AlAhli Takaful Company Annual Report 2016

Transcription

1 AlAhli Takaful Company Annual Report 2016

2 1 Introduction To the respected Shareholders of AlAhli Takaful Company: The Board of Directors of AlAhli Takaful Company is pleased to submit the Board of Directors Annual Report to the Company s Shareholders for the financial year ended December 31, 2016, where it provides an overview of the Company's activities, achievements and results of its operations during the financial year, accompanied by the annual auditors report of the Company's accounts and financial statements with notes and explanations for the financial year ended December 31, 2016.

3 Contents 2016 Annual Report Page Introduction AlAhli Takaful Company Background Core Operations Company s Mission Capital and Floated Shares Main Shareholders Competitive Advantages ATC s Most Significant Decisions and Events for Expectations and Future Plans Financial Results ATC s Annual Performance for Fiscal Year Participants Insurance Operations Shareholders Operations Financial Position for Current Year Compared to Prior Years Segmental Performance Retail Protection and Saving Product Group Products Al Ahli Group Care Protection Al Ahli Group Credit Protection Geographical Analysis of Consolidated Revenue Accounting Standards Followed for Reporting Payment of Dividends Policy Shares Owned by Directors / First Degree Relatives and Related Changes Board of Directors BOD s Formation, Membership and Representation Board Meetings Directors and Senior Executive Fees BOD Committees Executive Committee (EC) Audit Committee (AC) Nomination and Remuneration Committee (NRC) Investment Committee (IC) Risk Management Committee (RMC) Shari a Committee (SC) Related Parties Transactions and Balances Following are the details of related party transactions during the years ended 31 December 2016: Balance receivable from/ (payable) to related parties as at 31 December 2016 not disclosed elsewhere in the financial statements are as follows: Summary of Paid Government/Statutory Expenses Human Resources Social Responsibility

4 21. Employees Social Benefits and Services Representations in Accordance with CMA Listing Rules and CMA Corporate Governance Regulations Company s Possible Risks (Insurance Activity Risks) Risk Management Insurance Risk Reinsurance Risk Regulatory Framework Risk Capital Management (solvency) Risk Financial Risk Corporate Governance Implementation of Corporate Governance Regulations Corporate Governance Regulations Requirement not Applied by ATC Auditor s Report External Auditors Penalties Imposed by Capital Market Authority and Other Controlling Bodies Findings of Annual Audit of Internal Control Shareholders Rights

5 4 1. AlAhli Takaful Company Background AlAhli Takaful Company ATC, (The Company), affirmed by Royal Decree No. M/70 dated H (Corresponding to ) and incorporated by Ministerial Resolution No.262 dated H. (Corresponding to ), as a Saudi Joint Stock Company registered in Jeddah under Commercial Registration No dated H (Corresponding to ). The Company operates under Saudi Arabian Monetary Agency's (SAMA) (insurance regulator) license no. TMN/7/20079 dated H (corresponding to ) in accordance with the Cooperative Insurance Regulations issued by SAMA. 2. Core Operations The Company conducts its insurance operations in accordance with the Cooperative Insurance Regulations issued by SAMA. The Company's principal activity is to provide protection and saving insurance products through insurance solutions for individuals and groups. 2.1 Retail The Company provides insurance solutions for individuals to satisfy their present and future requirements through AlAhli Shari'a compliant protection and saving product. 2.2 Group ATC provides insurance solutions for companies and enterprises through the following products: AlAhli Group Care Protection AlAhli Group Credit Protection 3. Company s Mission The Company strives to be a Saudi Insurance Company that implements the highest international standards in order to provide world class insurance products based on Shari a values and principles and we aim to continue developing optimal solutions to meet the needs and expectations of both, our customers and partners alike.

6 5 4. Capital and Floated Shares The authorized and issued share capital of the Company is SR 167,666,670 divided into 16,666,667 ordinary shares of SR 10 each. The founding shareholders of the Company have subscribed and paid for 9.81 million shares with a nominal value of SR 10 each, which represents 58.85% of the shares of the Company s capital and the remaining 6.86 million shares with a nominal value of SR 10 each have been subscribed by the public. No Description Number of shares / Amount 1 Authorized capital SAR 166,666,670 2 No. of shares issued 16,666,667 shares 3 Floated shares 7,416,767 shares 4 Paid-up capital SAR 166,666,670 5 Par value per share SAR 10 6 Paid-up amount per share SAR Main Shareholders In accordance with registration and listing articles (43-10) and (45) the table below gives a description of any interest of share category with voting power attributable to persons (excluding Directors and Key Executives) controlling 5% or more together with any change in the related rights during the year: No Name Nationality No. of shares Ownership No. of shares Ownership Difference % 1 NCB Saudi 5,000, % 5,000, % 0% 2 FWU German 2,187, % 2,187, % 0% 3 International Finance Corporation (IFC) International Organization 1,370, % 1,370, % 0% 4 VHV German 1,250, % 1,250, % 0% 6. Competitive Advantages ATC has various competitive advantages compared to its peers in the Saudi Insurance Market, which are as follows:

