OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED AUDITED FINANCIAL STATEMENTS. for the YEAR ENDED NOVEMBER 30, 2015

Transcription

1 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED AUDITED FINANCIAL STATEMENTS for the YEAR ENDED NOVEMBER 30, 2015

2 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED. Board of Directors: Carlos G. Chamorro - President Orlando J. Guillen Sir Trevor A. Carmichael Ben Arrindell Dustin D. P. Delany Secretary: Chancery Corporate Services Carlos G. Chamorro, Under Secretary Auditors: MDG Corporate Services Ernst & Young - Panama Bankers Global Bank Overseas Capital Bank, Panama Banco Aliado, Panama Banco Panama, Panama Capital International Bank, Montserrat EFG Capital International Bank Miami Attorneys-at-law Owens & Watson, Panama Sucre, Arias & Reyes, Panama

3 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED Audited Financial Statements For the year ended November 30, 2015 Contents Pages Independent Auditors Report 1-2 Statement of financial position 3 Statement of comprehensive income 4 Statement of changes in shareholder s equity 5 Statement of cash flows 6 Notes to the financial statements 7-30 ~~~~~~~~~~~~~~

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7 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 4 STATEMENT OF COMPREHENSIVE INCOME For the year ended November 30, 2015 $ $ Notes (Expressed in US dollars) Income Premiums on reinsurance assumed 128,320, ,177,896 Retroceded premiums (112,393,529) (162,255,153) 15,926,862 12,922,743 Technical reserves 14 (2,521,382) (640,069) Net income from premiums 13,405,480 12,282,674 Acquisition cost Commissions expense (12,668,626) (16,455,546) Commissions income 9,606,123 12,273,277 Acquisition cost, net (3,062,503) (4,182,269) Losses incurred Incurred losses (15,506,134) (5,881,295) Recovered losses 9,253,887 3,624,451 Losses incurred,net (6,252,247) (2,256,844) Expenses General and administrative expenses 17 (1,551,215) (2,056,501) Impairment of investments 0 (331,790) Interest expense (51,071) (55,810) (1,602,286) (2,444,101) Total acquisition costs, losses incurred and expense (10,917,036) (8,883,214) Profit in insurance and reinsurance operations 2,488,444 3,399,460 Other income 510, ,007 Net profit for the year 2,999,024 4,103,467 Other comprehensive income: Surplus for revaluation of assets 39, ,076 Change in fair value of investment securities 21,845 61,833 Total other comprehensive income 61, ,909 Total comprehensive income for the year 3,060,800 4,442,376 The accompanying notes form an integral part of these financial statements.

8 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 5 STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY For the year ended November 30, 2015 Additional Accounts Unrealized loss Property Common paid-in Retained receivable in investments revaluation Notes shares capital earnings shareholders available for sale surplus Total (Expressed in US dollars) Balance at November 30, ,000 13,000,000 7,879,509 0 (253,165) 0 20,676,344 Additional paid-in capital 0 508, ,865 Accounts receivable - shareholders (508,103) 0 0 (508,103) Dividends paid (829,250) (829,250) Total income for the year 0 0 4,103, ,103,467 Loss on impairment of investment , ,790 Asset revaluation surplus , ,076 Change in fair value of investment securities (61,833) 0 (61,833) Balance at November 30, ,000 13,508,865 11,153,726 (508,103) 16, ,076 24,498,356 Additional paid-in capital , ,000 Accounts receivable - shareholders , ,000 Dividends paid (979,820) (979,820) Total income for the year 0 0 2,999, ,999,024 Transfer of depreciation re revalued property , (39,931) 0 Change in fair value of investment securit (21,845) 0 (21,845) Balance at November 30, ,000 13,663,865 13,212,861 (31,103) (5,053) 237,145 27,127,715 The accompanying notes form an integral part of these financial statements.

9 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 6 STATEMENT OF CASH FLOWS For the year ended November 30, 2015 $ $ Notes (Expressed in US dollars) Cash flows from operating activities: Total comprehensive income for the year 2,999,024 4,103,467 Adjustment to reconcile income before income tax to net cash from operations: Technical reserves 14 2,521, ,069 Depreciation 9 42,344 10,672 Disposal of fixed assets 0 5,058 Loss on impairment of investments 0 331,790 Opererating income before changes in working capital 5,562,749 5,091,056 Increase in premiums receivable (378,504) (925,498) Increase in premiums reserves held by cedants, net (314,990) (917,130) Increase in accounts receivable - others (25,472) (693,052) Increase in other assets (63,955) (218,097) Decrease in accounts payable retroceded 0 (4,329,952) Decrease in accounts payable (118,253) (94,295) Net cash flows provided by/(used in) operating activities 4,661,575 (2,086,968) Cash flows from investment activities: Time deposits increase (519,082) (2,008,850) Acquisition of investments available for sale, net (1,044,250) (362,076) Other financial investment, net 0 131,820 Acquisition of investment properties (377,777) (733,313) Acquisition of fixed assets 9 (1,444) (6,676) Net cash flows used in investing activities (1,942,553) (2,979,095) Cash flows from financing activities: Loans payable, net increase (68,472) (269,246) Accounts with related parties, net increase (844,941) (254,286) Accounts receivable - shareholders 8 477,000 (508,103) Additional paid-in capital 155, ,865 Dividends paid (979,820) (829,250) Net cash provided by financing activities (1,261,233) (1,352,020) Net increase/(decrease) in cash on hand and at banks 1,457,789 (6,418,083) Cash on hand and at banks - start of year 5 3,286,776 9,704,859 Cash on hand and at banks - end of year 5 4,744,565 3,286,776 The accompanying notes form an integral part of these financial statements.

