ALLIED COOPERATIVE INSURANCE GROUP (ACIG) (A SAUDI JOINT STOCK COMPANY) INTERIM CONDENSED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REVIEW REPORT

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1 INTERIM CONDENSED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REVIEW REPORT FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER

2 INTERIM CONDENSED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REVIEW REPORT FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER INDEX PAGE Independent Auditors Review Report 1 Interim Statement of Financial Position 2 3 Interim Statement of Insurance Operations and Accumulated Surplus 4 Interim Statement of Shareholders Operations 5 Interim Statement of Shareholders Comprehensive Income 6 Interim Statement of Changes in Shareholders Equity 7 Interim Statement of Insurance Operations Cash flows 8 Interim Statement of Shareholders Operations Cash flows 9 Notes to the Interim Condensed Financial Statements 10 21

12 FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER UNAUDITED 1. ORGANIZATION AND PRINCIPAL ACTIVITIES Allied Cooperative Insurance Group ( the Company ) is a Saudi Joint Stock Company registered in the Kingdom of Saudi Arabia under Commercial Registration No dated 9 Shabaan 1428H, corresponding to 22 August Registered Office address of the Company was Al Ruwais District, P. O. Box 7076, Jeddah 21462, Kingdom of Saudi Arabia. As per the shareholders resolution dated 13 May 2014, the registered office address of the Company has changed from Jeddah to Al Malka District P.O. Box Riyadh 11511, Kingdom of Saudi Arabia. The legal formalities to change the registered office address of the Company have been completed during the year 2014 and accordingly new Commercial Registration No has been obtained and Articles of Association has been amended. The activities of the Company are to transact cooperative insurance operations and related activities in the Kingdom of Saudi Arabia. On 4 April 2009, the Company received license from the Saudi Arabian Monetary Authority ( SAMA ) to engage in insurance in Saudi Arabia. The Company commenced its commercial operations on 1 July The company was listed on the Saudi Stock Exchange (Tadawul) on 27 August There are 3 registered branches as set out below: Branch Commercial Registration Number Place of issuance Date Branch of ACIG Al Khobar 12 Ramadan 1439 H Branch of ACIG Khamis Mushayt 12 Ramadan 1439 H Branch of ACIG Jeddah 12 Ramadan 1439 H 2. BASIS OF PREPARATION Statement of Compliance These interim condensed financial statements of the Company have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34) and Saudi Arabian Monetary Authority ( SAMA ) guidance on accounting for Zakat and Tax. These interim condensed financial statements for the nine-month period ended should be read in conjunction with the Company s audited financial statements as at 31 December. In the Company s Board of Directors opinion, the interim condensed financial statements reflect all adjustments (which include normal recurring adjustments) necessary to present fairly the results of operations for the interim period presented. The Company follows a fiscal year ending 31 December. The interim condensed financial statements are expressed in Saudi Riyals, being the functional currency of the Company and have been rounded off to the nearest thousand, unless otherwise specified. The preparation of interim condensed financial statements in conformity with International Financial Reporting Standards ( IFRS ) requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the interim condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates and judgments are based on management s best knowledge of current events and actions, actual results ultimately may differ from those estimates. The interim condensed financial statements do not contain all information and disclosures required for full financial statements prepared in accordance with International Financial Reporting Standards. Basis of presentation As required by Saudi Arabian insurance regulations, the Company maintains separate accounts for Insurance Operations and Shareholders Operations. Assets, liabilities, income and expenses clearly attributable to either activity are recorded in the respective accounts. The basis of allocation of expenses of joint operations is determined by the management and approved by the Board of Directors. 10

