STANDARD ALLIANCE INSURANCE PLC FINANCIAL STATEMENTS, 31 DECEMBER 2014

Transcription

1 STANDARD ALLIANCE INSURANCE PLC FINANCIAL STATEMENTS, 31 DECEMBER 2014

2 STANDARD ALLIANCE INSURANCE PLC 1 Contents Pages Corporate Information 2 Result at a glance 3 Statement of Directors' Responsibilities 4 Report of the Directors 5-8 Corporate Governance Report 9-14 Pursuant to section 60(2) of Investment and Securities Act 15 Management Discussion and Analysis Independent Auditors' Report Report of the Audit Committee 22 Summary of Significant Accounting Policies Statement of Financial Position 50 Statement of Profit or Loss and Other Comprehensive income 51 Statement of Changes in Equity 52 Statement of Cash Flows 53 Other notes to the financial statements Risk Management Report Appendices to the financial statements

3 STANDARD ALLIANCE INSURANCE PLC 2 Corporate information Country of Incorporation and domicile - Nigeria Company registration number - RC: Nature of business and principal activities - The principal activity of the Company is general and special risk insurance business Directors - Brig. Gen. Dominic Oneya (Rtd.) Bode Akinboye Omolola Oshiafi Orerhime Emerhor-Iwuagwu Adetayo Akintunde Etigwe Uwa, SAN Johnson Chukwu Austin Enajemo-Isire Company Secretary - Nwadiuto Onuoha FRC/2014/NBA/ Registered office - Plot 1 Block 94, Providence Street Lekki Scheme 1, Lekki Lagos Registrars - First Registrars Plot 2 Abebe Village Road, Iganmu Lagos Bankers - Access Bank Plc Ecobank Plc Enterprise Bank Limited FCMB Plc Fidelity Bank Plc First Bank of Nigeria Limited Guaranty Trust Bank Plc Mainstreet Bank Limited Lagoon Homes Savings & Loans Limited Skye Bank Plc Sterling Bank Plc Union Bank Plc United Bank for Africa Plc Reinsurers - JLT Group Plc, London African Reinsurance Corporation, Nigeria Continental Reinsurance Plc, Nigeria Nigeria Reinsurance Plc, Nigeria WAICA Reinsurance Pool, Nigeria Reinsurance Broker - Glanvill Enthoven Reinsurance Brokers Limited Auditors - BDO Professional Services (Chartered Accountants) ADOL House Plot 15, Central Business District Alausa, Ikeja Lagos. Actuaries - HR Nigeria Limited FRC/NAS/

4 STANDARD ALLIANCE INSURANCE PLC 3 Results at a glance % Statement of Comprehensive income: N'000 N'000 Gross premium written 4,333,254 3,792, Net premium income 3,863,664 3,095, Claims expenses 1,477,173 1,166, Underwriting results 1,430,687 1,005, Investment income 239, ,212 (29) Management expenses 1,795,804 1,497, Loss before tax (1,982,613) (789,736) 151 Statement of Financial Position: Cash and cash equivalents 701, , Investment in Associates 433,507 1,081,612 (60) Investment property 1,415,000 1,435,000 (1) Insurance contract liabilities 2,402,454 2,000, Paid up share capital 5,996,587 5,996,587 - Shareholders' funds 3,417,482 4,777,750 (28) Total Assets 7,721,387 8,788,881 (12) Per share data Basic loss per share (kobo) (17.35) (7.35) 136 Proposed dividend Net assets per share (Adjusted) - (0.07) (100) Share price (kobo) General Number of Shareholders 71,053 71,073 (0) Number of Employees (30) Number of Branches

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6 STANDARD ALLIANCE INSURANCE PLC FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 REPORT OF THE DIRECTORS 5 The Directors have the pleasure in presenting their annual report and the audited financial statements of the Company for the year ended 31 December The financial statements of the Company were prepared in compliance with the International Financial Reporting Standards (IFRS). Principal activities and business review The Company's principal activity is the provision of non-life risk underwriting and related financial services to its customers. Such services include provision of general insurance services to both individual and corporate customers. The following is the summary of the Company's operating results: N'000 N'000 Gross premium income 4,338,679 3,779,634 Claims incurred (1,194,074) (1,070,890) Underwriting expenses (1,341,981) (1,053,465) Underwriting results 1,430,687 1,005,363 Share of loss of associates (610,519) (239,741) Investment income 239, ,212 Loss before tax (1,982,613) (789,736) Taxation (98,029) (91,206) Loss after tax (2,080,642) (880,942) Directors The Directors of the Company are as follows: Brig. Gen. Dominic Oneya (Rtd.) - Chairman Mr Bode Akinboye - Group Managing Director/CEO Mrs Omolola Oshiafi - Director Mrs Orerhime Emerhor-Iwuagwu - Executive Director Mrs Adetayo Akintunde - Director Mr Johnson Egu Chukwu - Director Mr Etigwe Uwa, SAN - Director Austin Enajemo-Isire - Director

7 STANDARD ALLIANCE INSURANCE PLC 6 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 REPORT OF THE DIRECTORS (continued) Retirement of Directors The following Directors retired from the Board of the Company during the year, however, their retirement shall take effect from 20 January Alhaji Aliyu Sa'ad 2 Olorogun O'tega Emerhor, OON 3 Dr. Tom Imokhai 4 Mr. Ayodele Ajayi 5 Dr. Ramsey O. Mowoe, CON Appointment of Directors The following Directors were appointed to the Board of the Company during the year, however, their appointments shall take effect from 20 January Mr Bode Akinboye 2 Mrs Adetayo Akintunde 3 Mr Johnson Chukwu 4 Mr Etigwe Uwa,SAN 5 Mr Austin Enajemo-Isire 6 Mrs. Omolola Oshiafi Directors' interests The Directors' direct interests in the issued share capital of the Company as recorded in the Register of members as at 31 December 2014 is as follows: Number of shares held at the end of: Units % Units % Olorogun O'tega Emerhor, OON 415,130, ,130, Alhaji Aliyu Sa'ad 73,012, ,012, Brig. Gen. Dominic Oneya (Rtd.) 3,009, ,009, Mr. Ayodele Ajayi 1,442, ,442, Dr. Ramsey O. Mowoe, CON 1,200, ,200, Dr. Tom Imokhai 6,000, ,000, Mrs. Orerhime Emerhor-Iwuagwu 25,200, ,200, The Directors' indirect interests in the issued share capital of the Company as recorded in the Register of members are as follows: Units % Units % Olorogun O tega Emerhor, OON: Standard Alliance Investments Limited 3,158,892, ,158,892, Synetics Technologies Limited 309,581, ,581, New Heroes Limited 113,580, ,580,

8 STANDARD ALLIANCE INSURANCE PLC 7 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 REPORT OF THE DIRECTORS (continued) Contracts In accordance with Section 277 of the Companies and Allied Matters Act, CAP C20, LFN 2004, none of the Directors has notified the Company of any declarable interest in contracts. Acquisition of own shares By virtue of the existence of treasury shares per these financial statements arising from the issue of shares that did not result in net cash inflow to the Company during its public offer of 2008, the Company has secured an investor Gemrock Management Company Limited who acquired the Treasury shares of 2,212,046,824 units ordinary shares valued at N8,737,585,955 (par value of N1,106,024,412 and premium of N7,631,561,543) as at 31 December The transaction is however subject to obtaining all regulatory approval which is ongoing. Property, plant and equipment Information relating to changes in tangible assets is given in Note 15 to the financial statements. The Directors are of the opinion that the market value of the Company's assets is not lower than the value shown in the financial statements. Share capital information a) Share range analysis Number of Share % Range of shares Shareholders Units Total 1-1,000 15,048 14,482, ,001-5,000 27,790 86,881, ,001-10,000 11, ,982, ,001-50,000 12, ,440, , ,000 2, ,783, , ,000 1, ,199, ,001-1,000, ,181, ,000,001-5,000, ,674, ,000,001-10,000, ,264, ,000,001-50,000, ,095,873, ,000,001 and above 41 8,980,410, Total 71,053 11,993,173, b) Substantial interests in shares Apart from Standard Alliance Investments Limited and FCMB Plc which hold 3,158,892,140 units (26.34%) and 1,120,000,000 units (9.34%) respectively, no other shareholder held more than 5% of the issued share capital of the Company as at 31 December Corporate Social Responsibilies The Company makes donations to charitable and non-profit organisations in appreciation of the society's contributions toward the Company progress. During the year, the Company donated a sum of N700,000 to Fair Life Africa Foundation during the year. Human resources a) Employment of disabled persons The Company operates a non-discriminatory policy in the consideration of applications for employment, including those received from disabled persons. The Company's policy is that the most qualified and experienced persons are recruited for appropriate job levels irrespective of applicants state of origin, enthnicity, religion or physical condition. In the event that any employee becoming disabled in the course of employment, the Company is in a position to arrange appropriate training to ensure continuous employment of such person without being subjected to any disadvantage in his/her career development.

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10 STANDARD ALLIANCE INSURANCE PLC 9 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 CORPORATE GOVERNANCE REPORT Reporting entity Standard Alliance Insurance Plc is a Company incorporated and domiciled in Nigeria. The address of the Company s registered office is Plot 1, Block 94, Providence Street, Lekki Scheme 1, Lekki Epe Express way, Lekki, Lagos. The Company underwrites non-life insurance risks. The Company is listed on the Nigerian Stock Exchange. These financial statements of the Company as at and for the year ended 31 December 2014 comprise that of the Company and its interest in associates (together referred to as the 'Company' and individually as 'Company entities). The Company primarily operates in the insurance and other financial services sector but also in property development through one of its associates. Standard Alliance Insurance Plc has over the years built an enviable reputation and has consistently adopted, implemented and applied international best practices in corporate governance, service delivery and value creation for all its stakeholders. The Company's corporate governance principles are embodied in its Code of Corporate Governance, which represents the core values upon which the Company was founded. Code of Corporate Governance is designed to ensure that the company's business is conducted in a fair, honest and transparent manner that conforms to high ethical standards. For the entity, good corporate governance goes beyond just adhering to rules and policies of the regulators; it is about consistently creating excellent value for our stakeholders using the best possible principles within a sustainable and enduring system. In order to remain a pace setter in the area of good corporate governance practice, the Company's corporate governance practices are constantly under review in line with the dynamics of the business environment and guidelines of the regulatory bodies. Governance Structure The Company is committed to high standards of corporate governance. Corporate governance practice in the Company is drawn from various applicable codes of corporate governance issued by National Insurance Commission (NAICOM) and Securities and Exchange Commission (SEC). This ensures compliance with regulatory requirement as well as the core value which the company was established. The provision of the codes is geared towards ensuring transparency and accountability of the Board and Management to shareholders of the company. The Board of Directors Presently, the company has an eight man Board led by a Chairman who is a non-executive Director. There are two executive directors one of whom is the Group Managing Director/CEO. All other five directors are non-executive. All the Directors bring various and varied competencies to bear on all Board deliberations. The Directors individually have attained the highest pinnacle of their chosen professions. The Board meets quarterly and is responsible for effective control and monitoring of the Company s strategy. The ultimate responsibility for the governance of the Company resides with the Board of Directors, which is accountable to the shareholders for creating and delivering sustainable value through the management of the Company's business. The Board is also responsible for the management of the company's relationship with its various stakeholders. The day to day running of the Company is delegated to the Group Managing Director by the Board of Directors assisted by the Management Committees.

11 STANDARD ALLIANCE INSURANCE PLC 10 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 CORPORATE GOVERNANCE REPORT (Continued) Responsibilities of the Board The responsibilities of the Board of Directors include: i. Review corporate strategy, major plans of actions, risk policies, business plans, setting performance objectives, monitoring implementation and corporate performance and overseeing major capital expenditures and acquisitions ii. iii. iv. v. vi. vii. Select, compensate, monitor and when necessary, replace key executives and oversee succession planning. Monitor the effectiveness of the governance practices under which it operates and make changes as may be necessary. Ensure the integrity of the Company s accounting and financial reporting systems, including the independent audit and that appropriate systems of control are in place, in particular, systems for monitoring risk, financial control and compliance with the law. Monitor and manage potential conflicts of interest of management, board members and shareholders, including misuse of corporate assets and abuse in related party transactions. Supervise and monitor the execution of policies and providing direction for the management. Monitor potential risks within the company including recognising and encouraging honest whistle blowing. viii. Oversee the process of disclosure and communication in the company. Roles of Chairman and Chief Executive The roles of Chairman and Chief Executive are separate and no one individual combines the two positions. The Chairman's main responsibility is to lead and manage the Board to ensure that it operates effectively and fully discharges its legal and regulatory responsibilities. The Chairman is responsible for ensuring that Directors receive accurate, timely and clear information to enable the Board take informed decisions, monitor effectively and provide advice to promote the success of the Company. The Chairman also facilitates the contributions of Directors and promotes effective relationships and open communications between Executive and non-executive Directors, both inside and outside the Boardroom. The Board has delegated the responsibility for the day-to-day management of the Company to the Managing Director, who is supported by Executive Management. The Managing Director executes the powers delegated to him in accordance with guidelines approved by the Board of Directors. Executive management is accountable to the Board for the development and implementation of strategies and policies. The Board regularly reviews group performance, matters of strategic concern and any other matters it regards as material. Board Committees The Board carries out some of its responsibilities through the Board sub-committees whose terms of reference set out clearly their roles, responsibilities, scope of authority and procedures for reporting to the Board. Each committee is chaired by a non-executive Director in compliance with principles of good corporate governance and the Audit Committee is chaired by a representative of the shareholders. These committees report to the Board of Directors on their activities and decisions, which are ratified by the full Board. The committees are as follows: 1) The Investment and Finance Committee This is a standing committee of the Board with the responsibility for investment. The terms of reference of the committee includes: i. Ensure investment policies in place are documented, including placement limits. ii. Review existing investments and investment strategies The Board Investment and Finance Committee has the following members during the period under review: Mr Joshua Ayodele Ajayi Dr Ramsey O. Mowoe Mr. Thomas Imokhai Mrs. Orerhime Emerhor-Iwuagwu - Chairman - Member - Member - Member

12 STANDARD ALLIANCE INSURANCE PLC 11 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 CORPORATE GOVERNANCE REPORT (Continued) 2) The Strategy and Establishment Committee The members of the Committee includes the following: Dr. Ramsey Mowoe (CON) - Chairman Mr. Thomas Imokhai - Member Brig. Gen. Dominic Oneya (Rtd) - Member Mrs. Orerhime Emerhor-Iwuagwu - Member The terms of reference of this Committee include the following: To recommend strategic initiatives to the Board Review and make recommendations on procedural manuals, policies, staff issues and staff remuneration and staff welfare. Review and make recommendation of recruitment, promotion, termination of top management to the Board. Review and approve capital expenditure and recommend for Board ratification. 3) The Risk and Remuneration Committee The terms of reference of this Committee includes the following: Considers credit and risk management policies of the company and make recommendation to the Board for changes where necessary. Review risk portfolio of the Company and make recommendation to the Board Ensure an effective risk culture is built and maintained in the Company. Review and approve risk appetite of the company and recommend for Board ratification. To approve compensation policy and review compensation for General Managers and above. The Committee has the following members: Brig. Gen. Dominic Oneya (Rtd) Mr. Thomas Imokhai Mrs. Orerhime Emerhor-Iwuagwu Mr Joshua Ayodele Ajayi - Chairman - Member - Member - Member 4) The Audit Committee The Audit Committee is made up of 6 (six) members, three representatives each of Shareholders and Directors. Its members are elected at the Annual General Meeting. In addition to its responsibility to review the scope, independence and objectivity of the audit, the Committee carries out all such matters as are reserved to it by the Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria, These functions include to: Review the adequacy and effectiveness of the company s internal control policies prior to endorsement by the Board. Direct and supervise investigations into matters within the scope, such as evaluation of internal controls, cases of employee, business partners and client misconduct or conflict of interest. The Committee is made up of the following members: Mr Chuka Onwuchekwa - Chairman (Shareholder) Mr. Matthew Esonanjor - Member (Shareholder) Mr. Godwin Anono - Member (Shareholder) Dr. Ramsey Mowoe - Member (Director) Brig. Gen. Dominic Oneya (Rtd) - Member (Director) Mr. Ayodele Ajayi - Member (Director)

13 STANDARD ALLIANCE INSURANCE PLC 12 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 CORPORATE GOVERNANCE REPORT (Continued) Internal Control It is the responsibility of the Board of Directors to ensure that all the records are accurate and correctly reflect the financial position of the Company. The Board is mindful of the fact that as an insurance company, great relevance is placed by policy holders and potential investors on the accuracy of information contained in its financial statements. In order to ensure the accuracy of its records, the Board sets standards that the Quality Assurance department implements system of internal control comprising policies, standards and procedures to ensure that the safety of assets and reduction of the risk of loss, error, fraud and other irregularities. Both the Quality Assurance (Internal Auditors) and the External Auditors independently appraise the adequacy of the internal controls. BDO Professional Services acted as external auditors to the Company for the 2014 financial year. report for the year under review is contained on pages 20 and 21 of these financial statements Their Attendance of Board and Committee Meetings The table below shows the frequency of meetings of the Board of Directors and Board Committees, as well as Members attendance for the financial year ended 31 December Board Meetings 30/1/ /5/ /11/ /12/ /12/2014 Total Alhaji Yahaya Sa ad(chairman) Olorogun O tega Emerhor, OON Mr Thomas Imokhai Brig. Gen. Dominic Oneya (Rtd) Mr Ayodele Joshua Ajayi Dr Ramsey Mowoe, CON Mrs Orerhime Emerhor-Iwuagwu Audit Committee Meetings 24/4/2014 8/8/2014 6/11/2014 Total Mr Chuka Onwuchekwa (Chairman) Dr Ramsey Mowoe, CON Brig. Gen. Dominic Oneya (Rtd) Mr Matthew Esonanjor Mr Godwin Anono Mr Ayodele Joshua Ajayi

14 STANDARD ALLIANCE INSURANCE PLC 13 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 CORPORATE GOVERNANCE REPORT (Continued) Investment and Finance Committee Meetings 8/8/2014 6/11/2014 Total Mr Ayodele Joshua Ajayi (Chairman) Mr Thomas Imokhai Dr Ramsey Mowoe, CON Mrs Orerhime Emerhor-Iwuagwu Strategy and Establishment Committee Meetings 14/8/2014 7/11/2014 Total Dr Ramsey Mowoe, CON (Chairman) Mr Tom Imokhai Brig. Gen. Dominic Oneya (Rtd) Mrs Orerhime Emerhor-Iwuagwu Risk and Remuneration Committee Meetings 14/8/2014 6/11/2014 Total Brig. Gen. Dominic Oneya (Rtd) Mr Tom Imokhai Mr Ayodele Joshua Ajayi Mrs Orerhime Emerhor-Iwuagwu SCHEDULE OF YEARLY BOARD/COMMITTEE MEETINGS & AGM S/N DATES TYPE OF MEETING PROPOSED AGENDA 1 1st week of December Board Finance, Establishment & Risk Consideration/approval of coming each year Committee/Board meetings year's budget 2 Last week of April All Committees and Board meetings To consider and approve 1st quarter accounts for period ended 30th March of each year under review and audited accounts for the year ended 31 December of each year under review and general Company s brief 3 Last week of July All Committees and Board meetings To consider and approve 2nd quarter accounts for the period ended 30th June of year under review and general Company s brief 4 Last week of October All Committees and Board meetings To consider and approve 3rd quarter accounts for period ended 30 September of each year under review and general Company's brief.