10 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 7 For the year ended November 30, Corporate Information Ocean International Reinsurance Company Limited (the Company) was originally domiciled and incorporated in Belize, CA, on May 2006 (identification IBC 52,339) under the International Business Companies Act Chapter 270, and licensed to operate international reinsurance business under the International Insurance Act - Chapter 269, (Docket No.INT.INS/62/15/11). During 2012, the Company relocated its headquarters in Barbados, WI, under Certificate of Continuance No.36565, issued under Section (1) of the Companies Act, issued by Barbados Intellectual Property Office and Corporate Affairs and authorized by the Financial Services Commission in Barbados under the Reinsurance License No.532, granted under Section 8(1) of the Exempt Insurance Act (CAP 308A). On August 31, 2015, the company under the Insurance Act Cap 310 section 13A(1) of the Laws of Barbados, was registered as a qualifying Insurance Company, N The Company s financial statements for the year ended November 30, 2015 were authorized for issue by the Board of Directors on July 28, Statement of Compliance The financial statements of Ocean International Reinsurance Company Limited, were prepared as of November 30, 2015 according to the International Financial Reporting Standards. 3. Basis of Preparation of the Financial Statements 3.1 Basis of valuation and presentation currency The financial statements of Ocean International Reinsurance Company Limited, as of November 30, 2015 were prepared on a historical cost basis, except for investment securities which are measured at fair value and property. All the accounting policies applied by the entity are consistent with those used in the prior year. The financial statements are expressed in (US$) dollars, the currency of the United States of America.

11 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 8 For the year ended November 30, Basis of Preparation of the Financial Statements (continued) 3.2 Accounting judgments and estimates Preparation of the financial statements in accordance with International Financial Reporting Standards requires Management to make judgments relating to accounting estimates affecting asset and liability amounts as of the reporting date. These estimates were made with the information available as of November 30, 2015 on facts analyzed to that date. Results may differ from originally recorded estimates. Preparation of the Company s financial statements requires Management to conduct estimates and assumptions affecting the reported figures of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities as of the reporting date. Due to the implicit uncertainty of these estimates and assumptions, there may be adjustments to the figures having relative importance and affecting the disclosed figures of assets and liabilities in the future. The main assumptions related to future events and other sources of estimates subject to variations as of the reporting date, which due to their nature carry a high risk of causing significant adjustments to the asset and liability amounts in next year s financial statements, are presented below: Reserve for claims in process Estimates are based on the expected cost of claims reported to date of the statement of financial position and the estimated cost of claims incurred but not reported (IBNR) as of the reporting date. Claims can take a significant amount of time before their definite cost is established with certainty, and, for certain types of policies and businesses, claims incurred but not reported represent most of the liabilities presented in the statement of financial position. The main assumption of this technique is that past experience in losses can be used to project future loss development, and is therefore the best estimation for definite costs. Adjustments to reserves are recorded each year in the statement of comprehensive income. The reserve is adjusted to recognize the reinsurers share in the event. Insurance contract liabilities The loss reserve is estimated using a number of technical actuarial projection standards. The main judgment underlying these techniques is that the experience in the development of the Company s past claims may be used to project the future development of claims, and therefore the ultimate costs. These methods extrapolate the development of claims paid and incurred, median costs for claims, and the number of claims based on the development observed for the year and expected claim indicators.

