Flood insurance claims to surpass Rs.7b mark

25% of claims already settled:

By Lalin Fernandopulle

Insurance companies have already settled over 25% of the claims made by the flood-affected people across the country, a top official of the industry said.

The industry expects the value of the claims to surpass the initial estimate of Rs. 7 billion as the number of claims is expected to go up when people fully settle down over the next few weeks.

Finance Minister Ravi Karunanayake said post-flooding reconstruction costs would be between Rs.150 and 250 billion.

President, Insurance Association of Sri Lanka, Dirk Pereira said companies have settled over 25 percent of the claims and added that larger claims will need more time as they needed to be assessed by overseas or local professional loss adjusters.

He said settlements of vehicle claims are rather easy as they are straight forward.

With regard to the large claims, he said there is no issue of settling claims as insurance companies are backed by reinsurance. “The negative impact of the recent floods is much greater than the tsunami in 2004,” Perera said.The insurance industry hailed the setting up of the insurance trust fund in line with the concept of having retrocession in insurance. Reinsurance is a type of insurance wherein part of the risk taken by an insurance company is taken on by another insurance company.

Chief Operating Officer, Janashakthi General Insurance Ltd, Dayalanie Abeygunawardena said the company had already settled 60% of the claims and added that over 25% of the claims was settled on the day intimations were made.

“Of the 2,250 claims, 1,800 are motor and the rest are non-motor claims. Advance payments have been made to around 50% of the remaining claims,” Abeygunawardena said.

With regard to property claims, she said loss adjusters have to assess the losses. Three-wheelers, motor bicycles and cars account for a major component of the claims in the motor sector.

HNB Assurance and HNB General Insurance, CEO Deepthi Lokuarachchi said other than damages at construction sites, factories and warehouses, other claims were settled immediately on agreeing upon the damage estimates. Assessment of loss to factories, warehouses and construction sites are complex as it takes time to figure out the extent of damage.

“We have given them the flexibility to invite experts and carry out proper estimates without rushing so that they get the real value in claims,” he said.

Director and CEO, Asian Alliance Insurance, Ramal Jasinghe said around a 25% of the claims have been settled and added that more settlements would be made as soon as the estimates are available on damage to vehicles. “Motor vehicle claims are so far around 200 while non-motor claims are 31. All claims will be settled without a delay once the total estimate has been done,” he said. Chairman, Sri Lanka Insurance, Hemaka Amarasuriya said the total value of claims is around Rs. 1,750 million with non-motor claims accounting for Rs. 1 billion and motor Rs. 750 million. “We hope to settle over 75% of the claims this week and complete all settlements within a month,” he said. Ceylinco Insurance sources said all claims were settled on June 3 and new claims will be settled within seven days. Insurance industry experts said the need to obtain an insurance policy will be high following the recent destruction to life and property.

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LVL Energy raising Rs. 336m to invest in hydro power

LVL Energy Fund Ltd., a subsidiary of Lanka Ventures PLC 80% owned by Acuity Partners, a joint venture between the DFCC and HNB, is increasing its investment in the hydro power sector with several possibilities that had been in the pipeline materializing.

Announcing a one for 10 rights issue at Rs. 8 per share, shareholders of LVL have been told securing funding for three investments has become urgent with an immediate need for Rs. 324 million for the following projects.

(1) A 40% equity stake amounting to Rs. 124 million in Bambarapana Hydropower (Private) Ltd. for the construction of a 2.5 MW hydro power plant in the Badulla district.

(2) A 10% equity stake amounting to Rs. 85 million in Nividu (Private) Ltd. that presently owns and operates two hydro power plants with a capacity of 2.2 MW and 4.0 MW. LVL already owns 15% of Nividu.(3) A 90% equity stake amounting to Rs. 115 million in Pupulaketiya Hydro Power (Private) Ltd. for building a 1.4 MW hydro power plant in Ratnapura.

LVL plans to raise Rs. 326 million by way of the rights issue and has told shareholders that the eight rupee price, in the opinion of the board, "is fair and reasonable to the company and to all existing shareholders."

