€¦ · Table of Contents Corporate Information Chairman's Statement Management Discussion and...

FIN INSURANCE COMPANY LIMITED

20 16 ANNUAL REPORT & ACCOUNTS

RC38815

A Member of the Cornerstone Group

BUSINESS

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34, Gana Street, Maitama, Abuja.Tel: 09-2913712Web: www.finsurance.com.ngEnquiries: [email protected]

Table of Contents

Corporate Information

Chairman's Statement

Management Discussion and Analysis

Directors' Report

Corporate Governance Report

Statement of Directors' Responsibilities

Report on Audit Committee

Independent Auditor's Report

General Information

Statement Of Financial Position

Statement of Profit or Loss and other Comprehensive Income

Statement of Changes in Equity

Statement of Cash Flows

General Business Revenue Account

Notes to the Financial Statements

Value Added Statement

Financial Summary

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For the year ended 31 December 2016

Notice of Annual General Meeting 01

NOTICE IS HEREBY GIVEN that the 35th Annual General Meeting of Fin Insurance Company Limited will hold on Friday, 14th July, 2017 at Africa Capital Alliance Limited's Corporate Office, C&C Towers, Plot 1684, Sanusi Fafunwa Street, Victoria Island, Lagos at 1.00 pm to transact the following businesses:

ORDINARY BUSINESS 1. To lay before the members the Audited Financial Statements for the year ended December 31st, 2016 and the

Reports of the Directors and Auditors thereon.

2. To elect and re-elect Directors.

3. To consider and if thought fit, pass the following resolution as an ordinary resolution of which Special Notice has been given in accordance with Section 364 (1) (a) of the Companies and Allied Matters Act, CAP C20, LFN, 2004:

"That Akintola Williams Deloitte, shall resign as Auditors of the Company and in their stead, KPMG Professional Services be and are hereby appointed as Auditors of the Company.

4. To authorise the Directors to fix the remuneration of the Auditors.

5. To elect members of the Audit Committee.

NOTES

1. Proxy A member entitled to attend and vote at the meeting may appoint a proxy to attend and vote in his/her place. A

proxy need not be a member of the Company. A form of proxy is attached to the Annual Reports and Accounts and if intended to be used, it must be executed and returned to the office of the Registrars, Cardinal Stone Registrars, Plot 358, Herbert Macaulay Way, Yaba, Lagos or the office of the Company Secretary, PAC Solicitors, 16, Kofo Abayomi Street, Victoria Island, Lagos, not later than 48 hours before the time fixed for the meeting.

2. Audit Committee Pursuant to Section 359(5) of the Companies and Allied Matters Act CAP C20, LFN 2004, any Shareholder may

nominate another shareholder as member of the Audit Committee by giving notice in writing to the Company Secretary at least 21 days before the Annual General Meeting.

3. Closure of Register The Register of Members will be closed from 3rd July to July 7th 2017 both days inclusive for the purpose of updating

the Register. thDated this 12 day of June, 2017

BY ORDER OF THE BOARD

Elizabeth I. Uba-Onubogu PAC SOLICITORS (Company Secretary) FRC/2015/NBA/00000006266

16, KofoAbayomi Street, Victoria Island, Lagos. Tel: 09099298887, 08063480070

Website: www.finsurance.com

No�ce Of Annual General Mee�ng

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Fin Insurance Company Limited Annual Report & Accounts 2016

Corporate Informa�on

Mr. Segun AdebanjiMr. Polycarp DidamMuhammad B. HussainiMr. Ademola AbidogunMr. Dayo AlaoMr. Afolabi ElebijuMr. Emmanuel AssiakMr. Martins UwuilekhueAlh. Umar Farouk YakubuMr. Simon AranonuMs. Elizabeth Amadiume

ChairmanManaging Director/CEO (Appointed 1st May, 2016)Independent DirectorExecutive Director (Technical/Operations)Non-Executive DirectorNon-Executive DirectorNon-Executive Director (Appointed 9th November, 2016)Non-Executive Director (Appointed 9th November, 2016)Non-Executive Director (Resigned effective 18th March, 2016)Non-Executive Director (Resigned effective 7th August, 2016)Non-Executive Director (Resigned effective 1st December, 2016)

PAC SolicitorsGround and First floors, Dicon Towers16, Kofo Abayomi Street, Victoria Island, Lagos

Onosen Divine Alegbe34 Gana Street, Maitama, Abuja-FCT

Akintola Williams DeloitteChartered AccountantsCivic Towers, Plot GA 1 Ozumba Mbadiwe Avenue, Victoria Island, Lagos.

FCMB PLC, Unity Bank Plc, Access Bank Plc, Fidelity Bank Plc, Skye Bank Plc, United Bank for Africa Plc, First Bank of Nigeria Limited, Guaranty Trust Bank Plc

Fin Insurance Company Limited34 Gana Street, Maitama District, AbujaTelephone: 092913712Website: www.finsurance.com.ng

Lagos, Port Harcourt, Enugu, Owerri, Bauchi, Gombe, Kaduna, Sokoto, Ibadan, Minna, Akure

African Reinsurance CorporationContinental Re Insurance Plc

HR Nigeria Limited7th floor, AIICO PlazaAfribank Street, Victoria Island LagosTelephone: +234 1 2800917,2800918,4616768FRC/NAS/00000000738

Orji and PartnersFRC No: FRC/2013/NIESV/00000003947

Cardinal Stone Registrars358, Herbert Macaulay wayYaba, Lagos

38815

DIRECTORS

COMPANY SECRETARY

LEGAL ADVISER

AUDITOR

BANKERS

REGISTERED OFFICE

OTHER BRANCHES

REINSURERS

CONSULTING ACTUARIES

ESTATE SURVEYOR AND VALUER

REGISTRARS

CAC REGISTRATION NUMBER

201 6Annual Report & Accounts

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Mr. Segun AdebanjiChairman

Chairman’s Statement

IntroductionthDistinguished shareholders, on behalf of the Board of Directors, I welcome you to the 35 Annual General Meeting of our

Company, FIN Insurance Company Limited (“the Company”) and hereby present to you the Annual Report and Accounts for the financial year ended December 31, 2016. I will start by providing you with an overview of the environment in which the Company operated.

Economic and Business EnvironmentAccording to the United Nations World Economic Situation and Prospects report, the global economy witnessed an expansion of 2.2% in 2016 as against a contraction of 2.4% in the previous year. Despite the expansion, it was the slowest rate of growth since the 2009 global recession. Among the many factors that led to this sluggish increase, high levels of sovereign debt and low commodity prices were notable contributors.

The year 2016 was also challenging for the Nigerian economy. A 22% drop in the average price of Bonny Light (US$34.39 per barrel from US$44.08 per barrel) and reduced production in the Niger Delta region both led to an ensuing decrease in foreign exchange income and government revenue from the start of the year. The economic impact of the drop in international oil prices was so significant that for the first time in 29 years, the Nigerian economy was officially in a recession with -2.06% movement in Gross Domestic Product (GDP) by the end of the second quarter.

A quasi devaluation of the Naira against the US Dollar via change to a managed float system saw the official rate of the Naira plummet to N282 / US$ 1 in June 2016. The value of the currency continued to fall to as low as N349 / US$1 in August. Significant interventions by the Central Bank of Nigeria (CBN) in the following months saw a stabilization of the currency at just over the N300 / US$1 mark till the end of the year.

As an import dependent country, the impact of the exchange rate had a major effect on the inflation rate. The Consumer Price Index (CPI), which started the year in single digits, at 9.62%, inched upwards month on month and ended the year at 18.55%, an 11-year high. The key drivers of the almost 100% rise in the inflation rate (Year on Year) were electricity, fuel prices and road transportation.

The Insurance IndustryIndustry indices remain largely unchanged as analysts estimate a 10% increase in Gross Premium Income from 2015's N350 billion.

In response to sustained solvency gaps reported in audited financials of some insurers, during the course of the year, the National Insurance Commission (NAICOM), rolled out draft guidelines for a risk-based supervision regime for insurers which is gradually becoming the prevailing approach to regulatory supervision of financial institutions globally. Besides ensuring that insurance only undertake risks within their financial capability, it is NAICOM's expectation that this change in approach, will trigger another round of consolidation amongst industry operators.

Company Financial PerformanceThe recessionary trend in the macro-economy undoubtedly affected the general performance of Insurance Companies in Nigeria. Nonetheless, our Company had a marginal increase of 6% in Gross Premium Written from N757.59 million in 2015 to N800.68 million for the year ended 31 December, 2016.

There was a 37% decrease in investment income from N622.19 million in 2015 to N393.59 million in 2016 caused mainly by a sharp drop in dividend income from equity holdings. There were also some fair value losses on investment property. Overall,


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the Company recorded a profit before tax (PBT) of N217.83 million.

Outlook for 2017We expect the business environment for the Insurance industry to remain challenging just as the economy is expected to inch slowly towards growth. There are indications of greater cohesion between fiscal and monetary policies of the Federal Government and the Economic Management Team, headed by the Vice-President, have instilled some confidence among domestic and international investors.

The International Monetary Fund (IMF) and the World Bank predict 2017 GDP growth of 0.8% and 1% respectively and the recently unveiled 4-year Economic Recovery and Growth Plan (ERGP) of the Federal Government projects a growth rate of 2.19% for the year.

The Board and Management of your Company will continue to seek out opportunities to increase revenues and sustain growth while keeping a watchful eye on expenses.

I would like to conclude by appreciating our valued customers and their intermediaries for their continued patronage, as we hope to continue to provide effective solutions to your financial needs.

Olusegun AdebanjiChairman


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He has over 30 years working experience in blue chip companies. Prior to joining ACA in January 2011 where he is currently an Executive Partner, Mr. Adebanji was the Executive Vice Chairman of Alvac Company Limited. He is a Fellow of both the Chartered Association of Certified Accountants and the Institute of Chartered Accountants of Nigeria.

His working experience includes UAC and Unilever PLC London and South Africa. On his .He served as Financial Director of Nigerian Breweries PLC and later Managing Director, Heineken Ghana Breweries and Namibia Breweries. We trust that he would make a significant contribution to the Company in his role as Chairman. He is currently the outgoing chairman Fin insurance Company limited and the incoming chairman cornerstone insurance plc

Mr. Segun AdebanjiChairman

Mr. Polycarp DidamMD/CEO

He is a seasoned Insurance Professional with more than two decades in Insurance practice ranging from Underwriting, Insurance broking and Marketing.

Prior to joining the Company in May 2016, Polycarp was regional Manager of Afribank Insurance Brokers, North East from 1990 to 1993. He became an Assistant Director with Industrial General Insurance in 2001. He moved to Guaranty Trust Assurance Plc., now AXA Mansard Insurance as Regional Manager, North and later became Group lead, Public Sector/CBN. He left as an Asst. General Manager in 2013 to take appointment as MD/CEO of Guinea Insurance Plc. A position he held before joining Fin Insurance Co. Ltd, a member of the Cornerstone Group in May 2016. Polycarp is an Alumnus of Lagos Business School as well as University of Lagos.

He has attended several professional and Management courses locally and internationally. He is also an associate of both Chartered Insurance of Niger ia and London as wel l as Niger ian Institute of Management.nnnnnnnnnnnnnnnnnnnnnnnnnnnnbbbn

Board of Directors

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Mr. Muhammad B. HussainiIndependent Director

He is a Senior Lecturer in the Department of Business Administration, Ahmadu Bello University, Zaria. He has over Twenty Five (25) years working experience in the Insurance Industry and is an accomplished Professional with distinguished track records. He holds a B.Sc Degree in Actuarial Science from Ahmadu Bello University and a Master of Business Administration Degree (MBA) from the same University. Alhaji Muhammad B. Hussaini has worked with legacy companies of Unity Kapital Insurance Plc and NICON Insurance Plc. He was also at the National Insurance Commission where he was Director of Research, Director Technical and eventually rose to the position of Deputy Commissioner (Technical). He also acted as the Commissioner for Insurance of the Federal Republic of Nigeria.

He is an Associate of the Chartered Insurance Institute of London, Fellow of the Chartered Insurance Institute of Nigeria and Fellow of the Institute of Islamic Banking and Insurance London.

A consummate marketing strategist, he won the “Award for Exceptional Performance” at Cornerstone Insurance Plc in 1997 and was best producing staff at Linkage Assurance Plc in 2001, “Best Performing Sales Staff (2015)”. He is an alumnus of the Lagos Business School [LBS], holds a Bachelor's degree in Political Science and an MBA from the University of Ado-Ekiti.

He is also an associate of both Chartered Insurance Institute of Nigeria (CIIN) and the Nigerian Institute of Management (NIM).

Mr. Dayo AlaoNon-Executive Director

Mr. Afolabi ElebijuNon-Executive Director

He is the founding Principal of LeLaw, Barristers & Solicitors a commercial law firm. Widely acknowledged as one of Nigeria's leading tax and regulatory lawyers, he has two decades of premium corporate and commercial law experience in leading professional services firms. He was most recently General Counsel at Nigeria's foremost private equity firm.

He obtained his Bachelor of Arts (B.A. (Ed)) and Bachelor of Laws (LL.B) from Obafemi Awolowo University, Ile-Ife. He also has two Master of Laws (LL.M) degrees: from the University of Lagos and Harvard Law School respectively.

He is a Fellow of the Chartered Institute of Taxation of Nigeria (FCTI), the Vice Dean, Indirect Tax Faculty of the Chartered Institute of Taxation Nigeria, and an

Associate Member of the Chartered Institute of Arbitrators (ACIArb).


Mr. Emmanuel AssiakNon-Executive Director

Emmanuel Assiak is a Principal at African Capital Alliance (“ACA”). He joined ACA in 2006. Prior to joining ACA, he had 12 years' experience in Citizens Bank, Zenith Bank and Continental Trust Bank (now part of United Bank for Africa). Emmanuel holds a Bachelor's degree in Economics (First Class Honours) from the University of Cross River State, winning a number of prizes, including the best overall graduating student for the year. He later obtained a Master's degree in Economics from the University of Lagos and is a Chartered Accountant. He is an alumnus of the Coller Institute of Private Equity, London Business School.

Emmanuel is also a non-Executive Director of Bevpak Nigeria Limited.

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He is the DGM/ Head of the Technical & Risk Management Division at Cornerstone Insurance Plc., where he is responsible for the Underwriting, Claims and Reinsurance Management functions in the company. He has also held several positions within the organization including DGM of Special Risk & Corporate Market where he was responsible for business development, underwriting & profitability of the Oil & Gas, Bonds and Engineering units. Prior to that he began his underwriting career as an assistant superintendent at Franco-NIGERIA Insurance Brokers. Martins holds both a Bachelors and Master's degrees in Physiology from the University of Ibadan, and is an associate of the Chartered Insurance Institute of Nigeria [CIIN]. He is also an alumnus of Lagos Business School.

Non-Executive DirectorMr. Martins Uwuilekhue

Ademola has over 24year's experience in the insurance industry, he has vast experience in insurance technical as well as relationship and strategic management. He has a Master's degree in Business Administration from the Rivers State College of Science and Technology (2007); He is an alumnus of both prestigious London and Lagos Business Schools including the University of Texas. He has attended various management courses locally and internationally.

Mr. Ademola AbidogunExecutive Director (Technical and Operations)

This Management Discussion and Analysis ('MD&A') has been prepared as at December 31, 2016 and should be read in conjunction with the audited financial statements and the related notes to audited financial statements. Forward Looking Statement The MD&A contains forward looking statements related to FIN Insurance Company Limited ('the Company') financials and other projections, expected future plans, events, financial and operating results, objectives and performance as well as underlying assumptions all of which involve risk and uncertainties. When used in this MD&A the words 'believe', 'anticipate', 'intended', 'estimate', and similar expression are used to identify forward looking statements, although not all forward-looking statements contain such words. These statements reflect Management's current beliefs and are based on information available to the Company and are subject to certain risks, uncertainties and assumptions. Business Strategies Fin Insurance Company Limited was incorporated in 1981 as Yankari Insurance Company Limited. The Company's name however was changed in 2008 to FIN Insurance Company Limited following the acquisition of majority shares by FinBank PLC. The Company engages in underwriting of General Businesses. In 2016, the Company continued to make more inroads into the untapped insurance market through the joint marketing collaboration with the group company, Cornerstone Insurance PLC. The Company has now been set-up to provide the right products for the various market segments (retail, commercial, and corporate) with emphasis on the Northern region to help increase the financial inclusion in the northern states. Operating Results:

Management Discussion And Analysis (MD&A)


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2016 2015 Changes N'000 N'000 % Gross premium written 800,683 757,594 6

Gross premium income 687,607 824,473 (17)

Reinsurance expenses (284,834) (279,458) 2

Net premium income 402,773 545,015 (26)

Fees and commission income 32,595 33,997 (4)

Net underwriting income 435,368 579,012 (25)

Claims expenses 116,971 (159,679) (173)

Underwriting expenses (135,336) (111,398) 21

Underwriting profit 417,003 307,935 35

Investment income 393,592 622,192 (37)

Fair value gain on investment property 8,000 32,000 (75)

Other operating income 69,304 (8,057) (960)

Net income 887,899 954,070 (7)

Impairment written back on trade receivables 62 -

Management expenses (670,124) (679,403) (1)

Results of operating activities/profit before tax 217,837 274,667 (21)

The Directors of Fin Insurance Company Limited ("the Company or Fin Insurance"), present their Report on the affairs of the stCompany together with the Audited Financial Statements and Independent Auditor's Report for the year ended 31

December, 2016.

Legal form and principal activity The Company was incorporated in 1981 as Yankari Insurance Company Limited and commenced operations in January, 1983. It traded in this name until 2007 when it was acquired by FinBank PLC. The name was changed to Fin Insurance Company Limited in 2008. Fin Insurance Company Limited is incorporated in Nigeria under the Companies and Allied Matters Act as a private limited liability company, and it is domiciled in Nigeria. The registered office of the Company is 34, Gana Street, Maitama, FCT-Abuja. The main activity of the Company is the provision of General insurance business.

In 2015, FinBank PLC sold its controlling shares in the Company to Africa Capital Alliance Limited ("ACA") through ACA's thinvestment vehicle, Capital Alliance Private Equity (III) Limited (CAPE III). By a members' resolution dated 27 November,

2014, CAPE III transferred its full holding of the Company's shares to Cornerstone Insurance PLC. Following this restructure, Fin Insurance is currently a subsidiary of Cornerstone Insurance PLC. Operating results

Highlights of the financial performance is as follows:

Directors’ Report


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Year Year

2016 2015

N'000 N'000

Profit before taxation 217,837 274,667 Income tax (68,497) 40,569 Minimum tax (26,255) (26,632) Profit after taxation 123,085 288,604 Transfer to contingency reserve (24,617) (57,721) Retained earnings for the year 98,468 230,883 Retained earnings, beginning of year 814,593 583,710 Retained earnings, end of year 913,061 814,593

Earnings per share -basic (in kobo) 4k 9k

Directors Shareholding:No Director has direct or indirect interest in the share capital of the Company (December 2015: Nil)

Shareholding AnalysisThe shareholding pattern of the company is as stated below:

*These Directors represent the interest of Cape III Limited on the Board**These Directors represent the interest of Cornerstone Insurance PLC on the Board

2016 2015

No. of shares %

holding No. of shares %

holding

Cornerstone Insurance Plc 3,190,440,000 96.68 3,190,440,000 96.68 CAPE III, Gombe, Bauchi State Invest and Property Development, other institutional investors and individuals 109,560,000 3.32 109,560,000 3.32

Total 3,300,000,000 100 3,300,000,000 100

�Directors' Interest in Contracts In accordance with section 277 of the companies and Allied Matters Act of Nigeria, The Board received a declaration from the following Director in respect of the services set against his names:

Name of Director Interest In Company Name of Company Services To The Company

Mr. Afolabi Elebiju Director LeLaw Legal Legal Services

Directors The Directors of the Company who held office during the year were as follows.


