Ceylinco Life Insurance Limited
INTEGRATED ANNUAL REPORT 2016

STEWARDSHIP

Annual Report of the Board of Directors

The Directors of Ceylinco Life Insurance Limited (CLIL) are pleased to submit their Annual Report, together with the CLIL Audited Financial Statement and Auditors’ Report for the year ended 31 December 2016.

Financial Statements, recommended to the Board of Directors by the Audit Committee of the Company, were accepted and approved on at the Board meeting on 23 February 2017. The details set out in the following report provide information required by the Companies Act No. 07 of 2007 and are guided by the recommended best practices on Corporate Governance depicted in the Code of Best Practices on Corporate Governance 2013, issued jointly by the Institute of CA Sri Lanka and Securities Exchange Commission of Sri Lanka.

CLIL is a Public Company with limited liability incorporated on 22 April 2014, licensed as a Company authorised by the Insurance Board of Sri Lanka (IBSL) to carry on long term life insurance business, under the control of Regulation of Insurance Industry (Amendment) Act No. 43 of 2000. The Company was incorporated as a legal requirement that arose out of Section 53 of the said Act, which required segregating long term and general insurance business from the composite insurance companies.

The Company is domiciled in Sri Lanka and the registered office is situated at No. 106, Havelock Road, Colombo 05, at which the Company’s Head Office is operated.

1. Vision, Purpose and Corporate Conduct

The Company’s Vision and Purpose are given on page 4 to 5. In achieving its Vision and Purpose, all Directors and employees conduct their activities to the highest level of ethical standards.

2. Principal Activities of the Company

The Company’s principal activity is carrying out underwriting all classes of Life Insurance. The Company received the license to carry out its business as a long term insurance provider by the Insurance Board of Sri Lanka (IBSL) on 1 June 2015.

The Directors declare that the Company has not engaged in any activity, which contravene with laws and regulations of the country during the said period. Further, there were no significant changes in the nature of the principal activities of the Company during the financial year under review.

3. Ultimate Parent and Subsidiaries

The ultimate holding Company is Ceylinco Insurance PLC. Subsidiaries of the Company are Serene Resorts Limited, Ceylinco Seraka Limited and Ceylinco Healthcare Services Limited. Citizens Development Business Finance PLC is an Associate Company of CLIL.

Ceylinco Healthcare Services

Ceylinco Healthcare Services limited was established in the year 2000 and it is the only private sector ‘Radiation Treatment Centre’ for treating cancer patients in Sri Lanka.

Serene Resorts Limited

Serene Resorts Limited is aimed at serving the elderly population of the country by establishing a retirement home.

Ceylinco Seraka Limited

Ceylinco Seraka Limited is engaged in offering investment advisory services.

More details are given on page 34 under the topic of ‘Group Structure’.

4. Business Review

Review of the financial and operational performance and future business developments of the Company, are described in the Chairman’s and Managing Director’s messages, the Management. Discussion and Analysis sections of the Annual Report on pages 11 to 113. These Reports, together with the Audited Financial Statements, reflect the state of the affairs of the Company.

5. Financial Statements of the Company

The Financial Statements of the Company, for the year ended 31 December 2016, are duly certified by the Director/CFO, recommended by the Audit Committee, approved by the Board of Directors and signed by the Managing Director, in compliance with the requirements of Sections 151, 152 and 168 (1) (b) of the Companies Act No. 07 of 2007 are given on pages 182 to 297 of this Annual Report.

The Auditors’ Report on the Financial Statements of the Company is given on page 186.

6. Directors’ Responsibility for Financial Reporting

The Directors assume the responsibility for Financial Statements, which reflect a true and fair view of the state of affairs of the Company. The Statement of Directors’ Responsibility for Financial Reporting, appearing on page 178, forms as integral part of this Report.

7. Significant changes in Accounting Policies

The Company prepared their Financial Statements, in accordance with Sri Lanka Accounting Standards (SLFRS/LKAS). The said Accounting Policies adopted in the Financial Statements, are given on pages 182 to 297 as required by the Section 168 (1) (d) of the Companies Act No. 07 of 2007. The Board of Directors wish to confirm that there were no material changes in the Accounting Policies adopted by the Company, during the year under review.

