STRENGTH - Qatar General Insurance · Nasser Bin Ali Bin Saud Al Thani Chairman and Managing...

2016ANNUALREPORT

STRENGTHWILL PREVAIL

STRENGTHWILL PREVAIL

Hi s H ighness She i kh Tam im b in Hamad A l Than iEmi r o f the State of Qatar

Qatar General Insurance and Reinsurance Company PJSC | Annual Report 2016

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TABLE OF CONTENTS

Strategic report

Financial highlightsCredit ratingBoard of Director ’s reportGroup Chief Executive Officer ’s Statement

Performance review

Our GroupQatar General Insurance & Reinsurance Company PJSCGeneral Takaful Company W.L.L.Qatar General Holding Company W.L.L.General Real Estate Company W.L.L.Mozoon Real Estate Company W.L.L.General Company for Water and Beverages W.L.L.World Trade Center – Qatar W.L.L. Orientals Enterprises W.L.L.Human resourcesCorporate social responsibility

Governance

Risk management reportBoard of DirectorsCorporate governance reportFatwa and Shari ’a Supervisor y Board report

Consolidated financial statements

Independent Auditor ’s reportConsolidated statement of financial positionConsolidated statement of profit or lossConsolidated statement of comprehensive incomeConsolidated statement of changes in equityConsolidated statement of cash flowsNotes to the consolidated financial statements

35712

1415171921232425272931

33373946

48545658596163

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FINANCIAL HIGHLIGHTS

QR ‘000QR ‘000

20152016Consolidated Statement of Financial Position

1,454,2921,481,482Liquid assets

7,486,3987,590,507Total investments

9,410,2719,551,375Total assets

1,101,5801,038,757Total gross technical reserves

241,710259,034Net technical reserves

6,290,2456,367,937Equity attributable to equity holders of the Parent

3,117,8173,142,316Total liabilities

QR ‘000QR ‘000

20152016Consolidated Statement of Cash Flows

183,248190,932Net cash flows from operating activities

(183,646)(97,581)Net cash flows used in investing activities

(273,919)(22,025)Net cash flows used in financing activities

229,250300,576Cash and cash equivalents at 31 December

QR ‘000QR ‘000

20152016Consolidated Statement of Profit or Loss

627,256629,949Gross Written Premiums

200,706214,770Net Written Premiums

187,161203,661Net Earned Premiums

245,916236,534Investment Income

1,226,961637,525Total revenue

(320,034)(381,298)Total expenses

925,804258,254Profit for the year

925,709219,341Profit attributable to equity holders of the parent

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KEY INDICATORS

1.510.58

DIVIDEND PER SHARE

20152016

EARNINGS PER SHARE

20152016

2.51

TOTAL LIABILITIES TO TOTAL EQUITY

20152016

50%49%

LIQUID ASSETS TO NET TECHNICAL RESERVES

20152016

602%

572%

RETURN ON AVERAGE EQUITY

20152016

15%

4%

RETURN ON AVERAGE ASSETS

20152016

3%

10%

NET COMBINED RATIO

20152016

92%90%

NET LOSS RATIO

20152016

56% 59%

1.5

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A - (Excellent)FINANCIAL STRENGTH RATING

a -ISSUER CREDIT RATING

stableOUTLOOK FOR BOTH RATINGS


CREDIT RATING

For the IVth consecut ive year, QGIRCO has maintained its f inancial st rength rat ing and issuer credit rat ing. Once again, th is is a ref lect ion of our st rong r isk-adjusted capital izat ion, sound track record of operat ing per formance and enhanced r isk management capabi l i t ies.

CAPITAL STRENGTH

Our st rong capital posit ion has once again been maintained and wi l l cont inue to support the steady growth of the company. The coverage rat io of the avai lable economic capital compared to the requi red r isk based capital as at 31 December 2016 stood at 294% as per adopted economic capital model.

Our attent ion to r isk exposure and f requent analys is of our s i tuat ion has been enhanced with improved systems spanning across the Group, ensur ing we maintain suf f ic ient l iquidity to meet our insurance claims obl igations.

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A solid track record and healthy capital base puts us in a strong position to further our growth

in 2017.

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THE BOARD OFDIRECTOR’S REPORT

Dear Shareholder,

Peace and blessings of Allah be upon you

I am del ighted to present our Annual Report for the year ended 31 December 2016. This report provides an over view of the Group’s companies per formance and achievements throughout the year and thei r plans for the future.

Nasse r B in A l i B in Saud A l Than i

Chairman and Managing Di rector

While many companies were hit by the chal lenges

of 2016’s f inancial cl imate, we stood st rong and we

welcome 2017 with a posit ive out look.

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The Company per formance

While international and local markets were affected by the prevai l ing condit ions of oi l pr ices, which consequent ly had its impact on the insurance industr y which, s imi lar to the other industr ies, was af fected with these condit ions, our long histor y in the region and st rong capital base ensured that we fared wel l . I am happy to report a good result across the companies of the Group. We achieved a net prof i t of QR 258 mi l l ion for the year ended 31 December 2016. We managed to achieve a 42% growth in our net prof i t f rom previous year after excluding the revaluation gains of investment propert ies.

We proudly retained our st rong hold and outstanding posit ion in the insurance market with a gross wr i t ten premium of QR 838 mi l l ion ( including Takaful business) at year end, (2015: QR 859 mi l l ion) , which is a great achievement consider ing the highly unstable economic condit ions.

Our investment per formance also achieved a posit ive outcome with the Group achieving an investment income of QR 264 mi l l ion for the year ended 31 December 2016 after excluding the revaluation gains of investment propert ies (2015: QR 231 mi l l ion) . The total assets for the Group

increased to QR 9.6 bi l l ion as at 31 December 2016 compared to QR 9.4 bi l l ion as at 31 December 2015 pr imar i ly result ing f rom spending on the current projects and investment property revaluation.

As of 31 December 2016, our total equity stood at QR 6.4 bi l l ion an increase of 2% f rom previous year. This increase establ ishes that our st rategy on the management of our real estate port fol io is cont inuing to earn revenues and increasing our total l iquidity. We are maintaining our focus towards convert ing our non-income-producing land into income producing holdings.

The Board of Di rectors propose a cash dividend of (QR 1.50) per share and to approve the balance sheet and prof i t and loss account for the f inancial year ended 31/12/2016.

I t is noteworthy that our f inancial st rength and capital rat ings remain st rong with A.M. Best af f i rming our Financial Strength Rating of “A-” (Excel lent) and the Long-Term Issuer Credit Rating of “a-” . The rat ings ref lect the Company ’s st rong r isk-adjusted capital isat ion, enhanced r isk management capabi l i t ies and track record of sol id operating per formance.

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Welcoming international experts to Qatar

Towards the end of 2016, Qatar General Insurance & Reinsurance Company had the honour of host ing the annual IMIA Conference and of being the f i rst and only Arab countr y to host such an event. This esteemed event, br inging leaders and experts together, is held in high regard by the international engineer ing community.

Investing in people and innovation

People are what dr ives our business forward. Our “NextGen” Programme equips graduates and young profess ionals with the special ist sk i l l s in the insurance industr y. We have great conf idence in the high cal ibre of part icipants and thei r future with in the Group.

Our commitment to developing and mentor ing Qatar i talent has remained a key object ive, with Qatar izat ion forming an integral part of our overal l st rategy as we progress a greater number of qual i f ied Qatar i ’s into management level posit ions across the Group.

For our customers, we invested widely in smart technology that wi l l enable us to provide a much faster and cost ef f ic ient ser vices, by helping us to speed up claims procedures, internal communication, and making our ser vices avai lable via mobi le technology, ensur ing that we meet the needs of customers and remain operational ly ef f ic ient.

Maintaining strong governance

The sound governance f ramework adopted by QGIRCO supports our Group in the st rategic decis ions i t makes for long-term growth. There were no changes to our Board of Di rectors or members of our Execut ive Management Committee, Audit Committee, Risk Committee or Nomination and Remunerat ion Committee dur ing the year.

I am extremely grateful to al l the members of the Board and aforementioned committees for al l thei r hard work and dedication to the Group. Please take a moment to read through an abridged vers ion of our corporate governance report included at the end of th is report and in fu l l on our website.

The Company carr ies out i ts t ransactions with the related part ies through the approved Related Party Translat ion Pol icy Manual. This pol icy is based on the t ransparency and ful l disclosure pr inciples with regard to al l such t ransactions and partnerships with the related part ies such as Al Sar i Trading Company,

Trust International Group of Companies, and Falcon Readymix Company to achieve the best interest for the Company. Outlook

In l ight of our future vis ion of the Company ’s businesses, our main object ive is to expand in the insurance areas, focus on the future real estate projects current ly executed by the Company, enhance the Company ’s capabi l i t ies and increase the f inancial ef f ic iency in compl iance with international standards and cr i ter ia, and hence maintain the Company ’s leading posit ion in the insurance and real estate investment industr ies in Qatar bearing in mind the st rength of the Qatar i economy, which is one of the fastest growing economies.

All the appreciation and gratitude to those who stand behind our successes

Dear Shareholders,

In conclus ion, on behalf of the Board of Di rectors, I would l ike to convey our s incere appreciat ion and thanks to His Highness The Emir Sheikh Tamim Bin Hamad Bin Khal i fa Al Thani, for h is unst int ing leadership and support extended to our national companies and thei r dedicated efforts to advance our nation into a supreme economic landmark. Our thanks also go to His Excel lency Pr ime Minister and Inter ior Minister Sheikh Abdul lah Bin Nasser Bin Khal i fa Al Thani, His Excel lency Minister of Finance Mr. Al i Sher i f Al Emadi, His Excel lency Minister of Economy and Commerce Sheikh Ahmed Bin Jass im Bin Mohammed Al Thani, and His Excel lency Governor of Qatar Central Bank Sheikh Abdul la Bin Saud Al Thani for thei r cont inued support to our Group and to the industr y as a whole.

I would also l ike to express our unwaver ing grat i tude to our Shareholders and to our loyal customers for thei r support and big conf idence in us. We also record our appreciat ion in part icular to the Company ’s employees and senior management for al l thei r ef forts and dedication for the Company ’s progress and prosper i ty.

May Allah grant us success,

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Ghaz i Abu Nah l

Group Chief Execut ive Of f icer

GROUP CHIEF EXECUTIVE OFFICER’S STATEMENT

Review of the year

We have come through a chal lenging year st rong, stable and al igned to our v is ion. Our commitment as a Group to our long-term st rategy has enabled us to navigate through 2016 with a st rong capital base and managed growth.

Overal l , our per formance was as expected. The cash dividend per share of QR 1.50 for 2016 recommended by the Board demonstrates our abi l i ty to weather t r y ing condit ions through our long-term st rategy and foresight.

Education and communication

Insurance penetrat ion in Qatar remains low in comparison to the global average and as a leading provider i t is our responsibi l i ty to support in the education of customers on the needs and benef i ts of insurance, especial ly in a rapidly developing economy.

We have taken steps towards support ing customer understanding through the rebranding of our new Qatar General Insurance & Reinsurance Company website, our General Takaful Appl ication as wel l as in-branch market ing mater ials.

This knowledge wi l l become even more important moving forward as medical insurance becomes mandator y for al l res idents of Qatar. We are in a pr ime posit ion and have the requi red inf rast ructure in place to manage the increased demand for health-related insurance products in th is rapidly growing market.

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This year proved that we have a st rong

foothold with in the marketplace. Despite

market condit ions, we grew organical ly,

st rengthening our products, divers i fy ing

our port fol io and enjoying the rewards

of a robust st rategy.

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Developing the insurance landscape

Regulat ion and governance across the insurance sector cont inues to be a st rong focus as Qatar Central Bank remains committed to enhancing the f inancial regulator y envi ronment to meet international standards and best practice.

Regulator y reforms regarding the minimum capital requi rement, report ing requi rement, and pr icing are l ikely to force changes in the market. Larger, more establ ished companies with a substant ial capital base such as ourselves, are l ikely to remain in the market and we wi l l see the industr y mature.

We have been readi ly prepared for these changes with the implementation of new systems under r isk management, business intel l igence and operations over the past two years. Our overs ight across our Group continues to improve along with operational ef f ic iency and general best practice governance.

Outlook

Although chal lenging, we leave 2016 with a ver y posit ive att i tude as i t has presented us with a host of opportunit ies for the future.

The s lowdown in inf rast ructure expansion is expected to mit igate by the end of 2017 and we are l ikely to see an increased demand for insurance on large inf rast ructure projects. Overal l , we remain in a st rong posit ion to ser ve our countr y. Our att i tude to r isk remains cautious as we continue to divers i fy our products and ser vices across the Group, ut i l i s ing al l the sk i l l s we have invested in to maintain our stabi l i ty and ensure our future success.

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OUR GROUP

WORLD TRADE CENTER –

QATAR W.L.L.

ORIENTALS ENTERPRISES W.L.L.

QATAR GENERAL INSURANCE &

REINSURANCE COMPANY PJSC

MOZOON REAL ESTATE

COMPANY W.L.L

QATAR GENERAL HOLDING

COMPANY W.L.L.

GENERAL COMPANY FOR WATER

AND BEVERAGES W.L.L.

GENERAL REAL ESTATE

COMPANY W.L.L.

GENERAL TAKAFUL

COMPANY W.L.L.

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QATAR GENERAL INSURANCE & REINSURANCE COMPANY PJSC

For over 36 years Qatar General Insurance & Reinsurance Company (QGIRCO) has been providing individuals, fami l ies and businesses with exceptional and innovative insurance solut ions. The company ’s convent ional insurance expert ise has enabled them to become one of the most f inancial ly st rong and trusted providers in the region, with a major i ty share of Qatar ’s rapidly growing customer base.

Qatar General Insurance & Reinsurance Company leads the way in innovation and education on r isk management and loss prevent ion. They of fer a wide range of market- leading insurance products that have been tai lored to the needs of the local market.

Overview

While external envi ronmental condit ions such as the drop in oi l pr ices and the stagnation of inf rast ructure development brought a degree of uncertainty to 2016, the economy ’s near-to-medium out look remains st rong, and our insurance business continued to thr ive.

Dur ing the year, we remained true to our enterpr ise st rategy and focused on wr i t ing more prof i table business. As such,

our growth did s low down dur ing 2016 which was expected and intent ional for long-term benef i t.

New legislation brings new opportunities

2016 was a year of change to the local insurance market. In Apr i l , Qatar Central Bank int roduced the need to al ign pol icies and procedures with international standards, giv ing customers greater peace of mind when safeguarding thei r business and fami ly wel lbeing. Whi le midway through the year, the UAE Insurance Author i ty cal led for a uni f ied motor pol icy, so that al l motor pol icies f rom 1 Januar y 2017 wi l l have common standard coverages. The new regulat ion assures the protection of the r ights of both the pol icyholders and shareholders equal ly f rom potent ial future r isk. Although we foresee an increase in competit ion, the regulat ion al lows insurance companies the f reedom to offer f lex ible pr icing based on the accident histor y of each individual customer. I t further enables the insurance sector to increase i ts contr ibut ion to the GDP and support the growth in a st ronger, more t ransparent and sophist icated regulator y envi ronment. Another change to legis lat ion that di rect ly

Jama l Abu Nah l

Chief Execut ive Of f icer

We have continued to st rengthen our market posit ion and divers i fy

our product of fer ing thereby reinforcing an enviable reputat ion in the

insurance sector.

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impacts our business is the state-wide medical scheme, SEHA, which cal ls for employers to ensure that thei r employees are provided with medical insurance. Our Medical and Li fe department have been preparing for the inf lux of new customers by hi r ing key personnel such as medical underwr i t ing special ists and claims management teams. We are optimist ic about this new opportunity as we bel ieve that our large network of branches puts us in an advantageous posit ion.

Enhancing customer experiences

Customer sat is fact ion enables us to bui ld our business and fu l f i l our v is ion to lead the way. We understand that with advanced technology customers can easi ly swap insurance provider in favour of a better pr ice, ser vice or more convenient access.

In 2016, we rest ructured our motor claims department to provide a higher qual i ty and much more ef f ic ient customer ser vice exper ience. In addit ion, we launched our new website that al lowed us to tel l our company ’s stor y with clar i ty, and provide clear, compel l ing information about the products and ser vices we offer.

Bringing international experts to the region

In October, we were extremely proud to successfu l ly host the 49th Annual IMIA Conference which added to our honour as this was the f i rst t ime that an event of th is magnitude has been held in an Arab countr y. The conference is an important highl ight in the engineer ing insurance calendar, br inging exper ienced international experts and profess ionals together to exchange knowledge and discuss new industr y chal lenges. We welcomed 110 delegates f rom 30 countr ies, and the media exposure with in the GCC and abroad enabled us to highl ight the work of our organisat ion and br ing attent ion to Qatar.

Outlook

We are a forward-think ing organisat ion that is always looking for new ways to develop and divers i fy our products and ser vices, enhance operational ef f ic iency and improve customer exper iences.

Populat ion growth is st i l l on the r ise, albeit at a s lower rate than previous years, and we aim to continue to divers i fy our products and the way in which we sel l and ser vice them. Mobi le technology wi l l enable us to reach new customers and del iver convenient ser vices that can be used On The Go.

Throughout 2017, we wi l l remain focused on br inging in s igni f icant changes that wi l l benef i t our business, customers and partners.

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GENERAL TAKAFUL COMPANY W.L.L

General Takaful Company W.L.L is a leading provider of Shar i ’a-compl iant insurance products in Qatar. Establ ished in 2008, General Takaful provides Is lamic products and ser vices to local businesses and residents, and st r ives to of fer unique, ethical products that enable customers to prevent loss and ef fect ively manage f inancial hardship.

Overview

As we continue to del iver against our long-term st rategy and the st rategic real ignment of our products, the overal l business per formance has, as expected, been subdued compared to previous years. Gross wr i t ten premium for the year ended 31 December 2016 was QR 208 mi l l ion (2015: QR 231 mi l l ion) .

Dur ing 2016, we continued to reduce our exposure to Thi rd Party Motor insurance and replace it with Comprehensive Cover which of fers an enhanced qual i ty of ser vice for comprehensive cl ients. Addit ional ly, we consol idated three of our motor counters, and opened one dedicated motor claims branch, which supports a better customer ser vice, ef f ic ient process and has an onsite t raf f ic of f icer to process accident reports, removing the need for our customers to vis i t the t raf f ic department for minor accidents.

Bringing innovation into our services

This year saw the launch of our General Takaful mobi le appl ication on Android and iPhone platforms. This app enables our customers to log thei r claim f rom thei r mobi le device and ensure that we are noti f ied immediately–making i t possible for us to react and process claims more quick ly and giving customers a better choice of how they work with us.

Ma jed Ake l

General Manager

Our focus remains on prof i table business and not volume. We are

committed to providing Is lamic products that exceed our customers ’

expectations with per ipheral benef i ts that real ly make a di f ference.

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Addit ional ly, we successfu l ly implemented the same back of f ice system as QGIRCO which provides better overs ight, business information and report ing funct ional i ty. We expect to see the operational impact of th is throughout 2017.

Outlook

2016 was just the beginning of our focus to divers i fy our product port fol io away f rom the motor div is ion. In the year ahead, we wi l l be continuing to develop and promote our non-motor insurance products for commercial and personal customers, as wel l as dr iv ing the per formance of our business through modern technology and advanced methods of communication.

We continue to be a prefer red provider of Is lamic insurance across Qatar and support our commercial and personal customers in the thr iv ing Qatar market.

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QATAR GENERAL HOLDING COMPANY W.L.L.

Qatar General Holding Company owns most of the Group’s subsidiar y companies and manages the Group’s t reasur y and investment port fol io. They provide a st rong f inancial foundation to our business and enable the Group to del iver our commitments to shareholders and customers, whi le contr ibut ing to Qatar ’s economy through the creation of landmark projects.

Overview

While 2016 wasn’t a year of great economic conf idence, our st rong capital base and divers i f ied equity and bond investment port fol io al lowed us to increase prof i ts and per formance.

As part of our overal l enterpr ise st rategy, we continue to convert our idle land bank into income-producing propert ies. Last year ’s acquis i t ion of Orientals Enterpr ises under QGH was a mi lestone achievement that has al ready proved a valuable move.

We wi l l cont inue to make the most of Qatar ’s unique property condit ions - where most businesses choose to rent premises and off ices rather than own them - and rental income continues to provide a s izable source of l iquidity that we can ut i l i se throughout the Group.

We have also continued to invest across the region’s growing industr ies, including ut i l i t ies, government, real estate, ai r l ines and banking. To mit igate currency r isk and to keep in l ine with our Board di rect ive, the major i ty of our equity port fol io is based in the GCC, whi le our bond port fol io is more divers i f ied with investments placed throughout Turkey, Europe, the GCC and South East Asia.

Abdal lah Bar rage

Deputy Chief Execut ive Of f icer

I am pleased to report that despite unfavourable market condit ions,

our pragmatic approach enabled us to increase prof i ts and bui ld

reassurance amongst our customers and shareholders.

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Outlook

Our cautious att i tude to our investment activ i t ies wi l l remain as we seek to achieve reasonable returns on our investments whi le maintaining an appropriate level of divers i f icat ion.

We approach 2017 with cautious optimism as inf rast ructure spending is set to pick up and the turbulent condit ions we have exper ienced throughout the last year are expected to ease.

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GENERAL REAL ESTATE COMPANY W.L.L.

Since i ts establ ishment in 2008, General Real Estate Company (GRECO) has become one of Qatar ’s major players, of fer ing a divers i f ied product port fol io that includes resident ial, of f ice, commercial, leisure and l i festy le, and industr ial developments. The company also provides ser vices for hospital i ty, faci l i t ies, property and project management.

Overview

Despite the ef fects of the oi l cr is is and current s lowdown of real estate and inf rast ructure, 2016 has been a good year for us. Suppl iers and contractors who had previously enjoyed reaping the rewards of operat ing in a rapidly r is ing economy, have now had to establ ish more real ist ic and competit ive pr icing st rategies to win new business. This has enabled us to s igni f icant ly lower the construct ion costs of the three major projects that we launched in 2015—Mozoon Towers, Lusai l Water f ront, and Lusai l Fox Hi l l s. These cost savings enabled us to real ign capital towards new projects and further the development of our recent acquis i t ion, Orientals Enterpr ises.

St rong and steady has been the company ’s maxim throughout 2016: we have seen the continued development of the projects we launched in 2015; our book value remains st rong and is valued at QR 6.1 bi l l ion as at 31 December 2016; we have remained focused on local developments—most of our propert ies are located in Qatar and the UAE; and we have over 100 leasable propert ies providing rental income to the Group.

We are pleased with the progress of the three projects ; Lusai l Fox Hi l l s wi l l see the development of a new city, including an international hospital and

Ragheb Ja lab i

General Manager

2016 has been a stable year for us. Projects have continued to

meet thei r targets, and the adverse condit ions have uncovered some

favourable outcomes for our industr y.

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wel lness centre, hotel, and resident ial and commercial propert ies, has most of i ts engineer ing work completed and partners including Marr iot and VAMED have come on board to operate the hotel, medical and wel lness faci l i t ies and prepare concept development and feasibi l i ty analys is respectively

Lusai l Water f ront development has received al l of f ic ial approvals and engineer ing work is now complete with construct ion expected to start in the f i rst hal f of 2017. Oberoi, a leading global group of hotels, has s igned an agreement to operate the ser vice apartments.

Outlook

We are a company with long-term vis ion and foresee that Qatar ’s economic development wi l l cont inue to grow for the next f i f teen years, enabl ing us to capital ise on property development and the needs of a populat ion that is st i l l steadi ly increasing.

Our future aims are to convert more non-income-producing land into income-producing property, whi le enabl ing Qatar to reach i ts National Vis ion 2030 and become a nation that is less dependent on i ts natural resources.

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MOZOON REAL ESTATE W.L.L.

We are extremely proud to showcase the start of the skeleton construct ion of the Mozoon Towers, a mult i-tower resident ial and hotel complex, in West Bay this year. The complex has 4 towers and wi l l host the f ranchise of International hotel brands, Marr iott and Oberoi. I t wi l l also int roduce a cl ient operated hospital i ty brand that wi l l broaden the image of Qatar in the f ield of hospital i ty industr y.

The execut ive suites of the hotel wi l l boast stunning views of the Corniche along with providing luxur ious and comfortable faci l i t ies including a roof top swimming pool. The tal lest tower with a height of 207 m wi l l consist of 46 f loors plus ground f loor and wi l l accommodate 567 apartments that wi l l be operated by Marr iot. In addit ion to hotel apartments, these towers wi l l also contain residents lounge, business ser vices and center, boardrooms, meeting rooms, bal l and funct ion rooms, outdoor pool and spa, f i tness clubs and restaurants.

We expect the fu l l construct ion of th is iconic landmark tower to complete in Q4 2019.

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GENERAL COMPANY FOR WATER ANDBEVERAGES W.L.L.

