AIA INSURANCE LANKA PLC AND ITS SUBSIDIARY. CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - 30 September 2018

Transcription

1 AIA INSURANCE LANKA PLC AND ITS SUBSIDIARY CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS - 30 September 2018

2 Page 2 Consolidated Statement of Financial Position As at 30 September 31 December 30 September 31 December LKR '000 LKR '000 LKR '000 LKR '000 Assets Intangible assets 867, , , ,440 Property, plant and equipment 772, , , ,542 Investments in subsidiaries - - 1,000 1,000 Financial assets 44,758,960 45,735,748 44,758,960 45,735,748 Policyholder and other loans 851, , , ,382 Reinsurance receivables 87,159 81,308 87,159 81,308 Trade receivables 440, , , ,414 Other assets 3,212,693 3,166,061 3,212,609 3,165,994 Other fund assets 273, , , ,494 Cash and cash equivalents 336, , , ,626 Total assets 51,600,840 52,583,995 51,599,405 52,576,948 Liabilities Insurance liabilities 30,833,701 32,116,292 30,833,701 32,116,292 Retirement benefit obligations 223, , , ,085 Deferred income tax liabilities 374,377 6, ,377 6,498 Other fund liabilities 273, , , ,494 Reinsurance payables 141,612 91, ,612 91,288 Accruals and other payables 2,928,481 2,526,705 2,928,229 2,526,320 Current Income tax liabilities 190,101 3, ,889 3,170 Deferred revenue 8,599 11,262 8,599 11,262 Bank overdraft 48,755 5,622 48,755 5,622 Total liabilities 35,022,652 35,218,722 35,022,188 35,218,031 Equity Stated capital 511, , , ,922 Capital reserves 152, , , ,176 Restricted regulatory reserve 6,080,848 6,080,848 6,080,848 6,080,848 Revenue reserves 9,833,242 10,620,327 9,832,271 10,613,971 Total equity 16,578,188 17,365,273 16,577,217 17,358,917 Total equity and liabilities 51,600,840 52,583,995 51,599,405 52,576,948 I certify that the financial statements have been prepared in compliance with the requirements of the Companies Act No 7 of Signed Gavin D' Rosairo Chief Financial Officer The Board of Directors is responsible for the preparation and presentation of the financial statements. Signed for and on behalf of the Board by, Signed Signed Deepal Sooriyaarachchi Sarath Wikramanayake Director Director 14 November 2018

3 Page 3 Consolidated Income Statement For the nine months ended 30 September LKR '000 LKR '000 LKR '000 LKR '000 Gross written premium 9,329,376 8,414,513 9,329,376 8,414,513 Gross reinsurance premium (266,681) (216,008) (266,681) (216,008) Net earned premium 9,062,695 8,198,505 9,062,695 8,198,505 Other revenue Investment income 3,803,198 3,874,779 3,808,778 3,874,779 Fee income 552, , , ,403 Realised gains 100,244 36, ,244 36,879 Fair value gains / (losses) (271,077) 2,173 (271,077) 2,173 Other operating revenue 107, , , ,966 4,292,081 4,465,853 4,296,329 4,464,200 Total revenue 13,354,776 12,664,358 13,359,024 12,662,705 Net claims and benefits (4,350,061) (3,931,929) (4,350,061) (3,931,929) Change in contractual liability (315,807) (3,217,664) (315,807) (3,217,664) Net acquisition expenses (1,491,032) (1,322,378) (1,491,032) (1,322,378) Operating and administrative expenses (4,864,768) (3,803,915) (4,864,433) (3,803,397) Profit before tax 2,333, ,472 2,337, ,337 Income tax expense (234,943) (199,707) (234,141) (199,501) Profit for the period 2,098, ,765 2,103, ,836 Profit for the period attributable to, Owners of the parent 2,098, ,765 2,103, ,836 Non-controlling interest ,098, ,765 2,103, ,836 Basic / diluted earnings per share (in LKR) Dividend per share (in LKR)

