2013 ANNUAL REPORT 1

Transcription

1 ANNUAL REPORT 1

2 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT In The Name Of Allah The Most Merciful And The Most Gracious QATAR GENERAL INSURANCE & REINSURANCE COMPANY S.A.Q. Annual Report CONTENTS Chairman s Message 4 Board of Directors 7 Board of Directors Report 8 Financial Highlights 11 Future Plan 12 Corporate Governance 16 Human Capital Development 16 Consolidated Financial Statements 18 H.H. Sheikh Tamim bin Hamad AlThani Emir of the State of Qatar H.H. Sheikh Hamad bin Khalifa AlThani The Father Emir 2 3

3 QATAR GENERAL INSURANCE & REINSURANCE CO. CHAIRMAN S MESSAGE ANNUAL REPORT A.M. Best upgraded the Company s financial strength rating to A (Excellent) from B++ (Good) and issuer credit rating to a from bbb+ with stable outlook for both ratings. According to A.M. Best, the rating upgrades reflect QGIRC s strong riskadjusted capitalization, sound track record of operating performance and enhanced risk management capabilities Nasser Bin Ali Bin Saud Al Thani Chairman & Managing Director I am pleased to present you the Company s annual report for that witnessed a continuation of the strong performance of the Qatar General Group. I pay special tribute to the achievements of Qatar General Insurance and Reinsurance Company and its subsidiaries for the achievements in insurance industry as well as the investments in both financial and real estate sectors in light of the economic growth that the State of Qatar witnesses under the wise leadership of His Highness The Emir Sheikh Tamim Bin Hamad Bin Khalifa Al Thani. I am also pleased to convey to you that our Company by grace of Allah managed to achieve an upgrade in its rating to A by A.M. Best Company. This rating reflects the solvency and the financial strength the Company enjoys as well as the strength of the capital base and operational performance and risk management policy and what the Company offers as integrated insurance services to individuals and corporate clients. In regards of the development of administrative and technical performance of the Company, the Company has worked to achieve the best levels of performance in field of insurance services as well as in fields of financial and real estate investments. Therefore, the Company focused on reinforcing different departments of the Group by highly experienced and qualified professionals to carry out the Company s strategy and achieve its goals and objectives. In the field of human resources development, which is based on the Qatar vision 2030 and Qatarization policy pursued by the Company, the focus was on Qatari cadres whereby the Company recruited many Qatari employees. In the meantime, to affirm the Board of Directors commitment to the principles and rules of corporate governance, the Company issues its annual report which confirms its commitment to those principles and rules. We are pleased to invite you to view the corporate governance report for which is published on the Company s website. As for the future plan, World Trade Center Tower has been fully completed on Doha Corniche. The Company is willing to build landmark projects through development of its own land in the Lusail area and Qatar General Towers project (formerly known as Asia Towers). The Company is currently working on substantial amendments to restructure the Group s companies based on the Group s future business strategy through splitting the investment activities from the insurance activity to strengthen the financial and administrative condition and the competitiveness of the Group s companies. It is an honor on behalf of the Board of Directors, all shareholders and employees of the Company to convey our sincere gratitude and devotion to His Highness The Emir Sheikh Tamim Bin Hamad Bin Khalifa Al Thani, and to His Excellency Prime Minister and Interior Minister Sheikh Abdullah Bin Nasser Bin Khalifa Al Thani, His Excellency Minister of Finance Mr. Ali Sherif Al Emadi, His Excellency Minister of Economy and Trade Sheikh Ahmed Bin Jassim Bin Mohammed Al Thani, and His Excellency Governor of Qatar Central Bank Sheikh Abdullah Bin Saud Al Thani for their continuous and generous support to the Company and all economic activities in our country Qatar. I extend my thanks on this occasion to Shareholders and valued clients for their trust and continuous support of the Company. I would also like to thank the executive management and all employees of the Group for their dedicated efforts in implementing the Group s strategy and for the good results that have been achieved during this year. In conclusion, I reiterate our ongoing commitment to all Shareholders, clients and our determination to devote all efforts in 2014 and the coming years to further strengthen the leading position of the Group. Peace be upon you and Allah s mercy and blessings,, 4 5

4 QATAR GENERAL INSURANCE & REINSURANCE CO. BOARD OF DIRECTORS ANNUAL REPORT 35 Years of Success... Sh. Nasser Bin Ali Bin Saud Al Thani Chairman & Managing Director Sh. Mohammed Bin Ali Bin Saud Al Thani Deputy Chairman a real partner to rely on. Sh. Jassim Bin Khalifa Al Thani Member Mr. Mohammed Hamad Al Mana Member Mr. hamad Mohammad Al Mana Member Sr. Rashid Faisal Al Numaimi Member for Al Faisal Trading & Contracting Co. Mr. Khalifa Bin Ali Al Kaabi Member for Ali Bin Saad Al Kaabi Trading & Contracting Co. Mr. Jamal Kamel Abu Nahl Member for Al Sari Trading Co. 6 7

5 QATAR GENERAL INSURANCE & REINSURANCE CO. BOARD OF DIRECTORS REPORT ANNUAL REPORT Dear Shareholders, Peace be upon you and Allah s mercy and blessings,, I am pleased to welcome you on behalf of the Board of Directors and present our annual report for the year ended 31 December and the future business plan to achieve the best returns for our Shareholders with the help of Allah. Qatar General Insurance and Reinsurance group of companies was able to preserve its leadership position in the Qatari insurance market and to develop its investment activities capitalizing on the economic growth and prosperity State of Qatar witnesses under the wise leadership A Excellent Financial Strength Rating Fsr a Excellent Issuer Credit Rating ICR of His Highness Sheikh Tamim Bin Hamad Bin Khalifa Al Thani, the Emir of the State of Qatar. The Company managed to achieve an upgrade for its Financial Strength Rating (FSR) and Issuer Credit Rating (ICR) to A & a respectively with Stable outlook from A.M. Best Company. This reflects the Company s extremely strong capital, solid operating performance, risk management policy as well as the quality of insurance services provided by the Company to its individual and corporate clients. Stable Outlook The Group by grace of Allah achieved satisfactory results in the insurance business through offering high quality insurance products and excellent services. A growth of +12% was achieved in gross written premiums in spite of the strong competition in the Qatari market. Also, an immense growth of +33% in the gross written premiums was achieved for the Takaful business, which reflects the strong performance and constant achievement by the Group in the Takaful insurance market. The Group also continued to outperform in its investment activities through the development of exceptional real estate projects, diversification of the investment portfolio and income resources, and the mitigation of the associated risks while maintaining sufficient and stable returns. World Trade Centre project has been fully completed and is considered as one of the real estate edifices in Dafna area Doha Corniche. +12% growth in gross written premiums In this regard, the Group continues to exploit the investment opportunities in bond markets with good credit rating to provide stable returns and necessary liquidity for the Company s activities. The local investment portfolio of the Group of listed companies in Qatar Exchange also maintained a balanced performance derived from cash dividends, gain from sales and capital appreciation, supported by the robust performance in the capital markets and in view of the stable and attractive investment environment in the Country. The foreign strategic investments portfolio of the Group in the Arab region also achieved an outstanding performance in spite of the political situations witnessed in the region, reflecting the perspicacity and the prudent management of the objectives of such investments. 8 9

6 QATAR GENERAL INSURANCE & REINSURANCE CO. FINANCIAL HIGHLIGHTS ANNUAL REPORT QR 2,131 million QR 763 million QR 70 million QR 653 million QR 58 million NET PROFIT QR 176 million GROSS WRITTEN PREMIUM (INCLUDING TAKAFUL BUSINESS) INVESTMENT INCOME QR 7.12 billion QR 280 million QR 4.78 billion QR 4.71 billion QR 242 million QR 2.58 billion TOTAL ASSET GENERAL TAKAFUL COMPANY S TOTAL ASSET TOTAL EQUITY The Group achieved an enormous saving in borrowings cost during the current year through restructuring of credit facilities related to investments and real estate activities with better financing terms and more competitive interest rates. Regarding the development of the administrational and technical management and prudent corporate governance of the Group, the principles of corporate governance were strengthened through activating and developing the performance of the Board by means of Audit, Risk Management, Nomination and Remuneration Committees. In addition, different departments of the Group were supported by qualified and experienced professionals to assume the responsibilities of developing the Group businesses. In the meantime, work is underway to restructure the companies within the Group to cope up with the development requirements of the business based on the Group s future business strategy, whereby the Company conducted a thorough study to change the legal structure of Qatar General Holding Company, to manage the investment activities apart from the Company s main activity being insurance, and aims to strengthen the financial and organizational position, and to boost the competitiveness of the Group s companies. Meanwhile, the Group has taken large steps towards the development of the national cadres by means of encouraging and attracting Qatari youth to join the insurance industry and by providing necessary training both internally and externally including university education to empower and develop them. work is underway to restructure the companies within the Group to cope up with the development requirements of the business based on the Group s future business strategy Here we summarize the financial results of the Group for the year : The Group achieved net profit of QR 2,131 million for the year ended 31/12/ compared with QR 176 million for the year, representing an increase of QR 1,955 million, whilst the net profit of the Group after deducting the fair value gains from revaluation of investment properties amounted to QR 129 million compared with QR 136 million for the year. The gross written premium (including Takaful business) reached QR 763 million compared with QR 653 million for the year, representing an increase of 17%. The Group achieved earnings per share of QR compared with QR 3.04 for the year. The Group achieved investment income of QR 70 million compared with QR 58 million for the year, representing an increase of 21%. The total assets of the Group reached QR 7.12 billion as at 31/12/ compared with QR 4.71 billion as at 31/12/, representing an increase of 51%. The total assets of General Takaful Company (Shareholder and Policyholders) reached QR 280 million as at 31/12/ compared with QR 242 million as at 31/12/, an increase of 16%. Total equity reached QR 4.78 billion as at 31/12/ compared with QR 2.58 billion as at 31/12/, representing an increase of 85%. Return on equity reached 83% compared with 7% for the year

7 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT Based on the results and in light of the future financial requirements of the business, the Board recommend its esteemed General Assembly to endorse the following: 1. Approval of statement of balance sheet and profit and loss accounts for the financial year ended 31/12/. 2. Distribution of 15% cash dividends of the share s nominal value, equivalent to QR 1.5 per share, and bonus shares of 20% of share capital, equivalent to one share for every five shares. During, the Company opened its fully fledged branch in Al Khor City and started construction of another branch in Doha City Al Murrah Area. 1. Future Plan B. General Takaful Company A. Insurance activity The Company s business plan in the coming phase emphasizes on developing the insurance activities and boost up its competitiveness in the present environment that is characterized by increased competition from companies that recently entered into domestic insurance market through Qatar Financial Centre (QFC). This plan includes the development and modernization of the various insurance products with excellent customer service by increasing the number of local branches and creating strategic partnerships with leading insurance companies. The Company also works on enhancing the insurance business through strategic acquisitions in other insurance companies in the region. Since its inception in 2008, General Takaful Company has achieved outstanding results and attained an exceptional rank among the local Takaful companies in the Country as its gross premiums increased by 33%, and total assets increased by 16% compared with the year, and achieved return on equity of 29%. The plan in the coming phase for the Takaful business is to increase the client base as well as the Company s market share through opening new branches and introducing new products in compliance with the Shariaa principles, as well as providing competitive insurance products to clients of Islamic banks. +33% growth in Takaful gross written premiums +16% increase in General Takaful s total assets 12 13

