to a particular insurance
company and offer a limited
selection of products.
Amortisation - Intangible
assets
Amortisation is the systematic
allocation of the depreciable
amount of an intangible asset
over its useful life.
Annualised New Premium
(ANP)
A method for calculating
levels of life, pensions and
investment new business
levels, to smooth out the
effect of large, one-off
payments.
Annual report
An annual report is a
comprehensive report a
company’s activities through
out the preceding year. Annual
reports are intended to give
shareholders and other
intended people information
about the company’s activities
and financial performance.
Annuity
Another word for “pension”.
An annuity is a regular
payment from an insurance
company designed to give
the policyholder an income
for life after retirement. It is
paid for by a lump sum saved
during the policyholders’
working lifetime. Annuity
rates are based on yields on
gilt-edged securities at the
time of purchase. On death,
any remaining investments
usually become the property
of the annuity provider.
Asset
An asset is a resource
controlled by an entity as
a result of past events and
from which future economic
benefits are expected to flow
to the entity.
Assurance
A term sometimes used
instead of “insurance”,
generally in connection with
Life business, since assurance
implies the certainty of an
event (such as death) and
insurance only the probability.
Available for sale financial
assets
Non-derivative financial
assets that are designated
as available for sale or
are not classified as loans
and receivables or as at
fair value through profit
or loss. Available for sale
financial instruments are
measured at fair value,
with movements in fair
value recorded in other
comprehensive income.
Bancassurance
An arrangement whereby
banks allow selling of
insurance and investment
products to their customers
by insurers.
Benchmark
A market index or rate
against which an investment
fund compares its
performance and mix of
assets.
Beneficiary
A person, organisation or
estate that receives, or
may become eligible to
receive, benefits from a will,
insurance policy, retirement
plan or other contract.
Blue chip
A description applied to the
biggest and most highly
regarded companies quoted
on the stock market. Shares
in such companies are
usually considered a reliable
and profitable investment.
Board of Directors
Decision-making body
legally responsible for
overseeing the management
of a company. In a listed
company the Directors are
elected by the shareholders.
Executive Directors
are usually employees
responsible for managing
the day-to-day business of
the company.
Bond
A bond is technically a
certificate of debt issued by
a government or company
in return for a loan from
an investor. Bonds are
sometimes known as
fixed interest securities,
as they often have a fixed
rate of interest and a
predetermined repayment
date. Examples include giltedged securities issued by
the government of
Sri Lanka, and corporate
bonds issued by companies
as investment products.
Broker
An individual or firm that
acts as an intermediary
between a buyer and
seller, usually charging
commission or a fee.
Insurance brokers arrange
cover on behalf of their
clients and represent the
interests of the policyholder.
Capital
Any form of wealth capable
of being employed in the
production of more wealth.
Capital structure
The manner in which a
company finances itself,
including issuing shares,
long term borrowings and
retained earnings.
Central bank
The major regulatory bank in
a country, usually controlled
by the government. Its
role can include setting
interest rates, note issue,
supervision of commercial
banks, management of
exchange reserves and the
national currency’s value,
as well as acting as the
government banker.
CEO
Abbreviation for Chief
Executive Officer. The CEO is
the head of a company and
oversees strategic planning
and operational activities.
CFO
Abbreviation for Chief
Financial Officer. The
CFO is responsible for a
company’s accounting and
financial activities, and
usually reports to the Chief
Executive Officer.
Claim
Notification to an insurance
company of a call by a
230 AIA Insurance Lanka PLC
Glossary
policyholder to the benefits
due under the terms of an
insurance policy or scheme.
Claims incurred
The total of all claims
sustained during an
accounting period, whether
paid or not. Also known as
losses incurred.
Claims ratio
Claims incurred, adjusted
for any reinsurance,
expressed as a percentage
of net premiums earned.
Sometimes referred to as
loss ratio.
Commission
Payment made to an agent
or other intermediary,
normally in return for selling
an insurance or investment
policy.
Compliance
The requirement to operate
in accordance with statutory
or regulatory guidelines.