12 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 9 For the year ended November 30, Basis of Preparation of the Financial Statements (continued) Technical reserve for reinsurance The reserve for premiums is based on 35% of net premiums written and retained in the twelve months prior to the reporting date in all insurance and reinsurance branches, except for maritime charges, collective life charges, and reinsurance programs based on excess losses. Premiums in these reserves are earned in the following year. 4. Summary of Significant Accounting Policies Cash and cash equivalents Cash and cash equivalents comprise cash at banks, on hand, current deposits and term deposits with an original maturity of three months or less in the statement of financial position. These financial assets are measured at fair value through profit or loss as of the reporting date, without deducting the cost that may be incurred in their sale or disposal. As of the respective reporting date, there are no restrictions on the use of cash or cash equivalents. Financial assets The Company classifies its investments into assets available-for-sale and other financial investments. The classification depends on the purpose for which the investments were acquired. Financial assets available for sale are classified at fair value through profit or loss, depending on the Company s strategy for managing financial investments acquired to cover their insurance and reinsurance liabilities. Other financial investments are classified on the same basis, which is fair value. The available-for-sale and other financial investment classifications are used to determine how a particular financial asset is recognized and measured in the financial statements. Available for sale financial assets Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or not classified as investments held-to-maturity or investments at fair value with changes in profit or loss. These investments are initially recognized at fair value. After initial recognition, these investments are measured at fair value through profit or loss, recognized as a separate equity item, and are not derecognized until the investment has been determined as impaired, at which time earnings recognized or losses previously reported as equity are transferred to the statement of comprehensive income.

13 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 10 For the year ended November 30, Summary of Significant Accounting Policies (continued) Impairment and uncollectibility of financial assets The Company assesses whether a financial asset or group of financial assets are impaired at each reporting date. Financial assets carried at cost When the Company determines that it has incurred a loss due to impairment in the value of its investments in equity instruments, not having a market price quoted in an active market, it estimates the amount of the loss as the difference between the equity instrument s carrying amount and the present value of future cash flows discounted at the current market profitability rate for similar financial assets, and it deducts the loss from the asset s carrying value and recognizes such loss in the results of the year in which it occurs. Available for sale financial assets When the Company determines that it has incurred a loss due to impairment in the value of available for sale financial assets, it estimates the loss amount as the difference between the financial asset s carrying amount and the current fair value less any impairment loss in the financial asset s value previously recorded in the period s results, it then deducts the loss from the asset s recorded value and recognizes the loss in the results of the year in which it occurs. Reinsurance Reinsurance receivables are recognized based on reinsurance contract amounts and measured at amortized cost, using the effective interest method. Carrying amounts are reviewed for impairment when there are factors or circumstances indicating that these amounts may not be recovered. The impact of the loss is recognized in the statement of comprehensive income. The Company has written reinsurance agreements as part of its ordinary course of operations. Premiums and claims assumed in reinsurance contracts are recognized as income and expenses as if they were considered direct business, taking into account the classification of reinsurance business products. Reinsurance liabilities represent the balance owed to reinsurance companies. Amounts payable are estimated on a consistent basis according to reinsurance contract conditions. Premiums and losses are presented on a gross basis, for both assumed and ceded premiums. Reinsurance assets and liabilities are derecognized when contractual rights are extinguished or expire, or when contracts are transferred to a third party.

14 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 11 For the year ended November 30, Summary of Significant Accounting Policies (continued) Ceded contracts that do not transfer significant reinsurance risk are recorded directly in the statement of financial position. These assets received or financial liabilities are recognized based on the consideration paid or received less any explicit identified premiums or fees retained by the reinsured parties. The Company also cedes reinsurance risks in the ordinary course of business. Reinsurance receivables represent the amounts receivable from reinsured companies. Amounts expected to be recovered are recognized consistently with the outstanding claims reserve, and in conformity with clauses contained in contracts signed by the parties. An impairment review is performed each year or when there are impairment factors during the year. Impairment occurs when there is objective evidence that the Company cannot recover amounts under the contracted terms, and when the impact on the amounts that the Company will receive from reinsurers can be reliably measured. The impact of the loss is recognized in the statement of comprehensive income. Reinsurance commissions Commissions received for external reinsurance contracts are deferred and amortized on a straightline basis over the term of the expected premiums payable. Properties, furniture, equipment and improvements Properties, furniture, equipment and improvements are recorded at acquisition cost, plus a revaluation adjustment to property performed in 2014, based on an appraisal performed by an Independent appraiser, and credited to the Company s equity. Depreciation and amortization are calculated on a straight line basis, based on the assets estimated useful lives. The estimated useful lives are as follows: Properties and improvements Furniture and equipment Computer equipment 30 years 5 years 3 years The asset values, useful lives and depreciation and amortization methods are reviewed and adjusted if necessary at each year end. Impairment is reviewed when events or changes in circumstances indicate that the recorded value may not be recovered. Revaluations are performed to ensure that the revaluated asset s fair value does not differ significantly from its recorded amount.

