SEPTEMBER 2016 MANAGEMENT ACCOUNT
MANAGEMENT ACCOUNT FOR PERIOD ENDED SEPTEMBER 30,2016 FINANCIAL HIGHLIGHTS Major Statement Of Financial Position Items 30/09/2016 30/09/2015 N'000 N'000 As At 30 SEPTEMBER 2016 Total Assets 3,969,875 4,635,007 Total liabilities 1,026,474 1,697,471 Insurance Contract liabilities 686,386 602,544 Shareholder's Funds 2,943,402 2,937,536 Major Statement Of Profit Or Loss Items For The Period Ended 30th September 2016 Gross Premium Written 664,005 711,283 Gross Premuim Income 661,143 809,184 Net Premuim Income 466,368 633,281 Claims Expenses (63,289) -118,430 Profit/ (Loss) Before Tax 54,567-20,987 Taxation (17,462) (20,987) Profit (Loss) For The Year 43,449 40,940 1
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE PERIOD ENDED 30TH SEPTEMBER 2016 30/09/2016 30/09/2015 Notes Gross premium written 1 664,005 711,283 Changes in unearned premuim 1 (2,862) 97,901 Gross premium income 1 661,143 809,184 Reinsurance expenses 1.2 (194,775) (175,903) Net premium income 1.2 466,368 633,281 Fees and commission income 2 47,659 39,927 Net underwriting Income 514,027 673,207 Claims expenses 3 (63,289) (118,430) Underwriting expenses 4 (153,358) (189,077) Underwriting result 297,381 365,700 Investment Income 5 182,593 183,527 Net realized gains and losses 6 80 439 Net fair value gains 7 - - Other operating income 8 3,412 1,410 Impairment loss 9.1 - - Finance cost (2,044) 2,340 Management expenses 9 (426,854) (483,154) Profit/(Loss) before taxation 54,567 65,583 Income tax expenses 11 (17,462) (20,987) Profit/Loss after taxation 37,106 44,597 Other comprehensive income Net gain/(loss) on available-for-sale financial assets 13 6,343 (3,657) Remeasurement gains on defined benefit Income tax relating to OCI Total comprehensive( loss)/profit for the year, net of tax 43,449 40,940 Contigency Reserve 19,920 21,338 Earning/(Loss) per share Basic(kobo) 12 0.6 0.7 2
STATEMENT OF CASH FLOWS FOR THE PERIOD ENDED 30TH SEPTEMBER 2016 Note 30/09/2016 30/09/2015 Operating activities: Premium received 663,606 711,283 Commission received 47,659 39,927 Commission paid (85,120) (128,449) Reinsurance premium paid (160,550) (175,903) Gross claim paid net of recoveries (63,289) (118,430) Payments to employees (224,246) (239,154) Other operating cash receipts/(payments) (301,742) (282,247) Other income received 3,492 1,850 Tax paid (68,773) (135,267) Net cash flow from operating activities (188,962) (326,391) Investing activities: Investment income received 182,593 183,527 Purchase of property and equipment (4,812) (1,558) Proceed from sale of property and equipment 80 439 Purchase of investments property Proceed from loans and recievables(chrome and starcrest) 65,863 300,000 Cash and cash equivalents absorbed from life business - - Addtions to investment properties - - Net cash flows from investing activities 243,724 482,409 Financing activities: Deposit for shares - 400,000 Interest repayment on finance lease (2,044) (2,340) principal repayment on finance lease (10,750) (8,941) Net cash flows from financing activities (12,794) 388,719 Net increase in cash and cash equivalents 41,968 544,737 Effect of exchange rate changes on cash and cash equivalent Cash and cash equivalents at 1 January 886,970 1,048,755 Cash and cash equivalents at 30th September, 2016 928,938 1,593,492 4
STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30TH SEPTEMBER 2016 For the period ended 31st September, 2016 Issued share capital Retained earnings Share premium Contingen cy reserve Availablefor-sale financial assets Total equity As at 1 January 2016 3,070,000 (918,993) 337,545 365,300 46,101 2,899,953 Profit for the year - 37,106 - - 37,106 Transfer to contingency reserve - (19,920) - 19,920 - - Other comprehensive income - - - 6,343 6,343 Issues - - - - As At 30 SEPTEMBER 2016 3,070,000 (901,808) 337,545 385,220 52,444 2,943,402 For the period ended 3oth September 2015 As at 1 January 2015 Profit for the year 3,070,000 (856,851) 337,545 306,389 39,347 2,896,430 Transfer to contingency reserve - 44,597 - - 44,597 Issues - (21,338) - 21,338 - - Other comprehensive income - - - Issues - - - (3,491) (3,491) As at 30th September 2015 3,070,000 (833,593) 337,545 327,727 35,856 2,937,536 5