Towards the end of year 2016, we witnessed the successfu l complet ion of the construct ion of the water factor y. This is one of the mi lestone achievements that we are proud of. State of the art machines and equipment that wi l l k ick start the production in mid 2017 has al ready been procured and instal led. The laborator y has also been fu l ly equipped with modern equipment that are the best in the industr y. This wi l l aid in assur ing highest standard of qual i ty production that wi l l fu l ly comply with Qatar ’s in i t iat ive towards providing clean and safe envi ronment. These equipment have high production capacity and can ser ve the ent i re Qatar market. We are also in the process of putt ing together a team compris ing of exper ienced personnel who wi l l be t rained adequately and provide utmost ser vices to our customers.

We look forward to achieving our next mi lestone on this project and are conf ident that our chosen equipment, process and staf f wi l l ser ve best the growing needs of Qatar and the regional market.

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WORLD TRADE CENTER - QATAR W.L.L.

The World Trade Center - Qatar W.L.L. is part of the World Trade Centers Associat ion that promotes and faci l i tates t rade and investment between Qatar i and international companies. Our miss ion is to int roduce trading partners to the Qatar i market through events and exhibit ions.

Overview

In 2016 we made great st r ides in reaching out to other nations to create and bui ld on t rading and investment partnerships. To this end, the World Trade Center - Qatar approached 18 Afr ican embassies in Qatar for the Afr ican Fair, v is i t ing each nation’s embassy and invit ing them to our of f ice, to discuss and plan for the event.

Addit ional ly, we were wel l received by the Canadian, the Portuguese, and the Ukrainian embassies to discuss mutual interests.

The World Trade Center - Qatar were proud to attended the general assembly in Alger ia as wel l as be invited to part icipate in many business match-making events by Qatar ’s Chamber of Commerce to meet with overseas delegations who vis i ted Qatar specif ical ly for th is purpose.

We were honoured to take part in several act iv i t ies at the Chamber of Commerce and Qatar Development Bank alongside local dignitar ies and ambassadors of Qatar ’s future development.

Sadal lah E l sa id

General Manager

Our 2016 activ i ty was focused on bui lding mutual ly benef icial

relat ionships with countr ies through thei r local embassies and

encouraging col laboration between al l part ies.

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Outlook

We approached and vis i ted the embassies of the ASEAN to forward our proposal for an ASEAN exhibit ion in 2017.

The World Trade Center - Qatar actively part icipated in demonstrat ing the solut ions and opportunit ies we can offer to new partners. WTC Qatar is work ing towards host ing further events and exhibit ions dur ing 2017 along the l ines of our 2016 program. Possible activ i t ies include the ASEAN exhibit ion 2017.

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ORIENTALS ENTERPRISES W.L.L.

Founded in 1999, Orientals Enterpr ises has grown i ts construct ion management ser vices to become a leading construct ion company that has del ivered a number of s igni f icant inf rast ructure projects with in the state of Qatar. With over 500 employees, the company ’s expert ise extends across resident ial, commercial, and industr ial medium-to-large-scale construct ion projects.

Overview

Since i ts acquis i t ion in 2015, Orientals Enterpr ises has proved to be a highly benef icial addit ion to the Group. The result of th is integrat ion have been plent i fu l : the Group has seen s igni f icant savings with regards to mater ial and construct ion expenses—paying cost pr ice enables GRECO to remain competit ive with in the regional marketplace, whi le increasing prof i t margins.

From an in-house standpoint we are pleased to report that we have assumed 100% bui ld on the new General Takaful Head Quarters, a three-storey of f ice bui lding that wi l l improve the Group’s ef f ic iency and al low for i ts expanding workforce. We have also been entrusted to carr y out the concrete works for the Mozoon Towers Project located in West Bay. These prominent real estate developments wi l l st rengthen our reputat ion with in the region and put us in top of mind for future projects.

Ad ib E l Chou fan i

General Manager

The acquis i t ion of Orientals Enterpr ises by Qatar General Holding has

given the opportunity to take part in landmark projects across Qatar

with which we are proud to be associated.

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Outlook

We remain posit ive about the future and in Qatar ’s cont inued development. The recent securement of notable medium- and large-size real estate projects wi l l enable us to bolster our standing with in the marketplace, and put us in a st rong posit ion to win further work in Qatar ’s rapidly growing market.

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HUMAN RESOURCES

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Empowering people

We have always valued the importance of our people. We understand that our employees and future talent pool enable us to dr ive the business forward and are vital to our success.

We invest heavi ly in staf f t raining, graduate programs and profess ional qual i f icat ions to enhance our sk i l l set and empower our employees to develop thei r knowledge and careers.

This commitment towards learning and development benef i ts our business, ensures that we are meeting industr y standards, and helps young Qatar is develop a career in a highly rewarding envi ronment.

Investing in our future

Our overal l aim is to develop in-house knowledge. There are four ways in which we do this :

The NextGen Programme has been establ ished to f ind Qatar ’s future leaders, managers and special ists who can take the business forward. We support promis ing young graduates with a custom-designed training plan that provides them with core and special ised insurance sk i l l s. The current group are expected to complete this course next year, with the best candidates due to be selected to join our management team.

Professional exams and qualif ications are paramount to the development of our employees and we actively encourage our team to further thei r education through remote and classroom-based learning opportunit ies with the support of our associate company, The Arab Insurance Inst i tute.

Chartered Insurance Institute (CII) exams are international ly recognised qual i f icat ions, and we continue to register our employees on these special ist courses to acquire the international level of f inancial ser vices knowledge needed to support the growth of our business.

Professional accounting body ACCA, has cert i f ied us as an approved employer. This enhances our company ’s reputat ion as an employer and helps us in br inging talented people into our company.

Having started his career as the manager of the Motor Underwr i t ing Department with the Group in 1980, Mr. Ibrahim Abo Lebda has been a key member of the company. He has been inst rumental in bui lding the motor insurance prof i le and st rengthening the reputat ion of our company in th is area across the region. Current ly work ing as the Manager of our Central Branch, he takes an active role in the continuous profess ional development of himsel f and his team members. We thank him for his longstanding commitment to our company.

Ib rah im Abou lebda

Manager Centra l Branch

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CORPORATE SOCIAL RESPONSIBILITY


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Util is ing our size and strength for the good of our community

As our Group’s success has grown, our commitment to our local community has also progressed. We understand that our st rength and s ize enables us to make a posit ive di f ference to the l ives of many residents. Therefore, i t is our responsibi l i ty to set a good example and inspi re other companies in our countr y and region to help improve social condit ions.

We donate our resources to char i table organisat ions, work to promote healthy l i festy les, br ing better road safety to our countr y, and lend support to in i t iat ives that enable Qatar to bui ld an inclus ive community that br ings people together.

We are extremely proud of our countr y, i ts journey and ambit ion, and we st r ive to ensure that any project that we are involved with supports Qatar in achieving i ts 2030 vis ion and has a posit ive impact on our social and envi ronmental wel lbeing.

Continued commitment throughout 2016

Our endeavours with Al fanar, a leading char i ty that provides access to education and job opportunit ies for underpr iv i leged people, cont inued with the donation of our IT systems, accessor ies and technical support.

We embrace regional and national events that st rengthen our society. We contr ibute to Qatar Sport ’s Day and Gul f Traf f ic Week to educate, inspi re and enable people to improve thei r health and wel lbeing.

We believe in a healthy balance between our business lives and our personal lives, and actively encourage our staff to engage in sports and family days that promote mental and physical wellbeing

beyond the office.

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RISK MANAGEMENT REPORT

(a) The Governance Framework

The Group’s r isk management pol icies are approved by the Board of Di rectors and they def ine the Group’s ident i f icat ion of r isk and its interpretat ion. Within i ts r isk management f ramework, the Group maintains a var ied l imit st ructure to ensure the appropriate qual i ty and divers i f icat ion of assets, and to al ign underwr i t ing and reinsurance st rategy to the corporate goals in a manner consistent with i ts r isk appetite. The fol lowing i l lust rate the Group’s commitment to enhancing and improving r isk management :

• The Risk Management and Actuar ial Department continues with the enhancement of formal ised ERM processes throughout the Group and the process is progress ing wel l .

• The Group has an active Board Risk Committee which oversees the r isk management activ i t ies of the Group. The r isk committee consists of three board members, abides by the board approved charter, meets regular ly and takes an active role in the implementation and embedding of r isk management. The committee held four meetings dur ing 2016 and provided the Board with key information regarding i ts act iv i t ies.

• Fol lowing the select ion and acquis i t ion of a r isk management platform (GRC) f rom leading business software provider SAP in 2015, the Group proceeded with the implementation, and this new system to faci l i tate the ident i f icat ion, documentation and report ing of r isk, and the new platform went l ive and ful ly operat ional in Q1 2016. The new GRC platform br ings s igni f icant enhancements to the r isk review process, the documentation, communication and report ing of r isk.

• We have enhanced our r isk review process by conducting more f requent r isk reviews and by enhancing the documentation requi red for each r isk and each control act iv i ty. Further enhancements are planned for 2017.

• As part of our st rategy to enhance technology throughout the Group, we proceeded with the f inal stages of implementing a Business Intel l igence platform in General Takaful dur ing ear ly 2016. The Business Intel l igence platform is now fu l ly operat ional throughout the Group and is integrated in day-to-day business. The Business Intel l igence platform is used to enhance decis ion making as wel l as for the preparation of regulator y reports, increases the accuracy and t imel iness of information, provides s igni f icant staf f cost savings and reduces compl iance r isk.

• Signi f icant improvements were implemented to our Financial Project ions Model for the di rect operations. The model underwent a s igni f icant user inter face upgrade to improve user f r iendl iness and reduce computational and memor y resource intensiveness. Signi f icant enhancements on the reinsurance model l ing and the project ion of certain actuar ial reser ves have been amongst the most important upgrades to the model.

Actua r ia l and R i s k Management


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• Fol lowing the int roduction of new insurance regulat ions in UAE dur ing 2015, where the Group operates through i ts Dubai branch, addit ional requi rements were int roduced dur ing 2016 to produce Actuar ial Pr icing and Underwr i t ing Per formance reports. The Group compl ied by al locating appropriate actuar ial, f inancial and r isk resources to prepare the analyses and produce the reports.

• New insurance regulat ions were also issued by Qatar Central Bank for insurance companies operating in Qatar in the form of Execut ive Inst ruct ions. The new insurance regulat ion brought addit ional governance, r isk and report ing requi rements and int roduced a new solvency f ramework. Qatar General Insurance & Reinsurance Company welcomed the new regulat ion by meeting the solvency requi rements with a solvency rat io of 278% as of Q3 2016 (minimum 150%).

• The Group went through the rat ing review process with the rat ing agency A.M. Best, which reaff i rmed its f inancial st rength rat ing of A- (Excel lent) with a stable out look, ref lect ing the Group’s st rong capital isat ion, operat ing per formance and enhanced enterpr ise r isk management (ERM) capabi l i t ies.

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(b) Capital management objectives, policies and approach

The Group’s approach to managing capital involves managing assets, l iabi l i t ies and r isks in a coordinated way, assess ing short fal ls between avai lable and required capital levels (by each regulated ent i ty) on a regular basis and taking appropriate actions to enhance the capital posit ion of the Group in the l ight of changes in economic condit ions and r isk character ist ics.In managing the r isks that af fect the Group’s capital posit ion we have establ ished a number of capital management object ives, pol icies and approaches, including the fol lowing:

• Sett ing target r isk-adjusted rates of return, which are al igned to per formance objectives and ensure that the Group is focused on the creation of value for shareholders

• To maintain the requi red level of stabi l i ty of the Group thereby providing a degree of secur i ty to pol icyholders

• To retain f inancial f lex ibi l i ty by maintaining st rong l iquidity and access to a range of capital markets

• To al ign the prof i le of assets and l iabi l i t ies taking account of r isks inherent in the business

• To maintain f inancial st rength to support new business growth and to sat is fy the requi rements of the pol icyholders, regulators and stakeholders

(c) Regulator y Framework

Regulators are pr imar i ly interested in protecting the r ights of pol icyholders and monitor them closely to ensure that the Group is sat is factor i ly managing affai rs for thei r benef i t. At the same t ime, regulators are also interested in ensur ing that the Group maintains an appropriate solvency posit ion to meet unforeseen l iabi l i t ies ar is ing f rom economic shocks or natural disasters.

The operations of the Group are subject to regulator y requi rements with in the jur isdict ions in which i t operates and such regulat ions prescr ibe approval and monitor ing of activ i t ies and also impose certain rest r ict ive provis ions to minimise the r isk of default and insolvency on the part of the insurance companies. Al l regulated ent i t ies with in the Group act in accordance with thei r regulator y requi rements.

(d) Asset Liabil ity Management (ALM) Framework

Financial r isks ar ise f rom open posit ions in interest rate, cur rency and equity products, al l of which are exposed to general and specif ic market movements. We have been fol lowing a few s imple premises under our practicing ALM:

• Match assets to the l iabi l i t ies ar is ing f rom insurance contracts by reference to the type of benef i ts payable to pol icyholders• Ensure in each per iod suf f ic ient cash f low is avai lable to meet l iabi l i t ies ar is ing f rom insurance contracts and any other sources


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BOARD OF DIRECTORS

She i kh Nasse r B in A l i B inSaud A l Than i


Mr. Mohammed Hamad A l -Mana Board Member

Mr. Hamad Mohammed A l -Mana Board Member

She i kh Mohammed B in A l i B inSaud A l Than i

Deputy Chai rman


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Mr. Wal id Ahmed A l -Saadi Board Member representat ive

of North Af r ica Energy Company

Mr. Jama l Kame l Abu Nah l Board Member representat ive

of A l Sar i Trading Company

Mr. Kha l i fa A l i A l -Kaabi Board Member representat ive of A l i B in Saad Al-Kaabi Trading &

Contract ing Company

Mr. Rash id Fa i sa l A l -Nua im i Board Member representat ive

of A l -Faisa l Trading &Contract ing Establ i shment

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CORPORATE GOVERNANCE REPORT


Company Profile

Qatar General Insurance and Reinsurance Company PJSC (the “Company ”) is a publ ic joint-stock company, founded in 1979 under the provis ions of the Joint-Stock Companies Regulat ion Law of 1961 as amended by Commercial Companies Law No. (5) of 2002 which in turn was amended by Law No.11 of 2015, for the purpose of conducting al l types of insurance and reinsurance business (except l i fe insurance) and for capital and property investment. The Company ’s paid up capital is QR 875,067,030.

Board of Directors

The Company is managed by a Board of Di rectors compris ing eight members whom are requi red to possess the exper ience necessar y for the Company ’s business. Under the Company ’s Memorandum of Incorporat ion and Art ic les of Associat ion, the Board of Di rectors (the “Board ”) is col lect ively responsible for managing the Company and its per formance, for developing the overal l comprehensive st rategy of the Company and the requi red pol icies and procedures, including credit and investment pol icies, whether di rect ly or through the Committees emerging f rom the Board to implement the main business plans and provide the requi red administ rat ive and super visor y guidance and effect ive control of the Company.

The members of the Board are elected through the General Assembly Meeting of shareholders in accordance with the provis ions of the Company ’s Memorandum of Incorporat ion and Art ic les of Associat ion, Qatar ’s Commercial Companies Law and as per the law of the Qatar Central Bank. The Board of Di rectors comprises eight members, ser ving for a three-year renewable term. The current Board was elected by shareholders for a per iod of three years (2014-2016) at the Ordinar y General Assembly held on 16th March 2014. The Board members have the exper ience and knowledge required to per form thei r dut ies.

The Board ’s Charter

The Board per forms i ts responsibi l i t ies and dut ies in accordance with the Charter of the Board of Di rectors, developed in accordance with the form annexed to the Corporate Governance Code. This Charter

def ines the Board ’s tasks, dut ies, and responsibi l i t ies as wel l as the dut ies of i ts members, the composit ion of the Board and its committees. The Charter also def ines the mechanism of vot ing and decis ion-making and the overal l role in leading the Company as per the requi rements of the Company ’s Memorandum of Incorporat ion and Art ic les of Associat ion, the Code, the Commercial Companies Law, and the law of the Qatar Central Bank and the execut ive regulat ions issued pursuant to i t. The Board Charter is avai lable to the publ ic through the Company ’s website, which is one of the key requi rements of corporate governance pr inciples aimed to develop corporate funct ioning.

The Board’s Tasks and Responsibilities

1. The Board is responsible for management of the Company, and the development and super vis ion of implementation of the Company ’s key business plans, comprehensive st rategies and main object ives. Subject to the pur view of the General Assembly, the Board shal l assume al l the author i t ies and powers necessar y for management of the Company and shal l per form i ts responsibi l i t ies as per i ts dut ies set out in al l the appl icable laws and regulat ions and the Company ’s Art ic les of Associat ion and bylaws. The Board shal l remain responsible for al l the Board committees.

2. The Board shal l per form i ts dut ies responsibly, in good faith, with due di l igence and care, and its decis ions shal l be based on adequate information provided by the Execut ive Management or any other rel iable source.

3. The Board shal l ensure to provide Board members with fu l l and immediate access to information, documents and records pertaining to the Company. The Company ’s Execut ive Management shal l provide the Board and its committees with al l requested documents and information.

4. The tasks of the Board shal l also include the development and approval of the funct ional and organisat ional st ructure of the Company; the def in i t ion of tasks, pur view, dut ies and responsibi l i t ies ; the formation of committees and

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the def in i t ion of thei r dut ies and author i t ies ; the nomination of the Company ’s external auditor based on competence and eff ic iency; and the sett ing of the auditor ’s fees.

5. The members of the Board shal l ensure that the members of the Nomination and Remunerat ion Committee and Audit Committee, internal auditors and representat ives of external auditors attend the Company ’s General Assembly meeting.

6. The Board shal l develop a t raining programme for newly appointed members of the Board to ensure that, once elected, members shal l have an appropriate understanding of the Company ’s funct ions and operations and that they fu l ly understand thei r own responsibi l i t ies.

7. The Board members are responsible for having an appropriate understanding of thei r role and dut ies, and for educating themselves in f inancial, business, and industr y practices as wel l as the Company ’s operat ions and funct ioning. In th is respect, the Board shal l adopt an appropriate formal t raining to enhance Board members ’ sk i l l s and knowledge.

8. The Board shal l at al l t imes keep its members updated about the latest developments in the area of corporate governance and best practices relat ing thereto. The Board may delegate the same to the audit committee or the governance committee or any other body as i t deems appropriate.

The Company ’s Art ic les of Associat ion shal l include clear procedures for the tasks, author i t ies and powers of the Board, the terms related to Board membership and for removing Board members in the event of fai l ing to attend Board meetings, as wel l as other provis ions related to the Company ’s Board.

Non-Executive members of the Board of Directors

1. Non-Execut ive members of the Board shal l regular ly part icipate in Board meetings, providing independent opinion and engaging in decis ion-making concerning the Company ’s st rategic matters and general pol icy, evaluating the per formance of the Execut ive Management and the overal l management of the Company.

2. Non-Execut ive members shal l also be responsible for monitor ing and developing the Company ’s

internal control and r isk management systems, fol lowing up the work of internal audit and r isk management departments, invest igating any i r regular i t ies or v iolat ions of the Company ’s work ing systems and pol icies through thei r act ive membership in the Audit Committee and Risk Management Committee.

3. The Nomination and Remunerat ion Committee shal l comprise Non-Execut ive members to evaluate the per formance of the Chairman, members of the Board of Di rectors and the Execut ive Management of the Company, select ing the nominees for such posit ions and determining thei r remunerat ion, through thei r membership in the Nomination and Remunerat ion Committee to ensure impart ial and objective decis ion-making in th is regard.

The Tasks and Purview of the Chairman of the Board

1. The Chairman of the Board of Di rectors shal l be responsible for cal l ing, super vis ing the proper funct ioning and chair ing Board meetings;

2. Overseeing and approving the Board ’s agenda; providing Board members with relevant and accurate information in a t imely manner ;

3. Ensur ing that al l matters on the agenda are discussed ef fect ively. The Chairman shal l be responsible for proper and ef fect ive per formance of the Board ’s dut ies ;

4. The Chairman of the Board shal l maintain constant communication with shareholders and ensure that thei r opinions are communicated to the Board and relevant of f ic ial and regulator y author i t ies ;

5. The Chairman of the Board shal l chair the meetings of the Ordinar y and Extraordinar y General Assembl ies of the Company; submitt ing the Board ’s annual report to the General Assembly; fol lowing up on the implementation of General Assembly resolut ions and the decis ions of the Board; and super vis ing the annual per formance assessment of the Board;

6. The Chairman, in his capacity as the Managing Director, shal l be the l ink with the Company ’s senior management for coordinating between the management and the Board to proper ly achieve the objectives set by the Board.

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Board Meetings

Based on the provis ions of the appl icable laws in force and the Company ’s Art ic les of Associat ion, the Board must hold a minimum of s ix (6) Board meetings per year. The Board held s ix (6) Board meetings dur ing the year 2016. The Board members attended the meetings on a regular basis in accordance with the appl icable regulat ions.

Board Committees

Committees di rect ly report ing to the Board have been formed to help the Board per form i ts dut ies and responsibi l i t ies, develop its per formance, and develop and implement i ts plans and st rategies. These Committees have been formed, the tasks ass igned to them def ined, thei r term specif ied and the powers granted to them in accordance with the Code and the law of Qatar Central Bank and its execut ive regulat ions. The Board shal l remain accountable for al l the powers and responsibi l i t ies delegated by i t to such committees.

The Board committees at present are as fol lows:

A. The Audit Committee

The Audit Committee was formed to assist the Board in reviewing and approving the f inancial reports of the Company, overseeing the internal control system, and monitor ing compl iance with the appl icable laws and regulat ions. The most important responsibi l i ty of the Committee is to ensure the appl ication of the Company ’s accounting, f inancial and audit systems in accordance with best practices and procedures.

Dut ies and Responsibi l i t ies :1. To oversee the work and independency of the

external auditors, discuss thei r reports, and present the necessar y recommendations to the Board with regard to evaluating the external auditors and thei r fees;

2. To review and ver i fy the f inancial statements and annual reports according to the international accounting and disclosure standards and pr inciples pr ior to present ing them to the Board;

3. To review and explore ways to actively implement and develop the Company ’s internal and f inancial control systems, procedures and reports, ef fect iveness of ant i-money laundering and terror ism f inancing system, business systems

and conf l icts of interest, and to discuss the reports related to them and make the necessar y decis ions;

4. Discuss with the Company ’s Execut ive Management any obser vations made by the Internal Audit department and the External Auditor, and invest igate and ident i fy those involved in any violat ions of the internal control systems;

5. Def ine the tasks, powers, and action plans of the Company ’s Internal Control department ;

6. Oversee al l the tasks and works of the internal audit department ;

7. Regular ly report the Committee’s act iv i t ies to the Board;

8. Comply with the State’s appl icable laws; and

9. Consider any matters refer red to the Committee by the Board.

This Committee shal l per form i ts tasks in accordance with i ts Charter, approved by the Board, and by the appl ication of the provis ions st ipulated in the Corporate Governance Code for Joint Stock Companies l is ted on the markets regulated by QFMA and the law of Qatar Central Bank and its Execut ive Regulat ions.

This Committee held s ix (6) meetings dur ing 2016.

B. Nomination and Remuneration Committee

The Board shal l form a committee under the name Nomination and Remunerat ion Committee compris ing at least three members.

Dut ies and Responsibi l i t ies :1. To nominate and re-nominate the members of the

Board for elect ion by the General Assembly. The assessment of candidates for Board membership and the implementation of al l nomination requi rements are per formed in accordance with the regulator y laws and the approved pol icies and standards.

2. To evaluate the ef fect iveness of the Board and Board committees and conduct an annual sel f-assessment in respect of the Board ’s per formance.

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3. To Def ine the Company ’s wages and remunerat ion general pol icy, determining the remunerat ions of the Company ’s Board members, the Chairman and the Senior Execut ive Management.

4. Review the per formance assessment standards used to evaluate the Board members and the Senior Execut ive Management for the purposes of determining thei r annual remunerat ions.

This Committee shal l per form i ts dut ies in accordance with i ts charter which has been approved by the Board of Di rectors.

The Committee held one (1) meeting dur ing 2016.

C. Risk Management Committee

The Risk Management Committee was formed to assist the Board in ident i fy ing, evaluating and managing the f inancial and operational r isks faced by the Company.

Dut ies and Responsibi l i t ies :1. Discuss, review and approve the Company ’s

f inancial and operational r isk management pol icies and procedures, ensur ing that pol icies are in place to manage al l r isks facing the Company, and that these pol icies are in l ine with the appl icable legal requi rements and ensur ing the ef fect iveness of internal control and r isk management.

2. Assess the Company ’s r isk management practices, developing them in l ine with business requi rements, ensur ing that the Company shal l take the necessar y measures to achieve balance between r isks and returns in the operational process areas.

3. Consider and recommend to the Board for appropriate decis ion-making the ident i f ied business r isks and thei r potent ial impacts on the Company ’s reputat ion and f inancial posit ion.

4. Oversee the tasks and work of the Company ’s r isk management department.

5. Review the work of the independent Actuar y expert with regard to the Statement of Financial Posit ion, which is submitted to Qatar Central Bank, including the opinion of the Actuar y on the f inancial per formance of the Company, r isk assessment pol icy, technical reser ves, and insurance rates. The independent Actuar y

expert is approved by QCB to provide this report in a detai led form on an annual basis. The independent Actuar y Expert approved by QCB is Mr. Chr istos Patsal ides.

