NEST INVESTMENTS (HOLDINGS) LIMITED

Transcription

1 CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014

2 CONSOLIDATED FINANCIAL STATEMENTS 31 DECEMBER 2014 DIRECTORS AND ADVISORS... 1 CHAIRMAN S REPORT... 2 EXECUTIVE REPORT... 6 DIRECTORS REPORT FOR THE YEAR INDEPENDENT AUDITOR S REPORT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED INSURANCE REVENUE ACCOUNT CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS Corporate information Summary of significant accounting policies Basis of preparation Basis of consolidation Changes in accounting policies and disclosures Standards, Interpretations and Amendments to published standards that are issued but not yet effective Business combinations and goodwill Investments in associates Fair value measurement Classification of insurance products Underwriting results Reinsurance Foreign currency translation Property and equipment Intangible assets Properties held for trading Investment property Financial assets Cash and cash equivalents Premiums receivable and other debtors Income tax Financial liabilities Revenue recognition Nest Investments (Holdings) Ltd Annual Report 2014

3 2.22 Impairment of non-financial assets Share capital Provisions Significant judgments and estimates Restatement of prior year financial statements and reclassifications Life and non-life insurance business Net earned premiums Net benefits and claims Other operating and administrative expenses Net interest income - banking operations Net fee and commission income - banking operations Net income and gains from investments Other income Credit loss provisions - banking operations Other net finance income Income tax expense Property and equipment Intangible assets Properties held for trading Investment properties Investment in associates Financial assets Accounts receivable Deferred acquisition cost Other assets Due from banks - banking operations Bank and cash balances Share capital and reserves Bank loans Banking customer deposits Insurance contract liabilities Trade creditors and other liabilities Risk management Capital management Group companies Related party transactions Nest Investments (Holdings) Ltd Annual Report 2014

4 36. Contingent liabilities Operating lease commitments Nest Investments (Holdings) Ltd Annual Report 2014

5 DIRECTORS AND ADVISORS Board of Directors: Ghazi Kamel Abu Nahl - Chairman and CEO Hind Ali Tabaja Abu Nahl Reem Abu Nahl Kamel Abu Nahl Fadi Abu Nahl Amal Abu Nahl Mehran Eftekhar Board Secretary Company Secretary Mehran Eftekhar 2 nd floor Ariadne House 333, 28 October Street 3103 Limassol, Cyprus Independent Auditors Registered Office: Ernst & Young Cyprus Limited Jean Nouvel Tower 6 Stasinou Avenue P.O Box Nicosia, Cyprus 43/45 La Motte Street St. Helier JE4 8SD Jersey, Channel Islands Bankers Bank of Scotland Ahli Bank QSC Ahli United Bank BSC Middle East and Africa Blom Bank Qatar Islamic Bank Qatar International Islamic Bank Registration number Nest Investments (Holdings) Ltd Annual Report

6 CHAIRMAN S REPORT I am very pleased to report to you the results of Nest Group of companies for the year The year 2014 proved to be another challenging year for us in the MENA region due to continued political upheavals in a number of locations with consequences on businesses, and people s livelihood. Despite of these challenges, we have managed to mitigate the impact, through strong risk and local management. We have major or significant interests in 8 (Eight) insurance companies spanning Algeria, Libya, Cyprus, Lebanon, Palestine, Syria, Iraq and Yemen. Our insurance businesses offer a wide range of personal lines (life, travel, medical, etc.) and non-personal lines (motor, cargo, commercial, etc.). Our knowledgeable and professional management teams work with local partners to provide a unique blend of service excellence and locally adapted products / services but always packaged under the brand of Trust Insurance, recognized to be the best in its class. Direct insurance businesses in Syria, and Libya, while still operational have been affected by the local political events, but all are financially sound and continuing their operations. With Solvency II looming and due to become applicable on 1 January 2016 we have embarked on a plan of making sure our local insurance in Cyprus carries assets that achieves highest solvency ratios under the new regulatory regime. Our Reinsurance Operations led from Bahrain, continued their consistent growth with additional capital injection, which we have achieved in various ways: Injection of US$30 million additional capital in 2014 Waiving of dividends for the years Acquisition of capital Intensive assets by injecting more than US$30m cash in In previous years we also acquired more than US$ 100m of similar assets from our subsidiary. We have also committed that a further US$30 million will be injected as additional capital over the next two years. The Company s A- rating was reaffirmed in the latest process in Our Lloyds Insurance Broking operations based in the UK continue to make losses due to compliance and front loading recruitment costs. The Group subsidiary in the UK, however, provides added value service within the London insurance market. In order to be closer to our clients we have now formed a wholly owned subsidiary in Jordan that will handle the Group s business as well as regional third party risks. The investment in Lloyds syndicates through our UK corporate capital entity continues to provide profits and cash distributions matching or exceeding than the average market return. This can be partly attributed to Lloyds, who is highly capitalised, and also to the prudent underwriting and investment management of the Lloyds syndicates. Apart from insurance, our investment interests cover banking, real estate development and manufacturing in Algeria. Trust Bank Algeria, with a paid up capital of US$160 million, is a very profitable business with 16 branches carrying out mainly retail banking and providing trade finance facilities. Nest Investments (Holdings) Ltd Annual Report

