contents company details directors of company directors of subsidiary company management team notice of annual meeting

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3 our mission Our Mission is to be a profitable company, known for its integrity and customer service, based on long-term growth and financial security for the benefit of our stakeholders.

4 contents company details directors of company directors of subsidiary company management team notice of annual meeting chairman s and managing director s report corporate governance certificate from the company secretary premium and profitability charts report of the auditors to the shareholders balance sheets income statements income statement - general business income statement - life business statements of changes in equity cash flow statements 36 notes to the accounts

5 company details Head office: 1st Floor, IBL House, Caudan, Port Louis, Mauritius Tel: (230) Fax: (230) caudan@mauritianeagle.com - Website: Auditors: Kemp Chatteris Deloitte Port Louis, Mauritius Consulting actuaries: Deloitte Actuarial & Insurance Solutions, South Africa Bankers: Barclays Bank PLC, The Mauritius Commercial Bank Limited, HSBC, South East Asian Bank of Mauritius, State Bank of Mauritius. Registrar and transfer office: MCB Registry and Securities Raymond Lamusse Building, 9-11 Sir William Newton Street, Port Louis, Mauritius Registered office: 5th floor, IBL House, Caudan, Port Louis, Mauritius Secretary: Simon-Pierre Rey, B.A (Hons) Econ., A.C.A. MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

6 directors profile Patrice d HOTMAN DE VILLIERS Age 56 Mr d Hotman de Villiers was appointed director in August 1996 and Chairman of the Board in March He is presently the Chief Executive of Ireland Blyth Limited and also sits on the Board of Sun Resorts Ltd. Mr d Hotman de Villiers was previously the Chief Operating Officer of Mauritius Tuna Fishing and Canning Enterprises Ltd. Eric A. VENPIN FCA, TEP, Age 39 Mr Venpin was appointed Managing Director of the Company on 1 st January Before this appointment he was in the Global Business sector and was a partner of Kemp Chatteris Deloitte up to 30 June Nick BEYERS ACII, AMP (Harvard), Age 59 Mr Beyers joined the Board on 31 March He is currently the Managing Director of South African Eagle Insurance Company Limited. Gaëtan BOUIC FCA, Age 72 Mr Bouic was appointed as Independent Non-Executive Director on 24 June He retired as Managing Partner of De Chazal Du Mée Co in From 1987 to 2002 Mr Bouic was Chief Finance Officer of United Basalt Products Ltd. 4 5 Dennis Michael BURTON ACII, Age 57 Mr Burton joined the Board on 10 July He has been in the insurance industry for the past 36 years and is currently the Director, Sales and Marketing of South African Eagle Insurance Company Limited. 4 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

7 J. Gilbert ITHIER LL. B. Hons, Age 50 Me Ithier was appointed as Independent Non-Executive Director on 15 November Me Ithier has been practicing as a barrister before all the courts of Mauritius since 1979, specialising mostly in civil, commercial, company, insurance and property matters. 6 7 Subhash Chandra LALLAH Barrister-At-Law, Age 60 Me Lallah was appointed as Independent Non-Executive Director on 29 March Former Chairman of the National Transport Corporation and Member of the Board of Governors of the Mauritius Broadcasting Corporation, he is the legal advisor to the Central Electricity Board, the Central Water Authority and The Road Development Authority. 8 Gaëtan LAN HUN KUEN FCA, Age 52 Mr Lan spent 4 years as Chief Executive of Mauritian Eagle Insurance Company Limited. Mr Lan is also a director of the Stock Exchange of Mauritius Ltd and the Central Depository & Settlement Co Ltd. He has been with the IBL Group since 1977 and is currently the Chief Finance Officer in charge of Corporate Finance and the Chief Operating Officer of the Financial Services business Sector. Alain MALLIATE FCII, ACIS, Age 48 Mr Malliaté was appointed as Executive Director on 30 March He has been with the Company since August 1985 and is in charge of the Technical Departments Simon-Pierre REY BA (Hons) Econ., ACA, Age 53 Mr Rey joined the Board on 3 August 1989 and is also Secretary of the Company since December Mr Rey is a Director of Sun Resorts Ltd and Mount Sugar Estate Ltd. He is currently the Chief Corporate Affairs Officer in charge of IBL Legal, Secretarial and Corporate Governance. MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

8 directors of subsidiary company Yves MEYEPA Executive Director, Mauritian Eagle Leasing Company Limited Joined in 2001; Mr Méyépa has worked for more than 20 years in the IBL Group before joining Mauritian Eagle Leasing Company Limited at its incorporation. Appointed Executive Director in His areas of responsibility include the management of the day-to-day activities and liaison with the regulatory authorities. Natasha WONG CHUNG KI ACCA - Executive Director, Mauritian Eagle Leasing Company Limited Appointed Director in September 2005 after having held office in the audit department of Kemp Chatteris Deloitte and accounting department of DTOS Ltd. Mrs Wong Chung Ki s areas of responsibility include the establishment of policies and procedures and monitoring of the financial affairs of the Company. 6 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

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10 management team 1 Pierre AH SOON Assistant Finance Manager Joined Pierre s area of expertise is audit in which he has more than 3 years experience in an offshore company. He is currently assisting the Finance Manager in the day-to-day management of the Finance Department. 2 José ARSENIUS, FIAP, MBCS Systems Manager Joined in With more than 19 years experience in the IT sector, José is the head of the IT Services Department. His areas of responsibility include the management of day-to-day activities, Quality management, Information Security management and Occupational Health management systems. He is a fellow of the Institution of Analysts and Programmers. 3 Clency BASSET, FAIA Finance Manager Joined in 1984 after having worked for more than 15 years in the Accounts Department of Blyth Brothers Co. Ltd. Clency s area of competence is financial reporting. He is responsible for the activities of the Finance Department. He is a Fellow of the Association of International Accountants and is the Money Laundering Reporting Officer of the Company. 4 Winson CHAN CHIN WAH, DipCII Underwriting Manager Joined With more than 11 years in the insurance industry, Winson is currently specializing in Fire and Accident insurance. His duties include the underwriting of new and existing risks and assisting both internal and external customers. He is an active member of the Insurance Institute of Mauritius. 5 Bruno CHAN SIP SIONG, Bsc (Hons) Systems Administrator Joined in Has been working in the IT field for more than 15 years including 10 in the insurance industry. Bruno is responsible for the day-to-day operations including the administration of IT infrastructure and support delivery to end-users. His other areas of responsibility also include the maintenance of the insurance management system. 6 Michael HENRY, ACII Marine Manager Joined in Michael has worked for more than 20 years in the insurance industry. His area of specialization is reinsurance. He was appointed Marine Manager as from January 2006 and is responsible for managing all the activities of the Marine Department which include underwriting, reinsurance and claims processing MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

11 7 Richard KWON SIN KOY Motor Manager Joined in 1974 after having worked for the Insurance Department of Blyth Brothers. With more than 33 years experience in motor insurance, he is responsible for the operations of the Motor Department which underwrites all classes of vehicles. 8 Vikash MUNGLA, BA (Hons) Acc & Fin Manager-Reinsurance Department Joined Having worked for more than 5 years with a leading reinsurer, Vikash is now responsible of the Reinsurance Department. 9 Gilbert PETITE Claims Manager Joined With more than 32 years experience in the insurance industry, Gilbert is conversant with both English and French insurance procedures. He actually manages the day-to-day operations of the Claims Department which processes motor, fire, accident and engineering claims. He is an active member of the Insurance Institute of Mauritius. Jean Claude TSANG YAN SANG, MCIM, MBA Sales and Marketing Manager Joined Having worked in insurance marketing for the last 8 years, Jean Claude s area of expertise includes marketing analysis and planning. He is currently responsible for the Sales and Marketing functions. Jean Claude is a member of the Chartered Institute of Marketing and of the Insurance Institute of Mauritius. Jean Mario TYPHIS, ACII Senior Manager Joined in 1987 as Reinsurance Manager after more than 13 years in the reinsurance industry. His responsibilities subsequently moved to the underwriting and development of the Fire and Accident Department which embraces fire, accident, liability and engineering classes of insurance. Mario is an active member of the Insurance Institute of Mauritius. Philip VENPIN, BSc (Act Sci) Life & Pension Manager Joined With more than 15 years in the Life Assurance industry, his current responsibilities include the general management of the Life and Pension Department with specialization areas in business and product development. Philip is a member of the Insurance Institute of Mauritius MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

