STATEMENT OF FINANCIAL POSITION

The above Statement of Financial Position is to be read in conjunction with the notes to the Financial Statements on pages to which form an integral part of the Financial Statements.

These Financial Statements have been prepared in compliance with the requirements of the Companies Act No.07 of 2007.

P.A. Jayawardene

Director/Chief Financial Officer

The Board of Directors is responsible for the preparation and presentation of these Financial Statements

Approved and Signed on behalf of the Board by;

20th February, 2025

INCOME STATEMENT

The above Income Statement is to be read in conjunction with the notes to the Financial Statements on pages 282 to 398 which form an integral part of the Financial Statements.

STATEMENT OF COMPREHENSIVE INCOME

The above Statement of Comprehensive Income is to be read in conjunction with the notes to the Financial Statements on pages 282 to 398 which form an integral part of the Financial Statements.

STATEMENT OF CHANGES IN EQUITY

STATEMENT OF CASH FLOWS

The above Statement of Cash Flows is to be read in conjunction with the notes to the Financial Statements on pages 282 to 398 which form an integral part of the Financial Statements.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

Entity information

1.1. Reporting Entity

Ceylinco Life Insurance Limited (the Company) is a public limited liability company incorporated and domiciled in Sri Lanka. The registered office of the Company is located at No. 106, Havelock Road, Colombo 05. Additional corporate information is given on the inner back page.

1.2. Nature of Operations and Principal Activities

Descriptions of the nature of operations and principal activities of the Company, its Subsidiaries and Associates are given on page 14. There were no significant changes in the nature of the principal activities of the Company and the Group during the financial year under review.

1.3. Parent Entity and the Ultimate Parent Entity

Ceylinco Holdings PLC, which is a publicly quoted entity registered on the Colombo Stock Exchange of Sri Lanka. The holding company is incorporated and domiciled in Sri Lanka.Ceylinco Life Insurance Limited (“the Company”) is a wholly owned subsidiary of Ceylinco Holdings PLC, which is also the ultimate parent of the Company. The Financial Statements of Ceylinco Holdings PLC are available for public use.

Financial Statements

1.4. Consolidated Financial Statements

The Consolidated Financial Statements of Ceylinco Life Insurance Limited, as at and for the year ended 31 December 2024 encompass the Company, its Subsidiaries (together referred to as the ‘Group’) and the Group’s interest in Associates. All companies in the Group are limited liability companies incorporated and domiciled in Sri Lanka.

The financial statements of all the companies in the group have been prepared for a common financial year ending 31 December.

1.5. Responsibility for Financial Statements

The Board of Directors is responsible for preparation and presentation of the Consolidated Fnancial Statements as per the provisions of the Companies Act No. 07 of 2007 and the Sri Lanka Accounting Standards. The nature of this responsibility is explained in the Statement of Directors’ Responsibility for Financial Reporting on page 262.

1.6. Approval of Financial Statements

The Consolidated Financial Statements of Ceylinco Life Insurance Limited and its Subsidiaries (collectively, the Group) for the year ended 31 December 2024 were authorized for issue by the the Board of Directors on 20th February 2025.

2. BASIS OF ACCOUNTING

2.1. Statement of Compliance

The Consolidated Financial Statements have been prepared in accordance with the Sri Lanka Accounting and Auditing Standards Act, No. 15 of 1995, which requires compliance with Sri Lanka Accounting Standards (hereinafter referred to as SLFRS/LKAS) promulgated by The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka), and with the requirements of the Companies Act, No. 07 of 2007 and the requirements of the Regulation of Insurance Industry Act, No. 43 of 2000 and amendments thereto.

2.2. Basis of Measurement

The Financial Statements, except for information on cash flows, have been prepared on an accrual basis under the historical cost convention except for the following:

2.3. Functional and Presentation Currency

Items included in the Financial Statements of the company are measured using the currency of the primary economic environment in which the company operates (the Functional Currency). These Financial Statements are presented in Sri Lankan rupees (LKR), which is the company’s Functional and Presentation Currency. There was no change in the Company’s Presentation and Functional Currency during the year under review. All amounts presented in rupees have been rounded to the nearest rupees thousand (Rs ’000), except when otherwise indicated.

2.4. Presentation of Financial Statements

The assets and liabilities of the Company presented in its Statement of Financial Position are grouped by nature and listed in an order that reflects their relative liquidity and maturity pattern. No adjustments have been made to the inflationary factors affecting the Financial Statements.

2.5. Materiality and Aggregation

Each item which is similar in nature is presented separately if material. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted under LKAS 1 – “Presentation of Financial Statements”.

2.6. Offsetting

Offsetting of assets and liabilities

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position only when there is a legally enforceable right to offset the recognized amount and there is an intention to settle on a net basis or to realize the assets and settle the liabilities simultaneously.

Offsetting of income and expenses

Income and expenditures are not offset in the income statement, unless required or permitted by Sri Lanka Accounting Standards and as specially disclosed in the Material Accounting Policy Information of the Group.

2.7. Going Concern

In the preparation of the financial statements for the year ended 31 December 2024, the management has carefully considered all available information, including the prevailing macroeconomic conditions, sustainability related risks, and other pertinent events. Based on this evaluation, the management believes that there are no material uncertainties that would cast significant doubt on the Group’s ability to continue as a going concern.

Moreover, the management has conducted comprehensive stress testing across a range of scenarios, taking into account factors such as cost management, the Group’s ability to sustain operations amidst economic challenges, available cash reserves, access to additional funding to address potential cash flow disruptions, recruitment of essential personnel, anticipated revenue streams, and OPEX (Operating Expenses) and CAPEX (Capital Expenditures) management practices.

As a result of these assessments, the management is confident in the Group’s ability to continue operations for the foreseeable future. Furthermore, the management is not aware of any material uncertainties that may affect the Group’s capacity to continue as a going concern. Consequently, the financial statements have been prepared on a going concern basis.

2.8. Comparative Information

Consolidated Financial Statements provide comparative information in respect of the previous financial year. The presentation and classification of assets and liabilities in the financial statements of the previous year have been amended, where relevant for better presentation and to be comparable with those of the current year.

2.9. Rounding

The amounts in the Financial Statements have been rounded off to the nearest rupees thousands, except where otherwise indicated.

2.10. Supplementary Statements - Statement of Financial Position – Life Fund

Supplementary Statement of Financial Position of Life Insurance Fund together with notes are disclosed on pages 400 to 401.

3. USE OF MATERIAL ACCOUNTING JUDGEMENTS, ASSUMPTIONS AND ESTIMATES

The preparation of Financial Statements in conformity with Sri Lanka Accounting Standards (SLFRS and LKAS) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amount of assets and liabilities that are not readily apparent from other sources. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized prospectively.

3.1 Material accounting judgements

Information about judgments made in applying accounting policies that have material effects on the amounts recognized in these Financial Statements are included in the following notes.

3.2 Accounting assuptions and estimation uncertainties

Information about assumptions and estimation uncertainties that have a risk of resulting in material adjustments for the year ended 31 December 2024 are included in the following notes.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Specific accounting policies

Material accounting policy information has been disclosed along with the relevant individual notes to the Financial Statements. The accounting policies presented within each note have been applied consistently by the Company.

Accounting Policies not covered with individual notes

Following accounting policies which have been applied consistently by the company, are considered to be significant but are not covered with individual notes.

(a) Insurance Receivables

Insurance receivables are recognised when due and measured on initial recognition at the fair value of the consideration receivable. The carrying value of insurance receivables is reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable, with the impairment loss recorded in the Income Statement. Insurance receivables are derecognised when the de-recognition criteria for financial assets have been satisfied.

(b) Cash Flow Statement

The Statements of Cash Flows has been prepared using ‘Direct Method’ and cash flows from Operating Activities are shown using ‘Indirect Method’ with the purpose of better comparison. Interest paid is classified as an operating cash outflow. Dividend and interest income are classified as operating cash inflows.

5. SEGMENT INFORMATION

ACCOUNTING POLICY

A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment, which is subject to risks and returns that are different from those of other segments. Operating segments will be identified based on how management evaluates and makes decisions at the group level. This could be based on different lines of business, geographical regions, or other organizational criteria.

Life insurance segment is separately identified as policyholder and shareholder funds, which are monitored and managed independently, as they require different operational, risk management, and marketing strategies.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Transaction between operating segments are set on an arm’s length basis in a manner similar to transactions with third parties. Segment income, expenses and results include transfers between business segments which will then be eliminated on consolidation.

Geographic information

The activities of the Group are located mainly in Sri Lanka. Consequently, the economic environment in which the Group operates is not subject to risks and rewards that are significantly different on a geographical basis. Hence, disclosure by geographical region is not provided.

Major Customers

The company does not have any major customers.

6. INTANGIBLE ASSETS

ACCOUNTING POLICY

The Group’s Intangible Assets include the value of Computer Software.

Initial Recognition and measurement

An intangible asset is recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the Group and the cost of the asset can be measured reliably. An intangible asset is initially measured at cost. The cost of intangible assets acquired in a business combination is the fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangibles are not capitalised and the related expenditure is reflected in profit or loss in the year in which the expenditure is incurred.

Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embedded in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

Intangible assets with finite useful lives

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the Income Statement in the expense category consistent with the function of the intangible asset.

Useful economic life and amortization

Intangible assets with indefinite useful lives

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at cash generating unit level, irrespective of whether there is an indication of impairment. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

The Group or the Company does not have intangible assets with indefinite useful life for the year under review.

Derecognition

The carrying amount of an intangible asset is de-recognised on disposal or when no future economic benefits are expected from its use. Gain or loss arising from de-recognition of an intangible asset is calculated as the difference between the net disposal proceeds and the carrying amount of the asset as at the date of disposal, and are recognised in the statement of profit or loss when the asset is de-recognised.

6 (a) Other changes to intangible assets

Other than disclosed in above note, there were no other changes to the intangible assets during the period under review (2023– Nil)

6 (b) Acquisition of Intangible Assets during the year

Group

During the year, the Group acquired intangible assets amounting to Rs.89.4 Mn (2023- Rs. 77.8 Mn).

Company

During the year, the Company acquired intangible assets amounting to Rs .83.8 Mn (2023- Rs. 77.6 Mn).

6 (c) Fully Amortised Intangible Assets in use

Group

Intangible Assets includes fully amortized Computer software which are in the use of normal business activities having an initial cost of Rs. 745.Mn. (2023- Rs. 341.94 Mn).

Company

Intangible Assets includes fully amortized Computer software which are in the use of normal business activities having an initial cost of Rs. 733.94 Mn. (2023- Rs. 330.48 Mn).

6 (d) Title Restriction on Intangible Asset

There were no title restriction on Intangible Asset.

6 (e) Intangible assets pledged as securities

There were no items pledged as securities for liabilities as at the reporting date (2023 - Nil).

6 (f) Assessment of impairment of Intangible Assets

The Group has assessed potential impairment indicators of intangible assets as at 31st December 2024. Based on the assessment, no impairment indicators were identified.

6 (g) Capitalisation of Borrowing Costs

There were no capitalised borrowing costs related to the acquisition of Intangible Assets during the year. (2023 - Nil)

6 (h) Research and development costs

Expenditure on research activities is recognised in Profit or Loss as incurred. Development expenditure is capitalised only if the expenditure can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group intends to and has sufficient resources to complete development and to use or sell the asset. Otherwise, it is recognised in Profit or Loss as incurred. Subsequent to initial recognition, development expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses.

6 (i) Individually material / significant intangible assets

The company has invested in the FIS actuarial software system to support adopting SLFRS 17. This system has a material effect to the financial statements due to its impact to the valuation of the life insurance contract liabilities.

6 (j) Amount of contractual commitments for acquisition of intangible assets

There were no contractual commitments for acquisition of intangible assets as at the reporting date.

6 (k) Revaluation of intangible assets

Since the cost model has been followed, there is no revaluation adjustment for intangible assets.

7. PROPERTY, PLANT AND EQUIPMENT

ACCOUNTING POLICY

Property, plant and equipment are tangible items that are held for use in the production or supply of goods or services, for rental to others or for administrative purposes and are expected to be used during more than one period.

Basis of Recognition

Property, plant and equipment are recognised if it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably in accordance with “LKAS 16 - Property, Plant and Equipment”.

Measurement after Recognition

Items of property, plant and equipment are stated at cost or revalued amount less accumulated depreciation and accumulated impairment losses.

Cost Model

The Group applies the cost model to Property, Plant and Equipment except for freehold land and buildings and records at cost of purchase or construction together with any incidental expenses thereon, less accumulated depreciation and any accumulated impairment losses.