7 Through Trust Real Estate (a subsidiary of Trust Algeria Investment), the real estate project is due to deliver a major commercial site by middle of The site consists of: 1. 5 Star Hotels 2. Executive apartments 3. Residence Inn 4. Courtyard Hotel 5. Office complex 6. Shopping mall 7. Associated car parking The project is built on just over 40,000 sq. meters of land with just under 290,000 sq. meters usable space. All hotels and residences will be managed by a top international hotel chain. 1 ère esquisse de la façade du projet 17 We also enjoy ownership of real estate in Libya, Syria, Bahrain, Yemen, Palestine, Lebanon, Cyprus, UK, Spain, Saudi Arabia and other GCC countries. Our World Trade Center operations in Cyprus, Lebanon, as well as Algeria, continued providing a variety of professional services for promotion of trade as well as business centres, consultancy, mystery shopping and hospitality training under our Signature license. We intend to expand these in Jordan and North Africa, particularly in Tunis and Casablanca. Our core businesses will continue to be Reinsurance, Insurance, Real Estate, World Trade Center Services and Banking. Nest Investments (Holdings) Ltd Annual Report

8 The following is a summary of the financial results for different sectors of the Group: CONSOLIDATED NET PROFIT BY LINE OF BUSINESS: US$ '000 US$ '000 Investment holding 92, ,820 Insurance 11,467 3,052 Reinsurance 12,133 18,854 Services including broking (2,146) (1,801) Real Estate 36,574 (151,353) Investment 18,003 3,188 Banking 30,588 29,913 Manufacturing 844 (667) 199, ,006 Our vision continues to be: The Best in Everything We Do To successfully continue with the implementation of this vision, some of our strategies are stated as follows: Continue building on our core businesses ensuring they are profitable, value adding and provide the best service to external and internal clients Manage our investments through sound risk based and business planning approach Maintain our high liquidity position. Our cash balances increased from US$611 million in 2013 to US$709 million in 2014 Maintain a minimum A- rating for our Reinsurance business and aim for future upgrade Introduce efficient internal processes and mechanisms designed to improve our effectiveness through: a. Implement more advanced IT systems and platforms in line with the growth and future strategies of the group companies b. Further enhance ERM processes in the Group c. Further improve Corporate Governance and compliance processes d. Monitor and apply controls for further cost saving e. Continue development and enhancement of Human Resources processes I am very optimistic that even with all the challenges around the world, we will go from strength to strength maintaining our focus, dedication, professionalism and most importantly, the understanding of our markets that we operate in either alone or with business partners. Continuing with last year s theme, our priorities are to achieve: Long-term viability, integrity and reputation of the business and our brand name Prudent, accurate and timely financial management Implementation of effective organisation structure Improvement and enhancement of Corporate Governance and Compliance processes Application and further strengthening of Enterprise Risk Management throughout the Group. More than ever, we are aware of the importance for active leadership driven by clear strategies. We place emphasis on strong and appropriate human capital, strong and timely financial controls and reporting Nest Investments (Holdings) Ltd Annual Report

9 methods, effective processes such as risk management, efficient and integrated IT systems, and adherence to best practices in corporate governance. To this end, we are reviewing our corporate governance material including charters of the various entities, enhancing them to ensure they deal with new challenges and adhere to international as well as local standards. We also plan to make our guidelines accessible to all of our operations in an immediate and up-to-date manner through a secured website. We had a very receptive appetite with the financial institutions we approached for outside funding. Our gearing approximates 15% of our equity. This proves our financial flexibility in the financial markets when raising external funds. In conclusion, I am confident in our team s ability to meet our future challenges as we continue our journey of sustainable and managed growth. My warm thanks go out to all of our staff throughout the Group for their dedication and hard work. I am also grateful for the excellent contribution by our various boards of directors for their wise counsel and leadership. I sincerely thank our business partners and associates for their valued contribution to our success. Last, and by no means least, my deep gratitude goes to all our customers for their loyalty and continued support. I assure you all of our best personal attention and service, always. Ghazi Abu Nahl Group Chairman 5 June 2015 Nest Investments (Holdings) Ltd Annual Report

