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Stewardship

Investment Committee Report

The Investment Committee of Ceylinco Life oversees the investments of the Life Insurance Fund, which is invested prudently according to diverse investment objectives and varied risk preferences to ensure a return that is secure, steady and attractive.

By crafting investment strategies that add value, continually monitoring the execution of the set strategies to ensure conformity and making the right calls deemed necessary to ensure probity, the Committee ensures that the funds are well positioned, ideally invested and coherently managed to meet the objectives of various stakeholders such as policyholders, shareholders and regulators.

As at 31 December 2015, the Life Insurance Fund of Ceylinco Life stood as a giant, at Rs. 68.01 Bn, growing steadily at 13.3% over the last year.

2015 – A Year with Uncertainty and Challenges

The year 2015, saw major political and economic shifts take place around the world, leading to a great deal of uncertainty weighed on the financial markets.

United States (US), the largest economy in the world, continued to recover and accelerate towards higher growth trajectory. In order to normalise its unconventional monetary expansion strategies, the US Federal Reserve hiked its policy rates nearly after a decade, creating spillover effects in emerging and frontier markets.

China, the second largest, was at the other end of the bargain, where economy started to weaken and produce relatively weak economic data throughout 2015, impacting global sentiments and wiping out trillions of dollars from equity markets. The crude oil prices fell by 68% over the last 2 years, due to worsening of a global supply glut and lack of demand from its major consumers.

Given the expectation of an imminent US rate hike, debt issuance by sovereigns and corporates took the upper hand. According to published research, the global debt stock increased to USD 199 Tn this year from USD 57 Tn in 2007, which is equivalent to 287% of global GDP, stifling global economic growth and heightening the risk of defaults and market turmoil.

With the challenges faced by the Global economy, Sri Lankan economy followed suit, with economic growth slowing down, amid a shift to a new base year for the GDP calculation. Inflation too reversed its course in the latter part of the year, exerting pressure on the accommodative monetary policy adopted by the Central Bank of Sri Lanka to stimulate growth.

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A Pillar of Strength – Life Fund Growth

The Life Insurance Fund of Ceylinco Life, which is considered as a safe haven for investors, has maintained a strong 19.3% compound annual growth rate (CAGR) (2006-2015), which depicts the superior performance and stability of the investments and the continuous trust and loyalty placed by the policyholders.

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Quality Over Quantity – Credit Quality of Investments

The Investment Division of Ceylinco Life, with the recommendations and guidance of the Investment Committee, manages the Life Insurance Fund, which is regarded as one of the largest and thriving portfolios in Sri Lanka.

With an objective to provide secure, steady and attractive returns, this sacred fund is invested prudently, meeting the strict regulatory requirements, while serving diverse and varied risk preferences.

Risk and return, although carrying an inherent trade-off, are two aspects which hold paramount importance in crafting an investment strategy. Ceylinco Life takes utmost responsibility in providing the best investment solutions to maintain an optimum and cautious balance between the two aspects.

In order to emphasise the prudence and diligence of Life Fund investments, the below pie-chart elaborates the asset allocation of investments of the Life Insurance Fund as at 31 December 2015.

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To emphasise the credit quality of Life Fund investments, the below chart elaborates the credit risk profile of Life Insurance Fund as at 31 December 2015, along with a comparison against the last year.

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Swimming Upstream – Growth of Investment Income

Amidst challenging and volatile market conditions, Investment Division, under the guidance of the Investment Committee, continued to sustain its growth on a positive note throughout the last decade.

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Investment Committee

The Investment Committee comprises six members, out of whom, four are Executive Directors with expertise and experience in various fronts, which adds value in crafting prudent investment strategies. Recognising the long term nature of life insurance contracts and the subsequent need as well as the benefits that would accrue in reviewing the investment policies and the strategies, the Head of the Actuarial Division is also a member of the Committee. To supplement the collective expertise and to provide in-depth insights, a Non-Executive Director who is a veteran in financial markets, also forms part of the Committee.

The following members served in the Investment Committee during the year:

1. R Renganathan – Managing Director/CEO

2. E T L Ranasinghe – Director/Deputy CEO

3. P A Jayawardena – Director/CFO

4. S R Abeynayake – Director/Deputy CFO

5. R S W Senanayake – Non-Executive Director

6. S Kumarapperuma – Senior AGM – Actuarial

The Committee members contribute immensely and add value to the investment decision-making process through their vast knowledge and diverse experience. In addition, the Committee obtains independent external professional advice on matters within its purview.

Meeting and Attendance

In contrary to popular practice in the industry, the Investment Committee of Ceylinco Life meets weekly, recognising the prominence of the investment decision-making function, to proactively craft investment strategies with a minimum lead time and to timely meet the challenges posed from ever-changing global and domestic macroeconomic landscapes.

The Investment Committee meetings are organised by the officers of the Investment Division and it is chaired by the Managing Director/CEO of Ceylinco Life. Management representatives from the areas such as Actuarial, Systems Marketing and Life Operation attend the meetings on the invitation of the Committee.