Janashakthi 3Q profit trimmed as higher claims offset robust premiums and investment incomes

Higher insurance claims had a bearing on the performance of Janashakthi Insurance PLC as the September quarter profits fell slightly amid expansion in both premiums and investment incomes. 
According to the interim financial accounts, the third largest general insurer by gross written premiums (GWP) reported earnings of 28 cents or Rs.154.7 million for the July – September (3Q17) against the 29 cents or Rs.159.2 million recorded in the same period last year. 

“Janashakthi posted these numbers despite the impact of a spike in fire and engineering and medical claims during this period, as well as the kicking in of the full year adjustment for impairment of goodwill”, the company said in an earnings release.

The group paid Rs. 1.95 billion as net claims and benefits for the quarter, an increase of 12.7 percent from a year ago. 

A further Rs.199 million was provided as goodwill impairment for the nine months to September, which resulted from its 2015 acquisition of the AIA General Insurance Lanka Limited in a deal valued at Rs.3.1 billion.  Meanwhile, the top line expanded as the consolidated GWP rose by 15.1 percent year-on-year to Rs.3.82 billion and the investment income rose sharply by 40.3 percent YoY to Rs.653.2 million. 

The non-life premiums, led by motor segment, grew by about Rs.500 million during the 12 – months to September to Rs.3.06 billion while the life premiums changed little at Rs.765.4 million. 

The insurer noted that ongoing restructuring of its life insurance business was set to drive higher returns in the final quarter. 

The group earned a higher investment income because of its higher investment portfolio and the government securities yields. “The group’s consolidated total assets stood at Rs. 35.8 billion as of September 30, 2017, of which Rs.24.5 billion was held in the form of investments. 

The investments portfolio grew by Rs. 2.9 billion during the nine months under review, with average yields exceeding 11 percent. This was the key driving force behind the 30 percent on year growth in total other revenue, which came in at Rs.2.24 billion”, the company said. 

While the general insurance business may be expanding mainly due to the mandatory motor business, the profits in this business remain thin due to high frequency of claims. 

Long-term life insurance, although is attractive, the penetration levels still remain well below the regional averages and the economic condition does not support individuals to maintain life policies to protect the dependants.  

Meanwhile for the nine months, the group posted a net profit of Rs. 507.2 million or 93 cents a share, down 36 percent from the same period in 2016.  The total GWP was Rs.11.05 billion, up from Rs.9.8 billion a year earlier. 

The claims paid for the nine months were Rs.5.5 billion, up from Rs.4.9 billion. 

As of September 30, 2017, the holding company Janashakthi PLC held 75.92 percent stake Janashakthi Insurance PLC, while Schaffter family-controlled Dunamis Capital PLC held 3.17 percent stake.