4 Page 4 Consolidated Statement of Comprehensive Income For the nine months ended 30 September LKR '000 LKR '000 LKR '000 LKR '000 Profit for the period 2,098, ,765 2,103, ,836 Items that are / may be subsequently reclassified to profit or loss Changes in fair value of available for sale financial assets (1,181,224) 1,226,572 (1,181,224) 1,226,572 Changes in fair value of available for sale financial assets transferred to long term insurance fund 1,094,165 (1,195,232) 1,094,165 (1,195,232) Total other comprehensive income for the period (87,059) 31,340 (87,059) 31,340 Total comprehensive income for the period 2,011, ,105 2,016, ,176 Owners of the parent 2,011, ,105 2,016, ,176 Non-controlling interest Total comprehensive income for the period 2,011, ,105 2,016, ,176 Items disclosed in the statement above are net of tax.

5 Page 5 Consolidated Income Statement For the three months ended 30 September LKR '000 LKR '000 LKR '000 LKR '000 Gross written premium 3,098,282 2,882,511 3,098,282 2,882,511 Gross reinsurance premium (88,959) (80,656) (88,959) (80,656) Net earned premium 3,009,323 2,801,855 3,009,323 2,801,855 Other revenue Investment income 1,258,628 1,239,056 1,258,628 1,239,056 Fee income 202, , , ,886 Realised gains/ (losses) (21,475) 7,179 (21,475) 7,179 Fair value gains/losses (133,001) (80,339) (133,001) (80,339) Other operating revenue 29,113 52,713 29,071 52,544 1,336,191 1,337,122 1,335,757 1,336,326 Total revenue 4,345,514 4,138,977 4,345,080 4,138,181 Net claims and benefits (1,371,455) (1,419,914) (1,371,455) (1,419,914) Change in contractual liability (449,085) (805,294) (449,085) (805,294) Net acquisition expenses (487,612) (411,738) (487,612) (411,738) Operating and administrative expenses (1,673,542) (1,352,661) (1,673,411) (1,352,362) Profit before tax 363, , , ,873 Income tax expense (105,470) (95,594) (105,402) (95,544) Profit for the period 258,350 53, ,115 53,329 Profit attributable to, Owners of the parent 258,350 53, ,115 53,329 Non-controlling interest ,350 53, ,115 53,329 Basic / diluted earnings per share (in LKR)

6 Page 6 Consolidated Statement of Comprehensive Income For the three months ended 30 September LKR '000 LKR '000 LKR '000 LKR '000 Profit for the period 258,350 53, ,115 53,329 Items that are / may be subsequently reclassified to profit or loss Changes in fair value of available for sale financial assets (459,792) 120,426 (459,792) 120,426 Changes in fair value of available for sale financial assets transferred to long term insurance fund 98,517 (106,972) 98,517 (106,972) Total other comprehensive income for the period (361,275) 13,454 (361,275) 13,454 of discontinued operations Total comprehensive income for the period (102,925) 67,230 (103,160) 66,783 Comprehensive income attributable to, Owners of the parent (102,925) 67,230 (103,160) 66,783 Non-controlling interest Total comprehensive income for the period (102,925) 67,230 (103,160) 66,783 Items disclosed in the statement above are net of tax.