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* Mr. Segun Adebanji Mr. Polycarp Didam

*Mr. Emmanuel Assiak

**Mr. Martins Uwuilekhue

Alh. Farouk YakubuUmar

Mr. Muhammad B. Hussaini

**Mr. D a y o Alao

Mr. Afolabi Elebiju

Mr. Ademola Abidogun

Chairman

Managing Director (Appointed 1st May, 2016)

thDirector Appointed 9 November , 2016 th Director Appointed 9 Novembe r, 2016

thDirector Resigned effective 18 March, 2016

Director Resigned effective 7th August, 2016

Director Resigned 1st December , 2016

Director

Director

Director

Director

NAME POSITION

Mr. Simon Aranonu

Ms. Elizabeth A m adiume

Property and Equipment Information relating to changes in property and equipment during the year is given in Note 14 to the financial statements. Employment of physically challenged persons The Company operates a non-discriminatory policy on recruitment. Applications by physically challenged persons are always fully considered, bearing in mind the respective aptitudes and abilities of the applicants concerned. In the event of members of staff becoming physically challenged, every effort is made to ensure that their employment with the Company continues and that appropriate training is arranged. It is the policy of the Company that the training, career development and promotion of physically challenged persons should, as far as possible, be identical with those of other employees. During the year under review there was no physically challenged person in the Company's employment. Employee Health, Safety and Welfare The Company's ensures that the provisions of all safety and health legislations are rigorously complied with. Employee Training and Involvement The Company places considerable value on the involvement of its employees and has continued its practice of keeping them informed through written communication or general meetings on matters affecting them and the various factors affecting the performance of the Company. This is achieved through regular meetings between Management and staff of the Company. The employees to the best of their ability are encouraged to participate in the activities of the Company. Diversity in Employment and Gender Representation The number and percentage of male and female employees during the financial year vis-à-vis total workforce was as follows:

Male Female Male Female Number Number Percentage Percentage

Employees 30 22 58% 42%

Gender analysis of the Board and top Management is as follows:

Board 8 100%

Top Management 11 2 85% 15%

Detailed analysis of the Board and top Management is as follows:

Assistant Manager 3 1 23% 8%

Deputy Manager 3 - 23% -

Manager 1 1 8% 8%

Senior Manager 1 - 8% -

Principal Manager 1 - 8% -

Executive Director /CEO 2 - 15% - Total 11 2


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Donations and Charitable Gifts The Company made charitable donations of traffic stands to the Nigerian Police Force (Maitama Division, FCT-Abuja).Other donations are sponsorship programmes within and outside the Insurance company. Acquisition of own shares The Company did not purchase any of its own shares during the year. Events after the reporting period There were no events after the end of the reporting period which could have a material effect on the financial statements of the Company which have not been recognised or disclosed. Auditors Akintola Williams Deloitte have indicated their willingness to continue in office as External Auditors in accordance with section 357 (2) of the Companies and Allied Matters Act of Nigeria. By order of the Board

Elizabeth I. Uba - Onubogu PAC Solicitors (Company Secretary) FRC/2015/NBA/0000000/6266


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stThe Board of Directors of Fin Insurance Company Limited is pleased to report that during the year ended 31 December, 2016, the Company complied with all extant corporate governance codes and regulations. The Company's governance structures comply with best standards and practices in corporate governance and are predicated on compliance with the Company's Code of Ethics and Business Principles, NAICOM Code of Corporate Governance, the Memorandum and Articles of Association of the Company and International Corporate Governance best practices.

At the beginning of 2016, NAICOM issued a statement to the industry highlighting its regulatory priorities for the year 2016 part of which was monitoring the behavioural aspects of corporate governance. In furtherance of this objective, NAICOM

thsubsequently issued a circular dated 25 August, 2016 clarifying some provisions of its Code of Corporate Governance. The circular, among other things, compressed the existing committees of insurance companies to three namely:

a. Finance, Investment and General Purposesb. Audit and Compliancec. Enterprise Risk Management and Governance

In compliance with this circular, the Board reviewed its committee structure and approved changes to the committees' Terms of Reference.

The Report below highlights how the Company improved its corporate governance practices and complied with regulations during the year under review.

BUSINESS REVIEWIn accordance with the provisions of the Companies and Allied Matters Act, CAP C20, LFN, 2004, a balanced review of the

stdevelopment of the business of the Group and its undertakings for the year ended 31 December, 2015 is contained in the Chairman's statement to shareholders.

BOARD OF DIRECTORS Our Corporate Governance policies and strategies are formulated by our Board of Directors which comprises members from different industries with a good blend of skills and in depth knowledge of the industry. The Board is responsible for the overall supervision of the Company and takes appropriate action to protect the interest of the shareholders and other stakeholders.

The Board is responsible for providing entrepreneurial leadership for the Company within a framework of prudent and effective controls. It sets out the strategic direction, objectives, values and standards of the Company and ensures that the necessary financial, material and human resources are in place for the Company to meet its objectives and review Management performance. The Board meets every quarter and as frequently as exigencies demand on notice by the Chairman.

The Board is responsible for: • Reviewing and providing guidance for the Company's corporate and business strategy, major plans of action and risk

policy. • The review and approval of annual budgets and business plans; setting performance objectives, monitoring

implementation and corporate performance. • Overseeing major capital expenditures, acquisitions and divestitures. • Monitoring the effectiveness of the governance practices under which the Company operates and making appropriate

changes as necessary. • Ensuring the integrity of the Company's accounting and financial reporting systems, including the internal audit

Corporate Governance Report As at 31 December, 2016


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functions and that appropriate systems of control and risk monitoring are in place. • Establishing the various Committees of the Board including their Terms of Reference and review of reports of such

Committees to address key areas of the Company's business.

The daily operational Management of the Group is delegated to the Managing Director who is able to sub-delegate any of his powers and discretions. The Managing Director is responsible to the Board.

As at December 31, 2016, there were Eight (8) members of the Board of Directors comprising Six (6) Non-Executive Directors one of whom is the Chairman and Two (2) Executive Directors.

The composition of the Board during the year is presented as follows:

Board of Directors

Appointments/Election of DirectorsthOn the 9 of November, 2016, the Board strengthened its composition with the appointment of Two (2) new Directors, Mr.

Emmanuel Assiak and Mr. Martins Uwuilekhue.

Mr. Emmanuel Assiak is a Vice President managing one of the business units in African Capital Alliance Limited. He has over Twenty (20) years broad-based experience in the financial services sector spanning financial services and private equity.

He holds a First Class Bachelor's Degree in Economics from the University of Uyo, Nigeria and is a Chartered Accountant.

Mr. Martins Uwuilekhue is the GM/ Head of the Technical & Risk Management Division at Cornerstone Insurance Plc., where he is responsible for the Underwriting, Claims and Reinsurance Management functions in the company.

Martins holds both a Bachelors and Master's degrees in Physiology from the University of Ibadan, and is an associate of the Chartered Insurance Institute of Nigeria [CIIN]. He is also an alumnus of the Lagos Business School.

The Board is confident that the above individuals will add value to the Group and hereby presents their appointment to shareholders for approval. Re-Election of DirectorsIn accordance with Section 259(1) of the Companies and Allied Matters Act, CAP C20, LFN, 2004, the following Directors retiring by rotation in accordance with Section 259 of the Companies and Allied Matters Act being eligible are presenting themselves for re-election:


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Mr. Segun Adebanji Chairman Mr. Polycarp O. Didam Managing Director/CEO (Appointed 1st May, 2016)Muhammad B. Hussaini Independent DirectorMr. Ademola Abidogun Executive Director (Technical/Operations)Mr. Dayo Alao Non-Executive DirectorMr. Afolabi Elebiju Non-Executive DirectorMr. Emmanuel Assiak Non-Executive Director (Appointed 9th November, 2016)Mr. Martins Uwuilekhue Non-Executive Director (Appointed 9th November, 2016)Alh. Umar Farouk Yakubu Non-Executive Director (Resigned effective 18th March, 2016)Mr. Simon Aranonu Non-Executive Director (Resigned effective 7th August, 2016)Ms. Elizabeth Amadiume Non-Executive Director (Resigned effective 1st December, 2016)

NAME POSITION

a. Mr. Afolabi Elebijub. Mr. Dayo Alaoc. Muhammad B. Hussaini

BOARD COMMITTEES The Board carries out its oversight functions through its various Board Committees. This makes for efficiency and allows the Board focus its attention on specific matters. The Committees are set up in line with regulatory requirements.

The Committees have well defined Terms of Reference and Charters defining their scope of responsibilities in such a way as to avoid overlap of functions. The Committees of the Board meet quarterly but may hold extraordinary sessions as exigencies demand.

There are Three (3) standing Committees of the Board namely;a) Finance, Investment and General Purpose Committeeb) Enterprise Risk Management and Governance Committee, andc) Audit and Compliance Committee.

A. Finance, Investment and General Purpose Committee The Finance, Investment and General Purposes Committee assists the Board in making decisions relating to the

Company's investment policies. It makes recommendations to the Board on the Company's policy for investment and monitors the implementation of the Company's investment policies and procedures. The Committee assists the Board in overseeing the Group's financial strategy, financial performance and reviews the quarterly financial reports.

The membership of the Committee is as follows: Mr. Emmanuel Assiak Chairman Mr. Polycarp O. Didam Member Mr. Martins Uwuilekhue Member Mr. Ademola Abidogun Member Mr. Dayo Alao Member

B. Enterprise Risk Management and Governance Committee The Committee has oversight responsibility for the overall risk assessment of various areas of the Company's

operations and performance and risk management systems to ensure effective risk management through appropriate control systems. The Committee makes recommendations to the Board on the Company's policy and structure for remuneration of all Board members and Senior Management. The Committee reviews the structure, size, composition and succession of the Board, oversees human capital management, implements processes for Board evaluation, recommends policies and structures for effective corporate governance in line with best practices and carries out other matters delegated to it by the Board.

The membership of the Committee is as follows:

Mr. Afolabi Elebiju Chairman Mr. Martins Uwuilekhue Member Muhammad B. Hussaini Member

C. Audit and Compliance Committee The Audit and Compliance committee provides oversight of the Company's financial reporting process, its audit processes, the system of internal controls and compliance with laws and regulations. The Committee reviews the results of each financial year audit with Management and External Auditors, including matters required to be communicated to the Committee under generally accepted auditing standards.


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The membership of the Committee is as follows: Mr. Muhammad B. Hussaini Chairman Mr. Emmanuel Assiak Member Mr. Afolabi Elebiju Member

MEETINGS AND ATTENDANCEth th th thThe Board met Four (4) times in 2016 on 17 March, 2016, 12 May, 2016, 4 August, 2016 and 30 November, 2016.

All the Committees met at least Four (4) times in a year.


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Mr. Segun Adebanji 4/4Mr. Polycarp O. Didam 3/4 Mr. Emmanuel Assiak 1/4Mr. Simon Aranonu 2/4Alh. Umar Farouk Yakubu 1/4Ms. Elizabeth Amadiume 3/4Mr. Martins Uwuilekhue 1/4Muhammad B. Hussaini 4/4Mr. Dayo Alao 4/4Mr. Afolabi Elebiju 4/4Mr. Ademola Abidogun 4/4

Directors Board

1Not a member of any Board Committee2 thAppointed 9 November, 20163 thAppointed 9 November, 20164 Appointed March 2016 and Resigned August, 20165 stAppointed March, 2017 and Resigned from 1 December, 2017

1

2

3

4

5

6

7

8

9

10

11

Finance, Investment &

General purposeCommittee

Enterprise RiskManagement &

Governance Committee

Audit and Compliance Committee

Number of Meetings 4 4 4

NAME

Mr . Polycarp Didam 4 4 4

Mr . Simon Aranonu 4 3 N/A

Mrs. Elizabeth Amadiume N/A 3 3

Mr . Martins Uwuilekhue - 1 N/A

Mr . Emmanuel Assiak 1 - -

Mr . Muhammad B. Hussaini 5 - 4

Mr . Afolabi Elebiju N/A 4 4

Mr . Ademola Abid ogun 4

4

4

Mr . Dayo Alao

4

N/A

N/A

COMMITTEE MEETINGS The table below shows the frequency of meetings of the Board Committees and members' attendance at these meetings during the year under review.

Management Committee The Management Committee comprises the Senior Management of the Company and is responsible for identifying, analyzing and making recommendations on risks arising from day-to-day activities. The Committee also ensures that risk limits as contained in the Board and Regulatory policies are complied with. Members of the Management Committee make contributions to the respective Board Committees and also ensure that recommendations of the Board and Board Committees are effectively and efficiently implemented. They meet monthly or as frequently as the need arises. Relationship with Shareholders The Company maintains an effective communication with its shareholders, which enables them understand the business, financial condition and operating performance and trends. In addition to the Annual Report and Accounts, the Company maintains an up to date website that provides information on a wide range of issues for all stakeholders.


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The Board of Directors of Fin Insurance Company Limited renewed its mandate to J. K. Randle International to conduct stthe evaluation of the Board of Directors of the Company for the year ended 31 December, 2016 in accordance with the

provisions of the NAICOM Code of Corporate Governance for the Insurance Industry in Nigeria, issued February, 2009 (NAICOM Code).

The Board of Fin Insurance Company Limited had eleven Directors including four new appointments during the year ended 31 December 2016. This consisted of three Executive Directors, including the Managing Director/Chief Executive Officer, and eight Non-Executive Directors. During the year three Non-Executive Directors resigned from the Board.

Members of the Board remained conscious of their responsibilities in respect of the operations of the Board and the Company. They possess the requisite backgrounds and skills to supervise the operations of the Company as well as the performance of Management. The Board re-structured the Board Committees during the year under review. Accordingly, the Audit & Compliance Committee was merged with the Board Risk Management Committee.

Despite the changes on the Board, the skills mix, experience base, and diversity remained adequate for the effective performance of the Board's functions. We noted in particular, that the Board continued to review the performance of Management in line with the Company's business plan during the year. The Board adequately challenged the assumptions of Management in the implementation of the Company's business plans.

The Board held four meetings, and the level of attendance was satisfactory. The conduct of the meetings followed conventional procedures in a conducive atmosphere where all members expressed their views freely. The agenda of the Board consisted of relevant strategic issues in order to address the critical and emerging challenges within the Company and the industry. The activities of the Board were well documented in the minutes book.

The Board performed all the functions that fell within the purview of its oversight responsibilities which arose during the period under review. The Board also performed other statutory responsibilities including rendering the accounts of the operations and activities of the Company to the shareholders.

At the conclusion of the exercise, we recommended that the Board of Directors of Fin Insurance Company Limited should address highlighted issues in respect of a Board approved Enterprise Risk Management Framework, the need to separate the whistle blowing policy from the employee handbook. We have also recommended that the Board should ensure that the Company's annual budgets are considered early enough.

The performance of the Board did not violate the NAICOM Code in any material manner and is adjudged to be satisfactory.

Bashorun J. K. Randle, OFRChairman/Chief ExecutiveFRC/2013/ICAN/00000002703

ndDated 22 March, 2017

Report of the External Consultants on the Appraisal of the Board of Directors of Fin Insurance Company LimitedFor the Year ended 31 December, 2016


19

The Directors accept responsibility for the preparation of these financial statements set out on pages to 112 that give a true 20and fair view of the financial position of the Company in compliance with the International Financial Reporting Standards (IFRS) and in the manner required by the Companies and Allied Matters Act of Nigeria, the Financial Reporting Council of Nigeria Act, 2011, Insurance Act of Nigeria and relevant National Insurance Commission circulars. The Directors further accept responsibility for maintaining adequate accounting records as required by the Companies and Allied Matters Act of Nigeria and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. The Directors have made an assessment of the Company's ability to continue as a going concern and have no reason to believe the Company will not remain a going concern in the year ahead.

The Audited Financial Statements of Fin Insurance Company Limited for the year ended 31 December, 2016 were approved by the Board of Directors on 9 March, 2017.th SIGNED ON BEHALF OF THE BOARD OF DIRECTORS BY:

______________________________ _____________________________________ Segun Adebanji Polycarp Didam (Chairman) (Managing Director/CEO)(FRC/2014/ICAN/00000008434) FRC/2013/CIIN/00000005294

Statement of Directors' Responsibilities in relation to the Financial Statements For the year ended 31 December, 2016


20

Report of the Audit Committee

STREPORT OF THE AUDIT COMMITTEE FOR THE YEAR ENDED 31 DECEMBER, 2016 TO THE MEMBERS OF FIN INSURANCE COMPANY LIMITED In accordance with the provisions of Section 359 (6) of the Companies and Allied Matters Act of Nigeria, the members of the

stAudit Committee of the Company hereby, report on the financial statements for the year ended 31 December 2016 as follows:

1. We have exercised our statutory functions under Section 359 (6) of the Companies and Allied Matters Act of Nigeria and acknowledge the co-operation of Management and staff in the conduct of these functions.

2. We are of the opinion that the accounting and reporting policies of the Company are in accordance with legal requirements and agreed ethical practices and that the scope and planning of both the external and internal audits

stfor the year ended 31 December 2016 were satisfactory and reinforce the Company's internal control systems.

3. We have deliberated with the External Auditors, who confirmed that necessary cooperation was received from Management in the course of their statutory audit and we are satisfied with Management's responses to the Management Letter on the audit of the financial statements of the Company.

Muhammad B. Hussaini FRC/2017/CIIN/00000016037 Chairman, Audit & Compliance Committee

th8 March, 2017 Members of the Committee: Mr. Muhammad Bagudu Hussaini - (Chairman) Mr. Emmanuel Assiak - (Member) Mr. Afolabi Elebiju - (Member)


21

We, the Directors on behalf of Fin Insurance Company Limited hereby endorse to the best of our knowledge and belief, having made appropriate enquiries that:

a. The Company has instituted an operational structure aimed at adhering to the guidelines established by the National Insurance Commission in relation to establishing a risk management framework for Insurers and Reinsurers in Nigeria.

b. The Board is satisfied with the efficacy of the methods surrounding the production of financial information of the Company.

c. The Enterprise Risk Management and Internal Control structure functions are embedded in the Company's operational framework and are functioning effectively.

__________________________ __________________________Polycarp Didam Segun Adebanji Managing Director Chairman FRC/2013/CIIN/00000005294 FRC/2014/ICAN/00000008434

Risk Management Declaration


22

Report on the Audit of the financial statements

OpinionWe have audited the accompanying financial statements of FIN Insurance Company Limited, which comprise the statement of financial position as at 31 December 2016, the statement of profit or loss and other comprehensive income, statement of changes in equity, statement of cash flow for the year then ended, and the notes to the financial statements including a summary of significant accounting policies.

In our opinion, the financial statements give a true and fair view of the financial position of FIN Insurance Company Limited as at 31 December, 2016 and the financial performance and cash flows for the year then ended in accordance with the International Financial Reporting Standards, the Companies and Allied Matters Act Cap C20 LFN 2004, the Insurance Act CAP I17 LFN 2004 and the Financial Reporting Council of Nigeria Act, 2011.

Basis for OpinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the Institute of Chartered Accountants of Nigeria (ICAN) Professional Code of Conduct and Guide for Accountants and other independence requirements applicable to performing audits of financial statements in Nigeria. We have fulfilled our other ethical responsibilities in accordance with the ICAN Code and in accordance with other ethical requirements applicable to performing audits in Nigeria. The ICAN Code is consistent with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other InformationThe directors are responsible for the other information. The other information comprises the Directors' Report, Audit Committee's Report and Company Secretary's Report, which we obtained prior to the date of this auditor's report and the integrated report, which is expected to be made available to us after that date. The other information does not include the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the Financial StatementsThe directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies and Allied Matters Act CAP C20 LFN 2004, Insurance Act CAP I17 LFN 2004, Financial Reporting Council Act, 2011 and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF FIN INSURANCE COMPANY LIMITEDREPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Akintola Williams DeloitteChartered AccountantsCivic Center Towers,Ozumba Mbadiwe Avenue, Victoria Island, Lagos,Nigeria

Tel: +234 (1) 271 78800www.deloitte.com/ng

23

In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, 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 ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors' use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists relating to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the company's financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the company's audit. We remain solely responsible for our audit opinion.

We communicate with the Audit Committee and the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit Committee and directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Audit Committee and the directors, we determine the matter that was of most significance in the audit of the financial statements of the current year and is therefore the key audit matter. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse


24

consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements In accordance with the Sixth Schedule of Companies and Allied Matters Act CAP C20 LFN 2004 we expressly state that:I) We have obtained all the information and explanation which to the best of our knowledge and believe were necessary

for the purpose of our audit. ii) The Company has kept proper books of account, so far as appears from our examination of those books.

iii) The Company's financial position and its statement of profit or loss and other comprehensive income are in agreement with the books of account and returns.

Joshua Ojo - FRC/2013/ICAN/00000000849For: Akintola Williams Deloitte Chartered AccountantsLagos, Nigeria18 April, 2017

25

GENERAL INFORMATIONFor the year ended 31st December 2016

1 Reporting Entity Fin Insurance Company Limited was incorporated in 1981 as Yankari Insurance Company Limited and commenced

business in January 1983. It traded in this name until 2007 when it was acquired by FinBank Plc, a subsidiary of FCMB Plc. The name was changed to Fin Insurance Company Limited in 2008. Fin Insurance Company Limited is incorporated in Nigeria under the Companies and Allied Matters Act as a limited liability company and it is domiciled in Nigeria. It is currently a subsidiary of Cornerstone Insurance PLC.