Contract
A legally binding document
between two parties. In
the case of insurance, a
common name for a scheme
or policy.
Credit rating
A measure of the ability of
an individual, organisation
or country to repay debt.
The highest rating is usually
AAA, and the lowest D.
These are usually issued
by a credit rating agency or
credit bureau.
Debenture
A fixed interest security
issued by a company or
government agency, usually
secured on its assets, with
a long term redemption
(repayment) date typically
between 5 and 10 years
ahead. If a company files
for bankruptcy, debenture
stockholders are first in
line to be repaid before the
other stockholders and
shareholders.
Dependent
A person who depends
upon another for financial
support. A minor (child) is
normally a dependent at
least until reaching the age
of majority.
Depreciation
Reduction in the worth of
an asset in a company’s
accounts to reflect its loss of
value through age and use.
Dividend
An amount based on a
company’s profits paid out
to shareholders for each
share they hold based on the
profits of a company. Usually
paid as cash, but they can
also take the form of noncash benefits.
Earnings
Another word for profit.
Broadly calculated as
revenues minus costs,
operating expenses and
taxes, minority interests,
extraordinary items and
dividends on preference
stock.
Earnings Per Share (EPS)
Net profit attributable
to shareholders holding
ordinary shares divided by
the number of shares issued
- is a guide to how well a
company is performing.
Companies often use a
weighted average of shares
outstanding over the
reporting term.
Economic value added
A financial performance
measure used to evaluate
a company’s true profit and
the creation of wealth for
shareholders.
Effective interest method
A method of calculating the
amortised cost of a financial
asset or financial liability
and of allocating the interest
income or expense over the
relevant period.
Equity
Another word for “share”.
Shareholders’ equity is the
value of the shares they
hold.
Exchange rate
The rate at which one
currency may be converted
into another. Often quoted as
an indicator of the relative
strength of a currency or the
attractiveness of the market
in which it is used.
Expense ratio
Expenses associated
with running an
insurance business,
such as commission,
professional fees and
other administrative costs,
expressed as a percentage
of premiums. Also the
annual operating costs of an
investment fund, expressed
as a percentage of assets.
Fair value
The amount for which an
asset could be exchanged,
or a liability settled, between
knowledgeable, willing
parties in an arm’s length
transaction.
Fair value through profit or
loss (FVTPL)
A financial asset or financial
liability that is measured at
fair value in the statement
of financial position with
gains and losses arising
from movements in fair
value being presented in
the consolidated income
statement as a component
of the profit or loss for the
year.
Final dividend
The dividend paid by a
company to shareholders at
the end of the financial year.
Gilt-edged securities
Bonds or securities
issued by the Sri Lankan
Government to raise
funds, and are considered
the safest form of Rupee
lending.
Gross
Before tax has been
deducted. The opposite of
net.
Gross Domestic Product
(GDP)
The total value of all goods
and services produced
domestically by a country
each year. Can be calculated
as gross national product
minus income from abroad.
A key measure of national
economic health.
Gross written premium
The total earnings or
revenue generated by sales
of insurance products,
before any reinsurance is
taken into account. Not
all premiums written will
necessarily be treated
as income in the current
financial year, because
some of them could relate
to insurance cover for a
subsequent period.
Annual Report 2013 231
Health insurance
Provides cover against
loss from illness or bodily
injury. The policy can cover
expenses for medicine, visits
to the doctor, hospital stays,
other medical expenses and
loss of earnings, depending
on the conditions covered
and the benefits and choices
of treatment available on the
policy.
IFRS
International Financial
Reporting Standards. These
are accounting regulations
designed to ensure
comparable Balance Sheet
preparation and disclosure,
and are the standards that
all public listed companies
in the European Union are
required to use.
In force
An insurance policy is
“in force” from its start
date until the date it is
terminated.
Index
An index is the weighted
value of a group of securities
used to measure the ups and
downs of a market, market
sector or asset class, and
to provide a performance
benchmark against which
other investments in that
category can be measured.
Inflation
An increase in the general
level of prices over a period
of time.