13 FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER UNAUDITED (continued) 2. BASIS OF PREPARATION (continued) As per the by-laws of the Company, surplus arising from the Insurance Operations is distributed as follows: Transfer to Shareholders operations 90% Transfer to Policyholders operations 10% 100% In case of deficit, the whole deficit will be transferred to Shareholders operations. New IFRS, International Financial Reporting and Interpretations Committee s interpretations (IFRIC) and amendments thereof, adopted by the Company The Company has adopted the following amendments and revisions to existing standards, which were issued by the International Accounting Standards Board (IASB): Standard/ Interpretation Description IFRS 12 The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10 B16, apply to an entity s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale. This did not have any impact on the interim condensed financial statements of the Company as there is no investment in subsidiary, a joint venture or an associate. IAS 7 Amendments to IAS 7 Statement of Cash flows: Disclosure Initiative, The amendments require entities to provide disclosures about changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). On initial application of the amendment, entities are not required to provide comparative information for preceding periods. The Company is not required to provide additional disclosures in its interim condensed financial statements, but will disclose additional information in its annual financial statements for the year ending 31 December. The adoption of the relevant new and amended standards and interpretations applicable to the Company did not have any significant impact on these interim condensed financial statements. Standards issued but not yet effective Standards issued but not yet effective up to the date of issuance of the Company financial statements are listed below. The listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt these standards when they are effective. Standard/ Interpretation Description Effective date IFRS 15 Revenue from Contracts with Customers 1 January 2018 IFRS 2 Amendments to IFRS 2 Classification and Measurement of share-based Payment 1 January 2018 transactions. IAS 40 Amendments to IAS 40 Transfers of investment property. 1 January 2018 IFRIC 22 Foreign Currency Transactions and Advance consideration. 1 January 2018 IFRS 1 and IAS 28 Annual Improvements to IFRS cycle. 1 January 2018 IFRS 16 Leases 1 January 2019 IFRS 9 Financial Instruments 1 January 2021 IFRS 17 Insurance Contracts 1 January

14 FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER UNAUDITED (continued) 2. BASIS OF PREPARATION (continued) The Company is currently assessing the implications of adopting the above mentioned standards, amendments or interpretations on the Company s financial statements 3. CASH AND CASH EQUIVALENTS (Unaudited) 31 December (Audited) Insurance operations Cash in hand and at banks 23,345 36,381 Short term deposit - 168,119 23, ,500 Shareholders operations Cash in hand and at banks 24,888 14,483 Short term deposit - 39,868 24,888 54,351 Cash at banks are placed with counterparties who have good credit ratings. The carrying amounts disclosed above reasonably approximate fair value at the statement of interim condensed financial position date. 4. TERM DEPOSITS (Unaudited) 31 December (Audited) Insurance Operations Term deposits 147,249 - Shareholders Operations Term deposits 37,751 - The term deposits are held with the commercial banks. These term deposits are denominated in Saudi Arabian Riyals and have been an original maturity of more than three months and less than twelve months. The carrying amounts of these term deposits reasonably approximate their fair values at the reporting date. 5. PREMIUMS RECEIVABLE, NET (Unaudited) 31 December (Audited) Due from policyholders 100,967 95,804 Due from policyholders related parties Provision for doubtful debts (6,635) (6,214) 94,359 89,661 12

15 FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER UNAUDITED (continued) 5. PREMIUMS RECEIVABLE, NET (continued) Movement in provision for doubtful debts is as follows: (Unaudited) 31 December (Audited) Balance at the beginning of the period / year 6,214 2,622 Release of provision during the period / year - - Additional provision during the period / year 421 3,592 Balance at the end of the period / year 6,635 6, AVAILABLE-FOR-SALE INVESTMENTS Shareholders operations (Unaudited) 31 December (Audited) Investment in sukuk 25,000 25,000 Quoted securities 23,573 20,759 Unquoted securities 1,923 1,923 50,496 47,682 As at (Unaudited) Balance at the beginning of the period Net movement during the period Change in fair value for the period Balance at the end of the period Investment in Najm for Insurance Services Company 1, ,923 Investment in sukuk 25, ,000 Quoted securities 20,759 4,867 (2,053) 23,573 47,682 4,867 (2,053) 50,496 Balance at the beginning of the year Net movement during the year Change in fair value for the year Balance at the end of the year As at 31 December (Audited) Investment in Najm for Insurance Services Company 1, ,923 Investment in mutual funds 19,361 (19,632) Investment in sukuk 26,503 (2,105) ,000 Quoted securities 17,655 2, ,759 65,442 (19,266) 1,506 47,682 Investment in Najm for Insurance Services Company is classified under level 3. Investments in mutual funds and GACA Sukuk are classified under level 2. The unrealised loss of SR million for the nine-month period ended ( : unrealised loss SR million) was charged to the interim statement of changes in shareholders' equity as availablefor-sale investments reserve. The available-for-sale investments reserve as of is SR million (31 December : SR million). 13