10 EXECUTIVE REPORT 1. Reinsurance segment The Reinsurance operations led by the Group subsidiary Trust International Insurance & Reinsurance Company B.S.C. (c)- Trust Re ( Trust Re ) have once again produced excellent results both on technical and on net basis. Trust Re is regulated by the Central Bank of Bahrain, Trust Re s Cyprus branch is regulated by the Insurance Companies Control Services of The Republic of Cyprus, which operates in accordance with the EU directives and regulations, while the Labuan branch is regulated by LOFSA in Malaysia. The Morocco representative office is now fully operational and an application has also been made for a representative office in Quanzhou China. Trust Re carries an A- stable credit rating by both Standard and Poor s as well as AM Best rating agencies with further prospects for improved rating. With all the political upheavals, conditions remained challenging for the business environment in Economic conditions such as exchange rates between major currencies, reduction of oil prices and slow-down in economic growth created challenges to deal with. Despite a challenging market backdrop, Trust Re delivered a solid set of results for the year ended 31 December It continued to adhere to disciplined underwriting and to provide excellent service and support to its partners through increased product offering and financial security. Trust Re remains a highly regarded core asset within the portfolio of the Group. Trust Re's sound underwriting performance continues to be supported by reserve strengthening. They are in a solid position to achieve the targets set out in their business plan over the coming three years. The UK Lloyd s Corporate Capital subsidiary performance continues to provide results well above the market. Trust Re has produced excellent profits continuing the trend over the last decade. The company for the last 10 years has produced US$55 million of profit of which US$51 million has been distributed as cash to the Group. This represents an average return of 15% on funds at Lloyds compared to 14% market return. The prospects so far for 2015 and 2016 look promising, continuing the same trend as previously experienced. The above achievements are due to many years of astute planning, conservative underwriting, disciplined management, proper risk management, dedicated customer service and adherence to core business activities and markets we are familiar with. We are confident that the Company s performance will go from strength to strength and play a major role in the Group s overall profitability. The growth of Trust Re requires additional capital. For this purpose, we have subscribed an additional US$30 million capital, during 2014, while we expect to subscribe the same amount in We have also waived the rights to receive any dividends for the years , which represent savings in Trust Re s capital base of approximately US$30 - US$40 million. Finally, in 2014 we acquired more than US$30 million of capital-intensive assets by injecting cash into Trust Re. With the strong capital we are providing, we are confident of the company s sustained growth and profitably. Trust Re s vision continues to be: The Reinsurer of Choice Nest Investments (Holdings) Ltd Annual Report

11 2. Trust Holding operations including direct insurance companies The year 2014 proved to be another politically challenging year for some of the direct entities even though the overall results were slight improvement to Our interests in direct operations consists of 8 (eight) insurance companies spanning Algeria, Libya, Cyprus, Lebanon, Palestine, Syria, Iraq and Yemen. Our insurance businesses offer wide range of personal lines (life, travel, medical, etc.) and non-personal lines (motor, cargo, commercial, etc.). We work with local partners to provide a unique blend of service excellence and locally adapted products / services, but always with the unique brand of Trust Insurance recognized to be the best in its class. Looking ahead, we expect to continue to have challenges due to political unrests but with our dedicated local management, knowledge and risk processes we will overcome any difficulties that may arise. We have a coordinated strategy and approach to our businesses in order to bring economies of scale to our efforts, cross fertilize between the companies, whilst at the same time, allow the local identity of each Group company to flourish further. We continue with our implementation of a comprehensive programme of change and growth. This programme will continue to clearly define our long-term strategies; coordinated business plans; the launch of the Trust Franchise concept; integrated information and communication technology (ICT) platform; and a more effective organisation structure that will allow for business growth, secure business continuity and succession planning. We take pride in the management of our human capital, risk and actuarial processes, as well as compliance with best practice of Corporate Governance processes. Enhancement of these principles will continue to be one of our main aims in the future. The contribution to the growth of the Group s assets from the direct operations increased substantially. All direct insurance operations have made acceptable profits on both technical and on net basis, bearing in mind some of the conditions they have and are facing. However, we expect better returns in the future. The necessary technical corporate support is provided through the Amman Regional Office (ARO) covering areas of product development, technical processing, training and technical operational procedures. The Holding Company of the Direct Insurance Companies vision is: Guide and support our subsidiaries to maximise their economic value 3. Broking operations The Group subsidiary company Market Insurance Brokers Ltd ( MIB ), which is based in London UK, is an FCA and Lloyds regulated entity. MIB s main aim is to provide wholesale broking services in order to meet the Group requirements, as well as those of third parties. This type of business is becoming very competitive, with organic growth becoming more difficult and expensive due to regulatory and compliance requirements. Nest Investments (Holdings) Ltd Annual Report