7 2016 Annual Report The strategic partnership with National Commercial Bank (NCB) allows ATC access to a wide customer base (5 million clients and customers throughout the Kingdom of Saudi Arabia at end of the year 2016) via NCB s Branch network. This gives the Company the opportunity to significantly eliminate undue expenses necessary to establish its own distribution network considered to be the most important factor of success in the insurance industry. ATC s products and business are Shari a compliant. Advanced technical infrastructure to ensure the company providing its products across the branches of National Commercial Bank around the Kingdom through automated setup to its customers to ensure that customers are getting the insurance products smoothly and easily. The company offers innovative insurance products that cover all the customer needs from different segments. The company has a high financial solvency margin, which helps the company to achieve continuous growth of its business ATC s Most Significant Decisions and Events for 2016 In line with the Board s resolution in 2014 which has approved the agreement with TATA Consultancy Services (TCS) to implement a new Core Insurance System replacing the existing FWU-System, the Company had completed stages of the implementation of the new system and it has been launched in actual operation officially since January On The Board of Directors approved the termination of the Post Termination Agreement with FWU during the transitional phase effective after the end of the notice period stipulated to the Agreement (three months) commencing from the date of , the decision comes as a result of the completion of the successful implementation of the new insurance system and success of the soft launch phase, which has been implemented by Tata Consultancy Services Company (TCS). The Ordinary General Assembly approved in their meeting held on H (corresponding to ) for election and selection of board members for the new session, which starts from for a period of three years by ordinary voting, according to the Article of Association (AOA) of the company. And the members are: - Mr. Bleihid Nasser Al Bleihid - Engr. Saleh Ahmed Al Hefni - Mr. Abdullah Ali Al Farraj - Mr. Amr Mohammad Khashoggi - Dr. Manfred Joseph Dirrheimer - Mr. Jamal Jameel Malaikah - Mr. Mohammed Owais Ansari - Mr. Faisal Omar Al Sakkaf - Mr. Wolfgang Gemünd

8 2016 Annual Report The Board of Directors decided in their meeting held on to appoint Mr. Bleihid bin Nasser Al Bleihid as Chairman of the Board of Directors and Engr. Saleh Ahmed Al Hefni as Deputy Chairman of the Board and agreed on the formation of committees emanating from it, this decision is valid as of the date of for a period of three years. The company received a letter from Saudi Arabian Monetary Authority (SAMA) No dated H corresponding to includes the final conditional approval of SAMA's on the following new products: 1. Al Ahli Education Program. 2. Al Ahli Marriage Program. 3. Al Ahli Retirement Program. On H corresponding to , the Ordinary General Assembly approved the formation of the Audit Committee for the new session, which begins from for a period of three years. Also, during the Ordinary General Assembly the AC Charter was approved. The Corporate Governance Manual (CG) was approved by the Ordinary General Assembly on H corresponding to The Saudi Arabian Monetary Authority has renewed the Insurance Activity Permit of the company to conduct insurance business in the Kingdom of Saudi Arabia under protection and savings insurance for a period of three years starting from H and ends on H. On H (corresponding to ), the Company s Board of Directors proposed to pay a dividend, for the year ended , of SR 0.5 per share totaling SR 8.33 million to its shareholders. This dividend proposal was approved by the shareholders in the Ordinary General Assembly Meeting held on H (corresponding to ). Accordingly, the dividend payment was made on H (corresponding to ) Expectations and Future Plans The Company is aiming to enhance the current sales channels in order to improve the quality of selling process by conducting a proper training program for concerned staff, improving all relevant services and maintaining professional and high quality relationship with customers. The company seeks to grow the size of its insurance portfolio through the activation of direct sales channels and banking insurance products for groups. The company is considering the feasibility of expanding to the general insurance business to take advantage of opportunities available in the Saudi market. Launch new protection and savings products to cater for individual sector requirements.

9 9. Financial Results 2016 Annual Report Gross written contribution for 2016 amounted to SAR million compared to gross 8 written contribution amounting to SAR for 2015, i.e. a decrease of 1% over the prior year. ATC ended the fiscal year 2016 with a net profit of SAR million before zakat compared to a net profit of SAR million for the prior year, i.e. a decrease of 3 % over ATC s Annual Performance for Fiscal Year Participants Insurance Operations Difference (2016 vs. 2015) Description SAR (Million) % Gross Written Contribution (*) (4.77) (1%) Investments & Bank balances % Technical Reserves (30.52) (4%) Surplus from insurance Operations (2.53) (6%) (*) Certain prior year s amounts have been reclassified to conform to current year presentation. The decrease in Gross Written Contribution for 2016 compared to 5112 is due to the decline in insurance portfolio of individuals sector during the year which was due to the decrease in the number of sold insurance contracts to the participants of AlAhli Protection and Saving Program for the current year compared to the previous year. The total Gross Written Contribution for to individual sector for the year 2016 amounted to SAR million, compared to SAR million for 2015, i.e. a decline of 5 %.

