Head Office: 4-6 Trafalgar Road, Kingston 5 Branches are located islandwide Tel:

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1 Head Office: 4-6 Trafalgar Road, Kingston 5 Branches are located islandwide Tel:

2 To the members of Advantage General Insurance Company Limited Report on the Financial Statements We have audited the financial statements of Advantage General Insurance Company Limited, set out on pages 2 to 19 which comprise the balance sheet as at December 31, 2008, and the statements of income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and consistently applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors Responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements, which have been prepared in accordance with International Financial Reporting Standards, give a true and fair view of the financial position of the company as at December 31, 2008, and of its financial performance, changes in equity and cash flows for the year then ended, and comply with the Jamaican Companies Act. We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. In our opinion, proper accounting records have been maintained, proper returns have been received for branches not visited by us and the financial statements are in agreement with the accounting records and returns and give the information required by the Jamaican Companies Act in the manner so required. March 17,

3 Balance Sheet December 31, 2008 Income Statement Year ended December 31, 2008 Notes Assets Property, plant and equipment 6 297, ,900 Investment properties 7 1,153,000 1,014,950 Intangible assets 8 30,611 53,043 Investments 9 2,283,829 2,463,994 Securities purchased under resale agreements , ,141 Reinsurance assets ,670 1,042,665 Insurance receivables and deferred expense , ,097 Taxation recoverable 312, ,146 Deferred tax asset , ,307 Employee benefit assets ,012 90,673 Due from related companies 15-2,229 Other accounts receivable 69,240 43,584 Accrued investment income 50,102 40,295 Cash and cash equivalents 1,325, ,215 7,363,517 7,369,239 Shareholders Equity And Liabilities Insurance contract provisions 11 4,954,191 5,006,126 Accounts payable and accrued charges ,314 81,607 Insurance payables 17 38, ,539 Due to parent company 15-16,330 Due to related companies ,179 5,158,273 5,239,781 Share capital 18 1,950,002 1,950,002 Capital reserve 19 83, ,348 Investment reserves 5(f), (i) 3, ,443 Accumulated surplus/(deficit) 168,231 ( 435,335) 2,205,244 2,129,458 7,363,517 7,369,239 The financial statements on pages 2 to 20 were approved by the Board of Directors on March 17, 2009, and signed on its behalf by: Notes Gross premiums written 3,931,118 3,348,427 Change in gross provision for unearned premiums ( 265,781) ( 178,161) Gross insurance premium revenue 3,665,337 3,170,266 Written premiums ceded to reinsurers ( 633,485) ( 615,051) Reinsurers share of change in provision for unearned premiums ( 31,248) ( 213,950) Net insurance premium revenue 3,000,604 2,341,265 Claims expenses incurred 11 (1,992,547) (2,007,437) Reinsurers share of claims and benefits incurred , ,572 Net insurance claims and benefits incurred (1,842,348) (1,752,865) Commission income 17 82,159 36,124 Commission expense 12 ( 375,183) ( 252,828) Net commission expense ( 293,024) ( 216,704) Operating expenses ( 762,647) ( 725,859) * Redundancy cost provision ( 10,000) - Finance costs ( 5,031) ( 5,438) ( 777,677) ( 731,297) Underwriting profit/(loss) before other income and taxation 87,555 ( 359,601) Change in fair value of investment properties 121, ,923 Investment income , ,221 Investment impairment provision ( 40,000) ( 15,400) * Foreign exchange gain 169,184 36,252 Other income 31,608 27,489* Profit before taxation , ,884 Taxation 22 ( 171,223) 56,357 Net profit for the year 567, ,241 Director Mark Thompson * Reclassified to conform to current year s presentation The accompanying notes form an integral part of the financial statements. Director John Bell The accompanying notes form an integral part of the financial statements. 2

4 Statement of Changes in Shareholders Equity Year ended December 31, 2008 Share Capital Investment Accumulated capital reserve Reserves (deficit)/surplus Total $000 (note 18) (note 19) Balance as at December 31, ,950,002 47, ,943 (778,576) 1,680,695 Recognition of deferred taxation included in capital reserve - 30, ,695 Surplus on revaluation of investments and property, plant & equipment - 64,327 10,500-74,827 * Net profit for the year , ,241 * Balances at December 31, ,950, , ,443 (435,335) 2,129,458 Recognition of deferred taxation included in capital reserve - ( 57,679) - - ( 57,679) Transfer to accumulated surplus - ( 36,375) - 36,375 - Surplus/(Loss) on revaluation of investments and property, plant & equipment - 35,501 (469,227) - ( 433,726) * Net profit for the year , ,191 * Balances at December 31, ,950,002 83,795 3, ,231 2,205,244 * Total recognised gains for the year $133,465,000 (2007: $418,068,000). The accompanying notes form an integral part of the financial statements. We re the difference between a set back and back on the road Your motor vehicle is a major investment. Isn t it in your best interest to protect it? It s important that you choose a company that will be there when it matters most. We offer the strength, stability and support you can depend on. Speak to an Advantage General advisor or your trusted broker... Let us help you today. Statement of Cash Flows Year ended December 31, 2008 Cash Flows From Operating Activities Net profit for the year 567, ,241 Adjustments to reconcile profit after taxation to net cash used by operating activities: Depreciation on plant, property and equipment 19,740 25,256 Depreciation on intangible asset 23,538 23,847 Loss/(gain) on disposal of property, plant & equipment and investment properties, net 204 ( 2,208) Reinsurance assets 349, ,522 Change in fair value of investment properties ( 121,219) (380,923) Increase in insurance contract provisions ( 51,935) 529,852 Deferred taxation 171,223 ( 56,357) Employee benefit assets ( 24,339) ( 9,226) Interest income ( 309,754) (217,124) 624, ,880 Changes in: Insurance receivables & deferred expenses 7,661 (423,364) Other accounts receivable ( 25,656) 9,965 Accounts payable and accrued charges 83,707 ( 70,425) Insurance payables and deferred income ( 86,797) 54,124 Due to related company ( 7,924) 10,559 Due to parent company ( 16,330) 15, , ,814 Taxation recoverable ( 3,275) ( 39,129) Net cash provided by operating activities 576, ,685 Cash Flows From Investing Activities Interest received 299, ,465 Additions to property, plant and equipment and intangible assets ( 23,612) ( 29,075) Additions to investment property ( 4,831) - Additions to investments, net 259,792 (416,370) Proceeds of sale of property, plant and equipment and investment properties 9,363 5,504 Net cash provided/(used) by investing activities 540,659 (209,476) Net increase in cash and cash equivalents 1,116,689 72,209 Cash and cash equivalents at beginning of the year 209, ,006 Cash and cash equivalents at end of the year 1,325, ,215 Cash and cash equivalent comprises: Cash and bank balances 19,762 ( 5,075) Short-term investments 1,306, ,290 The accompanying notes form an integral part of the financial statements. 1,325, ,215 3