8 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT SYRIA Trust Syria Insurance Arabian Insurance Institute ALGERIA Trust Bank Algeria Trust Investment Holding Algeria Trust Algeria Assurances & Reassurances BAHRAIN Gulf Assist LIBYA Trust Libya Insurance QATAR Qatar General Insurance & Reinsurance Qatar General Holding General Takaful General Real Estate World Trade Center Mazoon Insurance Marketing Services Mazoon Real Estate General Water and Beverages International Financial Securities Qatari Unified Bureau Insurance Gulf Petroleum Limited OMAN Oman Reinsurance C. Investment activity The investment policy of the Group in the coming phase will continue to diversify income sources of the portfolio and the risks geographically and through the concentration on liquid investments aimed to diversify income sources and decrease the risks of financial market fluctuations. As part of the Group s strategic drive to develop its real estate portfolio, and since the development of the World Trade Center Qatar Tower project on Doha Corniche has now been completed, the Group finalized the preliminary works and obtained approvals and permits necessary to commence the development of Qatar General Towers (formally known as Asian Towers) in the West Bay area in addition to proceeding with preliminary designs for the development of land owned by the Company in Lusail area. D. Regional Expansion The Group adopted an expansion strategy outside the State of Qatar in the insurance, banking and real estate fields to enhance its position regionally as it participated in a number of important investments in Syria, Algeria, Libya, Oman and Bahrain. Regarding the Group s foreign investments, the Group has laid down an imminent strategy to provide technical and administrative support to the companies the Group has invested in within the countries of the region and to develop these strategic alliances to capitalize on the economic resurgence witnessed in the region, sustaining the State of Qatar s prudent policy to support economies of neighboring Arab countries. In this regard, we hereby confirm that all transactions with affiliated companies like Al Sari Trading Company and Trust Group of companies that provide technical support to the Company and the related parties disclosed in the consolidated financial statements are executed in the best interest of the Company, and are disclosed as required in the annual report and in the consolidated financial statements and presented with all transparency to the General Assembly

9 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 2. Corporate Governance The corporate governance rules and regulations are abided by in accordance with the corporate governance code of listed companies in financial markets which are under the supervision of Qatar Financial Market Authority and that the Company issues an annual report confirming its conformity with the principles of corporate governance and we are pleased to invite you to view our report which is published on the Company s website. 3. Human Capital Development In its continuing efforts to employ Qatari cadres, the Group worked on developing its human resources through attracting and training young Qatari talent that joined the Company in coordination with the Ministry of Labor. These efforts have led to maintain the advanced Qatarization percentage and the completion of training programs to prepare the future leaders of the Company. Attracting and training Qatari cadres to prepare the future leaders of the Company We look with great confidence for the near future in which our cherished nation Qatar shall by Allah s willing in the next few years a lot of mega projects including but not limited to Qatar Rail project and the projects associated with Qatar s hosting of the FIFA World Cup The Board of Directors would like to congratulate you for the continued success of the Group and its leading position in the local insurance market and international reinsurance markets and would like to thank the executive management and all staff members for their dedicated efforts to produce these results based on the Group s strategy. Finally, it is an honor on behalf of the Board of Directors to convey my sincere gratitude and devotion to His Highness Sheikh Tamim Bin Hamad Bin Khalifa AI Thani, the Emir of the State of Qatar, and to our wise government for their continuous and generous support to our Company. We ask Allah to help us to serve our Shareholders and to serve our clients and achieve greater successes. Peace be upon you and Allah s mercy and blessings

10 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT ANNUAL REPORT QATAR GENERAL INSURANCE & REINSURANCE COMPANY S.A.Q. Consolidated Financial Statements 31 December CONTENTS INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS OF QATAR GENERAL INSURANCE & REINSURANCE COMPANY S.A.Q. Report on the Financial Statements We have audited the accompanying consolidated financial statements of Qatar General Insurance & Reinsurance Company S.A.Q. (the Company ) and its subsidiaries (together referred to as the Group ), which comprise the consolidated statement of financial position as at 31 December and the consolidated statement of income, comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Board of Directors responsibility for the consolidated financial statements The Board of Directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgement, 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 control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated 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 consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. Independent auditors report 19 Consolidated statement of financial position 20 Consolidated statement of income 21 Consolidated statement of comprehensive income 22 Consolidated statement of changes in equity 2324 Consolidated statement of cash flows 25 Notes to the consolidated financial statements 2689 Report on Legal and Other Regulatory Matters Furthermore, in our opinion proper books of account have been kept by the Group and the consolidated financial statements comply with the Qatar Commercial Companies Law No. 5 of 2002 and the Company s Articles of Association. We have obtained all the information and explanations we required for the purpose of our audit, and are not aware of any violations of the above mentioned law or the Articles of Association having occurred during the year which might have had a material effect on the business of the Group or on its financial position. Ziad Nader of Ernst & Young Auditor s Registration No. 258 Date: 9 February 2014 Doha 18 19

11 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December CONSOLIDATED STATEMENT OF INCOME Notes Notes Assets Property and equipment Investment properties Equity accounted investees Financial assets: Availableforsale financial assets Financial assets at fair value through profit or loss Receivables from related parties Insurance receivables Reinsurance assets Takaful participants' assets Other assets Cash and cash equivalents Total assets Equity and liabilities Equity attributable to equity holders of the parent Issued share capital Retained earnings Legal reserve Revaluation reserves Noncontrolling interests Total equity Liabilities Insurance contract liabilities Financial liabilities: Borrowings Derivative financial instruments Payables to a related party Insurance payables Employees' endofservice benefits Takaful participants' liabilities Other liabilities Total liabilities Total equity and liabilities (a) 7(b) 7(c) 7(d) 8 9(a) (a) 24 63,626 4,277, ,366 1,023, ,623 9, , , , , ,083 7,124, ,461 3,224, , ,433 4,777,583 1,847 4,779, , ,994 39, ,653 28, , ,459 2,344,637 7,124, ,082 2,139, , , ,832 16, , , , ,477 60,700 4,714, ,270 1,433, , ,563 2,576,880 1,295 2,578, , ,585 51, ,115 26, , ,710 2,136,635 4,714,810 Gross written premiums Change in unearned premiums provision Gross earned premiums Premiums ceded to reinsurers Net earned premiums Fees and commission income Investment income Net realised gains Fair value gains Other operating revenue Other revenue Total revenue Gross claims paid Claims ceded to reinsurers Gross change in insurance contract liabilities Change in insurance contract liabilities ceded to reinsurers Net claims Finance costs Other operating and administrative expenses Other expenses Total expenses Profit before share of profits of associates Share of profits of associates Profit for the year Profit attributable to: Equity holders of the parent Noncontrolling interests Earnings per share Basic and diluted profit for the year attributable to ordinary equity holders of the parent (in Qatari Riyals per share) 26(a) 26(a) 26(a) 26(b) (a) 32(b) 32(c) 32(d) ,255 (42,103) 518,152 (312,163) 205,989 15,562 70,201 22,280 2,039,284 12,182 2,159,509 2,365,498 (231,249) 105,999 (23,152) 7,265 (141,137) (16,886) (101,136) (118,022) (259,159) 2,106,339 24,646 2,130,985 2,130, ,130, ,180 (26,206) 473,974 (278,345) 195,629 24,630 57,725 50,611 28,619 17, , ,935 (192,227) 79,790 (51,134) 34,568 (129,003) (16,266) (110,635) (126,901) (255,904) 119,031 56, , , , Nasser Bin Ali Bin Saud Al Thani Chairman and Managing Director Jamal Kamel Abu Nahl Chief Executive Officer and Board Member The attached notes 1 to 44 form part of these consolidated financial statements. The attached notes 1 to 44 form part of these consolidated financial statements

12 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Profit for the year Note 2,130, ,560 Total equity Noncontrolling interests 2,578,175 1,295 2,130, ,870 2,252, ,847 Other comprehensive income Exchange differences on translating foreign operations Net gain (loss) on cash flow hedges Net gain (loss) on availableforsale financial assets Other comprehensive income for the year Total comprehensive income for the year (20,600) 11, , ,870 2,252,855 (10,124) (1,277) (71,549) (82,950) 92,610 2,576,880 (26,742) 2,130, ,870 2,252,303 (20,600) (20,600) (50,127) (1,473) 4,779,430 Total ordinary shareholders' equity Foreign currency translation reserve (50,127) (1,473) 4,777,583 (47,342) Total comprehensive income attributable to: Equity holders of the parent Noncontrolling interests The attached notes 1 to 44 form part of these consolidated financial statements. 2,252, ,252,855 92, ,610 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Equity attributable to equity holders of the parent Revaluation reserves Cash flow hedging Revaluation surplus Availableforsale financial assets Legal reserve Retained earnings Issued share capital Notes At 1 January 501,270 1,433, , ,979 77,355 (51,029) 11,900 11, , ,570 2,130,433 2,130,433 Profit for the year Other comprehensive income Total comprehensive income 213,098 (75,191) (213,098) (50,127) 75, Issue of bonus shares Transfer to legal reserve Dividends paid during the year (1,473) 16 Contribution to social and sports activities fund At 31 December 576,461 3,224, , ,549 77,355 (39,129) The attached notes 1 to 44 form part of these consolidated financial statements

13 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT Total equity 2,548, ,560 (82,950) 92, ,547, ,999 (82,950) 92,049 (58,183) (4,389) 2,578,175 CONSOLIDATED STATEMENT OF CASH FLOWS Noncontrolling interests Total ordinary shareholders' equity (58,183) (4,389) 1,295 2,576,880 Operating activities Profit for the year Adjustment for: Net change in operating assets Net change in operating liabilities Notes ,130,985 (6,637) 116, ,560 (159,561) 66,691 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) Equity attributable to equity holders of the parent Revaluation reserves Foreign currency translation reserve Cash flow hedging Revaluation surplus Availableforsale financial assets Legal reserve Retained earnings Issued share capital Notes At 1 January 447,563 1,392, , ,528 77,355 (49,752) (16,618) (10,124) (10,124) (1,277) (1,277) (71,549) (71,549) 174, ,999 Profit for the year Other comprehensive income Total comprehensive income 17,556 (53,707) (17,556) 53, Issue of bonus shares Transfer to legal reserve Dividends paid during the year 15 (58,183) (4,389) 16 Contribution to social and sports activities fund At 31 December 501,270 1,433, , ,979 77,355 (51,029) (26,742) The attached notes 1 to 44 form part of these consolidated financial statements. Noncash items included in profit for the year Fair value gains Impairment (reversals) loss on receivables Share of profits of associates Depreciation of property and equipment Employees' end of service benefits Net cash flows from operating activities Investing activities Net movement in availableforsale financial assets Net movement in financial assets at fair value through profit or 4loss Purchase of property and equipment Purchase of investment properties Investments in equity accounted investees Dividends received from equity accounted investees Net cash flows used in investing activities Financing activities Proceeds from bank loans Finance costs paid on bank loans Dividends paid to equity holders of the parent Net cash flows from financing activities Net increase/ (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of year Cash and cash equivalents at the end of year Operational cash flows from interest and dividends Interest paid Interest received Dividends received The attached notes 1 to 44 form part of these consolidated financial statements (2,039,284) (7,367) (24,646) 4,614 2, ,753 (14,159) (2,339) (7,607) (96,745) (11,668) 10,867 (121,651) 123,063 (14,618) (50,127) 58, ,420 42, ,676 14,927 12,808 45,513 (28,619) 6,555 (56,529) 4,847 6,802 15,746 (58,684) 14,420 (983) (241,867) (39,916) 13,024 (314,006) 262,810 (14,949) (58,183) 189,678 (108,582) 150,838 42,256 15,262 8,365 37,

14 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 1. CORPORATE INFORMATION Qatar General Insurance and Reinsurance Company S.A.Q. (the Company or the Parent Company ) is a public shareholding company incorporated by Emiri Decree No. 52 of 1978 under commercial registry number 7200 and governed by the provisions of the Qatar Commercial Companies Law No. 5 of The Company and its subsidiaries (together referred to as the Group ) are engaged in the business of general insurance and reinsurance including Islamic Takaful insurance, real estate and investment management. The shares of the Company are listed on the Qatar Exchange. The Company has seven local branches in Qatar and one overseas branch in United Arab Emirates (in Dubai). The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries and the Group s interest in the associates. The subsidiaries are: Country of Name of the subsidiary Ownership incorporation Principal activities Qatar General Holding Company S.P.C. General Takaful Company S.P.C. 100 % 100 % State of Qatar State of Qatar Primarily engaged in managing investments of the Group Primarily engaged in Islamic insurance 2. BASIS OF PREPARATION AND ACCOUNTING POLICIES 2.1 Basis of Preparation Statement of compliance These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), and applicable provisions of the Qatar Commercial Companies Law No. 5 of Basis of measurement The consolidated financial statements are prepared under the historical cost convention, except for the following material items in the consolidated statement of financial position which are carried at fair value: derivative financial instruments; non derivative financial instruments carried at fair value through profit or loss; availableforsale financial assets; investment properties. The methods used to measure fair values are discussed further in Note 3. Functional and presentation currency The consolidated financial statements are presented in Qatari Riyal (QR), which is the Group s functional currency. All financial information presented in Qatari Riyal has been rounded to the nearest thousands (), except where otherwise indicated. General Real Estate Company S.P.C. World Trade Center S.P.C. Mazoon Insurance Marketing Services S.P.C. 100 % 100 % 100 % State of Qatar State of Qatar State of Qatar Primarily engaged in real estate investment and management Official recognized licensee of the World Trade Center Association. Insurance marketing services 2.2 Use of estimates and judgements The preparation of the consolidated financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that effect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses and disclosure of contingent liabilities at the reporting date. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectation of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Mazoon Real Estate Company W.L.L. 50 % State of Qatar Real estate investment and development Information about significant areas of estimates and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements are included under Note 42 and 43. General Water and Beverages Company W.L.L. (formally known as Arab Danish Diary W.L.L.) 60 % State of Qatar Water bottling and foodstuff trading During, the legal name of the Arab Danish Diary W.L.L. was changed to General Water & Beverages W.L.L. This change had been duly approved by its partners and the required legal and regulatory approvals have been obtained. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised. 2.3 Changes in accounting policies and disclosures The accounting policies adopted are consistent with those of the previous financial year, except for the following amendments to IFRS effective as of 1 January : These consolidated financial statements of the Group for the year then ended 31 December were authorized for issue by the Board of Directors on 9 February

