HNB Assurance : Annual Report 2023

HNB

ASSURANCE

PLC

ADEPENDABLE

FORCE

INTEGRATED ANNUAL REPORT 2023

1. DEPENDABLE F O R C E

Even after the darkest nights, the sun continues to rise each day, radiating its energy to make our existence possible. It is a force that sustains life − powering the continuity of the planet. Here at HNB Assurance, we are an entity structured to add value to the lives of our stakeholders- protecting them from adversity and uncertainties, transforming ourselves into a force our

nation can depend on.

When the people and communities we serve need stability, our Company's strengths have shined the brightest, radiating strength only we can deliver. Today, as one of the fastest-growing insurance providers in Sri Lanka, we take pride in delivering future-forward solutions with a team committed to keep us progressive and smart. This year, we pursued fresh ideas and embraced new perspectives, inspiring better results for us, and our stakeholders. As we open another chapter in our journey, we will continue to radiate hope and strength,

keeping alive our spirit of caring.

CONTENTS

ABOUT HNB ASSURANCE GROUP

About the Report	4
Our Journey to 2023	8
The Group at a Glance	10
Organisation Structure	11
Group Performance Highlights	12
Our Sustainability Agenda	14
Awards and Accolades	15
Independent External Assurance	16
Chairperson's Message	18
Board of Directors	22
Chief Executive Officer's Review	27
Group Executive Committee	32
Senior Management Team - HNBA	38
Senior Management Team - HNBGI	39

	MANAGEMENT DISCUSSION & ANALYSIS
	About Our Business	Business Line Review
	Value Creation	42	Life Insurance -	94
	Engaging with our Stakeholders	44	Business Review
	Operating Environment	47	General Insurance -	98
	Looking Ahead	54	Business Review
	Determining Materiality	56	Accounting for Our Capitals
	The Strategic Report	Review of Capitals	101
	On Track to Deliver Strategy	62	Financial Capital Review	103
	Sales Force Expansion	64
Exceptional Customer Experience	71
	Technological Transformation	74
	Comprehensive Product Suite	77	GOVERNANCE AND LEADERSHIP
	Our Commitment to Developing	80			Strategic Leadership	113
	Sustainable Products
	Passionate Human Capital	81			Corporate Governance	114
	Fund Management	88		Corporate Governance at HNB	144
	A Remarkable Brand	92			General Insurance Limited
			Risk Management Review	147
Fulfilling Our Social Responsibility	93
		Investor Information	161
					Compliance Summary	169
						FINANCIAL STATEMENTS
		Audit Committee Report	174		Report of the Life Actuary	204
	Human Resources and Remuneration Committee Report	178	Certification of Incurred But Not Reported (IBNR) and	205
	Related Party Transaction Review Committee Report	180	Incurred But Not Enough Reported (IBNER) Claims Reserve
	Nomination & Governance Committee Report	182		Independent Auditors' Report	206
	Investment Committee Report	184		Statement of Financial Position	210
	Risk Management Committee Report	186	Statement of Profit or Loss and Other Comprehensive Income	211
	Strategy Review Committee Report	188	Statement of Changes in Equity - Group	212
	Director's Statement on Internal Control	189	Statement of Changes in Equity - Company	213
	Annual Report of the Board of Directors	191		Statement of Cash Flows	214
	Director's Interest in Contracts with the Group/Company	200	Accounting Policies and Notes to the Financial Statements	215
Statement Of Directors Responsibility for Financial Reporting	201		Index to Financial Notes	226
	CEO's and CFO's Responsibility Statement	203

SUPPLEMENTARY INFORMATION

Statement of Financial Position of the Life Insurance Fund - Supplemental	348
Notes to the Supplemental Financial Statements -Life Insurance Fund	349
Insurance Revenue Account	354
Takaful Business Analysis - Profitability	355
Shari'ah Report of HNB Assurance Takaful Unit	356
Shari'ah Report of HNB General Insurance Takaful Unit	357
Quarterly Analysis 2023 and 2022 - Group	358
Quarterly Analysis 2023 and 2022 - Company	359
Decade at a Glance	360
Glossary	364
GRI Content Index	365

Sustainability	367
Disclosure Topics & Accounting Metrics
Notice of Meeting	369
Form of Proxy	371
Stakeholder Feedback Form	373
Corporate Information	375

ABOUT HNB ASSURANCE GROUP

ABOUT THE REPORT

The Annual Report of HNB Assurance PLC delivers the story of sustainable value creation achieved by executing our integrated strategy.

