23/04/2018 Full Year Results - RNS - London Stock Exchange Regulatory Story GBGI Limited - GBGI Full Year Results Released 07:00 23-Apr-2018 RNS Number : 7046L GBGI Limited 23 April 2018 GBGI Limited Full Year Results 23 April 2018 GBGI Limited ("GBGI" or the "Company" and, together with its subsidiary undertakings, the "Group") Full Year Results GBGI Limited (AIM: GBGI), a leading integrated provider of interna onal benefits insurance, announces its full year results for the twelve months ended. Financial Highlights Strong top line growth, with Gross Wri en Premiums ("GWP") up 17.5 percent to US$193.9 million (CY 1 : US$165.0 million) A steady underwri ng track record drives higher reten on, leading Net Wri en Premiums ("NWP") to rise 15.3 percent to US$104.5 million (CY : US$90.6 million) Total revenues increased by 30.6 percent to US$155.9 million (CY : US$119.4 million) As previously announced, in light of currency controls, GBGI has reorganised its ac vi es in the Angolan market. This has resulted in a one-off impairment allowance of US$12.3 million against receivables related to the Angolan business Opera ng income, excluding the US$12.3 million asset impairment, was US$14.2 million (CY : US$12.1 million) and EBITDA was US$14.9 million 2 (CY : US$12.6 million) Net profit before tax (unadjusted) was US$3.6 million (CY : US$11.2 million) Dividend policy adjusted to conserve the strength of the Group's solvency posi on and ensure growth opportuni es can be self-funded Business Highlights Admission to AIM in February improved corporate governance and transparency resul ng in commercial benefit The Group's strategic partnership with the global insurer AXA evolved, facilita ng the Group's entry into new La n American markets and crea ng a new product line focused on the needs of individuals The acquisi on and incorpora on of QHM into GBG Assist performed well in its first full year of opera on, and the Group is now leveraging the cost containment network across the en re set of group policies The TieCare Interna onal business won its largest-ever group medical insurance account, cemen ng its posi on as the market leader in the interna onal educa onal employee benefits segment Two hires were incorporated into the senior manager leadership team; David Carter was hired as Regional Vice- President for GBG Asia Pacific and Cathy Garner as Global Head of Life and Long Term Disability
23/04/2018 Full Year Results - RNS - London Stock Exchange Ongoing robust sales in the La n American individual private medical market, offering a strong pla orm to increase group business and enter new countries in La n America in CY 2018 Reorganised management structure in GBGI's Chinese opera ons; now fully op mised to offer high quality product and service offerings Ready to comply with the General Data Protec on Regula on (GDPR)'s requirements coming into force on 25 May 2018 Capital Posi on and Solvency Following the developments in Angola and the poten al impact on the Company's solvency posi on, the Board is focused on reinforcing its solvency ra o to support its credit ra ng. As such, the Board has revised its dividend policy with the objec ve of conserving the strength of the Group's solvency posi on, to ensure growth opportuni es can be self-funded and to distribute excess capital to shareholders. Dividend Consistent with the Board's prudent approach to maintaining capital adequacy, the Board has determined to declare a semiannual base dividend of US$0.014 per share (equivalent to 0.01 per share at current exchange rates) beginning in the first half period of 2018. The Company has also determined to declare a further base dividend of US$0.014 per share in respect of subsequent half-year periods. Going forward, such payments will be subject to the availability of distributable profits at the relevant me and other factors, including the solvency capital requirements of GBG Insurance Limited (GIL) and the need for GIL to maintain its insurer financial strength ra ng with A.M. Best. Addi onally, as part of its dividend policy, the Company has decided to assess annually, alongside its full year results, whether it would declare an addi onal ordinary dividend. The amount of the addi onal ordinary dividend will be subject to the Board's determina on of excess capital, a er taking into considera on the Company's then current capital posi on less any capital required to achieve its solvency and credit ra ng objec ves and less any capital required to support the Company's future growth. It is expected that the first me the Company would declare such an addi onal dividend would be in 2019. Payment of the first base dividend of US $0.014 per share will be made on 15 June 2018. The ex-dividend date will be May 2018 and the associated record date will be 1 June 2018. A copy of the Dividend Currency Elec on form, which when completed should be sent to Link Asset Services, The Registry, Beckenham Road, Beckenham, Kent, BR3 4TU, can be found on the Company's website www.gbg.com/investors. The dividend is capable of being paid in sterling rather than US dollars, provided that the relevant shareholder has registered to receive their dividend in sterling under the Company's Dividend Currency Elec on or registers to do so by the close of business on 1 June 2018. Outlook We con nue to successfully operate a niche, differen ated insurance model benefi ng from structural growth drivers. We have been in our market for many years, and have developed a deep broker network supported by an invested, integrated opera ons pla orm. Going forward we will con nue our focus on growing profitability within the context of improving risk adjusted returns and delivering consistent underwri ng excellence, which is the founda on of our profitable opera ons. In addi on, we con nue to invest in our pla orm to support both sales efforts and outstanding service levels, underpinning our growth poten al and control of risks. Looking forward, we con nue to see opportuni es to develop the business across our diversified por olio. GBGI's CEO, Bob Dubrish, commented: " marked another year of growth for GBGI as we made our