12 notice of annual meeting Notice is hereby given that the thirty-first Annual Meeting of the Shareholders of the Company will be held at the offices of the Company, 1 st Floor, IBL House, Caudan, Port Louis on Tuesday 27 th June 2006 at hours to transact the following business: Ordinary Resolutions: 1. To adopt the minutes of proceedings of the thirtieth annual meeting held on 24 th June To receive and adopt the Group s and Company s financial statements for the year ended 31 st December 2005 and the Directors and Auditors reports thereon. 3. To appoint Me Gilbert Ithier as Independent Non-Executive Director. 4. To re-appoint Mr Gaëtan Bouic as Director in compliance with Section 138(6) of the Companies Act To re-appoint Messrs Kemp Chatteris Deloitte as Auditors for the ensuing year and to authorise the Board of Directors to fix their remuneration. 6. To re-elect Mr Patrice d Hotman de Villiers as Director. 7. To re-elect Mr Eric A. Venpin as Director. 8. To re-elect Mr Nick Beyers as Director. 9. To re-elect Mr Dennis Burton as Director. 10. To re-elect Me Subhash Lallah as Director. 11. To re-elect Mr Gaëtan Lan Hun Kuen as Director. 12. To re-elect Mr Alain Malliaté as Director. 13. To re-elect Mr Simon-Pierre Rey as Director. By Order of the Board Simon-Pierre Rey - Secretary Port Louis, Mauritius 9 th June 2006 Note: A member entitled to attend and vote at the meeting may appoint any person, whether a member or not, to attend and vote in his stead. Proxy forms must be lodged at the registered office of the Company not less than twenty-four hours before the meeting. A proxy form is included in this Annual Report and is also available at the Registered Office of the Company. 10 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

13 { growing together and succeeding } MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

14 chairman s and managing director s report Overview During the year under review, conditions for the insurance industry remained difficult with increased competition on the local market and expensive reinsurance costs following hurricane Katrina in the United States. Consequently, in spite of having registered an increase in net earned premium, underwriting profit has been squeezed. Equity markets both locally and overseas have performed well, resulting in an increase of some 27% in our investment income compared to last year. Implementation of our new insurance application software (PREMIA) for our general insurance activities was completed. Benefits are already being felt and the comprehensive management information system backing up the software is proving to be a powerful tool. In January 2005, we acquired an additional 5% in the share capital of H. Savy Insurance in the Seychelles, bringing our total investment to 20%. We are pleased to report that results of this new associate have been satisfactory, in spite of having had to face material claims following the December 2004 tsunami. Group results Group turnover increased by 23% to reach Rs 757M, whilst the growth attributable to the Company for its insurance activities was 7%. Profit before tax was similar to last year at Rs 57M, with an increase in attributable earnings after tax and minority interest to Rs 45M. Our insurance funds increased by a further Rs 33M reaching Rs 237M, whilst shareholders funds stood at Rs 273M at the year end. Earnings per share at 31 December 2005 was Rs 16.05, compared to Rs at the same date last year. 12 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

15 Underwriting results Short Term Net earned premium increased to Rs 184M and reasonable underwriting profits have been achieved throughout the business cycle, except for motor business. The high level of claims resulting from the introduction of constat à l amiable, and the shortcomings of certain insurance companies contributed to a large extent towards the deterioration of this account. Long Term The Life and Pension department has performed well and continues to grow steadily. Gross premium reached Rs 84M, representing an increase of 27% over the preceding year. The Life Insurance Funds increased by a further Rs 42M and stood at Rs 180M at the end of Leasing Turnover for Mauritian Eagle Leasing Company Limited has increased by 67% to reach Rs 272M. The portfolio stood at Rs 990M at the year end and profit before tax for the year was Rs 13M. Regulatory In March 2005, the new Insurance Act was voted by the National Assembly but has not yet been promulgated. The Act includes the split of composite companies as from 2011 and the principle of risk based capital, whereas the solvency margin will be specified by way of regulation to be made by the Financial Services Commission. This new Act will certainly have an impact on the industry and we have already taken the necessary steps to ensure minimal disruption in our activities. Dividends The Board has recommended similar dividends to last year and accumulated funds are being used to enhance the growth of the company as evidenced by the increase of its net asset value. MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

16 chairman s and managing director s report (continued) The year ahead With the impending introduction of the new Insurance Act, 2006 will be a challenging year for the insurance industry. Reinsurance costs remain high although there are indications on the international market that rates are beginning to stabilise. This should enable us to secure more competitive terms with additional capacity to service our clients. We shall continue to focus on underwriting procedures with the right pricing. The country having been spared the catastrophe of a cyclone so far, our company can look forward to enhanced results from underwriting. Our services will benefit from the assistance of our enhanced information system. The good performance of the equity market, coupled with our competitiveness and the quality of our services, should permit the company to yield reasonable results. We will continue our training programmes to build technical skills within the organisation. Customer care will be a key factor and products to match market demands will be developed. Acknowledgement We offer our appreciation to our staff for their efforts during the year to achieve these results, with a special mention for their dedication and commitment during the implementation phase of the new insurance software. We would like to extend a warm welcome to Messrs Gaëtan Bouic and Gilbert Ithier as directors of the Company and thank the Board for their expertise and support during this past year. Patrice d Hotman de Villiers - Chairman Eric A. Venpin - Managing Director 14 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

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19 { a caring partnership }

20 corporate governance Corporate Governance Statement The Board, management and staff of the Mauritian Eagle Insurance Company Limited (the Company ) fully support and are committed to the principles of business integrity, transparency and professionalism as recommended by the Code of Corporate Governance. We recognize that adhering to good governance principles is not merely compliance with a set of rules and regulations, but entails aiming for the highest standards of Corporate Governance. Furthermore, we strive to ensure that all the activities of the Company are conducted in such a way as to satisfy the characteristics of good Corporate Governance, namely, discipline, transparency, independence, accountability, responsibility, fairness and social responsibility. Company Structure South African Eagle Ireland Blyth Other Company Limited Limited Shareholders 15% 60% 25% Mauritian Eagle Insurance Company Limited Board of Directors H.Savy Insurance Company Limited (Seychelles) Mauritian Eagle Leasing Company Limited 20% 51% The Board bears the responsibility of organizing and directing the affairs of the Company in a manner that is in the best interest of shareholders and other stakeholders. It is also responsible for continually reviewing the activities, practices and trends of the Company so that these are in conformity with legal and regulatory requirements, and with the principles of good governance as set out in the Report on Corporate Governance for Mauritius of April The Board retains full and effective control over the Company, delegating the day-to-day running and operational issues to the Managing Director and his management team. Composition The Board is responsible for the nomination, selection and appointment of directors who are selected on the basis of their integrity, skill, acumen and experience to make sound judgements relevant to the business of the Company. In compliance with the Code, the Board of directors includes three independent non-executive directors and two executive directors. In accordance with Section 30 of the Insurance Bill which states that an insurance company shall have a Board of directors composed of no less than 7 natural persons of which 30% should be independent non-executive directors, and with the code of Corporate Governance which requires that a company has at least two independent non-executive directors, composition of the Board is as follows: 18 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

21 Patrice d Hotman de Villiers, Chairman (Non-Executive Director) Eric A. Venpin, Managing Director (Executive Director) - Appointed on 1 st January 2005 Nick Beyers (Non-Executive Director) Gaëtan Bouic (Independent Non-Executive Director) - Appointed on 24 th June 2005 Dennis Burton (Non-Executive Director) Gilbert Ithier (Independent Non-Executive Director) - Appointed on 15 th November 2005 Subhash Lallah (Independent Non-Executive Director) - Appointed on 29 th March 2005 Gaëtan Lan Hun Kuen (Non-Executive Director) Alain Malliaté (Executive Director) Edmond Maurel (Non-Executive Director) - Resigned on 29 th March 2005 Simon-Pierre Rey (Non-Executive Director) The Board held three meetings during the year under review. Attendance was as follows: 29/03/05 05/09/05 15/11/05 Patrice d Hotman de Villiers (Chairman) Eric A. Venpin (Managing Director) Nick Beyers Gaëtan Bouic Not yet appointed Dennis Burton Gilbert Ithier Not yet appointed Not yet appointed Subhash Lallah Gaëtan Lan Hun Kuen Alain Malliaté Simon-Pierre Rey As from 1 st January, 2006, the Board will meet at least four times annually. Directors Responsibilities The directors are required to ensure that adequate records are maintained so as to disclose at any time, and with reasonable adequacy, the financial position of the Company; they are also responsible for the preparation of financial statements which give a true and fair view of the financial position, performance and cash flows of the Company and comply with the Companies Act 2001 and with International Financial Reporting Standards. The directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Committees The Board fulfils its proper governance responsibilities through various Committees. Two Committees have been formed to deal with Audit, Risk and Corporate Governance issues. Their attributions are summarised below: Audit and Risk Committee The Audit and Risk Committee is appointed by the Board of the Company and comprises of a Chairman, who must be an independent non-executive director, and of at least two members, who should be both non-executive directors. For the year under review, the Committee consisted of four directors, namely, Messrs. Gaëtan Bouic, Chairman (Independent Non-Executive Director), Nick Beyers (Non-Executive Director), Gaëtan Lan Hun Kuen (Non-Executive Director) and Simon-Pierre Rey (Non-Executive Director). Its principal function is to oversee the financial reporting process. MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

