Kuwait Insurance Company S.A.K.P Kuwait. Annual Financial Statements and Independent Auditors' Report 31 December 2014

Transcription

1 Insurance Company S.A.K.P Annual Financial Statements and Independent Auditors' Report 31 December 2014

2 Insurance Company S.A.K.P Annual Financial Statements and Independent Auditors' Report 31 December 2014 C o n t e n t s Page Independent Auditors' Report 1-2 Statement of Financial Position 3 Statement of Income 4 Statement of Comprehensive Income 5 Statement of Changes in Equity 6 Statement of Cash Flows 7 Notes to the Financial Statements 8 25

3 Deloitte & Touche Al-Wazzan & Co. Ahmed Al-Jaber Street, Sharq Dar Al-Awadi Complex, Floors 7 & 9 P.O. Box Safat or P.O. Box Safat Tel : , Fax: , Insurance Company S.A.K.P Independent Auditors Report to the Shareholders Report on the financial statements We have audited the accompanying financial statements of Insurance Company S.A.K.P ( the Company ), which comprise the statement of financial position as at 31 December 2014, and the statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatements, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2014, and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards.

4 Insurance Company S.A.K.P Independent Auditors Report to the Shareholders (Continued) Report on other Legal and Regulatory Requirements Furthermore, in our opinion, proper books of account have been kept by the Company and the financial statements, together with the contents of the report of the Board of Directors relating to these financial statements, are in accordance therewith. We further report that we obtained all the information and explanations that we required for the purpose of our audit and that the financial statements incorporate all information that is required by the Companies Law No 25 of 2012; as amended, and its executive regulations and of Law No. 24 of 1961, as amended, concerning insurance companies and insurance agents and its related regulations; and by the Company's Memorandum of Incorporation and Articles of Association; as amended, that an inventory was duly carried out and that, to the best of our knowledge and belief, no material violation of Companies Law No 25 of 2012, as amended, and its executive regulations or of Law No. 24 of 1961, as amended or of the Memorandum of Incorporation and Articles of Association, as amended, have occurred during the financial year ended 31 December 2014 that might have had a material effect on the business of the Company or on its financial position. Bader A. Al-Wazzan Licence No. 62A Deloitte & Touche Al-Wazzan & Co. Rabea Saad Al-Muhanna Licence No. 152A Horwath Al-Muhanna & Co., 10 February

5 Insurance Company S.A.K.P Statement of Financial Position as of 31 December 2014 (All amounts are in i Dinars) Note ASSETS Property and equipment 3 1,655,162 1,801,206 Investment properties 135, ,187 Loans secured by life insurance policies 230, ,803 Investments available for sale 4 60,710,962 60,062,013 Due from insurance and reinsurance companies 5,189,389 5,800,943 Reinsurance companies share of reserve for outstanding claims 40,763,134 23,562,629 Trade and other receivables 5 8,872,182 10,788,896 Fixed deposits with banks 6 34,947,934 29,169,686 Cash and cash equivalents 7 9,584,795 3,390,569 Total assets 162,088, ,834,932 EQUITY AND LIABILITIES Equity Share capital 8 19,404,000 19,404,000 Statutory reserve 8 9,702,000 9,702,000 Voluntary reserve 8 17,500,000 17,500,000 Treasury shares 9 (2,676,969) (2,575,354) Investment fair valuation reserve 9,792,970 4,857,620 Retained earnings 6,696,966 5,273,625 Total equity 60,418,967 54,161,891 Liabilities Technical reserves 10 84,429,150 63,520,330 Due to insurance and reinsurance companies 7,016,984 7,900,632 Insurance and other payables 11 10,223,664 9,252,079 Total liabilities 101,669,798 80,673,041 Total equity and liabilities 162,088, ,834,932 The accompanying notes form an integral part of these financial statements Mohammed Saleh Behbehani Sulaiman Khaled Al Ghunaim Dr. Ali Hamad Al Bahar Chairman Vice-Chairman Chief Executive Officer 3

6 Insurance Company S.A.K.P Statement of Income for the year ended 31 December 2014 (All amounts are in i Dinars) Note Revenue Gross premium revenue 35,615,709 33,975,646 Premium ceded to reinsurers (15,481,120) (13,956,160) Net premium revenue 20,134,589 20,019,486 Change in reserve for unexpired risks 408,955 (1,540,830) Premiums earned 20,543,544 18,478,656 Commission earned 2,735,391 2,434,194 Investment income 12 4,664,604 3,759,300 Other income 916,792 1,449,294 28,860,331 26,121,444 Expenses Net incurred claims losses (11,156,129) (11,687,841) Change in additional reserve (1,000,000) - Change in reserve for life insurance fund (1,738,215) 742,773 Life insurance - expiry settlement (985,555) (1,141,287) Life insurance - policies liquidated (115,308) (226,592) Commissions paid (3,709,242) (3,879,680) General and administrative expenses (4,245,848) (4,026,904) Participants rights 31,411 (14,406) (22,918,886) (20,233,937) Profit before provisions, contribution to taxes and remuneration 5,941,445 5,887,507 Impairment loss on investment securities (507,233) (1,379,433) Profit before taxes and remuneration 5,434,212 4,508,074 Board of Directors remuneration (56,000) (56,000) Foundation for Advancement of Science (KFAS) (54,342) (45,081) National Labour Support Tax (125,521) (121,700) Zakat tax (50,208) (48,680) Total contribution to taxes and remuneration (286,071) (271,461) Net profit for the year 5,148,141 4,236,613 Earnings per share (fils) The accompanying notes form an integral part of these financial statements 4