5 Notes to the Financial Statements Year ended December 31, Corporate structure and nature of business The company is incorporated under the laws of Jamaica, and is an 80% subsidiary of AIC (Barbados) Ltd, which is incorporated in Barbados. The company s registered office is located at 4-6 Trafalgar Road, Kingston 5. The ultimate parent company is Portland Holdings Inc., incorporated in Canada. Portland Holdings Inc. is controlled by Mr. Michael Lee-Chin. The company s name was changed on January 19, 2007 from United General Insurance Company Limited to Advantage General Insurance Company Limited. The principal activity of the company is the underwriting of general insurance business. 2. Insurance licence The company is registered under the Insurance Act 2001 ( the Act ). 3. Roles of the actuary and auditors The actuary has been appointed by the Board of Directors pursuant to the Act. With respect to the preparation of the financial statements, the actuary is required to carry out an actuarial valuation of management s estimate of the company s policy liabilities and report thereon to the shareholders. Actuarially determined policy liabilities consist of the provisions for, and reinsurance recovery of, unpaid claims and adjustment expenses on insurance policies in force, including provisions for salvage and subrogation, and future obligations on the unearned portion of insurance policies including deferred policy acquisition costs. The valuation is made in accordance with accepted actuarial practice, as well as any other matter specified in any directive that may be made by regulatory authorities. The actuary, in his verification of the management information provided by the company, and which is used in the valuation, also makes use of the work of the external auditors. The actuary s report outlines the scope of his work and opinion. The external auditors have been appointed by the shareholders pursuant to the Jamaican Companies Act to conduct an independent and objective audit of the financial statements of the company in accordance with International Standards on Auditing and report thereon to the shareholders. In carrying out their audit, the auditors also make use of the work of the actuary and his report on the company s actuarially determined policy liabilities. The auditors report outlines the scope of their audit and their opinion. 4. Statement of compliance and basis of preparation (a) Statement of compliance: The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and comply with the provisions of the Jamaican Companies Act. New standards adopted during the year: During the year, the company adopted the following standards which became effective: IFRIC 14 - IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. The adoption of IFRIC 14 IAS 19 did not have any significant impact on the financial statements. Amendments to IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7: Financial Instruments Disclosure. The amendment permits an entity to reclassify non-derivative financial assets (other than those designated at fair value through profit or loss by the entity upon initial recognition) out of the fair value through profit or loss category, in particular circumstances. The amendment also permits an entity to transfer from the available-for-sale category to the loans and receivables category a financial asset that would have met the definition of loans and receivables (if the financial asset had not been designated as available-for-sale), if the entity has the intention and ability to hold that financial asset for the foreseeable future. The adoption of this amendment resulted in the reclassification of certain investments from available-for-sale to loans and receivables. The impact on the financial results and the financial position of the company and group is disclosed at note 23. The additional disclosures required by IFRS 7 in respect of these investments are disclosed at note 23. New standards and interpretations not yet effective At the date of authorising the financial statements, there were certain new standards and interpretations which have been issued but are not yet effective and have therefore not been applied in preparing these financial statements. Those which are considered relevant to the company and their effective dates are as follows: Revised IAS 1 Presentation of Financial Statements (effective January 1, 2009) requires presentation of all non-owner changes in equity in one or two statements either in a single statement of comprehensive income, or in an income statement plus in a statement of comprehensive income. Revised IAS 1 also requires that a statement of financial position be presented at the beginning of the comparative period when the entity restates the comparatives, a disclosure for reclassification adjustments and disclosure of dividends and related per share amounts be disclosed on the face of the statement of changes in equity or in the notes. Amendments to IAS 32 Financial instruments: Presentation and IAS 1, Presentation of Financial Statements is effective for the company s 2009 financial statements and is not expected to have any impact on the financial statements. The amendments allow certain instruments that would normally be classified as liabilities to be classified as equity if certain conditions are met. Where such instruments are reclassified, the entity is required to disclose the amount, the timing and the reason for the reclassification. (b) Basis of preparation: These financial statements are prepared using the historical cost basis, modified for the inclusion of land and buildings at market value and available for sale investments at fair value. The preparation of the financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, contingent assets and contingent liabilities at the balance sheet date and the income and expenses for the year then ended. Actual amounts could differ from these estimates. These financial statements are presented in Jamaica dollars ($), which is the currency in which the company conducts the majority of its trading operations. The significant accounting policies used in the preparation of the financial statements are summarised below and conform in all material respects to IFRS and the Jamaican Companies Act. The accounting policies have been applied consistently to all periods presented in these financial statements. 4