15 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 12 For the year ended November 30, Summary of Significant Accounting Policies (continued) Any revaluation excess is credited to the properties revaluation surplus included in the equity section of the statement of financial position, unless this amount reverses the revaluation previously recorded for the same asset, where it is then recognized in the statement of comprehensive income. In this situation, the increase is recorded in the statement of comprehensive income. Any revaluation deficits are recorded in the statement of comprehensive income, unless it directly offsets a previous surplus of the same asset. Where then, it is taken directly to the surplus for revaluation of assets. All properties, furniture, equipment and improvements are removed when sold, or when no economic benefit is expected from their use. Any gains or losses resulting from this elimination (calculated as the difference between the net disposal and carrying amount) is included in the statement of comprehensive income in the year in which the asset is disposed. Investment properties Investment properties are initially valued at cost, including transaction costs. The cost of acquisition of an investment property comprises its purchase price and any directly attributable expenditure. The entity records the investment property at cost less accumulated depreciation. Any Investment property is derecognized when it has been disposed of, or when the investment property has been removed from permanent use and no economic benefit is expected from its use. Any gains or losses in the investment property s disposal or removal are recognized in the statement of comprehensive income in the year of their disposal. Loans payable All loans are initially recognized at cost, which is the fair value of the product received, less directly attributable transaction costs. After initial recognition, interest on loans is subsequently measured at amortized cost using the effective interest method. Any gains or losses incurred are recorded in the statement of comprehensive income when the liability is settled, as well as through the amortization process. Derecognition of financial assets and liabilities Financial assets Financial assets are derecognized by the Company when rights to receive cash flows from the asset have expired, or when the financial asset is transferred along with its inherent risks and benefits and contractual rights to receive cash flows from the asset are surrendered, or when the Company retains the contractual rights to receive cash flows and assumes the obligation to pay them to one or more parties.

16 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 13 For the year ended November 30, Summary of Significant Accounting Policies (continued) Financial liabilities Financial liabilities are derecognized by the Company when the obligation has been paid, cancelled or expires. When a financial liability is replaced by another, the Company derecognizes the original and recognizes a new liability. Differences that may result from these financial liability replacements are recognized through income or loss when incurred. Provisions Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the obligation s amount can be made. Where the Company expects all or part of a provision to be reimbursed by a third party, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. Expenses relating to provisions are presented in the statement of comprehensive income net of any reimbursements to be received. Revenue recognition Revenue is recognized to the extent that it is probable that economic benefits will flow to the Company and revenue can be reliably measured. Specific recognition criteria must be established before revenue is recognized. Written premiums Accepted reinsurance transactions are recorded when the reinsurance account statements are received from the ceding companies. Unearned premiums are portions of premiums written in the period that are related to risk periods after the date of the statement of financial position. Unearned premiums are calculated based on 35% of the written premiums. Reinsurance unearned premiums are deferred in the basic insurance term for risk contracts and deferred in the term of the reinsurance contract for contracts of losses incurred. Gross general premiums are comprised of the total premiums receivable for the full coverage period established in the contracts subscribed during the accounting period, and are recognized on the date on which the policy and/or transaction begins.

17 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 14 For the year ended November 30, Summary of Significant Accounting Policies (continued) The premiums include any adjustment arising from the premiums receivable related to contracts written during prior periods. The premiums collected by intermediaries, but not yet received, are assessed based on estimates of previous experiences or subscribed, and are included in premiums written. Gross general insurance premiums comprise the total premiums payable for the whole period of coverage provided by the contracts entered into during the period and are recognized on the date the policy begins. Premiums include any adjustments arising in the accounting period for reinsurance contracts signed in prior periods. Unearned reinsurance premiums are those proportions of premiums written in a year that relate to periods of risk after the reporting date. The reinsurance unearned premiums are deferred in the basic insurance term for risk contracts and are deferred in the term of the reinsurance contract for contracts of losses incurred. Ceded premiums The Company records participation in ceded reinsurance at the end of the realized ceding contracts, when the technical reinsurance operation is determined. Fees and commissions Reinsurance contracts and investments are recorded as management policy services, investment management services, and contract fees. These fees and charges are recognized as revenue over the period in which the related services are performed. Financial instrument returns Revenue arising from financial instruments is recognized in relation to the passage of time, calculated over the average monthly balances for the invested principal, applying the effective interest method. Financial instrument yields also include dividends, when rights to receive payments are established. Realized gains and losses Gains and losses in the sale of investments are calculated as the difference between the net proceeds from the sale and fair value, and are recognized when the transaction occurs.