7 Insurance Company S.A.K.P Statement of Comprehensive Income for the year ended 31 December 2014 (All amounts are in i Dinars) Net profit for the year 5,148,141 4,236,613 Other comprehensive income items: Items that may be reclassified subsequently to statement of income Changes in fair value of investments available for Sale 5,956,142 7,055,581 Transferred to statement of income on sale of investments available for sale (1,528,025) (747,815) Impairment of available for sale investments 507,233 1,379,433 Other comprehensive income for the year 4,935,350 7,687,199 Total comprehensive income for the year 10,083,491 11,923,812 The accompanying notes are an integral part of these financial statements 5

8 Insurance Company S.A.K.P Statement of Changes in Shareholders Equity for the year ended 31 December 2014 (All amounts are in i Dinars) Share Capital Statutory reserve Voluntary Reserve Treasury Shares Change in fair value reserve Retained Earnings s Total Balance as at 1 January ,404,000 9,702,000 17,500,000 (2,575,354) 4,857,620 5,273,625 54,161,891 Total comprehensive income for the year ,935,350 5,148,141 10,083,491 Treasury shares purchased (101,615) - - (101,615) Dividend paid for (3,724,800) (3,724,800) Balance as at 31 December ,404,000 9,702,000 17,500,000 (2,676,969) 9,792,970 6,696,966 60,418,967 Balance as at 1 January ,404,000 9,702,000 17,500,000 (2,345,235) (2,829,579) 4,761,812 46,192,998 Total comprehensive income for the year ,687,199 4,236,613 11,923,812 Treasury shares purchased (230,119) - - (230,119) Dividend paid for (3,724,800) (3,724,800) Balance as at 31 December ,404,000 9,702,000 17,500,000 (2,575,354) 4,857,620 5,273,625 54,161,891 The accompanying notes form an integral part of these financial statements 6

9 Insurance Company S.A.K.P Statement of Cash Flows for the year ended 31 December 2014 (All amounts are in i Dinars) Note Cash flows from operating activities Net profit for the year 5,148,141 4,236,613 Adjustments for: Investment income 12 (4,664,604) (3,759,300) Depreciation 182, ,206 Impairment loss on investment securities 507,233 1,379,433 Staff terminal benefits 245, ,791 Finance expenses 69 25,020 Operating profit before working capital changes 1,418,903 2,196,763 Decrease in due from insurance and reinsurance companies 611,554 1,116,918 Decrease in trade and other receivables 1,916,714 3,357,209 Increase in technical reserves 3,708,316 2,929,493 Decrease in due to insurance and reinsurance companies (883,648) (4,864,637) Increase in Insurance and other payables 987,577 1,503,402 Cash from operating activities 7,759,416 6,239,148 Payment of staff terminal benefits (20,857) (56,791) Payment of KFAS (45,081) (41,469) Payment of National Labour Support Tax (121,700) (98,846) Payment of Zakat tax (48,680) (39,538) Payment of Board of Directors remuneration (56,000) (56,000) Net cash from operating activities 7,467,098 5,946,504 Cash flows from investing activities Purchase of property and equipment (36,535) (13,162) Net movement of loans secured by life insurance policies (106,217) 12,346 Purchase of investments available for sale (1,468,872) (256,416) Proceeds from sale of investments available for sale 6,787,023 2,313,479 Net movement in fixed deposits with banks (5,778,248) (6,047,491) Dividend received 2,523,505 2,167,972 Interest received 602, ,428 Net cash generated from/(used in) investing activities 2,522,772 (1,369,844) Cash flows from financing activities Purchase of treasury shares (101,615) (230,119) Payment of finance expenses (69) (25,021) Dividends paid to shareholders (3,693,960) (3,729,449) Net cash used in financing activities (3,795,644) (3,984,589) Net increase in cash and cash equivalents 6,194, ,071 Cash and cash equivalents at beginning of the year 3,390,569 2,798,498 Cash and cash equivalents at end of the year 7 9,584,795 3,390,569 The accompanying notes form an integral part of these financial statements 7