6 5. Significant accounting policies (a) Cash and cash equivalents: Cash and cash equivalents comprise cash and bank balances, and include short-term deposits and other monetary investments with maturities ranging between one and three months from date of acquisition. Bank overdrafts repayable on demand and forming an integral part of the company s cash management activities are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. (b) Accounts receivable: Trade and other receivables are stated at cost less impairment losses [refer accounting policy (j)]. (c) Accounts payable: Trade and other payables, are stated at cost. (d) Provisions: A provision is recognised in the balance sheet when the company has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. (e) Related parties: A party is related to the company, if: (i) directly, or indirectly through one or more intermediaries, the party: (a) is controlled by, or is under common control with, the company; (b) has an interest in the company that gives it significant influence over the entity; or (c) has joint control over the company; (ii) the party is an associate of the company; (iii) the party is a joint venture in which the company is a venturer; (iv) the party is a member of the key management personnel of the company; (v) the party is a close member of the family of any individual referred to in (i) or (iv); (vi) the party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or (vii) the party is a post-employment benefit plan for the benefit of employees of the company. A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. (f) Investments: (i) Available-for-sale: Available-for-sale investments are stated at fair value, except where fair value cannot be reliably determined, in which case they are stated at cost, with movements in fair value included in investment revaluation reserve, except where there is evidence of impairment, in which event reductions in fair value are recognised in the profit and loss account. Investments with fixed or determinable payments and which are not quoted in an active market are classified as loans and receivables, and are measured at amortised cost less impairment losses. The fair value of available-for-sale investments is based on their quoted market bid price at the balance sheet date. Where a quoted market price is not available, fair value is estimated using discounted cash flow techniques. Available-for-sale investments are recognised or derecognised by the company on the date they commit to purchase or sell the investments. Other investments are recognised or derecognised on the day they are transferred to/by the company. (ii) Loans and receivables: Investments with fixed or determinable payments and which are not quoted in an active market are classified as loans and receivables and are initially measured at cost and subsequently at amortised cost, using the effective interest rate method less impairment losses. (g) Property, plant and equipment and intangible assets: Property, plant and equipment and intangible assets are stated at cost except for land and buildings, which is stated at revalued amount, less accumulated depreciation/ amortisation and impairment losses [see note 5(j)]. (h) Depreciation and amortisation: Property, plant & equipment and intangible assets with the exception of freehold land, on which no depreciation is provided, are depreciated on the straight-line basis at annual rates estimated to write off the assets over their expected useful lives. Leasehold improvements are depreciated over the shorter of the period of the lease and the expected useful lives. The depreciation/amortisation rates are as follows: Freehold buildings 2.5% Furniture, fixtures and office equipment 10%, 25% Leasehold improvement 10% Motor vehicles 20% Computer software 20% (i) Foreign currencies: Foreign currency balances at the balance sheet date are translated at the rates of exchange ruling on that date. Transactions in foreign currencies are converted at the rates of exchange ruling at the dates of those transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Jamaica dollars at the rates of exchange ruling on that date. Gains and losses arising from fluctuations in exchange rates are recognised in the income statement. For the purpose of the statement of cash flows, all foreign currency gains and losses recognised in the income statement are treated as cash items and included in cash flows from operating or financing activities along with movements in the principal balances. (j) Impairment: ( i) The carrying amount of the company s assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount.ximpairment losses are recognised in the income statement. 5

7 Impairment (cont d) The recoverable amount of the company s loans and receivables is calculated as the present value of the expected future cash flows, discounted at the original effective interest rate inherent in the asset. Receivables with a short duration are not discounted. The recoverable amount of the other assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted at their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. (ii) Reversal of impairment: An impairment loss in respect of investments, loans and receivables is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. In respect of other assets, an impairment loss is reversed if there has been a change in estimate used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, if no impairment loss had been recognised. Impairment losses on available for sale investments are reversed through equity. (k) Revenue recognition: Revenue is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the policyholder. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due. (l) Underwriting results: These are accounted for, in compliance with the recommendations and practices of the insurance industry, and comply with the provisions of the Insurance Act The underwriting results are determined after making provision for, inter alia, unearned premiums, outstanding claims, deferred commission expense and deferred commission income. Unearned premiums represent that proportion of the premiums written up to the accounting date, which is attributable to subsequent periods and is calculated substantially on the twenty-fourths basis on the total premiums written. Outstanding claims comprise estimates of the amount of reported losses and loss expenses plus a provision for losses incurred but not reported based on the historical experience of the company. The loss and loss expense reserves have been reviewed by the company s actuary using the past loss experience of the company and industry data. Amounts recoverable in respect of claims from reinsurers are estimated in a manner consistent with the underlying liabilities. Management believes, based on the analysis completed by their actuary that the provision for outstanding losses and loss expenses will be adequate to cover the ultimate net cost of losses incurred up to the balance sheet date. However, the provision is necessarily an estimate and may ultimately be settled for a significantly greater or lesser amount. Any subsequent differences arising are recorded in the period in which they are determined. (m) Reinsurance ceded: Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with reinsured policies. Unearned premium on business ceded up to the accounting date, which is attributable to subsequent periods is calculated substantially on the twenty-fourths basis on the total premiums ceded. (n) Taxation: Taxation on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement, except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (o) Employee benefits: Employee benefits comprise all forms of consideration given by an enterprise in exchange for service rendered by employees. These include current or short-term benefits such as salaries, NIS contributions paid, annual vacation and sick leave, and post-employments benefits, such as pensions and other long-term employee benefits, such as long service benefits. (i) General benefits: Employee benefits that are earned as a result of past or current service are recognised in the following manner: Short-term employee benefits are recognised as a liability, net of payments made, and charged as expense. The expected cost of vacation leave that accumulates is recognised when the employee becomes entitled to the leave. Post-employment benefits are accounted for as described below. Other long-term benefits are not considered material. (ii) Defined benefit pension plan: The company participates in a defined benefit pension plan for employees who have satisfied certain minimum service requirements. Employee pension benefits included in these financial statements have been actuarially determined by a qualified independent actuary, appointed by management. The appointed actuary s report outlines the scope of the valuation and the actuary s opinion. The actuarial valuations were conducted in accordance with IAS 19, and the financial statements reflect the company s net post-employment benefits asset as computed by the actuary. In carrying out their audit, the auditors make use of the work of the actuary and the actuary s report. 6