15 STANDARD ALLIANCE INSURANCE PLC 14 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 CORPORATE GOVERNANCE REPORT (Continued) Support Committees 1) Business Committee The Committee is responsible for strategic initiatives on business generation and membership includes: i. Group Managing Director/CEO ii. All Divisional Heads iii. Group Head, Technical iv. Group Head, Corporate Services v. Chief Finance Officer vi. Head, Internal Control/Quality Assurance vii. Head, Information Technology (IT) viii. Head, Enterprise Risk Management 2) Weekly Activity Review Committee This Committee meets weekly to review business development activities of the entire Company. Committee consists of: The i. Group Managing Director/CEO ii. All Divisional Heads iii. Group Head, Technical iv. Head, Information Technology v. Head, Corporate Services vi. Head, Internal Audit/Quality Assurance vii. Chief Finance Officer viii. Head, Enterprise Risk Management ix. All marketing staff 3) Management Performance Review Committee This Committee meets every quarter to review the Company s performance. The meetings are usually held two weeks following the end of a quarter. The Committee consists of: i. Group Managing Director/CEO ii. Executive Director iii. All Divisional Heads iv. All Regional Heads v. All Branch Managers vi. Group Head, Technical vii. Head, Information Technology viii. Chief Finance Officer ix. Head, Corporate Services x. Head, Internal Audit/Quality Assurance xi. Head, Enterprise Risk Management

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17 STANDARD ALLIANCE INSURANCE PLC 16 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 MANAGEMENT'S DISCUSSION AND ANALYSIS This Management Discussion and Analysis as at 31 December 2014 has been prepared in line with the regulatory requirements and also the need to foster deeper understanding of our strategy, operating risk and performance. The financial information presented in this report including the tabular amounts is in Naira and is prepared in accordance with the International Financial Reporting Standards ( IFRS ) To facilitate wholesome understanding of the Company s position, it is advised that the content in this report be read in conjunction with the financial statements. The principal activities of the Company during the year remained as general insurance business. The management commentary was as at 31 December 2014 and should be read in conjunction with the financial statements as at 31 December During the year under review the activities of Boko Haram continued unabated in some states in the North. This has caused unprecedented loss of lives and properties and gradually grounding the businesses of the affected states. Despite the initiatives by policy makers to encourage low cost or micro insurance products and to expand policies to better reach low and medium income community, low level acceptance of insurance among the wider public continue to remain the biggest hurdle for the industry. Business Objective and Strategy Standard Alliance Insurance Plc is a public liability company registered in Nigeria to provide a range of insurance services to individuals, corporate bodies and government. Its objective is to be an Insurer of choice. To achieve this, the Company is trying to lay down well-structured plans and corporate strategies to drive its growth. It is the intention of management to continually churn out new products that will satisfy the quest of our numerous customers while deepening the existing ones. To ensure that this goal is achieved, the Company's strategy is to broaden and align service delivery channels along customer segment taking cognizance of the difference between policy administration product support and customer care to adequately cater for peculiar needs for each segment.

18 STANDARD ALLIANCE INSURANCE PLC 17 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Performance Indicators Operating results and financial position BUDGET ACTUAL % ACTUAL ACHIEVED 2013 N 000 N 000 N 000 Gross premium 7,044,091 4,338, ,799,634 Net premium 6,057,918 3,863, ,095,919 Claims expenses 886,182 1,477, ,166,515 Investment income 242, , ,212 Profit/loss before tax 1,136,534 (1,982,613) (174) (789,736) Taxation 409,152 (98,029) (24) (91,206) Loss after tax 727,382 (2,080,642) (286) (880,942) Property, plant and equipment 2,344,791 2,222, ,909,303 Net assets 6,345,118 3,417, ,741,472 Ordinary share capital 5,996,587 5,996, ,996,587 Shareholders funds 6,345,118 3,417, ,741,472 Insurance funds 1,817,703 2,402, ,000,759 The business experienced some challenges resulting from the on-going business model restructuring and transformation of the service channels. These imperatives along with other initiatives targeted at strengthening our enterprise support capabilities have started yielding results. Performance Review The Company experienced a growth of 14% in gross premium written when compared to the prior year s result of N3.79 billion. The growth was mainly attributable to increasing marketing network. The increase in the Company s activity was also reflected in the earned premium of N3.9 billion, an increase of N856 million over that of Operating Expenses Operating Expenses which includes underwriting expenses, claims expenses, reinsurance expenses and management expenses totaled N5.09 billion for the year ended December 2014 as against N4.31 billion recorded in 2013, an increase of N0.7 billion which was largely due to increase in gross premium income during the year, consequent upon which the management expenses increased. Loss before Taxation The Company recorded a loss before tax of N1.98 billion in 2014 as against loss of N790 million in This increase in loss is mainly as a result of our share in the losses of our associate company.

19 STANDARD ALLIANCE INSURANCE PLC 18 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Liquidity, Capital Resources and Risk Factors The Company s cash investment continues to be in accordance with its investment policy and complies with regulatory requirements. The Company s investment strategy is underpinned by a focus on highly liquid financial instrument such as term deposit, equity and debt instrument. We expect our investment income to grow considerably in the coming years as we are poised to take advantage of the investment opportunities in the money market and capital markets. Future Outlook We expect to see a number of significant adjustments in the year 2015, especially to the realities of vastly changed government revenue profile and the Naira exchange rates against foreign currencies. The private sector may see intensification of existing and new export initiatives. There are signals that regulatory emphasis will be placed on promoting GDP-enhancing and foreign exchange earning activities. Inflation is very likely to commence an upswing and the need for cost control by both government at all levels and private sector operators is imperative. On our own part there are plans to merge the operations of the Company with that of its associate, Standard Alliance Life Assurance Limited. When consummated it is hoped that the resulting bigger composite company will take advantage of the huge potentials in both the General and Life segment of the insurance market. The coming on board of the new strategic investor, Gemrock Management Company Limited and the reconstitution of the Board and management team will lead to significant improvement in both corporate governance and financial performance going forward. Government policies and economic reforms We expect to see policy decisions and developments in the industry. Elections would have been held across the country freely and fairly. The activities of States and Federal tiers of government will continue to impact positively on the business environment. Performance Management The Company will continue with its quarterly nationwide performance review as a means of focusing and driving marketing activities. This will also aid in monitoring and matching actual performance with budget. IT Support The Company will continue to accord IT investment the deserved priority not only for its traditional investment status but also as a means of ensuring efficient and prompt service delivery.

20 STANDARD ALLIANCE INSURANCE PLC 19 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued) Conclusion Many factors and assumptions may affect the manifestation of the Company s projections, including but not limited to production rate, claims rate, employees turnover, relationships with Brokers, Agents and Suppliers, economic and political conditions, non compliance with laws or regulations by the Company s employees, brokers, agents, suppliers and/or partners and other factors that are beyond its control. Without prejudice to the Company, such forward looking-statement reflects Management s current belief and based on available information which are subject to risks and uncertainties as identified. Therefore, the eventual action and/or outcome could differ materially from those expressed or implied in such forward looking statements, or could affect the extent to which a particular projection materializes. The forward looking statements in this document reflect the Company s expectation at the time Company s Board of Directors approved this document and are subject to change after this date. The Company does not undertake any obligation to update publicly or revise any such forward-looking statements, unless required by applicable legislation or regulation.

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24 STANDARD ALLIANCE INSURANCE PLC 23 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following are the significant accounting policies adopted by the Company in the preparation of its financial statements.these policies have been consistently applied to all year's presentations, unless otherwise stated. 1 The reporting entity The Company was incorporated in July 1981 as a Private Limited Liability Company and commenced full operations in 1982 under the name Jubilee Insurance Company Limited. The name was changed to Standard Alliance Insurance Company Limited (Standard Alliance) in August Standard Alliance Insurance became a Public Liability Company (Plc) on 30th May 2002 and was quoted on the Nigerian Stock Exchange in December The Company is 100% fully owned by Nigerian citizens and Institutional investors. Its major shareholders are: Units % Standard Alliance Investments Ltd 3,158,982, FCMB Plc 1,428,700, Synetics Technologies Limited 309,581, New Heroes Limited 113,580, PanAfrica Capital Plc 252,931, Stanbic Nominee Trading Ltd 321,013, The Company has interest in the following associates: Units % Standard Alliance Life Assurance Ltd 1,905, Standard Alliance Properties Ltd 275, Standard Alliance Capital and Assets Ltd 400, These financial statements for the year ended 31 December 2014 were approved for issue by the Board of Directors on 6 July The Company s principal activity continues to be provision of risk underwriting and related financial services to its customers. Such services include provision of general insurance services to both corporate and individual customers. 2. Basis of presentation 2.1 Statement of compliance with International Financial Reporting Standards (IFRSs) The financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB) and the interpretations of these standards, issued by the International Accounting Standards Board (IASB) and the requirements of the Companies and Allied Matters Act CAP C20, LFN 2004 and the Insurance Act, I17, 2004 and regulatory guidelines as pronounced from time to time by National Insurance Commission (NAICOM), to the extent that they are not in conflict with IFRS.

25 STANDARD ALLIANCE INSURANCE PLC 24 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.2 Going concern The financial statements are prepared on a going concern basis. The Company has no intention or need to reduce substantially its business operations. 2.3 Basis of measurement Historical cost basis was used in the preparation of the financial statements as modified by certain items of: Investments at fair value Available for sale financial assets that are measured at fair value Impaired assets at their recoverable amounts Insurance contract liabilities at fair value Land and Building stated at revalued amount 2.4 Functional and Presentation Currency The financial statements are presented in Nigerian naira (N), which is also the functional currency of the Company, rounded to the nearest thousand (N'000) unless otherwise indicated. 2.5 Order of presentation The Company presents its statement of financial position broadly in order of liquidity. An analysis regarding recovery or settlement within twelve months after the reporting date (current) and more than 12 months after the reporting date (non-current) is presented in the notes.

26 STANDARD ALLIANCE INSURANCE PLC 25 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 NOTES TO THE FINANCIAL STATEMENTS 3 Significant management judgements and key sources of estimation uncertainty In the process of applying the accounting policies adopted by the Company, the directors make certain judgments and estimates that may affect the carrying values of assets and liabilities in the next financial period. Such judgments and estimates are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. The directors evaluate these at each financial reporting date to ensure that they are still reasonable under the prevailing circumstances based on the information available. The preparation of the Company s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require material adjustments to the carrying amount of the asset or liability affected in the future. These factors could include: (i) Significant judgements made in applying the Company's accounting policies The judgements made by the directors in the process of applying the Company s accounting policies that have the most significant effect on the amounts recognised in the financial statements include: Whether it is probable that future taxable profits will be available against which temporary differences can be utilised; and Whether the Company has the ability to hold 'held-to maturity' investments until they mature. If the Company were to sell other than an insignificant amount of such investments before maturity, it would be required to classify the entire class as "available-for-sale" and measure them at fair value. (ii) Key sources of estimation uncertainty a) Valuation of insurance contract liabilities Critical assumptions are made by the actuary in determining the present value of actuarial liabilities. These assumptions are set out in accounting policy 5.19 and as embedded in the report. The liability for insurance contracts is either based on current assumptions or on assumptions established at inception of the contract, reflecting the best estimate at the time increased with a margin for risk and adverse deviation. All contracts are subject to a liability adequacy test, which reflects management s best current estimate of future cash flows. Estimates are also made as to future investment income arising from the assets backing insurance contracts. These estimates are based on current market returns as well as expectations about future economic and financial developments. Assumptions on future expenses are based on current expense levels, adjusted for expected expense inflation if appropriate. b) Property, plant and equipment Critical estimates are made by the directors in determining the useful lives and residual values of property, plant and equipment.

27 STANDARD ALLIANCE INSURANCE PLC 26 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 NOTES TO THE FINANCIAL STATEMENTS c) Impairment losses Estimates are made in determining the impairment losses on assets. Such estimates include the determination of the recoverable amount of the asset. d) Income taxes The Company is subject to income taxes under the Nigerian Tax Laws. Significant estimates are required in determining the provisions for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcomes of these matters are different from the amounts that were initially recorded, such differences will impact the income tax and the deferred tax provisions in the period in which such determinations are made. e) Critical judgments in applying the entity's accounting policies In the process of applying the Company's accounting policies, management has made judgements in determining: i) The classification of financial assets and liabilities ii) Whether assets are impaired. iii) Whether land and buildings meet the criteria to be classified as investment property.

28 STANDARD ALLIANCE INSURANCE PLC 27 FINANCIAL STATEMENTS, 31 DECEMBER NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ISSUED THAT ARE NOT YET EFFECTIVE IFRS Reference Nature of change Application date Impact on initial Application IFRS 1 First-time Adoption of International Financial Reporting Standards Annual The amendment to the Basis for Conclusions clarifies that an Improvement entity has an option to use either: s ( The IFRSs that are mandatory at the reporting date, or Cycle) - One or more IFRSs that are not yet mandatory, if those IFRSs Issued permit early application. December 2013 Mandatory adoption for periods beginning on or after 1 July Early adoption permitted. No impact, as the Company has already adopted IFRS IFRS 2 Share-based Payment Annual Improvement s ( Cycle) Issued December 2013 The amendment clarifies vesting conditions by separately defining a performance condition and a service condition, both of which were previously incorporated within the definition of a vesting condition. IFRS 3 Business Combinations Annual The amendment clarifies that contingent consideration is Improvement assessed as either being a liability or an equity instrument on s ( the basis of IAS 32 Financial Instruments: Presentation, and Cycle) also requires contingent consideration that is not classified as Issued equity to be remeasured to fair value at each reporting date, December with changes in fair value being reported in profit or loss Annual Improvement s ( Cycle) Issued December 2013 The amendments to IFRS 3 clarify that: - The formation of all types of joint arrangements as defined in IFRS 11 (ie joint ventures and joint operations) are excluded from the scope of IFRS 3 - The scope exception only applies to the accounting by the joint arrangement in its own financial statements and not to the accounting by the parties to the joint arrangement for their interests in the joint arrangement. IFRS 5 Non-current Assets Held for Sale and Discontinued Operations Annual The amendment clarifies that the reclassification of an asset Improvement or disposal group from being held for sale to being held for s ( distribution to owners, or vice versa is considered to be a Cycle) continuation of the original plan of disposal. Issued Upon reclassification, the classification, presentation and December measurement requirements of IFRS 5 are applied If an asset ceases to be classified as held for distribution to owners, the requirements of IFRS 5 for assets that cease to be classified as held for sale apply. IFRS 7 Financial Instruments: Disclosures Annual Improvement s ( Cycle) The IASB clarified the circumstances in which an entity has continuing involvement from the servicing of a transferred asset. Continuing involvement exists if the servicer has a future interest in the performance of the transferred financial asset. Examples of situations where continuing involvement exists are where a transferor s servicing fee is: - A variable fee which is dependent on the amount of the transferred asset that is ultimately recovered; or - A fixed fee that may not be paid in full because of nonperformance of the transferred financial asset. The amendment is required to be applied retrospectively in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. However, the amendment needs not to be applied for any period beginning before the annual period in which the entity first applies the amendments. Mandatory adoption for periods beginning on or after 1 July Early adoption permitted. Mandatory adoption for periods beginning on or after 1 July Early adoption permitted. Mandatory adoption for periods beginning on or after 1 July Early adoption permitted. Mandatory adoption for periods beginning on or after 1 January Early adoption permitted. Mandatory adoption for periods beginning on or after 1 January Early adoption permitted. No impact as the Company has no share based payment No impact, as Company is not involved in any business combination. No impact No impact The Company is yet to assess the impact of the adoption of this standard.

29 STANDARD ALLIANCE INSURANCE PLC 28 FINANCIAL STATEMENTS, 31 DECEMBER 2014 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ISSUED THAT ARE NOT YET EFFECTIVE IFRS Reference Nature of change Application date Impact on initial Application A consequential amendment has been made to IFRS 1 Firsttime Adoption of International Financial Reporting Standards, in order that the same transitional provision applies to first time adopters. Applicability of the offsetting amendments in condensed interim financial statements A further amendment to IFRS 7 has clarified that the application of the amendment Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS 7) issued in December 2011 is not explicitly required for all interim periods. However, it is noted that in some cases these disclosures may need to be included in condensed interim financial statements in order to comply with IAS 34. IFRS 8 Operating Segments Annual The amendments require additional disclosures regarding Improvement management s judgements when operating segments have s ( been aggregated in determining reportable segments, Cycle) including: Issued: - A description of the operating segments that have been December aggregated The economic indicators considered in determining that the aggregated operating segments share similar economic characteristics. Reconciliation of the total of a reportable segment s assets to the entity s assets: The amendment clarifies that a reconciliation of the total of reportable segments assets to the entity s assets is only required if a measure of segment assets is regularly provided to the chief operating decision maker. IFRS 9 Financial Instruments IFRS 9 (2009) IFRS 9 (2009) applies to all assets within the scope of IAS 39 Issued: Financial Instruments: Recognition and Measurement. IFRS 9 November requires that on initial recognition, all financial assets are 2009 measured at fair value (plus an adjustment for certain transaction costs if they are not measured as at fair value through profit or loss) and are classified into one of two subsequent measurement categories: - Amortised cost - Fair value. IFRS 9 (2009) eliminates the Held to Maturity (HTM), Available for Sale (AFS) and Loans and Receivables categories. In addition, the exception under which equity instruments and related derivatives are measured at cost rather than fair value, where the fair value cannot be reliably determined, has been eliminated with fair value measurement being required for all of these instruments. A financial asset is measured after initial recognition at amortised cost only if it meets the following two conditions: 1. The objective of an entity s business model is to hold the financial asset in order to collect contractual cash flows 2. The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Mandatory adoption for periods beginning on or after 1 July Early adoption permitted. Can only be applied if an entity s date of initial application is before February The Company would implement the standard on adoption. To be implemented on adoption of the standard.

30 STANDARD ALLIANCE INSURANCE PLC 29 FINANCIAL STATEMENTS, 31 DECEMBER 2014 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ISSUED THAT ARE NOT YET EFFECTIVE IFRS Reference Nature of change Application date Impact on initial Application All other instruments are required to be measured after initial recognition at fair value. IFRS 9 (2009) retains the current requirement for financial instruments that are held for trading to be recognised and measured at fair value through profit or loss, including all derivatives that are not designated in a hedging relationship. Hybrid contracts with a host that are within the scope of IFRS 9 (2009) (ie a financial host) must be classified in their entirety in accordance with the classification approach summarised above. This eliminates the existing IAS 39 requirement to account separately for a host contract and certain embedded derivatives. The embedded derivative requirements under IAS 39 continue to apply where the host contract is a non-financial asset and for financial liabilities. IFRS 9 (2009) includes an option which permits investments in equity instruments to be measured at fair value through other comprehensive income. This is an irrevocable election to be made, on an instrument by instrument basis, at the date of initial recognition. Where the election is made, no amounts are subsequently recycled from other comprehensive income to profit or loss. Where this option is not taken, equity instruments with the scope of IFRS 9 (2009) are classified as at fair value through profit or loss. Irrespective of the approach adopted for the equity instrument itself, dividends received on an equity instrument are always recognised in profit or loss (unless they represent a return of the cost of investment). Subsequent reclassification of financial assets between the amortised cost and fair value categories is prohibited, unless an entity changes its business model for managing its financial assets in which case reclassification is required. However, the guidance is restrictive and such changes are expected to be very infrequent. IFRS 9 (2009) states explicitly that the following are not changes in business model: 1. A change in intention relating to particular financial assets (even in circumstances of significant changes in market conditions) 2. A temporary disappearance of a particular market for financial assets 3. A transfer of financial assets between parts of the entity with different business models. IFRS 9 (2010) Issued: October 2011 As noted above, IFRS 9 (2009) was published in November 2009 and contained requirements for the classification and measurement of financial assets. Equivalent requirements for financial liabilities were added in October 2010, with most of them being carried forward unchanged from IAS 39. In consequence: '- A financial liability is measured as at fair value through profit or loss (FVTPL) if it is held for trading, or is designated as at FVTPL using the fair value option - Other liabilities are measured at amortised cost. In contrast to the requirements for financial assets, the bifurcation requirements for embedded derivatives have been retained; similarly, equity conversion features will continue to be accounted for separately by the issuer. However, some changes have been made, in particular to address the issue of where changes in the fair value of an entity s financial liabilities designated as at FVTPL using the fair value option, which arise from changes in the entity s own credit risk, should be recorded. This amendment is a result of consistent feedback received by the IASB from its constituents that changes in an entity s own credit risk should not affect profit or loss unless the financial liability is held for trading.