successful transi on to a quoted company in the first quarter. We con nued to make significant progress driven by our global, well-diversified approach, delivering GWP growth of 17.5 percent to US$193.9 million and growth in adjusted opera ng profit of 17.1 percent to US$14.2 million. "The decisions taken in Angola followed our standard risk assessment procedures. Although the outcome of the restructuring of our opera ons in the country is disappoin ng, we firmly believe we took the right course of ac on. Looking across the breadth of our por olio, I am confident this is a non-recurring event. "The strength of our offering rests on our proven ability to write risks in an agile, flexible manner whilst maintaining our focus on delivering underwri ng profit. We have a strong market posi on and con nue to be one of the leading providers of interna onal benefits insurance given our presence in 120 jurisdic ons. "We con nue to focus on profitable growth and looking forward, we con nue to see opportuni es to develop the business across our diversified por olio." For further informa on please contact: GBGI Limited Bob Dubrish (CEO) +1 949 421 80 Eric Dickelman (CFO) +1 949 421 3390
23/04/2018 Full Year Results - RNS - London Stock Exchange Canaccord Genuity (Nominated Adviser and Broker) Sunil Duggal Andrew Buchanan Emma Gabriel +44 (0)20 7523 8000 Ins nc f Partners (Financial PR) Giles Stewart Rui Videira Lewis Hill +44 (0)20 7457 2020 Notes to Editors GBGI is a leading integrated provider of interna onal benefits insurance, opera ng globally across over 120 jurisdic ons. Trading principally as "The Global Benefits Group" or "GBG", the Group distributes and underwrites health, life and disability, and travel insurance, with a client base that spans mul na onal corpora ons, expatriates, local HNWIs, interna onal schools, non-profit organisa ons and interna onal students. GBGI is a fully integrated insurance group providing services from policy sales to claims administra on and servicing and is commi ed to delivering high levels of customer service. GBGI is incorporated in Guernsey. The informa on contained within this announcement is deemed to cons tute inside informa on as s pulated under the Market Abuse Regula ons (EU) No. 596/2014. Upon the publica on of this announcement this inside informa on is now considered to be in the public domain. Key: 1 CY : 12 months ended 2 Excludes IPO-related expenses of US$0.4 million and US$12.3 million asset impairment in Angolan business Chief Financial Officer's review A Strong Financial Performance This is GBGI's maiden set of annual results since changing its accoun ng year end to in alignment with our policy year, and I am delighted to report on a strong underlying financial performance for the Calendar Year. These underlying results demonstrate the good progress we have made in developing our business over the years from an agency model through to a resilient and diversified full service, integrated insurer wri ng profitable insurance business across 120 jurisdic ons. We are well placed to con nue to grow the business in 2018 and beyond, whilst we have taken decisive steps to minimise the impact of the developments in Angola. Gross wri en premiums ("GWP") for the period increased 17.5 percent from US$165.0 million to US$193.9 million, net revenues increased 30.6 percent from US$119.4 million to US$155.9 million, and our profit a er tax, including the Angola impairment, was US$3.5 million (CY : US$11.0 million). Trading Highlights (excluding Angola impairment of US$12.3 million in unless stated otherwise) US$' 000 US$' 000 12 months to 12 months to Gross Wri en Premiums 193,937 165,0 Total Revenue 155,929 119,366 Total Net Claims and Other 141,721 107,232 Expenses 1 EBITDA 1 14,914 12,600 Opera ng income 1 14,208 12,134 Profit before Tax 1 15,830 11,237 Profit A er Tax 1 15,790 10,962 EPS (US$) 2.04.16 1 2 Excluding US$12.3 million in rela on to Angola impairment in Includes the impact of Angola impairment in EBITDA The Group's adjusted earnings before interest, deprecia on and amor sa on (EBITDA) grew 18.4 percent for the year from US$12.6million in CY to US$14.9million in CY 1. This increase is reflec ve of the Group's con nuing ability to deliver opera ng income.
23/04/2018 Full Year Results - RNS - London Stock Exchange Year ended US$' 000 EBITDA Calcula on Opera ng income 1 14,208 12,134 Deprecia on and amor za on 706 467 Total EBITDA 14,914 12,600 1 Excluding US$12.3 million in rela on to Angola impairment in. Does not include IPO-related expenses of US$0.4 million Income Statement Gross Wri en Premiums ("GWP") We delivered strong growth in GWP during the year. GWP in CY was US$193.9 million, growth of 17.5 percent over the prior year period. Medical remains the primary product line for the business, represen ng 77.4 percent of GWP in the year. Performance in Travel, was up 48.8 percent to US$18.3 million and our high margin Life and Disability con nued to deliver profitable growth, increasing to US$24.9 million. Year ended US$ million Product Medical 150.1 129.0 Life and Disability 24.9 22.9 Travel 18.3 12.3 Specialty 0.6 0.7 Total GWP 193.9 165.0 Medical Our medical insurance products include a variety of group and individual plans with a range of benefits and levels of cover including emergency evacua on, maternity cover, dental cover, wellness programmes and pre-exis ng condi ons. Total Medical GWP grew 16.4 percent in CY to US$150.1 million (CY : US$129.0 million) as a result of premium growth across nearly all our geographic regions. Life and Disability Our life insurance products are typically annually renewable term life policies, although a small number of policies with slightly longer terms (up to 18 months) may be wri en. Term life benefits are set at either a fixed sum or as a mul ple of the insured's salary. We also write both long-term and short-term disability products with benefits typically set as a propor on of the insured's salary. Total Life and Disability GWP grew 8.7 percent in CY to US$24.9 million (CY : US$ 22.9 million). Travel We have con nued to see strong growth in Travel, supplemented by the