8 Employee benefits (cont d) When the benefits of the plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the statement of revenue and expenses on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits are vested immediately, the expense is recognised immediately in the statement of revenue and expenses. In calculating the company s obligation in respect of the plan, to the extent that any cumulative actuarial gain or loss exceeds 10 percent of the greater of the present value of the defined benefit obligation and the fair value of plan assets, that portion is recognised in the statement of revenue and expenses, over the expected average remaining working lives of the employees participating in the plan. Otherwise, the actuarial gain or loss is not recognised. Where the calculation results in a benefit to the company, the recognised asset is limited to the net total of any unrecognised actuarial losses and past service costs and the present value of any future refunds from the plan or reductions in future contributions to the plan. (p) Securities purchased under resale agreements: Securities purchased under resale agreements ( reverse repos ) are short-term transactions whereby an entity buys securities and simultaneously agrees to re sell the securities on a specified date and at a specified price. Title to the security is not actually transferred unless the counter-party fails to comply with the terms of the contract. Reverse repos are accounted for as short-term collateralised lending, classified as loans and receivables and measured at amortised cost. The difference between the sale and repurchase considerations is recognised on an accrual basis over the period of the transaction and is included in interest income. (q) Financial instruments: A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. For the purpose of these financial statements, financial assets have been determined to include cash and cash equivalents, premiums receivable, other accounts receivable and amounts due from other insurance companies, investments, securities purchased under resale agreements, accrued investment income, and due from related companies. Financial liabilities include accounts payable, amounts due to other insurance companies, and related party balances. (r) Determination of fair value: Fair value amounts represent estimates of the arm s length consideration that would be currently agreed between knowledgeable, willing parties who are under no compulsion to act and is best evidenced by a quoted market price, if one exists. Some financial instruments lack an available trading market. These instruments have been valued using present value or other valuation techniques and the fair value shown may not necessarily be indicative of the amounts realisable in an immediate settlement of the instruments. (s) Accounting estimates and judgement: The preparation of the financial statements to conform to IFRS requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and contingent liabilities at the balance sheet date, and the income and expense for the year then ended. Actual amounts could differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgements made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next financial year are discussed below: (i) Allowance for impairment losses on receivables: In determining amounts recorded for impairment losses in the financial statements, management makes judgements regarding indicators of impairment, that is, whether there are indicators that suggest there may be a measurable decrease in the estimated future cash flows from receivables, for example, based on default and adverse economic conditions. Management makes estimates of the likely estimated future cash flows from impaired receivables as well as the timing of such cash flows. (ii) Insurance liabilities, reinsurance recoverable and financial instruments: Notes 5(m), 11 and 24 contain information about the assumptions and uncertainties relating to insurance liabilities and amounts recoverable in respect of claims from reinsurers, and disclose the risk factors in these contracts. Note 25 contains information about the risks and uncertainties associated with financial instruments. (iii) Taxation: The company accounts for taxation in accordance with IAS 12. Accordingly, the company provides deferred tax assets and liabilities based on the estimated future tax effects of differences between the financial and tax base of assets and liabilities based on currently enacted tax laws. The tax balances and tax expense/credit recognized by the company are based on management s interpretation of the tax laws and IAS 12. Taxation expense/credit also reflects the company s best estimates and assumptions regarding, among other things, the level of future taxable income, interpretation of tax laws and IAS 12, tax planning and the split of the investment property valuation between that which relates to rental income and that which relates to capital appreciation. Future changes in tax laws, changes in projected levels of taxable income, tax planning and the split of the change in valuation of the investment property between that which related to income and that which relates to capital appreciation, could affect the effective tax rate and tax balances recorded by the company. (iv) Deferred benefit pension plan: Note 14(e) contains information about the assumptions relating to employee benefit assets. (v) Investment properties: Properties that have dual usage, in order to determine the portion that can qualify as investment property, the directors, based on their judgment, estimate that if fifty percent or less of the total square feet (including common area) is being used for own use, the balance will qualify as investment property. (t) Investment properties: Investment properties are carried at open market value using valuations performed on an annual basis by independent appraisers or the directors. Changes in the fair value of investment properties are recognised in the income statement. 7

9 Notes to the Financial Statements (Continued) Year ended December 31, Property, plant and equipment Furniture, Land and Leasehold fixtures and Motor Buildings improvement office equipment vehicles Total $ 000 At cost or valuation: December 31, ,445 7, ,360 8, ,342 Additions 46 1,047 7,823-8,916 Reclassification of investment property 108, ,750 Revaluation 64, ,327 Disposals (3,600) ( 3,600) December 31, ,568 8, ,183 4, ,735 Additions 2,371 2,233 12,963 4,939 22,506 Transfer to investment properties ( 21,000) ( 21,000) 7. Investment properties Balance at January 1 1,014, ,827 Transfer from/(to) property, plant and equipment 21,000 ( 107,800) Additions 4,831 - Disposal ( 9,000) ( 3,000) Changes in fair value 121, ,923 Balance at December 31 1,153,000 1,014,950 Income earned from the properties 28,877 16,800 Expenses incurred by properties (44,070) (37,991) Investment properties at December 31, 2008 are stated at fair value derived from valuations performed by independent valuators The C. D. Alexander Realty Limited and the Board of Directors as at dates between November 2008 and December The directors are of the opinion that there is no material difference between these values and the fair market value as at December 31, Revaluation 35, ,501 Disposals (4,331) ( 4,331) December 31, ,440 10, ,146 5, ,411 Depreciation: December 31, ,694 3, ,641 5, ,549 Charge for the year 1, , ,256 Eliminated on transfer to investment properties ( 950) ( 950) Eliminated on disposals (3,020) ( 3,020) December 31, ,892 4, ,067 3, ,835 Charge for the year 4, , ,740 Eliminated on disposals (3,764) ( 3,764) We re the difference between a set back and back home December 31, ,956 5, , ,811 Net book values: December 31, ,484 5,572 47,101 4, ,600 December 31, ,676 4,285 48, ,900 December 31, ,751 4,156 62,719 2, ,793 Your home is a major investment. Isn t it in your best interest to protect it? Advantage General Insurance will ensure that the value of your home is preserved so that it can be passed on for decades to come. Speak to an Advantage General advisor or your trusted broker... Let us help you today. 8

