The Report Company: Can you give us an overview of the mission of the company, and your role?

Mohan De Alwis: Sri Lanka Insurance is a household name. Our mission is to be the insurer to the nation. We’re celebrating our 50 year anniversary this year, and we’re a strong company with huge goodwill.

This company has gone through a lot of changes. It started as a government entity, went over to the private sector in 2004, and then became once again a government entity.

I joined the company on 17th May 2010. I was picked for the role as I was able to bring in a lot of private sector culture and thinking into this government-owned business, enabling it to compete in a challenging environment. We need to run government owned business models as commercial profitable enterprises, as the perception of government-owned commercial enterprises is that they are white elephants and a drain on the funds of the country.

TRC: As an overview, what have been some of the memorable highlights from 2010/2011?

MDA: We were upgraded to an AA rating by Fitch in 2011. We won the World Finance Award in 2010, we won the World Quality Award in 2011, and I’m sure we will win it again in 2012. We are also ISO certified.

Looking at our results, in the three years prior to the company reverting back to government ownership, turnover was stagnant at 13.5bn rupees (GBP 66.8m). We made changes in 2010 and ended the year with a turnover of 15.1bn rupees (GBP 74.7m). 2011 saw us end the year with a turnover of 18.4bn rupees (GBP 91.1m), so we have started the wheels turning.

TRC: What were the secrets to this success?

MDA: In 2012, we’re looking at 20% growth and it looks promising, we’re almost there. As an insurance company, in addition to the insurance premium we earn, we also have to be into investments. We took certain calculated risks because we need the assets to sweat for us. Unless we invest prudently and maintain certain liquidity and solvency ratios we cannot pay up and honour our claims. In 2010, we made due diligent investments in the right interest bearing tools. This was a year where the stock markets were very good in Sri Lanka so we made a healthy profit.

We then declared a dividend of 6.7bn rupees (GBP 33.2m) to the stakeholders, which is the government at 99.9% and the balance is with some employees who retain the shares that they were issued with by the private owner. Then we looked around for further investment. On 15th November 2010 Shell Gas decided to divest their investment in Asia in general and in Sri Lanka in particular. We took a business decision to go in and take over Shell Gas Lanka and Shell Gas Terminals by paying $63m in cash. That investment bore fruit. We made a profit of over 3bn rupees in the first year and the converted rupee equivalent of the $63m (GBP 40m) we paid for the company was 7.2bn rupees so as you can see, the return on investment was very high. In 2011, our consolidated profit was around 12bn rupees.

We feel we could have done better, but the global economic climate has not been good.

TRC: What about 2012, can you give us an overview of your strategies for continuing this performance?

MDA: It’s good to be here for our 50th anniversary. We’ve set some very optimistic targets. We’re targeting a 20% growth in the top line which covers both life and general insurance, and I’m happy to say that we are on track to meet that target.

Success doesn’t come to you by fluke. We are thinking out our business model. We operate through our 120 branches and we are a composite insurance company, which means life and general are done together. The insurance act which comes into force in April 2015 mandates that we separate that out, so we are working towards that and we also intend to list the company by 2016.

We have also realised that tie-ups or associations are one way of getting a quick return. In the motor insurance sector we have partnered with some large leasing companies, and that’s paying off. We then looked at large government-owned organisations, such as the banks, and we partnered with Bank of Ceylon, which has a very large network. We see that we’ve got the strength and that they’ve got the strength, it’s just a case of marrying that together. However, bank insurance takes some time to bear fruit but so far it’s working well. We also tied up with National Savings Bank, with whom we work very closely. We also have a 50% stake in Seylan Bank, so we’ve got a whole string of banks partnering with us.

We also looked at another way of taking our insurance products to the masses, and with that in mind we have picked up a company in the telecommunications business.

Sri Lanka has a life insurance penetration of about 11%, which is low, and is mainly due to lack of awareness and lack of disposable income. Through our tie up with the telecommunication company, which again majority-owned by the government, we have been able to access their database, use their infrastructure and their call centres. We provide them with the training and the product knowledge and they promote our insurance via telemarketing. With these processes coming into place we are seeing huge growth.

TRC: What plans do you have for expanding your branch network, particularly in the newly liberated areas of the country?

MDA: In 2010, we only had 2 branches in the north of the country. We now have 8, because we realised the potential there. The disposable income in the hands of people in the north is increasing due to agriculture and certain development projects. It’s a great success and the lapse rate for insurance policies is very low. Today, we see the eastern province as a major growth area, and we’re also developing in the south, particularly in the Hambantota area.

TRC: As the government is planning to make the Hambantota area a hub complex, what plans do you have to invest in that region?

MDA: We are looking at certain investment projects. This is a long-term goal, but we would also like to be part of the hotel industry. We are planning to invest in developing a 250-bed 5 star hotel in Hambantota in collaboration with a well known foreign party. There are also two city hotels in Colombo that we are going to take over and refurbish. These are large projects where we need participation from other investors, so we’re looking at a conglomerate consisting of some public corporations, some banks, and maybe some private sector companies. It’s going to be a public-private set up

TRC: What specific products, campaigns and activities are you rolling out to celebrate the 50th anniversary of the company?

MDA: There’s a postage stamp that will be launched to commemorate our 50th anniversary, there’ll be a coffee table book, there’ll be additional remuneration for our staff and we have also given our employees the opportunity to take life policies at a discounted rate for a specific period. We’re also upgrading our facilities to a world-class standard, as first impressions really matter to our client base.

TRC: You’re travelling to the UK in May to expand the business. What are your expectations there?

MDA: Willis is our broker, and we’re going to the UK to discuss the renewal of business in the airline industry. We’re meeting with the reinsurers to discuss the risk they are prepared to underwrite with regard to Sri Lankan airline’s fleet. We also aim to discuss other lines of insurance, particularly in the petroleum industry, as Sri Lanka has started drilling for oil. It’s something we need to talk about because if it turns out that we have reserves, there’s going to be a huge area for coverage. Initial indications are positive.

TRC: What opportunities would you highlight for investors looking at Sri Lanka?

MDA: The tourism industry is one sector that is growing. Sri Lanka has a very high literacy rate and a very well qualified workforce, so the IT industry is one area that many people are looking at. Many youngsters are taking up software development and programming. The apparel industry is also doing pretty well, accounting for about $3.5bn (GBP 2.2bn) in exports.

TRC: What key goals do you aim to achieve in your time as CEO of the company?

MDA: My goal is a big quick turnaround which can be sustained. We want to double our turnover within 4 years, and so far we are on track to do that. We need growth. We are looking at getting the top line up, the bottom line up, and getting certain accolades. We are addressing governance issues, taking care of liquidity and solvency ratios, and then we’re looking at getting suitable partners into the IPO. We are looking for international financiers and insurance companies of international repute.

TRC: How would you like the international community to view Sri Lanka?

MDA: Sri Lanka is an emerging country. Even with the western world going into recession, we had 3.9% growth in 2009. We have a highly skilled workforce, good living conditions, and we have had no security or safety threats for close to three years. There are huge opportunities with the infrastructure projects underway here. The railroads, the harbours, the airports, the roads, there’s a lot of work going on which will bear fruit over a long period of time. In addition, when we go for our IPO, international investors are very welcome.