Revaluation Model

Revaluation is performed on freehold land and buildings by professionally qualified valuers using the valuation techniques mentioned in the note 7(a). Land and buildings are revalued with sufficient regularity so that the carrying value does not differ materially from the fair value at the reporting date. The revaluation surplus is recognised on the net carrying value of the asset. Any revaluation gain or loss attributable to policyholders is recognised in the Life Insurance Fund, whereas any revaluation gain or loss attributable to shareholders is recognised in revaluation reserve.

Initial measurement

Initially items of property, plant and equipment are measured at cost. Cost includes expenditure that is directly attributable to the acquisition or construction of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Borrowing costs related to the acquisition or construction of qualifying assets are also capitalised.When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Replacement Cost

The cost of replacing a component of an item of Property, Plant and Equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is de-recognised. The costs of the day-to-day servicing of Property, Plant and Equipment are recognised in Profit or Loss as incurred.

Repairs and maintenance

Repairs and maintenance are charged to Profit or Loss during the financial period in which they are incurred. The cost of major renovations is included in the carrying amount of the assets when it is probable that future economic benefits in excess of the most recently assessed standard of performance of the existing assets will flow to the Group and the renovation replaces an identifiable part of the asset. Major renovations are depreciated during the remaining useful life of the related asset.

Depreciation

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The assets are depreciated from the month it is available for use and cease to depreciate from the month of disposal. Depreciation methods, useful lives and residual values are reviewed at each reporting date.

The estimated useful lives for property, plant and equipment are as follows:

Reclassification to investment property

When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified accordingly. Any gain arising on this remeasurement is recognised in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive income and presented in the revaluation reserve. Any loss is recognised in profit or loss.

Impairment

The carrying amounts of the Group’s non-financial assets are reviewed at each Reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in Income Statement. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis.

For assets excluding goodwill, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

The impairment analysis is principally based upon discounted estimated cash flows from the use and eventual disposal of the assets. Factors like lower than anticipated sales and resulting decreases of net cash flows and changes in the discount rates could lead to impairment.

Capital work-in-progress

Capital work-in-progress is stated at cost. Capital expenses incurred during the year which are not completed as at the reporting date are shown as capital work in progress, whilst the capital assets which have been completed during the year and available to use have been transferred to property, plant and equipment.

Cost of dismantling

The estimated costs of dismantling, removing, or restoring items of property, plant and equipment is zero.

Borrowing Cost

Borrowing Cost that are directly attributable to the acquisition, construction or production of a qualifying asset is capitalised as part of the cost of the asset as per the Sri Lanka Accounting Standard – LKAS 23 Borrowing Costs. A qualifying asset is an asset which takes a substantial period of time to get ready for its intended use or sale. Capitalisation ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use are completed. Other borrowing cost are recognized in the income statement in the period in which expense incur.

Derecognition

An item of property, plant and equipment is de-recognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in Income Statement in the year the asset is derecognised. When a previously revalued asset is de-recognised, the revaluation reserve pertaining to such asset is transferred to retained earnings.

7. (a) Valuation of Freehold Land and Building

The Company performed a valuation of the freehold land and buildings as at December 2024 and significant changes in the market value of the properties at the reporting date have been recognized in revaluation reserve.

As at 31 December 2024, the fair values of the freehold land and building are based on valuations performed by an accredited independent valuer, Mr. Chandrasena Weerasinghe.

The effective date of valuation of the freehold land and buildings is 31 December 2024.

Valuation models used for valuation include Cost Basis method, Investment Method and Comparison Method and are in compliance with the SLFRS/LKAS and also in accordance with the 8th Edition of International Valuation Standards recommended by the International Valuation Standards Committee.

There were no transfers between Levels 1 and 2 or to Level 3 during the year.

Description of the above valuation techniques together with narrative descriptions on sensitivity of the fair value measurement to changes in significant unobservable inputs are tabulated below;

7.(b) Acquisition of Property, Plant and Equipment’s during the year

Group

During the financial year Group has acquired Property, Plant & Equipment to the aggregate value of Rs. 895.6 Mn (2023-Rs. 445.7 Mn-). Cash payments amounting to Rs. 884.4 Mn (2023 - Rs. 411.7 Mn) were made for the purchase of Property, Plant and Equipment.

Company

During the financial year, the Company acquired property, plant and equipment to the aggregate value of Rs. 614.3 Mn (2023 - 423.2 Mn) - Cash payments amounting to Rs. 611.7 Mn (2023- Rs. 395.1 Mn) were made during the year for purchase of Property, Plant and Equipment.

7.(c) Capital Commitments

The group has committed to pay an amount of Rs.166.6 Mn (2023 - Rs.33.2 Mn) as at the reporting date under contracts entered into on capital expenditure projects.

7.(d) Title Restrictions on Property, Plant and Equipment

There were no restrictions on the title of the Property, Plant and Equipment of the Group and Company as at reporting date.

7.(e) Temporarily idle Property, Plant and Equipment

There was no temporarily idle Property, Plant and Equipment as at year ended 31 December 2024.

7.(f) Assessment of Impairment

The Group has assessed the potential Impairment indicators of Property, Plant and equipment as at 31 December 2024. Based on the assessment conducted, no impairment indicators were identified concluded that no impairment is necessary for any of the Group’s Property, Plant and Equipment as at the reporting date.

7.(g) Capitalization of Borrowing Cost

There are no capitalised borrowing costs relating to the acquisition of Property, Plant and Equipment during the year. (2023 Nil).

7 (h) Compensation from third parties for Items of PPE

There was no compensation received / receivable from third parties for items of property, plant and equipment that were impaired, lost or given up as at the reporting date.

7 (i) Property, plant and equipment retired from active use

There was no property plant and equipment retired from active use as at the reporting date (2023 - Nil)

7 (j) Permanent fall in value of property, plant and equipment

There was no permanent fall in the value of property, plant and equipment which required an impairment provision to be recongised in the Financial Statements as at 31 December 2024.

7 (k) Fully Depreciated Property, Plant and Equipment

The initial cost of fully depreciated property, plant and equipment which is still in use as at reporting date is as follows;

7(l) Property Plant and Equipment under Construction

Refer the capital WIP column of the Movement of Property, Plant and Equipment (PPE) note -Group / Company as at 31.12.2024

Below is the breakup of the Capital work-in-progress as at 31.12.2024

Capital work-in-progress - Nittambuwa - Rs. 2 Mn

Capital work-in-progress - Ambalanthota- Rs. 0.7 Mn

7 (n). Movement of Revalued Freehold Land & Buildings, if Accounted on Cost

8. RIGHT-OF-USE ASSETS

ACCOUNTING POLICY

A right-of-use asset (ROU asset) is an intangible asset that represents a lessee’s right to use an underlying asset for a lease term. It is a key concept in SLFRS 16, that governs how to account for leases.

Recognition

At inception of a contract, the group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:

• the contract involves the use of an identified asset
• the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the period of use; and
• the contract involves the use of an identified asset

the Group has the right to direct the use of the asset

Initial Measurement

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.

Where a subsidiary company has a right-of-use asset and a lease liability as result of property rented out by the Company to the subsidiary, such right-of-use asset and lease liability are eliminated in the Consolidated Financial Statements.

Subsequent Measurement

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of rightof-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination option.

Short-term leases and leases of low-value assets

The Group has elected not to recognise Right of Use Assets and lease liabilities for leases of low-value assets and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight line basis over the lease term.

8.(a) Assets held under lease recognized as Right-of Use Assets

8.(b) Lease liabilities

8.(c) Maturity analysis – contractual undiscounted cash flows

The Company has entered into commercial leases on certain property and equipment. These leases have an average life of between three and five years, with no renewal option included in the contracts. There are no restrictions placed upon the Group by entering into the leases.

Future minimum rentals payable under non–cancellable operating leases as at 31 December are, as follows:

8.(d) Amounts recognised in profit or loss

8.(e) Amounts recognised in statement of cash flows

8.(f). Impairment of right-of-use assets

The Group does not foresee any impairment of right-of-use assets and does not anticipate discontinuation of any assets for which the Group has the right to use.

8.(g). Lease Liability Reassessment

Lease liabilities are not assessed as there are no known moratorium received for the lease payments during the year.

8.(h) Sale-and-Lease back transactions

The group does not have sale and leased back transactions as at the reporting date.

8.(i) Sub leases

The group does not have sub leased properties as at the reporting date.

8.(j) Restrictions and covenants imposed by the leases

There were no restrictions or covenants imposed under lease agreements which required to be disclosed in these financial statements.

8.(k) Incremental Borrowing rate

The Average Weighted New Lending Rate (AWNLR) was used as the discount rate in determining liabilities. Throughout 2024, the discount rate fluctuated within a range of 15.17% in January to 10.77% in December, reflecting a downward trend over the year.

9. INVESTMENT PROPERTIES

ACCOUNTING POLICY

Investment properties are properties held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, used in the production of supply of goods or services or for administrative purposes.

Initial Measurement

Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property.

Where a subsidiary company occupies a significant portion of the investment property of the Company, such investment properties are treated as property, plant and equipment in the Consolidated Financial Statements and accounted using Group accounting policy for property,plant and equipment.

Subsequent Measurement

Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are included in the Income Statement in the year in which they arise.

Fair values are evaluated annually by an accredited external independent valuator applying the relevant valuation models.

Transfers

Transfers are made to or from investment property only when there is a change in use evidenced by the end of owneroccupation, commencement of an operating lease to another party or completion of construction or development. For a transfer from investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes investment property, the Company and the Group account for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.

Derecognition

Investment properties are de-recognised either when they have been disposed of, or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the Income Statement in the year of retirement or disposal.

9. (a) Valuation of Investment Properties

As at 31 December 2024 the fair values of the land and buildings held for investment purpose are based on valuations performed by an accredited independent valuer, Mr. Chandrasena Weerasinghe.

Valuation models used for valuation include Cost Basis method, Investment Method and Comparison Method, which are in compliance with the SLFRS/LKAS and also in accordance with the 8th Edition of International Valuation Standards recommended by the International Valuation Standards Committee.

The effective date of valuation of the land and buildings held for investment purpose is 31 December 2024.

There were no transfers between Levels 1 and 2 or to Level 3 during the year.

Description of the above valuation techniques together with narrative descriptions on sensitivity of the fair value measurement to changes in significant unobservable inputs are tabulated below;

The fair value measurement for all land and buildings held for investment purpose has been categorized as a Level 3 based on the inputs to the valuation techniques used.

9.(b) Temporarily Idle Investment Property

There was no temporarily idle Investment property as at 31 December 2024.

9.(c) Assessment of Impairment

The Group assessed the potential Impairment indicators of Investment Properties as at 31 December 2024 . Based on the assessment, no impairment indicators were identified and it was concluded that no impairment is necessary for any of the Group’s Investment Property as at year end.

9.(d) Capital commitments and assets pledged

There were no capital commitments as at reporting date under contracts entered into on capital expenditure projects.

9.(e) Title restriction on Investment Property

There were no restrictions on the title of the Investment Property of the Group and Company as at reporting date.

9.(f) Capitalization of Borrowing Cost

There were no capitalised borrowing costs relating to the acquisition of Investment Property during the year. (2023 Nil)

9.(g) Details of Investment Properties of Company

10. INVESTMENT IN SUBSIDIARIES-COMPANY

ACCOUNTING POLICY

Business combinations are accounted for using the purchase method. Transaction costs directly attributable to the acquisition form part of the acquisition costs. Non-controlling interests are measured at the proportionate share of the acquirer’s identifiable net assets.

The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at fair value on the acquisition date and the amount of any non-controlling interest in the acquiree. For each business combination, the Group measures the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquirer’s identifiable net assets. Transaction costs, other than those associated with the issue of debt or equity securities that the Group incurs in connection with a business combinations are expensed and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. If the business combination is achieved in stages, the previously held equity interest is remeasured at fair value on the acquisition date and any resulting gain or loss is recognised in Income Statement. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes in the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with LKAS 39 either in Income Statement or as a change to Other Comprehensive Income. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of LKAS 39, it is measured in accordance with the appropriate SLFRS/LKAS.

As common control business combinations are scoped out in SLRFS 3 – Business Combinations, management used the guidance available in LKAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors and the guidance issued under the Statement of Recommended Practice (‘SoRP’) – ‘Merger Accounting for Common Control Business Combinations’ issued by The Institute of Chartered Accountants of Sri Lanka.