addi on of student based travel insurance products. Travel GWP was US$18.3 million, a 48.8 percent increase over the prior year (CY : US$12.3 million). Net Wri en Premiums ("NWP") NWP grew 15.3 percent in CY to US$104.5 million (CY : US$90.6 million), which reflects both growth in GWP and higher risk reten on. Higher reten on levels have been a contribu ng factor behind the growth in our profitability and a est to the consistency of our underwri ng performance over a sustained period, the confidence in the quality of our underwri ng process and our rich data histories. Looking forward we expect reten on levels to remain broadly around 60 percent for at least policy year 2019. Total Revenue Total revenues grew 30.6 percent to US$155.9 million in CY, as a result of the overall growth of GWP across the medical products pla orm and the increased levels of reten on. Growth in the Commission and Fees income was impacted by a lower Profit Share of US$393,000 in CY (CY : US$3.1 million). However, the lower Profit Share fee was offset by higher Administra ve Services Only (ASO) fees of US$4.4 million in CY (CY : US$6,000). All other fee rates were in line with expecta ons. Expenses Year ended US$ million Net Claims 62.1 41.3 Administra ve Expenses 53.9 35.9 Commission Expense 38.0 30.0 Given the Group's higher risk reten on level, net claims were US$62.1 million, a 50.5 percent increase over the prior year. The Net Claims expense was generally within expecta ons with the excep on of the booking of a higher than normal loss expense for one of the programmes the Group had been reinsuring. The profitability of the Company's medical risk underwri ng for policy years and were in line with our expecta ons. The policy year medical underwri ng results con nue to show an improving trend compared with the previous policy year. The underwri ng results for Life and Disability con nue to deliver excellent profitability, in line with the results from prior years. Administra ve expenses, including the $12.3 million Angola impairment, were US$53.9 million, increasing 50.0 percent from US$35.9 million in CY. Without the US$12.3 million impairment, the Administra ve expenses increase was 15.9 percent. The increase in administra ve expenses year on year was driven by costs associated with being a PLC, con nued investment in GBGI's opera onal pla orm and associated infrastructure, and certain one-off expenses. The expense increases were offset by improved opera onal cost management processes that were implemented throughout the calendar year.
23/04/2018 Full Year Results - RNS - London Stock Exchange Commission expenses increased 26.4 percent from US$30.3 million to US$38.0 million. However, the expense was broadly in line with the growth in premium, and in line with our expecta ons. Profitability Group opera ng income, inclusive of the Angola impairment, was US$2.0 million (CY US$12.1 million). As noted, absent the Angola impairment, the Company's opera ng income would have been US$14.2 million, a 17.1 percent increase over CY ; a result that, combined with the GWP and Revenue results, is indica ve of the underlying strength of the business. Angola Pursuant to the Board's vigilance in managing risk exposure and in light of the Angolan AOA currency devalua on and GBGI's view on the inability to transfer funds to USD (or equivalent currency) in a mely manner, the Group reorganized its approach in the Angolan market. Under the new approach, GBGI will transfer its risk book and opera ons to its local partners, while GBG Insurance Ltd. will con nue as an excess of loss reinsurer to its local partner in Angola. In return for transferring the business, our insurance partner agreed to pay GBG, Inc. a se lement amount of US$17.5 million, to be paid in the Angolan AOA currency over the next 3 years. However, it subsequently became clear that the Company's ability to convert the AOA currency received by it under the se lement agreement into a tangible western currency (USD, GBP, or Euro) would be significantly delayed or possibly never converted. As a result, the Board has taken the decision to take an impairment allowance against Angolan receivables of US$12.3 million. This impairment is shown in the profit and loss statements in Administra ve Expenses in the CY. It is important to note that the Board and Management view the decisions that have been made in Angola to be a necessary part of our overall risk assessments and part of our commitment to our shareholders and other stakeholders to con nuously review the risks and returns in each region and make prudent strategic, business and financial decisions as a result of those reviews. Earnings per share Earnings per share (EPS) was US$0.04, calculated with reference to post tax profit of US$3.2 million and weighted average number of shares in issue of 84,518,229. Dividend Consistent with the Board's prudent approach to maintaining capital adequacy, the Board has determined to declare a semiannual base dividend of US$0.014 per share (equivalent to 0.01 per share at current exchange rates) beginning in the first half period of 2018. Going forward, such payments will be subject to the availability of distributable profits at the relevant me and other factors, including the solvency capital requirements of GBG Insurance Limited (GIL) and the need for GIL to maintain its insurer financial strength ra ng with A.M. Best. Addi onally, as part of its dividend policy, the Company has decided to assess annually, alongside its full year results, whether it would declare an addi onal ordinary dividend. The amount of the addi onal ordinary dividend will be subject to the Board's determina on of excess capital, a er taking into considera on the Company's then current capital posi on less any capital required to achieve its solvency and credit ra ng objec ves and less any capital required to support the Company's future growth. It is expected that the first me the Company would declare such an addi onal dividend would be in 2019. Payment of the first base dividend of US $0.014 per share will be made on 15 June 2018. The ex-dividend date will be May 2018 and the