22 corporate governance (continued) Audit and Risk Committee (continued) The activities of the Audit Committee include regular reviews and monitoring of the effectiveness of the Company s financial reporting and internal control policies and risk management systems, the effectiveness of the internal audit function, the independence of the external audit process and assessment of the external auditor s performance, the remuneration of external auditors, and ensuring compliance with laws and regulations relevant to financial reporting and with our internal code of business conduct. The Committee meets as frequently as it deems necessary prior to the Board s review of the semi-annual and annual financial statements. Attendance to the Audit and Risk Committee for year under review was as follows: Gaëtan Bouic (Chairman) Nick Beyers Gaëtan Lan Hun Kuen Simon-Pierre Rey Audit and Risk 25/10/05 As from 1 st January 2006, the Committee will meet at least three times annually as per the Committee s terms of reference. When deemed necessary, the presence of internal and external auditors and management team will be requested. The internal audit function is entrusted to the internal audit team of the IBL Group. The Board confirms that there have been no significant issues that have affected the proper functioning of the internal control systems during the year under review which could have impacted on the financial statements. Risk Management The Audit and Risk Committee is also responsible for reviewing the effectiveness of the risk strategy of the Company, for establishing and maintaining a strong risk control environment and for the monitoring of the risk management process. It ensures that appropriate structures, procedures and systems are in place to mitigate all risks. Significant and critical issues are reported to the Board. Corporate Governance Committee The Corporate Governance Committee is appointed by the Board of the Company and comprises of a Chairman, who must be an independent non-executive director, and of at least four members. The majority of the Committee should be composed of non-executive directors. The current Committee met twice during the year under review and is composed of Messrs. Subhash Lallah, Chairman (Independent Non-Executive Director), Gaëtan Lan Hun Kuen (Non-Executive Director), Simon-Pierre Rey (Non-Executive Director), Eric A. Venpin (Managing Director), Alain Malliaté (Executive Director). Attendance was as follows: Corporate Governance 27/07/05 24/10/05 Subhash Lallah (Chairman) Eric A. Venpin (Managing Director) Gaëtan Lan Hun Kuen Alain Malliaté Simon-Pierre Rey 20 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

23 The main functions and objects of the Committee are to determine, agree and develop the Company s policy on Corporate Governance in accordance with the recommendations of the Code of Corporate Governance; advise and make recommendations to the Board on all aspects of Corporate Governance provisions; ensure that disclosures are made in accordance with the principles recommended in the Code; prepare the Corporate Governance report. The meetings are held as the Committee deems appropriate. As from 1 st January 2006, the Committee will meet at least thrice a year. The chairperson of the Committee or any other member may call a meeting at any time. Remuneration Philosophy The Board has entrusted the Remuneration Committee the responsibility of determining the adequate remuneration of Directors by taking into consideration the market conditions, benchmarking in the industry and the Company s results. The Human Resources Team of the IBL Group has been delegated the responsibility of determining employees remuneration. This is reviewed annually after taking into consideration market conditions and practices as well as the performances and responsibilities of the employees. Dividend Policy Dividends are declared and paid half yearly. Subject to internal cash flow requirements and the need for future capital investments, it is the Company s policy to declare dividends out of profits available for distribution in accordance with the Companies Act 2001 and International Financial Reporting Standards; the balance being transferred to reserves. Statutory Disclosures Directorship of other listed companies Directors of the Company who sit on the Board of other listed companies are as follows: Ireland Blyth Sun Resorts The Mount Limited Limited Sugar Estate Patrice d Hotman de Villiers Simon-Pierre Rey Common Directors The common directors of the Company and its subsidiary are as follows: Mauritian Eagle Insurance Mauritian Eagle Leasing Company Limited Company Limited Patrice d Hotman de Villiers (Chairman) Gaëtan Bouic Gilbert Ithier Subhash Lallah Gaëtan Lan Hun Kuen Simon-Pierre Rey MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

24 corporate governance (continued) Statutory Disclosures (continued) Directors Emoluments The remuneration of directors is set out in the table below: The Company Related Corporations Rs 000 Rs 000 Rs 000 Rs 000 Full-Time 5,459 5,282-1,400 Part-Time ,073 27,572 Total 5,629 5,282 24,073 28,972 Directors Service Contracts There are no service contracts between the Company and its directors. Share Dealings Members of the Board have been made aware that they should not deal in Company s shares during the 30 calendar days preceding publication of semi-annual and annual results, and prior to the declaration of dividends, or any major event affecting the Company that might influence its share price. Members have also been advised to declare to the Company all transactions conducted by them outside the periods mentioned. Directors Share Interests The interests of the Chairman and the directors of the Company are as follows: Ordinary Shares of Rs.10 each (Numbers) Mr. Gaëtan Lan Hun Kuen 1,034 Mr. Eric A. Venpin 2,100 The other directors do not hold shares in the Company whether directly or indirectly. None of the directors have a direct or indirect share in the equity of the subsidiary of the Company. Significant Contracts No contracts of significance existed during the period under review between the Company, its subsidiary and any director or controlling shareholder of the Company, either directly or indirectly. Substantial Shareholding The directors have been advised that the following persons or entities (excluding directors) held 5% or more of the nominal value of the share capital of the Company. South African Eagle Insurance Company Limited 15% Audit Fees External auditor s remuneration is as follows: The Group The Company Rs 000 Rs 000 Rs 000 Rs 000 Audit Fees 210, , , ,250 Other Services 15,750 9,200 10,000 9,200 Total 225, , , , MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

25 Share Price Information The evolution of the Company s share price is as follows: Rs At 31 st December Anti-Money Laundering In line with the requirements of the Financial Intelligence and Anti-Money Laundering Act 2002 and the Regulations 2003, a review of control procedures and internal policies has been carried out. Training is provided to staff on an ongoing basis. Safety, Health and Environmental Practices Health and safety policies adopted have ensured satisfactory compliance with the appropriate legislation and ruling standards. No injuries at work were recorded. The Company adheres to the IBL Group s health and safety and environmental policies. Social Responsibility During year under review, donations made by the Group and the Company amounted to Rs 196,511 and Rs 186,161 respectively. (2004: Rs 8,500 for the Group). This includes sponsorship of projects undertaken by Terre de Paix. Political Contributions The Company did not make any contribution to political parties during the year under review. Relationship with Shareholders The Board is committed to properly understand the information needs of all shareholders and other stakeholders of the Company. It ensures that lines of communication are kept open to communicate all matters affecting the Company to its shareholders. Code of Ethics The Company is committed to the highest standards of integrity and ethical conduct with all its stakeholders. Important Events - Calender 2006 Annual Meeting 27 th June 2006 Declaration of Final Dividend - Financial Year th March 2006 Payment of Final Dividend - Financial Year th April 2006 Declaration of Interim Dividend - Financial Year 2006 September 2006 Payment of Interim Dividend - Financial Year 2006 September 2006 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

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27 certificate from the company secretary In terms of Section 166 (d) of the Companies Act 2001, I certify that the Company has filed with the Registrar of Companies all such returns as are required of the Company under the Companies Act. Simon-Pierre Rey - Company Secretary 27 th March 2006 { highest standards of protection } MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

28 premium and profitability charts (the Company) Fire 27% Gross Class Mix 2005 Premium Percentage Marine 11% Accident 17% Engineering 5% Motor 22% Life 18% Gross Premium Income Management Expense Ratio Profitability Before tax After tax Rs M % of Gross Premium Rs M 26 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

29 report of the auditors to the shareholders We have audited the financial statements of the Group and the Company set out on pages 28 to 73. This report is made solely to the Company s members, as a body, in accordance with Section 205 of the Companies Act Our audit work has been undertaken so that we might state to the Company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors are responsible for the preparation of financial statements which give a true and fair view of the financial position, performance and cash flows of the Group and the Company and comply with the Companies Act 2001 and with International Financial Reporting Standards. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. It is our responsibility to form an independent opinion, based on our audit, on those financial statements and to report our opinion to you. Basis of opinion We conducted our audit in accordance with International Standards on Auditing. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by directors in the preparation of financial statements, and of whether the accounting policies are appropriate to the Group s and the Company s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatements. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion. We have no relationship with, or interests in the Group and the Company, other than in our capacity as auditors and tax advisors, and arm s length dealings with the Group and the Company in the ordinary course of business. Opinion We have obtained all the information and explanations that we have required. In our opinion: - proper accounting records have been kept by the Group and the Company as far as appears from our examination of those records; and - the financial statements give a true and fair view of the financial position of the Group and the Company as at 31 December 2005, and of their financial performance and cash flows for the year then ended, and comply with the Companies Act 2001 and with International Financial Reporting Standards. Kemp Chatteris Deloitte - Chartered Accountants 29 th March 2006 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