This is our 12th report prepared in accordance with the International Integrated Reporting Framework ( Framework) and 15th report complying with the requirements of the Global Reporting Initiatives Sustainability Reporting Standards (GRI Standards).

SCOPE AND BOUNDARY	TARGETED READERS
This report comprises both financial	This report is primarily prepared to
and non-financial performance of HNB	provide information to our Shareholders,
Assurance PLC and its fully owned	but we have also focused on providing
subsidiary HNB General Insurance	information on value creation to
Limited for the financial year ended 31st	our other key stakeholders including
December 2023. This follows the most	Regulators, Employees, Customers,
recent report for the year ended 31st	Business Partners, and Community.
December 2022, for which comparatives	ASSURANCE
are given where applicable. The financial
and non-financial reporting boundaries	External Assurance has been obtained
have been aligned to cover both entities	from Messrs KPMG, the Independent
of the Group. During this reporting	Auditors of the Group on the Financial
period, no significant changes to the	Statements with resulting notes and the
organisation structure, ownership took	integrated report.
place.

GUIDING FRAMEWORKS AND PRINCIPLES

AVAILABLE MEDIUMS

This Report is available in multiple mediums and formats to meet communication requirements of our diverse stakeholder groups. The online version of the Annual Report is available on the Company website and the website of the Colombo Stock Exchange. As an eco-friendly practice we have printed only a limited number of copies.

Sinhala and Tamil translations of Chairperson's Message, Chief Executive Officer's Review and Financial Statements are available on request.

Print

Available on request

Online

Available in PDF format at

www.hnbassurance.com

Financial Reporting

• Companies Act No.7 of 2007
• Listing Rules of Colombo Stock Exchange
• Sri Lanka Financial Reporting Standards (SLFRS) and Sri Lanka Accounting Standards (LKAS)
• Regulations and Directions issued by the Insurance Regulatory Commission of Sri Lanka (IRCSL)
• Regulation of Insurance Industry Act No. 43 of 2000 and subsequent amendments

Integrated Reporting

• International Integrated Reporting Framework

Sustainability Reporting

• Global Reporting Initiative Sustainability Reporting Standards
• Sustainable Development Goals (SDGs) of United Nations
• Sustainability Guide of Colombo Stock Exchange
• Gender Parity Reporting issued by CA Sri Lanka
• Sustainable Accounting Standards by Sustainability Accounting Standards Board

Corporate Governance

• Code of Best Practices on Corporate Governance 2017 issued by CA Sri Lanka
• Corporate Governance Framework for Insurers issued by the Insurance Regulatory Commission of Sri Lanka
• Listing Rules of the Colombo Stock Exchange

4 HNB ASSURANCE PLC - INTEGRATED ANNUAL REPORT 2023

REPORTING PRINCIPLES

Strategic Focus and Future Orientation

This report aims to provide a clear understanding of how we execute our strategy to create value in the short, medium and long term.

NAVIGATING THIS REPORT

THE CAPITALS

Comparability

Performance of the current year is provided along with the performance of the previous year and industry benchmarks where relevant and applicable.

Clarity

Included in this report are both text and visual illustrations to enhance readability and understanding.

Reliability and Completeness

Information provided have been verified by the Board of Directors, Audit Committee, Other Board Sub-Committees and Group Executive Committee as applicable.

Accuracy and Consistency

Financial

Capital

Social and

Relationship

Capital

Natural

Capital

Human

Capital

Intellectual

Capital

Manufactured

Capital

Digital

Capital

Internal control mechanisms have facilitated the traceability and verifiability of the information provided in this report. Unless otherwise stated, all reporting concepts remain consistent with the most recent report.

Materiality

Included in this report is a list of material factors that have an impact on sustainable value creation process and the method of determining materiality.