The Committee held four (4) meetings dur ing 2016.

Executive Management Committee

An Execut ive Committee was formed to st rengthen corporate governance practices and improve execut ive decis ion-making with in the Company. I t is a standing management committee compris ing the execut ive members of the Board and members f rom the Senior Execut ive Management of the Company.

Tasks and Responsibil it ies of the Executive Management Committee

1. Monitor the overal l per formance of the Company across the var ious div is ions and departments, implement business plans and st rategies, implement the Board ’s decis ions in cooperation with the relevant department di rectors and provide relevant reports to the Board.

2. Discuss and make decis ions on matters related to i ts pur view within the scope of i ts f inancial and administ rat ive author i t ies which are approved by the Board.

3. Ass ist the Board in the preparation and evaluation of the Company ’s st rategy and business plans.

4. Ass ist the Board in the preparation and adoption of budget est imates for the Company and its subsidiar ies.

5. Ass ist the Board of Di rectors in managing the Company ’s investment port fol io.

This Committee per forms i ts tasks in accordance with i ts approved Charter.

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The Organisational Structure of the Company

The Company ’s organisat ional st ructure has been approved by the Board which includes al l the departments, div is ions and subsidiar ies with the aim of achieving continued per formance development and ensur ing that al l st rategies and future action plans are implemented. The Company ’s amended organisat ional st ructure (a copy of the Company ’s organisat ional st ructure is enclosed), under which the administ rat ive st ructure has been reorganised, has been adopted by the Board to include four main sectors :

1. Insurance businesses; 2. Real estate investment sector ; 3. Investment businesses; 4. Support ser vices.

Internal Control

As the Board is fu l ly aware of the importance of the internal control systems across al l the Company ’s operat ional areas, i t has approved the internal control system and this includes the internal regulator y pol icies, ru les and procedures cover ing al l the Company ’s operat ions with in the corporate governance f ramework approved by the Company.

The internal control system provides the super visor y and regulator y envi ronment necessar y for managing the Company and the ef fect ive monitor ing of per formance in accordance with the pol icies and controls establ ished by the Board. I t also sets clear and dist inct ive boundaries as to the funct ional responsibi l i t ies and author i t ies with in the Company at al l levels, as wel l as accountabi l i ty in case of any i r regular i ty, vulnerabi l i ty or default.

There were no violat ions or fai lures dur ing 2016 in the implementation of the internal control system within the Company that would have a mater ial ef fect on the Company ’s f inancial and administ rat ive per formance.

Internal Audit

The Company has an independent internal audit unit funct ional ly report ing to the Board. The unit has clear processes, per forms f inancial and operational audits, assess ing techniques and procedures and detecting any errors in thei r implementation. I t is accountable to the Board and submits i ts reports to the Board through the Audit Committee. The unit is responsible for assess ing the adherence by the Execut ive Management

to the internal control system, detecting i r regular i t ies and ident i fy ing vulnerabi l i t ies and r isks inherent in the system, and proposing recommendations to address them.

The unit is independent as i t reports funct ional ly to the Board and coordinates administ rat ively with the Group CEO. I t does not have any execut ive administ rat ive funct ions with in the Company. I ts remunerat ion is di rect ly determined by the Board, ensur ing impart ial i ty, independence, and objectiv i ty in i ts report ing.

The Internal Audit Unit is super vised by a competent and exper ienced internal audit super visor who prepares and implements internal audit programmes cover ing the Company ’s business and activ i t ies, and ef fect ively and per iodical ly super vises al l the Company ’s work.

External Auditor

The f i rm of Ernst & Young was appointed as External Auditor of the Company for the f inancial year 2012 at the Ordinar y General Assembly Meeting of shareholders held on 13 March 2012. This is the Fi f th year for the External Auditor, and the Company shal l comply with the provis ions of the Code which requi re i ts external auditors to be changed at a maximum of ever y f ive years.

The Company ’s contract with the External Auditor f i rm does not include offer ing any profess ional advice or any related ser vices dur ing the year apart f rom carr y ing out the external audit of the Company ’s accounts.

Risk Management

The main object ive of r isk management in the Company is to protect the Company ’s shareholders f rom events that could prevent the Company f rom achieving i ts object ives. The senior management is aware of the utmost importance of avai labi l i ty of ef fect ive and eff ic ient r isk management systems. The Board of Di rectors has adopted the Company ’s r isk management general f ramework which involves ident i fy ing, evaluating and managing the var ious r isks with in the Company. As the Board is aware of the importance of r isk management and its impact on the Company ’s business and future plans, i t has formed a Risk Management Committee to assist in ident i fy ing, fol lowing up, assess ing and managing r isks faced by the Company ’s business and to take the necessar y actions to mit igate them.

Accepting and managing r isk is an integral part of the Company ’s business in the insurance industr y. However, r isk management in th is context means the f inancial and

43

operational r isks inherent in the Company ’s business which are faced by companies in general as a result of carr y ing out thei r work and thei r commercial and investment activ i t ies.

In th is regard, the Company has created a separate Risk Management Unit in addit ion to engaging an external consultant to undertake r isk management evaluation.

Rating

In 2016, the Company was granted an “A-“ (Excel lent) rat ing and a credit issuance st rength rat ing of “-a” by international credit rat ing agency, A.M. Best Global, which special ises in the credit rat ing of insurance companies. Once more, these rat ings ref lect the sol id the r isk-weighted capital base, the outstanding record of operat ional per formance and the Group’s r isk management capabi l i t ies. I t also ref lects the Company ’s st rong f inancial, technical and credit standing and its st rong local and regional competit ive posit ion.

Compliance

As the Board is aware of the important role played by the Compl iance Off icer in complementing the other elements of the Company ’s internal control system and money laundering and f inancing of ter ror ism r isks, the Company has establ ished an independent Compl iance Unit, under the di rect super vis ion of the Board, to be responsible for the Company ’s compl iance with the off ic ial legal and regulator y requi rements governing the Company. Further, the Unit develops pol icies and procedures to combat money laundering and the f inancing of ter ror ism, ensur ing st r ict adherence to the appl icable laws, regulat ions and standards. The Company was one of the f i rst local insurance companies in Qatar to establ ish a compl iance unit.

A dedicated Compl iance Off icer who is independent of the Execut ive Management oversees this responsibi l i ty, super vis ing the implementation of the general legal and regulator y compl iance f ramework with in the Company as wel l as the Corporate Governance Code for joint-stock companies l is ted on the markets regulated by QFMA and QCB, quarter ly report ing in detai l the Company ’s compl iance, and any non-compl iance, with al l the relevant laws and regulat ions, Code of Conduct, and the Code.

Confl ict of Interest and Transactions With Related Parties

In accordance with the Company ’s approved Related Part ies Transactions Pol icy Manual, the Company implements th is pol icy in al l i ts t ransactions with these part ies, ensur ing achievement of the highest t ransparency and disclosure levels. Such t ransactions are per iodical ly reviewed by the Internal Audit Committee to ensure compl iance with th is pol icy in the Company ’s t ransactions with related part ies.

The Company ’s Related Party Pol icy is that such t ransactions shal l be made at market pr ices and on an arm’s- length basis, providing equal opportunit ies to the related party and other competitors with the same terms to ensure the interest of the Company in the f i rst place. This pol icy is bui l t on the pr inciples of t ransparency and ful l disclosure of related party t ransactions, as the Company is requi red to provide such disclosure in i ts annual report. Shareholders are also di rect ly informed at the General Assembly Meeting about related party t ransactions.

The Internal Audit Department and the Board ’s Audit Committee shal l give due considerat ion and attent ion to reviewing t ransactions with related part ies, ensur ing that they are completed in accordance with Company ’s relevant pol icy, have been disclosed as requi red, and have been clear ly and completely noti f ied to the External Auditor.

The Company has disclosed the related part ies t ransactions in Note 28 to the consol idated f inancial statements indicating the Company ’s involvement in a number of important internal and external investments in Qatar, Syr ia, Alger ia, L ibya and Oman.

Al l t ransactions and partnerships with associates such as Al Sar i Trading Company and Trust International Group of Companies, which provide technical support to the Company part icular ly in the areas of insurance and reinsurance business and information technology, and transactions with Falcon Ready-mix Company in the Group’s real estate projects for provis ion of raw bui lding mater ials, and the related part ies stated in the f inancial statements have been made to achieve the best interest for the Company and are openly and transparent ly presented to the General Assembly of shareholders.

The Company carr ies out i ts t ransactions with the related part ies through the Related Party Transaction Pol icy Manual which has been approved by the Board.

44

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Disclosure

The Company fu l ly compl ies with al l the disclosure requi rements set forth in the Code and by implementing QCB’s execut ive inst ruct ions. The Board is responsible for submitt ing the requi red disclosures in a complete and accurate manner. The information included in the disclosure shal l be t rue and suf f ic ient ensur ing fai rness by providing information on a t imely basis.

Shareholders ’ Equity

The Company ’s issued and paid up share capital is QR 875,067,030, div ided to 87,506,703 ordinar y shares, the nominal value of each is QR 10. The Company has not issued any prefer red shares, bonds or other secur i t ies other than the ordinar y shares issued to the Company ’s ordinar y shareholders. The detai ls of the capital st ructure are clear ly disclosed in the annual report of the Company.

The Rights of Other Stakeholders

In accordance with the Code and the Code of Conduct, the Company ’s general pol icy adopted by the Board is to respect and preser ve the r ights of the Company ’s other stakeholders, including employees, creditors, cl ients, suppl iers, st rategic partners and investors. The Company also ensures that they have access to the relevant information in a t ransparent manner to enable them make informed decis ions.

The Company maintains open and transparent communication channels with shareholders, investors and other stakeholders, where i t communicates on a regular basis information relat ing to the Company ’s f inancial posit ion and per formance and future business plans and investment projects in of f ic ial newspapers, through press conferences and on i ts website.

Distribution of Profits

The prof i t dist r ibut ion rat ios f rom cash dividends or bonus shares shal l be proposed by the Board based on the Company ’s f inancial posit ion and per formance at the end of i ts f inancial year and the Company ’s future business plan. This shal l be discussed, approved and adopted by the General Assembly in thei r ordinar y annual meeting and thei r ext raordinar y annual meeting in the event of the dist r ibut ion of bonus shares.

The fu l l vers ion of the Corporate Governance Report is publ ished on the Company Website www.qgirco.com

45

Al l praise to Al lah, the Lord of al l the Worlds, and peace be upon the last messenger

and prophet, sent as a mercy to al l mankind, and his fami ly, companions and fol lowers

t i l l the Day of Judgement.

In the Name of Allah, the Most Beneficent, the Most Merciful

FATWA AND SHARI’A SUPERVISORY BOARD REPORT

As per the appointment letter, we have drafted the contracts, agreements and pol icies of General Takaful Company (the “Company ”) and reviewed its system and art ic les of associat ions, and we have reviewed the used pr inciples and contracts related to t ransactions and appl ication executed dur ing the per iod.

To the ShareholdersPeace and blessings of Allah be upon you,

We conducted our review to form an opinion as to whether the Company has compl ied with Shar i ’a ru les and pr inciples as wel l as specif ic fatwa, ru l ings and guidel ines issued by us.

The Company ’s management is responsible for ensur ing that the Company conducts i ts business in accordance with Shar i ’a ru les and pr inciples. I t is our responsibi l i t ies to form an independent opinion based on our review of the operations of the Company, guide the management to comply with Shar i ’a ru les and to prepare a report to Shareholders.

We planned and per formed our review to obtain al l the information and explanations which we considered necessar y in order to provide us with suf f ic ient evidence to give reasonable assurance that the Company has not violated Shar i ’a ru les and pr inciples. Our review through Internal Shar i ’a Audit includes examining contracts, appl ied models and fol lowed procedures.

In our opinion

1. The contracts and transactions entered into by the Company dur ing the year ended 31 December 2016 that we have reviewed are in compl iance with Shar i ’a ru les and pr inciples

2. The Company has maintained separate accounts for Pol icyholders and Shareholders

3. The Al location of prof i t and charging of losses for

investments account conform to the basis that has been approved by us in accordance with Shar i ’a ru les and pr inciples

4. We have reviewed the f inancial statements for the year ended 31 December 2016, and discussed Shareholders and Pol icyholders ’ accounts, the calculat ion of prof i t and surplus and accuracy of information f rom Shar i ’a prospective which were general ly found compl ied with general pr inciples and rules of Is lamic insurance.

5. The Company has compl ied with the Shar i ’a Board ’s decis ions concerning the surplus or def icit, and the rates of Wakala and Mudaraba between the Company and the Pol icyholders.

We pray to Almighty Al lah, to grant success for those who are in charge of the management of General Takaful Company for more construct ive contr ibut ion to establ ish the edif ice and achieve the purpose of Is lamic economy, to grant success to the Company ’s customers, and to protect our beloved Countr y f rom any harm.

“And The Last of our Cal l is Praise to Al lah, the Lord of al l the Worlds. ”

Prof. Dr. Al i M. Al QuradaghiChairman of Fatwa and Shari ’a Supervisor y Board

13 Jumada Al Oula 1438 Hijr i

Corresponding to 10 Februar y 2017

Pro f. D r. A l i M. A l Quradagh i

Chairman of Fatwa and Shar ia ’ s Super v isor y Board

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Qatar General Insurance & Reinsurance Company PJSC

CONSOLIDATED FINANCIAL STATEMENTS

31 DECEMBER 2016

47

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF QATAR GENERAL INSURANCE & REINSURANCE COMPANY PJSC

Opinion

We have audited the consol idated f inancial statements of Qatar General Insurance & Reinsurance Company PJSC (the “Company ”) and its subsidiar ies (together refer red to as the “Group”) , which comprise the consol idated statement of f inancial posit ion as at 31 December 2016, and the consol idated statement of prof i t or loss, consol idated statement of comprehensive income, consol idated statement of changes in equity and consol idated statement of cash f lows for the year then ended, and notes to the consol idated f inancial statements, including a summar y of s igni f icant accounting pol icies.

In our opinion, the accompanying consol idated f inancial statements present fai r ly, in al l mater ial respects, the consol idated f inancial posit ion of the Group as at 31 December 2016, and its consol idated f inancial per formance and its consol idated cash f lows for the year then ended in accordance with International Financial Report ing Standards ( IFRS) .

Basis for Opinion

We conducted our audit in accordance with International Standards on Audit ing ( ISAs) . Our responsibi l i t ies under those standards are further descr ibed in the Auditor ’s Responsibi l i t ies for the Audit of the Consol idated Financial Statements sect ion of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants ’ Code of Ethics for Profess ional Accountants ( IESBA Code) together with the ethical requi rements that are relevant to our audit of the consol idated f inancial statements in the State of Qatar, and we have fu l f i l led our other ethical responsibi l i t ies in accordance with the IESBA Code. We bel ieve that the audit evidence we have obtained is suf f ic ient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our profess ional judgment, were of most s igni f icance in our audit of the consol idated f inancial statements of the current year. These matters were addressed in the context of our audit of the consol idated f inancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our descr ipt ion of how our audit addressed the matter is provided in that context.

We have fu l f i l led the responsibi l i t ies descr ibed in the Auditor ’s Responsibi l i t ies for the Audit of the Consol idated Financial Statements sect ion of our report, including in relat ion to these matters. Accordingly, our audit included the per formance of procedures designed to respond to our assessment of the r isks of mater ial misstatement of the consol idated f inancial statements. The results of our audit procedures, including the procedures per formed to address the matters below, provide the basis for our audit opinion on the accompanying consol idated f inancial statements.

Report on the Audit of the Consol idated Financial Statements

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INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF QATAR GENERAL INSURANCE & REINSURANCE COMPANY PJSC (CONTINUED)

Key Audit Matters (continued)

We identi f ied the fol lowing key audit matters :

a) Valuation of investment propert ies

The Group records i ts investment propert ies at fai r value, with changes in fai r value being recognised in the consol idated statement of comprehensive income. The fai r values are determined by external valuators appointed by the management. These valuations are based on est imates such as est imated rental revenues, occupancy rates, discount rates and market indicators.

Since investment propert ies represent 63% of the total assets of the Group, and its valuation involves computations dependent on est imates, we consider the valuation of investment propert ies as a key audit matter.

Our audit procedures over valuation of investment propert ies included the fol lowing:

• Evaluated the objectiv i ty, independence and expert ise of the external valuators appointed by the management.• Tested the accuracy and completeness of the under ly ing data used as inputs for the valuation.• Involved our internal special ist to evaluate the resonableness of the under ly ing assumptions used by the valuator by comparing the assumptions used to internal and external data. • Assessed the adequacy and completeness of the disclosures on the valuation of investment propert ies, presented in Note 5 of the consol idated f inancial statements.

b) Est imation of provis ion for reported claims by pol icyholder, and valuation of Incurred But Not Reported Reser ve The Group’s provis ion for reported claims by pol icyholders and incurred but not reported reser ve ( IBNR) represent 22% of the total l iabi l i t ies.

The provis ion for reported claims by pol icyholders recorded by the Group comprises of the total value of individual outstanding claims est imated by internal or external loss adjusters when a claim has been in i t iated. These est imates are reassessed dur ing the var ious stages of the claim processing cycle and are revised based on changes in specif ic ci rcumstances pertaining to each claim.

The IBNR recorded by the Group represents an est imate of the l iabi l i ty for a claim-generat ing event that has taken place dur ing the year but has not yet been reported to the Group as of 31 December 2016. IBNR is calculated at the report ing date based on the computations per formed by an external actuar y appointed by the management, after consider ing histor ical claim t rends, empir ical data and current assumptions that may include a margin for adverse deviat ions.

Report on the Audit of the Consol idated Financial Statements (cont inued)

49


Key Audit Matters (continued)

b) Est imation of provis ion for reported claims by pol icyholder, and valuation of Incurred But Not Reported Reser ve (continued)

Due to the magnitude of the balances and the est imation uncertainty and subject iv i ty involved in the assesment of these reser ves we have considered the valuation of the provis ion for reported claims by pol icyholders and IBNR as a key audit matter. Further, the measurement of these insurance contract l iabi l i t ies involves s igni f icant judgment over uncertain future outcomes, mainly the ul t imate total sett lement value of the insurance contract l iabi l i t ies, including any guarantees provided to pol icyholders.

Provis ion for reported claims by pol icyholders :

Our audit procedures over the provis ion for reported claims by pol icyholders included the fol lowing:

• Tested controls over the int iat ion, review and approval of the claim process across the di f ferent l ines of business including the claim sett lement process. • Evaluated the provis ion for reported claims by pol icyholder recorded by management by reviewing the loss adjusters reports, internal pol icies for reser ves and other assumptions made by management.• Per formed a substant ive analyt ical review on the movements in the provis ion for reported claims by pol icyholders dur ing the year.• Tested the adequacy and completeness of the disclosures on the provis ion for reported claims by pol icyholders, presented in Note 20 of the consol idated f inancial statements.

Incurred but not reported reser ve ( IBNR):

Our audit procedures over IBNR included the fol lowing:

• Evaluated the objectiv i ty, independence and expert ise of the actuar ial valuator appointed by management.• Ver i f ied the data used by external actuar y to the actuar ial exhibits and ver i f ied that the data on which the est imate is based is accurate and complete.• Involved our internal special ist to ver i fy the computation and evaluate the methodology and assumptions used by the actuar y by comparis ion to general ly accepted industr y practices. • Tested the adequacy and completeness of the disclosures on the IBNR, presented in Note 20 of the consol idated f inancial statements.

Report on the Audit of the Consol idated Financial Statements (cont inued)

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Other information

The Board of Di rectors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the consol idated f inancial statements and our auditor ’s report thereon. The annual report is expected to be made avai lable to us after the date of th is auditor ’s report.

Our opinion on the consol idated f inancial statements does not cover the other information and we do not express any form of assurance conclus ion thereon.

In connection with our audit of the consol idated f inancial statements, our responsibi l i ty is to read the other information ident i f ied above when i t becomes avai lable and, in doing so, consider whether the other information is mater ial ly inconsistent with the consol idated f inancial statements or our knowledge obtained in the audit, or otherwise appears to be mater ial ly misstated.

When we read the annual report, i f we conclude that there is a mater ial misstatement therein we are requi red to communicate the matter (s) with those charged with governance.

Responsibil it ies of Management and Those Charged with Governance for the Consolidated Financial Statements

The Board of Di rectors is responsible for the preparation and fai r presentat ion of the consol idated f inancial statements in accordance with IFRSs and for such internal control as the Board of Di rectors determines is necessar y to enable the preparation of the consol idated f inancial statements that are f ree f rom mater ial misstatement, whether due to f raud or er ror.

In preparing the consol idated f inancial statements, the Board of Di rectors is responsible for assess ing the Group’s abi l i ty to continue as a going concern, disclosing, as appl icable, matters related to going concern and using the going concern basis of accounting unless the Board of Di rectors either intends to l iquidate the Group or to cease operations, or has no real ist ic alternative but to do so.

The Board Audit Committee is responsible for overseeing the Group’s f inancial report ing process.

Auditor ’s Responsibil it ies for the Audit of the Consolidated Financial Statements

Our object ives are to obtain reasonable assurance about whether the consol idated f inancial statements as a whole are f ree f rom mater ial misstatement, whether due to f raud or er ror, and to issue an auditor ’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA wi l l always detect a mater ial misstatement when i t exists. Misstatements can ar ise f rom f raud or er ror and are considered mater ial i f, indiv idual ly or in the aggregate, they could reasonably be expected to inf luence the economic decis ions of users taken on the basis of these consol idated f inancial statements.

51


Auditor ’s Responsibil it ies for the Audit of the Consolidated Financial Statements (continued)

As part of an audit in accordance with ISA, we exercise profess ional judgment and maintain profess ional skepticism throughout the audit. We also:

• Ident i fy and assess the r isks of mater ial misstatement of the consol idated f inancial statements, whether due to f raud or er ror, design and per form audit procedures responsive to those r isks, and obtain audit evidence that is suf f ic ient and appropriate to provide a basis for our opinion. The r isk of not detecting a mater ial misstatement result ing f rom f raud is h igher than for one result ing f rom error, as f raud may involve col lus ion, forger y, intent ional omiss ions, mis representat ions, or the overr ide of internal control.• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the ci rcumstances, but not for the purpose of express ing an opinion on the ef fect iveness of the Group’s internal control.• Evaluate the appropriateness of accounting pol icies used and the reasonableness of accounting est imates and related disclosures made by management.• Conclude on the appropriateness of management ’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a mater ial uncertainty exists related to events or condit ions that may cast s igni f icant doubt on the Group’s abi l i ty to continue as a going concern. I f we conclude that a mater ial uncertainty exists, we are requi red to draw attent ion in our auditor ’s report to the related disclosures in the consol idated f inancial statements or, i f such disclosures are inadequate, to modify our opinion. Our conclus ions are based on the audit evidence obtained up to the date of our auditor ’s report. However, future events or condit ions may cause the Group to cease to continue as a going concern.• Evaluate the overal l presentat ion, st ructure and content of the consol idated f inancial statements, including the disclosures, and whether the consol idated f inancial statements represent the under ly ing t ransactions and events in a manner that achieves fai r presentat ion.• Obtain suf f ic ient appropriate audit evidence regarding the f inancial information of the ent i t ies or business activ i t ies with in the Group to express an opinion on the consol idated f inancial statements. We are responsible for the di rect ion, super vis ion and per formance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with the Board Audit Committee regarding, among other matters, the planned scope and t iming of the audit and s igni f icant audit f indings, including any s igni f icant def iciencies in internal control that we ident i fy dur ing our audit.

We also provide the Board Audit Committee with a statement that we have compl ied with relevant ethical requi rements regarding independence, and communicate with them al l relat ionships and other matters that may reasonably be thought to bear on our independence, and where appl icable, related safeguards.

From the matters communicated with the Board Audit Committee, we determine those matters that were most of s igni f icance in the audit of the consol idated f inancial statements of the current per iod and are therefore the key audit matters. We descr ibe these matters in our auditor ’s report unless law or regulat ion precludes publ ic disclosures about the matter or when, in ext remely rare ci rcumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the publ ic interest benef i ts of such communication.

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Report on Legal and Other Regulator y Matters

Furthermore, in our opinion, proper books of account have been kept by the Group and the consol idated f inancial statements comply with the Qatar Commercial Companies Law No. 11 of 2015, the appl icable provis ions of Qatar Central Bank Law No. 13 of 2012 and the Company ’s Art ic les of Associat ion. We have obtained al l the information and explanations we requi red for the purpose of our audit, and are not aware of any violat ions of the above mentioned laws or the Company ’s Art ic les of Associat ion having occurred dur ing the year, which might have had a mater ial adverse ef fect on the Group’s f inancial posit ion or per formance.

Ziad Nader of Ernst & Young Auditor ’s Regist rat ion No. 258 Date: 15 Februar y 2017 Doha

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CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 31 December 2016

The attached notes 1 to 44 form an integral part of these consol idated f inancial statements.