16 FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER UNAUDITED (continued) 7. STATUTORY DEPOSIT 31 December (Unaudited) (Audited) Shareholders Operations Statutory deposit 20,000 20,000 As required by Saudi Arabian Insurance Regulations, the Company deposited 10% of its paid up capital, amounting to SR 20 million in a bank designated by the Saudi Arabian Monetary Authority (SAMA). The Company cannot withdraw this deposit without SAMA s approval. 8. UNEARNED PREMIUMS, NET (Unaudited) 31 December (Audited) Unearned premiums 210, ,296 Reinsurance share of unearned premiums (28,833) (35,120) 181, , OUTSTANDING CLAIMS, NET (Unaudited) 31 December (Audited) Gross outstanding claims 33,475 24,450 Add: Incurred but not reported (IBNR) reserve 89, ,970 Outstanding claims 122, ,420 Reinsurance share of outstanding claims (44,619) (43,224) Outstanding claims, net 77,986 86, ZAKAT AND INCOME TAX Zakat and Income Tax The Zakat and income tax payable by the Company has been calculated based on the best estimates of the management. The movement in the Zakat payable is as follows: (Unaudited) 31 December (Audited) Balance at the beginning of the period / year 1, Charge for the current period / year 1,878 1,641 Paid during the period / year (1,530) (896) Balance at the end of the period / year 1,841 1,493 14

17 FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER UNAUDITED (continued) 10. ZAKAT AND INCOME TAX (continued) The movement in the Income tax payable is as follows: (Unaudited) 31 December (Audited) Balance at the beginning of the period / year 17 - Charge for the current period / year 4 17 Balance at the end of the period / year The differences between the financial and the zakatable results are mainly due to certain adjustments in accordance with the relevant fiscal regulations. Zakat base has been computed based on the Company s understanding of the zakat regulations enforced in the Kingdom of Saudi Arabia. The zakat regulations in Saudi Arabia are subject to different interpretations, and the assessments to be raised by the GAZT could be different from the declarations filed by the Company. Income Tax Foreign shareholder, being Islamic Development Bank (IDB) is exempted from income tax. Status of assessment: Zakat and income tax returns have been filed with the General Authority of Zakat and Tax ( GAZT ) for the years ended up to 31 December. Final certificate has been received from GAZT for the year ended 31 December However, GAZT has raised an additional assessment in respect of the returns filed for the years ended 31 December 2008, 2009 and 2010 amounting to SR 1.86 million which has not been booked in the interim condensed financial statements. The major difference of the additional assessment relates to disallowance of a portion of pre-incorporation expenses and withholding tax. The Company has filed an objection against this additional assessment with the Preliminary Tax Objection Committee subsequent to the year end, an adverse decision was received from the Preliminary Tax Objection Committee, upon which the Company the appeal with the Higher Objection Committee. The high appeal committee issued its decision in favour of the Company with respect to Zakat and rejected the appeal related to withholding tax. The Company is in the process of reforming the matter to the board of grievance. In this regard, the Company have issued a letter of guarantee amounting to SR 1.83 million in favour of GAZT (See Note 16). 11. SHARE CAPITAL The authorized, issued and paid up share capital of the Company is SR 200 million at period end consisting of 20 million shares of SR 10 each. 31 December (Unaudited) (Audited) % holding % holding Founding shareholders 40 80, ,000 General public , ,000 Balance at the end of the period / year , , BASIC AND DILUTED EARNINGS PER SHARE Earnings per share for the period has been calculated by dividing the net income for the period by the weighted average number of issued and outstanding shares for the period. 15

18 FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER UNAUDITED (continued) 13. STATUTORY RESERVE As required by Saudi Arabian Insurance Regulations, 20% of the net shareholders income shall be set aside as a statutory reserve until this reserve amounts to 100% of paid capital. No appropriation has been made as the Company has accumulated losses at the end of the period. 14. BALANCES AND TRANSACTIONS WITH RELATED PARTIES Major related party transactions during the period and the related balances at the end of the period / year are as follows: Insurance operations Related party Nature of transaction Amount of transactions Nine-month period ended Closing balance Receivable / (Payable) 31 December (Unaudited) (Unaudited) (Unaudited) (Audited) Affiliates Premiums written Claims paid (313) Board and audit committee Meetings fee 1, Key management personnel Short term benefits 4,021 3, Long term benefits ,702 (1,024) 16