30 balance sheets at 31 December 2005 The Group The Company Note ASSETS Rs Rs Rs Rs NON CURRENT ASSETS Intangible assets 4 1,214, ,021 - Property, plant and equipment 5 172,465,317 68,088,819 64,740,068 66,404,228 Investment in subsidiary ,000,000 30,600,000 Investment in associate 7 12,140,228-6,313,125 - Statutory and other deposits 8 15,500,000 18,500,000 15,500,000 18,500,000 Other investments 9 122,648,589 83,667,204 83,142,341 50,957,091 Mortgage and other loans ,994,511 78,534, ,994,511 78,534,277 Finance lease receivables ,627, ,853, Deferred tax asset 19 64, , ,367 1,175,655, ,219, ,659, ,571,963 CURRENT ASSETS Statutory and other deposits 8 23,000,000 26,000,000 23,000,000 26,000,000 Mortgage and other loans 10 5,598,350 16,745,187 5,598,350 16,745,187 Finance lease receivables ,845, ,470, Trade and other receivables ,688, ,703, ,473, ,056,610 Deposits with Group companies 13 46,330,785 53,705,285 46,330,785 63,705,285 Amounts due from Group companies 14 21,093,087 53,030,188 19,357,220 19,357,220 Bank and cash balances 97,559,371 80,826,848 26,193,186 32,605, ,116, ,480, ,953, ,469,856 TOTAL ASSETS 1,804,771,457 1,303,700, ,612, ,041,819 CAPITAL AND RESERVES Share capital 20 26,666,660 26,666,660 26,666,660 26,666,660 Share premium 21,404,453 21,404,453 21,404,453 21,404,453 Revaluation reserve 20,215,640 20,215,640 20,215,640 20,215,640 Investment revaluation reserve 7,749,452 5,644,711 7,749,452 5,644,711 Retained profits 163,300, ,394, ,340, ,509,521 EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 239,336, ,325, ,376, ,440,985 Minority interest 68,343,494 41,779, TOTAL EQUITY 307,679, ,104, ,376, ,440,985 STATUTORY RESERVE FUND 33,803,352 28,566,034 33,803,352 28,566,034 INSURANCE FUNDS General insurance fund 21 56,753,683 66,295,918 56,753,683 66,295,918 Life insurance fund ,801, ,323, ,801, ,323, ,555, ,619, ,555, ,619,093 LONG TERM LIABILITIES Loans ,000, Deposits from clients ,654, ,482, Deferred tax liability , ,654, ,482, ,581 - CURRENT LIABILITIES Bank overdraft 166, Trade and other payables ,479,567 78,230,166 68,902,652 55,039,389 Loans 16 40,000, Claims outstanding 17(a) 70,835,877 64,889,842 70,835,877 64,889,842 Deposits from clients ,596, ,537, Taxation 19 7,000,000 10,270,621 7,000,000 7,486, ,078, ,927, ,738, ,415,707 TOTAL EQUITY AND LIABILITIES 1,804,771,457 1,303,700, ,612, ,041,819 These financial statements have been approved by the Board of Directors on 27 March The notes on pages 36 to 73 form an integral part of these financial statements. Auditors Report on page 27 Patrice d Hotman de Villiers - Chairman Eric A. Venpin - Managing Director 28 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

31 income statements for the year ended 31 December 2005 The Group The Company Note Rs Rs Rs Rs Gross insurance premiums 484,250, ,446, ,250, ,446,358 Gross lease rental income 272,478, ,529, ,729, ,975, ,250, ,446,358 Less: Reinsurance premiums 233,982, ,675, ,982, ,675,841 Capital element of finance lease rental income 188,489, ,047, ,471, ,723, ,982, ,675,841 NET REVENUE 334,257, ,252, ,268, ,770,517 INVESTMENT INCOME 32,777,085 25,770,896 25,344,290 23,938,594 COMMISSION INCOME 33,451,636 29,696,458 33,451,636 29,696,458 OTHER INCOME 14,618,866 9,357,454 8,368,168 7,954, ,105, ,076, ,432, ,360,003 BENEFITS AND EXPENSES Benefits and claims 17(b) 158,185, ,210, ,185, ,210,447 Commission paid 37,420,861 31,304,020 37,420,861 31,304,020 Administrative expenses 66,555,892 53,061,903 52,008,919 45,737, ,162, ,576, ,615, ,252,281 PROFIT FROM OPERATIONS ,943, ,500,570 69,817,334 73,107,722 RELEASE FROM/(TO) - General insurance fund 9,542,235 2,704,961 9,542,235 2,704,961 - Life insurance fund (42,478,424) (34,143,915) (42,478,424) (34,143,915) (32,936,189) (31,438,954) (32,936,189) (31,438,954) 120,007, ,061,616 36,881,145 41,668,768 FINANCE COSTS 24 (69,660,279) (43,373,026) ,346,782 57,688,590 36,881,145 41,668,768 SHARE OF RESULTS OF ASSOCIATE 6,940, PROFIT BEFORE TAXATION 57,287,167 57,688,590 36,881,145 41,668,768 TAXATION 19 (7,512,891) (10,440,441) (7,146,514) (7,806,294) PROFIT AFTER TAXATION 49,774,276 47,248,149 29,734,631 33,862,474 LESS: APPROPRIATIONS - Transfer to statutory reserve fund (5,237,318) (4,461,761) (5,237,318) (4,461,761) PROFIT FOR THE YEAR 44,536,958 42,786,388 24,497,313 29,400,713 ATTRIBUTABLE TO: Equity holders of the parent 37,572,812 36,227,407 24,497,313 29,400,713 Minority interest 6,964,146 6,558, ,536,958 42,786,388 24,497,313 29,400,713 EARNINGS PER SHARE The notes on pages 36 to 73 form an integral part of these financial statements. Auditors Report on page 27 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

32 income statement - general business for the year ended 31 December 2005 The Company Rs Rs GROSS PREMIUMS 400,043, ,420,706 LESS: REINSURANCE PREMIUMS 225,922, ,677,626 NET PREMIUMS 174,121, ,743,080 INVESTMENT INCOME 10,919,869 13,275,991 COMMISSION INCOME 33,451,636 29,696,458 OTHER INCOME 6,636,217 5,986, ,129, ,701,946 EXPENSES Claims 126,749, ,907,700 Commission paid 29,817,777 24,671,626 Administrative expenses 41,223,292 36,158, ,790, ,738,139 PROFIT FROM OPERATIONS 27,338,910 38,963,807 ADD: RELEASE FROM GENERAL INSURANCE FUND 9,542,235 2,704,961 PROFIT BEFORE TAXATION 36,881,145 41,668,768 TAXATION (7,146,514) (7,806,294) PROFIT AFTER TAXATION 29,734,631 33,862,474 DEDUCT APPROPRIATIONS - Transfer to Statutory Reserve Fund (5,237,318) (4,461,761) PROFIT ATTRIBUTABLE TO SHAREHOLDERS 24,497,313 29,400,713 The notes on pages 36 to 73 form an integral part of these financial statements. Auditors Report on page MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

33 income statement - life business for the year ended 31 December 2005 The Company Rs Rs GROSS PREMIUMS 84,206,680 66,025,652 LESS: REINSURANCE PREMIUMS 8,059,863 6,998,215 NET PREMIUMS 76,146,817 59,027,437 INVESTMENT INCOME 14,424,421 10,662,603 OTHER INCOME 1,731,951 1,968,017 BENEFITS AND EXPENSES 92,303,189 71,658,057 Benefits and claims 31,436,054 21,302,747 Commission paid 7,603,084 6,632,394 Administrative expenses 10,785,627 9,579,001 49,824,765 37,514,142 PROFIT FROM OPERATIONS 42,478,424 34,143,915 LESS: TRANSFER TO LIFE INSURANCE FUND 42,478,424 34,143, The notes on pages 36 to 73 form an integral part of these financial statements. Auditors Report on page 27 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

34 statements of changes in equity for the year ended 31 December 2005 THE GROUP Investment Attributable to Share Share Revaluation revaluation Retained equity holders Minority Total Note capital premium reserve reserve profits of the parent interests equity Rs Rs Rs Rs Rs Rs Rs Rs At 1 January ,666,660 21,404,453 20,215,640 1,152, ,833, ,272,540 18,070, ,342,907 Revaluation surplus realised (359,194) - (359,194) - (359,194) Change in fair value of available-for-sale investments ,851,523-4,851,523-4,851,523 Issue of shares to minorities ,150,000 17,150,000 Profit attributable to shareholders ,227,407 36,227,407 6,558,981 42,786,388 Dividend (12,666,664) (12,666,664) - (12,666,664) At 31 December ,666,660 21,404,453 20,215,640 5,644, ,394, ,325,612 41,779, ,104,960 At 1 January ,666,660 21,404,453 20,215,640 5,644, ,394, ,325,612 41,779, ,104,960 Revaluation surplus realised (4,093,168) - (4,093,168) - (4,093,168) Change in fair value of available-for-sale investments ,197,909-6,197,909-6,197,909 Issue of shares to minorities ,600,000 19,600,000 Profit attributable to shareholders ,572,812 37,572,812 6,964,146 44,536,958 Dividend (12,666,664) (12,666,664) - (12,666,664) At 31 December ,666,660 21,404,453 20,215,640 7,749, ,300, ,336,501 68,343, ,679,995 The notes on pages 36 to 73 form an integral part of these financial statements. Auditors Report on page MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

35 statements of changes in equity for the year ended 31 December 2005 THE COMPANY Investment Share Share Revaluation revaluation Retained Note capital premium reserve reserve profits Total Rs Rs Rs Rs Rs Rs At 1 January ,666,660 21,404,453 20,215,640 1,152, ,775, ,214,607 Revaluation surplus realised (359,194) - (359,194) Change in fair value of available-for-sale investments ,851,523-4,851,523 Profit attributable to shareholders ,400,713 29,400,713 Dividend (12,666,664) (12,666,664) At 31 December ,666,660 21,404,453 20,215,640 5,644, ,509, ,440,985 At 1 January ,666,660 21,404,453 20,215,640 5,644, ,509, ,440,985 Revaluation surplus realised (4,093,168) - (4,093,168) Change in fair value of available-for-sale investments ,197,909-6,197,909 Profit attributable to shareholders ,497,313 24,497,313 Dividend (12,666,664) (12,666,664) At 31 December ,666,660 21,404,453 20,215,640 7,749, ,340, ,376,375 The notes on pages 36 to 73 form an integral part of these financial statements. Auditors Report on page 27 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

