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NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 1
Contents Page
Corporate Information 2
Results at a Glance 5
Report of the Directors 6
Statement of Directors’ Responsibilities 18
Certification Pursuant to Section 60 (2) of Investment and Securities Act No. 29 of 2007 19
Report of the Independent Auditors 20
Report of the Audit Committee 21
Statement of Significant Accounting Policies 22
Statement of Financial Position 49
Statement of Comprehensive Income 50
Statement of Change in Equity 51
Statement of Cash Flows 53
Segment Information 54
Segment Income Statement 55
Notes to the Financial Statements 56
Segments Report 75
Claim Development Table 77
Financial Risk Management Policy 83
Capital Management Policy 98
Value Added Statement 100
Group Financial Summary 102
Parent Financial Summary 103
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 2
Corporate Information
Directors Chief Adewale Teluwo Chairman
Mr. Tope Smart Group Managing Director/CEO
Mrs. Susan Abisola Giwa-Osagie DMD (WEF June 2014)
Mr. Alani Olojede Executive Director (WEF June 2014)
Mrs. Yinka Aletor Director
Mr. Olusesan Adekunle Director
Dr. Fidelis Ayebae Director
Company Secretary Mrs. Omolara Oyetunde
NEM Insurance Plc
138/146, Broad Street
Lagos
Registered Office 138/146 Broad Street
Lagos
FRCN Number FRC/2012/0000000000249
Registration Number 6971
Corporate Head Office NEM House
199, Ikorodu Road
Obanikoro, Lagos
Registrars Africa Prudential Registrars Plc
Registrars’ Department
220B, Ikorodu Road
Palmgrove
Lagos
Tel: 01-841153, 7301004
E-mail: info@africaprudential registrars.com
Bankers Access Bank Plc
Diamond Bank Plc
Ecobank Nigeria Limited
First Bank of Nigeria Limited
First City Monument Bank Plc
GT Bank Plc
Keystone Bank Plc
Standard Chartered Bank Limited
Sterling Bank Plc
United Bank for Africa Plc
Zenith Bank Plc
Auditors SIAO (Chartered Accountants) 18b, Olu Holloway Road
Off Alfred Rewane Road
Falomo- Ikoyi
P.O.Box 55461, Falomo
Ikoyi, Lagos.
Tel: +234 01 463 0871-2
Website: www.siao-ng.com
E-mail: [email protected]
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 3
Corporate Information (Cont’d)
Solicitors Koya & Kuti Solicitors
5th Floor, 3, Ajele Street
Lagos.
Sola Abidakun & Co
9th Floor, UBA House
57, Marina
Lagos.
Reinsurers African Reinsurers Corporation Continental Reinsurance Corporation
WAICA Reinsurance Pool
Nigerian Reinsurance Corporation
Aveni Reinsurance
Branch Networks
Subsidiary C587/13, Olu Obasanjo Highway
Accra Girls Area
P.M.B AN, Accra
Ghana
Tel: 021-220797,021-220798
Managing Director, Iyiola Saraki
Mobile No: 08033143823
Abuja - Garki Kano
10, Onitsha Crescent 3rd Floor, Union Bank Building
Off Gambiya Street 37, Niger Street
Area II, Garki, Abuja P.O. Box 1185, Kano
Branch Manager: Michael A. Giwa Tel: 064-649374
Tel:09-6714952, 5233083,7805440 Branch Manager: Peter I. Agono
Mobile Nos: 08033208141 Mobile No: 08035923740
070228243127, 07029909242
Abuja – Wuse Kaduna
Plot 960, Ahmadu Bello Way Ground Floor, Turaki Ali House
Wuse II, Abuja 3, Kanata Road
Branch Manager: Mr. Martins Ilegoma P.O Box 822, Kaduna
Mobile Nos: 08077284843 Tel: 062-217683
08078153184, 08037020262 Branch Manager: Eyitayo Ogboyomi
Mobile Nos: 07028243118
Akure Jos 3rd Floor, BIO Building Alagabaka 10, Rwang Pam Street
Akure, Ondo State P.O. Box 1261
Tel: 034-215829 Jos, Plateau State
Branch Manager: Kehinde Agbelade Tel: 073-454216
Mobile No: 08033509419 Branch Manager: Thomas Nkom
Mobile No: 08098376292
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 4
Corporate Information (Cont’d)
Apapa Warri
3rd Floor, Commercial Road 57, Effurun Sapele Road
Apapa, Lagos Effurun, Delta State
Tel: 01-7375546, 07028442653 Branch Manager: Kayode Arimoro
Branch Manager: Uzor Enubuzor Mobile No: 08034221374
Mobile Nos: 08059301673, 08028968842 08023288188,07029554541
07029096131
Calabar Lagos Mainland
2nd Floor, 26, Etta-Agbor Road 284, Ikorodu Road
Calabar Anthony Lagos
Cross River State Tel: 01-8171844, 01-4824737, 01-2710060
Tel No: 087-239571 Branch Manager: Andrew M. Ikekhua
Branch Manager: Nkume Omoghogie Mobile Nos: 08076175287, 08023123006
Moblie Nos: 08054642551 07028243123
08033542048
Ibadan Onitsha
3rd Floor, Broking House 2nd Floor, (AIB) Building
1, Alhaji Jimoh Odutola Street 107, Upper New Market Road, Onitsha
PMB 5328, Ibadan Tel: 046-410736
Oyo State Branch Manager: Cyracus Akinjobi
Tel: 02-2411992 Mobile Nos: 08033457426, 07029219983
Branch Manager: Rufus Olumide
Mobile Nos: 08033463697
08055899976, 07028243124
Osogbo Port Harcourt
1st Floor, Former Afribank Building House 2, Road 2
Opposite Fakunle Comprehensive High School Circular Road, Residential Estate
Fakunle, Gbongan/Ibadan Road Port Harcourt, Rivers State
Osogbo, Osun Sate Tel: 084-233513
Tel: 035-214844 Branch Manager: Yemi Mayadenu
Branch Manager: Victor Eweme Mobile Nos: 08063670020,
Mobile Nos: 08023276477, 08033698967 08052653797
Vision
To be the preferred choice of the insuring public.
Mission
To build a customer-satisfying Insurance Institution that is passionate about adding value to the
interests of all stakeholders.
Core Values
Discipline
Integrity
Humility
Excellence
Empathy
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 5
Result at a Glance
31 Dec. 2014
31 Dec. 2013
Change
Financial Position N'000
N'000
N'000 %
Cash and cash equivalents 3,446,995
3,865,965
(418,970) -11
Trade receivable 209,493
496,007
(286,514) -58
Financial assets 3,161,059
2,624,638
536,422 20
Reinsurance Asset 717,121
65,496
651,624 995
Property and equipment 2,213,264
1,284,191
929,073 72
Other receivables and prepayments 137,232
278,712
(141,480) -51
Deferred acquisition cost 482,385
513,387
(31,002) -6
Investment properties 485,830
468,974
16,856 4
Statutory deposit 340,112
349,200
(9,088) -3
Intangible asset 5,627
18,851
(13,224) -70
Income tax credit -
80,456
(80,456)
Total Assets 11,199,118
10,045,877
1,153,242 11
Insurance contract liabilities 4,660,059
4,787,052
(126,993) -3
Trade payables 9,733
48,510
(38,777) -80
Other payables 175,213
167,874
7,339 4
Book overdraft 4,364
9,848
(5,484) -56
Retirement benefit obligations 187,848
170,838
17,009 10
Income tax liability 15,212
-
15,212
Deferred tax liability 280,913
166,062
114,851 69
Total Liabilities 5,333,341
5,350,184
(16,843) 0
Issued share capital 2,640,251
2,640,251
- 0
Share premium 272,551
272,551
- 0
Contingency reserve 1,995,456
1,696,986
298,470 18
Retained earnings 560,109
30,366
529,743 1745
Shareholders Fund 5,865,777
4,695,693
1,170,084 25
Comprehensive Income Gross premiums 9,836,596
8,933,345
903,251 10
Net premiums 8,545,534
7,424,740
1,120,795 15
Other revenue 721,215
858,255
(137,040) -16
Total Revenue 9,266,749
8,282,995
983,755 12
Claims paid (2,655,818)
(3,070,271)
414,454 -13
Other expenses (4,844,159)
(4,668,314)
(175,845) 4
Total Benefits, Claims and Other Expenses (7,499,977)
(7,738,585)
238,608 -3
Profit before tax 1,766,772
544,410
1,222,362
Income tax expense (241,451)
(149,350)
(92,101)
Profit For the Year 1,525,321
395,060
1,130,261 Other Comprehensive Income for the year, net of tax 341,870
(12)
341,882
Total comprehensive income for the year net of tax 1,867,191
395,048
1,472,143
Basic Earnings Per Share (Kobo) 29
7
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 6
REPORT OF THE DIRECTORS
The Directors present their annual reports on the affairs of NEM Insurance Plc together with the
financial statements and auditor’s reports.
1. LEGAL FORM
The Company was incorporated in 1970 as a Nigerian Company in accordance with the
Companies Act 1968. The Company became listed on the Nigerian Stock Exchange in 1989
following its privatization by the Federal Government of Nigeria.
2. PRINCIPAL ACTIVITIES
The Company is engaged in General Insurance business which includes marine, motor
vehicle, fire etc.
2.1 SUMMARY OF THE RESULT
Comprehensive Income 2014
N’000
Gross premiums 9,836,596
Net premiums 8,545,534
Other revenue 721,215
Total Revenue 9,266,749
Claims paid (2,655,818)
Other expenses (4,844,159)
Total Benefits, Claims and Other Expenses (7,499,977)
Profit before tax 1,766,772
Income tax expense (241,451)
Profit For the Year 1,525,321
Other Comprehensive Income for the year, net of tax 341,870
Total comprehensive income for the year net of tax 1,867,191
Basic Earnings Per Share (Kobo) 29
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 7
Directors Report (Cont’d)
3. CORPORATE GOVERNANCE REPORT
Introduction
The business of NEM Insurance Plc is conducted under a corporate governance structure that
incorporates the Board, the Committees, and a functional Management System with the
Board as the apex decision making body. This is in accordance with the “Code of Good
Corporate Governance for the Insurance Industry in Nigeria” and Best Practice. The Company
adheres to a high standard of ethics, integrity and professionalism as a demonstration of its
avowed commitment to excellent corporate governance practices. At NEM Insurance Plc, we
have ensured that our business activities are implicitly transparent.
A summary of the key components of our Corporate Governance System is provided
hereunder.
The Board
The Board of the Company is responsible for establishing the policy framework that would
ensure that the Company fully discharges its legal, financial as well as regulatory
responsibilities. The Board is ultimately responsible to deliver sustainable value to the
shareholders. The Board monitors the performance of the Company, monitors the
effectiveness of the governance structure under which it operates, renders the accounts of its
stewardship of the organization’s resources to the shareholders.
The Board of Directors of the Company is composed of a mix of non-executives and
executives whereby the number of non-executives exceeds the executives while the position of
the Chairman of the Board is clearly delineated from the Chief Executive Officer.
The Chairman
The Chairman of NEM Insurance Plc was duly appointed. The Chairman’s primary role is to
ensure that the Board carries out its governance role in the most effective manner. The
Chairman manages the operations of the Board effectively in order to ensure that members
make concrete contributions towards the decisions of the Board and that the Board operates
in harmony.
The Chief Executive Officer (CEO)
The CEO has the overall responsibilities for developing, implementing and monitoring the
strategic and financial plans of the Company with the cooperation and support of the Board.
The CEO ensures the effective operation and management of the Company’s resources in
order to ensure profitability of its operations and that all significant matters affecting the
Company are brought to the attention of the Board.
Independent Director
The Board appointed one independent director who has remained truly independent since his
appointment.
Annual Board Appraisal
In accordance with the requirement of the NAICOM Code, the Board commissioned New
Version Consultants Limited, 5, Lanre Da-Silva Close, Dolphin Extension, Ikoyi, Lagos to
conduct the appraisal exercise of its performance.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
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Director Report (Cont’d)
Activities of the Board
The Board met four times during the year (27th May, 30th July, 12th November and 16th
December, 2014) to discuss critical issues affecting the organization and performs other
responsibilities that fall within its purview as provided in the Company’s Article of Association
and by other relevant regulatory authorities. Meetings were well attended with sufficient
notice given well in advance of the meetings.
Composition of the Board/Schedule of Attendance at Meetings
S/N Name of Director Status No of Meetings
Attended per
Director
1.
2.
3.
4.
5.
6.
7.
Chief Adewale Teluwo
Mr. Tope Smart
Mrs. Susan Giwa-Osagie
Mrs. Yinka Aletor
Mr. Olusesan Adekunle
Dr. Fidelis Ayebae
Mr. Alani Olojede
Chairman
Group Managing Director/CEO
Deputy Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Executive Director
4
4
4
4
4
4
3
Board Committee
The Board has put in place a committee structure specified in the NAICOM code and
adequate for the complexity of the operation of the Company. The Committees are:
Finance and General Purpose Committee.
Investment Committee.
Enterprise Risk Management Committee.
Audit and Compliance Committee.
Establishment and Governance Committee
The established Committees namely: Finance and General Purpose, Investment, Enterprise
Risk Management and Establishment and Governance Committees were provided with
specified terms of reference to guide their activities.
Finance and General Purposes Committee (F&GPC)
The key responsibilities of the Finance and General Purposes Committee are:
Monitoring Budget
Monitoring Sources of Income Generation
Ensuring Integrity of Financial Reporting
Expenses Control
The Committee met twice during the year (17th April and 8th September 2014).
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 9
Director Report (Cont’d)
Composition of Committee/Attendance
Name Status Attendance
Mr. Olusesan Adekunle
Mr. Tope Smart
Mrs. Susan Giwa-Osagie
Chairman
Group Managing Director
Deputy Managing Director
2
2
2
Investment Committee
The essential responsibilities of the Committee are:
Setting Investment Policies of the Company;
Approving Investment Plans;
Evaluating Investment Performance; and
Reviewing the adequacy of the Investment Charter of the Company.
The Committee held two meetings (4th April and 2nd October 2014).
Composition of the Committee/Attendance
Name Status Attendance
Mrs. Yinka Aletor
Mr. Tope Smart
Mrs. Susan Giwa-Osagie
Chairman
Group Managing Director
Deputy Managing Director
2
2
2
Enterprise Risk Management Committee
The key responsibilities of the Committee are:
Determine the policies in respect of Risk Profile and Risk Limits;
Review Policies as required by the emerging dynamics of the operating
environment;
Ensure that all the departments of the Company are adequately sensitized to the level of
risks inherent in their operations.
Assess adequacy of risk mitigants for major risk indicators.
The Committee met twice during the year (16th April and 22nd October 2014).
Composition of the Committee/Attendance
Name Status Attendance
Dr. Fidelis Ayebae
Mr. Tope Smart
Mrs. Susan Giwa-Osagie
Chairman
Group Managing Director
Deputy Managing Director
2
2
2
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 10
Director Report (Cont’d)
Establishment and Corporate Governance Committee
The Terms of Reference of the Committee are to:
To ensure that money and properties are used and managed to meet the aims and objectives
of the Company;
To ensure that the organization adheres to regulations, its governing instrument/constitution
and agreed procedures;
To recommend the number of directors who shall serve on the Board;
To identify individuals acknowledged to be qualified as Board members; and
To agree on evaluation process to be employed in evaluating the performance of the Board,
the Board Committees and Management.
The Committee met twice during the year (16th April and 22nd October 2014).
Composition of the Committee/Attendance
Audit and Compliance Committee
The NAICOM Code makes the following provisions in respect of the responsibilities of the
Audit and Compliance Committee:
The Committee shall have a written mandate and Terms of Reference;
The Committee shall be responsible for the review of integrity of the data and information
provided in the Audit and/or Financial Report.
The Committee shall provide oversight functions with regards to both the company’s financial
statement and its Internal Control and Risk Management functions.
The Committee shall review the terms of engagement and recommend the appointment or
reappointment and compensation of External Auditors to the Board and the Shareholders.
Review the procedure put in place to encourage honest whistle blowing.
The Audit Committee shall meet at least three times in a year and at least once with the
External Auditors
The committee performance shall be evaluated periodically.
S.359 (6) of the Companies and Allied Matters Act Cap (20) Laws of the Federation of Nigeria
2004 provides for the functions of this committee.
The committee met four times during the year (5th February, 19th March, 21st May and 23rd
December, 2014) and covered the basic components of these responsibilities.
Name Status Attendance
Dr. Fidelis Ayebae
Mr. Tope Smart
Mrs. Susan Giwa-Osagie
Chairman
Group Managing Director
Deputy Managing Director
2
2
2
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 11
Director Report (Cont’d)
The Composition of the Committee and schedule of attendance are as follows
4. DIVIDEND
The Directors recommend a declaration of dividend of N…....................................... which
translates to…..................................per ordinary share of 50 kobo each subject to the
approval of the shareholders at the next Annual General Meeting.
5. DIRECTORS AND DIRECTORS’ INTERESTS
i. Directors
No director has disclosed any declarable interest in any contract with the Company during
the year in pursuant to Section 277 of the Companies and Allied Matters Act CAP C20 LFN
2004.
ii. Directors’ interest
The interests of the directors in the issued share capital of the Company as recorded in the
register of shareholdings and/or as notified by them for the purposes of Sections 275 and
276 of the Companies and Allied Matters Act CAP C20 LFN 2004 are as follows:
Name Indirect Direct
Total
2014 2013 2014 2013 2014 2013
Chief Adewale Teluwo 337,054,367 337,054,369 112,621,359 112,621,359 449,675,726 449,675,728
Tope Smart Esq - - 118,243,848 118,243,848 118,243,848 118,243,848
Suzan Giwa-Osagie (Mrs) - - 2,125,008 2,125,008 2,125,008 2,125,008
Olusesan Adekunle Esq - - 50,848,252 50,848,252 50,848,252 50,848,252
Yinka Aletor (Mrs) 383,492,958 387,378,703 - - 387,492,958 387,378,703
Dr. Fidelis Ayebae - - - - - -
Mr. Alani Olojede - - 837,373 - 837,373 -
6. DIRECTORS RESPONSIBILITIES
The Directors are responsible for the preparation of the consolidated financial statements
which give a true and fair view of the state of affairs of the Company at the end of each
financial year and of the income statement for that year and comply with the Insurance Act,
2003, Financial Reporting Council of Nigeria Act, No 6 2011 CAP 117 LFN 2004 and the
Companies and Allied Matters Act CAP C20 LFN 2004.
Name Status Attendance
Mr. Peter Okoh
Mr. Taiwo Oderinde
Mr. Samuel Mpamaugo
Mr. Olusesan Adekunle
Mrs. Susan Giwa-Osagie
Mrs. Yinka Aletor
Chairman-Shareholders’ Rep
Shareholders’ Representative
Shareholders’ Representative
Non-Executive Director
Deputy Managing Director
Non-Executive Director
4
4
4
4
4
4
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 12
Director Report (Cont’d)
7. SHAREHOLDINGS
The Registrars have advised that the called-up and fully paid up shares of the Company as at
31 December, 2014 were beneficially held as follow:
Range
No. of
Holders
Holders
%
Holders
Cum Units
Units
% Units Cum.
1 - 1,000 4,444 9.3 4,444 2,833,375 0.05 2,833,375
1,001 - 5,000 11,618 24.3 16,062 37,397,601 0.71 40,229,976
5,001 - 10,000 8,985 18.8 25,047 75,615,607 1.43 115,844,583
10,001 - 50,000 15,722 32.89 40,769 401,483,496 7.60 517,328,07
50,001 - 100,000 3,766 7.88 44,535 299,777,166 5.68 817,105,245
100,000 - 500,000 2,573 5.38 47,108 556,546,322 10.54 1,373,651,567
500,001 - 1,000,000 334 0.7 47,442 260,081,900 4.93 1,633,733,467
1,000,001 - 999,999,999,999 362 0.76 47,804 3,646,769,446 69.06 5,280,502,913
47,804
5,280,502,913
Shareholders with 5% and above of the company’s issued and fully paid shares as at 31st December, 2014
Holding %
1. Capital Express Assurance Limited 383,492,958 7.26
2. Jeidoc Limited 368,445,497 6.98
3. Bukson Investment Limited 337,054,367 6.38
Retirement by Rotation and Re-election
In accordance with the Articles of Association of the Company, Mr. Olusesan Adekunle will
retire by rotation and being eligible offer himself for re-election.
Change in the Composition of the Board
Since the last Annual General Meeting of the Company, Mrs. Susan Giwa-Osagie Executive
Director (Business Development) was elevated to the position of Deputy Managing Director
while Mr. Alani Olojede was appointed an executive director of the company with effect from
1st June, 2014.
8. RECORD OF DIRECTORS ATTENDANCE
In accordance with section 258(2) of the Companies and Allied Matters Act CAP C20 LFN
2004, the records of the Directors attendance at Directors’ meeting in 2014 are available for
inspection at the Annual General Meeting.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 13
Directors Report (Cont’d)
9. PROPERTY, PLANT AND EQUIPMENT
Movements in property, plant & equipment are shown in note 11 on pages 61 and 62. In the
opinion of the directors, the market value of the Company’s properties is not less than the
value shown in the consolidated financial statements.
10. REINSURERS
During the financial year under review, the Company had business transactions with the
following re-insurance companies in compliance with the relevant Insurance Act of 2003. The
re-insurance companies are:
African Reinsurance Corporation
Continental Reinsurance Plc.,
WAICA Reinsurance Pool,
Nigerian Reinsurance Corporation and
Aveni Reinsurance.
11. AGENTS AND BROKERS
The Company maintains a network of licensed agents and renders services to its customers
through Insurance Licensed Brokers and Registered Agents.
12. DONATIONS
Donations during the year ended December 31, 2014 amounted to N 5,045,000 (2013:
N1,760,000) as follows: N
Ikoyi Club 1938 250,000
The Pearl Awards 250,000
Nigerian Council of Regulatory Insurance Brokers 420,000
Insurance Consumer Association 500,000
Chartered Insurance Institute of Nigeria 750,000
Charity Homes & Less Privilege 600,000
Assbhi NEM Unit 200,000
Professional Insurance Ladies Association 750,000
Industrial Relations and Personnel Management 50,000
Actuarial Science Insurance Associate 50,000
Almond Production Limited 300,000
Nigerian Insurance Association 350,000
National Institute of Marketing 50,000
Fame Production 500,000
National Association of Insurance Correspondence 25,000
5,045,000
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 14
Directors Report (Cont’d)
13. EVENTS AFTER REPORTING DATE
There were no significant events after reporting date which could have had a material effect
on the consolidated financial statements for the year ended 31 December, 2014 which have
not been adequately provided for or disclosed in the financial statements except the
promotion and appointment of Mrs Susan Giwa-Osagie & Mr. Alani Olojede as Deputy
Managing Director & Executive Director respectively both with effect from 6 June, 2014.
14. EMPLOYMENT AND EMPLOYEES
It is the policy of the Company not to adopt discriminatory criteria for considering
applications for employment including those from disabled persons. All employees whether
or not disabled are given equal opportunities to develop their experience and knowledge and
to qualify for promotion.
When an employee becomes disabled during the course of his or her employment, the
Company endeavours to retain the individual for employment in spite of his disability, when
this is reasonably possible. As at 31st December, 2014 one disabled person was in the
employment of the Company.
15. EMPLOYEES INVOLVEMENT, TRAINING AND DEVELOPMENT
i. Information dissemination
“The employees are regularly provided with information on matters that are of
concern to them through established channels of communication.”
ii. Consultation with employees
There are regular consultations between the senior and junior staff unions and
Management, particularly on matters affecting staff welfare.
iii. Encouraging employees’ involvement and training
The employees are the Company’s most valuable and cherished resource. The
Company is therefore committed to their continuous training and development. In
line with this policy of continuous development of the human resources, members of
staff are sent on training programmes. The courses are aimed at broadening their
technical/professional knowledge and managerial skills.
iv. Health, safety at work and welfare of employees
The Company places high premium on health and welfare of its employees. Medical
facilities are provided for staff and their families at private hospitals retained in their
respective localities.Transportation, housing and lunch subsidies are provided to all
levels of employees. Fire fighting equipments are also installed in strategic positions
in the office building.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 15
Directors Report (Cont’d)
16. AUDITORS
In compliance with Section 33(2) of the Securities and Exchange Commission’s Code of
Corporate Governance and Section 22(1) of National Insurance Commission 2010 guidelines
on the tenure of External Auditors, Messrs SIAO (Chartered Accountants) has shown
willingness to continue in office as the auditors in accordance with Section 357(2) of the
Companies and Allied Matters Act 2004, as amended. A resolution will be proposed at the
Annual General Meeting to authorize the Directors to determine their remunerations.
BY ORDER OF THE BOARD
OMOLARA OYETUNDE (MRS.) COMPANY SECRETARY
Lagos, Nigeria
FRC/2013/NBA/00000003153
Date:
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 16
REPORT OF EXTERNAL CONSULTANTS ON BOARD APPRAISAL
NEM INSURANCE PLC
In compliance with the requirement of the NAICOM “Code of Good Corporate Governance for the
Insurance Industry in Nigeria” “The Code” the Board of NEM Insurance Plc commissioned New
Version Consultants Limited to conduct an appraisal of the performance of the Board of the
Company. The exercise was guided by the provisions of The NAICOM Code and other recognised
Codes of Best Practices which promote enhanced governance values. Our findings are as follows:
i. The Board is composed of a mix of executives and non-executives which indicates that the
non-executives are in greater proportion than the executives. The proportion of executives to
non-executives is 1:2. Members are individuals of diverse professional backgrounds and
business experience. Among the non-executives are: A legal practitioner, foremost
industrialist and investment expert as well as astute businessmen with interests in key
sectors of the economy including: Insurance, Pharmaceuticals, Real Estate and
Manufacturing who have established successful track records in their chosen fields of
endeavours and are well exposed to taking business and financial decisions in their day-to-
day activities. The Executive Directors are qualified professionals with cognate experience in
their areas of specialization and a vast knowledge of Insurance business and its operating
terrain. Members have been bringing their experience to bear in directing the affairs of the
Company which has since stabilized its operations post-consolidation.