8. Review of the Financial Performance

The Statement of Profit and Loss and other Comprehensive Income of the Company is given below. Transfers to/from Reserves of the Company are shown in the statement of Changes in Equity appearing on page 191.

Description 2016
Rs. Mn
2015
Rs. Mn
Change
%
Gross Written Premiums 15,028 13,457 12
Premiums Ceded to Reinsurers (374) (310) 21
Investment and Other Income 8,781 6,741 30
Net Benefits and Claims Paid (6,652) (5,957) 12
Acquisition Cost (1,694) (1,610) 5
Expenses (2,947) (3,004) 2
Income Tax Expense (665) (121) 449
Profit after Tax 3,079 2,060 49

9. Future Development

Likely future developments in business are discussed in the Review of Managing Director on pages 15 to 19.

10. Total Amount of Expenses Paid in Respect of CSR Activities and Donations by the Company

During the year, The Company has made donations amounting to Rs. 1.3 Mn in terms of the Shareholder Resolution passed by the shareholders, in the AGM held on 30th March 2015.

11. Tax Expenses

Tax expense has been computed at the rates given in Note 34 to the Financial Statements, appearing on page 254 of this Report.

12. Investments

Total investments of the Company and other equity investments amounted to Rs. 80.7 Bn. During the year under review, the Company invested Rs. 250 Mn each in Ceylinco Healthcare Services Limited and in Serene Resorts Limited with the
approval of IBSL. These transactions were also reviewed by the Company’s – RPTR Committee

13. Property, Plant and Equipment

The net book value of property, plant and equipment of the Company, as at the Reporting date amounted to Rs. 7.1 Bn. Total capital expenditure during the year for acquisition of property, plant and equipment by the Company, amounted to Rs. 281 Mn. Details of property, plant and equipment are given in Note 8 to the Financial Statements.

14. Stated Capital and Reserves

The stated capital is the total of all amounts received by the Company, in respect of the issue of shares. The stated capital of the Company, as at 31 December 2016, amounts to Rs. 500,000,500.00 (Five Hundred Million and Five Hundred Rupees), which is represented by issued and fully paid 50,000,050 ordinary shares.

Total reserves of the Company stood at Rs. 11.4 Bn as at 31 December 2016 details of which are given in the Statement of Changes in Equity on page 191.

15. Market Value of the investment Properties

Market value of the investment properties are given on page 222.

16. Shareholding and Share Information

The Company is a fully owned subsidiary of Ceylinco Insurance PLC. The Company has issued 50,000,050 ordinary shares to the said Sole Shareholder of the Company. Information relating to dividends and net asset per share are stated under Investor Capital on pages 75 to 89.

17. Directors’ Dealing in Shares

As the Company is not listed in the CSE, there were no shares nor debentures of the Company held by the Directors.

18. Internal Control and Risk Management

Internal Control

The Directors acknowledge their responsibility for the Company’s system of internal control. The systems are designed to provide reasonable assurance that the assets of the Company are safeguarded and to ensure that proper accounting records are maintained. The Board of Directors, having reviewed the system of internal control, is satisfied with the systems and measures in effect at the date of signing this Annual Report.

Risk Management

The Company has a separate Board Risk Committee, to look after the policy development for risk management of the Company. Risk Management of the Company is given in pages 124 to 132 under the topic of ‘Risk Management’.

19. Corporate Governance

The Board of Directors have shown their commitment to maintain an effective corporate governance structure and always be in compliance with all relevant rules, regulations and best practices on corporate governance, extending beyond regulatory requirements.

More details are given in the Corporate Governance report on pages 133 to 155.

20. Human Resources

The Company continued to develop appropriate human resources management policies and focus their contribution towards the achievement of corporate goals. The Company’s HR Policy and more other details are given in Employee Capital section on pages 95 to 104.

21. Board of Directors

The Board of Directors of the Company and their brief profiles are given on pages 22 to 24 The following persons were the Directors of the Company as at 31 December 2016.