associated record date will be 1 June 2018. A copy of the Dividend Currency Elec on form, which when completed should be sent to Link Asset Services, The Registry, Beckenham Road, Beckenham, Kent, BR3 4TU, can be found on the Company's website www.gbg.com/investors. The dividend is capable of being paid in sterling rather than US dollars, provided that the relevant shareholder has registered to receive their dividend in sterling under the Company's Dividend Currency Elec on or registers to do so by the close of business on 1 June 2018. Balance Sheet Net Assets & Working Capital Net assets at CY were US$48.5 million (CY : US$33.4 million), with growth driven by the combined effect of growth in GWP, cash genera on, IPO related restructuring and equity raise. Net Cash The Group's opera ng ac vi es con nue to be highly cash genera ve and during CY cash inflow from opera ng ac vi es was US$23.0 million. The business is prudently financed, in keeping with the commercial demands of our business. Cash and cash equivalents at was US$93.1 million. Insurance Liabili es and Reserves Total gross insurance liabili es as at CY of US$1.1 million comprises US$89.6 million of unearned premiums, which are deferred to be recognised in subsequent periods (CY : US$92.1 million), and outstanding claims liabili es of US$41.4 million (CY : US$42.2 million). Unearned premiums decreased 2.7 percent from the prior period due to ming of booked premium and the overall increase in GWP. Outstanding claim liabili es was approximately even to the prior period reflec ng ming and overall improvements in the underwri ng result. The provisioning for outstanding claims liabili es is an area of significant judgement as it es mates the cost required to se le all unpaid claims, both reported and incurred but not reported (IBNR), at the balance sheet date. The Group manages this risk by applying a consistent reserving methodology to each of its product areas and measuring actual loss amounts against the reserves quarterly. In addi on, the Group engages an independent third party to review the reserves and reserve methodologies annually. Reinsurance Contracts The Group uses excess of loss reinsurance arrangements to manage its risk exposure, therefore protec ng its solvency and underwri ng capability. Excess of loss reinsurance is designed to prevent large claims from having a material impact on performance whilst our quota share arrangements allow us to benefit from our underwri ng excellence without having to fully allocate capital to back the policy underwri en. In recent periods, we have ac vely sought to increase our risk reten on levels as our consistent underwri ng performance gives us confidence that we are able to generate underwri ng returns. Overall, our proven approach to risk structuring is to
23/04/2018 Full Year Results - RNS - London Stock Exchange maximise return whilst reducing vola lity risk caused by the accumula on of losses and large individual claims. Reinsurance assets, comprising reinsurers' share of outstanding claims liabili es, remained at CY levels with CY at US$23.8 million (CY : US$23.8 million) due to the Group's increased risk reten on levels. Reinsurance assets have been impacted by our strategic decision to retain more of the risk across all of our product areas. However, we an cipate that we will maintain our current risk reten on levels into the near future. Capital posi on and solvency Following the developments in Angola and the poten al impact on the Company's solvency posi on, the Board is focused on improving its solvency ra o to support its credit ra ng. The Board has revised its dividend policy with the objec ve of conserving the strength of the Group's solvency posi on, to ensure growth opportuni es can be self-funded and to distribute excess capital to shareholders. Key: 1 CY : 12 months ended GBGI Limited Consolidated statement of comprehensive income For the years ended and Notes Income Gross premiums wri en 4 193,937 165,0 Outward reinsurance premiums 4 (89,487) (74,436) Net premiums wri en 104,450 90,595 Change in the gross provision for unearned premiums 4 2,167 (8,801) Change in the provision for unearned premiums, reinsurers' share 4 5,879 (2,015) Change in net provision for unearned premiums 8,046 (10,816) Earned premiums, net of reinsurance 112,496 79,779 Commission and fees 7 43,433 39,587 Total revenue 4 155,929 119,366 Claims incurred, net of reinsurance Claims paid - gross amount (106,191) (77,296) - reinsurers' share 43,652 39,900 Net claims paid (62,539) (37,396) Change in the provision for outstanding claims - gross amount 825 222 - reinsurers' share (404) (4,095) Change in net provision for claims 421 (3,873) Net claims 13 (62,118) (41,269) Administra ve expenses 12 (53,889) (35,933) Commission expense 8 (37,968) (30,030) Total net claims and other expenses (153,975) (107,232) Opera ng income 1,954 12,134 Investment income 5 377 195 Other income / (expense) 6 1,342 (432) Finance costs 9 (97) (660) Profit before income tax 3,576 11,237 Income tax expense 15 (40) (275) Profit a er income tax 3,536 10,962 Total comprehensive income a er tax 3,536 10,962 Profit and total comprehensive income a er tax a ributable to: Owners of the Group 3,196 10,844 Non-controlling interests 340 118 Basic earnings per share 16 0.04 0.16 Diluted earnings per share 16 0.04 0.16 The accompanying notes form an integral part of these consolidated financial statements. GBGI Limited Consolidated statement of financial posi on As at and