The registered office of the Company is 34 Gana Street Maitama FCT-Abuja. The main activity of the Company is the provision of General insurance business. This includes Marine insurance, Motor insurance, Accident insurance, Fire insurance and other non-life insurance services.

1.1 Going Concern

These financial statements have being prepared on the going concern basis. The Company has no intention or need to reduce substantially its business operations. The management believes that the going concern assumption is appropriate for the Company due to a very good solvency margin and projected liquidity, based on historical experience that short -term obligations will be refinanced in the normal course of business. Liquidity ratios and continuous evaluation of current ratio of the Company is carried out by the management to ensure that there are no going concern threats to the operation of the Company.

2 Basis of Preparation

(a) Statement of compliance with International Financial Reporting Standards. The financial statements have been prepared in accordance with and comply with International Financial

Reporting Standards (IFRSs) as issued by International Accounting Standards Board (IASB), in the manner required by the Companies and Allied Matters Act of Nigeria, the Financial Reporting Council of Nigeria Act, 2011, the Insurance Act of Nigeria, and relevant National Insurance Commission (NAICOM) guidelines and Reporting Council of Nigeria Act, 2011, the Insurance Act of Nigeria, and relevant National Insurance Commission (NAICOM) guidelines and circulars to the extent that they do not conflict with the requirement of IFRS.

(b) The financial statements include the statement of financial position, statement of profit or loss and other

comprehensive income, the statement of cash flows, the statement of changes in equity and the notes to the account.

The financial statements were authorised for issue by the Board of directors on 10 March 2017. (c) Basis of measurement These financial statements have been prepared in accordance with the going concern principle under the

historical cost basis except for the following material items in the statement of financial position: • Available-for-sale financial assets are measured at fair value • Insurance contract liabilities, which are actuarially valued • Defined benefit liabilities, which are actuarially valued • Investment properties are carried at fair value

General Information


28

• Land and buildings are carried at revalued amount • Other receivable and prepayment • Receivables, held to maturity financial assets and financial liabilities are measured at amortised cost

(d) Functional and presentation currency These financial statements are presented in Nigerian Naira, which is the Company's functional and

presentation currency. Except as indicated, financial information presented in Naira has been rounded to the nearest thousand.

(e) Use of estimates and judgment In preparing these financial statements, management has made judgements, estimates and assumptions that

affect the application of the Company's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

A Judgements Information about judgements made in applying accounting policies that have the most significant effects on the

amounts recognised in the financial statements is included in the notes to the accounts

B Assumptions and estimation uncertainties Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material

adjustment in the year ending 31 December 2016 is included in the following notes: • Note 16 - measurement of insurance contract liabilities: key actuarial assumptions; • Note 20 - recognition of deferred tax assets: availability of future taxable profit against which carry forward

tax losses can be used;

Measurement of fair values A number of the company's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Company has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the CFO.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified. When measuring the fair value of an asset or a liability, the Company uses observable market data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows. • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest


29

level input that is significant to the entire measurement. The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. Further information about the assumptions made in measuring fair values is included in the following notes: • Note 12 - investment property; and• Note 6 - financial instruments.

3 SIGNIFICANT ACCOUNTING POLICIES Significant accounting policies are defined as those that reflect significant judgements and uncertainties, and

potentially give rise to different results under different assumptions and conditions. Except for the changes explained in Note 1.4 above, the Company consistently applied the following accounting

policies to all periods presented in the financial statement.

3.1 Foreign currency transactions Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the

dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the profit or loss within 'finance income or cost'. All other foreign exchange gains and losses are presented in the income statement within 'Other operating income' or 'Other operating expenses'.

Changes in the fair value of monetary assets denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the fair value of the security, and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss; other changes in carrying amount are recognised in 'other comprehensive income'.

Translation differences on non-monetary financial assets such as equities classified as available-for-sale financial assets are included in 'other comprehensive income'."

3.2 Cash and cash equivalent Cash and cash equivalent include notes and coins on hand, unrestricted balances held with banks and highly liquid

financial assets with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used by the Company in the management of its short term commitment.

3.3 Financial assets and liabilities

(a) Classification The classification of financial assets depends on the purpose for which the investments were acquired or

originated. The Company classifies its financial assets into the following categories:

• financial assets at fair value through profit or loss; • held-to-maturity investments; • loans and receivables, and • available-for-sale financial assets

The Company's financial assets include cash and short term deposits, trade and other receivables, quoted and


30

unquoted equity instruments, bonds and treasury bills.

The Company's financial liabilities are classified as other financial liabilities. It includes creditors and accruals.

All financial instruments are initially recognized at fair value, which includes directly attributable transaction costs for financial instruments not classified as at fair value through profit and loss. Financial instruments are derecognized when the rights to receive cash flows from the financial instruments have expired or where the Company has transferred substantially all risks and rewards of ownership.

(b) Subsequent measurement Subsequent measurement of financial instruments depends on their classification. Subsequent to initial

measurement, financial instruments are measured either at fair value or amortised cost, depending on their classification.

(c) Derecognition: Financial assets The Company derecognises a financial asset when the contractual rights to the cash flow from the financial

asset expires; or transfers its right to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of the financial assets are transferred or in which the Company neither transfers nor retains substantially all risks and rewards of ownership and it does not retain control of the asset.

(d) Derecognition: Financial liabilities The Company derecognises a financial liability when its contractual obligations are discharged, cancelled or

expired.

(e) Financial assets held at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading. Financial assets

classified as trading are acquired principally for the purpose of selling in the short term.

"These investments are initially recorded at fair value. Subsequent to initial recognition, they are remeasured at fair value, with gains and losses arising from changes in this value recognized in the statement of comprehensive income in the period in which they arise. The fair values of quoted investments in active markets are based on current bid prices. The fair values of unquoted equities, and quoted equities for which there is no active market, are established using valuation techniques corroborated by independent third parties. These may include reference to the current fair value of other instruments that are substantially the same and discounted cash flow analysis.

Interest earned and dividends received while holding trading assets at fair value through profit or loss are included in investment income. Interest income are recognised using effective interest rate.

(f) Held-to-maturity Held-to-maturity investments are non-derivative financial assets with fixed determinable payments and

fixed maturities that management has both the positive intention and ability to hold to maturity other than:

• those that the Company designates as available for sale. • those that meet the definition of loans and receivables.

Held-to-maturity investments are carried at amortised cost using effective interest method less any impairment losses. A sale or reclassification of more than insignificant amount of held-to-maturity investment would result in the reclassification of all held-to-maturity investments to Available-for-sale, and would prevent the company from classifying investment security as held-to-maturity for the current and following two financial years. However, sales and reclassification in any of the following circumstances would not trigger a reclassification;


31

• sales or reclassification that are so close to maturity that changes in the market rate interest would not have a significant effect in the financial asset's fair value;

• sales or reclassification after the Company has collected substantially all of the assets' original

principals; and

• sales or reclassification attributable to non-recurring isolated events beyond the Company's control that could not have been reasonably anticipated.

(g) Available-for-sale Available for sale financial investments are non-derivative instruments which includes equity and debt

securities. The Company classifies as available-for-sale those financial assets that are generally not designated as another category of financial assets, and strategic capital investments held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices.

Available-for-sale financial assets are carried at fair value, with the exception of investments in equity instruments where fair value cannot be reliably determined, which are carried at cost. Fair values are determined in the same manner as for investments at fair value through profit or loss. Unrealised gains and losses arising from changes in the fair value of available-for-sale financial assets are recognised in other comprehensive income while the investment is held, and are subsequently transferred to the statement of comprehensive income upon sale or de-recognition of the investment.

Dividends received on available-for-sale instruments are recognised in income statement when the

Company's right to receive payment has been established. Interest income on available-for-sale investments are recognised in the profit and loss account using effective

interest rates.

h Loans and receivables Loans and receivables include non-derivative financial assets with fixed or determinable payments that are

not quoted in an active market, other than those classified by the Company as at fair value through profit or loss or available-for-sale.

Loans and receivables consist primarily of staff loans, premium debtors, due from reinsurers, other receivables. These are managed in accordance with a documented policy.

Loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. Loans granted at below market rates are fair valued by reference to expected future cash flows and current market interest rates for instruments in a comparable or similar risk class and the difference between the historical cost and fair value is accounted for as employee benefits under staff costs.

(h) Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Company has access at that date. The fair value of a liability reflects its non-performance risk.When available, the Company measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Company uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.


32

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the Company determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

If an asset or a liability measured at fair value has a bid price and an ask price, then the Company measures assets and long positions at a bid price and liabilities and short positions at an ask price.

Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Company on the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net long position (or paid to transfer a net short position) for a particular risk exposure. Those portfolio-level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio.

The Company recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred. The Company discloses fair value of all its financial instruments.

Effective interest method The effective interest method is a method of calculating the amortized cost of a debt instrument and of

allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Income is recognized on an effective interest basis for debt instruments other than those financial assets

classified as at FVTPL.

(I) Amortised cost measurement The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is

measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest rate method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.

Effective interest method The effective interest method is a method of calculating the amortized cost of a debt instrument and of

allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.

(j) Impairment of financial assets The carrying amounts of these assets are reviewed at each reporting date to determine whether there is any

objective evidence of impairment. A financial asset is considered to be impaired if objective evidence indicates that one or more events that have occurred since the initial recognition of the asset have had a negative effect


33

on the estimated future cash flows of that asset and can be reliably estimated. For financial assets measured at amortised cost, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant and, on the other hand, collectively for financial assets that are not individually significant. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed in companies that share similar credit risk characteristics. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying value and the present value of the estimated future cash flows discounted at the original effective interest rate.

Available-for-sale financial assets are impaired if there is objective evidence of impairment, resulting from one or more loss events that occurred after initial recognition but before the statement of financial position date, that have an impact on the future cash flows of the asset.

All impairment losses are recognized through statement of comprehensive income. If any loss on the financial asset was previously recognized directly in equity as a reduction in fair value, the cumulative net loss that had been recognized in equity is transferred to the statement of comprehensive income and is recognized as part of the impairment loss. The amount of the loss recognized in the statement of comprehensive income is the difference between the acquisition cost and the current fair value, less any previously recognized impairment loss.

The Company assesses the premium debtors on both specific and collective impairment tests bases. Specific impairment on premium debtors are assessed on individually significant receivables based on impairment triggers identified by the Company. The amount of loss recognised in the income statement is the difference between the carrying amount and discounted present value of expected cash flows.

Loans and receivables, including premium debtors not specifically impaired are then assessed for collective impairment. Loans and receivables not individually significant are collectively assessed for impairment by grouping together the receivables with similar risk characteristics.

In assessing collective impairment, the Company uses statistical modelling of historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management's judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends. Default rates, loss rates and the expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure that they remain appropriate.

Subsequent decreases in the amount relating to an impairment loss, that can be linked objectively to an event occurring after the impairment loss was recognized in the income statement, is reversed through the statement of comprehensive income.

(k) Offsetting financial instruments Financial assets and liabilities are set off and the net amount presented in the statement of financial position

when, and only when, the Company has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

3.4 Trade receivables Trade receivables arising from insurance contracts represent premium debtors with determinable payments that are

not quoted in an active market and the Company has no intention to sell. Receivables are stated net of impairment determined in line with the general and incurred loss model. 3.5 Reinsurance assets Reinsurance assets represent balances due from reinsurance contracts. Reinsurance assets consist prepaid

resinsurance cost and claims recoverable.


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Prepaid Reinsurance cost Prepaid reinsurance cost is determined on a time apportionment basis and is part of reinsurance assets in the

statement of financial position. Premiums include any adjustments arising in the accounting period in respect of reinsurance contracts incepting in prior accounting periods.

Claims recoverable Claims recoverable are dependent on the expected claims and benefits arising under the related reinsured insurance

contracts. Amounts recoverable from reinsurers are measured consistently with the amounts associated with the reinsured insurance contracts and in compliance with the terms of each reinsurance contracts.

3.6 Deferred acquisition costs Acquisition costs comprise insurance commissions, brokerage and other related expenses arising from the generation

and conclusion of insurance contracts. The proportion of acquisition costs that correspond to the unearned premiums are deferred as an asset and recognized in the subsequent period. They are recognised on a basis consistent with the related provisions for unearned premiums.

3.7 Other receivables and prepayments Other receivables are stated net of impairment. When a debt is deemed not collectible, it is assessed for specific

impairment, the recoverable amount is determined and if the present value of the recoverable amount is lower than its carrying value, the debt is impaired to that extent. All other recievables not specifically impaired are assessed collectively for impairment. The related impairment is directly charged to the profit and loss account to the extent not previously provided for. Any subsequent recovery of written-off debts is credited to the profit and loss account.

Prepayments are carried at cost less amortised amounts.

3.8 Investment in Joint venture/arrangements A joint venture is a joint arrangement whereby parties that have joint control of the arrangements have right to the net

assets of the joint arrangements. Joint control is the contractually agreed sharing of control of an arrangement, which exists when decisions about the relevant activities require unanimous consent of the parties sharing control.

An investment in a joint venture is accounted for using the equity method of accounting in line with IFRS 11 – Joint

arrangements, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with IFRS 5. Under the equity method, an investment in an associate or a joint venture is initially recognized in the statement of financial position at cost and adjusted thereafter to recognize the Companies share of profit or loss and other comprehensive income of the joint venture.

However, where the Company does not have joint control of the arrangement that it participates in, interest in such arrangement is accounted for in line with IFRS 11:25 & IFRS 11:C14 as follows:

- If it has significant influence over the joint venture, using the equity method as set out in IAS 28; - otherwise, in accordance with IFRS 9 Financial instruments ( or , for entities that have not yet adopted IFRS 9,

IAS 39 Financial Instruments : Recognition and Measurement)

3.9 Investment property Investment property comprises investment in leasehold land or buildings held primarily to earn rentals or capital

appreciation or both.

Investment property is initially recognized at cost including transaction costs, The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes cost of day to day servicing of an investment property. An investment property is subsequently measured at fair value with any change therein recognised in profit or loss. Fair values are determined individually, on a basis appropriate to the purpose for which the property is intended and with regard to recent market transactions for similar properties in the same location.


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Fair values are reviewed annually by independent valuer, holding a recognized and relevant professional qualification and with relevant experience in the location and category of investment property being valued. Any gain and loss arising from a change in the fair value is recognized in the statement of comprehensive income.

Subsequent expenditure on investment property is capitalized only if future economic benefit will flow to the Company; otherwise they are expensed as incurred.

Investment properties are disclosed separately from the property and equipment used for the purposes of the business.

3.10 Intangible assets

Software Software acquired by the Company is measured at cost less accumulated amortisation and any accumulated

impairment losses.

Recognition of software acquired is only allowed if it is probable that future economic benefits to this intangible asset are attributable and will flow to the Company.

Software acquired is initially measured at cost. The cost of acquired software comprises its purchase price, including any import duties and non-refundable purchase taxes, and any directly attributable expenditure on preparing the asset for its intended use. After initial recognition, software acquired is carried at its cost less any accumulated amortisation and any accumulated impairment losses. Maintenance costs is not included.

Internally developed software is capitalized when the Company has the intention and demonstrates the ability to complete the development of the software and to use it in a manner that will generate future economic benefits, and can reliably measure the costs to complete the development. The capitalised costs include all costs directly attributable to the development of the software. Internally developed software is stated at capitalised cost less accumulated amortisation and impairment.

Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures are expensed as incurred. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful life of the software, from the date that it is available for use. The estimated useful life of software is three years subject to annual reassessment.

3.11 Property and equipment

(a) Recognition & measurement Property and Equipment comprise leasehold land and buildings and other properties owned by the Company. Items of property and equipment are carried at cost/revalued amount less accumulated depreciation and

impairment losses. The revaluation is done by a registered Estate Valuer. The revaluation is recognised in other comprehensive income

(b) Subsequent costs Subsequent costs are included in th asset's carrying amount or recognized as a separate asset, as appropriate,

only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the statement of comprehensive income during the financial period in which they are incurred.

Subsequent costs on replacement parts on an item of property are recognized in the carrying amount of the asset and the carrying amount of the replaced or renewed component is derecognized.


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(c) Depreciation Depreciation is calculated on property and equipment on the straight line basis to write down the cost of each

asset to its residual value over its estimated useful life. Depreciation methods, useful lives and residual values are reassessed at each reporting date. No depreciation is charged on item of property and equipment until they are brought into use.

Depreciation begins when an asset is available for use and ceases at the earlier of the date that the asset is derecognised or classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.

Depreciation reduces an asset's carrying value to its residual value at the end of its useful life, and is allocated on a straight line basis over the estimated useful lives, as follows:

Leasehold Land - over the shorter of the useful life of item or lease period Plant and Machinery - 5 years Furniture and Office equipment - 5 years Computer equipment - 5 years Motor vehicles - 5 years

Depreciation method, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(d) De-recognition Upon disposal of any item of property and equipment or when no future economic benefits are expected to flow from

its use, such items are derecognized from the books. Gains and losses on disposal of assets are determined by comparing proceeds with their carrying amounts and are recognized in the statement of comprehensive income in the year of de-recognition.

(e) Impairment of non-financial assets The carrying amounts of the Company's non-financial assets, other than deferred tax assets, are considered to be

impaired when there exists any indication that the asset's recoverable amount is less than the carrying amount. Impairment losses are recognised in profit or loss.

The carrying amount of these non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment.

Impairments or losses of non-financial assets, related claims for or payments of compensation from third parties and any subsequent purchase or construction of replacement assets are separate economic events and are accounted for separately.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Reversals of impairment losses are recognised in profit or loss.

3.12 Statutory deposit

Statutory deposit represents 10% of required minimum paid-up capital of the Company deposited with and held by the Central Bank of Nigeria (CBN) in pursuant to Section 10(3) of the Insurance Act 2003. Statutory deposit is measured at cost.


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Restriction in use of Asset The Company does not have significant restrictions on its ability to access or use its assets and settle its liabilities

other than those resulting from NAICOM guidelines within which insurance Companies operate. This guideline requires general insurance businesses to deposit N300 million with the CBN.

3.13 Trade and other payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the

effective interest method. The fair value of a non-interest bearing liability is its discounted repayment amount. If the due date of the liability is less than one year, discounting is omitted.

3.14 Provisions and other payables A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that

can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

3.15 Insurance Contract Liabilities 3.15.1 Insurance Contract Liabilities components (a) Recognition and measurement of insurance contracts Short-term insurance contracts under General business is determined and accounted for on an annual basis

whereby the incurred cost of claims, commission and related expenses are charged against the earned proportion of premiums, net of reinsurance costs.

(b) Reserve for unearned premiums and unexpired risk The reserve for unearned premium is calculated on time apportionment basis in respect of risk accepted during

the year. A provision for the additional unexpired risk reserve is recognised for an underwriting year where it is envisaged that the estimated cost of claims and expenses would exceed the unearned premium reserve.

(c) Reserves for outstanding claims The reserve for outstanding claims is maintained at the total amount of outstanding claims incurred and

reported plus claims incurred but not reported (IBNR) at the reporting date.

(d) Reserving methodology and assumptions

Data segmentation The data used for reserving is segmented into the eight classes as per the Insurance Act 2003 of Nigeria: - Motor vehicle insurance business - Fire insurance business - General accident insurance business - Marine, aviation and transport insurance business - Oil and gas insurance business - Engineering - Bonds, credit and suretyship; and - Miscellaneous

3.15.2 Classification of insurance contracts liabilities The Company issues contracts that transfer insurance risk or financial risk or both.

Contracts under which the Company accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policy holder or other beneficiary if a specified uncertain future event (the insured event) adversely affects the policy holder or other beneficiary are classified as insurance contracts. Insurance risk is risk other than financial risk, transferred from the holder of the contract to the issuer.


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Financial guarantees are contracts that requires the Company to make specific payments to reimburse the holder for a loss it incurs because a specified debtors fails to make payments when due in accordance with the terms of a debt instrument.

Contracts that transfer financial risks but not significant insurance risk are classified as investment contracts. Financial risk is the risk of a possible future change in one or more of a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. Insurance contracts may also transfer some financial risk.

3.15.3 Recognition and measurement of insurance contracts liabilities Liabilities arising from financial guarantees, commitments and insurance contract are initially measured at fair

value and the initial fair value is amortised over the life of the guarantees, commitments or insurance contract. The liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment to settle the liability when a payment under the contracts has become probable.

Short term insurance contracts under General business is determined and accounted for on an annual basis whereby the incurred cost of claims, commission and related expenses are charged against the earned proportion of premiums, net of reinsurance costs.