10 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) 1. Incorporation and objectives Insurance Company S.A.K.P, (the Company) is a i Public Shareholding Company established in in 1960 by Amiri Decree No. 7 of 1960, and registered with the Ministry of Commerce in accordance with the Insurance Companies and Agent Law No. 24 of 1961 under Insurance license No. 1. The objects of the Company are to underwrite life and non-life insurance risks such as fire, general accidents, marine and aviation, lend funds against life insurance policies; and to invest in permitted securities and real estate properties. The Company also engages in underwriting all types of risks under the Takaful insurance law. The registered office of the Company is located at Insurance Building, Abdullah Al-Salem Street,. P.O. Box 769 Safat 13008,. The Company has 13 branches in the State of. These financial statements have been approved for issue by the Board of Directors on 10 February 2015, and are subject to shareholders approval at the annual general meeting. The extra-ordinary general assembly meeting was held on 7 April 2014 to approve the amendments to the company s Memorandum of Incorporation and Articles of Association to be in compliance with companies law, as amended, and CMA s related resolutions. These amendments have been authenticated in the commercial register on 23 June Basis of preparation and significant accounting policies 2.1 Basis of preparation These financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by International Accounting Standards Board (IASB). These financial statements are prepared under the historical cost basis of measurement as modified by the revaluation of financial instruments classified as available for sale. The financial statements have been presented in i Dinar. The preparation of financial statements in conformity with International Financial Reporting Standards requires management to make estimates and assumptions that may affect amounts reported in these financial statements, as actual results could differ from those estimates. It also requires management to exercise its judgment in the process of applying the Company s accounting policies. The areas where estimates and assumptions are significant to the financial statements, or areas involving a higher degree of judgment, are disclosed in Note 20. New and revised standards New and revised IFRSs issued and effective In the current year, the Company has applied a number of new and revised IFRSs that are issued and effective for accounting periods that begin on or after 1 January Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities The Company has applied the amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities for the first time in the current year. The amendments to IFRS 10 define an investment entity and require a reporting entity that meets the definition of an investment entity not to consolidate its subsidiaries but instead to measure its subsidiaries at fair value through profit or loss in its consolidated and separate financial statements. Consequential amendments have been made to IFRS 12 and IAS 27 to introduce new disclosure requirements for investment entities. The application of the amendments has had no impact on the disclosures or the amounts recognized in the Company s financial statements. Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities The Company has applied the amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities for the first time in the current year. The amendments to IAS 32 clarify the requirements relating to the offset of financial assets and financial liabilities. The amendments have been applied retrospectively. The Company has assessed whether certain of its financial assets and financial liabilities qualify for offset based on the criteria set out in the amendments and concluded that the application of the amendments has had no impact on the amounts recognised in the Company s financial statements. 8

11 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets The Company has applied the amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets for the first time in the current year. The amendments to IAS 36 remove the requirement to disclose the recoverable amount of a cash-generating unit (CGU) to which goodwill or other intangible assets with indefinite useful lives had been allocated when there has been no impairment or reversal of impairment of the related CGU. Furthermore, the amendments introduce additional disclosure requirements applicable to when the recoverable amount of an asset or a CGU is measured at fair value less costs of disposal. The application of these amendments has had no material impact on the disclosures in the Company s financial statements. New and revised IFRSs in issue but not yet effective The Company has not applied the followings new and revised IFRS that have been issued and not yet effective For annual periods beginning on or after 1 July 2014 Amendments to IAS 19 Defined Benefit Plans: Employee Contributions The Annual Improvements to IFRSs Cycle: IFRS 2 Share-based Payment IFRS 3 Business Combinations IFRS 8 Operating Segments IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets IAS 24 Related Party Disclosures The Annual Improvements to IFRSs Cycle:. IFRS 3 Business Combinations IFRS 13 Fair Value Measurement IAS 40 Investment Property The directors of the Company do not anticipate that the application of these amendments will have a material impact on the Company s financial statements. For annual periods beginning on or after 1 January 2016 Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations Amendments to IAS 16 & IAS 38 Clarification of Acceptable Methods of Depreciation & Amortisation Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants The directors of the Company do not anticipate that the application of these amendments will have a material impact on the Company s financial statements. Effective for annual periods beginning on or after 1 January 2017 IFRS 15 Revenue from Contracts with Customers The directors of the Company anticipate that the application of these IFRS 15 in the future may have a material impact on amounts reported in respect of the Company s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the effect until the Company undertakes a detailed review. Effective for annual periods beginning on or after 1 January 2018 IFRS 9 Financial Instruments The directors of the Company anticipate that the application of IFRS 9 in the future may have a material impact on amounts reported in respect of the Company s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the effect until the Company undertakes a detailed review. 2.2 Significant Accounting Policies Financial Instruments Classification and measurement The Company classifies financial assets as loans and receivables and available for sale. Financial liabilities are classified as other than at fair value through profit or loss. 9