NOTES TO THE FINANCIAL STATEMENTS 1 Net insurance premium revenue 30/09/2016 30/09/2015 1.1 Gross premium income on insurance contracts Gross premium written in the year 664,005 711,283 Change in unearned premiums provision (2,862) 97,901 Total gross premium income 661,143 809,184 1 Gross Premium Income Gross premium written Increase/ (Decrease) in Unearned premium Gross premium Income 30/09/2016 30/09/2016 30/09/2016 N 000 N 000 N 000 Motor 142,145 160 141,985 Fire 157,682 (30,886) 188,568 Marine & Aviation 48,682 6,498 42,184 Miscellaneous General Accident 315,496 27,090 288,406 664,005 2,862 661,143 1.1 Changes In unearned Premium per class of insurance business Unearned Premium As At Increase/ (Decrease) in Unearned premium Unearned Premium As At 01/01/2016 30/09/2016 N 000 N 000 N 000 Motor 65,059 160 65,219 Fire 73,818 (30,886) 42,932 Marine & Aviation 12,001 6,498 18,499 Miscellaneous General Accident 127,511 27,090 154,601 278,389 2,862 281,251 Gross premium written Increase/ (Decrease) in Unearned premium Gross premium Income 30/09/2015 30/09/2015 30/09/2015 N 000 N 000 N 000 Motor 151,577 5,085 146,492 Fire 167,371 (26,581) 193,952 Marine & Aviation 35,367 (47,775) 83,142 Miscellaneous General Accident 356,968 (28,630) 385,598 711,283-97,901 809,184 7
1.2 Re-insurance expenses 30/09/2016 30/09/2015 Total reinsurance expenses (194,775) (175,903) Total net insurance premium revenue 466,368 633,281 2 Fees and commission income Reinsurance commission income 47,659 39,927 Total fees and commission income 47,659 39,927 3 Claims expenses Gross claims paid 170,533 174,832 Claims ceded to reinsurers (28,611) 2,065 Gross change in outstanding claims (116,186) (58,466) Change in outstanding cliams ceded to reinsurers 37,553 63,289 118,430 4 Underwriting expenses Note Fire Motor General accident Marine and aviation Total 2016 Amortised aquisition cost (Note 18) 38,286 16,033 41,299 8,105 103,723 128,449 Maintenace cost 2,608 17,814 28,193 1,019 49,635 60,628 40,894 33,847 69,492 9,125 153,358 189,077 5 Investment income Rental income from investment properties 1,297 2,900 Rental income from land and building 9,908 3,695 Available-for-sale financial assets: Dividend income 10,220 13,813 Interest income on statutory deposit 5,667 23,411 Interest income on cash and cash equivalents 155,500 139,708 182,593 183,527 5.1 Interest income on cash and cash equivalents Due to Policy holders 113,318 29,555 Due to shareholders 42,183 110,153 155,500 139,708 7
6 Gain on sale of property, plant and equipment Property, plant and equipment: Realised gains on disposal 80 439 Total net realised gains and losses 80 439 7 Net fair value gains on investment properties Fair value gains on investment properties (Note 20) - 8 Other operating income Recoveries from trade receivables and sundry income 3,377 1,407 Travel insurance income 34 3 3,412 1,410 9.1 Impairment charge Trade receivables Availaible for sale financial assets (Note 16b) Revaluation deficit on Investment property - Revaluation deficit on building Reclassification adjustment on gains (note 14) - - 9 Management expenses Depreciation on property, plant and equipment 77,636 86,491 Armotisation of Software 2,873 20,358 Auditors remuneration 6,750 7,180 Employee benefits expense (Note 9.2) 224,246 239,154 Exchange differentials - - Legal and professional fees 7,416 12,443 Rent and Rates 11,048 6,738 Administrative 96,886 110,789 Total management expenses 426,854 483,154 9.2 Employee benefits expense Wages and salaries 215,964 230,933 Defined benefit plan cost - Pension costs 8,281 8,221 Total employee benefits expense 224,246 239,154 9.3 Finance cost 2,044 2,340 2,044 2,340 8i
10 Income tax Notes The major components of income tax expense for the period are 10 Income tax expense Per profit or loss Current income tax: Company income tax 16,370 19,675 Education tax 1,091 1,312 Underprovision for tax in the prior years 17,462 20,987 Deferred tax Fair value gains/losses on investment properties Employee benefits Property, plant and equipment Revaluation loss on building - Income tax expense reported in profit or loss 17,462 20,987 Reported in other comprehensive income Deferred tax relating to items recorgnised in other comprehensive income (OCI) during the year: Re-measurement gains on defined benefit plans - - Income tax expense charged to OCI - - 10 Reconciliation of tax charge N'000 N'000 Profit/(Loss) before taxation 54,567 65,583 Tax at Nigerian's statutory income tax rate of 30% 16,370 19,675 Income not subject to tax Non deductible expenses Minimum tax - - Tax effect of capital allowance Education tax @ 2% of assessable profit 1,091 1,312 Unused tax losses Tax rate differencial on fair value gains - - Total tax charge for the year 17,462 20,987 11 Dividends paid and proposed No dividend was proposed or paid by the Company for the period ended September 30, 2016 9