10 8. Intangible assets Computer software 2008 $ 00 At cost: December 31, ,575 Additions 20,159 December 31, ,734 Additions 1,106 December 31, ,840 Amortisation: December 31, ,844 Charge for the year 23,847 December 31, ,691 Charge for the year 23,538 December 31, ,229 Net book values: December 31, ,611 December 31, ,043 December 31, , Investments Loans and receivables: Within 1 and 5 years: Government of Jamaica Bonds 26,984 - Over 5 years: Government of Jamaica Bonds 690, ,634 - Available for sale: Within 1 year: Government of Jamaica Securities 216,743 81,150 Government of Jamaica local debenture 4,394 84,623 Certificate of Deposit 71,420 50,632 Within 1 and 5 years: Government of Jamaica Bonds 282, ,094 Government of Jamaica Registered Stocks 66,331 85,252 Government of Jamaica Local Debentures - 90,789 Over 5 years: Government of Jamaica Bonds - 455,277 Quoted equities 835,301 1,205,169 Unquoted investments 80,017 40,417 Income and growth fund units 8,990 16,591 1,566,195 2,463,994 2,283,829 2,463,994 Investments include foreign currency investments aggregating US$13,504,000 (2007: US$10,934,000). At December 31, 2008, the fair value of loans and receivables aggregated $465,660,000 (2007: $Nil). Government of Jamaica securities include amounts totalling $45,000,000 (2007: $45,000,000), which are deposited with the Financial Services Commission in accordance with the Insurance Regulations Have you ever been involved in a motor vehicle breakdown or an accident and experienced feelings of abandonment or vulnerability? At Advantage General Insurance Company we provide all our private comprehensively insured clients with Advantage 24/7 roadside assistance service which is available 24 hours a day, seven days a week, 365 days a year. This service encourages speedy processing of claims. Advantage 24/7 gives you total peace of mind as you travel on the road ensuring that you and your family are fully protected from roadside emergencies such as: Accidents Towing To the nearest authorized garage Jump Start service When your battery is low and needs boosting Flat tire assistance replacement of flat tires Winching removal of vehicle stuck in mud, sand or ditch Lock out/ lost key - keys that are broken in the ignition, locked inside the vehicle or lost Minor mechanical repairs repairs to fuses or hoses In order to use this service, dial 1888-CALL-AGIC ( ) and our professional and speedy Advantage 24/7 Representative will be happy to assist you and will be at your location within 25 minutes. No worries, No confusion, No fuss. At Advantage General Insurance Company we place our client s safety first because our reliability is your peace of mind. 10. Securities purchased under resale agreements The securities purchased under resale agreements with a carrying value of $159,287,000 (2007: $708,141,000) has underlying securities, the fair value of which amounts to $161,357,000 (2007: $723,644,000). 9

11 11. Reinsurance assets and insurance contract provisions Gross Reinsurance Net Gross Reinsurance Net Claims outstanding [note 11(a)] 3,208, ,485 2,712,068 3,526, ,232 2,711,037 Unearned premiums [note 11(b)] 1,745, ,185 1,549,453 1,479, ,433 1,252,424 4,954, ,670 4,261,521 5,006,126 1,042,665 3,963,461 Analysis of movements in insurance contract provisions - Claims outstanding: Gross Reinsurance Net Gross Reinsurance Net Claims notified 4,025,839 (1,147,777) 2,878,062 3,017,544 (1,034,220) 1,983,324 Claims incurred but not reported ( 499,570) 332,545 ( 167,025) 157,034 ( 35,584) 121,450 Balance at January 1 3,526,269 ( 815,232) 2,711,037 3,174,578 (1,069,804) 2,104,774 Change in outstanding claims provision 1,992,547 ( 150,199) 1,842,348 2,007,437 ( 254,572) 1,752,865 Claims paid in year (2,310,263) 468,946 (2,712,068) (1,655,746) 509,144 (1,146,602) Balance at December 31 3,208,553 ( 496,485) 2,712,068 3,526,269 ( 815,232) 2,711,037 Analysis: Claims notified 3,348,298 ( 606,590) 2,741,708 4,025,839 (1,147,777) 2,878,062 Claims incurred but not reported ( 139,745) 110,105 ( 29,640) ( 499,570) 332,545 ( 167,025) Balance at December 31 3,208,553 ( 496,485) 2,712,068 3,526,269 ( 815,232) 2,711,037 (a) Outstanding claims includes claims payable of $40,432,000 (2007: $18,950,000) under policies issued to related parties. (b) Unearned premiums: Gross Reinsurance Net Gross Reinsurance Net Balance at January 1 1,479,857 (227,433) 1,252,424 1,301,696 (441,383) 860,313 Premiums written during the year 3,931,118 (633,485) 3,297,633 3,348,427 (615,085) 2,733,342 Premiums earned during the year (3,665,337) 664,733 (3,000,604) (3,170,266) 829,035 (2,341,231) Balance at December 31 1,745,638 (196,185) 1,549,453 1,479,857 (227,433) 1,252,424 Private Motor Comprehensive Policy extended to include Luxury Pick-ups. 10