In accordance with The NAICOM Code, the Board Chairman is a Non-Executive Director; there
is a clear delineation of responsibilities between the position of the GMD and the Chairman
while no one individual occupies the two positions at the same time thereby avoiding the
issue of executive duality. The two individuals are not members of the same family.
ii. The Operations/Processes of the Board were managed within the context of regulatory
requirements and in accordance with Best Practices. Accordingly, the Board held four
meetings during the year under review and attendance was outstanding whereby each
member met the 75% minimum requirement prescribed in The Code in respect of
attendance. A Committee structure comprising of the minimum requirement of the NAICOM
Code was institutionalized and the Committees were provided with the required Terms of
Reference. The agenda contained issues meant for the attention of the Board and the
preparation of the agenda was flexible in allowing all members to introduce relevant subject
matters to the Board.
Adequate notice was given for meetings and Board materials were circulated promptly to
members which allowed them adequate time to prepare for the meetings. Members were
given equal opportunity and they made cogent contributions to deliberations and most
decisions were arrived at by consensus. The Board enjoys a cordial working relationship and
meetings were conducted in an atmosphere devoid of rancour. The above review suggests
that the Composition and Processes/Operations of the Board meet most of the parameters of
The NAICOM Code.
iii. Members performed their oversight responsibilities with respect to the activities of
management in particular as regards the Company’s growth strategy, its Financial
Performance, Business Prospects as well as status of Regulatory Compliance.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 17
Report of External Consultant (Cont’d)
Following the recommendation made to the Board, particularly the regularization of its size,
we observed that the Board has instituted the required mechanism to address the issue in
order to enhance its governance practices.
BY ORDER OF THE BOARD
MOSUNMOLA OYERINDE (MRS.)
MANAGING CONSULTANT
Lagos, Nigeria
Date:
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 18
Statement of Directors’ Responsibilities
In accordance with the provisions of Section 334 and 335 of the Companies and Allied Matters Act
2004 and Sections 24 and 28 of the Banks and Other Financial Institutions Act 1991, the Directors
are responsible for the preparation of annual financial statements which give a true and fair view of
the financial position at the end of the financial year of the Company and of the operating result for
the year then ended.
The responsibilities include ensuring that:
Appropriate and adequate internal controls are established to safeguard the assets of the
Company and to prevent and detect fraud and other irregularities;
The Company keeps proper accounting records which disclose with reasonable accuracy
the financial position of the Company and which ensure that the financial statements
comply with the requirements of the Companies and Allied Matters Act, 2004, Banks and
Other Financial Institutions Act, 1991, Insurance Act 2003, Financial Reporting Council
and the yearly Operational Guidelines issued by NAICOM.
The Company has used appropriate accounting policies, consistently applied and
supported by reasonable and prudent judgments and estimates, and that all applicable
accounting standards have been followed; and
The financial statements are prepared on a going concern basis unless it is presumed that
the Company will not continue in business.
The Directors accept responsibility for the year’s financial statements, which have been prepared
using appropriate accounting policies supported by reasonable and prudent judgments and
estimates in conformity with;
Insurance Act 2003
International Financial Reporting Standards;
Companies and Allied Matters Act 2004;
Banks and Other Financial Institutions Act, 1991;
NAICOM Operational Guidelines; and
Financial Reporting Council Act, 2011.
The Directors are of the opinion that the financial statements give a true and fair view of the state of
the financial affairs of the Company and of its operating result for the year ended.
The Directors further accept responsibility for the maintenance of accounting records that may be
relied upon in the preparation of the financial statements, as well as adequate systems of financial
control. Nothing has come to the attention of the Directors to indicate that the Company will not
remain a going concern for at least twelve months from the date of this statement.
Signed on behalf of the Directors on ……………………. by:
…………………………. ………………………………….
Mr. Tope Smart Chief Adewale Teluwo
GMD Chairman, Board of Directors
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 19
Certification Pursuant to Section 60 (2) of Investment and Securities Act No. 29 of 2007
We the undersigned hereby certify the following with regards to our Audited Financial Statements for
the year ended December 31, 2014 that:
We have reviewed the report;
To the best of our knowledge, the report does not contain:
- Any untrue statement of a material fact, or
- Omit to state a material fact, which would make the statements, misleading in the light of
circumstances under which such statements were made;
To the best of our knowledge, the financial statement and other financial information included in
this report fairly present in all material respects the financial condition and results of operation
of the company as of, and for the periods presented in this report.
We:
- are responsible for establishing and maintaining internal controls.
- have designed such internal controls to ensure that material information relating to the
Company and its consolidated subsidiary is made known to such officers by others within
those entries particularly during the period in which the periodic reports are being prepared;
- have evaluated the effectiveness of the Company’s internal controls as of date within 90 days
prior to the report;
- have presented in the report our conclusions about the effectiveness of our internal controls
based on our evaluation as of that date;
We have disclosed to the auditors of the Company and Audit Committee:
- all significant deficiencies in the design or operation of internal controls which would
adversely affect the company’s ability to record, process, summarize and report financial
data and have identified for the company’s auditors any material weakness in internal
controls, and
- any fraud, whether or not material, that involves management or other employees who have
significant role in the company’s internal controls;
We have identified in the report whether or not there were significant changes in internal controls or
other factors that could significantly affect internal controls subsequent to the date of our evaluation,
including any corrective actions with regard to significant deficiencies and material weaknesses.
_____________________ ______________________ Mr. Tope Smart (GMD) Miss Stella Omoraro CFO FRC/2013/CIIN/00000001331 FRC/2013/ICAN/00000001238
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 20
Independent Auditor’s Report
To the members of NEM Insurance Plc We have audited the accompanying financial
statements of NEM Insurance Plc (“the Company), and its subsidiary (“together referred
to as the Group”), which comprise the
Consolidated Statement of Financial Position as at
December 31, 2014, Statement of changes in
Equity, the Consolidated Statement of
Comprehensive Income and Other Comprehensive
Income, Consolidated Cash Flows Statements and
the statement of significant accounting policies on
pages 22 to 48 and explanatory notes to the financial statements, as set out on pages 56 to 99.
Directors’ Responsibility for the Financial
Statements The directors are responsible for the preparation
and fair presentation of these financial statements
in accordance with International Financial
Reporting Standard (IFRSs) and in the manner
required by the Companies and Allied Matters Act,
CAP C20, LFN 2004, Financial Reporting Council
Act 2011, the Insurance Act 2003 of Nigeria, the
Investments and Securities Act 2007 and National
Insurance Commission (NAICOM) circulars. This
responsibility includes: designing, implementing
and maintaining internal controls relevant to the
preparation and fair presentation of financial
statements that are free from material
misstatement, whether due to fraud or error;
selecting and applying appropriate accounting
policies; and making accounting estimates that
are reasonable in the circumstances.
Auditor’s Responsibility Our responsibility is to express an opinion on
these financial statements based on our audit. We
conducted our audit in accordance with Nigerian
Standard on Auditing (NSA) and International
Standard on Auditing (ISA). Those standards
require that we comply with ethical requirements
and plan and perform the audit to obtain
reasonable assurance on whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures
in the financial statements. The procedures
selected depend on the auditor’s judgment,
including the assessment of the risks of material
misstatement of the financial statements whether
due to fraud or error. In making those risk
assessments; the auditor considers internal
controls relevant to the entity’s preparation and
fair presentation of the financial statements 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 controls. An
audit also includes evaluating the appropriateness
of accounting policies used and the
reasonableness of accounting estimates made by
the directors, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion In our opinion, the consolidated financial
statements give a true and fair view of the
financial position of NEM Insurance Plc and its subsidiary as at December 31, 2014 and of its
financial performance and cash flows for the year
then ended in accordance with International
Financial Reporting Standards (IFRSs) applicable
and in the manner required by the Financial
Reporting Council Act 2011, Companies and
Allied Matters Act, CAP C20 LFN 2004, the
Insurance Act 2003 of Nigeria, the Investments
and Securities Act 2007 and the relevant NAICOM
circulars.
Report on Other Legal Regulatory Requirements The Company contravened the following guidelines in
the year
- Violation of approved format on rendition of
quarterly returns
- Late submission of documents on IFRS
- Late filing of 2013 Audited Accounts
- Late payment on Staff pension.
Appropriate penalties have been paid by the company
Compliance with the requirements of the Companies
and Allied Matters Act, 2004.
In our opinion, proper books of account have been
kept by the Company, so far as appears from our
examination of those books and Company’s
financial position and comprehensive income are
in agreement with the books of accounts.
Joshua Ansa, FCA FRC/2013/ICAN/00000001728 For: SIAO (Chartered Accountants) Lagos, Nigeria Date…………..
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 21
Report of the Audit Committee
To the members of NEM Insurance Plc
In accordance with the provisions of Section 359(6) of the Companies and Allied Matters Act, Cap
59 of the Laws of the Federation of Nigeria 2004, we the Members of the Audit Committee of NEM
Insurance Plc, is having carried out our statutory functions under the Act, hereby report as follows:
We have reviewed the scope and planning of the audit for the year ended December 31,
2014 and we confirm that they were adequate.
The Company’s reporting and accounting policies as well as internal control systems
conform to legal requirements and agreed ethical practices.
We are satisfied with the departmental responses to the External Auditors’ findings on
management matters for the year ended December 31, 2014
Finally, we acknowledge and appreciate the co-operation of Management and Staff in the conduct of
these duties.
----------------------------
Mr. Peter Okoh
Chairman of the Audit Committee
FRC/2013/NIM/00000002860
Date.........................
Members of the Audit Committee
Mr. Peter Okoh - (Shareholders’ Representative)- Chairman
Mr. Taiwo Oderinde - ,, ,, Member
Mr. Samuel Mpamaugo - ,, ,, Member
Mr. Olusesan Adekunle - (Non Exec Director) Member
Mrs. Yinka Aletor - ,, ,, Member
Mrs. Suzan Giwa Osagie - (Exc. Director) Member
The Company Secretary/Legal Adviser acted as the Secretary to the Committee.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 22
Statement of Significant Accounting Policies
The following are the significant accounting policies adopted by the Group in the preparation of
these financial statements. These accounting policies have been consistently applied for all years
presented.
1.0 General Information
NEM Insurance Plc (“NEM” or ‘‘the Company”) is a public limited liability company domiciled in
Nigeria. The Company’s registered and corporate office is 138/146 Broad Street, Lagos Island,
Lagos. The Company is principally engaged in the business of general Insurance activities. Such
services include provision of non-life insurance services for both corporate and individual
customers. In 2009 the Company opened a subsidiary in Ghana (NEM Insurance Ghana Limited) to
transact the same line of business.
The financial statement was authorised by Board on 30th March, 2015.
2.0 Summary of Significant Accounting Policies
The principal accounting policies applied in the preparation of these Financial Statements are set
out below. These policies have been consistently applied to all the years presented, unless
otherwise stated.
2.1 Going Concern Assessment
These financial statements have been prepared on the going concern basis. The Group has no
intention or need to reduce substantially its business operations, the management believes that the
going concern assumption is appropriate for the Group due to sufficient capital adequacy ratio and
projected liquidity, based on historical experience that short-term obligations will be refinanced in
the normal course of the business. Liquidity ratio and continuous evaluation of current ratio of the
group is carried out by the group to ensure that there are no going concerns threats to the
operation of the group.
2.2 Basis of Preparation and Compliance with IFRS
The Group’s financial statements for the year 2013 have been prepared in accordance with the
International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB), Company and Allied Matters Act, CAP C20 LFN 2004, Insurance Act 2003
of Nigeria and Investment and Securities Act 2007 to the extent that they do not conflict with the
requirements of International Financial Reporting Standard (IFRS).
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Statement of Significant Accounting Policies (Cont’d)
Functional and Presentation of Currency
The financial statements are presented in Nigerian currency (Naira) which is the Company’s
functional currency. Except otherwise indicated, financial information presented in Naira have been
rounded to the nearest thousand (₦ 000)
Basis of Measurement
The financial statements have been prepared under the historical cost basis except for the
following:
Financial instruments at fair value through profit or loss.
Financial assets classified as available for sale which are measured at fair value through other
comprehensive income.
Loans and receivables and held to maturity financial assets and financial liabilities which are
measured at amortized cost
Investment properties which are measured at fair value
2.3 Critical Accounting Estimates, Judgments and Assumptions
The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in the process of
applying the company’s accounting policies. The estimates and associated assumptions are based
on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgments about carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ
from these estimates under different assumptions and conditions. Changes in assumptions may
have a significant impact on the financial statements in the period the assumptions changed.
Management believes that the underlying assumptions are appropriate and that the company’s
financial statements therefore present the financial positions and results fairly. The areas involving
a higher degree of judgment or complexity, or areas where assumptions and estimates are
significant to the financial statements are disclosed in Note 2.4.
2.4 Judgment, Estimates and Assumption The estimates and underlying assumptions are reviewed on an on-going basis. Revision to
accounting estimates are recognized in the period in which the estimate is revised, if the revision
affects only that period or if the revision affects both current and future periods.
Information about significant areas of estimation uncertainty and critical judgments in applying
accounting policies that have the most significant effect on the amounts recognized in the financial
statements are described below:
2.4.1 Income Taxes Significant estimates are required in determining the provision for income taxes. There are many
transactions and calculations for which the ultimate tax determination is uncertain. The company
recognizes liabilities for anticipated tax issues based on estimates of whether additional taxes will
be due. Where the final tax outcome of these matters is different from the amounts that were
initially recorded, such differences will impact the income tax and deferred tax provisions.
2.4.2 Retirement Benefits
The present value of the retirement benefit obligations depends on a number of factors that are
determined on an actuarial basis using a number of assumptions. Any changes in these
assumptions will impact the carrying amount of gratuity obligations. The assumptions used in
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NEM Insurance 2014 Page 24
Statement of Significant Accounting Policies (Cont’d)
determining the net cost (income) for gratuity include the discount rate, rate of return on assets,
future salary increments and mortality rates.
The Group determines the appropriate discount rate at the end of the year. This is the interest rate
that should be used to determine the present value of estimated future cash outflows expected to
be required to settle the gratuity obligations. In determining the appropriate discount rate, the
Company considers the interest rates of high-quality government bonds that are denominated in the
currency in which the benefits will be paid and that have terms to maturity approximating the terms
of the related gratuity liability. Other key assumptions for gratuity obligations are based in part on
current market conditions.
In most cases, no explicit assumptions are made regarding the future rates of claims inflation or
loss ratios. Instead, the assumptions used are those implicit in the historical claims development
data on which the projections are based. Additional qualitative judgment is used to assess the
extent to which past trends may not apply in future, (e.g. to reflect one-off occurrences, changes in
external or market factors such as public attitudes to claiming, economic conditions, level s of
claims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix,
policy features and claims handling procedures) in order to arrive at the estimated ultimate cost of
claims that present the likely outcome from the range of possible outcomes, taking account of all
the uncertainties involved.
Similar judgments, estimates and assumptions are employed in the assessment of adequacy of
provisions for unearned premium. Judgment is also required in determining whether the pattern of
insurance service provided by a contract requires amortization of unearned premium on a basis
other than time apportionment.
2.4.3 Fair Valuation of Investment Properties
The fair value of investment properties is based on the nature of investment properties is based on
the nature, location and condition of the specific asset. The fair value is determined by reference to
observable market prices. The fair value of investment property does not reflect the related future
benefits from this future expenditure. These valuations are performed annually by external
appraisers. Assumptions are made about expected future cash flows and the discounting rates
2.5 Improvements to IFRSs
Below are the IFRSs and International Financial Reporting Interpretations Committee (IFRIC)
interpretations that are effective for the first time for the financial period beginning on or after 1
January 2014 that would be expected to have an impact on the company.
IFRS Updates (Effective in 2014 and beyond) and IFRS Updates in 2014 List of amendments
Amendments Issued 2014
IFRIC 21 LEVIES- Effective for annual periods beginning on or after 1 January 2014
IFRIC 21 is applicable to all levies other than outflows that are within the scope of other standards
(e.g. IAS 12 Income Taxes) and fines or other penalties for breaches of legislation. IFRIC 21
provides guidance on when to recognise a liability for a levy imposed by a government, both for
levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and
Contingent Assets and those where the timing and amount of the levy is certain. The Interpretation
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Statement of Significant Accounting Policies (Cont’d)
covers the accounting for outflows imposed on entities by governments (including government
agencies and similar bodies) in accordance with laws and/or regulations. However, it does not
include income taxes (IAS 12 Income Taxes), fines and other penalties, liabilities arising from
emissions trading schemes and outflows within the scope of other Standards.
Levies are defined as outflows of resources embodying economic benefits imposed by governments
on entities in accordance with legislation.
The interpretation clarifies that an entity recognizes a liability for a levy when the activity that
triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability
is accrued progressively only if the activity that triggers payment occurs over a period of time, in
accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum
threshold, the interpretation clarifies that no liability is recognized before the specified minimum
threshold is reached.
However, the interpretation does not address the accounting for the debit side of the transaction
that arises from recognizing a liability to pay a levy. Entities would need to look to other standards
to decide whether the recognition of a liability to pay a levy would give rise to an asset or an
expense under the relevant standard
Transition
The interpretation must be applied retrospectively.
Impact
The interpretation is intended to eliminate the current diversity in practice on the treatment for the
obligation to pay levies. The scope of this interpretation is very broad and captures various
obligations that are imposed by governments in accordance with legislation and sometimes not
always described as “levies”. Therefore, entities need to consider the nature of payments to
government carefully when determining if the payment is in the scope of IFRIC 21.
Amendments to IFRS 10 Amended by Investment Entities (Amendments to IFRS 10, IFRS 12 and
IAS 27) - Effective for annual periods beginning on or after 1 January 2014
The IASB has published 'Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)',
providing an exemption from consolidation of subsidiaries under IFRS 10 'Consolidated Financial
Statements' for entities which meet the definition of an 'investment entity', such as certain
investment funds. Instead, such entities would measure their investment in particular subsidiaries
at fair value through profit or loss in accordance with IFRS 9 'Financial Instruments' or IAS 39
'Financial Instruments: Recognition and Measurement'
The key amendments include
The amendments define an 'investment entity' as an entity that: obtains funds from one or
more investor for the purpose of providing those investor(s) with investment management
services commits to its investor(s) that its business purpose is to invest funds solely for
returns from capital appreciation, investment income, or both, and measures and evaluates
the performance of substantially all of its investments on a fair value basis.
An entity is required to consider all facts and circumstances when assessing whether it is an
investment entity, including its purpose and design. The amendments provide that an
investment entity should have the following typical characteristics:
1. more than one investment
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Statement of Significant Accounting Policies (Cont’d)
2. more than one investor
3. investors that are not related to the entity or other members of the group containing
the entity
4. ownership interests, typically in the form of equity or similar interests (e.g.
partnership interests), to which proportionate shares of the net assets of the
investment entity are attributed.
If an entity does not meet one or more of these typical characteristics, it is required to justify and
disclose how its activities continue to be consistent with that of an investment entity. Additional
guidance is provided on detailed specifics in determining whether an entity is an investment entity,
such as the impacts of being involved in the day-to-day management of an investee or providing
investment-related services to third parties, the nature of the entity, and how the entity measures
and manages its financial liabilities.
The types of entities which may meet the definition of an investment entity may include private
equity organisations, venture capital organisations, pension funds, sovereign wealth funds and other
investment funds.
Where an entity meets the definition of an investment entity, it is not permitted to consolidate its
subsidiaries and is required to measure its investments in those subsidiaries at fair value through
profit or loss. However, an investment entity is still required to consolidate a subsidiary where that
subsidiary provides services that relate to the investment entity’s investment activities.
The amendments also: introduce new disclosure requirements related to investment entities in IFRS
12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements provide an
scope exemption for investment entities from IFRS 3 Business Combinations (meaning such entities
do not need to apply business combination accounting to the acquisition of subsidiaries) include
various consequential amendments to numerous standards.
The amendments do not introduce any new accounting requirements for investments in associates
or joint ventures. IAS 28 Investments in Associates and Joint Ventures already permits a venture
capital organisation, mutual funds, unit trusts and similar entities including investment-linked
insurance funds to elect to measure investments in associates and joint ventures at fair value
through profit or loss in accordance with IFRS 9 or IAS 39, and the IASB expects that investment
entities would apply these requirements.
Transition
The amendments must be applied retrospectively.
Impact
The concept of an investment entity is new in IFRS. The amendments represent a significant change
for investment entities, which are currently required to consolidate investees that they control.
Significant judgement of facts and circumstances may be required to assess whether an entity
meets the definition of investment entity.
IAS 32 Offsetting Financial Assets and Financial Liabilities- Amendments to IAS 32
Effective for annual periods beginning on or after 1 January 2014 The amendments to IAS 32 clarify the meaning of “currently has a legally enforceable right set off”.
The amendments also clarify the application of the IAS 32 offsetting criteria to settlement system
(such as central clearing house systems), which apply to gross settlement mechanisms that are not
simultaneous. The amendments clarify that rights of set-off must not only be legally enforceable in
the normal course of business, but must also be enforceable in the event of default and the event of
bankruptcy or insolvency of all of the counterparties to the contract, including the reporting entity
itself. The amendments also clarify that rights of set-off must not be contingent on a future event.
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Statement of Significant Accounting Policies (Cont’d)
The IAS 32 offsetting criteria require the reporting entity to intent either to settle on a net basis, or
to realize the asset and settle the liability simultaneously. The amendments clarify that only gross
settlement mechanism with features that eliminate or result in insignificant credit and liquidity risk
and that process receivables and payables in a single settlement and therefore meet the net
settlement criterion.
Transition The amendments must be applied retrospectively. Early application is permitted. If an entity
chooses to early adopt, it must disclose that fact and also make the disclosure required by IFRS 7
Disclosures- Offsetting Financial Assets and Financial Liabilities- Amendments to IFRS 7.
Impact
Entities will need to review legal documentation and settlement procedures, including those applied
by the central clearing houses they deal with to ensure that offsetting of financial instruments is still
possible under the new criteria. Changes in offsetting may have significant impact on financial
statement presentation. The effect on leverage ratios, regulatory capital requirement etc will need to
be considered.
IAS 36 Amended by Recoverable Amount Disclosures for Non-Financial Assets (clarification of disclosures required) - Effective for annual periods beginning on or after 1 January 2014
The amendments clarify the disclosure requirements in respect of fair value less costs of disposal.
When IAS 36 originally changed as a consequence of IFRS 13, the IASB intended to require
disclosure of information about the recoverable amount of impaired assets if that amount was
based on fair value less costs to sell. However, as written, an entity was required to disclose the
recoverable amount for each cash generating unit for which the carrying amount of goodwill or
intangible assets with indefinite useful lives allocated to that unit was significant in comparison with
the entity’s total carrying amount of goodwill or intangible assets with indefinite useful lives. This
requirement has been deleted by the amendments.
In addition, the IASB added two disclosure requirements:
Additional information about the fair value measurement of impaired assets when the
recoverable amount is based on fair value less costs of disposal.
Information about the discount rates that have been used when the recoverable amount is
based on fair value less costs of disposal using a present value technique. The amendments
harmonise disclosure requirements between value in use and fair value less costs of
disposal.
Transition
The amendments must be applied retrospectively.
Impact
As a result of the amendments, entities are no longer required to disclose information that was
regarded as commercially sensitive by preparers. This might be a valid reason for entities to early
adopt the amendments. Nevertheless, additional information needs to be provided. In general, it is
likely that the information required to be disclosed will be readily available.
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Statement of Significant Accounting Policies (Cont’d)
IAS 39-AMENDMENT BY NOVATION OF DERIVATIVES AND CONTINUATION OF HEDGE
ACCOUNTING
Effective for annual periods beginning on or after 1 January 2014
The objective of the amendments is to avoid any impact on an entity’s hedge accounting from
derecognizing the derivative, following its novation. A novation indicates an event where the original
parties to a derivative agree that one or more clearing counterparties replace their original
counterparty to become the new counterparty to each of the parties. Specifically, the IASB was
concerned that the effectiveness for cash flow hedges might not be sufficient to maintain the
designation or to designate the novated derivative as a hedging instrument.
The amendments provide an exception to the requirement to discontinue hedge accounting in
certain circumstances in which there is a change in counterparty to a hedging instrument in order
to achieve clearing for that instrument. The amendments cover novations :
That arises as a consequence of law or regulations, or the introduction of laws or
regulations.
In which the parties to the hedging instrument agree that one or more clearing
counterparties replace the original counterparty to become the new counterparty to each of
the parties.
That did not result in changes to the terms of the original derivative other than changes
directly attributable to the change in counterparty to achieve clearing.
All of the above must be met to continue hedge accounting under this exception. The amendments
also cover novations to central counterparties, as well as to assess the changes to the hedging
instrument against the de-recognition criteria for financial instruments and the general conditions
for continuation of hedge accounting.
Transition
The amendments must be applied retrospectively. However, entities that discontinued hedge
accounting in the past, because of a novation that would be in scope of the amendments may not
reinstate that previous hedging relationship. Early application is permitted and must be disclosed.
Impact
The amendments are in effect, a relief from the hedge accounting requirements, and will allow
entities to better reflect hedge relationships in the circumstances in which the novation exception
applies.
AMENDMENT TO IFRS 1- MEANING OF EFFECTIVE IFRSs’
Effective from 1 July, 2014. Earlier application is permitted and must be disclosed The amendment clarifies the Basis for Conclusions that an entity may choose to apply either a
current standard or a new standard that is not yet mandatory, but permits early application,
provided either standard is applied consistently throughout the periods presented in the entity’s
first IFRS financial statements.
Transition
The amendment is effective immediately.
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Statement of Significant Accounting Policies (Cont’d)
IFRS 3 – BUSINESS COMBINATIONS SCOPE EXCEPTIONS FOR JOINT VENTURES
Effective from 1 July, 2014. Earlier application is permitted and must be disclosed
The amendment clarifies that:
Joint arrangements, not just ventures, are outside the scope of IFRS 3
The scope exception applies only to the accounting in the financial statements of the joint
arrangement itself.
The amendment must be applied prospectively.
IFRS 13 FAIR VALUE MEASUREMENT (PORFOLIO EXCEPTION)
Effective from 1 July, 2014. Earlier application is permitted and must be disclosed
The amendment clarifies that the portfolio exception in IFRS 13 can be applied not only to financial
assets and financial liabilities, but also to other contracts within the scope of IFRS 9 (or IAS 39, as
applicable).