10 9 Gross Written Contribution Product Wise for 2016 SAR - Million Al Ahli Group Credit Protection % Retail Protection and Saving Product % Al Ahli Group Care Protection % Total : : Gross Written Contribution Product Wise for 2015 SAR - Million Al Ahli Group Credit Protection % Retail Protection and Saving Product % Al Ahli Group Care Protection % Total : : The increase in the value of investments and bank balances is due to the increment in Diversified Saudi Riyal Trade fund. In addition to profits from policy holders investment during the current year. Despite the existence of redemption in policy holders investments during 2016 by SAR 39.5 million. The decrease in technical reserves is due to the decrease in the investable contributions which was due to the decline in insurance portfolio due to increase in surrenders and maturities for A technical reserve is made by the Company for total investments. The decrease in insurance operations' surplus for the current year 2016 was as a result of recording a non-recurring income amounted SAR 6.84 million in the last year of 2015, which reflects the reversal of accrual due from to in favor of AlAhli

11 Insurance Marketing Services Company Limited which led to decrease in underwriting expenses as the company signed an agreement on with AlAhli Insurance Marketing Services Company Limited (a subsidiary of National Commercial Bank a related party of the company) for sales and marketing of company's products through the distribution channels of the National Commercial Bank for a period of 10 years starting from This agreement supersedes the signed distribution agreement dated December 11, 2007 as previously announced on the Tadawul website on This was effective from , excess of fees accrued under previous distribution agreement over the fees payable under the agency agreement for six month period ended which has been reversed and recorded as other income in the period last year Also, one of reasons of in insurance operations' surplus for the current year 2016 compared to the year of 2015 was due to increase in the policyholders' operations general and administration expenses in the current year of 2016 by SAR 3.6 Million Shareholders Operations Difference (2016 vs. 2015) Description SAR (Million) % Income/(Loss) from FVIS investments % Net Income/(loss) for the Year before Zakat (1.06) (3%) Cash and Cash Equivalents (1.18) (90%) FVIS investments % Total Shareholders Assets % Total Shareholders Liabilities % Total Shareholders Equity % The increase in profit from FVIS investments in the investment portfolio was due to an improvement in the performance of the investment portfolio as a result of market fluctuations as well as due to increase in the return on Murabaha investments. Reason of decrease in the profit before Zakat for the current year of 2016 compared to the prior year of 2015, was due to the decrease in insurance operations' surplus for the current year 2016 as a result of recording a non-recurring income amounted SAR 6.84 million in the last year of 2015, which reflects the reversal of accrual due from to in favor of AlAhli Insurance Marketing Services Company Limited which led to decrease in underwriting expenses as the company signed an agreement on with AlAhli Insurance Marketing Services Company Limited (a subsidiary of National Commercial Bank a related party of the company) for sales and marketing of company's products through the distribution channels of the National Commercial Bank for a period of 10 years starting from This agreement supersedes the signed distribution agreement dated December 11, 2007 as previously announced on the Tadawul website on This was effective from , excess of fees accrued under previous distribution agreement over the fees payable under the agency agreement for six month period ended which has been reversed and recorded as other income in the period last year Also, one of reasons

12 of decrease in net profit before Zakat for the current year of 2016 compared to the last year of was due to increase in the policyholders' operations general and administration expenses in the current year of 2016 by SAR 3.6 Million and booking of SAR 2.2 Million impairment loss on available for sale investment in the current year of Despite the increase in shareholders capital investment income. 11 Reason of decrease in cash and cash equivalents of Shareholders Operations for 2016 compared to the year of 2015, is due to the payments done by the company during the year 2016 for some accruals and other payables pertaining to the year The increase in FVIS investments for 2016 is due to entering into new investments by purchasing units from AlAhli Diversified Saudi Riyal Trade Fund at amount of SAR 3.9 million. In addition to achieving Unrealized gain on FVIS investment during the year 2016 amounts to SAR 3.8 million. The increase in total shareholders 'assets from SAR million in 2015 to SAR million in the current year i.e. 13% increase is generally due to the increase in shareholders' investments and due to increase in the balance of Due from Insurance Operations. The increase in shareholders liabilities from SAR million for 2015 to SAR million in the current year i.e. an increase of 26% is due to the increase in the provision for zakat and tax payable for Included in shareholders' liabilities in current year payables and accruals amounting to SAR 4.27 million compared to SAR 3.68 million for the 2015 i.e. an increase of 16%. The increase in equity for the current year compared to prior year is due to the increase in retained earnings as well as record gains on investments available for sale for the current year despite the dividends distributed to the shareholders during the current year by SAR 0.5 per share of shareholder s equity with total amount of SAR 8.33 million.

13 Shareholders' Net Profit/(Loss) before Zakat SAR-Million Annual Report Total Shareholders' Assets SAR-Million

14 13 Total Shareholders' Liabilities SAR-Million Total Shareholders' Equity SAR-Million

15 Financial Position for Current Year Compared to Prior Years Difference (2016 vs. 2015) Description SAR (Million) % Total Assets 1, , % Total Liabilities % Paid-up Capital % Total Shareholders' Equity % The increase in total assets from SAR 1, million in 2015 to SAR 1, million in 2016 is due to the increase in Insurance operations investments (AlAhli Diversified Saudi Riyal Trade Fund), in addition to the increase in the value of shareholders' investments. The increase in total liabilities was due to the increase in gross outstanding claims as well as increase in reinsurance balances payable during the year 2016 resulting from maturities for insurance policies issued in previous years. The increase in total shareholders equity from SAR million in 2015 to SAR million in 2016, i.e. an increase of 11% was due to the increase in retained earnings as well as record gains on investments available for sale for the current year despite the dividends distributed to the shareholders during the current year by SAR 0.5 per share of shareholder s equity with total amount of SAR 8.33 million.