3.15.4 Salvages Some non-life insurance contracts permits the Company to sell (usually damaged) property acquired in settling a

claim. The Company may also have the right to pursue third parties for payment of some or all costs.

Estimates of salvage recoveries are included as an allowance in the measurement of the insurance liability for claims. Salvage property is recognised in other assets when the liability is settled . The allowance is the amount that can reasonably be recovered from the disposal of the property.

3.16 Income tax

(a) Current Income tax Income tax comprises current and deferred tax. Income tax expense is recognised in the income

statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at the statement of financial position date, and any adjustment to tax payable in respect of previous years.

(b) Deferred Taxation Deferred taxation, which arises from timing differences in the recognition of items for accounting and tax

purposes, is calculated using the liability method. Deferred taxation is provided fully on timing differences, which are expected at the rate of tax likely to be in force at the time of reversal. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the associated unused tax losses and deductible temporary differences can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

3.17 Employee benefits/Personnel expenses

i Short term benefits Short-term employee benefit obligations include wages, salaries and other benefits which the Company

has a present obligation to pay, as a result of employees' services provided up to the statement of financial position date. The accrual is calculated on an undiscounted basis, using current salary rates.


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ii Defined Contribution Plans The Company operates a defined contributory retirement scheme as stipulated in the Pension Reform Act

2014. Under the defined contribution scheme, the Company pays fixed contributions of 10% to a separate entity – Pension Fund Administrators; employees also pay a fixed contribution of 8% to the same entity. Once the contributions have been paid, the Company retains no legal or constructive obligation to pay further contributions if the Fund does not hold enough assets to finance benefits accruing under the retirement benefit plan. The Company's obligations are recognized in the statement of comprehensive income in the period it which they arise.

iii Post employment defined benefit scheme "The Company operates a post employment defined benefit scheme for its employees.The defined benfit

liability is valued by an actuary using the projected unit credit method with discount rate used being the market yield on Federal government bond. Net actuarial gains and losses are recognised immediately in other comprehensive income.

Past service cost is recognised immediately in the statement of profit or loss for all qualified employees. The plan is unfunded and payments are made on a pay-as-you-go basis.Only the staff who have completed

a minimum of five years of service are eligible for the staff defined benefit scheme. 3.18 Share Capital The Company has authorised capital of N5billion but has N3.3billion as issued and fully paid capital. This is in

compliance with Section 9(1) of the Insurance Act as amended. The Company classifies ordinary shares and share premium as equity when there is no obligation to transfer cash

or other assets. Incremental costs directly attributable to issue of shares are recognized as deductions from equity, net of any tax

effects.

3.19 Share Premium Share premium represents excess amount paid by shareholders on the nominal value of the shares.This amount is

distributable to the share holders at their descretion. It is classified as equity instrument in the statement of financial position.

3.20 Contingency Reserve Contingency reserve is credited with the greater of 3% of gross premiums, or 20% of the profits. This shall

accumulate until it reaches the amount of greater of minimum paid-up capital or 50 percent of net premium.

3.21 Other Reserves Revaluation reserves

Revaluation reserves represent surplus of land and building at the end of the financial period. Increases in the value of the assets are recognized in the other comprehensive income and accumulated in the asset valuation reserve until the assets are derecognized.

Fair value reserves The fair value reserve comprises the net cumulative change in the fair value of available-for-sale investments until

the investment is derecognised or impaired.

3.22 Retained Earnings Retained earnings comprises of undistributed profit/loss from the operations of the current and previous years.

Retained earnings is classified as part of equity in the statement of financial position.


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3.23 Earnings per share The Company presents basic earnings per share for its ordinary shares. Basic earnings per share is calculated by

dividing the profit attributable to ordinary shareholders of the company by the number of shares outstanding during the year.

Adjusted earnings per share is determined by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares adjusted for the bonus shares issued.

3.24 Dividends Dividend distribution to the Company's shareholders is recognized as a liability in the financial statements in the

period in which the dividends are approved by the Company's shareholders. Dividends that are proposed but not yet declared are disclosed in the notes to the financial statements.

Dividends on the Company's ordinary shares are recognised in equity in the period in which they are paid or, if earlier, the period approved by the Company's shareholders.

3.25 Premiums

(a) Gross premiums written Gross premiums written comprise the premiums on insurance contracts entered into during the year,

irrespective of whether they relate in whole or in part to a later accounting period.

Premiums on reinsurance inward are included in gross written premiums and accounted for as if the reinsurance was considered direct business, taking into account the product classification of the reinsured business.

Outward reinsurance premiums are accounted for in the same accounting period as the premiums for the related direct insurance or reinsurance business assumed. Outward reinsurance premiums are recognized as an expense in accordance with the pattern of premium earned.

(b) Gross premiums earned Gross premium relates to premium written in a year to cover assumed insurance risk. Gross premiums

comprise the premiums on insurance contracts entered into during the year, irrespective of whether they relate in whole or in part to a later accounting period. Premium earned is stated gross of commission and recognised when due. Premium earned relates to risks assumed during the period.

3.26 Reinsurance expenses The Company cedes reinsurance in the normal course of business for the purpose of limiting its net loss potential

on policies written. Reinsurance expense comprise written premiums ceded to reinsurers, adjusted for the reinsurers' share of the movement in the provision for the unearned premiums. Reinsurance arrangements do not relieve the company from its direct obligations to its policyholders.

Premium ceded, claims reimbursed and commission recovered are presented in the income statement and statement of financial position separately from the gross amounts.

Reinsurance expense comprise of ceded premium and changes in prepaid reinsurance premium.

Ceded Premium Ceded premium is outwards reinsurance premium paid to clients insurance contracts are ceded to.

3.27 Commission Received/Fee Income Commissions are recognized on ceding business to reinsurere, and are credited to the profit and loss account over

the period the service is provided.


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3.28 Claims incurred

(a) General Business Claims incurred consist of claims and claims handling expenses paid during the financial year together with

the surplus or deficit on actuarial valuation of claims liability at the end of every accounting period. The surplus or deficit in outstanding claims is actuarially determined using the chain ladder and inflation adjusted chain ladder method and the Company's data base of policies underwritten and emerging claims over each of the past six (6) underwriting years.

(b) Provision for outstanding claims The provision for outstanding claims represent the Company's estimate of the ultimate cost of settling all

claims incurred but unpaid at the statement of financial position date whether reported or not. The provision includes an allowance for claims management and handling expenses.

(c) Reinsurance claims recoveries Reinsurance recoverables are recognized as reinsurance assets when the Company records the liability for

the claims and are not netted off claims expense but are presented separately in the Statement of Profit or Loss and Other Comprehensive income.

3.29 Underwriting expenses Underwriting expenses are made up of acquisition and maintenance expenses. Acquisition expenses are those

incurred in obtaining and renewing insurance contracts. They include commission paid, policy expenses, and indirect expenses such as salaries of underwriting staff. Maintenance expenses are those incurred in servicing existing policies/contract. Maintenance expenses are charged to the relevant segments of the revenue account in the accounting period in which they are incurred.

Underwriting expenses for insurance contracts and investment contracts are recognized as expense when incurred, with the exception of acquisition costs which are recognized on a time apportionment basis in respect of the service provided.

3.30 Investment income Investment income comprises interest income earned on short-term deposits, rental income and income earned

on trading of securities including all realised and unrealised fair value changes, interest, dividends and foreign exchange differences. Investment income is accounted for on an accrual basis.

Interest income is recognised in the income statement as it accrues and is calculated using the effective interest rate method. Fees and commissions that form an integral part of the effective yield of a financial instrument are recognised as an adjustment to the effective interest rate of the instrument.

When a receivable is impaired, the Company reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income.

Dividend income Dividend is recognised as earned in the period in which the right of receipt is established and is stated at gross

amount payable.

3.31 Management expenses Management expenses are expenses other than claims, investment expenses,and underwriting expenses. They

include depreciation expenses, admin expenses and other expenses. They are accounted for on an accrual basis.


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3.32 Contingent liabilities A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed

only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or the Company has a present obligation as a result of past events which is not recognised because it is not probable that an outflow of resources will be required to settle the obligation; or the amount cannot be reliably estimated. Contingent liabilities normally comprise of legal claims under arbitration or court process in respect of which a liability is not likely to crystallise.

3.33 Provisions A provision is recognized if, as a result of a past event, the company has a present legal or constructive obligation

that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

4. Application of new and revised International Financial Reporting Standards (IFRSs)

4.1 New standards and amendments that are mandatorily effective for the current year A number of standards, interpretations and amendments thereto, had been issued by the IASB which are effective

but do not impact on these financial statements as summarised in the table below:


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IFRS Effective date Subject of standard/amendment

IFRS 14 Regulatory Deferral Accounts

1 January 2016 IFRS 14 specifies the accounting for regulatory deferral account balances that arise from rate-regulated activities. The Standard is available only to first-time adopters of IFRSs who recognised regulatory deferral account balances under their previous GAAP. IFRS 14 permits eligible first-time adopters of IFRSs to continue their previous GAAP rate-regulated accounting policies, with limited changes, and requires separate presentation of regulatory deferral account balances in the statement of financial position and statement of profit or loss and other comprehensive income.

Disclosures are also required to identify the nature of, and risks associated with, the form of rate regulation that has given rise to the recognition of regulatory deferral account balances.

This standard does not impact on the financial statements as the Company does not provide services subject to rate regulation.

Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)

Effective for annual periods beginning on or after 1 January 2016

The amendments to IFRS 11 provide guidance on how to account for the acquisition of an interest in a joint operation in which the activities constitute a business as defined in IFRS 3 Business Combinations. Specifically, the amendments state that the relevant principles on accounting for business combinations in IFRS 3 and other standards (e.g. IAS 12 Income Taxes regarding recognition of deferred taxes at the time of acquisition and IAS 36 Impairment of Assets regarding impairment testing of a cash-generating unit to which goodwill on acquisition of a joint operation has been allocated) should be applied. The same requirements should be applied to the formation of a joint operation if and only if an existing business is contributed to the joint operation by one of the parties that participate in the joint operation.

A joint operator is also required to disclose the relevant information required by IFRS 3 and other standards for business combinations.


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The amendments to IAS 16 prohibit entities from using a revenue-based depreciation method for items of property, plant and equipment. The amendments to IAS 38 introduce a rebuttable presumption that revenue is not an appropriate basis for amortisation of an intangible asset. This presumption can only be rebutted in the following two limited circumstances:

a) when the intangible asset is expressed as a measure of revenue. For example, an entity could acquire a concession to explore and extract gold from a gold mine. The expiry of the contract might be based on a fixed amount of total revenue to be generated from the extraction and not be based on time or on the amount of gold extracted. Provided that the contract specifies a fixed total amount of revenue to be generated on which amortisation is to be determined, the revenue that is to be generated might be an appropriate basis for amortising the intangible asset; orb) when it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. Based on the assessment, it was noted that none of its intangible assets or property, plant and equipment are being amortised or depreciated based on revenue

Clarification of Acceptable Methods of Depreciation and Amortization (Amendments to IAS16 and IAS 38)


Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41)


The amendments bring bearer plants, which are used solely to grow produce, into the scope of IAS 16 so that they are accounted for in the same way as property, plant and equipment. For the purpose of bringing bearer plants from the scope of IAS 41 into the scope of IAS 16 and therefore enabling entities to measure them at cost subsequent to initial recognition or at revaluation, a definition of a 'bearer plant' is introduced into both standards. A bearer plant is defined as a living plant that:

i. is used in the production or supply of agricultural produce;ii. is expected to bear produce for more than one period; andiii. has a remote likelihood of being sold as agricultural produce,

except for incidental scrap sales.

The scope sections of both standards are then amended to clarify that biological assets except for bearer plants are accounted for under IAS 41 while bearer plants are accounted for under IAS 16. The entity does not have any record of bearer plant in its books


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The amendments reinstate the equity method as an accounting option for investments in subsidiaries, joint ventures and associates in an entity's separate financial statements. The amendments allow an entity to account for investments in subsidiaries, joint ventures and associates in its separate financial statements at cost, in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments: Recognition and Measurement for entities that have not yet adopted IFRS 9), or using the equity method as described in IAS 28 Investments in Associates and Joint Ventures.

This standard does not impact the financial statements of the Company.

The amendments aim at clarifying IAS 1 to address perceived impediments to preparers exercising their judgment in presenting their financial reports. Disclosure Initiative (Amendments to IAS 1) makes the following changes:

i. Materiality: The amendments clarify that (1) information should not be obscured by aggregating or by providing immaterial information, (2) materiality considerations apply to the all parts of the financial statements, and (3) even when a standard requires a specific disclosure, materiality considerations do apply.

ii. Statement of financial position and statement of profit or loss and other comprehensive income: The amendments (1) introduce a clarification that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant and additional guidance on subtotals in these statements and (2) clarify that an entity's share of OCI of equity-accounted associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently be reclassified to profit or loss.

iii. Notes: The amendments add additional examples of possible ways of ordering the notes to clarify that understandability and comparability should be considered when determining the order of the notes and to demonstrate that the notes need not be presented in the order so far listed in paragraph 114 of IAS 1. The IASB also removed guidance and examples with regard to the identification of significant accounting policies that were perceived as being potentially unhelpful

Equity Method in Separate Financial Statements (Amendments to IAS 27)


Disclosure Initiative (Amendments to IAS 1)


Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)


The amendments address issues that have arisen in the context of applying the consolidation exception for investment entities. Investment Entities: The amendments confirm that the exemption from preparing consolidated financial s tatements for an intermediate parent entity is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value. It also states that a


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subsidiary that provides services related to the parent's investment activities should not be consolidated if the subsidiary itself is an investment entity. In addition, when applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries. In addition, an investment entity measuring all of its subsidiaries at fair value must provide the disclosures relating to investment entities as required by IFRS 12.This standard does not have impact on the operation of the company.

The above standards does not have impact on the operation of the company during the year.


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Annual Improvements to IFRSs 2012 - 2014 Cycle(Effective for annual periods beginning on or after 1 January 2016, except as detailed below)The Annual Improvements include amendments to a number of IFRSs, which have been summarised below.

Standard Subject of amendment Details

The amendment introduces specific guidance in IFRS 5 for when an entity reclassifies an asset (or disposal group) from held for sale to held for distribution to owners (or vice versa). The amendment clarifies that such a change is considered as a continuation of the original plan of disposal and hence the requirements set out in IFRS 5 regarding the change of sale plan do not apply. The amendments also clarifies the guidance for when held-for-distribution accounting is discontinued.

IFRS 5

Non-current Assets Held for Sale and Discontinued Operations

Changes in methods of disposal.

IFRS 7Financial Instruments: Disclosures

(with consequential amendments to IFRS 1)

(I) Servicing contracts

IAS 19

Employee Benefits

Discount rate: regional market issue

The amendment provides additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset for the purpose of the disclosures required in relation to transferred assets.

The amendment clarifies that the rate used to discount post-employment benefit obligations should be determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The basis for conclusions to the amendment also clarifies that the depth of the market for high quality corporate bonds should be assessed at a currency level which is consistent with the currency in which the benefits are to be paid. For currencies for which there is no deep market in such high quality bonds, the market yields at the end of the reporting period on government bonds denominated in that currency should be used instead.

The application of these amendments has had no effect on the company's financial statements.

4.2 New and revised IFRSs in issue that are not mandatorily effective (but allow early application) for the year ended 31 December 2016

The company has not applied the following new and revised IFRSs that have been issued but are not yet effective: i. IFRS 9 Financial Instruments; ii. IFRS 15 Revenue from Contracts with Customers; iii. Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or

Joint Venture iv. IFRS 16 Leases v. Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses vi. Amendments to IAS 7 Additional disclosure on changes in financing activities vii. Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions viii. Amendments to IFRS 4 upon applying IFRS 9


48

4.2.1 IFRS 9 Financial Instruments (Effective for annual periods beginning on or after 1 January 2018) In July 2014, the IASB finalised the reform of financial instruments accounting and issued IFRS 9 (as revised in

2014), which contains the requirements for a) the classification and measurement of financial assets and financial liabilities, b) impairment methodology, and c) general hedge accounting. IFRS 9 (as revised in 2014) will supersede IAS 39 Financial Instruments: Recognition and Measurement upon its effective date.

Phase 1: Classification and measurement of financial assets and financial liabilities With respect to the classification and measurement, the number of categories of financial assets under IFRS 9 has

been reduced; all recognised financial assets that are currently within the scope of IAS 39 will be subsequently measured at either amortised cost or fair value under IFRS 9. Specifically:

• a debt instrument that (i) is held within a business model whose objective is to collect the contractual cash flows and (ii) has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding must be measured at amortised cost (net of any write down for impairment), unless the asset is designated at fair value through profit or loss (FVTPL) under the fair value option.

• a debt instrument that (i) is held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets and (ii) has contractual terms that give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, must be measured at FVTOCI, unless the asset is designated at FVTPL under the fair value option.

· all other debt instruments must be measured at FVTPL.

• all equity investments are to be measured in the statement of financial position at fair value, with gains and losses recognised in profit or loss except that if an equity investment is not held for trading, an irrevocable election can be made at initial recognition to measure the investment at FVTOCI, with dividend income recognised in profit or loss.

IFRS 9 also contains requirements for the classification and measurement of financial liabilities and derecognition requirements. One major change from IAS 39 relates to the presentation of changes in the fair value of a financial liability designated as at FVTPL attributable to changes in the credit risk of that liability. Under IFRS 9, such changes are presented in other comprehensive income, unless the presentation of the effect of the change in the liability's credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability's credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as FVTPL is presented in profit or loss.

Phase 2: Impairment methodology The impairment model under IFRS 9 reflects expected credit losses, as opposed to incurred credit losses under IAS

39. Under the impairment approach in IFRS 9, it is no longer necessary for a credit event to have occurred before credit losses are recognised. Instead, an entity always accounts for expected credit losses and changes in those expected credit losses. The amount of expected credit losses should be updated at each reporting date to reflect changes in credit risk since initial recognition.

Phase 3: Hedge accounting The general hedge accounting requirements of IFRS 9 retain the three types of hedge accounting mechanisms in

IAS 39. However, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify as hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an 'economic relationship'. Retrospective assessment of hedge effectiveness is no longer required. Far more disclosure requirements about an entity's risk management activities have been introduced.


49

The work on macro hedging by the IASB is still at a preliminary stage - a discussion paper was issued in April 2014 to gather preliminary views and direction from constituents with a comment period which ended on 17 October 2014. The project is under redeliberation at the time of writing.

Transitional provisions

IFRS 9 (as revised in 2014) is effective for annual periods beginning on or after 1 January 2018 with earlier application permitted. If an entity elects to apply IFRS 9 early, it must apply all of the requirements in IFRS 9 at the same time, except for those relating to:

1. the presentation of fair value gains and losses attributable to changes in the credit risk of financial liabilities designated as at FVTPL, the requirements for which an entity may early apply without applying the other requirements in IFRS 9; and

2. hedge accounting, for which an entity may choose to continue to apply the hedge accounting requirements of IAS 39 instead of the requirements of IFRS 9.

An entity may early apply the earlier versions of IFRS 9 instead of the 2014 version if the entity's date of initial application of IFRS 9 is before 1 February 2015. The date of initial application is the beginning of the reporting period when an entity first applies the requirements of IFRS 9.

IFRS 9 contains specific transitional provisions for i) classification and measurement of financial assets; ii) impairment of financial assets; and iii) hedge accounting. Please see IFRS 9 for details.

4.2.2 IFRS 15 Revenue from Contracts with Customers (Effective for annual periods beginning on or after 1 January 2018) IFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue arising from

contracts with customers. It will supersede the following revenue Standards and Interpretations upon its effective date:

• IAS 18 Revenue; • IAS 11 Construction Contracts; • IFRIC 13 Customer Loyalty Programmes; • IFRIC 15 Agreements for the Construction of Real Estate; • IFRIC 18 Transfers of Assets from Customers; and • SIC 31 Revenue-Barter Transactions Involving Advertising Services.

As suggested by the title of the new revenue Standard, IFRS 15 will only cover revenue arising from contracts with customers. Under IFRS 15, a customer of an entity is a party that has contracted with the entity to obtain goods or services that are an output of the entity's ordinary activities in exchange for consideration.

Unlike the scope of IAS 18, the recognition and measurement of interest income and dividend income from debt

and equity investments are no longer within the scope of IFRS 15. Instead, they are within the scope of IAS 39 Financial Instruments: Recognition and Measurement (or IFRS 9 Financial Instruments, if IFRS 9 is early adopted).