QR ‘000QR ‘000

20152016

Notes

201,3999

2,20919

234,089

41,122

Assets

Insurance receivables

Equity and liabilities

Non-controlling interests

84,5824

859,87010

104,013

779,723

Property and equipment

Reinsurance assets

Equity

5,936,6075

281,00111 (a)

795,51514

6,292,454

6,064,376

296,495

875,067

6,409,059

Investment properties

Takaful participants’ assets

Issued share capital

Total equity

324,7496

264,87912

4,431,958

345,225

243,009

4,421,367

Investment in associates

Other assets

Retained earnings

231,20213

533,07915

303,287

558,904

Financial assets:

Cash and bank balances

Legal reserve

1,057,4247

529,69316

1,016,777

512,599

Available-for-sale financial assets

Revaluation reserves

167,6188

9,410,271

164,129

9,551,375

Financial assets at fair value through profit or loss

Total assets

94038 (b)

6,290,245

252

6,367,937

Receivables from related parties

Equity attributable to equity holders of the Parent

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Jama l Kame l Abu Nah l

Chief Execut ive Of f icer and Board Member


CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)As at 31 December 2016

QR ‘000QR ‘000

20152016

Notes

Liabilities

1,101,58020Insurance contract liabilities

Financial liabilities:

1,172,59021 Loans and borrowings

28,51522 Derivative financial instruments

57,46138 (b) Payables to related parties

241,18523 Insurance payables

33,94224Employees’ end-of-service benefits

281,00111 (a)Takaful participants’ liabilities

201,54325Other liabilities

3,117,817

9,410,271

Total liabilities

Total equity and liabilities

1,038,757

1,270,651

19,820

81,992

231,279

37,744

296,495

165,578

3,142,316

9,551,375

55

CONSOLIDATED STATEMENT OF PROFIT OR LOSSFor the Year Ended 31 December 2016

QR ‘000QR ‘000

20152016

627,25627 (a)

Notes

22,82328

(109,930)

629,949

13,438

(114,893)

Gross written premiums

Fees and commission income

Net claims

(34,319)27 (a)

245,91629

1,226,961

(33,627)

236,534

637,525

Change in unearned premiums provision

Investment income

Total revenue

(2,392)30

(42,883)34

18,336

(47,993)

Net realised gains (losses)

Finance costs

592,93727 (a)

746,49431

(218,147)33 (a)

(10,981)

596,322

56,600

(314,417)

(29,161)

Gross earned premiums

Fair value gains

Gross claims paid

Cost of construction activities

(405,776)27 (b)

10,592

112,83733 (b)

(156,240)35

(392,661)

34,406

205,739

(189,251)

Premiums ceded to reinsurers

Income from construction activities

Claims ceded to reinsurers

Other operating and administrative expenses

16,36732

(297,940)33 (c)

74,550

96,450

Other operating revenue

Gross change in insurance contract liabilities

187,161

293,32033 (d)

(210,104)

203,661

(102,665)

(266,405)

Net earned premiums

Change in insurance contract liabilities ceded to reinsurers

Other expenses

1,039,800433,864Other revenue


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CONSOLIDATED STATEMENT OF PROFIT OR LOSS (CONTINUED)For the Year Ended 31 December 2016

QR ‘000QR ‘000

20152016

(320,034)

Notes

95

(381,298)

38,913

Total expenses

Equity holders of the Parent


906,927

925,804

256,227

258,254

Profit before share of profits of associates

18,8776 2,027Share of profits of associates

Earnings per share

Basic and diluted profit for the year attributable to ordinary equity holders of the Parent (in Qatari Riyals per share)

925,804

10.5836

258,254

2.51

Profit for the year

925,709219,341

Profit attributable to:

57

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the Year Ended 31 December 2016

QR ‘000QR ‘000

20152016

925,804

Note

258,254Profit for the year

756,578241,160Total comprehensive income for the year

Other comprehensive loss

(53,404)6 (5,021)Exchange differences on translating foreign operations

Total comprehensive income attributable to:

6,338

756,483

8,695

202,247

Net gain on cash flow hedge

Equity holders of the Parent

(122,160)

95

(20,768)

38,913

Net loss on available-for-sale financial assets


(169,226)

756,578

(17,094)

241,160

Other comprehensive loss for the year


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CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the Year Ended 31 December 2016

Equity attributable to equity holders of the Parent

Revaluation reserves

QR ‘000 QR ‘000 QR ‘000QR ‘000QR ‘000QR ‘000QR ‘000QR ‘000QR ‘000QR ‘000Notes

Total ordinary

sharehold-ers’ equity

Non-con-

trolling interests

Total equity

Foreign currency

translation reserve

Cash flow

hedge

Revalua-tion

surplus

Available-for-sale

financial assets

Legal reserve

Retained earnings

Issuedshare

capital

6,290,245 2,209 6,292,454(137,098)(28,515)77,355617,951533,0794,431,958795,515At 1 January 2016

219,341 38,913 258,254-----219,341-Profit for the year

(17,094) - (17,094)(5,021)8,695-(20,768)---Other comprehensive (loss) income

202,247 38,913 241,160(5,021)8,695-(20,768)-219,341-Total comprehensive income (loss)

- - ------(79,552)79,55214Bonus shares issued

- - -----25,825(25,825)-15Transfer to legal reserve

(119,327) - (119,327)-----(119,327)-17Shareholders dividends

Contribution to social and

(5,228) - (5,228)-----(5,228)-18sports activities fund

6,367,937 41,122 6,409,059(142,119)(19,820)77,355597,183558,9044,421,367875,067At 31 December 2016

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)For the Year Ended 31 December 2016

Equity att r ibutable to equity holders of the Parent

Revaluation reser ves

QR ‘000 QR ‘000 QR ‘000QR ‘000QR ‘000QR ‘000QR ‘000QR ‘000QR ‘000QR ‘000Notes

Total ordinary

sharehold-ers’ equity

Non-controlling

interestsTotal

equity

Foreign currency

translation reserve

Cash flow

hedgeRevaluation

surplus

Available-for-sale

financial assets

Legal reserve

Retained earnings

Issuedshare

capital

5,675,801 2,114 5,677,915(83,694)(34,853)77,355740,111440,4993,844,630691,753At 1 January 2015

925,709 95 925,804-----925,709-Profit for the year

(169,226) - (169,226)(53,404)6,338-(122,160)---Other comprehensive (loss) income

756,483 95 756,578(53,404)6,338-(122,160)-925,709-Total comprehensive income (loss)

- - ------(103,762)103,76214Bonus shares issued

- - -----92,580(92,580)-15Transfer to legal reserve

(138,351) - (138,351)-----(138,351)-17Shareholders dividends

Contribution to social and

(3,688) - (3,688)-----(3,688)-18sports activities fund

6,290,245 2,209 6,292,454(137,098)(28,515)77,355617,951533,0794,431,958795,515At 31 December 2015


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CONSOLIDATED STATEMENT OF CASH FLOWSFor the Year Ended 31 December 2016

QR ‘000QR ‘000

20152016

Notes

(18,877)6

5,421

(2,027)

19,061

Operating activities

Share of profits of associates

Purchase of additional shares in associates

925,804

11

(88,938)3

-

258,254

(216)

-

10,957

Profit for the year

(Gain) loss from sale of property and equipment

Investing activities

Net movement in available-for-sale financial assets

(3,961)30

(7,191)4

(1,314)

(28,263)

Adjustment for:

Gain from sale of investment in associates

Acquisition of a subsidiary, net of cash acquired

Net movement in financial assets at fair value through profit or loss

(334,304)37

7,9894

-

69,731

8,409

639

Net change in operating assets

Depreciation of property and equipment

Purchase of property and equipment

353,32837

97735

(108,193)5

(183,646)

(89,391)

1,676

(78,637)

(97,581)

Net change in operating liabilities

Amortization of intangible asset

Proceeds from sale of property and equipment

Net cash flows used in investing activities

(136)

3,961

3,802

1,314

Non-cash items included in profit for the year:

Employees’ end of service benefits

Purchase of investment properties

(746,494)31

11,2946

(56,600)

11,577

Fair value gains

Proceeds from sale of investment in associates

(1,089)35

183,248

-6

(1,392)

190,932

(34,229)

Impairment recoveries

Net cash flows from operating activities

Dividends received from associates

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CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)For the Year Ended 31 December 2016

QR ‘000QR ‘000

20152016

Notes

503,567229,250

Financing activities

Cash and cash equivalents at 1 January

(94,820)142,852Net movement in term loans

(40,748)34

229,25013

(45,550)

300,576

Finance costs on term loans

Cash and cash equivalents at 31 December

(138,351)(119,327)Dividends paid to equity holders of the Parent

Operational cash flows from interest and dividends

(273,919)

41,02634

(22,025)

45,841

Net cash flows used in financing activities

Interest paid

16,34017,305Interest received

(274,317)

47,561

71,326

36,543

Net increase (decrease) in cash and cash equivalents

Dividend received


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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 CORPORATE INFORMATION

Qatar General Insurance & Reinsurance Company PJSC (the “Company ” or the “Parent Company ”) is a publ ic shareholding company incorporated by Emir i Decree No. 52 of 1978 under commercial regist r y number 7200 and governed by the provis ions of the Qatar Commercial Companies ’ Law No. 11 of 2015 and the appl icable provis ions of Qatar Central Bank Law No. 13 of 2012. The Company and its subsidiar ies (together refer red to as the “Group”) are engaged in the business of general insurance and reinsurance including Is lamic Takaful insurance, real estate, investment, and contract ing. The shares of the Company are l is ted on the Qatar Exchange.

The Company has seven local branches in Qatar and one overseas branch in United Arab Emirates ( in Dubai) . The consol idated f inancial statements incorporate the f inancial statements of the Company and its subsidiar ies and the Group’s interest in the associates. The subsidiar ies are:

These consol idated f inancial statements of the Group for the year ended 31 December 2016 were author ized for issue by the Board of Di rectors on 15 Februar y 2017.

2 SIGNIFICANT ACCOUNTING POLICIES

Basis of preparationThese consol idated f inancial statements have been prepared in accordance with International Financial Report ing Standards ( IFRS) and appl icable provis ions of the Qatar Commercial Companies ’ Law No. 11 of 2015 and the appl icable provis ions of Qatar Central Bank Law No. 13 of 2012.

The consol idated f inancial statements are prepared under the histor ical cost convention, except for the fol lowing mater ial i tems in the consol idated statement of f inancial posit ion that have been measured at fai r value:

- der ivat ive f inancial inst ruments- non der ivat ive f inancial inst ruments carr ied at fai r value through prof i t or loss- avai lable-for-sale f inancial assets- investment propert ies

For the Year Ended 31 December 2016

Qatar General Holding Company W.L.L.

Name of the subsidiary

100%

Ownership

State of Qatar

Country of incorporation

Investments management of the Group.

Principal activities

General Takaful Company W.L.L. 100% State of Qatar Islamic insurance.

World Trade Center – Qatar W.L.L.

Orientals Enterprises W.L.L.

100%

100%

State of Qatar

State of Qatar

Hospitality, exihibition and events management.

Contracting and construction.

Mozoon Insurance Marketing Services W.L.L.

General Company for Water and Beverages W.L.L.

Mozoon Real Estate Company W.L.L.

100%

60%

50%

State of Qatar

State of Qatar

State of Qatar

Insurance marketing services.

Water bottling and beverages trading.

Real estate investment and development.

General Real Estate Company W.L.L.

General Tower for Real Estate Investments W.L.L.

100%

100%

State of Qatar

State of Qatar

Real estate investment and management.

Real estate investment and development.

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2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basis of preparation (continued)

The methods used to measure fai r values are disclosed within th is note.

The Group presents i ts consol idated statement of f inancial posit ion broadly in order of l iquidity. An analys is regarding ut i l i sat ion or sett lement of assets and l iabi l i t ies, with in 12 months after the report ing date (current) and more than 12 months after the report ing date (non-current) is presented in Note 41.

The consol idated f inancial statements are presented in Qatar i Riyal (QR), which is the Group’s funct ional cur rency. Al l f inancial information presented in Qatar i Riyal has been rounded to the nearest thousands (QR ‘000) except when otherwise indicated.

The preparation of the consol idated f inancial statements in conformity with IFRSs requi res management to make judgements, est imates and assumptions that ef fect the appl ication of accounting pol icies and the reported amounts of assets, l iabi l i t ies, income and expenses and disclosure of cont ingent l iabi l i t ies at the report ing date. Est imates and judgements are continual ly evaluated and are based on histor ical exper ience and other factors, including expectation of future events that are bel ieved to be reasonable under the ci rcumstances. Actual results may di f fer f rom these est imates.

Information about cr i t ical judgements and s igni f icant areas of est imates in applying accounting pol icies that have the most s igni f icant ef fect on the amounts recognised in the consol idated f inancial statements are included under Note 42 and 43 respectively.

Est imates and under ly ing assumptions are reviewed on an ongoing basis. Revis ions to accounting est imates are recognised in the year in which the est imates are revised.

Changes in accounting policies and disclosures The accounting pol icies adopted are consistent with those of the previous f inancial year, except for the fol lowing:

New and amended standards and interpretationsThe Group appl ied for the f i rst t ime certain standards and amendments, which are ef fect ive for annual per iods beginning on or after 1 Januar y 2016. The Group has not ear ly adopted any other standard, interpretat ion or amendment that has been issued but is not yet ef fect ive.

The nature and the impact of each new standard or amendment is descr ibed below. Although these new standards and amendments were appl ied for the f i rst t ime in 2016, they did not have a mater ial impact on the annual consol idated f inancial statements of the Group.

IFRS 14 Regulator y Deferral AccountsIFRS 14 is an optional standard that al lows an ent i ty, whose activ i t ies are subject to rate-regulat ion, to continue applying most of i ts exist ing accounting pol icies for regulator y deferral account balances upon i ts f i rs t-t ime adoption of IFRS. Ent i t ies that adopt IFRS 14 must present the regulator y deferral accounts as separate l ine i tems on the statement of f inancial posit ion and present movements in these account balances as separate l ine i tems in the statement of prof i t or loss and OCI. `


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New and amended standards and interpretations (continued)

IFRS 14 Regulator y Deferral Accounts (continued)The standard requi res disclosure of the nature of, and r isks associated with, the ent i ty ’s rate-regulat ion and the ef fects of that rate-regulat ion on i ts f inancial statements. Since the Group is an exist ing IFRS preparer and is not involved in any rate-regulated activ i t ies, th is standard does not apply.

Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisit ions of InterestsThe amendments to IFRS 11 requi re that a joint operator accounting for the acquis i t ion of an interest in a joint operat ion, in which the activ i ty of the joint operat ion const i tutes a business, must apply the relevant IFRS 3 Business Combinations pr inciples for business combination accounting. The amendments also clar i fy that a previously held interest in a joint operat ion is not re-measured on the acquis i t ion of an addit ional interest in the same joint operat ion i f joint control is retained. In addit ion, a scope exclus ion has been added to IFRS 11 to specify that the amendments do not apply when the part ies shar ing joint control, including the report ing ent i ty, are under common control of the same ult imate control l ing party.

The amendments apply to both the acquis i t ion of the in i t ial interest in a joint operat ion and the acquis i t ion of any addit ional interests in the same joint operat ion and are appl ied prospectively. These amendments do not have any impact on the Group as there has been no interest acquired in a joint operat ion dur ing the year. statement of prof i t or loss and OCI. `

Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation The amendments clar i fy the pr inciple in IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets that revenue ref lects a pattern of economic benef i ts that are generated f rom operating a business (of which the asset is a part) rather than the economic benef i ts that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in ver y l imited ci rcumstances to amort ise intangible assets. The amendments are appl ied prospectively and do not have any impact on the Group, given that i t has not used a revenue-based method to depreciate i ts non-current assets.

Amendments to IAS 16 and IAS 41 Agriculture: Bearer PlantsThe amendments change the accounting requi rements for biological assets that meet the def in i t ion of bearer plants. Under the amendments, biological assets that meet the def in i t ion of bearer plants wi l l no longer be within the scope of IAS 41 Agr iculture. Instead, IAS 16 wi l l apply. After in i t ial recognit ion, bearer plants wi l l be measured under IAS 16 at accumulated cost (before matur i ty) and using either the cost model or revaluation model (after matur i ty) . The amendments also requi re that produce that grows on bearer plants wi l l remain in the scope of IAS 41 measured at fai r value less costs to sel l .

For government grants related to bearer plants, IAS 20 Accounting for Government Grants and Disclosure of Government Ass istance wi l l apply. The amendments are appl ied retrospectively and do not have any impact on the Group as i t does not have any bearer plants.

Amendments to IAS 27 Equity Method in Separate Financial StatementsThe amendments al low ent i t ies to use the equity method to account for investments in subsidiar ies, joint ventures and associates in thei r separate f inancial statements. Ent i t ies al ready applying IFRS and elect ing to change to the equity method in thei r separate f inancial statements have to apply that change retrospectively. These amendments do not have any impact on the Group’s consol idated f inancial statements.


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Annual Improvements 2012-2014 Cycle

These improvements include:

IFRS 5 Non-current Assets Held for Sale and Discontinued OperationsAssets (or disposal groups) are general ly disposed of either through sale or dist r ibut ion to the owners. The amendment clar i f ies that changing f rom one of these disposal methods to the other would not be considered a new plan of disposal, rather i t is a continuation of the or iginal plan. There is, therefore, no inter rupt ion of the appl ication of the requi rements in IFRS 5. This amendment is appl ied prospectively.

IFRS 7 Financial Instruments: Disclosures

(i) Servicing contractsThe amendment clar i f ies that a ser vicing contract that includes a fee can const i tute continuing involvement in a f inancial asset. An ent i ty must assess the nature of the fee and the arrangement against the guidance for cont inuing involvement in IFRS 7 in order to assess whether the disclosures are requi red. The assessment of which ser vicing contracts const i tute continuing involvement must be done retrospectively. However, the requi red disclosures need not be provided for any per iod beginning before the annual per iod in which the ent i ty f i rs t appl ies the amendments.

(i i) Applicabil ity of the amendments to IFRS 7 to condensed interim f inancial statementsThe amendment clar i f ies that the offsett ing disclosure requi rements do not apply to condensed inter im f inancial statements, unless such disclosures provide a s igni f icant update to the information reported in the most recent annual report. This amendment is appl ied retrospectively.

IAS 19 Employee BenefitsThe amendment clar i f ies that market depth of high qual i ty corporate bonds is assessed based on the currency in which the obl igation is denominated, rather than the countr y where the obl igation is located. When there is no deep market for high qual i ty corporate bonds in that currency, government bond rates must be used. This amendment is appl ied prospectively.

IAS 34 Interim Financial ReportingThe amendment clar i f ies that the requi red inter im disclosures must either be in the inter im f inancial statements or incorporated by cross-reference between the inter im f inancial statements and wherever they are included within the inter im f inancial report (e.g. , in the management commentar y or r isk report) . The other information with in the inter im f inancial report must be avai lable to users on the same terms as the inter im f inancial statements and at the same t ime. This amendment is appl ied retrospectively. These amendments do not have any impact on the Group.

Amendments to IAS 1 Disclosure Init iativeThe amendments to IAS 1 clar i fy, rather than s igni f icant ly change, exist ing IAS 1 requi rements. The amendments clar i fy :

- The mater ial i ty requi rements in IAS 1- That specif ic l ine i tems in the statement(s) of prof i t or loss and OCI and the statement of f inancial posit ion may be disaggregated- That ent i t ies have f lex ibi l i ty as to the order in which they present the notes to f inancial statements- That the share of OCI of associates and joint ventures accounted for us ing the equity method must be presented in aggregate as a s ingle l ine i tem, and class i f ied between those i tems that wi l l or wi l l not be subsequent ly reclass i f ied to prof i t or loss


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Annual Improvements 2012-2014 Cycle (continued)

Amendments to IAS 1 Disclosure Init iative (continued)Furthermore, the amendments clar i fy the requi rements that apply when addit ional subtotals are presented in the statement of f inancial posit ion and the statement(s) of prof i t or loss and OCI. These amendments do not have any impact on the Group.

Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entit ies: Applying the Consolidation ExceptionThe amendments address issues that have ar isen in applying the investment ent i t ies exception under IFRS 10 Consol idated Financial Statements. The amendments to IFRS 10 clar i fy that the exemption f rom present ing consol idated f inancial statements appl ies to a parent ent i ty that is a subsidiar y of an investment ent i ty, when the investment ent i ty measures al l of i ts subsidiar ies at fai r value. Furthermore, the amendments to IFRS 10 clar i fy that only a subsidiar y of an investment ent i ty that is not an investment ent i ty i tsel f and that provides support ser vices to the investment ent i ty is consol idated. Al l other subsidiar ies of an investment ent i ty are measured at fai r value. The amendments to IAS 28 Investments in Associates and Joint Ventures al low the investor, when applying the equity method, to retain the fai r value measurement appl ied by the investment ent i ty associate or joint venture to i ts interests in subsidiar ies. These amendments are appl ied retrospectively and do not have any impact on the Group as the Group does not apply the consol idation exception.

Standards issued but not yet effectiveThe standards and interpretat ions that are issued, but not yet ef fect ive, up to the date of issuance of the Group’s f inancial statements are disclosed below. The Group intends to adopt these standards, i f appl icable, when they become effect ive.

IFRS 9 Financial InstrumentsIn Ju ly 2014, the IASB issued the f inal vers ion of IFRS 9 Financial Inst ruments that replaces IAS 39 Financial Inst ruments : Recognit ion and Measurement and al l previous vers ions of IFRS 9. IFRS 9 br ings together al l three aspects of the accounting for f inancial inst ruments project : class i f icat ion and measurement, impairment and hedge accounting. IFRS 9 is ef fect ive for annual per iods beginning on or after 1 Januar y 2018, with ear ly appl ication permitted. Except for hedge accounting, retrospective appl ication is requi red but providing comparative information is not compulsor y. For hedge accounting, the requi rements are general ly appl ied prospectively, with some l imited exceptions.

The Group plans to adopt the new standard on the requi red ef fect ive date. Dur ing 2016, the Group has per formed a high- level impact assessment of al l three aspects of IFRS 9. This prel iminar y assessment is based on current ly avai lable information and may be subject to changes ar is ing f rom further detai led analyses or addit ional reasonable and supportable information being made avai lable to the Group in the future. Overal l , the Group expects no s igni f icant impact on i ts f inancial posit ion and equity except for the ef fect of applying the impairment requi rements of IFRS 9.

(a) Classif ication and measurementThe Group does not expect a s igni f icant impact on i ts f inancial posit ion or equity on applying the class i f icat ion andmeasurement requi rements of IFRS 9. I t expects to continue measur ing at fai r value al l f inancial assets current ly held at fai r value. Quoted equity shares current ly held as avai lable-for-sale with gains and losses recorded in OCI wi l l be measured at fai r value through prof i t or loss instead, which wi l l increase volat i l i ty in recorded prof i t or loss. The AFS reser ve current ly presented as accumulated OCI wi l l be reclass i f ied to opening retained earnings. Debt secur i t ies are expected to be measured at fai r value through OCI under IFRS 9 as the Group expects not only to hold the assets to col lect contractual cash f lows but also to sel l a s igni f icant amount on a relat ively f requent basis.


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Standards issued but not yet effective (continued)

IFRS 9 Financial Instruments (continued)

(a) Classif ication and measurement (continued)The equity shares in non-l isted companies are intended to be held for the foreseeable future. The Group expects to apply the option to present fai r value changes in OCI, and, therefore, bel ieves the appl ication of IFRS 9 would not have a s igni f icant impact. I f the Group were not to apply that option, the shares would be held at fai r value through prof i t or loss, which would increase the volat i l i ty of recorded prof i t or loss.

Loans as wel l as receivables are held to col lect contractual cash f lows and are expected to give r ise to cash f lows represent ing solely payments of pr incipal and interest. Thus, the Group expects that these wi l l cont inue to be measured at amort ised cost under IFRS 9. However, the Group wi l l analyse the contractual cash f low character ist ics of those inst ruments in more detai l before concluding whether al l those inst ruments meet the cr i ter ia for amort ised cost measurement under IFRS 9.

(b) ImpairmentIFRS 9 requi res the Group to record expected credit losses on al l of i ts debt secur i t ies, loans and receivables, either on a 12-month or l i fet ime basis. The Group expects to apply the s impl i f ied approach and record l i fet ime expected losses on al l receivables. The Group expects a s igni f icant impact on i ts equity due to unsecured nature of i ts loans and receivables, but i t wi l l need to per form a more detai led analys is which considers al l reasonable and supportable information, including forward-looking elements to determine the extent of the impact.

(c) Hedge accountingThe Group bel ieves that al l exist ing hedge relat ionships that are current ly designated in ef fect ive hedging relat ionships wi l l st i l l qual i fy for hedge accounting under IFRS 9. As IFRS 9 does not change the general pr inciples of how an ent i ty accounts for ef fect ive hedges, the Group does not expect a s igni f icant impact as a result of applying IFRS 9. The Group wi l l assess possible changes related to the accounting for the t ime value of options, forward points or the currency basis spread in more detai l in the future.