15 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 2. BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued) 2.3 Changes in accounting policies and disclosures (continued) Standard IFRS 1 IFRS 7 IFRS 10 IFRS 11 IFRS 12 IFRS 13 IAS 1 IAS 19 Content Firsttime Adoption of International Financial Reporting Standards Government Loans Amendments to IFRS 1 Financial Instruments: Disclosures Offsetting Financial Assets and Financial Liabilities Amendments o IFRS 7 Consolidated Financial Statements, IAS 27 Separate Financial Statements Joint Arrangements, IAS 28 Investments in Associates and Joint Ventures Disclosure of Interests in Other Entities Fair Value Measurement Presentation of Items of Other Comprehensive Income Amendments to IAS 1 Employee Benefits (Revised 2011) IFRS 1 Government Loans Amendments to IFRS 1 These amendments require firsttime adopters to apply the requirements of IAS 20 Accounting for Government Grants and Disclosure of Government Assistance, prospectively to government loans existing at the date of transition to IFRS. Entities may choose to apply the requirements of IFRS 9 (or IAS 39, as applicable) and IAS 20 to government loans retrospectively if the information needed to do so had been obtained at the time of initially accounting for that loan. The exception would give firsttime adopters relief from retrospective measurement of government loans with a belowmarket rate of interest. The amendment is effective for annual periods on or after 1 January. IFRS 7 Disclosures Offsetting Financial Assets and Financial Liabilities Amendments to IFRS 7 These amendments require an entity to disclose information about rights to setoff and related arrangements (e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity s financial position. The new disclosures are required for all recognized financial instruments that are set off in accordance with IAS 32 Financial Instruments: Presentation. The disclosures also apply to recognized financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are set off in accordance with IAS 32. These amendments become effective for annual periods beginning on or after 1 January and are not expected to impact the Group s financial position or performance. IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also addresses the issues raised in SIC12 Consolidation Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgment to determine which entities are controlled and therefore are required to be consolidated by a parent, compared with the requirements that were in IAS 27. This standard becomes effective for annual periods beginning on or after 1 January 2. BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued) 2.3 Changes in accounting policies and disclosures (continued) IFRS 11 Joint Arrangements IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC13 Jointlycontrolled Entities Nonmonetary Contributions by Venturers. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. This standard becomes effective for annual periods beginning on or after 1 January, and is to be applied retrospectively for joint arrangements held at the date of initial application. IAS 28 Investments in Associates and Joint Ventures (as revised in ) As a consequence of the new IFRS 11 Joint Arrangements, and IFRS 12 Disclosure of Interests in Other Entities, IAS 28 Investments in Associates, has been renamed IAS 28 Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures in addition to associates. The revised standard becomes effective for annual periods beginning on or after 1 January. IFRS 12 Disclosure of Interests in Other Entities IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity s interests in subsidiaries, joint arrangements, associates and structured entities. This standard becomes effective for annual periods beginning on or after 1 January. IFRS 13 Fair Value Measurement IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The Group is currently assessing the impact that this standard will have on the financial position and performance, but based on the preliminary analyses, no material impact is expected. This standard becomes effective for annual periods beginning on or after 1 January. IAS 1 Presentation of Items of Other Comprehensive Income Amendments to IAS 1 The amendments to IAS 1 change the grouping of items presented in other comprehensive income (OCI). Items that could be reclassified (or recycled ) to profit or loss at a future point in time would be presented separately from items that will never be reclassified (for example, net loss or gain on availableforsale financial assets). The amendment affects presentation only and is effective for annual periods beginning on or after 1 July. IAS 19 Employee Benefits (Revised) The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor mechanism and the concept of expected returns on plan assets to simple clarifications and rewording. The amendment becomes effective for annual periods beginning on or after 1 January

16 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 2. BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued) 2.4 Standards issued but not yet effective Standards issued but not yet effective up to the date of issuance of the Group s consolidated financial statements are listed below. This listing of standards and interpretations issued are those that the Group reasonably expects to have an impact on disclosures, financial position or performance when applied at a future date. The Group intends to adopt these standards when they become effective. The Group is currently considering the implications of the new IFRSs which are effective for future accounting periods and has not early adopted any of the new Standards as listed below: IFRS 10, IFRS 12 and IAS 27 Investment Entities (Amendments) The concept of an investment entity is new to IFRS. The amendments represent a significant change for investment entities, which are currently required to consolidate investees that they control. Significant judgment of facts and circumstances may be required to assess whether an entity meets the definition of investment entity. These amendments become effective for annual periods beginning on or after 1 January IAS 32 Offsetting Financial Assets and Financial Liabilities Amendments to IAS 32 These amendments clarify the meaning of currently has a legally enforceable right to setoff. The amendments also clarify the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. These amendments become effective for annual periods beginning on or after 1 January 2014 and are not expected to impact the Group s financial position or performance. IAS 36 Recoverable Amount Disclosures for Non Financial Assets Amendments to IAS 36 The amendments clarify the disclosure requirements in respect of fair value less costs of disposal. The amendments no longer require the disclosure of information that was regarded as commercially sensitive by preparers. This might be a valid reason for entities to early adopt the amendments. Nevertheless, additional information needs to be provided. In general, it is likely that the information required to be disclosed will be readily available. These amendments become effective for annual periods beginning on or after 1 January IAS 39 Novation of Derivatives and Continuation of Hedge Accounting Amendments to IAS 39 The amendments provide an exception to the requirement to discontinue hedge accounting in certain circumstances in which there is a change in counterparty to a hedging instrument in order to achieve clearing for that instrument. The amendments cover novations to central counterparties, as well as to intermediaries such as clearing members, or clients of the latter that are themselves intermediaries. These amendments become effective for annual periods beginning on or after 1 January BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued) 2.4 Standards issued but not yet effective (continued) IFRIC 21 Levies IFRIC 21 is applicable to all levies other than outflows that are within the scope of other standards (e.g., IAS 12) and fines or other penalties for breaches of legislation. The interpretation clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability is accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability is recognized before the specified minimum threshold is reached. These amendments become effective for annual periods beginning on or after 1 January IFRS 9 Financial Instruments: Classification and Measurement IFRS 9, as issued, reflects the first phase of the IASB s work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard was initially effective for annual periods beginning on or after 1 January, but Amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition Disclosures, issued in December, moved the mandatory effective date to 1 January In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement of the Group s financial assets, but will not have an impact on classification and measurements of financial liabilities. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued. 2.5 Annual Improvements May These improvements are effective for annual periods beginning on or after 1 January. These improvements will not have an impact on the Group, but include: IFRS 1 Firsttime Adoption of International Financial Reporting Standards Repeated application of IFRS 1 This improvement clarifies that an entity that stopped applying IFRS in the past and chooses, or is required, to apply IFRS, has the option to reapply IFRS 1. If IFRS 1 is not reapplied, an entity must retrospectively restate its financial statements as if it had never stopped applying IFRS. IAS 1 Presentation of Financial Statements This improvement clarifies the difference between voluntary additional comparative information and the minimum required comparative information. Generally, the minimum required comparative information is the previous period. IAS 16 Property, Plant and Equipment This improvement clarifies that major spare parts and servicing equipment that meet the definition of property; plant and equipment are not inventory

17 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 2. BASIS OF PREPARATION AND ACCOUNTING POLICIES (continued) 2.5 Annual Improvements May (continued) IAS 32 Financial Instruments, Presentation This improvement clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12 Income Taxes. IAS 34 Interim Financial Reporting The amendment aligns the disclosure requirements for total segment assets with total segment liabilities in interim financial statements. This clarification also ensures that interim disclosures are aligned with annual disclosures. 3. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied by the Group consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities. Basis of consolidation The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Parent Company, using consistent accounting policies. All intragroup balances, transactions, recognized gains and losses resulting from intragroup transactions and dividends are eliminated in full. Total comprehensive income within a subsidiary is attributed to the noncontrolling interest even if it results in a deficit balance. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it: Derecognises the assets (including goodwill) and liabilities of the subsidiary Derecognises the carrying amount of any noncontrolling interests Derecognises the cumulative translation differences recorded in equity Recognises the fair value of the consideration received Recognises the fair value of any investment retained Recognises any surplus or deficit in profit or loss Reclassifies the parent s share of components previously recognized in other comprehensive income to profit or loss or retained earnings, as appropriate. 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Basis of consolidation (continued) Investment in subsidiary companies Subsidiaries are defined as companies that are controlled by the Group, namely companies in which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The consolidated financial statements comprise the financial statements of Qatar General Insurance and Reinsurance Company S.A.Q and its subsidiary companies as at 31 December. The financial statements of the subsidiary companies are prepared for the same reporting year as the Parent Company, using consistent accounting policies. Intragroup balances and transactions, and any unrealised income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. One of the Group s subsidiaries, General Takaful Company S.P.C, is an operator of Islamic insurance business operating under Islamic Shari a principles. In accordance with applicable Shari a principles, participants (policyholders ) funds are maintained distinct from the operator s (shareholders ) funds. Accordingly, the participants assets and liabilities including the fund balances are shown separately as Takaful participants assets and Takaful participants liabilities respectively in the consolidated statement of financial position as supplementary information. Takaful participants fund accounts comprising of statement of financial position and statement of comprehensive income (policyholders) is set out in Note 9. The Group manages the takaful funds on behalf of the policy holders under the Hybrid model. The Hybrid model uses the principles of both Wakala and Mudaraba, whereby the shareholder receives a fixed Wakala fee of 15% (: 20%) of gross insurance premiums, in addition to the 70% share in the realised investment gains on the policyholders contributions. The administrative costs of underwriting are covered by the Wakala fee and borne by the shareholder. Investment in associate companies Associate companies are those entities in which the Group has significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the Group s share of total recognised gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. All subsequent changes to the Group s share of interest in the equity of the associate are recognised in the Group s carrying amount of the investment. Changes resulting from the profit and loss generated by the associate are reported in the consolidated statement of income and therefore affect net results of the Group. Amounts reported in the consolidated financial statements of associates have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group s interest in the investee. When the Group s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long term investments, is reduced to zero and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee

18 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Foreign currency Foreign operations For the purpose of the consolidated financial statements, the results and financial position of the foreign branch is expressed in the functional currency of the parent company at the exchange rate prevailing at the reporting date. Income and expenses are translated at the average exchange rates for the year unless exchange rates fluctuated significantly during the year in which case the exchange rates at the dates of the transactions are used. Investment in foreign associates is translated at the closing exchange rates. Foreign currency translation differences are recognised directly in other comprehensive income. When a foreign operation is disposed of in part or full, the relevant amount in the reserve is transferred to the consolidated statement of income for the corresponding period. Foreign currency transactions Foreign currency transactions are initially recorded in Qatari Riyals at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to Qatari Riyal at the exchange rate at that date. Nonmonetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to Qatari Riyal at the exchange rate at the date that the fair value was determined. Nonmonetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transactions. The resultant exchange differences are included in the consolidated statement of income. Financial instruments Financial instruments represent the Group s financial assets and liabilities. Financial assets include cash and cash equivalents, insurance and other receivables, receivables from related parties, reinsurance assets and investments. Financial liabilities include insurance payables, borrowings, derivative financial instruments, insurance contract liabilities, payables to a related party and other liabilities. Recognition The financial assets and liabilities are recognised on the date they are generated and on the date at which the Group becomes a party to the contractual provisions of the instrument. All financial assets are recognised initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss. Measurement Availableforsale financial assets The Group s investments in equity securities, fund accounts and certain debt securities are classified as availableforsale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, and foreign currency differences on availableforsale monetary items, are recognised directly in other comprehensive income and presented within equity in the fair value reserve. When an investment is derecognised, the cumulative gain or loss in equity is transferred to profit or loss. All purchases and sales of investments are recognised at the settlement date. Financial assets at fair value through profit and loss An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are held for trading if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group s investment strategy. Upon initial recognition, attributable transaction costs are recognised in profit or loss as incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss. Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and shortterm deposits with an original maturity of three months or less as on the consolidated statement of financial position date. Insurance and other receivables Insurance and other receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in the consolidated statement of income when there is objective evidence of that the asset is impaired. Reinsurance assets The Group cedes insurance risk in the normal course of business for its businesses. Reinsurance assets represent balances recoverable from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurers policies and are in accordance with the related reinsurance contract. Derecognition The Group derecognises the financial asset when the contractual rights to receive cash flows from that asset expire or it transfers the right to receive the contractual cash flow of that asset in a transaction in which substantially all the risks and rewards of ownership of the financial assets are transferred. The Group also derecognizes certain assets when it expenses balances pertaining to assets deemed to be uncollectible. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired

19 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Measurement (continued) Insurance contract liabilities Insurance contract liabilities include the outstanding claims provision, provision for claims incurred but not reported and the provision for unearned premium. Amounts payable for insurance claims reported up to the reporting period end and the amount payable to reinsurance companies are accrued as a liability payable. The insurance claims are accrued on the basis of the actual losses reported against the policies underwritten by the Group during the period. Provision for claims incurred but not reported are computed based on actuarial review after considering current assumptions, historical trends and empirical data which is not discounted for the time value of money. Unearned premiums represent the portion of net premiums written relating to the unexpired period of coverage calculated on the actual number of days method (daily pro rata basis). The change in the provision for unearned premium is taken to the consolidated statement of income in order that revenue is recognised over the period of risk. Borrowings All borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After the initial recognition, borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the profit or loss when liabilities are derecognised. Others Other nonderivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses. Derivative financial instruments The Group uses interest rate swap contracts to hedge its risk associated with interest rate fluctuations relating to the interest payments on the Group s term loan. These interest rate swap contracts are stated at fair value. The Group classifies a hedge as a cash flow hedge where it hedges the exposure to variability in cash flows that are either attributable to a particular risk associated with a recognised asset or liability or a forecasted transaction. The interest rate swap contract has been classified as a cash flow hedge and meets the conditions for hedge accounting. Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each statement of financial position date. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. Cash flow hedges The effective portion of changes to the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the consolidated statement of income. Measurement (continued) Fair values Amounts deferred in other comprehensive income are transferred to the consolidated statement of income in the periods when the hedged item is recognized in the consolidated statement of income. Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable willing parties on an arm s length transaction on the measurement date. Differences can therefore arise between the book values under the historical cost method and fair value estimates. Underlying the definition of fair value is a presumption that an enterprise is a going concern without any intention or need to liquidate, curtail materially the scale of its operations or undertake a transaction on adverse terms. Financial assets at fair value through profit or loss and availableforsale financial assets The fair value of financial instruments that are actively traded in organized financial markets is determined by reference to quoted market bid prices for assets and offer prices for liabilities, at the close of business on the statement of financial position date. If the fair value cannot be measured reliably using any of the methods mentioned, then these financial instruments are measured at cost, being the fair value of the consideration paid for the acquisition of the investment or the amount received on issuing the financial liability until a reliable measure of the fair value is available. All transaction costs directly attributable to the acquisition are also included in the cost of the investment (Refer to Note 40 for fair value hierarchy). Investment properties The fair value of investment property is determined by independent real estate valuation experts with recent experience in the location and category of property being valued. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the valuation date between a willing buyer and a willing seller in an arm s length transaction after proper marketing wherein parties had each acted knowledgeably. Transfers are made to or from investment property only whem there is a change in use evidenced by the end of owneroccupation, commencement of an operating lease to another party or completion of construction or development. For a transfer from investment property to owneroccupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owneroccupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property and equipment up to the date of the change in use. Interest rate swap agreements The fair value of interest rate swap contracts is calculated by discounting the expected future cash flows at the prevailing interest rate based on broker s quotes

20 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. If such evidence exists, the estimated recoverable amount of that asset is determined and any impairment loss is recognised in the consolidated statement of income. For assets carried at fair value, impairment is the difference between cost and fair value, less any impairment loss previously recognized in the consolidated statement of income. For an investment in equity security classified under availableforsale, a significant or prolonged decline in its fair value below its cost provides objective evidence of impairment. Reversal of impairment losses in respect of equity investments classified as availableforsale are treated as increases in fair value through the consolidated statement of comprehensive income. Reversal of impairment losses on debt instruments are done through the consolidated statement of income, when the increase in fair value can be objectively related to an event occurring after the impairment loss was recognised in the consolidated statement of income. For assets carried at cost, impairment is the difference between carrying value and the present value of future cash flows discounted at the current market rate of return for a similar financial asset. For assets carried at amortised cost, impairment is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the financial asset s original effective interest rate. Property and equipment Recognition and measurement Property and equipment are stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of selfconstructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment, and are recognised net within other income in profit or loss. Subsequent costs The cost of replacing part of an item of property and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the daytoday servicing of property and equipment are recognised in profit or loss as incurred. Depreciation Depreciation is provided on cost by the straightline method on all property and equipment other than land which is determined to have an indefinite life and is charged to the consolidated statement of income, at annual rates which are intended to write off the cost of the assets over their estimated useful lives as follows: Nonfinancial assets The carrying amounts of the Group s nonfinancial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset s recoverable amount is estimated. Buildings Furniture and fixtures Computers Motor vehicles 20 years 4 years 3 5 years 3 5 years Other assets and liabilities All other assets and liabilities which are financial instruments are stated at cost, being the fair value and recognized at amounts to be received or to be paid in the future. Investment properties Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business or use in the production or supply of goods and services or for administrative purposes. Investments in property are measured by applying the fair value model. Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of selfconstructed investment property includes the cost of materials and direct labour, any other cost directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing cost. These properties are constructed for future use as investment properties and hence are considered as investment properties and accounted at fair value. Any gain or loss on disposal of any investment property (calculated as a difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss. Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate. Provisions Provisions are recognised in the consolidated statement of financial position when the Group has a legal or constructive obligation as a result of a past event that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Employee benefits Local employees With respect to the local employees, the Group makes contributions to the government pension fund to the respective local regulatory authorities as a percentage of the employees salaries in accordance with the requirements of respective local laws pertaining to retirement and pensions, wherever required. The Group s share of contributions to these schemes, which are defined contribution schemes under International Accounting Standard (IAS) 19 Employee Benefits are charged to the consolidated statement of income in the year to which they relate. When the use of a property changes such that it is reclassified as property and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting

21 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Employee benefits (continued) Expatriate employees For the expatriate employees, the Group provides for employees end of service benefits determined in accordance with the requirements of respective local laws of Group entities pertaining to retirement and pensions, wherever required. These unfunded charges are made by the Group on the basis of employees salaries and the number of years of service at the statement of financial position date. Although the expected costs of these benefits are accrued over the period of employment, these are paid to employees only on completion of their term of employment with the Group. Share capital Ordinary share capital Ordinary shares are classified as equity. The bonus shares issued during the year are shown as an addition to the share capital and deducted from the accumulated retained earnings of the Group. Dividends on ordinary share capital Dividends on ordinary shares are recognised as a liability and deducted from retained earnings when they are approved by the Company s shareholders. Dividends for the year that are approved after the consolidated statement of financial position date are dealt with as an event after the consolidated statement of financial position date. Fair value reserve This represents the unrealised gain or loss on yearend fair valuation of availableforsale financial assets. In the event of sale or impairment, the cumulative gains or losses recognised under the investments fair value reserve are recycled to the consolidated statement of income for the year. Income recognition Gross premiums Gross premiums written comprise the total premiums receivable for the whole period of cover provided by the contracts entered into during the accounting period and are recognised on the date on which the policy commences. Net earned premiums Premiums, net of reinsurance, are taken to income over the terms of the related contracts or policies. The portion of premium received on inforce contracts that relates to unexpired risks at the statement of financial position date is reported as the unearned premium liability. Unearned premiums are calculated principally on the basis of actual number of day s method (daily pro rata basis). Income recognition (continued) Reinsurance arrangements As part of managing its insurance risks, the Group enters into contracts with other reinsurers for compensation of losses on insurance contracts issued by the Group. A proportionate amount of the gross premiums, in proportion to the amount of risk reinsured on an individual policy basis are paid to the reinsurance companies according to the rates agreed in the reinsurance contracts, as reinsurance premiums. In the ordinary course of business, the Group assumes and cedes reinsurance. Such reinsurance arrangements provide for greater diversification of business, allow management to control exposure to potential losses arising from large risks, and provide additional capacity for growth. A significant portion of the reinsurance is affected under treaty, facultative and excessofloss reinsurance contracts. The amounts payable to reinsurance companies are accrued on the basis of reinsurance premium payable on individual policy basis. Unearned reinsurance premiums are those proportions of premiums written in a year that relate to periods of risk after the consolidated statement of financial position date and are deferred over the term of the underlying direct insurance policies. Net commission income A proportionate amount of reinsurance premium paid to the reinsurance company is paid back to the Group as commission for undertaking the business. This commission percentage is agreed according to the reinsurance contract entered on individual line of business with different reinsurance companies. The amount of commission is recognised according to the reinsurance commission receivable on an individual policy basis. Fees Insurance contract policy holders are charged for policy administration services, management services and other contract fees. This income is recognised during the period when the policy is underwritten or the service is provided. Investment income Rental income from investment properties is recognised in the consolidated statement of income on a straight line basis over the period of the lease. Investment income also includes dividends, which are recognised when the right to receive the same is established. Interest income is recognised in the consolidated statement of income as it accrues. Income from associate companies is recognised as per the equity accounting method. Changes resulting from the profit or loss generated by the associates is reported under the consolidated statements of income. Claims and related expenses Gross claims paid Claims and related expenses are accounted for based on reports received and subsequent review on an individual case basis. Provision is made to cover the estimated ultimate cost of settling claims arising out of events, which have occurred by the end of the financial year, including unreported losses, and claims handling expenses

22 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 3. SIGNIFICANT ACCOUNTING POLICIES (continued) 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Claims and related expenses (continued) Provision for unreported claims Provision for unreported claims is established based on actuarial analysis and application of underwriting judgment having regard to the range of uncertainty as to the eventual outcome for each category of business. Reinsurance and other recoveries Compensations receivable from reinsurers are estimated in a manner consistent with the corresponding claim liability. The obligations arising under reinsurance contracts are recognised in income and the related liabilities are recognised as accounts receivable or deducted from reinsurers share of technical reserves. Hence, a portion of the reinsurance premium payable is provided as a reserve for future claims in order to provide additional liquidity for the Group, which is finally settled at the end of the reinsurance period. Finance costs The finance costs incurred on qualified assets are capitalised being part of cost of construction. All other finance costs are recognised on an accrual basis in the consolidated statement of income during the year in which they arise. Events after the reporting period The consolidated financial statements are adjusted to reflect events that occurred between the consolidated statement of financial position date and the date when the consolidated financial statements are authorised for issue, provided they give evidence of conditions that existed at the consolidated statement of financial position date. There were no subsequent events which required either adjustments or disclosures in the consolidated financial statements except for the proposed dividend. Movement in outstanding claims Claims reported but not settled (RBNS) Provision for outstanding claims is recognized at the date the claims are known and covers the liability for loss and loss adjustment expenses based on loss reports from independent loss adjusters and management s best estimate. Claims incurred but not reported (IBNR) Claims provision also includes a liability for claims incurred but not reported as at the consolidated statement of financial position date. An independent actuarial firm is appointed every subsequent year to assess the adequacy of reserves to meet future outstanding liabilities. The liability is generally calculated at the reporting date, which is within the range of 13% to15% of gross claims outstanding, after considering the independent actuarial report, historic trends, empirical data and current assumptions that may include a margin for adverse deviations. The liability is not discounted for the time value of money. Reserve for unexpired risks The reserve for unexpired risk represents the estimated portion of net premium income which relates to periods of insurance subsequent to the consolidated statement of financial position date. The reserve is calculated using actual number of day s method. The reinsurers share on estimated liability of RBNS, IBNR and unexpired insurance premium is separately classified as reinsurance assets in the consolidated statement of financial position. Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted number of ordinary shares outstanding during the year. Segment reporting Segment results that are reported to senior management includes items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets and head office expenses