16 11.Segmental Performance 2016 Annual Report Retail Protection and Saving Product Gross regular contribution for protection and saving product for the period from 1 January 2016 to 31 December 2016 amounted to SAR million, i.e. a decrease of 5 % compared to SAR million for This was due to the decline in the number of contracts sold which led to decrease in the retail portfolio. Retail Gross Written Contribution SAR-Million Group Products Al Ahli Group Care Protection In 2016 ATC provided insurance for 9,855 lives compared to 9,323 for 2015, i.e. an increase of 6% with the total Gross Written Contribution amounting to SAR 7.23 million for 2016 compared to SAR 4.51 million for 2015, i.e. an increase of 60% as a result of higher pricing of insurance products related to the Group Care Protection.

17 16 Group Care Protection - Gross Written Contribution SAR-Million Al Ahli Group Credit Protection Gross Written Contributions from AlAhli Group Credit Protection for the year ended 31 December 2016 amounted to SAR million compared to SAR million for 2015, i.e. an increase of 4%. Group Credit Protection - Gross Written Contribution SAR-Million

18 12.Geographical Analysis of Consolidated Revenue 2016 Annual Report ATC operates solely in the Kingdom of Saudi Arabia. The Company has no subsidiaries or other branches inside or outside the Kingdom. The chart below illustrates the geographical analysis of consolidated revenue as at 31 December Gross Written Contribution - Kingdom Wide- Regional Wise SAR - Million Central Eastern Other Western Total : Accounting Standards Followed for Reporting The Company s Financial Statements are prepared in accordance with International Financial Reporting Standards (IFRS). In this respect the Company assures that there are no material differences or negative financial effects on the Financial Statements due to its preparation in accordance with IFRS compared with the account established with the standards issued by the Saudi Arabian Organization for Certified Public Accountants. The BOD represents that the Company kept proper accounting records.

19 14.Payment of Dividends Policy 2016 Annual Report The Company seeks to pay dividends on an annual basis to increase shareholders profit appropriately with Company s profits, its financial position, the condition of the market, general economic atmosphere and other factors. In executing this, the Company will be including the analyzing of investment opportunities, the requirements for reinvestment, cash and capital requirements, commercial forecasts and the impact of any such dividends on any legal or statutory considerations. In spite of the fact that the Company expects to pay dividends to shareholders annually, there are no guarantees that any such dividends will actually be paid. Further, there is no guarantee of the payment of any specific amounts in the future. In fact, the payment of dividends is subject to the conditions set out in article 47 of Company s by-laws that state: 18 Company s net profit for the year will be paid after deducting all general expenses and other costs as follows: 1. Provision for tax and Zakat % of net profit will be transferred to statutory reserve. Ordinary general meeting may discontinue such transfer once the statutory reserve equals Company s paid-up capital. 3. Ordinary general meeting may at the recommendation of the Board of Directors transfer a percentage of net profit to create additional reserve to be allocated for particular purpose(s), at the discretion of general meeting. 4. The balance will be paid to shareholders by way of first installment of at least 5% of paid-up capital. 5. The balance will be paid to shareholders as a share of profit or otherwise transferred to retained earnings. 6. Periodic dividends, by a board resolution, may be paid. Such payments will be deducted from profit for the year as stated in paragraph 4 above, in accordance with the relevant governing rules issued by the concerned authorities. Dividends distributed to the shareholders for the year 2015: On 19 Jumada Al-Awwal 1437H (corresponding to 28 February 2016), the Company s Board of Directors proposed to pay a dividend, for the year ended 31 December 2015, of SAR 0.5 per share totaling SAR 8.33 million to its shareholders. This dividend proposal was approved by the shareholders in the Ordinary General Assembly Meeting held on 24 Rajab 1437H (corresponding to 1 May 2016). Accordingly, the dividend payment was made on 13 Shab an 1437H (corresponding to 26 May 2016). Proposed dividends to the shareholders for the year 2016: The Company, after zakat, reported a profit of SAR million for the fiscal year, and the Board of Directors has recommended a cash dividend to the shareholders of the Company for the year 2016 for a total amount of SAR 8.33 million, SAR 0.5 per share, the distribution represents 5% of the nominal value of shares. There are no arrangements or otherwise agreements whereby the shareholders have waivered their right to dividends.

20 15.Shares Owned by Directors / First Degree Relatives and Related Changes 2016 Annual Report 19 Following are the details for number of shares held by the Board of Directors during their current session in 2016: No Director s Name No. of Shares Difference % 1 Mr. Bleihid Nasser Al Bleihid 2 Engr. Saleh Ahmed Hefni 3 Mr. Abdullah Ali Al-Farraj 4 Mr. Faisal Omar Al-Sakkaf 5 Mr. Jamal Jameel Malaikah 6 Mr. Amr Mohammed Khashoggi 7 Dr. Manfred Joseph Dirrheimer 8 Mr. Mohammed Owais Ansari 9 Mr. Wolfgang Gemünd 1,000* 1,000* 1,000* 1,000* 1,000* 1,000* 1,000* 1,000* 1,000* 1,000* 1,000* 1,000* 1,000* 1,000* 1,000* 1,000 1,000 1,000 1,000** 1,000** 1,000** 1,000** 1,000** - 1,000*** 1,000*** - 0% 0% 0% 0% 0% 0% 0% 0% 0% *Shares blocked in favor of the Board Member from NCB Portfolio **Shares blocked in favor of the Board Member from FWU Portfolio ***Shares blocked in favor of the Board Member from VHV Portfolio No option right to any Share, investments or other reserves to the interest of directors, key executives, employees or their families 16.Board of Directors The main duty of the Board of Directors is to develop and ensure the implementation of the Company s overall plans and policies and set its financial goals. All financial allocations and budgets are approved by the Board. Further, the Board follows through the BOD s various committees the work in progress and to what extent the goals are being adhered and achieved. In addition, the BOD is willing to protect the interest of shareholders and other stockholders through ensuring full compliance with the applicable rules and Bylaws as set out in the Company s Articles of Association and its Corporate Governance Regulations.