19 FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER UNAUDITED (continued) 15. SEGMENTAL INFORMATION Consistent with the Company s internal reporting process, operating segments have been approved by the Management in respect of the Company s activities, assets and liabilities as stated below. Segment results do not include general and administrative expenses, provision for doubtful debts and other income. Segment assets do not include cash and cash equivalents, investments, prepayments and other receivables, and property and equipment, net. Segment liabilities do not include reinsurance payables, accrued expenses and other liabilities, due to shareholders operations and employees terminal benefits. Operating segments For three-month period ended (Unaudited) Motor Medical General accident Others Total Revenue SR 000 SR 000 SR 000 SR 000 SR 000 Gross premiums written 70,225 35,744 3,629 3, ,798 Less: Premiums ceded - (8,233) (1,080) (3,099) (12,412) Excess of loss premiums (1,900) - (156) (96) (2,152) Net written premiums 68,325 27,511 2, ,234 Changes in net unearned premiums (14,625) (1,627) (15,993) Net premiums earned 53,700 25,884 2, ,241 Other underwriting Income 2,746 3, ,779 Reinsurance commission earned Net revenues 56,451 28,917 2, ,941 Cost and expenses Gross claims paid 38,529 20, ,091 Less: Reinsurers share (9) (6,375) (144) (148) (6,676) Net claims paid 38,520 14, ,415 Changes in outstanding claims, net 3, (424) (16) 3,699 Net claims incurred 41,962 15, (6) 57,114 Policy acquisition cost 4,315 2, ,329 Other underwriting expense 419 (100) Net cost and expenses 46,696 17, ,762 Net result of insurance operations 9,755 11,361 2, ,179 General and administrative expenses (19,106) Supervision and inspection fee (278) (168) (25) (27) (498) CCHI fee - (336) - - (336) Provision for doubtful debts (840) Investment income 380 Other income 52 Surplus from insurance operations 3,831 17

20 FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER UNAUDITED (continued) 15. SEGMENTAL INFORMATION (Continued) For nine-month period ended (Unaudited) Motor Medical General accident Others Total Revenue SR 000 SR 000 SR 000 SR 000 SR 000 Gross premiums written 178,810 91,700 14,430 11, ,867 Less: Premiums ceded (106) (22,718) (5,228) (11,381) (39,433) Excess of loss premiums (3,600) - (469) (285) (4,354) Net written premiums 175,104 68,982 8, ,080 Changes in net unearned premiums (5,906) 22,194 (661) (14) 15,613 Net premiums earned 169,198 91,176 8, ,693 Other underwriting Income 6,708 4, ,717 Reinsurance commission earned ,506 2,472 Net revenues 175,919 95,185 9,025 1, ,882 Cost and expenses Gross claims paid 146,205 72,165 2, ,569 Less: Reinsurers share (231) (22,571) (1,168) (181) (24,151) Net claims paid 145,974 49, ,418 Changes in outstanding claims, net (8,210) (56) 5 56 (8,205) Net claims incurred 137,764 49, ,213 Policy acquisition cost 13,951 9, ,319 Other underwriting expense ,372 Net cost and expenses 152,646 59,115 1, ,904 Net result of insurance operations 23,273 36,070 7,360 1,275 67,978 General and administrative expenses (52,158) Supervision and inspection fee (586) (419) (52) (538) (1,595) CCHI fee - (1,172) - - (1,172) Provision for doubtful debts (421) Investment income 1,409 Other income 237 Surplus from insurance operations 14,278 As at (Unaudited) Motor Medical General accident Others Total SR 000 SR 000 SR 000 SR 000 SR 000 Premiums and reinsurance receivables net 31,453 41, ,763 97,973 Reinsurance share of unearned premiums 46 14, ,710 28,833 Reinsurance share of outstanding claims 2,974 7,491 1,773 32,381 44,619 Deferred policy acquisition cost 8,837 4,484 1, ,702 Unallocated assets 215,257 Total insurance operations assets 401,384 Unearned commission income Unearned premiums 122,091 57,925 16,404 13, ,397 Outstanding claims 62,971 22,099 4,774 32, ,605 Other liabilities 46,634 Unallocated liabilities 21,326 Total insurance operations liabilities 401,384 18