23 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT Total 140, (26) 141,097 36,194 4,847 (26) 41, , INVESTMENT PROPERTIES Total 141,090 (40,871) 7, ,826 41,008 4,614 (1,422) 44,200 63,626 Note Motor Vehicles At 1 January Additions Reclassification from property and equipment Fair value gains 30 2,139,173 96,745 39,449 2,001,832 1,857, ,867 39,860 Computers 12,633 1,056 13,689 9,369 1,579 10,948 2,741 3,264 At 31 December 4,277,199 2,139,173 As at 31 December, the fair values of the properties are based on valuations performed by accredited independent valuers who are specialists in valuing these types of investment properties. The valuation models used are in accordance with that recommended industry practice. Furniture & fixtures 11, ,685 11, , The Group has no restrictions on the realisability of its investment properties and no contractual obligations to either purchase, construct or develop investment properties or for repairs, maintenance and enhancements. 4. PROPERTY AND EQUIPMENT Buildings Freehold land 47,460 (11,375) 5,638 68,650 (29,496) Cost: At 1 January Transfers to investment properties Additions Disposals At 31 December 39,154 41,723 19,694 2,488 (1,422) Accumulated depreciation: At 1 January Depreciation for the year Transfers to investment properties Disposals At 31 December 20,760 20,963 39,154 Net carrying amounts: At 31 December At 31 December 68,650 27,766 The fair value of the investment properties were estimated based on fair valuation techniques and assumptions with reference to recent sales transactions of similar properties in an active market, as well as, discounted cash flows valuation techniques with reference to rental income. 6. EQUITY ACCOUNTED INVESTEES At 1 January Equity accounted investees Increase in investment in equity accounted investee Share of profits of associates Dividends received from equity accounted investees Exchange differences on translating foreign operations At 31 December Notes Effective, the Group increased its equity investment in Trust Bank Algeria from 8% to 20%. The increase in the equity investment is pending approval from the Central Bank of Algeria ,903 11,668 98,616 24,646 (10,867) (20,600) 392, ,606 39,916 56,529 (13,024) (10,124) 288,

24 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 6. EQUITY ACCOUNTED INVESTEES (continued) The following table illustrates summarised financial information of the Group s equity accounted investees: 7. FINANCIAL ASSETS (continued) (b) Financial assets at fair value through profit or loss Share of the associates statement of financial position: Noncurrent assets Current assets Noncurrent liabilities Current liabilities Net assets 214, ,287 (372,140) (41,828) 392, , ,030 (223,877) (36,859) 288,903 Equity securities (c) Receivables from related parties 171, ,832 Share of the associates revenues and profit: Revenues Profit 37,957 24,646 24,272 56,529 Trust Insurance Company Amman Gulf Petroleum Limited W.L.L. International Financial Securities Others 3,798 3, ,765 4,040 3,732 3,527 5, FINANCIAL ASSETS (d) Insurance receivables 9,141 16,906 Availableforsale financial assets Financial assets at fair value through profit or loss Receivables from related parties Insurance receivables (a) Availableforsale financial assets Notes (a) (b) (c) (d) 1,023, ,623 9, ,843 1,432, , ,832 16, ,887 1,264,080 Due from policyholders Due from insurers and reinsurers Due from agents, brokers and intermediaries Claims recoveries Impairment allowance Note (e) 202,222 16,053 4,794 5, , ,006 34,254 9,237 5, ,887 At 1 January Impairment charge for the year Reversals during the year 53,158 20,827 (28,194) 46,603 6,555 Equity securities Debt securities Managed funds 835, ,112 39, , ,698 43,409 At 31 December 45,791 53,158 1,023, ,

25 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 7. FINANCIAL ASSETS (continued) 9. TAKAFUL PARTICIPANTS FUND ACCOUNTS (e) Impairment of receivables (a) Statement of financial position Policyholders As at the reporting date, the aging of unimpaired trade receivables was as follows: 31 December 31 December Total 228, ,887 Unimpaired receivables are expected to be fully recoverable. It is not the practice of the Group to obtain collateral over receivables and the vast majority is therefore unsecured. (f) Determination of fair value and fair values hierarchy All financial instruments for which fair value is recognised or disclosed are categorised within Level 1 of the fair value hierarchy whereby the fair value is determined according to quoted market prices in an active market (that are unadjusted) for identical assets or liabilities. 8. REINSURANCE ASSETS Neither past due nor impaired 18,454 25,447 Past due but not impaired < 3 months 3 9 months > 9 months 23,350 25,541 Note 78,348 78, , ,930 Assets Investment properties Furniture and equipment Availableforsale financial assets Receivables from related parties Insurance receivables Reinsurance assets Other assets Cash and cash equivalents Liabilities Insurance contract liabilities Payables to a related party Insurance payables Employees' end of service benefits Other liabilities Fair value reserve Surplus at the end of the year 98,383 2,720 28,288 12,232 38,159 13,705 7,140 4, , , ,870 3,393 9,739 (640) 189,779 15,340 2,296 33,398 38,754 13,856 3,723 99, , , ,929 3,030 31,810 (174) 177,465 13,721 Reinsurance of insurance contracts , , , ,

26 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 9. TAKAFUL PARTICIPANTS FUND ACCOUNTS (continued) (b) Statement of revenue and expenses Policyholders 11. CASH AND CASH EQUIVALENTS The cash and cash equivalents position for cash flow purposes, net of the Group overdraft is as follows: Note Gross contributions Reinsurance cessions Wakala fee Retained premium Unearned premium adjustment Commission expense, net Other income Net contributions Claims paid Claims recovered Reinsurance cessions Outstanding claims adjustment Net claims Insurance profits (losses) Other income Surplus (deficit) for the year 202,649 (21,057) (30,397) 151,195 (27,667) (7,241) ,490 (124,150) 13,834 3,698 (9,570) (116,188) 302 1,317 1, ,803 (22,776) (30,561) 99,466 (28,849) (2,160) ,648 (71,200) 14, (13,311) (70,062) (1,414) 577 (837) Cash and cash equivalents Cash facility (bank overdrafts) 12. ISSUED SHARE CAPITAL Authorized, issued and fully paid up share capital of 57,646,050 shares of QR 10 each (: 50,127,000 shares of QR 10 each). During the year, the Group issued 7,519,050 bonus shares of QR 10 each (: 5,370,750 shares of QR 10 each) ,083 3, , ,461 60,700 (18,444) 42, , OTHER ASSETS 13. LEGAL RESERVE Staff receivables Prepayments Accrued interest Advance payments against investments Other receivables Notes (a) (b) 1, ,884 63,452 50, ,113 1, , ,680 95, ,477 The Qatar Commercial Companies Law No.5 of 2002 requires that 10% of the net profit for each year should be appropriated to a legal reserve until the balance therein equals to 50% of the paid up capital. The balance under this reserve is not available for distribution, except in the circumstances specified in the above law. During the year, the Group has transferred an amount of QR million (: QR million) from retained earnings to the legal reserve. During, as a result of the transfer, the Group s legal reserve exceeds 50% of share capital. However, in accordance with Qatar Central Bank s Law No. 33 of 2006 as amended, 10% of net profit for the year is required to be transferred to legal reserve until the legal reserves equals 100% of the paid up capital. (a) During the year, the Group has transferred an amount of QR million from payments in advances included in other assets to equity accounted investees representing the payment for the additional equity investment purchased in Trust Bank Algeria (Note 6). (b) Other receivables include an amount of QR million (: QR million) which represents balances due from the disposal of the Group s investment in the Lebanese Canadian Bank in

27 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 14. REVALUATION RESERVES Availableforsale financial assets Revaluation surplus Cash flow hedging Foreign currency translation reserve Notes (a) (b) (c) (d) 637,549 77,355 (39,129) (47,342) 628, ,979 77,355 (51,029) (26,742) 506,563 (a) Availableforsale financial assets The fair value reserve comprises the cumulative net change in the fair value of availableforsale financial assets until the investments are derecognised or impaired. The movement in the balances are as follows: 15. DIVIDEND PAID AND PROPOSED The Board of Directors has proposed a cash dividend of 15% of the nominal share value (QR 1.50 per share) and a bonus share of 20% of the share capital for the year ended 31 December (: cash dividend of 10% of the nominal share value (QR 1 per share) and a bonus share of 15% of the share capital were approved and paid). The amounts are subject to the approval of the general assembly. 16. CONTRIBUTION TO SOCIAL AND SPORTS ACTIVITIES FUND Pursuant to the Qatar Law No. 13 of 2008 and the related clarifications issued in, which is applicable for all Qatari listed shareholding companies with publicly traded shares, the Group has made an appropriation of 2.5% of its net profit for the year after adjustment for amounts overpaid during prior years, resulting in a net amount of QR 1.47 million being its contribution to the social and sports activities fund for the year (: QR 4.39 million). 17. NONCONTROLLING INTERESTS The noncontrolling interests relate to the subsidiaries Mazoon Real Estate Company W.L.L and the General Water and Beverages Company W.L.L At 1 January Fair value change during the year Transferred to consolidated statement of income on sale of investments At 31 December 506, ,219 (21,649) 637, ,528 (25,054) (46,495) 506,979 (b) Revaluation surplus One of the associate companies of the Group has revalued its properties and a revaluation surplus was directly recognized in the statement of other comprehensive income of the associate. The Group has recognized its proportionate share of the revaluation surplus amounting to QR million, in equity under the revaluation reserve. (c) Cash flow hedging The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedges related to hedge transactions that have not yet affected profit or loss. (d) Foreign currency translation reserve The translation reserve comprises of all foreign currency differences arising from the translation of investments in foreign associates, at the closing exchange rates

28 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 18. INSURANCE CONTRACT LIABILITIES Notes Insurance contract liabilities Provision for reported claims by policyholders Provision for claims IBNR Outstanding claims provision Provision for unearned premiums (a) 18 (b) ,671 53, , , ,322 (a) Outstanding claims provision Note Insurance contract liabilities At 1 January Gross/ ceded change in contract liabilities ,595 23,152 At 31 December 456, INSURANCE CONTRACT LIABILITIES (continued) (b) Provision for unearned premiums Notes Insurance contract liabilities At 1 January Premiums written during the year Premiums earned during the year , ,255 (518,152) At 31 December 231,575 Reinsurance of liabilities Net Insurance contract liabilities Reinsurance of liabilities Net (319,226) (25,444) (344,670) (139,100) 84,445 27, ,077 92, ,980 55, , ,472 (308,296) (29,109) (337,405) (98,804) 69,684 26,506 96,190 90,668 (483,770) 204, ,067 (436,209) 186,858 Reinsurance of liabilities Net Insurance contract liabilities Reinsurance of liabilities Net (337,405) (7,265) 96,190 15, ,461 51,134 (302,837) (34,568) 79,624 16,566 (344,670) 112, ,595 (337,405) 96,190 Reinsurance of liabilities Net Insurance contract liabilities Reinsurance of liabilities Net (98,804) (352,459) 312,163 90, ,796 (205,989) 163, ,180 (473,974) (79,503) (297,646) 278,345 83, ,534 (195,629) (139,100) 92, ,472 (98,804) 90,

