AIA floats fully owned subsidiary to take over general insurance

AIA Insurance Lanka PLC has summoned an extraordinary general meeting on March 27 to formalize arrangements for separating its life and general insurance businesses.

In a circular to shareholders, AIA said that the company is currently engaged in both life and general insurance and these businesses have to be segregated under Section 53 of the Regulation of Insurance Industry (Amendment) Act No.3 of 2011.

AIA has therefore proposed to transfer its general insurance business to a newly incorporated wholly owned subsidiary of the company. This business has a net book value of Rs.1.89 billion according to the audited financial statements of the financial year ending December 31, 2013.

AIA plans to separate these businesses at the end of the third quarter of the current financial year and this transfer would be done at a value equal to the net book value of the General insurance business as at the date of transfer at a value that shall not exceed Rs.2.4 billion.

The company has told its shareholders that this value of Rs.2.4 billion has been projected as the maximum net book value at or around the date the transfer may take place. This has been done to ensure transparency.

The company said that it would make an announcement to the CSE at the time of the actual transfer stating the actual net book value at which the general insurance business will be transferred.

AIA will receive shares in the subsidiary to the value of the transfer.

The company explained that subject to relevant statutory and regulatory approvals, the proposed transfer of the general insurance business of the company would amount to the transfer of the assets, liabilities and staff of the company presently distinctly identified with the general business in relation to sales and distribution related functions, underwriting, claims and policyholder complaints management and re-insurance.

In terms of the regulatory requirements, a formal proposal in this regard has already been submitted to the Insurance Board of Sri Lanka (IBSL) last December and this proposal is under review by IBSL. As such, the proposed transfer may be subject to observations and/or conditions as may be issued by the IBSL and the relevant statutory and regulatory approvals pertaining thereto being secured.

The transfer will see AIA exclusively carrying out its life insurance business but the newly incorporated wholly owned subsidiary will handle general insurance.

As the transfer constitutes a major transaction in terms of the Companies Act, it is required to obtain shareholder approval by way of a special resolution. This resolution would be proposed for consideration at the March 27 EGM which will follow the company’s AGM.
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NDB Capital Holdings grows investment banking & wealth management portfolios

NDB Capital Holdings PLC (NCAP - previously Capital Development Investment Company or CDIC), has closed the year ended December 31, 2013 with group revenue of Rs.1.47 billion, up 85% from a year earlier and an after-tax profit of Rs.932 million, up 21% from the previous year, its recently released annual report said.

At company level revenue was up 41% to Rs.784 million and after-tax profit up 40% toRs.681 million.

The company is almost wholly owned by the NDB holding 99.62% of its equity with the balance held by 308 other shareholders most of whom own less than 1,000 shares.

The Chairman of NCAP, Mr. A.K. Pathirage has reported that they were able to deliver a sterling performance during the year generating attractive returns for their shareholders.

He expected that the proposed new Securities and Exchange Commission Act will set a solid foundation ensuring a level playing field with greater efficiency, transparency and accountability.

"I commend the Colombo Stock Exchange and the Securities and Exchange Commission for their initiatives to grow the market in a sustainable manner," he said.

Pathirage said that some key milestones including the pivotal positioning of their investment bank in the debenture market had been accomplished and they had further consolidated market leadership in their wealth management business.

A dividend of Rs.8.50 per share had been declared for the year.

NCAP divested its stake in Aviva NDB Insurance in the previous year and it also bought back shares held by minority shareholders.

Mr. Vajira Kulatilaka, CEO of the company said they had a significant presence in capital market transactions with their investment banking arm playing a major role in the surge of debenture issues seen recently.

The growth of this business has been consolidated by the budgetary tax concessions extended to develop the debt market in the country, he said, reporting that NDB Investment Bank had structured and placed ten debenture issues for leading corporates amounting to Rs.29.2 billion.

"This included the largest ever corporate debenture issue in the country of Rs.10 billion placed and managed for our parent, NDB, in December 2013," he said.

Kulatilaka also reported that their wealth management arm, NDB Wealth Management Limited, had exceeded expectations during the year under review to record an outstanding performance both in terms of funds collected from institutions and high net worth clients but also in the nascent retail segment.

"NDB Wealth Management continued to lead the industry by being the largest in terms of assets under management which crossed the Rs.65 billion mark," he said.

The unit trust funds has reached Rs.15 billion corresponding to over 29% of funds in the industry making NDB Wealth Management the largest unit trust fund manager in the country.

Kulatilaka also said that during the year concrete plans had been made to lay the initial ground work to set up a USD 50 to 60 million private equity fund and a management company in partnership with a US based global emerging markets investment manager, Zephyr Management LP.