31 STANDARD ALLIANCE INSURANCE PLC 30 FINANCIAL STATEMENTS, 31 DECEMBER 2014 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ISSUED THAT ARE NOT YET EFFECTIVE IFRS Reference Nature of change Application date Impact on initial Application IFRS 9 (2013) Issued: November 2013 IFRS 9 (2014) Issued: July 2014 IFRS 9 (2010) requires that changes in the fair value of financial liabilities designated as at FVTPL which relate to changes in an entity s own credit risk should be recognised directly in other comprehensive income (OCI). However, as an exception, where this would create an accounting mismatch (which would be where there is a matching asset position that is also measured as at FVTPL), an irrevocable decision can be taken to recognise the entire change in fair value of the financial liability in profit or loss. Three significant changes/additions were made compared to the previous version of IFRS 9: - Add new hedge accounting requirements - Withdraw the previous effective date of 1 January 2015 and leave it open pending the completion of outstanding phases of IFRS 9 - Make the presentation of changes in own credit in other comprehensive income (OCI) for financial liabilities under the fair value option available for early adoption without early application of the other requirements of IFRS 9. The new hedge accounting requirements are more principlesbased, less complex, and provide a better link to risk management and treasury operations than the requirements in IAS 39 Financial Instruments: Recognition and Measurement. The new model allows entities to apply hedge accounting more broadly to manage profit or loss mismatches, and as a result reduce artificial hedge ineffectiveness that can arise under IAS 39. Key changes introduced by the new model include: - Simplified effectiveness testing, including removal of the % highly effective threshold - More items will now qualify for hedge accounting, eg pricing components within a non-financial item, and net foreign exchange cash positions - Entities can hedge account more effectively the exposures that give rise to two risk positions (eg interest rate risk and foreign exchange risk, or commodity risk and foreign exchange risk) that are managed by separate derivatives over different periods - Less profit or loss volatility when using options, forwards, and foreign currency swaps - New alternatives available for economic hedges of credit risk and own use contracts which will reduce profit or loss volatility. IFRS 9 Financial Instruments (2014) incorporates the final requirements on all three phases of the financial instruments projects classification and measurement, impairment, and hedge accounting. IFRS 9 (2014) adds to the existing IFRS 9: - New impairment requirements for all financial assets that are not measured at fair value through profit or loss. -Amendments to the previously finalised classification and measurement requirements for financial assets. In a major change, which will affect all entities, a new expected loss impairment model in IFRS 9 (2014) replaces the incurred loss model in IAS 39 Financial Instruments: Recognition and Measurement. Under IFRS 9 (2014), the Can only be applied if No impact an entity s date of initial application is before February Mandatory adoption for periods beginning on or after 1 January Early adoption permitted. The Company is still assessing the impact of adoption.

32 STANDARD ALLIANCE INSURANCE PLC 31 FINANCIAL STATEMENTS, 31 DECEMBER 2014 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ISSUED THAT ARE NOT YET EFFECTIVE IFRS Reference Nature of change Application date Impact on initial Application impairment model is a more forward looking model in that a credit event (or impairment trigger ) no longer has to occur before credit losses are recognised. For financial assets measured at amortised cost or fair value through other comprehensive income (FVTOCI), an entity will now always recognise (at a minimum) 12 months of expected losses in profit or loss. Lifetime expected losses will be recognised on these assets when there is a significant increase in credit risk after initial recognition. For trade receivables there is a practical expedient to calculate expected credit losses using a provision matrix based on historical loss patterns or customer bases. However, those historical provision rates would require adjustments to take into account current and forward looking information. The new impairment requirements are likely to bring significant changes. Although provisions for trade receivables may be relatively straightforward to calculate, new systems and approaches may be needed. However, for financial institutions the changes are likely to be very significant and require significant changes to internal systems and processes in order to capture the required information. In other changes, IFRS 9 (2014) also introduces additional application guidance to clarify the requirements for contractual cash flows of a financial asset to be regarded as giving rise to payments that are Solely Payments of Principal and Interest (SPPI), one of the two criteria that need to be met for an asset to be measured at amortised cost. Previously, the SPPI test was restrictive, and the changes in the application of the SPPI test will result in additional financial assets being measured at amortised cost. For example, certain instruments with regulated interest rates may now qualify for amortised cost measurement, as might some instruments which only marginally fail the strict SPPI test. A third measurement category has also been added for debt instruments - FVTOCI. This new measurement category applies to debt instruments that meet the SPPI contractual cash flow characteristics test and where the entity is holding the debt instrument to both collect the contractual cash flows and to sell the financial assets. In comparison with previous versions of IFRS 9, the introduction of the FVTOCI category may result in less profit or loss volatility, in particular for entities such as insurance companies which hold large portfolios with periodic buying and selling activities. The amendments could lead to significant reclassifications of debt instruments across the different measurement categories: amortised cost, FVTOCI, and FVTPL. This may lead to less volatility in profit or loss for debt investment portfolios, but greater equity volatility if assets are reclassified from amortised cost to FVTOCI (which could affect regulatory capital).

33 STANDARD ALLIANCE INSURANCE PLC 32 FINANCIAL STATEMENTS, 31 DECEMBER 2014 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ISSUED THAT ARE NOT YET EFFECTIVE IFRS Reference IFRS 9 (own credit risk requirement s) Nature of change Application date Impact on initial Application IFRS 9 (2014) provides an option to early adopt the own credit provisions for financial liabilities measured at fair value through profit or loss (FVTPL) under the fair value option without any of the other requirements of IFRS 9. This option will remain available until 1 January Entities that use the fair value option and designate financial liabilities at fair value through profit or loss (FVTPL) present the fair value changes in own credit in OCI instead of profit or loss. Therefore, for financial liabilities designated at FVTPL, entities can continue to apply IAS 39 Financial Instruments: Recognition and Measurement but follow the presentation requirement in IFRS 9 and present the changes in own credit in OCI. This amendment is expected to mainly affect financial institutions and insurers. Can be applied until the effective date of IFRS 9 (2014) which is 1 January IFRS 10 Consolidated financial statements Amendments to IFRS 10 Issued: September 2014 Amendments to IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments clarify the accounting for transactions where a parent loses control of a subsidiary, that does not constitute a business as defined in IFRS 3 Business Combinations, by selling all or part of its interest in that subsidiary to an associate or a joint venture that is accounted for using the equity method. In the case of any retained interest in the former subsidiary, gains and losses from the remeasurement are treated as follows: Mandatory adoption for periods beginning on or after 1 January Early adoption permitted. No impact. - The retained interest is accounted for as an associate or joint venture using the equity method: The parent recognises the gain or loss in profit or loss only to the extent of the unrelated investors interests in the new associate or joint venture. The remainder is eliminated against the carrying amount of the investment in the associate or joint venture. - The retained interest is accounted for at fair value in accordance with IFRS 9 Financial Instruments: The parent recognises the gain or loss in full in profit or loss. IFRS 11 Joint Arrangements Amendments Amendments to IFRS 11 Accounting for Acquisitions of to IFRS 11 Interests in Joint Operations Issued: May The amendments require an entity to apply all of the 2014 principles of IFRS Business Combinations when it acquires an interest in a joint operation that constitutes a business as defined by IFRS 3. The amendment also includes two new Illustrative Examples: - Accounting for acquisitions of interests in joint operations in which the activity constitutes a business - Contributing the right to use know-how to a joint operation in which the activity constitutes a business. A consequential amendment to IFRS 1 First-time Adoption of International Financial Reporting Standards has also been made, to clarify that the exemption from applying IFRS 3 to past business combinations upon adoption of IFRS also applies to past acquisitions of interests in joint operations in which the activity of the joint operation constitutes a business, as defined in IFRS 3. Mandatory for periods beginning on or after 1 January Early adoption permitted. adoption No impact.

34 STANDARD ALLIANCE INSURANCE PLC 33 FINANCIAL STATEMENTS, 31 DECEMBER 2014 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ISSUED THAT ARE NOT YET EFFECTIVE IFRS Reference Nature of change Application date Impact on initial Application IFRS 13 Fair Value Measurement Annual The amendment clarifies that short-term receivables and Improvement payables with no stated interest rate can still be measured at s ( the invoice amount without discounting, if the effect of Cycle) discounting is immaterial. Issued: December 2013 Mandatory adoption for periods beginning on or after 1 July Early adoption permitted. No impact. Scope of IFRS (portfolio exemption) Improvement s ( Cycle) Issued: December 2013 IFRS defines the scope of the exception that permits an entity to measure the fair value of a group of financial assets and financial liabilities on a net basis. This is often referred to as the portfolio exception. The amendment clarifies that the portfolio exception applies to all contracts within the scope of IAS 39 Financial Instruments: Recognition and Measurement (or IFRS 9 Financial Instruments if this has been adopted early), regardless of whether they meet the definition of financial assets or financial liabilities in IAS 32 Financial Instruments: Presentation. Mandatory adoption for periods beginning on or after 1 July Early adoption permitted. No impact. IFRS 14 Regulatory Deferral Accounts IFRS 14 In many countries, industry sectors (including utilities such as Issued: gas, electricity and water) are subject to rate regulation January where governments regulate the supply and pricing. This can 2014 have a significant effect on the amount and timing of an entity s revenue. Some national GAAPs require entities that operate in industry sectors subject to rate regulation, to recognise associated assets and liabilities. The scope of IFRS 14 is narrow, with this extending to cover only those entities that: Mandatory adoption for periods beginning on or after 1 January Early adoption permitted. No impact. IFRS 14 Issued: January 2014 In many countries, industry sectors (including utilities such as gas, electricity and water) are subject to rate regulation where governments regulate the supply and pricing. This can have a significant effect on the amount and timing of an entity s revenue. Some national GAAPs require entities that operate in industry sectors subject to rate regulation, to recognise associated assets and liabilities. The scope of IFRS 14 is narrow, with this extending to cover only those entities that: - Are first-time adopters of IFRS - Conduct rate regulated activities - Recognise associated assets and/or liabilities in accordance with their current national GAAP. Entities within the scope of IFRS 14 would be afforded an option to apply their previous local GAAP accounting policies for the recognition, measurement and impairment of assets and liabilities arising from rate regulation, which would be termed regulatory deferral account balances. Any regulatory deferral account balances, and their associated effect on profit or loss, would be recognised and presented separately from other items in the primary financial statements. As a result, for those entities that elect to adopt IFRS 14, all other line items and subtotals would exclude the effects of regulatory deferral accounts, meaning that they would be comparable with other entities that report in accordance with IFRS but do not apply IFRS 14. Mandatory adoption for periods beginning on or after 1 January Early adoption permitted. No impact.

35 STANDARD ALLIANCE INSURANCE PLC 34 FINANCIAL STATEMENTS, 31 DECEMBER 2014 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ISSUED THAT ARE NOT YET EFFECTIVE IFRS Reference Nature of change Application date Impact on initial Application Application guidance is included in IFRS 14 in respect of other IFRSs that would need to be considered alongside the previous national GAAP accounting requirements in order for these regulatory deferral accounts to be accounted for appropriately in an entity s IFRS financial statements, including: - IAS 10 Events after the Reporting Period - IAS 12 Income Taxes - IAS 28 Investments in Associates and Joint Ventures - IAS 33 Earnings per Share - IAS 36 Impairment of Assets - IFRS 3 Business Combinations - IFRS 5 Non-current Assets Held for Sale and Discontinued Operations - IFRS 10 Consolidated Financial Statements - IFRS 12 Disclosure of Interests in Other Entities. IFRS 15 Revenue from Contracts with Customers IFRS 15 Issued: May 2014 IFRS 15 Revenue from Contracts with Customers supersedes IAS 18 Revenue, IAS 11 Construction Contracts and related Interpretations (IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue Barter Transactions Involving Advertising Services).The objective of IFRS 15 is to clarify the principles of revenue recognition. This includes removing inconsistencies and perceived weaknesses and improving the comparability of revenue recognition practices across companies, industries and capital markets. In doing so IFRS 15 establishes a single revenue recognition framework. The core principle of the framework is, that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Mandatory adoption for periods beginning on or after 1 January Early adoption permitted. The Company is currently assessing the impact on adoption. To accomplish this, IFRS 15 requires the application of the following five steps: Furthermore the guidance significantly enhances the required qualitative and quantitative disclosures related to revenue. The main objective of the requirements is the disclosure of sufficient information in terms of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In order to meet this objective, IFRS 15 requires specific disclosures for contracts with customers and significant judgements. IAS 16 Property, Plant and Equipment Annual Improvement s ( Cycle) Issued: December 2013 Revaluation method proportionate restatement of accumulated depreciation The amendment clarifies the computation of accumulated depreciation when items of property, plant and equipment are subsequently measured using the revaluation model. The net carrying amount of the asset is adjusted to the revalued amount, and either: i. The gross carrying amount is adjusted in a manner consistent with the net carrying amount (eg proportionately to the change in the [net] carrying value, or with reference to observable market data). Accumulated depreciation is then adjusted to equal the difference between the gross and net carrying amounts ii. Accumulated depreciation is eliminated against the gross carrying amount. Mandatory adoption for periods beginning on or after 1 July Early adoption permitted. The standard is not expected to have a material impact on the future financial statements.

36 STANDARD ALLIANCE INSURANCE PLC 35 FINANCIAL STATEMENTS, 31 DECEMBER 2014 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ISSUED THAT ARE NOT YET EFFECTIVE IFRS Reference Nature of change Application date Impact on initial Application Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation Amendments Mandatory adoption to IAS 16 for periods beginning Issued: May on or after 1 January Early adoption permitted. IAS 19 Employee Benefits Amendments to IAS 19 Issued: November 2013 Paragraph 62A of IAS 16 has been added to prohibit the use of revenue-based methods of depreciation for items of property, plant and equipment. Paragraph 62A clarifies that this is because the revenue generated by an activity that includes the use of an item of property, plant and equipment generally reflects factors other than the consumption of the economic benefits of the item, such as: - Other inputs and processes - Selling activities and changes in sales - Volumes and prices, and - Inflation. Paragraph 56 of IAS 16, which includes guidance for the depreciation amount and depreciation period, has been expanded to state that expected future reductions in the selling price of items produced by an item of property, plant and equipment could indicate technical or commercial obsolescence (and therefore a reduction in the economic benefits embodied in the item), rather than a change in the depreciable amount or period of the item. Amendments to IAS 19 - Defined Benefit Plans: Employee Contributions The amendment introduces a narrow scope amendments that: - Provides a practical expedient for certain contributions from employees or third parties to a defined benefit plan, but only those contributions that are independent of the number of years of service - Clarifies the treatment of contributions from employees or third parties to a defined benefit plan that are not subject to the practical expedient. These are accounted for in the same way that the gross benefit is attributed in accordance with IAS Contributions that are independent of the number of years of service include: - Contributions that are based on a fixed percentage of salary - Contributions of a fixed amount throughout the service period - Contributions that are dependent on the employee s age. Mandatory adoption for periods beginning on or after 1 July Early adoption permitted. The Company is currently assessing the impact on adoption. The standard is not expected to have a material impact on the future financial statements. IAS 19 Employee Benefits Annual Improvement s ( Cycle) Issued: September 2014 The guidance in IAS 19 has been clarified and requires that high quality corporate bonds used to determine the discount rate for the accounting of employee benefits need to be denominated in the same currency as the related benefits that will be paid to the employee. Entities are required to apply the amendment from the earliest comparative period presented in the financial statements, with initial adjustments being recognised in retained earnings at the beginning of that period. IAS 24 Related Party Disclosures Annual The amendment clarifies that an entity that provides key Improvement management personnel services (management entity) to a s ( reporting entity (or to the parent of the reporting entity), is a Cycle) related party of the reporting entity, and: December - Would require separate disclosure of amounts recognised as 2013 an expense for key management personnel services provided by a separate management entity - Would not require disaggregated disclosures by the categories set out in IAS Mandatory adoption for periods beginning on or after 1 January Early adoption permitted. Mandatory adoption for periods beginning on or after 1 July Early adoption permitted. The standard is not expected to have a material impact on the future financial statements. The standard is not expected to have a material impact on the future financial statements.

37 STANDARD ALLIANCE INSURANCE PLC 36 FINANCIAL STATEMENTS, 31 DECEMBER 2014 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ISSUED THAT ARE NOT YET EFFECTIVE IFRS Reference Nature of change Application date Impact on initial Application IAS 27 Separate Financial Statements Amendments to IAS 27 Issued: August 2014 The amendments include the introduction of an option for an entity to account for its investments in subsidiaries, joint ventures, and associates using the equity method in its separate financial statements. The accounting approach that is selected is required to be applied for each category of investment. Before the amendments, entities either accounted for its investments in subsidiaries, joint ventures or associates at cost or in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments: Recognition and Measurement for those entities that have yet to adopted IFRS 9). The option to present its investments using the equity method result in the presentation of a share of profit or loss, and other comprehensive income, of subsidiaries, joint ventures and associates with a corresponding adjustment to the carrying amount of the equity accounted investment in the statement of financial position. Any dividends received are deducted from the carrying amount of the equity accounted investment, and are not recorded as income in profit or loss. A consequential amendment was also made to IAS 28 Investments in Associates and Joint Ventures, to avoid a potential conflict with IFRS 10 Consolidated Financial Statements for partial sell downs. IAS 34 Interim Financial Reporting Annual Improvement s ( Cycle) Issued: September 2014 IAS 38 Intangible Assets Annual Improvement s ( Cycle) Issued: December 2013 The requirements of paragraph 16A of IAS 34 require additional disclosures to be presented either in the: - Notes to the interim financial statements or - Elsewhere in the interim financial report. The amendment clarifies, that a cross-reference is required, if the disclosures are presented elsewhere in the interim financial report, such as in the management commentary or the risk report of an entity. However, to comply with paragraph 16A of IAS 34, if the disclosures are contained in a separate document from the interim report, that document needs to be available to users of the financial statements on the same terms and at the same time as the interim report itself. The amendment clarifies the computation of accumulated amortisation when intangible assets are subsequently measured using the revaluation model. The net carrying amount of the asset is adjusted to the revalued amount, and either: i. The gross carrying amount is adjusted in a manner consistent with the net carrying amount (eg proportionately to the change in the [net] carrying value, or with reference to observable market data). Accumulated amortisation is then adjusted to equal the difference between the gross and net carrying amounts ii. Accumulated amortisation is eliminated against the gross carrying amount. Mandatory adoption for periods beginning on or after 1 January Early adoption permitted. Mandatory adoption for periods beginning on or after 1 January Early adoption permitted. Mandatory adoption for periods beginning on or after 1 July Early adoption permitted. The standard is not expected to have a material impact on the future financial statements. The standard is not expected to have a material impact on the future financial statements. The standard is not expected to have a material impact on the future financial statements.