12 (Loss)/earnings per share (LPS)/EPS Basic (LPS)/EPS amounts are calculated by dividing the (loss)/profit for the period attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding at the reporting date. The following reflects the income and share data used in the basic and diluted (LPS)/EPS computations: (loss)/profit attributable to ordinary shareholders (N'000) 37,106 44,597 Weighted average number of ordinary shares for basic EPS ('000) 6,140,000 6,140,000 Basic and diluted (loss)/earnings per ordinary share (kobo) 0.6 0.7 13 Net unrealized (loss)/gains on available-for-sale finacial assets Unrealised (loss)/gains on available-for-sale financial assets 6,343 (3,657) Reclasification adjustments to gains included in profit or loss 6,343-3,657 - - Total net unrealised (loss)/gains on available-for-sale financial assets 6,343-3,657 10
14 Cash and cash equivalents Cash at banks and on hand 6,992 175,313 Short-term deposits (including demand and time deposits) 934,902 1,418,179 Total cash and cash equivalents 941,894 1,593,492 Representing: Policyholder's fund 686,386 602,544 Shareholder's fund 255,508 990,948 941,894 1,593,492 Short term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Company. All placements are subject to an average variable interest rate obtainable in the market. The carrying amounts disclosed above reasonably approximate fair value at the reporting date. 15 Financial assets Available-for-sale financial assets 149,805 129,156 Total financial instruments 149,805 129,156 15 Available-for-sale financial assets comprises: Listed equity securities at fair value 112,001 91,352 Unlisted equity securities at cost 37,803 37,803 Total available-for-sale financial assets 149,805 129,156 11
15 Financial assets - continued 2016 15.2 Carrying values of financial instruments Available-forsale Total At 1 January 2015 132,812 132,812 Fair value loss recorded in OCI 10,650 At 1 January 2016 143,462 143,462 Impairment - - Fair value loss recorded in OCI 6,343 6,343 - - As At September 30, 2016 149,805 149,805 Fair value of financial assets and financial liabilities not carried at fair values The following describes the methodologies and assumptions used to determine fair values for those financial instruments which are not already recorded at fair value in the financial statements. Assets for which fair value approximates carrying value For financial assets and financial liabilities that have less than three month s maturity such as demand deposits and those without specified maturity such as statutory deposit, other receivables and other payables, the carrying amounts approximate to their fair value. Unquoted investments carried at cost Certain unquoted investments for which fair values could not be reliably estimated have been carried at cost less impairment. There are no active markets for these financial instruments, fair value information are therefore not available, this makes it impracticable for the Company to fair value these investments. They have therefore been disclosed at cost less impairment. The carrying amount is the expected recoverable amount on these investments.the Company does not intend to dispose of these investments. 15.3 Determination of fair value and fair values hierarchy The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique: Level 1: Quoted (unadjusted) prices in active markets for identical assets Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly, and Level 3: Techniques which use inputs which have a signifcant effect on the recorded fair value that are not based on observable market data. 12
15 Financial assets - continued As At 30th September 2016 Level 1 Level 2 Level 3 Total Available-for-sale financial assets: Equity securities 112,001 - - 112,001 Total financial assets 112,001 - - 112,001 16 Trade receivables Gross insurance receivables 10,297 13,417 Impairment allowance -9,898-10,812 Total trade receivables 399 2,605 The carrying amounts disclosed above approximate fair value at the reporting date and are net of impairment charges. 16 Movement in impairment allowance: At begining of the year 9,898 10,812 Additions - - Impairment written off - - At end of the year 9,898 10,812 17 Reinsurance asset Reinsurers's share of reserve for outstanding claims 63,399 16,393 Prepaid reinsurance 92,673 82,648 Total reinsurance asset 156,072 99,041 Reinsurance assets are not impaired as balances are set-off against payables from retrocession at the end of every quarter. 13