36 cash flow statements for the year ended 31 December 2005 The Group The Company Note Rs Rs Rs Rs CASH FLOWS FROM OPERATING ACTIVITIES Net profit before taxation 57,287,167 57,688,590 36,881,145 41,668,768 Adjustments for: Depreciation 8,587,114 5,597,922 5,638,482 4,993,039 Profit on sale of property and equipment - (390,745) - (390,745) Profit on sale of investments (7,429,172) (3,691,112) (7,429,172) (3,691,112) Provision for credit losses 5,200,000 2,984, Dividend income (2,164,247) (2,836,912) (2,698,622) (2,836,912) Interest income (22,170,668) (26,136,916) (22,645,668) (20,987,244) Interest expense 69,660,279 43,373, Share of results of associate (6,940,385) Net life insurance fund 42,478,424 34,143,915 42,478,424 34,143,915 Net general insurance fund (9,542,235) (2,704,961) (9,542,235) (2,704,961) OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 134,966, ,027,078 42,682,354 50,194,748 Increase in trade and other receivables (37,985,448) (33,368,852) (30,416,902) (25,884,668) Increase in mortgage and other loans (13,313,397) (18,491,358) (13,313,397) (18,491,358) Increase in claims outstanding 5,946,035 12,985,085 5,946,035 12,985,085 Increase/(decrease) in trade and other payables 41,249,401 1,555,964 13,863,263 (11,034,255) (4,103,409) (37,319,161) (23,921,001) (42,425,196) CASH GENERATED FROM OPERATIONS 130,862,868 70,707,917 18,761,353 7,769,552 Taxation paid (9,692,948) (7,986,003) (6,918,042) (6,344,505) Interest paid (69,660,279) (43,373,026) - - NET CASH GENERATED FROM OPERATING ACTIVITIES 51,509,641 19,348,888 11,843,311 1,425,047 CASH FLOW FROM INVESTING ACTIVITIES Decrease/(increase) in amount due from Group companies 31,937,101 (33,672,968) - 33,150,000 Purchase of investments (102,590,978) (25,176,103) (63,822,286) (17,490,243) Increase in investment in subsidiary - - (20,400,000) (17,850,000) Net decrease/(increase) in statutory and other deposits 6,000,000 (15,846,000) 6,000,000 (15,846,000) Proceeds from sale of investments 65,398,067 22,788,689 34,857,824 22,788,689 Purchase of property and equipment (111,708,930) (9,667,878) (3,210,306) (7,378,404) Purchase of intangible assets (2,469,037) - (1,733,037) - Proceeds from sale of property and equipment - 415, ,000 Interest received 23,602,982 23,967,046 22,645,668 20,987,244 Dividend received 2,164,247 2,836,912 2,698,622 2,836,912 Investment in finance lease (537,145,934) (379,872,892) - - Capital repayment of finance lease 209,795, ,356, Net deposits received 165,230, ,193, NET CASH GENERATED FROM/(USED IN) FINANCING ACTIVITIES (249,786,000) 60,321,353 (22,963,515) 21,613,198 (198,276,359) 79,670,241 (11,120,204) 23,038,245 CASH FLOW FROM FINANCING ACTIVITIES Loans received/(repaid) 200,000,000 (31,850,000) - - Dividend received from associate 534, Dividend paid (12,666,664) (12,666,664) (12,666,664) (12,666,664) Proceeds from issue of shares to minority shareholders 19,600,000 17,150, NET CASH GENERATED FROM/(USED IN) FINANCING ACTIVITIES 207,467,711 (27,366,664) (12,666,664) (12,666,664) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 9,191,352 52,303,577 (23,786,868) 10,371,581 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR ,532,133 82,228,556 96,310,839 85,939,258 CASH AND CASH EQUIVALENTS AT END OF THE YEAR ,723, ,532,133 72,523,971 96,310,839 The notes on pages 36 to 73 form an integral part of these financial statements. Auditors Report on page MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

37 { assuring peace of mind } MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

38 notes to the accounts for the year ended 31 December Legal form and activity The Company is a public company incorporated in Mauritius. Its registered office is situated at 5 th Floor, IBL House, Caudan and it conducts business at 1 st Floor, IBL House, Caudan, Port Louis. The Company carries out short and long term insurance businesses while the subsidiary is a private company dealing in finance leases. Short term insurance comprises general insurances and covers the following: Fire and allied perils Accidents Marine Motor and travel Engineering Long term insurance relates to life assurances and pension plans. 2. Accounting policies The principal accounting policies adopted by the Company are as follows: (a) Adoption of new and revised International Financial Reporting Standards (IFRS) In the current year, the Group has adopted all of the new and revised standards and interpretations issued by the International Accounting Standards Board (the IASB ) and the International Financial Reporting Interpretations Committee ( IFRIC ) of the IASB that are relevant to its operations and effective for accounting periods beginning on 1 January The adoption of these new and revised standards and interpretations has resulted in changes to the Group s accounting policies in the following areas that have affected the amounts reported for the current or prior years: Intangible assets (Revised IAS 38) Insurance contracts (IFRS 4) The impact of these changes in accounting policies is discussed in detail below: Intangible assets (Revised IAS 38) Following the introduction of Revised IAS 38, Intangible assets, computer software that is not considered integral to the related hardware has been reclassified as intangible assets. The change in classification has no impact on the results or cash flows for the year ended 31 December Insurance contracts (IFRS 4) The Group has adopted IFRS 4, Insurance Contracts, the main objective of which is to specify the financial reporting for insurance contracts by any company that issues such contracts (the insurer). 36 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

39 2. Accounting policies (continued) (a) Adoption of new and revised International Financial Reporting Standards (IFRS) (continued) IFRS 4 exempts an insurer temporarily from some requirements of other IFRSs. Amongst other, IFRS 4 Inter alia: prohibits provisions for possible claims under contracts that are not in existence at the reporting date; requires a test for the adequacy of recognised insurance liabilities and an impairment test for reinsurance assets; requires an insurer to keep insurance liabilities in its balance sheet until they are discharged, cancelled or expired and to present insurance liabilities without offsetting them against related assets. permits an insurer to change its accounting policies for insurance contracts only if, as a result, the financial statements present information that is more reliable and no less relevant. Under existing standards, for the year ended 31 December 2004 the Group has already satisfied the minimum requirements set by IFRS 4 except for some additional disclosures. Consequently, there is no impact on the results and cash flows for the year ended 31 December However, the Group has taken advantage of paragraphs 42 and 44 of IFRS 4 which dispenses it from the requirement to give comparative information to the disclosure requirements of IFRS 4 to annual periods beginning before 1 January At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective: IAS 19 (Revised 2004) Employee Benefits IFRS 6 Exploration for and Evaluation of Mineral Resources IFRS 7 Financial Instruments: Disclosure IFRIC 4 Determining whether an Arrangement contains a Lease IFRIC 5 Right to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds IFRIC 6 Liabilities arising from Participating in a Specific Market Waste Electrical and Electronic Equipment IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies IFRIC 8 Scope of IFRS 2 The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group and the separate financial statements of the Company. (b) Basis of accounting The financial statements are prepared under the historical cost convention as modified by the revaluation of land and building and certain available-for-sale investments and in accordance with International Financial Reporting Standards. MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

40 notes to the accounts for the year ended 31 December 2005 (continued) 2. Accounting policies (continued) (c) Basis of consolidation The consolidated accounts include the results of the Company and of its subsidiary. The results of subsidiary acquired or disposed of during the year are included in the consolidated income statements from the date of their acquisition or up to the date of their disposal. Inter-group transactions and balances are eliminated on consolidation. Minority interests in the net assets of consolidated subsidiary are identified separately from the Group s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority s interest in the subsidiary s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses. (d) Revenue recognition (i) General business Gross premiums on general business excluding marine, motor and part of fire businesses are earned on a pro-rata basis over the term of the policy coverage. The portion of the unearned premiums, which is calculated using the 1/8 method, is transferred to the general insurance fund. Premiums are shown gross of commission. Gross premiums on marine business are accounted for on an underwriting year basis and the net surplus is transferred to the general insurance fund to be released to the income statement at the end of a period of two years. (ii) Life business Insurance contracts with fixed and guaranteed terms Gross premiums from life insurance business are recognised when they become payable from the policyholders and are shown gross of commission and other expenses. Unit-linked insurance contracts Insurance premiums are recognised directly as liabilities. (iii) Lease business Gross earnings on finance lease are accounted for in the year in which they are receivable. Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. 38 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