The company also said that it had taken certain steps towards obtaining a listing on the Colombo Stock Exchange and made an application to the SEC which is presently under consideration.

Analysts do not expect an Initial Public Offering until capital market conditions improve.

www.island.lk

IMF Executive Board Approves Three-Year US$1.5 Billion Extended Arrangement under EFF for Sri Lanka

June 3, 2016

The Executive Board of the International Monetary Fund (IMF) today approved a 36-month extended arrangement under the Extended Fund Facility (EFF) with Sri Lanka for an amount equivalent to SDR 1.1 billion (about US$1.5 billion, or 185 percent of quota) to support the country’s economic reform agenda.

The IMF arrangement aims to meet balance of payments needs arising from a deteriorating external environment and pressures that may persist until macroeconomic policies can be adjusted. It is also expected to catalyze an additional US$650 million in other multilateral and bilateral loans, bringing total support to about $2.2 billion (over and above existing financing arrangements).

The Executive Board’s decision will enable an immediate disbursement of SDR 119.894 million (about US$ 168.1 million), and the remainder will be available in 6 installments subject to quarterly reviews.

During the same meeting, the Board also concluded the 2016 Article IV consultation. A separate press release will be issued shortly.

Following the Executive Board discussion on Sri Lanka, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:

"Despite positive growth momentum, Sri Lanka’s economy is beginning to show signs of strain from an increasingly difficult external environment and challenging policy adjustments. The new government's economic agenda, supported by the Extended Fund Facility, provides an important opportunity to re-set macroeconomic policies, address key vulnerabilities, boost reserves, and support stability and resilience.

"A return to fiscal consolidation, targeting a reduction in the overall fiscal deficit to 3.5 percent of GDP by 2020, is the linchpin of the reform program. Rebuilding tax revenues through a comprehensive reform of both tax policy and administration will be key in this regard, supplemented by steps toward more effective control over expenditures and putting state enterprise operations on a more commercial footing.

"Medium-term growth prospects also need to be supported through a greater role for market forces and a decisive shift toward an outward orientation. A clear commitment to exchange rate flexibility will enable adjustment to a shifting external environment while allowing the central bank to rebuild foreign exchange reserves and focus more closely on its key mandate of price stability. The economic program also supports the government’s objective of boosting competitiveness and greater integration with regional and global markets through comprehensive trade reform and improvements to the investment environment. Steadfast implementation of these reforms should strengthen Sri Lanka’s ability to attract investment, improve prospects for sustained medium-term growth, and reduce fiscal risks."
-IMF Press Release

Keells Food Products post best ever result in 2015/16

Looks forward to export market in India

Keells Food Products PLC, the country’s biggest meat processor established in 1982, has posted its best ever year ended March 31, 2016 with revenue up 16% to Rs. 3.03 billion and profit after tax up 28% to Rs 334.7 million.

"KFP continued to deliver a strong performance which resulted in the company achieving its best performance to date in terms of top-line and bottom-line, surpassing the records set in 2014/15," the Company’s Chairman, Mr. Susantha Ratnayake, has told shareholders in recently released annual report.

He expected opportunities in export markets as likely to produce positive results in the current financial year (2016/17) saying that during the last two years their exports to India had been hindered by changes in regulations at the point of entry.

"It is heartening to note that these regulations have been relaxed during the fourth quarter of the year under review and we are hopeful of recommencing our exports to India during the 2016/17 financial year," Ratnayake said.

He reported that KFP has developed sustainable procurement sources for meat, vegetables and spices with networks which comprise mainly of small to medium scale farmers. Guaranteed prices provided an incentive to increase production. Also, a reputation for fair play and technical support by their team of visiting specialists helped ensure quality and best practice awareness.

KFP enjoys exports markets in India, Maldives and the UAE with 70% of its revenue generated by its range of sausages and 19% earned by ready-to-fry crumbed meat products.

The report said that the establishment of out-grower models for chicken, pork, spices and vegetables in previous years had facilitated a sustainable supply chain with stable prices, volumes, and most importantly quality.