12 The support for Group s risk placements remains a key objective for MIB, but we have employed new brokers in order to target third party business as a second strand of our strategy. The entity is loss making hence we created a wholly owned subsidiary in Jordan to provide broking services closer to our clients. We have also appointed a very experienced CEO to lead the operations and implement the Board strategies. 4. Licensed business operations World Trade Center Services These are very effective and well-known brands for development of real estate projects, providing consulting services covering traditional trading services, and hospitality productivity. Real estate remains the backbone of the World Trade Center brand. We have also integrated the Signature licensed operation as part of the World Trade Center operations, with the Cyprus Head Offices providing support services. I and another Director of this Company are elected Board members on the main Board of the World Trade Center Association in New York with me having the honour of serving as the Chairman of the Board. 5. Real estate operations We continue to substantially own either residential or commercial properties in Cyprus, Algeria, Bahrain, Lebanon, Libya, Palestine, Spain, Syria, United Kingdom and Yemen. Our main project consisting of hotel, residential and commercial properties, close to the international airport of the Algerian capital Algiers, is well underway and expected to be completed by middle of Other projects are planned in Cyprus, Qatar, Lebanon, Tunisia, Morocco Yemen and Algeria. The financial crisis has had little impact on our real estate operations as they are selective and retained as long-term investments with steady income. We also own selected land in different territories, which we plan to develop when the local commercial circumstances justify the development. This approach will continue and real estate will represent a major portion of our overall assets in the future. 6. Manufacturing operations Trust Industries based in Algeria produces bricks for the growing local property development market. We have acquired new production machinery and drying kilns, which have entered full production levels since Banking operations Trust Bank, based in Algeria with 16 branches, provides mainly Trade finance facilities. The Bank is highly profitable in a continually growing market. The profitability of the Bank remained stable during the year 2014, in comparison to 2013, at $30 million. Nest Investments (Holdings) Ltd Annual Report

13 Although the banking sector in Algeria is dominated by State owned banks, during the year 2014 the Bank has obtained further market share and increased its loan portfolio by 10%. In addition, Trust Bank has managed to reduce its non-performing loans by 11% and past due loans by 69%, thus improving the credit quality of its loan portfolio. 8. Strategy planning All our operations are based on a three-year rolling business plan, which is reviewed and extended annually. 9. Corporate governance We have had a comprehensive and internationally compliant code of corporate governance, which we systematically embedded in the various operating companies throughout the Group. In addition, we ensured that for each country of operation, our corporate governance guidelines were sufficiently flexible to accommodate local commercial laws, thus ensuring compliance both to the letter and spirit of corporate governance. In 2015 we intend to revise the guidelines in order to bring them up to date with the international standards and make sure they remain relevant and effective in each of our operating companies within their respective jurisdiction. Further, we intend to make them available to all parts of the Group via our intranet IntraNest. As a minimum, we continue to press for the creation of board committees that focus on Audit, Risk, Corporate Governance and meritocracy-based remuneration of staff. We encouraged and campaigned for the convening of at least 4 full board and board committee meetings within a given fiscal year. We encouraged and campaigned for the inclusion of at least 33% totally independent non-executive directors with appropriate and value adding expertise and experience. 10. Actuarial and risk management (a) The Governance framework The Group s risk management policies are approved by the Board of Directors and they define the Group s identification of risk and its interpretation. Within its risk management framework, the Group maintains a varied limit structure to ensure the appropriate quality and diversification of assets and to align underwriting and reinsurance strategy to the corporate goals in a consistent manner to its risk appetite. The Group has placed a greater emphasis on the assessment and documentation of risks and controls, including the development of an articulation of its risk appetite. The following illustrate the Group s commitment to enhancing and improving risk management: i. The Group Risk Management and Actuarial Department continues with the implementation of formalized ERM processes throughout the Group and the process is progressing well. Our ultimate objective is to implement ERM into as many areas of the Group as possible and reasonably feasible, but emphasis is always placed on areas of agreed priority considering the principle of proportionality. ii. The Group has an active Board Risk Committee at Group level and in a number of subsidiaries. Risk committees abide by board approved charters, meet regularly along with risk specialists from within the Nest Investments (Holdings) Ltd Annual Report

14 companies and the Group and take an active role in the implementation and embedding of risk management. iii. We are continually enhancing our internally developed Risk Registers and have significantly enhanced the scope and level of depth of our Risk Reviews, providing greater insight to the various Board Risk Committees. iv. We are progressing well with the rollout plan of our Business Intelligence platform. Trust Palestine went live in early 2014 and we have achieved significant progress with Trust Algeria Insurance. Furthermore, we have enhanced the breadth and scope of the existing implementations. v. During 2014 we went through a rigorous selection process for the selection of a group risk management system and a decision was taken towards the end of the year. The implementation of the system will start in the second half of vi. There have been further significant improvements and enhancements to our multi-line financial projections model for the direct operations. viii. We have developed a Generic Risk Management Framework Manual, which defines and articulates the risk management strategy, the risk management framework, the risk appetite framework and the monitoring and reporting framework. ix. We have developed Generic Underwriting Risk Manuals, for Non-Life, Health and Life insurance which define and articulate the underwriting risk framework, the underwriting risk appetite and the monitoring and reporting framework. x. We have developed Generic Underwriting Guidelines Manuals for Non-Life, Health and Life insurance which define and articulate generic guidelines for the risk categorization process, the premium to be charged for each risk and the generic information requirements to be gathered from the relevant application form and other sources to be used in the underwriting process. xi. We have developed various models to perform a risk-based analysis of the reinsurance needs of the various direct operations. (b) Capital management objectives, policies and approach The Group s approach to managing capital involves managing assets, liabilities and risks in a coordinated way, assessing shortfalls between available and required capital levels (by each regulated entity) on a regular basis and taking appropriate actions to enhance the capital position of the Group in the light of changes in economic conditions and risk characteristics. Nest Investments (Holdings) Ltd Annual Report