23/04/2018 Full Year Results - RNS - London Stock Exchange Notes ASSETS Intangible assets 17 10,690 6,734 Property, plant and equipment 18 820 891 Investments 10 249 - Reinsurers share of technical provisions 23 53,524 59,424 Tax assets 15 57 257 Trade and other receivables 20 75,930 102,158 Deferred acquisi on costs on unearned premium 8 14,035 16,489 Cash and cash equivalents 21 93,053 67,990 Total assets 248,358 253,943 LIABILITIES Insurance liabili es 23 1,065 134,371 Other insurance liabili es 24 49,707 56,994 Borrowings: Redeemable Preferred Stock 26 250 250 Class D shares 26-5,500 Deferred tax liabili es 15 940 1,088 Other liabili es 29 2,354 - Trade and other payables 29 15,520 22,6 Tax liabili es 15 - - Total liabili es 199,836 220,519 Net assets 48,522 33,424 EQUITY Called up share capital 27 88 34 Share premium 44,817 22,105 Treasury stock 28 (1,467) (11,993) Retained earnings 4,416 22,950 A ributable to the equity holders of the parent 47,854 33,096 Non-controlling interests 668 328 Total equity 48,552 33,424 The accompanying notes form an integral part of these consolidated financial statements. The financial statements of GBGI Limited were approved by the Board of Directors and authorised for issue on 19 April 2018. They were signed on its behalf by: Eric Dickelman Chief Financial Officer 22 April 2018 GBGI Limited Consolidated statement of changes in equity For the years ended and Called up share capital Share Premium Treasury Stock Retained Earnings Total Non-controlling interests Equity a ributable to equity holders of the en ty At 34 22,105 (11,993) 22,950 33,096 328 33,424 Distribu on to Class B and Class C common shareholders - - - (16,513) (16,513) - (16,513) Shares exchanged and converted to ordinary shares in reorganisa on 33 (12,026) 11,993 - - - - Shares repurchased for repayment of note receivable - - (1,467) - (1,467) - (1,467) Shares issued in current period 21 39,522 - - 39,543-39,543 Cost of issuance of equity - (5,151) - - (5,151) - (5,151)
23/04/2018 Full Year Results - RNS - London Stock Exchange shares Dividends paid - - (5,217) (5,217) (5,217) Share-based payments - 367 - - 367-367 Profit and total comprehensive income - - 3,196 3,196 340 3,536 Total equity as at 88 44,817 (1,467) 4,416 47,854 668 48,522 Called up share capital Share Premium Capital Redemp on Reserve Retained Earnings Total Non-controlling interests Equity a ributable to equity holders of the en ty At 2015 34 22,105 (11,993) 12,106 22,252 210 22,462 Profit and total comprehensive income - - - 10,844 10,844 118 10,962 Total equity as at 34 22,105 (11,993) 22,950 33,096 328 33,424 The accompanying notes form an integral part of these consolidated financial statements. GBGI Limited Consolidated cash flow statement For the years ended and Notes Cash flows from opera ng ac vi es Profit before taxa on 3,576 11,237 Adjustments for: Share-based payments 11 367 - Deprecia on of property, plant and equipment 12 129 437 Amor sa on of intangible assets 12 577 30 Loss on disposal of property, plant and equipment 105 - Finance costs 9 97 660 Impairment for other receivables 20 12,254 - Opera ng profit before working capital changes 17,105 12,364 Changes in working capital (net of change from acquisi on) Decrease/(increase) in other receivables 20,676 (26,373) Increase in gross insurance liabili es (3,306) 9,706 (Decrease)/increase in other liabili es (17,358) 7,045 Decrease in reinsurers share of technical provisions 5,899 5,073 Cash generated from opera ons 23,016 7,815 Income taxes refunded/ (paid) 11 (233) Net cash generated from opera ng ac vi es 23,027 7,582 Cash flows from inves ng ac vi es Purchases of property and equipment 18 (163) (570) Purchase of intangibles 17 (3,735) (2,138) Purchase of investments 10 (249) - Purchase of business, net of cash acquired 32 (882) - Net cash used in inves ng ac vi es (5,029) (2,708) Cash flows from financing ac vi es 34 Dividends paid to holders of Class D shares 9 (97) (660) Ordinary dividends paid 22 (5,217) - Proceeds from the issuance of ordinary shares 27 12,379 - Net cash (used) / generated by financing ac vi es 7,065 (660) Net change in cash and cash equivalents 25,063 4,214 Cash and cash equivalents at the beginning of the period 67,990 63,776 Cash and cash equivalents at the end of the period 21 93,053 67,990 The accompanying notes form an integral part of these consolidated financial statements.
23/04/2018 Full Year Results - RNS - London Stock Exchange NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Accoun ng Policies a) General informa on GBGI Limited ('GBGI' or the "Group") was incorporated as Saxton Lane Company Limited in Guernsey in 2008 and is a mul ple line insurance group wri ng substan ally all lines of expatriate health insurance products and long term liability insurance products. GBGI is a Guernsey corpora on located at Level 5, Mill Court La Charroterie, St. Peter Port, Guernsey GY1 1EJ. Its registra on number is 48728. b) Basis of prepara on The financial statements represent the consolidated financial statements for the Group for the years ended with compara ve unaudited. The consolidated financial statements have been prepared in accordance with Interna onal Financial Repor ng Standards ('IFRS') and IFRC Interpreta ons issued by the Interna onal Accoun ng Standards Board as adopted by the European Union. The Group changed its financial year end from 30 June to, effec ve. The financial statements have been prepared using the historical cost conven on. Outstanding claims liability and reinsurance and other recoveries are carried at management's best es mate of the amounts at which these will be se led based on the informa on currently available to them. These policies have been consistently applied to all periods presented. The prepara on of the consolidated financial statements requires the use of certain cri cal accoun ng es mates. The areas involving a higher degree of judgement of complexity, or areas where assump ons or es mates are significant are disclosed in Note 2 below. The presenta on currency of the financial statements is US Dollars, rounded to the nearest thousands ($'000) unless otherwise indicated. The Group's func onal currency is US Dollars. The presenta on and func onal currency of the Group and its subsidiaries is deemed to be US Dollars. c) Going concern The Directors have prepared a cash flow forecast covering a period extending beyond 12 months from the financial statements presented as at. The Directors have taken into account the historical posi ve cash flows, growth in business and the inherent risks and uncertain es facing the business, and have derived forecast assump ons that are the Directors' best es mate of the future development of the business. For these reasons, they con nue to adopt the going