21 16.1 BOD s Formation, Membership and Representation 2016 Annual Report The BOD comprises of nine members. On 25 June 2013 the Extraordinary General Assembly approved the decrease of the number of Directors to nine (from eleven) and accordingly the amendment of the Articles of Association. The Directors have been elected for the new term on 26 June 2016, so the current term of the BOD Members ends on 25 June The following table shows the composition of present BOD in terms of title, classification, the party the Director represents and the Director s membership in the board of directors of other Joint Stock Companies: No Member s Name Title Classification Representation 1 Mr. Bleihid Nasser Al Bleihid Chairman Non-executive NCB, one of the founding shareholder of ATC Membership in Other Listed Companies Membership in Other Non - Listed Companies Engr. Saleh Ahmed Al-Hefni Deputy Chairman Independent ---- Halawani Brothers Company. Listed Company Middle East Healthcare Co. Listed Company Saudi Industrial Services Co. (SISCO) Listed Company Kindasa Water Services - Closed Joint Stock Company 3 Mr. Amr Mohammad Khashoggi 4 Mr. Abdullah Ali Al-Farraj Member Non-executive 5 Mr. Faisal Omar Al-Sakkaf Member Non-executive Member Independent NCB, one of the founding shareholder of ATC NCB, one of the founding shareholder of ATC --- Middle East Paper Co. (MEPCO) - Listed Company Najm Insurance Services Company Closed Joint Stock Company 6 Jamal Jameel Malaikah Member Independent Dr. Manfred J. Dirrheimer Member Non-executive FWU Company, one of the founding shareholder of ATC FWU Company, 8 Mr. Mohammed Owais one of the Member Non-executive Ansari founding shareholder of ATC VHV, one of the 9 Mr. Wolfgang Gemünd Member Non-executive founding shareholder of ATC

22 16.2 Board Meetings 2016 Annual Report The Board of Directors has held Five (5) meetings during The table below shows the BOD Meetings during 2016 and the number of meetings attended by each Board Member: Director s Name Attendance Mr. Bleihid Nasser Al Bleihid 5 Eng. Saleh Ahmed Hefni 5 Mr. Amr Mohammad Khashoggi 5 Mr. Abdullah Ali Al-Farraj 5 Mr. Faisal Omar Al-Sakkaf 5 Mr. Jamal Jameel Malaikah 4 Dr. Manfred J. Dirrheimer 1 Mr. Mohammed Owais Ansari 2 Mr. Wolfgang Gemünd 5

23 Independent Independent Nonexecutives Nonexecutives 16.3 Directors and Senior Executive Fees 2016 Annual Report Annual, attendance fees and other related expenses are paid to directors and board committees in accordance with Company s By-laws and other related regulations. Senior executives compensations are paid by the Company in accordance with the contract of employment made with the particular senior executive The table below shows details of the fees and remuneration for the Board of Directors and members of other committees and their related expenses, in addition to the fees and bonuses paid to senior executives during the year ended 31December 2016: Description Balance Payable as of 31 December 2015 Directors and board committees Add: Expense provided during the year 2016 Total expense provided Less: Paid during the year 2016 Balance Payable Total paid (*) as of 31 December 2016 Paid to five Senior Executives including CEO and Chief Financial Officer SAR, 000 SAR, 000 SAR, 000 SAR, 000 SAR, 000 SAR, 000 SAR, 000 SAR, 000 SAR, 000 Basic salaries ,948 Remuneration 1, ,226 2,122 (726) (858) (1,584) 2,001 - Allowances (70) (95) (165) Periodic and Annual allowances Compensation for travelling and accommodation expenses (17) (669) (686) Incentive schemes Any other compensation or benefits in kind paid on monthly/ annual basis Total 2,204 1,069 1,769 2,838 (813) (1,622) (2,435) 2,607 3,595 (*) The remuneration and related expenses payable as at 31 December 2015 were paid during 2016 after obtaining the approval in the Annual General Meeting held in May There is no arrangement or otherwise agreement whereby the Directors or Key Executives will waiver their rights to salaries, remunerations and other compensations. No loan, whatsoever, has been made by the Company to directors. Furthermore, no loan arranged by any director with a third party is guaranteed by the Company. The Board of Directors also approved to pay the deputy chairman extra remuneration amounting to SAR 160 thousand due to extra duties undertaken by him in the course of his position as a Chairman of Executive Committee.