The amendment must be applied prospectively.
IAS 40 INVESTMENT PROPERTY- INTERRELATIONSHIPS BETWEEN IFRS 3 AND IAS 40 Effective from 1 July, 2014. Earlier application is permitted and must be disclosed
The description of ancillary services in IAS 40 differentiates between investment property and owner
occupied property (i.e.PPE). The amendment clarifies that IFRS 3, not the description of ancillary
services in IAS 40 is used to determine if the transaction is the purchase of an asset or a business
combination.
The amendment must be applied prospectively.
IFRS 2 SHARE –BASED PAYMENT DEFINITIONS OF VESTING CONDITIONS Effective from 1 July, 2014. Earlier application is permitted and must be disclosed
The amendment defines ‘performance condition’ and ‘service condition’ in order to clarify various
issues, including the following:
A performance condition must contain a service condition
A performance target must be met while the counterparty is rendering service
A performance target may relate to the operations or activities of an entity, or to those of
another entity in the same group
A performance condition may be a market or non-market condition
If the counterparty, regardless of the reason, ceases to provide service during the vesting
period, the service condition is not satisfied.
The amendment must be applied prospectively.
IFRS 3 BUSINESS COMBINATION- ACCOUNTING FOR CONTINGENT CONSIDERATION IN A
BUSINESS COMBINATION Effective from 1 July, 2014. Earlier application is permitted and must be disclosed
The amendment clarifies that all contingent consideration arrangements classified as liabilities or
assets arising from a business combination must be subsequently measured at FVTPL whether or
not they fal within the scope of IFRS 9 (or IAS 39, as applicable)
The amendment must be applied prospectively.
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Statement of Significant Accounting Policies (Cont’d)
IFRS 8 OPERATING SEGMENTS
Effective from 1 July, 2014. Earlier application is permitted and must be disclosed
1. Aggregation of operating segment The amendment clarifies that an entity must disclose the judgements made by management in
applying the aggregation criteria in paragraph 12 of IFRS 8, including a brief description of
operating segments that have been aggregated and the economic characteristics (e.g. sales and
gross margins) used to assess whether the segments are similar.
The amendment must be applied retrospectively
2. Reconciliation of the total of the reportable segments’ assets to the entity’s assets
The amendment clarifies that the reconciliation of segment assets to total assets is only required to
be disclosed if the reconciliation is reported to the chief operating decision maker, similar to the
required disclosure for segment liabilities.
The amendment must be applied retrospectively
IFRS 13 FAIR VALUE MEASUREMENT-SHORT TERM RECEIVABLES AND PAYABLES
Effective from 1 July, 2014. Earlier application is permitted and must be disclosed
The amendment clarifies in the Basis for Conclusions that short term receivables and payables with
no stated interest rates can be measured at invoice amounts when the effect of discounting is
immaterial.
The amendment is effective immediately.
IAS 16 PROPERTY, PLANT AND EQUIPMENT AND IAS 38 INTANGIBLE ASSETS
Effective from 1 July, 2014. Earlier application is permitted and must be disclosed
The amendment clarifies that the asset may be revalued by reference to observable data on either
the gross or the net carrying amount. The amendment also clarifies that accumulated
depreciation/amortization is the difference between the gross and carrying amounts of the asset.
The amendment must be applied retrospectively.
IAS 24 RELATED PARTY DISCLOSURES
Effective from 1 July, 2014. Earlier application is permitted and must be disclosed
Key Management Personnel
The amendment clarifies that a management entity- an entity that provides key management
personnel services is a related party subject to the related party disclosures. In addition, an entity
that uses a management entity is required to disclose the expenses incurred for management
services.
The amendment must be applied retrospectively.
NEW, AMENDED STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
IFRS 9- Financial Instruments
Effective for annual periods beginning on or after 1 January 2018
Classification and measurement of financial assets
IFRS 9 amendment clarifies the classification of financial assets and financial liabilities on the basis of contractual cash flows and the business model of the instrument. All financial assets are,
on initial recognition measured at fair value, adjusted for transaction costs if the instrument is not
accounted for at FVTPL. Subsequently, equity instruments are generally measured at FVTPL except
where there’s an irrevocable election on an instrument-by-instrument basis to present changes in
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Statement of Significant Accounting Policies (Cont’d)
the fair value of non-trading instruments in OCI. Debt instruments are, measured on the basis of
their contractual cash flows and business model under which they are held. Where the instrument
has contractual cash flows are solely payments of principal and interest on the principal
outstanding and is held with the business model objective of collecting contractual cash flows, it is
accounted for at amortized cost. However, where the contractual cash flows are solely payments of
principal and interest on the principal outstanding and the business model objective is that of
collecting contractual cash flows and selling financial assets, it is accounted for at FVTOCI with
subsequent reclassification to P or L. All other debt instruments are subsequently accounted for at
FVTPL.
IFRS 9 also proposes new impairment requirements based on an expected credit loss model (ECL) to replace the IAS 39 incurred loss model. The ECL model is applicable to debt instruments
accounted for at amortised cost or at FVOCI.
Hedge effectiveness testing must be prospective and can be qualitative, depending on the
complexity of the hedge. A risk component of a financial or non-financial instrument may be
designated as the hedged item if the risk component is separately identifiable and reliably
measured.
IFRS 11- Accounting for Acquisitions of Interests in Joint Operations- Amendments to IFRS 11 Effective for annual periods beginning on or after 1 January 2016
The amendments requires an entity acquiring an interest in a joint operation to apply, to the extent
of its shares, all of the principles on business combinations accounting in IFRS 3 business
combinations, and other IFRSs, that do not conflict with the requirements of IFRS 11. Also, entities
are required to disclose the information required in those IFRSs in relation to business combination.
The amendments also apply to an entity on a formation of a joint operation if, an existing business
is contributed by the entity of the joint operation on its formation.
The amendments also clarify that for the acquisition of an additional interest in a joint operation in
which the activity of the joint operation constitutes a business; previously held interests in the joint
operation must not be re-measured if the joint operator retains joint control
IFRS 14 Regulatory Deferral Accounts Effective for annual periods beginning on or after 1 January 2016
This standard is applicable to entities whose activities are subject to rate regulation. According to
IFRS 14, such entities are to continue applying most of its existing accounting policies for deferred
regulatory accounts on 1st time adoption. An entity whose current standards does not allow
recognition of rate- regulated assets and liabilities, or that has not previously applied this policy,
would not be allowed to recognize them(rate regulated assets and liabilities) on first time
application of IFRS. Entities that adopt this standard are to present on the face of the SOFP, the
regulatory deferral accounts as separate line items. Also, movements in these account balances are
to be presented as separate line items in the SPLOCI.
IFRS 14 requires disclosures on the nature, the risks associated, entity’s rate regulation and the
effects on its financial statements.
IFRS 15- Revenue from Contracts with Customers
Effective for annual periods beginning on or after 1 January, 2017
IFRS replaces all existing revenue requirements (IAS 11 Construction Contracts, IAS 18 Revenue,
IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for Construction of Real Estate,
IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue- Barter Transactions Involving
Advertising Services)in IFRS and applies to all revenue arising from contracts with customers. It
provides a model for recognizing and measuring of sales of some non-financial assets including PPE
and Intangible assets.
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Statement of Significant Accounting Policies (Cont’d)
IFRS 15 outlines the principles to apply to measure and recognize revenue. These principles are to
be applied using a five step model. Each step of the model requires entities to exercise judgment
and to consider all relevant facts and circumstances when applying the model to contracts with
customers. The standard also specifies how to account for the incremental costs of obtaining a
contract and the costs directly related to fulfilling a contract.
IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortization-
Amendments to IAS 16 and IAS 38
Key requirements
The amendment clarify the principle in IAS 16 property, plant and equipment and IAS 38 intangible
assets that revenue reflects a pattern of economic benefits that are generated from operating a
business (of which the assets is part) rather than the economic benefits that are consumed through
use of the asset. As a result, the ratio of revenue generated total revenue expected to be generated
cannot be used to depreciate property, plant and equipment and may only be used in very limited
circumstances to amortize intangible assets.
Impact
Entities currently using revenue based amortization methods for property, plant and equipment will
need to change their current amortization approach to an acceptable method that result in a
different amortization pattern.
IAS 16 and IAS 41 Agriculture: Bearer Plants- Amendments to IAS 16 and IAS 41
Effective for annual periods beginning on or after 1 January 2016
Key requirements
The amendments to IAS 16 and IAS 41 includes bearer plants in the scope of IAS 16.Bearer plants
will be subject to the recognition and measurement requirements in IAS 16. Also, government
grants relating to bearer plants will be accounted for in accordance with IAS 20, instead of IAS 41.
In the event of applying this amendment for the 1st time, any difference between the fair value used
as deemed cost and the previous carrying amount is recognized in retained earnings. Also, in the
application of this amendment, where the entity uses the revaluation model in the subsequent
measurement of bearer plants, fair value changes should be recognized in the other comprehensive
income and not profit or loss. Bearer plants should also be assessed for impairment at the end of
each reporting period, in line with IAS 36.
Early application of this amendment is permitted and must be disclosed.
IAS 27 Equity Method in Separate Financial Statements-Amendments to IAS 27
Effective for annual periods beginning on or after 1 January 2016 This amendment was made to restore the option to use the equity method to account for
investments in subsidiaries and associates in the entity’s financial statements. Therefore, an entity
can account for investment either:
At cost
In accordance with IFRS 9(or IAS 39)
Using equity method
Early application of this amendment is permitted and must be disclosed.
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Statement of Significant Accounting Policies (Cont’d)
IAS 19 Employee Benefits-Discount rate: Regulated Market Issue (Annual Improvements 2012-
2014 Cycle)
Effective for periods beginning on or after 1st January, 2016 This amendment clarifies that high quality bonds used in estimating the discount rate for post-
employment benefits should be denominated in the same currency as the benefits to be paid.
IAS 28- Amendment on Sale or Contribution of Assets between an Investor and its Associate or
Joint Venture Effective for annual periods beginning on or after 1st January, 2016
The amendments address a conflict between the requirements of IAS 28 “Investments in Associates
and Joint Venture” and IFRS 10 “Consolidated Financial Statements” and clarify that in a
transaction involving an associate or joint venture the extent of gain or loss recognized depends on
whether the assets sold or contributed constitute a business.
The requirements on gain/losses resulting from transactions between an entity and its associate or
joint venture have been amended to relate only to assets that do not constitute a business. Also,
gains and losses from downstream transactions involving assets that constitute a business between
an entity and its associate or joint venture must be recognized in full in the investor’s financial
statements. A requirement has been added as to whether assets that are sold or contributed in
separate transactions constitute a business and should be accounted for as a single transaction.
This amendment should be applied prospectively.
2.6 Foreign Currency Transactions
2.6.1 Functional and Presentation Currency Items included in the financial statements are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency). The financial
statements are presented in thousands. Naira is the Company’s functional and presentation
currency.
2.6.2 Transactions and Balances Transactions denominated in foreign currencies are recorded in Naira at the rate of exchange ruling
at the date of each transaction. Any gain or loss arising from a change in exchange rates
subsequent to the date of the transaction is included in the profit and loss account. Monetary assets
and liabilities denominated in foreign currencies at the balance sheet date are translated at that
date. Exchange gains arising from the revaluation of monetary assets and liabilities are recognized
in the income statement while those on non-monetary items are recognized in other comprehensive
income. For non-monetary financial investments available-for-sale, unrealized exchange differences
are recorded directly in equity until the asset is disposed or impaired.
2.7 Consolidation
2.7.1 Subsidiaries
The financial statements of subsidiaries are consolidated from the date the Group acquires control,
up to the date that such effective control ceases. For the purpose of these financial statements,
subsidiaries are entities over which the Group, directly or indirectly, has the power to govern the
financial and operating policies so as to obtain benefits from their activities. Changes in the Group’s
interest in a subsidiary that do not result in a loss of control are accounted for as equity
transactions (transactions with owners). Any difference between the amount by which the non-
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Statement of Significant Accounting Policies (Cont’d)
controlling interest is adjusted and the fair value of the consideration paid or received is recognised
directly in equity and attributed to the Group.
Inter-company transactions, balances and unrealised gains on transactions between companies
within the Group are eliminated on consolidation. Unrealised losses are also eliminated in the same
manner as unrealised gains, but only to the extent that there is no evidence of impairment.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with
the policies adopted by the Group. Investment in subsidiaries in the separate financial statement of
the parent entity is measured at cost.
Acquisition-related Costs are expensed as Incurred
If the business combination is achieved in stages, fair value of the acquirer’s previously held equity
interest in the acquiree is re-measured to fair value at the acquisition date through profit or loss.
2.7.2 Disposal of Subsidiaries
On loss of control, the Group derecognises the assets and liabilities of the subsidiary, any
controlling interests and the other components of equity related to the subsidiary. Any surplus or
deficit arising from the loss of control is recognised in income statement.
If the Group retains any interest in the previous subsidiary, then such interest is measured at fair
value at the date that control is lost. Subsequently, that retained interest is accounted for as an
equity-accounted investee or as an available-for-sale financial asset depending on the level of
influence retained.
3.0 Detailed Accounting Policies
3.1 Cash and Cash Equivalents
Cash and cash equivalents include cash in hand and at bank, call deposits and short term highly
liquid financial assets with original maturities of three months or less from the acquisition date,
which are subject to insignificant risk of changes in their fair value, and are used by the Company in
the management of its short-term commitments. Cash and cash equivalents are carried at
amortised cost in the statement of financial position.
3.2 Financial assets
3.2.1 Classification
The classification of financial assets depends on the purpose for which the investments were
acquired or originated. The Company classifies its financial assets into the following categories:
financial assets at fair value through profit or loss;
held-to-maturity investments;
loans and receivables, and
available-for-sale financial assets
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Statement of Significant Accounting Policies (Cont’d) 3.2.2 Financial assets held at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading.
Financial assets classified as trading are acquired principally for the purpose of selling in the short
term.
These investments are initially recorded at fair value. Subsequent to initial recognition, they are
remeasured at fair value, with gains and losses arising from changes in this value recognized in the
income statement in the period in which they arise. The fair values of quoted investments in
active markets are based on current bid prices. The fair values of unquoted equities, and quoted
equities for which there is no active market, are established using valuation techniques
corroborated by independent third parties. These may include reference to the current fair value of
other instruments that are substantially the same and discounted cash flow analysis.
Interest earned and dividends received while holding trading assets at fair value through profit or
loss are included in investment income.
3.2.3 Held-to-maturity
Held-to-maturity investments are non-derivative financial assets with fixed determinable payments
and fixed maturities that management has both the positive intention and ability to hold to maturity
other than:
Those that the Company designates as available for sale.
Those that meet the definition of loans and receivables.
Such instruments include corporate bonds, government bonds, convertible debt notes and are
carried at amortised cost, using the effective interest method, less any provisions for impairment.
3.2.4 Available-for-sale
Available for sale financial investments include equity and debt securities. The Company classifies
as available-for-sale those financial assets that are generally not designated as another category of
financial assets, and strategic capital investments held for an indefinite period of time, which may
be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity
prices.
Available-for-sale financial assets are carried at fair value, with the exception of investments in
equity instruments where fair value cannot be reliably determined, which are carried at cost. Fair
values are determined in the same manner as for investments at fair value through profit or loss.
Unrealised gains and losses arising from changes in the fair value of available-for-sale financial
assets are recognised in other comprehensive income while the investment is held, and are
subsequently transferred to the income statement upon sale or de-recognition of the investment.
Dividends received on available-for-sale instruments are recognised in income statement when the
Company’s right to receive payment has been established.
3.2.5 Loans and receivables
Loans and receivables include non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market, other than those classified by the Company as at fair value
through profit or loss or available-for-sale.
Loans and advances consist primarily of commercial loans, staff loans, premium debtors, due from
reinsurers, other debtors. These are managed in accordance with a documented policy.
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Statement of Significant Accounting Policies (Cont’d)
Loans and receivables are measured at amortised cost using the effective interest method, less any
impairment losses. Loans granted at below market rates are fair valued by reference to expected
future cash flows and current market interest rates for instruments in a comparable or similar risk
class and the difference between the historical cost and fair value is accounted for as employee
benefits under staff costs.
3.2.6 Fair Value Measurement
The best evidence of the fair value of a financial instrument on initial recognition is the transaction
price, i.e. the fair value of the consideration paid or received, unless the fair value is evidenced by
comparison with other observable current market transactions in the same instrument, without
modification or repackaging, or based on discounted cash flow models and option pricing valuation
techniques whose variables include only data from observable markets.
Subsequent to initial recognition, the fair values of financial instruments are based on quoted
market prices or dealer price quotations for financial instruments traded in active markets. If the
market for a financial asset is not active or the instrument is an unlisted instrument, the fair value is
determined by using applicable valuation techniques. These include the use of recent arm’s length
transactions, discounted cash flow analyses, pricing models and valuation techniques commonly
used by market participants.
Where discounted cash flow analyses are used, estimated cash flows are based on management’s
best estimates and the discount rate is a market-related rate at the balance sheet date from a
financial asset with similar terms and conditions.
Where pricing models are used, inputs are based on observable market indicators at the balance
sheet date and profits or losses are only recognised to the extent that they relate to changes in
factors that market participants will consider in a setting price.
3.3 Trade Receivables
Trade receivables arising from insurance contracts are stated after deducting allowance made for
specific debts considered doubtful of recovery. Trade receivables are reviewed at every reporting
period for impairment. They are initially recognised at fair value and subsequently measured at
amortised cost less provision for impairment. A provision for impairment is made when there is
objective evidence (such as the probability of solvency or significant financial difficulties of the
debtors) that the Group will not be able to collect the entire amount due under the original terms of
the invoice.
Allowances are made based on an impairment model which considers the loss given default for each
customer, probability of default for the sectors in which the customer belongs and emergence
period which serves as an impairment trigger based on the age of the debt. Impaired debts are
derecognized when they are assessed as uncollectible. If in a subsequent period the amount of the
impairment loss decreases and the decrease can be related objectively to an event occurring after
the impairment was recognised, the previous recognised impairment loss is reversed to the extent
that the carrying value of the asset does not exceed its amortised cost at the reversed date. Any
subsequent reversal of an impairment loss is recognized in the Income Statement.
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Statement of Significant Accounting Policies (Cont’d)
3.3.1 Derecognition
The Company derecognizes a financial asset only when the contractual rights to cash flows from
the asset expire or it transfers the financial asset expire or it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset to another entity. If the Company
neither transfers nor retains substantially all the risks and rewards of ownership and continues to
control the transferred asset, the Company recognizes its retained interest in the asset and an
associated liability for amounts it may have to pay. If the Company retains substantially all the risks
and rewards of ownership of a transferred financial asset, the Company continues to recognize the
financial asset and also recognizes a collateralized borrowing for the proceeds received.
3.4 Reinsurance Assets
The Company cedes business to reinsurers in the normal course of business for the purpose of
limiting its net loss potential through the transfer of risks. Premium ceded comprise gross written
premiums. Reinsurance arrangements do not relieve the Company from its direct obligations to its
policy holders.
Reinsurance assets are recognized when the related gross insurance claim is recognized according
to the terms of the relevant contract. The Company has the right to set off reinsurance payables
against amounts due from reinsurers and brokers in line with the agreed arrangements between
both parties.
3.5 Deferred Acquisition Costs (DAC)
Acquisition costs comprise insurance commissions, brokerage and other related expenses arising
from the generation and conclusion of insurance contracts. The proportion of acquisition costs that
correspond to the unearned premiums are deferred as an asset and recognized in the subsequent
period. They are recognised on a basis consistent with the related provisions for unearned
premiums.
3.6 Other Receivables and Prepayments
Other receivables and prepayments are carried at cost less accumulated impairment losses.
3.7 Investment in Subsidiary
3.7.1 Subsidiaries
The financial statements of subsidiaries are consolidated from the date the Company acquires
control, up to the date that such effective control ceases. For the purpose of these financial
statements, subsidiaries are entities over which the Group, directly or indirectly, has the power to
govern the financial and operating policies so as to obtain benefits from their activities. Changes in
the Company’s interest in a subsidiary that do not result in a loss of control are accounted for as
equity transactions (transactions with owners). Any difference between the amount by which the
non-controlling interest is adjusted and the fair value of the consideration paid or received is
recognised directly in equity and attributed to the Group.
Inter-company transactions, balances and unrealised gains on transactions between companies
within the Group are eliminated on consolidation. Unrealised losses are also eliminated in the same
manner as unrealised gains, but only to the extent that there is no evidence of impairment.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with
the policies adopted by the Group. Investment in subsidiaries in the separate financial statement of
the parent entity is measured at cost.
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Statement of Significant Accounting Policies (Cont’d)
Acquisition-related Costs are expensed as Incurred
If the business combination is achieved in stages, fair value of the acquirer’s previously held equity
interest in the acquiree is re-measured to fair value at the acquisition date through profit or loss.
3.7.2 Disposal of Subsidiaries
On loss of control, the Group derecognises the assets and liabilities of the subsidiary, any
controlling interests and the other components of equity related to the subsidiary. Any surplus or
deficit arising from the loss of control is recognised in income statement. If the Group retains any
interest in the previous subsidiary, then such interest is measured at fair value at the date that
control is lost. Subsequently, that retained interest is accounted for as an equity-accounted investee
or as an available-for-sale financial asset depending on the level of influence retained.
3.8 Investment Property
Investment property comprises investment in land or buildings held primarily to earn rentals or
capital appreciation or both. Investment property is initially recognized at cost including transaction
costs. The carrying amount includes the cost of replacing part of an existing investment property at
the time that cost is incurred if the recognition criteria are met; and
excludes cost of day to day servicing of an investment property. An investment property is
subsequently measured at fair value with any change therein recognised in profit or loss. Fair values
are determined individually, on a basis appropriate to the purpose for which the property is
intended and with regard to recent market transactions for similar properties in the same location.
3.8.1 Recognition and Measurement
Fair values are reviewed annually by independent valuer, holding a recognized and relevant
professional qualification and with relevant experience in the location and category of investment
property being valued. Any gain and loss arising from a change in the fair value is recognized in the
income statement.
Subsequent expenditure on investment property is capitalized only if future economic benefit will
flow to the Company; otherwise they are expensed as incurred.
Investment properties are disclosed separate from the property and equipment used for the
purposes of the business. The Company separately accounts for a dual purpose property as
investment property if it occupies only an insignificant portion. Otherwise, the portion occupied by
the Company is treated as property plant and equipment. However, the Company considers an
occupation of 30% as significant.
3.8.2 Transfer
If an item of property and equipment becomes an investment property its use has changed, any
difference arising between the carrying amount and the fair value of this item at the date of transfer
is recognized in other comprehensive income as a revaluation of property, plant and equipment.
However, if a fair value gain reverses a previous impairment loss, the gain is recognized in the
Statement of Comprehensive Income. Upon the disposal of such investment property, any surplus
previously recorded in equity is transferred to retained earnings; the transfer is not made through
the statement of comprehensive income.
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Statement of Significant Accounting Policies (Cont’d)
3.8.3 De-recognition
Investment properties are derecognized either when they have been disposed of, or when the
investment property is permanently withdrawn from use and no future economic benefit is expected
from its disposal. Any gains or losses on the retirement or disposal of an investment property is
recognized in the statement of comprehensive income in the year of retirement or disposal.
3.9 Statutory Deposits Statutory deposits are cash balances held with the Central Bank of Nigeria and are only available to
the Company upon liquidation of the Company. They have been separately disclosed due to their
nature and liquidity. They represent 10% of the paid up capital of Company as stipulated by Section
10 (3) of the Insurance Act of 2003. Statutory deposits are measured at cost.
3.10 Intangible assets (Software)
3.10.1 Recognition and Measurement
Recognition of software acquired is only allowed if it is probable that future economic benefits to
this intangible asset are attributable and will flow to the Company. Software acquired is initially
measured at cost. The cost of acquired software comprises its purchase price, including any import
duties and non-refundable purchase taxes, and any directly attributable expenditure on
preparing the asset for its intended use. After initial recognition, software acquired is carried at its
cost less any accumulated amortisation and any accumulated impairment losses. Maintenance
costs should not be included.
Internally developed software is capitalized when the Company has the intention and demonstrates
the ability to complete the development and use of the software in a manner that will generate
future economic benefits, and can reliably measure the costs to complete the development. The
capitalised costs include all costs directly attributable to the development of the software. Internally
developed software is stated at capitalised cost less accumulated amortisation and impairment.
Subsequent expenditure on software assets is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All other expenditure is
expensed as incurred. Amortisation is recognised in profit or loss on a straight-line basis over the
estimated useful life of the software, from the date that it is available for use. The estimated useful
life of software is four years subject to annual reassessment.
3.11 Property, Plant and Equipment3.11.1 Recognition & Measurement
Property, Plant and Equipment comprise land and buildings and other properties owned by the
Company. Items of property, plant and equipment are carried at cost less accumulated depreciation
and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of
the assets.
3.11.2 Subsequent Costs
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will
flow to the Company and the cost of the item can be measured reliably. All other repairs and
maintenance costs are charged to the profit or loss account during the financial period in which
they are incurred.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 40
Statement of Significant Accounting Policies (Cont’d)
Subsequent costs on replacement parts on an item of property are recognized in the carrying
amount of the asset and the carrying amount of the replaced or renewed component is
derecognized.
3.11.3 Depreciation
Depreciation is calculated on property, plant and equipment on the straight line basis to write down
the cost of each asset to its residual value over its estimated useful life. Depreciation methods,
useful lives and residual values are reassessed at each reporting date. No depreciation is charged
on fixed assets until they are brought into use
Depreciation reduces an asset's carrying value to its residual value at the end of its useful life, and
is allocated on a straight line basis over the estimated useful lives, as follows: Land - over the lease period
Buildings - 2%
Office equipment - 20%
Computer hardware - 20%
Furniture and fittings - 20%
Motor vehicles - 20%
3.12 Insurance Contracts
NEM Insurance issues contracts that transfer insurance risk.