Insurance
A contract taken out with an
insurer to protect against
loss from a perceived risk.
The person taking out the
insurance is called the
insured. Payments for the
policy are called premiums.
Insurance contract
A contract under which the
insurer accepts significant
insurance risk from the
policyholder by agreeing to
compensate the policyholder
if specified uncertain future
events adversely affect the
policyholder.
Insurance premium
revenue
This includes gross written
premium of life and Non-life
business and comprised
of change in unearned
premium reserve applicable
for current financial year.
Insurance risk
The potential loss resulting
from inappropriate
underwriting, mispricing,
adverse expense, lapse,
mortality and morbidity
experiences. Under IFRS,
insurance risk means risk,
other than financial risk,
transferred from the holder
of a contract to the issuer.
Intangible assets
An intangible asset is an
identifiable non monetary
asset without a physical
substance.
Interest
The fee charged by a lender
for the use of borrowed
money, or the return earned
on an investment, such as
savings in a deposit account.
It can also mean part or
total ownership of an asset.
Interest rate
Percentage rate at which
money is added to savings
or borrowings. The cost of
borrowing or lending money.
Interim results
Figures issued during the
financial year to indicate
business performance since
the last full-year accounts
were published. Usually
announced quarterly or halfyearly.
Intermediary
An individual or organisation
who introduces business to
an insurance company on
behalf of a customer and
represents them in dealings
with the company. Types
of intermediaries include
financial advisers, agents,
brokers, dealers and traders.
Investment
Buying and holding assets,
such as shares, bonds,
property and commodities,
to earn income or to make
capital gains.
Investment contract
An investment contract is an
insurance policy that, whilst
structured and regulated as
a contract of insurance, does
not meet the accounting
definition of an insurance
contract because it does
not transfer significant
insurance risk.
Investment bank
A financial organisation
involved in corporate
finance, advice on mergers,
takeovers and acquisitions,
the launch of new stocks
and shares and investment
management.
Investment income
Earnings or revenue (such as
share dividends and interest
payments) arising from the
ownership of assets.
Liabilities
A company’s debts and
obligations, shown on the
Balance Sheet as claims on
its assets.
Liability adequacy testing
An assessment of whether
the carrying amount of an
insurance liability needs to
be increased or the carrying
amount of related deferred
acquisition and origination
costs or related intangible
assets decreased based on a
review of future cash flows.
Liability insurance
Insurance designed to
protect the policyholder
in the event of a claim by
a third party alleging that
negligence or inappropriate
action has resulted in
bodily injury or damage to
property. Can cover a range
of personal, professional
and commercial risks.
Life insurance
Promises the payment of an
agreed sum of money upon
the death of the insured
within a specified period of
time. Also known as Life
assurance.
Liquidity
Ease with which an asset
can be bought or sold
without significantly
affecting its price. A
liquid asset is one easily
convertible into cash.
Liquidity risk
The risk of having
insufficient cash available to
meet payment obligations
to counterparties when they
fall due.
Listed
A company whose shares are
traded on a stock exchange
is said to be listed. It means
the same as quoted.
Long-term savings
Collective term for Life
insurance, pensions,
232 AIA Insurance Lanka PLC
Glossary
savings, investments and
related business.
Margin
Profit margin as a
percentage of trading profit.
Reflects the underlying
profitability of the business,
but not whether the
company is making money
for shareholders. It is
calculated before interest
charges and tax.
Market
The place where
transactions take place
in a particular type of
commodity, such as a stock
exchange.
Market capitalisation
The value of a company
calculated by multiplying
the number of shares the
company has in circulation
by the market price of those
shares.
Maturity
The date that an insurance
policy or other financial
contract finishes or
“matures”, and the
proceeds, sometimes known
as the maturity value,
become payable.
Million Dollar Round Table
(MDRT)
MDRT is a global
professional trade
association of life
insurance and financial
services professionals that
recognises significant sales
achievements and high
service standards.
Money supply
Total amount of money in
circulation in an economy.