18 Deferred acquisition cost These represents commission paid to brokers on unearned premium relating to the unexpired tenure of risks. Fire Motor General Marine and Total accident aviation At 1 January 2016 14,800 7,172 17,933 2,436 42,341 Commission incured during the 32,261 16,291 43,557 9,248 101,357 year Amortisation (Note 4) (38,286) (16,033) (41,299) (8,105) (103,723) As At September 30th 2016 8,775 7,431 20,190 3,579 39,975 At 1 January 2015 16,336 5,916 29,592 14,015 65,860 Commission incured during the year 34,207 17,393 51,488 6,758 109,846 Amortisation (Note 4) (40,651) (14,482) (57,080) (16,236) (128,449) As At September 30th 2015 9,891 8,827 24,000 4,538 47,256 14
19 Other receivables and prepayment Loan to Guinea coop - Staff upfront and advances 4,547 13,158 Accrued interest 5,667 Due from Global Scansystems 217,444 283,307 93,691 93,002 Deposit for computerization Others 3,931 2,202 Prepayments 12,493 22,777 337,773 414,447 Impairment charged on other receivables (93,291) (93,291) - Impairment on staff salary advances 244,482 321,156 The carrying amounts disclosed above reasonable approximate the fair value at the reporting date. All other receivable amounts are collectible within one year and the prepayment utilisable within one year. 20 Investment properties At the beginning of the year 1,420,500 1,310,000 Fair value adjustments - At the end of the year 1,420,500 1,310,000 Investment properties are stated at fair value, which has been determined based on valuations performed by Yinka Kayode&Co.(FRCN/2013/00000000001197), accredited independent valuers,the valuer is a specialist in valuing these types of investment properties. The determination of fair value ofthe investment property was supported by market evidence. The modalities and process of valuationutilized extensive analysis of market data and other sectors specific peculiarities corroborated withavailable data derived from previous experiences. Valuations are performed on an annual basis and the fair value gains and losses were recorded withinthe profit or loss. 15I
Representing: N 000 N 000 Policyholders funds 400,000 400,000 Shareholders funds 1,020,500 910,000 1,420,500 1,310,000 N 000 N 000 Opening balance at 1 January 1,420,500 1,310,000 Fair value adjustments - - Closing balance as at September 30, 2016 1,420,500 1,310,000 Description of valuation techniques used and key inputs to valuation on investment properties The valuation of the properties is based on the price for which comparable land and properties are being exchanged hands on or are being marketed for sale. (investment method ) By nature, detailed information on concluded transactions is difficult to come by. We have thereforerelied on past transactions and recent adverts in deriving the value of the subject properties. At least,eight properties were analysed and compared with the subject property. There are no restrictions on the reliability of investment property or the remittance of income and proceeds of disposal. The Company has no contractual obligations to purchase, construct or develop investment property or for repairs or enhancement. N'000 N'000 Rental income derived from investment properties 2,900 Direct operating expenses (including repairs & maintenance) - - Profit arising from investment properties carried at fair value - 2,900 15I
21 Taxation 21.1 Current tax payable At the beginning of the year 103,769 297,700 Amounts recorded in the income statements 17,462 20,987 Tax on extra-ordinary item - - Payments made on-account during the year -68,773-135,267 WHT Tax Asset At the end of the year 52,457 183,420 Income Statement Deferred tax expense/(credit) Accelerated depreciation for tax purposes Revaluation loss on building Fair value gains/(losses) on investment properties Employee benefit obiligation Total deferred tax expense/(credit) - - 21.2 Deferred tax liabilities/(assets) Statement of financial position Fair value gains/(losses) on investment propert 90,081 78,073 Tax credit /expense Tax expense during the period through OCI - Deferred tax liabilities 90,081 78,073 Reconciliation of deferred tax liabilities is as shown below: At the beginning of the year 90,081 78,073 Amounts recorded in the income statement - Reclassified to/from deferred tax asset At the end of the period 90,081 78,073 Reconciliation of deferred tax asset is as shown below: At the beginning of the year Amounts recorded in the income statement - Reclassified from/to deferred tax asset - At the end of the period - - 21.3 Intangible Asset Opening 8,439 36,149 Amounts recorded in the income statement (2,873) (20,358) As at 30th September 2016 5,566 15,791 16