18 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 15 For the year ended November 30, Summary of Significant Accounting Policies (continued) Losses incurred and acquisition cost Gross losses incurred consist of claims paid to reinsured parties, as well as changes in the gross valuation of insurance contract liabilities, except for gross fluctuations in unearned premium provisions, which are recorded in revenues from premiums. They also include internal and external claim adjustment expenses, which are directly related to claims processing and payment. Changes in accounting policies and disclosures The accounting policies adopted by the Company to prepare its financial statements as of November 30, 2015 are consistent with those used to prepare its financial statements as of November 30, The Company applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after January 1, These standards and amendments have no material impact on the Company s financial statements as of November 30, The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. Amendments to IAS 19 Defined Benefit Plans: Employee Contributions IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognize such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. This amendment is effective for annual periods beginning on or after July 1, Standards issued but not yet effective The standards and interpretations that are issued, but not yet effective, as of November 30, 2015 are disclosed below. The Company intends to adopt these standards, if applicable to its activities, when they become effective. The new standards or amendments are not expected to have a material impact on the Company s financial position, performance, and/or disclosures. IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Except for hedge accounting, retrospective application is required, but providing comparative information is not compulsory. For hedge accounting, the requirements are generally applied prospectively, with some limited exceptions.

19 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 16 For the year ended November 30, Summary of Significant Accounting Policies (continued) IFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective application or a modified retrospective application is required for annual periods beginning on or after January 1, 2018, when the IASB finalizes their amendments to defer the effective date of IFRS 15 by one year. Early adoption is permitted. Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortization The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenuebased method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortize intangible assets. The amendments are effective prospectively for annual periods beginning on or after January 1, 2016, with early adoption permitted. Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that the gain or loss resulting from the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture, is recognized in full. Any gain or loss resulting from the sale or contribution of assets that do not constitute a business, however is recognized only to the extent of unrelated investor s interest in the associate or joint venture. These amendments must be applied prospectively and are effective for annual periods beginning on or after January 1, 2016, with early adoption permitted. Annual improvements cycle These improvements are effective for annual periods beginning on or after January 1, They include: - IFRS 7 Financial Instruments: Disclosures (i) Servicing contracts: The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and the arrangement against the guidance for continuing involvement in IFRS 7 in order to assess whether the disclosures are required. The assessment of which servicing contracts constitute continuing involvement must be done retrospectively. However, the required disclosures would not need to be provided for any period beginning before the annual period in which the entity first applies the amendments.

20 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 17 For the year ended November 30, Summary of Significant Accounting Policies (continued) (ii) Applicability of the amendments to IFRS 7 to condensed interim financial statements: The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim financial statements, unless such disclosures provide a significant update to the information reported in the most recent annual report. This amendment must be applied retrospectively. - IAS 19 Employee Benefits. The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. This amendment must be applied prospectively. - Amendments to IAS 1 Disclosure Initiative. The amendments to IAS 1 Presentation of Financial Statements clarify, rather than significantly change, existing IAS 1 requirements. The amendments clarify: (a) the materiality requirements in IAS 1, (b) that specific line items in the statement(s) of profit or loss and other comprehensive income and the statement of financial position may be disaggregated, (c) That entities have flexibility as to the order in which they present the notes to financial statements, (d) That the share of other comprehensive income of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss. Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement(s) of profit or loss and other comprehensive income. These amendments are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. - Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception. The amendments address issues that have arisen in applying the investment entities exception under IFRS 10. The amendments to IFRS 10 clarify that the exemption from presenting consolidated financial statements applies to a parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries at fair value. Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is not an investment entity itself and that provides support services to the investment entity is consolidated. All other subsidiaries of an investment entity are measured at fair value. The amendments to IAS 28 allow the investor, when applying the equity method, to retain the fair value measurement applied by the investment entity associate or joint venture to its interests in subsidiaries. These amendments must be applied retrospectively and are effective for annual periods beginning on or after January 1, 2016, with early adoption permitted.

21 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 18 For the year ended November 30, Cash on hand and at banks Cash on hand and at banks is detailed as follows: November 30, Petty cash US$ 200 US$ 200 Checking accounts 1,245,149 1,044,238 Saving accounts 3,499,216 2,242,338 US$ 4,744,565 US$ 3,286,776 The saving account generated an annual interest rate of 0.30% and 2.5% (2014: 0.30% and 2.5%). 6. Time Deposits Time deposits generate an annual interest rate from 2.50% % (2014: 2.50% %) and matures between December 1, 2015 and February 7, As at November 30, 2015 Financial Date Interest Institution Issue Maturity Rate Amount Banco Panamá, S.A 12/01/ /30/ % US$ 350,000 Capital Bank, Inc. 02/07/ /07/ % 527,947 Capital Bank, Inc. 02/12/ /12/ % 5,000,000 Banisi 12/24/ /23/ % 500,000 BAC International Bank Inc. 05/06/ /06/ % 499,985 Global Bank Overseas LTD 05/14/ /13/ % 3,000,000 London International Bank & Trust Company 09/18/ /19/ % 5,000,000 Metrobank, S.A. 09/23/ /23/ % 500,000 Metrobank, S.A 04/16/ /16/ % 300,000 St. Georges Bank & Company, Inc. 09/18/ /19/ % 500,000 US$ 16,177,932