concern basis of accoun ng in preparing the consolidated financial statements. The consolidated financial statements do not include any adjustments that would result from the going concern basis of prepara on being inappropriate. d) New accoun ng standards and amendments i) Standards, amendments and interpreta ons effec ve or early adopted as at January 1, and relevant for the Group's opera ons Below are the new accoun ng standards or amendments to and interpreta ons of standards relevant to the Group that have been implemented for the financial year beginning January 1,, with no material impact on the Group's financial posi on or performance. Amendments resul ng from the IASB annual improvements project have no impact on the Group's financials. New standards/interpreta ons Effec ve Date IAS 7 Disclosure Ini a ve 1 January IAS 12 Recogni on of Deferred Tax Assets for Unrealised Losses 1 January ii) New standards, interpreta ons and amendments not yet effec ve The new Interna onal Financial Repor ng Standards ('IFRS') and Interna onal Accoun ng Standards ('IAS') and amendments detailed below are not mandatory un l the effec ve dates stated. Early adop on is permi ed where the standards has been endorsed by the EU. New standards/interpreta ons Effec ve Date IFRS 9 Financial instruments 1 January 2018 IFRS 15 Revenue from contracts with customers 1 January
23/04/2018 Full Year Results - RNS - London Stock Exchange 2018 IFRS 16 Leases 1 January 2019 IFRS 17 Insurance Contracts 1 January 2021 IFRIC 22 Foreign Currency Transac ons and Advance Considera on 1 January 2018 Amended standards IFRS 2 Classifica on and Measurement of Share-based Payment Transac ons 1 January 2018 IFRS 4 Applying IFRS 9 with IFRS 4 1 January 2018 IAS 20 Transfers of Investment Property 1 January 2018 IAS 28 Long-term Interests in Associates and Joint Ventures 1 January 2019 IFRS 9 Prepayment Features with Nega ve Compensa on 1 January 2021 The Group will apply the standards detailed above for the repor ng periods beginning on the effec ve dates set out above. The following new standards, interpreta ons and amendments, which are not yet effec ve and have not been adopted early in this financial statements, will or may have an effect on the Group's future financial statements: IFRS 9 Financial Instruments, effec ve annual periods beginning on or a er 1 January 2018, endorsed by the EU. IFRS 9 is a replacement for IAS 39 'Financial Instruments' and covers three dis nct areas. Phase 1 contains new requirements for the classifica on and measurement of financial assets and liabili es. Phase 2 relates to the impairment of financial assets and requires the calcula on of impairment on an expected loss basis rather than the current incurred loss basis. Phase 3 relates to less stringent requirements for general hedge accoun ng. The Group performed a high-level impact assessment of all three aspects of IFRS 9. This preliminary assessment is based on currently available informa on and may be subject to changes arising from further detailed analyses or addi onal reasonable and supportable informa on being made available to the Group in the future. Overall, the Group expects no significant impact on its balance sheet and equity, except for the effect of applying the impairment requirements of IFRS 9. The group plans to defer the applica on of IFRS 9 un l the earlier of the effec ve date of the new insurance contracts standard of 1 January 2021, applying the temporary exemp on from applying IFRS 9 as introduced by the amendments. Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts In September, the IASB issued amendments to IFRS 4 to address issues arising from the different effec ve dates of IFRS 9 and the upcoming new insurance contracts standard. The amendments introduce two alterna ve op ons for en es issuing contracts within the scope of IFRS 4, notably a temporary exemp on and an overlay approach. The temporary exemp on enables eligible en es to defer the implementa on date of IFRS 9 for annual periods beginning before 1 January 2021 at the latest. An en ty may apply the temporary exemp on from IFRS 9 if: (i) it has not previously applied any version of IFRS 9 before and (ii) its ac vi es are predominantly connected with insurance on its annual repor ng date that immediately precedes 1 April. The overlay approach allows an en ty applying IFRS 9 to reclassify between profit or loss and other comprehensive income an amount that results in the profit or loss at the end of the repor ng period for the designated financial assets being the same as if an en ty had applied IAS 39 to these designated financial assets. An en ty can apply the temporary exemp on from IFRS 9 for annual periods beginning on or a er 1 January 2018. An en ty may start applying the overlay approach when it applies IFRS 9 for the first me. The Group performed an assessment of the amendments and reached the conclusion that its ac vi es are predominantly connected with insurance as at. The Group intends to apply the temporary exemp on in its repor ng period star ng on 1 January 2018. IFRS 15 Revenue from Contracts with Customers, effec ve annual periods beginning on or a er 1 January 2018, endorsed by the EU, sets out to clarify the principles of revenue recogni on and establish a single framework for revenue recogni on. This standard replaces the previous standard IAS 11 Construc on Contracts, IAS18 Revenue and revenue related IFRICs. The Group expects to apply IFRS 15 fully retrospec ve. Given insurance contracts are scoped out of IFRS 15, the Group does not expect the impact of applying IFRS 15 to be significant to the Group. IFRS 16 Leases, effec ve annual periods beginning on or a er 1 January 2019, endorsed by the EU sets out the principles for the recogni on, measurement, presenta on and disclosure of leases for both par es to a contract, i.e. the customer ('lessee') and the supplier ('lessor'). IFRS 16 completes the IASB's project to improve the financial repor ng of leases and replaces the previous leases Standard, IAS 17 Leases, and related Interpreta ons. The impact of this new standard on the Group is s ll being considered.
