UNION ASSURANCE PLC Financial Summary
UAL.N0000 · UNION ASSURANCE PLC · Insurance · 2026-08-15
Union Assurance PLC Financial Summary and Investment Analysis
Executive Overview
Union Assurance PLC is a Sri Lankan life insurer established in 1987 and listed on the Colombo Stock Exchange since 1988. John Keells Holdings PLC remains the controlling shareholder with 90.0% ownership. The business is increasingly focused on regular-premium life insurance, Agency and Bancassurance distribution, digitalisation, and value-oriented new business rather than pure premium-volume growth.
Periods covered: Q3 2023 through Q2 2026, plus audited CY2025. Interim figures are provisional and unaudited; CY2025 financial statements received an unmodified audit opinion.
The central trend is a divergence between strong premium growth and weaker near-term earnings. CY2025 GWP increased 19% to LKR 25,750 Mn, but PAT declined 10% to LKR 3,370 Mn. H1 2026 extended this pattern: GWP rose 15% YoY, while PAT fell 37% to LKR 504.239 Mn. Capital remained comfortably above regulatory requirements at end-2025, although equity and NAV declined materially during H1 2026.
Financial Performance
Revenue and Profitability Trends
*Amounts except EPS in Rs. ‘000. Gross profit is not a meaningful metric for a life insurer.*
| Period | GWP | Total Net Revenue | Gross Profit | Net Profit/(Loss) | NP Margin | EPS (Rs.) |
|---|---|---|---|---|---|---|
| Q3 2023 | 4,727,316 | 8,134,467 | N/A | 434,883 | 5.3% | 0.74 |
| Q4 2023 | 5,666,239 | 8,319,438 | N/A | 2,410,219 | 29.0% | 4.09 |
| Q1 2024 | 4,887,227 | 7,994,506 | N/A | 483,538 | 6.0% | 0.82 |
| Q2 2024 | 4,919,653 | 7,875,589 | N/A | 375,510 | 4.8% | 0.64 |
| Q3 2024 | 5,468,883 | 7,992,267 | N/A | 445,345 | 5.6% | 0.76 |
| Q4 2024 | 6,371,206 | 10,956,101 | N/A | 2,436,825 | 22.2% | 4.14 |
| Q1 2025 | 5,735,461 | 8,253,499 | N/A | 516,492 | 6.3% | 0.88 |
| Q2 2025 | 5,869,372 | 9,404,219 | N/A | 286,507 | 3.0% | 0.49 |
| Q3 2025 | 6,857,395 | 11,371,617 | N/A | (27,098) | (0.2%) | (0.05) |
| Q4 2025 | 7,287,439 | 10,776,273 | N/A | 2,594,013 | 24.1% | 4.40 |
| Q1 2026 | 6,676,569 | 8,586,906 | N/A | 266,406 | 3.1% | 0.45 |
| Q2 2026 | 6,713,199 | 11,070,543 | N/A | 237,833 | 2.1% | 0.40 |
Quarterly profitability is structurally lumpy, with Q4 consistently contributing a large portion of annual earnings through life-fund/surplus and investment-related effects. Therefore, individual quarterly NP margins should not be interpreted like those of a conventional industrial company.
CY2025 GWP rose 19%, driven by 27% First Year Premium growth and 17% Renewal Premium growth. Individual policies generated LKR 25,023 Mn, up 20%. However, PAT declined from LKR 3,741 Mn to LKR 3,370 Mn. The Fairfirst Insurance Limited divestment created a one-off PBT impact and removed future associate-profit contributions.
Q3 2025 illustrates earnings volatility: despite 25% GWP growth and 42% net-revenue growth, higher insurance contract liability movements and a LKR 401.925 Mn tax expense produced a small loss.
H1 2026 GWP reached LKR 13,389.768 Mn (+15%), but PAT fell to LKR 504.239 Mn (-37%). Operating profit fell 20%, while the previous comparative included LKR 170.818 Mn of Fairfirst associate earnings. Q1 2026 also absorbed an LKR 876.191 Mn fair-value loss.