12 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) All financial instruments are initially recognized at fair value. Transaction costs are included only for those financial instruments not classified as at fair value through profit or loss. Loans and receivables These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. These are subsequently measured and carried at amortized cost using the effective interest rate, less any provision for impairment. Loans and receivables include loans secured by life insurance policies, due from insurance and reinsurance companies, trade and other receivables, fixed deposits, cash and cash equivalents. Available for sale These are non-derivative financial assets not included in any of the above classifications and are principally those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity, changes in interest rates or prices. These are subsequently measured and carried at fair value. Any resultant unrealized gains and losses arising from changes in fair value are recognized in other comprehensive income and accumulated in change in fair value reserve in equity. When an available for sale asset is disposed off or is impaired, the related cumulative fair valuation changes earlier reported in other comprehensive income and accumulated in equity are transferred to the statement of income. Financial liabilities Financial liabilities are subsequently measured at amortized cost using the effective interest rate. Recognition and de-recognition A financial asset or a financial liability is recognized when the Company becomes a party to the contractual provisions of the instrument. A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or when the Company has transferred substantially all the risks and rewards of ownership or when it has neither transferred nor retained substantially all risks and rewards of ownership and it no longer has control over the asset or portion of the asset. If the Company has retained control, it shall continue to recognize the financial asset to the extent of its continuing involvement in the financial asset. A financial liability is derecognized when the obligation specified in the contract is discharged/ cancelled or expired. All 'regular way' purchase and sale of financial assets are recognized using trade date accounting. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulations or conventions in the market place. Fair values 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. Impairment A financial asset is impaired if its carrying amount is greater than its estimated recoverable amount. An assessment is made at each date of financial position to determine whether there is objective evidence that a specified financial asset, or a group of similar financial assets, may be impaired. In the case of financial assets classified as available for sale, a significant or prolonged decline in the fair value of assets below its cost is considered in determining whether the assets are impaired. If any such evidence exists for available for sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in the statement of income, is removed from shareholder s equity and recognized in the statement of income. Impairment loss recognized in the statement of income on available for sale financial assets that are equity instruments are not subsequently reversed through the statement of income. 10

13 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) A credit risk provision for impairment of loans and receivables is established if there is objective evidence that the Company will not be able to collect all amounts due. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected future cash flows, discounted at the original effective rate of interest and the current contractual interest rate, for fixed and floating rate loans respectively Offsetting financial instruments Financial assets and liabilities are setoff and the net amount reported in the statement of financial position when there is a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset or settle the liability simultaneously Property and equipment Property and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. These are depreciated on a straight line basis over their useful lives as follows: Buildings Equipment, Furniture and fixtures 20 years up to 3 years Land is not depreciated. The carrying amount of property and equipment is reviewed periodically to determine whether there is any indication of impairment in its carrying value. If any such indication exists, an impairment loss, is recognised in the statement of income, being the difference between carrying value and the asset s recoverable amount. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows Investment properties Investment properties held by the Company are the properties held for capital appreciation or to earn rental income. Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investments properties are carried out at historical cost less accumulated impairment losses. Freehold land is not depreciated. Investment properties are derecognized when either 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. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the statement of income in the year of derecognition Cash and cash equivalents Cash and cash equivalents comprise of cash in hand, current account with banks and fixed deposits with banks with maturities not exceeding three months from acquisition date Provisions for liabilities Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events; and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made Employees terminal benefits Provision is made for amounts payable under i labour law. This liability, which is unfunded, represents the amount payable to each employee as a result of involuntary termination on the date of statement of financial position, and approximates the present value of this obligation. 11

14 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) Insurance payables Reserve for outstanding claims Provisions are recognized for reported claims, which are not settled on the date of statement of financial position based on internal and independent loss assessments, after deduction of expected salvage values and other recoveries. Reserve for unexpired risks General Insurance This is computed at the rate of 40% of the net retained premiums for the Fire and General Accidents departments and 25% of the net retained premiums for the Marine and Aviation departments. Life Insurance Provisions for life insurance liabilities are recognised based on independent actuarial valuation. Additional reserves The Company estimates additional provisions for claims incurred but not reported at the date of statement of financial position based on historical loss ratios Treasury shares The Company s holding in its own shares is stated at the acquisition cost. These shares are not entitled to any cash dividend that the Board of Directors may propose Revenue recognition Premiums are recognized as revenue annually and over the period of the cover. The portion of premiums that relates to unexpired risks at the date of statement of financial position is reported as reserve for unexpired risks or as unearned premium. Dividend income is recognized when the right to receive payment is established and interest on fixed deposits are recognized on time proportion basis using effective interest rate. Commission earned is recognized at the time insurance policies are ceded to other insurers Contribution to taxes Contribution to Foundation for the Advancement of Sciences (KFAS) The Company calculates KFAS at 1% of taxable profit for the year, in accordance with the calculation based on the Foundation s Board of Directors resolution. National Labour Support Tax (NLST) The Company calculates NLST in accordance with Law No 19 of 2000 and the Ministry of Finance Resolution No. 24 of 2006 at 2.5% of taxable profit for the year. Zakat The Company calculates Zakat in accordance with Law No. 46 of 2006 and the Ministry of Finance resolution No 58 of 2007 at 1% of the taxable profit of the Company Foreign currency translation The Company's functional currency is the i Dinar. Transactions in foreign currencies are converted into i Dinars at the rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies outstanding at the date of statement of financial position are converted into i Dinar at the rates prevailing at the date of statement of financial position. Resulting gains or losses are taken to the statement of income. 12