22 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 19 For the year ended November 30, Time Deposits (continued) As November 30, 2014 Financial Date Interest Institution Issue Maturity Rate Amount Banco Panamá, S.A 11/30/ /01/ % US$ 350,000 Capital Bank, Inc. 11/30/ /01/ % 5,000,000 Capital Bank, Inc. 02/07/ /07/ % 508,865 BAC International Bank Inc. 05/06/ /06/2015 3% 499,985 Global Bank Overseas LTD 05/14/ /14/2015 3% 3,000,000 London International Bank & Trust Company 09/16/ /16/ % 5,000,000 Metrobank, S.A 04/16/ /16/ % 300,000 St. Georges Bank & Company, Inc. 09/18/ /19/ % 500,000 Metrobank, S.A. 09/23/ /23/ % 500,000 US$ 15,658, Premiums Receivable Maturity of premiums receivable is as follow: November 30, Current US$ 1,853,613 US$ 1,279, days and more 579, ,798 US$ 2,432,800 US$ 2,054,296 Management did not consider it necessary to establish a provision for uncollectible accounts. The accounts receivables premium reserves held by cedants for US$12,340,727 (2014 US$14,015,480) are released within 30 days after the expiration of each policy and transferred to the premiums receivable account. Therefore, this account maintains current balances only.

23 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 20 For the year ended November 30, Balance and Transactions with Related Parties The most important balances and transactions with related parties are summarized as follows: Statement of Financial Position November 30, Accounts receivable Meridian Corredores de Reaseguro US$ 864,653 US$ 681,870 Marcussi International LLP 33, Marcussi International LLC US$ 564,877 95,923 1,462,737 US$ 777,793 Accounts receivable - shareholders US$ 31,103 US$ 508,103 Accounts payable Marcussi Continental Inc. US$ 186,978 US$ 341,978 Meridian Corredores de Reaseguros 278, ,386 J.A. Suárez 109, ,212 Marcussi International LLP 121, ,950 US$ 696,529 US$ 856,526 November 30, Statement of Comprehensive Income Office Rent US$ 36,000 US$ 6,000 Outstanding balances at year-end are unsecured, do not generate interest, and settlement occurs in cash. No guarantees have been granted or received for any account payable or receivable with related parties. For the year ended November , the company has not created an allowance for doubtful accounts for amounts receivable from related parties. This assessment is performed at the end of each financial year through tests on the related party s financial situation and the market in which it operates. :

24 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 21 For the year ended November 30th, Property, Furniture, Equipment and Improvements, Net The property, furniture, equipment and improvements, are detailed as follows: As at November 30, 2015 Properties Improvements Computer equipment Office furniture Net beginning balance US$ 1,465,017 US$ 0 US$ 5,987 US$ 0 US$ 1,471,004 Additions 0 0 1, ,444 Depreciation (39,931) 0 (2,413) 0 (42,344) Net beginning balance US$ 1,425,086 US$ 0 US$ 5,018 US$ 0 US$ 1,430,104 Cost US$ 1,475,000 US$ 0 US$ 8, ,483,120 Accumulated depreciation (49,914) 0 (3,102) 0 0 Net ending balance US$ 1,425,086 US$ 0 US$ 5,018 0 US$ 1,430,104 Total As at November 30, 2014 Net beginning balance US$ 1,197,924 US$ 882 US$ 1,321 US$ 2,855 US$ 1,202,982 Surplus for revaluation of property 277, ,076 Additions 0 0 6, ,676 Disposal 0 (882) (1,321) (2,855) (5,058) Depreciation (9,983) 0 (689) 0 (10,672) Net ending balance US$ 1,465,017 US$ 0 US$ 5,987 US$ 0 US$ 1,471,004 Cost US$ 1,475,000 US$ 0 US$ 6,676 US$ 0 US$ 1,481,676 Accumulated depreciation (9,983) 0 (689) 0 (10,672) Net ending balance US$ 1,465,017 US$ 0 US$ 5,987 US$ 0 US$ 1,471,004

25 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 22 For the year ended November 30th, Investments Available for Sale Investments available for sale, at fair value, are detained as follows: November 30, Bonds US$ 947,074 US$ 886,427 Precious metal 142, ,542 Common shares 1,071,822 76,239 US$ 2,161,613 US$ 1,139,208 A breakdown of the fair value is detailed as follows: Investment Cost Change in fair value 2015 Fair value 2015 Bonds US$ 1,043,925 US$ (96,851) US$ 947,074 Precious metal 298,488 (155,771) 142,717 Common shares 1,167,580 (95,758) 1,071,822 US$ 2,509,993 US$ (348,380) US$ 2,161,613 Investment Cost Change in fair value 2014 Fair value 2014 Bonds US$ 996,439 US$ (110,012) US$ 886,427 Precious metal 298,488 (121,946) 176,542 Common shares 170,815 (94,577) 76,239 US$ 1,465,742 US$ (326,535) US$ 1,139,208 The transactions in investments available for sale are summarized below: November 30, Balance at beginning of year US$ 1,139,208 US$ 838,965 Acquisitions of investments 713, ,439 Redemption and sales of investments (168,934) (514,363) Transfers of investment properties 500,000 - Change in fair value of investment securities (21,845) (61,833) Balance at end of year US$ 2,161,613 US$ 1,139,208

