HNB Assurance posts Rs.33.5mn net profit in 1Q

Hatton National Bank PLC (HNB) subsidiary, HNB Assurance PLC posted a net profit of Rs.33.5 million for the quarter ended March 31, 2016 (1Q16), recording an increase of 116 percent from a year ago, the interim results showed.

The performance has been supported by growing business – both life and non-life, interest and other incomes but the company made both realized and fair value losses on its financial investment portfolio. The earnings per share rose to 67 cents from 31 cents.

The total gross written premium (GWP) rose by 17.5 percent to Rs.1.61 billion supported by both life and general insurance but the former had a higher growth. The life insurance GWP grew by 33 percent year-on-year (YoY) to Rs.832.7 million, while the general insurance GWP rose by 4.8 percent YoY to Rs.778.3 million.

Despite the low penetration, the life insurance business, which once looked a potential area for growth with the increasing per capita income, is now faced with dim prospects as the inflation and higher taxes biting into the disposable incomes of the people, making a life insurance policy less affordable. Sri Lanka’s life insurance penetration stands woefully low at just above 0.5 percent of gross domestic product (GDP) (based on GWP). With vehicle importation too has now largely come to a standstill, the growth prospects in this area too remains cloudy but ensures a steady source of income for the companies.

The growth of the motor insurance GWP, which accounts for 67 percent of total general insurance business of the company, has narrowed by 2 percent YoY to Rs.523.4 million. Insurance benefits and claims paid by the company during the three months on a net basis rose by 4 percent YoY to Rs.433.3 million. In a key management change, this week saw the former Chief Executive of state-owned insurance giant, Sri Lanka Insurance Corporation Limited, Deepthi Lokuarachchi taking the reins at HNB Assurance.

For over a year, the company was run by the company’s Chief Operating Officer Niranjan Manickam, who was appointed as acting Chief Executive. Former Chief Executive Manjula de Silva, who is now Chairman of state-owned National Insurance Trust Fund Board, stepped down on March 31, 2015 after serving more than 10 years. Meanwhile, the company saw its interest and dividend income rising by 20 percent YoY to Rs.243.1 million in response to the increase in treasury bills and bond yields during the quarter.

Nevertheless, the company suffered both realized and fair value losses, probably on its gilt-edged portfolio. The net realized losses of its financial investment portfolio was Rs.11.1 million, against a gain of Rs.14.2 million recorded in the same period last year. The fair value loss more than tripled to Rs.36.6 million from Rs.11.6 million a year ago. The fee and commission income however rose by 38.8 percent YoY to Rs.54 million. As of March 31, 2016, HNB PLC held a 59.99 percent stake in the company being the single largest shareholder.