15 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. Translation difference on non-monetary items classified as at fair value through statement of income are reported as part of the fair value gain or loss in the statement of income whereas the translation difference on non-monetary items classified as available for sale financial assets are included in change in fair value reserve in the statement of comprehensive income Segment reporting A segment is a distinguishable component of the Company that engages in business activities from which it earns revenues and incurs costs. The operating segments are used by the management of the Company to allocate resources and assess performance. Operating segments exhibiting similar economic characteristics, product and services, class of customers where appropriate are aggregated and reported as reportable segments. 3. Property and equipment Land & buildings Furniture & office equipment Cost As at 1 January ,319,335 1,693,464 6,012,799 Additions for the year ,162 13,162 Disposals for the year (1,670) (1,670) As at 31 December ,319,335 1,704,956 6,024,291 Additions for the year ,535 36,535 Disposals for the year (1,329) (1,329) As at 31 December ,319,335 1,740,162 6,059,497 Accumulated depreciation As at 1 January ,372,086 1,693,463 4,065,549 Charge for the year ,044 11, ,536 As at 31 December ,518,130 1,704,955 4,223,085 Charge for the year ,044 36, ,579 Disposals for the year (1,329) (1,329) As at 31 December ,664,174 1,740,161 4,404,335 Net book value As at 31 December ,655, ,655,162 As at 31 December ,801, ,801,206 Depreciation is included in general and administrative expenses in the statement of income. Total 4. Investments available for sale Quoted shares 56,091,486 50,264,900 Unquoted shares 2,955,880 3,658,292 Investment funds 1,663,596 6,138,821 60,710,962 60,062,013 Movements in investments available for sale: Opening balance 60,062,013 54,673,409 Additions 1,468, ,416 Disposals (6,776,065) (1,923,393) Changes in fair value 5,956,142 7,055,581 Closing balance 60,710,962 60,062,013 Investments in quoted shares include shares with fair value of KD 5,148,000 as of 31 December 2014 (31 December 2013: KD 9,606,000) are under lien to Ministry of Commerce and Industry, to comply with local insurance regulations. 13

16 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) 5. Trade and other receivables Trade receivables 10,020,562 11,869,115 Provision for doubtful debts (2,375,000) (2,283,829) 7,645,562 9,585,286 Participation in Arab Syndicate Fund for War Risk Insurance 929, ,426 Other receivable 296, ,184 8,872,182 10,788, Fixed deposits with banks Fixed deposits amounting to KD 18,925,000 are under lien to the Ministry of Commerce and Industry, to comply with local insurance regulations (31 December 2013: KD 20,425,000). The average effective interest rate on fixed deposits was 1.97% as at 31 December 2014 (31 December 2013: 1.47%). 7. Cash and cash equivalents Cash on hand 5,524 9,838 Cash at banks 9,079,271 3,005,731 Fixed deposits with less than three months maturity 500, ,000 Cash and cash equivalents 9,584,795 3,390,569 Effective interest rate on time deposits (%) Share capital The authorized, issued and fully paid-up capital is KD 19,404,000 divided into 194,040,000 shares with a nominal value of i fils 100 each and all shares are in cash. Statutory reserve The statutory reserve has reached 50% of the share capital and as permitted by the Articles of Association, the Company has discontinued appropriations to statutory reserve. This reserve is not available for distribution except for distribution of a maximum dividend up to 5% of share capital in years when the retained earnings are inadequate for this purpose. Voluntary reserve In accordance with the Company s Articles of Association, 10% of net profit is to be transferred annually to the voluntary reserve. This reserve has been discontinued since 1998 based on a recommendation of the Board of Directors and approval of the shareholders. Proposed dividend On 10 February 2015, The Board of Directors has proposed a cash dividend of 20 fils per share for the income of the year ended 31 December 2014 (31 December 2013: 20 fils per share). This is subject to the approval of the shareholders at the next annual general meeting. 9. Treasury shares Number of treasury shares (Share) 8,150,000 7,800,000 % of treasury shares to issued shares Cost of treasury shares 2,676,969 2,575,354 Fair value of treasury shares 2,200,500 2,262,000 The Company is committed to retain reserves and retained earnings equivalent to the treasury shares throughout the period, in which they are held by the Company, pursuant to the relevant instructions of the regulatory authorities. 14

