Janashakthi to enter Colombo bourse

Janashakthi Insurance Company Ltd (JICL) is planning to list on the Colombo Stock Exchange (CSE) this year, despite negative market conditions, a top official said.

Prakash Schaffter, Managing Director, JICL said they will put into action what the company had wanted a long time age, this year. “We have always wanted to go public. We wanted to do this when Janashakthi life Insurance Company was launched, but at the time the market collapsed and we had to abandon those plans,” he told The Sunday Times FT.

He acknowledged that presently market conditions are not conducive for listing, but the company is actively going ahead with their plans. “The market conditions have not been conducive for listing over the past 12 months or so, but we are hoping to go public this year. We have done most of the ground work such as talking to banks,” he added.

Schaffter said the details of the listing are being finalised at present. When asked whether JICL is looking at merging or acquiring related businesses, he said it is a possibility sometime in the future.

“We have no such plans at this point of time. We are interested only to consolidate our balance sheet but maybe sometime in the future we can do it,” he said. He also noted that at some point in time Janashakthi Ltd, the holding company of JICL may look at banking. “JICL cannot be involved in businesses, other than insurance as it is restricted by legislation. At some point of time, a holding company can do banking. During the next couple of years we will concentrate on insurance but we will not rule out banking.”Schaffter pointed out that presently the insurance market is very fragmented. “There are five major players who control 90 percent of the market. We have too many players and the market is ‘too price competitive,’ and maybe we can do with less players,” he added.

He noted that increasing minimum capital requirement legislation by the regulator may result in consolidation of firms and reduction in players. However, he said that JICL is very concerned about the same legislation that has been outlined by Insurance Board of Sri Lanka (IBSL). “Splitting of composite companies into separate ‘life’ and ‘general’ companies is of some concern. It was done without any industry consultation and is very revolutionary. For us it means going back from what we did less than a decade ago when we merged the separate companies,” he pointed out, adding that merging is much easier that de-merging.

Schaffter said that de-merging does not benefit the industry or the general public. “We do not think that enough thought has been given to the costs involved in this process”.

When informed that IBSL may have thought of such a step because some insurance firms are known to transfer life funds to general reserves which is prohibited, he said, “I cannot answer for all the companies, but we are subject to audits by the IBSL and to send quarterly returns to the regulator. Transfer of funds cannot take place, because at the end of the year, we have to square our accounts. It is a serious allegation to make.”

When asked how he sees the industry a couple of years down the line, Schaffter said, “Much depends on the legislation that is coming in. Assuming the capital requirements are increased and solvency margin laws are brought in, there certainly will be same degree of consolidation in the industry.”

He said JICL has complied with capital requirements of IBSL. “We have exceeded Rs.1 billion.” He added that admissibility of assets also leaves more room to be reviewed. “All our fixed assets are inadmissible and this impacts our bottom-line. This is an area which needs to be revisited,” he said. Schaffter noted that as an industry, insurance firms need to improve a lot on lobbying for issues.

“We can exercise our muscle to a greater extent on issues such as splitting up of life and general entities. There should be a concerted lobbying effort. We need to be more active.”

He also noted that the industry is on the verge of ‘over regulation’ “IBSL has been very patient with us and the body is a vast improvement to what existed 15 years ago. However over regulation, which we are verging on at present will stifle the industry,” he said, adding that it will also curb growth.

“What we need to focus on is the strengths our industry has. For an example, all insurers went beyond their expectations while paying out tsunami claims. We need to harness these strengths. What we do not want is either fraud or collapse of a firm, which will be a loss of confidence for the entire industry,” he said, adding that there should be a ‘balance’ in regulation. “Sri Lanka needs to find what is good for Sri Lanka, rather than bringing in prototypes from other nations.”

He noted that JICL presently employs 2200 employees of whom 1100 are office staff and has net assets worth Rs.1.4 billion.

“Our total business touched Rs.5 billion last year and considering the 13 years we have been in business, it is an achievement.”
Schaffter insisted that Janashakthi Ltd and Kshatriya Ltd are two independent firms, despite siblings heading them. “There is no legal link or an operational relationship between these two,” he stressed.

He also added that their direction for the next two years will be to grow their market share, the bottom-line and thereafter concentrate on expansion plans.