There are several ways this
can be measured such as
M0, M1, M2, M2b. Financial
authorities use these
measures to set targets for
monetary growth.
Net
After tax has been deducted.
The opposite of gross.
Net asset value
The value of a company
calculated by subtracting its
liabilities from its assets.
The difference is the capital,
that is, the funds that would
be available to ordinary
shareholders if the company
were wound up.
Net Combined Ratio (NCR)
A financial measure of
insurance underwriting
profitability that expresses
the total of claim costs,
commission and expenses
as a percentage of
premiums. A NCR below
100% indicates profitable
underwriting.
Net premiums earned
The proportion of net written
premiums recognised for
accounting purposes as
income in a given period.
Net written premium
Total gross written premium
for a given period, minus
premiums paid over or
“ceded” to reinsurers.
Net profit
The amount left over after
deducting tax, interest,
depreciation, fees, minority
interests and extraordinary
charges from sales revenue.
Also known as net earnings,
or net income.
New business
Term used to describe the
value of Long Term savings
policies sold to new and
existing customers. Includes
premium increases on
existing business.
Ordinary share
Where ownership of a
company is divided into
a number of equal parts
or “shares”, ordinary
shareholders are entitled
to a distribution of the
profits (known as dividends)
and have the right to vote
at company meetings. If
the company is wound up,
ordinary shareholders are
entitled to any assets left
after all other obligations
have been met. These
residual assets are
known as the equity of the
company, hence the term
“equities” sometimes used
to describe ordinary shares.
Ordinary shares rank after
debentures and preference
shares.
Policy document
A document that details
the full product information
and terms and conditions
of an insurance policy,
and the policy schedule(s)
which provides the specific
benefits / premiums /
payment conditions covered.
It provides evidence that a
contract exists between the
insured and insurer.
Portfolio
A collection of financial
assets - investments in
shares, fixed interest stocks,
cash and property - held by
an investor.
Premium
The monetary amount paid
for an insurance policy. The
payment a policyholder
makes in return for
insurance cover. Usually
paid monthly, annually or
as a single lump sum. Also,
if the market price of a new
share is higher than its issue
price, it is said to be trading
at a premium.
Price/Earnings ratio
(P / E ratio)
Share price divided by
earnings per share over the
latest 12-month period. The
result offers investors a way
of comparing companies’
prospects. For example,
a high P/E ratio might
suggest a company has
strong growth potential, and
investors will pay more for
a share if they think that the
company’s earnings will rise
rapidly.
Profit
Excess of income over
expenses for a particular
period. Figures may be given
as gross profit, net profit
before tax, net profit after
tax, and earnings.
Profit and loss account
An account compiled at the
end of the financial year
showing that year’s revenue
and expense items, and
indicating gross and net
profit or loss.
Profit before tax
All profits earned in a
period, including investment
gains.
Proxy
A method by which a
shareholder may vote
without attending a meeting
by appointing someone else
to vote on their behalf.
Public company
A company whose shares
are available to members of
the public.
Annual Report 2013 233
Quoted
If a company has a quote
(or is “quoted”), its shares
can be traded on the stock
exchange. It means the
same as listed.
Rate of return
The change in value of an
investment over a period
of time, taking into account
income from it and any
change in its market value.
Normally expressed as an
equivalent annual percentage
of the total amount invested.
Also the yield from a fixed
income security.
Recession
A period of general
economic decline.
Specifically, a decline in
Gross Domestic Product
(GDP) for two or more
consecutive quarters.
Regulatory body
An organisation with
statutory powers to lay down
a framework within which
member companies must
operate.
Reinsurance
A form of insurance bought
by insurance companies to
protect themselves from
the risk of large losses. One
insurer pays to place part of
an insured risk or an entire
book of business with one
or more other insurance
companies, known as the
reinsurers.
Return
For savings, the difference
between the original sum
invested and the final value
of income or capital growth,
given as a percentage.
For shares, the overall
investment performance
based on the movement in
the price of the shares (gain
or loss) and the dividend
income from the shares.