38 STANDARD ALLIANCE INSURANCE PLC 37 FINANCIAL STATEMENTS, 31 DECEMBER 2014 NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS ISSUED THAT ARE NOT YET EFFECTIVE IFRS Reference Amendments to IAS 38 Issued: May 2014 Nature of change Application date Impact on initial Application The amendments clarify that for intangible assets there is a rebuttable presumption that amortisation based on revenue is not appropriate. Paragraphs 98A - 98C of IAS 38 have been added to clarify that there is a presumption that revenue-based amortisation is not appropriate, and that this can only be rebutted in limited circumstances where either: - The intangible asset is expressed as a measure of revenue, or - Revenue and the consumption of the economic benefits of the intangible asset are highly correlated. Paragraph 98B clarifies that as a starting point to determining an appropriate amortisation method, an entity could determine the predominant limiting factor inherent in the intangible asset, for example: - A contractual term which specifies the period of time that an entity has the right Mandatory adoption for periods beginning on or after 1 January Early adoption permitted. The standard is not expected to have a material impact on the future financial statements. to use an asset - Number of units allowed to be produced - Fixed total amount of revenue allowed to be received. Paragraph 98C then clarifies that where an entity has identified that the achievement of a revenue threshold is the predominant limiting factor of an intangible asset, it may be possible to rebut the presumption that revenue-based amortisation is not appropriate. IAS 40 Investment Property Annual The amendment notes that determining whether the Improvement acquisition of an investment property is a business s ( combination requires consideration of the specific Cycle) requirements of IFRS 3, independently from the requirements Issued: of IAS 40, in relation to: December - Whether the acquisition of investment property is the 2013 acquisition of an asset, a group of assets, or a business combination (by applying the requirements of IFRS 3 only) - Distinguishing between investment property and owneroccupied property (by applying the requirements of IAS 40 only). IAS 41 Agriculture Amendments The amendments extend the scope of IAS 16 Property, Plant to IAS 41 and Equipment to include bearer plants and define a bearer Issued: June plant as a living plant that: Is used in the production process of agricultural produce, - Is expected to bear produce for more than one period; and - Has a remote likelihood of being sold (except incidental scrap sales). The changes made result in bearer plants being accounted for in accordance with IAS 16 using either: - The cost model, or - The revaluation model. The agricultural produce of bearer plants remains within the scope of IAS 41 Agriculture. The amendments include the following transitional reliefs for the purposes of their first time application: Mandatory adoption for periods beginning on or after 1 July Early adoption permitted. Mandatory adoption for periods beginning on or after 1 January Early adoption permitted. The standard is not expected to have a material impact on the future financial statements. The standard is not expected to have a material impact on the future financial statements. - Deemed cost exemption Entities are allowed to use the fair value of the bearer plants at the beginning of the earliest period presented as the deemed cost. - Disclosures Quantitative information describing the effect of the first time application as required by IAS 8.28(f) is not required for the current reporting period, but is required for each prior period presented.

39 STANDARD ALLIANCE INSURANCE PLC 38 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Significant accounting policies The principal accounting policies adopted in the preparation of these financial statements are set out below: 5.1 Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less. They include bank overdrafts in the context of the statement of cash flows. 5.2 Financial instruments Financial instruments are recognized when the Company becomes a party to the contractual provisions of the instruments. They are recognized initially at fair value plus transaction costs, except for those carried at fair value through profit or loss, which are measured initially at fair value. Financial assets are derecognized when the contractual rights to the cash flows from the financial assets expire, or when the financial assets and all substantial risks and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires. Financial assets and financial liabilities are measured subsequently as described below: Financial Assets The Company classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity, available-for-sale investments The classification depends on the purposes for which the investments are acquired. Management determines the classification of its investments at initial recognition and re-evaluates such designation at every reporting date. i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading and those designated at fair value through profit or loss at inception. Investments typically bought with the intention to sell in the near future are classified as held for trading. For investments designated as at fair value through profit or loss, the following criteria must be met: The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognizing gains or losses on a different basis, or The assets and liabilities are part of a portfolio of financial assets, financial liabilities or both which are managed and their performances evaluated on a fair value basis, in accordance with a documented risk management or investment strategy and information regarding these instruments are reported to the key management personnel on a fair value basis. These investments are initially recorded at fair value. Subsequent to initial recognition, they are remeasured at fair value. Fair value adjustments and realized gains and losses are recognized in the income statement. The Company s financial assets at fair value through profit or loss include some quoted shares and money market funds which are considered as held for trading. ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. The amounts receivable are discounted if they are receivable beyond the current period and the effect of discounting is material. The Company s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty shall default.

40 STANDARD ALLIANCE INSURANCE PLC 39 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 The Company s trade receivables are its premium receivables from co-assurers as at the end of the reporting period. These are considered to be impaired when such premiums have been outstanding for three cumulative months and all possible measures have been taken without success to secure settlement. The impairments are recognized accordingly in the profit or loss. The receivables from co-assurers are considered remote for impairment as they are usually off-set from entitlements between the parties as a normal trade practice. iii) Held-to-maturity investments Held to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company has the positive intention and ability to hold to maturity other than loans and receivables. Held-to-maturity investments comprise Government securities (Treasury Bills etc). The investments are initially recognized at fair value plus transaction costs. Held-to-maturity investments are subsequently measured at amortized cost using the effective interest method. If there is objective evidence that the investment is impaired, determined by reference to external credit ratings, the financial asset is measured at the present value of the estimated future cash flows. Any changes to the carrying amount of the investment, including impairment losses, are recognized in profit or loss. iv) Available-for-sale investments Available-for-sale financial assets are non-derivative financial assets that are designated as available-forsale or are not classified in any of the three preceding categories. Where financial instruments do not have a quoted market price in an active market and whose fair value cannot be reliably measured, the instruments are measured at cost less any impairment charges. The impairment charges are recognized in the statement of other comprehensive income. The Company classifies its investment in the Oil and Energy Pool in this category. The other available-for-sale financial assets are measured at fair value. Fair value gains and losses are reported as a separate component in other comprehensive income and reported within the available-forsale reserve within equity, except for impairment losses and foreign exchange differences on monetary assets which are recognized in profit or loss. On derecognition of the asset or when determined to be impaired, the cumulative fair value gains and losses previously reported in equity are transferred to the income statement. This category of financial assets includes the Company s equity holdings in Transcorp Plc and the Company s joint venture investment in real estate development with Standard Alliance Properties Limited. 5.3 Derecognition of financial assets A financial asset is derecognised when: The rights to receive cash flows from the asset have expired The Company retains the right 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: the Company has transferred substantially all the risks and rewards of the asset; or the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Company has transferred its right to receive cash flows from an asset or has entered into a pass through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Company s continuing involvement in the asset as guarantee over the transferred asset. In that case, the Company 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 Company has retained.

41 STANDARD ALLIANCE INSURANCE PLC 40 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Amortised cost Amortised cost is computed using the effective interest method less any allowance for impairment and principal repayment or reduction. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate. 5.5 Impairment of non-financial assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset s recoverable amount. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. An asset s recoverable amount is the higher of an asset s or cash-generating unit s fair value less costs to sell and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. Impairment losses of continuing operations are recognised in the income statement in those expenses categories consistent with the function of the impaired asset, except for property previously revalue where the revaluation surplus was taken to comprehensive income. In this case the impairment is also recognised in comprehensive income up to the amount of any previous revaluation surplus. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Company makes an estimate of recoverable amount. A previous impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at revalue amount, in which case the reversal is treated as a revaluation in surplus. The following criteria are also applied in assessing impairment of specific assets: The recoverable amount for the life insurance business has been determined based on a fair value less cost to sell calculation. The calculation requires the Company to make an estimate of the total of the adjusted net worth of the life insurance business plus the value of in-force covered business. New business contribution represents the present value of projected future distributable profits generated from business written in a period. Growth and discount rates used are suitable rates which reflect the risks of the underlying cash flows. 5.6 Fair value measurements The fair values of quoted investments are based on current market prices. If the market for a financial asset is not active (and for unlisted securities), the Company establishes fair value by using valuation techniques. The techniques include: the use of recent arm's length transactions, reference to other instruments that are substantially the same, net asset value and discounted cash flow analysis

42 STANDARD ALLIANCE INSURANCE PLC 41 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Impairment of financial assets The Company assesses at each reporting date whether there is 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. If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in other comprehensive income, is transferred from equity to the income statement. Reversals in respect of equity instruments classified as available-for-sale are not recognised in the income statement. Reversals of impairment losses on debt instruments classified at available-for-sale are reversed through the income statement if the increase in the fair value of the instruments can be objectively related to an event occurring after the impairment losses were recognised in the income statement. 5.8 Off-setting of Financial Assets and Liabilities Financial assets and financial liabilities are offset and the net amounts reported in the statement of financial position only when there are current and legally enforceable rights to offset the recognised amounts and there is an intention in each case to settle on a net basis, or to realise the assets and settle the liabilities simultaneously. Income and expenses will not be offset in the income statement unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the Company. 5.9 Trade receivables Trade receivables are recognised when due. These include amounts due from agents, brokers, reinsurers, co-insurers and insurance contract holders. They are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment. An allowance for impairment is made when there is an objective evidence (such as the probability of solvency or financial difficulties of the debtors) that the Company will not be able to collect all amount due under the original terms. If there is objective evidence that the insurance receivables are impaired, the Company reduces the carrying amount of the insurance receivables accordingly and recognises that impairment loss in profit or loss. The Company first assesses whether objective evidence of impairment exists individually for receivables that are individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed receivable, whether significant or not, it includes the receivable in a group of receivables with similar credit risk characteristics and collectively assesses them for impairment using the model that reflects the Company's historical outstanding premium collection ratio per sector. If in a subsequent period the amount of impairment loss decreases and the decrease can be related objectively to an event occuring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of impairment loss is recognised in profit or loss Reinsurance assets The Company cedes insurance risk in the normal course of business on the bases of our treaty and facultative agreements. Reinsurance assets represent balances due from reinsurance Companies. Amounts recoverable from reinsurers are estimated in a manner consistent with settled claims associated with the reinsurer s policies and are in accordance with the related reinsurance contract Deferred acquisition costs (DACs) Incremental costs directly attributable to the acquisition of investment and insurance contracts with investment management services are capitalized to a Deferred acquisition cost(dac) asset if they are separately identifiable, can be measured reliably and its probable that they will be recovered. DAC are amortized in the income statement over the term of the contracts as the related services are rendered and revenue recognized, which varies from year to year depending on the outstanding terms of the contracts in force. The DAC asset is tested for impairment bi annually and written down when it is not expected to be fully recovered.

43 STANDARD ALLIANCE INSURANCE PLC 42 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Other receivables and prepayments They are initially recognised at fair value and subsequently measured at amortised cost less provision for impairment. A provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtors) that the Company will not be able to collect all the amount due under the original terms of the contract. Impaired debts are derecognised when they are assessed as uncollectible. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. Any subsequent reversal of an impairment loss is recognised in profit or loss. Prepayments are carried at cost less accumulated impairment losses Non-current assets held for sale Non-current assets or disposal groups comprising assets and liabilities that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. Immediately before classification as held for sale, the asset, or components of a disposal group are remeasured in accordance with the Company s accounting policies. Thereafter generally, the assets or disposal Company are measured at the lower of their carrying amounts and fair values less costs to sell. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property and biological assets, which continue to be measured in accordance with the Company s accounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognized in profit or loss, subject to cumulative subsequent gains not exceeding cumulative losses recorded for the asset Investment property An investment property is property held to earn rentals or for capital appreciation or both. Investment property, including interest in leasehold land, is initially recognized at cost including the transaction costs. Subsequently, investment property is carried at fair value representing the open market value at the statement of financial position date determined by annual valuations carried out by external registered valuers. Gains or losses arising from changes in fair value of investment property shall be recognized in profit or loss for the period in which it arises. Investment properties are derecognized when either they have been disposed off or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. On disposal of an investment property, the difference between the disposal proceeds and the carrying amount is charged or credited to profit or loss. Transfers are made to or from investment property only when there is a change in use. 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 an investment property, the Company accounts for such property in accordance with the policy stated under property and equipment up to the date of the change in use. When the Company completes the construction or development of a self-constructed investment property, any difference between the fair value of the property at that date and its previous carrying amount is recognized in the other comprehensive income Investment in associates The Company s investment in its associates are accounted for using the equity method of accounting. An associate is an entity in which the Company has significant influence and which is neither a subsidiary nor a joint venture. Under the equity method, the investment in the associate is carried in the statement of financial position at cost plus post-acquisition changes in the Company s share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment.

44 STANDARD ALLIANCE INSURANCE PLC 43 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 The income statement reflects the share of the results of operations of the associate. Where there has been a change recognised directly in the equity of the associate, the Company recognises its share of any changes and discloses this, when applicable, in the statement of changes in equity. Profits or losses resulting from transactions between the Company and the associate are eliminated to the extent of the interest in the associate. The share of profit of the associate is shown on the face of the income statement. This is profit attributable to equity holders of the associate and, therefore, is profit after tax and non-controlling interests in the subsidiaries of the associate. The financial statements of the associate are prepared for the same reporting period as the Company. Where necessary, adjustments are made to bring its accounting policies in line with the Company s. After application of the equity method, the Company determines whether it is necessary to recognize an additional impairment loss on the Company s investment in an associate. The Company determines at each reporting date, whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in the share of profit of an associate in the income statement. Upon loss of significant influence over the associate, the Company measures and recognises any remaining investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the remaining investment and proceeds from disposal is recognized in profit or loss Intangible assets Software licence costs and computer software that are not an integral part of the related hardware are initially recognised at cost, and subsequently carried at cost less accumulated amortisation and accumulated impairment losses. Costs that are directly attributable to the production of identifiable computer software products controlled by the Company are recognised as intangible assets. Amortization is calculated using the straight line method to write down the cost of each licence or item of software to its residual value over its estimated useful life. For this financial, four years has been approved as a Company policy. Amortization begins when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management, even when idle. Gains or losses arising from the derecognition of intangible assets are measured as the differences between the net disposal proceeds and the carrying amount of the assets and are recognised in the income statements of the periods in which the assets are Property, plant and equipment All categories of property, plant and equipment are initially recognized at cost or at fair value. Cost includes expenditure directly attributable to the acquisition of the assets. Subsequent costs are included in the asset s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. Repairs and maintenance expenses are charged to the income statement in the year in which they are incurred. Depreciation is calculated using the straight line method to write down the cost or the revalued amount of each of the following classes of assets to its residual value over its estimated useful life: Building years Furniture & Fittings 3-7 years Office Equipment 4-8 years Motor Vehicles 5-8 years Plant and machinery 10 years Land is a component of property, plant and equipment but not subject to depreciation. Depreciation on an item of property, plant and equipment commences when it is available for use and continues to be depreciated until it is derecognized, even if during that period the item is idle. Depreciation of an item ceases when the item is retired from active use and is being held for disposal.

45 STANDARD ALLIANCE INSURANCE PLC 44 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 As no parts of items of property, plant and equipment of the Company have a cost that is significant relation to the total cost of the item, the same rate of depreciation is applied to the whole item. in The assets residual values, depreciation method and useful lives are reviewed and adjusted, if appropriate, at each statement of financial position date. Impairment reviews are performed when there are indicators that the carrying value of an asset may not be recoverable. Impairment losses are recognised in the income statement as an expense. The Company classifies all assets within a disposal group as Non-current assets held for sale if the carrying amount will be recovered principally through sale transaction rather than continuous use. Freehold land and buildings are subsequently carried at revalued amounts, based on periodic valuations by external independent valuers; less accumulated depreciation and accumulated impairment losses. All other items of property, plant and equipment are subsequently carried at cost less accumulated depreciation and accumulated impairment losses. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use. Gains and losses on disposal of property, plant and equipment are determined by reference to their carrying amounts and are taken into account in determining operating profit. Increases in the carrying amounts arising on revaluation are recognised in other comprehensive income and accumulated in equity under the heading of revaluation reserve. Decreases that offset previous increases of the same asset are recognised in other comprehensive income. All other decreases are charged to the Income statement. Annually, the difference between depreciation computation based on the revalued carrying amount of the asset and charged to the income statement and depreciation based on the asset s original cost is transferred from the revaluation reserve to income statement. Amortization ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognized and ceases temporarily while the residual value exceeds or is equal to the carrying value 5.18 Statutory deposit Statutory deposit represents 10% of the minimum paid up capital of the Company deposited with the Central Bank of Nigeria (CBN) in pursuant to Section 10(3) of the Insurance Act, CAP I17, LFN 2004 Statutory deposit is measured at cost Insurance contract liabilities Insurance contract liabilities include the outstanding claims provision, the provision for unearned premium and the provision for premium deficiency. The outstanding claims provision is based on the estimated ultimate cost of all claims incurred but not settled at the reporting date, whether reported or not, together with related claims handling costs and reduction for the expected value of salvage and other recoveries. Delays can be experienced in the notification and settlement of certain types of claims, therefore, the ultimate cost of these cannot be known with certainty at the reporting date. The liability is calculated at the reporting date using a range of standard actuarial claim projection techniques, based on empirical data and current assumptions that may include a margin for adverse deviation. The liability is not discounted for the time value of money. No provision for equalisation or catastrophe reserves is recognised. The liabilities are derecognised when the obligation to pay a claim expires, is discharged or is cancelled. The provision for unearned premiums represents that portion of premiums received or receivable that relates to risks that have not yet expired at the reporting date. The provision is recognised when contracts are entered into and premiums are charged, and is brought to account as premium income over the term of the contract in accordance with the pattern of insurance service provided under the contract. At each reporting date, the Company reviews its unexpired risk and a liability adequacy test is performed in accordance with requirement of IFRS on liability adequacy test to determine whether there is any overall excess of expected claims and deferred acquisition costs over unearned premiums.

46 STANDARD ALLIANCE INSURANCE PLC 45 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 This calculation uses current estimates of future contractual cash flows after taking account of the investment return expected to arise on assets relating to the relevant non-life insurance technical provisions. If these estimates show that the carrying amount of the unearned premiums (less related deferred acquisition costs) is inadequate, the deficiency is recognised in the income statement by setting up a provision for premium deficiency. Liability adequacy test At the end of the reporting period, liability adequacy tests are performed by an actuary to ensure the adequacy of the contractual liabilities net of related deferred acquisition cost assets (DAC). In performing these tests current best estimates of future contractual cash flows and claims handling and administrative expenses, as well as investment income from the assets backing such liabilities, are used. Any deficiency is immediately charged to profit or loss initially by writing off DAC and by subsequently establishing a provision for losses arising from liability adequacy tests the unexpired risk provision Trade payables Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate. The estimated fair value of payables with no stated maturity which includes no interest payables is the amount repayable on demand Other payables and accruals General Provisions are recognised when the Company 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. Where the Company 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. If the effect of the time value of money is material, provisions are discounting using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost Financial liabilities All financial liabilities are recognized initially at fair value of the consideration given plus the transaction cost with the exception of financial liabilities carried at fair value through profit or loss, which are initially recognized at fair value and the transaction costs are expensed in the income statement. The Company financial liabilities include Deawoo bond, lease payables, trade and other payables. These are measured subsequently at amortized cost using the effective interest method. All interest related charges and, if applicable changes in an instrument s fair value that are reported in profit or loss are included within finance costs or income. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred, Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate. Fees paid on the establishment of loan facilities are recognised as a transaction cost of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.