Insurance contracts are those contracts that transfer significant insurance risk. NEM Insurance
defines significant insurance risk as the possibility of having to pay benefits, on the occurrence of
an insured event, that are significantly more than the benefits payable if the insured event did not
occur.
These contracts are accident and casualty and property insurance contracts.
Accident and casualty insurance contracts protect the Company’s customer against the risk of
causing harm to third parties as a result of their legitimate activities. Damages covered include
both contractual and non contractual events. The typical protection offered is designed for
employers who become legally liable to pay compensation to injured employee (employers’
liability) and for individual and business customers who become liable to pay compensation to a
third party for bodily harm or property damage (public holiday).
Property insurance contract mainly compensate the Company’s customer for damage suffered to
their properties or for the value of properties lost. Customers who undertake commercial activities
on their premises could also receive compensation for the loss of earnings caused by the inability
to use the insured properties in their business activities (business interruption cover).
In accordance to IFRS 4, the Company has continued to apply the accounting policies it applied in
accordance with the prechange over from Nigerian GAAP.
3.12.1 Salvages
Some non-life insurance contracts permits the company to sell (usually damaged) property acquired
in the process of settling a claim. The Company may also have the right to pursue third parties for
payment of some or all costs of damages to its client’s property (subrogation right).
Salvage recoveries are used to reduce the claim expenses when the claim is settled.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 41
Statement of Significant Accounting Policies (Cont’d) 3.12.2 Subrogation
Subrogation is the right of an insurer to pursue a third party that caused an insurance loss to the
insured. This is done as a means of recovering the amount of the claim paid to the insured for the
loss. A receivable for subrogation is recognized in other assets when the liability is settled and the
Company has the right to receive future cash flow from the third party.
3.12.3 Insurance Contract Liabilities
These are computed in compliance with the provision of section 20, 21, and 22of the Insurance Act
2003 as follows:
3.12.3.1 Reserves for Outstanding Claims
The reserve for outstanding claims is maintained at the total amount of outstanding claims incurred
and reported plus claims incurred but not reported (“IBNR”) as at the balance sheet date. The IBNR
is based on the liability adequacy test (See 20 b (vii)
3.12.3.2 Reserves for Unexpired Risk
A provision for additional unexpired risk reserve (AURR) is recognized for an underwriting year
where it is envisaged that the estimated cost of claims and expenses would exceed the unearned
premium reserve (UPR)”
3.12.4 Liability Adequacy Test
3.13 Trade Payables
Trade payables are recognised when due and measured on initial recognition at the fair value of the
consideration received less directly attributable transaction costs. Subsequent to initial recognition,
they are measured at amortized cost using the effective interest rate method.
3.13.1 Derecognition of Trade Payables
Trade payables are derecognized when the obligation under the liability is settled, cancelled or
expired.
3.13.2 Other Payables and Accruals
A financial liability is derecognized when the obligation under the liability is discharged or cancelled
or expires. When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the original liability and the recognition of
a new liability, and the difference in the respective carrying amounts is recognised in the income
statement. Gains and losses are recognised in the income statement when the liabilities are
derecognized.
At each end of the reporting period, liability adequacy test are performed by an Actuary to ensure
the adequacy of the contract liability net of related DAC assets. In performing these tests, current
best estimates of future contractual cash flows and claims handling and administration expenses, as
well as invest income from the assets backing such liabilities, are used. Any deficiency is
immediately charged to profit or loss initially by writing off DAC and by subsequently establishing a
provision for losses arising from Liability Adequacy test ''the unexpired risk provision.''
The provision of the Insurance Act 2003 requires an actuarial valuation of life reserves only.
However, However, IFRS 4 requires a liability adequacy test for insurance reserves.
The provision of Section 59 of the Financial Reporting Council Act 2011 gives superiority to the
provision of IFRS and since it results in a more conservative reserving than the provision of the
Insurance Act 2003, it serves the Company's prudential concern well.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 42
Statement of Significant Accounting Policies (Cont’d)
3.14 Employee Benefits
3.14.1 Short-term benefits
Short-term employee benefit obligations include wages, salaries and other benefits which the
Company has a present obligation to pay, as a result of employees’ services provided up to the
balance sheet date. The accrual is calculated on an undiscounted basis, using current salary rates.
A provision is recognised for the amount expected to be paid under short-term cash bonus or profit-
sharing plans if the Company has a present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the obligation can be estimated reliably.
3.14.2 Post-Employment Benefits
The Company operates a defined contributory retirement scheme as stipulated in the Pension
Reform Act 2004. Under the defined contribution scheme, the Company pays minimum
contributions of 10% to a separate entity – Pension Fund Administrators; employees also pay a
minimum of 8% to the same entity. Once the contributions have been paid, the Company retains no
legal or constructive obligation to pay further contributions if the Fund does not hold enough assets
to finance benefits accruing under the retirement benefit plan. The Company’s obligations are
recognized in the profit and loss account.
3.14.3 Gratuity Benefits
Prior to 31 December, 2004, the Company operated a gratuity scheme under which employees were
entitled to one month basic salary, transport and housing allowance for each completed year of
service effective 31 December, 2004 the gratuity scheme was terminated. Under the terms of the
termination, amounts payable to employees who were in the employment of the Company as at the
termination date will be paid when such employees leave the service of the Company based on
benefits determined as at 31 December 2004. The gratuity assets are managed in-house.
3.14.4 Other Long-Term Employee Benefits
The company recognizes obligation for defined benefit plans in respect of its long term service
award as determined by actuarial valuation. The liability recognized is the net total of the present
value of the defined benefit obligations plus any unrecognized actuarial gains (less actuarial losses)
minus any unrecognized past service costs minus fair value of plan assets at the end of the
reporting period.
3.14.5 Termination Benefits
Termination benefits are payable whenever an employee’s employment is terminated before the
normal retirement date or whenever an employee accepts voluntary redundancy in exchange for
these benefits. The Company recognizes termination benefits when it is demonstrably committed
either to terminate the employment of current employees according to a detailed formal plan
without possibility of withdrawal, or to provide termination benefits as a result of an offer made to
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 43
Statement of Significant Accounting Policies (Cont’d)
encourage voluntarily redundancy if it is probable that the offer will be accepted and the number of
acceptances can be estimated. Benefits falling due more than 12 months after balance sheet date
are discounted to present value.
3.15 Taxation
Income tax comprises current income and deferred tax. Income tax expense is recognised in the
income statement except to the extent that it relates to items recognised directly in equity, in which
case it is recognised in equity.
3.15.1 Current Income Tax
Current income Tax assets and liabilities for the current period are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted by the reporting date.
Current income Tax asset and liabilities also include adjustments for tax expected to be payable or
recoverable in respect of previous periods.
Current income tax relating to items recognised directly in equity is recognised in other
comprehensive income and not in income statement. Management periodically evaluates positions
taken in the tax returns with respect to situations in which applicable tax regulations are subject to
interpretation and establishes provisions, where appropriate.
3.15.2 Deferred tax
Deferred taxation, which arises from timing differences in the recognition of items for accounting
and tax purposes, is calculated using the liability method.
Deferred taxation is provided fully on timing differences, which are expected to reverse at the rate of
tax likely to be in force at the time of reversal. A deferred tax asset is recognized to the extent that
it is probable that future taxable profits will be available against which the associated unused tax
losses and deductible temporary differences can be utilized. Deferred tax assets are reduced to the
extent that it is no longer probable that the related tax benefit will be realized.
Deferred tax is not recognised for the following temporary differences: the initial recognition of
assets or liabilities in a transaction that is not a business combination and that affects neither
accounting nor taxable profit, differences relating to investments in subsidiaries to the extent that
they probably will not reverse in the foreseeable future and differences arising from investment
property measured at fair value whose carrying amount will be recovered through use. Deferred
tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realised. Additional income taxes that arise from the
distribution of dividends are recognised at the same time as the liability to pay the related dividend
is recognised.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 44
Statement of Significant Accounting Policies (Cont’d)
3.16 Issued Share Capital
The issued ordinary shares of the Company are classified as equity instruments. Incremental costs
directly attributable to the issue of an equity instrument are deducted from the initial measurement
of the equity instruments.
3.16.1 Dividends on ordinary share capital
Dividends on the Company’s ordinary shares are recognised in equity in the period in which they are
paid or, if earlier, approved by the Company’s shareholders.
3.17 Share Premium
This represents the excess amount paid by the shareholder on the nominal value of its shares. This
amount is distributable to the shareholders at the discretion. The share premium is classified as an
equity instrument in the statement financial position.
3.18 Contingency Reserves
The Company maintains contingency reserves in accordance with the provisions of the Insurance
Act 2003 to cover fluctuations in securities and variations in statistical estimates at the rate equal
to the higher of 3% of total premium or 20% of the total profit after taxation until the reserve
reaches the greater of minimum paid up capital or 50% of net premium for general business.
3.19 Retained earnings
The reserve comprises of undistributed profit/loss from previous years and the current year.
Retained earnings are classified as part of equity in the statement of financial position.
3.20 Available-for-sale Reserve
The available-for-sale reserve comprises the cumulative net change in the fair value of the
Company’s available-for-sale investments. Net fair value movements are recycled to income
statement if an underline available-for-sale investment is either derecognized or impaired.
3.21 Other Reserves- Employee Benefit Actuarial Surplus
Actuarial surplus/ deficit on employee benefit represent changes in benefit obligation due to
changes in actuarial valuation assumptions or actual experience differing from experience. The
gains/ losses for the year, net of applicable deffered tax assets /liability on employee benefit
obligation, are recognized in other comprehensive income.
3.22 Gross Premiums Written
Gross written premiums comprise the premiums on insurance contracts entered into during the
year, irrespective of whether they relate in whole or in part to a later accounting period. These are
shown gross of any taxes or duties levied on premiums.
3.22.1 Gross premium earned
Gross premium earned includes estimates of premium due but not yet received, less unearned
premium.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 45
Statement of Significant Accounting Policies (Cont’d)
3.22.2 Unearned premiums
Unearned premiums are those proportions of premiums written in the year that relate to periods of
risks after the reporting date. It is computed by a recognised professional actuary separately for
each insurance contract or another suitable basis for uneven risk contracts. Provision for unexpired
risk is made for unexpired risks arising where the expected value of claims and expenses
attributable to the unexpired period of policies in force at the reporting date exceeds the unearned
premium in relation to such policies after deduction of any deferred acquisition costs. Specifically,
provision for unexpired risk is based on time apportionment.
3.22.3 Reinsurance Premium
Reinsurance premiums are recognized as outflows in accordance with the tenor of the reinsurance
contract.
3.23 Reinsurance Cost
Reinsurance cost represents outward premium paid to reinsurance companies less the unexpired
portion as at the end of the accounting year.
3.24 Fees and Commission Income
Insurance contract policyholders are charged for policy administration services and other contract
fees. These fees are recognised as revenue over the period in which the related services are
performed.
3.25 Claims Expenses
Claims expenses consist of claims and claims handling expenses paid during the financial year
together with the movement in the provision for outstanding claims. The provision for outstanding
claims represent the amount computed Company’s estimate of the ultimate cost of settling all
claims incurred but unpaid at the balance sheet date whether reported or not. The provision
includes an allowance for claims management and handling expenses.
The provision for outstanding claims for reported claims is estimated based on current information
and the ultimate liability may vary as a result of subsequent information and events and may result
in significant adjustments to the amounts provided. Adjustments to the amounts of claims provision
for prior years are reflected in the income statement in the financial period in which adjustments
are made, and disclosed separately if material.
Reinsurance recoverable is recognized when the Company records the liability for the claims and is
not netted off. Claim expenses are presented separately in the income statement.
3.26 Underwriting expenses
Underwriting expenses are made up of acquisition and maintenance expenses comprising
commission and policy expenses, proportion of staff cost and insurance supervision levy.
Underwriting expenses for insurance contracts are recognized as expense when incurred, with the
exception of acquisition costs which are recognized on a time apportionment basis in respect of
risk.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 46
Statement of Significant Accounting Policies (Cont’d)
3.27 Investment Income
Investment income comprises interest income earned on short-term deposits, rental income and
income earned on trading of securities including all realised and unrealised fair value changes,
interest, dividends and foreign exchange differences. Investment income is accounted for on an
accrual basis.
Interest income is recognised in the income statement as it accrues and is calculated using the
effective interest rate method. Fees and commissions that form part of an integral part of the
effective yield of a financial instrument are recognised as an adjustment to the effective interest rate
of the instrument.
When a receivable is impaired, the Company reduces the carrying amount to its recoverable
amount, being the estimated future cash flow discounted at the original effective interest rate of the
instrument, and continues unwinding the discount as interest income.
3.28.1 Dividend income
Dividend is recognized as earned when the quoted price of the related security is adjusted to reflect
the value of the dividend and is stated net of withholding tax. Scrip dividend is recognized on the
basis of the market value of the shares on the date they are quoted.
3.29 Impairment of Financial Assets The carrying amounts of these assets are reviewed at each reporting date to determine whether
there is any objective evidence of impairment. A financial asset is considered to be impaired if
objective evidence indicates that one or more events that have occurred since the initial recognition
of the asset have had a negative effect on the estimated future cash flows of that asset and can be
reliably estimated. For financial assets measured at amortised cost, the Company first assesses
whether objective evidence of impairment exists individually for financial assets that are individually
significant and individually or collectively for financial assets that are not individually significant.
Individually significant financial assets are tested for impairment on an individual basis. The
remaining financial assets are assessed collectively in groups that share similar credit risk
characteristics. An impairment loss in respect of a financial asset measured at amortised cost is
calculated as the difference between its carrying value and the present value of the estimated future
cash flows discounted at the original effective interest rate.
Available-for-sale financial assets are impaired if there is objective evidence of impairment, resulting
from one or more loss events that occurred after initial recognition but before the balance sheet
date, that have an impact on the future cash flows of the asset.
All impairment losses are recognized through profit or loss. If any loss on the financial asset was
previously recognized directly in equity as a reduction in fair value, the cumulative net loss that had
been recognized in equity is transferred to the income statement and is recognized as part of the
impairment loss. The amount of the loss recognized in the income statement is the difference
between the acquisition cost and the current fair value, less any previously recognized impairment
loss.
Subsequent decreases in the amount relating to an impairment loss, that can be linked objectively
to an event occurring after the impairment loss was recognized in the income statement, is reversed
through the income statement. An impairment loss in respect of an equity instrument classified as
available-for-sale is not reversed through the income statement but accounted for directly in equity.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 47
Statement of Significant Accounting Policies (Cont’d)
Impairment of non-financial assets
The carrying amounts of the Group’s non-financial assets are considered to be impaired when
existence of an indication that the asset’s recoverable amount is less than the carrying amount.
Impairment losses are recognised in profit or loss.
Impairments or losses of non-financial assets, related claims for or payments of compensation from
third parties and any subsequent purchase or construction of replacement assets are separate
economic events and are accounted for separately.
Impairment losses recognised in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed if there
has been a change in the estimates used to determine the recoverable amount. An impairment loss
is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or amortisation, if no impairment loss had
been recognised. Reversals of impairment losses are recognised in profit or loss.
3.30 Administrative expenses
Management expenses are expenses other than claims and underwriting expenses. They include
depreciation expenses and other expenses. They are accounted for on an accrual basis.
3.31 Earnings per share
The Group presents basic earnings per share for its ordinary shares. Basic earnings per share are
calculated by dividing the profit attributable to ordinary shareholders of the Group by the number of
shares outstanding during the year. Adjusted earnings per share is determined by dividing the profit
or loss attributable to ordinary shareholders by the weighted average number of ordinary shares
adjusted for the bonus shares issued.
3.32 Provisions, contingent liabilities and assets
Provisions are liabilities that are uncertain in amount and timing. Provisions are recognized when
the Group has a present legal or constructive obligation as a result of past events and it is more
likely than not that an outflow of resources will be required to settle the obligation and the amount
can be reliably estimated.
Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is
recognized even if the likelihood of an outflow with respect to any one item included in the same
class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be required to settle
the obligation using a pre-tax rate that reflects the current market assessments of the time value of
money and the risks specific to the obligation.
A contingent liability is a possible obligation that arises from past event and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the company. Contingent assets are not recognized but are disclosed in
the financial statement as they arise.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 48
Statement of Significant Accounting Policies (Cont’d) 3.33 Comparatives
Except when a standard or an interpretation permits or requires otherwise, all amounts are reported
or disclosed with comparative information. Where IAS 8 applies, comparative figures have been
adjusted to conform to changes in presentation in the current year.
3.34 Segment reporting
A segment is a distinguishable component of the Group that is engaged in providing products or
services (business segment), or in providing products or services within a particular economic
environment (geographical segment), which is subject to risks and rewards that are different from
those of other segments. The Group’s primary format for segment reporting is based on business
segments. Significant geographical regions have been identified as the secondary basis of reporting.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 49
Consolidated Statement of Financial Position
Group Parent
2014 2013 2014 2013
Notes N'000 N'000 N'000 N'000
Assets Cash and cash equivalent 1 3,446,995 3,865,965 3,425,121 3,836,821
Financial assets 2 3,161,059 2,624,638 2,914,575 2,373,132
Trade receivables 3 209,493 496,007 209,493 347,494
Reinsurance assets 4 717,121 65,496 717,121 65,496
Deferred acquisition cost 5 482,385 513,387 442,473 472,346
Other receivables and prepayments 6 137,232 278,712 89,159 219,552
Investment in subsidiary 7 - - 193,308 175,396
Investment properties 8 485,830 468,974 485,830 468,974
Statutory deposit 9 340,112 349,200 320,000 320,000
Intangible asset 10 5,627 18,851 4,459 15,772
Property, Plant and Equipment 11 2,213,264 1,284,191 2,175,775 1,245,149
Income tax credit 16.1 - 80,456 - 87,745
Total assets
11,199,118 10,045,877 10,977,314 9,627,877
Liabilities Insurance contract liabilities 12 4,660,059 4,787,052 4,444,126 4,419,597
Trade payables 13 9,733 48,510 9,733 48,510
Other payables 14 175,213 167,874 137,406 127,699
Book overdraft 1.2 4,364 9,848 4,364 9,848
Retirement benefit obligations 15 187,848 170,838 187,848 170,838
Income tax liability 16.1 15,212 - 12,212 -
Deferred tax liability 16.3 280,913 166,062 280,913 166,062
5,333,341 5,350,184 5,076,601 4,942,554
Equity Issued share capital 17.1 2,640,251 2,640,251 2,640,251 2,640,251
Share premium 18 272,551 272,551 272,551 272,551
Contingency reserve 19 1,995,456 1,696,986 1,966,395 1,664,960
Retained earnings 20 560,109 30,366 624,106 52,022
Available for sale reserve 21 329,232 9,978 329,232 9,978
Other Reserves-employee benefit
actuarial surplus 22 68,178 45,562 68,178 45,562
Total Equity
5,865,777 4,695,693 5,900,713 4,685,323
Total equity and liabilities
11,199,118 10,045,877 10,977,314 9,627,877
These accounts were approved by Board on………………………….. and signed on its behalf by:
________________________ _________________________ _______________________
Chief Adewale Teluwo (Chairman) Mr. Tope Smart (GMD/CEO) Miss. Stella Omoraro (CFO)
FRC/2013/IODN/00000003151
FRC/2013/CIIN/00000001331 FRC/2013/ICAN/00000001238
The accounting policies on pages 22 to 48 and the explanatory notes on pages 56 to 99 form an integral part of
these financial statements.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 50
Consolidated Statement of Comprehensive Income
Group Parent
2014 2013 2014 2013
Notes N'000 N'000 N'000 N'000
Gross premiums written 23 9,836,596 8,933,345 9,448,284 8,261,325
(Increase) in unearned income
(63,046) (1,142,383) (63,888) (1,010,503)
Gross premium income 23 9,773,550 7,790,962 9,384,396 7,250,821
Reinsurance expenses 24 (1,228,016) (366,222) (1,185,663) (324,527)
Net premium income 23 8,545,534 7,424,740 8,198,733 6,926,294
Fee and commission income 25 65,398 14,873 52,877 1,035
Net underwriting income
8,610,932 7,439,613 8,251,610 6,927,329
Claims expenses 26 (2,655,818) (3,070,271) (2,568,166) (2,965,052)
Underwriting expenses 27 (2,573,848) (2,538,188) (2,526,400) (2,488,051)
Underwriting profit
3,381,266 1,831,154 3,157,044 1,474,226
Investment Income 28 607,837 444,972 560,374 396,959
Fair value (loss)/gain 29 (434,769) 370,276 (434,769) 370,276
Other income 30 31,124 18,973 27,327 18,889
Revaluation gain on investment
properties 8 16,856 9,161 16,856 9,161
Impairments 31 (68,852) (355,627) - (225,302)
Other operating and admin. Expenses 32 (1,766,690) (1,774,500) (1,586,748) (1,537,320)
Profit before tax
1,766,772 544,410 1,740,084 506,889
Income taxes 16.2 (241,451) (149,350) (232,905) (137,981)
Profit after tax
1,525,321 395,060 1,507,179 368,908
Other Comprehensive Income
Fair value loss on available for sale 21 319,254 (43,433) 319,254 (43,433)
Actuarial profit on defined benefit plan 22 22,616 43,421 22,616 43,421
1,867,191 395,048 1,849,049 368,896
Basic earnings per share (kobo) 33 29 7 29 7
The accounting policies on pages 22 to 48 and the explanatory notes on pages 56 to 99 form an integral part of
these financial statements.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 51
Consolidated Statement of Change in Equity – Group
GROUP
Issued Share
Capital Share
Premium Retained Earnings
AFS Reserve
Other Reserves
Contingency Reserves Total
N'000 N'000 N'000 N'000 N'000 N'000 N'000
At January 1, 2014 2,640,251 272,551 30,366 9,978 45,562 1,696,986 4,695,694
Profit for the year -
1,525,321
1,525,321
Transfer to capital reserves
-
Transfer to contingency
reserves -
(312,088)
312,088 -
Actuarial gain on defined
benefit plan -
-
Exchange Difference
(49,830)
(13,618) (63,448)
Other comprehensive income
319,254 22,616
341,870
Distribution to Owners
-
Dividend paid during the year - - (633,660)
(633,660)
As at December 31, 2014 2,640,251 272,551 560,109 329,232 68,178 1,995,456 5,865,777
Exchange difference arose on conversion of balance on retained earnings of NEM Insurance (Ghana) Limited at N 56.92
to 1 Ghana Cedis.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 52
Statement of Change in Equity - Parent
Parent
Issued Share
Capital Share
Premium Retained Earnings
AFS Reserve
Other Reserves
Contingency Reserves Total
N'000 N'000 N'000 N'000 N'000 N'000 N'000
At January 1, 2014 2,640,251 272,551 52,022 9,978 45,562 1,664,960 4,685,324
Profit for the year -
1,507,179
1,507,179
Transfer to contingency
reserves -
(301,435)
301,435 -
Other Comprehensive Income
319,254
319,254
Actuarial gain on defined
benefit plan -
22,616
22,616
Distribution to Owners
-
Dividend paid during the year - - (633,660)
(633,660)
As at December 31, 2014 2,640,251 272,551 624,106 329,232 68,178 1,966,395 5,900,713
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 53
Consolidated Statement of Cash Flows
Group Parent
Dec. 2014 Dec. 2013 Dec. 2014 Dec. 2013
Note N'000 N'000 N'000 N'000
Operating profit before taxation
1,766,772 544,410 1,740,084 506,889
Adjustment for items not involving movement of cash:
Depreciation of Property, Plant & Equipment 11.1 95,796 134,862 88,749 119,949
Amortization of intangible asset 10 11,597 12,340 11,313 11,313
Fixed Asset adjustment
10,597 Loss / (Profit) on disposal of assets
5,246 (2,384) 5,494 (2,384)
Fair Value Gain on investment property 8 (16,856) (9,161) (16,856) (9,161)
Exchange Gain 30 (28,063) (11,503) (24,577) (11,503)
Service & Interest cost on retirement benefit 15 54,499 59,633 54,499 59,633
Interest & Dividend Income 28 (607,837) (444,972) (560,374) (396,959)
Cashflow changes before changes in working capital
1,291,751 283,224 1,298,333 277,777
CHANGES IN WORKING CAPITAL Decrease in Trade receivables
286,514 512,890 138,001 539,514
(Increase) / Decrease in Reinsurance assets
(651,625) 27,015 (651,625) 27,015
Decrease/(Increase) in Deferred acquisition cost
31,002 (187,442) 29,873 (174,196)
Decrease in Other receivables and prepayments
141,480 (31,952) 130,394 4,599
(Decrease)/Increase in Insurance contract liabilities
(126,993) 1,759,495 24,529 1,600,202
(Decrease)/Increase in Trade payables
(38,777) 58,342 (38,777) 46,978
Increase/(Decrease) in Other payables
7,339 (34,052) 9,707 (34,052)
Net cash inflow from operating activities
940,691 2,387,521 940,433 2,287,838
Exchange gain 30 28,063 11,503 24,577 11,503
Foreign exchange difference
(63,448) - - -
Gratuity benefit to employee 15 (14,874) (5,579) (14,874) (5,579)
Tax paid 16.1 (30,932) (192,363) (18,097) (180,499)
859,500 2,201,082 932,040 2,113,263
CASH FLOW FROM INVESTING ACTIVITIES
Proceed of disposal of PPE
4,021 2,384 3,773 2,384
Investment in subsidiary
- - (17,912) -
Interest & Dividend Income 28 607,837 444,972 560,374 396,959
Statutory deposits
9,088 (6,321) - -
Bond maturity in the year 2.4.1 5,000 - 5,000 -
Purchase of bond 2.4.1 (104,110) (15,000) (104,110) (15,000)
Purchase of investment 2.1 (118,054) (1,302,107) (123,080) (1,050,599)
Purchase of intangible asset 10 - (4,106) - -
Purchase of plant and equipment 11.1 (1,043,108) (590,465) (1,028,643) (567,890)
Net cash outflow for investment activities
(639,326) (1,470,643) (704,598) (1,234,146)
CASH FLOW FROM FINANCIAL ACTIVITIES Dividends paid to equity holders of the parent
(633,660) - (633,660) -
Net cash outflow for financing activities
(633,660) - (633,660) -
Total cash outflow
(413,486) 730,438 (406,216) 879,117
Cash and cash equivalent at January 1
3,856,117 3,125,679 3,826,973 2,947,856
Cash and cash equivalent at December 31 1.3 3,442,631 3,856,117 3,420,757 3,826,973
Represented by: Cash and cash equivalent at December 31
3,442,631 3,856,117 3,420,757 3,826,973
The accounting policies on pages 22 to 48 and the explanatory notes on pages 56 to 103 form an integral part of these
financial statements.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 54
Segment Information
For Management purposes, the Group is organized into business units based on location and has
two reportable operating segments as follows:
NEM Insurance Plc in Nigeria comprises general insurance to corporate entities and
individuals. Non-life insurance products offered include motor, household, commercial
and business interruption insurance. These products offer protection of policyholder’s
assets and indemnification of other parties that have suffered damage as a result of
policyholder’s accident.