Return on Net Assets
(RONA)
Usually calculated as posttax profit divided by equity
(total assets minus total
liabilities), expresses as a
percentage.
Rights issue
An invitation from a
company to their existing
shareholders to buy new
shares, usually for less than
the prevailing share price, to
raise additional capital.
Risk
The measurable probability
of loss or less-thanexpected returns from
an investment, asset or
business activity.
Risk based capital
Capital allocated by a
company to cover risks
arising from the nature of its
business and the markets
in which it operates, based
on an assessment of those
risks and the likelihood of
adverse developments. For
example, banks may be
required to set aside capital
to cover their exposure
to the risk of customers
defaulting on the repayment
of loans.
Sector
Part of a market or industry
whose components share
similar characteristics.
Stocks are often grouped
into sectors.
Securities
General term for financial
instruments traded on a
stock exchange, such as
stocks and shares, and
the notes, certificates and
bearer warrants that signify
ownership of them.
Securities and Exchange
Commission of Sri Lanka
(SEC)
Official Sri Lankan
regulatory body responsible
for investor protection and
regulation of the securities
industry and companies
quoted on Colombo Stock
Exchanges.
Share
Common term for equity.
Specifically, a certificate
conferring ownership rights
in a company. Ordinary
shares (or common stock)
provide voting rights at
company meetings and
entitle the holder to a
proportional share of the
profits.
Shareholder
Someone who owns shares
or stock in a company or
mutual fund. Shareholders
also have the right to
declared dividends and the
right to vote on company
matters, including the Board
of Directors.
Shareholders’ funds
Shareholders’ funds
represent the assets that
remain once all a company’s
liabilities have been
accounted for. This also
equates to the capital of the
company, plus any profits
that have been retained by
the business.
Stakeholder
Any individual or
organisation with an interest
in a company.
Statement of Financial
Position/Balance Sheet
A statement showing the
financial position of a
business on a specific date
by listing its assets (what it
owns) and its liabilities (the
claims on its assets, or what
it owes).
Statutory accounts
The accounts that every
public limited company is
required by law to produce
and publish.
Stock
Often used as an alternative
word for share, especially in
the US. However, it can refer
specifically to fixed-interest
investments, such as bonds
and gilt-edged stocks, which
represent a loan to the
issuer, rather than shares,
which signify part ownership
of a company.
Stock exchange
A marketplace where
stocks and shares and other
financial instruments can be
traded.
Sum assured
The lump sum benefit
payable under an insurance
policy or contract in
circumstances defined
within the policy (usually
it represents an amount
payable on death or
maturity).
Surrender
The act of cancelling or
cashing in the proceeds
of an insurance contract
before it becomes payable or
reaches its maturity date for
a surrender value.
Sustainability Review
A company’s approach to
how they engage with issues
234 AIA Insurance Lanka PLC
Glossary
such as environmental
management, local
communities, employees,
human rights, health and
safety at work, suppliers,
customers and standards of
business conduct.
Technical provisions
Amounts set aside on
the basis of actuarial
calculations to meet
obligations to policyholders.
Treasury bill/Treasury
bond
Loan or debt securities
issued by a government to
help pay for its financial
needs. Investors receive a
guaranteed return over a
fixed period. In Sri Lanka,
treasury bills (also known
as T-bills) are short-term
securities issued for up to
one year. They are sold at
a discount, the difference
between the purchase
price and the face value
representing the holder’s
profit at the end of the term.
Treasury bonds (T-bonds)
also pay a fixed rate of
interest and are long term
securities issued with a
term of more than one year.
Treasury bills and Treasury
bonds are usually known as
gilt-edged securities.
Trust
A legal arrangement where
one or more people are
appointed to look after
property or investments on
behalf of someone else (the
beneficiary). The Trustees
are legally responsible for
how the assets are managed.
Trustee
Someone appointed to hold
or administer assets for the
benefit of other people.
Underwriting
The process of selecting
which risks an insurance
company can cover, and
deciding the premiums
and terms of acceptance.