29 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 18. INSURANCE CONTRACT LIABILITIES (continued) Claims development The following table shows the estimate cumulative incurred claims, including both claims notified and IBNR for each successive accident year at the end of each reporting period, together with cumulative payments to date: Accident year Estimate of cumulative claims At end of the accident year One year later Two years later Three years later Four years later 2009 and before , , , , , , , , , , , , , ,317 Total 160,032 Current estimate of cumulative claims Cumulative payments to date 835,299 (826,399) 132,607 (128,926) 119,648 (115,787) 134,317 (114,965) 160,032 (83,749) 1,381,903 (1,269,826) Total cumulative claims recognized in the consolidated statement of financial position as at 31 December 8,900 3,681 3,861 19,352 76, , INSURANCE CONTRACT LIABILITIES (continued) Claims development The following table shows the estimate cumulative incurred claims, including both claims notified and IBNR for each successive accident year at the end of each reporting period, together with cumulative payments to date: Accident year Estimate of cumulative claims At end of the accident year One year later Two years later Three years later Four years later 2008 and before , , , , , , , , , , , , , ,741 Total 143,924 Current estimate of cumulative claims Cumulative payments to date 636,995 (628,880) 164,254 (154,893) 129,093 (124,808) 120,741 (109,267) 143,924 (80,969) 1,195,007 (1,098,817) Total cumulative claims recognized in the consolidated statement of financial position as at 31 December 8,115 9,361 4,285 11,474 62,955 96,

30 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 19. BORROWINGS Term loans (Cash facility) bank overdrafts (a) Current borrowings Term loans (Cash facility) bank overdrafts (b) Noncurrent borrowings Term loans Note 11 Note ,587 (3,593) 982, ,346 (3,593) 524, , ,141 18, , ,141 18, , DERIVATIVE FINANCIAL INSTRUMENTS Liabilities Notional amount Assets Liabilities Notional amount Assets 301,125 51, ,250 39,129 Derivatives held as cash flow hedges: Interest rate swap 4,944 Derivatives held as trading: Put options Interest rate swaps The Group entered into interest rate swap contracts designated as a hedge of expected future LIBOR interest rate payable. Under the terms of the interest rate swap contracts, the Group pays a fixed rate of interest and receives floating LIBOR rates. The terms of the interest rate swap contracts have been negotiated to match the terms of the underlying commitments. As at 31 December, the measurement of the fair value of the hedge resulted in an amount of QR million (: QR million) being recognized in equity as a cash flow hedge reserve. Options Options are contractual agreements that convey the right, but not the obligation, for the purchaser either to buy or sell a specified amount of a financial instrument at a fixed price, either at a fixed future date or at any time within a specified period. The Group purchases and sells options through regulated exchanges and in the over the counter markets. Options purchased by the Group provide the Group with the opportunity to purchase (call options) or sell (put options) the underlying asset at an agreed upon value either on or before the expiration of the option. The Group is exposed to credit risk on purchased options only to the extent of their carrying amount, which is their fair value. Options written by the Group provide the purchaser the opportunity to purchase from or sell to the Group the underlying asset at an agreed upon value either on or before the expiration of the option. The put options expired in January 2014 and were not exercised

31 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 21. PAYABLES TO A RELATED PARTY Trust Insurance Company Bahrain Adjustments and eliminations Total 63,626 4,277, ,366 (130,000) 1,023, ,623 9, , , , , ,083 7,124,067 (130,000) 22. INSURANCE PAYABLES Investments including real estate 49,752 4,199, , ,947 61,595 4,770 (1,346,234) 3,044 3,750,820 Due to policyholders Due to insurers and reinsurers Due to agents, brokers and intermediaries 139, ,097 15, , , ,574 6, ,115 Takaful insurance 34,178 14, ,119 5,436 20, , EMPLOYEES END OF SERVICE BENEFITS Movements in the provision recognized in the consolidated statement of financial position are as follows: At 1 January Provided during the year End of service benefits paid At 31 December 24. OTHER LIABILITIES Staff payables Accrued expenses Contribution to social and sports activities fund Other payables 26,875 2,560 (527) 28,908 5,272 11,961 1,473 85, ,459 20,073 8,751 (1,949) 26,875 11,542 10,333 4,389 94, , SEGMENT INFORMATION Segment statement of financial position at 31 December : Conventional insurance 13,874 43,367 4, , , ,028 4, , ,770 1,458, ,897 Assets Property and equipment Investment properties Equity accounted investees Investments in subsidiaries Financial assets: Availableforsale financial assets Financial assets at fair value through profit or loss Receivables from related parties Insurance receivables Reinsurance assets Takaful participants' assets Other assets Cash and cash equivalents 3,223,675 Total assets 60 61

32 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 25. SEGMENT INFORMATION (continued) Segment statement of financial position at 31 December (continued): Equity and liabilities Equity attributable to equity holders of parent Issued share capital Retained earnings Legal reserve Revaluation reserves Noncontrolling interests Total equity Conventional insurance 576, , , ,053 1,746,059 1,746,059 Liabilities Insurance contract liabilities Financial liabilities: Borrowings Derivative financial instruments Payables to a related party Insurance payables Employees' endofservice benefits Takaful participants' liabilities Other liabilities Total liabilities 688, , ,653 26,202 5,131 1,477,616 Total equity and liabilities 3,223, SEGMENT INFORMATION (continued) Segment statement of financial position at 31 December : Assets Property and equipment Investment properties Equity accounted investees Investments in subsidiaries Financial assets: Availableforsale financial assets Financial assets at fair value through profit or loss Receivables from related parties Insurance receivables Reinsurance assets Takaful participants' assets Other assets Cash and cash equivalents Conventional insurance 17,687 9,778 6, , ,022 87,125 4, , ,209 1,524,280 46,236 Total assets 3,038,246 Takaful insurance 30,000 15,159 3,142 48,301 48, ,119 26, , ,572 Takaful insurance 14, ,186 29,923 2, ,828 Investments including real estate 100,000 2,856, ,475 3,113,223 1,847 3,115, ,739 39,129 2,706 73, ,750 3,750,820 Investments including real estate 82,395 2,129, , ,774 44,707 12,293 (1,319,726) 12,404 1,558,736 Adjustments and eliminations Total (130,000) (121,763) 121,763 (130,000) (130,000) 576,461 3,224, , ,433 4,777,583 1,847 4,779, , ,994 39, ,653 28, , ,459 2,344,637 (130,000) 7,124,067 Adjustments and eliminations Total 100,082 2,139, ,903 (120,000) 878, ,832 16, , , , ,477 60,700 (120,000) 4,714,

33 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 25. SEGMENT INFORMATION (continued) Segment statement of financial position at 31 December (continued): Equity and liabilities Equity attributable to equity holders of parent Issued share capital Retained earnings Legal reserve Revaluation reserves Noncontrolling interests Total equity Conventional insurance 501, , , ,537 1,657,710 1,657,710 Liabilities Insurance contract liabilities Financial liabilities: Borrowings Derivative financial instruments Payables to a related party Insurance payables Employees' endofservice benefits Takaful participants' liabilities Other liabilities Total liabilities 623, , ,115 24,469 20,686 1,380,536 Total equity and liabilities 3,038, SEGMENT INFORMATION (continued) Segment statement of income for the year ended 31 December : Conventional insurance Gross written premiums Change in unearned premiums provision Gross earned premiums Premiums ceded to reinsurers Net premiums 560,255 (42,103) 518,152 (312,163) 205,989 Fees and commission income Investment income Net realised gains and losses Fair value gains and losses Other operating revenue Other revenue 15,562 36,008 8,859 26,267 2,495 89,191 Total revenue 295,180 Takaful insurance 20,000 14,983 1,753 36,736 36, ,186 9, , ,828 Takaful insurance 2,001 1,734 9,687 13,422 13,422 Investments including real estate 100, ,212 83,222 1,002,434 1,295 1,003, ,454 51,029 2,406 90, ,007 1,558,736 Investments including real estate 34,039 8,399 2,013,017 2,055,455 2,055,455 Adjustments and eliminations Total (120,000) (125,051) 125,051 (120,000) (120,000) 501,270 1,433, , ,563 2,576,880 1,295 2,578, , ,585 51, ,115 26, , ,710 2,136,635 (120,000) 4,714,810 Adjustments and eliminations Total 560,255 (42,103) 518,152 (312,163) 205,989 (1,847) 3,288 1,441 15,562 70,201 22,280 2,039,284 12,182 2,159,509 1,441 2,365,

34 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 25. SEGMENT INFORMATION (continued) Segment statement of income for the year ended 31 December (continued): Conventional insurance Gross claims paid Claims ceded to reinsurers Gross change in contract liabilities Change in contract liabilities ceded to reinsurers Net claims (231,249) 105,999 (23,152) 7,265 (141,137) Finance costs Other operating and administrative expenses Other expenses (5,916) (74,254) (80,170) Total expenses (221,307) Profit before share of profits of associates 73,873 Share of profits of associates 1,707 Profit for the year 75, SEGMENT INFORMATION (continued) Segment statement of income for the year ended 31 December : Conventional insurance Gross written premiums Change in unearned premiums provision Gross earned premiums Premiums ceded to reinsurers Net premiums 500,180 (26,206) 473,974 (278,345) 195,629 Fees and commission income Investment income Net realised gains Fair value gains and losses Other operating revenue Other revenue 24,630 27, (5,315) 4,551 51,700 Total revenue 247,329 Takaful insurance (509) (509) (509) 12,913 12,913 Takaful insurance 189 1,202 13,163 14,554 14,554 Investments including real estate (10,461) (28,729) (39,190) (39,190) 2,016,265 22,939 2,039,204 Investments including real estate 31,576 27,013 33, ,530 92,530 Adjustments and eliminations Total (231,249) 105,999 (23,152) 7,265 (141,137) 1,847 1,847 (16,886) (101,136) (118,022) 1,847 (259,159) 3,288 2,106,339 24,646 3,288 2,130,985 Adjustments and eliminations Total 500,180 (26,206) 473,974 (278,345) 195,629 (1,847) 22,369 20,522 24,630 57,725 50,611 28,619 17, ,306 20, ,

35 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT Adjustments and eliminations Total (192,227) 79,790 (51,134) 34,568 (129,003) (16,266) (110,635) (126,901) 1,847 1,847 (255,904) 1, ,031 22,369 56, ,560 22, SEGMENT INFORMATION (continued) Geographic information: Year ended 31 December Gross written premiums Noncurrent assets Qatar 513,660 4,721,491 United Arab Emirates 46,595 11,700 Total 560,255 4,733,191 Investments including real estate (10,029) (28,472) (38,501) (38,501) 54,029 56, ,177 Year ended 31 December Gross written premiums Noncurrent assets 449,190 2,518,229 50,990 9, ,180 2,528, NET EARNED PREMIUMS Takaful insurance (401) (401) (401) 14,153 14,153 (a) Gross earned premiums Note 25. SEGMENT INFORMATION (continued) Segment statement of income for the year ended 31 December (continued): Conventional insurance (192,227) 79,790 (51,134) 34,568 (129,003) Gross claims paid Claims ceded to reinsurers Gross change in contract liabilities Change in contract liabilities ceded to reinsurers Net claims (5,836) (84,010) (89,846) Finance costs Other operating and administrative expenses Other expenses (218,849) Total expenses 28,480 Profit before share of profits of associates 381 Share of profits of associates 28,861 Profit for the year Insurance contracts Change in unearned premiums provision (b) Premiums ceded to reinsurers Insurance contracts Change in unearned premiums provision Net earned premiums 27. FEES AND COMMISSION INCOME Reinsurance commission income Policyholders administration fees 18(b) 18(b) Note 18(b) 18(b) 560,255 (42,103) 518, ,459 (40,296) 312, ,989 15, ,180 (26,206) 473, ,646 (19,301) 278, ,629 22,875 1,755 15,562 24,