NEM Insurance Ltd in Ghana is a Subsidiary wholly owned (100%) by NEM Insurance
Plc Nigeria and its business comprises only general insurance to corporate entities
and individuals. Non-life insurance products offered include motor, household,
commercial and business interruption insurance. These products offer protection of
policyholder’s assets and indemnification of other parties that have suffered damage
as a result of policyholder’s accident.
Segment performance is evaluated based on profit or loss which, in certain respects, is measured
differently from profit or loss in the financial statements. The Company’s financing and income
taxes are managed on a group basis and are not allocated to individual operation segments.
No inter-segment transaction occurred in 2014 and 2013. If any transaction were to occur,
transfer prices between operating segment are set on an arm’s length basis in a manner similar
to transaction with third parties. Segment income, expenses and result will include those
transfers between business segment.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 55
Segment Statement of Comprehensive Income at 31st December, 2014
Nem Insurance (Nigeria) Plc
Nem Insurance (Ghana) Ltd
Group 31 Dec. 2014
N'000 N'000 N'000
Gross premiums written 9,448,284 388,311 9,836,596
Decrease/(Increase) in unearned income (63,888) 842 (63,046)
Gross premium income 9,384,396 389,153 9,773,550
Reinsurance expenses (1,185,663) (42,352) (1,228,016)
Net premiums income 8,198,733 346,801 8,545,534
Fee and commission income 52,877 12,521 65,398
Net underwriting income 8,251,610 359,322 8,610,932
Claims expenses (2,568,166) (87,652) (2,655,818)
Underwriting expenses (2,526,400) (47,448) (2,573,848)
Underwriting profit 3,157,044 224,222 3,381,266
Investment Income 560,374 47,463 607,837
Fair value (loss)/gain (434,769) - (434,769)
Other income 27,327 3,797 31,124
Revaluation loss on investment properties 16,856 - 16,856
Impairments - (68,852) (68,852)
Other operating and admin. Expenses (1,586,748) (179,942) (1,766,690)
Profit before tax 1,740,084 26,688 1,766,772
Income taxes (232,905) (8,546) (241,451)
Profit after tax 1,507,179 18,142 1,525,321
Other Comprehensive Income -
Fair value loss on Available for sale 319,254 - 319,254
Actuarial profit on defined benefit plan 22,616
22,616
Total Comprehensive income for the year, net of tax 1,849,049 18,142 1,867,191
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 56
Notes to the Financial Statements 1 Cash and Cash Equivalent Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000
Cash and bank balances 473,613 920,514 451,739 891,370
Short - term deposits (Note 1.1) 2,973,382 2,945,451 2,973,382 2,945,451
Total cash and cash equivalents 3,446,995 3,865,965 3,425,121 3,836,821
Cash and Cash Equivalent
For Shareholders 618,877 200,000 600,000 443,672
For Policy Holders 2,640,270 3,495,127 2,637,273 3,222,311
Staff Benefit( Gratuity) 187,848 170,838 187,848 170,838
Total cash and cash equivalents 3,446,995 3,865,965 3,425,121 3,836,821
Short-term deposits are made for varying periods averaging between 1 - 90 days depending on the immediate
cash requirements of the Group. All deposits are subject to an average interest rate of 9%. The carrying
amounts disclosed above reasonably approximate fair value at the reporting date.
1.1 Short term deposit 2014 2013 2014 2013
N'000 N'000 N'000 N'000
Placements with Local Bank 2,973,382 2,945,451 2,973,382 2,945,451
1.2 Book Overdraft 2014 2013 2014 2013
N'000 N'000 N'000 N'000
Book Overdraft 4,364 9,848 4,364 9,848
This is not the same as Bank Overdraft as the Company has not borrowed any fund from any lending
institution. The sum represents debit balance as at 31st December 2014. The reason being that most of the
cheques raised in those Cashbooks have not been presented to the banks.
1.3 Cash & Cash Equivalent for Cash flow
Cash & Cash Equivalent 3,446,995 3,865,965 3,425,121 3,836,821
Book Overdraft (4,364) (9,848) (4,364) (9,848)
Cash & Cash Equivalent for Cash flow 3,442,631 3,856,117 3,420,757 3,826,973
2 Financial Assets
The financial assets are as summarised below: 2014 2013 2014 2013
N'000 N'000 N'000 N'000
Financial assets at fair value through profit or loss
(Note 2.2) 665,837 1,055,737 665,837 1,055,737
Available for sale (Note 2.3) 2,334,283 1,507,072 2,087,799 1,255,566
Held to maturity financial assets(Note 2.4) 160,939 61,829 160,939 61,829
Total financial assets 3,161,059 2,624,638 2,914,575 2,373,131
Current 2,334,284 1,507,073 2,087,799 1,255,566
Non- current 826,775 1,117,566 826,776 1,117,566
3,161,059 2,624,638 2,914,575 2,373,132
2.1 Movement in financial asset
Opening balance 2,624,638 1,350,967 2,373,131 1,350,967
Purchase of investment 118,054 1,302,107 123,080 1,050,599
Fair value gain/(loss) on available for sale 319,254 (43,433) 319,254 (43,433)
Change in held to maturity 99,110 15,000 99,110 15,000
Closing balance 3,161,059 2,624,638 2,914,575 2,373,131
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 57
Notes to the Financial Statements (Cont’d) 2.2 Fair value through profit and loss 2014 2013 2014 2013
N'000 N'000 N'000 N'000
Opening balance 1,055,737 685,463 1,055,737 685,463
Fair value loss / (gain) (434,769) 370,274 (434,769) 370,274
Addition during the year 44,869 - 44,869
Quoted equity securities at fair value 665,838 1,055,737 665,838 1,055,737
Quoted equities are shares held in publicly quoted Companies and these shares are valued at their market
prices.
2.3 Available for Sale
Short term Investment over 90 days 860,485 553,544 614,001 302,038
Unquoted investments 1,473,798 953,528 1,473,798 953,528
2,334,283 1,507,072 2,087,799 1,255,566
2.3.1 Movement in Available for Sale
Opening balance 1,507,072 618,677 1,255,566 618,677
Movement in the year 507,956 931,829 512,979 680,322
Fair value gain/(loss) on available for sale 319,254 (43,433) 319,254 (43,433)
Closing balance 2,334,283 1,507,072 2,087,799 1,255,566
2.4 Held to maturity financial assets
Lagos State Bond 4,000 9,000 4,000 9,000
Ondo State Bond 10,000 10,000 10,000 10,000
Osun State Bond 15,000 15,000 15,000 15,000
GT Bank Euro Bond 27,829 27,829 27,829 27,829
Niger State Bond 54,110 - 54,110 -
Fidson Bond 50,000 - 50,000 -
160,939 61,829 160,939 61,829
Fair value through profit or loss
Management valued the Company's quoted investment at market value which is a reasonable measurement of fair
value since the prices of the shares are quoted in an active market. This prompted the classification of quoted
investment as Financial assets at FVTPL (Fair Value Through Profit or Loss).
Available for sale
The fair value of unquoted equities was determined on market price as at year end. The over the counter price
(OTC) that was used in the last transaction before the reporting date was used as a reflection of fair value.
Fixed deposits with tenor of more than 90 days are classified as available for sale. This could easily be turned to
liquidity if there is urgent need for cash usage. It is valued at cost because there is no active market or other
similar market that could be used for its valuation.
2.4.1 The details of Held to maturity investment are as follow:
2014 2013 2014 2013
N'000 N'000 N'000 N'000
As at January 1 61,829 46,829 61,829 46,829
Purchased during the year 104,110 15,000 104,110 15,000
Matured (5,000)
(5,000)
As at December 31 160,939 61,829 160,939 61,829
The held to maturity investment relates to the fixed rate bond of the Lagos State Government. The first one has a
tenure spanning 2008 to 2011, it was purchased in 2009. The second one has a tenure spanning 2010 to 2017. It
was purchased in 2010 whose coupon rates are 13% and 10% respectively payable half yearly.
Other investment relates to the fixed rate bond of GT Bank Euro, Ondo State Government and Osun State
Government with coupon rate of 7.5%, 15.5% and 14.75% with tenure period of 2012 to 2016, 2012 to 2017 and
2013 to 2020 respectively.
During the year, Lagos State Bond of N 5m matured, Fidson Bond and Niger State Bond were purchased with
coupon rate of 15.5% and 14% payable half yearly.
The bonds were issued at par with no discount and they are redeemable at par on their respective due dates.
Based on all these facts, management is of the opinion that the fair values of these bonds are equal to their face
values.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 58
Notes to the Financial Statements (Cont’d)
Group
Parent 3 Trade Receivables 2014 2013
2014 2013
N'000 N'000
N'000 N'000
Opening Balance 4,612,097 5,025,075
4,333,260 5,835,813
Prior year collection (347,494) -
(347,494) -
Addition 209,493 (412,978)
209,493 (1,502,553)
4,474,096 4,612,097
4,195,259 4,333,260
Impairment for trade receivables (4,264,603) (4,116,091)
(3,985,766) (3,985,766)
209,493 496,007
209,493 347,494
3.1 Movement in Impairment
Opening Balance 4,116,091 5,007,080
3,985,766 4,948,804
Reversed 148,512 (890,989)
- (963,038)
4,264,603 4,116,091
3,985,766 3,985,766
3.2 Analysis of Trade Receivables
Insurance Companies - -
- -
Insurance Agents - -
- -
Direct Business - -
- -
Insurance Brokers 209,493 496,007
209,493 347,494
209,493 496,007
209,493 347,494
3.3 The age analysis of trade receivable
Under 90 days 209,493 496,007
209,493 347,494
91-180 days - -
- -
Above 180 days - -
- -
209,493 496,007
209,493 347,494
The Group's policy in line with the provisions of “No Premium, No Cover” on impairment of trade receivables
recognize trade receivables from Brokers only. Such receivables should not exceed a period of 30 days.
4 Reinsurance Asset 2014 2013
2014 2013
N'000 N'000
N'000 N'000
Reinsurance share of outstanding claims
reported 371,186 -
371,186 -
Reinsurance claim recoverable - 65,496
- 65,496
Reinsurance share of Incurred but not reported 59,377 -
59,377 -
Prepaid Reinsurer 286,557 -
286,557 -
Total Reinsurance Asset 717,121 65,496
717,121 65,496
4.1 Movement in reinsurance Asset
Opening Balance 65,496 129,501
65,496 92,512
For the year reinsurance assets 651,625 161,297
651,625 198,286
Transfer to Impairment - (225,302)
(225,302)
717,121 65,496
717,121 65,496
4.2 Analysis of Reinsurance Assets
Prepayments 286,557 -
286,557 -
Recoverables 430,563 65,496
430,563 65,496
717,121 65,496
717,121 65,496
5 Deferred acquisition cost
At January 1 513,386 325,944
472,346 298,151
Acquisition cost during the year 1,511,232 1,627,934
1,464,911 1,564,549
Apportionment during the year (1,542,233) (1,440,492)
(1,494,784) (1,390,354)
482,385 513,386
442,473 472,346
Deferred acquisition cost represents commissions paid on unearned premium relating to the unexpired risk.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 59
Notes to the Financial Statements (Cont’d)
Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000 6 Other Receivables and Prepayments
Prepayments 18,789 31,844 12,873 17,150
Accrued Income 38,442 34,776 38,442 34,776
Other Debtors 5,887 755 5,887 755
Other receivables 74,114 211,337 31,957 166,870
137,232 278,712 89,159 219,552
6.1 Other Receivables
Mortgage Loan 18,573 158,934 18,573 158,934
Staff Loan Parent Company 13,384 7,936 13,384 7,936
Staff Loan Subsidiary 42,157 44,467 - -
74,114 211,337 31,957 166,870
7 INVESTMENT IN SUBSIDIARY 2014 2013 2014 2013
N'000 N'000 N'000 N'000
Investment in a subsidiary - - 193,308 175,396
The Company's investment in a subsidiary in Ghana (NEM Insurance (Ghana) Limited) is wholly
owned (100%) by NEM Insurance Plc, Nigeria. The investment was fully funded by the Company.
Therefore no goodwill could arise from this transaction since it is not an IFRS 3 transaction i.e. not
a business combination. During the year, additional approx. N 17.9m capital was invested in the
subsidiary NEM Insurance (Ghana) Ltd.
8 INVESTMENT PROPERTIES
2014 2013 2014 2013
N'000 N'000 N'000 N'000
Opening Balance 468,974 459,813 468,974 459,813
Revaluation surplus/deficit 16,856 9,161 16,856 9,161
As at December 31. 485,830 468,974 485,830 468,974
Investment properties are held at fair value, which has been determined based on valuations
performed by independent valuation experts, Diya Fatimileyin & Co. - Our Estate Surveyors and
Valuers owned by Messrs Diya Maurise Kolawole (FRC/2013/NIESV/0000002773) and Messrs
Fatimileyin Adegboyega (FRC/2013/NIESV/0000000754)
The valuers are the industry specialists in valuing these types of investment properties. The fair
value is supported by market evidence and represents the amount at which the assets could be
exchanged between knowledgeable, willing buyers and knowledgeable, willing seller in an arm's
length transaction at the date of valuation, in accordance with standards issued by International
Valuation Standards Committee. Valuations are performed on an annual basis and the fair value
gains and losses are recorded within the statement of comprehensive income.
This is an investment in land and building held primarily for generating income or capital
appreciation and occupied substantially for use in the operations of the Company. This is carried
in the statement of financial position at their market value.
9 Statutory deposit
This represents the amount deposited with the Central Bank of Nigeria as at 31 December, 2014:
N 320,000,000 (2013; N320million) which was in accordance with section 9(1) and section 10 (3)
of Insurance Act 2003 Statutory deposits are measured at cost.
Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000
Statutory deposit 340,112 349,200 320,000 320,000
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 60
Notes to the Financial Statements (Cont’d)
10 INTANGIBLE ASSET
Group
Parent
2014
2013
2014
2013
Cost
N'000
N'000
N'000
N'000
At January 1,
49,359
45,253
45,253
45,253
Addition
-
4,106
-
-
Adjustment
(1,769)
-
-
-
Reclassification from non-current asset
-
-
-
-
At December 31
47,590
49,359
45,253
45,253
Amortization
At January 1,
30,507
18,168
29,481
18,168
Adjustment
(142)
Written off
-
-
-
-
Amortization during the year
11,597
12,340
11,313
11,313
At December 31
41,963
30,507
40,794
29,481
Net Book Value
5,627
18,851
4,459
15,772
The only intangible asset of the Company was a software named "perfect policy' used in posting the business
transactions of the Company and this was acquired. It was formerly treated as Office Computer Equipment. In
accordance with IAS 38, it is now being recognized under intangible asset.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 61
Notes to the Financial Statements (Cont’d)
11.1 PROPERTY, PLANT AND EQUIPMENTS - GROUP
Cost/Valuation
Building under
Construction
Office Partitioning
Machinery & equipt
Motor Vehicles
Furniture &
fittings
Computer Equipt
Total
N'000
N'000
N'000
N'000
N'000
N'000
N'000
As at Jan. 1 2014 1,028,446
37,107
28,106
334,777
45,610
146,961
1,621,006
Addition 911,854
5,017
9,333
101,882
7,564
7,457
1,043,108
Adjustments
(8,935)
(5,158)
8,969
(9,619)
(8,007)
(22,750)
Written off -
(25,310)
-
-
-
-
(25,310)
Disposal -
-
(2,046)
(64,251)
(4,660)
(113,191)
(184,148)
At Dec. 31, 2014 1,940,300
7,879
30,236
381,377
38,895
33,220
2,431,906
Depreciation
As at Jan. 1 2014 -
31,162
12,854
142,027
23,364
127,408
336,816
Charged for the
year -
1,894
6,913
74,848
5,777
6,364
95,796
Adjustments
(3,568)
(2,036)
(4,369)
(2,463)
(1,343)
(13,779)
Written off -
(25,310)
-
-
-
-
(25,310)
Disposal -
-
(2,046)
(54,984)
(4,659)
(113,191)
(174,880)
At Dec. 31, 2014 -
4,178
15,685
157,522
22,020
19,238
218,642
NET BOOK VALUE
At December 31, 2014 1,940,300
3,701
14,551
223,856
16,876
13,982
2,213,264
At December 31,
2013 1,028,446
5,945
15,252
192,749
22,245
19,553
1,284,191
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 62
Notes to the Financial Statements (Cont’d)
11.2 PROPERTY, PLANT AND EQUIPMENTS – PARENT
Cost/Valuation
Building under
Construction
Office Partitioning
Machinery &
equipment
Motor Vehicles
Furniture &
fittings
Computer Equipment
Total
N'000
N'000
N'000
N'000
N'000
N'000
N'000
As at Jan. 1 2014 1,028,445
25,310
23,353
289,574
33,115
136,023
1,535,820
Addition 911,854
550
6,754
101,882
2,754
4,849
1,028,643
Written off
(25,310)
(25,310)
Disposal -
-
(2,046)
(59,169)
(4,659)
(113,191)
(179,065)
At Dec. 31, 2014 1,940,299
550
28,061
332,287
31,210
27,681
2,360,088
Depreciation
As at Jan. 1 2014 -
25,310
9,786
115,901
18,721
120,955
290,672
Charge for the
year
110
5,894
72,664
4,545
5,536
88,749
Written off
(25,310)
(25,310)
Disposal
(2,046)
(49,902)
(4,659)
(113,191)
(169,798)
At Dec. 31, 2014 -
110
13,634
138,663
18,606
13,300
184,313
NET BOOK VALUE
At December 31, 2014 1,940,299
440
14,427
193,624
12,604
14,381
2,175,775
At December
31, 2013 1,028,445
-
13,567
173,674
14,394
15,068
1,245,149
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 63
Notes to the Financial Statements (Cont’d)
12 Insurance Contract Liabilities Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000
As at January 1
Reserve for unexpired Premium 3,060,236 1,917,853 2,740,749 1,730,246
Reserve for outstanding claims 1,726,816 1,109,703 1,678,848 1,089,148
Additions/(Reduction) during the year
Reserve for unexpired Premium (74,609) 1,142,383 63,888 1,010,503
Reserve for outstanding claims (52,385) 617,113 (39,361) 589,700
As at December 31. 4,660,059 4,787,052 4,444,126 4,419,597
Reserve for unexpired Premium (12.2) 2,985,627 3,060,236 2,804,638 2,740,749
Reserve for outstanding claims (12.1) 1,674,432 1,726,816 1,639,488 1,678,848
4,660,059 4,787,052 4,444,126 4,419,597
12.1 Outstanding Claims
Provision for reported claims by
policyholders 1,095,110 1,360,639 1,063,343 1,317,032
Provision for claims incurred but not reported
(IBNR) 579,322 366,177 576,145 361,816
1,674,432 1,726,816 1,639,488 1,678,848
12.2 Unexpired Premium
Opening Balance 3,060,236 1,917,853 2,740,749 1,730,246
Adjustment due to Exchange difference (137,654) - - -
Gross premium written 9,836,596 8,933,345 9,448,284 8,261,325
Gross premium earned (9,773,551) (7,790,962) (9,384,396) (7,250,822)
2,985,627 3,060,236 2,804,638 2,740,749
The above balances represent the amounts payable on direct insurance business and assumed reinsurance
business. The carrying amounts disclosed above approximate fair value at the reporting date. All amounts are
payable within one year.
12.3 Allocation of Assets to Policy Holders Fund Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000
Cash and cash equivalents 2,640,270 3,495,127 2,637,273 3,222,311
Financial assets 2,019,789 1,291,925 1,806,853 1,197,286
4,660,059 4,787,052 4,444,126 4,419,597
12.4 Cash and Cash equivalents
Policy holders Fund 2,640,270 3,495,127 2,637,273 3,222,311
Shareholders Fund 618,877 200,000 600,000 443,672
Staff Gratuity 187,848 170,838 187,848 170,838
3,446,995 3,865,965 3,425,121 3,836,821
12.5 Financial Assets
Policy holders Fund 2,019,789 1,291,925 1,806,853 1,197,286
Shareholders Fund 1,141,270 1,332,713 1,107,722 1,175,846
3,161,059 2,624,638 2,914,575 2,373,132
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 64
Notes to the Financial Statements (Cont’d)
12.6 Investment Property
Policy holders Fund - - - -
Shareholders Fund 485,830 468,974 485,830 468,974
459,830 468,974 485,830 468,974
12.7 Plant, Equipment and Others
Policy holders Fund - - - -
Shareholders Fund 2,213,264 1,284,191 2,175,775 1,245,149
2,213,264 1,284,191 2,175,775 1,245,149
12.8 Work in Progress
Policy holders Fund - - - -
Shareholders Fund 1,940,299 1,028,446 1,940,299 1,028,446
1,940,299 1,028,446 1,940,299 1,028,446
13 Trade Payables Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000
Trade Creditor 9,733 48,510 9,733 48,510
The carrying amount disclosed above reasonably approximates fair value at the reporting date. All amounts
are payable within one year.
14 Other Payables Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000
Accruals 83,042 107,671 75,848 67,496
Other creditors 92,171 60,203 61,558 60,203
175,213 167,874 137,406 127,699
The carrying amount disclosed above reasonably approximates fair value at the reporting date. All amounts
are payable within one year.
15 Retirement Benefit Obligations
The Company has a defined benefit gratuity scheme covering its entire employee who has spent an average
minimum number of five years. The scheme is funded; therefore, no contribution is made to any fund.
The amounts recognized in the income statement (other operating and administrative expenses) are as
follows:
Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000
Current service cost 32,042 39,070 32,042 39,070
Interest cost on benefit obligation 22,457 20,563 22,457 20,563
54,499 59,633 54,499 59,633
The amounts recognized in the statement of financial position at the reporting date are as follows:
Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000
Present value of the defined benefit obligation 187,848 170,838 187,848 170,838
Total defined benefit obligation 187,848 170,838 187,848 170,838
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 65
Notes to the Financial Statements (Cont’d)
The movement in the defined benefit obligation is, as follows:
Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000
At 1 January 170,838 160,205 170,838 160,205
Current service cost 32,042 39,070 32,042 39,070
Interest cost 22,457 20,563 22,457 20,563
Benefits paid (14,874) (5,579) (14,874) (5,579)
Actuarial gains - Due to change in assumption (25,775) 8,510 (25,775) 8,510
Actuarial losses - Due to experience adjustment 3,160 (51,931) 3,160 (51,931)
At 31 December 2014 187,848 170,838 187,848 170,838
Actuarial Assumptions
The principal actuarial assumptions used in determining the pension benefit obligation for the Company's
plan are as follows:
Financial Assumptions (expressed as weighted
averages)
Group Parent
Long Term Average 2014 2013 2014 2013
Average Pay Increase (p.a) 13.0% 13.0% 13.0% 13.0%
Average Rate Inflation (p.a) 9.0% 9.0% 9.0% 9.0%
Discount Rate (p.a) 15.0% 13.5% 15.0% 13.5%
Mortality rate
Less than or equal to 30 3 3 3 3
31-39 2 2 2 2
40-44 2 2 2 2
45-50 0 0 0 0
The discount rate is the assumption that has the largest impact on the value of the obligation. A 1%
increase in this rate would reduce the present value of the defined benefit obligation.
The mortality base table used for the schemes is A49/52 Ultimate Tables, published jointly by the
Institute and Faculty Actuaries in the United Kingdom.
Amounts for the current and previous period are as follows:
Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000
Defined benefit obligation 187,848 170,838 187,848 170,838
Experience adjustments on plan liabilities 3,160 (51,931) 3,160 (51,931)
191,008 118,907 191,008 118,907
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 66
Notes to the Financial Statements (Cont’d)
16 Taxation Group Parent
2014 2013 2014 2013
16.1 Per Financial Position N'000 N'000 N'000 N'000
At January 1, (80,456) 21,949 (87,745) 14,164
Income tax for the year 126,600 89,959 118,054 78,590
Paid during the year (30,932) (192,364) (18,097) (180,499)
At December 31, 15,212 (80,456) 12,212 (87,745)
2014 2013 2014 2013
16.2 Per Income Statement N'000 N'000 N'000 N'000
Income tax 111,951 80,263 103,405 68,894
Education tax 14,649 9,696 14,649 9,696
126,600 89,959 118,054 78,590
Deferred tax 114,851 59,391 114,851 59,391
241,451 149,350 232,905 137,981
16.3 Deferred tax
At January 1, 166,062 106,671 166,062 106,671
Release/ charge for the year 114,851 59,391 114,851 59,391
At December 31, 280,913 166,062 280,913 166,062
TAX EXPENSE RECONCILIATION
Profit before tax differs from the theoretical amount that would arise using the basic tax rate as
follows:
2014 2013 2014 2013
N'000 N'000 N'000 N'000
Profit before income tax 1,766,771 544,410 1,740,084 506,889
Tax calculated at the corporate tax rate (30%) 530,031 163,323 522,025 152,067
Effect of:
Non-deductible expenses 136,294 259,614 131,957 259,417
Education tax levy 14,649 9,696 14,649 9,696
Effect of Capital allowance on income tax (391,544) (255,149) (391,544) (255,149)
Tax exempt income (47,980) (28,134) (44,183) (28,050)
Tax incentive - - - -
Total income tax expense in income statement 241,451 149,350 232,905 137,981
Effective tax Rate 13.7% 27.4% 13.4% 27.2%
17 Issued Share Capital 2014 2013 2014 2013
N'000 N'000 N'000 N'000
Authorised share:
8,400,000,000 ordinary shares of 50k each 4,200,000 4,200,000 4,200,000 4,200,000
17.1 Ordinary shares At January 1 issued and fully paid:
5,280,502,913 ordinary shares of 50k each 2,640,251 2,640,251 2,640,251 2,640,251
At December 31, 2,640,251 2,640,251 2,640,251 2,640,251
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 67
Notes to the Financial Statements (Cont’d)
Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000
18 Share Premium 272,551 272,551 272,551 272,551
Premium from the issue of shares are reported in share premium
19 Contingency Reserve
As at 1 January 1,696,986 1,434,193 1,664,960 1,417,120
Transfer from retained earnings 312,088 262,793 301,435 247,840
Exchange Difference (13,618) - - -
1,995,456 1,696,986 1,966,395 1,664,960
Contingency reserve is calculated in accordance with the provisions of Section 21(2) of the Insurance Act,
2003 at the higher of 3% of the total premium or 20% of total profit after tax. This shall accumulate until it
reaches the amount of greater of minimum paid-up capital or 50% of net premium. During the current year,
this is calculated based on 20% of total profit after tax.