47 STANDARD ALLIANCE INSURANCE PLC 46 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Finance lease obligations Asset held under finance leases are initially recognised as asset of the Company at their fair value at the inception of the lease or if lower at the present value of the minimum lease payments. The corresponding liability to the leasor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between the liability and finance charges. The corresponding rental obligation, net of finance charges are included in long term payables. The interest element of the finance cost is charged to the income statement over the lease periods so as to produce constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the useful life of the asset Employee retirement benefits Retirement Benefit Obligations The Company operates a defined contribution scheme for qualifying employees. The Company and all its employees contribute 7.5% each of their pensionable emoluments (basic salary, housing allowance and transport allowance) to the Pension Scheme and this is being managed by registered and licensed pension managers ass may be chosen by the staff from time to time Income tax liabilities Income tax expense is the aggregate amount charged/(credited) in respect of current tax and deferred tax in determining the profit or loss for the year. Tax is recognised in the income statement except when it relates to items recognised in other comprehensive income, in which case it is also recognised in other comprehensive income. Company Income tax This is the amount of income tax payable on the taxable profit of the Company for the year determined in accordance with the Company Income Tax Act, CAP. 60 LFN; The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted as at the reporting date. Education tax This is a component of the income tax. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted as at the reporting date Deferred tax liabilities Deferred tax is provided in full on all temporary differences except those arising from the fair value measurement of assets. Deferred tax is determined using the liability method on all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes, using tax rates and laws enacted or substantively enacted at the statement of financial position date and expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss. Deferred tax items are recognized in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off such current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

48 STANDARD ALLIANCE INSURANCE PLC 47 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Share capital and share premium. Ordinary shares are recognized at par value and classified as share capital in equity. Any amounts received over and above the par value of the shares issued are classified as share premium in equity. The share premium account is utilized in accordance with the provisions of Companies and Allied Maters Act (CAMA) CAP. C20 LFN, Treasury shares This is where the Company acquire its own shares. Treasury shares are deductible from total shareholders equity Contingency reserves This is computed in accordance with the provisions of section 22 of the Insurance Act, CAP 117 LFN It is credited with amount equal to the higher of 3% of the total premium written and 20% of the net profit until it reaches the amount of the minimum paid up capital Retained earnings Retained earnings are the carried forward recognised income net of expenses plus current period profit or loss attributable to owners of the Company Gross premium income Insurance premium revenue is received or receivable by the Company from in-force insurance contracts during the reporting period. In-force insurance contracts are those whose premiums have been collected by the Company, its intermediaries or collectible within 30 days of the reporting date. Premium revenue is recognized on the date on which the insurance policy commences. Gross premium income comprises the total premium written in a year after adjusting for unearned premiums. Unearned premiums Unearned premiums are those proportions of premiums written in a year that relate to periods of risk after the statement of financial position date. Unearned premiums are calculated on a daily pro rata basis. The proportion attributable to subsequent periods is deferred as a provision for unearned premiums. Reinsurance premium Reinsurance premiums are outward premiums due to reinsurance companies in accordance with the tenor of the reinsurance contract, after adjusting for the unexpired portion, as at the end of the period. Net premium income The result of the gross premium income and reinsurance premium expenses is the net premium income accruing to the entity for the period Commission on reinsurance When the Company acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognized is the amount of commission made by the Company. Commission on reinsurance is recognised as income over the period of the underlying contracts. If the fees are for services provided in future periods, then they are deferred and recognised over those future periods.

49 STANDARD ALLIANCE INSURANCE PLC 48 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER Investment income Investment income includes interest on bank placements, dividend income and rental income arising from operating leases on investment properties, which are presented in the Income statement. Income from any earmarked investment is credited to its source. Otherwise, the investment income is distributed between the Insurance contract business, Investment contract business and shareholders account on the basis of average investments outstanding during the year as financed by the respective funds. The distribution is presented only as note to the financial statements Realized/unrealized gains and losses Realized gains and losses include gains and losses arising from the disposal of financial instruments, noncurrent assets held for sale and investment properties and they are recognised in the Income statement of the period in which the disposal occurred. Unrealized gains and losses include gains and losses arising from the fair valuation of financial assets, noncurrent assets held for sale (that is, immediately before classification as held for sale) and investment properties. Unrealized gains and losses arising from the fair valuation of investment properties are recognized in the Income statement Underwriting and management expenses Expenses are recognized in the Statement of profit or loss and other comprehensive income when a decrease in future economic benefit related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably. This means, in effect, that recognition of expenses occurs simultaneously with the recognition of an increase in liabilities or a decrease in assets. Underwriting expenses These are acquisition costs and other underwriting expenses, which include commissions to brokers and other agents, business development costs and other technical expenses. The expenses are accounted for on accrual basis. Brokers' and Agents commissions The Company employs the services of brokers in marketing its insurance policies. Commissions paid to the brokers are charged against revenue as underwriting expenses Benefits and claims expenses Gross benefits and claims Gross benefits and claims for insurance contracts are included in the cost of all claims incurred during the period including internal and external claims handling costs that are directly related to the processing and settlement of claims as well as changes in the gross valuation of insurance liabilities. Claims are recorded on the basis of notifications received. Reinsurance claims recoveries Reinsurance claims recoveries are recognized when the related gross insurance claim expenses are recognized according to the terms of the relevant contract. Salvage and subrogation reimbursements Some insurance contracts permit the Company to sell (usually damaged) property acquired in settling a claim (for example, salvage). The Company may also have the right to pursue third parties for payment of some or all costs (for example, subrogation). Estimates of salvage recoveries are included as an allowance in the measurement of the insurance liability for claims, and salvage property is recognized in other assets when the liability is settled. The allowance is the amount that can reasonably be recovered from the disposal of the property. Subrogation reimbursements are also considered as an allowance in the measurement of the insurance liability for claims and are recognized in other assets when the liability is settled. The allowance is the assessment of the amount that can be recovered from the action against the liable third party.

50 STANDARD ALLIANCE INSURANCE PLC 49 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 Net claims expenses The result of the gross benefits and claims expenses and reinsurance claims recoveries is the net claims expense for the period. Ceded reinsurance arrangements do not relieve the Company from its obligations to policyholders. Policyholder benefits incurred comprise claims paid in the year and changes in the provision for insurance contract liabilities. Benefits paid represent all payments made during the year, whether arising from events during that or earlier years. Insurance contract liabilities represent the estimated ultimate cost of settling all benefits accruing to policyholders and are discounted to the present value Dividends Dividends on ordinary shares are recognised as a liability in the year in which they are declared. Proposed dividends are accounted for as a separate component of equity until they have been declared at an annual general meeting. Dividends for the year that are approved after the statement of financial position date are dealt with as a non-adjusting event after the statement of financial position date Earnings per share The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic earnings per share amounts are calculated by dividing the profit for the year attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding at the reporting date. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees Conversion of foreign currencies On initial recognition, all transactions are recorded in the functional currency (the currency of the primary economic environment in which the Company operates or transacts business), which is Nigerian Naira and Kobo. Transactions in foreign currencies during the year are converted into the functional currency using the exchange rate prevailing at the transaction dates. Monetary assets and liabilities at the statement of financial position date denominated in foreign currencies are translated into the functional currency using the exchange rate prevailing as at that date. The resulting foreign exchange gains and losses from the settlement of such transactions and from yearend translation are recognised on a net basis in the income statement in the year in which they arise Comparatives Where necessary, comparatives have been adjusted to conform to changes in presentation in the current year. Where changes are made and affect the statement of financial position, a third statement of financial position at the beginning of the earliest period presented is presented together with the corresponding notes Events after the statement of financial position date The financial statements are adjusted to reflect events that occurred between the statement of financial position date and the date when the financial statements are authorised for issue, provided they give evidence of conditions that existed at the statement of financial position date. Events that are indicative of conditions that arose after the statement of financial position date are disclosed, but do not result in an adjustment of the financial statements.

51

52 STANDARD ALLIANCE INSURANCE PLC 51 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2014 NOTE N'000 N'000 Gross premium written 31 4,333,254 3,792,076 Unearned premium 5,425 (12,442) Gross premium income 31 4,338,679 3,779,634 Reinsurance expenses 32 (475,015) (683,715) Net premium income 3,863,664 3,095,919 Commission income ,078 33,799 Net underwriting income 3,966,742 3,129,718 Claims expenses (net) 34 (1,194,074) (1,070,890) Underwriting expenses 35 (1,341,981) (1,053,465) Total underwriting expenses (2,536,055) (2,124,355) Underwriting profit 1,430,687 1,005,363 Investment and other income , ,212 Management expenses 37 (1,795,804) (1,497,228) Finance charges 38 (48,483) (137,084) Impairment charges on other assets 39 (1,145,650) (297,351) Fair value (loss)/gains on financial assets (32,475) 41,093 Fair value loss on investment properties 13.1 (20,000) - Share of loss of associate Company 12.3 (610,519) (239,741) Loss before taxation (1,982,613) (789,736) Income tax 23 (86,505) (64,879) Deferred tax 24.1 (11,524) (26,327) Loss after taxation (2,080,642) (880,942) Other comprehensive income Item that are or may be reclassified to profit or loss: Fair value (loss)/gain on financial assets 30.2 (243,574) 641,102 Items that will be classified to profit or loss: Revaluation surplus on building ,117 - Total comprehensive income for the year (1,913,099) (239,840) Loss attributable to: Owners of equity (1,913,099) (239,840) Non controlling interest - - (1,913,099) (239,840) Loss per share : Basic/diluted (17.35) (7.35)

53 STANDARD ALLIANCE INSURANCE PLC 52 STATEMENT OF CHANGES IN EQUITY YEAR ENDED 31 DECEMBER 2014 Share Share Treasury Contingency Retained Revaluation Fair value Capital Premium Shares Reserves Earnings Reserves Reserves Total N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 Balance 1 January, ,996,587 15,852,049 (8,737,585) 1,113,425 (10,894,417) 703, ,110 4,777,570 Total comprehensive income for the year: Loss for the year (2,080,642) - - (2,080,642) Transfer to contingency reserve (Note 28) ,998 (129,998) Allotment of treasury shares - (8,184,574) 8,737, ,011 Other comprehensive income: Revaluation surplus on building (Note 30.1) , ,117 Fair value loss on quoted shares - Available for sale(note 30.2) (243,574) (243,574) Total comprehensive income for the year - (8,184,574) 8,737, ,998 (2,210,640) 411,117 (243,574) (1,360,088) Transactions with owners recorded directly in equity Contributions by and distribution to owners Dividends to equity holders Total transactions with owners Balance 31 December, ,996,587 7,667,475-1,243,423 (13,105,057) 1,114, ,536 3,417,482 Balance 1 January, ,996,587 15,852,049 (8,737,585) 999,663 (9,935,811) 703, ,008 4,981,312 Prior period restatement (Note 46) ,098 36,098 5,996,587 15,852,049 (8,737,585) 999,663 (9,899,713) 703, ,008 5,017,410 Total comprehensive income for the year: Loss for the year (880,942) - - (880,942) Transfer to contingency reserve (Note 28) ,762 (113,762) Other comprehensive income: Fair value gain on quoted shares - Available for sale(note 30.2) , ,102 Total comprehensive income for the year ,762 (994,704) - 641,102 (239,840) Transactions with owners recorded directly in equity Contributions by and distribution to owners Dividends to equity holders Total transactions with owners Balance 31 December, ,996,587 15,852,049 (8,737,585) 1,113,425 (10,894,417) 703, ,110 4,777,570

54 STANDARD ALLIANCE INSURANCE PLC 53 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER Cash flows from operating activities NOTES N'000 N'000 Premium received from policy holders 4,313,706 4,414,220 Interest received on investments , ,088 Dividend received 36 11, Rent and sundry income 36 18,308 17,506 Other income 36 18,582 - Claim paid (net of recoveries) (764,851) (939,791) Fees and commission ,078 33,799 Cash payments for reinsurance (475,015) (683,716) Brokers commissions and allowances 35 (1,054,965) (1,067,538) Agents allowances and commissions - 14,073 Cash payments to employees, suppliers and others (1,913,691) (1,715,236) 392, ,105 Taxes paid: Income tax 23 (29,820) (57,693) VAT - (6,322) Net cash generated from operating activities 363, ,090 Cash flows from investing activities Purchase of Property, plants and equipments 15 (162,943) (282,632) Purchase of Intangible assets 14 (3,207) - Proceeds from sale of Property, plants and equipments 2,753 1,729 Acquisition of interest in Blueberry project (102,300) - Net Cash used in investing activities (265,697) (280,903) Cash flows from financing activities Finance charges 38 (48,483) (137,084) Loan obtained 200,000 - Repayment of Daewoo loan (196,470) (188,083) Repayment of term loan (7,673) - Lease financing (net) 21 (17,545) 32,188 Payment of preference dividend (175,000) Proceeds from sale of treasury shares 553,011 - Net Cash flow from financing activities 482,840 (467,979) Net increase/(decrease) in cash and cash equivalents 580,292 (604,792) Cash and cash equivalents at the beginning of the year 120, ,736 Cash and cash equivalents at the end of the year 701, ,944 Cash and cash equivalent comprise: Current Bank accounts balances 83, ,076 Short term deposits - Local banks 617,451 98, , ,395 Bank overdraft - (109,451) 701, ,944

55 STANDARD ALLIANCE INSURANCE PLC 54 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS Cash and cash equivalents N'000 N'000 Cash in hand 3, Bank balances 79, ,451 Short term deposits 617,451 98, , ,396 Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Company. 7 Financial assets N'000 N'000 At fair value through profit or loss (Note 7.1) 58,949 91,424 Loans and receivables (Note 7.2) 956,232 1,809,010 Available for sale investment (Note 7.3) 821,950 1,126,072 1,837,131 3,026, Financial assets at fair value through profit or loss Quoted investments N'000 N'000 Cost 334, ,433 Fair value changes (Note 7.1.1) (275,484) (243,009) Market Value 58,949 91, The fair value changes are further analysed thus: N'000 N'000 At 1 January (243,009) (284,102) (Increase)/ Decrease in fair value losses (32,475) 41,093 At 31 December (275,484) (243,009) Analysis of the fair value of the Company's investments in listed entities is shown below: N'000 N'000 ABC Transport Plc 5,174 14,109 Dangote Sugar Refineries Plc 1,905 3,510 Diamond Bank Plc 1,674 2,250 Ecobank Transnational Plc First City Monument Bank Plc 3,984 6,064 Fidelity Bank Plc 3,871 6,362 First Bank of Nigeria Limited 3,465 6,458 Guaranty Trust Bank Plc 11,803 12,619 Skye Bank Plc 798 1,290 United Bank for Africa Plc 1,974 4,106 WAPCO Nigeria Plc 24,150 34,500 WAPIC Insurance Plc ,949 91, Loans and receivables Standard Alliance Properties Limited 945,217 1,800,412 Staff debtors 11,015 8, ,232 1,809, Standard Alliance Properties Limited N'000 N'000 Balance, beginning of the year 1,800,412 1,714,678 Interest income for the year 90,021 85,734 1,890,433 1,800,412 Impairment provision (945,216) - Balance, end of the year 945,217 1,800,412 Standard Alliance Insurance Plc ventured into a joint estate development with Standard Alliance Properties Limited. The terms of arrangement included an annual interest of 5% on contribution and share of profit from the joint venture. The balance due from Standard Alliance Properties Limited represents accumulated interest and outstanding contributions. Impairment provision of N945,216,000 was made on amount due from Standard Alliance Property Limited as at 31 December 2014 as a result of non-performance of the loan.

56 STANDARD ALLIANCE INSURANCE PLC 55 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS Available for sale financial assets N'000 N'000 Quoted shares in Transcorp Plc (Note 7.3.1) 719, ,224 Oil & Energy Pool (Note 7.3.2) - - Lagoon Homes Saving & Loans Ltd (Note 7.3.3) - 162,848 Investment in Blueberry Project (Note 7.3.4) 102, ,950 1,126, Investment in quoted shares (Transcorp Plc) N'000 N'000 Balance, beginning of the year 147,235 95,158 Additions during the year - 52,077 Balance, end of the year 147, ,235 Fair value gain 572, ,989 Market value 719, ,224 Fair value charges are further analysed as folows: N'000 N'000 At 1 January 815, ,653 Fair value (loss)/gain during the year (Note 30.2) (243,574) 712,336 At 31 December 572, ,989 During the year 2013, Standard Alliance Capital and Assets Management Limited transferred 32,035,807 units of shares of Transcorp Plc to the Company at N52,076,535 in settlement of its indebtedness Oil & Energy Pool N'000 N'000 Gross investment - 6,618 Investment amount now written off - (6,618) - - Impairment provision N'000 N'000 At 1 January - 6,618 Impairment allowance now written off - (6,618) At 31 December Lagoon Home Savings and Loans Limited N'000 N'000 5% 5 year Redeemable preference share 162, ,848 Impairment provision (162,848) ,848 During the year 2013, the Company converted its term deposit and current accounts balances with Lagoon Homes Savings and Loans Limited to a 5% 5 years preference shares holding in the bank. Impairment provision N'000 N'000 At 1 January - - Impairment allowance for the year 162,848 - At 31 December 162,848 - During the year, the investment in Lagoon Homes was fully impaired due to withdrawal of its licence by the Central Bank of Nigeria and subsequent takeover by the NDIC Investment in Blueberry Technology Solutions Limited This represents the Company's investment in Blueberry Technology Solutions Limited under a joint venture arrangement for the provision of Electronic National Drivers' and Vehicles Identification System (ENDVIS) for the Kaduna State Government. Under the terms of agreement investment is expected to be recovered within a period of 5 years and revenue from the project is to be shared by the parties. 8 Reinsurance assets N'000 N'000 Claims recoverable 416, ,262 Deferred reinsurance cost 191,115 63, , ,092 This represents amount recoverable from reinsurers in respect of claims incurred and reinsurance premium paid of which risk has not expired. The reinsurance assets are of current maturity.