7 Page 7 Statement of Changes in Equity - Stated capital Capital reserve Revaluation reserve Restricted Regulatory Reserve Resilience reserve Revenue reserves Available for sale reserve Retained earnings Total equity LKR '000 LKR '000 LKR '000 LKR '000 LKR '000 LKR '000 LKR '000 Balance as at 1 January ,922 72, ,000 (15,603) 4,508,439 5,365,854 Profit for the period , ,765 Changes in fair value of available for sale financial assets ,226,572-1,226,572 Changes in fair value of available for sale financial assets transferred to the long term fund (1,195,232) - (1,195,232) Transactions with owners: Interim dividend for (1,475,970) (1,475,970) Final dividend for (61,499) (61,499) Balance as at 30 September ,922 72, ,000 15,737 3,159,735 4,048,490 Profit for the period ,252,799 13,252,799 Changes in fair value of available for sale financial assets ,843,199-1,843,199 Changes in fair value of available for sale financial assets transferred to the long term fund (1,842,227) - (1,842,227) Re-measurement of retirement benefit obligations (17,068) (17,068) One-Off Surplus transfer to Restricted Regulatory Reserve - - 6,080, (6,080,848) - Revaluation of land - 80, ,080 Balance as at 31 December , ,176 6,080, ,000 16,709 10,314,618 17,365,273 Profit for the period ,098,165 2,098,165 Changes in fair value of available for sale financial assets (1,181,224) - (1,181,224) Changes in fair value of available for sale financial assets transferred to the long term fund ,094,165-1,094,165 Transactions with owners: First and final dividend for (2,798,191) (2,798,191) Balance as at 30 September , ,176 6,080, ,000 (70,350) 9,614,592 16,578,188

8 Page 8 Statement of Changes in Equity - Stated capital Capital reserve Revaluation reserve Restricted Regulatory Reserve Resilience reserve Revenue reserves Available for sale reserve Retained earnings Total equity LKR '000 LKR '000 LKR '000 LKR '000 LKR '000 LKR '000 LKR '000 Balance as at 1 January ,922 72, ,000 (15,603) 4,503,569 5,360,984 Profit for the period , ,836 Changes in fair value of available for sale financial assets ,226,572-1,226,572 Changes in fair value of available for sale financial assets transferred to the long term fund (1,195,232) - (1,195,232) Transactions with owners: Interim dividend for (1,475,970) (1,475,970) Final dividend for (61,499) (61,499) Balance as at 30 September ,922 72, ,000 15,737 3,153,936 4,042,691 Profit for the period ,252,242 13,252,242 Changes in fair value of available for sale financial assets ,843,199-1,843,199 Changes in fair value of available for sale financial assets transferred to the long term fund (1,842,227) - (1,842,227) Re-measurement of retirement benefit obligations (17,068) (17,068) One-Off Surplus transfer to Restricted Regulatory Reserve - - 6,080, (6,080,848) - Revaluation of land - 80, ,080 Balance as at 31 December , ,176 6,080, ,000 16,709 10,308,262 17,358,917 Profit for the period ,103,550 2,103,550 Changes in fair value of available for sale financial assets (1,181,224) - (1,181,224) Changes in fair value of available for sale financial assets transferred to the long term fund ,094,165-1,094,165 Transactions with owners: First and final dividend for (2,798,191) (2,798,191) Balance as at 30 September , ,176 6,080, ,000 (70,350) 9,613,621 16,577,217