On the stock exchange, an
arrangement by which a
company is guaranteed that
an issue of shares will raise
a given amount of money,
because the underwriters
promise to buy any of the
issue not taken up by the
public.
Underwriting profit
The difference between
insurance premiums
earned and claims and
expenses paid over a given
period. If premiums are
the higher figure, there
is an underwriting profit;
if they are lower, there
is an underwriting loss.
Underwriting profit excludes
investment income, so is a
commonly used method of
evaluating the performance
of a General insurance
company.
Unearned premiums
Premiums received by an
insurer relating to cover
provided outside the current
accounting period. Such
premiums are not normally
treated as income until they
have been “earned” during
the period to which they
relate.
Unit trust
Fund of stocks and shares
held by a manager for
the benefit of investors.
Individuals buy units in the
fund, which then invests
in a wide range of shares.
This approach offers small
investors the opportunity
to pool their money with
others and benefit from a
greater spread of risk and
investment opportunities.
British equivalent of an
American mutual fund.
Unitised
Investment policy under
which contributions are
used to buy units in a chosen
investment fund.
Unit-linked
A type of long-term savings
plan where premiums are
used to buy units in an
investment fund, such as a
unit trust. The assets in the
fund can be a mix of stocks,
shares, bonds, property or
other securities. The value
of the units and the return
from them can fluctuate
in line with the investment
performance of the assets
in the fund, and there is no
guarantee on the amount of
capital that will be returned.
Unrealised
A notional profit or loss that
has not yet been achieved
through a transaction. The
profit or loss is “realised”
when the investor sells the
security or asset in question.
Unrealised gains are usually
not taxable.
Volatility
The variable amount by
which a share price or
market value rises and falls
during a period of time. If it
moves up and down rapidly
or unpredictably, it has high
volatility; if it is more stable
or rarely changes, it has low
volatility.
Warrant
A tradable security that
gives the holder the right
to buy a share or bond at a
fixed price on a future date.
Withholding tax
Withholding tax is an
amount withheld by the
party making payment to
another (payee) and paid to
the taxation authorities.
Write off
To cancel a debt, or to
acknowledge the loss
or worthlessness of an
asset. Also to remove an
asset or holding entirely
from a Balance Sheet. The
reduction in value, or loss, is
said to be “written off”.
Yield
Rate of return on an
investment in percentage
terms, taking into account
annual income and any
change in capital value.
Also the dividend payable
on a share expressed as a
percentage of the market
price.
Annual Report 2013 235
Notice of Meeting
NOTICE IS HEREBY GIVEN THAT the 28 Annual General Meeting of AIA Insurance Lanka PLC will be held on Thursday, 27
March 2014 at 10.00 a.m at Ball Room 1, Hotel Hilton - Colombo, No. 2, Sir Chittampalam A Gardiner Mawatha, Colombo 2,
for the following purposes:
Ordinary Business:
1. To receive and consider the audited financial statements for the year ended 31 December 2013 together with the Reports
of the Auditors and the Directors thereon.
2. To declare a first and final dividend of LKR 2/-per share for 2013 as recommended by the Directors.
3. To re-elect Mr. Manoj Ramachandran as a Director who retires by rotation in terms of Article 30 of the Articles of
Association of the Company.
4. To re-elect Mr. Heerak Basu as a Director who retires by rotation in terms of Article 30 of the Articles of Association of
the Company.
5. To ratify the total donations of LKR 6.6 Mn which had been made by the Company during the year ended 31 December
2013 which amount is within the aggregate thereof amounting to 1% of the average profits after tax for the preceding
three years.
6. To authorize the Directors, to make on behalf of the Company, in pursuance of the provisions of the Companies
(Donations) Act No 26 of 1951, donations during the year 2014 not exceeding 1% of the average profits after tax of the
Company for the preceding three years.
7. To re-appoint Messrs. PricewaterhouseCoopers, Chartered Accountants as Company’s external auditors and to
authorize the Directors to determine their remuneration.