12 WE AGREE Having difficulty agreeing on the amount of your settlement with your insurer when you have a total loss? Advantage General Insurance Company has a policy designed with you in mind. Agreed Advantage is designed especially for you by Advantage General Insurance Company. This product allows you, the policyholder and us the insurance company to agree on the value of your motor vehicle so that in the event of a total loss, you will be reimbursed for the actual value agreed at inception. It is just that simple! What are your benefits? Faster settlement of claims No disputes or disagreements concerning motor vehicle value at the time of total loss There is no adjustment for depreciation. Vehicle value remains unchanged for one year. How do you qualify? For private cars and luxury pickups up to seven years old Motor vehicle has to be a minimum value of $1.5 million Valuation required at the inception and at each policy renewal. For Individuals only (b) Unearned premiums (cont d): Gross unearned premiums are analysed as follows: Liability 28,464 18,074 Motor 1,394,549 1,240,507 Pecuniary loss 1,831 6,947 Property 320, ,329 1,745,638 1,479,857 Process used to determine the assumptions for measuring insurance contracts The company adopts a consistent process in the calculation of an adequate provision for insurance contracts. The overriding aim is to establish reserves which are expected to be at least adequate and that there is consistency from year to year. Therefore the level of reserves is set at a level above the actuarial best estimate position. However, there is a risk that, due to unforeseen circumstances, the reserves may be insufficient to meet insurance claim liabilities reported in future years on policy periods which have expired. The insurance claims provision at the reporting date comprises the expected ultimate cost of settlement of all claims incurred in respect of events up to that date, whether reported or not, together with related claims handling expenses, less amounts already paid. This provision is not discounted for the time value of money. The estimation of claims incurred but not reported is generally subject to a greater degree of uncertainty than the estimates of claims already notified, where more information is available. The outstanding claims provisions are estimated based on facts known at the date of estimation. Case estimates are generally set by skilled claims technicians, applying their experience and knowledge to the circumstances of individual claims. The ultimate cost of outstanding claims is estimated using a range of standard actuarial claims projection techniques. The main assumption underlying these techniques is that a company s past claims development experience can be used to project future claims development and hence ultimate claims costs. As such, these methods extrapolate the development of paid and incurred losses, average costs per claim and claim numbers based on the observed development of earlier years and expected loss ratios. There are reasons why this may not be the case, which, insofar as they can be identified, have been allowed for by modifying the methods. Such reasons include: Economic, legal, political and social trends (resulting in, for example, a difference in expected levels of inflation); Changes in the mix of insurance contracts written; and Impacts of large losses. Incurred but not reported provisions and provisions for outstanding claims are initially estimated at a gross level and a separate calculation is carried out to estimate the size of reinsurance recoveries. The company purchases a range of excess of loss and other reinsurance contracts with sufficiently high retentions for only relatively few, large claims to be recoverable. The method uses historical data, gross incurred but not reported estimates and the terms and conditions of the reinsurance contracts to estimate the carrying value of the reinsurance asset. Impairment of reinsurance assets is considered separately. 12. Insurance receivables and deferred expense Receivables arising from insurance and reinsurance contracts due from other insurance companies 131, ,509 Premiums receivable (a) 423, ,142 Deferred commission expense (b) 131, ,446 (a) (b) 686, ,097 The premiums receivable balance is shown after an allowance for impairment of $73,784,000 (2007: $100,127,000), and includes $130,171,000 (2007: $129,745,000) due from related parties. The analysis of the deferred commission expense is as follows: Balance at January 1 100,446 65,630 Commissions paid during year 143, ,644 Recognised in income during the year (375,183) (252,828) Balance at December , ,446 11

13 13. Deferred tax asset Deferred tax asset is attributed to the following: Balance at Recognised Recognised Balance at January 1 in income in equity December 31 Accounts payable and accrued charges 2,571 ( 1,996) Investment properties ( 50,199) 6,046 - ( 44,153) Property, plant and equipment ( 44,531) 54,285 (57,679) ( 47,925) Tax benefit of unused tax losses 552,123 (207,760) - 344,363 Investments - ( 10,417) ( 10,417) Accounts receivable ( 13,432) ( 3,269) - ( 16,701) Employee benefit assets ( 30,225) ( 8,112) - ( 38,337) 416,307 (171,223) (57,679) 187, Employee benefit assets The company participates in a defined benefit pension scheme [see note 5(o)], which is open to all employees who have satisfied certain minimum service requirements, and is managed by a related company. The scheme is funded by employee contributions at rates of either 5% or 10% of salary and employer contributions. Retirement and other benefits are based on average salary for the last three years of pensionable service. The amounts recognised in the financial statements in respect of pension benefits are as follows: (a) Asset recognised in balance sheet Present value of funded obligations (187,555) (208,152) Fair value of plan assets 210, ,957 23, ,805 Unrecognised actuarial loss/(gain) 91,963 ( 69,132) 115,012 90,673 Plan assets consist of: Government of Jamaica Securities 159, ,222 Debt - 34,663 Equity 21,015 25,865 Other 30,279 90, , ,957 (c) (d) (e) Movement in plan assets Fair value of plan assets at January 1 367, ,147 Contributions 24,361 20,084 Expected returns on plan assets 41,242 35,949 Benefits paid ( 10,422) ( 8,751) Actuarial loss on plan assets (212,534) ( 472) Fair value of plan assets at December , ,957 Expense recognised in the income statement Current service costs ( 770) ( 8,114) Interest on obligation ( 28,244) ( 27,359) Net actuarial gain 1,301 - Expected return on plan assets 41,242 35,949 13, Principal actuarial assumptions at the balance sheet date (expressed as weighted averages) % % Discount rate at December Expected return on plan assets at December Rate of salary increases Rate of inflation Rate of increase in employee benefit assets The overall expected long-term rate of return of assets is 11%. The expected long-term rate of return is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yield on fixed interest investment are based on growth redemption yields as the balance sheet date. Expected returns on equity and property investment reflect long-term real rates of return experienced in the market. The total assets value used in the calculations was based on data provided by NCB Insurance Company Limited (2007: based on the revenue accounts for the year ended December 31, 2007 in respect of funds built up after March 31, In addition, assets to be transferred from the UGI Group Pension Fund have not yet been transferred. An estimate of this amount was made by applying interest to the estimated amount at March 31, 2006). (f) Historical information (b) Movements in the net assets recognised in the balance sheet Net assets at January 1 90,673 81,447 Income recognised in the income statement 13, Contributions paid 10,810 8,750 Net assets at December ,012 90, $ 000 Present value of the defined benefit obligation (187,555) (208,152) (212,927) (159,779) (132,629) Fair value of plan assets 210, , , , ,253 Surplus in plan 23, , , , ,624 Experience adjustments arising on plan liabilities ( 58,691) 370 8,503 ( 2,527) 8,306 Experience adjustments arising on plan assets (212,534) ( 472) ( 21,132) 15,361 66,722 The company expects to pay $10.5 million in contributions to the defined benefit plan in 2009 (2008: $10.9 million). 12