20 Retained earnings
As at 1 January 30,367 (101,902) 52,022 (69,047)
Transfer from comprehensive income 579,572 132,268 572,084 121,069
Exchange Difference (49,830) - - -
560,109 30,366 624,106 52,022
Retained earnings consist of undistributed profits/loss from previous years. Exchange difference arose from
the consolidation of the balance on NEM Insurance (Ghana) Limited at the closing rate of N 55.59 to 1
Ghana Cedis.
21 Available for sale reserve
Opening Balance 9,978 53,411 9,978 53,411
Movement 319,254 (43,433) 319,254 (43,433)
329,232 9,978 329,232 9,978
The fair value reserve shows the effect from the fair value measurement of financial instruments of the
category available for sale. Any gains or losses are not recognised in the comprehensive income statement
until the asset has been sold or impaired. The negative movement was due to change in the long term
Unquoted Investment.
2014 2013 2014 2013
22 Other Reserve- N'000 N'000 N'000 N'000
Actuarial gains on retirement benefit
Opening Balance 45,562 2,141 45,562 2,141
Gain during the year 22,616 43,421 22,616 43,421
68,178 45,562 68,178 45,562
This represents actuarial gains on employee retirement benefit
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 68
Notes to the Financial Statements (Cont’d)
23 Gross Premium written 2014 2013 2014 2013
N'000 N'000 N'000 N'000
The analysis of gross premium by business class is as follows:
Fire 1,545,518 1,437,937 1,486,133 1,340,434
Oil and Gas 1,327,231 1,524,120 1,327,231 1,524,120
General accident 2,259,951 1,599,171 2,177,157 1,444,199
Marine 1,305,107 1,192,152 1,297,679 1,185,049
Motor 3,362,432 3,073,238 3,123,728 2,660,795
Inward reinsurance 36,357 106,727 36,357 106,727
Gross premium written 9,836,596 8,933,345 9,448,284 8,261,325
Increase in unearned premium (63,046) (1,142,383) (63,888) (1,010,503)
Gross premium income 9,773,550 7,790,962 9,384,396 7,250,821
Re-insurance expenses (Note 24) (1,228,016) (366,222) (1,185,663) (324,527)
Net premium income 8,545,534 7,424,740 8,198,733 6,926,294
2014 2013 2014 2013
24 Reinsurance expense N'000 N'000 N'000 N'000
Motor 27,183 25,590 1,148 -
Marine 78,830 441 78,020 -
Fire 118,923 8,413 112,446 2,364
General Accident 180,213 9,615 171,182 -
Oil & Gas 822,867 322,163 822,867 322,163
1,228,016 366,222 1,185,663 324,527
25 Fee and commission income
Fee income represents commission received on direct business and transactions ceded to re-insurance
during the year under review.
Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000
Motor 2,852 947 - -
Marine 11,508 73 10,718 -
Fire 40,394 8,954 34,561 1,035
General Accident 10,644 4,899 7,598 -
65,398 14,873 52,877 1,035
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 69
Notes to the Financial Statements (Cont’d)
26 Claims Expenses Group Parent
2014 2013 2014 2013
N'000 N'000 N'000 N'000
The analysis of claim expenses by business class is as follows:
Motor 1,060,364 989,146 978,952 892,322
Marine 257,100 327,664 257,100 327,664
Fire 723,832 414,883 722,919 413,552
General Accident 620,240 1,084,483 614,913 1,077,419
Oil & Gas (5,718) 254,095 (5,718) 254,095
2,655,818 3,070,271 2,568,166 2,965,052
Claim expenses consist of claims paid during the financial year together with the movement in the provision for
outstanding claims.
26.1 Component of Claims expenses 2014 2013 2014 2013
N'000 N'000 N'000 N'000
Claims paid during the year 3,645,554 2,674,258 3,537,336 2,575,235
Outstanding Claims at year end C/F 1,674,432 1,726,816 1,639,488 1,678,848
Foreign exchange difference 20,486 - - -
Total 5,340,472 4,401,074 5,176,824 4,254,084
Outstanding Claims at the beginning B/F (1,726,816) (1,109,703) (1,678,848) (1,089,148)
Gross Claim expense 3,613,656 3,291,371 3,497,976 3,164,935
Changes in Reinsurance Claims Recoverable (957,838) (221,100) (929,810) (199,883)
Net Claims expense 2,655,818 3,070,271 2,568,166 2,965,052
27 Underwriting Expenses 2014 2013 2014 2013
N'000 N'000 N'000 N'000
Commission expense (27.1) 1,671,749 1,440,492 1,624,301 1,390,354
Maintenance expense (27.2) 902,099 1,097,697 902,099 1,097,697
2,573,848 2,538,188 2,526,400 2,488,051
27.1 Commission expense 2014 2013 2014 2013
The analysis of commission expenses by
business class is as follows: N'000 N'000 N'000 N'000
Motor 468,774 353,987 436,974 320,810
Marine 294,462 227,629 294,357 227,616
Fire 329,035 281,028 325,021 275,021
General Accident 359,976 313,078 348,447 302,137
Oil & Gas 219,502 264,770 219,502 264,769
1,671,749 1,440,492 1,624,301 1,390,354
2014 2013 2014 2013
27.2 Maintenance expense N'000 N'000 N'000 N'000
Motor 299,398 481,454 299,398 481,454
Marine 124,378 129,893 124,378 129,893
Fire 142,440 129,628 142,440 129,628
General Accident 127,210 162,476 127,210 162,476
Oil & Gas 208,673 194,248 208,673 194,248
902,099 1,097,697 902,099 1,097,697
Underwriting expenses consist of acquisition and maintenance expenses which include commission and policy
expenses, proportion of staff cost and insurance supervision levy. Underwriting expenses for insurance
contracts are recognised as expense when incurred.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 70
Notes to the Financial Statements (Cont’d)
Group Parent
2014 2013 2014 2013
28 Investment Income N'000 N'000 N'000 N'000
Dividend income 192,622 139,830 192,622 139,830
Interest from fixed deposit 375,206 263,686 327,743 215,673
Interest from statutory deposit 40,009 41,456 40,009 41,456
607,837 444,972 560,374 396,959
28.1 Investment Income
Investment Income attributable to Policy holders 298,365 335,864 275,292 289,435
Investment Income attributable to Share holders 309,472 109,108 285,082 107,524
607,837 444,972 560,374 396,959
2014 2013 2014 2013
29 Fair Value Gain through profit or loss N'000 N'000 N'000 N'000
Financial Assets at Fair Value Through Profit or Loss at
beginning of the year (1,055,739) (685,463) (1,055,739) (685,463)
Addition during the year (44,869) - (44,869) -
(1,100,608) (685,463) (1,100,608) (685,463)
Financial Assets at Fair Value Through Profit or Loss at
end of the year 665,839 1,055,739 665,839 1,055,739
Gain on Financial Assets at Fair Value Through Profit or
Loss at end of the year (434,769) 370,276 (434,769) 370,276
2014 2013 2014 2013
30 Other Income N'000 N'000 N'000 N'000
Sundry Income 1,623 86 1,311 2
Rental Income 1,438 5,000 1,438 5,000
Exchange Gain 28,063 11,503 24,577 11,503
Profit on disposal of Property, Plant and Equipment - 2,384 - 2,384
31,124 18,973 27,326 18,889
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 71
Notes to the Financial Statements (Cont’d)
Group Parent
2014 2013 2014 2013
31 Impairments N'000 N'000 N'000 N'000
Trade receivable 68,852 130,325 - -
Reinsurance assets - 225,302 - 225,302
68,852 355,627 - 225,302
2014 2013 2014 2013
N'000 N'000 N'000 N'000
32 Other Operating & Administrative Expenses
Auditors Remuneration 9,437 9,957 8,000 8,000
Employee Benefits (32.1) 1,012,337 794,802 942,217 698,303
Other Management Expenses (32.2) 631,446 822,540 536,468 699,754
Depreciation & Amortisation 113,470 147,201 100,063 131,263
1,766,690 1,774,500 1,586,748 1,537,320
2014 2013 2014 2013
32.1 Employee benefit expenses N'000 N'000 N'000 N'000
Salaries and Wages 770,948 569,238 717,668 496,956
Medical Expenses 45,341 38,278 38,556 29,564
Staff Training 69,319 26,035 67,603 24,719
Staff Uniform/Welfare 39,466 69,294 35,869 61,741
Gratuity 54,499 59,633 54,499 59,633
Employers' Contribution Fund 32,763 32,324 28,022 25,690
1,012,337 794,802 942,217 698,303
2014 2013 2014 2013
32.2 Other Management Expenses N'000 N'000 N'000 N'000
Advertising 30,066 17,245 29,960 16,592
Occupancy Expenses 139,549 114,348 123,041 89,544
Communication and Postages 8,751 10,258 7,714 8,343
Office Supply and Stationery 30,976 31,998 27,413 25,912
Fees and Assessments 232,871 238,700 190,411 185,124
Furnitures, Equipments and Miscellaneous
Expenses 189,233 409,990 157,929 374,241
631,446 822,540 536,468 699,754
33 Earnings Per Share 2014 2013 2014 2013
N'000 N'000 N'000 N'000
Net profit attributable to ordinary shareholders
for basic and diluted 1,525,321 395,060 1,507,179 368,908
Weighted average number of ordinary shares for
basic EPS 5,280,503 5,280,503 5,280,503 5,280,503
Basic Earnings Per Share (kobo) 29 7 29 7
There have been no other transaction involving ordinary shares or potential ordinary shares between the
reporting date and date of completion of these financial statements.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 72
Notes to the Financial Statements (Cont’d)
2014
2013
2014
2013
34 Chairman's and Directors' Emoluments N'000
N'000
N'000
N'000
Fees
Chairman 4,460
3,750
3,500
2,250
Other Directors 10,060
12,171
7,500
3,750
14,520
15,921
11,000
6,000
Emoluments as Executives 52,000
69,640
50,200
48,300
66,520
85,561
61,200
54,300
The number of Directors excluding the Chairman whose emoluments were within the following
ranges were:
N N
5,000,001 - 6,000,000 -
-
-
-
8,000,001 - 9,000,000 2
2
2
2
9,000,001 - 10,000,000 1
1
1
1
10,000,001 - above 2
2
2
2
5
5
5
5
The Highest paid Director earned N 29,150,000 in 2014 (2013 N27,500,000)
Group
Parent
35 Staff Costs
The average number of persons employed
(excluding Directors ) in the financial year
and staff costs were as follows:
2014
2013
2014
2013
Managerial 18
18
14
14
Senior 127
121
116
114
Junior 107
96
77
74
252
235
207
202
The related staff costs was N 1,085,750,332 (2013 N797,694,674)
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 73
Notes to the Financial Statements (Cont’d)
36 Related party transactions
Transaction with Key Personnel
The key Management personnel of the Company comprises of both the Board of Directors and the
Management Team of the company.
Short term Benefits (Board of Directors) 2014
2013
2014
2013
Fees: N'000
N'000
N'000
N'000
Chairman 4,460
3,750
3,500
2,250
Other Directors 10,060
12,171
7,500
3,750
14,520
15,921
11,000
6,000
Other Emoluments:
Other Directors 52,000
69,640
50,200
48,300
66,520
85,561
61,200
54,300
Short term Benefits (Management Team)
Salaries and Allowances: 242,424
251,030
192,318
192,318
Total Short term benefits 308,944
336,591
253,518
246,618
Other Long Term Benefits (Management
Team)
Loan 18,573
188,934
18,573
188,934
Total Long Term benefits 18,573
188,934
18,573
188,934
Post Employment Benefits (Management
Team)
Pension 15,720
15,720
11,408
11,408
Total Post Employment benefits 15,720
15,720
11,408
11,408
Total Benefits to Key Personnel 343,237
541,245
283,499
446,960
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 74
Notes to the Financial Statements (Cont’d)
37 Employees Remunerated at Higher Rates
The number of employees in receipt of emoluments excluding allowance and pension within the following ranges
were:
N N
Group Parent
60,001 - 80,000
9 - - -
80,001 - 100,000
21
100,001 - 120,000
- - - -
120,001 - 140,000
- - - -
140,001 - 160,000
7
7
160,001 - 180,000
12 8 12 8
180,001 and Above
231 214 195 187
252 250 207 202
38 Financial Commitments
The Directors are of the opinion that all known liabilities and commitments relevant in assessing the Company's
state of affairs have been taken into account in the preparation of these financial statement.
39 Comparative Figures
Certain prior year figures have been reclassified to conform with the current year's presentation and meet
accounting standards disclosure requirements.
40 Contingencies and Commitments
(a) Capital Commitments
The company has spent N1.940 billion on ongoing building project and has been included in the consolidated
financial statements as at 31 December, 2014.
(b) Legal Proceedings and Regulations
At the balance sheet date, there were several law suits in various court against the Company. The directors are
of the opinion that the Company will not incur any significant loss with respect to these claims and accordingly,
no provisions have been made in the accompanying financial Statements.
41 Fines and Penalties
The company paid fines and penalties during the year as follows:
PAYEE DETAILS
Amount
N
NAICOM
Violation of approved format on rendition of
quarterly returns 2,045,000
NSE
For Late filing the 2013 Audited
Account
2,600,000
PREMIUM PENSION LTD For outstanding contribution & interest
514,485
ZPC/TRUST FUND PENSION For outstanding contribution & interest
1,355,431
FPCNL RE NLPC For outstanding contribution & interest
2,495,227
FRCN Late submission of documents on IFRS
1,000,000
10,010,143
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 75
Underwriting Result Per Class of Business.
Group MOTOR MARINE FIRE GENERAL ACCIDENT
OIL & GAS
2,014 2013
N'000 N'000 N'000 N'000 N'000 N'000 N'000
Direct Business Premium 3,362,432 1,305,107 1,545,518 2,259,951 1,327,231 9,800,240 8,826,618
Reinsurance Inward 10,825 3,758 9,334 9,135 3,303 36,357 106,727
Gross Premium 3,373,257 1,308,865 1,554,852 2,269,086 1,330,534 9,836,596 8,933,345
(Increase)/Decrease in
Unexpired Risk (64,857) 32,519 23,471 (378,219) 324,039 (63,046) (1,142,383)
Gross Premium Earned 3,308,401 1,341,384 1,578,324 1,890,868 1,654,573 9,773,550 7,790,962
Reinsurance Cost (27,183) (78,831) (118,923) (180,213) (822,867) (1,228,016) (366,222)
Net Premium Earned 3,281,218 1,262,553 1,459,401 1,710,655 831,706 8,545,534 7,424,740
Commission Received 2,852 11,508 40,394 10,644 - 65,398 14,873
3,284,070 1,274,061 1,499,791 1,721,299 831,706 8,610,932 7,439,613
Direct Claim Paid (1,331,591) (337,624) (722,591) (890,036) (363,712) (3,645,554) (2,674,258)
Decrease in Prov. of
Outstanding Claims 121,602 19,122 (280,104) 6,873 164,405 31,899 (617,113)
Gross Claim Incurred (1,209,989) (318,501) (1,002,696) (883,163) (199,306) (3,613,655) (3,291,371)
Reinsurance Claim Recovery 149,625 61,401 278,864 262,923 205,025 957,838 221,100
Net Claim Expense (1,060,364) (257,100) (723,831) (620,240) 5,718 (2,655,818) (3,070,271)
Underwriting Expenses (869,956) (348,100) (403,891) (596,126) (355,775) (2,573,848) (2,538,188)
Total Deduction (1,930,320) (605,200) (1,127,722) (1,216,366) (350,057) (5,229,665) (5,608,458)
Underwriting Profit 1,353,750 668,861 372,069 504,933 481,650 3,381,266 1,831,154
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 76
Underwriting Result Per Class of Business.
Parent MOTOR MARINE FIRE GENERAL ACCIDENT
OIL & GAS
2,014 2013
N'000 N'000 N'000 N'000 N'000 N'000 N'000
Direct Business Premium 3,123,728 1,297,679 1,486,133 2,177,157 1,327,231 9,411,928 8,154,597
Reinsurance Inward 10,825 3,758 9,334 9,135 3,304 36,357 106,727
Gross Premium 3,134,554 1,301,437 1,495,467 2,186,292 1,330,534 9,448,284 8,261,325
(Increase)/Decrease in
Unexpired Risk (57,742) 33,180 19,045 (382,410) 324,039 (63,888) (1,010,503)
Gross Premium Earned 3,076,812 1,334,617 1,514,513 1,803,882 1,654,573 9,384,396 7,250,821
Reinsurance Cost (1,148) (78,021) (112,446) (171,183) (822,867) (1,185,663) (324,527)
Net Premium Earned 3,075,664 1,256,596 1,402,067 1,632,699 831,706 8,198,733 6,926,294
Commission Received - 10,718 34,561 7,598 - 52,877 1,035
3,075,664 1,267,313 1,436,628 1,640,297 831,706 8,251,610 6,927,329
Direct Claim Paid (1,234,727) (337,624) (722,591) (878,682) (363,712) (3,537,336) (2,575,235)
Decrease in Prov. of
Outstanding Claims 125,596 19,122 (276,636) 6,873 164,405 39,361 (589,700)
Gross Claim Incurred (1,109,131) (318,501) (999,228) (871,809) (199,306) (3,497,975) (3,164,935)
Reinsurance Claim Recovery 130,179 61,401 276,309 256,896 205,025 929,809 199,883
Net Claim Expense (978,952) (257,100) (722,919) (614,913) 5,718 (2,568,166) (2,965,052)
Underwriting Expenses (838,156) (347,994) (399,877) (584,598) (355,775) (2,526,400) (2,488,051)
Total Deduction (1,817,108) (605,095) (1,122,795) (1,199,511) (350,057) (5,094,566) (5,453,103)
Underwriting Profit 1,258,556 662,219 313,833 440,786 481,650 3,157,044 1,474,226
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 77
Claim Development Table 46 Extracts from HR Nigeria Limited Valuation Report
46a Claims Data
The claims data has five risk groups - Marine, Motor, Fire, Personal Accident and Oil and Gas.
The combined claims data for all lines of business between 2008 and 2014 are summarized in
the table below;
Incremental Development Pattern - Annual Projections (N'000)
A/Y Year/Dev
Years 1 2 3 4 5 6 7
2008 505,582 170,574 48,919 12,862 8,402 1,053 976
2009 491,747 167,581 43,179 25,012 5,953 34,365
2010 489,651 122,770 95,853 66,234 22,019 -
2011 507,856 357,673 263,383 311,361 - -
2012 1,111,150 700,187 604,317 - - -
2013 1,461,811 898,393
2014 1,665,349 - - - - -
46b Premium Data
The premium data received have been compared with the revenue account as at 31st
December, 2014.This certifies the accuracy of the data used in computing unearned risk
premium. The table below presents the distribution of premiums by class of business.
Class of Business
Gross Premium
Written Data
Gross Premium Written Account
General Accident 2,186,292 2,186,292
Fire 1,495,467 1,495,467
Marine 1,301,437 1,301,437
Motor 3,134,554 3,134,554
Oil and Gas 1,330,534 1,330,534
Total 9,448,284 9,448,284
46c Valuation Results
We present the results below for each of the valuation methods (The Chain Ladder and
Inflation Adjusted Chain Ladder Methods) and the estimated outstanding (including IBNR)
claim reserves as at December 31, 2014.
We estimate our reserves as the sum of the Unearned Premium Reserve (UPR), Outstanding
Claims including the Incurred But Not Reported (IBNR) and the Additional Unexpired Risk
Reserve (AURR) for each line of business as at 31st December, 2014.
Incremental Chain Ladder
Incremental Development Pattern - Annual Projections (N'000)
Accident Years 1 2 3 4 5 6 7
2008 99,112 44,058 10,400 1,442 994 703 976
2009 108,729 44,503 10,009 7,615 4,530 25,045 -
2010 104,093 35,744 28,823 46,162 19,141 - -
2011 120,533 98,790 50,182 28,094 - - -
2012 391,308 221,809 247,231 - - - -
2013 353,511 262,022 - - - - -
2014 212,851 - - - - - -
This table illustrates that N99.112 million was paid from claims that year. At the end of 2009, the total
claims payment arising from accident in 2008 was N143.17 million, this increased to N153.569 million in
2010 e.t.c.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 78
Claim Development Table Cont’d
Cummulative Data
Cummulative Development Pattern - Annual Projections (N'000)
A/Y year/Dev
Years 1 2 3 4 5 6 7
2008 99,112 143,170 153,570 155,012 156,006 156,709 157,685
2009 108,729 153,232 163,241 170,856 175,386 200,431
2010 104,093 139,837 168,660 214,822 233,963
2011 120,533 219,323 269,505 297,599
2012 391,308 613,117 860,348
2013 353,511 615,533
2014 212,851
Loss dev Factors
1.600
1.273
1.110
1.046
1.078
1.006
We summarise Unearned Premium Reserve (UPR) estimation by class of business below. This
was calculated assuming risk will occur evenly over the period of insurance.
Unearned Premium
Reserve
Class of Business
Gross UPR (N'000)
Reinsurance UPR
(N'000) Net UPR (N'000)
Motor
819,045 (57,917) 761,128
Accident
390,490 (16,635) 373,855
Marine
389,825 (6,305) 383,520
Fire
907,445 (675) 906,770
Oil and Gas
297,834 (205,025) 92,809
Total 2,804,638 (286,557) 2,518,081
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 79
Claim Development Table Cont’d
Technical Reserves
We present Gross Claims Technical Reserves under Basic Chain Ladder and Inflation Adjusted Chain Ladder.
Technical Reserve Using Basic Chain Ladder Method
Class of Business
Gross Outstanding
Claim
Estimated Reinsurance Recoveries
Net Outstanding
Claims
General Accident
561,661,476 (111,819,476)
449,842,000
Fire
527,036,676 (244,863,682)
282,172,994
Marine
119,047,579 (23,606,168)
95,441,411
Motor
181,435,539 (14,802,673)
166,632,866
Oil and Gas*
219,702,194 -
219,702,194
Total 1,608,883,464 (395,091,999)
1,213,791,465
Accounts (Outstanding Claims) 1,063,342,858 (371,186,596)
692,156,262
Difference 545,540,606 (23,905,403)
521,635,203
* Reserve for Bond, Oil & Gas was based on Expected Loss
Ratio Approach
Technical Reserve - Using Discounted Basic Chain Ladder Method
Class of Business
Gross Outstanding
Claim
Estimated Reinsurance Recoveries
Net Outstanding
Claims
General Accident
462,034,818 (98,035,728)
363,999,090
Fire
450,638,252 (226,813,721)
223,824,531
Marine
97,838,434 (20,213,842)
77,624,592
Motor
153,596,013 (13,763,498)
139,832,515
Oil and Gas*
219,702,194
219,702,194
Total 1,383,809,711 (358,826,789)
1,024,982,922
Accounts (Outstanding Claims) 1,063,342,858 (371,186,596)
692,156,262
Difference 320,466,853 12,359,807
332,826,660
* Reserve for Bond, Oil & Gas was based on Expected Loss
Ratio Approach
Should we allow for discounting, our gross claims reserve will reduce from N 1.61 billon to N
1.38 billion leading to a net position of N 1.02 billion
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 80
Claim Development Table Cont’d
We illustrate our estimates of reserve adjusting for inflation.
Technical Reserve - Using Inflation Adjusted Basic Chain Ladder Method
Class of Business
Gross Outstanding
Claim
Estimated Reinsurance Recoveries
Net Outstanding
Claims
General Accident
719,262,815 (127,735,800)
591,527,015
Fire
639,126,866 (259,319,448)
379,807,418
Marine
144,396,682 (27,972,468)
116,424,214
Motor
209,732,616 (15,535,697)
194,196,919
Oil and Gas*
219,702,194
219,702,194
Total 1,932,221,173 (430,563,413)
1,501,657,760
Accounts (Outstanding Claims) 1,063,342,858 (371,186,596)
692,156,262
Difference 868,878,315 (59,376,817)
809,501,498
* Reserve for Bond, Oil & Gas was based on Expected Loss Ratio
Approach
Technical Reserve - Using Discounted inflation Adjusted Basic Chain Ladder Method – Discounted
Class of Business
Gross Claim Reserve
Estimated Reinsurance Recoveries
Net Outstanding
Claims
General Accident
581,795,752 (127,735,800)
454,059,952
Fire
544,026,729 (259,319,448)
284,707,281
Marine
118,143,725 (27,972,468)
90,171,257
Motor
175,819,259 (15,535,697)
160,283,562
Oil and Gas*
219,702,194
219,702,194
Total
1,639,487,659 (430,563,413)
1,208,924,246
Accounts
(Outstanding Claims)
1,063,342,858 (371,186,596)
692,156,262
Difference
576,144,801 (59,376,817)
516,767,984
* Reserve for Bond, Oil & Gas was based on Expected Loss Ratio
Approach
Should we allow for discounting, our gross claims reserve will reduce from N 1.93 billon to N 1.64 billion leading to a
net position of N 1.21 billion.
The Actuary adopted the Inflation Adjusted Basic Chain Ladder (Discounted) Method which presents a gross claims
reserve of N1.64 billion and reinsurance recoveries estimate of N430.56million (a net position of N1.21billion) as being
representative of the liability.