As mentioned above, the new revenue Standard has a single model to deal with revenue from contracts with customers. Its core principle is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The new revenue Standard introduces a 5-step approach to revenue recognition and measurement:

Step 1: Identify the contract with a customer


50

Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation. Far more prescriptive guidance has been introduced by the new revenue Standard:

• Whether or not a contract (or a combination of contracts) contains more than one promised good or service, and if so, when and how the promised goods or services should be unbundled.

• Whether the transaction price allocated to each performance obligation should be recognised as revenue over time or at a point in time. Under IFRS 15, an entity recognises revenue when a performance obligation is satisfied, which is when 'control' of the goods or services underlying the particular performance obligation is transferred to the customer. Unlike IAS 18, the new Standard does not include separate guidance for 'sales of goods' and 'provision of services'; rather, the new Standard requires entities to assess whether revenue should be recognised over time or a particular point in time regardless of whether revenue relates to 'sales of goods' or 'provision of services'.

• When the transaction price includes a variable consideration element, how it will affect the amount and timing of revenue to be recognised. The concept of variable consideration is broad; a transaction price is considered variable due to discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties and contingency arrangements. The new Standard introduces a high hurdle for variable consideration to be recognised as revenue – that is, only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

• When costs incurred to obtain a contract and costs to fulfil a contract can be recognised as an asset.

4.2.3 Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The amendments clarify that the exemption from preparing consolidated financial statements is available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all its subsidiaries at fair value in accordance with IFRS 10. Consequential amendments have also been made to IAS 28 to clarify that the exemption from applying the equity method is also applicable to an investor in an associate or joint venture if that investor is a subsidiary of an investment entity that measures all its subsidiaries at fair value.

The amendments further clarify that the requirement for an investment entity to consolidate a subsidiary providing services related to the former's investment activities applies only to subsidiaries that are not investment entities themselves.

Moreover, the amendments clarify that in applying the equity method of accounting to an associate or a joint venture that is an investment entity, an investor may retain the fair value measurements that the associate or joint venture used for its subsidiaries.

Lastly, clarification is also made that an investment entity that measures all its subsidiaries at fair value should provide the disclosures required by IFRS 12 Disclosures of Interests in Other Entities.

The amendments apply retrospectively for annual periods beginning on or after 1 January 2016 with earlier application permitted.


51

4.2.4 IFRS 16 Leases

IFRS 16 Leases was issued, it specifies how an IFRS reporter will recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor, IAS 17.

Effective date of this standard is 1 January 2018

4.2.5 Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses IAS 12 Income Taxes was amended to clarify the following aspects: Unrealized losses on debt instruments

measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument's holder expects to recover the carrying amount of the debt instrument by sale or by use. The carrying amount of an asset does not limit the estimation of probable future taxable profits. Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary differences. An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilization of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.

Effective date of the amendment is 1 January, 2017

4.2.6 Amendments to IAS 7 Additional disclosure on changes in financing activities IAS 7 was amended to clarify that entities shall provide disclosures that enable users of financial statements to

evaluate changes in liabilities arising from financing activities.

4.2.7 Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions IFRS 2 was amended to clarify the standard in relation to the accounting for cash-settled share-based payment

transactions that include a performance condition, the classification of share-based payment transactions with net settlement features, and the accounting for modifications of share-based payment transactions from cash-settled to equity-settled.

Effective date is 1 January 2018


52

FINANCIAL STATEMENTSFor the year ended 31st December 2016

2016 2015 N'000 N'000

Assets Note Cash and cash equivalents 5 524,350 2,609,613 Financial assets 6 2,277,412 1,212,459 Trade receivables 7 506 -

Reinsurance assets 8 267,400 113,466

Deferred acquisition cost 9 51,472 22,226

Other receivables and prepayments 10 37,948 9,721

Investment in Joint arrangement

11 707,331 -

Investment properties 12 494,000 486,000

Intangible assets 13 9,451 3,797

Property and equipment 14 1,429,808 1,299,263

Deferred tax asset 20 - 39,916

Statutory deposits 15 300,000 300,000 Total assets 6,099,678 6,096,461

Liabilities

Insurance contract liabilities

16

634,028

757,392

Trade payables

17

-

1,046

Provision and other payables

18

191,394

293,366

Current income tax liabilities

19

111,085

92,590

Deferred tax liability

20

177,948

-

Total liabilities

1,114,455

1,144,394 Net assets

4,985,223

4,952,067

Equity

Ordinary share capital

21

3,300,000

3,300,000

Share premium

22

93,878

93,878

Statutory contingency reserve

23

486,459

461,842

Other reserves

24

191,824

281,754

Retained earnings

25

913,062

814,593

Total equity

4,985,223

4,952,067

Statement of Financial Position


54

Statement of Profit or Loss and Other Comprehensive Income

2016 2015

Notes N'000 N'000 Gross premium written 27 800,683 757,594 Gross premium income 27(b) 687,607 824,473 Reinsurance expenses 28 (284,834) (279,458) Net premium income 402,773 545,015 Fees and commission income 29 32,595 33,997 Net underwriting income 435,368 579,012 Claims expenses 30 116,971 (159,679) Underwriting expenses 28 (135,336) (111,398) Underwriting profit 417,003 307,935 Investment income 32 393,592 622,192 Net fair value gain/(loss) on financial asset at fair value 33 8,000 32,000 Other operating income 34 69,304 (8,057) Net income 887,899 954,070 Impairment written back on trade receivables 35(c) 62 - Management expenses 35 (670,124) (679,403) Results of operating activities/profit before tax 217,837 274,667 Minimum tax 36 (26,255) (26,632) Income taxes 36 (68,497) 40,569 Profit for the year 123,085 288,604 Other comprehensive income: Items that are or may be classified to profit or loss: Fair value adjustment on available for sale equities 6 (472,980) (279,347) Foreign currency gain on available for sale equities 6 452,634 120,980 Related tax 20 (135,790) (36,294)

(156,136) (194,661)

Items that will not be reclassified to profit or loss: Revaluation gain on property and equipment 14 85,127 7,397 Deferred tax charge on revaluation gain on building 20 (15,614) (15,577) Deferred tax charge on revaluation surplus on land 20 (3,308) 4,446

66,205 (3,734) Other comprehensive income, net of tax (89,931) (198,395) Total comprehensive income for the year 33,154 90,209 Profit attributable to: Owners of the parent Company 123,085 288,604 Total comprehensive income attributable to: Owners of the parent Company 33,154 90,209 Earnings per share for profit attributable to the equity holders of the Company during the year

– Basic/diluted (in kobo) 26.1 3.7k 8.7k


55

Stat

emen

ts o

f Cha

nges

in E

quit

y (A

ll am

ount

s in

thou

sand

s of N

aira

unl

ess o

ther

wise

stat

ed)

as a

t 31 D

ecem

ber 2

016

Sh

are

Cap

ital

Shar

e

prem

ium

Fair

va

lue

rese

rves

Ass

et

reva

luat

ion

re

serv

e O

ther

Rese

rves

Stat

utor

y

Con

ting

ency

rese

rve

Reta

ined

ea

rnin

gs

Bala

nce

at 1

Janu

ary

2016

3,

300,

000

93,8

78

(222

,579

)

504,

333

28

1,75

4 46

1,84

2

814,

593

4,

952,

067

To

tal c

ompr

ehen

sive

inco

me

for t

he y

ear

Profi

t for

the

year

-

-

-

-

-

12

3,08

5

Tr

ansf

er to

sta

tuto

ry c

ontin

genc

y re

serv

es

-

-

-

-

24

,617

(24,

617)

-

-

-

-

24

,617

98,4

68

O

ther

com

preh

ensiv

e in

com

e

-

-

(20,

346)

-

(20,

346)

-

-

Re

valu

atio

n ga

in o

n pr

oper

ty a

nd e

quip

men

t, ne

t of r

elat

ed ta

xes

-

-

-

85,1

27

85,1

27

-

-

ta

x

-

-

(135

,790

)

(18,

922)

(154

,712

)

-

-

(154

,712

)

Tota

l co

mpr

ehen

sive

inco

me

for y

ear

-

-

(156

,136

)

66,2

05

(89,

931)

24,6

17

98,4

68

Tran

sact

ions

wit

h ow

ners

, rec

orde

d di

rect

ly in

equ

ity

Cont

ribut

ions

by

and

dist

ribut

ions

to o

wne

rs

-

-

-

-

-

-

Tota

l tr

ansa

ctio

ns w

ith o

wne

rs-

--

--

--

Bala

nce

at 3

1 D

ecem

ber 2

016

3,30

0,00

093

,878

(378

,715

)57

0,53

819

1,82

448

6,4

5991

3,06

24,

985,

223

Tota

l

123,

085 - -

123,

085

Fair

valu

e lo

ss o

n av

aila

ble

on a

vaila

ble

for s

ales

equ

ities

(20,

346)

85,1

27D

efer

red

33,1

54

- - -


56

Share

Share

Fair

Asset

revaluation

Other

Statutory

Retained Total

C

apital

premium

value

reserve

Reserves

contingency

reserve earnings

reserves

Balance at 1 January 2015, as previously reported

3,300,000

93,878

(27,918)

508,067

480,149 404,121

583,710 4,861,858

Prior year adjustments

-

3,300,000

93,878

(27,918)

508,067

480,149 404,121

583,710 4,861,858

Total comprehensive incom

e for the year

Profit or loss for the year

-

-

-

-

-

288,605 288,605

Transfer to statutory contingency reserves

-

-

-

-

57,721

(57,721) -

-

-

-

-

57,721

230,884 288,605

Other com

prehensive income

Fair value gain on available-for-sale financial assets

-

-

(194,661)

-

(194,661)

- -

(194,661)

Revaluation gain on property and equipment, net of related

taxes

-

-

-

(3,734)

(3,734)

-

(3,734)

Deferred tax on revaluation surplus on landed properties

-

-

-

-

- -

-

Total comprehensive incom

e for year

-

-

(194,661)

(3,734)

(198,395)

57,721 230,884

90,210

Transactions with ow

ners, recorded directly in equity

Contributions by and distributions to ow

ners

-

-

-

-

-

- -

-

Total transactions with ow

ners

-

-

-

-

-

- -

-

Balance at 31 Decem

ber 2015

3,300,000

93,878

(222,579)

504,333

281,754 461,842

814,594 4,952,067


57

Statement of Cash Flows

2016

2015

Note N'000

N'000 Cash flows from operating activities

Insurance premium received 27 769,407

757,594

Reinsurance premium paid 28 (288,913)

(264,383)

Reinsurance commission received 29

32,595

33,997

Reinsurance claim received 30 16,243

7,967

Recoveries from salvage 34 1,800

-

Insurance benefits and claims paid 30 (286,612)

(298,775)

Commission paid 31(a) (137,783)

(90,103)

Maintenance cost paid 5 (26,798)

(15,343)

Cash paid to employees 35(a) (227,797)

(658,458) Other management expenses (240,387)

(388,245)

(527,504)

Corporate tax paid 19 (8,000)

(59,686)

Other operating cash flows

(169,351)

(76,236)

Net cash used in operating activities (565,596)

(663,426)

Cash flows from investing activities

Interest received 32 328,012

346,589 Rent received 32 6,600

6,550

Dividend income received 32 3,656

184,591 Purchase of property and equipment 14 (93,628)

(2,152)

Proceeds on disposal of property and equipment

3,638

6,132 Purchase of intangible assets 13 (8,482)

(2,100)

Redemption of investment in Nigeria Oil and Energy pool 36,825

- Disposal/(purchase) of treasury bills 6(b)(i)

(1,042,952)

1,454,051

(Purchase)/Disposal of held to maturity investment

-

(229,740)

Purchase of equity securities 6(a)(i) (46,006)

-

11 (707,331)

-

Net cash generated (used)/from investing activities (1,519,667)

1,763,921

Cash flows from financing activities:

-

Net cash generated from/(used in) financing activities -

-

Net Increase/(decrease) in cash and cash equivalents

(2,085,263)

1,100,495

Cash and cash equivalents at the beginning of the year

2,609,613

1,509,118

Cash and cash equivalents at the end of the year 524,350

2,609,613

Purchase of equity in Caphoenix Cornerstone Insurance


58

General Business Revenue A

ccounts

2016

2015

Fire

Accident

Motor

Marine

Bond

Engineering

Aviation

Oil &

Gas

Total

Total

Note

N'000

N'000

N'000

N'000

N'000

N'000

N'000

N'000

N'000

N'000

Gross prem

ium w

ritten

27

155,482

109,061

212,990

35,827

21,193

39,384

47,585

179,161

800,683

757,594

(Increase)/decrease in

U

nearned premium

14,334

(29,768)

(50,135)

(10,669)

2,448

(16,264)

(12,013)

(11,010)

(113,076)

(66,879)G

ross premium

income

27(b)

169,816

79,294

162,856

25,159

23,642

23,119

35,573

168,151

687,607

824,473Reinsurance expenses

28(c

(100,027)

(12,301)

(2,357)

(11,898)

(11,795)

(14,985)

(38,916)

(92,555)

(284,834)

(279,458)

Net prem

ium incom

e

69,789

66,992

160,499

13,261

11,847

8,135

(3,344)

75,596

402,773

545,0

15Fees and com

missions

income

29

22,121

1

95

5,277

2,246

2,196

-

659

32,595

33,997Total incom

e

91,911

66,993

160,594

18,538

14,093

10,330

(3,344)

76,255

435,368

579,012

Direct claim

s paid

30

(28,638)

(21,359)

(75,711)

(4,985)

(146,536)

-

(7,516)

(1,868)

(286,612)

(298,775)C

hanges in provision foroutstanding

claims-

Increase/(Decrease)

(19,529)

(7,876)

49,692

(4,094)

218,605

(8,921)

1,528

7,036

236,440

131,129G

ross claims incur

(48,167)

(29,235)

(26,019)

(9,079)

72,069

(8,921)

(5,988)

5,168

(50,172)

(167,646)

Change in reinsurance

recoverable

30

31,490

39,527

35,312

11,133

38,150

11,467

64

167,143

7,967N

et claims incurred

30

(16,677)

10,292

9,293

2,094

110,219

2,546

(5,988)

5,232

116,971

(159,679)

Acquisition Expenses

(33,992)

(18,115)

(20,159)

(5,219)

(10,273)

(5,315)

(1,962)

(13,503)

(108,538)

(111,398)M

aintenance costs

(6,038)

(3,056)

(8,043)

(942)

(568)

(1,135)

(2,105)

(4,911)

(26,798)

Underw

riting expenses

31

(40,030)

(21,170)

(28,202)

(6,161)

(10,841)

(6,451)

(4,067)

(18,414)

(135,336)

(111,398)

Underw

riting profit/(loss)

35,204

56,116

141,685

14,471

113,470

6,425

(13,399)

63,074

417,003

307,935


59

Notes To The Financial Statements

2016 2015 N’000 N’000 5 Cash and cash equivalents Cash and bank balances comprise: Balances held with banks in Nigeria 41,702 76,044 Placements with financial institution 482,648 2,533,569

524,350 2,609,613 6 Financial assets Available-for-sale financial assets ( see note (6a) below) 942,883 942,954 Held -To Maturity financial assets ( see note (6b) below) 1,334,529 269,505 2,277,412 1,212,459 6a Available -for-Sale financial assets Equity securities measured at fair value ( see note i below) 198,073 97,474 Unquoted equity measured at fair value (see note (ii) below) 744,810 819,749 Unquoted equity measured at cost (see note (iii) below) - 25,731 942,883 942,954

(i) This represents investment in listed equities. These investments are being carried at fair value, with their

value determined by using last trading day price on the NSE. (ii) This represents the Company's investment in MTN Linked units with Stanbic IBTC Asset Management Ltd

acting as trustees and Jaiz bank .These investments are being carried at fair value with their value determined by using the last trading price of the equity.

(iii) This represents the Company's investment in Nigeria oil and energy pool fund. These investments are being

carried at cost and it was disposed during the year. 2016 2015

6b Held -To Maturity financial assets Treasury bills 1,187,210 229,740

Eurobonds (See note (vi) below) 147,319 39,765 1,334,529 269,505 (vi) This represents the company's investments in Diamond Bank and Access Bank Eurobond. These investments are

carried at amortised cost with maturity dates of 21 May 2019 and 25 July 2017 respectively.

6a (i) Movement in Financial assets Available for sale 2016 2015 At 1 January 942,954 2,555,372 Addition during the year 46,006 - Disposal/ Repayment during the year (25,731) (1,454,051) Fair value gain or loss (472,980) (279,347) Foreign currency gains / losses 452,634 120,980 Balance as at 31 December 942,883 942,954


60


6b (i) Movement in Financial assets Held to Maturity 2016 2015

At 1 January 269,505 33,824 Addition during the year 1,042,952 229,740 Accrued Interest 790 42 Foreign exchange gains / losses 21,282 5,899 At 31 December 1,334,529 269,505

N’000 N’000

7 Trade receivables

(a) Trade receivables comprise: Due from brokers 144,645 Due from direct customers 47,012 191,657 Less: impairment on trade receivables ( see note (i) below) (191,657) -

(i) Movement in impairment of trade receivables At 1 January 191,657 (Reversal)/charge to P&L-(see note 35 (c)) - 191,657 The age analysis of trade receivables as at the end of the year are as follows: 0-30 days - 31-90 days - 91 – 180 days - Above 180 days 191,657 191,657 8 Reinsurance assets Prepaid Reinsurance (see 8a below) 69,656 Reinsurance share of Outstanding claims (see 8b below) 33,076 Reinsurance share of IBNR (see 8c below) 10,734 113,466 8a Movement in Prepaid Reinsurance assets 2015 Balance as at 1 January 84,731 Addition during the year (see note 28a) 264,383 Changes during the year ( see note 28c) (279,458) Balance as at 31 December 69,656

145,089 47,012

192,101

(191,595)

506

191,657 (62)

191,595

506 - -

191,595 192,101

72,689 171,128 23,583

267,400

2016 69,656

287,868 (284,835)

72,689


61


2016 2015 N’000 N’000 8b Movement in Reinsurance share of Outstanding claims 2016 2015 Balance as at 1 January 33,076 105,498 Addition during the year 127,318 35,069 Changes during the year 10,734 (107,491) Balance as at 31 December 171,128 33,076 8c Movement in Reinsurance share of I BNR 2016 2015 Balance as at 1 January 10,734 11,453 Changes during the year 12,849 (719) Balance as at 31 December 23,583 10,734

9 Deferred acquisition cost

The analysis of deferred acquisition costs (DAC) represents commission paid during the year on unearned premium received among different classe s of business is as shown below:

2016 2015 N’000 N’000 Deferred Acquisition Cost- Fire 5,568 7,701 Deferred Acquisition Cost- Gen. Accident 9,189 1,610 Deferred Acquisition Cost- Motor 13,233 7,266 Deferred Acquisition Cost- Marine 4,303 1,668 Deferred Acquisition Cost- Aviation 968 195 Deferred Acquisition Cost- Engineering 5,214 816 Deferred Acquisition Cost- Oil & Gas 11,832 1,480 Deferred Acquisition Cost- Bond 1,165 1,490 Total deferred acquisition cost 51,472 22,226 Movement in deferred acquisition cost Balance, beginning of year 22,226 28,177 Addition during the year 137,784 90,103 Amortisation during the year (108,538) (96,054) At 31 December 51,472 22,226


62


Maturity profile of deferred acquisition cost 2016 2015 N’000 N’000 Within 12 months 51,472 22,226 After 12 months - -

Total deferred acquisition cost 51,472 22,226 10 Other receivables and prepayments

2016 2015 N’000 N’000 Prepayments ( note 10 a.1) 25,741 23,995 Receivable from staff ( note 10 a.2) 16,897 - Dividend receivables 1,706 1,706 Sundry receivables ( note 10 a.3) 50,730 41,146 95,074 66,847 Less: impairment of other receivables(See note (b) below) (57,126) (57,126)

37,948 9,721

10a.1 Prepayment include N21m in respect of prepaid other allowances which has been fully impaired 10a.2 Receivable from staff represents upfront housing allowance paid to staff that is deductible from their gross

salaries on a monthly basis. 10a.3 Sundry receivables includes withholding tax deducted on investments with financial institutions and other

unsubstantiated debit balances of N27m that has been fully impaired.