9 Page 9 Consolidated Statement of Cash Flows For the nine months ended 30 September LKR '000 LKR '000 LKR '000 LKR '000 Cash flows from operating activities Premiums / fees received from customers 9,408,051 8,370,100 9,406,885 8,369,022 Reinsurance premium (net of commission) paid (174,842) (126,492) (174,842) (126,492) Claims and benefits paid (4,151,402) (3,520,179) (4,151,402) (3,520,179) Reinsurance receipts in respect of claims and benefits 93,727 66,909 93,727 66,909 Cash paid to and on behalf of employees (1,507,106) (1,586,965) (1,507,106) (1,586,965) Interest received 168, , , ,089 Payments to agents and intermediaries (1,470,189) (1,769,056) (1,470,189) (1,769,056) Other operating cash payments (3,292,704) (1,336,777) (3,291,599) (1,335,596) Cash flow used in operating activities (926,273) 282,135 (926,505) 281,732 Taxes paid (275) (51) - - Policy loans granted (244,481) (150,226) (244,481) (150,226) Policy loans repayment 327, , , ,017 (843,171) 382,875 (843,128) 382,523 Cash flows from investing activities Purchase of liquid investments (7,932,704) (6,016,538) (7,932,704) (6,011,238) Purchase of other investments (9,152,636) (20,044,427) (9,147,871) (20,044,018) Proceeds from sale of liquid investments 7,650,683 5,225,820 7,650,683 5,225,820 Proceeds from sale of other investments 9,790,625 19,211,002 9,785,860 19,211,002 Investment expenses (86,039) (86,669) (86,039) (86,669) Interest received 3,539,894 3,121,852 3,539,894 3,121,852 Dividend received 61,250 70,318 66,830 70,318 Purchase of intangible assets (5,168) (30,059) (5,168) (30,059) Purchase of property, plant and equipment (212,098) (374,250) (212,098) (374,250) Disposal of property, plant and equipment 6,737 8,328 6,737 8,328 Net cash flow from investing activities 3,660,544 1,085,377 3,666,124 1,091,086 Cash flows from financing activities Dividends paid (2,798,191) (1,537,469) (2,798,191) (1,537,469) Net cash used in financing activities (2,798,191) (1,537,469) (2,798,191) (1,537,469) Increase / (decrease) in cash and cash equivalents 19,182 (69,217) 24,805 (63,860) Cash and cash equivalents (net of bank overdraft) at the beginning of the period 268, , , ,942 Cash and cash equivalents (net of bank overdraft) at the end of the period 287, , , ,082

10 Page 10 Long term insurance Statement of Financial Position - supplemental As at 30 September 31 December LKR '000 LKR '000 Assets Financial assets 30,485,866 30,545,324 Policyholder and other loans 698, ,788 Reinsurance receivables 87,159 81,308 Premium receivables 439, ,414 Other assets 1,646,683 2,453,965 Cash and cash equivalents 330, ,044 Total assets 33,688,039 34,603,843 Liabilities Insurance liabilities 30,833,701 32,116,292 Reinsurance payables 141,612 91,288 Accruals and other payables 2,663,715 2,379,379 Deferred revenue 8,599 11,262 Bank overdraft 40,412 5,622 Total liabilities 33,688,039 34,603,843 The above Long Term Insurance Balance Sheet is to be read in conjunction with the Statement of Financial Position on page 2 of these condensed interim financial statements.