36 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 28. INVESTMENT INCOME 31. OTHER OPERATING REVENUE Investment properties Rental income Financial assets at fair value through profit or loss Dividend income Availableforsale financial assets Interest income Dividend income Cash and cash equivalents Interest income 29. NET REALISED GAINS 11,880 6,492 9,555 39,021 3,253 70,201 11,835 9,368 6,575 28,157 1,790 57,725 Shareholders income from Takaful operations Miscellaneous income 32. NET CLAIMS (a) Gross claims paid Gross claims paid Claims recovered Note 9,688 2,494 12,182 13,164 4,557 17, ,021 (22,772) 217,925 (25,698) Financial assets at fair value through profit or loss Realised gains Availableforsale financial assets Realised gains Equity securities net of impairment Debt securities Total net realised gains ,540 4,109 21,649 22, ,608 1,349 49,957 50,611 (b) Claims ceded to reinsurers Claims ceded to reinsurers (c) Gross change in insurance contract liabilities Provision for reported claims by policyholders Provision for claims IBNR (d) Change in insurance contract liabilities ceded to reinsurers Provision for reported claims by policyholders 18(a) 18(a) 231,249 (105,999) 26,598 (3,446) 23,152 (7,265) 192,227 (79,790) 46,303 4,831 51,134 (34,568) 30. FAIR VALUE GAINS Net claims 141, , FINANCE COSTS Fair value gains on investment properties Fair value gains (losses) on financial assets at fair value through profit or loss other than derivatives Note 5 2,001,832 37,452 2,039,284 39,860 (11,241) 28,619 Interest expense Interest on reinsurance premium reserves 14, ,927 14, ,262 Bank charges 1,959 1,004 16,886 16,

37 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 34. OTHER OPERATING AND ADMINISTRATIVE EXPENSES 36. COMPONENTS OF OTHER COMPREHENSIVE INCOME Note Employee benefits expenses Board of Directors remuneration Depreciation on property and equipment Occupancy expenses Marketing expenses Consultancy expenses Travel expenses Net foreign exchange adjustments Impairment (reversals) on receivables Other expenses 72,851 5,953 4,614 3,963 2,678 2,608 1, (7,367) 14,656 76,132 5,680 4,840 2,782 2,540 1,761 1,206 (43) 6,555 9,182 Exchange differences on translating of foreign operations Cash flow hedges: Gains (losses) arising during the year Availableforsale financial assets: Gains (losses) arising during the year Other comprehensive income for the year 37. CASH GENERATED FROM OPERATING ASSETS AND LIABILITIES 6 (20,600) 11, , ,870 (10,124) (1,277) (71,549) (82,950) 101, , EARNINGS PER SHARE Net change in receivables from related parties Net change in insurance receivables Net change in reinsurance assets Net change in other assets (7,765) (16,146) 47,561 (17,013) (76,426) 67,623 53, ,496 Profit attributable to the ordinary equity holders of the parent Weighted average number of shares Earnings per share (in Qatari Riyals) 2,130,433 57, ,999 57, Net change in operating assets Net change in insurance contract liabilities Net change in payables to a related party Net change in insurance payables Net change in other liabilities 6,637 65,255 (15) 68,538 (17,723) 159,561 77,341 (1,522) 47,987 (57,115) Net change in operating liabilities 116,055 66,

38 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 38. RELATED PARTY DISCLOSURES Related party transactions Related parties consist of shareholders, related companies and key management personnel of the Group, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Group s management. Compensation of key management personnel The compensation of key management personnel during the year are as follows: Board of Directors remuneration Salaries and other shortterm benefits End of service benefits 5,953 21, ,725 Related party balances The receivables from and payables to related parties are disclosed in Note 7(c) and Note 21, respectively. These amounts are unsecured, interest free and settlement normally occurs in cash. There have been no guarantees provided or received for any related party receivables. 39. CONTINGENT LIABILITIES AND CONTRACT COMMITMENTS 5,680 24, , CLASSIFICATION AND FAIR VALUES (continued) Fair value hierarchy: The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs) Level 1 Level 2 Level 3 Total 31 December Financial assets Availableforsale At fair value through profit or loss Financial liability Derivative financial instruments 31 December Financial assets Availableforsale At fair value through profit or loss Notes 7 (a) 7 (b) 20 7 (a) 7 (b) 998, ,623 1,170, , , ,795 21,800 21,800 39,129 25,572 25,572 1,020, ,623 1,191,887 39, , ,832 1,007,367 Contingent liabilities: Letters of guarantee 11,430 13,833 Financial liability Derivative financial instruments 41. RISK MANAGEMENT 20 51,029 51,029 Contract commitments: The Group entered into a construction contract for the construction of the World Trade Centre Tower in the State of Qatar. The total contract commitment is QR 520 million, of which QR 468 million (: QR 407 million) has been paid as at the reporting date. The outstanding commitment amounts to QR 52 million (: QR 113 million). 40. CLASSIFICATION AND FAIR VALUES Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable and willing parties on an arm s length basis. Since the accompanying consolidated financial statements have been prepared under the historical cost convention, carrying values of certain financial instruments as recorded could therefore be different from the fair value. However, in the opinion of management, the fair values of the financial assets and liabilities are not considered significantly different from their book values as most of these items are either shortterm in nature or revalued frequently. The Group, in the normal course of business derives its revenue mainly from assuming and managing insurance and investments. The Group s lines of business are exposed to the following risks: Insurance risk Credit risk Liquidity risk Market risk, and Operational risk This note presents information about the Group s exposure to each of the above risks, the Group s objectives, policies and processes for measuring and managing risk, and the Group s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Group s risk management framework. The Board of Directors approves the Group risk 74 75

39 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 41. RISK MANAGEMENT (continued) management policies and meets regularly. These policies define the Group s identification of risk and its interpretation, limit structure to ensure the appropriate quality and diversification of assets, align underwriting and reinsurance strategy to the corporate goals, and specify reporting requirements. The Group s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group s activities. The Group Audit and Compliance Committee oversees how management monitors compliance with the Group s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. Insurance risk The risk under any insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable. The insurance contracts issued by the Group for various risks are homogeneous. For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur when the frequency or severity of claims and benefits are greater than estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year from the level established using statistical techniques. Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability of the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected by a change in any subset of the portfolio. The Group has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome. Risks are accepted based on an evaluation of pricing and prior underwriting experience in accordance with underwriting guidelines that have been laid out for each line of business. Underwriting guidelines are constantly reviewed and updated to take account of market developments, performance and opportunities. Accumulation limits are set to control exposures to natural hazards and catastrophes. Various underwriting and approval limits are specified for accepting risks. The reinsurance strategy of the Group is designed to protect exposures to individual and event risks based on current risk exposures through cost effective reinsurance arrangements. The recoverable amounts from reinsurers are estimated in a manner consistent with the outstanding claims provision and are in accordance with the reinsurance contracts. Even though the Group has reinsurance arrangements, the direct obligation to its policy holders is shown as a liability and thus to the extent the reinsurer is not able to meet its obligations under the reinsurance arrangement, a credit exposure exists. The management ensures that the Group s reinsurance placement is diversified within a range of reinsurers and is not concentrated or dependent on any single reinsurer. 41. RISK MANAGEMENT (continued) Frequency and severity of claims The frequency and severity of claims can be determined after consideration of several factors as follows: Past experience of the claims; Economic level; Laws and regulations; and Public awareness The Group manages these risks through its underwriting strategy, adequate reinsurance arrangements and proactive claims handling. The underwriting strategy attempts to ensure that the underwritten risks are well diversified in terms of type and amount of risk, industry and geography. Underwriting limits are in place to enforce appropriate risk selection criteria. For example, the Group has the right not to renew individual policies, it can impose deductibles and it has the right to reject the payment of a fraudulent claim. The Group has the right to reprice the risk on renewal. Insurance contracts also entitle the Group to pursue third parties for payment of some or all costs (for example, subrogation). The reinsurance arrangements include proportional, nonproportional and catastrophic coverage. The effect of such reinsurance arrangements is that the Group should not suffer major insurance losses. The Group has specialised claims units dealing with the mitigation of risks surrounding general insurance claims. This unit investigates and adjusts all general insurance claims. The general insurance claims are reviewed individually monthly and adjusted to reflect the latest information on the underlying facts, current law, jurisdiction, contractual terms and conditions, and other factors. The Group actively manages settlements of general insurance claims to reduce its exposure to unpredictable developments. Sources of uncertainty in the estimation of future claim payments Claims on general insurance contracts are payable on a claimsoccurrence basis. The Group is liable for all insured events that occurred during the term of the contract, even if the loss is discovered after the end of the contract term. As a result, a larger element of the claims provision relates to incurred but not reported claims (IBNR) which are settled over a short to medium term period. There are several variables that affect the amount and timing of cash flows from these contracts. These mainly relate to the inherent risks of the business activities carried out by individual contract holders and the risk management procedures adopted. The compensation paid on these contracts is the monetary awards granted for the loss suffered by the policy holders or third parties (for third party liability covers). The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected subrogation values and other recoveries. The Group takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is likely that the final outcome will prove to be different from the original liability established. The liability for these contracts comprise a provision for IBNR, a provision for reported claims not yet paid and a provision for unexpired risks as at the statement of financial position date

40 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 41. RISK MANAGEMENT (continued) Sources of uncertainty in the estimation of future claim payments (continued) In calculating the estimated cost of unpaid claims (both reported and not), the Group s estimation techniques are a combination of lossratiobased estimates (where the loss ratio is defined as the ratio between the ultimate cost of insurance claims and insurance premiums earned in a particular financial year in relation to such claims) and an estimate based upon actual claims experience using predetermined formula where greater weight is given to actual claims experience as time passes. An actuarial valuation is done every subsequent year to ensure the adequacy of the reserves. Claims development The Group maintains strong reserves in respect of its insurance business in order to protect against adverse future claims experience and developments. The uncertainties about the amount and timing of claim payments are generally resolved within one year (Note 18). Process used to decide on assumptions The risks associated with these insurance contracts are complex and subject to a number of variables that complicate quantitative sensitivity analysis. The exposure of the Group to claims associated with general insurance is material. This exposure is concentrated in Qatar where significant transactions take place. The Group uses assumptions based on a mixture of internal and actuarial reports to measure its general insurance related claims liabilities. Internal data is derived mostly from the Group s monthly claims reports and screening of the actual insurance contracts carried out at yearend to derive data for the contracts held. The Group has reviewed the individual contracts and their actual exposure to claims. This information is used to develop scenarios related to the latency of claims that are used for the projections of the ultimate number of claims. Sensitivity analysis The reasonableness of the estimation process is tested by an analysis of sensitivity around several scenarios. The sensitivity of the Group s income to insurance risks is as follows: Loss ratio Change in assumptions +5% 5% Impact on net profit (10,299) 10,299 Impact on equity (10,299) 10,299 Impact on net profit (9,781) 9,781 Impact on equity (9,781) 9, RISK MANAGEMENT (continued) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge an obligation. Reinsurance arrangements are effected with reinsurers whose creditworthiness is assessed on the basis of satisfying minimum rating and financial strength criteria. Reinsurance is made with different reinsurance companies in order to reduce the risk of concentration. The Group s exposure to credit risk is limited to the carrying amount of financial assets recognised at the statement of financial position date. The Group continuously monitors defaults of customers and other counterparties and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group s policy is to deal only with creditworthy counterparties. The Group s management considers that all the financial assets that are not impaired for each of the reporting dates under review are of good credit quality. In respect of insurance and other receivables, the Group is not exposed to any significant credit risk exposure to any single counterparty or any company of counterparties having similar characteristics. The credit risk for liquid funds and other shortterm financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. Impaired financial assets At 31 December there are impaired insurance and reinsurance assets of QR million (: QR million) and other assets of QR 4.74 million (: QR 4 million). The Group records all impairment allowances in separate impairment allowances accounts. A reconciliation of all the allowances for impairment losses are as follows: At 1 January Charge for the year Reversals At 31 December Impairment on insurance and reinsurance assets 49,156 20,091 (28,194) 41,053 42,601 6,555 49,156 Impairment on other receivables 4, ,738 4,002 4,002 The sensitivity to a 5% increase/decrease in gross loss ratios is the same both net and gross of reinsurance as this increase does not result in any material excess of loss reinsurance limits being reached

41 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 41. RISK MANAGEMENT (continued) Liquidity risk Liquidity risk is the risk that cash may not be available to pay obligations when due. The Group manages its liquidity needs by carefully monitoring scheduled payments for financial liabilities as well as cashoutflows due in daytoday business. The Group maintains cash and marketable securities to meet its liquidity requirements for up to 90day periods. Funding for longterm liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell medium to longterm financial assets. Contractual maturity of the Group s liabilities as at 31 December are summarised below: Within 6 months Current noncurrent 6 to 12 months Total Current 1 to 5 years More than 5 years Total noncurrent Total Insurance payables and other liabilities Derivative financial instruments interest rate swap Insurance contract liabilities Payables to a related party Borrowings 155, ,017 1,406 76,387 39, , , ,770 39, , , , , ,637 9, , , ,328 1,020, ,112 39, , ,046, , , ,299 1,299, ,379 1,464,378 2,173, RISK MANAGEMENT (continued) Liquidity risk (continued): Contractual maturity of the Group s liabilities as at 31 December are summarised below: Current noncurrent Within 6 months 6 to 12 months Total Current 1 to 5 years More than 5 years Total noncurrent Insurance payables and other liabilities Derivative financial instruments interest rate swap Insurance contract liabilities Payables to a related party Borrowings 145, ,767 2, , , , , , ,841 18, , ,762 51,029 38, ,403 18,752 51, , , ,825 51, , , , , ,835 1,040, ,534 1,252,160 1,954,995 The above contractual maturities reflect the gross cash flows, which may differ to the carrying values of the liabilities at the statement of financial position date