(b) Movement in specific impairment on other receivables

2016 2015 N’000 N’000 Balance, beginning of the year 57,126 43,689 Impairment charge during the year - 13,437 57,126 57,126 Maturity profile of other receivables and prepayments Within 12 months 37,948 9,721 After 12 months - - 37,948 9,721


63


11. Investment in Joint arrangement Caphoenix Cornerstone Insurance 707,331 -

This represents Investment in CAP Phoenix Cornerstone Insurance Limited which is a Special Purpose Entity (SPE) between CAP Phoenix and Cornerstone Insurance Plc. The entity was created to manage a real estate project which involves the construction of office spaces from which the Group plans to earn rental income. Cornerstone Plc also plans to relocate its Head Office to some floors in this building once it is completed. FIN Insurance Company Limited (FICL) owns effectively 23% interest in the SPE. The investment was made in CAP Phoenix Cornerstone Limited (CPCL) by FICL through its parent company, Cornerstone Insurance Plc (CIPlc). FIN Insurance Company Limited by virtue of this investment is deemed to be a party to the joint arrangement and thereby recognised the investment in line with the requirement of IFRS 11-Joint arrangement.

Although; FIN Insurance company Limited has an investment in Caphoenix Cornerstone Insurance Plc that made it a joint venture to the arrangement, it does not have a significant influence or joint control as its investment were obtained through its parents company and it is not a primary party to the SPE arrangement. Significant influence rests with the parent company.[IFRS 11: 25 & IFRS 11 ; C14 ] states that a party that participates in a joint venture, but does not have joint control is required to account for its interest as follows:-If it has significant influence over the joint venture, using the equity method as set out in IAS 28; -otherwise, in accordance with IFRS 9 Financial instruments (or, for entities that have not yet adopted IFRS 9, IAS 39 Financial Instruments: Recognition and Measurement). The Investment in Caphoenix Cornerstone Insurance Plc was therefore recognised by FIN Insurance Company Limited at cost in line with IAS 39 since it has not yet early adopted IFRS 9.

12 Investment properties 2016 2015 N’000 N’000

(a) The balance in this account can be analysed as follows : Cost 292,000 292,000 Unrealised fair value gain 202,000 194,000 Carrying amount 494,000 486,000

(a) Reconciliation of carrying amount N’000 N’000 At 1 January 486,000 292,000

Changes in fair value 8,000 194,000

Impairment allowance

-

At 31 December

494,000

486,000

Investment properties comprise of investments made by the Company in landed properties in Plot 667 (No. 8A & 8B), Umuozu Street, Abuja and House No.16 & 18, 2nd Avenue, 21(D) Road F.H.A Lugbe FCT.

The properties are held for the purpose of generating rental income or capital appreciation or both, and are not occupied substantially for use in the operations of the Company.Revaluation was made in December 2016 by Orji & Partners, Estate Surveyors & Valuers (FRC/2013/NIESV/00000003947).


64


The following investment properties are still carried in the name of Yankari Insurance Limited. The Compnay's former business

S/N Name of property

Type of Property

Date of Acquisition

Documentation Location Carrying Amount

1 Yankari Insurance -

Garki propertyLand and Twin Duplex

Aug2 03- - C of O DD 02.08.2005

Plot 667 8 (A&B) Umozi Street off Ladoke Akintola Boulevant, Abuja Garki II

460,000,000

2 Lugbe propertyLand andTwo Blocks Flats

Lugbe Property-Land and Two Blocks of Flats

FHA allocation letter FHA/ES/FCT/lg/nhp/33 DD 09.11.2001

House no 16&18 2nd Avenue, 21(D) Road by Babangida market , beside Dominion Chapel, FHA Estate , Lugbe

34,000,000 The Company has applied for Certified True Copy (CTC) of the AllocationLetter yet to received this

Total 494,000,000

Steps taken for perfection

registry response

Relevant documents have been submited to Land

10-Nov- 00

(b) Measurement of fair value

(i) Fair value hierarchy The fair value of investment properties was determined by an external, independent property valuer, having

appropriate recognised professional qualifications and recent experience in the location and category of the property being valued. The independent valuer, Orji & Partners, Estate Surveyors & Valuers (FRC/2013/NIESV/00000003947) valued the properties on the basis of open market value as at 31 December 2016.

The fair value measurement for the investment properties of N 494,000,000 (2015: N486,000,000) has been categorised as a Level 3 fair value based on the inputs into the valuation technique used.

(ii) Valuation technique and significant unobservable inputs The following table shows the valuation technique used in measuring the fair value of investment properties,

as well as the significant unobservable inputs used.


65

Notes To The Financial StatementsFor the year ended 31 December 2016

Valuation technique Significant unobservable inputs

Inter-relationship between key unobservable inputs and fair value measurement

The fair values are determined by applying the direct market evidence comparative method of valuation to derive the open market value. This valuation model reflects the current price on actual transaction for similar properties in the neighbourhood in recent time. References were made to prices of land and comparable properties in the neighbourhood. The data obtained were analysed and adjustment was made to reflect differences in site area and the actual location, quality of construction and off-site facilities.

- Prices per square meter

- Rate of development in the area

- Quality of the building

-Influx of people and/or businesses to the area

The estimated fair value would increase (decrease) if the rate of development in the area increases (decreases), quality of the building increases (decreases), influx of people and/or business to the area increases (decreases).

13 Intangible assets Purchased softwares 2016 2015 N’000 N’000 Cost At 1 January 19,383 17,283 Additions during the year 8,482 2,100 At 31 December 27,865 19,383

Accumulated amortization: At 1 January 15,586 14,146 Charge during the year 2,828 1,440 At 31 December 18,414 15,586 Net book value as at 31 December 9,451 3,797 Net book value as at 1 January 3,797 3,137


66

14. Property and equipment

Cost

O

ffice

Com

puter

Motor

Plant &

Furniture

Land

Building

equipment

H

ardware

V

ehicles

Machinery

&

Fittings

Bicycles

Total

N

' 000

N' 000

N

' 000

N' 000

N

' 000

N' 000

N

' 000

N' 000

N

' 000

At 1

January

Balance, beginning of year

1,153,487

285,639

36,266

49,831

111,486

3,445

32,734

269

1,673,157

Additions

-

4,663

1,564

8,079

63,560

6,523

9,239

-

93,628

Revaluation gain/loss

33,081

52,046

-

-

-

-

-

-

85,127

Disposal

-

-

-

(1,722)

(35,613)

(4,502.00)

(1,819.00)

(97)

(43,753)

At 31 D

ecember

1,186,568

342,348

37,830

56,188

139,433

5,466

40,154

172

1,808,159

Accum

ulated depreciation

At 1 January

46,687

114,704

34,253

48,557

95,429

2,962

31,162

140

373,894

Charge for

the year

13,052

11,573

1,094

2,785

15,881

1,221

2,570

34

48,210

Disposal

-

-

-

(1772)

(35,613)

(4,502)

(1,819)

(97)

(43,753)

At 31 D

ecember

59,739

126,277

34,597

50,370

75,697

(319)

31,913

77

378,351

Net book value

At 31 D

ecember

20

16

1,126,829

216,071

3,233

5,818

63,736

5,785

8,241

95

1,429,808

At 31 D

ecember 20

15

1,106,800

170,935

2,013

1,274

16,057

483

1,572

129

1,299,263

Land and building was independently valued by O

rji and Partners in 2016 to ascertain the open m

arket value of the Land and building. The open market value of

land and building as at 31 Decem

ber 2016 w

as N1,342,900,000 ( see note 13 (ii)) (20

15:N1,276,800,000) and a revaluation gain of N

85,126,676.33 was

recognised as the excess of the revalued amount over the carrying value of Land and building.

Included in property and equipment is land w

hich is a leased asset. Land has been accounted for as a finance lease in line with the am

endment to IA

S 17-"Leases" w

hich revises previous guidance stating that “a lease of land with an indefinite econom

ic life is classified as an operating lease”.

There were no capitalised borrow

ing costs related to the acquisition of property and equipment during the year (20

15: Nil).

The Company had no capital com

mitm

ents as at the reporting date (31 Decem

ber 2015: N

il)

No

tes T

o T

he F

inan

cia

l Sta

tem

en

tsFor the year ended 31 D

ecember 2016


67

14

.i

Pro

pert

y a

nd

eq

uip

men

t

C

ost

Offi

ce

C

om

pu

ter

M

oto

r P

lan

t &

Fu

rnit

ure

Lan

d B

uil

din

g e

qu

ipm

en

t

Hard

ware

Veh

icle

s

Mach

inery

&

Fit

tin

gs

B

icycle

s T

ota

l

N' 0

00

N

' 0

00

N

' 0

00

N

' 0

00

N

' 0

00

N

' 0

00

N' 0

00

N

' 0

00

N

' 0

00

Bala

nce,

begin

nin

g o

f year

1,1

98,0

46

233,6

83

35,8

31

49,1

62

146,9

71

3,4

45

31,6

86

269

1,6

99,0

93

Additio

ns

435

669

1,0

48

0

2,1

52

Revalu

ation g

ain

/loss

(4

4,5

59)

51,9

56

-

-

-

-

-

-

7,3

97

D

isposal

-

-

-

- (3

5,4

85)

-

-

-

(3

5,4

85)

Bala

nce,

end o

f year

1,1

53,4

87

285,6

39

36,2

66

49,8

31

111,4

86

3,4

45

32,7

34

269

1,6

73,1

57

A

ccu

mu

late

d d

ep

recia

tio

n

Bala

nce,

begin

nin

g of year

36,9

46

103,6

82

26,8

34

35,2

52

108,0

87

2,8

28

30,2

32

117

343,9

78

Charg

e for

the y

ear

9,7

41

11,0

22

7,4

19

13,3

05

5,0

79

134

930

23

47,6

53

Accum

ula

ted im

pairm

ent

charg

e

-

-

-

-

-

-

-

-

-

D

isposal

-

-

-

- (1

7,7

37)

-

-

-

(1

7,7

37)

Bala

nce,

end o

f period

46,6

87

114,7

04

34,2

53

48,5

57

95,4

29

2,9

62

31,1

62

140

373,8

94

N

et

bo

ok v

alu

e

At

31 O

cto

ber

2015

1,1

06,8

00

170,9

35

2,0

13

1,2

74

16,0

57

483

1,5

72

129

1,2

99,2

63

At

31D

ecem

ber

2014

1,1

61,1

00

130,0

01

8,9

97

13,9

10

38,8

84

617

1,4

54

152

1,3

55,1

15

a)

La

nd a

nd b

uild

ing

was

inde

pend

entl

y va

lued

by

Orji

and

Par

tner

s in

2015

to a

scer

tain

the

open

mar

ket v

alue

of t

he L

and

and

build

ing.

The

ope

n m

arke

t val

ue o

f lan

d an

d bu

ildin

g as

at 3

1 Dec

embe

r 20

15 w

as N

1,27

6,80

0,00

0 (2

014

:N1,

291,

100,

000)

and

a re

valu

atio

n ga

in o

f N7,

397,

000

was

re

cogn

ised

as t

he e

xces

s of t

he re

valu

ed a

mou

nt o

ver t

he ca

rryi

ng va

lue

of La

nd a

nd b

uild

ing.

b)

Incl

uded

in p

rope

rty

and

equi

pmen

t is l

and

whi

ch is

a le

ased

ass

et. L

and

has b

een

acco

unte

d fo

r as a

fina

nce

leas

e in

line

with

the

amen

dmen

t to

IAS

17-"

Leas

es" w

hich

revi

ses p

revi

ous g

uida

nce

stat

ing

that

“a le

ase

of la

nd w

ith a

n in

defin

ite e

cono

mic

life

is cl

assi

fied

as a

n op

erat

ing

leas

e”.

c)

Ther

e w

ere

no ca

pita

lised

bor

row

ing

cost

s rel

ated

to th

e ac

quis

ition

of p

rope

rty

and

equi

pmen

t dur

ing

the

year

(20

14: N

il).

d)

Th

e Co

mpa

ny h

ad n

o ca

pita

l com

mitm

ents

as a

t the

repo

rtin

g da

te (3

1 Dec

embe

r 20

14: N

il)

No

tes T

o T

he F

inan

cia

l S

tate

men

tsFo

r the

yea

r end

ed 3

1 Dec

embe

r 201

6


68

14.ii

The summ

ary of the valuation reports for the landed properties are as detailed below :

S/N

Title of D

ocuments

D

ATE O

F A

CQ

USITIO

N

TITLE D

OC

UM

ENT

LO

CA

TION

CA

RRYING

A

MO

UN

T STEPS TA

KEN

FOR PERFEC

TION

1A

TIKU

ABU

BAKA

R

6TH June 2004

C

of O: File no A

D

10060:DD

06.06.2005

Plot N

o;3459 C

adastral Zone A

06 off Am

ozon Street M

aitama

750,000,000.00

The Company has obtained the pow

er of attorney in respect of Certificate of O

ccupancy of the property in the name

of yankari Insurance and is in process of filling w

ith the registry

2G

ABRIEL

ABIO

DU

N

7TH M

arch 20

11

C of O

: File no OG

10050 D

D 19.

12.2004

34 Gana Street M

aitama A

buja

550,000,000.00 The relevant docum

ents are about to be subm

ited

3YA

NKA

RI IN

SURA

NC

E

20th April 1991

C

of O: File

noBA/1394

5 D

D:20.4.1993

Plot N

o BA/1394

5 Biu road G

ombe

36,000,000.00

The Company's Estate Surveyor/Law

yer are handling this. A

n application form

has filled

4YA

NKA

RI IN

SURA

NC

E

N/A

C

of O: N

o BA

/25536

Plot(plan) No BA

/25536 Sunshine international school road, off Bauchi-D

as road. New

G

RA

5,500,000.00 The relevant docum

ents have been subm

itted to land registry. Aw

ating registry response.

5YA

NKA

RI IN

SURA

NC

E

N/A

C

of O: N

o 1652,D

D.18.06.93

Plot N

o.A519(Topo Bauchi

Shhet 187SW) Pennisula Estate

Phase 11 New

Karu

700,000.00 The relevant docum

ents have been subm



6YA

NKA

RI IN

SURA

NC

E

N/A

C

of O: N

o 1653,D

D.18.06.93

Plot N

o.A519(Topo Bauchi

Shhet 187SW) Pennisula Estate

Phase 11 New

Karu

700,000.00 The relevant docum

ents have been subm



Total

1,342,900,000.00

** In addition to the steps taken above for the perfection of the Property at C

adastral Zone Off A

mazon street , M

anagement has em

ployed the services of a solicitor in the process of perfection and is of the firm

opinion that it has a strong legal claim on the land. Furtherm

ore, it is noted that the property is subject to litigation betw

een FCD

A and a claim

ant who claim

s to be the rightful previous owner. There is no currently no indication the Com

pany would lose the property

and should this happen , managem

ent is of the opinion that it will be able to claim

a part of the damages from

FCM

B based on the share purchase agreement

(SPA) signed during the sale of the com

pany by FCM

B to CA

PE III. There is currently no evidence that the legal title will not be further perfected.

No

tes T

o T

he F

inan

cia

l Sta

tem

en


ecember 2016


69

2016 2015 N’000 N’000

15 Statutory deposits

Statutory deposit 300,000 300,000 This represents the amount deposited with the Central Bank of Nigeria ( CBN) as at 31 December 2016 in

accordance with section 9 (1) and section 10 (3) of Insurance Act 2003. Interest income earned on this deposit is included in the Investment income.

2016 2015 N’000 N’000

15(a) Maturity profile of statutory deposit

Within 12 months - - After 12 months 300,000 300,000

300,000 300,000

16 Insurance contract liabilities a Carrying amount

Gross Reinsurers’ asset Net 2016 2015 2016 2015 2016 2015 Non-life: N’000 N’000 N’000 N’000 N’000 N’000 Outstanding claims 272,488 469,767 171,128 33,076 101,360 436,691

IBNR 55,557 94,718 23,583 10,734 31,974 83,984 Unearned premiums 305,983 192,907 72,689 69,656 233,294 123,251 634,028 757,392 267,400 113,466 366,628 643,926 Total non-life 634,028 757,392 267,400 113,466 366,628 643,926 b Maturity profile Within one year 509,015 471,980 182,358 91,451 326,657 380,529 More than one year 125,013 285,412 85,042 22,015 39,971 263,397 634,028 757,392 267,400 113,466 366,628 643,926



70

(c) Outstanding claims is comprise of: 2016 2015 N’000 N’000 Provision for outstanding claims (see (c)(i)) 272,488 469,767 IBNR claims (see (c)(ii)) 55,557 94,718 328,045 564,485 (c)(i) Analysis of provision for outstanding claims is as follows; Fire 23,973 5,792 Accident 39,291 37,477 Motor 23,319 59,357 Marine 4,835 - Bond 144,998 363,498 Engineering 1,642 2,554 Aviation 8,096 - Oil & Gas 26,334 1,089 272,488 469,767 (c)(ii) Analysis of IBNR claims is as follows; Fire 6,179 4,831 Accident 13,754 7,692 Motor 14,587 28,241 Marine 1,820 2,561 Bond 4,441 4,545 Engineering 5,372 6,330 Aviation 2,695 1,528 Oil & Gas 6,709 38,990 55,557 94,718 (c)(iii)

Analysis of total outstanding claims is as follows 2016 2015

N’000 N’000 Fire 30,152 10,623 Accident 53,045 45,169 Motor 37,906 87,598 Marine 6,655 2,561 Bond 149,438 368,043 Engineering 7,014 8,884 Aviation 10,790 1,528 Oil & Gas 33,043 40,079 328,044 564,485



71


(c)(iv) ) The movement in outstanding claims during the year was as follows:

2016 2015 N’000 N’000 At 1 January 564,485 336,865 Claims incurred in the year 50,171 389,201 Claims paid during the year (see note 30) (286,612) (161,581) At 31 December 328,044 564,485 (c)(v) The movement in IBNR - Incurred But Not Reported claims is shown

below:

At 1 January 94,718 141,773 (Reduction)/addition during the year (39,161) (47,055) At 31 December 55,557 94,718 (d) Unearned Premium Movement in unearned premium can be analysed as: :follows: 2016 2015 At 1 January 192,907 259,786 Increase/(decrease) in unearned premium (see note 27(b)) 113,076 (66,879) At 31 December 305,983 192,907 Analysis of unearned premium is as follows: Fire 27,919 42,254 Accident 38,918 9,151 Motor 106,742 56,607 Marine 18,825 8,156 Bond 5,587 8,035 Engineering 20,110 3,846 Aviation 13,565 1,552 Oil and Gas 74,317 63,306 305,983 192,907 17 Trade payables This comprises: Reinsurance payable - 1,046 Coinsurance payable - - Trade Payables - 1,046 (a) Movement in trade payables can be analysed as follows 2016 2015 At 1 January 1,046 10,458

Payments made to re-insurers (1,046) (9,412) At 31 December - 1,046


72


2016 2015 N’000 N’000 18 Provisions and other payables

(a) This comprises: Accrued expenses (see note (i) below) 50,537 43,358 Unallocated premium (see note (ii) below) 18,185 49,017 Intercompany payable ( see note (iii) below) 25,331 91,594 Provision for Litigation - 4,000 Stale cheque 86,069 39,962 Dividend payable 3,156 3,156 Employee defined benefit obligation (note 18(a) iv) - 52,772 Sundry payables 8,117 9,507 191,394 293,367

(i) Accrued expenses include provision for Audit fee, professional fee, NAICOM levy and sundry creditors.

(ii) Unallocated premium represents outstanding bank credits which have not been matched to the prospective policyholders.

(iii) This is made up of expenses incurred by the parent company on behalf of the (FIN Insurance Company Limited) subsidiary.

(iv) The sum of N52.7 million relates to prior years’ actuarial estimation for employees’ defined benefit obligations that the Company has now determined to be no longer required and thereby reversed in the current period.

(b) Maturity profile of provision and other payables 2016 2015

N’000 N’000

Within 12 months 191,394 293,367

After 12 months - -

191,394 293,367


73


2016 2015 N’000 N’000 19 Current income tax liabilities

The movement in this account during the year was as follows:

At 1 January 92,590 125,172

Charge for the year (see note 33(a)) 31,600 29,351

Payments during the year (8,000) (59,686)

Unutilised withholding tax credits (5,105) (2,247)

At 31 December 111,085 92,590

(b) Maturity profile of taxation payable Within 12 months 111,085 92,590

After 12 months - -

111,085 92,590 20 Deferred tax liability/Asset

(a) The movement in this account during the year was as follows:

At 1 January (39,916) (44,053) Charge for the year to profit or loss (see note 20(b)) 217,864 4,137 At 31 December 177,948 (39,916) 20(b) Charge for the year comprises:

Charge/(reversal) to other comprehensive income 154,712 47,425

Charge/(reversal) to profit or loss (see note 37(a)) 63,152 (43,288)

At 31 December 217,864 4,137


74


20(c) Movement in deferred tax (asset)/liability is as follows :

1 January 2016

Recognised in profit or loss

Recognised in OCI

December 2016

N’000 N’000 N’000 N’000

Property and equipment 19,099 62,352 18,922 100,373

Unrelieved tax losses (136,702) - - (136,702)

Fair valuation of investment property 19,400 800 - 20,200

Unrealised exchange gain 58,287 - 135,790 194,077

(39,916) 63,152 154,712 177,948

20(d) Deferred tax charge

Year Year

December

2016 December

2015 N’000 N’000 Deferred tax asset (see note 20 (b )) - -

Deferred tax liability (see note 20(b)) 217,864 4,137

21 Share capital:

Share capital comprises:

Authorized:

5,000,000,000 Ordinary shares of N1 each 5,000,000 5,000,000 Issued and fully paid:

3,300,000,000 Ordinary shares of N1 each 3,300,000 3,300,000

All shares rank equally with regard to the Company's residual assets.