By order of the Board
Chathuri Munaweera
Company Secretary
Colombo
10 February 2014
NOTE:
1) A Member entitled to attend and to vote at the afore stated Meeting is entitled to appoint a Proxy to attend and to vote in
his/her stead.
2) A Proxy need not be a Member of the Company.
3) A Form of Proxy accompanies this Notice.
4) The completed Form of Proxy should be deposited at the registered office of the Company not later than 48 hours before
the time appointed for the holding of the meeting.
236 AIA Insurance Lanka PLC
Notes
Annual Report 2013 237
238 AIA Insurance Lanka PLC
Notes
Annual Report 2013 239
Form of Proxy
I/We ...........……....................………...……..........................................................................… (please indicate the full name) bearing
NIC/Passport/Com.Reg. No. ……….……..........……............. of ..........................……………...................................………………. being a
member/members of AIA Insurance Lanka PLC do hereby appoint Mr/Ms ............……....................………............……...…..…..…..
….....................................………(please indicate the full name of the Proxy) bearing NIC No./Passport No. ….………………………...
of…………...…………………………………………………..whom failing:
Mr. Gordon Timmins Watson Mr. Mitchell David New
Mr. Manoj Ramachandran
Mr. Heerak Basu
Ms. Sally Yuen Wai Wan Mr. Deepal Sooriyaarachchi
or failing him
or failing him
or failing him
or failing him
or failing her
as my/our Proxy to represent me/us and to vote on my/our behalf at the Twenty Eighth Annual General Meeting of the Company to
be held on the 27 March 2014 at 10.00 a.m. at “Ball Room 1”, Hotel Hilton – Colombo, No. 2, Sir Chittampalam A Gardiner Mawatha,
Colombo 2 and at any adjournment thereof, and at every poll which may be taken in consequence of the aforesaid Meeting.
I/We the undersigned, hereby direct my/our Proxy to vote for me/us and on my/our behalf on the specified resolution as indicated
by the letter “X” in the appropriate cage.
Ordinary Business
FOR
AGAINST
1. The ordinary resolution numbered (1) set out in the Notice convening the aforesaid meeting
2. The ordinary resolution numbered (2) set out in the Notice convening the aforesaid meeting
3. The ordinary resolution numbered (3) set out in the Notice convening the aforesaid meeting
4. The ordinary resolution numbered (4) set out in the Notice convening the aforesaid meeting
5. The ordinary resolution numbered (5) set out in the Notice convening the aforesaid meeting
6. The ordinary resolution numbered (6) set out in the Notice convening the aforesaid meeting
7. The ordinary resolution numbered (7) set out in the Notice convening the aforesaid meeting
* Please indicate your preference with ‘X’ marked in the appropriate cage
Signed on this ……………………………………. day of …………………………………… Two Thousand and Fourteen.
..............................……….........
Signature/s of Shareholder/s
Notes:
1.
If no indications are given and/or there is in the view of the Proxy holder doubt (by reason of the way in which the instructions
contained in the Proxy form have been completed) as to the way in which the Proxy holder should vote, the Proxy holder shall vote as
he/she thinks fit.
2.
A Proxy holder need not be a member of the Company.
3.
Instructions as to completion appear on reverse.
4.
Proxy holders are requested to bring with them their National Identity Cards or any other form of valid identification and present same
at the time of registration.
240 AIA Insurance Lanka PLC
Instructions as to completion of Form of Proxy
1.
Kindly perfect the Form of Proxy after filling in legibly your full name and address signing in the space provided and
filling in the date of signature.
2.
The persons mentioned on the reverse hereof, are Directors of the Company and they are willing to represent any
Shareholder/s as Proxy, and vote as directed by the Shareholder. They will not, however be willing to speak or move or
second any amendments to the resolutions or make any statement in regard thereto on behalf of any Shareholder.
3.
If another Proxy is preferred, delete the names printed, add the name of the Proxy preferred and initial the alteration.
4.
Please indicate your preference with ‘X’ in the appropriate cages provided in the Form of Proxy, as to how your Proxy is
to vote on the resolutions. If no indication is given the Proxy in his/her discretion may vote as he/she thinks fit.
