Eagle Insurance PLC, a subsidiary of global insurance giant Aviva, has made clear in its recently released annual report that the company will "walk away from business if it’s not profitable."

The company’s Managing Director Deepal Sooriyaarachchi has said so in response to the question of whether Eagle too, like other insurers, was experiencing a high incidence of general insurance claims.

"The general insurance claims experienced across the industry is very high, and Eagle is also experiencing high claims," Sooriyaarachchi said.

"There will be a twin strategy approach to handle this issue. The first is to ensure that a reinsurance program suited to the company’s business strategies and risk profile is in place. The second strategy is to focus on the underwriting of more quality focused business rather than volume driven business, while clearly indicating that we will walk away from business if it’s not profitable."

He said that they will focus on business generation by expanding their commercial and personal lines of business to diversify their portfolio.

"We will also strengthen measures in our claims servicing and assessment of losses in order to minimize claims leakages whilst maintaining our service standards in line with customer expectations," he said.

2008 had seen Eagle’s group profit after-tax down to Rs.463.7 million from the previous year’s Rs.527.1 million while at company level the profit was down to Rs.443.6 million from Rs.514.6 million.

Sooriyaarchchi said that the profit during the year under review included a credit of Rs.171 million contributed by grossing up the withholding tax on investment income.

"When this is excluded, profit before tax stands at 79% of the previous year’s recorded profit," he explained.

Pointing out that the lower profit was due to the high lapses the company experienced in its life insurance business and high claims in general insurance, he said that this was expected in a high inflation environment.

However, Eagle had reined expense growth at 11% and this was a key contributor to the bottom line.

"We are satisfied that the profit after tax earnings are in line with our expectations and that we are able to deliver the dividend expectations of the shareholders," he said.

They had been able to do this while maintaining the financial strength of the company at a healthy level which was most important in the context of the financial crisis being experienced by many institutions.

Eagle’s Chairman, Mr. Craig Brackenrig, announced a dividend of Rs.7 per share for 2008 despite the effects of the economic challenges of last year on the insurance industry.

As insurance was low in consumer priorities, there was an increase in insurance policy lapses and surrenders. The general insurance market had experienced intense price competition especially in the motor sector affecting profitability of market players due to decreasing premium levels. Also, high inflation resulted in the increase in claim cost industry-wide.

Eagle Insurance has a stated capital of Rs.300 million, capital reserves of Rs.39.9 million and revenue reserves of Rs.1.9 billion.

Aviva NDB Finance Lanka (Pvt) Limited with 87.27% of the equity of Eagle is the controlling shareholder of the company followed by the NDB with 5%.

In effect, Aviva International Holdings is the ultimate controlling interest with 58.4% of Aviva NDB Finance while NDB has a direct shareholding of 5% and an indirect shareholding of 36.1% (through Aviva NDB Finance).