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at the meetings of the Company.

22 Share premium

Share premium comprises additional paid-in capital in excess of the par value. This reserve is not ordinarily available

for distribution.


75


December2016

December 2015

N’000 N’000 At 1 January 461,842 404,121

Transfer from retained earnings 24,617 57,721 At 31 December 486,459 461,842

The statutory contingency reserve is prescribed under section 21 (1&2) of the Insurance Act of Nigeria. The Company is mandated to maintain a statutory contingency reserve to cover for fluctuation in securities and variations in statistical estimates.

This reserve is credited with an amount of not less than 3% of the gross premium or 20% of the net profit (whichever is

greater) and the amount shall accumulate until it reaches the amount of the minimum paid-up capital or 50% of the premium (whichever is greater).

24 Other reserves The movement in this account during the year is as follows:

2016

2015

AFS Fair value Reserve

Revaluation Reserve

Total Other Reserve

AFS Fair value Reserve

Revaluation Reserve

Total Other

Reserve

N’000 N’000 N’000 N’000 N’000 N’000

At 1 January (222,579) 504,333 281,754 (27,918) 508,067 480,149 Fair value loss on AFS (note 6a.i) (472,980) - (472,980) (279,347) - (279,347) Foreign currency gain on AFS (note 6a.i) 452,634 - 452,634 120,980 - 120,980 Revaluation gain on PPE (note 14) - 85,127 85,127 - 7,397 7,397 Related deferred tax (note 20c ) (135,790) (18,922) (154,712) (36,294) (11,131) (47,425) At 31 December (378,715)

570,538 191,824

(222,579) 504,333 281,754

25 Retained earnings

The movement in this account during the year is as follows:

December2016

December 2015

N’000

N’000

At 1 January

814,593

583,710

Profit for the year

123,085

288,604

Transfer to contigency reserves

(24,617)

(57,721)

At 31 December

913,061

814,593

Retained earnings are the carried forward recognised income net of expenses plus current period profit attributable


76

23 Statutory contingency reserves

to shareholders.


26.1 Earnings per share Basic earnings per share is calculated by dividing the profit attributable to shareholders by the weighted average

number of ordinary shares outstanding at end of year.

December2016

December 2015

N’000 N’000 Profit attributable to shareholders 123,085 288,604 Weighted average number of ordinary shares at end of year 3,300,000 3,300,000 Basic earnings per share (in kobo) 3.7 8.7

The Company does not have any instrument with a dilutive effect on its capital. Hence, the diluted earnings

per share is same as the basic earnings per share. 26.2 Dividend The Company did not declare any dividend in the period under review.

27 Gross premium written 2016 2015

N’000 N’000 Gross premium written is derived from the following business: Fire 155,482 129,725

Accident 109,061 48,225 Motor 212,990 224,561 Marine 35,827 23,411 Bond 21,193 40,816 Engineering 39,384 38,224 Aviation 47,585 12,206 Oil & gas 179,161 240,426 Gross premium written 800,683 757,594

The Insurance premium received of N769.41 million as per cash flow is made up of Gross premium amount of

N800.68 million as adjusted with opening and closing Unallocated Premium of N49.02 million and N18.19 million respectively (See note 18a). This was further adjusted by trade receivable balance of N506,000 as at 31 Dec 2016 as well as impairment written back of N62,000 at year end.

27(b) Gross premium income The gross premium income is analyzed as follows: N’000 N’000 Gross premium 800,683 757,594 Increase/(Decrease) in unearned premium (see note 16(d)) (113,076) 66,879 687,607 824,473


77


28 Reinsurance expenses

N’000 N’000

Reinsurance premium ceded (See Note (a) below and note 8 (a))

287,867 264,384 Increase/(decrease) in prepaid reinsurance premium (See note

(b) below)

(3,033) 15,074 284,834 279,458

28(a) Analysis of reinsurance premium ceded is as follows;

2016 2015 N’000 N’000 Fire 94,355 47,597 Accident 7,658 20,268 Motor 1,716 27,130 Marine 17,070 8,771 Bond 10,801 20,598 Engineering 30,378 12,218 Aviation 45,216 Oil & Gas 80,673 127,802 287,867 264,384

28(b) Analysis of increase/(decrease) in prepaid reinsurance premium

Fire 5,672 (22,084) Accident 4,643 (4,277)

Motor 641 2,139 Marine (5,172) (3,971) Bond 994 (351) Engineering (15,393) (599) Aviation (6,300) 75 Oil & Gas 11,882 44,142 (3,033) - 15,074

28(c) Analysis of reinsurance expenses 2016 2015 N’000 N’000 Fire 100,027 25,513 Accident 12,301 15,992 Motor 2,357 29,269 Marine 11,898 4,800 Bond 11,795 20,246 Engineering 14,985 11,619 Aviation 38,916 75 Oil & Gas 92,556 171,944

284,835 279,458

The Reinsurance paid of N288,913m in cash flow is made up of reinsurance ceded of N287,867 and payments made to re-insurers N1,046 (Note 17a)


78


29 Fees and commission income Reinsurance commission 32,595 33,997 32,595 33,997

30 Claims expenses 2016 2015 N’000 N’000 Direct claims paid ( see note 16c(iv)) 286,612 298,775 Changes in outstanding claims reserve (236,440) (131,129)

Gross claim incurred 50,172 167,646 Claims recovered (16,243) (7,967)

Changes in reinsurance recoverables (150,900) (116,971) 159,680

31 Underwriting expenses Underwriting expenses are categorised into commission/acquisition expenses and maintenance expenses.

Commission/acquisition expenses are those incurred in obtaining and renewing insurance contracts. They include commissions or brokerage paid to agents or brokers. Maintenance expenses are those incurred in servicing existing policies/contracts. These include processing cost, preparation of statistics and reports, and other incidental costs attributable to maintenance.

2016 2015 (a) The analysis of the underwriting expenses are as follows: N’000 N’000

Commission paid in the year 137,783 90,103 Movement in deferred charge (29,245) 5,952 Commission (see (a) (i) below 108,538 96,055 Maintenance cost expenses (see (a) (ii) below 26,798 15,343 135,336 111,398 2016 2015

(i) Commission N’000 N’000 Commission on indirect premium - fire 33,992 22,883

Commission on indirect premium - gen. accident 18,115 10,901 Commission on indirect premium - motor 20,159 30,244 Commission on indirect premium - marine 5,219 7,661 Commission on indirect premium - bond 10,273 10,061 Commission on indirect premium - engineering 5,315 8,687 Commission on indirect premium - aviation 1,962 784 Commission on indirect premium - oil & gas 13,503 4,834

108,538 96,055


79


(ii) Maintenance expenses Maintenance expense on direct premium - fire 6,038 2,018

Maintenance expense on direct premium - gen. accident 3,056 795 Maintenance expense on direct premium - motor 8,043 5,178 Maintenance expense on direct premium - marine 942 558 Maintenance expense on direct premium - bond 568 443 Maintenance expense on direct premium - engineering 1,135 855 Maintenance expense on direct premium - aviation 2,105 615 Maintenance expense on direct premium - oil & gas 4,911 4,881

26,798 15,343 Total (i)+(ii) 135,336 111,398

32 Investment income Investment income comprises:

Dividend income on available for sale equity 3,656 184,591 Interest income 328,012 413,444 Accrued interest income 748 42 Rental income from investment property 6,600 6,550 Exchange gain 54,576 17,565

393,592 622,192

33 Fair value gains and losses

Fair value gain on investment property 8,000 32,000

34 Other income

2016 2015 N’000 N’000 Recoveries due from salvage 1,800 420 Profit/(Loss) on disposal of property and equipments 3,638 (11,616) Other income 11,094 3,139 Reversal of prior year accrual ( note 18(a) (iv) 52,772 -

69,304 (8,057)


80


2016 2015 N’000 N’000

35. Management expenses:

(a) Management expenses comprise of: Personnel expenses (see 35(b) below) 227,797 264,707 Depreciation 48,210 47,653 Amortization 2,828 1,440 Promotional expenses 11,609 14,688 Rental expenses 10,102 19,011 Auditors remuneration 9,000 9,000 Directors allowance 13,633 4,287 NAICOM levy 11,078 5,168 Professional fees* 101,811 116,111 Bank charges 6,615 20,011 Impairment charges - 13,437 Repairs & maintenance expense 26,599 33,290

Overhead/other administrative expenses** 91,685 68,615 Training and development 12,316 12,494 Transport and travelling expenses 30,498 14,679 Subscription 10,812 10,594 Auxiliary staff salary 55,531 24,217 670,124 679,403

*Professional fees includes management fees for SIM capital advisory services on investment, technical fees and Legal fees. **Overhead/other administrative expenses includes entertai nment, fines and pen alty, insurance premium on company assets, postages and Withholding tax expenses

(b) Personnel expenses Personnel expenses comprise of 2016 2015 N’000 N’000 Wages and salaries 217,115 316,703 Other pension cost 10,682 23,563 Terminal benefit - (38,848) 227,797 301,418

(c) Impairment on other assets Impairment written back on trade receivables(see note 7) 62 -

62 -


81


2016 2015 N’000 N’000 36 Income taxes (a) The tax charge for the year comprises: Current taxes: Company income tax -

Tertiary education tax 3,137 Withholding tax on dividend paid - National Information Technology Development Agency levy 2,178 2,719 5,345 2,719 Changes in estimates related to prior years - - 2,719 Deferred taxes: Originating temporary differences (see note 20(b)) 63,152 (43,288) Total income tax expense 68,497 (40,569) (b) Minimum tax Minimum tax 26,255 26,632 Total tax expense 94,752 (13,937)

36(c ) The effective tax reconciliation for the Company is as follows:

2016 2015 N' 000 N' 000

Profit before tax 217,837 274,667

Income tax using the domestic corporation tax rate 30% 65,351 30% 82,400 Non-chargeable expenses 32% 69,848 2% 6,339

Tax exempt income -33% (72,047) -48% (132,028) Tertiary education tax 1% 3,167 0% - NITDA Levy 1% 2,178 1% 2,719 Minimum tax 12% 26,255 10% 26,632

43% 94,752 -5% (13,938)

The effective tax rate for the Company as at 31 December 2016 is 43% (31 December 2015:-5%)


82


37 Related parties Parties are considered to be related if one party has the ability to control the other party or exercise influence over the

other party in making financial and operational decisions, or one other party controls both. The definition includes all key management personnel.

(a) Transaction with related parties The Company's related party includes its parents: Cornerstone insurance plc, as well as the subsidiaries of the

parents.

No transactions were entered into with ACA/CAPE III and any of its subsidiaries during the financial year.

(b) Transactions with key management personnel The Company's key management personnel, and persons connected with them, are also considered to be

related parties. The definition of key management includes the close members of family of key personnel and any entity over which key management exercise control. The key management personnel have been identified as the executive and non-executive directors of the Company. Close members of family are those family members who maybe expected to influence, or be influenced by that individual in their dealings with the Company."

Key management personnel compensation for the year comprises:

2016 2015 N'000 N'000

Fees as directors 9,453 8,887

Fees and allowances

Fees and other emoluments (excluding pension contributions) disclosed above include amounts paid to :

The chairman 480 480

The highest paid director 480 480

The number of directors who received fees and other emoluments (excluding pension contributions) in

the following ranges were : 2016 2015

Number Number 130,000 - 150,000 - -

150,001 - 200,000 - - Above 200,000 5 5 5 5


83


38 Employees 2016 2015 Number Number

(a) The average number of persons employed (excluding directors) in the

Company during the year was 52 42

The staff costs for the above employees was: 2016 2015

N'000 N'000 Wages & salaries 217,115 316,703 Other pension costs 10,682 23,563 Terminal benefit (reversal) - (38,848) 227,797 301,418

(b) The number of employees of the Company, other than directors, who received emoluments in excess

of N100,000 are shown in the following ranges: 2016 2015 Number Number 600,001 - 900,000 900,001 - 2,000,000 9

10

2,000,001 - 3,000,000 13

15 3,000,001 - 4,000,000 5

10

4,000,001 -

5,000,000

20

5

Above 5,000,000

5

2

52

42

The Company operates a contributory pension scheme in accordance with the provision of the Pension Act 2014. The contribution by the employees and the company are 8% and 10% respectively of the employees basic salary, housing and transport allowances. The contribution by the company during the year is N10,682,000 (2015: N23,563,000).

39 Capital commitments The company had no capital commitments as at the balance sheet date. (2015: Nil) 40 Events after the reporting date There are no post balance sheet events that require disclosure in these financial statements as at 31 December 2016.


84


41 Contraventions , Fines and penalties 2016

Details of contravention

Fines and Penalties

Being penalty for late submission of Board resolution in respect of maximum exposure on

Aviation risk. 250,000

250,000

42 Risk management framework

(a) Capital management objectives, policies and approach The Company has established the following capital management objectives, policies and approach to managing the

risks that affect its capital position: (i) To maintain the required level of stability of the Company thereby providing a degree of security to

policyholders. (ii) To allocate capital efficiently and support the development of business by ensuring that returns on capital

employed meet the requirements of its capital providers and of its shareholders. (iii) To retain financial flexibility by maintaining strong liquidity and access to a range of capital markets. (iv) To align the profile of assets and liabilities taking account of risks inherent in the business. (v) To maintain financial strength to support new business growth and to satisfy the requirements of the

policyholders, regulators and stakeholders. (vi) To maintain strong credit ratings and healthy capital ratios in order to support its business objectives and

maximise shareholders value.

In reporting financial strength, capital and solvency are measured using the rules prescribed by the National Insurance Commission (NAICOM). These regulatory capital tests are based upon required levels of solvency, capital and a series of prudent assumptions in respect of the type of business written. The Company's capital management policy for its insurance and non-insurance business is to hold sufficient capital to cover the statutory requirements based on the NAICOM directives, including any additional amounts required by the regulator.

(b) Approach to capital management The Company seeks to optimise the structure and sources of capital to ensure that it consistently maximises returns

to the shareholders and policyholders. The Company's approach to managing capital involves managing assets, liabilities and risks in a coordinated way, assessing shortfalls between reported and required capital levels on a regular basis and taking appropriate actions to influence the capital position of the Group in the light of changes in economic conditions and risk characteristics.

The primary source of capital used by the Company is equity shareholders' funds. The Group has had no significant changes in its policies and processes to its capital structure during the past year from

previous years.

The table below shows the available capital resources as at 31 December:

2016 2015

Total shareholders' funds 4,985,223 4,952,067Regulatory required capital 3,000,000 3,000,000Excess capital reserve 2,079,178 1,952,067


85


(c) Regulatory framework The insurance industry regulator measures the financial strength of Non-Life Insurers using a Solvency Margin model.

NAICOM generally expects non – life insurers to comply with this capital adequacy requirement. Section 24 of the Insurance Act 2003 defines the solvency margin of a non – life insurer as the difference between the admissible assets and liabilities, and this shall not be less than 15% of the net premium income (gross income less reinsurance premium paid), or the minimum capital base (�3billion) whichever is higher.

This solvency model compares the insurer's capital against the risk profile. The regulator indicated that insurers should

produce a minimum solvency margin of 100%. During the year, the Company has consistently exceeded this minimum. The regulator has the authority to request more extensive reporting and can place restrictions on the Company's operations if the Company falls below this requirement.


86

87


43 SOLVENCY MARGIN The solvency margin for the Company is as follows: Solvency margin computation as at 31 December 2016

Total

Assets

Inadmissible

Assets

Admissible

Assets

Asset N'000 N'000 N'000

Cash and Cash Equivalents 524,350 524,350

Financial Assets 2,277,412 2,277,412

Trade Receivables 506 506

Reinsurance Assets 267,400 267,400

Deferred Acquisition costs 51,472 51,472

Other Receivables & prepayments 37,948 21,051 16,897

Investment in Joint Arrangement 707331 707,331

Investment properties 494,000 494,000

Deferred Tax Asset

Property, Plant & Equipment - Excluding Land & Buiding 1,429,808 1,342,900 86,908

Intangible assets 9,451 9,451

Statutory deposit 300,000 300,000

Total Assets 6,099,678 1,857,951 4,241,727

Liabilites

Insurance Contract Liabilities 634,028 634,028

Trade Payables

Provision and Other payables 191,394 191,394

Current Income Tax 111,085 111,085

Deferred tax Liability 177,948 177,948 0

Total Liabilities 1,114,455 177,948 936,507

3,305,220

Minimum Required 3,000,000

Surplus 305,220

Solvency Margin


-

-

--

-

-

-

--

-

-

-

-- -

31

Dec

embe

r 20

16

Car

ryin

g am

ount

Fair

Val

ue

In t

hous

ands

of n

aira

Des

ign

ated

at

fair

va

lue

Hel

d-to

-m

atur

ity

Loan

s an

d Re

ceiv

abl

e A

vaila

ble

-for

-sal

e

Oth

er

Fina

ncia

l lia

bilit

ies

To

tal

Leve

l 1

Leve

l 1

Leve

l 3

Tota

l

Fina

ncia

l ass

ets

mea

sure

d at

fair

val

ue

Ava

ilabl

e-fo

r-sa

le fi

nanc

ial a

sset

s

942,

883

942,

883

198,

073

-74

4,81

094

2,88

3

-

-

-

942,

883

-

-

19

8,07

3

-

744,

810

942,

883

Fi

nanc

ial a

sset

s no

t m

easu

red

at fa

ir

valu

e

Cas

h an

d ca

sh e

quiv

alen

ts

52

4,35

0

52

4,35

0

-

-

-

-

Re

insu

ranc

e as

sets

^*

19

4,71

1

19

4,71

1

Ava

ilabl

e-fo

r-sa

le fi

nanc

ial a

sset

s^^

-

Hel

d to

mat

urity

fina

ncia

l ass

ets

1,33

4,52

9

1,33

4,52

9

Stat

utor

y de

posi

t

300,

000

-

-

-

300,

000

Fina

ncia

l lia

bilit

ies

not m

easu

red

at fa

ir va

lue

Tr

ade

paya

bles

*

-

-

O

ther

pay

able

s*

33,4

47

33,4

47

33,4

47

33,4

47.3

Fina

ncia

l ins

trum

ents

- Fa

ir v

alue

s and

risk

man

agem

ent

Acc

ount

ing

clas

sific

atio

ns a

nd fa

ir v

alue

s

The

follo

win

g ta

ble

show

s the

carr

ying

am

ount

s and

fair

valu

es o

f fina

ncia

l ass

ets a

nd fi

nanc

ial l

iabi

litie

s, in

clud

ing

thei

r lev

els i

n th

e fa

ir va

lue

hier

arch

y. It

doe

s no

t inc

lude

fair

valu

e in

form

atio

n fo

r fina

ncia

l ass

ets a

nd fi

nanc

ial l

iabi

litie

s not

mea

sure

d at

fair

valu

e if

the

carr

ying

am

ount

is a

reas

onab

le a

ppro

xim

atio

n of

fa

ir va

lue.

No

tes T

o T

he F

inan

cia

l S

tate

men

tsFo

r the

yea

r end

ed 3

1 Dec

embe

r 201

6


88

31 Decem

ber 2015

Carrying amount

Fair Value

In thousands of naira

N

ote

Designated

fair value

Held-to-

maturity

Loans and Receivable

Available-for-sale

Other

Financial liabilities

Total

Level 1

Level 2 Level

3

Total

Carrying amount

Financial assets m

easured at fair value

Available-for-sale financial assets

917,223

917,223

97,474

-

89,749

917,223

917,223

917,223

The Company has disclosed the fair value of each class of financial assets and liabilities in a w

ay that permits the inform

ation to be compared w

ith the carrying am

ounts. In addition, it has reconciled the assets and liabilities to the different categories of financial instruments as defined in IA

S 39 Financial instruments:

Recognition and Measurem

ent.