14 15. Related parties (a) The balance sheet includes balances, arising in the ordinary course of business, with related parties as follows: Investments - shares in related companies 815,782 1,173,967 - unquoted equities 80,017 40,000 - mutual funds 8,990 16,591 Securities purchased under resale agreements - 508,501 Insurance receivables and deferred expenses 130, ,526 Due from related companies - 2,229 Accrued investment income - 31,168 Due to parent company - 16,330 Due to related companies 26 10,179 (b) The income statement includes the following income earned from, and expenses incurred in, transactions with related parties. The transactions were in the ordinary course of business. Gross premiums written 605, ,794 Interest income 5,336 38,584 Dividend received 64,235 38,655 Claims 39,790 36,773 Rental income 5,530 3,329 Operating expenses - management fees 16,784 16, Accounts payable and accrued charges Accounts payable and accrued charges 98,501 30,140 Other payables 66,813 51, ,314 81, Insurance payables Payables arising from insurance and reinsurance contracts - 61,520 Deferred commission income 38,742 64,019 38, ,539 The analysis of the movement in deferred commission income is as follows: 18. Share capital Authorised, stated, issued and fully paid: 6,000,010,000 (2007: 6,000,010,000) ordinary shares without par value 1,950,002 1,950, Capital reserve Capital reserve is comprised as follows: Surplus on revaluation of land and building 144, ,403 Transfer to accumulated surplus ( 36,375) - Deferred tax arising from surplus on revaluation of land and buildings ( 26,984) 30,695 Realised gain on disposal of investment property 2,250 2,250 83, ,348 Realised capital reserves are available for distribution to shareholders, subject to transfer tax at 5% (2007: 7.5%). 20. Investment income, net Interest income 309, ,642 Dividend income 65,611 39, , ,420 Less: investment expenses ( 6,517) ( 8,199) Total investment income 368, , Disclosure of expenses and income (a) Net profit for the year is stated after charging/(crediting): Depreciation and amortisation 43,278 49,103 Directors emoluments - fees 3,362 3,500 - management remuneration (inclusive of profit share) 23,344 20,267 Auditors remuneration 4,200 3,950 Salaries and related costs (excluding redundancy cost provision) 469, ,171 Redundancy cost provision 10,000 - Loss/(gain) on sale of property, plant and equipment and investment properties, net 204 ( 2,208) Balance at January 1 64,019 41,137 Commission received during the year 56,882 59,006 Amounts recognised in income during the year (82,159) ( 36,124) Balance at December 31 38,742 64,019 13