In applying merger accounting, Financial Statement items of the combining entities or businesses for the reporting period in which the common control combination occurs, and for any comparative periods disclosed, are included in the Consolidated Financial Statements of the combined entity as if the combination had occurred from the date when the combining entities or businesses first came under the control of the controlling party or parties.

Accordingly, the comparative figures of the Consolidated Financial Statements were restated as if the combination had occurred from the date when the combining entities or businesses first came under the control of the controlling party or parties of Ceylinco Life Insurance Limited.

Transactions Eliminated on Consolidation

Intra-group balances and transactions, and any unrealised income expenses arising from intra-group transactions and dividend, are eliminated in preparation of the Consolidated Financial Statements.

Subsidiaries

Subsidiaries are entities controlled by the parent company. Control is achieved when the Group is exposed or has the right to variable returns from its involvement with the investee and when it has the ability to affect those returns through its power over the investee. Specially, the Group controls an investee if, and only if, the Group has:

• Power over the investee (i.e., Existing rights that give it the current ability to direct the relevant activities of the investee)
• Exposure or rights, to variable returns from its involvement with the investee
• The ability to use its power over the investee to affect its return

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee including:

• The contractual agreement with the other vote holders of the investee
• Rights arising from other contractual agreements
• The Group’s voting rights and potential voting rights

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the Consolidated Financial Statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the Financial Statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction . If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

The Financial Statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies.

Transactions with Non-Controlling Interests

The profit or loss and net assets of a subsidiary attributable to equity interests that are not owned by the parent, directly or indirectly through subsidiaries, is disclosed separately under ‘Non-Controlling Interest’. Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.

Assessment of Impairment

Having evaluated the business continuity plans and the cash flows (where necessary) of each subsidiary, the Group determined that no impairment provision is required for investment made in its subsidiaries as at 31 December 2024.

11. INVESTMENT IN ASSOCIATES

ACCOUNTING POLICY

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but it has no control or joint control over those policies. The considerations made in determining significant influence is similar to those necessary to determine control over subsidiaries.

The Group’s investment in its associate is accounted for using the equity method. Under the equity method, the investment in an associate is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate since the acquisition date.

The Income Statement reflects the Group’s share of the results of operations of the associate. Any change in Other Comprehensive Income of those investees is presented as part of the Group’s Other Comprehensive Income. In addition, when there has been a change recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable, in the Statement of Changes in Equity. Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate.

The aggregate of the Group’s share of profit or loss of an associate is shown on the face of the Income Statement outside operating profit and represents profit or loss after tax.

The Financial Statements of the associate are prepared for the same Reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in associates. At each Reporting date, the Group determines whether there is any objective evidence that the investment in the associate is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the ‘share of profit of an associate’ in the Income Statement.

Upon loss of significant influence over the associate, the Group measures and recognises any remaining investment at its fair value. Any differences between the carrying amount of the associate upon loss of significant influence and the fair value of the remaining investment and proceeds from disposal are recognised in Income Statement.

Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

11(b) Summarized Financial Information of the Associates

The above summarized financial information includes the share of following account balances.

11(c) Fair Value of the Investment

Fair Value of the Company’s investments in the associate as at reporting date is given in the note 11(a).

11(d) Impairment of Investment in Associates

Having evaluated the business continuity plans and the cash flows of the associates, the Group determined that no impairment provision is required for the carrying value of investment in associates as at 31 December 2024.

12. FINANCIAL INSTRUMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

ACCOUNTING POLICY

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Classification of Financial Assets

Depending on the intention and ability to hold the invested assets, the Company classifies its non-derivative financial assets into following categories:

• Financial assets at fair value through profit or loss (FVTPL)
• Held-to-maturity (HTM)
• Loans and receivables (L&R) and
• Available-for-sale (AFS) financial assets.

LKAS 39 was replaced by SLFRS 9 – Financial Instruments with effect from 1 January 2018. However, the Company meets the eligibility criteria of the temporary exemption from SLFRS 9 and intends to defer its application until 1 January 2026.

Initial Recognition

The Group initially recognises loans and receivables, and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. In the case of financial assets not at fair value through profit or loss, a financial asset is measured initially at fair value plus transaction costs that are directly attributable to its acquisition or issue.

Income and expenses are presented on a net basis only when permitted under SLFRS/LKAS, or for gains and losses arising from a group of similar transactions such as in the Group trading activity.

Subsequent measurement

Subsequent measurement of each classes of financial assets are disclosed in respective sub-notes.

Fair Value through Profit or Loss investments and Available-For-Sale investments are valued at fair value. Held to maturity investments and loans and receivable investments are valued at amortised cost.

Impairment of Financial Assets

The Group assesses, at each Reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial re-organisation and when observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Offsetting

Financial assets and financial liabilities are offset and the net amount is reported in the Consolidated Statement of Financial Position if, and only if, there is a currently enforceable legal right to offset de-recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Income and expense will not be offset in the Consolidated Income Statement unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the Group.

Derecognition of Financial Assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is de-recognised when:

• The rights to receive cash flows from the asset have expired; or
• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either:

(a) the Group has transferred substantially all the risks and rewards of the asset; or

(b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

The following table consists of the fair values of the financial investments together with their carrying values.

The following table compares the fair values of the financial instruments to their carrying values:

12.(a) Held to Maturity Financial Assets

ACCOUNTING POLICY

Initial measurement

Financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Group has the positive intention and ability to hold it to maturity. Held-to-maturity financial assets are recognised initially at fair value plus any directly attributable transaction costs.

Subsequent measurement

Subsequent to initial recognition, held-to-maturity financial assets are measured at amortised cost using the effective interest method, less any impairment losses.

Amortized cost

The amortised cost of a financial asset is the amount at which the financial asset is measured at initial recognition,minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment. The losses arising from impairment are recognised as finance cost in the Income Statement.

Impairement

Any impairment loss on an HTM investment is recognized as finance cost in the income statement.

De-recognition

Gains and losses are recognised in Income Statement when the investments are de-recognised or impaired, as well as through the amortisation process.

12. (a). 1. Impairment of Financial Investments at HTM

The Group has not experienced any indication for impairment in respect of HTM financial assets.

12. (a). 2. Re-Classification

During the Year Group did not reclassify any financial assets under this category.

12. (a). 3. Fair Value Measurement

The Group measures the fair value using fair value hierarchy which reflects the significance of level of inputs used in making the fair value measurement which is described in the Note 12.(g). in page 328.

12. (b) Loans and Receivables

ACCOUNTING POLICY

Initial measurement

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

Such assets are initially measured at fair value plus transaction costs that are directly attributable to acquisition or issue of such instrument.

Subsequent measurement

After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Income Statement.

Impairment

The losses arising from impairment are recognised in the Income Statement in finance costs for loans and in other operating expenses for receivables.

De-recognition

Gains and losses are recognised in Income Statement when the investments are de-recognised or impaired, as well as through the amortisation process.

The carrying value of the staff loan and the Car hire to sales agents have been computed based on the market interest rates prevailed at the time of granting the loan/hire.

12 . (b) . 1. Impairment of Financial Assets Carried at Amortised Cost

For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the Income Statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the Income Statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the Income Statement.

12. (b). 2. Re-Classification

During the Year Group did not reclassify any financial assets under this category.

12. (b). 3. Fair Value Measurement

The Group measures the fair value using fair value hierarchy which reflects the significance of level of inputs used in making the fair value measurement which is described in the Note 12(g). in page 328.

12. (c) Available-For-Sale Financial Assets

ACCOUNTING POLICY

Initial measurement

Available-for-sale financial investments include equity and debt securities. Equity investments classified as available-for-sale are those that are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those that are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions.

Subsequent measurement

Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses on available-for sale equity instruments are recognised in Other Comprehensive Income and presented within equity in the available-for-sale reserve. Fair value changes of Available For Sale financial assets of life insurance related assets are included under life policyholders’ Available For Sale reserve fund through OCI in Insurance Contract Liabilities - Life. Interest earned whilst holding Available For Sale investments is reported as ‘Interest Income’ using the EIR. Dividends earned whilst holding Available For Sale investments are recognised in Income Statement as ‘Dividend Income’ when the right of the payment has been established”.

De- recognition

When an investment is derecognized, the cumulative gain or loss in Other Comprehensive Income is transferred to the Income Statement.

12. (c). 1. Impairment of Available-for-Sale Financial Investments

The Group assesses at each Reporting date whether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments classified as Available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. When there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the Income Statement – is removed from Other Comprehensive Income and recognised in the Income Statement. Impairment losses on equity investments are not reversed through the Income Statement; increases in their fair value after impairment are recognised directly in Other Comprehensive Income.

In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the Income Statement. Future interest income continues to be accrued based on the reduced carrying amount of the asset and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the Income Statement, the impairment loss is reversed through the Income Statement.

The determination of what is ‘significant’ or ‘prolonged’ requires judgment. In making this judgment, the Group evaluates among other factors, the duration or extent to which the fair value of the investment is less than its cost.

12. (c). 2. Re-Classification

The Group evaluates its available-for-sale financial assets to determine whether the ability and intention to sell them in the near term would still be appropriate. In the case where the Group is unable to trade these financial assets due to inactive markets and management’s intention significantly changes to do so in the foreseeable future, the Group may elect to reclassify these financial assets in rare circumstances. Reclassification to loans and receivables is permitted when the financial asset meets the definition of loans and receivables and management has the intention and ability to hold these assets for the foreseeable future or until maturity. There classification to held-to-maturity is permitted only when the entity has the ability and intention to hold the financial asset until maturity.

During the Year Group did not reclassify any financial assets under this category.

12. (c). 3. Fair Value Measurement

The Group measures the fair value using fair value hierarchy which reflects the significance of level of inputs used in making the fair value measurement which is described in the Note 12(g).

12. (d) Financial Assets at Fair Value Through Profit or Loss

ACCOUNTING POLICY

Initial measurement

A financial asset is classified as fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial assets are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group’s investment strategy. Attributable transaction costs are recognised in Income Statement as incurred.

Subsequent Measurement

Subsequent to initial recognition, these investments are re-measured at fair value. Changes in fair value are recorded in ‘Fair value gains and losses’ in Income Statement.

Financial assets designated at fair value through profit or loss comprises quoted equity instrume nts and Treasury Bills and Treasury Bonds unless otherwise have been classified as available-for-sale.

12. (d) .1. Re-Classification

During the Year Group did not reclassify any financial assets under this category.

12. (d) .2. Fair Value Measurement

The Group measures the fair value using fair value hierarchy which reflects the significance of level of inputs used in making the fair value measurement which is described in the Note 12(g) in page 328.

12 (e). Accrued Investment Income

Accrued Income of Financial Instruments are amalgamated to the each instruments and shown under each class of financial instruments above.

12. (f). Pledged of Financial Instruments

Details of pledged assets held under Financial assets have been disclosed under Note 43 on Page 392.

12. (g) Determination of Fair Value and Fair Value Hierarchy

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability or;
• In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the Financial Statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

For assets and liabilities that are recognised in the Financial Statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each Reporting period. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

Fair Value Basis – Instrument Wise

The following table shows an analysis of Assets & Liabilities recorded at fair value by level of the fair value hierarchy:

* Listed corporate debt has been classified under level two in the above fair value hierarchy as there is no active market for those corporate debts, even though such corporate debts are listed.

12.(h) Carrying Values of Financial Instruments

The movement of carrying value of above financial instruments as of Reporting date is as follows:

12. (I) Assets For Which Fair Value Approximation is applied for Carrying Value

For financial assets and financial liabilities that have a short-term maturity (less than three months), it is assumed that the carrying amounts approximate to their fair value. This assumption is also applied to demand deposits, and savings accounts without a specific maturity.

Fixed rate financial instruments

The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest rates when they were first recognised with current market rates for similar financial instruments.

For quoted debt instruments the fair values are determined based on quoted market prices.

For unquoted equity investments book values have been used as a base to calculate fair value of investments.

For unquoted debt instruments, the carrying value approximates the fair value of the investments.

Instruments Category - Fair Value Basis

12. (j) Entity wise details of Financial Instruments

12. (j). (1) Held to Maturity Financial Assets -Debentures (Quoted)

12. (j). (2) Loans and Receivables -Debentures (Quoted)

13/14PENSIONS, GRATUITY AND OTHER POST-EMPLOYMENT BENEFITS

ACCOUNTING POLICY

(a) Pensions and Other Post-Employment Benefits Measurement

The Group operates a defined benefit pension plan, which requires contributions to be made to a separately administered fund. The cost of providing benefits under the defined benefit plan is determined separately using the projected unit credit valuation method as recommended by LKAS 19 – ‘Employee Benefits’. The cost of providing benefits under the defined benefit plan is determined separately using the projected unit credit valuation method. The defined benefit asset or liability comprises the present value of the defined benefit obligation less the fair value of plan assets out of which the obligations are to be settled directly. Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are not available to creditors of the Company nor can they be paid directly to the Company.