57 STANDARD ALLIANCE INSURANCE PLC 56 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS Trade receivables N'000 N'000 Amount due from Insurance Brokers 32,646 7,673 Impairment allowance (Note 9.1) - - Net premium receivables 32,646 7, Impairment allowance N'000 N'000 At 1 January - 3,288,804 Charge during the year - - Written off during the year - (3,288,804) At 31 December - - Age analysis N'000 N' days 32,646 7, days ,646 7,673 The balance of N32.6million due from insurance brokers has been fully received subsequent to year end. 10 Other receivables and prepayments N'000 N'000 Prepayments 25,069 81,816 Current account with related companies (Note 14.1) Sundry 7,400 7,987 32,469 89, Current account with related companies N'000 N'000 At 1 January ,997 Payments during the year (112) (52,077) Balance written off - (454,808) At 31 December Deferred acquisition costs N'000 N'000 Motor 25, ,478 Aviation 176 9,372 Engineering 11,168 40,554 Fire 16,038 44,716 General Accident 17,286 81,943 Marine 10,794 57,818 Bond 15,052 12,232 Oil & Gas ,727 96, ,840 The movement in deferred acquisition cost is: N'000 N'000 At 1 January 420, ,728 Additions during the year 96, ,840 Amortisation for the year (420,840) (140,728) At 31 December 96, ,840

58 STANDARD ALLIANCE INSURANCE PLC 57 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS 12 Investment in Associate Companies The Company has equity investments in the following entities: N'000 N'000 Standard Alliance Life Assurance Limited (47.47%) 433,507 1,044,026 Standard Alliance Properties Limited (36.67%) - 30,495 Standard Alliance Capital and Assets Limited (40%) - 7,091 Standard Alliance Pension Limited (40%) - - Total carrying amount at 31 December 433,507 1,081,612 The investments are accounted for using the equity method and further details of the investments balances are: Standard Alliance Life Assurance Limited N'000 N'000 Cost 1,905,000 1,905,000 Share of post acquisition reserve (Note 12.2) (1,471,493) (860,974) 433,507 1,044,026 Impairment provisions/write off - - Carrying amount at 31 December 433,507 1,044, Standard Alliance Properties Limited. N'000 N'000 Cost 275, ,000 Share of post acquisition reserve (Note 12.2) (244,505) (244,505) Carrying amount at 31 December 30,495 30,495 Cost written off (275,000) - Share of post acquisition reserve written off(note 12.2) 244,505 - Carrying amount at 31 December - 30, Standard Alliance Capital and Assets Limited. N'000 N'000 Cost 400, ,000 Share of post acquisition reserve (Note 12.2) (392,909) (392,909) Carrying amount at 31 December 7,091 7,091 Cost written off (400,000) - Share of post acquisition reserve written off(note 12.2) 392,909 - Carrying amount at 31 December - 7, Standard Alliance Pensions Limited. N'000 N'000 Cost - 260,000 Cost written off against impaiment - (260,000) Carrying amount at 31 December - - Impairment provisions N'000 N'000 At 1 January - 260,000 Impairment provisions now written off - (260,000) At 31 December Share of post acquisition profit or losses Standard Alliance Life Assurance Limited N'000 N'000 At 1 January (860,974) (658,609) Share of current year profit/(loss) (Note 12.3) (610,519) (202,365) At 31 December (1,471,493) (860,974) Standard Alliance Properties Limited. N'000 N'000 At 1 January (244,505) (246,529) Share of current year profit/(loss) (Note 12.3) - 2,024 Share of post acquisition profit or losses written off 244,505 - At 31 December - (244,505) Standard Alliance Capital and Assets Limited. N'000 N'000 At 1 January (392,909) (353,509) Share of current year profit/(loss) (Note 12.3) - (39,400) Share of post acquisition profit or losses written off 392,909 At 31 December - (392,909)

59 STANDARD ALLIANCE INSURANCE PLC 58 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS 12.3 Summary of financial statements of Associates: Standard Alliance Life Assurance Limited 47.47% N'000 N'000 Property, plant and equipment 149, ,550 Investment property 1,825,563 1,807,762 Other assets 1,921,267 4,946,809 Liabilities (2,929,377) (4,711,991) Net assets 967,016 2,253,131 Revenue 2,994,428 1,874,250 Loss before taxation (1,262,359) (406,915) Loss after taxation (1,286,115) (426,300) 47.47% thereof (610,519) (202,365) Standard Alliance Properties Limited 40% N'000 N'000 Property, plant and equipments - 11,123 Non-current assets held for sale - 2,362,518 Investment property - 95,000 Other assets - 469,257 Liabilities - (293,999) Long term deposits - (1,800,411) Net Assets - 843,488 Revenue - 565,000 Profit/ (loss) before taxation - 10,966 Profit/ (loss) after taxation - 5,059 Adjustment for unrealised profit ,059 40% thereof - 2,024 Standard Alliance Capital and Assets Limited 40% N'000 N'000 Property, plant and equipments - 163,326 Other assets - 33,306 Long term investment 191,834 liabilities - (117,367) Net Assets - 271,099 Revenue - 18,427 Profit/ (loss) before taxation - (98,501) Profit/ (loss) after taxation - (98,501) 40% thereof - (39,400) Total share of profit/(loss) for the year (610,519) (239,741)

60 STANDARD ALLIANCE INSURANCE PLC 59 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS Investment Properties N'000 N'000 Cost at 1 January 1,435,000 1,435,000 Addition during the year - - Cost at 31 December 1,435,000 1,435,000 Fair value loss (Note 13.1) (20,000) - Market value 1,415,000 1,435,000 The Company's investment properties are properties held to earn rentals or capital appreciation or both. A sum of N18.3million naira was earned as rentals from investment properties during the year. The transfer documents on the 250 hecters of land at Mydumbi Village, Kaduna valued at N40 million has been fully executed but issues relating to consent and ownership have not been perfected. The transfer documents and issues relating to consent and ownership of the Twin Duplex at Parkview Estate, Ikoyi-Lagos, valued at N330 million have not been fully executed and perfected Fair value loss N'000 N'000 At 1 January - - Loss for the year 20,000 - At 31 December 20,000 - Fair value of invesment properties are stated below: Cost Valuation N'000 N'000 N' hecters of farmland at Mydumbi Village, Kaduna-Zaria Road, Kaduna 40,000 40,000 40,000 Twin Duplex, Parkview Estate, Ikoyi-Lagos 350, , , units of 4-bedroom terrace houses at New County Estate, Lekki, Lagos 1,045,000 1,045,000 1,045,000 1,435,000 1,415,000 1,435, Intangible assets Computer software N'000 N'000 Cost AT 1 January 36,605 36,605 Additions 3,207 - At 31 December 39,812 36,605 Amortisation N'000 N'000 AT 1 January 25,062 16,754 Amortisation for the year 7,064 8,307 At 31 December 32,126 25,061 Carrying amount at 31 December 7,686 11,544 The intangible asset relates to the Company's accounting software packages (Turnquest) bought from Turnkey Africa, a Company registered in Nairobi, Kenya.

61 STANDARD ALLIANCE INSURANCE PLC 60 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS 15 Property, plant and equipment Land Building Motor Furniture Computer and Work in Total vehicles and fittings other equipment Progress Cost N'000 N'000 N'000 N'000 N'000 N'000 N'000 At 1 January ,000 1,362, , , ,110-2,354,424 Additions - 69,294 88,744 2,776 45,592 76, ,632 Disposals - - (23,608) (23,608) At 31 December ,000 1,431, , , ,702 76,226 2,613,448 At 1 January ,000 1,431, , , ,702 76,226 2,613,448 Additions 5, ,490 5,363 7, ,943 Revaluation surplus - 411, ,117 Disposals - - (43,045) (43,045) Transfers - 77, (77,026) - Assets written off - - (129,740) (129,740) At 31 December ,000 1,920, , , ,992-3,014,723 Accumulated depreciation and impairment At 1 January , ,760 57, , ,690 Charge for the year - 27,940 58,686 10,735 24, ,051 On disposals - - (21,596) (21,596) At 31 December , ,850 68, , ,145 At 1 January , ,850 68, , ,145 Charge for the year - 30,178 75,169 10,369 25, ,901 On disposals - - (33,775) (33,775) On assets written off - - (19,154) (19,154) At 31 December , ,090 78, , ,117 Carrying amounts as at: 31 December ,000 1,343,127 90,108 54,564 60,278 76,226 1,909, December ,000 1,801,092 39,573 49,558 42,383-2,222,606 Building was professionally valued by Messrs Osaro Eguasa & Co. FRC/2012/ (Estate Surveyors and Valuers) as at 30th December, 2014 on the basis of their open market values. The revised value of the properties was N1,920,000,000 resulting in a surplus on revaluation of N411,117,000 which has been credited to the property, plant and equipment revaluation account. The revaluation report was dated 30 December The re-valued property is the Company's Head Office building located at Plot 94, Providence Street, Lekki Scheme 1, Lekki, Lagos and the Ibadan building located at No. 20 MKO Abiola Way, Ring road, Ibadan, Oyo. Included in Computer and other equipment is an amount of N27,035,597 being cost of the Company's generating set acquired on lease in April The lease period is 24 months at an interest rate of 21% per annum. Included in Motor vehicles is an amount of N61,250,000 being cost of the Company's cars acquired on lease in March The lease period is 18 months at an interest rate of 22% per annum. At the Board of Directors meeting held on 14 May 2015, it was resolved that the retiring Directors should be given possession and ownership of the official vehicles bought for the during 2014 and the net book value of these vehicles should be written off the company's books. The cost and depreciation charged in the year on these vehicles amounted to N129.7 million and N19 million respectively. The sum of N77 million transferred from work in progress to building represents the accumulated cost of construction of the Security and administrative building at the Company's Head Office.

62 STANDARD ALLIANCE INSURANCE PLC 61 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS Statutory Deposits N'000 N'000 Deposit with the Central Bank of Nigeria 335, ,000 This represents 10% of the minimum paid up share capital deposited with the Central Bank of Nigeria in accordance with Section 10 (3) of the Insurance Act, CAP I17, LFN Insurance contract liabilities N'000 N'000 Unearned premium reserve (Note 17.1) 917, ,803 Outstanding claims (Note 17.2) 1,485,076 1,077,956 2,402,454 2,000,759 Less: Reinsurance assets (Note 8) (607,664) (241,092) 1,794,790 1,759,667 The insurance contract liabilities balances above are covered by the Company's dedicated assets thus: N'000 N'000 Cash and cash equivalents 617, ,396 Financial assets 719, ,224 Investment properties 380, ,139 Statutory deposits 335,000-2,052,101 2,000, Unearned premium reserve N'000 N'000 Aviation 37,976 14,578 Bond 91,377 19,134 Engineering 55,720 48,768 Fire 92, ,910 General accident 101, ,043 Marine 86, ,472 Motor 310, ,586 Oil & gas 141, , , , Outstanding claims reserves N'000 N'000 Aviation 111,376 40,345 Bond 23,969 8,099 Engineering 101,438 63,578 Fire 239, ,151 General accident 97,832 70,131 Marine 98,380 37,192 Motor 124,806 57,451 Oil & gas 386, ,063 1,184, ,010 Provision for claims incurred but not reported (IBNR) 300, ,946 1,485,076 1,077, Movement in outstanding claims reserves N'000 N'000 Oustanding claims reserve at the beginning 772, ,805 Reported claims in the current year 1,482, ,621 Claims paid during the year (1,070,053) (1,035,416) 412,498 (167,795) Oustanding claims reserve at the end 1,184, ,010 The age analysis of outstanding claims was as follows: 0-90 days 136, , days 39,025 69, days 217, , days and above 791, ,906 1,184, , Trade payables N'000 N'000 Due to Reinsurer 75,954 49,463 Due to Co-assurers - - Due to Brokers ,954 49,463 The trade payables are all of current maturity.

63 STANDARD ALLIANCE INSURANCE PLC 62 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS Other payables and accruals N'000 N'000 Due to government agencies 10,456 25,007 Lease rent received in advance (Note 19.1) 18,813 22,011 Due to staff 16,022 - Accrued expenses 117,064 - Other credit balances 58, ,716 Preference dividend payable (Note 19.2) 175, , , ,734 The above are further analysed as: N'000 N'000 Current 376, ,723 Non-current 18,813 12, , , Lease rent received in advance The Company leased out three floors (ground, first and second) of its head office building to Standard Alliance Properties Limited at an annual rent of N10 million effective July This is to ensure professional management of the lease agreements with non-related tenants of the floors. Standard Alliance Properties Limited made an advance payment of rent of N47 million in 2011 which is now being amortised at N10 million rent per annum. The balance of this account as at 31 December 2014 is N million 19.2 Preference dividend payable N'000 N'000 At 1 January 175, ,000 Paid during the year - (175,000) At 31 December 175, ,000 The Company had 17,500,000 (Seventeen Million, Five Hundred Thousand units of preference shares of N100 (One Hundred Naira) each prior to year ended 31 December These were converted to ordinary shares of 50k (50 Kobo) each in the Company and issued to the holders of the preference shares as at 31 December 2011 in accordance with the resolution passed at the 15th Annual General Meeting of 16th December The amount of N175 million is the balance of pre conversion dividend yet unpaid as at 31 December, Borrowings N'000 N'000 Daewoo Securities Bond (Note 20.1) 565, ,314 Term loan (Note 20.2) 192,327 - Bank overdraft - 109, , , Daewoo Securities Bond The Company received a capital inflow of JPY650,000,000 ($7,397,516) zero coupon bond raised from Daewoo Securities in December The bond was tenured originally for 20 years with the lenders' option to convert the bond to Standard Alliance Insurance Plc's ordinary shares. If the option is not exercised, the Company must pay interest 4.25% per annum on the gross bond value for the entire term it has been outstanding. Daewoo Securities requested for the full redemption of the bond in 2011 following which the Company went to a negotiation with it for a repayment plan. During the year 2012, the Company concluded the negotiation of the payment plan with the bond owners on the balance of JPY 569,777,070 principal sum and accrued interest of JPY26,469,000 under the following terms: i. Non-payment of dividend to shareholders until 2014 ii. Outstanding balance and interest to be paid over five years starting from 2013 and as detailed hereunder: Payment due date Principal Interest Total JPY'000 JPY'000 JPY'000 12/15/ ,234 18, ,875 12/16/ ,622 14, ,875 12/17/ ,196 9, ,895 12/17/ ,552 4, , ,604 47, ,108

64 STANDARD ALLIANCE INSURANCE PLC 63 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS Further details of transactions during the year are: Principal Interest Total JPY'000 JPY'000 JPY'000 N'000 N'000 At 1 January 500,010 6, , ,314 1,072,192 Interest accrued during the year - 18,641 18,641 26,166 36,006 Payments during the year (103,215) (18,641) (121,856) (196,470) (188,083) Foreign exchange difference (12,534) (171,801) At 31 December 396,795 6, , , ,314 Current maturities Interest 67,477 94,717 8,949 Principal 107, , ,453 Total current maturities 175, , ,402 Non-current principal maturity 227, , , , , ,314 The balance of JPY 402,842,000 (N565,475,909) is stated in the financial statements at the Central Bank of Nigeria closing exchange rate of N1.4037/JPY as at 31 December Subsequently in 2015, a sum of JPY 70,000,000 was paid in principal and interest. Daewoo Securities still has the option up to year 2029 to subscribe to the equity shares of the Company at a strike price of 50 kobo per share Term Loan N'000 N'000 Balance, at beginning of the year - - Additions during the year 200,000 - Repayment during the year (7,673) - Balance, at end of the year 192,327 - Current 54,914 - Non-current 137, ,327 - The Company took a loan facility of N200 million during the year from FCMB Plc for operational needs. The loan is payable in thirty six equal monthly instalments from November The loan attracts interest at the rate of 20% per annum. 21 Finance lease obligations N'000 N'000 Balance, at beginning of the year 49,953 17,765 Additions during the year 45,937 48,746 Repayment during the year (63,482) (16,558) Balance, at end of the year 32,408 49,953 The Company obtained lease facility of N20,276,698 during 2013 from Diamond Bank at an interest rate of 21% for a period of 24 months to finance the acquisition of a Mantrac Generator. During the year 2014, the Company obtained a new lease facility of N45,937,500 from Diamond Bank at an interest rate of 22% for a period of 18 months to finance the acquisition of 8 units of motor vehicles. These generators and motor vehicles are included in the property, plant and equipment of the Company as at 31 December The rental due as at 31 December 2014 are further analysed as follows: N'000 N'000 Less than 3 months 10, Between 3 and 6 months 11,256 1,160 Between 6 and 12 months 10,495 31,058 32,408 33,213 Over 12 months - 16,740 32,408 49,953 Restated 22 Employee benefit liabilities: N'000 N'000 Gratuity At 1 January - 36,098 Charge for the year - - Provision no longer required (Note 46) - (36,098) At 31 December - - During 2012, the Company changed its policy on gratuity. The Company no longer makes provision for gratuity and as such the provision of N36 million made up to 31 December 2012 is no longer required.

65 STANDARD ALLIANCE INSURANCE PLC 64 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS 23 Current income tax liabilities Per Statement of Comprehensive income N'000 N'000 Company income tax 75,989 55,062 Education tax 10,516 9,817 Information technology development levy tax ,505 64,879 Per Statement of Financial Position: Balance at beginning of the year: N'000 N'000 Company income tax 259, ,507 Education tax 18,227 15,907 Information technology development levy tax , ,414 Provisions for the year: Company income tax 75,989 55,062 Education tax 10,516 9,817 Information technology development levy tax - - Payments during the year: Company income tax (21,000) (50,196) Education tax (8,820) (7,497) Information technology development levy tax At 31 December 334, , Deferred tax liabilities N'000 N'000 At 1 January 294, ,475 Charged for the year (Note 24.1) 11,524 97,561 At 31 December 305, , Charge for the year N'000 N'000 Profit or loss charged on timing differences of carrying amounts of taxable assets 11,524 26,327 Tax recorded in other comprehensive income: Charge on timing difference of carrying amount of taxable assets - - Revaluation surplus on building (Note 30.1) - - Fair value (loss)/gains on available for sale investment(note 30.2) - 71,234 11,524 97, Ordinary share capital Authorized N'000 N'000 14,000,000,000 ordinary shares of 50k each 7,000,000 7,000,000 Issued and Fully Paid N'000 N'000 11,993,173,000 units of ordinary shares of 50k each 5,996,587 5,996, Share premium N'000 N'000 At 1 January 15,852,049 15,852,049 Discount on treasury shares (8,184,574) - At 31 December 7,667,475 15,852,049 Share premium comprises additional paid-in capital in excess of the pair value. This reserve is not ordinarily available for distribution. 27 Treasury shares N'000 N'000 At 1 January 8,737,585 8,737,585 Cash proceeds from investors (553,011) - Discount on sale of treasury shares (8,184,574) - At 31 December - 8,737,585 These represent the offer price of 2,212,046,824 units of ordinary shares of 50k each (N1,106,024,412 and associated total share premium of N7,631,561,991) for which no net cash inflow accrued to the Company during its public offer of The Company at its 15th Annual General Meeting held on 16th December 2011 approved the cancellation of these shares and to this effect a court order was also obtained on 26th of April The Company applied to the Securities and Exchange Commission (SEC) for the final approval of the share cancellation. SEC however, in its response subsequently in 2014 has directed that Standard Alliance Insurance Plc should realise the shares presented for cancellation and report back to it on or before December The Company initiated urgent and appropriate steps in engaging in discussions with prospective investors. During the year, the Company offerred the treasury shares to potential investors and subsequently Gemrock Management Company Limited bought the shares at the sum of N553 million. The difference between the cash proceeds and the value of treasury shares was transferred to the share premium account.