This Figure:
- Anticipates that total claims may be exposed to inflationary increase
- Recognizes that present value needs to be reserved for anticipated future payments.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 81
Claim Development Table Cont’d 46d Appendix
Cumulative Claims Development Pattern
General Accident
Accident Year
Incremental Development Pattern - Annual Projections (N'000)
1 2 3 4 5 6 7 8
2008 99,112 44,058 10,400 1,442 994 703 976
2009 108,729 44,503 10,009 7,615 4,530 25,045 - -
2010 104,093 35,744 28,823 46,162 19,141 - - -
2011 120,533 98,790 50,182 28,094 - - - -
2012 391,308 221,809 247,231 - - - - -
2013 353,511 262,022 - - - - - -
2014 212,851 - - - - - - -
Cumulative Development Pattern - Annual Projections (N'000)
Accident Year 1 2 3 4 5 6 7 8
2008 99,112 143,170 153,569 155,011 156,005 156,707 157,683 58,572
2009 108,729 153,232 163,241 170,856 175,385 200,430 201,680 201,680
2010 104,093 139,837 168,660 214,823 233,964 240,029 241,524 241,524
2011 120,533 219,323 269,505 297,600 311,175 319,242 321,231 321,231
2012 391,308 613,118 860,349 955,289 998,866 1,024,760 1,031,145 1,031,145
2013 353,511 615,533 623,684 631,835 660,657 677,784 682,007 682,007
2014 212,851 330,801 421,187 467,665 488,999 501,675 504,801 504,801
Summary of Results (N'000)
Years
Latest Paid
Dev to Date Ultimate
Gross Oustanding Claims
2008 157,684
200,431
233,963
297,600
860,348
615,533
212,851
2,578,410
100%
99%
97%
93%
83%
90%
42%
82%
157,683
201,680
241,524
321,231
1,031,145
682,007
504,801
3,140,071
-
1,249
7,561
23,631
170,797
66,474
291,950
561,661
2009
2010
2011
2012
2013
2014
Total
Motor
Incremental Development Pattern - Annual Projections (N'000)
Accident Year 1 2 3 4 5 6 7 8
2008 280,295 60,420 18,611 5,134 3,924 - - -
2009 294,076 52,370 13,978 9,965 548 114 - -
2010 291,789 39,416 28,686 11,229 2,095 - - -
2011 258,498 149,644 13,328 3,935 - - - -
2012 472,735 197,280 38,814 - - - - -
2013 578,128 304,586 - - - - - -
2014 890,220 - - - - - - -
Cumulative Development Pattern - Annual Projections (N'000)
Accident Year 1 2 3 4 5 6 7 8
2008 280,295 340,716 359,327 364,460 368,384 368,384 368,384 368,384
2009 294,076 346,445 360,424 370,389 370,937 371,051 371,051 371,051
2010 291,789 331,205 359,891 371,120 373,379 373,273 373,273 373,273
2011 258,498 408,143 421,470 425,406 427,932 427,998 427,998 427,998
2012 472,735 670,015 708,829 723,120 727,413 727,525 727,525 727,525
2013 578,128 882,714 930,466 949,226 954,861 955,008 955,008 955,008
2014 890,220 903,979 952,882 972,093 977,865 978,015 978,015 978,015
Summary of Results (N'000)
Years
Latest Paid
Dev to Date Ultimate
IBNR
2008 368,384
371,051
373,273
427,998
727,525
955,008
978,015
4,201,254
100%
100%
100%
101%
103%
108%
110%
105%
368,384
371,051
373,215
425,406
708,829
882,714
890,220
4,019,819
-
2009
-
2010
- 58
2011
- 2,592
2012
- 18,696
2013
2014
- 87,795
Total
(109,141)
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 82
Claim Development Table Cont’d Fire
Incremental Development Pattern - Annual Projections (N'000)
Accident Year 1 2 3 4 5 6 7 8
2008 70,236 31,105 13,693 2,986 1,535 - - -
2009 59,885 35,926 7,100 4,616 875 956 - -
2010 70,927 30,311 26,737 6,068 631 - - -
2011 77,014 59,343 40,018 45,125 - - - -
2012 163,490 116,685 129,592 - - - - -
2013 186,568 225,160 - - - - - -
2014 362,242 - - - - - - -
Cumulative Development Pattern - Annual Projections (N'000)
Accident Year 1 2 3 4 5 6 7 8
2008 70,236 101,341 115,034 118,021 119,556 119,556 119,556 119,556
2009 59,885 95,810 102,910 107,526 108,401 109,356 109,356 109,356
2010 70,927 101,238 127,975 134,043 134,674 135,239 135,239 135,239
2011 77,014 136,357 176,375 221,500 245,188 246,216 246,216 246,216
2012 163,490 280,176 409,768 498,713 502,930 505,039 505,039 505,039
2013 186,568 411,728 475,625 529,166 533,641 535,879 535,879 535,879
2014 362,242 438,820 572,101 636,503 641,886 644,577 644,577 644,577
Summary of Results (N'000)
Years Latest Paid Dev to Date Ultimate IBNR 2008 119,556
109,356
134,674
221,500
409,768
411,728
362,242
1,768,824
100%
100%
100%
90%
81%
77%
56%
77%
119,556
109,356
135,239
246,216
505,039
535,879
644,577
2,295,862
-
-
565
24,716
95,271
124,151
282,335
527,038
2009
2010
2011
2012
2013
2014
Total
Marine Incremental Development Pattern - Annual Projections (N'000)
Accident Year 1 2 3 4 5 6 7 8
2008 55,939 34,990 6,216 3,300 1,949 - - -
2009 29,059 34,783 12,092 2,817 - 497 - -
2010 22,842 17,299 11,607 2,774 152 - - -
2011 51,811 49,895 22,783 7,427 - - - -
2012 83,615 102,159 89,538 - - - - -
2013 141,967 65,199 - - - - - -
2014 197,203 - - - - - - -
Cumulative Development Pattern - Annual Projections (N'000)
Accident Year 1 2 3 4 5 6 7 8
2008 55,939 90,929 97,145 100,444 102,394 102,394 102,394 102,394
2009 29,059 63,841 75,933 78,750 78,750 79,247 79,247 79,247
2010 22,842 40,140 51,747 54,521 54,674 54,824 54,824 54,824
2011 51,811 101,706 124,489 131,916 133,103 133,468 133,468 133,468
2012 83,615 185,774 275,313 288,174 290,765 291,563 291,563 291,563
2013 141,967 207,166 208,765 218,517 220,482 221,087 221,087 221,087
2014 197,203 207,379 268,527 281,071 283,598 284,377 284,377 284,377
Summary of Results (N'000)
Years Latest Paid Dev to Date Ultimate IBNR 2008 102,394
79,247
54,674
131,916
275,313
207,166
197,203
1,047,913
100%
100%
100%
99%
94%
94%
69%
90%
102,394
79,247
54,824
133,468
291,563
221,087
284,377
1,166,960
-
-
150
1,552
16,250
13,921
87,174
119,047
2009
2010
2011
2012
2013
2014
Total
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 83
Financial Risk Management Policy Management of financial and insurance risk
NEM Insurance Plc issues contracts that transfer insurance risk or financial risk or both. This section
summarizes these risks and the way the company manages them.
Insurance risk
The risk, under any insurance contract, is the possibility that the insured event occurs and the
uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk
is random and therefore unpredictable. The Company manages its insurance risk by means of
established internal procedures that include underwriting authority levels, pricing policy, approved
reinsurers list and monitoring.
NEM is exposed to underwriting risk through the insurance contracts that are underwritten. The risks
within the underwriting risk category are associated with both the perils covered by the specific lines
of insurance including General Accident, Motor, Fire, Marine and Aviation, Oil and Gas and
Miscellaneous insurance, as well as the specific processes associated with the conduct of the
insurance business. The various subsets of underwriting risks are listed below;
Underwriting Process Risk: risk from exposure to financial losses related to the selection and
acceptance of risks to be insured.
Mispricing Risk: risk that insurance premiums will be too low to cover the Company’s expenses
related to underwriting, claims, claims handling and administration.
Individual risk: This include the identification of the risk inherent in an insured property (movable or
unmovable), we shall ensure surveys are performed and reviewed as at when due and that risks are
adequately priced.
Claims Risk (for each peril): Risk that many more claims occur than expected or that some claims
that occur are much larger than expected claims resulting in unexpected losses to the Company. The
underwriting risk assessment shall also determine the likelihood of a claim arising from an insured
risk by considering various factors and probabilities, determined by information obtained from the
insured party, historical information on similar risks and available external data.
Concentration risk (including geographical risk): This includes identification of the concentration of
risks insured by NEM. NEM utilizes data analysis, software and market knowledge to determine the
concentration of its risks by insurance class, geographic location, exposure to a client or business.
The assessment of the concentration risk is consistent with the overall risk appetite as established by
the Company.
Underwriting Risk Appetite
The following statements amongst others shall underpin NEM’s underwriting risk appetite:
We do not underwrite risks we do not understand;
We are cautious in underwriting unquantifiable risks; We are extremely cautious in underwriting risk observed to poorly managed at proposal state e.g. those with
low safety standards, shoddy construction or businesses with excessively high risk profile;
We carefully evaluate businesses or opportunities that could create systemic risk exposures (
i.e. incidents of multiple claims occurring from one event e.g. natural catastrophe risks, and
risks dependent on the macroeconomic environment);
We consider all applicable regulatory guidelines while carrying out our underwriting activities;
We established and adhere to internal standards for co-insurance, reinsurance transactions;
We exercise extreme caution when underwriting discrete (one-off) risks, particularly where we
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 84
Financial Risk Management Policy (Cont’d)
Do not have the requisite experience or know-how;
Where the broker has inadequate knowledge of the trade of the client or the class of business,
we exercise caution in taking on such risks into our books;
We exercise extreme prudence and caution when dealing with clients with financial difficulties
or poor payment records; and with transient clients who change insurers regularly; and
We ensure compliance with NAICOM’s guideline on KYC for consistency.
Underwriting Strategy
The Company has developed its insurance underwriting strategy to diversify the type of insurance risks
accepted and within each of these categories to achieve a sufficiently large population of risks to
reduce the variability of the expected outcome. Any risks exceeding the underwriting limits require
head office approval. Factors that aggravate insurance risk include lack of risk diversification in terms
of type and amount of risk, geographical location and type of industry covered. The Company manages
these risks through its underwriting strategy, adequate reinsurance arrangements and proactive
claims handling. Underwriting limits are in place to enforce appropriate risk selection criteria. For
example, the Company has the right not to renew individual policies, it can impose deductibles and it
has the right to reject the payment of a fraudulent claim. Insurance contracts also entitle the Company
to pursue third parties for payment of some or all costs (for example, subrogation).
Products and Services
NEM Insurance Plc is presently operating as a non-life insurance company and we have a wide range
of insurance products and services that are tailored to meet the specific needs of the company’s
clients. Insurance contracts are issued on an annual contract either directly to the customer or
through accredited insurance brokers and agents. Premiums from brokers and agents are payable
within 30 days, whereas from direct customers immediately. The following is a broad spectrum of the
products and services the company is offering:
Fire/Extraneous Perils Policy
This type of policy will provide indemnity to the insured in the event of loss or damage to property
covered under it as a direct result of fire outbreak, lightning or explosion. Other extraneous perils such
as social disturbances like strike and riot, and natural disasters like storm damage, flood and
earthquake can also be covered by an extension of the standard scope of the cover. The items to be
insured are usually made up of the following:
a) Buildings
b) Office Furniture, Electrical & Electronic Equipment
c) Plant and Machinery
d) Stock of Raw Materials and finished goods
e) Loss of Annual Rent for alternative accommodation.
The policy also contains various other extensions that are granted at no extra cost to the policyholder.
The replacement cost of the items to be insured will have to be supplied to us for assessment to
facilitate quotation of the premium payable.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 85
Financial Risk Management Policy (Cont’d)
Consequential Loss Policy
This type of policy, often referred to as "business interruption insurance" is designed to indemnify the
insured against loss of productive capacity or future earning power which may occur as a result of loss
or damage to the premises and property insured under the Fire/Extraneous Perils in 1 above. This
policy is normally taken out in conjunction with the Fire Policy so that when the latter pays for the
material damage to property insured under it, this will pick up the intangible loss that will flow from
the primary loss of the Fire perils. The items usually covered under this policy are as follows:
a)Gross Profit
b)Salary and Wages
c)Auditor's fees
The sum insured to be indicated against the items of Gross Profit should represent the difference in
turnover and the total of standing and variable charges. The sum insured on Salary and Wages will be
that which is required to maintain some key staff pending resumption of business while the sum
insured on Auditor's Fees will represent charges that any firm of accountants will make in preparing
papers for insurance claim.
Burglary/Housebreaking Policy
This type of policy is designed to indemnify the insured against loss or damage resulting from theft
or attempted theft which is accompanied by actual forcible or violent entry into or out of the
premises or any attempt thereat. The items usually covered under this policy are similar to those
under the Fire/Extraneous Perils policy above with the exception of Buildings and Loss of Rent.
The replacement cost of the relative items would have to be supplied to enable us submit our
quotation.
Fidelity Guarantee Policy
This is a form of policy that protects an organization against loss of money or valuable stock as a
result of dishonesty or fraudulent activity of employees. It is possible to grant cover on named
basis, positions basis or on a blanket basis. In any of these cases, the number of persons and the
limit of guarantee any one loss would be advised as well as aggregate amount of guarantee in a
given year. Once we have this information, we would be in a position to quote for premium
payable.
Public Liability Policy
This policy also covers the insured against legal liability to third party for cost and expenses
incurred in respect of accidental death, bodily injury and accidental damage to property occurring
within the insured's premises or at work-away premises. The vicarious liability of the insured's
employee can also be covered provided it arose in the course of carrying out his official duties.
The Company usually require the insured to indicate the limit of cover required to enable her
advise the premium payable.
Money Policy
This is another type of All Risks policy which is designed to cover any fortuitous event that could
result in the loss of cash while in the course of transit either to or from the bank. The cover will
also operate while the money is on the premises of the insured and while in a securely locked safe.
The policy can also be extended to cover cash in the personal custody of selected management
staff.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 86
Financial Risk Management Policy
Goods in Transit Policy
This is also an "All Risks" policy covering goods being carried from one location to another. Any
loss not specifically excluded under the policy is covered and the insurance is suitable for any
organization that is engaged in movement of goods either by road or rail and the cover will operate
when the goods are being conveyed by the insured’s owned or hired vehicles. Losses arising from
Fire and Theft are covered under this policy.
Group Personal Accident Policy
This type of policy is designed to foster the welfare of employees as well as reduce the financial
constrain that an organization could undergo in the event of death or bodily injury to a member of
staff arising as a result of any injury sustained through accidental, violent, external and visible
means. The policy provides a world-wide cover on 24 hours basis and benefits payable in respect
of Death and Permanent Disability are usually expressed as multiple of salaries. Cover also
extends to pay weekly benefit in the event of temporary total disability resulting from bodily injury
to the insured person as well as certain allowance for expenses incurred on medical treatment as a
result of accidental injury. Death or injuries from natural causes are however not covered.
Motor Insurance Policy
This class of insurance is made compulsory by Government through the legislation known as the
Motor Vehicle (Third Party) Insurance Act of 1945. Third Party Only cover which is the minimum
type of insurance legislated upon provides indemnity to policyholder against legal liability to Third
Parties for death, bodily injury and property damage.
The most popular type of cover under this policy is comprehensive insurance which, in addition to
the cover provided under the Third Party Only, will also indemnify the policyholder for loss or
damage to the vehicle resulting from road accident, fire and theft. The premium payable for the
various forms of cover under this policy is regulated by a statistical table of rate known as "tariff"
which is approved by Government.
Marine Policies
CARGO: The policy issued here is to provide indemnity for loss or damage to imported goods being
conveyed by sea or air. The All Risks type of cover known as Clauses "A" provides indemnity to the
insured in the event of total or partial loss of the goods while the restricted cover known as Clauses "C"
would provide indemnity in the event of total loss only. To enable us determine the premium payable
in this regard, we would require information on the nature and value of goods being imported as well
as the type of cover required.
HULL: This type of policy is issued on vessels and yachts to provide indemnity for any loss, damage or
liability that may arise from their use. The scope of cover provided is either an "all risks" or "total loss
only" while the policy usually carries a deductible of about 10% of the value of the vessel or yacht.
Aviation Policy
This policy provides comprehensive cover against loss or damage to insured aircraft while operating
anywhere in the world. Cover also extends to include the operator's legal liability to Third Parties for
death, bodily injury and property damage. Liability to passengers is also covered up to a certain limit
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 87
Financial Risk Management Policy
selected. In order to ensure full protection for our clients, we reinsure as much as 90% of this type of
risk in the London Aviation Market through one of our overseas associates. The essence of this
arrangement is to obviate the problem of absorption in the Nigerian Market which has limited capacity
for Aviation Insurance and also to afford our clients the opportunity of having a dollar/sterling based
insurance policy.
Machinery Breakdown Policy
This policy is designed to cover any damage to a plant or equipment while working or at rest, or being
dismantled for the purpose of cleaning, repairing or overhauling. In the same vein, boiler and pressure
vessels can be covered under a separate but similar policy.
Electronic Equipment Policy
This policy is designed to cover any loss or damage that could result while any computer and or
equipment insured is working or at rest. The cover under this policy also extends to include loss or
damage to external data media such as diskettes and tapes containing processed information while
such are kept within the premises. The increase in cost of working, as a result of damage to the main
computer equipment, is also covered and indemnity is provided for alternative means of carrying on
operation. With payment of an additional premium, this policy can be extended to cover the risk of
theft.
Energy Risks
The policies on offer in this area have been specifically developed to take advantage of the insurance
opportunities created by the Nigerian Content Policy. The Nigerian content policy is aimed at utilizing
Nigerian human and material resources in creating values in the country through all contracts awarded
in the Oil and Gas industry and the Power sector of the economy. NEM Insurance Plc has carved a
niche as the Leader in provision of Oil & Gas and Energy Insurance in Nigeria.
Our focus is on the following areas:
• Upstream Risks which includes Construction/Erection All Risks, Operators Extra Expense Insurance,
Property Insurance and General Third Party Liability Insurance.
• Downstream Risks which includes the downstream properties (Refineries and Petrochemical plants,
Onshore pipelines, Oil tank farm, Gas processing plants, Pumping and Metering stations, Gas turbines
and Boilers, Damage to Asset and other related downstream sector risks.
• Power, Solid Mineral and Other special products.
The above products have been packaged for marketing to the public sector as well as various
manufacturing, industrial and commercial concerns. Financial institutions such as banks, mortgage
and stock broking firms are also being offered these products. Our company is innovative in
approach and we specialize in packaging policies in line with the needs of the various segments of
the economy. NEM Insurance Plc also provides comprehensive risk management services. The
company carries out various risk surveys and make appropriate recommendations towards risk
improvement and minimization of loss impacts.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 88
Financial Risk Management Policy
Approach to Management of Underwriting Risks
The Company’s underwriting risk shall be managed by adhering to policies, principles and
guidelines spelt out in the Annual Underwriting Plan.
Where the broker has inadequate knowledge of the trade of the client or the class of business and
the client not willing to disclose such information, the Company shall exercise caution in taking on
such risks.
The Company shall exercise extreme prudence and caution when dealing with clients with financial
difficulties or poor payment records; and with transient clients who change insurers regularly; and
The Company shall ensure compliance with the National Insurance Commission’s guidelines on
“Know Your Customer” (KYC) requirement to get enough information about the transaction.
The company carries out timely pre-loss inspection/survey exercise of risks, preferably before
commencement of cover but not later than 48 hours after commencement of risks.
We limit acceptance of risks to a more convenient value/share while spreading excess through co-
insurance or facultative basis.
We ensure application/introduction/review of policy terms and conditions including
clauses/warranties that will deal with areas of concern which will at the end of the day make the risk
worthy of being in the company’s portfolio.
Risk Acceptance Rules
The company shall follow the provisions (terms and conditions) of the reinsurance treaties that were
arranged for the classes of insurance that any risk offered for insurance falls under in deciding
whether to accept the risk or not. This shall be the case on all cases where the sum insured of the
risk is more than the company’s retention as contained and evidenced by the treaty cover notes.
For any risk that Reinsurance Treaty could not be arranged for, acceptance of such risks shall be
limited to any limit set by the company for such risks at the beginning of each year and shown in the
underwriting plan.
Energy Insurance Risks
No risks relating to the special covers in (as different from the standard covers) Energy, Oil and Gas
shall be accepted without clarification from the Head of Energy Department or Head of Branch
Operations Department (for risks coming from the Branch/Area/Agency offices).
Marine Insurance Risks
No Marine insurance risk (Hull or Cargo), Marine Cargo or any other special risks of different nature
but relating to Marine Insurance E.G. Marine Cargo Insurance export, shall be accepted without
clarification from the Heads of Technical, Energy and Branch Operations Departments. The
company shall not accept Marine Cargo business in respect of fish head risks whether as import or
export. Where it must be covered for any reason, cover shall be limited to ICC “C” and on rate of
premium of a minimum of 0.20%.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 89
Financial Risk Management Policy
Aviation Risks
No Aviation risk, Marine Hull risk, Marine Cargo export and any other special risks of different nature
shall be accepted without clarification from the Heads of Technical, Energy and Branch Operations
Departments.
Approaches to Risk Mitigation
Generally, we shall apply any of the following four (4) approaches to risk mitigations:
a) Risk Termination (Avoidance)
Under the risk termination approach, we will take measures to avoid risks that are outside our risk
appetite, not aligned to our strategy or offer rewards that are unattractive when compared to the
risk undertaken. Specifically, we will discontinue activities that generate these risks, such as
divesting from certain geographical markets, product lines or businesses. Generally, we will utilise
these approach for high-risk events that remain unacceptably high even after we have applied
controls.
b) Risk Treatment (Reduction)
Under the risk treatment approach, we would accept the risks inherent in our transactions, but
shall take measures, through our system of internal controls, to reduce the likelihood and/or
impact of these risks. Generally, we would utilise this approach for risks that occur frequently and
have low impact. Some of the measures we shall take under this approach may include formulating
or enhancing policies, defining boundaries and authority limits, assigning accountabilities and
measuring performance, improving processes, strengthening existing controls or implementing
new controls and continuing education and training.
c) Risk Transfer (Sharing)
Under the risk transfer approach, we would accept the risks inherent in our transactions, but shall
take measures to transfer whole or portions of the risk to an independent counterparty.
Specifically, we shall transfer our risks to an independent counterparty such as co-insurance and
reinsurance companies by utilising contracts and arrangements. We will retain accountability for
the outsourced risk and that outsourcing does not eliminate risk but only changes our risk profile.
The relevant business units shall be responsible for identifying and incorporating the risks arising
from such risk transfer arrangements in their risk registers. The business units shall also be
responsible for managing the resultant risks and reviewing the risk transfer arrangement to ensure
that it is still capable of mitigating the initial risk.
d) Risk Tolerance (Acceptance)
Under the risk tolerance approach, we would accept the risks inherent in our transactions and
would not take any action to change the likelihood and/or impact of the risks. We shall adopt this
approach where the risk is low and the cost of further managing the risk exceeds the potential
benefit should the risk crystallize.
d) Reinsurance Treaty Cover
We have arranged very adequate reinsurance treaties to enable us accommodate risks with high
necessary support in the event of large claims. Our treaties are arranged by UAIB RE and placed
with a consortium of reputable reinsurance companies.
The types of re-insurance on NEM Treaty are:
1) Quota share
2) Surplus
3) Excess of loss
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 90
Financial Risk Management Policy
1) Quota share This is the simplest type of Re-insurance whereby a Reinsurer agrees to reinsure a fixed proportion of
every risk accepted by the ceding company, sharing proportionately in all losses and receiving in the
same proportion of all direct net premium, less the agreed reinsurance commission.
2) Surplus Under this arrangement the ceding company can retain a risk up to the level of its agreed Retention
amount. The proportion of the risk which is beyond the Retention amount is then ceded into the
Surplus treaty and reinsurer receives a proportionate share of the premium, less reinsurance
commission.
3) Excess of Loss This arrangement protects the ceding company against a loss where the ceding company's claims
liability exceeds its retention.
Concentration of insurance risk
The Company monitors concentrations of insurance risk by product and sector. An analysis of
concentrations of insurance risk at 31 December 2014 and 2013 for Gross Premiums written is set
out below:
(a) By product 31-Dec 31-Dec
2014 2013
N'000 N'000
Motor business 3,134,554 2,663,837
Fire & Property 1,495,467 1,343,594
Marine & Aviation 1,301,437 1,187,072
General Accident 1,454,225 1,136,503
C.A.R & Engineering 732,067 406,199
Energy business 1,330,534 1524,120
9,448,284 8,261,325
(b) By sector 31-Dec 31-Dec
2014 2013
N’000 N'000
Energy 1,051,662 836,046
Financial Services 3,138,675 2,654,364
IT/Telecoms & Other Corp. 2,526,522 2,147,945
Manufacturing 1,944,093 1,931,497
Retail 787,332 660,906
9,448,284 8,261,325
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 91
Financial Risk Management Policy (Cont’d)
Financial risk management
NEM Insurance Plc operates in a highly complex and competitive environment driven by the need to
meet all claim obligations, maximize returns to shareholders and comply with all statutory and
regulatory requirements. The Company is in the business of managing risks for public and private
entities as well as individuals. In the ordinary course of its business activities, the Company is exposed
to a variety of financial risks, including currency risk, liquidity risk, credit risk, country risk and market
risk as well as operational and compliance risks.
Risk is the level of exposure to opportunity, threat and uncertainty – that should be identified,
understood, measured and effectively managed, in the course of executing the Company’s business
strategies. In terms of opportunity, we see risk in relation to returns in that the greater the risk, the
greater the potential return. We therefore manage risk by using several methods to maximize the
positive aspects within the constraints of our risk appetite and business environment.
In terms of threat, we see risk as the potential for the occurrence of negative events such as financial
loss, fraud, damage to reputation or public image and loss of competitive advantage. We therefore
manage risk in this context by introducing risk management techniques to reduce the probability of
these negative events occurring without incurring excessive costs or stifling the initiative, innovation, and
entrepreneurial flair of our staff.