Fair value is based on market price information and, in the case of quoted securities, it is the published market price. The value of any defined benefit asset is restricted to the sum of any past service cost and actuarial gains and losses not yet recognised and the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan. The amount recognised as defined benefit liabilities has been netted with the fair value of the plan assets of the reporting period. Any surplus in plan assets has been measured based on the requirements of LKAS 19 - Employee Benefits, Para 58 and IFRIC 14 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. However, according to the Payment of Gratuity Act No. 12 0f 1983, the liability for gratuity payments to an employee arises on the completion of five years of continued service with the company. The provision is externally funded.

Recognition of acturial gain / (losses), current services cost and interest cost

Actuarial gains and losses are recognised immediately in the statement of financial position with a corresponding debit or credit to retained earnings through OCI in the period in which they occur. Re-measurements are not reclassified to income statement in subsequent periods. Past service costs are recognised in income statement on the earlier of:

• * The date of the plan amendment or curtailment, and
• * The date that the Company recognises restructuringrelated costs

Valuation of the employee defined benefit liability

The defined benefit obligation is calculated by a qualified Actuary as at the reporting date using the Projected Unit Credit (PUC) method as recommended by LKAS 19 - “Employee Benefits”. The actuarial valuation involves making assumptions about discount rate, salary increment rate and balance service period of employees. Due to the long-term nature of the plans such estimates are subject to significant uncertainty

The defined benefit plans typically expose the Group to following risks

Interest risk - Present value of the defined benefit plan liability is calculated using a discount rate determined by reference to long term interest rate. Accordingly, a decrease in the long-term interest rate will increase the plan liability.

Longevity risk

Present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

Salary risk

Present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

(b) Short Term Benefits

Short term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short term cash bonus if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

13. EMPLOYEE GRATUITY BENEFIT ASSET

The amounts recognised in the income statement are as follows:

The amounts recognised in the statement of financial position at the reporting date are as follows:

13. (a) The Movement of the present value of the defined benefit obligation

As at 31 December 2024, the gratuity liability was actuarially valued under the Projected Unit Credit (PUC) Method by Consultant Actuary Mr K A Pandit as required by Sri Lanka Accounting Standard (LKAS) 19 – ‘Employee Benefits’.

According to LKAS 19 - Employee Benefits, the re-measurements of the net defined benefit liability, assets, which comprise actuarial gains and losses are recognised in Other Comprehensive Income.

13.(b) The movement in the plan assets is as follows:

13.(c) Details of Plan Assets:

The distribution of the Plan Assets at the reporting date is as follows:

The overall expected rate of return on assets is determined based on market expectations prevailing on that date, applicable to the period over which the obligation is to be settled.

Gratuity funds’ Plan Assets include investment in equity shares of Ceylinco Holdings PLC, market value amounting to Rs.3,610,740,381 as at the reporting date.(2023 - Rs. 5,597,199,180).

13. (d). Principal Actuarial Assumptions

The principal actuarial assumptions used in determining the gratuity benefit obligation for the Group’s plan assets are as follows:

13.(e) Change in the defined benefit obligation and fair value of the plan assets

COMPANY

Gratuity benefit asset has been in excess of the Gratuity benefit liability due to share investment which has share appreciation annually.

13.(f). A quantitative sensitivity analysis for significant assumptions are as follow:

Sensitivity Analysis

13.(g). Method and Assumptions Used in Preparing the Sensitivity Analysis

The above sensitivity analysis is based on a change in significant assumptions while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method “Projected Unit Credit method (PUC)” has been applied as when calculating the defined benefit obligation recognised in the balance sheet as at the reporting date. The methods and types of assumptions used in preparing the sensitivity did not change compared to the prior period. However, the discount rate has changed from 12.60.% to 11.6% during the year to reflect the increment in market interest rates and future salary increment rate has changed from 15% to 10.0% to be inline with the economic variables.

13.(h). Following payments are expected contributions to the defined benefit plan obligation in the future years

14. EMPLOYEE PENSION BENEFIT ASSET

The Company has two defined benefit pension plans, both of which require contributions to be made to separately administered funds namely Pension Trust Fund of Ceylinco Holdings PLC and Pension Fund of Ceylinco Holdings PLC.

As at 31 December 2024, and as at the end of the comparative period the pension liability was actuarially valued under the Projected Unit Credit (PUC) method by Consultant Actuary K A Pandit, as required by Sri Lanka Accounting Standard (LKAS) 19 – ‘Employee Benefits’.

Pension benefit obligation is valued by K A Pandit Actuarial Valuers.

According to LKAS 19 - Employee Benefits, the re-measurements of the net defined benefit liability, assets, which comprise actuarial gains and losses are recognised in Other Comprehensive Income.

14.(a). Change in the defined benefit obligation and fair value of the plan asset

Pension benefit asset has been in excess over the Pension benefit liability due to appreciation in the value of the investment in shares over the previous financial year end.

GROUP/ COMPANY

GROUP/ COMPANY

14.(b). Distribution of Plan Asset

The distribution of the Plan Assets at the reporting date is as follows:

Plan Assets include investment in equity shares of Ceylinco Holdings PLC , market value amounting to Rs. 3,390,020,000/ - at the Reporting date. ( 2023 - 813,130,915 /- )

14.(c). Principal Actuarial Assumptions

The principal assumptions used in determining pension and post-employment medical benefit obligations for the Company’s plans are shown below:

The overall expected rate of return on assets is determined based on market expectations prevailing on that date, applicable to the period over which the obligation is to be settled.

14 (d). A quantitative sensitivity analysis for significant assumptions as at 31 December are as follows:

The average duration of defined benefit plan obligation at the end of the reporting period is 15 years (2023: 15 years)

15. REINSURANCE RECEIVABLES

ACCOUNTING POLICY

Reinsurance receivables consist of short term balances due from reinsurers that are dependent on the expected claims and benefits arising under the related reinsured insurance contracts. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contract. Reinsurance is recorded on gross basis in the Statement of Financial Position unless a right to offset exists.

Impairment

Reinsurance assets are reviewed for impairment at each Reporting date or more frequently when an indication of impairment arises during the reporting year. Impairment occurs when there is objective evidence as a result of an event that occurred after initial recognition of the reinsurance asset that the Group may not receive all outstanding amounts due under the terms of the contract and the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer. The impairment loss is recorded in the Income Statement.

Derecognition

Reinsurance assets are de-recognised when the contractual rights are extinguished or expired or when the contract is transferred to an another party.

The carrying amounts disclosed above is in respect of the reinsurance of insurance contracts approximate fair value at the reporting date.

15.(a).The age analysis of the reinsurance receivable

15.(b) Fair Value Measurement

The carrying value of reinsurance receivables approximates the fair value at the reporting date.

15.(c) Impairment Losses on Reinsurance Receivables

The Company assessed potential impairment loss on reinsurance receivables as at 31st December 2024 and the Company did not indentify any objective evidences which require an impairement to its reinsurance receivable. Based on the assessment, no impairment provision is required to be made in the Financial Statements as at the reporting date.

15.(d). Collateral Details

The Group does not hold any collateral as security against potential default by reinsurers.

15 (e) Reinsurance Receivables on Outstanding Claims

The reinsurance portion of the outstanding claims has not been materialised, since the insurance claim has not been paid as at the reporting date.

15 (f) Financial risk associated with reinsurance receivable

Refer note 41.(a).1. in page 377 for reinsurance risk note for risk mitigation initiatives

16. TAXATION

ACCOUNTING POLICY

Income Tax Expense

Income tax expense comprises current and deferred tax. It is recognised in the Income Statement except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

(i) Current Tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the Reporting date and any adjustment to tax payable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the reporting date.

The Company is liable to pay income tax in accordance with the provisions of the Inland Revenue Act, No.24 of 2017 and subsequent amendments thereto. Income tax rates applicable for year 2024 as per the act are stipulated as follows:

1. Surplus distributed to shareholders from Life Insurance business as certified by appointed actuary @ 30%

2. Investment Income of Shareholder fund less any expenses incurred in the production of such income @ 30%

3. Bonuses Distributed to policyholders @ 30%

4. Realization of capital gains @ 30%

5. Dividend Income @ 15%

Ceylinco Healthcare Services Ltd is liable to pay income taxes on below rates for year 2024 as per the act.

1. Business income @ 30%

2. Investment income @ 30%

Ceylinco Serene Resorts Ltd is liable to pay income taxes on below rates for year 2024 as per the act.

1. Business income @ 30%

2. Investment income @ 30%

(ii) Deferred Tax

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for taxation purposes. Deferred tax is not recognized for:

• Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;
• Temporary differences related to investments in subsidiaries, associates and jointly-controlled entities to the extent that the Group/ Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group/Company expects, at the end of the Reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

Deferred Tax Assets

Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except:

• When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.
• In respect of deductible temporary differences associated with investments in subsidiaries, equity accounted investee and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each Reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred Tax Liabilities

Deferred tax liabilities are recognised for all taxable temporary differences, except where the deferred tax liability arising from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor the taxable profit or loss:

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted at the reporting date.

Offsetting

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Measurement of Deferred Tax

Deferred tax assets and liabilities are measured at the tax rates expected to apply when the asset is realized or liability is settled.

The applicable tax rates must be enacted or substantively enacted at the reporting date.

Recognition aligns with the underlying transaction-either in Other Comprehensive Income (OCI) or directly in equity.

Tax Benefits in Business Combinations

If tax benefits from a business combination do not meet recognition criteria initially, they may be recognized later if new information becomes available.

Tax Uncertainties and Adjustments

Tax laws, regulations, and taxable income projections can be uncertain.

Differences between actual results and assumptions could require adjustments to tax income and expenses.

Tax Rate

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted at the reporting date.

(iii) Significant Judgment

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies.

(iv) Transfer pricing

As prescribed in Inland Revenue Act No. 24 of 2017 and gazette notification on transfer pricing Group and Company have complied with the arm’s length principles relating to transfer pricing.

(v) Withholding Tax on Dividends

Withholding tax that arises from the distribution of dividends by the Company is recognized at the time the liability to pay the related dividend is recognized.

16. (a) Movement of Tax Receivable

16. (b) Notional Tax / WHT Recognized

16 .(c) Deferred Tax Liability- Group

Total Deferred Tax Liability

16. (d) Deferred Tax Liability- Company

16. (e) Expiry date of carried forward tax loss

Expiry date of carried forward tax loss as per the Inland Revenue Act. No. 24 of 2017 is maximum of six years . As of the reporting date there is a carried forward tax loss as per the note 16(c). in page 345.

16. (f) Unrecognised deferred tax liabilities

As at the reporting date, there is no unrecognised deferred tax liabilities (2023 - Nil).

16. (g) Deferred tax and income tax on items directly recognised in equity

During the period ended 31 December 2024, the group did not recognise any deferred tax and income tax expenses on transactions which are directly recorded in equity (2023 Nil).

16. (h) Unrecognised deferred tax assets

As at the reporting date, there are no unrecognised deferred tax assets (2023- Nil).

16. (i) Unrecognised tax losses and unused tax credits

As at 31.12.2024, the Group has accumulated tax losses amounting to Rs.23.16 Mn which are available for offset against future taxable profits. Deferred tax asset has been recognized in respect of these losses as the management believes that there would be future taxable profits within the allowable period for utilization. Further, there were no unused tax credits for the Company to recognise a differed tax asset as at the reporting date.

17. LOANS TO POLICY HOLDERS

ACCOUNTING POLICY

Policyholder Loans are granted up to 90% of the surrender value of a Life Insurance Policy at a rate equivalent to market rate. Policyholder loans are initially measured at Fair value of Loan amount granted and subsequently measured at the amortised cost. If the policyholder dies before the full repayment of the loan, the loan balance is deducted from the death benefit. Policyholder Loans are reviewed for impairment at each reporting date. Loans receivable as at reporting date are as follows.

17.(a) Movement of Policy Loans

17.(b) Fair value of loans to life policyholders

The fair value of the policyholder loans is equal to its carrying value as those are given at competitive market rates.

17.(c) Concentration risk of loans to life policyholders

There is lower concentration of credit risk with respect to policyholders, as the company has a large number of dispersed receivables. If the total receivable under the loan, including interest due and accrued, exceeds the cash surrender value, the policy terminates and becomes void. The Company has a first lien on all policies which are subject to policy loans. This mitigates the Company’s credit exposure on Policy Loans.