66 STANDARD ALLIANCE INSURANCE PLC 65 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS Contingency reserve N'000 N'000 At 1 January 1,113, ,663 Charge for the year 129, ,762 At 31 December 1,243,423 1,113,425 Contingency reserve is provided for at the rate of 3% of the gross premium or 20% of profit (whichever is greater for the year) in accordance with Section 22 (1)(b) of the Insurance Act Accumulated loss N'000 N'000 At 1 January (10,894,417) (9,899,712) Loss for the year (2,080,642) (880,943) Appropriation to contingency reserves (129,998) (113,762) At 31 December (13,105,057) (10,894,417) 30 Other reserves N'000 N'000 Revaluation reserve 1,114, ,401 Fair value gain reserve 500, ,110 1,615,054 1,447, Revaluation Reserve N'000 N'000 At 1 January 703, ,401 Addition during the year(note 15) 411,117 - At 31 December 1,114, ,401 Further details are: N'000 N'000 Revaluation surplus - Building 411,117 - Deferred tax on revaluation surplus ,117 - The Company's office building at Ibadan and Head Office in Lagos were revalued at N20 million in 2006 and N1,431,857,000 in 2012 respectively by the firm of Messrs Osaro Eguasa & Co (FRC/2012/ ). The revaluations resulted in surpluses of N14,299,000 and N767,258,000 respectively, which has been credited to the property, plant and equipment revaluation account. During the year, the Head office was revalued at N1,900,000,000 by Messrs Osaro Eguasa & Co (FRC/2012/ ). The revaluations resulted in surpluses of N411,117,000 which has been credited to the property, plant and equipment revaluation account Fair Value Gains Reserve This is the net accumulated changes in the fair value of available for sale assets. N'000 N'000 At 1 January 744, ,008 (Decrease)/increase during the year - net of income tax (243,574) 641,102 At 31 December 500, ,110 The addition during the year is further analyzed thus: N'000 N'000 Fair value (loss)/gains on available for sale - (Note 7.3.1) (243,574) 712,336 Deferred tax on fair value gains for the year (Note 24.1) - (71,234) (243,574) 641,102

67 STANDARD ALLIANCE INSURANCE PLC 66 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS General Motor Gross premium income Aviation Bonds Engineering Fire Accident Marine Accident Oil & Gas N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 Premium written 14, , , , , ,009 1,003, ,243 4,333,254 3,792,076 Movements in unexpired risks (Note 31.1) (23,398) (72,243) (6,952) 17,333 49,197 29,246 7,332 4,910 5,425 (12,442) Gross premium (8,399) 346, , , , ,255 1,011, ,153 4,338,679 3,779, Movement in Unepired risks Unexpired risk At 1 January ,578 19,134 48, , , , , , , ,361 Unepired risk At 1 December 2014 (37,976) (91,377) (55,720) (92,577) (101,846) (86,226) (310,254) (141,402) (917,378) 922,803 Movement during the year (23,398) (72,243) (6,952) 17,333 49,197 29,246 7,332 4,910 5,425 (12,442) General Motor Aviation Bonds Engineering Fire Accident Marine Accident Oil & Gas Total 32 Reinsurance premium expenses N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 Charged for the year ,951 (241) 47,185 55,020 23,352 77,638 24, , ,015 Charged for the year ,658 2,051 18, ,001 2, ,945 23, , ,715

68 STANDARD ALLIANCE INSURANCE PLC 67 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS Commission income N'000 N'000 Aviation 3,358 1,143 Bond - 84 Engineering 14, Fire 23,359 4,292 General Accident 9,989 7,915 Marine 33,016 4,235 Motor 5,110 4,279 Oil &Gas 13,429 10, ,078 33, Claims expenses N'000 N'000 Claims paid 1,070,053 1,035,416 Increase/(decrease) in outstanding claims(note ) 412,498 (167,795) (Decrease)/increase in claims incurred but not reported (5,378) 298,894 1,477,173 1,166,515 Claims expenses recoveries from reinsurers (283,099) (95,625) 1,194,074 1,070, Underwriting expenses Acquisition cost: N'000 N'000 Aviation 10,073 26,446 Bond 83,925 30,374 Engineering 73,778 78,385 Fire 91, ,128 General Accident 214, ,739 Marine 204, ,672 Motor 216, ,332 Oil and Gas 63,976 87,451 Others 96, ,011 Total acquisition cost 1,054,966 1,067,538 Maintenance cost 287,015 - Deferred commision - (14,073) 1,341,981 1,053, Investment and other income N'000 N'000 Interest on deposits 136, ,088 Lease rental income 18,308 17,506 Dividend received 11, , ,294 Balances with banks recovered 10,649 - Foreign exchange difference 44, ,918 Other income 18, , ,212 The total investment income is further classified as: Investment income attributable to policyholders' funds 1,634 2,286 Investment income attributable to shareholders' funds 237, , , ,212

69 STANDARD ALLIANCE INSURANCE PLC 68 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS Management expenses N'000 N'000 Salaries and Allowances 454, ,011 Other staff costs 92,197 54,151 Directors' fees and Allowances 89,485 41,983 Insurance expenses 19,722 12,938 Rent and rates 24,176 25,330 Repairs and maintenance 142, ,000 Depreciation and amortisation 147, ,358 Professional fees 146,537 82,827 Bank charges 14,902 42,150 Printing and stationery 23,833 12,413 Advertising and promotion expenses 142,535 20,702 Books and periodicals 1,265 1,112 Telephone and postages 25,003 34,931 Other administrative expenses 37,293 28,104 Supervisory levies 25,000 72,522 Staff training and development 9,433 28,447 Audit fee 7,000 9,000 Corporate and public relation expenses 83,882 66,842 Travelling,outstation and hotel epenses 78,552 95,419 General management expenses 92,397 42,785 Annual general meeting expenses 19,249 7,203 Property, plant and equipment written off 110,586 - Loss on sale of property, plant and equipment 6,517 - Staff debts written off 1,794-1,795,804 1,497, Finance charges N'000 N'000 Interest expenses 13,771 27,830 Lease charges 8,546 25,197 Interest on Daewoo bond 26,166 84,057 48, , Impairment charges N'000 N'000 Other receivables - Staff share loan - 5,279 Impairment provision on investment in associate companies 37,586 - Current account balances - 454,920 Impairment provision on loans and receivables 945,216 - Provision/(write back) of impairment on deposit (Note 7.3.3) 162,848 (162,848) 1,145, , Information Technology Development Levy N'000 N'000 At 1 January 3,191 3,191 Appropriation for the year - - At 31 December 3,191 3,191 The Nigerian Information Technology Development Agency (NITDA) Act was signed into law on 24 April, Section 12(a) of the Act stipulates that specified Companies contribute 1% of their profit before tax to the Nigerian Information Technology Development Agency. No provision has been made as there was no profit before taxation as at 31 December Loss before taxation Loss before taxation is stated after charging/(crediting): N'000 N'000 Depreciation 140, ,051 Amortization 7,064 8,307 Auditors' remuneration 7,000 9,000 Director's remuneration 89,485 41, Premium receipt from policy holders N'000 N'000 Premium due from policy holder at 1 January 7, ,254 Gross Premium written in the year 4,338,679 3,779,639 4,346,352 4,421,893 Premium due from policyholders at 31 December (32,646) (7,673) Premium receipts in the year 4,313,706 4,414,220

70 STANDARD ALLIANCE INSURANCE PLC 69 FINANCIAL STATEMENTS, 31 DECEMBER 2014 NOTES TO THE FINANCIAL STATEMENTS 43 Fair value Hierarchy The Company's fair value measurements model is highlighted in accounting policy 5.6. Level 1 Fair value measurements classified as level 1 include fair values of quoted investments based on current market prices. Level 2 Fair value measurements classified as level 2 include fair values of unquoted investments which the Company established using valuation techniques such as: recent arm's length transactions reference to other instruments that are substantially the same net assets value and discounted cash flows Level 3 Fair value measurements classified as level 3 include fair values of financial assets of which there are no active markets and no observable inputs. They comprise loans and other receivables. The table below highlights financial instruments in their various fair value hierarchies at year end: 2014 Asset type Total Level 1 Level 2 Level 3 N'000 N'000 N'000 N'000 Quoted securities - At fair value through profit or loss 58,949 58, Quoted securities - Available for sale 719, , , , Asset type Total Level 1 Level 2 Level 3 N'000 N'000 N'000 N'000 Quoted securities - At fair value through profit or loss 91,424 91, Quoted securities - Available for sale 963, , ,054,648 1,054,

71 STANDARD ALLIANCE INSURANCE PLC 70 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS 44 Penalty by NAICOM During the year the Company contravened certain sections of the Insurance Act, CAP I17, LFN 2004 and NAICOM's operational guidelines. Details of the contraventions and appropriate penalties thereon are as follows: Section Section 49(3) of Insurance Act 2004 Section 49(3) of Insurance Act 2004 Section 1.16 of operational guideline Section 1.16 of operational guideline Section 30 of NAICOM Act 1997 Section 49(5) of NAICOM ACT, Nature of infraction N'000 N'000 Supply of wrong information Use of unregistered intermediaries Late submission of 2013 audited accounts Late submission of th quarter returns Late submission of copy of self-assessment form (1A) Filing of 2013 Reinsurance treaty arrangement Failure to furnish information Section 81(1) of NAICOM ACT, 1997 Penalty in respect of 2012 insurance account of Operational guidelines Nigeria Methodology Agency Operational guidelines Non-rendition of of un-remitted premium report Operational guidelines Late submission of fees Section 1.16 of operational guideline Late submission of 2012 Audited Account - 1,000 operational guidelines Filling fees Section 81(1) of Insurance Act Non-submission of claims management expenses ,715 3, Directors and employees Employees Amount of penalty The average number of persons employed by the Company during the year by category Number Number Excecutive Director 1 1 Management Staff Non-management staff Staff cost for the above persons (Excluding Executive Directors) was: Wages and Salaries 527, ,292 Employees' Retirement Benefits 6,463 20, , ,162 The number of employees of the company otherthan Director who received emolument in the following range was: The details of the restatements are as follows: Number Number N500,001 - N600,000-1 N600,001 - N700, N700,001 - N800, N800,001 - N900, N900,001 - N1,000, N1,000,001 - N1,100, N1,100,001 - N1,200, N1,200,001 - N3,000, N1,300,001 - N1,400, N1,400,001 - N1,500, Above - N1,500, Directors' Remuneration The remuneration paid to the Directors of the company was: N'000 N'000 Fees and other allowances 33,906 27,750 Excecutive compensation 14,367 14,233 48,273 41,983 Fees and other emolument disclosed above include amount paid to: N'000 N'000 The Chairman - - Highest paid Director 14,367 14,233

72 STANDARD ALLIANCE INSURANCE PLC 71 FINANCIAL STATEMENTS, 31 DECEMBER 2014 OTHER NOTES TO THE FINANCIAL STATEMENTS The number of Director who received fees and other emolument (excluding pension contribution) in the following ranges was: Number Number N1,000,001 - N2,000, N2,000,001 and above Prior Period Restatements 46.1 Employee benefits liabilities 7 7 An amendment was made to the accounting policy on gratuity which took effect from 2012 but was not effected in the books. The management had decided to discontinue its gratuity scheme and all prior year provisions were cancelled. Based on the above, gratuity obligation amounting to N36,098,000 was written-back. The financial statements have been restated to correct this error. The restatements required adjustments in the statement of financial position as at 31 December To this effect, the Statement of financial position, statement of changes in equity and affected notes showed restated comparative information for the year ended 31 December The details of the restatements are as follows: Employee benefits liabilities - (Gratuity) N'000 As previously stated 36,098 Correction of provision no longer required (36,098) As restated - Retained earnings As previously stated (10,930,515) Correction of provision for employee benefits no longer required 36,098 As restated (10,894,417) 47 Contingent liabilities No material contingent liabilities have been made or are likely to be made in these financial statements. 48 Related party transactions Insurance contract - Standard Alliance Life Assurance Limited. The Company buys Group Life Policy for the staff from Standard Alliance Life Limited, a related Company. A sum of N9,830,051 (2013: N1,910,226) was paid as premium for the year ended 31 December Group Expenses - Standard Alliance Investment Group The Company is a member of Standard Alliance Investment Group. The Company's share of the common expenses of the group for the year ended 31 December 2014 amounted to N92,396,774 (2013: N43,285,000) Purchase of Furniture - Heroes Furniture Ltd. During the year, the Company purchase office furniture from Heroes Furniture Limited to the total sum of N10,055,300 (2013: N1,335,000). One of the immediately past Directors of the Company, Olorogun O'tega Emerhor, OON has beneficial interest in Heroes Furniture Limited. Investment in a property business - Standard Alliance Properties Limited The Company invested in a property business with Standard Alliance Properties. The term of this include an annual interest income of 4.5% and share of profit. A sum of N90,020,596 accrued to the Company during the year. In the year 2012, SA Properties Limited assigned a total of 3 blocks of 11 flat located at New County Estate, Lekki to the Company at a valueof N95million each (total value was N1.045billion as certified by Osaro Eguasa & Co [FRC/2012/ ] as at 8th August 2012). A recent valuation carried out by the same expert put the market value of these properties at N1.05 billion as at 31 December The balance on this investment account was N1.89 billion as at 31 December 2014 (2013: N1.8 billion as at 31 December 2013) The Company also has a lease agreement on three (3) floors (ground, first and second) of its Corporate Headquarters building with Standard Alliance Properties Limited. The lease is for a period of 4 years with an annual rent of 10million. 49 Events after the reporting period There were no events after the reporting period which could have a material effect on the financial position of the Company as at 31 December 2014 and profit attributable to equity holders.

73 STANDARD ALLIANCE INSURANCE PLC 72 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER RISK MANAGEMENT REPORT A) Introduction and overview The company was faced with the following risks in its operations. i Capital Adequacy risk ii Regulatory risk iii Liquidity risk This note presents information about the company's exposure to each of the above risks, the company's objectives, policies and processes for measuring and managing risks. Risk Management Philosophies and Principles The following principles guide financial risk management in the company: i. A deliberate and conscious management of the company s investment portfolio to ensure that the risk of excessive concentration on any one class, industry, or sector is minimized, as well as to ensure portfolio flexibility and liquidity. ii. iii. iv. v. vi. vii. viii. A strict adoption of sound internal policies and processes resulting in consistent adherence to investment guidelines issued by the National Insurance Commission to enable the Insurance industry maintain sound solvency margin and sound liquidity health at all times. The Executive Management took responsibility for establishing a robust liquidity management framework consistent with regulatory requirements of the Commission that ensures sufficient liquidity to withstand a range of stress events. The financial risk procedural manual spell-out the operational steps and procedures for executing relevant controls to prevent the occurrence or reduce the impact of risk events touching on Financial and strategy risk. The manual is being reviewed periodically reviewed and updated to take into account new activities, system changes, and structural changes in the industry. The Board approves all strategies and policies in respect of financial and strategic risk management. Evaluation of the effectiveness of risk management process and the internal control system shall be carried out by external consultants periodically. The Company relies on its Risk Management Committee lt develops early warning indicators to aid the prompt identification of all risks from all of the risk categories Risk Management Strategy The Board and Management has put in place clearly defined financial risk management framework that provides the Company with guidance and prescribes tolerable financial risk related losses considering available capital and levels of other investment risk exposures. The company s financial risk policy and strategy are anchored on the following: i. Investment portfolio diversification which involves the application of the Company s investible funds in a wide range and class of financial instruments consistent with Regulatory Requirements. ii. iii. Liquidity risk Management taking within well defined limits with the sole purpose of creating and enhancing liquidity and competitive advantage, Effective utilization of Company s liquidity position.

74 STANDARD ALLIANCE INSURANCE PLC 73 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 Risk Management Framework The Standard Alliance Insurance Plc recognizes the presence of financial risk in its process of delivering value to its stakeholders. This financial risk Management Framework is set out to manage financial risks resident in the investment processes and procedures of the company. It provides guidance on related issues of Identification, Measurement, Monitoring and Reporting of financial risks in order to ensure the Company continually meets its contractual liabilities to policy holders. The company recognizes the importance of these classes of risks, which is inherent in the investment, market, and liquidity management of its insurance business. This policy contains guidelines to help the Company manage its assets in a sound and prudent manner, taking account of the profile of its liabilities, its solvency position and its risk return profile. The Company's financial risk shall be managed within tolerable limits through an appropriate management focus and deployment of resources. Risk Management Governance The overall responsibility for the management of financial risk shall resides with the Board through its Risk and Remuneration Committee. To ensure consistency and prudent management of financial risks, this responsibility shall be divided as follows: i. Board of Directors/ Risk & Remuneration Committee ii. Finance and Investment Committee of the Board iii. Executive Management Committee on Investment iv. ERM Committee/CRO v. Finance and Investment Department. vi Quality Assurance and Control Risk Tolerance/Appetite The Company shall operate by managing its risks within acceptable bounds so as to maintain and increase the value of its resources for its stakeholders. An explicit discussion of risks and risk tolerance will be part of the STANDARD ALLIANCE INSURANCE s decision making process. STANDARD ALLIANCE INSURANCE has defined Enterprise risk appetite at two levels: i. The enterprise level; and ii. The Business/Support/Functional Unit levels The ERM Committee set target key performance indicators ( KPI s ) at both an enterprise and a business/support unit level based on recommendations from the Chief Risk Officer. Target KPI s is reviewed at least on annual basis. At the Business and Support unit levels, the enterprise KPI s is cascaded to the extent that the contribution of each Business/Support Unit to enterprise risk shall serve as input for assessing the performance of the Business/Support Unit. Tolerance levels is defined for each key risk indicator and serves as a proxy for the risk appetite for each risk area and Business/Support Unit. Tolerance levels is subject to approval of ERM Committee and shall be reviewed on a periodic basis to reflect changing circumstances.

75 STANDARD ALLIANCE INSURANCE PLC 74 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 Risk Management Process The Company s disciplined approach to risk management is iterative, scalable, and includes the steps below. Consistent application of this process enables continuous improvement in decision making and performance by top Management. The process as follows: 1. Communication and Dialogue: Communication and dialogue with internal and, as appropriate, external stakeholders as far as necessary takes place at each stage of the risk management process Establishing the Context: This defines risk parameters to be taken into account when managing risk, and setting the scope and risk criteria for the remaining process. Risk Identification: This process helps the company develop a comprehensive list of risks based on those events that might enhance, prevent, degrade, or delay the achievement of the objectives. Risk Analysis: This context helps to understand the causes and sources of risk, their positive and negative consequences, and the likelihood that those consequences can occur. Existing risk controls and their effectiveness should be taken into account and communicated. Risk Evaluation: The purpose of risk evaluation is to assist in making decisions based on the outcomes of risk analysis about which risks need treatment and to prioritize treatment implementation for those unacceptable risks (i.e. those that exceed risk tolerance) Risk Treatment: This involves the selection of one or more options for modification of unacceptable risks and implementing those options. Risk treatment options include: avoiding the risk, seeking out an opportunity, removing the source of risk, changing the likelihood, changing the consequence, sharing the risk with another party, and retaining the risk by choice. 7. Monitoring and Review: This step should encompass all aspects of the risk management process to: i. Analyze and learn lessons from events, changes, and trends. ii. Detect changes in the external and internal context including changes to the risk. Risks/ events shall be identified and analyzed against the broad success criteria which may be affected. The focus in risk identification is capturing all the possible risks associated with an event, activity, project, roles or management decisions. It also covers the impact of an event occurring on the identified success criteria. i. Element of Risk- Description of the risk engaged within a process and event or a role. ii. Impact on business- Details the consequences of a risk occurring upon the related success criteria. iii. Mitigation Measures- Details controls already established or in the process of being established. iv. Responsibility- Identifies the officer and department responsible for the implementation and monitoring of compliance of the prescribed controls B) Financial Risk Assessment Risks is measured in terms of likelihood and consequences on both inherent and residual basis (pre and post controls). Both likelihood and consequences may be measured qualitatively or quantitatively depending on the risks being considered. The criteria for success adopted by the Company are; i. Shareholders funds ii. Market Share iii. Company s image iv. Revenue growth v. Employees welfare vi. Solvency Margin vii. Customer Service