26 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 23 For the year ended November 30th, Investments Available for Sale (continued) The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Level 1 to 3 based on the degree to which the fair value is observable Level 1 Level 2 Level 3 Investments AFS US$ 2,161,613 US$ 0 US$ 2,161,613 US$ Level 1 Level 2 Level 3 Investments AFS US$ 1,139,208 US$ 0 US$ 1,139,208 US$ Other Financial Investment Other financial investments are detailed as follows: Proportion of November Ownership interest Investment in non-consolidated subsidiaries 100% US$ 55,546 US$ 55,546 Investments in shares Less than 1% 102, ,487 US$158,033 US$ The investments in non-consolidated subsidiaries represent the initial contribution on American Int l Re T&C (US$113,755 initial contribution) and All American Joint Venture (US$56,571 initial contribution). These financial statements do no consolidate the non-operating subsidiary. 12. Investment Properties Investment properties are detailed as follows: At November 30, 2015 the company had investment properties in different projects. November 30, Beginning balance US$ 1,193,333 US$ 1,193,333 Increase 877,777 0 Transfer to investment available for sale (500,000) 0 End balance US$ 1,571,110 US$ 1,193,333

27 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 24 For the year ended November 30th, Loans Payable The loans payable are detailed as follows: November 30, Banco Aliado, S. A. US$ 811,856 US$ 880,328 Short maturities US$ 138,554 US$ 134,364 Long maturities US$ 673,302 US$ 745,964 The mortgage loan with Banco Aliado, S. A. in the amount of US$960,000 was granted on September 24, 2013, maturing on September 26, 2023 at an annual interest rate of 6% and will be repaid in 120 monthly payments of principal and interest in the amount of US$11,197. The purpose of this loan was to purchase the property where the new office of the Company is located, at Costa del Este Torre Banco Panama and is secured by a first mortgage on properties. 14. Technical Reserve The technical reserves are detailed as follows: November 30, Unearned premium reserve US$ 2,838,346 US$ 1,713,750 Reserve for losses incurred but not reported 415, ,432 Reserve for outstanding losses 3,195,628 1,798,843 US$ 6,449,406 US$ 3,928,025

28 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 25 For the year ended November 30th, Technical Reserve (continued) The transactions of the technical reserves are as follows: November 30, Unearned premium reserve Balance at beginning of year US$ 1,713,750 US$ 882,254 Net movement of reserve during the year 1,124, ,496 Balance at end of year US$ 2,838,346 US$ 1,713,750 Reserve for losses incurred but not reported Balance at beginning of year US$ 415,432 US$ 415,432 Net movement of reserve during the year 0 0 Balance at end of year US$ 415,432 US$ 415,432 Reserve for outstanding losses Balance at beginning of year US$ 1,798,843 US$ 990,270 Net movement of reserve during the year 1,396,785 (191,427) Balance at end of year US$ 3,195,628 US$ 1,798,843

29 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 26 For the year ended November 30th, Accounts Payable The accounts payable are detailed as follows: November 30, Bonus Payable US$ 100,000 US$ 395,226 Commissions payable 353, ,088 Balance at end of year 49,676 61,481 Guarantee deposit received 3,000 3,000 Funds received pending processing 0 21,344 US$ 505,886 US$ 624,139 The accounts payable - premium reserves held by cedants for $8,266,192 (2014 US$10,255,935) are released within 30 days after the expiration of each policy and transferred to the premiums payable account, therefore, this account maintains current balance and shows no default. 16. Shareholders Equity Dividend paid At January 15, 2015 The Board of Directors of Ocean International Reinsurance Company Limited declared and authorized the payment of dividends in the aggregate sum of US$979,820 (2014: US$829,250). The additional paid in capital of US$508,865 was declared and authorized by The Board of Directors of the Company on February 20, Other equity components Property revaluation surplus On November 30, 2015 the balance of the reserve was US$237,145 (2014 US$277,076). This equity reserve is used to recognize increases related to the revaluation of properties. The Company transfers the realized amount of depreciating assets from the revaluation surplus directly to retained earnings, as they are used by the Company, or when they are derecognized due to disposal or sale, for the corresponding amount net of income tax. Unrealized gain (loss) for investments available for sale On November 30, 2015 the balance was US$(5,053) (2014 US$16,792). This equity reserve is used to recognize losses from the valuation at fair value of financial assets available for sale until the date of expropriation.