17.(d) Impairment of loans to life policyholders

The Group assessed the potential impairment loss of Loans to Life Policyholders as at 31st December 2024. Based on the assessment, no impairment provision is required to be made in the Financial Statements as at the reporting date in respect of Loans to Life Policyholders.

17.(e) Number of Policy Loans

Number of policy loans due as at 31 December 2024 was 26,998 (2023 - 29,492)

17.(f) Collateral Details

The company does not hold any collateral as security against potential default by policyholders other than surrender.

17 (g) Maturity Analysis

Maturity Analysis of Loans to Life Policyholders is given in Note 41(j) on page 387.

17(h) Financial risk disclosure on loans to life policyholders

The fair value of the policyholder loans is equal to its carrying value as those are given at competitive market rates.

18. PREMIUM RECEIVABLES

ACCOUNTING POLICY

Premium receivables are recognised when due and measured on initial recognition at the fair value of the consideration receivable. The carrying value of insurance receivables is reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable, with the impairment loss recorded in the Income Statement. Insurance receivables are de-recognised when the de-recognition criteria for financial assets have been satisfied.

18.(a) Premium Receivables from Related Parties

There is no premium receivables from related parties as at the reporting date.

18.(b) Fair value of Premium Receivable

The carrying value of premium receivable approximates Fair Value at the reporting date.

18.(c) Concentration Risk of Premium Receivable

There is lower concentration of credit risk with respect to premium receivables, as the company has a large number of dispersed receivables.

18.(d) Impairment of Premium Receivable

The Company assessed the potential impairment loss of Premium Receivables as at 31st December 2024. Based on the assessment, no impairment provision is required to be made in the Financial Statements as at the reporting date in respect of Premium Receivables.

18.(e) Collateral Details

The company does not hold any collateral as security against potential default by policyholders.

18 (g) Maturity Analysis

Maturity Analysis of premium receivable is given in Note 41(j) on page 387.

19. OTHER ASSETS

ACCOUNTING POLICY

INVENTORIES

Inventories include all consumable items and are measured at the lower of cost and net realisable value. Cost is generally determined by reference to weighted average cost. Net realisable value is the estimated market price in the ordinary course of business less any estimated expense to sell. The cost of the inventories include all expenses incurred in bringing inventories to the present location and condition.

Having evaluated the nature of the inventories held by the Group, the Group has assessed whether there is any impact to net realizable value of the inventories and assessed whether it was required to adjust the carrying value of the inventory. The Group has not identified any circumstances where adjustments are required to reduce the carrying value of the inventories.

19.(a) Maturity Analysis

Other assets are generally settled within one year.

19.(b) Inventories Pledged

None of the inventories have been pledged as securities for liabilities as at the reporting date (2023 - Nil).

19.(c) Impairment of other assets

The Group assessed potential impairment loss of other assets as at 31 December 2024. Based on the assessment, no impairment provision is required to be made in the Financial Statements as at the reporting date in respect of other assets (2023-Nil).

20. CASH AND CASH EQUIVALENTS

ACCOUNTING POLICY

Cash and cash equivalents comprise cash in hand and cash at bank. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows.

The carrying amounts disclosed above reasonably approximate fair value at the reporting date.

20.(a) Fair value of cash and cash equivalents

The carrying amounts disclosed above reasonably approximate fair value at the reporting date.

20.(b) Maturity Analysis

Maturity analysis of cash and cash equivalents is given in Note 41(j) on page 387.

20.(c) Risk management initiatives relating to cash and cash equivalents

Refer Note 41(h) on page 386 for risk management initiatives relating to cash and cash equivalents - Liquidity Risk.

21 EQUITY

21.(a) Ordinary Shares - Voting (Stated Capital)

Accounting Policy

Ordinary Shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as a deduction from equity, net of any tax effects.

All issued shares are fully paid. There is one class of ordinary shares. All shares issued carry equal voting rights. The holders of ordinary shares – voting are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. The holders of ordinary shares – voting are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

21.(b) Other Reserves

21.(c) Retained Earnings

21.(d) Available for Sale Reserve

The Available for Sale Reserve comprises the cumulative net change in the fair value of Available for Sale financial instruments held by the Group and the Company as at 31 December 2024 and amortization of fair value changes previously recognized in other comprehensive income in respect of AFS assets reclassified during the period.

21.(e) Revaluation Reserve

The Revaluation Reserve relates to the gain on revaluation of property, plant and equipment recognised in Equity trough OCI.

21.(f) Special Reserve

The special reserve represents the value (net book value) of net assets transferred to the Company from then Ceylinco Holdings PLC (formerly known as Ceylinco Insurance PLC) on 1 June 2015 as a result of the regulatory segregation of composite insurance companies.

21.(g) Restricted Regulatory Reserve

Restricted Regulatory Reserve was created as a result of One-Off Surplus generated due to change in valuation method from ‘Net Premium Valuation’ to ‘Gross Premium Valuation’ as specified in Direction 16, issued by IRCSL on 20th March 2018, for identification and treatment of One-Off Surplus. Complying with the same, the transfer made from policyholders’ to Shareholders’ fund is limited to surplus generated from other than participating business, whereas the surplus generated from the participating business will be maintained within the participating fund.

The basis for computation of one-off surplus is in line with Direction 16 issued by IRCSL titled “Directions on the Identification and Treatment of One-off Surplus” dated 20th March 2018.

The Company’s One-off Surplus is equal to the minimum One-off Surplus prescribed in the recommendations in the Direction issued by the IRCSL.The basis is common for both participating business and other than participating business.

The One-Off Surpluses in amounts, created for participating business and other than participating business are as follows:

Distribution of One-Off Surplus to Shareholders, held as part of the Restricted Regulatory Reserve, is subject to meeting governance requirements stipulated by the IRCSL and can only be released upon receiving approval from IRCSL. The One-Off Surplus in the Shareholders’ Fund will remain invested in assets as shown in the note below as per directions of IRCSL.

One-off surplus of participating business amounting to Rs. 2,736,685,339/-will be held within the participating fund as part of the unallocated valuation surplus and may only be transferred to the shareholders by means of bonuses to policyholders in line with Section 38 of the “Regulation of Insurance Industry, Act No.43 of 2000”.

The composition of the assets, held to support the Restricted Regulatory Reserve (One-off Surplus for other than participating business) as at 31 December 2024 are disclosed below at their market values:

22. INSURANCE CONTRACT LIABILITIES

ACCOUNTING POLICY

(a) Classification of Insurance Contracts

SLFRS 4 requires contracts written by insurers to be classified as either ‘insurance contracts’ or ‘investment contracts’ depending on the level of insurance risk transferred.

Insurance Contracts

Insurance contracts are contracts under which one party (the Insurer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder. The classification of contracts identifies both, the insurance contracts that the Company issues and reinsurance contracts that the Company holds.

Investment Contracts

Investment contracts are those contracts that transfer significant financial risk and no significant insurance risk. Financial risk is the risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of price or rates, credit rating or credit index or other variable, provided in the case of a nonfinancial variable that the variable is not specific to a party to the contract.

Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder of its lifetime, even if the insurance risk reduces significantly during this period, unless all rights and obligations are extinguished or expired. Investment contracts can, however, be reclassified as insurance contracts after inception, if insurance risk becomes significant. Insurance and investment contracts are further classified as being either with or without discretionary participating features (DPF).

(b) Discretionary Participating Features (DPF)

DPF is a contractual right to receive, as a supplement to guaranteed benefits, additional benefits that are:

• likely to be a significant portion of the total contractual benefits;
• the amount or timing of which is contractually at the discretion of the issuer; and that are contractually based on:
• the performance of a specified pool of contracts or a specified type of contracts;
• realised and or unrealised investment returns on a specified pool of assets held by the issuer; and
• the profit or loss of the Company, fund or other entity that issues the contract.

IRCSL regulations and the terms and conditions of these contracts set out the bases for the determination of the amounts on which the additional discretionary benefits are based (the DPF eligible surplus) and within which the Company may exercise its discretion as to the quantum and timing of their payment to contract holders.

At least 90% of the eligible surplus must be attributed to contract holders as a group (which can include future contract holders) and the amount and timing of the distribution to individual contract holders is at the discretion of the Company, subject to the advice of the Appointed Actuary. All DPF liabilities including unallocated surpluses, at the end of the reporting period are held within insurance contract liabilities, as appropriate.

(c) Unit-Linked Contracts

Unit-Linked contracts are those contracts that do not meet the definition of insurance or investment contracts with discretionary participating features. For these Unit-Linked contracts, the liabilities are valued at current unit value, i.e., on the basis of the fair value of the financial investments backing those contracts at the reporting date together with rights to future management fees.

(d) Life Insurance Contract Liabilities

These liabilities are calculated as the total of best estimate liability and a risk margin for adverse deviation. The best estimate liabilities are measured by using the gross premium method. The liability is determined as the sum of the discounted value of the expected future benefits, claims handling and policy administration expenses, policyholder options and guarantees, investment income from assets backing such liabilities and investment management expenses, which are directly related to the contract, less the discounted value of the expected premiums that would be required to meet the future cash outflows, based on the valuation assumptions used, charges and fees. Adjustments to the liabilities at each Reporting date are recorded in the Income Statement in ‘Increase in life insurance contract liabilities’.

Derecognition

The liability is released when the contract expires, discharged or cancelled.

At each Reporting date, an assessment is made of whether the recognised life insurance liabilities are adequate, by using an existing liability adequacy test in accordance with SLFRS 4.

For products containing DPF, the amount of the DPF is deemed to be the investment return on all related assets, where the apportionment between the shareholder and the policyholder has not yet been determined. The liability includes certain elements of net unrealised gains/(losses) and retained earnings attributable to the DPF, based on the mandated rates applied to these gains and earnings on the assumption that they had been realised as of the Statement of Financial Position date.

The minimum mandated amounts, which are to be paid to policyholders plus any declared/undeclared additional benefits, are recorded in liabilities.

22. (a) Liability Adequacy Test (LAT)

At each Reporting date, an assessment is made of whether the recognised life insurance liabilities are adequate by using an existing liability adequacy test as laid out under SLFRS 4. The liability value is adjusted to the extent that it is sufficient to meet future benefits and expenses. In performing the adequacy test, current best estimates of future contractual cash flows, including related cash flows such as claims handling and policy administration expenses, policyholder options and guarantees, as well as investment income from assets backing such liabilities, are used. A number of valuation methods are applied, including discounted cash flows to the extent that the test involves discounting of cash flows, the interest rate applied based on management’s prudent expectation of current market interest rates. Any deficiency shall be recognised in the Income Statement by setting up a provision for liability adequacy.

The Company’s actuaries have performed Liability Adequacy Test in accordance with SLFRS -4 Insurance Contracts requirements.

The valuation of the Life Insurance business as at 31 December 2024 was carried out by our Consulting Actuary, Mr Vivek Jalan, FIA, on behalf of Willis Towers Watson. In the opinion of the Consulting Actuary, proper reserves have been provided for all known liabilities in respect of the Life Insurance business and the Company has adequate financial resources to cover its capital requirements in accordance with the Solvency Margin (Risk Based Capital) Rules 2015 dated 15th December 2015.

Consultant Actuary further concluded that the liability value has been determined on a “going concern” basis and assumes a continuation of current economic, regulatory and legal environment prevailing in Sri Lanka; and are considered sufficient to meet future benefits and expenses under what is believed to be a view of the “most probable” future experience.

Following the actuarial valuation as at 31 December 2024 the Consulting Actuary has approved a transfer of Rs. 3.0 Bn (2023 - Rs.1.98 Bn) from the Life Fund to the Shareholder’s Retained Profit Account.

The Company’s Capital Adequacy Ratio (CAR) as at 31 December 2024 was 448.% (2023 - 344%) and is well above the minimum requirement of 120%.

Key Assumptions

The company exercises a significant judgment in determining the policy liabilities and in selecting assumptions. The key assumptions for which the liability value can be sensitive are mortality, morbidity, expenses, discount rates, lapse and surrender rates. The choice of assumptions depends on the past and current experience of the Company and other available information. Assumptions on future expenses are based on current expense levels, adjusted for expected expense inflation, if appropriate. Lapse and surrender rates are based on the Company’s historical experience. Discount rates are based on current industry risk free rates. All these assumptions are within the guidelines issued by the IRCSL.

Mortality rate

Mortality assumptions are based on standard mortality tables.

Lapse rates

Lapses occur due to non-payment of premiums before the policy acquires a surrender value. Surrenders occur due to termination of policies by policyholders after acquiring a surrender value.

