AIA to focus on growth opportunities in Sri Lankan life insurance market
View(s):AIA Sri Lanka PLC announced recently that it is to sell its general insurance company to continue to focus on realising significant growth opportunities in the Sri Lankan life insurance market.
The company will be divesting its fully owned general insurance subsidiary AIA General Insurance Lanka Limited to Janashakthi Insurance PLC for Rs. 3.2 billion and the transaction will be completed by month’s end. AIA Group’s vision is to be the pre-eminent life insurance provider in the Asia-Pacific region and AIA Sri Lanka is fully committed to this, an AIA media release said.
AIA Head of Marketing - Suren Perera, AIA CEO Shah Rouf and AIA Deputy CEO Upul Wijesinghe address a press conference. Pic by Indika Handuwela
“Over the period since joining the AIA Group, AIA Sri Lanka has also made significant investments to expand its branch network with 52 new branch offices and establish its partnership with Sri Lanka Cricket,” the release said. The formal requirement of an industry wide segregation of life and general insurance businesses by the insurance board of Sri Lanka (IBSL) at the start of this year provided the backdrop for AIA’s decision, its officials told reporters last week.
AIA was the first company to comply with the segregation requirement which AIA views as a progressive move by the regulator, they said.
AIA Group is the largest independent publicly listed Pan-Asian life insurance group, with a presence in 18 markets in Aisa-Pacific, including Sri Lanka. Established over 90 years ago, AIA is a market leader in the Asia – Pacific region (ex-Japan) based on life insurance premiums and holds leading positions across the majority of its markets.
Janashakthi Insurance Plc founder Chandra Schaffter said they hope this acquisition will enable them to increase their market share by 6.5 per cent to 17.5 per cent in terms of the general insurance business within the country.
The strategic notion behind the acquisition according to Janashakthi Insurance PLC CEO Jude Fernando is to bridge the significant gap between the industry leaders.
“We have been the third in the general insurance industry since 2005 and that’s not a good place to be because there was a huge gap between us and our contenders. Our strategy behind this acquisition is to get closer to the leading spot,” he noted.
With the proposed acquisition of AIA’s general insurance business which accounts for 6 per cent of the segment, Janashakthi’s market share is expected to rise to 17.4 per cent from 11.4 per cent.
In the first half Janashakthi’s general insurance GWP was Rs. 3.6 billion up from Rs. 3.2 billion a year earlier. Net benefits and claims rose to Rs. 1.9 billion from Rs. 1.6 billion. Pre-tax profit from the business was down to Rs. 252 million from Rs. 373 million. Assets of general insurance were Rs. 11.95 billion as at 30 June 2015, marginally down from Rs. 12.2 billion as at 31 December 2014. Liabilities were Rs. 7.7 billion up from Rs. 7.5 billion.