76 STANDARD ALLIANCE INSURANCE PLC 75 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 The impact of risk against this success criteria form the basis for the development of the consequence rating scale. The specific evaluation criteria adopted in this document is: Consequence rating scale No Rating Consequence (impact on established success criteria) Quantification 1 Catastrophic 2 Major 3 Moderate 4 Minor 5 Negligible Shareholder s fund depleted, license withdrawn and liquidation imminent Most success criteria threatened or one severely affected Some success criteria affected, considerable effort being made to rectify Easily remedied, criteria can be recovered Very small impact, rectified in the course of normal processes >/= 10% of Shareholders fund 5% - < 10% of shareholders fund 1% - < 5% of shareholders fund 0.5% - < 1% of shareholders fund < 0.5% of shareholders fund Likelihood rating scale No Rating Interpretations 1 Almost certain More than 50% change that it will happen during the year and may occur several 2 Likely 50% change that it will happen during the year 3 Possible Less than 50% chance that it will happen during the year 4 Unlikely Could occur once over a 5-10 year period 5 Rare Very unlikely over a 10 year period a) Market Risks Market risk refers to worsening financial condition arising from adverse movements in the level of volatility of market prices. It involves the exposure to movement of financial variables such as; equity prices, interest rates or exchange rates. It is usually introduced into a Standard Alliance Operation through variations in financial markets that cause changes in asset values, product or portfolio valuation. Some of the events under market risks are: i. ii. iii. Movement in interest rates to the extent that future cash flows from the assets and liabilities are not well matched. Movement in market values of equity, real estate and other assets to the extent that the company is exposed to changes in market value. Movement in exchange rates which may result in losses from asset and liabilities denominated in different currencies. b) Credit Risks Credit risk refers to the risk of financial losses arising from default or movement in the credit quality of issuers of security, debtors, or counterparties and intermediaries to whom the company has exposures. Such risk events are: i. ii. iii. iv. Default Risk: Risk that a company will not receive or receipts delayed or partially the cash flow or assets to which it is entitled because the other parties default in one or more obligations. This risk has been substantially eliminated by the regulations No Premium, No Cover policy. Concentration Risk: Risk of increased exposure to losses due to concentration of investments geographical area, economic sector, counterparty, or connected parties. Downgrade or Migration Risks: Risks that change in the probability of a future default by an obligor will adversely affect the present value of the contract with the obligor today. Indirect or Spread Risks: Risk due to market perception of increased risk on either a macro or micro basis. in a

77 STANDARD ALLIANCE INSURANCE PLC 76 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 c) Liquidity Risks: Liquidity risk refers to the risk that a company, though solvent has insufficient liquid assets to meet its obligations as they fall due. Liquidity is concerned with the current and future maintenance of appropriate levels of cash and liquid assets. Such risk events are: i. ii. Liquidation Value Risks: The risk that unexpected timing or amount of needed cash may require the liquidation of asset when market condition may result in loss of realized value. Affiliated Investment Risk: The risk that an investment in a member company of the group may be difficult to sell or that such affiliate may create a drain on the financial or operating resources of the Company. iii. Capital Funding Risks: The risk that the company will not be able to obtain sufficient outside funding as its assets are illiquid at the time of need. iv. Negative Publicity with unexpected liquidity strain. v. Negative Report about other companies in similar trade. vi. Deterioration of the Economy. vii. Abnormally volatile or stressed market. Identification of Financial Risk The various risk types identified under financial risk category as used in this policy are: Market Risks Credit Risks Liquidity Risks Interest Rate Concentration Risk Liquidation Value Equity Default Risk Affiliated Investment Real Estate Indirect or spread Risks Capital Funding Currency Downgrade or Migration Risks Negative Publicity Role of the CRO in conjunction with the finance/ Investment risk manager: i. Strive to anticipate the risks inherent in the above listed indicative factors and propose appropriate preventive measures. ii. Document the anticipated risks and reports to the ERMC for appropriate response and implementation. Assessment of Financial Risk i. The Company measures its financial risk exposures across risk types, risk factors and overall investment portfolio ii. iii. iv. v. The Company documents the appropriate products to be used to hedge exposures, the item that qualifies to be hedged, how hedging instruments effectiveness shall be assessed and identify individuals responsible for monitoring hedge performance The Company has set appropriate limit structure to control its financial risk exposures. The Company periodically reviews its financial risk limits to verify its suitability based on current market conditions, economic conditions and its overall risk tolerance The Company applies its stress testing to determine the potential effect of economic shifts, market events, changes in interest rates, changes in foreign exchange and changes in liquidity conditions Internal Risk Identification and Assessment Internal risk relate to risks that have their sources in faulty or deficient internal systems, process or negligence or indolence of persons responsible for such roles. Such risk resides within the financial management system of the Company. i. Internal Processes ii. Reporting System iii. Bank reconciliation practices iv. Budget preparation and monitoring v. Working capital management Financial risks also reside within financial processes, people in financial management, compliance levels, Reporting system, control processes.

78 STANDARD ALLIANCE INSURANCE PLC 77 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 External Risk Identification and Assessment External risks relate to risks that are exogenously determined and impact directly on the financial health of the company. Such risks can arise from the following; i. Changes in regulation ii. Changes in currency and exchange rate iii. Changes in interest rate iv. Changes in capitalization and Solvency Margin. v. Changes in shareholder s structure and composition vi. Changes in money and capital markets Risk & Control Self Assessments Risk control self assessment of existing, newly identified and emerging financial risk should be carried-out regularly, at least once every quarter. i. a b c d For every Control-based financial risks such as fraud, the CRO in conjunction with the finance/ Investment managers risk shall; Identify the control structure Compare the control structure to a best practice model Identify the gaps Recommend and implement new controls. Risk Ratings The CRO in conjunction with the finance/ Investment risk managers Ensure every risk identified and assessed is given the right risk priority rating for effective treatment. Key Risk Indicators Management considers several factors as indicative of the presence of financial risks across the organization. Some of these indicative factors are: Market Risks KRIs Credit Risks KRIs Liquidity Risks - KRIs Interest rate fluctuations Increasing receivables Earnings volatility Proportion of debt to equity Changes in debt profile Asset coverage Decline in market values Frequency of settlement failure Liquidity ratio Guaranteed value losses Connected or affiliated Cash flow modelling Changes in exchange rate Financial trends Frequency of Cash conversion Rising inflation Counterparty exposures Working Variations in capital Risk Mitigation a. Insurance i. ii. iii. The finance/ Investment risk manger brings to the attention of the Head Administration department every risk emanating from investment operations that ought to be insured (refer to the risk register for financial risks that are mitigated through insurance) The Administration Manager ensures that premium due for all insurances are dully paid The finance/ Investment risk manager shall advise the administration department of any insurance that is no longer required. b. Consultancy All consultancy services relating to financial risk shall have contract which clearly states the terms of engagement of the consultant. The Chief risk officer shall ensure that the contract arising from all consultancy services covers the following; Standard Level Agreement (SLAs) which; i. details the minimum level of performance/quality required from the consultants ii. clearly delineates the risks to be borne by the consultant iii. clearly specifies the penalty for default

79 STANDARD ALLIANCE INSURANCE PLC 78 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 Risk Reporting Financial Risk Management requires an organization to have an effective risk reporting process reflecting the up-todate status of risk issues within the Company. i. ii. iii. Such report should define the responsibility for production of investment report, the layout of each of the reports, timing of production and delivery, presentation of result, basis evaluation, etc. Report should be analyzed to improve existing risk management performance, evaluate the impact of financial risk breaches and monitor compliance with risk appetite levels. Separate report should be generated for each of the three major risk types: Market, Credit and Liquidity Risk. Risk Reporting Template The periodic report should include the following: i. Details of investment activities during the period under reference ii. Commentary on each of the investment activity iii. Details of portfolio positions by asset type iv. Concentration analysis of portfolio and/or credit exposures v. Details of any regulatory or internal limits breached during the period vi. vii. Actions taken on such if any Planned future investment activities C) Capital management The Company s capital management framework is designed to ensure that the company is capitalised in line with the risk profile, regulatory requirements, economic capital standards and target ratios approved by the board. The capital management objectives of the company are to: maintain sufficient capital resources to meet minimum regulatory capital requirements set by NAICOM maintain sufficient capital resources to support the company s risk appetite and economic capital requirements; support the company s credit rating; maintain adequate capital to support the development of its business and to enable it continue as a going concern, while at the same time maximising the return to its shareholders. allocate capital to businesses to support the company s strategic objectives, including optimising returns on economic and regulatory capital; ensure the company holds capital in excess of minimum requirements in order to achieve the target Capital Adequacy Ratios set by management and to withstand the impact of potential stress events; and manage the net asset value currency management process, including evaluating and implementing new derivative instruments that could be used for hedging purposes; Capital Management Strategy The Company s Enterprise Risk Management (ERM) committee ensures compliance with the Company s capital management objectives. The committee reviews actual and forecast capital adequacy on a regular basis. The processes in place for delivering the group s capital management objectives are: establish internal targets for capital adequacy; apply stress tests to assess the group s capital adequacy under stress scenarios; plan and forecast capital requirements to ensure that capital ratios exceed the targets set by the Board. In addition to these processes, the board, through the ERM Committee, review and set risk appetite annually and analyse the impact of stress scenarios to understand and manage the Company s projected capital adequacy. The Company has had no significant changes in its policies and processes to its capital structure during the year under review through effective selection of investment platforms and has shown concerns over strict compliance with NAICOM investment guidelines.

80 STANDARD ALLIANCE INSURANCE PLC 79 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 Solvency Margin The Company solvency margin position as at 31 December 2014 is summarised below: N'000 Company solvency 2,737,670 Regulatory mimimum capital required (3,000,000) Deficit in solvency margin (262,330) The Company had a solvency margin of N2.738 billion for the year ended 31 December 2014, which is N262 million less than the regulatory minimum capital of N3 billion. The deficit is mainly due to non-admissibility of the Company's loan to Standard Alliance Properties Limited amounting to N956 million. The directors are pursuing aggressively to realize these assets and are confident that the solvency deficit shall be rectified without any adverse effect on the operations of the Company. Valuation Methods The Insurance Act, CAP I17, LFN 2004 does not specify any particular approach that must be used in determining the statutory value of insurance liabilities. Whilst some sections of the Act appear to make reference to the net premium approach to reserving, we understand that this simply reflects the practice at the time the Act was written and is not a requirement to adopt a net premium valuation approach. We have in the last few years adopted the gross premium valuation approach for statutory purposes as standard and this has been acceptable to NAICOM. From the IFRS perspective, the main features of IFRS 4 that impact the liability calculations are as follows: a) The IFRS prohibits provisions for possible claims under contracts that are not in existence at the end of the reporting period. b) c) The IFRS requires an insurer to keep insurance liabilities in its statement of financial position until they are discharged or cancelled, or expire, and to present insurance liabilities without offsetting them against related reinsurance assets. The IFRS requires a test for the adequacy of recognised insurance liabilities and an impairment test for reinsurance assets. Liability adequacy At each reporting date, an assessment is made of whether the recognized long-term business provisions are adequate, using current estimates of future cash flows. If that assessment shows that the carrying amount of the liabilities (less related assets) is insufficient in light of the estimated future cash flows, the deficiency is recognized in the profit or loss by setting up an additional provision in the statement of financial position. Key assumption in liability adequacy testing IFRS 4 paragraph 15 describes the liability adequacy test which, if conditions are not met, requires any deficiency to be recognised in profit or loss. Paragraph 16 states that: If an insurer applies a liability adequacy test that meets the specified minimum requirements, this IFRS imposes no further requirements. The minimum requirements are the following: a) The test considers current estimates of all contractual cash flows, and of related cash flows such as claims handling costs, as well as cash flows resulting from embedded options and guarantees. b) If the test shows that the liability is inadequate, the entire deficiency is recognised in profit or loss.

81 STANDARD ALLIANCE INSURANCE PLC 99 FINANCIAL STATEMENTS, 31 DECEMBER 2014 APPENDIX TO THE FINANCIAL STATEMENTS General REVENUE ACCOUNT Aviation Bond Engineering Fire Accident Marine Motor Oil & Gas N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 Premium Income Premium written 14, , , , , ,009 1,003, ,243 4,333,254 3,792,076 Decrease/(increase) in Unearned premium (23,398) (72,243) (6,952) 17,333 49,197 29,246 7,332 4,910 5,425 (12,442) (8,399) 346, , , , ,255 1,011, ,153 4,338,679 3,779,634 Reinsurance premium expenses (9,951) 241 (47,185) (55,020) (23,352) (77,638) (24,834) (237,277) (475,015) (683,715) Net premium written (18,350) 346, , , , , , ,876 3,863,664 3,095,919 Commission received on reinsurance 3,358-14,817 23,359 9,989 33,016 5,110 13, ,078 33,799 Underwriting income (14,992) 346, , , , , , ,305 3,966,742 3,129,718 Less Claims Expenses Claim paid 71,340 23,352 50, , ,189 42, , ,176 1,070,053 1,035,416 (Decrease)/Increase in provision for outstanding claims 71,031 15,870 37,859 31,826 27,701 61,188 67,354 99, ,497 (167,795) Claims incurred but not reported (IBNR) (2,103) 45,881 (40,811) 107,550 13,321 (21,950) (116,099) 8,833 (5,377) 298, ,268 85,103 47, , ,211 81, , ,677 1,477,173 1,166,515 Claims expenses recoveries from reinsurers - (5,000) (89,313) (92,040) (45,340) (49,326) (2,081) - (283,099) (95,625) Net Claims expenses 140,268 80,103 (41,623) 176, ,871 32, , ,677 1,194,074 1,070,890 Underwriting expenses: Acquisition cost 10,407 93,253 79,209 97, , , ,126 80,915 1,054, ,453 Maintenance cost ,730 16,147 18,156 54,096 53,055 66,482 50, , ,012 Total underwriting expenses 11, ,983 95, , , , , ,270 1,341,981 1,053,465 Total Expenses 151, ,086 53, , , , , ,947 2,536,055 2,124,355 Underwriting profit (166,660) 145, ,726 (32,087) 414, , ,506 (46,642) 1,430,687 1,005,363

82 STANDARD ALLIANCE INSURANCE PLC 100 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER, 2014 APPENDIX TO THE FINANCIAL STATEMENTS STATEMENT OF VALUE ADDED N'000 % N'000 % PREMIUM, INVESTMENT AND OTHER INCOME 4,199,856 3,464,930 PREMIUMS,COMMISIONS, CLAIMS PAID AND OTHER OPERATIONAL COST (5,463,185) (3,404,408) VALUE (LOST)/ADDED (1,263,329) , DISTRIBUTED AS FOLLOWS: EMPLOYEES Staff costs 534,360 (42) 609,144 1,006 PROVIDERS OF FUNDS Finance charges 48,483 (4) 137, GOVERNMENT Taxation including information technology development levy 86,505 (7) 64, ASSET REPLACEMENT Depreciation & amortisation 147,965 (12) 130, CONTRACTION/EXPANSION - Shareholder's interest Loss for the year after taxation (2,080,642) 165 (880,943) (1,456) VALUE (LOSS) ADDED (1,263,329) , The value added statement represents the distribution of the wealth created by the Company through the use of its assets and the efforts of the employees.

83 STANDARD ALLIANCE INSURANCE PLC 101 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER, 2014 APPENDIX TO THE FINANCIAL STATEMENTS FIVE YEAR FINANCIAL SUMMARY STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER ASSETS EMPLOYED N'000 N'000 N'000 N'000 N'000 Cash and cash equivalents 701, , , ,801 1,005,251 Financial assets 1,837,131 3,017,908 1,963,821 2,802,762 2,698,829 Trade Receivable 32,646 7, ,257 2,074,009 1,314,507 Reinsurance assets 607, , , , ,215 Deferred acqusition costs 96, , ,728 97, ,843 Other receivables and Prepayment 32,469 98, , ,913 1,162,330 Non-Current Asset Held for sale - - 1,435, ,000 40,000 Investment in Associate 433,507 1,081,612 1,123,290 1,047,654 1,238,740 Investment Properties 1,415,000 1,435, Intangible Assets 7,686 11,544 18,937 17,345 21,617 Property, plants and equipments 2,222,606 1,909,303 1,750,734 1,117,053 1,064,841 Statutory Deposit 335, , , , ,000 7,721,387 8,788,881 8,932,073 9,454,360 9,344,173 LIABILITIES 4,303,905 4,011,311 4,059,225 3,415,418 3,151,640 NET ASSETS 3,417,482 4,777,570 4,872,848 6,038,942 6,192,533 SHAREHOLDERS' EQUITY Share Capital 5,996,587 5,996,587 5,996,587 4,246,587 4,246,587 Preference shares ,750,000 1,750,000 Share Premium 7,667,475 15,852,049 15,852,049 15,852,049 15,852,049 Treasury shares - (8,737,585) (8,737,585) (8,737,585) (8,737,585) Contingency Reserves 1,243,423 1,113, , , ,808 Other reserves 1,615,054 1,447, ,009 37,869 23,280 Retained earning (13,105,057) 10,894,417 (10,133,875) (7,944,742) (7,633,606) TOTAL SHAREHOLDERS' EQUITY 3,417,482 4,777,570 4,872,848 6,038,942 6,192,533 TOTAL LIABILITY AND SHAREHOLDERS' EQUITY 7,721,387 8,788,881 8,932,073 9,454,360 9,344,173 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME N'000 N'000 N'000 N'000 N'000 Gross premium income 4,338,679 3,779,634 5,381,232 4,551,723 3,883,161 Reinsurance premium expenses (475,015) (683,715) (480,958) (391,384) - Net premium Income 3,863,664 3,095,919 4,900,274 4,160,339 - Commission earned on reinsurance 103,078 33,799 90,967 92,726 - Underwriting income 3,966,742 3,129,718 4,991,241 4,253,065 - Total underwriting expenses (2,536,055) (2,124,355) (2,430,346) (1,552,008) - Underwriting result 1,430,687 1,005,363 2,560,895 2,701,057 1,754,156 Investment income 239, , , ,948 - Investment and sundry income ,250 Management expenses (1,795,804) (1,497,228) (1,386,984) (1,388,761) - Exceptional charges - Provision for diminition in investment (3,789,950) Impairment charges on premium receivable (784,359) (6,475,611) Finance charges (48,483) (137,084) (190,144) (148,413) - Impairment charges (1,145,650) (297,351) (358,959) (152,069) - Share of profit/ (loss) on Associate Company (610,519) (239,741) 75,637 (191,086) - Unrealised Fair value gain/(losses) (52,475) 41,093 10,715 (111,090) - Information Technology Development levy (3,191) - (Loss)/Profit before taxation (1,982,613) (789,736) 919,229 99,036 (8,462,155) Income tax (86,505) (64,879) (120,192) (82,307) (137,349) Deferred tax (11,524) (26,327) (17,855) (9,906) - Transfer to contingency reserves (116,495) (Loss)/profit after taxation (2,080,642) (880,942) 781,182 6,823 (8,715,999) Other comprehensive income/(loss) Revaluation surplus on building 411, Fair value gain on devine benefit plan valuation ,800 - Fair value gain on quoted shares(available for sale) net of tax (243,574) 641, ,328 3,786 - Total comprehensive income 167, , ,328 14,586 - Total comprehensive income (loss) for the year (1,913,099) (239,840) 1,553,510 21,409 (8,715,999) Loss per share: Basic/Diluted (Kobo) (17.35) (7.35) (16.88) (17) (99) IFRS NON-IFRS

84 STANDARD ALLIANCE INSURANCE PLC 102 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2014 DETERMINATION OF SOLVENCY MARGIN The solvency margin for the Company as at 31 December 2014 is as follows: Admissible assets N'000 Cash and cash equivalents 701,236 - Financial assets: - Fair value through profit or loss 58,949 Loans and receivables 11,015 Available for sale investment 821,950 Reinsurance assets 607,664 - Trade receivable 32,646 Other receivables - Deferred acquisition cost 96,442 Investment properties 1,415,000 Investment in associates 433,507 Property, plant and equipment 2,222,606 Statutory deposits 335,000-6,736,015 Admissible liabilities Finance liabilities 757,803 - Trade payables 75,954 - Other payables 395,441 - Current income tax liabilities 334,285 Emplyee benefits liability - Insurance contract liabilities 2,402,454 Finance lease obligation 32,408 3,998,345 Excess of admissible assets over admissible liabilities 2,737,670 - The higher of 15% of net premium and minimum paid up capital 3,000,000 Deficit in solvency margin (262,330) Solvency ratio (0.09)