Risk Free Rate

Risk free discount rate is used to discount the cash flows for corresponding durations for guaranteed benefits of nonparticipating and participating insurance fund policies. The applicable risk free rates are shared by the Insurance Board of Sri Lanka every quarter.

Fund-based yield

Fund-based yield was used in the participating fund to discount the cash flows for corresponding durations where total benefits are considered.

Management Expense

The assumptions for management expenses are determined based on the expense investigation into the expenses of the Company over the last four calendar years. Each expense is classified as acquisition/maintenance/termination and then classified as fixed/variable.

22.(b) Life Insurance Contract Liabilities

The following tables shows the concentration of life insurance contract liabilities by type of contracts.

23. FINANCIAL LIABILITIES

ACCOUNTING POLICY

(i) Initial Recognition and Measurement

Financial liabilities within the scope of LKAS 39 are classified as Financial Liabilities at Fair Value through Profit or Loss, loans and borrowings as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognized initially at fair value plus, in the case of loans and borrowings, directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowing and amounts due to equity accounted investees.

(ii) Subsequent Measurement

The measurement of financial liabilities depends on their classification as described below:

(a) Financial Liabilities at Fair Value Through Profit or Loss

Financial liabilities at Fair Value through Profit or Loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at Fair Value through Profit or Loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on liabilities held for trading are recognized in the Income Statement.

Financial liabilities designated upon initial recognition at Fair Value through Profit and Loss are so designated at the initial date of recognition, if and only if the criteria of LKAS 39 are satisfied.

(b) Loans and Borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in the Income Statement when the liabilities are derecognized as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance costs in the Income Statement.

(iii) De-recognition of Financial Liabilities

A financial liability is de-recognized when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the Income Statement.

(iv) Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the Consolidated Statement of Financial Position if, and only if, there is a currently enforceable legal right to offset de-recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Income and expense will not be offset in the Consolidated Income Statement unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the Group.

23.(a). Interest Bearing Borrowings

As at 31 December 2023, the Company’s interest-bearing borrowings included a short-term loan obtained from a commercial bank under a clean facility. No assets were pledged as security for the said loan.

23.(a).1 Interest Bearing Borrowings - Face value

23.(a) .2 Interest Bearing Borrowings - Movement

23.(a) .3 Interest Bearing Borrowings - Maturity

All interest bearing borrowings are payable within one year.

24 REINSURANCE PAYABLES

ACCOUNTING POLICY

Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable are estimated in a manner consistent with the related reinsurance contract. Reinsurance assets or liabilities are de-recognized when the contractual rights are extinguished or expired or when the contract is transferred to an another party.

The carrying amounts disclosed above in respect of the reinsurance of insurance contracts approximate fair value at the reporting date.

24.(a).The age analysis of the reinsurance Payables

25. TRADE AND OTHER PAYABLES

ACCOUNTING POLICY

(a) Insurance Payables

Insurance payables are recognised when due and measured on initial recognition at the fair value of the consideration payable less directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest rate method.

Insurance payables are derecognised when the obligation under the liability is discharged, cancelled or expired.

(b) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Income Statement net of any reimbursement.

The carrying amounts disclosed above reasonably approximate fair value at the reporting date.

25. (b).1Tax Payable

25. (b).1.(a). Movement of Income Tax Payable

(b) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Income Statement net of any reimbursement.

(c) Maturity Analysis

All amounts are payable within one year.

References to the maturity analysis is given in Note 41(j) on page 387.

24 REINSURANCE PAYABLES

ACCOUNTING POLICY

Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable are estimated in a manner consistent with the related reinsurance contract. Reinsurance assets or liabilities are de-recognized when the contractual rights are extinguished or expired or when the contract is transferred to an another party.

26. NET PREMIUMS

26.(a) Gross Premiums

ACCOUNTING POLICY

Revenue Recognition

Gross recurring premiums are recognised as revenue when receivable from the policyholder. Premiums received in advance are not recognised as revenue but as a liability until the premiums become due. For single premium business, revenue is recognised on the date on which the policy is effective.

All product sold during the reporting period by the Company are insurance contracts and therefore, classified as Insurance Contracts as per SLFRS 4. The Company has not sold pure investment contracts for the Reporting Period.

26.( b) Life Insurance Premium

26.(c) Premiums Ceded to Reinsurers on Insurance Contracts

ACCOUNTING POLICY

Gross recurring premiums are recognised as revenue when receivable from the policyholder. Premiums received in advance are not recognised as revenue but as a liability until the premiums become due. For single premium business, revenue is recognised on the date on which the policy is effective.

Reinsurance premiums are decided based on rates agreed with reinsurer and accounted an accrual basis.

26.( d) Premiums Ceded to Reinsurers

26. (e) Annualised New Business Life Premium - Rs.

26. (f) Revenue From Subsidiaries

27. FEES AND COMMISSION INCOME

ACCOUNTING POLICY

Reinsurance Commission Income

Commission received or receivable in respect of premium paid or payable to a Reinsurer. Reinsurance commission income on outwards reinsurance contracts are recognised as revenue when receivable.

28. INVESTMENT INCOME

ACCOUNTING POLICY

Finance Income

Finance income comprises interest income on funds invested Interest income is recognised in the Income Statement as it accrues and is calculated by using the effective interest rate method (EIR). Fees and commissions that are an integral part of the effective yield of the financial asset or liability are recognised as an adjustment to the effective interest rate of the instrument.

Dividend Income

Dividend income is recognised when the Company’s right to receive the payment is established.

Rental income

Rental income from property is recognised in profit or loss on a straight line basis over the term of the lease.

Other Income

Other income comprises fees charged for policy administration services, and miscellaneous income.

28.(a). Investment Income

28.(b) Dividend Income from Associate

29. REALISED GAINS

ACCOUNTING POLICY

Finance income comprises interest income on funds invested Interest income is recognised in the Income Statement as it accrues and is calculated by using the effective interest rate method (EIR). Fees and commissions that are an integral part of the effective yield of the financial asset or liability are recognised as an adjustment to the effective interest rate of the instrument.

Gains and losses on disposal of property, plant and equipment and investement properties are calculated as the difference between net sales proceeds and the carrying amount on the date of disposal.

30. FAIR VALUE GAINS AND LOSSES

ACCOUNTING POLICY

Fair value gains and losses recorded in the Income Statement on investments include fair value gains and losses on financial assets at fair value through profit or loss, and on investment property.

31. NET BENEFITS AND CLAIMS

ACCOUNTING POLICY

Gross Benefits and Claims Expense

Gross benefits and claims for life insurance contracts include the cost of all claims arising during the year, including internal and external claims handling costs that are directly related to the processing and settlement of claims and policyholder bonuses. Death claims and surrenders are recorded on the basis of notifications received. Maturities, annuity payments and interim payments are recorded when due.

Reinsurance Claims Recoveries

Reinsurance claims are recognised when the related gross insurance claim is recognised according to the terms of the relevant contract.

31.(d) Gross claims and benefits (Excluding Life fund increase)

32. ACQUISITION COSTS

ACCOUNTING POLICY

Commission expense is charged to the period in which it is incurred. Commission payable on accrued premium is recognised to the extent that these costs are recoverable out of future premiums. All expenses vary with, and are primarily related to, the acquisition of new insurance contracts.

33. OTHER OPERATING AND ADMINISTRATIVE EXPENSES

ACCOUNTING POLICY

Expenditure Recognition

Expenses are recognised in the Income Statement on the basis of a direct association between the cost incurred and the earning of specific items of income. All expenditure incurred in the running of the business and in maintaining the property, plant and equipment in a state of efficiency has been charged to the Income Statement.

33.(a) Employee Benefits Expenses

33. (b) . Auditor’s Fee and Expenses

33. (c) Other Operating Expenses In Respect of Investment Properties

The operating expenses incurred in respect of investment property which does not earn rental income is Rs.3,367,870/- (2023 - Rs.3,082,801/-) The operating expenses incurred in respect of investment property which earns rental income is Rs.307,511/- (2023 - Rs.2,400,552/-)

33. (d) Defined gratuity benefit & Pension costs

Net Gratuity Benefit and Pension Cost shows a negative amount primarily due to expected return on plan assets over current service cost and interest cost on benefit obligations.

34. FINANCE COSTS

ACCOUNTING POLICY

Finance cost mainly includes the charges and commission paid on financial services provided by financial institutions, particularly bank charges.

35. INCOME TAX EXPENSE

ACCOUNTING POLICY

Income tax expense comprises current and deferred tax. Refer Accounting Policy under Taxation Note 35 in Page 370.

The major components of income tax expense for the years ended 31 December 2024 and 2023 are:

(a) Current Tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the Reporting date and any adjustment to tax payable in respect of previous years.

35.(a) Current Year Tax Charge

35.(b) Tax Recorded in Other Comprehensive Income

35.(c) Basis of computing the estimate tax

Company

A reconciliation between income tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows;

36. NON CONTROLLING INTERESTS (NCI)

Non-controlling interest is measured at their proportionate share of the acquires identifiable net assets at the date of acquisition.

The total profit and loss for the year of the Company and its subsidiaries included in consolidation are shown in the Income Statement with the proportion of profit and loss after taxation pertaining to Non-controlling shareholders of subsidiaries being deducted as “Non-controlling Interest”. All assets and liabilities of the Company and of its subsidiaries included in consolidation are shown in the Statement of Financial Position. The interest of Non-controlling shareholders of subsidiaries in the net assets of the Group is indicated separately in the statement of financial position under the heading “Non-controlling interests”. Changes in the Group’s interest in subsidiary that do not result in loss of controls are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on proportionate amount of the net assets of the subsidiary.

36. (a) Accumulated Balances of Non-Controlling Interest

36. (b) Profit Allocated to Non-Controlling Interest

37. BASIC/DILUTED EARNINGS PER SHARE

Earnings Per Share (EPS)

ACCOUNTING POLICY

The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

Basic Earnings per Share has been calculated by dividing profit after taxation attributable to ordinary shareholders of the parent by the weighted average Ordinary Shares in issue at the year end.

37.(a) Earnings Per Share

There were no potential dilutive Ordinary Shares outstanding at any time during the year. Therefore, diluted earnings per share is same as basic earnings per share shown above.

38. DIVIDENDS

38.(a) Dividends Proposed

The Board of Directors proposed a final dividend of Rs.17.70 (2023 Rs. 15/- ) per share, amounting to a total of Rs. 885 million (2023 - Rs. 750 million) on 20 February 2025 out of the profit for the year ended 31 December 2024 subject to the approval of shareholder at the Annual General Meeting. IRCSL requires insurance companies to consider some critical aspects such as financial results, impact of contingent liabilities, impact of potential risks, additional capital requirements, etc. when declaring dividends.

As required by Section 56 of the Companies Act No. 07 of 2007, the Board of Directors of the company has confirmed that the company satisfies the ‘Solvency Test’. A statement of solvency was duly signed by the directors on 20 February 2025 and was audited by Messrs, Ernst & Young Chartered Accountants.

In accordance with LKAS 10- “ Events after the reporting period”, the proposed dividend has not been recognized as a liability in the financial statements.

38.(b) Dividends Paid

The company has paid a final dividend of Rs. 15 per share, amounting to Rs. 750 Mn on 20 May 2024. As required by Section 56 of the Companies Act No. 07 of 2007, the Board of Directors of the company has satisfied the solvency test in accordance with Section 57 prior to recommending the final dividend for the year ended 31 December 2023. A statement of solvency was completed and duly signed by the directors on 22 February 2024, and has been audited by Messrs, Ernst & Young Chartered Accountants.

39. INCOME TAX EFFECTS RELATING TO OTHER COMPREHENSIVE INCOME

40. RISK MANAGEMENT FRAMEWORK

40. (a) Governance framework

The primary objective of the Group’s financial risk management is to manage financial risks within its risk appetite and provide reasonable assurance on the achievement of financial objectives.

Financial risk management is embedded into the Group’s broader Risk Management Framework and spans across the Group with clear objectives, duties and responsibilities specified at each level. The Board of Directors, with the assistance of the Board Risk Committee, bears the overall responsibility for establishment and oversight of the risk management framework. The Executive Risk Management Committee, headed by the Chief Risk Officer, is responsible for developing, facilitating and monitoring the control framework and execution of proper risk management strategies. The line management and staff are responsible for day-to-day risk management and are represented at the Sub-committee level. Regular review of risks and effective risk mitigation strategies ensure consistent corporate performance, while risks are managed within the risk appetite of the Group.