42 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 41. RISK MANAGEMENT (continued) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Currency risk Most of the Group s transactions are carried out in Qatari Riyals. Exposures to currency exchange rates arise from the Group s overseas investments. The Qatari Riyal is effectively pegged to the United States Dollar and thus currency risk occurs only in respect of currencies other than the United States Dollar. Foreign currency denominated financial assets and liabilities, translated into Qatari Riyals at the closing rate, are as follows: Euro Other Euro Other Nominal amounts Financial assets Short term exposure Financial assets Financial liabilities Longterm exposure 1,096 1,096 8,639 (9,598) (959) 42,359 42,359 The impact that exchange rates fluctuations would have on the Group s net results is considered to be not significant. The analysis below is performed for reasonably possible movements in key variables with all other variables held constant, showing the impact on profit and equity due to changes in the fair value of currency sensitive monetary assets and liabilities including insurance contract claim liabilities. 1,156 1,156 9,369 (10,159) (790) 29,841 29, RISK MANAGEMENT (continued) Market risk (continued) The Group s policy is to minimise interest rate risk exposures on term financing. The Group is exposed to changes in the market interest rates through its financial assets and liabilities which are subject to variable interest rates. Fixed and variable rate instruments Financial assets Financial liabilities Carrying amounts 320,861 1,022,122 Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets at fair value through profit or loss, and the Group does not designate interest rate swaps as hedging instruments under the fair value hedge accounting model. Therefore a change in interest rate at the reporting date would not affect profit or loss. Cash flow sensitivity analysis for variable rate instruments A change of 50 basis points in interest rate at the reporting date would have increased (decreased) profit or loss by the amount shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. 31 December Variable rate instruments Interest rate swap 243, ,615 Profit or loss 50 bps 50 bps increase decrease (4,933) 2,281 4,933 (2,281) Currency EUR Others Changes in variables +10% +10% Impact on Impact on Impact on Impact on profit equity profit equity (850) ,905 (900) (14) 937 2,998 Cash flow sensitivity (net) 31 December Variable rate instruments Interest rate swap Cash flow sensitivity (net) (2,652) (4,487) 2,061 (2,426) 2,652 4,487 (2,061) 2,426 Total EUR Others Total 10% 10% (519) 850 (331) 519 4,769 (864) (3,905) (4,769) (914) ,935 (937) (2,998) (3,935) Equity price risks The Group is exposed to other market price risk in respect of its listed equity securities and bonds. Equity price risk is the risk that the fair values of equities decrease as a result of changes in the levels of equity and the value of individual stocks. The effect on equity due to a reasonably possible change in equity indices by (+/) 10%, with all other variables held constant is as follows: 82 83

43 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 41. RISK MANAGEMENT (continued) Equity price risks (continued) 41. RISK MANAGEMENT (continued) Capital management (continued) Changes in variables Impact on net profit Impact on other comprehensive income Impact on net profit Impact on other comprehensive income Equity excluding cash flow hedge reserve Less : Cash and cash equivalents 4,818,559 (151,083) 2,629,204 (60,700) Capital 4,667,476 2,568,504 Qatar Market International Markets +10% +10% 16, ,792 22,527 12, ,069 20,777 Equity Add: Loan and borrowings 4,779, ,994 2,578, ,585 Qatar Market International Markets 10% 10% (16,874) (288) (79,792) (22,527) (12,910) (273) (67,069) (20,777) Overall financing 5,762,424 3,474,760 Operational risk Operational risk is the risk of loss arising from systems and control failures, fraud and human errors, which can result in financial and reputation loss, and legal and regulatory consequences. The Group manages operational risk through appropriate controls, instituting segregation of duties and internal checks and balances, including internal audit and compliance. Capital management The Board s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total shareholders equity. The Group s objectives when managing capital is: To safeguard the Group s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and To provide an adequate return to shareholders by pricing insurance and investment contracts commensurately with the level of risk. The Group monitors capital on the basis of the carrying amount of equity less cash and cash equivalents as presented on the face of the consolidated statement of financial position. The Group s goal in capital management is to maintain a capitaltooverall financing structure ratio of 1:1.5. Capital for the reporting periods under review is summarized as follows: Capital to overall financing 1: CRITICAL JUDGEMENTS IN APPLYING THE GROUP S ACCOUNTING POLICIES 1:1.35 In the process of preparing these consolidated financial statements, management has made use of a number of judgments relating to the application of accounting policies which are described in note 2. Those which have the most significant effect on the reported amounts of assets, liabilities, income and expense are listed below (apart from those involving estimations which are dealt with in Note 43). These judgments are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management believes that the following discussion addresses the accounting policies that require judgments. Classification of investments Quoted securities could be classified either as availableforsale or at fair value through profit or loss. The Group invests substantially in quoted securities either locally or overseas and management has primarily decided to account for these investments based on their potential for long term growth rather than on the short term profit basis. Consequently, the majority of such investments are recognized as availableforsale rather than at fair value through profit or loss. Financial assets are classified as fair value through profit or loss where the assets are either held for trading or initially designated at fair value through profit or loss. Impairment of financial assets The Group determines that availableforsale financial assets are impaired when there has been a significant or prolonged decline in the fair value below its cost. The determination of what is significant or prolonged requires judgment and is assessed based on qualitative and quantitative factors, for each availableforsale financial asset separately. In making a judgment on impairment, the Group evaluates among other factors, evidence of deterioration in the financial health of the entity, impact of delay in execution, industry and sector performance, changes in technology and operational and financing cash flows

44 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 43. KEY SOURCES OF ESTIMATES AND UNCERTAINTY The key assumptions concerning the future, and other key sources of estimating uncertainty at the statement of financial position date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: Claims made under insurance contracts Claims and loss adjustment expenses are charged to the consolidated statement of income as incurred based on the estimated liability for compensation owed to contract holders or third parties damaged by the contract holders. Liabilities for unpaid claims are estimated using the input of assessments for individual cases reported to the Group and management estimations for the claims incurred but not reported (IBNR). The method for making such estimates and for establishing the resulting liability is continually reviewed. Any difference between the actual claims and the provisions made are included in the consolidated statement of income in the year of settlement. 43. KEY SOURCES OF ESTIMATES AND UNCERTAINTY (continued) Interest rate swap valuation The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date. Fair values reflect the credit risk of the instruments and include adjustments to take account of the credit risk of the Group and counterparty when appropriate. Investment property valuation The fair value of investment property is determined by independent real estate valuation experts with recent experience in the location and category of property being valued. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the valuation date between a willing buyer and a willing seller in an arm s length transaction after proper marketing wherein parties had each acted knowledgeably. Unearned premiums 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. Unearned premiums are calculated on a daily pro rata basis. Impairment of insurance and other receivables An estimate of the collectible amount of insurance and other receivables is made when collection of the full amount is no longer probable. The determination of whether insurance and other receivables are impaired, involves the Group evaluating, the credit and liquidity position of the policy holders and the insurance companies, historical recovery rates including detailed investigations carried out during and feedback received from the legal department. The difference between the estimated collectible amount and the book amount is recognized as an expense in the consolidated statement of income. Any difference between the amounts actually collected in future periods and the amounts expected will be recognized in the consolidated statement of income at the time of collection. Useful lives, residual values and depreciation charges of property and equipment The Group s management determines the estimated useful lives, residual values and related depreciation charges of its property and equipment. These estimates are determined after considering the expected usage of the asset, physical wear and tear and technical or commercial obsolescence. Liability adequacy test At each statement of financial position date, liability adequacy tests are performed to ensure the adequacy of insurance contract liabilities. The Group makes use of the best estimates of future contractual cash flows and claims handling and administration expenses, as well as investment income from the assets backing such liabilities in evaluating the adequacy of the liability. Any deficiency is immediately charged to the consolidated statement of income

45 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT 44. RECLASSIFICATION OF COMPARATIVE AMOUNTS 44. RECLASSIFICATION OF COMPARATIVE AMOUNTS (continued) Certain comparative figures have been reclassified to conform to the presentation in the current year s financial statements. However, such reclassifications did not have any effect on the net profit, total assets and equity of the comparative period. The reclassifications are summarised below: Consolidated statement of financial position Reclassified 31 December Previous 31 December Amount of the Reclassification Consolidated statement of income Reclassified 31 December Previous 31 December Amount of the Reclassification Property and equipment Investment properties 100,082 2,139,173 2,239,255 99,999 2,139,178 2,239, (5) 78 Fee andfee and commission income Net commission income Other income Other income technical 24,630 24,630 22,876 32,979 1,488 57,343 24,630 (22,876) (32,979) (1,488) (32,713) Insurance and other receivables Due from related parties Insurance receivables Receivables from related parties Other assets 236,887 16, , , ,470 73, ,805 (421,470) (73,335) 236,887 16, ,477 (6,535) Investment income 57, ,974 (47,249) Reinsurance assets 436, ,619 3,590 Net realized gains and losses Fair value gain on investment properties Fair value gains and losses Other operating revenue Finance costs Impairment loss on availableforsale investments General and administrative expenses Total 50,611 28,619 28,619 17,721 (16,266) (110,635) (110,635) 52,405 39,860 39,860 (14,959) (5,756) (129,057) (134,813) 52,405 50,611 (39,860) 28,619 (11,241) 17,721 (1,307) 5,756 18,422 24,178 Cash and cash equivalents Statutory deposits Insurance contract liabilities Borrowings Derivative financial instruments Payables to a related party Insurance payables Other liabilities Legal reserve Fair value reserve Revaluation reserve Foreign currency translation reserve Cash flow hedge reserve Retained earnings 60,700 60,700 (623,067) (896,585) (51,029) (68) (227,115) (120,710) (1,918,574) (135,399) (506,563) (1,433,648) (2,075,610) 55,055 6,000 61,055 (614,086) (897,315) (33,665) (187,525) (189,205) (1,921,796) (117,843) (506,898) (77,355) 26,661 51,029 (1,451,204) (2,075,610) 5,645 (6,000) (355) (8,981) 730 (51,029) 33,597 (39,590) 68,495 3,222 (17,556) 506,898 (429,208) (26,661) (51,029) 17,556 Total (769,750) (769,750) 88 89

46 QATAR GENERAL INSURANCE & REINSURANCE CO. ANNUAL REPORT اتصل بنا Contact Us المكتب الري يسي QGIRC MAIN OFFICE TEL: (NEW BUILDING) TEL: (OLD BUILDING) FAX: طريق سلوى SALWA ROAD P. O. BOX 4500, DOHA QATAR TEL: FAX: الخور AL KHOR P.O. BOX 60122, DOHA QATAR TEL: FAX: الوكرة AL WAKRA TEL : مش ب (سوفيتل) MUSHEIREB (SOFITEL) P.O. BOX 4500, DOHA QATAR TEL: FAX: المنطقة الصناعية INDUSTRIAL AREA P.O. BOX 4500, DOHA QATAR TEL: FAX: الرويس ALRUWAIS TEL : FAX : ا مارات العربية المتحدة UNITED ARAB EMIRATES M11 ROYAL HOUSE AL WUHAIDA RD P.O.BOX 8080 DUBAI, UNITED ARAB EMIRATES QATARINS@EMIRATES.NET.AE TEL: FAX: /288 الشركة القطريةالعامة للتا مين وإعادة التا مين ش.م.ق QATAR GENERAL INSURANCE & REINSURANCE CO. S.A.Q ٢٠١٤ الشركة القطرية العامة للتا مين وإعادة التا مين. جميع الحقوق فوظة Qatar General Insurance & Reinsurance Co. S.A.Q. All rights reserved.