Balance Sheet Analysis
| LKR Mn | 2024-12-31 | 2025-12-31 | 2026-06-30 |
|---|---|---|---|
| Total assets | 109,459.341 | 127,248.926 | 131,523.135 |
| Financial investments | 95,567.444 | 108,252.636 | 112,164.027 |
| Insurance liabilities incl. unit-linked | 79,191.683 | 94,566.564 | 103,916.106 |
| Total liabilities | 85,791.350 | 103,876.333 | 112,432.759 |
| Total equity | 23,667.991 | 23,372.593 | 19,090.376 |
| NAV/share (Rs.) | 40.16 | 39.66 | 32.40 |
Assets grew 3.4% during H1 2026, but liabilities increased 8.2% and equity fell 18.3%. The main driver was growth in insurance contract liabilities, while the available-for-sale reserve fell from LKR 3,357.792 Mn to LKR 1,499.455 Mn. The LKR 2,946.429 Mn shareholder dividend also reduced retained earnings.
Traditional current and debt/equity ratios are not particularly informative because the insurer does not present its balance sheet on a conventional current/non-current basis and most liabilities are policyholder obligations. Bank overdraft was only LKR 187.512 Mn at 2026-06-30.
The latest disclosed CAR was 215% at 2025-12-31, down from 264% but substantially above the 120% regulatory minimum.
Cash Flow Analysis
| LKR Mn | CY2024 | CY2025 | H1 2025 | H1 2026 |
|---|---|---|---|---|
| Operating cash flow | 13,661.592 | 15,108.239 | 6,815.388 | 8,049.413 |
| Investing cash flow | (7,591.694) | (11,924.665) | (4,287.624) | (5,186.669) |
| Financing cash flow | (5,306.939) | (3,164.381) | (3,088.899) | (3,057.660) |
| CFO less PPE/intangible capex | 13,475.228 | 9,628.557 | 1,620.447 | 7,787.172 |
Operating cash generation remains strong, rising 18% YoY in H1 2026. The unusually low H1 2025 conventional FCF proxy reflected approximately LKR 5.1 Bn of intangible investment associated principally with strategic distribution rights. For an insurer, securities purchases and maturities form part of core asset-liability management, so conventional FCF has limited standalone meaning.
CY2025 shareholder dividends were LKR 2,946 Mn, or approximately 87% of PAT, with DPS maintained at Rs. 5.00.
Key Financial Ratios and Growth Indicators
| Indicator | 2023 | 2024 | 2025 | Latest |
|---|---|---|---|---|
| ROE | 20% | 16% | 14% | — |
| ROA | 3.93% | 3.42% | 2.65% | — |
| Investment yield | 18% | 17% | 16% | — |
| Claims/NWP | 38% | 33% | 33% | — |
| Expense ratio | 23% | 23% | 23% | — |
| EPS (Rs.) | 6.38 | 6.35 | 5.72 | TTM 5.20 |
| NAV/share (Rs.) | 41.00 | 40.16 | 39.66 | 32.40 |
| P/E | 6.30x | 9.75x | 13.52x | ~13.9x at Rs.72.50 |
| P/B | 0.98x | 1.54x | 1.95x | ~2.24x |
From CY2023-CY2025, GWP CAGR was approximately 16.8%, AUM CAGR 13.9%, and Life Fund CAGR approximately 20.3%, while PAT CAGR was approximately -5.3%. Thus, balance-sheet and premium growth have substantially outpaced shareholder earnings growth.
Economic and Market Context
The reports describe improving Sri Lankan economic stability, moderating inflation and recovering disposable income as supportive of policy acquisition and persistency. Conversely, declining interest rates create reinvestment pressure for life insurers.