15 In managing the risks that affect the Group s capital position we have established a number of capital management objectives, policies and approaches, including the following: Setting target risk adjusted rates of return, which are aligned to performance objectives and ensure that the Group is focused on the creation of value for shareholders To maintain the required level of stability of the Group thereby providing a degree of security to policyholders To retain financial flexibility by maintaining strong liquidity and access to a range of capital markets To align the profile of assets and liabilities taking account of risks inherent in the business To maintain financial strength to support new business growth and to satisfy the requirements of the policyholders, regulators and stakeholders (c) Regulatory framework Regulators are primarily interested in protecting the rights of policyholders and monitor them closely to ensure that the Group is satisfactorily managing affairs for their benefit. At the same time, regulators are also interested in ensuring that the Group maintains an appropriate solvency position to meet unforeseen liabilities arising from economic shocks or natural disasters. The operations of the Group are subject to regulatory requirements within the jurisdictions in which it operates and such regulations prescribe approval and monitoring of activities and also impose certain restrictive provisions to minimise the risk of default and insolvency on the part of the insurance companies. All regulated entities within the Group act in accordance with their regulatory requirements throughout the financial year. (d) Asset Liability Management (ALM) framework Financial risks arise from open positions in interest rate, currency and equity products, all of which are exposed to general and specific market movements. We have been following a few simple premises under our practicing ALM: Match assets to the liabilities arising from insurance contracts by reference to the type of benefits payable to policy holders Ensure in each period sufficient cash flow is available to meet liabilities arising from insurance contracts and any other sources 11. Internal audit The Group internal audit department continued to implement a risk-based approach on the audits performed across the Group through a risk based internal audit platform, TeamMate. This software has enabled us to have paperless offices. Our main goal as Group Internal Audit Department was to introduce the correct concept of the risk based Internal Audit to all managers and employees of the Group, in order to apply our value added services with competence and professionalism. The department continued to provide support, training, reviewing, and advisory/ consultancy services to the Group s internal audit departments, management and to the Audit Committees. The Audit Nest Investments (Holdings) Ltd Annual Report

16 Committee(s) have Board approved charter(s), which are being reviewed and updated every year, meet frequently to discuss the internal audit reports and report to the Board major findings at every board meeting. The Group internal auditors report functionally to the Audit Committee. All the internal audit perceived risks of the companies/processes derived from our experiences and from the risk registers (where applicable, as prepared by the risk departments), have all been included in the risk matrix of the software; this enabled us to produce more realistic risk based annual audit plans. All final internal audit reports, as soon as they have been approved by the Audit committees, are forwarded to the Risk department so that they can update their risk registers accordingly and based on these new risks, the audit plans can be further adjusted so that the higher risks are given priority in our audit cycles. AuditTimes, a quarterly internally generated, internal audit newsletter continues to be published. The aim of this newsletter is to give a clear understanding of modern Internal Audit processes, and enhance communication between the auditors and their clients. 12. Information and Communication Technology (ICT) To date, our ICT initiatives have been primarily aimed at providing operational capabilities and infrastructure support. Our long-term vision is to have a new totally integrated ICT environment that affords us a sophisticated operational platform capable of providing management and executive information systems. A number of initiatives are underway to develop the necessary architectural design to facilitate this vision by employing a new ICT strategist. A new head of group corporate ICT was appointed in July 2012 with the main objective to develop a new ICT Strategy that is aligned with the Group Businesses Plan and support the group operational model, as well as develop a Work Plan to achieve this strategy. The new ICT strategy addresses the three pillars: People, Technology and Process. We have now fully developed business continuity plans and site that meet both avoidance as well as disaster recovery capabilities. We have also installed a state of the art ICT technology that will meet our future demands in this area. This Work Plan specifically addresses the following major area: NEW ICT Organization Structure Up to date ICT infrastructure (hardware, software, communications and maintenance). Stabilize and document the in-house developed insurance platform. Implement change management and software life cycle development processes. Introduced quality control and quality assurance processes. Streamline all software changes and enhancement and centralize it in the corporate ICT. Vendor management. Leveraging the group purchasing power to obtain better services and prices. The Cloud initiative. Moving some non-core operations to the Cloud resulting in significant savings to the Group. Disaster Recovery plan aligned with the group Business Continuity Strategy Personnel development and training Support the Business Intelligence platform (FRAME) implementations across the Group. Introduce group wide initiatives: Document Management Systems, CRM, Oracle DB security, unified communications, ICT Infrastructure and DR support for the operating companies. Nest Investments (Holdings) Ltd Annual Report