24 Brief CVs for Senior Executives of the Company: Abdulrahman Saleh Al Obrah - Chief Executive Officer (CEO) He holds a bachelor's degree in economics from King Saud University in Riyadh, Saudi Arabia in 2003, also holds degree of (ALMI) from Life Management Institute (LOMA) United States of America. He worked at AlJazira Bank - Cooperative Takaful Group (Aljazira Takaful Taawuni Co.) from 2003 till 2013, during which he held various positions, most recently as Vice President, Head of Sales and Distribution Channels. He was appointed as CEO of Ahli Takaful Company in February Hani Fareed Damra Chief Financial Officer (CFO) Holds bachelor's degree in Business Administration from King Abdul Aziz University (KAAU) Jeddah Kingdom of Saudi Arabia in 1989, and a Master s Degree in Finance and Banking from Arab Institute for Banking and Finance Studies Amman, Jordan in 1996, and holds Arabic Certified Public Accountant from International Arab Society of Certified Accountants Jordan in 2001, his experience spans over 25 years in financial and accounting management, in 2007 he joined AlAhli Takaful Company as Finance Manager till he was promoted in 2010 to become the Chief Financial Officer of the Company. Nagieb Martin Head of Product Development Holds B.Sc. in Economics from Life Underwriters Association of South Africa (LUASA) in 1994, his experience spans over 37 years in field of Life and Takaful Insurance and most notably in Insurance Products Development (technical and functional), Shari ah Compliance, Underwritings and Reinsurance, he joined AlAhli Takaful Company in 2007 and working as Head of Product Development of the Company. Muhammad Saqib Altaf Head of Operations & Claims Holds Master s Degree in Business Administration (MBA) from Virtual University of Pakistan in 2013, Associate Life Management Institute (ALMI) from Life Office Management Association (LOMA), USA in 2016, Associate Customer Services (ACS) from Life Office Management Association (LOMA), USA in 2016, his experience spans over 15 years In several areas most notably in the field of Individual Life & Health Insurance, Group Life & Health Insurance, Bancassurance, Takaful, Operations, Claims, Customer Services, Call Center, Underwriting, Reinsurance, System and Processes, he joined AlAhli Takaful Company in 2014 and working as Head of Operations & Claims.

25 BOD Committees Mohammed Osman Head of Information Technology Holds bachelor's degree in Commerce & Computer Science from Osmania University Hyderabad, India in 1985, his experience spans over 32 years in field of Information Technology in several sectors such as Health Care, Distribution, Financial Institutions, Banking and Insurance Companies (Life/Non-Life), in 2104 he joined AlAhli Takaful Company as Head of Information Technology. Thamer Khalid Bafel Head of Compliance & Corporate Secretary Holds bachelor's degree in Science; General Accounting from (KAAU) King Abdul Aziz University Jeddah Kingdom of Saudi Arabia in 2007, Pre-MSc Foundation Course from Cass Business School, London UK in 2008, Master of Business Administration (MBA) from University of Wolver Hampton UK in 2015, and hold professional qualifications of Capital Market (CME-1/CME-2/ CME-3), his experience spans over 8 years in Accountancy, Finance, Capital Markets and Compliance, in 2016 he joined AlAhli Takaful Company and working as Head of Compliance & Corporate Secretary of the company. The Board of Directors approved the installation of various committees to assist the BOD to perform its duties and promote supervision, control and decision making controls in compliance with the Corporate Governance Framework. The different committees comprise Directors and other members, as detailed below Executive Committee (EC) The role of the Executive Committee is to oversee the Company's daily activities and monitor the strategic initiatives set by the BOD. The Committee also develops the Company's financial and commercial plans in accordance with the Company's strategy. During 2016, the Executive Committee held six (6) meetings. The Committee comprises Director Eng. Saleh Ahmed Hefni as Chairman, Directors Mr. Abdullah Ali Al-Farraj, and Mr. Mohammed Owais Ansari as members. The following table shows the EC's Members and their attendance on the Committees' meetings during the year 2016: Committee Meetings for the year 2016 Director s Name Attendance Engr. Saleh Ahmed Hefni 6 Mr. Abdullah Ali Al-Farraj 6 Mr. Mohammed Owais Ansari 3

26 Audit Committee (AC) The AC assists the BOD in performing its duties in respect of assessment, control, internal control structure, reporting, disclosure, accuracy or financial information, adequacy of internal/external audit activities, auditor s qualifications of internal/external auditors, its independence, and its recommendations as well as in the evaluation of business and operational risks. In addition, the AC reviews the accounting policies and makes recommendations as necessary to the BOD in this respect. During the year 2016, the Committee, in satisfaction of its duties to assist the BOD in developing the Company, held a series of meetings with internal and external auditors and reviewed all the Company's financial matters throughout the year to ensure compliance with the disclosure requirements before filing the same with the regulating authorities and before publishing the results. The Committee reported its activities to the BOD and Company's management throughout the year. The AC assisted also the Board in nominating the external auditors, and the Committee ensured the implementation of remedial actions proposed by audit report. During the period from up to , the AC was headed by Mr. Abdullah Ali Al-Farraj as Chairman, Dr. Abdulaziz Al Zeyban, Mr. Abdulelah Al Harorah, and Mr. Husain Feroz as members. The Board of Directors restructured the Committee for the period from up to where Mr. Abdullah Ali Al-Farraj is the chairman, while Dr. Abdulaziz Al Zeyban and Mr. Saeed Ahmed Al-Ghamdi are appointed as members. Director s Name The appointment of the AC Members for the new session was approved during the Ordinary General Assembly held on H corresponding to , which starts from for the period of three years. Dr. Abdulaziz Al Zeyban was appointed as AC chairman replacing Mr. Abdullah Ali Al-Farraj, while Mr. Jamal Jameel Malaikah and Mr. Saeed Ahmed Al-Ghamdi were appointed as members. All Committee Members have extensive financial and accounting experience and as such they are an important asset for the Company. During the year 2016, the Committee held seven (7) meetings. Due to the changes of AC structure during the year, the tables below show the Members and their attendance on the Committee s Meetings: Committee Meetings from to Attendance Mr. Abdullah Ali Al-Farraj 2 Dr. Abdulaziz Al Zeyban 2 Mr. Abdulelah Al Harorah 2 Mr. Husain Feroz 0