The year under review saw the company increasing its dividend payout 120% to Rs. 285 million from Rs 127.5 million a previous year. Earnings per share were up by 28% to Rs. 13.13 from Rs. 10.25 a year earlier while cash earnings per share had grown to Rs. 20.92 from 17.28.

KFP has a stated capital of Rs.1.294 billion, revenue reserves of Rs.277.4 million and other equity components to Rs 197.2 million. Total assets ran at over Rs.2.4 billion and total liabilities at Rs.317.6 million.

The Directors of the Company are Messrs: S.C. Ratnayake (Chairman), A.D. Gunawardene, J.R.F. Peiris, J.R. Guneratne, R.Pieris, S.H. Amarasekera, PC, A.D.E.I. Perera and M.P Jayawardena.

www.island.lk

Sri Lanka, Singapore ink deal to develop port city of Trincomalee

Sri Lanka’s government and Singapore infrastructure consultancy Surbana Jurong have signed a Memorandum of Understanding (MOU) to develop the port city of Trincomalee.

It will see Surbana detailing a long-term development plan for the Trincomalee metropolitan area and surrounding cities in the island's Eastern Province.

Singapore's Minister for Trade and Industry (Industry) S Iswaran and Sri Lanka's Minister for Development Strategies and International Trade Malik Samarawickrama on Thursday (Jun 2) witnessed the signing of the MOU in Colombo.

Progress in the Eastern Province was hampered over the years by the civil war which ended in 2009. The state government is now focused on its development.

"We in the Eastern Province would certainly be willing to play the role of a launching pad for our two countries to achieve a higher level of economic achievement for the benefit of the people of our two countries," said Mr Nazeer Ahamed, chief minister of the Eastern Province in Sri Lanka.

While in Trincomalee, Mr Iswaran also visited a plant run by Singapore's Prima Group - one of the first Singapore companies to do business in Sri Lanka.

"I was personally struck by first, how long the business has been in operation here,” he said. “And secondly, the close relationship that exists between the government, the people of this region and the Prima flour business. This is the kind of example we'd like to emulate."

Mr Iswaran is in Sri Lanka for a three-day working trip.
www.dailynews.lk

Sri Lanka tea crops reduced by floods, landslides

ECONOMYNEXT – Although volumes at Colombo’s tea auction have been high so far, heavy rains that caused floods and landslides in Sri Lanka recently have reduced crops that will arrive at the sale in future, brokers said.

“Crop harvests have reduced in most planting districts during that past week,” brokers John Keells Ltd. said in a report.

Several earth slips in the mountainous regions where tea is grown and floods in the low lying areas continue to cause complications in daily operations of the industry, the brokers said.

“The country suffered from unprecedented drought from January to April and faced the highest temperatures for decades,” the report said.

“The arrival of the monsoonal rains in May brought relief but in a couple of weeks the relief was replaced by floods, causing much inconvenience and damage to plantation crops and tea exporters.”

Prices fell at this week’s Colombo auction and are expected to fluctuate in the next few weeks, following quality, John Keells said.

Sri Lanka’s Central Bank to sell USD200mn development bonds

(LBO) – The Central Bank will issue 200 million US dollars development bonds with a tenor of 1 year, 2 years, 3 years and 5 years to local and foreign investors.

The Debt Department said the subscription will be at a floating rate of 6 month LIBOR for USD plus a margin through competitive bidding or at a fixed rate to be determined through competitive bidding.

Minimum investment is 10,000 US dollars with additional investments in multiples of 10,000 US dollars.

The issue will be open for subscription from 7 to 13 June and has a date of settlement of 30 June 2016.

Development bonds are to be issued by the Public Debt Department of Central Bank and exempted from income tax paid in Sri Lanka.

Foreigners, non resident or dual citizen Sri Lankans, NRFC/RFC account holders, authorized dealers in foreign exchange, primary dealers in government securities, BOI specified companies and specified insurance companies are among eligible investors.