41 2. Accounting policies (continued) (d) Revenue recognition (continued) (iv) Other revenues Other revenues earned by the Company are recognised on the following bases: Dividend income from listed investments is recognised on an accrual basis whereas those from unquoted investments are recognised on a receipt basis. Commission income from reinsurers is recognised on an accrual basis in accordance with the substance of the relevant agreement. Profit commission from reinsurers is recognised on a receipt basis. Interest income on bank deposits and debentures is recognised on an accrual basis whereas those on mortgages and policy loans are recognised on a receipt basis. (e) Property and equipment Property and equipment are stated at cost or revalued amount less accumulated depreciation. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at balance sheet date. Increases in carrying amount arising from revaluation of land and building are credited to revaluation reserve. Decreases in carrying amount that offset previous increases are charged against the revaluation reserve; all other decreases are charged to the Income Statement. Profit or loss on disposal of property, plant and equipment is determined by the difference between the carrying amount of the assets and the net disposal proceeds and is accounted for in the income statement. (f) Depreciation No depreciation is charged on land. Depreciation on other property and equipment is calculated to write off their costs or revalued amount on a straight line basis over their expected useful lives. The annual depreciation rates used for the purpose are as follows: Building: 2% Furniture and equipment: 20% Computer equipment: 33.3% Motor vehicles: 6 years Plant and machinery and motor vehicles under operating leases: depreciated over the lease terms (g) Intangible asset and amortisation Computer software is stated at cost less accumulated amortisation. Amortisation of computer software is calculated to write off its cost on a straight line basis over its expected useful life, which is six years. MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

42 notes to the accounts for the year ended 31 December 2005 (continued) 2. Accounting policies (continued) (h) Investment in subsidiary Investment in subsidiary is stated at cost less any impairment loss to reflect irrecoverable amounts. (i) Investment in associate An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decision of the investee but is not control or joint control over these policies. Investment in associate is accounted for at cost in the Company s accounts and under the equity method in the Group accounts. The Group s share of the associates profit or loss for the year is recognised in the income statement and the Group s interest in the associate is carried in the balance sheet at an amount that reflects its share of the net assets of the associates. Any excess of the cost of acquisition over the Group s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment on an annual basis as part of the investment. Any excess of the Group s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss. (j) Mortgage and other loans Mortgage and other loans are stated at outstanding principal less provisions if any. (k) Claims outstanding Claims outstanding represent the estimated liability for claims reported plus losses incurred but not yet reported and the related loss adjustment expenses. Claims and loss adjustment expenses are charged to the income statement as incurred based on the estimated liability for compensation owed to contract holders or third parties damaged by the contract holders. They include direct and indirect claim settlement costs and arise from events that have occurred up to the balance sheet date even if they have not yet been reported to Group. The liability for losses and loss adjustment expenses is determined using case basis evaluations and statistical analysis, and represents an estimate of the ultimate net cost of all losses incurred but not paid at balance sheet date. Although considerable variability is inherent in such estimates, management believes that the liability for unpaid losses and loss adjustment expenses is adequate. These estimates are continually reviewed and adjusted as necessary; such adjustments are reflected in current operations. (l) Benefits Benefits are recorded as an expense when they are incurred. The liabilities for benefit are recalculated at each balance sheet date using the assumptions established at the inception of the insurance contracts. 40 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

43 2. Accounting policies (continued) (m) Reinsurance contracts held Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group are classified as reinsurance contracts held. Insurance contracts entered into by the Group under which the contract holder is another insurer (Inwards Reinsurance) are included with insurance contract. (n) Salvage and subrogation reimbursements Some insurance contracts permit the Group to sell property acquired in setting a claim (i.e. salvage). The Company may also have the right to sue third parties for payment of some or all the costs incurred (i.e subrogation). Estimates of salvage recoveries are included as allowance in the measurement of the insurance liability for claims, and salvage property is recognised in other assets when the liability is settled. (o) Comparative figures When an accounting policy is changed with retrospective effect, comparative figures are restated in accordance with the new policy. (p) Deferred taxation Deferred taxation is provided on the comprehensive basis using the liability method. Deferred tax liabilities are recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial reporting purposes. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is possible that taxable profit will be available against which the deductible temporary differences can be utilised. (q) Foreign currencies Foreign currency transactions are translated to Mauritian rupees at the rate of exchange ruling at the date of the transactions. Monetary assets and liabilities outstanding at year end are translated to Mauritian rupees at the rate of exchange ruling at the balance sheet. All exchange differences on translation are dealt with in the income statement. (r) Life Assurance fund The transfer of reserves to Life Assurance Fund for the future benefits of policyholders is determined annually by actuarial valuation and is subject to provisions of the Insurance Act. MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

44 notes to the accounts for the year ended 31 December 2005 (continued) 2. Accounting policies (continued) (s) Retirement benefits (i) Defined benefit pension plan The Company provides retirement benefit for its employees through a defined benefit plan. The plan which is wholly funded by Ireland Blyth Limited, has the characteristics of a multi-employer plan and an actuarial valuation of the plan has been performed by The Anglo Mauritius Assurance Society Ltd on 17 January Sufficient information is not available to use defined benefit accounting and accordingly the plan has been accounted for as a defined contribution plan as permitted by IAS 19. Contributions to the pension plan have been charged to the income statement in the year to which they fall due. (ii) State plan Contributions to the National Pension Scheme are expensed to the income statement in the period in which they fall due. (t) Financial instruments Financial assets and liabilities are recognised on the balance sheet when the Group has become party to the contractual provisions of the financial instruments. (i) Investments Investments are recognised on a trade-date basis and are initially measured at fair value. At subsequent reporting dates, investments classified as loans-and-receivables ( L&R ) or as held-to-maturity ( HTM ) are measured at amortised cost, less any impairment loss. Investments other than L&R and HTM investments are classified as either held-for-trading ( HFT ), which is a subset of the fair-value-through-profit-or-loss ( FVTPL ) category, or available-for-sale ( AFS ) and are normally measured at subsequent reporting dates at fair value. However, AFS investments which do not have a quoted market price and whose fair value cannot be reliably measured are subsequently measured at amortised cost or cost, depending on whether they have a fixed maturity or not, less any impairment loss. For FVTPL (including HFT) assets and liabilities, unrealised gains and losses are included in the Income and Distribution Statement. For AFS investments, unrealised gains and losses are recognised directly in equity until the investment is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity in respect of that investment is included in the Income and Distribution Statement. The Group has the possibility to designate any financial asset or financial liability as at FVTPL i.e at fair value with changes in fair value recognised through profit or loss provided that the financial asset or financial liability satisfies certain conditions. The gains and losses on disposal of HFT and AFS investments are recognised in the Income and Distribution Statement. 42 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

45 2. Accounting policies (continued) (t) Financial instruments (continued) (ii) Accounts receivable Accounts receivable originated by the Group are stated at cost less provision for doubtful debts. An estimate of doubtful debts is made based on a review of all outstanding amounts at balance sheet date. Debts are written off during the period in which they are identified. (iii) Borrowings Borrowings are measured at amortised cost. (iv) Cash and cash equivalents Cash and cash equivalents are measured at fair value, based on the relevant exchange rates at balance sheet date. (v) Treasury bills Treasury bills are classified as held-to-maturity and are measured at amortised cost. (u) Impairment At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any, and the carrying amount of the asset is reduced to its recoverable amount. (v) Provision A provision is recognised when there is a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. (w) Leases Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group s net investment outstanding in respect of the leases. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term as required by IAS 17 (Revised 2003). (x) Insurance liabilities As permitted by IFRS 4, the Group has continued its practice of measuring insurance liabilities on an undiscounted basis. MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

46

47 { premium protection }

48 notes to the accounts for the year ended 31 December 2005 (continued) 3. Accounting judgements and key sources of estimation uncertainty (a) Judgements made in applying the Group s accounting policies Judgements made in the process of applying the Group s accounting policies and that have the most significant effect on the amounts recognised in the financial statements include: (i) the classification of financial statements into the FVTPL category, HTM category or L&R category. (ii) the classification of lease into finance and operating lease. (b) Key sources of estimation uncertainty There are no key sources of estimation uncertainty in the financial statements as at 31 December 2005 that would have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. 4. Intangible assets Computer software COST The Group The Company Rs Rs Acquisitions during the year 2,469,037 1,733,037 DEPRECIATION Charge for the year 1,254, ,016 NET BOOK VALUE At 31 December ,214, ,021 At 31 December MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