FORWARD LOOKING STATEMENTS

Included in this Integrated Annual Report are forward-looking statements to support evaluation of the Group's ability to create value in the future. It is important to note the relatively high levels of uncertainty associated with these statements as Sri Lanka navigates through the troubled times. Additionally, as highlighted in the Operating Environment, the doubts related to the global outlook has added to these uncertainties. Readers are cautioned to use the latest available information at the time of assessment and adjust their evaluations accordingly. All forward-looking statements are presented without recourse or liability to the Board or other preparers of the Annual Report, given the considerable uncertainty associated with them.

ANY FEEDBACK TO,

[e-mail]

www.hnbassurance.com

[phone]

[phone]

Board Secretary,

HNB Assurance PLC,

Legal and Company Secretarial Division,

Iceland Business Center,

No.30, Sri Uttarananda Mawatha,

Colombo 03, Sri Lanka.

STRATEGIC PILLARS

Sales Force						Technological
Exceptional
Expansion
Transformation
	Customer
	Experience

Fund	Passionate	A Remarkable
Management	Human Capital	Brand

Comprehensive

Product Suite

STAKEHOLDERS

Customers	Communities	Employees

Shareholders	Business		Government
	Partners		& Regulator

A DEPENDABLE FORCE

5

ENDURING

FORCE

Established over two decades ago, HNB Assurance is an innovative insurance solutions provider, illuminating lives across the country especially during challenging times, where the Company demonstrated its enduring strength by consistently delivering reliable financial security and peace of mind to its policyholders.

ABOUT HNB ASSURANCE GROUP

About the Report 4| Our Journey to 2023 8| The Group at a Glance 10| Organisation Structure 11

Group Performance Highlights 12| Our Sustainability Agenda 14| Awards and Accolades 15| Independent External Assurance 16

Chairperson's Message 18| Board of Directors 22| Chief Executive Officer's Review 27| Group Executive Committee 32

Senior Management Team - HNBA 38| Senior Management Team - HNBGI 39

Vision

To be Sri Lanka's most admired and trusted partner in meeting insurance needs professionally with a spirit of caring

Mission

Working together with a passion for excellence and a team sprit none can match, to provide innovative, customized solutions, exploring opportunities beyond conventional boundaries

Purpose

Strengthening every step of your life

Values

Treasure integrity and ethical conduct Show mutual respect in all our interactions Inculcate positive thinking

Foster diversity as a corporate strength Empower people to strive for excellence

Founded in 2001, HNB Assurance PLC (HNBA) operates as a provider of Life Insurance with a fully-owned subsidiary, HNB General Insurance Ltd. (HNBGI), providing General Insurance services. HNBA is a subsidiary of Hatton National Bank PLC, a publicly listed, domestically significant commercial bank and one of the largest private sector financial services Group in Sri Lanka.

HNBA provides an extensive range of insurance products, including individual life policies, corporate life policies, and takaful insurance. HNBA is navigating a growth plan to increase its market share to 10% by 2026, while HNBGI is gearing to move upto the fifth position by the same year, through customer-focused strategies, technology and a motivated team which will be a game changer for the Group. A sound track record of delivering value and upholding values allows us to move towards our goals with confidence.

A DEPENDABLE FORCE

7

ABOUT HNB ASSURANCE GROUP

OUR JOURNEY TO 2023

We became a Public	We were accredited with an Insurer
Listed Company	Financial Strength Rating of 'A(lka)' and
through an Initial	National Long-Term Rating of 'A' by Fitch
Public Offering (IPO).	Ratings Lanka Ltd.

2003 2007

2009

We were crowned with the first and foremost international award for Best Presented Accounts - Corporate Governance presented by the South Asian Federation of Accountants (SAFA).

2015

Our General Insurance business was transferred to HNBGI, while we increased our focus on the Life Insurance business as we segregated the businesses as per regulations.

2013

To ensure customer service excellence we established a dedicated Customer Service Centre.

2011

- Adjudged the Joint Winner of the

Bronze award for Overall Excellence in

Annual Financial Reporting.

• We made a successful Rights Issue of 6.25 Million shares to meet future regulatory requirements.

2001

The milestone year that we embarked on a steadfast journey to serve customers beyond their expectations.

8 HNB ASSURANCE PLC - INTEGRATED ANNUAL REPORT 2023