11 Page 11 Notes to the consolidated interim financial statements 1 The basis of preparation The interim financial statements of the and are prepared in compliance with the Sri Lanka Accounting Standard- LKAS 34, Interim Financial Reporting and in compliance with the Direction 16 Identification and treatment of One-Off Surplus, issued by the Insurance Regulatory Commission of Sri Lanka, to provide guidelines on the release of the One-Off Surplus arising from the policyholder fund to the shareholder fund due to change in regulatory solvency basis from Net Premium Valuation to the Risk Based Capital. They have been prepared under the historical cost convention except for the revaluation of land and financial instruments which are measured at fair value. These interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December Accounting policies The same accounting policies and methods of computation as stated in the annual report 2017 have been followed in the preparation of the Interim financial statements as at 30 September Stated capital The stated capital of the consists of 30,749,370 ordinary shares. 4 Taxation AIA Insurance Lanka PLC and its subsidiary are liable for income tax at 28% ( %). The taxation basis of life insurance business changed from 01 April 2018 with the coming into effect of the Inland Revenue Act No. 24 of 2017 where a surplus based taxation basis is adopted replacing what was commonly known as "I-E" basis of taxation. However, the profits of Life Shareholders' fund will be taxed along a basis of "I-E". Accordingly, the does not foresee a taxable/ deductible temporary difference over the foreseeable future that requires a provision for deferred tax from the life insurance business except for the results of the Life Shareholders' fund. 5 Events after the reporting period No events have occurred since the date of the Statement of Financial Position that necessitates adjustments to/or disclosure in the financial statements. 6 Contingent liabilities There has been no significant changes in the nature of the contingencies and other commitments, which were disclosed in the annual report for the year ended 31 December Implementation of Solvency Margin (Risk Based Capital) Rules The Insurance Regulatory Commission of Sri Lanka (IRCSL) implemented the Risk- Based Capital (RBC) framework for solvency purposes with effect from 1 January 2016, and the IRCSL by their letter dated 30 December 2016 instructed that, the surplus created due to change in valuation method from NPV to GPV be maintained within the long term insurance fund / insurance contract liabilities. The surplus created due to change in valuation method from NPV to GPV on 01 January 2016 is as follows: LKR'000 Long term policy liability as per accounting policy (NPV) Long term policy liability for solvency margin under RBC rules (GPV) Surplus created due to change in valuation method from NPV to GPV 36,749,652 27,981,497 8,768,155 On 20 March 2018 the IRCSL issued Direction #16: Identification and Treatment of One-Off Surplus, which defined a specific methodology for the computation of the One-Off Surplus to be uniformly adopted by the industry. This methodology defines the One-Off Surplus as being the difference between the policy liabilities computed using the minimum regulatory basis under the previous NPV based solvency regime and the 'distribution basis' adopted as at 31 December 2017 under the RBC solvency regime. The revised One-Off Surplus as determined under the revised computation basis is LKR 6,081m as opposed to the previously reported LKR 8,768m. LKR'000 One-Off Surplus as determined and reported as at 01 January ,768,155 One-Off Surplus based on the guidelines of Direction # 16 issued on 20 March ,080,848 Additional liability retained in order to enhance the solvency margins 1,265,804 Amount included in the surplus for the three months ending 31 March ,421,503 Direction # 16, also recommended the transfer of the One-Off Surplus to the Shareholders' fund with the approval of IRCSL and to be maintained unchanged until further notice from the IRCSL or until distributed to shareholders upon explicit approval of the IRCSL. IRCSL also required all life insurers to include a new line item in the Balance sheet under equity called " Restricted Regulatory Reserve" to maintain such One-Off Surplus. Accordingly, the Distribution of the One-Off Surplus to shareholders, held as part of the Restricted Regulatory Reserve, is subject to meeting governance requirements stipulated by the IRCSL and can only be released upon receiving approval from the IRCSL. As such LKR 6,081m was transferred from retained earnings to the "Restricted Regulatory Reserve" and presented on the face of the Balance Sheet. The will maintain adequate amount of admissible assets to back the One-Off Surplus so transferred within Shareholders' funds until IRCSL grants approval for distribution to Shareholders. The One-Off Surplus in the shareholders' fund remains invested in Government securities and deposits as per the directions of the IRCSL.