23/04/2018 Full Year Results - RNS - London Stock Exchange IFRS 17 Insurance Contracts, effec ve annual periods beginning on or a er 1 January 2021, not yet endorsed by the EU, sets out the requirements that a company should apply in repor ng informa on about insurance contracts it issues and reinsurance contracts it holds. IFRS 17 supersedes IFRS 4. IFRS 17 will provide comprehensive guidance on accoun ng for insurance contracts and investment contracts with discre onary par cipa on features. For general insurance contracts, IFRS 17 will introduce mandatory discoun ng of loss reserves expected to be paid in more than one year as well as risk adjustment, for which confidence level equivalent disclosure will be required. Further, IFRS 17 is expected to have a significant impact on accoun ng for life insurance contracts as well as on the presenta on of insurance contract revenue in the financial statements. The impact of this new standard on the Group is s ll being considered. IFRIC 22, effec ve annual periods beginning on or a er 1 January 2018, endorsed by the EU, clarifies how to determine the date of transac on for the exchange rate to be used on ini al recogni on of a related asset, expense or income where an en ty pays or receives considera on in advance for foreign currency-denominated contracts. For a single payment or receipt, the date of the transac on should be the date on which the en ty ini ally recognises the non-monetary asset or liability arising from the advance considera on (the prepayment or deferred income/contract liability). If there are mul ple payments or receipts for one item, a date of transac on should be determined as above for each payment or receipt. Insurance contracts (including reinsurance contracts) that the en ty issues or reinsurance contracts that the en ty holds are outside the scope of IFRIC 22. The Group performed a high level impact assessment of IFRIC 22. This preliminary assessment is based on currently available informa on and may be subject to changes arising from further detailed analyses or addi onal reasonable and supportable informa on being made available to the Group in the future. Overall, the Group expects no significant impact from this Interpreta on. e) Basis of consolida on The consolidated financial statements incorporates the assets and liabili es of all en es controlled by the Group as at and and the results of all controlled en es for the financial years then ended. Control is the power over the investee, exposure, or rights, to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of the investor's returns. The effects of all transac ons between controlled en es are eliminated in full. Non-controlling interests in the results and equity of the controlled en es are shown separately in the consolidated statement of comprehensive income and consolidated statement of financial posi on. Business combina ons are accounted for using the acquisi on method when control of an en ty of business is obtained. The cost of an acquisi on is measured as the fair value of the assets given, equity instruments issued and liabili es incurred or assumed at the date of exchange. Iden fiable assets acquired and liabili es and con ngent liabili es assumed in a business combina on are measured ini ally at their fair values at the acquisi on date, irrespec ve of the extent of any non-controlling interest. The excess of the cost of acquisi on over the fair value of the Group's share of the iden fiable net assets acquired is recorded as goodwill. If the cost of acquisi on is less than the fair value of the net assets of the controlled en ty acquired, the difference is recognised directly in profit or loss. Non-controlling interests in an acquiree are recognised at the non-controlling interest's propor onate share of the acquiree's net iden fiable assets. f) Insurance contracts A contract is recognised as an insurance contract if it transfers significant insurance risk. Such contracts may also transfer financial risk. Insurance risk is transferred to the Group where it agrees to compensate a policyholder if a specified uncertain event, other than those caused by changes in a financial variable such as interest and foreign exchange rates, adversely affects the policyholder. All of the Group's insurance products are classified as insurance contracts. The results are determined on an annual basis whereby the incurred cost of claims, commission and related expenses are charged against the earned propor on of premiums, net of reinsurance as follows: i) Premiums wri en Premiums wri en relate to business incepted during the year, together with any addi onal premiums arising on insurance contracts recognised in prior years. Wri en premiums include es mates of premiums due but not yet receivable or no fied to the Group, less allowance for cancella ons. Premiums are stated net of taxes collected on behalf of third par es. ii) Unearned premiums Unearned premiums represent the propor on of premiums wri en that relate to periods of insurance coverage to be provided in periods subsequent to the repor ng date. Unearned premiums are earned as revenue over the period of the contract on a me appor onment basis, unless there is a marked unevenness in the incidence of risk over the period covered by the insurance. In these cases, premiums are recognised based on the assessed incidence of risk. iii) Acquisi on costs Acquisi on costs, which represent commissions due to internal employees and third party brokers for the sale of insurance policies are deferred and amor sed over the period in which the related premiums are earned.