17 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) 10. Technical reserves Technical reserves movements by segment are as follows: Marine and Fire General Takaful Life Total Year ended 31 December 2014 aviation accident Gross balance at beginning of the year 4,177,757 5,672,739 31,299,030 1,339,711 21,031,093 63,520,330 Less: Reinsurance recoverable (3,461,188) (4,648,421) (14,516,686) (61,645) (874,688) (23,562,628) Net balance at beginning of the year 716,569 1,024,318 16,782,344 1,278,066 20,156,405 39,957,702 Net charge for the year 96,597 99,960 9,810, ,855 3,178,201 13,485,389 Paid during the year (52,543) (56,241) (7,127,045) (966,753) (1,574,493) (9,777,075) Net balance at end of the year 760,623 1,068,037 19,466, ,168 21,760,113 43,666,016 Add: Reinsurance recoverable 3,399,720 24,162,975 12,168,952 45, ,975 40,763,134 Gross balance at end of the year 4,160,343 25,231,012 31,635, ,680 22,746,088 84,429,150 Marine and Fire General Takaful Life Total Year ended 31 December 2013 aviation accident Gross balance at beginning of the year 7,165,542 13,960,980 26,306, ,906 21,284,017 69,232,163 Less: Reinsurance recoverable (6,353,350) (12,986,544) (12,103,798) (79,942) (680,321) (32,203,955) Net balance at beginning of the year 812, ,436 14,202, ,964 20,603,696 37,028,208 Net charge for the year (7,691) 125,597 9,134,428 1,443,005 1,790,559 12,485,898 Paid during the year (87,932) (75,715) (6,555,004) (599,903) (2,237,850) (9,556,404) Net balance at end of the year 716,569 1,024,318 16,782,344 1,278,066 20,156,405 39,957,702 Add: Reinsurance recoverable 3,461,188 4,648,421 14,516,686 61, ,688 23,562,628 Gross balance at end of the year 4,177,757 5,672,739 31,299,030 1,339,711 21,031,093 63,520,330 During the year ended 31 December 2014, the Company has recorded a reported claim amounted to USD 100 Million based on the loss valuator estimation. This claim is fully reinsured and partial amount of USD 30 Million has been collected from reinsurer and paid to the insured party. 15

18 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) 11. Insurance and other payables Insurance payables 2,467,767 2,739,047 Unearned premiums 1,450, ,134 Reserve for reinsurance premium ceded 618, ,595 Dividends payable 117,201 86,360 Staff payables and others 2,036,188 2,048,980 Staff terminal benefits 2,165,262 1,940,634 Reserve for Arab Syndicate Fund for War Risk Insurance 929, ,426 Board of directors remuneration 56,000 56,000 Foundation for Advancement of Sciences (KFAS) 54,342 45,081 National Labour Support tax 125, ,700 Zakat tax 50,208 48,680 Due to policy holders 152, ,442 10,223,664 9,252,079 Due to policy holders represents 50% (2013: 50%) of the net surplus from Takaful insurance business appropriated to the policy holders and is subject to the approval from Sharia Board. 12. Investment income Realized gain from sale of investments 1,538,983 1,137,900 Cash dividends 2,523,505 2,167,972 Interest income 602, ,428 4,664,604 3,759, Earning per share Earning per share is calculated by dividing net profit for the year and by the weighted average number of ordinary shares after deduction of treasury shares, as follows: Net profit for the year 5,148,141 4,236,613 Weighted average number of issued shares (share) 186,239, ,240,000 Earning per share (fils) Staff Costs General and administrative expenses include staff costs of KD 2,717,340 (31 December KD 2,630,451). As of 31 December 2014, the Company had 223 (31 December 2013: 225) employees. 15. Segmental analysis The Company has five principal reportable segments as follows: Marine and aviation Insurance against risks related to goods transportation and different types of marine and aviation vessels. Fire Insurance against fire for different types of buildings, stores, industrial risks and gas and oil industry. 16

19 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) General accident Insurance against risks of contractors, machinery and computer damages and cessation of work; insurance cover for cash, bonds, fidelity, professional risks, work accidents, civil responsibility and motor vehicles. Life insurance Life insurance cover for individuals and groups and medical insurance cover. Takaful Insurance against all type of risk under Takaful insurance law. Investment activities are not considered as a segment by itself. Assets and liabilities are not allocated to the Company s segments except for those related to the life insurance and Takaful insurance segment. 17