5.
In the case of a corporate member the Proxy Form must be executed under its common seal or by a duly authorized
officer of the entity in accordance with its Articles of Association or Constitution. If the Form of Proxy is signed by an
Attorney, the relative Power of Attorney should also accompany the completed Form of Proxy, if it has not already been
registered with the Company.
6.
The completed Form of Proxy should be deposited at the registered office of the Company at No. 75, Kumaran Ratnam
Road, Colombo 02 not less than 48 hours before the time appointed for the holding of the Meeting.
Corporate Information
Name of the Company
AIA Insurance Lanka PLC
Company Registration No – PQ 18
Chartered Accountants
No. 100, Braybrooke Place
Colombo 02,
Sri Lanka.
Legal Form
• Public Company with limited liability.
• Incorporated in Sri Lanka on 12 December 1986 under the
Companies Act No. 17 of 1982.
• Re - registered under the Companies Act No. 07 of 2007.
• Insurance Company licensed by the Insurance Board of
Sri Lanka.
• The shares of the Company are listed on the Colombo
Stock Exchange.
Tax Payer Identification Number (TIN)
134001356
Consultant Actuaries – General Insurance
NMG Financial Services Consulting Pte Ltd
No. 65, Chulia Street #37-07/08
OCBC Centre
Singapore 049513
Lawyers
Julius & Creasy
Attorneys-at-Law & Solicitors
No. 41, Janadhipathi Mawatha
Colombo 01
VAT Registration Number
134001356 - 7000
Directors
Gordon Timmins Watson – Chairman
Mitchell David New
Manoj Ramachandran
Heerak Basu
Sally Yuen Wai Wan
Deepal Sooriyaarachchi
Reinsurance Panel - Life Insurance
Munich Re
RGA International Reinsurance Company Limited
Chief Executive Officer
Shah Rouf
Deputy Chief Executive Officer
Upul Wijesinghe
Company Secretary
Chathuri Munaweera
Accounting year
31 December
Subsidiary
Name of the Company Rainbow Trust
Management Limited
Appointed Actuary – Life Insurance
Frank Munro
AIA Insurance Lanka PLC
No. 75, Kumaran Ratnam Road, Colombo 2
Sri Lanka
Holding
Principal Activity
100%
Trust Management
Registered Office/ Head Office
No. 75, Kumaran Ratnam Road, Colombo 02
Telephone : 0094-11-2310000
Fax
: 0094-11-2447620 / 2310076
E-mail
: [email protected]
Web
: www.aialife.com.lk
Company Registrars
SSP Corporate Services (Private) Limited
No. 101, Inner Flower Road, Colombo 03
Telephone: 0094-11-2573894 / 2576871
Auditors
PricewaterhouseCoopers
Designed and produced by emagewise
Photography by Dimitri Crusz and Dhanush de Costa
Digital plates and printing by Aitken Spence Printing & Packaging (Pvt) Ltd.
Reinsurance Panel – General Insurance
Treaty Reinsurers
Aviva Re
National Insurance Trust Fund
Munich Re
ACR
Scor Re
Labuan Re
Malaysian Re
GIC Re
Trust Re
Facultative Reinsurers
Chubb Group
Asia Capital Reinsurance Group
General Insurance Corporation of India
Lloyds Syndicates
Bankers
Standard Chartered Bank PLC
Bank of Ceylon
Commercial Bank of Ceylon PLC
Hatton National Bank PLC
The Hongkong & Shanghai Banking Corporation Limited
People’s Bank
Sampath Bank PLC
National Development Bank PLC
Nations Trust Bank
National Savings Bank PLC
Deutsche Bank
Union Bank PLC
Pan Asia Banking Corporation PLC
Seylan Bank PLC
Custodian Banks
Bank of Ceylon
Deutsche Bank
AIA Insurance Lanka PLC
No. 75, Kumaran Ratnam Road,
Colombo 02
Telephone : 2310000
Fax : 2447620, 2310076
E-mail : [email protected]
Web : www.aialife.com.lk

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