17 13. Human resources and training We increased expertise and capability within the existing team in order to change direction and focus - to provide pro-active HR Service delivered through systems and process aligned to objectives. We created management development programmes in order to deliver new training modules and increase training hours. We offered a variety of training and development opportunities for the employees as well as annual conference for all staff. Our investment in training for the future will be a result of the gap analysis for each individual through his or her performance monitoring and management. The department is also enhancing the processes including succession plans, retention of human capital and recruiting the best candidates for the respective roles. We participated in several salaries and benefit benchmark surveys to be informed and remain up to date with issues relating to employee benefits. 14. Legal services The Group Legal Department is based in Beirut, Lebanon; and it initially operates from its offices located in Badaro - Beirut, Lebanon. The department is composed of a group of 3 qualified lawyers having extensive expertise and experience in various legal domains. The department (i) provides its legal services and advice to the Group including the Group numerous subsidiaries, associates and affiliates that are spread worldwide and (ii) supports the Chairman s and CEO s legal requirements and offers advice to the Board of the Holding company, as well as the Boards and other corporate entities of the Group s subsidiaries and/or affiliates, on various legal requirements. Notwithstanding the above, the department focuses as well on: (i) Integrating the Group s businesses legal requirements; (ii) Providing direct support to the Group through coordinating all legal matters; (iii) Coordinating with local legal advisors where the jurisdiction deems it necessary and whenever needed; and, in general, (iv) Providing any legal assistance and/or advice and/or service that is requested or is deemed necessary for the continuity, success and fulfilment of the Group s business and legal needs. 15. Finance In 2014 the Finance Department achieved the bronze position of SAP Quality Awards for their successful implementation of Business Planning and Consolidation platform. The Department also acquired the SAP All-in-One Accounting software which has been implemented and went live on 1st January The two software, including the Business Intelligence platform, which has been implemented in some of the Group subsidiaries, will have direct communication and the aim is to strengthen the Group reporting by providing timely, efficient and quality information to the management and the Board of Directors. In September 2014, the Finance team successfully held the 1st Annual Finance Managers Conference for the entire Group. The aim of the Conference was to transfer the knowledge of the BPC platform to all the subsidiaries and enhance their knowledge on the major International Financial Reporting Standards ( IFRS ) was the first year which half yearly Consolidations were prepared at 3 different consolidation levels. Nest Investments (Holdings) Ltd Annual Report

18 The Finance Department also provides a variety of Services to the Group companies including: Bookkeeping and accounting Review, analysis and provision of financial reports Support on Business planning processes Assistance to the investment department with cash flow reports Continued monitoring and application of the reporting standards Budgetary controls Cash Flow Management Assistance with ERM processes Preparation of Consolidation using the Business Consolidation Platform Monitoring Receivables Assistance with Ratings Liaise with External and Internal Auditors Apart from the above tasks, the future priorities are: Further enhancement of the Management Reporting Financial planning and fund management with the Investment department Ensuring Capital adequacy with the assistance of the Actuarial department 16. Review of the 2014 Group financial results 5-year financial summary US$ millions Investments 2,336 2,158 2, Cash at bank Total assets 4,507 4,181 3,836 2,138 1,588 Shareholders equity 2,397 2,266 2, Net Profit for the year , The Group s Net profit for the year was US$199 million compared to US$197 million in Stability in profitability was noted. Group turnover was US$681 million compared to US$599 million in 2013 (14% increase). Cash Balances increased from US$666 million to US$729 million enhancing the liquidity position. The shareholder s equity was US$2,397 million compared to US$2,266 million in The above results are legacy of our success in one of the most economically challenging times the economic world has faced. 17. Future outlook and strategy The outlook for the Group continues to be a combination of consolidation, diversification and risk managed growth. This entails consolidation of capabilities by evolvement of existing units to reflect the overall vision of the Group in order to maximize profitability and effectiveness. Consolidation also includes streamlining and improvement of processes in order to manage and control costs, as well as to enhance the overall effectiveness of these processes. Nest Investments (Holdings) Ltd Annual Report