20 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) Information on the Company s principal reportable segments are as follows: Income statement Marine & aviation Fire General accident Life Takaful Unallocated items Year ended 31 December 2014 Revenue Gross premium revenue 2,873,971 6,005,479 19,496,809 6,863, ,970-35,615,709 Premium ceded to reinsurers (2,392,026) (5,460,182) (5,713,244) (1,842,476) (73,192) - (15,481,120) Net premiums revenue 481, ,297 13,783,565 5,021, ,778-20,134,589 Changes in reserve for unexpired risks 2,502 (38,544) (51,242) - 496, ,955 Premiums earned 484, ,753 13,732,323 5,021, ,017-20,543,544 Commissions earned 789, ,823 1,278,514 85,975 10,663-2,735,391 Investment income ,506 14,640 4,229,458 4,664,604 Other income 5, ,206 (33,230) 5,922 58, ,792 1,279,516 1,078,333 15,890,043 5,494, ,242 4,287,942 28,860,331 Total Expenses Net incurred claims 99,099 11,416 8,809,534 1,439, ,094-11,156,129 Change in additional reserve - 50, , ,000,000 Changes in reserve for life insurance fund ,738, ,738,215 Life insurance Expiry settlement , ,555 Life insurance Policies liquidated , ,308 Commissions paid 134, ,599 3,068, ,946 23,657-3,709,242 General and administrative expenses 472, ,154 1,334, ,245 73,313 1,274,470 4,245,848 Participants rights (31,411) - (31,411) Impairment loss on investment securities , ,233 BOD remuneration ,000 56,000 Contribution to foundation for advancement of Science share (KFAS) ,342 54,342 National Labour Support tax , ,521 Zakat tax ,208 50, , ,169 14,163,195 5,194, ,653 2,067,774 23,712,190 Net profit for the year 573, ,164 1,726, ,000 (31,411) 2,220,168 5,148,141 18

21 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) Marine & aviation Fire General accident Life Takaful Unallocated items Year ended 31 December 2013 Revenue Gross premium revenue 2,897,431 5,660,774 18,459,204 5,278,378 1,679,859-33,975,646 Premium ceded to reinsurers (2,405,479) (5,211,836) (4,803,745) (1,398,588) (136,512) - (13,956,160) Net premiums revenue 491, ,938 13,655,459 3,879,790 1,543,347-20,019,486 Changes in reserve for unexpired risks (10,605) (1,646) (1,056,284) - (472,295) - (1,540,830) Premiums earned 481, ,292 12,599,175 3,879,790 1,071,052-18,478,656 Commissions earned 660, ,068 1,181,887 36,717 16,368-2,434,194 Investment income ,738 2,568 3,446,994 3,759,300 Other income 6, ,356,035 (6,417) 14,163 77,791 1,449,294 1,148, ,147 15,137,097 4,219,828 1,104,151 3,524,785 26,121,444 Total Expenses Net incurred claims 18,296 (123,951) (8,078,144) (2,533,332) (970,710) - (11,687,841) Changes in reserve for life insurance fund , ,773 Life insurance Expiry settlement (1,141,287) - - (1,141,287) Life insurance Policies liquidated (226,592) - - (226,592) Commissions paid (140,276) (268,008) (3,256,364) (182,517) (32,515) - (3,879,680) General and administrative expenses (476,976) (420,861) (1,346,755) (578,873) (72,113) (1,131,326) (4,026,904) Participants rights (14,406) - (14,406) Impairment loss on investment securities (1,379,433) (1,379,433) BOD remuneration (56,000) (56,000) Contribution to foundation for advancement of Science share (KFAS) (45,081) (45,081) National Labour Support tax (121,700) (121,700) Zakat tax (48,680) (48,680) (598,956) (812,820) (12,681,263) (3,919,828) (1,089,744) (2,782,220) (21,884,831) Net profit for the year 549, ,327 2,455, ,000 14, ,565 4,236,613 19

22 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) Segment assets and liabilities Statement of financial position as of 31 December 2014 Life Takaful General Insurance Total Assets Property and equipment - - 1,655,162 1,655,162 Investment properties , ,187 Loans secured by life insurance policies 230, ,020 Investments available for sale 3,300,000-57,410,962 60,710,962 Due from insurance and reinsurance companies - 31,641 5,157,748 5,189,389 Reinsurance companies share of Reserve for outstanding claims 985,975 45,512 39,731,647 40,763,134 Trade and other receivables 562,377 23,775 8,286,030 8,872,182 Fixed deposits with banks 12,700,000 1,009,493 21,238,441 34,947,934 Cash and cash equivalents 652, ,917 8,530,500 9,584,795 Total assets 18,430,750 1,512, ,145, ,088,765 Equity and Liabilities Technical reserve 22,746, ,680 61,026,382 84,429,150 Due to Insurance and reinsurance companies 31, ,538 6,842,469 7,016,984 Insurance and other payables 804, ,234 8,864,501 10,223,664 Share holders equity ,418,967 60,418,967 Total equity and liabilities 23,582,994 1,353, ,152, ,088,765 General Statement of financial position as of Life Takaful Insurance 31 December 2013 Total Assets Property and equipment - - 1,801,206 1,801,206 Investment properties , ,187 Loans secured by life insurance policies 123, ,803 Investments available for sale 3,300,000-56,762,013 60,062,013 Due from insurance and reinsurance companies 151,501 29,159 5,620,283 5,800,943 Reinsurance companies share of reserve for outstanding claims 874,692 61,645 22,626,292 23,562,629 Trade and other receivables 569, ,323 9,972,022 10,788,896 Fixed deposits with banks 12,700,000 1,000,462 15,469,224 29,169,686 Cash and cash equivalents 418, ,766 2,490,456 3,390,569 Total assets 18,137,894 1,820, ,876, ,834,932 Equity and Liabilities Technical reserve 21,031,096 1,339,711 41,149,523 63,520,330 Due to Insurance and reinsurance companies ,921 7,750,262 7,900,632 Insurance and other payables 792, ,969 8,337,588 9,252,079 Share holders equity - 183,442 53,978,449 54,161,891 Total equity and liabilities 21,824,067 1,795, ,215, ,834, Insurance Risk Management The Company issues contracts that assumes insurance risk. This section summarizes these risks and the way the Company manages them. Insurance risk The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable. 20