IFRS 15 Revenue from Contracts with CustomersIFRS 15 was issued in May 2014 and establ ishes a f ive-step model to account for revenue ar is ing f rom contracts with customers. Under IFRS 15, revenue is recognised at an amount that ref lects the considerat ion to which an ent i ty expects to be ent i t led in exchange for t ransfer r ing goods or ser vices to a customer. The new revenue standard wi l l supersede al l cur rent revenue recognit ion requi rements under IFRS. Ei ther a fu l l ret rospective appl ication or a modif ied retrospective appl ication is requi red for annual per iods beginning on or after 1 Januar y 2018. Ear ly adoption is permitted. The Group plans to adopt the new standard on the requi red ef fect ive date using the fu l l ret rospective method. Dur ing 2016, the Group per formed a prel iminar y assessment of IFRS 15, which is subject to changes ar is ing f rom a more detai led ongoing analys is. Furthermore, the Group is consider ing the clar i f icat ions issued by the IASB in Apr i l 2016 and wi l l monitor any further developments.

Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint VentureThe amendments address the conf l ict between IFRS 10 and IAS 28 in deal ing with the loss of control of a subsidiar y that is sold or contr ibuted to an associate or joint venture. The amendments clar i fy that the gain or loss result ing f rom the sale or contr ibut ion of assets that const i tute a business, as def ined in IFRS 3, between an investor and its associate or joint venture, is recognised in fu l l . Any gain or loss result ing f rom the sale or contr ibut ion of assets that do not const i tute a business, however, is recognised only to the extent of unrelated investors ’ interests in the associate or joint venture. The IASB has deferred the ef fect ive date of these amendments indef in i tely, but an ent i ty that ear ly adopts the amendments must apply them prospectively.


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IAS 7 Disclosure Init iative – Amendments The amendments to IAS 7 Statement of Cash Flows are part of the IASB’s Disclosure In i t iat ive and require an ent i ty to provide disclosures that enable users of f inancial statements to evaluate changes in l iabi l i t ies ar is ing f rom f inancing activ i t ies, including both changes ar is ing f rom cash f lows and non-cash changes. On in i t ial appl ication of the amendment, ent i t ies are not requi red to provide comparative information for preceding per iods. These amendments are ef fect ive for annual per iods beginning on or after 1 Januar y 2017, with ear ly appl ication permitted. Appl ication of amendments wi l l result in addit ional disclosure provided by the Group.

IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses – Amendments The amendments clar i fy that an ent i ty needs to consider whether tax law rest r icts the sources of taxable prof i ts against which i t may make deductions on the reversal of that deductible temporar y di f ference. Furthermore, the amendments provide guidance on how an ent i ty should determine future taxable prof i ts and explain the ci rcumstances in which taxable prof i t may include the recover y of some assets for more than thei r carr y ing amount.

Ent i t ies are requi red to apply the amendments retrospectively. However, on in i t ial appl ication of the amendments, the change in the opening equity of the ear l iest comparative per iod may be recognised in opening retained earnings (or in another component of equity, as appropriate), without al locating the change between opening retained earnings and other components of equity. Ent i t ies applying this rel ief must disclose that fact. These amendments are ef fect ive for annual per iods beginning on or after 1 Januar y 2017 with ear ly appl ication permitted. I f an ent i ty appl ies the amendments for an ear l ier per iod, i t must disclose that fact. These amendments are not expected to have any impact on the Group.

IFRS 2 Classif ication and Measurement of Share-based Payment Transactions — Amendments The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the ef fect of vest ing condit ions on the measurement of a cash-sett led share-based payment t ransaction; the class i f icat ion of a share-based payment t ransaction with net sett lement features for withholding tax obl igations; and accounting where a modif icat ion to the terms and condit ions of a share-based payment t ransaction changes i ts class i f icat ion f rom cash sett led to equity sett led. On adoption, ent i t ies are requi red to apply the amendments without restat ing pr ior per iods, but retrospective appl ication is permitted i f elected for al l three amendments and other cr i ter ia are met. The amendments are ef fect ive for annual per iods beginning on or after 1 Januar y 2018, with ear ly appl ication permitted. These amendments have no impact on the consol idated f inancial statements.

IFRS 16 LeasesIFRS 16 was issued in Januar y 2016 and it replaces IAS 17 Leases, IFRIC 4 determining whether an arrangement contains a Lease, SIC-15 Operating Leases – Incent ives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the pr inciples for the recognit ion, measurement, presentat ion and disclosure of leases and requires lessees to account for al l leases under a s ingle on-f inancial posit ion model s imi lar to the accounting for f inance leases under IAS 17. The standard includes two recognit ion exemptions for lessees – leases of ’ low-value’ assets (e.g. , personal computers) and short-term leases ( i .e. , leases with a lease term of 12 months or less) . At the commencement date of a lease, a lessee wi l l recognise a l iabi l i ty to make lease payments ( i .e. , the lease l iabi l i ty) and an asset represent ing the r ight to use the under ly ing asset dur ing the lease term ( i .e. , the r ight-of-use asset) . Lessees wi l l be requi red to separately recognise the interest expense on the lease l iabi l i ty and the depreciat ion expense on the r ight-of-use asset.


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IFRS 16 Leases (continued)

Lessees wi l l be also requi red to remeasure the lease l iabi l i ty upon the occurrence of certain events (e.g. , a change in the lease term, a change in future lease payments result ing f rom a change in an index or rate used to determine those payments) . The lessee wi l l general ly recognise the amount of the remeasurement of the lease l iabi l i ty as an adjustment to the r ight-of-use asset.

Lessor accounting under IFRS 16 is substant ial ly unchanged f rom today ’s accounting under IAS 17. Lessors wi l l cont inue to class i fy al l leases us ing the same class i f icat ion pr inciple as in IAS 17 and dist inguish between two types of leases: operat ing and f inance leases. IFRS 16 also requi res lessees and lessors to make more extensive disclosures than under IAS 17. IFRS 16 is ef fect ive for annual per iods beginning on or after 1 Januar y 2019. Ear ly appl ication is permitted, but not before an ent i ty appl ies IFRS 15. A lessee can choose to apply the standard using either a fu l l ret rospective or a modif ied retrospective approach. The standard ’s t ransit ion provis ions permit certain rel iefs. In 2017, the Group plans to assess the potent ial ef fect of IFRS 16 on i ts consol idated f inancial statements. Summar y of signif icant accounting policiesThe accounting pol icies set out below have been appl ied by the Group consistent ly to al l per iods presented in these consol idated f inancial statements, and have been appl ied consistent ly by the Group ent i t ies.

Basis of consolidationThe consol idated f inancial statements comprise the f inancial statements of the Company and its subsidiar ies as at 31 December 2016.

Subsidiar ies are consol idated f rom the date of acquis i t ion, being the date on which the Group obtains control, and continue to be consol idated unt i l the date when such control ceases. The f inancial statements of the subsidiar ies are prepared for the same report ing per iod as the Parent Company, us ing consistent accounting pol icies. Al l int ra-group balances, t ransactions, recognized gains and losses result ing f rom int ra-group transactions and dividends are el iminated in fu l l .

Total comprehensive income within a subsidiar y is att r ibuted to the non-control l ing interest even i f i t results in a def icit balance.

A change in the ownership interest of a subsidiar y, without a loss of control, is accounted for as an equity t ransaction. I f the Group loses control over a subsidiar y, i t :

- derecognises the assets ( including goodwi l l ) and l iabi l i t ies of the subsidiar y ;- derecognises the carr y ing amount of any non-control l ing interests ;- derecognises the cumulat ive t ranslat ion di f ferences recorded in equity ;- recognises the fai r value of the considerat ion received;- recognises the fai r value of any investment retained;- recognises any surplus or def icit in prof i t or loss ;- reclass i f ies the Parent ’s share of components previously recognized in other comprehensive income to prof i t or loss or retained earnings, as appropriate.


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Summar y of signif icant accounting policies (continued)

Basis of consolidation (continued)

Business combinations and goodwil l Business combinations are accounted for us ing the acquis i t ion method. The cost of an acquis i t ion is measured as the aggregate of the considerat ion t ransfer red, which is measured at acquis i t ion date fai r value, and the amount of any non-control l ing interests in the acquiree. For each business combination, the Group elects whether to measure the non-control l ing interests in the acquiree at fai r value or at the proport ionate share of the acquiree’s ident i f iable net assets.

Acquis i t ion-related costs are expensed as incurred and included in administ rat ive expenses.

When the Group acquires a business, i t assesses the f inancial assets and l iabi l i t ies assumed for appropriate class i f icat ion and designation in accordance with the contractual terms, economic ci rcumstances and pert inent condit ions as at the acquis i t ion date. This includes the separation of embedded der ivat ives in host contracts by the acquiree.

Any contingent considerat ion to be transfer red by the acquirer wi l l be recognised at fai r value at the acquis i t ion date. Contingent considerat ion class i f ied as an asset or l iabi l i ty that is a f inancial inst rument and within the scope of IAS 39 Financial Inst ruments : Recognit ion and Measurement, is measured at fai r value with the changes in fai r value recognised in the consol idated statement of prof i t or loss.

Goodwi l l is in i t ial ly measured at cost (being the excess of the aggregate of the considerat ion t ransfer red and the amount recognised for non-control l ing interests) and any previous interest held over the net ident i f iable assets acquired and l iabi l i t ies assumed. I f the fai r value of the net assets acquired is in excess of the aggregate considerat ion t ransfer red, the Group re-assesses whether i t has correct ly ident i f ied al l of the assets acquired and al l of the l iabi l i t ies assumed and reviews the procedures used to measure the amounts to be recognised at the acquis i t ion date. I f the reassessment st i l l results in an excess of the fai r value of net assets acquired over the aggregate considerat ion t ransfer red, then the gain is recognised in prof i t or loss.

After in i t ial recognit ion, goodwi l l is measured at cost less any accumulated impairment losses. For the purpose of impairment test ing, goodwi l l acquired in a business combination is, f rom the acquis i t ion date, al located to each of the Group’s cash-generat ing units that are expected to benef i t f rom the combination, i r respective of whether other assets or l iabi l i t ies of the acquiree are assigned to those units.

Where goodwi l l has been al located to a cash-generat ing unit (CGU) and part of the operation with in that unit is disposed of, the goodwi l l associated with the disposed operation is included in the carr y ing amount of the operation when determining the gain or loss on disposal. Goodwi l l disposed in these ci rcumstances is measured based on the relat ive values of the disposed operation and the port ion of the cash-generat ing unit retained.

Investment in subsidiar y companiesSubsidiar ies are def ined as companies that are control led by the Group, namely companies in which the Group has the power to govern the f inancial and operating pol icies so as to obtain benef i ts f rom thei r act iv i t ies.


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Investment in subsidiar y companies (continued)The consol idated f inancial statements comprise the f inancial statements of Qatar General Insurance & Reinsurance Company PJSC and its subsidiar y companies as at 31 December 2016. The f inancial statements of the subsidiar y companies are prepared for the same report ing year as the Parent Company, us ing consistent accounting pol icies.

Int ra-group balances and transactions, and any unreal ised income and expenses ar is ing f rom int ra-group transactions, are el iminated in preparing the consol idated f inancial statements.

One of the Group’s subsidiar ies, General Takaful Company W.L.L. , is an operator of Is lamic insurance business operating under Is lamic Shar i ’a pr inciples. In accordance with appl icable Shar i ’a pr inciples, part icipants ’ (pol icyholders ’ ) funds are maintained separately f rom the operator ’s (shareholders ’ ) funds. Accordingly, the part icipants ’ assets and l iabi l i t ies including the fund balances are shown separately as Takaful part icipants ’ assets and Takaful part icipants ’ l iabi l i t ies respectively in the consol idated statement of f inancial posit ion as supplementar y information. Takaful part icipants ’ fund accounts compris ing of statement of f inancial posit ion and statement of prof i t or loss – pol icyholders is set out in Note 11. The Group manages the Takaful funds on behalf of the pol icyholders under the Hybr id model as an operator.

The Hybr id model uses the pr inciples of both Wakala and Mudaraba. Accordingly, the operator receives a f ixed Wakala fee of 15% (2015: 15%) of gross wr i t ten contr ibut ions, in addit ion to the 70% (2015: 70%) share in the investment gains on the pol icyholders ’ contr ibut ions. The administ rat ive costs of underwr i t ing are covered by the Wakala fee and borne by the shareholders.

Investment in associate companiesAssociate companies are those ent i t ies in which the Group has s igni f icant inf luence, but not control, over the f inancial and operating pol icies. The consol idated f inancial statements include the Group’s share of total recognised gains and losses of associates on an equity accounted basis, f rom the date that s igni f icant inf luence commences unt i l the date that s igni f icant inf luence ceases.

Al l subsequent changes to the Group’s share of interest in the equity of the associate are recognised in the Group’s carr y ing amount of the investment. Changes result ing f rom the prof i t and loss generated by the associate are reported in the consol idated statement of prof i t or loss and therefore af fect net results of the Group.

Amounts reported in the f inancial statements of associates have been adjusted where necessar y to ensure consistency with the accounting pol icies adopted by the Group. Unreal ised gains ar is ing f rom transactions with associates are el iminated against the investment to the extent of the Group’s interest in the investee.

When the Group’s share of losses exceeds i ts interest in an associate, the carr y ing amount of that interest, including any long term investments, is reduced to zero and the recognit ion of further losses is discontinued except to the extent that the Group has an obl igation or has made payments on behalf of the investee.


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Investment in associate companies (continued)After appl ication of the equity method, the Group determines whether i t is necessar y to recognise an impairment loss on i ts investment in associate. At each report ing date, the Group determines whether there is object ive evidence that the investment in associate is impaired. I f there is such evidence, the Group calculates the amount of impairment as the di f ference between the recoverable amount of the associate and its carr y ing value, and then recognises the loss under ‘ share of prof i ts of associate’ in the consol idated statement of prof i t or loss.

Foreign currency

Foreign operations For the purpose of the consol idated f inancial statements, the results and f inancial posit ion of the foreign branch is expressed in the funct ional cur rency of the Parent Company at the exchange rate prevai l ing at the report ing date. Income and expenses are t ranslated at the average exchange rates for the year unless exchange rates f luctuated s igni f icant ly dur ing the year in which case the exchange rates at the dates of the t ransactions are used. Investment in foreign associates is t ranslated at the closing exchange rates. Foreign currency t ranslat ion di f ferences are recognised direct ly in other comprehensive income. When a foreign operation is disposed of in part or fu l l , the relevant amount in the reser ve is t ransfer red to the consol idated statement of prof i t or loss for the corresponding per iod.

Foreign currency transactionsForeign currency t ransactions are in i t ial ly recorded in Qatar i Riyals at exchange rates at the dates of the t ransactions. Monetar y assets and l iabi l i t ies denominated in foreign currencies at the report ing date are retranslated to Qatar i Riyal at the exchange rate at that date.

Non-monetar y assets and l iabi l i t ies denominated in foreign currencies that are measured at fai r value are retranslated to Qatar i Riyal at the exchange rate at the date that the fai r value was determined. Non-monetar y i tems in a foreign currency that are measured based on histor ical cost are t ranslated using the exchange rates at the date of the t ransactions. The resultant exchange di f ferences are included in the consol idated statement of prof i t or loss.

Financial instruments Financial inst ruments represent the Group’s f inancial assets and l iabi l i t ies. Financial assets include cash and cash equivalents, insurance and other receivables, receivables f rom related part ies, and reinsurance assets. Financial l iabi l i t ies include insurance payables, loans and borrowings, der ivat ive f inancial inst ruments, insurance contract l iabi l i t ies, payables to related part ies and other l iabi l i t ies.

RecognitionThe f inancial assets and l iabi l i t ies are recognised on the date they are generated and on the date at which the Group becomes a party to the contractual provis ions of the inst rument.

Al l f inancial assets are recognised in i t ial ly at fai r value plus t ransaction costs, except in the case of f inancial assets recorded at fai r value through prof i t or loss.


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Financial instruments (continued)

De-recognitionThe Group derecognises the f inancial asset when the contractual r ights to receive cash f lows f rom that asset expire or i t t ransfers the r ight to receive the contractual cash f low of that asset in a t ransaction in which substant ial ly al l the r isks and rewards of ownership of the f inancial assets are t ransfer red.

The Group also derecognizes certain assets when i t expenses balances pertaining to assets deemed to be uncol lect ible. The Group derecognises a f inancial l iabi l i ty when i ts contractual obl igations are discharged, cancel led or expired.

Offsetting of f inancial instrumentsFinancial assets and f inancial l iabi l i t ies are of fset and the net amount is reported in the consol idated statement of f inancial posit ion i f there is a current ly enforceable legal r ight to of fset the recognised amounts and there is an intent ion to sett le on a net basis, to real ise the assets and sett le the l iabi l i t ies s imultaneously.

Segment reportingSegment results that are reported to senior management includes i tems di rect ly att r ibutable to a segment as wel l as those that can be al located on a reasonable basis. Unal located items comprise mainly corporate assets and head off ice expenses. For management purpose, the Group is organised into two business segments, insurance and investments. These segments are the basis on which the Group reports i ts operat ing segement information. No operating segment has been aggregated in arr iv ing at the reportable segment of the Group.

Measurement

Available-for-sale f inancial assets The Group’s investments in equity secur i t ies, fund accounts and debt secur i t ies are class i f ied as avai lable-for-sale f inancial assets. Subsequent to in i t ial recognit ion, they are measured at fai r value and changes therein, other than impairment losses, and foreign currency di f ferences on avai lable-for-sale monetar y i tems, are recognised direct ly in other comprehensive income and presented within equity in the fai r value reser ve.

When an investment is derecognised, the cumulat ive gain or loss in equity is t ransfer red to prof i t or loss. Al l purchases and sales of investments are recognised at the sett lement date.

Financial assets at fair value through profit or lossAn inst rument is class i f ied at fai r value through prof i t or loss i f i t is held for t rading or is designated as such upon in i t ial recognit ion. Financial inst ruments are held for t rading i f the Group manages such investments and makes purchase and sale decis ions based on thei r fai r value in accordance with the Group’s investment st rategy. Upon in i t ial recognit ion, att r ibutable t ransaction costs are recognised in prof i t or loss as incurred. Financial inst ruments at fai r value through prof i t or loss are measured at fai r value, and changes therein are recognised in prof i t or loss.

Cash and cash equivalentsCash and cash equivalents comprise cash at bank and in hand and short-term deposits with an or iginal matur i ty of three months or less as on the consol idated statement of f inancial posit ion date. For the purpose of the consol idated


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Measurement (continued)

Cash and cash equivalents (continued)statement of cash f lows, cash and cash equivalents consist of cash and cash equivalents as def ined above, net of outstanding bank overdrafts.

Insurance and other receivablesInsurance and other receivables are measured at in i t ial recognit ion at fai r value, and are subsequent ly measured at amort ised cost us ing the ef fect ive interest rate method. Appropriate al lowances for est imated i r recoverable amounts are recognised in the consol idated statement of prof i t or loss when there is an objective evidence that the asset is impaired.

Reinsurance assetsThe Group cedes insurance r isk in the normal course of business. Reinsurance assets represent balances recoverable f rom reinsurance companies. Amounts recoverable f rom reinsurers are est imated in a manner consistent with the outstanding claims provis ion or sett led claims associated with the reinsurers ’ pol icies and are in accordance with the related reinsurance contract.

Insurance contract l iabil it iesInsurance contract l iabi l i t ies include the outstanding claims provis ion, provis ion for claims incurred but not reported and the provis ion for unearned premium.

Amounts payable for insurance claims reported up to the report ing per iod end and the amounts payable to reinsurance companies are accrued as a provis ion for outstanding claims. The insurance claims are accrued on the basis of the actual losses reported against the pol icies underwr i t ten by the Group dur ing the year.

Provis ion for claims incurred but not reported are computed based on actuar ial review after consider ing current assumptions, h istor ical t rends and empir ical data which is not discounted for the t ime value of money.

Unearned premiums represent the port ion of net premiums wr i t ten relat ing to the unexpired per iod of coverage calculated on the actual number of days method (dai ly pro rata basis) . The change in the provis ion for unearned premium is taken to the consol idated statement of prof i t or loss in the order that revenue is recognised over the per iod of r isk.

Loans and borrowingsAl l loans and borrowings are in i t ial ly recognised at the fai r value of the considerat ion received less di rect ly att r ibutable t ransaction costs. After the in i t ial recognit ion, loans and borrowings are subsequent ly measured at amort ised cost us ing the ef fect ive interest rate method. Gains and losses are recognised in the prof i t or loss when l iabi l i t ies are derecognised.

OthersOther non-der ivat ive f inancial inst ruments are measured at amort ised cost us ing the ef fect ive interest rate method, less any impairment losses.


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Measurement (continued)

Derivative f inancial instrumentsThe Group uses interest rate swap contracts to hedge its r isk associated with interest rate f luctuations relat ing to the interest payments on the Group’s term loan. These interest rate swap contracts are stated at fai r value. The Group class i f ies a hedge as a cash f low hedge where i t hedges the exposure to var iabi l i ty in cash f lows that are either att r ibutable to a part icular r isk associated with a recognised asset or l iabi l i ty or a forecasted transaction. The interest rate swap contract has been class i f ied as a cash f low hedge and meets the condit ions for hedge accounting.

Der ivat ives are in i t ial ly recognized at fai r value at the date a der ivat ive contract is entered into and are subsequent ly re-measured to thei r fai r value at each consol idated statement of f inancial posit ion date. The result ing gain or loss is recognized in prof i t or loss immediately unless the der ivat ive is designated and effect ive as a hedging inst rument, in which event the t iming of the recognit ion in prof i t or loss depends on the nature of the hedge relat ionship.

Cash f low hedgeThe ef fect ive port ion of changes to the fai r value of der ivat ives that are designated and qual i fy as cash f low hedge are deferred in other comprehensive income. The gain or loss relat ing to the inef fect ive port ion is recognized immediately in the consol idated statement of prof i t or loss.

Fair value measurementThe Group measures f inancial and certain non-f inancial inst ruments at fai r value at each consol idated f inancial posit ion date. Fai r value related disclosures for such inst ruments are disclosed in the fol lowing notes:

- investment propert ies in Note 5.- avai lable-for-sale f inancial assets in Note 7.- f inancial assets at fai r value through prof i t or loss in Note 8.- der ivat ive f inancial inst ruments in Note 22.- quanti tat ive disclosures of fai r value measurement hierarchy in Note 40.- disclosures for valuation methods, s igni f icant est imates and assumptions in Note 43.

Fai r value is the pr ice that would be received to sel l an asset or paid to t ransfer a l iabi l i ty in an order ly t ransaction between market part icipants at the measurement date. The fai r value measurement is based on the presumption that the t ransaction to sel l the asset or t ransfer the l iabi l i ty takes place either :

- in the pr incipal market for the asset or l iabi l i ty ; or - in the absence of a pr incipal market, in the most advantageous market for the asset or l iabi l i ty.

The pr incipal or the most advantageous market must be accessible by the Group. The fai r value of an asset or a l iabi l i ty is measured using the assumptions that market part icipants would use when pr icing the asset or l iabi l i ty, assuming that market part icipants act in thei r economic best interest.

Al l assets and l iabi l i t ies for which fai r value is measured or disclosed in the consol idated f inancial statements are categorised within the fai r value hierarchy, descr ibed as fol lows, based on the lowest level input that is s igni f icant to the fai r value measurement as a whole:


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Fair value measurement (continued)

- Level 1: Quoted (unadjusted) market pr ices in active markets for ident ical assets or l iabi l i t ies. - Level 2: Valuation techniques for which the lowest level input that is s igni f icant to the fai r value measurement is di rect ly or indi rect ly obser vable. - Level 3: Valuation techniques for which the lowest level input that is s igni f icant to the fai r value measurement is unobser vable.

For assets and l iabi l i t ies that are recognised in the consol idated f inancial statements on a recurr ing basis, the Group determines whether t ransfers have occurred between levels in the hierarchy by re-assess ing categorisat ion (based on the lowest level input that is s igni f icant to the fai r value measurement as a whole) at the end of each report ing per iod.

The Group determines the pol icies and procedures for both recurr ing fai r value measurement such as unquoted avai lable-for-sale f inancial assets, and for non-recurr ing measurement.

External valuers are involved in the valuation of s igni f icant assets, such as investment propert ies, and s igni f icant l iabi l i t ies. Involvement of external valuers is decided upon annual ly by the management after discuss ion with and approval by the Group’s Audit Committee. Select ion cr i ter ia include market knowledge, reputat ion, independence and whether profess ional standards are maintained. The Group decides, after discuss ions with the Group’s external valuers, which valuation techniques and inputs to use for each case.

At each report ing date, the Group analyses the movements in the values of assets and l iabi l i t ies which are requi red to be re-measured or re-assessed as per the Group’s accounting pol icies. For th is analys is, the Group ver i f ies the major inputs appl ied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents.

The Group, in conjunct ion with the Group’s external valuers, also compares the change in the fai r value of each asset and l iabi l i ty with relevant external sources to determine whether the change is reasonable.

For the purpose of fai r value disclosures, the Group has determined classes of assets and l iabi l i t ies on the basis of the nature, character ist ics and r isks of the asset or l iabi l i ty and the level of the fai r value hierarchy as explained above.

