Despite intense competition and tough economic conditions in 2008, Janashakthi Insurance PLC (JIP) posted a post-tax profit of Rs. 449 million, which is a 14.57 percent drop from Rs. 525 million in 2007.

However, the profits made in 2007, included Rs. 258 million which arose out of an asset disposal.

The insurance company’s revenue, in terms of gross-written down premiums, increased by 10 percent to Rs. 5.4 billion during 2008.

The long term life insurance segment grew by 18 percent to Rs. 1.4 billion while general insurance grew by 7 percent to Rs. 3.9 billion during the year under review.

The Chairman of JIP, W. T. Ellawala, said the performance of the company was exceptional given the business climate in 2008.

"2008 was a difficult year. Economic conditions were tough and competition was fierce, however we have grown in all business segments," he said.

Despite high interest rates the company’s borrowing costs had been kept under control.

In fact, borrowing costs for 2008 came down to Rs. 93 million as against Rs. 233 million in 2007, a decline of 59.97 percent.

Ellawala said the company’s growth was largely due to the investments that were made from capital that was raised when JIP went public last year, which was utilized to build its brand image, develop infrastructure and train staff.

JIP used also used the funds from the IPO to centralize its corporate business segment.

"This will contribute to a major savings in the short term on a sustainable basis," Ellawala said.

Meanwhile, Managing Director of JIP, Prakash Schaffter, said the tough economic climate resulted in the company having its fair share of lapsed policies.

"Things could have been better but it must be kept in mind that even during better times, policies have lapsed," Schaffter said.

This phenomenon is not limited to JIP, but to the entire insurance sector and the regulator of the Insurance Board of Sri Lanka has time and time again instructed the public on how policies lapse and insurance companies were requested to educate their customers accordingly.

"However, polices are lapsing at a worrying rate," Schaffter said echoing sentiments in the industry that a difficult economic climate in the country today is making it difficult for some policy holders to meet their premium obligations.

The company had spent 64,000 man/hours on training last year and plans not to let up this year.

The company’s General Manager for Sales and Marketing, Ravi Liyanage, said that people’s priority to have a life policy had always been low.

"It will be an added challenge to continue growth in this sector under the present economic environment," Liyanage said.

Ellawala said that JIP will continue to manage its costs and maintain its position in a business climate that may not improve anytime soon.

"The economic and financial state of affairs is difficult. It will only get worse before it gets better. Furthermore doing business in the insurance industry is getting difficult because of intense competition in a shrinking market," he said.

Ellawala said the management of JIP will continue to focus on building share holder value during the year ahead despite the tough times.

"Our life insurance fund is Rs. 2.9 billion and is more than adequate to meet all commitments and this is the kind of standard we want to introduce to the entire industry," he said.

Schaffter said the company will continue to increase its sales force, train its staff and invest in developing its human resources despite the challenges ahead.

He did not want to divulge the company’s growth target for 2009.

"This year will be as tough as 2008, but we have not set ourselves over ambitious, over estimated targets. We have a target, but one needs to keep in mind the economic climate we are in," Schaffter said.

When journalists pushed for an answer…"About 20 percent," he said, reflecting uncertainty any business would be facing, leaving it up to us to quote him.

"We are aware of the global financial crisis and the financial crisis in Sri Lanka, but we will be much stronger and more resilient. We would like to reaffirm our commitment to good governance, sound risk management and growth in business lines," Schaffter said.