23 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) The principal risk that the Company faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year. The Company manages these risks through its underwriting strategy, adequate reinsurance arrangements and proactive claims handling. Sources of uncertainty in the estimation of future claim payments Non life Claims are payable on a claims-occurrence basis. The Company is liable for all insured events that occurred during the term of the contract, even if the loss is discovered after the end of the contract term. As a result, liability claims are settled over a long period of time and an element of the claims provision relates to incurred but not reported claims (IBNR). There are several variables that affect the amount and timing of cash flows from these contracts. These mainly relate to the inherent risks of the business activities carried out by individual contract holders and the risk management procedures they adopted. The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected subrogation value and other recoveries. The Company takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established. The liability for these contracts comprise a provision for IBNR, a provision for reported claims not yet paid and a provision for unexpired risks at the statement of financial position date. In estimating the liability for the cost of reported claims not yet paid the Company considers any information available from loss adjusters and information on the cost of settling claims with similar characteristics in previous periods. Large claims are assessed on a case-by-case basis or projected separately. Life Uncertainty in the estimation of future benefit payments and premium receipts for life insurance contracts arises from the unpredictability of overall levels of mortality, health and the variability in contract holder behaviour. The Company uses an actuarial valuation to determine reserve estimate for life insurance contracts. For health and disability insurance covers there is no need to estimate mortality rates or morbidity rates for future years because these contracts have short duration and the claims are payable on a claims-occurrence basis. These insurance contracts are exposed to similar risks of uncertainty in the estimation of future claim payments as non life insurance contracts and are managed in a similar manner. 17. Fair value estimation The fair value for the financial assets and financial liabilities are determined as follows: Level one: Quoted prices in active markets for identical financial instruments. Level two: Quoted prices in an active market for similar instruments. Quoted prices for identical assets or liabilities in the market that is not active. Inputs other than quoted prices that is observable for assets or liabilities. Level three: Inputs for the assets or liabilities that are not based on observable market data. 21

24 Insurance Company S.A.K.P (All amounts are in i Dinars unless otherwise stated) The table below gives information about how the fair values of the financial assets are determined: Fair value of the Company s financial assets that are measured at fair value on a recurring basis. Fair value hierarchy 22 Valuation technique(s) and Key input(s) Fair value as at Financial assets 31/12/14 31/12/13 Investments available for sale - Quoted Shares 56,091,486 50,264,900 1 Last bid price - Unquoted Shares 2,955,880-3 Technical valuation methods Significant unobservabl e input(s) N/A Adjusted book value of market risk N/A Relationship of unobservable inputs to fair value N/A The higher the market risk, the lower the fair value N/A - Investment Funds 1,663,596 6,138,821 2 Net assets value The fair value of financial assets and financial liabilities that are not measured at fair value on a recurring basis approximately equals their carrying values. During the year, there were no transfers between the levels. 18. Financial Risk Management The Company is exposed to a variety of financial risks, through its financial assets, financial liabilities, reinsurance assets and insurance liabilities. The most important components of this financial risk are credit risk, market risk and liquidity risk. In particular, the key financial risk is that the Company s investment proceeds may not be sufficient to fund the obligation arising from its underwritings. The Company s risk management is conducted by its senior management in accordance with policies approved by the Board of Directors. The various risks that the Company is exposed to and the processes in place to manage those risks are described below. Credit Risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The financial assets, other than investments in equities are exposed to credit risk. The assets value presented in the statement of financial position represent the maximum level exposed to those risks. The Company seeks to mitigate this risk by dealing with credit worthy parties including banks, financial institutions, insurance and reinsurance companies and non-concentration of its assets with one counter party. The maximum exposure to credit risk as of the date of statement of financial position is given below. Asset Description Loans secured by life insurance policies 230, ,803 Due from insurance and reinsurance companies 5,189,389 5,800,943 Trade and other receivables 7,942,300 9,858,460 Fixed deposits with banks 34,947,934 29,169,686 Cash and cash equivalents 9,579,271 3,380,731 57,888,914 48,333,623 Due from insurance and reinsurance companies represent amounts receivable from reinsurance claims net of premium on policies ceded. These are due from local and international companies of repute which have a track record of settling debts. Trade and other receivables primarily represent amounts due against premiums for policies underwritten by the Company. These are generally due for payment within a period of one month from the date of issue of the policy. The Company is selective in extending credit facilities to its customers and has a good track record of collecting its debts. Furthermore, credit risk with respect to receivables is limited due to dispersion across large number of customers.