22 Property, Plant and equipmnote Computer Equipmen t Household Equipment, Office Furniture and Fittings Motor Vehicles Land & Building Total Cost At 1st January 2016 211,393 700,000 102,618 89,715 1,103,726 Additions 225 0 1,224 3,363 4,812 Disposals 0 0 0 0 As At 30th September 2016 211,618 700,000 103,842 93,078 1,108,538 Accumulated depreciation At 1st January 2016 164,543 30,556 81,815 46,489 323,402 Depreciation for the period 8 20,229 22,854 19,474 13,441 75,997 As At 30th September 2016 184,772 53,409 101,289 59,929 399,399 Disposals 0 - - 0 As At 30th September 2016 184,772 53,409 101,289 59,929 399,399 Carrying amount As At 30th September 2016 26,846 646,591 2,553 33,148 709,139 As at 30th September 2015 53,872 671,971 27,740 47,926 801,510 17
23 Statutory deposit This represents the amount deposited with the Central Bank of Nigeria as at September 30th 2016 ( September 30th 2015 N315,000,000) in accordance with Section 10 (3) of Insurance Act 2003. Interest income was earned at an average rate of 11% per annum (2015: 15%) and this has been included within investment income. Statutory deposit 315,000 315,000 24 Insurance contract liabilities Insurance contract liabilities consist of the following: Provision for reported claims by policyholders 365,425 210,504 Provisions for claims incurred but not reported (IBNR) 39,710 69,939 Outstanding claims provisions (Note 24.1) 405,135 280,443 Provision for unearned premiums (Note 24.2) 281,251 322,101 Total insurance contract liabilities 686,386 602,544 18
The cash and cash equivalents as described in Note 14 serves as a cash cover for the insurance contract liabilities. 24 Outstanding claims provision At 1 January 519,871 338,953 Claims incurred in the current accident period 55,798 year 116,321 Claims paid during the year (170,533) (174,832) At the end of the period 405,135 280,443 24 Provision for unearned premiums At 1 January 278,389 420,002 Premiums written in the year (Note 1) 664,005 711,283 Premums earned during the period (Note 1) (661,143) (809,184) At the end of the period 281,251 322,101 25 Trade payables Due to brokers 12,719 141 Due to agents 424 424 Due to insurance companies - Due to reinsurance companies - local 19,089 95,402 32,233 95,968 This represents the amount payable to insurance and reinsurance companies 26 Other payables and accruals 26 Accrued expenses 57,407 71,136 Deferred revenue (Note 26.1) 4,881 17,908 Unearned Commission 15,602 12,853 Other payables (Note 26.2) 76,782 106,569 154,673 208,466 Other payables represent outstanding NAICOM charges, PAYE, NSITF, ITF, NHF, union dues, witholding tax, VAT, travel insurance, stale cheque, unclaimed dividend and other creditors. The carrying amounts disclosed above reasonably approximate fair value at the reporting date. All amounts are payable within one year (with the exception of deferred revenue). 18
26.1 Deferred Revenue Rental Income At the beginning 10,333 13,730 Amount deferred 8,753 10,773 Amount released to the income statement (14,205) (6,595) Total deferred revenue 4,881 17,908 Rental income arising from operating lease on investment properties is accounted for on a straight line basis over the lease terms and is included in investment income. 27 Employee benefit obligations The amounts recognised in the statement of financial position at the reporting date are, as follows: At the begining of the year 18,794 10,815 Movement in the period 18,794 10,815 20
28 Deposit for shares As at 30th September 2016 0 500,000 500,000 29 Issued share capital Authorised and issued share capital Authorised share capital 3,200,000 3,200,000 6.4 billion Ordinary shares of N0.50k each Ordinary shares issued and fully paid At 1 January 3,070,000 3,070,000 Issued during the period - As at 30th September 2016 3,070,000 3,070,000 30 Share premium At 1 January 337,545 337,545 0 As at 30th September 2016 337,545 337,545 20
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NOTES TO THE FINANCIAL STATEMENTS - Continued 31 Contingency reserve Contingency reserve in respect of non-life business is the higher of 20% of net profit and 3% of premium as specified in Section 21(2) of the Insurance Act 2003. At the beginig of the period 365,300 306,389 For the period 19,920 21,338 As at 30th September 2016 385,220 327,727 Retained Earnings At the beginig of the period (918,993) (864,122) For the period 37,106 44,597 Contigency reserve (19,920) (21,338) As at 30th September 2016 (901,808) (840,863) 32 Available-for-sale Financial Assets Reserve At the begining of the period 46,101 39,347 For the period 6,343-3,657 As at 30th September 2016 52,444 35,690 33 Financial Liabilities. At the begining of the period 15,556 27,126 For the period (10,750) (8,941) As at 30th September 2016 4,806 18,186 22