19 Growth will be three-directional: we intend to grow existing businesses in terms of market share and penetration; we also intend to grow existing business types into new geographies. Finally, we intend to grow the Group in terms of attempting to develop entirely new business segments without losing focus and priority in our core businesses. In both consolidation and growth, our intention is to always work from a firm base of stability and certainty of direction in order to minimise and manage risk as far as possible. This includes addressing the question of affordability and only borrow when it is the most prudent course of action. Our aim will continue to be management of: Capital: generate capital at competitive rates Profit: achieve sustainable profitability by all business sectors Equity: growth in equity at a minimum 10% per annum Investment: seek new investment opportunities 18. Board of Directors a. The ultimate holding company s directors and officers are disclosed in the directors report. b. The directors and officers of the operating subsidiary providing Group corporate services are: Ghazi Abu Nahl Sheikh Nasser Al Thani Jamal Abu Nahl Walid Saadi Reem Abu Nahl Kamel Abu Nahl Fadi Abu Nahl Mehran Eftekhar Ibrahim Barraj Chairman and Chief Executive Officer Non Executive Non Executive Non Executive Non Executive Non Executive Non Executive Executive Board Secretary Board Committees a. Audit Committee Walid Saadi - Chairman Reem Abu Nahl Fadi Abu Nahl Josiane Semaan Jabbour Secretary b. Risk Committee Reem Abu Nahl - Chairperson Walid Saadi Fadi Abu Nahl Christos Patsalides - Secretary c. Nomination and remuneration Committee Sheikh Nasser Al Thani - Chairman Jamal Abu Nahl Kamel Abu Nahl (Member and Secretary) Nest Investments (Holdings) Ltd Annual Report

20 Officers and management team Chairman and Chief Executive Officer Ghazi Abu Nahl Group Finance and Corporate Services Director Mehran Eftekhar Group Chief Strategy Officer Mufid Sukkar Group Legal Counsel Ibrahim Barraj Group Internal Audit Manager Josiane Semaan Jabbour Group Chief Actuary and Risk Manager Christos Patsalides Senior Actuary and Risk Manager Andreas Stylianou Group Chief Technology and Information Officer Marwan Bataineh Group IT Manager Ali Safa Business System Analyst George Georghiou Human Resources Manager Biljana Kocevska Adam For further information on the Group refer to: Independent auditors Recommendation will be made to the Annual General meeting of the Company in order to appoint Ernst and Young Cyprus Ltd as independent auditors for the year Acknowledgements We would like to thank all of our associates and business partners for the trust extended to us. We would also like to thank all our management and staff for their hard work, dedication, loyalty and vision, without which we would not have been able to achieve such excellent results. On Behalf of the Board of Directors Ghazi Abu Nahl Chairman and Chief Executive Officer 5 June 2015 Nest Investments (Holdings) Ltd Annual Report

21 DIRECTORS REPORT FOR THE YEAR 2014 The Board of Directors presents its report and audited consolidated financial statements of Nest Investments (Holdings) Limited (the Company ) and its subsidiaries (together referred to as the Group ) for the year ended 31 December The financial statements for the Company for the year ended 31 December 2014 have been issued separately. Principal activities The principal activities of the Group are the provision of investment holding, insurance and reinsurance, real estate, banking services broking services and licenced operations. Review of current position, future developments and significant risks The Group s development to date, financial results and position as presented in the financial statements are considered very satisfactory and outlined in the Chairman and Chief Executive s reports. The main risks and uncertainties faced by the Group and the steps taken to manage these risks are disclosed in note 32 of the financial statements. Results The profit of the Group for the year ended 31 December 2014 was US$199,469 thousand (2013: US$197,006 thousand). Dividends The Board of Directors does not recommend the payment of a dividend. Share capital There were no changes in the share capital of the Company during the year. Board of Directors The members of the Company s Board of Director s as at 31 December 2014 and at the date of this report are presented on page 1. In accordance with the Company s Articles of Association, all directors hold office until the next following Annual General Meeting and they shall then be eligible for re-election. There were no significant changes in the assignment of responsibilities and remuneration of the Board of Directors. Independent auditors The independent auditors, Ernst & Young Cyprus Limited, have expressed their willingness to continue in office and a resolution to giving authority to the Board of Directors to fix their remuneration will be proposed at the Annual General Meeting. Events after the reporting date There were no material events after the reporting date, which have a bearing on the understanding of the financial statements. By order of the Board of Directors Mehran Eftekhar Secretary Limassol, 5 June 2015 Nest Investments (Holdings) Ltd Annual Report

22 INDEPENDENT AUDITOR S REPORT To the Members of Nest Investments (Holdings) Ltd Report on the Consolidated Financial Statements We have audited the consolidated financial statements of Nest Investments (Holdings) Limited (the Company ) and its subsidiaries (together with the Company, the Group ) on pages 20 to 109, which comprise the consolidated statement of financial position as at 31 December 2014, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Board of Directors' Responsibility for the Consolidated Financial Statements The Company s Board of Directors is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

23 Opinion In our opinion, the consolidated financial statements of Nest Investments (Holdings) Ltd give a true and fair view of the financial position of the Group as at 31 December 2014, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union. Ernst & Young Cyprus Limited Certified Public Accountants and Registered Auditors Nicosia 5 June 2015