  • J G P Perera – Chairman/Non-Executive Director
  • R Renganathan – Executive Director/Managing Director/Chief Executive Officer
  • E T L Ranasinghe – Executive Director/Deputy Chief Executive Officer
  • P D M Cooray – Executive Director/Head of HR and Training
  • Palitha Jayawardena – Executive Director/Chief Financial Officer
  • Ranga Abeynayake – Executive Director/Deputy Chief Financial Officer
  • D H J Gunawardena – Non-Executive Director
  • Gen. C S Weerasooriya (Retired) – Non-Executive Director
  • R S W Senanayake – Non-Executive Director
  • J A Setukavalar – Non-Executive Independent Director
  • Prof. Mohan de Silva – Non-Executive Independent Director
  • Dr. B G S De Silva – Non-Executive Independent Director
  • J Wickramasinghe – Non-Executive Independent Director
  • Sugath Caldera – Non-Executive Independent Director
  • Ms. A K Seneviratne – Non-Executive Independent Director

Retirement and Re-election

In accordance with the Section 210 of Companies Act No. 07 of 2007, J Godwin Perera will retire and be eligible himself to be re-elected as a Director of the Company. J G P Perera will be 80 years of age in December 2017 and the shareholders approval shall be sought by way of an ordinary resolution at the forthcoming AGM that J Godwin Perera to be re-elected as a Companies Act No. 07 of 2007, shall not apply to J G P Perera.

In accordance with the Section 210 of Companies Act No. 07 of 2007, Gen. C S Weerasooriya will retire and be eligible himself to be re-elected as a Director of the Company. Gen. C S Weerasooriya will be 73 years of age in December 2016 and the shareholders approval shall be sought by way of an ordinary resolution at the forthcoming AGM, that No. 07 of 2007, shall not apply to Gen. C S Weerasooriya.

Both appointments were considered at the Nomination Committee of the Company and recommended to the Board of Directors to notify to the Shareholder. As per the articles of Association of the Company, three Directors will retire and make themselves eligible for re-election. More details are given on page 297 under the ‘Notice of the AGM’.

22. Register of Directors and Secretaries

As required under Section 223 (1) of the Companies Act No. 07 of 2007, the Company maintains a Register of Directors and Secretaries, which contain information of each Director and the Secretary.

23. Board Committees

The Board of Directors has appointed Board Sub-Committees to ensure oversight and control over certain affairs of the Company.

Board Sub-Committees Composition
Audit Committee J A Setukavalar Chairman Non-Executive Independent Director
D H J Gunawardena Member Non-Executive Director
J Wickramasinghe Member Non-Executive Independent Director

More details are disclosed on pages 166 and 167 under ‘the Report of the Audit Committee’.

Board Sub-Committees Composition
Remuneration Committee Prof. Mohan De Silva Chairman Non-Executive Independent Director
R S W Senanayake Member Non-Executive Director
D H J Gunawardena Member Non-Executive Director

More details are disclosed on page 164 under ‘the Report of the Remuneration Committee’.

Board Sub-Committees Composition
Risk Committee Ms. A K Seneviratne Chairperson Non-Executive Independent Director
R S Senanayake Member Non-Executive Director
J Wickramasinghe Member Non-Executive Independent Director
Board Sub-Committees Composition
Nomination Committee Dr. B G S De Silva Chairman Non-Executive Independent Director
R Renganathan Member Executive Director –
MD/CEO
J Wickramasinghe Member Non-Executive Independent Director

More details are disclosed on page 165 under ‘the Report of the Nomination Committee’.

Board Sub-Committees Composition
Related Party Transaction Review Committee D H J Gunawardena Chairman Non-Executive Director
R S W Senanayake Member Non-Executive Director
Palitha Jayawardena Member Executive Director – CFO

More details on the Related Party Transaction Review Committee are disclosed on page 168 under ‘the Report of the RPTR Committee.

24. Directors’ Meetings

The details of the meetings which comprise Board meeting and Board Sub-Committees meetings and the attendance of Directors at these meetings, are given on page 135 and 136.

25. Interest Register of the Company and Directors’ Interests in Contract or Proposed Contracts

Interest Register

The Company maintains an Interest Register in compliance with the Companies Act No. 07 of 2007. All Directors have made declarations as required by Section 192 (1) and (2) of the Companies Act No. 07 of 2007.

Directors’ Interest in Contracts

The Directors of the Company have no direct or indirect interest in any contract or proposed contract with the Company, except for those specified, which have been disclosed and declared at meetings of Directors.