21 FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER UNAUDITED (continued) 15. SEGMENTAL INFORMATION (Continued) For three-month period ended (Unaudited) Motor Medical General accident Others Total Revenue SR 000 SR 000 SR 000 SR 000 SR 000 Gross premiums written 68,265 56,280 4,424 7, ,478 Less: Premiums ceded (33) (11,728) (1,224) (7,358) (20,343) Excess of loss premiums (1,406) - (115) (100) (1,621) Net written premiums 66,826 44,552 3, ,514 Changes in net unearned premiums 6,713 (11,101) (596) (26) (5,010) Net premiums earned 73,539 33,451 2, ,504 Other underwriting Income 2, ,396 Reinsurance commission earned ,029 1,436 Net revenues 75,937 33,451 2,894 1, ,336 Cost and expenses Gross claims paid 58,701 15, ,709 Less: Reinsurers share (517) (4,915) - (124) (5,556) Net claims paid 58,184 10, ,153 Changes in outstanding claims, net 8,522 1, (19) 10,122 Net claims incurred 66,706 12, (19) 79,275 Change in premium deficiency reserve Policy acquisition cost 6,232 3, ,115 Other underwriting expense Net cost and expenses 73,279 15, ,776 Net result of insurance operations 2,658 17,573 2, ,560 General and administrative expenses (15,453) Supervision and inspection fee (375) (115) (19) (16) (525) CCHI fee - (443) - - (443) Provision for doubtful debts (399) Investment loss (90) Other loss (113) Surplus from insurance operations 6,537 19

22 FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER UNAUDITED (continued) 15. SEGMENTAL INFORMATION (Continued) For nine-month period ended (Unaudited) Motor Medical General accident Others Total Revenue SR 000 SR 000 SR 000 SR 000 SR 000 Gross premiums written 238, ,442 16,901 20, ,524 Less: Premiums ceded (66) (33,958) (6,963) (20,161) (61,148) Excess of loss premiums (4,221) - (345) (297) (4,863) Net written premiums 234, ,484 9, ,513 Changes in net unearned premiums (11,956) (28,651) (3,404) 178 (43,833) Net premiums earned 222,156 91,833 6, ,680 Other underwriting Income 7, ,801 Reinsurance commission earned 8-1,088 2,787 3,883 Net revenues 229,965 91,833 7,277 3, ,364 Cost and expenses Gross claims paid 195,469 53, , ,794 Less: Reinsurers share (1,485) (18,177) (84) (1,081) (20,827) Net claims paid 193,984 35, ,967 Changes in outstanding claims, net 10,423 3,149 1, ,848 Net claims incurred 204,407 38,492 1, ,815 Change in premium deficiency reserve (6,854) (6,854) Policy acquisition cost 18,681 9, ,498 Other underwriting expense ,156 Net cost and expenses 216,999 48,319 2, ,615 Net result of insurance operations 12,966 43,514 4,904 2,365 63,749 General and administrative expenses (46,248) Supervision and inspection fee (1,132) (499) (69) (92) (1,792) CCHI fee - (1,211) - - (1,211) Provision for doubtful debts (752) Investment income 1,802 Other income 1,721 Surplus from insurance operations 17,269 As at 31 December (Audited) Motor Medical General accident Others Total SR 000 SR 000 SR 000 SR 000 SR 000 Premiums and reinsurance receivables net 26,164 33,714 1,839 32,683 94,400 Reinsurance share of unearned premiums 30 17,396 2,653 15,041 35,120 Reinsurance share of outstanding claims 1,100 7,572 2,870 31,682 43,224 Deferred policy acquisition cost 4,788 11,410 1, ,532 Unallocated assets 241,438 Total insurance operations assets 431,714 Unearned commission income Unearned premiums 116,168 83,428 17,405 15, ,296 Outstanding claims 69,307 22,237 5,872 32, ,420 Other liabilities ,290 Unallocated liabilities 13,064 Total insurance operations liabilities 431,714 20

23 FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER UNAUDITED (continued) 16. CONTINGENT LIABILITY As at, the Company has a letter of guarantee amounting to SR 1.83 million (31 December : SR 1.83 million) in favor of GAZT (See Note 10). A margin of SR 1.83 million (31 December : SR 1.83 million) being deposited with a bank for this purpose is included in prepayments and other receivables in the interim statement of financial position of insurance operations. 17. COMPARATIVE FIGURES Certain of the prior year amounts have been reclassified to conform to the presentation in the current year. 18. APPROVAL OF INTERIM CONDENSED FINANCIAL STATEMENTS These interim condensed financial statements have been approved by the board of directors on 24 October corresponding to 4 Safar 1439H. 21

ALLIED COOPERATIVE INSURANCE GROUP (ACIG) (A SAUDI JOINT STOCK COMPANY) INTERIM CONDENSED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REVIEW REPORT

ALLIED COOPERATIVE INSURANCE GROUP (ACIG) (A SAUDI JOINT STOCK COMPANY) INTERIM CONDENSED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REVIEW REPORT INTERIM CONDENSED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REVIEW REPORT FOR THE THREE-MONTH PERIOD ENDED 31 MARCH 2017 INTERIM CONDENSED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REVIEW REPORT