40. (b) Capital management objectives, policies and approach

The Group has established the following capital management objectives, policies and approach to managing the risks that affect its capital position:

• To maintain the required level of stability of the Group thereby providing a degree of security to policyholders
• To allocate capital efficiently and support the development of business by ensuring that return on capital employed meet the requirements of its capital providers
• To retain financial flexibility by maintaining strong liquidity and access to a range of capital markets
• To align the profile of assets and liabilities taking account of risks inherent in the business
• To maintain financial strength to support new business growth and to satisfy the requirements of the policyholders, regulators and stakeholders

40 (c) Approach to capital management

The Group allocates capital to businesses as required and ensures sufficient returns to shareholders and policyholders. The asset and liability management establishes the required level of liquidity and reduces the risks of the company and achieves the required capital levels of the company. The primary source of capital used by the Company is equity shareholders’ funds. The return expectations are regularly forecasted and comparisons are made in order to ensure the requirements of stakeholders are achieved. The Group had no significant changes in its policies and processes relating to its capital structure during the past year from previous years.

Ceylinco Life Insurance Ltd has following capital resources.

The adjustments onto a regulatory basis Includes the followings:.

1. Adjustment for valuation differences of Assets and Liabilities between SLFRS and RBC frameworks.

2. Unallocated valuation surplus maintained in the insurance funds.

3. 50% of net future bonuses in respect of participating business

4. Value of Inadmissible Assets considered as a deduction from capital under RBC framework.

40.(d) Regulatory framework

Regulators are primarily interested in protecting the rights of policyholders and monitor them closely to ensure that the Group manages its business affairs in a manner that benefits the policyholders. At the same time, regulators are also interested in ensuring that the Group maintains an appropriate Capital Adequacy position to meet unforeseen liabilities arising from economic shocks or natural disasters. The Company is regulated by Insurance Regulatory Commission of Sri Lanka (IRCSL) with the objective of protecting shareholders and policyholders.

There are various regulations and directives the company is expected to adhere to in order to achieve the expected norms, which leads the company to maintain required solvency and maintain sufficient capital. The new Risk Based Capital framework or RBC is focused on managing the risks rather than complying with solvency margin rules. The RBC framework was tested and refined since 2011 and full implementation started from January 2016. RBC reporting to the regulator consists of templates and questionnaires developed over the past years. RBC is a flexible framework for maintenance of minimum capital requirements based on riskiness of respective insurance company. It consist of risk factors insurance companies are exposed to such as Credit Risk, Concentration Risk, Market Risk, Operational Risk and Liability Risk. It also includes quantified capital charges for those risk factors and valuation methodology for assets and liabilities of insurance companies. The implementation of RBC was intended to increase transparency and establish appropriate risk management systems. It was expected to create a more stable industry with greater public confidence. This framework helps to develop a culture of risk awareness in the industry while encouraging efficient use of capital to improve returns based on the risk exposure. This will be advantageous to the companies with good risk management practices.

Operations of the Group are also subject to regulatory requirements within the jurisdictions in which it operates. Such regulations not only prescribe approval and monitoring of activities, but also impose certain restrictive provisions (e.g., capital adequacy) to minimise the risk of insolvency on the part of the insurance companies to meet unforeseen liabilities as these arise. The Company maintains capital, investments and solvency as per the regulations prescribed by Insurance Regulatory Commission of Sri Lanka. (IRCSL). New changes in regulations are timely adopted and necessary changes are made to internal processes.

The Company operates according to the requirements set by the Regulator - IRCSL. The Capital Adequacy Ratio of the Company is as follows:

40. (e) Asset Liability Management (ALM) Framework

ALM framework is used to manage the risks arising due to mismatches of asset and liability cash flows. ALM is an ongoing process of formulating, implementing, monitoring and revising strategies related to management of assets and liabilities to achieve an organization’s financial objectives, given the organization’s risk appetite, tolerance and other constraints.

The Board Investment Committee (BIC), along with inputs from Operational Investment Committee (OIC), identifies the nature of liabilities arising from the product portfolio and evaluates investment options that best suit to hedge/manage the said risks. The Company manages these selected positions prudently, within a strategically crafted and Board approved ALM Policy that has been developed considering the cyclical nature of the domestic interest rates as well as other macroeconomic variables, in order to achieve risk-adjusted investment returns in excess of its obligations, in the long-term.

41. INSURANCE AND FINANCIAL RISK

41.(a) Insurance Risk

The principal insurance risk the Company faces is that the actual claims and benefit payments or the timing thereof, differ from expectations. This is influenced by the frequency of claims, severity of claims, actual benefits paid and subsequent development of long–term claims. Therefore, the objective of the Company is to ensure that sufficient financial and reinsurance protection is available to cover these liabilities.

This risk is mitigated by careful selection and implementation of underwriting strategy guidelines, as well as the use of reinsurance arrangements.

The Company has entered into long term reinsurance treaties with the \world's leading reinsurers as a part of its risks mitigation program.

The reinsurance program is designed to mitigate the Company's exposure to a single claim as well as to catastrophic losses.

More details on how we mitigate underwriting, claims and reinsurance risk are described under Risk Management report on page 76 to 89.

41. (a).1. Reinsurers ‘Credit Ratings

The following table shows the credit ratings of reinsurance companies with whom the Company has entered in to the reinsurance arrangements as of 31st December 2024

The below note shows the re insurances receivables as of 31 st December, with the respective ratings of each reinsurer, company has engaged with.

41. (a).(2) Life Insurance Contracts

Life insurance contracts offered by the Company include: whole life, term assurance, endowment plans, retirement plans, critical illness benefit, disability insurance, daily hospital cash, and major surgery benefit.

The main risks that the Company is exposed to are as follows:

The Company’s underwriting strategy is designed to ensure that risks are properly assessed and correct premium is charged.

The use of scientifically designed proposal forms and medical screening ensures that appropriate data related to the risks to be covered are collected to arrive at a premium which takes into account current health conditions and additional risks of the life to be insured.

The strategy also addresses regular review of actual claim experience and product pricing, as well as detailed claims handling procedures. Underwriting limits are in place to enforce appropriate risk selection criteria.

For contracts in which death or disability is the insured risk, the significant factors that could increase the overall frequency of claims are epidemics, widespread changes in lifestyle and natural disasters, resulting in earlier or more claims than expected.

41.(a) 3. Sensitivity of the Value of Insurance Liabilities for Changes in Assumptions

41. (b) Credit Risk

Credit risk (in ALM context) is the risk that an issuer or counterparty failing to meet its contractual obligations towards the Company, due to various reasons such as its declining financial strength. The sub-categories of credit risk include;

i. Default risk: the risk that the issuer failing to make timely interest or principal payments.

ii. Downgrade risk: the risk that the credit rating of the issuer/debt instrument will be downgraded.

iii. Credit spread risk: the risk that credit spreads will widen.

Financial Credit Risk Mangement

To minimize credit risk, financial investments (such as term deposits, debentures, etc.) are placed, investment transactions (such as government securities purchases and sales, repurchase/reverse repurchase agreements) are entered, strictly adhering to guidelines set by the BIC.

In addition, individual exposures to such approved counterparties are set and monitored based on Insurance Regulatory Commission of Sri Lanka (IRCSL) determinations as well as internal limits which are set by the BIC. The internal limits and their exposures are monitored regularly by Investment Middle Office on an ongoing basis, and reviewed periodically by the BIC.

Reinsurance Credit Risk Management-

Reinsurance is placed with counterparties that have a good credit rating. At each reporting date, an assessment of creditworthiness of reinsurers are performed and updates the reinsurance purchase strategy, ascertaining suitable allowance for impairment.

Premium Receivable Credit Risk

The credit risk in respect of customer balances incurred on non–payment of premiums or contributions will only persist during the grace period specified in the policy document until expiry, when the policy is either paid up or terminated. Commission paid to intermediaries is netted off against amounts receivable from them to reduce the risk of doubtful debts.

More details on how we mitigate Interest rate risk is described under risk management report on pages 76 to 89.

41. (b).1. Credit Risk Exposure

The table below shows the maximum exposure to credit risk for the components of the Statement of Financial Position and items such as future commitments.

Investments in Government securities consist of Treasury Bonds, Treasury Bills and Repo investments. Treasury Bills and Treasury Bonds are considered to be risk free instruments , which are fully backed by the Government of Sri Lanka.

41. (b).2. Industry analysis - Company

41. (b).3. Credit Ratings of Financial Instruments - Company

The below table indicates the rating of investments as at 31st December 2024 & 2023.

As at 31 December 2024

As at 31 December 2023

41. (b).4. Corporate Debt Securities by Credit Ratings

The following table shows the credit rating of Investment in Corporate Debt.

The Group/Company has invested 100.00% (2023 -100 %) of its investment in Corporate Debentures (Quoted) held under HTM category in instruments, which are rated BBB+ and above by Fitch Ratings Lanka Ltd. and ICRA Lanka Ltd.

The Group/Company has invested 91.12% (2023- 97.4%) of its investment in Corporate Debentures (Quoted) held under Loans and Receivables category in instruments, which are rated BBB+ by Fitch Ratings Lanka Ltd and ICRA Lanka Ltd.

The Group/Company has invested 22.05 % (2023- 47.9%) of its investment in Corporate Debentures (Unquoted) held under Loans and Receivables category in instruments, which are rated BBB and above by Fitch Ratings Lanka Ltd and ICRA Lanka Ltd.

41.(b).5. Fixed Deposits by Credit Ratings

The following table shows the credit rating of Investment in Fixed Deposits

The Group has invested 98.74% (2023- 99.94%) of its investment in Fixed Deposits held under Loans and Receivables in instruments, which are rated BBB and above by Fitch Ratings Lanka Ltd and ICRA Lanka Ltd.

The Company has invested 99.04.% (2023- 99.94%) of its investment in Fixed Deposits held under Loans and Receivables in instruments, which are rated BBB and above by Fitch Ratings Lanka Ltd and ICRA Lanka Ltd.

41.(c). Market Risk

Market risk is the risk that market value or future cash flows of a financial instrument will fluctuate due to changes in market factors which are directly/indirectly related to financial markets.

The sub-categories of market risk include;

i. Interest rate risk : the risk that market value and/or future cash flows of a financial instrument will fluctuate due to changes in the level of interest rates, credit spreads or shape of the yield curve. This includes reinvestment risk and inflation risk, which eventually impacts the interest rates.

ii. Currency risk: the risk that market value or future cash flows of a financial instrument will fluctuate due to changes in exchange rates.

iii. Equity price risk: the risk that market value or future cash flows of a financial instrument will fluctuate due to changes in equity prices.

iv. Commodity price risk: the risk that market value or future cash flows of a commodity-linked financial instrument will fluctuate due to changes in commodity prices.

v. In addition, due to its investments in real estate, the Company is also exposed (albeit on a marginal basis) to changes in real estate values.

More details on how we mitigate Interest rate risk is described under risk management report on pages 76 to 89

41.(d). Currency Risk

The Company has no significant exposure to currency risk. However, lack of available foreign exchange liquidity in the banking system might impact Company’s operations as foreign supplier payments might be delayed.

41.(e) Interest Rate Risk

Interest rate risk is the risk that market value or future cash flows of a financial instrument will fluctuate due to changes in the level of interest rates, credit spreads or shape of the yield curve. This includes reinvestment risk and inflation risk, which eventually impacts the interest rates.

Since financial investments of the Company consist mainly of fixed income securities (such as government securities, term deposits, corporate debt, etc.), interest rate risk is one of the most prominent risks faced by the Company. Given (a) unavailability of long-term financial instruments with adequate yields, (b) cyclical and volatile nature of domestic interest rates, and (c) frequent changes to taxation and policy decisions, in order to optimize the returns on its investment portfolio, the Company diligently carries a duration gap in its asset-liability management framework, in accordance with the Board approved ALM Policy.

Further, Company’s Board approved Investment Policy recognizes the cyclical nature of the domestic financial markets. As a part on its investment decision making process, the Company closely monitors the current and future expected shifts in monetary and fiscal policy, changes in inflation expectations, movements in domestic and global interest/exchange rates, balance of payment position, changes in taxation and other key macroeconomic indicators and in turn, fine tune the investment strategies/horizons accordingly.

In addition to internal expertise, to ensure prudence and probity, the Company seeks the views of independent macro research providers in crafting and reviewing its investment strategy.

More details on how we mitigate Interest rate risk is described under risk management report on pages 76 to 89

41.(e).1 Exposure to Interest Rate Risk

The following table presents the financial assets and liabilities which are subject to interest rate risk.