27 26 Director s Name Committee Meetings from to Attendance Mr. Abdullah Ali Al-Farraj 1 Dr. Abdulaziz Al Zeyban 1 Mr. Saeed Ahmed Al-Ghamdi 1 Committee Meetings from to Director s Name Attendance Dr. Abdulaziz Al Zeyban (Chairman) 4 Mr. Saeed Ahmed Al-Ghamdi 3 Mr. Jamal Jameel Malaikah Nomination and Remuneration Committee (NRC) The NRC assists the BOD to ensure the admission of the best suitable and capable people to the BOD. NRC also assists in appointing qualified Key Executives and ensures that the procedures necessary for the assessment of the compensations to managers, committee members and the Company s employees are in place and respected. The NRC headed by Mr. Bleihid Nasser Al-Bleihid as chairman while Mr. Jamal Jameel Malaikah and Mr. Mohammed Owais Ansari are appointed as members. The Board of Directors has approved in their meeting held on the formation of NRC for the new session, which starts from for the period of three years where Engr. Saleh Ahmed Hefni was appointed as committee Chairman while Mr. Mohammed Owais Ansari and Mr. Amr Mohammad Khashoggi are appointed as members. The Committee held three (3) meeting during the year The table below shows the names and their attendance on the meeting: Director s Name Committee Meetings from to Attendance Mr. Bleihid Nasser Al Bleihid 1 Mr. Jamal Jameel Malaikah 1 Mr. Mohammed Owais Ansari 1 Committee Meetings from to Director s Name Attendance Engr. Saleh Ahmed Hefni 2 Mr. Mohammed Owais Ansari 2 Mr. Amr Mohammad Khashoggi 2

28 Investment Committee (IC) 2016 Annual Report The IC s responsibility is to assist the BOD in developing the policies and strategies for the investment of ATC s and policy holders assets, to monitor investment performance, ensuring compliance of investments with Shari'a controls and Saudi Arabian applicable regulations and related Bylaws. The IC consists of Mr. Amr Mohammad Khashoggi as Chairman, while Mr. Jamal Jameel Malaikah and Mr. Faisal Omar Al-Sakkaf are Members. All members have distinctive experience in investment and finance. In addition, the IC Members are familiar with Shari a controls related to the investments. The Committee reviewed the existing investment guidelines and strategies with a view to promote investment performance. The Board of Directors has approved in their meeting held on to renew the membership of the Committee for the new session, which starts from for three years. 27 The IC holds six (6) meetings during the year The table below shows the Members and their attendance during their meetings: Meetings During 2016 Director s Name Attendance Mr. Amr Mohammad Khashoggi 6 Mr. Jamal Jameel Malaikah 6 Mr. Faisal Omar Al-Sakkaf Risk Management Committee (RMC) This committee was created during 2016 in accordance with Article No. (107) contained in the Insurance Corporate Governance Regulation. The Board of Directors has approved in their meeting held on the formation and membership of the Committee for the session, which starts from for three years, where the Risk Management Committee responsible for Identifying risks that may imperil the Company and maintaining an acceptable risk profile for the Company also overseeing the risk management system and assessing its effectiveness in addition defining a comprehensive risk management strategy for the Company, overseeing its implementation, and reviewing and updating it on a regular basis and reporting to the Board details of risk exposures and recommending actions to mitigate the risks or manage them. The RMC consists of Mr. Faisal Omar Al-Sakkaf as Chairman, Mr. Wolfgang Gemünd and Mr. Mr. Husain Feroz Ali as Members. The RMC holds three (3) meetings during the year The table below shows the Members and their attendance on the meetings:

29 Meetings During 2016 Director s Name Attendance Mr. Faisal Omar Al-Sakkaf 3 Mr. Wolfgang Gemünd 3 Mr. Husain Feroz Ali Shari a Committee (SC) The Shari a Committee plays an important role in providing the Shari'a consultancy as needed by the Company. The annual Shari'a review of the products approved by the SC has demonstrated the products' compliance with the Committee's resolutions and no significant violations of committee's resolutions has been detected. The committee consisting of four of the most prominent and well-respected scholars in the Kingdom is chaired by Sheikh Abdullah Bin Sulaiman Al Maneea. The other three members of the Committee are Sheikh Dr. Abdullah Bin Abdulaziz Al Musleh, Sheikh Dr. Abdulla Bin Mohammed Al Mutlaq and Dr. Mohammed Ali Al Gari. The SC performed a major role in providing necessary advice to the Company. The annual Shari a audit procedures for the products approved have been overseen by the Shari a Committee. This audit demonstrated that the Company s products were in conformity with the decision of the Shari a Committee as no significant exceptions were noticed.