The Company carried out transactions in the ordinary course of business on an arm’s length basis with entities where a Director of the Company is the Chairman or a Director of such entities, as details below.

No. Name of the Company J P G
Perera
R
Renganathan
E L T
Ranasinghe
P D M
Cooray
Palitha
Jayawardena
Ranga
Abeynayake
D H J
Gunawardena
R S W
Senanayake
Gen. C S
Weerasooriya
1. Ceylinco Insurance PLC  
2. Ceylinco Seraka Limited          
3. Serene Resorts Limited        
4. Ceylinco Healthcare
Services Limited
            
5. Citizen Development Business Finance PLC              
6. SMB Securities (Pvt) Limited                
7. SMB Real Estate Limited                

In addition, Related Party Disclosures as per Sri Lanka Accounting Standards are detailed in Note 43 to the Financial Statement on pages 269 to 272 of this Annual Report.

26. Directors’ Remuneration

Directors’ remuneration in respect of the Company for the financial year ended 31 December 2016, is given in Note 43.iv.d to the Financial Statements as required by Section 168 (1) (f) of the Companies Act No. 07 of 2007.

27. Environmental Protection

The Company has not engaged in any activity that was detrimental to the environment and has been in due compliance with all applicable laws and regulations of the country to the best of its ability. The Company has chosen ‘Go Green’ as the theme for the year under review. The Company’s effort in this regard is described in the social and environment capital.

28. Statutory Payments

The Board of Directors confirm that to the best of their knowledge and belief, all taxes, duties and levies payable by the Company and in respect of the employees of the Company and all other known statutory dues, as were due and payable by the Company, as at the Reporting date have been paid or, where relevant provided for.

29. Going Concern

The Board of Directors is satisfied that the Company has adequate resources to continue in operational existence for the foreseeable future, to justify adopting the going concern basis in preparing these Financial Statements.

30. Dividends and revenue

The Board of Directors recommends a final cash dividend of Rs. 7.50 per share final Dividend for the financial year under review.

The Board was satisfied that the Company would meet the solvency test after the declaration of the aforesaid dividend and required to obtain a solvency certificate from the Company’s Auditors to that effect. The Board authorised the distribution, in terms of Section 56 of the Companies Act No. 07 of 2007. The said dividend will be paid, subject to the approval by the Shareholder and a resolution will be put forward to the shareholder at the forthcoming AGM with this regard.

Rs. 2,708 Mn (net of dividend) was transfered during the year to retained earnings.

31. Events after Reporting date

No material events have taken place after the Reporting date, which require an adjustment to or a disclosure in the Financial Statements.

32. Appointment of Auditors, Auditors’ Fees and Auditors’ Report

Appointment of Auditors

The Financial Statements for the year have been audited by Messrs Ernst & Young (Chartered Accountants) and in accordance with the Company’s Act No. 07 of 2007 a resolution will be proposed to the shareholder at the forthcoming AGM for the approval pertaining to their reappointment and authorising the Directors to determine their remuneration.

Auditors’ Fees

The fees paid to the Auditors are disclosed in the Note 32 in the Financial Statements attached. The Auditors of the Company, Messrs Ernst & Young have confirmed that they do not have any relationship with the Company other than that as the Auditors which would have an impact on their independence.

Auditors’ Report

Further, the Company Auditors performed the audit on the Financial Statements for the year ended 31 December 2016 and the Auditors’ Report issued thereon, is given on page 186 as required by Section 168 (1) (c) of the Companies Act No. 07 of 2007.

33. Annual General Meeting

The Third Annual General Meeting of CLIL, will be held at the Board Room of the Ceylinco Life Insurance Limited at No. 106, Havelock Road, Colombo 05 on 30 March 2017 at 3.00 p.m. The Notice of the AGM appears in page 297 of the Annual Report.

As required by the Section 168 (1) (k) of the Companies Act No. 07 of 2007, the Board of Directors does acknowledge the contents of the Annual Report and is signed for and on behalf of the Board of Directors.

By Order of the Board,

R Renganathan
Managing Director/CEO

Palitha Jayawardena
Director/CFO

K I Weththasinghe
Company Secretary

23 February 2017
Colombo