12 Page 12 Notes to the consolidated interim financial statements (contd.) The One-Off Surplus of LKR 6,081m is transferred through the Income Statement for the financial year Hence, the following balances in the reported Balance Sheet as at 31 December 2017 are amended as follows; Insurance liabilities Retained earnings Restricted Regulatory Reserve LKR'000 LKR'000 LKR'000 Balance as reported in the annual report for ,197,140 10,314,618 - Change in contractual liability due to transfer of One-Off Surplus (6,080,848) 6,080,848 - Transfer of One-Off Surplus to the Restricted Regulatory Reserve - (6,080,848) 6,080,848 Balance reported in these condensed interim financial statements 32,116,292 10,314,618 6,080,848 8 Profit After Tax The Profit After Tax of the for the nine months ended 30 September 2018 includes surplus from life insurance business amounting to LKR 1,510m ( Nil) including the surplus of LKR 1,422m as disclosed in note 7 to this condensed financial statements which was recognised and transferred during the quarter ended 31 March As per the provisions in Direction #16 issued by IRCSL, the One-Off Surplus will be reflected in the Income Statement for the three months ending 31 December 2018 as a component of profits for 4Q 2017 in comparative information. Therefore, the profits reported for the respective quarters in 2017 and the profits that would be reflected for the same periods in 2018 as comparative information will be as follows; For the three months period ending 31 March June Sep Dec 2017 For the financial year ending 31 Dec 2017 LKR'000 LKR'000 LKR'000 LKR'000 LKR'000 Consolidated Profits for the period as reported in the interim financial statements in ,201 63,788 53,776 7,171,951 7,360,716 Reflection of One-Off Surplus in the Income Statement for ,080,848 6,080,848 Consolidated Profits that will be reflected as comparative information for 2017 in ,201 63,788 53,776 13,252,799 13,441,564 9 Related party disclosures Details of significant related party disclosures are as follows: 9.1 Transactions with the parent and related entities Nature of transaction For nine months ended 30 September AIA Holdings Lanka (Private) Limited AIA Limited AIA Limited AIA Shared Services (Hong Kong) Limited AIA Shared Services Sdn. Bhd. Immediate parent Parent Ultimate parent Fellow subsidiary Fellow subsidiary AIAIT (Guangzhou) Limited Fellow subsidiary AIA Information Technology (Beijing) Limited Fellow subsidiary 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 recharges - - (235,797) (332,842) (92,969) (53,971) (76,192) (95,395) (40,638) (4,777) (7,020) (8,395) (2,643) (2,395) Net dividend paid (2,197,927) (1,213,020) (248,330) (137,327)

13 AIA INSURANCE LANKA PLC AND ITS SUBSIDIARIES Page 13 Notes to the consolidated interim financial statements (contd.) 10 Major Shareholders The 20 largest shareholders as at 30 September 2018 are given below. No. of shares % AIA Holdings Lanka (Private) Limited 26,836, % AIA Limited 3,038, % Mr. R Srikantha 38, % MR. P Subasinghe 31, % Miss. A S Gunaratne 15, % Mr. N W H D Gunaratne 15, % Mr. Chandra Jayaratne 13, % Mr. K K Shujeevan 10, % Mr. A A A Rifkee 10, % Mr. M N Aththas 10, % Mr. S Aravinthan 9, % Dr. A B Abeysundara 8, % Tarika Investments Private Limited 8, % Mr. S Varatharajah 7, % Mr. S K Kader/ Mrs. N M Kader 7, % Mrs. S Thevarajah 7, % Mr. P K C P Samarasinghe 7, % Mr. J B Hirdaramani 7, % Mr. R T Manatunga/ Mrs C.N.C. Manatunga 6, % DFCC Bank Plc/Mr.K.S.D.Senaweera 6, % Mr. Perera 6, % Total number of public shareholders as at 30 September 2018 is 1,949 and the percentage of shareholding is 2.84% The 's float adjusted market capitalisation as at 30 September 2018 is LKR 786m. The has been making necessary mandatory regulatory disclosures to the Colombo Stock Exchange (the CSE) on a monthly basis as to the status of its compliance with regard to minimum public holding requirements of the. The has also secured a communication from the CSE dated 19 July 2018 that the Securities and Exchange Commission of Sri Lanka has concurred with the CSE to grant an exemption to the for a period of one year from complying with the requirement of increasing the public float, as per the Listing Rules of the CSE. 11 Share information As at 30 September 31 December 30 September 31 December LKR LKR LKR LKR Net assets value per share Market price of Share For the three months ended 30 September LKR LKR Market price per share at the end of the period Highest price per share for the period Lowest price per share for the period Directors' shareholding Details of Directors' shareholding as at 30 September 2018 are given below. Name Designation No. of shares Mr. William Lisle Chairman - Mr. Deepal Sooriyaarachchi Director - Mr. Manoj Ramachandran Director - Mr. Robert Alexander Hartnett Director - Mr. Sarath Wikramanayake Director - Mr. Stuart Anthony Spencer Director - 14 Chief Executive Officer's shareholding Details of CEO's shareholding as at 30 September 2018 are given below. Name Designation No. of shares Mr. Pankaj Banerjee CEO -