30 29 17.Related Parties Transactions and Balances Related parties represent major shareholders, directors (*), key management personnel of the Company and entities controlled, jointly controlled or significantly influenced by such parties. All transactions with such related parties are conducted on normal terms and conditions, which are approved by the management Following are the details of related party transactions during the years ended 31 December 2016: Related party Board Member Representative for the Party Nature of related party Nature of transaction Transaction Amount SAR 000 Contract Duration Gross Group NCB Mr. Bleihid Nasser Al Bleihid Mr. Abdullah Ali Al-Farraj Mr. Faisal Omar Al-Sakkaf Shareholder Insurance Contributions 109,611 1 year Gross claims paid 89,572 1 year AlAhli Insurance Marketing Services Company Limited Mr. Bleihid Nasser Al Bleihid Mr. Abdullah Ali Al-Farraj Mr. Faisal Omar Al-Sakkaf Subsidiary of a Shareholder Agency commission and sales campaigns 3, years FWU Dr. Manfred Joseph Dirrheimer Mr. Mohammad Owais Ansari Shareholder Administration fee Service charges 2,927 Indefinite 1, months NCBC Mr. Bleihid Nasser Al Bleihid Mr. Abdullah Ali Al-Farraj Mr. Faisal Omar Al-Sakkaf Subsidiary of a Shareholder Investment fund Management fees 5,007 Indefinite Key Management Personnel Short term benefits End of service benefits 3,359 1 year 157 Indefinite See item no. 16.3

31 Balance receivable from/ (payable) to related parties as at 31 December 2016 not disclosed elsewhere in the financial statements are as follows: Related Party Board Member Representative for the Party Nature of Related Party Nature of Transaction Balance receivable from/ (payable) SAR 000 Contract Duration NCB Mr. Bleihid Nasser Al Bleihid Mr. Abdullah Ali Al-Farraj Mr. Faisal Omar Al-Sakkaf Shareholder Net Insurance Contributions receivable Gross Outstanding claims 1,489 1 year (41,166) 1 year AlAhli Insurance Marketing Services Company Limited Mr. Bleihid Nasser Al Bleihid Mr. Abdullah Ali Al-Farraj Mr. Faisal Omar Al-Sakkaf Subsidiary of a Shareholder commissions due for products distributing (937) 10 years FWU Dr. Manfred Joseph Dirrheimer Mr. Mohammad Owais Ansari Shareholder Management fees due (227) Indefinite NCBC Mr. Bleihid Nasser Al Bleihid Mr. Abdullah Ali Al-Farraj Mr. Faisal Omar Al-Sakkaf Subsidiary of a Shareholder Investment fund management due fees 362 Indefinite A report on Related Parties transactions together with a special report from the external auditor was submitted to the General Assembly. Accordingly, all Related Parties transactions between Al Ahli Takaful Company and the National Commercial Bank, AlAhli Insurance Marketing Services Company Limited, FWU and NCB Capital have been approved. For the purpose of transparency and disclosure, the company will submit a report to the General Assembly for all Related Parties transactions attached with a special report from the external auditor on an annual basis for approval on those transactions, in accordance with Companies Regulations article 69 and Corporate Governance Regulations article 18(a).

32 18.Summary of Paid Government/Statutory Expenses 2016 Annual Report 31 Description Difference (2016 vs. 2015) SAR (000) % Zakat and Tax 1,892 1, , % GOSI % Visa and Government Fees (38) (32%) Saudi Arabian Monetary Agency - Inspection Fees 1,660 1, , % CMA % TOTAL 4,460 4,128 2,218 1,494 4, % All government and other bodies' fees payable have been timely paid by ATC and accordingly no custom duty, GOSI, or zakat is outstanding. Accrued Zakat and tax as at 31 st December 2016 amounted to SAR million (2015: SAR million). 19.Human Resources The Company was classified as a Platinum Zone according to Ministry of Labor zone system. Saudization rate attained was 61% and female employees occupied 33% of total jobs. Much emphasis is placed by the Company on the skills development of the employees in order to fit with the Company s Mechanism in promoting its own junior staff to senior management positions. The Company is also committed in the development of its employees who have shown consistency and dedication The Company provides its employees continuous professional trainings in Life Insurance such as Insurance Fundamental Competency Exam (IFCE) provided by the Saudi Institute of Finance as well as enrollment of its employees to Advanced Life Insurance Courses provided by Life Office Management Association (LOMA-USA) to enhance ATC s human resources in the field of Life Insurance. In addition the company is also provides all of its employees a special training course in Anti-Money Laundering and Terrorism Financing. 20. Social Responsibility The Company is aware in the need to contribute to community service, social development and to the advancement of the country and citizens through schemes intended to serve the public interest, appointment of handicapped people in suitable positions, offering students summer holiday training, in addition to cooperative training programs for university students. The Company, by training its employees, seeks to promote the culture of responsibility. In addition, the Company does not forget its responsibility towards non-profit organizations. The Company visited Albir Society Jeddah, a non-profit organization on June 26, 2016 and donated the sum of SAR (50,000).