24 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER (Restated) Notes US$ '000 US$ '000 Transfer from consolidated insurance revenue account 23,954 26,105 Interest income - banking operations 9 27,890 24,976 Interest expense - banking operations 9 (967) (771) Fee and commission income - banking operations 10 14,627 22,373 Fee and commission expense - banking operations 10 (1) (579) Net income and gains from investments 11 4,932 11,512 Fair value gains / (losses) on investment properties 19 83,355 (165,425) Other income 12 16,191 14,787 Net release of credit loss provision - banking operations 13 9,179 5,933 Impairment losses on investments in associates 20 (4,378) Administrative expenses 8 (41,779) (38,021) Net finance income 14 (2,307) 971 Profit / (loss) from operations 111,119 (128,623) Reclassification to AFS revaluation reserve ,421 Share of profit of associate 20 76, ,793 Profit for the year before tax 211, ,696 Income tax expense 15 (12,513) 6,310 Net profit for the year 199, ,006 Other comprehensive income To be reclassified to profit or loss in subsequent periods: Change in fair value of available for sale financial assets (2,058) 7,483 Impairment of available for sale financial assets (755) 2,572 Disposal of available for sale financial assets (5,144) Reclassification to profit or loss (123,421) Exchange difference on translation of foreign operations (36,142) (8,149) Net other comprehensive income to be reclassified to profit or (38,955) (126,659) loss in subsequent periods Not to be reclassified to profit or loss in subsequent periods: Revaluation of property, net of tax 14,599 (740) Net other comprehensive income not to be reclassified to profit 14,599 (740) or loss in subsequent periods Other comprehensive income (24,356) (127,399) Total comprehensive income for the year 175,114 69,607 Total comprehensive income for the year attributable to: Equity holders of the parent 146, ,320 Non-controlling interests 28,662 (53,713) 175,114 69,607 Nest Investments (Holdings) Ltd Annual Report

25 CONSOLIDATED INSURANCE REVENUE ACCOUNT FOR THE YEAR ENDED 31 DECEMBER Notes US$ '000 US$ '000 Gross written premium 681, ,390 Outward reinsurance premium (293,487) (248,536) Retained premium 387, ,854 Change in unearned premiums (15,469) (9,527) Net earned premium 6 372, ,328 Gross claims paid 7(a) (306,419) (260,523) Claims recovered from reinsurers 7(b) 105, ,002 Change in provision for outstanding claims - gross (24,754) (45,775) Change in provision for outstanding claims - reinsurance (12,205) (12,622) Change in IBNR (2,001) (10,661) Claims and related expenses 7(d) (239,386) (212,579) Commissions and taxes paid (123,345) (114,062) Commissions and taxes received from reinsurers 51,931 44,863 Interest on premium reserve Interest on premium reserve - reinsurance (42) (19) Change in deferred acquisition cost gross 23 5,418 2,308 Change in deferred acquisition cost reinsurance 23 (3,290) (646) Change in unexpired risk reserves 37 (93) Acquisition costs, commissions and taxes 23 (69,125) (67,580) Gross underwriting profit 63,634 61,169 Operating expenses 8 (42,695) (37,416) Technical Income 3,014 2,353 Transfer to consolidated statement of comprehensive income 23,954 26,105 Nest Investments (Holdings) Ltd Annual Report

26 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER (Restated) (Restated) Notes US$ '000 US$ '000 US$ '000 Assets Goodwill 17(b) 20,907 26,817 26,817 Intangible assets 17(a) 6,400 7,227 7,175 Property and equipment , , ,315 Properties held for trading 18 25,399 9,229 8,945 Investment properties 19 1,709,521 1,629,887 1,718,718 Investment in associates , ,005 24,186 Loans and advances to banking customers 21(a) 362, , ,746 Other financial assets 21(b) 115, , ,293 Reinsurance assets , , ,164 Insurance receivables 22 32,930 38,126 30,618 Gross deferred acquisition cost 23 52,574 47,748 45,489 Other assets , , ,967 Accounts receivable , , ,716 Due from banks - banking operations 25 19,835 53,899 80,077 Bank and cash balances , , ,302 Total assets 4,506,666 4,181,424 3,835,529 Equity Share capital 27(a) Reserves 27(b) 1,667,697 1,520,460 1,394,928 Contribution from shareholder 75, ,175 28,968 Equity attributable to equity holders of the parent 1,742,714 1,632,652 1,423,912 Non-controlling interests 654, , ,607 Total equity 2,397,219 2,265,848 2,132,519 Liabilities Bank loan , , ,634 Banking customer deposits , , ,920 Due to banks 2,177 2,376 9 Insurance contract liabilities , , ,620 Reinsurance balances payable 51,873 61,189 47,717 Trade creditors and other liabilities , , ,699 Bank overdraft 26 11, Income received in advance 2,301 1,951 2,691 Reinsurers' share of deferred acquisition costs 23 17,954 14,664 14,018 Total Liabilities 2,109,447 1,915,576 1,703,009 Total equity and liabilities 4,506,666 4,181,424 3,835,529 Ghazi Abu Nahl Chairman and CEO 5 June 2015 Mehran Eftekhar, FCA Director Nest Investments (Holdings) Ltd Annual Report