In terms of uncertainty, we see risk as the distribution of all possible outcomes both positive and
negative. In this context, we manage uncertainty by seeking to reduce the variance between anticipated
outcomes and actual results.
RISK MANAGEMENT PHILOSOPHY AND CULTURE
Our risk management philosophy and culture consist of our shared beliefs, values, attitudes and
practices with respect to how we consider risk in everything we do, from strategy development and
implementation to every aspect of our day-to-day activities.
“We shall underwrite all profitable transactions that we consider prudent and meets our risk appetite
and profile. We shall take calculated and informed risk while seeking to maximize returns and
shareholders’ value. We shall continuously evaluate the risk and rewards inherent in our business
transactions, from strategy development and implementation to our day-today activities. We believe that
to achieve this objective would require a good understanding of the risks we are taking and the effective
management of these risks both at the individual and enterprise levels”.
We therefore manage and control risk by introducing new risk management techniques, enhancing
existing risk management practices and placing a greater emphasis on cooperation among departments
to comprehensively manage the Company’s full range of risks as a whole. The Company proactively
formulates strategies and plans that enable the identification and management of
events/factors/occurrences that impact our ability to attain our business and strategic objectives.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 92
Financial Risk Management Policy (Cont’d)
Risk Management Strategy The Company adopts the following strategy for managing risks:
i. Establish a clearly defined risk management process for identifying, measuring, controlling, monitoring and
reporting risks.
ii. Entrench and incorporate risk management principles in all functions across the Company
iii. Comprehensive implementation and maintenance of our risk management framework
iv. Ensure good corporate governance practices
v. Board and senior management support to promote sound risk management
vi. Zero tolerance for non-compliance with risk and control procedures
vii. Avoid concentration of risk to any industry, market, sector or individual entity.
viii. Deployed a risk management systems to facilitate the effective management of risks
Short-term insurance contracts
For short-term insurance contracts, the Company funds the insurance liabilities with a portfolio of equity and debt
securities exposed to market risk. The following tables indicate the contractual timing of cash flows arising from
assets and liabilities included in the Company's ALM framework for management of short-term insurance contracts.
At 31 December 2014
Carrying amount N'000
No stated maturity
0 - 90 days
91 - 180 days
180 - 365 days
1 - 2 years > 2 years
Financial assets Cash &bank balances 451,739
451,739 -
Short Term Deposits 2,973,382
2,973,382
- Trade receivables 209,493
209,493
- Other Receivables 85,159
38,442
32,144
18,573
Debt securities 160,939
160,939
Equity securities
- quoted 665,837 665,837 - - - - -
- unquoted 1,473,798 1,473,798 - - - - -
6,089,858 2,139,635 3,789,286 - 32,144 - 179,512
Insurance liabilities Insurance Contract liability 4,444,126 - 4,444,126 - - - -
Reinsurance Asset (717,121) - (717,121) - - - -
3,727,005 - 3,727,005 - - - -
At 31 December 2013
Carrying amount N'000
No stated maturity
0 - 90 days
91 - 180 days
180 - 365 days
1 - 2 years > 2 years
Financial assets Cash &bank balances 891,370
891,370 -
Short Term Deposits 2,945,451
2,945,451 -
- Trade receivables 347,494
347,494 -
- Other Receivables 219,552
34,776 - 25,842
158,934
Debt securities 61,829 - - - - - 61,829
Equity securities
- quoted 1,055,737 1,055,737 - - - - -
- unquoted 953,528 953,528 - - - - -
6,474,961 2,009,265 4,219,091 - 25,842 - 220,763
Insurance liabilities Insurance Contract liability 4,419,597 - 4,419,597 - - - -
Reinsurance Asset (65,496) - (65,496) - - - -
4,354,101 - 4,354,101 - - - -
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 93
Financial Risk Management Policy (Cont’d) The sensitivity analysis below is based on a change in one assumption while holding all other
assumptions constant. In practice this is unlikely to occur, and changes in some of the assumptions
may be correlated - for example, change in interest rate and change in market values.
(a) Sensitivity analysis - interest-rate risk 31 December 2014 (N'000)
Assets Carrying amount Fixed rate Floating rate
Non-interest bearing
Cash and cash equivalent 3,425,121 - - -
Trade receivables 209,493 - - 209,493
Reinsurance Assets 717,121 - - 717,121
Debt securities 160,939 160,939 - -
4,512,673 160,939 - 926,614
Liabilities
Non-life insurance liability 4,444,126 - - 4,444,126
Other liabilities 334,986 - - 334,986
Bank Overdraft 4,364
4,364
Debt security in issue - - - -
4,783,476 - 4,364 4,777,912
31 December 2013 (N'000)
Assets Carrying amount Fixed rate Floating rate
Non-interest bearing
Cash and cash equivalent 3,836,821 - - -
Trade receivables 347,494 - - 347,494
Reinsurance Assets 65,496 - - 65,496
Debt securities 61,829 61,829 - -
4,311,640 61,829 - 412,991
Liabilities
Non-life insurance liability 4,419,597 - - 4,419,597
Other liabilities 347,047 - - 347,047
Bank Overdraft 9,848
9,848
Debt security in issue - - - -
4,776,492 - 9,848 4,766,644
The impact on the Company's profit before tax if interest rates on financial instruments held at
amortised cost or at fair value had increased or decreased by 100 basis points, with all other
variables held constant are considered insignificant. This is due to the short term nature of the
majority of the financial assets measured at amortised cost.
(b) Sensitivity analysis - equity risk
The sensitivity analysis for equity price risk illustrates how changes in the fair value of equity
securities will fluctuate because of changes in market prices, whether those changes are caused by
factors specific to the individual equity issuer, or factors affecting all similar equity securities traded
in the market.
Management monitors movements of financial assets and equity price risk movements by
assessing the expected changes in the different portfolios due to parallel movements of a 10%
increase or decrease in the Nigeria All share index with all other variables held constant and all the
Company’s equity instruments in that particular index moving proportionally.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 94
Credit Risk
The Company’s assets are exposed to credit risk, which is the risk that a counterparty will be
unable to pay amounts in full when due. The Company’s maximum exposure to credit risk is
reflected in the carrying amounts of financial assets on the balance sheet. The main sources of the
Company’s incoming cash flow are the amounts of receivables from insured and reinsurers. The
Company manages the credit risk arising from such sources by aging and monitoring the
receivables. The Company conducts the review of current and non-current receivables on a monthly
basis and monitors the progress in the process of collection of the premiums in accordance with
the procedure stated in the Company’s internal control policy. The non-current receivables are
checked and assessed for impairment.
The overdue premiums are considered by the Company on case by case basis. If an overdue
premium is recognized by the Company as uncollectible, a notification is sent to the policyholder
and the insurance agreement is cancelled from the date of notification. The premium related to the
period from the beginning of insurance cover until the date of cancellation of the insurance
agreement is considered a bad debt, and further steps right up to legal actions are planned with
regard to that bad debt.
Other areas where the Company is exposed to credit risk are:
• amounts due from reinsurers for the insurance risks ceded;
• amounts due from insurance intermediaries.
• amounts due from insured
• amounts of deposits held in banks and correspondent accounts
NEM is exposed to the following categories of credit risk;
Direct Default Risk - risk that NEM will not receive the cash flows or assets to which it is entitled
because brokers, clients and other debtors which NEM has a bilateral contract defaults on their
obligations.
Concentration Risk – is the exposure to losses due to excessive concentration of business activities
to individual counterparties, groups of individual counterparties or related entities, counterparties
in specific geographical locations, industry sectors, specific products, etc
Counterparty Risk - the risk that a counterparty is not able or willing to meet its financial obligations
to the Company as they fall due.
Financial Risk Management Policy (Cont’d)
As at 31 December 2014, the market value of quoted securities held by the Company is N 665
million (2013: N 1.05 billion). If the all share index of the NSE moves by 100 basis points at 31
December 2014, the effect on profit or loss would have been N 6.65 million (2013: N 10.5 million).
The Company holds a number of investments in unquoted securities with a market value of N
1.47 billion as at 31 December 2014 (2013: N 954 million) of which investment in MTN Nigeria Ltd
is the significant holding. This investment was valued at N 1.15 billion (cost N 1.15 billion) (2013: N
741 million, cost N 741 million) as at 31 December 2014. MTN Nigeria is a private limited liability
company whose principal activity is the provision of mobile telecommunications service using the
Global System for Mobile Communications (GSM) platform.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 95
Financial Risk Management Policy (Cont’d)
Credit Risk Principles
The following principles underpin the Company’s credit risk management policies:
Individuals who create the credit risk and those who manage the risk clearly understand the
nature of the risk;
The Company’s credit risk exposure is within the limits as approved by the Board;
Credit decisions are clear and explicit and in line with the business strategy and objectives
as approved by the Board;
Credit risk exposures shall be within the defined limits to ensure there is no excessive
concentration and that credit control procedures for managing large exposures and related
counterparties are adhered to;
Appropriate classification of credit risk through periodic evaluation of the collectability of
risk assets; and
Adequate loan loss provisioning to ensure that provisions or allowances are made to absorb
anticipated losses.
The expected payoffs more than compensate for the credit risks taken by the Company;
Credit risk taking decisions are explicit and clear;
There shall be clear delegated authorization limits for transactions;
Sufficient capital as a buffer is available to take credit risk;
The Company’s credit risk appetite shall be in line with its strategic objectives, available resources and
the provisions of NAICOM Operational Guidelines. In setting this appetite/tolerance limits, NEM takes
into consideration its corporate solvency level, risk capital and liquidity level , credit ratings, level of
investments, reinsurance and coinsurance arrangements, and nature and categories of its clients. In
setting the credit limit, a few conditions were put into consideration and these actually assisted in the
selection of the brokers that made this list. From the records available for this purpose, the conditions
used as yardstick are as follows:
1. Speed of payment;
2. Relationship management;
3. Volume of business and
4. Size of the accounts
From the above conditions, the few Insurance Brokers identified have been categorized into three
(3) groups namely A, B and C. Maximum exposure to credit risk before collateral held or other
credit enhancements:
Maximum exposure
31-Dec 31-Dec 31-Dec
2014 2013 2012
N'000 N'000 N'000
Cash and bank balances 451,739 891,370 547,907
Loans and receivables - Trade receivables 209,493 347,494 887,009
- Other Receivables and Prepayments 89,159 219,552 224,150
Reinsurance assets 717,121 65,496 92,512
Debt securities 160,939 61,829 46,829
Total assets bearing credit risk 1,628,451 1,585,741 1,798,407
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 96
Financial Risk Management Policy (Cont’d)
Liquidity Risk Liquidity risk is the inability of a company to meet obligations on a timely basis. It is also the inability of a company
to take advantage of business opportunities and sustain the growth target in its business strategy due to liquidity
constraints or difficulty in obtaining funding at a reasonable cost. Our liquidity risk exposure is strongly related to our
credit and investment risk profile. The Company is exposed to daily calls on its available cash resources from claims
to be paid.
At 31 December 2014, management does not believe the current maturity profile of the Company lends itself to any
material liquidity risk, taking into account the level of cash and deposits and the nature of its securities portfolio at
year end, as well as the reinsurance structure of the Company’s insurance portfolio. The Company’s bank deposits
and trading securities are able to be released at short notice when and if required. The possible payments of
significant insurance claims are secured by the reinsurance contracts’ clause that allows a cash call from the
reinsurers for the losses exceeding a certain amount based on line of business.
Sources of Liquidity Risk
Our liquidity risk exposure depends on the occurrence of other risks. Some of the factors that could lead
to liquidity risks are:
Reputational loss or rating downgrade, leading to inability to generate funds;
Failure of insurance brokers and clients to meet their premium payment obligation as and when
due;
Lack of timely communication between Finance &Investment Division and Claims Department
resulting in mismatch of funds;
Investment in volatile securities; and
Frequency and severity of major and catastrophic claims.
Liquidity Risk Management Strategy
The Company’s strategy for managing liquidity risks are as follows:
Maintain a good and optimum balance between having sufficient stock of liquid
assets, profitability and investment needs;
Ensure strict credit control and an effective management of account receivables;
Ensure unrestricted access to financial markets to raise funds;
Develop and continuously update the contingency funding plan;
Adhere to the liquidity risk control limits; and
Communicate to all relevant staff on the liquidity risk management objectives and
control limits.
Liquidity Risk Appetite/Tolerance
Our liquidity risk appetite is defined using the following parameters:
Liquidity gap limits;
Scenario and Sensitivity Analysis
Liquidity Ratios such as:
- Claims ratio
- Cash ratio
- Quick ratio
Receivable to capital ratio
Technical provision to capital ratio
Maximum exposure for single risk to capital ratio
Maximum exposure for a single event to capital ratio
Retention rate
Re-insurance receipts to ceded premium ratio
Solvency margin
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 97
Financial Risk Management Policy (Cont’d)
(b) Financial instruments measured at fair value
IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those
valuation techniques are observable or unobservable. Observable input reflect market data
obtained from independent sources; unobservable inputs reflect the Group's market
assumptions. These two types of inputs have created the following fair value hierarchy:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3: Inputs for the asset or liability that are not based on observable market data
(unobservable inputs)
This hierarchy requires the use of observable market data when available. The Group
considers relevant and observable market prices in its valuations where possible.
At 31 December 2014 (N'000) Level 1 Level 2 Level 3 Total
Financial assets
Quoted equity investments 665,837 - - 665,837
Unquoted equity investments - 1,473,798 - 1,473,798
Debt securities 160,939
160,939
826,776 1,473,798 - 2,300,574
At 31 December 2013 (N'000) Level 1 Level 2 Level 3 Total
Financial assets
Quoted equity investments 1,055,737 - - 1,055,737
Unquoted equity investments - 953,528 - 953,528
Debt securities 61,829
61,829
1,117,566 953,528 - 2,071,094
(c) Fair valuation methods and assumptions (i) Cash and bank balances
Cash and bank balances represent cash held with other banks. The fair value of these balances is their carrying
amounts.
(ii) Equity securities
The fair values of quoted equity securities are determined by reference to quoted prices (unadjusted) in active
markets for identical assets. The fair value of the unquoted equity securities was determined on a net asset value
basis.
(iii) Debt securities
Treasury bills represent short term instruments issued by the Central bank of the jurisdiction where the Company
operates. The fair value of treasury bills and bonds at fair value are determined with reference to quoted prices
(unadjusted) in active markets for identical assets. The estimated fair value of bonds (asset or liability) at
amortised cost represents the discounted amount of estimated future cash flows expected to be received.
Expected cash flows are discounted at current market rates to determine fair value.
(iv) Other assets
Other assets represent monetary assets which usually have a short recycle period and as such the fair values of
these balances approximate their carrying amount.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 98
Capital management Policy
NEM has over the years been deploying capital from earnings and additional equity funds to
support growth in business volumes while striving to meet dividend commitments to shareholders.
To be able to continue to generate and deploy capital both to grow core businesses and reward
shareholders, there is need for the Company to execute the right strategy, the right growth
dynamics, the right cost structure and risk discipline as well as the right capital management.
NEM’s capital management strategy focus on the creation of shareholders’ value whilst meeting
the crucial and equally important objective of providing an appropriate level of capital to protect
stakeholders’ interests and satisfy regulators.
The Company’s objectives when managing capital are as follows:
To ensure that capital is, and will continue to be, adequate for the safety, soundness and
stability of the Company;
To generate sufficient capital to support the Company’s overall business strategy;
To ensure that the Company meets all regulatory capital ratios and the prudent buffer
required by the Board;
To ensure that the average return on capital over a 3 -5 years performance cycle is
sufficient to satisfy the expectations of investors;
To maintain a strong risk rating;
To ensure that capital allocation decisions are optimal, considering the return on economic
and regulatory capital;
To determine the capital required to support each business activity based on returns
generated on capital to facilitate growth/expansion of existing businesses (i.e. capital
allocation);
To establish the efficiency of capital utilization.
Minimum Capital Requirement The Company complied with the minimum capital requirement of N3billion for non-life operations.
This is shown under Shareholders' Fund in the Statement of Financial Position.
Solvency Status
The Company met the criteria for solvency margin as stated in section 24(1) of the Insurance Act
2003, the solvency margin maintained is N 2,928,195,000
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 99
Capital Management Policy (Cont’d)
Solvency Margin
2014
ADMISSIBLE ASSETS N'000 N'000
Cash and cash equivalents
3,425,121
Financial Assets
2,914,575
Trade Receivables
209,493
Reinsurance assets
717,121
Deferred Acquisition Cost
442,473
Other Receivables & Prepayments
13,384
Investment Property
485,830
Statutory Deposits
340,112
Property & Equipment
2,175,775
A
10,723,884
ADMISSIBLE LIABILITIES
Insurance Liabilities 4,444,126
Trade payables 9,733
Other payables 137,406
Book Overdraft 4,364
Retirement Benefit Obligations 187,848
Income tax payable 12,212
B
(4,795,689)
Actual Solvency (A - B) C
5,928,195
Net Premium
8,198,732
Solvency Margin
Limit of Net premium i.e 15% of Net Premium
1,229,810
Minimum of paid up Capital - D
3,000,000
Since C>D - Positive Solvency Margin - (C-D)
2,928,195
Percentage of solvency
49%
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 100
Statement of Value Added- Group
2014
2013
N'000
%
N'000
%
Gross Premium Income: Local 9,384,396
7,250,821
Foreign 389,154
540,140
Other Income: Local 657,433
426,044
Foreign 63,782
432,211
10,494,765
8,649,217
Bought in Services: Local (7,175,942)
(6,598,246)
Foreign (426,245)
(564,557)
Value Added 2,892,578
100
1,486,414
100
Applied as follows:
Employees Salaries and other employees benefits 1,012,337
35
794,802
53
Provider of Capital Dividend to Shareholder 633,660
22
-
-
Government Taxation 241,451
8
149,350
10
Retention and Expansion Depreciation 113,470
4
147,201
10
Contingency reserves 312,088
11
262,793
18
Retained profits for the year 579,572
20
132,269
9
Value Added 2,892,578
100
1,486,414
100
Value added represents the additional wealth the company has been able to create by its own and its employees’ efforts. This statement shows the allocation of the wealth between employees, shareholders, government and that retained for the future creation of more wealth.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 101
Statement of Value Added- Parent
2014
2013
N'000
%
N'000
%
Gross Premium Income 9,384,396
7,250,821
Other Income 657,433
426,044
10,041,829
7,676,865
Bought in Services (7,259,465)
(6,340,410)
Value Added 2,782,364
100
1,336,455
100
Applied as follows:
Employees Salaries and other employees benefits 942,217
34
698,303
52
Provider of Capital Dividend to Shareholder 633,660
23
-
-
Government Taxation 232,905
8
137,981
10
Retention and Expansion Depreciation 100,063
4
131,262
10
Contingency reserves 301,435
11
247,840
19
Retained profits for the year 572,084
21
121,069
9
Value Added 2,782,364
100
1,336,455
100
Value added represents the additional wealth the company has been able to create by its own and its
employees' efforts. This statement shows the allocation of the wealth between employees, shareholders,
government and that retained for the future creation of more wealth.
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 102
Financial Summary – Group
Dec. 2014 Dec. 2013 Dec. 2012 Dec. 2011 Dec. 2010 Assets N'000 N'000 N'000 N'000 N'000 Cash and Cash Equivalents 3,446,995 3,865,965 3,125,679 2,427,729 1,773,360
Trade Receivable 209,493 496,007 981,032 575,766 546,805
Reinsurance Assets 717,121 65,496 129,501 93,983 140,264
Deferred Acquisition Cost 482,385 513,387 325,944 247,923 184,468
Financial Assets 3,161,059 2,624,638 1,350,967 1,066,499 1,475,884
Investment Properties 485,830 468,974 459,813 483,120 483,120
Intangible Assets 5,627 18,851 27,085 13,875 13,500
Property and Equipment 2,213,264 1,284,191 828,586 705,922 598,215
Other Receivables and Prepayments 137,232 278,712 237,634 281,683 66,990
Statutory Deposit 340,112 349,200 342,879 414,839 399,759
Income Tax Credit - 80,456 - - -
Total Assets 11,199,117 10,045,877 7,809,120 6,311,339 5,682,364
Liabilities
Trade Payables 9,733 48,510 23,367 37,966 14,808
Other Payables 175,213 167,874 168,727 - -
Current Income Tax Liabilities 15,212
21,949 - 129,122
Deferred Tax Liability 280,913 166,062 106,671 106,671 108,992
Retirement Benefit Obligations 187,848 170,838 160,205 113,033 -
Insurance Contract Liabilities 4,660,059 4,787,052 3,027,556 1,905,361 1,258,119
Bank Overdraft 4,364 9,848
Total liabilities 5,333,341 5,350,184 3,508,476 2,163,030 1,511,041
Net Assets 5,865,776 4,695,693 4,300,644 4,148,310 4,171,323
Equity
Issued Share Capital 2,640,251 2,640,251 2,640,251 2,640,251 2,640,251
Share Premium 272,551 272,551 272,551 272,551 272,551
Other Reserves-employee benefit actuarial
surplus 68,178 45,562 2,141 - -
Available-For-Sale Reserve 329,232 9,978 53,411 94,503 106,785
Contingency Reserve 1,995,456 1,696,986 1,434,193 1,147,115 850,415
Retained Earnings 560,109 30,366 (101,902) (6,110) 301,321
Shareholders' Fund 5,865,778 4,695,693 4,300,644 4,148,310 4,171,323
Gross Premium Written 9,836,596 8,933,345 9,652,556 8,381,196
Gross premiums income 9,773,550 7,790,962 9,335,182 7,817,268
Net Premium income 8,545,534 7,439,613 9,130,771 7,166,438
Other Revenue 721,215 834,221 496,549 275,557
Total Revenue 9,266,749 8,273,835 9,627,321 7,441,995
Claims expense (2,655,818) (3,070,271) (2,934,435) (1,810,688)
Impairment (68,852) (355,627) (1,960,905) (1,676,541)
Other Expenses (4,775,306) (4,303,527) (4,066,735) (3,567,662)
Total Benefits, Claims and Other Expenses (7,499,976) (7,729,425) (8,962,075) (7,054,891)
Profit Before Tax 1,766,774 544,410 665,246 387,104
Income tax expense (241,451) (149,350) (209,934) (133,810)
Profit For the Year 1,525,323 395,060 455,312 253,294
Other Comprehensive Income for the year, net
of tax 341,870 (12) (38,951) (12,282)
Total Comprehensive Income for the year, net
of tax 1,867,193 395,048 416,361 241,012
Basic Earnings Per Share (Kobo) 29 7 9 5
NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014
NEM Insurance 2014 Page 103
Financial Summary – Parent
Dec. 2014 Dec. 2013 Dec. 2012 Dec. 2011 Dec. 2010
Assets N'000 N'000 N'000 N'000 N'000 Cash and Cash Equivalents 3,425,121 3,836,821 2,947,856 2,371,375 1,733,238
Trade Receivable 209,493 347,494 887,009 569,480 509,524
Reinsurance Assets 717,121 65,496 92,512 83,937 131,497
Deferred Acquisition Cost 442,473 472,347 298,151 228,758 164,280
Financial Assets 2,914,575 2,373,132 1,350,967 1,066,499 1,475,884
Investment in Subsidiary 193,308 175,396 175,396 175,396 175,396
Investment Properties 485,830 468,974 459,813 483,120 483,120
Intangible Assets 4,459 15,772 27,085 13,875 13,500
Property and Equipment 2,175,775 1,245,149 797,208 671,675 566,865
Other Receivables and Prepayments 89,159 219,552 224,147 274,021 58,565
Statutory Deposit 320,000 320,000 320,000 320,000 320,000
Income Tax Credit - 87,745
- -
Total Assets 10,977,313 9,627,878 7,580,144 6,258,136 5,631,869
Liabilities Trade Payables 9,733 48,510 1,532 21,798 12,744
Other Payables 137,406 127,699 161,751 - -
Current Income Tax Liabilities 12,212
14,164 - 129,226
Deferred Tax Liability 280,913 166,062 106,671 106,671 108,992
Retirement Benefit Obligations 187,848 170,838 160,205 113,033
Insurance Contract Liabilities 4,444,126 4,419,597 2,819,395 1,831,307 1,179,225
Bank Overdraft 4,364 9,848 - - -
Total liabilities 5,076,601 4,942,554 3,263,718 2,072,809 1,430,187
Net Assets 5,900,712 4,685,324 4,316,427 4,185,328 4,201,682
Equity Issued Share Capital 2,640,251 2,640,251 2,640,251 2,640,251 2,640,251
Share Premium 272,551 272,551 272,551 272,551 272,551
Other Reserves-employee benefit actuarial
surplus 68,178 45,562 2,141 94,503 106,785
Available-For-Sale Reserve 329,232 9,978 53,411 - -
Contingency Reserve 1,966,395 1,664,960 1,417,120 1,137,642 852,496
Retained Earnings 624,106 52,022 (69,047) 40,381 329,599
Shareholders' Fund 5,900,714 4,685,324 4,316,427 4,185,328 4,201,682
Gross Premium Written 9,448,284 8,261,325 9,246,217 8,178,886
Gross premiums income 9,384,396 7,250,821 9,043,882 7,619,304
Net Premium income 8,198,732 6,927,329 8,865,670 7,001,803
Other Revenue 657,433 795,286 478,655 249,864
Total Revenue 8,856,166 7,722,614 9,344,325 7,251,667
Claims expense (2,568,166) (2,965,052) (2,879,691) (1,795,573)
Impairment - (225,302) (1,960,905) (1,676,541)
Other Expenses (4,547,916) (4,025,370) (3,866,327) (3,452,292)
Total Benefits, Claims and Other Expenses (7,116,083) (7,215,725) (8,706,923) (6,924,406)
Profit Before Tax 1,740,084 506,889 637,401 327,261
Income tax expense (232,905) (137,981) (203,326) (125,583)
Profit For the Year 1,507,179 368,908 434,075 201,678
Other Comprehensive Income for the
year, net of tax 341,870 (12) (38,951) (12,282)
Total Comprehensive Income for the year,
net of tax 1,849,049 368,896 395,124 189,396
Basic Earnings Per Share 29 8 8 5