"Our joint venture partner has the expertise and vast experience in implementing this business model in Latin America, Africa and Asia," he said.

"This will no doubt be our strength, not only in obtaining technical know-how but also supporting us to attract investors mainly that of bilateral and multilateral agencies and thereby moving this venture to the heights aspired."

Under the NCAP umbrella there are three subsidiaries, NDB Investment Bank, NDB Wealth Management and NDB Securities.

NDB Investment Bank operates in debt and equity structuring and distribution, corporate restructuring, manages and acquisitions and project financing for both listed and unlisted entities.

NDB Wealth Management is licensed by the SEC to provide wealth management solutions and mutual fund management for institutions and high net worth investors and the retail market.

NDB Securities (Pvt) Limited is a licensed stockbroker of the CSE providing investment advisory and securities trading services.

The directors of NCAP are: Messrs. A.K. Pathirage (Chairman), Sarath Wikramanayake, Rajendra Theagarajah, Indrajit Wickramasinghe, Vajira Kulatilaka (Director/CEO), Malinga Arsakularatne and Ms. Aruni Rajakarier.
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NDB – DFCC merger: preliminary talks begin

NDB posts best ever profit boosted by strategic divestment





Board of Directors

Both the new Chairman of the NDB and its CEO have stated in the recently released 2013 annual report of the bank that the directors of both the NDB and the DFCC Bank have commenced preliminary talks with a view to achieving such consolidation but given no timeframe for completing an arrangement.

Mr. Sunil G. Wijesinha, who assumed the chairmanship of the NDB on December 1, 2013 noted that "the regulators have expressed the desire to see the two development lending oriented banks, DFCC Bank and National Development Bank PLC merged in order to create a strong development bank that could provide a broader impetus development bank activities."

Wijesinha said that the talks between the two banks had begun in this context and has told shareholders "your bank is ready to embrace the positive changes that the consolidation of the sector will bring about."

NDB’s Director/CEO Rajendra Theagarajah said that the merger talks were intended "to create a strong development bank of significant strength and stature – an institution that will be one of Sri Lanka’s systemically important banks in the next few years."

"After all, size does matter," he asserted.

In a note on events occurring after balance sheet date, the report said that the NDB and DFCC Bank "are about to commence preliminary discussions with a view to achieving such consolidation."

"The consolidation of the two entities will be dependent on relevant approvals and possibly, passage of facilitative legislation."

Claiming "exemplary financial results" for the NDB, Theagarajah said that they have posted their best ever financial performance during the year under review including many firsts for the bank –

* The bank’s profit after tax reached an unprecedented Rs.7.7 billion, a staggering 164% year on year growth, albeit inclusive of an exceptional equity gain of Rs.5.3 billion arising from a strategic divestment.

* Amidst an environment of steadily declining margins, the bank successfully defended its position and maintained its net interest margin at 3.74% for the second successive year.

* The total operating income of the bank – comprising net interest income, fee and commission income and net trading income achieved an impressive 80% year on year growth to reach Rs.15.9 billion.

"However, the corresponding growth in net operating income was limited to 68% due to impairment losses totaling Rs.1.2 billion during the year. This was a result of increased stress levels within the industry for loan recoveries, and the bank’s prudent adoption of fair valuing the impaired loans based on sound judgment and objective evidence on future recoveries," he said.

The Bank of Ceylon with 9.94% of the NDB is its biggest individual shareholder followed by the EPF (9.72%) and the General Fund of the SLIC with 5.70%. The Life Fund of SLIC has 4.74% and the ETF 3.22%.

Dr. Sena Yaddehige with 5.26% is the biggest individual shareholder and Mr. Ashok Pathirage is among the top twenty. Several foreign funds and local banks like HNB and insurance companies such as Asian Alliance Insurance are also among the top 20 shareholders. The NDB’s own Employees Share Ownership Plan owns 2.51%.

The directors of NDB are: Messrs Sunil G. Wijesinha (Chairman), Ashok Pathirage (Deputy Chairman), Rajendra Theagarajah (Director/CEO),Trevine Jayasekara, Sarath Wickramanayake, Mrs. Kimarli Fernando, Anura Siriwardena, G.D.C. Ekanayake, Sujeewa Rajapakse, Mrs. Indrani Sugathadasa, Hemaka Amarasuriya (Chairman - Retired 30.11.2013), Russell de Mel (Director/CEO – Retired 23.8.2013) and Ms. Shehani Ranasinghe (Asst. Vice-President).
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