Financial assets at fair value through profit or loss and available-for-sale f inancial assetsThe fai r value of f inancial inst ruments that are actively t raded in organized f inancial markets is determined by reference to quoted market bid pr ices for assets and offer pr ices for l iabi l i t ies, at the close of business on the consol idated statement of f inancial posit ion date. I f the fai r value cannot be measured rel iably us ing any of the methods mentioned, then these f inancial inst ruments are measured at cost, being the fai r value of the considerat ion paid for the acquis i t ion of the investment or the amount received on issuing the f inancial l iabi l i ty unt i l a rel iable measure of the fai r value is avai lable. Al l t ransaction costs di rect ly att r ibutable to the acquis i t ion are also included in the cost of the investment.


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Fair value measurement (continued)

Investment propertiesThe fai r value of an investment property is determined by independent real estate valuation experts with recent exper ience in the location and categor y of the property being valued. The fai r values are based on market values, being the est imated amount for which a property could be exchanged on the valuation date between a wi l l ing buyer and a wi l l ing sel ler in an arm’s length t ransaction after proper market ing wherein part ies had each acted knowledgeably.

Transfers are made to or f rom investment propert ies only when there is a change in use evidenced by the end of owner-occupation and commencement of an operating lease to another party or complet ion of construct ion or development. For a t ransfer f rom investment property to owner-occupied property, the deemed cost for subsequent accounting is the fai r value at the date of change in use. I f owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the pol icy stated under property and equipment up to the date of the change in use.

Interest rate swap agreementsThe fai r value of interest rate swap contracts is calculated by discount ing the expected future cash f lows at the prevai l ing interest rate based on broker ’s quotes.

Impairment

Financial assetsA f inancial asset is assessed at each report ing date to determine whether there is any object ive evidence that i t is impaired. I f such evidence exists, the est imated recoverable amount of that asset is determined and any impairment loss is recognised in the consol idated statement of prof i t or loss. For assets carr ied at fai r value, impairment is the di f ference between cost and fai r value, less any impairment loss previously recognized in the consol idated statement of prof i t or loss. For an investment in equity secur i ty class i f ied under avai lable-for-sale, a s igni f icant or prolonged decl ine in i ts fai r value below its cost provides object ive evidence of impairment. Reversal of impairment losses in respect of equity investments class i f ied as avai lable-for-sale are t reated as increases in fai r value through the consol idated statement of comprehensive income. Reversal of impairment losses on debt inst ruments are done through the consol idated statement of prof i t or loss, when the increase in fai r value can be objectively related to an event occurr ing after the impairment loss was recognised in the consol idated statement of prof i t or loss.

For assets carr ied at cost, impairment is the di f ference between the carr y ing value and the present value of future cash f lows discounted at the current market rate of return for a s imi lar f inancial asset.

For assets carr ied at amort ised cost, impairment is calculated as the di f ference between i ts carr y ing amount and the present value of the est imated future cash f lows discounted at the f inancial asset ’s or iginal ef fect ive interest rate.

Non-financial assetsThe carr y ing amounts of the Group’s non-f inancial assets are reviewed at each report ing date to determine whether there is any indication of impairment. I f any such indication exists, then the asset ’s recoverable amount is est imated.


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Other assets and l iabil it iesAl l other assets and l iabi l i t ies which are f inancial inst ruments are stated at cost, being the fai r value and recognized at amounts to be received or to be paid in the future.

Intangible assets Intangible assets acquired separately are measured on in i t ial recognit ion at cost. The cost of intangible assets acquired in a business combination is thei r fai r value at the date of acquis i t ion. Fol lowing in i t ial recognit ion, intangible assets are carr ied at cost less any accumulated amort isat ion and accumulated impairment losses. The useful l ives of intangible assets are assessed as either f in i te or indef in i te.

Intangible assets with f in i te l ives are amort ised over the useful economic l i fe and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amort isat ion per iod and the amort isat ion method for an intangible asset with a f in i te useful l i fe are reviewed at least at the end of each report ing per iod. Changes in the expected useful l i fe or the expected pattern of consumption of future economic benef i ts embodied in the asset are considered to modify the amort isat ion per iod or method, as appropriate, and are t reated as changes in accounting est imates. The amort isat ion expense on intangible assets with f in i te l ives is recognised in the consol idated statement of prof i t or loss in the expense categor y that is consistent with the funct ion of the intangible assets.

Intangible assets with indef in i te useful l ives are not amort ised, but are tested for impairment annual ly, either individual ly or at the cash-generat ing unit level. The assessment of indef in i te l i fe is reviewed annual ly to determine whether the indef in i te l i fe continues to be supportable. I f not, the change in useful l i fe f rom indef in i te to f in i te is made on a prospective basis.

Gains or losses ar is ing f rom derecognit ion of an intangible asset are measured as the di f ference between the net disposal proceeds and the carr y ing amount of the asset and are recognised in the consol idated statement of prof i t or loss when the asset is derecognised. The current pol icy appl ied to the Group’s intangible asset is the r ight of use intangible asset (acquired) with an economic l i fe of 13 years amort ised on a st raight- l ine basis over the per iod of the r ight to use.

Investment propertiesInvestment property is property held either to earn rental income or for capital appreciat ion or for both, but not for sale in the ordinar y course of business or use in the production or supply of goods and ser vices or for administ rat ive purposes. Investment propert ies are measured by applying the fai r value model.

Cost includes expenditure that is di rect ly att r ibutable to the acquis i t ion of the investment property. The cost of sel f-constructed investment property includes the cost of mater ials and direct labour, any other cost di rect ly att r ibutable to br inging the investment property to a work ing condit ion for thei r intended use and capital ised borrowing cost.

Any gain or loss on disposal of any investment property (calculated as a di f ference between the net proceeds f rom disposal and the carr y ing amount of the i tem) is recognised in prof i t or loss.

When the use of a property changes such that i t is reclass i f ied as property and equipment, i ts fai r value at the date of reclass i f icat ion becomes i ts cost for subsequent accounting.


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Recognition and measurement Property and equipment is stated at cost less accumulated depreciat ion and impairment losses. Cost includes expenditure that is di rect ly att r ibutable to the acquis i t ion of the asset. The cost of sel f-constructed assets includes the cost of mater ials and direct labour, any other costs di rect ly att r ibutable to br inging the assets to a work ing condit ion for thei r intended use, and the costs of dismant l ing and removing the i tems and restor ing the s i te on which they are located.

Gains and losses on disposal of an i tem of property and equipment are determined by comparing the proceeds f rom disposal with the carr y ing amount of property and equipment, and are recognised net with in other income in prof i t or loss.

Subsequent costsThe cost of replacing part of an i tem of property and equipment is recognised in the carr y ing amount of the i tem i f i t is probable that the future economic benef i ts embodied within the part wi l l f low to the Group and its cost can be measured rel iably. The carr y ing amount of the replaced part is derecognised. The costs of the day-to-day ser vicing of property and equipment are recognised in prof i t or loss as incurred.

Depreciation Depreciat ion is calculated on a st raight- l ine method over the est imated useful l ives of property and equipment other than land which is determined to have an indef in i te l i fe as fol lows:

Bui ldings 20 yearsFurniture and f ixtures 4 yearsComputers 3 – 5 yearsMotor vehicles 3 – 5 yearsTools and equipment 3 – 5 years

Depreciat ion methods, useful l ives and residual values are reviewed at each f inancial year end and adjusted i f appropriate. Depreciat ion is al located within the consol idated statement of prof i t or loss under cost of construct ion activ i t ies and other operat ing and administ rat ive expenses. LeasesThe determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease i f fu l f i lment of the arrangement is dependent on the use of a specif ic asset (or assets) and the arrangement conveys a r ight to use the asset (or assets) , even i f that asset is (or those assets are) not expl ici t ly specif ied in an arrangement.

Group as a lesseeA lease is class i f ied at the inception date as a f inance lease or an operating lease. A lease that t ransfers substant ial ly al l the r isks and rewards incidental to ownership to the Group is class i f ied as a f inance lease.


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Summary of significant accounting policies (continued)

Leases (continued)

Group as a lessee (continued)Finance leases are capital ised at the commencement of the lease at the inception date fai r value of the leased property or, i f lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liabil ity so as to achieve a constant rate of interest on the remaining balance of the l iabil ity. Finance charges are recognised in f inance costs in the consolidated statement of profit or loss.

A leased asset is depreciated over the useful l i fe of the asset. However, i f there is no reasonable certainty that the Group wil l obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful l i fe of the asset and the lease term.

An operating lease is a lease other than a finance lease. Operating lease payments are recognised as an operating expense in the consolidated statement of profit or loss on a straight-l ine basis over the lease term.

Group as a lessor Leases in which the Group does not transfer substantially all the risks and rewards of ownership of an asset are classif ied as operating leases. Init ial direct costs incurred in negotiating and arranging an operating lease are added to the carr ying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.

ProvisionsProvisions are recognised in the consolidated statement of f inancial position when the Group has a legal or constructive obligation as a result of a past event that can be estimated reliably, and it is probable that an outflow of economic benefits wil l be required to settle the obligation.

Finance costsThe finance costs incurred on qualif ied assets are capitalised being part of cost of construction. All other f inance costs are recognised on an accrual basis in the consolidated statement of profit or loss during the year in which they arise.

Employee benefits

Local employees With respect to local employees, the Group makes contributions to the government pension fund to the respective local regulator y authorit ies as a percentage of the employees ’ salaries in accordance with the requirements of respective local laws pertaining to retirement and pensions, wherever required. The Group’s share of contributions to these schemes, which are defined contribution schemes under International Accounting Standard 19 Employee Benefits are charged to the consolidated statement of profit or loss in the year to which they relate.

Expatriate employees For the expatriate employees, the Group provides for employees ’ end-of-service benefits determined in accordance with the requirements of respective local laws of Group entit ies pertaining to retirement and pensions, wherever required.


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Employee benefits (continued)

Expatriate employees (continued)These unfunded charges are made by the Group on the basis of employees’ salaries and the number of years of service at the consolidated statement of financial position date. Although the expected costs of these benefits are accrued over the period of employment, these are paid to employees only on completion of their term of employment with the Group.

Share capital

Ordinary share capitalOrdinary shares are classified as equity. The bonus shares issued during the year are shown as an addition to the share capital and deducted from the accumulated retained earnings of the Group.

Dividends on ordinary share capitalDividends on ordinary shares are recognised as a liability and deducted from retained earnings when they are approved by the Company ’s shareholders. Dividends for the year that are approved after the consolidated statement of financial position date are dealt with as an event after the consolidated statement of financial position date.

Fair value reserveThis represents the unrealised gain or loss on year end fair valuation of available-for-sale financial assets. In the event of sale or impairment, the cumulative gains or losses recognised under the investments fair value reserve are recycled to the consolidated statement of profit or loss for the year.

Income recognition

Gross written premiumsGross written premiums comprise total premiums receivable for the whole period of cover provided by contracts entered into during the accounting period and are recognised on the date on which the policy commences.

Net earned premiumsPremiums, net of reinsurance, are recognizd in the consolidated statement of profit or loss over the terms of the related contracts or policies. The portion of premium received on in-force contracts that relates to unexpired risks at the consolidated statement of financial position date is reported as the unearned premium liability. Unearned premiums are calculated principally on the actual number of day ’s method (daily pro rata basis).

Reinsurance arrangements As part of managing its insurance risks, the Group enters into contracts with other reinsurers for compensation of losses on insurance contracts issued by the Group. A proportionate amount of gross written premiums, in proportion to the amount of risk reinsured on an individual policy basis are paid to reinsurance companies according to the rates agreed in reinsurance contracts, as reinsurance premiums. In the ordinary course of business, the Group assumes and cedes reinsurance. Such reinsurance arrangements provide for greater diversification of business, allow management to control exposure to potential losses arising from large risks, and provide additional capacity for growth. A significant portion of reinsurance is affected under treaty, facultative and excess-of-loss reinsurance contracts. Amounts payable to reinsurance companies are accrued on the basis of reinsurance premium payable on an individual policy basis. Unearned reinsurance premiums are those




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Reinsurance arrangements (continued)proportions of premiums written in a year that relate to periods of risk after the consolidated statement of financial position date and are deferred over the term of the underlying direct insurance policies.

Net commission incomeA proportionate amount of reinsurance premium paid to reinsurance companies is paid back to the Group as commission for undertaking the business. This commission percentage is agreed according to reinsurance contracts entered per individual l ine of business with different reinsurance companies. The amount of commission is recognised according to the reinsurance commission receivable on an individual policy basis.

Fees Insurance contract policyholders are charged for policy administration services, management services and other contract fees. This income is recognised during the period when the policy is underwritten or the service is provided.

Investment income Rental income from investment properties is recognised in the consolidated statement of profit or loss on a straight-l ine basis over the period of the lease. Investment income also includes dividends, which are recognised when the right to receive the same is established. Interest income is recognised in the consolidated statement of profit or loss as it accrues. Income from associate companies is recognised as per the equity accounting method. Changes resulting from the profit or loss generated by the associates are recognised under the consolidated statements of profit or loss.

Income from/cost of construction activitiesCost of construction activit ies is recognized when incurred. When the outcome of a fixed price construction contract cannot be estimated reliably, income from construction activit ies is recognized only to the extent of contract costs incurred that are l ikely to be recoverable.

When the outcome of a fixed price construction contract can be estimated reliably and it is probable that the contract wil l be profitable, contract revenue is recognized over the period of the contract. When it is probable that total contract costs wil l exceed total contract revenue, the expected loss is recognized as an expense immediately.

The Group uses the percentage of completion method to determine the appropriate amount of revenue to recognize in a given period. The stage of completion is measured by the proportion that contract costs incurred for work per formed to date relative to the estimated total contract costs for each contract. Costs incurred in the year in connection with future activity on a contract are excluded from contract costs in determining the stage of completion.

Claims and related expenses

Gross claims paidClaims and related expenses are accounted for based on reports received and subsequent review on an individual case basis. Provision is made to cover the estimated ultimate cost of settl ing claims arising out of events, which have occurred by the end of the financial year, including unreported losses, and claims handling expenses.




83




Claims and related expenses (continued)

Reinsurance and other recoveriesCompensations receivable from reinsurers are estimated in a manner consistent with the corresponding claim l iabil ity. The obligations arising under reinsurance contracts are recognised in profit or loss and the related liabil it ies are recognised as accounts receivable or deducted from reinsurers ’ share of technical reserves. Hence, a portion of the reinsurance premium payable is provided as a reserve for future claims in order to provide additional l iquidity for the Group, which is f inally settled at the end of the reinsurance period.

Movement in outstanding claims

Provision for reported claims by policyholdersProvision for outstanding claims is recognized at the date the claims are known and covers the l iabil ity for loss and loss adjustment expenses based on loss reports from independent loss adjusters and management ’s best estimates.

Provision for claims incurred but not reported (IBNR)Claims provision also includes a l iabil ity for claims incurred but not reported as at the consolidated statement of f inancial position date. An independent actuarial f i rm is appointed ever y subsequent year to assess the adequacy of reserves to meet future outstanding liabil it ies. The liabil ity is generally calculated at the reporting date, after considering the independent actuarial report, historic trends, empirical data and current assumptions that may include a margin for adverse deviations. The liabil ity is not discounted for the time value of money.

Provision for premium deficiencyAt the end of each reporting period, provision is made for premium deficiency arising from general insurance contracts where the expected value of claims and expenses attr ibutable to the unexpired periods of policies in force at the reporting date exceeds the unearned premiums provision and already recorded claim l iabil it ies in relation to such policies. The provision for premium deficiency is made by reference to classes of business at the date of consolidated statement of f inancial position based on actuarial estimates.

Provision for unallocated loss adjustment expense (ULAE)Provision for unallocated loss adjustment expense represents an estimate of ultimate payments for losses and related settlement expenses from claims that have been reported but not paid. The loss reserve estimates are expectations of what ultimate settlement and administration of claims wil l cost upon final resolution. These estimates are based on facts and circumstances then known to us, review of historical settlement patterns, estimates of trends in claims frequency and severity, projections of loss costs, expected interpretations of legal theories of l iabil ity and other factors. In establishing the provision, we also take into account estimated recoveries from reinsurance, salvage and subrogation. The provision is reviewed regularly by the Group’s actuar y.

Reserve for unexpired risksThe reserve for unexpired risk represents the estimated portion of net premium income which relates to periods of insurance subsequent to the consolidated statement of f inancial position date. The reserve is calculated using the actual number of day ’s method. The reinsurers ’ share on estimated liabil ity of RBNS, IBNR and unexpired insurance premium is separately classif ied as reinsurance assets in the consolidated statement of f inancial position.


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Events after the reporting periodThe consolidated financial statements are adjusted to reflect events that occurred between the consolidated statement of f inancial position date and the date when the consolidated financial statements are authorised for issue, provided they give evidence of conditions that existed at the consolidated statement of f inancial position date. There were no subsequent events which required either adjustments or disclosures in the consolidated financial statements except for the proposed dividend.

Earnings per shareThe Group presents basic and diluted earnings per share (EPS) data for its ordinar y shares. Basic EPS is calculated by dividing the profit attr ibutable to ordinar y equity holders of the Parent by the weighted number of ordinar y shares outstanding during the year.


85


3 BUSINESS COMBINATIONS

On 2 June 2015, the Group acquired 100% of the voting shares of Orientals Enterprises W.L.L. and obtained control over its f inancial and operating activit ies. Orientals Enterprises W.L.L. was registered under commercial registr y number 21830. The principal activit ies of Orientals Enterprises W.L.L. are trading in steel and insulation materials as well as contracting and construction activit ies. The Group acquired Orientals Enterprises W.L.L. to support the Group’s real estate activit ies as well as to diversify the source of income.

Assets acquired and liabilities assumedThe fair values of the identif iable assets and liabil it ies of Orientals Enterprises W.L.L. as at the date of acquisit ion were:

The goodwil l of QR 14.41 mil l ion represents future synergies expected to arise in the combined operations, the value of new contracts going forward, and the value of the workforce and management and other future business which is not separately recognized. Goodwil l is allocated entirely to the investment segment. Acquisit ion-related costs were recognised in profit or loss and included in other operating and administrative expenses.


QR ‘000

Fair value recognised on acquisition

Assets



Cash and cash equivalents

Employees’ end-of-service benefits (Note 24)

Goodwill arising from acquisition (Note 12)

Liabilities

Analysis of cash flows on acquisition:

Net cash acquired with the subsidiary

Intangible asset

Investment properties (Note 5)

Other assets

Other liabilities

Purchase consideration transferred

Loans and borrowings

Total identifiable net assets at fair value

Cost of the acquisition

Net cash flows on acquisition

15,171

8,533

2,664

2,718

14,409

36,815

2,664

21,789

44,946

20,905

114,008

33,511

91,602

586

77,193

(91,602)

(88,938)

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* The depreciation for the year has been allocated within the consolidated statement of profit or loss as follows:

4 PROPERTY AND EQUIPMENT


QR ‘000 QR ‘000 QR ‘000QR ‘000QR ‘000QR ‘000QR ‘000QR ‘000

Tools and equipment

Total 2016

Total 2015

Motor VehiclesComputers

Furniture and fixtures Buildings

Freehold land

28,579 175,883 118,92210,43518,66617,50661,54339,154

- - 49,871-----

15,211 28,263 7,1916653,3657148,308-

(1,064) (1,192) (101)(40)(64)(24)--

42,726 202,954 175,88311,06021,96718,19669,85139,154

23,455 91,301 48,7028,880 14,847 15,125 28,994 -

- - 34,700 -----

2,877 8,409 7,9898241,774 9292,005 -

(661)

25,671

(769)

98,941

(90)

91,301

(20)

9,684

(64)

16,557

(24)

16,030

-

30,999

-

-

17,055

5,124

104,013

84,582

1,376

1,555

5,410

3,819

2,166

2,381

38,852

32,549

39,154

39,154

At 1 January

At 1 January

At 31 December 2016

Depreciation for the year*

Additions

At 31 December 2015

Disposals

Accumulated depreciation:

Disposals

Cost:

Net carrying amounts:

At 31 December

Incurred through acquisition of a subsidiary

At 31 December

Acquired through acquisition of a subsidiary

Note

35

2016

QR ‘000

7,765Other operating and administrative expenses

644Cost of construction activities

8,409

2015

QR ‘000

7,989

-

7,989

87


As at 31 December 2016, the fair values of the properties are based on valuations per formed by accredited independent valuers who are specialists in valuing these types of investment properties. The valuation models used are in accordance with recommended industr y practice. The fair value of the investment properties was estimated based on fair valuation techniques and assumptions with reference to recent sales transactions of similar properties in an active market. The rental income arising during the year from the investment properties are disclosed in Note 29 and direct operating expenses of QR 16.86 mil l ion (2015: QR 7.48 mil l ion) is part of other expenses disclosed in Note 35. Investment properties include a property with a book value of QR 2.98 bil l ion (2015: QR 2.99 bil l ion) that is pledged against a first degree real estate mortgage along with the assignment of future rental proceeds from such property.

5 INVESTMENT PROPERTIES


Notes

3

31

2016

QR ‘000

5,936,607 At 1 January

78,637Additions

-Acquired through acquisition of a subsidiary

49,132

6,064,376

Fair value gains

At 31 December

2015

QR ‘000

5,005,196

108,193

44,946

778,272

5,936,607

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The Group has the following investment in associates:

* During the year, the Group acquired additional 5% (QR 6.75 mil l ion) to reach 25% ownership of shares of Qatari Unif ied Bureau Insurance W.L.L. The investment in this associate includes goodwil l amounting to QR 6.27 mil l ion.

6 INVESTMENT IN ASSOCIATES


2016 2016

Ownership QR ‘000

20% 123,192 Trust Bank Algeria

25% 52,392

23% 23,181

32% 5,942

12% 9,166

21% 5,061

8% 868

345,225

Oman Reinsurance Company S.A.O.C.

Trust Syria Insurance Company S.A.S.C.

Gulf Assist B.S.C.

20% 113,095 Trust Investment Holding Algeria

25% 7,558

15% 4,770

Trust Algeria Assurances & Reassurance S.P.A.

International Financial Securities Company Q.P.S.C.

The Arab Insurance Institute Company S.A.S.C.

Qatari Unified Bureau Insurance W.L.L.*

Trust Insurance – Libya

2015 2015

Ownership QR ‘000

20% 125,033

25% 57,492

23% 22,767

32% 4,584

12% 9,072

21% 4,927

8% 854

324,749

20% 92,674

20% 2,378

15% 4,968

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6 INVESTMENT IN ASSOCIATES (CONTINUED)


2016

2016

QR ‘000

QR ‘000

324,749At 1 January

Share in the associates statement of financial position:

2,027

273,361

(11,577)

(338,226)

345,225


Current assets

Dividends received from associate

Current liabilities

Net assets

Share of the associates revenues and profit:

34,229

454,752

Additional shares in associates

Non-current assets

818

(44,662)

(5,021)

345,225

2,027

13,088

Share of other comprehensive income (loss) of associates

Non-current liabilities

Exchange differences on translating foreign operations

At 31 December

Profit

Revenues

2015

2015

QR ‘000

QR ‘000

370,711

18,877

269,032

(11,294)

(360,005)

324,749

-

464,817

(141)

(49,095)

(53,404)

324,749

18,877

31,902

The following table i l lustrates summarised financial information of the Group’s investment in associates:

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7 AVAILABLE-FOR-SALE FINANCIAL ASSETS

8 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

9 INSURANCE RECEIVABLES


2016

2016

2016

QR ‘000

QR ‘000

QR ‘000

814,785

149,229

164,129

Equity securities

Due from policyholders

Equity securities

21,107

14,512

1,016,777

Managed funds

Due from agents, brokers and intermediaries

180,885

65,064

Debt securities

Due from insurers and reinsurers

5,284

234,089

Claims recoveries

2015

2015

2015

QR ‘000

QR ‘000

QR ‘000

839,044

151,015

167,618

29,198

11,257

1,057,424

189,182

33,016

6,111

201,399

91


9 INSURANCE RECEIVABLES (CONTINUED)

10 REINSURANCE ASSETS


As at the reporting date, the aging of unimpaired insurance receivables was as follows:

Unimpaired insurance receivables are expected to be ful ly recoverable. It is not the practice of the Group to obtain collateral over receivables and the vast majority is therefore unsecured.