GROUP

COMPANY

41.(f) Equity Price Risk

The equity price risk is relatively negligible due to Company’s diminutive exposure to equity market, except for several strategic investments which are of long-term in nature. However, the Company maintains a closer watch on movements in stock prices and indices.

Following table shows diversification of the equity investments of the Company as of 31 December 2024.

More details on how we mitigate liquidity risk is described under risk management report on pages 76 to 89.

41.(g). Operational Risks

This is the risk that the Group may not meet its objectives due to failed, inadequate or incomplete internal processes, people, systems, controls, or due to external events. In the context of financial risk management, this involves management of operational risks which could lead to financial losses.

The Group manages operational risks by initiating a rigorous control framework and by monitoring and responding to potential risks. Controls include effective segregation of duties, access controls, authorisation and reconciliation procedures, ethical business practices and standards, staff education, training and assessment processes, including the use of internal audit.

More details on how we mitigate liquidity risk is described under risk management report on pages 76 to 89.

41.(g)i Risk Associated with SLFRS 17 /SLFRS 09 and risk mitigating actions

41.(h). Liquidity risk

Liquidity risk is the risk that the Company will may not be able to meet both expected and unexpected current and future cash flow and collateral needs, efficiently, without affecting either daily operations or financial conditions of the firm. In the context of providing financial protection to policyholders through life insurance, timely settlement of financial commitments such as policyholder benefits and claims is essential. In addition, preserving the confidence of investment counterparties is also vital for continued investment management and operations.

Since a strain on liquidity would lead to fire sale of assets which would adversely affect the profitability and policyholder/ investor confidence, zero tolerance is maintained for adverse deviations. The investment strategy of the Company ensures that sufficient liquid assets/credit lines are available to comfortably meet such unforeseen cash outflows, if any.

41.(i). Investment Concentration Risk

Investment Concentration risk is the risk that arises due to excessive concentration of the investment portfolio. Unless the investment portfolio is sufficiently diversified, an excessive concentration in to one or more asset classes, entities (issuers), currencies or markets would create investment concentration risk.

Investment Concentration risk can be viewed in two aspects;

1. Entity-wise: the concentration risk arising from an excessive concentration in to one or more issuers.

2. Asset class-wise: the concentration risk arising from an excessive concentration in to one or more asset classes.

The company notes that due to naturethe nature of domestic financial markets, number of available and regulated high credit quality issuers are limited. Further, diversification for the sole purpose of addressing investment concentration risk introduces unwarranted exposure to credit and liquidity risks. Therefore, BIC has taken a calculated conservative approach to maintain a suitable balance between credit risk vs. concentration risk.

Further, regular updates are presented to the BIC which identify, quantify and analyze impact on current and expected levels of investment concentration while ensuring that proper limit verifications are documented and available on all investment transactions. Further, all such counterparty/issuer exposures are monitored and reported regularly by Investment Middle Office.BIC monitors the current exposure to approved counterparties individually as well as on a related group basis and ensure compliance with determinations, directions and guidelines issued by IRCSL.

41.(j). Maturity Profile

The following table summarises the maturity profile of the financial assets, financial liabilities and insurance contract liabilities of the Group/ Company based on remaining undiscounted contractual obligations, including interest payable and receivable.

For insurance contracts liabilities, maturity profiles are determined based on estimated timing of net cash outflows from the recognised insurance liabilities.

GROUP

Asset and Liabilities

GROUP

Asset and Liabilities

GROUP

Asset and Liabilities

GROUP

Asset and Liabilities

The Company has no significant of concentration of liquidity risk during the reporting period.

42. PROVISIONS, COMMITMENTS AND CONTINGENCIES

ACCOUNTING POLICY

Provisions are recognised when the Group/Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed the reimbursement is recognised as a separate asset when the reimbursement is virtually certain. The expense relating to provision is presented in income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. All known provisions have been accounted for in preparing the Financial Statements. Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations where the transfer of economic benefit is not probable or cannot be readily measured. Contingent liabilities are not recognised in the statement of financial position but disclosed as a note to the financial statements. Contingent assets are disclosed, where inflow of economic benefit is probable.

42.(a) Legal proceedings and regulations

There are no contingencies due to legal proceeding and regulations.

42.(b).(1) Capital Commitments

Capital Commitments relating to the property, plant and equipment’s have been disclosed separately in Note 7(c).

42.(b).(2) Financial Commitments

The Company has not enetered in to any financial commitements during the year.

42.(c). Assessments from Department of Inland Revenue

Tax Assessments on Income Tax

The Company has received Income Tax Assessments from the Department of Inland Revenue for the Years of Assessment (Y/A) 2015/16, 2016/17, 2017/18, 2018/19, 2019/20, and 2020/21. The Company contends that these assessments are not in accordance with the provisions of the Inland Revenue Act.

The assessment for Y/A 2020/21 is currently being adjudicated by the Commissioner General of Inland Revenue (CGIR). With respect to Y/A 2019/20, the CGIR issued a determination against the Company, which has been appealed to the Tax Appeals Commission (TAC). For Y/A 2015/16 and 2016/17, the TAC ruled in favor of the Company, dismissing the determinations made by the CGIR. The CGIR has subsequently appealed these TAC decisions to the Court of Appeal. For Y/A 2018/19, the TAC’s ruling was mixed, with some grounds of appeal being upheld and others being rejected. Both the Company and the Department of Inland Revenue have filed appeals with the Court of Appeal regarding the unfavorable aspects of the TAC’s decision. The assessment for Y/A 2017/18 remains under consideration by the TAC.

A significant concern is that these assessments are predominantly based on Section 92 of the Inland Revenue Act, No. 10 of 2006, which has implications for the broader life insurance industry. Furthermore, assessments relating to Y/A 2019/20, 2020/21, and portions of Y/A 2018/19 have been issued under Section 67 of the Inland Revenue Act, No. 24 of 2017, which came into effect on April 1, 2018.”

The Company is of the view that the probability of materializing any of the assessments against the Company is very remote due to the fact that the Company has complied with the requirements of the Inland Revenue Act No. 10 of 2006 and Act No. 24 of 2017. Accordingly, no additional provision has been recognized in respect of these Assessments in the Financial Statements.

Tax Assessments on VAT

There is no any on going assessments relating to VAT at the end of year 2024.

Tax Assessments on VAT And NBT on Financial Services

“TAC issued a determination in favor of the Company concerning the Nation Building Tax (NBT) on Financial Services (FS) for Y/A 2016 and 2017. CGIR disagreeing with the TAC’s decision, has lodged an appeal with the Court of Appeal against the Company.

For Value Added Tax (VAT) on FS, the TAC and CGIR both ruled in favor of the Company for Y/A 2016 and 2017, respectively. However, the CGIR issued a determination against the Company for Y/A 2018. As a result, the Company has filed an appeal with the TAC, which is currently under consideration. The VAT on FS assessment for Y/A 2021 is presently being reviewed by the designated Commissioner within the CGIR’s office.”

The Company is of the view that, it is out of scope of VAT on FS and NBT on FS as the Company engages in the business of Life Insurance. This stance has been communicated to the CGIR.

Similar assessments have been received by the other players in the industry on the same grounds as well. In those cases, Court of Appeal has already determined in favour of the Life Insurance Companies.

The Company is of the view of that the probability of materialization of the above assessments is very remote..

Compliance with IFRIC 23 - Uncertainty Over Income Tax Treatments

The Company reviewed its uncertain income tax positions that could have an impact on the financial statements in order to comply with the provisions stipulated under IFRIC 23 interpretation.

Consequently, the management concluded that the current accounting treatment for uncertain tax positions is in accordance with IFRIC 23.

43. ASSETS PLEDGED

There are no assets pledged as security for liabilities as at end of the reporting period.

44. RELATED PARTY DISCLOSURES

ACCOUNTING POLICY

The Company carried out transactions in the ordinary course of its business with parties who are defined as related parties as per Sri Lanka Accounting Standard LKAS 24 – “Related Party Disclosures”.

Terms and conditions of transactions with related parties.

The transactions with related parties are made on terms equivalent to those that prevail in arm’s length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 December 2024, the Group has not recorded an impairment of receivables relating to amounts owed by related parties (2023 – Nil).

According to LKAS 24 - “Related Party Disclosure”, Key Management Personnel (KMP) are those having authority and responsibility for planning, directing and controlling the activities of the entity. Accordingly, the Directors (including Executive and Non-Executive Directors) of the Company have been classified as Key Management Personnel of the Company. In addition, Chief Executive Officer has also been classified as Key Management Personnel of the Company.

As Ceylinco Holdings PLC is the ultimate parent of the Company, and the Board of Directors of CIPLC have the authority and responsibility for planning, directing and controlling the activities of the Company, the Directors of Ceylinco Holdings PLC have also been identified as Key Management Personnel of the Company.

Close Family Members (CFM) of the KMP are those family members who may be expected to influence, or be influenced by, that KMPs in their dealing with the entity. They may include:

(a) The KMP’s domestic partner and children;

(b) Children of the KMP’s domestic partner; and

(c) Dependent of the KMP or the KMP’s domestic partner

CFM are related parties to the entity. There were no transactions with CFM during the year.

44. I Amounts recieved from related parties

44.IV.c Transaction with related parties - Other Related companies

44.IV.d Compensation of Key management personnel

The summary of compensation of key management personnel for the year is, as follows:

The amounts disclosed in the above table are the amounts recognised as an expense during the reporting period related to key management personnel.

No loans have been given to the Directors of the Company.

Investment in Associate

No restrictions are placed on the ability of the associate to transfer funds to the parent company in the form of cash dividends or for the repayment of loans when due.

No guarantees or collaterals were provided to the associate.

45. EVENTS AFTER THE REPORTING DATE

Events after the reporting period are those events, favourable and unfavourable, that occur between the Reporting date and the date when the Financial Statements are authorised for issue.

Proposed Dividend

The Board of Directors has proposed a final divided of Rs17.70 (2023 Rs.15.00) per share amounting to a total of Rs.885 Million (2023 - Rs. 750 million) on 20 February 2025 out of the profit for the year ended 31 December 2024 and out of the dividends received during 2024 subject to the approval of shareholder at the Annual General Meeting. More details on Dividend Declaration and payments are given on pages 373.

46. EMPLOYEE AND INDUSTRIAL RELATIONS

There were no material issues pertaining to Employees & Industrial relations during the year.

47. STANDARDS ISSUED BUT NOT YET EFFECTIVE

The new and amended standards and interpretations that are issued up to the date of issuance of the Group financial statements but are not effective for the current annual reporting period, are disclosed below. The Ceylinco Life Insurance Limited intends to adopt these new and amended standards and interpretations, if applicable, when they become effective.

SLFRS 17 Insurance Contracts

SLFRS 17 is a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, SLFRS 17 will replace SLFRS 4 Insurance Contracts that was issued in 2004. SLFRS 17 applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply. The overall objective of SLFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in SLFRS 4, which are largely based on grandfathering previous local accounting policies, SLFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects. The core of SLFRS 17 is the general model, supplemented by:

• A specific adaptation for contracts with direct participation features (the variable fee approach)
• A simplified approach (the premium allocation approach) mainly for short-duration contracts

SLFRS 17 is effective for annual reporting periods beginning on or after 1 January 2026, with comparative figures required. Early application is permitted, provided the entity also applies SLFRS 9 and SLFRS 15 on or before the date it first applies SLFRS 17.

Present Status of the SLFRS 17

Refer Financial Performance on pages no. 148 - 150 for the status of the adoption of the standard.

SLFRS 9 Financial Instruments

SLFRS 9 replaces the existing guidance in LKAS 39 Financial Instruments: recognition and Measurement. SLFRS includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from LKAS 39. SLFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

Present Status of the SLFRS 9

The Company meets the eligibility criteria of the temporary exemption from SLFRS 9 and intend to defer the application of SLFRS 9 until annual reporting periods beginning on or after 1 January 2026. The management is currently in the process of implementing initial classification of financial instruments and assessed the impact to financial instruments from the impairment assessments according to Expected Credit Loss (ECL) Model.

Refer Financial Performance on page no. 150 - 151 for the status of the adoption of the standard.

Lack of exchangeability – Amendments to LKAS 21

The amendments specify how an entity should assess whether a currency is exchangeable and how it should determine a spot exchange rate when exchangeability is lacking. The amendments also require disclosure of information that enables users of its financial statements to understand how the currency not being exchangeable into the other currency affects, or is expected to affect, the entity’s financial performance, financial position and cash flows. The amendments will be effective for annual reporting periods beginning on or after 1 January 2025. Early adoption is permitted, but will need to be disclosed. When applying the amendments, an entity cannot restate comparative information.