49 5. Property, plant and equipment (a) The Group Land & Plant & Furniture & Computer Motor Building machinery equipment equipment vehicles Total Rs Rs Rs Rs Rs Rs COST / REVALUATION At 1 January ,001,640-23,549,258 12,062,392 9,878, ,491,345 Additions - - 2,905,701 4,071,377 2,690,800 9,667,878 Disposals (1,273,450) (1,273,450) Written off - - (20,052,331) (9,719,688) - (29,772,019) At 31 December ,001,640-6,402,628 6,414,081 11,295,405 83,113,754 Additions - 81,434, ,215 1,223,711 28,253, ,708,930 Written off - - (899,260) (1,005,750) - (1,905,010) At 31 December ,001,640 81,434,116 6,300,583 6,632,042 39,549, ,917,674 Comprising: At cost 1,882,260 81,434,116 6,300,583 6,632,042 39,549, ,798,294 At valuation 57,119, ,119,380 59,001,640 81,434,116 6,300,583 6,632,042 39,549, ,917,674 DEPRECIATION At 1 January ,764,520-21,741,656 10,486,733 4,455,318 40,448,227 Charge for the year 941,130-1,009,874 1,572,364 2,074,554 5,597,922 Disposals (1,249,195) (1,249,195) Written off - - (20,052,331) (9,719,688) - (29,772,019) At 31 December ,705,650-2,699,199 2,339,409 5,280,677 15,024,935 Charge for the year 941,130-1,171,580 1,524,452 3,695,270 7,332,432 Written off - - (899,260) (1,005,750) - (1,905,010) At 31 December ,646,780-2,971,519 2,858,111 8,975,947 20,452,357 NET BOOK VALUES At 31 December ,354,860 81,434,116 3,329,064 3,773,931 30,573, ,465,317 At 31 December ,295,990-3,703,429 4,074,672 6,014,728 68,088,819 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

50 notes to the accounts for the year ended 31 December 2005 (continued) 5. Property, plant and equipment (continued) (b) The Company Land & Furniture & Computer Motor Building equipment equipment vehicles Total Rs Rs Rs Rs Rs COST / REVALUATION At 1 January ,001,640 23,549,258 12,062,392 9,878, ,491,345 Additions - 1,718,629 2,968,975 2,690,800 7,378,404 Disposals (1,273,450) (1,273,450) Written off - (20,052,331) (9,719,688) - (29,772,019) At 31 December ,001,640 5,215,556 5,311,679 11,295,405 80,824,280 Additions - 778,115 1,591, ,040 3,210,306 Written off - (899,260) (1,005,750) - (1,905,010) At 31 December ,001,640 5,094,411 5,897,080 12,136,445 82,129,576 Comprising: At cost 1,882,260 5,094,411 5,897,080 12,136,445 25,010,196 At valuation 57,119, ,119,380 59,001,640 5,094,411 5,897,080 12,136,445 82,129,576 DEPRECIATION At 1 January ,764,520 21,741,656 10,486,733 4,455,318 40,448,227 Charge for the year 941, ,458 1,204,897 2,074,554 4,993,039 Disposals (1,249,195) (1,249,195) Written off - (20,052,331) (9,719,688) - (29,772,019) At 31 December ,705,650 2,461,783 1,971,942 5,280,677 14,420,052 Charge for the year 941, ,890 1,589,580 1,410,866 4,874,466 Written off - (899,260) (1,005,750) - (1,905,010) At 31 December ,646,780 2,495,413 2,555,772 6,691,543 17,389,508 NET BOOK VALUE At 31 December ,354,860 2,598,998 3,341,308 5,444,902 64,740,068 At 31 December ,295,990 2,753,773 3,339,737 6,014,728 66,404,228 (c) The Group rents out the following plant and equipment under operating leases: Accumulated Net book Cost depreciation value Rs Rs Rs - Plant and machinery 81,434,117-81,434,117 - Motor vehicles 27,412,848 (2,284,404) 25,128, ,846,965 (2,284,404) 106,562,561 The plant and equipment are expected to generate rental yields of 11.25% on an ongoing basis. All of these plant and equipment held have committed tenants for the next 7 years. 48 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

51 5. Property, plant and equipment (continued) At the balance sheet date, the Group has contracted with tenants for the following future minimum lease payments: 2005 Rs Within one year 10,868,957 In the second to the fifth years inclusive 58,652,984 After five years 37,776, ,298,149 Land and building were revalued on 31 December 2001 by Gexim Real Estate Ltd, independent valuers at Rs 57,119,380 on the basis of open market value. The surplus on revaluation of Rs 20,215,640 was transferred to revaluation reserve. Had land and building been carried at historical cost, the carrying amount would have been Rs 34,516,141 (2004: Rs 35,273,038). The Group has pledged all the subsidiary s assets having a carrying amount of Rs 108M to secure banking facilities granted to it. 6. Investment in subsidiary (a) Unquoted investment at cost: Rs Rs At 1 January 30,600,000 12,750,000 Additions 20,400,000 17,850,000 At 31 December 51,000,000 30,600,000 (b) Details of investment: Country of Name of subsidiary Type of shares incorporation % holding Mauritian Eagle Leasing Co Ltd Ordinary shares of Rs10 each Mauritius 51% 51% (c) Valuation The directors consider the market value of the investment to be worth its cost. MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

52 notes to the accounts for the year ended 31 December 2005 (continued) 7. Investment in associate (a) Unquoted The Group The Company Rs Rs Cost transferred from other investments 6,313,125 6,313,125 Share of post-acquisition profit, net of dividend received 5,827,103 - At 31 December ,140,228 6,313,125 (b) Details of the investment are: Proportion Place of of voting Proportion of Name of associate operation power held ownership interest Principal activity H Savy Insurance Co Ltd Seychelles 20% 20% General, life and marine insurances (c) Basis for applying the equity method of accounting The financial statements of H Savy Insurance Co Ltd are made up to 30 June each year. For the purpose of applying the equity method of accounting, the audited financial statements of H Savy Insurance Co Ltd for the year ended 30 June 2005, and draft management accounts for the period ended 31 December 2005 have been used. (d) Summarised financial information in respect of the Group s associate is set out below: At 31 December 2005 Rs Total assets 138,282,119 Total liabilities (100,043,040) Net assets 38,239,079 Group s share of associate s net assets 7,647,816 Year ended 31 December 2005 Rs Revenue 146,816,872 Profit for the period 34,701,925 Group s share of associate s profit for the period 6,940, MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

53 8. Statutory and other deposits The Group and The Company Statutory Other deposits deposits Total Rs Rs Rs At 1 January ,000,000 28,500,000 44,500,000 Additions 9,000,000 11,000,000 20,000,000 Disposals (9,000,000) (17,000,000) (26,000,000) At 31 December ,000,000 22,500,000 38,500,000 Maturity of the deposits: - within one year 8,000,000 15,000,000 23,000,000 - in the second to the fifth year inclusive 8,000,000 7,500,000 15,500,000 16,000,000 22,500,000 38,500,000 (i) (ii) The statutory deposits are pledged in favour of the Financial Services Commission. The statutory deposits and other deposits earn interest at rates varying from 5% to 10% per annum and at rates varying from 5% to 11% per annum respectively. 9. Other investments (a) The Group Available-for-sale Held-to-maturity At fair value At amortised cost Quoted Unquoted Unquoted Total Rs Rs Rs Rs At 1 January ,760,100 26,196,991 32,710,113 83,667,204 Additions 48,803,468 15,018,818 38,768, ,590,978 Transfer to investment in associate - (6,313,125) - (6,313,125) Disposals (21,689,318) (9,832,502) (32,710,113) (64,231,933) 51,874,250 25,070,182 38,768, ,713,124 Change in fair value 5,973, ,459-6,197,909 Interest income , ,556 At 31 December ,847,700 25,294,641 39,506, ,648,589 Gross proceeds on disposals 23,424,412 11,433,412 33,900,000 68,757,824 Interest income element: - Accrual at start of year - - (2,169,870) (2,169,870) - Receivable for the year - - (1,189,887) (1,189,887) - - (3,359,757) (3,359,757) Net proceeds on disposals 23,424,412 11,433,412 30,540,243 65,398,067 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

54 notes to the accounts for the year ended 31 December 2005 (continued) 9. Other investments (continued) (b) The Company Available-for-sale At fair value Quoted Unquoted Total Rs Rs Rs At 1 January ,760,100 26,196,991 50,957,091 Additions 48,803,468 15,018,818 63,822,286 Transfer to investment in associate - (6,313,125) (6,313,125) Disposals (21,689,318) (9,832,502) (31,521,820) 51,874,250 25,070,182 76,944,432 Change in fair value 5,973, ,459 6,197,909 At 31 December ,847,700 25,294,641 83,142,341 Proceeds on disposals 23,424,412 11,433,412 34,857,824 Available-for-sale investments comprise principally of quoted and unquoted debentures, securities and units. The fair value is based on the Stock Exchange and brokers statement prices at the close of business on balance sheet date. Some of the unquoted shares for which fair values cannot be obtained are stated at cost. 10. Mortgage and other loans The Group and The Company Rs Rs Repayable by instalments - within one year 5,598,350 16,745,187 - in the second year 4,564,178 4,718,579 - after two but before five years 14,299,318 15,691,929 - after five years 84,131,015 58,123, ,994,511 78,534, ,592,861 95,279,464 The mortgage and other loans are secured and bear interests at rates varying from 10% to 12% per annum (2004: 11% to 12%). 52 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

55 { building for the future } MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

