Merchant Bank of Sri Lanka and Finance PLC, a subsidiary of Bank of Ceylon (BOC), will be divesting a 49% minority stake in its now-defunct, 81.1%-owned MBSL Insurance Co for Rs 700 million, a top company official told Ceylon FT.
“As per the directions of Sri Lanka’s insurance sector regulator, the Insurance Board of Sri Lanka (IBSL), we can divest only up to 49% of MBSL Insurance Co. Therefore, we have withdrawn our earlier decision to divest the entire ownership. Under the new circumstances, we have some local and global interest to acquire up to 49% stake of this general and life composite insurance entity for Rs 700 million,” he said.
“The final bidding process was closed last week and we are now evaluating the proposals. It is nice to hear that a top global private equity firm also submitted their application to acquire the minority 49% stake of the company.”
The company is currently in non-compliance with the solvency margin (non-life insurance). According to the statement of solvency prepared by the management of MBSL Insurance, the solvency ratios of non-life Insurance business as at December 31, 2015 stood at 0.41 against previous year’s 1.18.
Therefore, the Board of IBSL suspended the registration of MBSL Insurance Company Limited to carry on Long Term and General Insurance Businesses with effect 28 June 2017.
Since then, Merchant Bank of Sri Lanka & Finance PLC has been spending over Rs 15 million per month for the defunct insurance subsidiary MBSL Insurance, for staff, rental and claim-settling payments.
According to MBSL’s annual report, MBSL Insurance incurred a loss of Rs 109 million for the year ended December 31 2015 against a loss of Rs 53 million in the previous year.
The accumulated losses of the company as at December 31, 2015 stood at Rs 743 million against Rs 633 million a year ago.
The company’s net assets and stated capital as at December 31 2015 were Rs 333.5 million and Rs 1.08 billion, respectively.
The company collapsed mainly due to fraudulent behavior of some of its earlier directors and management.