Total < 3 months

Past due but not impaired

QR ‘000 QR ‘000

234,089 36,00031 December 2016

201,399 60,76031 December 2015

Neither past due

nor impaired 3 – 9 months > 9 months

QR ‘000 QR ‘000 QR ‘000

67,773 68,587 61,729

51,380 64,649 24,610

Note

20

2016

QR ‘000

479,772Reported claims by policyholders

54,249Claims IBNR

245,702Unearned premiums

2015

QR ‘000

600,104

36,582

223,184

779,723 859,870

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11 TAKAFUL PARTICIPANTS’ FUND ACCOUNTS


(a) Statement of financial position – Policyholders

QR ‘000QR ‘000

20152016

52,894

56,721

41,581

45,487

Assets

Other assets

Takaful payables

3,074

36,653

3,356

13,903

Furniture and equipment


Other liabilities

73,826

281,001

(60)

81,821

296,495

128


Fair value reserve

57,362

311,348

48,399

290,826

Financial assets:

4,927

(30,347)

6,341

5,669


Liabilities

Surplus (deficit) at 31 December

44,610

217,227

64,141

229,938


Takaful contract liabilities

32,126

281,001

39,261

296,495

Takaful receivables


12,182

807

11,595

1,370

Retakaful assets

Payables to related parties

93


11 TAKAFUL PARTICIPANTS’ FUND ACCOUNTS (CONTINUED)


(b) Statement of profit or loss – Policyholders

QR ‘000QR ‘000

20152016

231,267

(8,143)

(212,910)

(1,278)

207,644

(6,238)

(135,829)

36,259

Gross written contributions

Fees and commission expenses

Gross claims paid

Surplus (deficit) for the year before wakala fee

6,445

2,581

36,089

(33,935)

10,793

(1,775)

6,917

(30,590)

Change in unearned contributions provision

Investment (losses) income

Claims ceded to retakaful companies

Wakala fee

576

(1,637)

447

(23,505)


Gross change in Takaful contract liabilities

237,712

(24,196)

(35,213)

218,437

10,053

5,669

Gross earned contributions

Change in Takaful contract liabilities ceded to retakaful companies

Surplus (deficit) for the year

(31,304)

(4,986)

(31,311)

(7,566)

Contributions ceded to retakaful companies

Other expenses

(202,654)(142,364)Net claims

206,408

201,422

187,126

179,560

Net earned contributions

Total revenue

(46)(937)Impairment losses on receivables

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12 OTHER ASSETS


(a) Accrued rent includes an amount of QR 30.48 mil l ion (2015: QR 54.86 mil l ion) which pertains to the leasing of a tower in the Doha Corniche area. (b) The Qard Hasan was provided by the shareholders of General Takaful Company W.L.L. to cover the accumulated deficit in Takaful participants ’ fund as per the Board of Directors ’ resolution and Shari ’a Supervisor y Board ’s approval. (c) The intangible asset represents a right of use over property leased by Orientals Enterprises W.L.L. in the Mesaieed industrial area. The right of use intangible asset is amortised on a systematic basis over the period of the remaining lease which is 13 years. (d) Goodwil l amounting to QR 14.4 mil l ion that arose on the acquisit ion of Orientals Enterprises W.L.L. has been allocated to the Orientals cash-generating unit (Orientals CGU). The recoverable amount of this cashgenerating unit is determined on the basis of the market value based approach.

QR ‘000QR ‘000

20152016

84,55138 (e)

Notes

850

70,949

800

Advance payments against investments

Staff receivables

27,292

55,556

31,077

35,154

Prepayments and advances

Other receivables

54,899(a) 30,509Accrued rent

-(b)

264,879

30,347

243,009

Qard Hasan to Takaful participants’ fund

20,812(c) 19,135Intangible asset

14,409(d) 14,409Goodwill

3,7608,299Inventory

2,7502,330Accrued interest

95


13 CASH AND CASH EQUIVALENTS

14 ISSUED SHARE CAPITAL

15 LEGAL RESERVE


The cash and cash equivalents position for cash flow purposes, net of the Group overdraft is as follows:

Authorized, issued and ful ly paid up share capital comprises of 87,506,703 shares of QR 10 each (2015: 79,551,549 shares of QR 10 each).

The Qatar Commercial Companies ’ Law No. 11 of 2015 requires that 10% of the net profit for each year should be appropriated to a legal reserve unti l the balance therein equals to 50% of the paid up capital. During the year, the Group has transferred an amount of QR 25.83 mil l ion (2015: QR 92.58 mil l ion) from retained earnings to the legal reserve. The Group’s legal reserve exceeds 50% of share capital. However, in accordance with Qatar Central Bank ’s Law No. 13 of 2012 as amended, 10% of net profit is required to be transferred to legal reserve unti l the legal reserve equals 100% of the paid up capital. The balance under this reserve is not available for distr ibution, except in the circumstances specified in the above law and after Qatar Central Bank approval.

During the year, the Company issued 7,955,154 bonus shares of QR 10 each (2015: 10,376,289 shares of QR 10 each).

QR ‘000

QR ‘000

QR ‘000

QR ‘000

2015

2015

2016

2016

231,202

795,515

Note

303,287

875,067


(1,952)21 (2,711)Bank overdrafts

229,250300,576Cash and cash equivalents

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16 REVALUATION RESERVES


(a) Available-for-sale financial assets The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets unti l the investments are derecognised or impaired. The movement in the balances is as follows:

(b) Revaluation surplus One of the associate companies, Trust Investment Holding Algeria where the Group has a 20% equity investment, has revalued its properties and a revaluation surplus was directly recognized in the statement of comprehensive income of the associate. The Group has recognized its proportionate share of the revaluation surplus amounting to QR 77.36 mil l ion in equity under the revaluation reserve.

(c) Cash flow hedge The hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedge related to hedge transactions that have not yet affected profit or loss.

QR ‘000

QR ‘000

QR ‘000

QR ‘000

2015

2015

2016

2016

617,951

740,111

(a)

Notes

Note

597,183

617,951


At 1 January

77,355

(128,513)

529,693

617,951

(b) 77,355

(4,981)

512,599

597,183

Revaluation surplus

Fair value change during the year

At 31 December

(28,515)

(5,201)

(c) (19,820)

(42,538)

Cash flow hedge

Transferred to the consolidated statement of profit or loss upon sale

(137,098)

11,554

(d)

30

(142,119)

26,751

Foreign currency translation reserve

Transferred to the consolidated statement of profit or loss upon impairment

97


16 REVALUATION RESERVES (CONTINUED)

17 SHAREHOLDERS DIVIDENDS

18 CONTRIBUTION TO SOCIAL AND SPORTS ACTIVITIES FUND

19 NON-CONTROLLING INTERESTS


(d) Foreign currency translation reserve The translation reserve comprises all foreign currency differences arising from the translation of investments in foreign associates, at the closing exchange rates.

The Board of Directors has proposed a cash dividend of 15% of the nominal share value (QR 1.50 per share) for the year ended 31 December 2016 (2015: cash dividend of 15% of the nominal share value (QR 1.50 per share) and a bonus share of 10% of the share capital were approved and paid). The amounts are subject to the approval of the general assembly.

Pursuant to the Qatar Law No. 13 of 2008 and the related clarif ications issued in 2012, which is applicable for all Qatari l isted shareholding companies with publicly traded shares, the Group has made an appropriation of 2.5% of its net profit for the year excluding unrealised fair value gains on investment properties resulting in a net amount of QR 5.23 mil l ion being its contribution to the social and sports activit ies fund for the year 2016 (2015: QR 3.69 mil l ion).

The non-controll ing interests relate to the subsidiaries Mozoon Real Estate Company W.L.L. and General Company for Water and Beverages W.L.L.

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20 INSURANCE CONTRACT LIABILITIES


(a) Outstanding claims provision

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

Notes

Insurance contractliabilities


Reinsurance of insurance

contract liabilities



Net

Net

Net

Net





Insurance contract liabilities


717,059

481,693

779,633

-

(600,104)

(343,366)

(636,686)

-

116,955

138,327

142,947

-

119,081

142,947

149,162

2,683

(479,772)

(636,686)

(534,021)

-

598,853

779,633

683,183

2,683

(a)

62,574

297,940

321,947

-

779,633

1,101,580

(36,582)

(293,320)

(223,184)

-

(636,686)

(859,870)

25,992

4,620

98,763

-

142,947

241,710

24,466

6,215

109,872

2,932

149,162

259,034

(54,249)

102,665

(245,702)

-

(534,021)

(779,723)

78,715

(96,450)

355,574

2,932

683,183

1,038,757

(b)

Provision for claims IBNR

Gross / ceded change in contract liabilities

Provision for unearned premiums (reserve for unexpired risks)

Provision for unallocated loss adjustment expense

At 31 December

Provision for reported claims by policyholders

At 1 January

Outstanding claims provision

Provision for premium deficiency

2016 2015

2016 2015

99


20 INSURANCE CONTRACT LIABILITIES (CONTINUED)


(b) Provision for unearned premiums (reserve for unexpired risks)

Claims development 2016 The following table shows the estimated cumulative incurred claims, including both claims notif ied and IBNR for each successive accident year at the end of each reporting period, together with cumulative payments to date:

The claims development table is presented net of r isk mitigation through reinsurance to give the most meaningful insight into the impact on the operating results.

Premiums written during the year

At end of the accident year

Two years later

At 1 January

Estimate of cumulative claims

Premiums earned during the year

One year later

At 31 December

Three years later

Current estimate of cumulative claims

Four years later

Cumulative payments to date

Total cumulative claims recognized in the consolidated

statement of financial position as at 31 December 2016

QR ‘000

QR ‘000

Net

Total

85,218

(187,161)

98,763

(1,662,926)

143,547

200,706

1,806,473

QR ‘000

QR ‘000

Reinsurance of insurance con-tract liabilities

2016

(202,410)

405,776

-

(223,184)

-

(63,343)

89,013

(426,550)

152,356

-

-

152,356

QR ‘000

QR ‘000


2015

287,628

(592,937)

128,364

321,947

-

(102,708)

25,656

627,256

156,754

-

-

128,364

QR ‘000

QR ‘000

Net

2014

98,763

(203,661)

136,241

109,872

-

(116,510)

12,288

214,770

162,598

128,798

-

128,798

QR ‘000

QR ‘000



2013

(223,184)

392,661

149,219

(245,702)

139,427

(132,973)

6,454

(415,179)

160,031

142,206

-

139,427

QR ‘000

QR ‘000


2012 and before

321,947

(596,322)

1,258,409

355,574

1,259,101

(1,247,392)

10,136

629,949

1,231,545

1,258,482

1,257,528

1,257,528

2016 2015

Accident year

100

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20 INSURANCE CONTRACT LIABILITIES (CONTINUED)


Claims development 2015The following table shows the estimated cumulative incurred claims, including both claims notif ied and IBNR for each successive accident year at the end of each reporting period, together with cumulative payments to date:

The claims development table is presented net of r isk mitigation through reinsurance to give the most meaningful insight into the impact on the operating results.

QR ‘000 QR ‘000 QR ‘000QR ‘000QR ‘000QR ‘000

2014 2015 Total 201320122011 and before

136,241

-

(110,789)

25,452

-

-

(67,682)

89,072

(1,551,355)

142,947

149,219

-

(130,079)

12,127

134,317

130,526

(124,183)

6,343

1,087,621

1,127,617

(1,118,622)

9,953

162,598

-

-

136,241

156,754

-

-

156,754 1,694,302

160,031

142,206

-

142,206

143,924

130,865

-

130,526

1,100,698

1,124,092

1,128,575

1,128,575

At end of the accident year

Two years later

Estimate of cumulative claims

One year later

Three years later

Current estimate of cumulative claims

Four years later

Cumulative payments to date

Total cumulative claims recognized in the consolidated

statement of financial position as at 31 December 2015

Accident year

101


21 LOANS AND BORROWINGS


QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

2015

2015

2015

2016

2016

2016

1,170,638

744,123

Note

Note

1,267,940

309,040

Term loans

Term loans

1,952

1,952

426,515

13

13

2,711

2,711

958,900

Bank overdrafts

Bank overdrafts

Term loans

1,172,590

746,075

1,270,651

311,751

(a) Current portion

(b) Non-current portion

102

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22 DERIVATIVE FINANCIAL INSTRUMENTS


QR ‘000 QR ‘000 QR ‘000QR ‘000QR ‘000QR ‘000

Assets LiabilitesNotional

amountNotional

amountLiabilitiesAssets

- - 3,650---

- 28,515 479,063417,46919,820-Interest rate swaps

Derivatives held for trading:

Derivatives held as cash flow hedge:

Put options

Interest rate swapsThe Group entered into interest rate swap contracts designated as a hedge of expected future LIBOR interest rate payable. Under the terms of the interest rate swap contracts, the Group pays a fixed rate of interest and receives f loating LIBOR rates. The terms of the interest rate swap contracts have been negotiated to match the terms of the underlying commitments. As at 31 December 2016, the measurement of the fair value of the hedge resulted in an amount of QR 19.82 mil l ion (2015: QR 28.52 mil l ion) being recognized in equity as a cash flow hedge reserve.

OptionsOptions are contractual agreements that convey the right, but not the obligation, for the purchaser either to buy or sell a specified amount of a financial instrument at a fixed price, either at a fixed future date or at any time within a specified period.

The Group purchases and sells options through regulated exchanges and in the over–the–counter markets. Options purchased by the Group provide the Group with the opportunity to purchase (call options) or sell (put options) the underlying asset at an agreed–upon value either on or before the expiration of the option. The Group is exposed to credit r isk on purchased options only to the extent of their carr ying amount, which is their fair value.

Options written by the Group provide the purchaser the opportunity to purchase from or sell to the Group the underlying asset at an agreed–upon value either on or before the expiration of the option.

2016 2015

103


23 INSURANCE PAYABLES

24 EMPLOYEES’ END-OF-SERVICE BENEFITS

25 OTHER LIABILITIES


QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

2015

2015

2015

2016

2016

2016

125,413

27,584

58,568

Note

117,446

33,942

65,581

Due to insurers and reinsurers

97,414

2,718

2,413

201,543

3

93,777

-

6,181

165,578

Due to policyholders


Staff payables

At 1 January

Accrued expenses

18,358

5,701

3,184

33,942

241,185

(5,837)

20,056

5,723

2,435

37,744

231,279

(1,921)

Due to agents, brokers and intermediaries

Provided during the year

Accrued interest

At 31 December

Paid during the year

3,776

137,378

-

91,381

Transferred from Takaful participants’ fund accounts

Other payables

104

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26 SEGMENT INFORMATION


Segment consolidated statement of profit or loss for the year ended 31 December 2016:

QR ‘000 QR ‘000 QR ‘000QR ‘000QR ‘000QR ‘000

Insurance Investments Total TotalInvestmentsInsurance

627,256

187,161

-

(405,776)

22,823

-

-

-

(2,392)

-

-

10,592

627,256

187,161

(2,392)

(405,776)

22,823

10,592

629,949

203,661

18,336

(392,661)

13,438

34,406

-

-

18,336

-

-

34,406

629,949

203,661

-

(392,661)

13,438

-

(34,319)

-

12,441

592,937

35,264

222,425

-

245,916

3,926

-

746,494

1,004,536

1,004,536

(34,319)

245,916

16,367

592,937

746,494

1,039,800

1,226,961

(33,627)

236,534

74,550

596,322

56,600

433,864

637,525

-

236,534

69,687

-

56,600

415,563

415,563

(33,627)

-

4,863

596,322

-

18,301

221,962


Investment income


Gross earned premiums

Fair value gains

Other revenue

Total revenue


Net earned premiums

Net realised gains (losses)



Income from construction activities

2016 2015

105


26 SEGMENT INFORMATION (CONTINUED)


Segment consolidated statement of profit or loss for the year ended 31 December 2016 (continued):

Segment assets and liabilities Assets and liabil it ies of the Group are commonly used across the primar y segments.

Geographic information The Group operates in two geographic markets, in the State of Qatar and the United Arab Emirates. Gross written premiums in the State of Qatar amounted to QR 574.29 mil l ion (2015: QR 579.62 mil l ion) and the United Arab Emirates amounted to QR 55.66 mil l ion (2015: QR 47.64 mil l ion).

QR ‘000 QR ‘000 QR ‘000QR ‘000QR ‘000QR ‘000

Insurance Investments Total TotalInvestmentsInsurance

(218,147)

-

-

(297,940)

29,514

-

(10,981)

18,877

-

896,290

(218,147)

(10,981)

18,877

(297,940)

925,804

(314,417)

(29,161)

2,027

96,450

258,254

-

(29,161)

2,027

-

235,153

(314,417)

-

-

96,450

23,101

Gross claims paid

Cost of construction activities


Gross change in insurance contract liabilities

Profit for the year

112,837

(109,930)

(81,717)

(192,911)

293,320

(1,264)

(82,981)

29,514

-

-

(74,523)

(127,123)

-

(41,619)

(127,123)

877,413

112,837

(109,930)

(156,240)

(320,034)

293,320

(42,883)

(210,104)

906,927

205,739

(114,893)

(189,251)

(381,298)

(102,665)

(47,993)

(266,405)

256,227

-

-

(106,677)

(182,437)

-

(46,599)

(182,437)

233,126

205,739

(114,893)

(82,574)

(198,861)

(102,665)

(1,394)

(83,968)

23,101


Net claims

Other operating and administrative expenses

Total expenses

Change in insurance contract liabilities ceded to reinsurers

Finance costs

Other expenses

Profit before share of profits of associates

2016 2015

106

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27 NET EARNED PREMIUMS



(a) Gross earned premiums

(b) Premiums ceded to reinsurers

28 FEES AND COMMISSION INCOME

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

2015

2015

2015

2016

2016

2016

627,256

(426,550)

21,043

20 (b)

20 (b)

Note

Note

629,949

(415,179)

10,821

(34,319)

20,774

1,780

(33,627)

22,518

2,617



Policyholders administration fees


Insurance contracts

Reinsurance and other commission income

592,937

(405,776)

22,823

187,161

20 (b)

20 (b)

596,322

(392,661)

13,438

203,661 Net earned premiums

107

29 INVESTMENT INCOME

30 NET REALISED GAINS (LOSSES)



QR ‘000

QR ‘000

QR ‘000

QR ‘000

2015

2015

2016

2016

182,015

3,658

182,686

41,246

Rental income

Equity securities



1,543

12,621

-

8,647

(11,554)

3,719

(2,392)

1,292

13,071

1,235

5,877

(26,751)

4,234

18,336


Debt securities

Interest income

Equity securities

Dividend income

Impairment losses on investments

Interest income

38,914

3,961

245,916

30,666

1,314

236,534

Dividend income





108

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31 FAIR VALUE GAINS

32 OTHER OPERATING REVENUE

33 NET CLAIMS



QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

2015

2015

2015

2016

2016

2016

778,272

10,840

5

Note

49,132

2,928

(31,778)

5,527

247,294

7,468

71,622

339,320


Miscellaneous income

Gross claims paid


Shareholders’ income from Takaful operations

(a) Gross claims paid

(29,147)

218,147

(24,903)

314,417

Claims recoveries

(b) Claims ceded to reinsurers

746,494

16,367

(112,837)

56,600

74,550

(205,739)Claims ceded to reinsurers

109

33 NET CLAIMS (CONTINUED)

34 FINANCE COSTS



QR ‘000

QR ‘000

QR ‘000

QR ‘000

2015

2015

2016

2016

40,748

Note

45,550

299,563

278

1,857

42,883

(118,205)

291

2,152

47,993


Interest on reinsurance premium reserves

Bank charges

(c) Gross change in insurance contract liabilities

Interest expenses

(1,623)

41,026

-

297,940

(293,320)

20 (a)

20 (a)

16,140

45,841

2,932

(96,450)

102,665


Provision for unallocated loss adjustment expense

(d) Change in insurance contract liabilities ceded to reinsurers

-

(293,597)

277

109,930

2,683

120,332

(17,667)

114,893

Provision for premium deficiency



Net claims

110

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35 OTHER OPERATING AND ADMINISTRATIVE EXPENSES

36 EARNINGS PER SHARE



QR ‘000QR ‘000

2015

2015

2016

2016

89,402

925,709

Notes

109,070

219,341

Employee benefits expenses

Profit attributable to the ordinary equity holders of the Parent (QR ‘000)

8,961

87,507

12,856

87,507

Occupancy expenses

Weighted average number of shares (in thousands)

8,740

4,413

38 (a) 8,310

158

Board of Directors’ remuneration

Net foreign exchange adjustments

7,989

10.58

(1,089)

4 7,765

2.51

(1,392)

Depreciation of property and equipment

Earnings per share (in Qatari Riyals)

Impairment recoveries

2,974

26,693

6,281

38,188

Marketing expenses

Reconciliation of the number of ordinary shares outstanding (in thousands):

Other expenses

5,568

10,377

79,552

4,855

7,955

87,507

Consultancy expenses

Bonus shares issued during the year

Number of shares outstanding at 31 December

977

69,175

156,240

1,676

79,552

189,251

Amortization of intangible asset

Number of shares outstanding at 1 January

1,6121,484Travel expenses

111

36 EARNINGS PER SHARE (CONTINUED)

37 CASH GENERATED FROM OPERATING ASSETS AND LIABILITIES



During 2016, the Group issued bonus shares for the year 2015. Accordingly, the previously reported earnings per share for 2015 have been restated for the effect of this transaction. There were no potentially diluted shares outstanding at any time during the year and therefore the diluted earnings per share is equal to the basic earnings per share.

QR ‘000QR ‘000

20152016

136(688)Net change in receivables from related parties

1,97931,689Net change in insurance receivables

314,094(80,147)Net change in reinsurance assets

18,095(20,585)Net change in other assets

54,101

353,328

24,531

(89,391)

Net change in payables to related parties

Net change in operating liabilities

334,304

310

(69,731)

(9,906)

Net change in operating assets

Net change in insurance payables

(33,342)(41,193)Net change in other liabilities

332,259(62,823)Net change in insurance contract liabilities

112

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38 RELATED PARTY DISCLOSURES



Related parties consist of shareholders, related companies, key management personnel of the Group, and entit ies controlled, jointly controlled or signif icantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Group’s management.

(a) Related party transactions Transactions with related parties included in the consolidated statement of profit or loss were as follows:

The compensation of key management personnel during the year were as follows:

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000



Fees and commission

income

Fees and commission

income

Other operating expenses

Other operating expenses

Gross claims paid

Gross claims paid





10,514

2,630

3,153

6,073

(407)

(348)

-

-

(74,098)

(61,286)

388

-

-

-

-

-

(2,750)

(2,129)

(8,371)

(13,560)

(7)

-

11,580

13,608

Others

Others

Trust Re – Bahrain


QR ‘000QR ‘000

20152016

27,408

Note

38,613Salaries and other short-term benefits

8,740 35 8,310 Board of Directors’ remuneration

1,392 1,522 End-of-service benefits

37,54048,445

2016

2015

113

38 RELATED PARTY DISCLOSURES (CONTINUED)



(b) Receivables from / payables to related parties Non-insurance related balances with related parties included in the consolidated statement of f inancial position are as follows: Receivables from related parties


QR ‘000

QR ‘000

QR ‘000

QR ‘000

2015

2015

2016

2016

-

57,327

Affiliate

Affiliate

Relationship

Relationship

76

73,141

Trust Holding Ltd. Company

Alsari Trading Company W.L.L.

54

-

Associate

Affiliate

54

6,260

Trust Syria Insurance Company S.A.S.C.

Falcon Readymix Company W.L.L.

-

-

Affiliate

Affiliate

54

2,591

North Africa Energy Company W.L.L.

Nest Investments (Holdings) Limited

39

134

14

57,461

66

940

Associate

Affiliate

Affiliate

Affiliate

52

-

5

81,992

-

252

Trust Algeria Assurances & Reassurance S.P.A.

Trust Holding Ltd. Company


Falcon Readymix Company W.L.L.

-

767

Associate

Affiliate

11

-

International Financial Securities Company Q.P.S.C.

Nest Investments (Holdings) Limited

114

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38 RELATED PARTY DISCLOSURES (CONTINUED)



(c) Insurance receivables and payables Insurance related balances with related parties included in the consolidated statement of financial position are as follows:

* Trust Re – Bahrain balance includes an amount of QR 9.25 mil l ion (2015: QR 103 thousand) in premiums ceded to it in its capacity as Treaty Administrators.

(d) Investment properties The additions to investment properties in Note 5 include QR 18.93 mil l ion (2015: QR 21.25 mil l ion) in supplies from Falcon Readymix Company W.L.L. (e) Other assets Other assets include advance payments to related parties as follows:

All above disclosed balances are unsecured, interest free and settlement normally occurs in cash. There have been no guarantees provided or received for any related party receivables. For the year ended 31 December 2016, the Group has not recorded any impairment of receivables relating to amounts owed by related parties (2015: Nil) .

QR ‘000QR ‘000

20152016

8,046 Affiliate

Relationship

12,434 Trust Re – Bahrain*

3,395 Others 3,494 Other insurance receivables

(2,442) Others (1,091) Other insurance payables

QR ‘000QR ‘000

20152016

84,55112

Note

70,949Trust Investment Holding Algeria

2,933-Falcon Readymix Company W.L.L.

87,48470,949

115

39 CONTINGENT LIABILITIES AND COMMITMENTS

40 FAIR VALUE MEASUREMENT



QR ‘000QR ‘000

20152016

(a) Contingent liabilities

15,188116,751Letters of guarantee

(b) Lease commitments

4,8996,204

Operating lease commitments are payable as follows:

9836,701

Less than one year

Between one and five years

5,88212,905

The following table provides the fair value measurement hierarchy of the Group’s assets and liabil ity that are measured at fair value.