56 notes to the accounts for the year ended 31 December 2005 (continued) 11. Finance lease receivables (a) Movement during the year: The Group Rs Rs At beginning of the year 662,294, ,777,434 Leases granted during the year 537,145, ,872,892 Capital repayment during the year (209,795,738) (113,356,233) 989,644, ,294,093 Less: Allowance for credit losses (10,170,979) (4,970,979) At end of the year 979,473, ,323,114 (b) Gross and net investment in finance leases: - within one year 335,845, ,050,489 - between one and five years 913,675, ,709,640 1,249,520, ,760,129 Less: Unearned finance income (259,876,666) (177,466,036) Net investment in finance lease before allowance for credit losses 989,644, ,294,093 Analysed as: - current 233,177, ,622,203 Less: Allowance for credit losses (2,331,775) (1,152,167) 230,845, ,470,036 - non-current 756,466, ,671,890 Less: Allowance for credit losses (7,839,204) (3,818,812) 748,627, ,853,078 (c) Remaining term to maturity: within 3 months 438, ,919 over 3 to 6 months 1,002,208 1,524,833 over 6 to 12 months 6,058,651 3,973,662 over 1 to 5 years 982,144, ,236, ,644, ,294, MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

57 11. Finance lease receivables (continued) (d) Credit concentration of risk by industry sectors The Group Rs Rs Agriculture and fishing 214,932, ,595,680 EPZ 6,356,574 1,218,137 Non EPZ 876,655 - Tourism 45,744,556 48,966,311 Transport 74,580,449 56,584,521 Construction 348,009, ,780,188 Financial and Business Services 32,098,887 2,407,449 Traders 47,935,456 23,391,960 Personal 175,613, ,841,516 Other 43,495,851 44,508, ,644, ,294,093 (e) General provision Balance at beginning of the year 4,970,979 1,986,708 Provision made during the year 5,200,000 2,984,271 Balance at end of the year 10,170,979 4,970,979 (f) Credit facilities to related parties Net investment in finance lease balances receivable - holding company 211,177 15,589,313 - fellow subsidiaries 54,119,652-54,330,829 15,589, Trade and other receivables The Group The Company Rs Rs Rs Rs Trade receivables 126,740, ,399, ,740, ,399,710 Amounts due by ceding companies 41,777,592 10,211,092 41,777,592 10,211,092 Other receivables 36,170,259 30,092,594 16,954,927 18,445, ,688, ,703, ,473, ,056,610 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

58 notes to the accounts for the year ended 31 December 2005 (continued) 13. Deposits with Group companies The Group The Company Rs Rs Rs Rs Holding company 46,330,785 53,705,285 46,330,785 53,705,285 Subsidiary ,000,000 46,330,785 53,705,285 46,330,785 63,705,285 The deposit with the holding company, Ireland Blyth Limited, bears interest at 9.75% p.a. and has no fixed maturity date. 14. Amounts due from Group companies The Group The Company Rs Rs Rs Rs Holding company 1,735,867 33,672, Fellow subsidiary 19,357,220 19,357,220 19,357,220 19,357,220 21,093,087 53,030,188 19,357,220 19,357,220 The amounts due from holding company and the fellow subsidiary, Highway Properties Limited, bear interest at 8.5% p.a. and 8% p.a. respectively and have no fixed terms of repayment. 15. Trade and other payables The Group The Company Rs Rs Rs Rs Amounts due to re-insurers 42,996,247 35,175,103 42,996,247 35,175,103 Other payables 76,483,320 43,055,063 25,906,405 19,864, ,479,567 78,230,166 68,902,652 55,039, Loans The Group 2005 Rs Repayable by instalments: - within one year 40,000,000 - in the second year 40,000,000 - in the third to the fifth years inclusive 120,000, ,000, ,000,000 The loans from Barclays Bank Plc and Mauritius Post and Cooperative Bank Ltd are secured by floating charges on all of the subsidiary s assets and bear interest at the respective banks Prime Lending Rate + 0.5% per annum. 56 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

59 17. Claims (a) Claims outstanding Gross Reinsurance Net Rs Rs Rs Notified claims 99,841,957 36,402,115 63,439,842 Incurred but not reported 1,450,000-1,450,000 At 1 January ,291,957 36,402,115 64,889,842 Cash paid for claims settled in the year (158,498,539) (52,914,819) (105,523,720) Increase in liabilities: - arising from current year claims 124,519,370 45,781,962 78,737,408 - arising from prior year claims 52,353,187 19,620,840 32,732,347 At 31 December ,665,975 48,830,098 70,835,877 Analysed into: Notified claims 118,215,975 48,830,098 69,385,877 Incurred but not reported 1,450,000-1,450, ,665,975 48,830,098 70,835,877 (b) Benefits and claims expensed Current year claims 136,124,661 29,136, ,988,511 Additional cost for prior year claims 69,089,558 23,838,668 45,250,890 Increase in expected cost of claims for unexpired risk 18,374,018 12,427,983 5,946, Deposits from clients 223,588,237 65,402, ,185,436 The Group Rs Rs Personal and Business Time deposits with remaining term to maturity: - within 3 months 68,910,000 44,391,900 - over 3 up to 6 months 54,248,172 50,317,750 - over 6 up to 12 months 119,438,103 25,827, ,596, ,537,144 - over 1 up to 5 years 586,654, ,482, ,250, ,019,969 The time deposits bear interest at rates varying from 7.6% to 9.6% per annum (2004: 5.1% to 11% per annum). MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

60 notes to the accounts for the year ended 31 December 2005 (continued) 19. Taxation (a) Income tax Income tax is calculated at the rate of 25% on the net profit for the year as adjusted for income tax purposes for the Company and at 15% for its subsidiary. The Group The Company Rs Rs Rs Rs Current tax liability 7,000,000 10,270,621 7,000,000 7,486,476 (b) Tax expense Current tax 7,000,000 10,270,621 7,000,000 7,486,476 Overprovision in previous year (577,673) (297,303) (568,434) (147,305) Deferred tax charge 511, , , ,123 Share of associate s tax 578, Tax expense 7,512,891 10,440,441 7,146,514 7,806,294 (c) Tax reconciliation Profit before tax 57,287,167 57,688,590 36,881,145 41,668,768 Tax at 25% 14,321,792 14,422,148 9,220,286 10,417,192 Tax effect of: - investment tax credit (300,000) (300,000) (300,000) (300,000) - exempt income (13,619,459) (11,601,909) (13,619,459) (11,601,909) - expenses not deductible in determining taxable profit 11,604,135 9,895,352 10,823,960 9,443,526 - investment allowances (3,483,841) (378,830) (415,524) (292,975) - depreciation on fixed assets not eligible for capital allowances 288, , , ,617 - tax rate differential (1,400,001) (1,601,982) - - Share of associate tax 578, Consolidation adjustment (1,601,502) Overprovision of tax in prior year (577,673) (297,303) (568,434) (147,305) Overprovision of tax in the current year 1,607,200-1,607,200 - Deferred tax not recognised - 15, Under provision in deferred taxation 94,830 3, ,982 3,148 Tax expense 7,512,891 10,440,441 7,146,514 7,806, MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

61 19. Taxation (continued) (d) Deferred tax (asset)/liability Deferred taxation is calculated on all temporary differences under the liability method at the rate of 25%: The Group The Company Rs Rs Rs Rs At beginning of the year (576,367) (1,043,490) (576,367) (1,043,490) Deferred tax charge 511, , , ,123 At end of the year (64,710) (576,367) 138,581 (576,367) The deferred tax balances comprise the following: - accelerated capital allowances 3,019,901 (576,367) 138,581 (576,367) - unutilised tax losses (3,084,611) (64,710) (576,367) 138,581 (576,367) 20. Share capital The Group and The Company 2005 & 2004 Authorised Rs 5,000,000 ordinary shares of Rs10 each 50,000,000 Issued and fully paid 2,666,666 ordinary shares of Rs10 each 26,666, General insurance fund Gross Reinsurance Net Rs Rs Rs At 1 January ,309,414 47,013,496 66,295,918 Increase in the year 904, ,033 Release in the period (18,311,778) (7,865,510) (10,446,268) At 31 December ,901,669 39,147,986 56,753,683 MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT

62 notes to the accounts for the year ended 31 December 2005 (continued) 22. Life insurance fund Rs At 1 January ,323,175 Transfer from life income statement 42,478,424 At 31 December ,801, Profit from operations Profit from operations is arrived at after (crediting) and charging the following: The Group The Company Rs Rs Rs Rs Dividend income (2,164,247) (2,836,912) (2,698,622) (2,836,912) Interest income (22,170,668) (19,839,744) (22,645,668) (20,987,244) Commission income (33,451,636) (29,696,458) (33,451,636) (29,696,458) Profit on sale of investments (7,429,172) (4,061,574) (7,429,172) (4,061,574) Gain on exchange (326,968) (996,660) (326,968) (996,660) Profit on sale of property, plant and equipment - (390,745) - (390,745) Depreciation 8,587,114 5,597,922 5,638,482 4,993,039 Directors emoluments - Full time 5,628,740 5,282,638 5,628,740 5,282,638 Auditors remuneration: - audit fees 210, , , ,250 - other services 15,750 15,250 10,000 9,500 Staff costs 28,986,565 24,578,027 27,174,349 23,361,256 Consideration for annuities (608,527) - (608,527) - Profit commission - (1,968,017) - (1,968,017) Donations 196,511 8, ,161 8, MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT 2005

63 { an amazingly good service } MAURITIAN EAGLE INSURANCE COMPANY LTD ANNUAL REPORT