Life-industry GWP grew 24% to LKR 227 Bn in 2025, faster than Union Assurance PLC's 19%. Consequently, market share eased from 11.8% to 11.3%. Management attributes part of this to deliberately reducing lower-value single-premium business from 5% to 4% of GWP while prioritising long-term value.
The Company's five-year First Year Premium CAGR of 20.3% was slightly below the industry's 21.8%, while Renewal Premium CAGR of 14.1% exceeded the industry's 13.9%.
Future Potential and Outlook
Management's major growth platform is the exclusive Sampath Bank PLC Bancassurance partnership, launched in 2025. Bancassurance new-business premiums increased 80%, while Agency continued to contribute approximately 70% of GWP.
Growth initiatives include the FlexLife product, digital Bancassurance integration, digital advisor lifecycle management, e-MER healthcare integrations, analytics, AI and RPA. Advisor onboarding was reduced from four days to approximately 15–20 minutes.
SLFRS 17 and SLFRS 9 represent a major reporting transition. Management expects future performance assessment to focus increasingly on Contractual Service Margin, new-business value, risk adjustment and underlying insurance profitability rather than premium volume alone. This should improve visibility into economic value but can increase reported earnings volatility.
Risks and Challenges
- Profit conversion: premium growth has not translated into equivalent PAT or ROE growth.
- Investment risk: lower reinvestment yields and equity/fair-value movements materially affect earnings and OCI.
- Claims/persistency: rising healthcare costs, maturities, surrenders and lapses can pressure margins.
- Capital/equity: H1 2026 NAV/share fell 18% from 2025 year-end despite asset growth.
- Competition: aggressive pricing, Bancassurance bargaining power and talent poaching remain significant.
- Regulation/accounting: SLFRS 17/9, AML/CFT, data protection and customer-conduct requirements increase complexity and cost.
- Tax litigation: multiple historical income-tax/VAT assessments remain under appeal. For certain years the Court of Appeal ruled in the Company's favour, after which the Inland Revenue Department appealed to the Supreme Court.
- Insurance contract liabilities involve significant actuarial assumptions and were identified as a key audit matter.
Shareholder and Corporate Information
John Keells Holdings PLC held 530,357,150 shares (90.0%) at 2026-06-30. Public holding remained 10.0%, with 3,286 public shareholders and float-adjusted market capitalisation of LKR 4.4 Bn. Directors and the Chief Executive Officer reported no shareholdings.
The latest market snapshot showed Rs. 72.50 on 2026-08-14, versus Rs. 69.50 at the start of the latest 90-session period, a 4.32% gain. The 90-session range was Rs. 67.00–82.00. Foreign holdings increased from 2,955,400 to 3,050,700 shares.
Investment Decision Indicators
Strengths
- Persistent double-digit GWP, renewal, Life Fund and AUM growth.
- Strong operating cash generation and substantial regulatory capital headroom.
- Powerful Agency/Bancassurance distribution architecture and major Sampath Bank growth runway.
- High policy persistency focus, improving cession ratio and stable claims/expense ratios.
- Significant digitalisation and process-efficiency investments.
Weaknesses
- PAT, ROE and ROA have declined despite strong premium growth.
- H1 2026 PAT fell 37% and NAV/share fell to Rs.32.40.
- Fairfirst divestment removes associate earnings previously supporting profit.
- 90% controlling ownership leaves only a 10% public float.
- Valuation has rerated materially from below book value in 2023 to above 2x latest NAV.
Overall assessment: Union Assurance PLC shows strong underlying franchise and premium-growth characteristics but currently weaker earnings conversion. The most important indicators to monitor are whether the Sampath Bank partnership and higher-quality regular-premium business translate into stronger surplus and PAT, whether ROE stabilises under SLFRS 17, and whether the H1 2026 decline in equity/NAV reverses. The reports therefore depict a financially well-capitalised growth business whose next phase depends more on profitability and value creation from new business than on premium growth alone.