23/04/2018 Full Year Results - RNS - London Stock Exchange iv) Claims incurred Claims incurred comprise claims and related expenses paid in the year and changes in the provisions for outstanding claims, including provision for claims incurred but not reported and related expenses, together with any adjustments to claims outstanding from previous years. v) Claims provisions and related reinsurance recoveries Provision is made at the repor ng date for the es mated cost of claims incurred but not se led at the repor ng date, including the cost of claims incurred but not yet reported to the Group. Although the Group takes all reasonable steps to ensure that it has appropriate informa on regarding its claim exposures, given the uncertainty in establishing claims provisions, it is likely that the final outcome will be different from the original liability established and may result in significant adjustments to the amounts provided. Adjustments to the amounts provided are reflected in the consolidated financial statements in the accoun ng period in which the adjustments are made. The Group does not discount liabili es for unpaid claims. The es ma on of claims incurred but not recorded ('IBNR') is generally subject to a greater degree of uncertainty than the es ma on of the cost of se ling claims already no fied to the Group, where more informa on about the claim event is generally available. The in-house underwri ng team conducts the IBNR review using standard actuarial methodologies to evaluate and determine the IBNR reserves for of the Group. vi) Reinsurance The Group cedes reinsurance in the normal course of business, with reten on limits set for each line of business. The contracts entered into by the Group with reinsurers, under which the Group is compensated for losses on one or more contracts issued by the Group and that meet the classifica on requirements for insurance contracts, are classified as reinsurance contracts. Outward reinsurance premiums are recognised in the same accoun ng period as the related premium income. Reinsurance claims recoveries are recognised in the same accoun ng period as the related insurance claims are accounted for. The amounts recoverable from reinsurers are es mated based upon the gross provisions, having due regard to their collectability and the terms of the related reinsurance contract. The reinsurance recoveries in respect of es mated claims incurred but not reported are assumed to be consistent with the historical pa ern of such recoveries, adjusted to reflect changes in the nature and extent of the reinsurance program over me. The recoverability of reinsurance recoveries is assessed having regard to market data on the financial strength of each of the reinsurers. Gains and losses on buying reinsurance are recognised immediately at the point of purchase and not amor sed. The reinsurers' share of claims incurred, in the profit or loss, reflects the amounts received or receivable from reinsurers in respect of those claims incurred during the period. The reinsurance premiums due are primarily premiums payable for reinsurance contracts and are recognised in the profit or loss as outward reinsurance premiums when due. g) Foreign Currencies Monetary assets and liabili es denominated in foreign currencies are translated at the func onal currency spot rate of exchange at the repor ng date. Non-monetary items are measured at historical cost and are translated using the exchange rate at the date of the transac on and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined. The Group is exposed to gains and losses that result from the effect of changes in foreign currency exchange rates on foreign currency denomina on transac ons. Gains and losses which result from transac ons denominated in foreign currency are reported in the consolidated statement of comprehensive income. h) Property, plant and equipment Property, plant and equipment is stated at cost (or deemed cost) less accumulated deprecia on and any accumulated impairment losses. Cost includes expenditure that is directly a ributable to bringing the asset to its working condi on for its intended use. Property, plant and equipment are depreciated to their residual values over their useful lives. Deprecia on is calculated on the straight line method to reduce their carrying value to the residual amount as follows: Equipment Furniture and fixtures Leasehold improvements 5 years 5-7 years 7 years or lease term, if shorter
23/04/2018 Full Year Results - RNS - London Stock Exchange The residual values, length of the economic lives and deprecia on method applied are reviewed on a regular basis, and at least at every repor ng date, and adjusted as appropriate. Where the carrying amount of an asset is greater than its es mated recoverable amount, it is wri en down immediately to its recoverable amount. Gains and losses on disposal of property and equipment are determined by reference to their carrying amount. i) Intangible assets Costs of implemen ng new so ware systems are capitalised as incurred. Amor sa on of so ware does not commence un l the system is fully installed and opera onal. Intangible assets acquired are measured on ini al recogni on at cost. The cost of intangible assets acquired in a business combina on is their fair value as at the date of acquisi on. Following ini al recogni on, intangible assets are carried at cost less any accumulated amor sa on and any accumulated impairment losses. The amor sable intangible assets represent computer so ware and development costs and are reported net of accumulated amor sa on. The amor sable intangible assets are amor sed on a straight-lined basis over its es mated useful life of 3-5 years and is assessed for impairment whenever there is an indica on that the intangible asset may be impaired. The amor sa on of intangible assets is carried out only when the implementa on is complete and the asset is in use. j) Goodwill Goodwill arises on the acquisi on of subsidiaries and represents the excess of the fair value of considera on transferred over the Group's interest in the net fair value of the iden fiable net assets, liabili es and con ngent liabili es of the en ty acquired and the fair value of non-controlling interest in the acquiree. For the purpose of impairment tes ng, goodwill acquired in a business combina on is allocated to each of the CGUs, or groups of CGUs, that is expected to benefit from the synergies of the combina on. Goodwill is tested for impairment annually, or more frequently if circumstances indicate impairment may have occurred. If the recoverable amount of the cash genera ng unit is less than its carrying amount. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to that unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss is recognised in profit or loss. Impairment losses so recognised are not subsequently reversed. k) Cash and cash equivalents Cash and cash equivalents include cash in hand and deposits held on call, together with other short term highly liquid investments which are not subject to significant changes in value and have original maturi es of less than three months. l) Tax The charge for tax is based on the results for the year determined in accordance with the relevant tax laws and regula ons that are enacted, or substan vely enacted, at the repor ng date in each jurisdic on. Deferred tax is provided in full on all temporary differences arising between the carrying amounts in the consolidated financial statements and the tax bases of the assets and liabili es. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax is calculated based on the tax rates that have been enacted or substan vely enacted at the end of the repor ng period and which are expected to be in force when the relevant deferred tax asset is realised or the relevant deferred tax liability is se led. Deferred tax balances are not discounted. Deferred tax assets and liabili es are offset when the Group has a legally enforceable right to offset current tax assets and liabili es and the deferred tax assets and liabili es relate to taxes levied by the same tax authority within the Group. m) Employee benefits Share-based payments A transac on is accounted for as a share-based payment where the Group receives services from employees and pays for these in shares and similar equity instruments. The Group makes equity-se led share-based payments to certain employees. Equity-se led share-based schemes are measured at fair value (excluding the effect of non-market-based ves ng condi ons) at the date of grant, measured by use of an appropriate valua on model. The expected life used in the model has been adjusted, based on management's best es mate, for the effects of nontransferability, exercise restric ons and behavioural considera ons. The fair value determined at the grant date of the equity-se led share-based payments is expensed over the ves ng period, based on the Group's es mate of shares that will eventually vest. Share op ons are forfeited when an employee ceases to be employed by the Group. Short-term employee benefits Short-term employee benefits, including compensated absences, are benefits to be paid within one year a er the end of the repor ng period in which the related services are rendered. A liability and expense are recognised for the undiscounted amount expected to be paid for short-term employee benefits in the period in which the employee renders services in exchange for the benefits.