15 (b) Transactions with key management personnel: Compensation of key management personnel (including executive director) is as follows: Short term employment benefits Salary 53,967 51,628 Pension contributions [see note 5(o)] 1, ,043 52, Taxation (a) Taxation for the year is based on results for the year as adjusted for tax purposes and comprises the following: Deferred taxation: Origination and reversal of temporary differences ( 36,537) (67,962) Tax benefit of unused tax losses 207,760 11, ,223 (56,357) (b) (c) Taxation losses, subject to agreement by the Commissioner of Taxpayer Audit and Assessment, amounted to approximately $1,032,592,000 (2007: $1,501,937,000). If unutilised, these losses can be carried forward indefinitely for offset against future taxable profits. Reconciliation of effective tax rate: Profit before tax 738, ,884 Expected tax at 331/3% of profit before tax 246,138 95,628 Effect on income tax of treating the following items differently for tax purposes: Depreciation and capital allowances ( 22,432) 26,438 Disallowed expenses ( 5,963) 32,381 Capital gains ( 46,452) (199,276) Gains on foreign exchange - ( 11,528) Tax exempt revenue ( 68) - Actual tax charge/(credit) 171,223 ( 56,357) 23. Reclassification of financial assets Consequent on the adverse market conditions in the financial sector worldwide and the demise of certain broker dealers which were significantly involved in the marketing of Global Bonds issued by The Government of Jamaica (GOJ), certain investment assets have been reclassified from available-for-sale to loans and receivables in accordance with paragraph 50E of IAS 39 [See note 4(a)]. The standard requires that such reclassification be made at the fair value of the instruments at the date of reclassification. The prices of GOJ Global Bonds as at September 30, 2008 were used to determine the fair value used for the reclassification. (b) (c) Fair value losses of $251,634,000 excluding deferred taxation would have been included in equity for the year had the investments not been reclassified. This amount was estimated on the basis of the bid price of the securities as at December 31, Management believe that this price is not necessarily indicative of the amount at which the securities would have been valued if an active market for the securities actually existed at that date. The weighted average effective interest rate of the investments at the date of reclassification was 8.99%. The undiscounted cash flows to be recovered from the investment reclassified is $755,404, Insurance risk management Risk management objectives and policies for mitigating insurance risk: (a) Overview: The management of insurance and financial risk is a critical aspect of the business. The primary insurance activity carried out by the company is the transfer of risk from persons or entities that are directly subject to the risk, by means of the sale of insurance policies. As such the company is exposed to uncertainty surrounding the timing, frequency and severity of claims under these policies. The principal types of policy written by the company are: Liability insurance Property insurance Motor insurance The company manages its insurance risk through its underwriting policy that includes inter alia, authority limits, approval procedures for transactions that exceed set limits, pricing guidelines and the centralised management of reinsurance. The company actively monitors insurance risk exposures both for individual and portfolio types of risks. These methods include internal risk measurement, portfolio modeling and scenario analyses. Underwriting strategy: Insurance companies assume risk through the insurance contracts they underwrite and the exposures are associated with both the perils covered by the specific line of insurance and the specific processes associated with the conduct of the insurance business. The company manages the individual risk through its Underwriting Risk Management Policy to determine the insurability of risks and exposure to large claims. The company follows detailed, uniform underwriting practices and procedures designed to properly assess and quantify risks before issuing coverage. The company s underwriting guidelines also outline acceptance limits and the appropriate levels of authority for acceptance of risks. Reinsurance strategy: A comprehensive reinsurance programme is critical to the financial stability of the organisation and a detailed analysis of the company s exposures, reinsurance needs and quality of reinsurance securities is conducted by the Board and Senior Management. (a) Carrying value Fair value Carrying value Fair value Securities: US$ denominated GOJ Global Bonds 717, , , ,952 Fair value losses of $65,806,000 (2007: gains of $28,036,000) excluding deferred taxation were recognised in equity in relation to the above investments reclassified during the year. (b) The company s exposures are continually evaluated by Management to ensure that its reinsurances remain adequate and mechanisms are in place to continually monitor the reinsurance securities to ensure that they maintain A rating, in keeping with the company s Board approved Reinsurance Risk Management Policy. Credit risk on reinsurance is discussed in more detail later in note 24. Terms and conditions of general insurance contracts and associated risks: The table below provides an overview of the terms and conditions of general insurance contracts written by the company and the key factors upon which the timing and uncertainty of future cash flows of these contacts depend: 14

16 Terms and conditions of general insurance contracts and associated risks (cont d) Types of Contract Liability Property Terms and conditions Under these contracts, compensation is paid for injury suffered by individuals, including employees or members of the public. The main liability exposure is in relation to bodily injury. Property insurance indemnifies, subject to any limits or excesses, the policyholder against the loss or damage to their own material property and business interruption arising from this damage. Key factors affecting future cash flows The timing of claim reporting and settlement is a function of factors such as the nature of the coverage and the policy provisions. Although bodily injury claims have a relatively long tail, the majority of bodily injury claims are settled in full within three to four years. In general, these contracts involve higher estimation uncertainty. The risk on any policy varies according to many factors such as location, safety measures in place and the age of the property. The event giving rise to a claim for damage to buildings or contents usually occurs suddenly (as for fire and burglary) and the cause is easily determinable. Therefore, claims are generally notified promptly and can be settled without delay. Property business is therefore classified as short-tailed and expense deterioration and investment return is of less importance in estimating provisions. Property contracts: The risks relating to property contracts are managed primarily through the pricing process. The company uses strict underwriting criteria to ensure that the risk of losses is acceptable. Furthermore, the company accepts property insurance risks for one year so that each contract can be re-priced on renewal to reflect the continually evolving risk profile. Motor contracts: The risks relating to motor contracts are managed primarily through the pricing process. The company monitors and reacts to changes in trends of injury awards, litigation and the frequency of claims appeals. Risk exposure and concentrations of risk: The following table shows the company s exposure to general insurance risk (based on the carrying value of insurance provisions at the reporting date) per major category of business. Liability Property Motor Other Total $ 000 At 31 December 2008 Gross 43, ,842 3,054,971 5,456 3,208,553 Net of reinsurance 29,227 70,793 2,608,363 3,685 2,712,068 At 31 December 2007 Gross 200,251 86,323 3,230,221 9,474 3,526,269 Net of reinsurance 126,500 40,317 2,535,455 8,765 2,711,037 Motor Motor insurance contracts provide cover in respect of policyholders motor vehicles and their liability to third parties in respect of damage to property and injury. The exposure on motor insurance contracts is normally limited to the replacement value of the vehicle and a policy limit in respect of third party damage. The cost of repairing or rebuilding assets, of replacement or indemnity for contents and the time taken to restart or resume operations to original levels for business interruption losses are the key factors influencing the level of claims under these policies. In general, claims reporting lags are minor and claim complexity is relatively low. The frequency of claims is affected by adverse weather conditions, and the volume of claims is higher in the hurricane season. (d) Claims development: Claims development information is disclosed in order to illustrate the insurance risk inherent in the company. The top part of the table shows how the estimates of total claims for each accident year develop over time. The estimates are increased or decreased as losses are paid and more information becomes known about the severity of unpaid claims. The lower part of the table provides a reconciliation of the total provision included in the balance sheet and the estimate of cumulative claims. Your partner in getting things back to normal. (c) Risk management approach: Liability contracts: Risks arising from liability insurance are managed primarily through pricing, product design, risk selection, adopting an appropriate investment strategy, rating and reinsurance. The company monitors and reacts to changes in the general economic and commercial environment in which it operates to ensure that only liability risks which meet its criteria for profitability are underwritten. In pricing contracts, the company makes assumptions that costs will increase in line with the latest available research. Your business is a major investment. Isn t it in your best interest to protect it? We offer superior service and experienced advisors. You can be sure that when things go wrong, we will be here to make it right. Speak to an Advantage General advisor or your trusted broker... Let us help you today. 15