QR ‘000 QR ‘000 QR ‘000QR ‘000Date of valuation Notes

Significant observable

inputs Level 2

Significant unobservable inputs Level 3 Total

Quoted prices in active markets

Level 1

10,206 - 1,013,1271,002,92131 December 20167

-

10,206

19,820

-

6,064,376

6,064,376

-

-

6,064,376

7,241,632

19,820

164,129

-

1,167,050

-

164,129

31 December 2016

31 December 2016

31 December 2016

5

22

8


Derivative financial instruments

At fair value through profit or loss

Assets measured at fair value:

31 December 2016

Available-for-sale

Liability measured at fair value:

116

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40 FAIR VALUE MEASUREMENT (CONTINUED)

41 RISK MANAGEMENT



Available-for-sale financial assets carried at cost amount to QR 3.65 mil l ion (2015: QR 6.64 mil l ion). During the year, there were no transfers between Level 1, Level 2 and Level 3 (2015: Nil) .

The Group, in the normal course of business, derives its revenue mainly from assuming and managing insurance, investments and investment properties. The Group’s l ines of business are exposed to the following risks: - Insurance risk - Credit r isk - Liquidity r isk - Market r isk, and - Operational r isk This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements.

QR ‘000 QR ‘000 QR ‘000QR ‘000Date of valuation Notes

Significant observable

inputs Level 2

Significant unobservable inputs Level 3 Total

Quoted prices in active

markets Level 1

18,410

28,515

-

-

1,050,781

28,515

1,032,371

-

31 December 2015

31 December 2015

7

22

-

18,410

-

5,936,607

5,936,607

-

5,936,607

7,155,006

167,618

-

1,199,989

167,618

31 December 2015

31 December 2015

5

8


Liability measured at fair value:

At fair value through profit or loss

Assets measured at fair value:

31 December 2015

Available-for-sale


117

41 RISK MANAGEMENT (CONTINUED)



The Board of Directors has overall responsibil ity for the establishment and oversight of the Group’s r isk management framework. The Board of Directors approves the Group risk management policies and meets regularly. These policies define the Group’s identif ication of r isk and its interpretation, l imit structure to ensure the appropriate quality and diversif ication of assets, align underwrit ing and reinsurance strategy to the corporate goals, and specify reporting requirements. The Group’s r isk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk l imits and controls, and to monitor r isks and adherence to l imits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activit ies. The Audit Committee and the Risk Committee of the Group oversee how management monitors compliance with the Group’s r isk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Committees are assisted in their oversight role by Internal Audit Department. Internal Audit Department undertakes both regular and ad hoc reviews of r isk management controls and procedures, the results of which are reported to the Audit Committee. Insurance risk The risk under any insurance contract is the possibil ity that the insured event occurs and the uncertainty of the amount of the resulting claim. By the ver y nature of an insurance contract, this r isk is random and therefore unpredictable. The insurance contracts issued by the Group for various risks are homogeneous. For a portfolio of insurance contracts where the theor y of probability is applied to pricing and provisioning, the principal r isk that the Group faces under its insurance contracts is that the actual claims and benefit payments exceed the carr ying amount of the insurance liabil it ies. This could occur when the frequency or severity of claims and benefits are greater than estimated. Insurance events are random and the actual number and amount of claims and benefits wil l var y from year to year from the level established using statistical techniques. Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variabil ity of the expected outcome wil l be. In addition, a more diversif ied portfolio is less l ikely to be affected by a change in any subset of the portfolio. The Group has developed its insurance underwrit ing strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a suff iciently large population of r isks to reduce the variabil ity of the expected outcome. Risks are accepted based on an evaluation of pricing and prior underwrit ing experience in accordance with underwrit ing guidelines that have been laid out for each line of business. Underwrit ing guidelines are constantly reviewed and updated to take account of market developments, per formance and opportunities. Accumulation l imits are set to control exposures to natural hazards and catastrophes. Various underwrit ing and approval l imits are specified for accepting risks. The reinsurance strategy of the Group is designed to protect exposures to individual and event risks based on current r isk exposures through cost effective reinsurance arrangements. The recoverable amounts from reinsurers are estimated in a manner consistent with the outstanding claims provision and are in accordance with the reinsurance contracts. Even though the Group has reinsurance arrangements, the direct obligation to its policyholders is shown as a l iabil ity and thus to the extent the reinsurer is not able to meet its obligations under the reinsurance arrangement, a credit exposure exists. The management ensures that the Group’s reinsurance placement is diversif ied within a range of reinsurers and is not concentrated or dependent on any single reinsurer.

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Insurance risk (continued)

Frequency and severity of claims

The frequency and severity of claims can be determined after consideration of several factors as follows: - past experience of the claims; - economic level; - laws and regulations; - public awareness The Group manages these risks through its underwrit ing strategy, adequate reinsurance arrangements and proactive claims handling. The underwrit ing strategy attempts to ensure that the underwritten risks are well diversif ied in terms of type and amount of r isk, industr y and geography.

Underwrit ing l imits are in place to enforce appropriate risk selection criteria. For example, the Group 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. The Group has the right to re-price the risk on renewal. Insurance contracts also entit le the Group to pursue third parties for payment of some or all costs (for example, subrogation). The reinsurance arrangements include proportional and non-proportional coverage. The effect of such reinsurance arrangements is that the Group should not suffer major insurance losses. The Group has specialised claims units dealing with the mitigation of r isks surrounding general insurance claims. This unit investigates, adjusts and settles all general insurance claims. The general insurance claims are reviewed individually regularly and adjusted to reflect the latest information on the underlying facts, current law, jurisdiction, contractual terms and conditions, and other factors. The Group actively manages settlements of general insurance claims to reduce its exposure to unpredictable developments. Sources of uncertainty in the estimation of future claim payments Claims on general insurance contracts are payable on a claims-occurrence basis. The Group is l iable for all insured events that occurred during the term of the contract, even if the loss is discovered after the end of the contract term. As a result, a larger element of the claims provision relates to incurred but not reported claims (IBNR) which are settled over a short to medium term period. There are several variables that affect the amount and timing of cash flows from these contracts. These mainly relate to the inherent r isks of the business activit ies carried out by individual contract holders and the risk management procedures adopted. The compensation paid on these contracts is the monetar y awards granted for the loss suffered by the policyholders or third parties (for third party l iabil ity covers). The estimated cost of claims includes direct expenses to be incurred in settl ing claims, net of the expected subrogation values and other recoveries. The Group takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing claims provisions, it is l ikely that the final outcome wil l prove to be different from the original l iabil ity established. The liabil ity for these contracts comprise a provision for IBNR, a provision for reported claims not yet paid and a provision for unexpired risks as at the consolidated statement of f inancial position date.

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Sources of uncertainty in the estimation of future claim payments (continued)

In calculating the estimated cost of unpaid claims (both reported and not), the Group’s estimation techniques are a combination of loss-ratio-based estimates (where the loss ratio is defined as the ratio between the ultimate cost of insurance claims and insurance premiums earned in a particular f inancial year in relation to such claims) and an estimate based upon actual claims experience using predetermined formula where greater weight is given to actual claims experience as time passes. An actuarial valuation is done ever y year to ensure the adequacy of the reserves. Claims development The Group maintains strong reserves in respect of its insurance business in order to protect against adverse future claims experience and developments. The uncertainties about the amount and timing of claim payments are generally resolved within one year (Note 20).

Process used to decide on assumptions The risks associated with these insurance contracts are complex and subject to a number of variables that complicate quantitative sensitivity analysis. The exposure of the Group to claims associated with general insurance is material. This exposure is concentrated in Qatar where signif icant transactions take place. The Group uses assumptions based on a mixture of internal and actuarial reports to measure its general insurance related claims l iabil it ies. Internal data is derived mostly from the Group’s monthly claims reports and screening of the actual insurance contracts carried out at year end to derive data for the contracts held. The Group has reviewed the individual contracts and their actual exposure to claims. This information is used to develop scenarios related to the latency of claims that are used for the projections of the ultimate number of claims.

The table below sets out the concentration of outstanding claims provision by type of contract:

QR ‘000 QR ‘000 QR ‘000QR ‘000QR ‘000QR ‘000

Gross reserves

Reinsurance reserves Net reserves Net reserves

Reinsurance reserves

Gross reserves

114,701 (8,585) 106,116108,296(10,466)118,762Motor

664,932

779,633

(628,101)

(636,686)

36,831

142,947

40,866

149,162

(523,555)

(534,021)

564,421

683,183

Non-Motor

2016 2015

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Sensitivity analysis The reasonableness of the estimation process is tested by an analysis of sensitivity around several scenarios. The sensitivity of the Group’s income to insurance risks is as follows:

Credit risk Credit r isk is the risk that one party to a financial instrument wil l cause a financial loss to the other party by fail ing to discharge an obligation. The Group’s exposure to credit r isk is l imited to the carr ying amount of f inancial assets recognized at the consolidated statement of f inancial position. The Group manages and limits its credit exposure as stated below. The Group credit control policy sets out exposures l imits per counter party, which is reviewed and monitored by the Executive Management Committee. Limits are set for investments and minimum credit ratings for investments that may be held. Reinsurance is placed with counterparties that have a good credit rating and concentration of r isk is avoided by following policy guidelines in respect of counterparties ’ l imits that are subject to regular reviews. At each reporting date, management per forms an assessment of creditworthiness of reinsurers and updates the reinsurance purchase strategy, ascertaining suitable allowance for impairment. The Group sets the maximum credit amounts and terms to its customers. The credit r isk in respect of such customer balances incurred on non–payment of premiums wil l only persist during the grace period specified, when the policy is either paid up or terminated. Commission paid to intermediaries is netted off against amounts receivable from them to reduce the risk of doubtful debts.

QR ‘000 QR ‘000 QR ‘000QR ‘000

Increase (decrease) in

reinsurance contract liabilities

Impact on net profit Impact on equity

Increase (decrease) in

insurance contract liabilities

Change in assumptions

(26,701)

31,834

7,324

(7,147)

7,324

(7,147)

(34,025)

38,982

-5%

+5%

26,701

(31,834)

(7,324)

7,147

(7,324)

7,147

34,025

(38,982)

+5%

-5%



31 December 2016

31 December 2015

121




Credit risk (continued) The Group further restricts its credit r isk exposure by entering into master netting arrangements with counterparties with which it enters into signif icant volumes of transactions. However, such arrangements do not generally result in offsetting the consolidated statement of f inancial position assets and liabil it ies, as transactions are usually settled on a gross basis. However, the credit r isk associated with such balances is reduced in the event of a default, when such balances are settled on a net basis. The Group actively manages its product mix to ensure that there is no signif icant concentration of credit r isk. The credit r isk for l iquid funds and other short-term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. The table below shows the maximum exposure to credit r isk for the components of the consolidated statement of f inancial position:

QR ‘000QR ‘000

20152016

Credit risk exposure by financial asset type:

600,104479,772Reinsurance recoverable on outstanding claims

230,759302,877Bank balances

201,399234,089Insurance receivables

189,182180,885Available-for-sale financial assets (debt securities)

111,693105,667Other assets

940

1,334,077

252

1,303,542


Total credit risk exposure

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Credit risk (continued)

Impaired financial assets As at 31 December 2016, the impaired insurance and reinsurance assets amount to QR 35.06 mil l ion (2015: QR 36.06 mil l ion) and other assets amount to QR 19.93 mil l ion (2015: QR 20.32 mil l ion). The Group records all impairment allowances in separate impairment allowances accounts. A reconcil iation of all the allowances for impairment losses are as follows:

QR ‘000 QR ‘000 QR ‘000QR ‘000

Impairment on insurance and reinsurance assets Impairment on other receivables

37,145 20,323 9,02836,056At 1 January

-

(1,139)

50

36,056

-

(471)

80

19,932

11,295

-

-

20,323

-

(2,840)

1,839

35,055


Impairment recoveries during the year

At 31 December

Impairment losses for the year

2015 2016 20152016

Liquidity riskLiquidity r isk is the risk that cash may not be available to pay obligations when due. The Group manages its l iquidity needs by carefully monitoring scheduled payments for f inancial l iabil it ies as well as cash-outflows due in day-today business. The Group maintains cash and marketable securit ies to meet its l iquidity requirements for up to 90-day periods. Funding for long-term l iquidity needs is additionally secured by an adequate amount of committed credit facil it ies and the abil ity to sell medium to long-term financial assets.

123




Contractual maturity of the Group’s l iabil it ies as at 31 December 2015 are summarised below:

The above contractual maturit ies reflect the gross cash flows, which may differ to the carr ying values of the l iabil it ies at the consolidated statement of f inancial position date.

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

More than 5 years

More than 5 years

Total non-current

Total non-current

Total

Total

1 to 5 years

1 to 5 years

Total current

Total current

6 to 12 months

6 to 12 months

Within 6 months

Within 6 months

-

-

135,448

62,970

-

-

135,448

62,970

15,545

26,630

1,005,054

449,424

-

-

1,093,678

533,381

396,857

442,728

1,347,873

1,213,483

1,038,757

1,101,580

2,885,299

2,843,767

15,545

26,630

869,606

386,454

-

-

958,230

470,411

381,312

416,098

342,819

764,059

1,038,757

1,101,580

1,791,621

2,310,386

157,536

157,568

57,203

498,093

623,254

660,948

866,726

1,345,258

223,776

258,530

285,616

265,966

415,503

440,632

924,895

965,128

-

-

-

-

-

-

73,079

57,327

19,820

28,515

81,992

57,461

-

-

73,079

57,327

19,820

28,515

8,913

134

19,820

28,515

8,913

134

-

-

-

-





Insurance payables and other liabilities

Insurance payables and other liabilities





Liquidity risk (continued)

Contractual maturity of the Group’s l iabil it ies as at 31 December 2016 are summarised below:

Current Non-current

Current Non-current

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Liquidity risk (continued)

The table below summarises the expected uti l isation or settlement of assets and liabil it ies

QR ‘000 QR ‘000 QR ‘000QR ‘000QR ‘000QR ‘000

Current Non-current 2015 2016Non-current Current

-

160,013

-

-

940

859,870

28,515

241,185

280,915

84,582

104,866

324,749

1,057,424

-

-

-

-

86

84,582

264,879

324,749

1,057,424

940

859,870

28,515

241,185

281,001

104,013

243,009

345,225

1,016,777

252

779,723

19,820

231,279

296,495

104,013

60,643

345,225

1,016,777

-

-

-

-

-

936

-

182,366

-

-

252

779,723

19,820

231,279

295,559

-

231,202

1,765,289

167,618

1,101,580

201,399

746,075

144,247

134

-

174,913

2,573,317

5,936,607

-

7,644,982

-

-

-

426,515

136,754

57,327

33,942

26,630

544,500

5,936,607

231,202

9,410,271

167,618

1,101,580

201,399

1,172,590

281,001

57,461

33,942

201,543

3,117,817

6,064,376

303,287

9,551,375

164,129

1,038,757

234,089

1,270,651

296,495

81,992

37,744

165,578

3,142,316

6,064,376

-

7,727,434

-

-

958,900

136,400

73,079

37,744

15,545

1,086,204

-

303,287

1,823,941

164,129

1,038,757

234,089

311,751

160,095

8,913

-

150,033

2,056,112



Financial assets:

Total assets



Insurance receivables


Takaful participants’ assets


Employees’ end-of-service benefits

Other liabilities

Total liabilities


Other assets





Reinsurance assets


Insurance payables

Takaful participants’ liabilities

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Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices wil l affect the Group’s income or the value of its holdings of f inancial instruments. The objective of market r isk management is to manage and control market r isk exposures within acceptable parameters, while optimising the return. Currency risk Most of the Group’s transactions are carried out in Qatari Riyals. Exposures to currency exchange rates arise from the Group’s overseas investments. The Qatari Riyal is effectively pegged to the United States Dollar and thus currency risk occurs only in respect of currencies other than the United States Dollar. Foreign currency denominated financial assets and liabilities, translated into Qatari Riyals at the closing rate, are as follows:

The impact that exchange rates f luctuations would have on the Group’s net results is considered to be not signif icant. The analysis below is per formed for reasonably possible movements in key variables with all other variables held constant, showing the impact on profit and equity due to changes in the fair value of currency sensitive monetar y assets and liabil it ies including insurance contract l iabil it ies.

QR ‘000QR ‘000 QR ‘000QR ‘000

OtherOther EuroEuro

45,725

-

-

50,143

-

-

688

(7,755)

(988)

1,719

(7,216)

(7,216)

Financial assets

Financial liabilities

Long-term exposure

45,725

-

50,143

-

688

6,767

1,719

-

Short-term exposure

Financial assets

2016 2015

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Interest rate risk The Group’s policy is to minimise interest rate risk exposures on term financing. The Group is exposed to changes in the market interest rates through its f inancial assets and liabil it ies which are subject to variable interest rates.

Market risk (continued)

Currency risk (continued)

QR ‘000 QR ‘000 QR ‘000QR ‘000

Impact on profitImpact on profit Impact on equity Impact on equity Changes in variables

789

550

239

2,288

707

1,581

2,288

707

1,581

789

550

239

+10%

-10%

(550)

(239)

(789)

(707)

(1,581)

(2,288)

(707)

(1,581)

(2,288)

(550)

(239)

(789)

+10%

-10%

EUR

Total

Others

Currency

Others

EUR

Total

QR ‘000QR ‘000

20152016

Carrying amounts

Fixed and variable rate instruments

397,353

1,201,105

456,996

1,290,471

Financial assets

Financial liabilities

2016 2015

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Market risk (continued) Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets at fair value through profit or loss, and the Group does not designate interest rate swaps as hedging instruments under the fair value hedge accounting model. Therefore a change in interest rate at the reporting date would not affect profit or loss. Cash flow sensitivity analysis for variable rate instruments A change of 50 basis points in interest rate at the reporting date would have increased (decreased) profit or loss by the amount shown below. This analysis assumes that all other variables, in particular foreign currency exchange rates, remain constant.

QR ‘000QR ‘000

50 bps decrease50 bps increase

Profit or loss

(2,087)

4,253

(2,395)

3,458

2,087

(4,253)

2,395

(3,458)

31 December 2016

Interest rate swaps

Cash flow sensitivity (net)

31 December 2015

Interest rate swaps

Cash flow sensitivity (net)

6,340

5,853

(6,340)

(5,853)

Variable rate instruments

Variable rate instruments

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Equity price risk The Group is exposed to other market price risk in respect of its l isted equity securit ies and bonds. Equity price risk is the risk that the fair values of equities decrease as a result of changes in the levels of equity and the value of individual stocks. The effect on equity due to a reasonably possible change in equity indices by (+/-) 10%, with all other variables held constant is as follows:

Operational risk Operational r isk is the risk of loss arising from systems and control failures, fraud and human errors, which can result in f inancial and reputation loss, and legal and regulator y consequences. The Group manages operational r isk through appropriate controls, instituting segregation of duties and internal checks and balances, including internal audit and compliance.

Capital management The Board ’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defines as profit for the year divided by total shareholders ’ equity. The Group’s objectives when managing capital is : - To safeguard the Group’s abil ity to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; - To provide an adequate return to shareholders by pricing insurance and investment contracts commensurately with the level of r isk.

Market risk (continued)

QR ‘000 QR ‘000 QR ‘000QR ‘000

Impact on profitImpact on profit

Impact on other comprehensive

income

Impact on other comprehensive

incomeChanges in variables

78,300

(21,992)

16,520

(242)

79,346

(23,891)

16,149

(264)

+10%

-10%

21,992

(78,300)

242

(16,520)

23,891

(79,346)

264

(16,149)

+10%

-10%

International Markets

Qatar Market

Qatar Market

International Markets

2016 2015

129




Capital management (continued)

The Group monitors capital on the basis of the carr ying amount of equity excluding cash flow hedge reserve and cash and bank balances as presented on the face of the consolidated statement of f inancial position. The Group’s goal in capital management is to maintain a capital-to-overall f inancing structure ratio of 1:1. Capital for the reporting periods under review is summarized as follows:

42 CRITICAL JUDGEMENTS IN APPLYING THE GROUP’S ACCOUNTING POLICIES In the process of preparing these consolidated financial statements, management has made use of a number of judgments relating to the application of accounting policies which are described in Note 2. Those which have the most signif icant effect on the reported amounts of assets, l iabil it ies, income and expense are l isted below (apart from those involving estimations which are dealt with in Note 43). These judgments are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Management believes that the following discussion addresses the accounting policies that require judgments.

QR ‘000QR ‘000

20152016

6,292,454

1:1.23

1,172,590

7,493,559

6,409,059

1:1.26

1,270,651

7,699,530

Equity

Capital to overall financing

Add: loans and borrowings

Overall financing

(202,687)

6,089,767

6,320,969

(283,467)

6,125,592

6,428,879

Less: cash flow hedge reserve and cash and bank balances

Capital

Equity excluding cash flow hedge reserve

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42 CRITICAL JUDGEMENTS IN APPLYING THE GROUP’S ACCOUNTING POLICIES (CONTINUED)

43 KEY SOURCES OF ESTIMATES AND UNCERTAINTY

Classification of investments Quoted securit ies could be classif ied either as available-for-sale or at fair value through profit or loss. The Group invests substantially in quoted securit ies either locally or overseas and management has primari ly decided to account for these investments based on their potential for long term growth rather than on the short term profit basis. Consequently, the majority of such investments are recognized as available-for-sale rather than at fair value through profit or loss. Financial assets are classif ied as fair value through profit or loss where the assets are either held for trading or init ially designated at fair value through profit or loss.

Impairment of financial assets The Group determines that available-for-sale financial assets are impaired when there has been a ‘signif icant ’ or ‘prolonged’ decline in the fair value below its cost. The determination of what is ‘ signif icant ’ or ‘prolonged’ requires judgment and is assessed based on qualitative and quantitative factors, for each available-for-sale financial asset separately. In making a judgment on impairment, the Group evaluates among other factors, evidence of deterioration in the financial health of the entity, impact of delay in execution, industr y and sector per formance, changes in technology and operational and financing cash flows.

The key assumptions concerning the future and other key sources of estimating uncertainty at the consolidated statement of f inancial position date, that have a signif icant risk of causing a material adjustment to the carr ying amounts of assets and liabil it ies within the next f inancial year are discussed below. Claims made under insurance contracts Claims and loss adjustment expenses are charged to the consolidated statement of profit or loss as incurred based on the estimated liabil ity for compensation owed to contract holders or third parties damaged by the contract holders. Liabil it ies for unpaid claims are estimated using the input of assessments for individual cases reported to the Group and management estimations for the claims incurred but not reported (IBNR). The method for making such estimates and for establishing the resulting l iabil ity is continually reviewed. Any difference between the actual claims and the provisions made are included in the consolidated statement of profit or loss in the year of settlement. Unearned premiums The provision for unearned premiums represents that portion of premiums received or receivable that relates to risks that have not yet expired at the reporting date. The provision is recognised when contracts are entered into and premiums are charged, and is brought to account as premium income over the term of the contract in accordance with the pattern of insurance service provided under the contract. Unearned premiums are calculated on a daily pro rata basis.

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43 KEY SOURCES OF ESTIMATES AND UNCERTAINTY (CONTINUED)

Impairment of insurance and other receivables An estimate of the collectible amount of insurance and other receivables is made when collection of the ful l amount is no longer probable. The determination of whether insurance and other receivables are impaired, involves the Group evaluating, the credit and liquidity position of the policyholders and the insurance companies, historical recover y rates including detailed investigations carried out during 2016 and feedback received from the legal department. The difference between the estimated collectible amount and the book amount is recognized as an expense in the consolidated statement of profit or loss. Any difference between the amounts actually collected in future periods and the amounts expected wil l be recognized in the consolidated statement of profit or loss at the time of collection.

Useful lives, residual values and depreciation charges of property and equipment The Group’s management determines the estimated useful l ives, residual values and related depreciation charges of its property and equipment. These estimates are determined after considering the expected usage of the asset, physical wear and tear and technical or commercial obsolescence.

Liability adequacy tests At each consolidated statement of f inancial position date, l iabil ity adequacy tests are per formed to ensure the adequacy of insurance contract l iabil it ies. The Group makes use of the best estimates of future contractual cash flows and claims handling and administration expenses, as well as investment income from the assets backing such l iabil it ies in evaluating the adequacy of the l iabil ity. Any deficiency is immediately charged to the consolidated statement of profit or loss.

Interest rate swaps valuation The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date. Fair values reflect the credit r isk of the instruments and include adjustments to take account of the credit r isk of the Group and counterparty when appropriate.

Investment properties valuation The fair value of investment property is determined by independent real estate valuation experts with recent experience in the location and categor y of property being valued. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the valuation date between a wil l ing buyer and a wil l ing seller in an arm’s length transaction after proper marketing wherein parties had each acted knowledgeably.

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44 RECLA SSIF ICATION OF COMPARATIVE AMOUNTS

Certain comparative figures have been reclassif ied to conform to the presentation in the current year ’s consolidated financial statements. However, such reclassif ications did not have any effect on the net profit and equity of the comparative year. The reclassif ications are summarised below:

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

QR ‘000

Effect of the reclassification

Effect of the reclassification

After reclassification 2015

After reclassification 2015

As previosly reported 2015

As previosly reported 2015

Consolidated statement of profit or loss

Consolidated statement of financial position

1,128

66

(755)

-

21,695

874

(200,788)

64,276

22,823

940

(201,543)

64,276



Other liabilities

(1,128)

689

-

17,495

264,190

39,190

16,367

264,879

39,190


Other assets

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