30 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 27 For the year ended November 30th, General and Administrative Expenses November Professional fees US$ 753,724 US$ 930,856 Colombia Branch 277,343 0 Hotel and entertainment 168, ,750 Bonus 100, ,237 Bank charges 78, ,593 Miscellaneous 48,140 48,072 Travel 43,846 57,404 Depreciation 42,344 10,672 Insurance 17,883 21,065 Licenses and software 12,390 9,138 Conferences and training 8,653 0 Telephone expenses Customer service Advertising 0 52,000 Bad debts 0 87,514 Improvements 0 3,737 Office rent 0 6,385 US$ 1,551,215 US$ 2,056, Taxation Under the Insurance Act of Barbados, the Company is liable to tax at 8% on the first US$125,000 of taxable income paid as an annual licence fee. The Company is further subject to taxation in accordance with Income Tax Act, Cap 73 at a rate of 25% per annum and qualifies under section 12H for a foreign currency allowance resulting in an effective tax rate of 1.75%. The tax expense for 2015 is USD$13,044 (2014 Nil) 19. Share Capital Authorised An unlimited number of common shares of no par value. An unlimited number of preferred shares Issued $ $ Common shares 50,000 50, Panamanian Auditors The Company is audited by Ernst & Young Panama, Republic of Panama where the trading offices are located. Significant reliance was placed by MDG Corporate Services on the audit conducted by Ernst & Young.

31 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 28 For the year ended November 30th, Solvency Requirements Pursuant to the requirements of the Barbados Insurance Act, Cap. 310, the Company is required to meet certain minimum capital and solvency requirements. The required margin of solvency at November 30 th, 2015 is US$2,922,743. The Company met this requirement. 22. Fair Value of Financial Instruments International Financial Reporting Standards require the disclosure of information regarding the fair value of financial instruments for which it is possible to estimate a value, regardless of whether they are recognized in the statement of financial position. Likewise, these standards require the use of a three-level hierarchy to classify each financial instrument in the statement of financial position. Consequently, the Company used the following hierarchy to determine and disclose the fair value of financial instruments through the valuation technique: Level 1: Level 2: Level 3: Unadjusted quoted prices in active markets for identical assets or liabilities. Quoted prices in active markets for similar financial instruments, or use of a valuation technique whereby all variables are obtained from observable market information for assets or liabilities, either directly or indirectly. The unobservable variables used in the fair value measurement have a significant effect on their calculation. Fair value estimates are made on the reporting date, based on relevant market data and on information related to the financial instruments. These estimates do not reflect any increase or discount that could result from maintaining financial instruments as available-for-sale, given that none are held for this purpose. The nature of these estimates is subjective and involves uncertain aspects and Management s judgment, therefore these amounts are not determined with absolute precision. Consequently, should there be changes in the assumptions on which these estimates are based they could differ from the final results. The assumptions used by the Company s Management to establish the fair market value of financial instruments are as follows: a. The amounts for cash, accounts receivable, accounts payable, other accounts payable and short term loans payable approximate their fair market value due to their short term nature. b. Investments available for sale are listed in active markets for similar financial instruments or are determined by the use of a technique whereby all variables are observed information, obtained from market for the asset or liability, either directly or indirectly.

32 OCEAN INTERNATIONAL REINSURANCE COMPANY LIMITED 29 NOTES TO THE FINANCIAL STATEMENTS - CONTINUED For the year ended November 30th, Financial Risk Management Objectives and Policies A financial instrument is any contract that creates an asset in an entity and a financial liability of an equity instrument in another entity. The activities of the Company relate primarily to the use of financial instruments. Capital Administration In order to maintain an adequate level of capital that allows it to sustain losses from financial risks, the Board of Directors created a Committee whose main purpose is to manage the risks to which the Company is exposed, whether they are quantifiable or not, as well as monitor that the operations adjust to the limits, policies and procedures for risk management approved by the Board. The Company adopted as its main principle the risk management strategy. This strategy clearly stipulates the risks that the organization can take and those that it should not take. The mandatory compliance of these principles is to achieve the following: Avoiding surprises and reducing uncertainty and volatility surrounding the business. Achieve balance between risk and reward on capital and the resources that are invested; and Achieve a competitive advantage through a better understanding of the risk environment in which The Company operate. The Company recognizes that in order to fulfill its shareholders economic expectations, it is necessary to take a certain degree of risk. Its policy is to maintain, when feasible, a balance between risk and reward to optimize the gains produced by its activity. The application of these principles is the responsibility of all individuals in the organization. To support this application The Company uses: Analytical techniques that allow identifying and assessing risk, Systems for control and feedback to improve or optimize the Company s risk profile. Performance indicators and mechanisms of communication throughout the Company.