* The Company has not disclosed the fair values for financial instrum

ents such as receivables, payables and reinsurance assets because their carrying am

ounts are a reasonable approximation of fair value.

^ Reinsurance assets excludes prepaid reinsurance, which is not a financial asset (N

72.7 million)

^^ A

vailable for sale financial assets not measured at fair value com

prise of unquoted equities carried at cost as their fair value was not readily available.

No

tes T

o T

he F

inan

cia

l Sta

tem

en


ecember 2016


89

Financial assets not measured at fair value Cash and cash equivalents - 2,609,613 - - 2,609,613 Reinsurance assets^* - 43,810 - - 43,810 Available-for-sale financial assets^ ̂ - - 25,731 - 25,731

Held to maturity financial assets 269,505 - - - 269,505

Statutory deposit 300,000 - - - 300,000 569,505 2,653,423 25,731 - 3,248,659

Financial liabilities not measured at fair value

-

Trade payables* - - - (101,101) (101,101)

Other payables* - - - (1,046) (1,046) (102,147) (102,147)

The Company has disclosed the fair value of each class of financial assets and liabilities in a way that permits the information to be compared with the carrying amounts. In addition, it has reconciled the assets and liabilities to the different categories of financial instruments as defined in IAS 39 Financial instruments: Recognition and Measurement.

* The Company has not disclosed the fair values for financial instruments such as receivables, payables, reinsurance assets because their carrying amounts are a reasonable approximation of fair value.

^ Reinsurance assets excludes prepaid reinsurance, which is not a financial asset (₦69.7 million)

^^ Available for sale financial assets not measured at fair value comprise of unquoted equities carried at cost as their fair value was not readily available.

(b)

Measurement of fair values

(i)

Transfer between Levels 1 and 2

At 31 December 2016, there was no transfer between level 1 and level 2 (2015: NIL)

(ii)

Level 3 fair value

Reconciliation of level 3 fair values

(iii)

The following table shows a reconciliation from the opening balances to the closing balances for Level 3 fair values

Transfer out of level 3

The Company did not transfer out of or into level 3 during the year (2015: Nil)

(c)

Financial risk management

The Company has exposure to the following risks arising from financial instruments

Credit risk

Liquidity risk

Market risk



90


(c)(i) Risk management framework The Company's board of directors has the overall responsibility for the establishment of oversight of the

Company's risk management framework. The board of directors has established the Risk Management Committee, which is responsible for developing and monitoring the Company's risk management policies. The committee reports regularly to the board of directors for on its activities.

The Company's risk management policies are established to identify and analyse the risk faced by the Company,

to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and Company activities. The Company, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Company audit committee oversees how management monitors compliance with the Company's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Company Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the result of which are reported to the audit committee.

(c)(ii) Credit risk Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial

instrument fails to meet its contractual obligations, and arisies principally from the Company's receivables from customers and investment in debt securities.

The carrying amount of financial assets represents the maximum credit exposure In addition to credit risks arising out of investments and transactions with clients, Fin Insurance actively

assumes Credit Risk through the writing of insurance business. Credit Risk can arise when a client defaults on settlement of premium payments and can also arise when its own repayment capability decreases (as reflected in a rating downgrade).

Fin Insurance's strategy as Insurance Company does not entail the elimination of Credit Risk but rather to take on Credit Risk in a well- controlled, planned and targeted manner pursuant to its business objectives. Its approach to measuring Credit Risk is therefore designed to ensure that it is assessed accurately in all its forms, and that relevant, timely and accurate Credit Risk information is available to the relevant decision makers at an operational and strategic level at all times.

At a strategic level, Fin Insurance manages its credit risk profile within the constraints of its overall Risk Appetite and structured its portfolio so that it provides optimal returns for the level of risk taken. Operationally, the Insurance Company Credit Risk Management is governed by the overall risk appetite framework and aims to ensure that the risk inherent to individual exposures or certain business portfolios are appropriately managed through the economic cycle.

The organization is committed to: a) Create, monitor and manage credit risk in a manner that complies with all applicable laws and

regulations; b) Identify Credit Risk in each investment, loan or other activity of the Insurance Company; c) Utilize appropriate, accurate and timely tools to measure credit risk; d) Set acceptable risk parameters; e) Maintain acceptable levels of credit risk for existing individual credit exposures; f) Maintain acceptable levels of overall credit risk for Fin Insurance's Portfolio; and g) Coordinate Credit Risk Management with the management of other risks inherent in Fin Insurance's

business activities.


91


Unsecured exposures to high risk obligors, transactions with speculative cash flows, loans in which the insurance Company will h old an inferior or subordinate position are some of the credit exposures that are considered undesirable by the organization.The Company's credit risk can be analysed as follows: 2016 2015

N'000 N'000 Reinsurance receivables (see note (a) below) 267,400 113,466 Cash and cash equivalents (see note (b) below) 524,350 2,609,613 Held-to maturity (see note (c) below) 1,334,529 269,505 Statutory deposit 300,000 300,000 2,426,279 3,292,584

a Reinsurance receivables The Company insures its liabilities with reputable reinsurance companies with which it has a right of set-off.

None of its receivable from reinsurance companies was impaired as at 31 December 2016 (2015: NIL)

b. Cash and cash equivalents

The Company's cash and cash equivalents are held with reputable banks and financial institutions.

c. Held-to maturity

The Company's HTM investments are in treasury bills and eurobond. None of its investment was impaired as at 31 December 2016 (2015: NIL)

The Company did not have any debt securities that were past due but not impaired as at 31 December 2016

(2015: nil)

(c) (iii) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

The Company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation.

The Company uses activity-based costing to cost its products and services, which assists it in monitoring cash flow requirements and optimising its cash return on investments.

The Company aims to maintain the level of its cash and cash equivalents at an amount in excess of expected cash outflows on financial liabilities over the next 60 days.

The Company also monitors the level of expected cash inflows on trade and other receivables together with expected cash outflows on trade and other payables.

Exposure to liquidity risk

The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, include contractual interest payments and exclude the impact of netting

agreements


92

31 Decem

ber 2016

Contractual cash fl

ows

Carrying

amount

Total

3 months or

less

3-12 months

1-2 years

2-5 years

more than 5

years

Trade payables

-

-

-

-

-Provisions and other payables

33,447

33,447

33,447

-

-

-

-

33,447

33,447

33,447

-

-

-

-

31 Decem

ber 2015

Contractual cash fl

ows

Carrying

amount

Total

3 months or

less

3-12 months

1-2 years

2-5 years

more than 5

years

Trade payables

1,046

1,046

1,046

-

-

-

-Provisions and other payables

101,10

1

101,10

1

45,176

-

-

55,925

-

102,147

102,147

46,222

-

-

-

No

tes T

o T

he F

inan

cia

l Sta

tem

en


ecember 2016

55,925


93

Mat

urity

ana

lysi

s

The

tabl

e be

low

sum

mar

ises t

he e

xpec

ted

utili

satio

n or

sett

lem

ent o

f ass

ets a

nd li

abili

ties a

s at 3

1 D

ecem

ber

2016

2015

Curr

ent

Non

-cur

rent

Tota

l

Curr

ent

Non

-cur

rent

Tota

l

Fina

ncia

l ass

ets

-

2,27

7,41

2

2,27

7,41

2

-

1,21

2,45

9

1,21

2,45

9

Inve

stm

ent i

n Jo

int a

rran

gem

ent

707,

331

707,

331

-

-

-

Rein

sura

nce

asse

ts

267,

400

-

267,

400

113,

466

-

113,

466

Def

erre

d ac

quisi

tion

cost

51,4

72

-

51,4

72

22,2

26

-

22,2

26

Oth

er re

ceiv

able

s and

pre

paym

ents

37,9

47

-

37,9

47

9,72

1

-

9,72

1

Stat

utor

y de

posit

-

300,

000

300,

000

-

300,

000

300,

000

Tota

l ass

ets

356,

820

3,28

4,74

3

3,64

1,56

3

145,

413

300,

000

1,65

7,87

2

Insu

ranc

e co

ntra

ct li

abili

ties

634,

028

(634

,028

)

757,

392

(757

,392

)

Trad

e pa

yabl

es

-

-

956

(956

)

Oth

er p

ayab

les a

nd a

ccru

als

191,

395

(191

,393

)

293,

366

(293

,366

)

Curr

ent t

ax p

ayab

le

111,

085.

00

(111

,085

)

92,5

90

(92,

590)

Def

erre

d ta

x lia

bilit

y

177,

948

(177

,948

)

Tota

l lia

bilit

ies

1,11

4,45

7

(1,1

14,4

57)

1,14

4,30

4

(1,1

44,3

04)

No

tes T

o T

he F

inan

cia

l S

tate

men

tsFo

r the

yea

r end

ed 3

1 Dec

embe

r 201

6


94

(c)(iv) Market risk

31 Decem

ber 2016

31 Decem

ber 2015

In thousands of

Carrying

USD

NG

N

Carrying

USD

NG

N

Cash and cash equivalent

524,350

42,600

481,750

2,609,613

80,267

2,529,346Financial assets

2,277,412

147,319

2,130,093

1,212,459

859,049

353,410

Net statem

ent of financialposition exposure

2,801,762

189,919

2,611,843

3,822,072.00

939,316

2,882,756

Market risk is the risk that changes in m

arket prices – such as foreign exchange rates, interest rates and equity prices – will affect the Com

pany's income

or the value of its holdings of financial instruments. The objective of m

arket risk managem

ent is to manage and control m

arket risk exposures within

acceptable parameters, w

hile optimising the return.

Currency risk

The Com

pany is exposed to currency risk to the extent that there is a mism

atch between the currencies in w

hich premium

and claims are denom

inated and the respective functional currencies of the Com

pany. The functional currency of the Company is the N

igerian naira.

The currencies in which these transactions are prim

arily denominated are the N

igerian naira. How

ever, the Company receives som

e premium

in foreign currencies and also pays som

e claims in foreign currencies. The foreign currencies the Com

pany transacts in include euro, british pounds and united states dollars.

Exposure to currency risk

The summ

ary quantitative data about the Company's exposure to currency risk as reported to the m

anagement of the Com

pany is as follows:

No

tes T

o T

he F

inan

cia

l Sta

tem

en


ecember 2016


95

The following significant exchange rates have been applied.

Year-end spot rate

Naira 2016 2015 USD 1 305.00

196.50


Sensitivity analysis A reasonably possible strengthening (weakening) of the US dollar against all other currencies at 31 December would have affected the measurement of financial instruments denominated in a foreign currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases.

Profit or Loss Equity, net of tax

Effects in Thousands of naira

Strenghtening Weakkening Strenghtening Weakkening

31 December 2016

USD (10% movement) 93,932 (93,932) 93,932 (93,932)

31 December 2015

USD (10% movement)

93,932

(93,932)

93,932

(93,932)

Fair value sensitivity analysis for fixed-rate instruments The Company does not account for any fixed-rate financial assets and financial liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

Other market price risk The primary goal of the Company's investment strategy is to maximise investment returns, both to partially meet the Company's claims and benefits obligations and to improve its returns in general.

Sensitivity analysis - Equity price risk The Company's has equity investments some of which are listed on the Nigerian Stock Exchange and are classified as available for sale. A 2% increase in the share price of those equities at the reporting date would have increased equity by N18.9million after tax (2015: N18.9million). An equal change in the opposite direction would have reduced equity by N18.9million after tax (2015: N18.9million).

45 Insurance Risk The principal risk the Company faces under insurance contracts is that the actual claims and benefit payments or the

timing thereof, differ from expectations. This is influenced by the frequency of claims, severity of claims, actual benefits paid and subsequent development of long–term claims. Therefore, the objective of the Company is to ensure that sufficient reserves are available to cover these liabilities. The risk exposure is mitigated by diversification across a large portfolio of insurance contracts and geographical areas. The variability of risks is also improved by careful selection and implementation of underwriting strategy guidelines, as well as the use of reinsurance arrangements.

The Company purchases reinsurance as part of its risks mitigation programme. Reinsurance ceded is placed on both a

proportional and non–proportional basis. The majority of proportional reinsurance is quota–share reinsurance which is taken out to reduce the overall exposure of the Company to certain classes of business. Non–proportional reinsurance is primarily excess–of–loss reinsurance designed to mitigate the Company's net exposure to catastrophe losses. Retention limits for the excess–of–loss reinsurance vary by product line and territory.


96


Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision and are in accordance with the reinsurance contracts. Although the Company has reinsurance arrangements, it is not relieved of its direct obligations to its policyholders and thus a credit exposure exists with respect to ceded insurance, to the extent that any reinsurer is unable to meet its obligations assumed under such reinsurance agreements. The Company's placement of reinsurance is diversified such that it is neither dependent on a single reinsurer nor are the operations of the Company substantially dependent upon any single reinsurance contract.

The Company principally issues the following types of general insurance contracts: fire, motor, bond, personal accident, aviation, marine and oil and gas. Risks under non–life insurance policies usually cover twelve months duration. For general insurance contracts, the most significant risks arise from climate changes, natural disasters and terrorist activities. For longer tail claims that take some years to settle, there is also inflation risk. The above risk exposure is mitigated by diversification across a large portfolio of insurance contracts and geographical areas. The variability of risks is improved by careful selection and implementation of underwriting strategies, which are designed to ensure that risks are diversified in terms of type of risk and level of insured benefits. This is largely achieved through diversification across industry sectors and geography.

Furthermore, strict claim review policies and procedures exist to assess all new and on-going claims, regular detailed

review of claims handling procedures and frequent investigation of possible fraudulent claims are all policies and procedures put in place to reduce the risk exposure of the Company. The Company further enforces a policy of actively managing and promptly pursuing claims, in order to reduce its exposure to unpredictable future developments that can negatively impact the business. Inflation risk is mitigated by taking expected inflation into account when estimating insurance contract liabilities.

The Company has also limited its exposure by imposing maximum claim amounts on certain contracts as well as the

use of reinsurance arrangements in order to limit exposure to catastrophic events (e.g., hurricanes, earthquakes and flood damage).

The purpose of these underwriting and reinsurance strategies is to limit exposure to catastrophes based on the

Company's risk appetite as decided by management. The overall aim is currently to restrict the impact of a single catastrophic event to approximately 50% of shareholders' equity on a gross basis and 10% on a net basis. In the event of such a catastrophe, counterparty exposure to a single reinsurer is estimated not to exceed 2% of shareholders' equity. The Board may decide to increase or decrease the maximum tolerances based on market conditions and other factors.

Key assumptions The principal assumption underlying the liability estimates is that the Company's future claims development will

follow a similar pattern to past claims development experience. This includes assumptions in respect of average claim costs, claim handling costs, claim inflation factors and claim numbers for each accident year.

Additional qualitative judgments are used to assess the extent to which past trends may not apply in the future, for example: one–off occurrence, changes in market factors such as public attitude to claims, economic conditions, as well as internal factors such as portfolio mix, policy conditions and claims handling procedures. Judgment is further used to assess the extent to which external factors such as judicial decisions and government legislation affect the estimates. Other key circumstances affecting the reliability of assumptions include variation in interest rates, delays in settlement and changes in foreign currency rates.

Sensitivities The Company's claim liabilities are sensitive to the key assumptions that follow. It has not been possible to quantify

the sensitivity of certain assumptions such as legislative changes or uncertainty in the estimation process. Claims development table


97


The following tables show the estimates of cumulative incurred claims, including both claims notified and IBNR for each successive accident year at each reporting date, together with cumulative payments to date. The Company has taken advantage of the transitional rules of IFRS 4 that permit only five years of information to be disclosed upon adoption of IFRS.

In general, the uncertainty associated with the ultimate claims experience in an accident year is greatest when the

accident year is at an early stage of development and the margin necessary to provide the necessary confidence in the provisions adequacy is relatively at its highest. As claims develop, and the ultimate cost of claims becomes more certain, the relative level of margin maintained should decrease. However, due to the uncertainty inherited in the estimation process, the actual overall claim provision may not always be in surplus.


98

Gross claim

reserving

The claims paid are allocated to claim

development years as illustrated below

.

Cum

ulative Claim

s Developm

ent Pattern: FIRE

Incremental C

hain ladder-Yearly Projections (N’000)

Accident year

1

2

3

4

5

6

7

8

9

10

2007

2,590

1,259

1,026

926

25

-

-

-

-

2008

3,448

4,075

1,256

899

789

-

-

-

-

2009

1,326

1,110

2,513

1,920

-

-

-

-

-

2010

1,583

3,024

2,987

152

127

13

63

-

-

2011

1,097

9,016

66,133

50

-

-

-

-

-

2012

3,040

4,422

1,168

64

-

-

-

-

-

2013

7,415

397

578

-

-

-

-

-

-

2014

1,198

4,682

3100

-

-

-

-

-

-

2015

3,570

12,319

2016

13,155

-

-

-

-

-

-

-

-

No

tes T

o T

he F

inan

cia

l Sta

tem

en


ecember 2016

99


99

C

umul

ativ

e ta

ble

C

umul

ativ

e C

hain

ladd

er-A

nnua

l Pro

ject

ions

(N

’000

) A

ccid

ent

year

1

2 3

4 5

6 7

8 9

10

2007

6,

011

9,

019

11

,170

12

,907

12

,950

12

,950

12

,950

12

,950

12

,950

12

,950

20

08

8,23

8 16

,787

19

,144

20

,674

21

,872

21

,872

21

,872

21

,872

21

,872

21

,872

20

09

2,78

1 4,

862

9,13

8 12

,054

12

,054

12

,054

12

,054

12

,054

12

,054

12

,054

20

10

2,97

0 8,

114

12,6

50

12,8

64

13,0

29

13,0

45

13,1

08

13,1

08

13,1

08

13,1

08

2011

1,

866

15,5

60

108,

565

108,

630

108,

630

108,

630

108,

975

108,

975

108,

975

108,

975

2012

4,

617

10,8

35

12,3

52

12,4

28

12,4

28

12,4

37

12,4

37

12,4

37

12,4

37

12,4

37

2013

10

,428

10

,944

11

,629

11

,629

11

,648

11

,657

11

,657

11

,657

11

,657

11

,657

20

14

1,55

6 7,

103

10,2

03

13,6

83

13,7

08

13,7

20

13,7

20

13,7

20

13,7

20

13,7

20

2015

4,

230

16,5

49

26,2

14

26,2

88

26,3

42

26,3

69

26,3

69

26,3

69

26,3

69

26,3

69

2016

13

,155

25

,920

32

,753

32

,853

32

,927

32

,963

32

,963

32

,963

32

,963

32

,963

Resu

lts

Sum

mar

y of

Res

ults

Acc

iden

t Yea

r Pa

id to

dat

e (N

,000

) To

tal U

ltim

ate

Gro

ss C

laim

s Re

serv

e G

ross

Ear

ned

Prem

ium

U

ltim

ate

Loss

Rat

io

2007

12

,950

12

,950

134,

627

0%

2008

21

,872

21

,872

134,

627

0%

2009

12

,054

12

,054

134,

627

0%

2010

13

,108

13

,108

134,

627

0%

2011

10

8,63

0 10

8,63

0 30

0 13

4,62

7 81

%

2012

12

,428

12

,435

8

134,

627

9%

2013

11

,629

11

,652

24

11

2,38

7 10

%

2014

10

,203

13

,256

3,

053

118,

602

11%

20

15

16,5

49

25,0

60

8,51

1 11

7,50

8 21

%

2016

13

,155

29

,548

16

,392

17

0,32

0 17

%

Tota

l

28

,288

No

tes T

o T

he F

inan

cia

l S

tate

men

tsFo

r the

yea

r end

ed 3

1 Dec

embe

r 201

6

100


Cu

mu

lativ

e C

laim

s D

evelo

pm

en

t Patte

rn: G

en

era

l Accid

en

t

In

cre

men

tal C

hain

lad

der-Y

early

Pro

jectio

ns (

N’0

00

)

Accid

en

t year

1

2

3

4

5

6

7

8

9

10

2007

35,2

37

9,8

75

2,7

90

1,2

59

1,0

90

896

-

-

-

2008

25,3

24

13,1

83

6,9

84

4,5

50

1,5

66

-

-

-

-

2009

27,6

30

15,7

40

12,4

56

3,6

55

-

337

-

2,1

12

-

2010

21,6

77

43,0

46

8,8

56

10,2

96

488

963

255

-

-

2011

26,2

88

13,2

62

2,4

68

720

3,0

02

3,4

60

-

-

-

2012

23,0

18

27,9

83

2,9

81

1,1

20

1,1

84

-

-

-

-

2013

3,2

56

1,9

40

1,2

45

1,0

07

-

-

-

-

-

2014

26,4

01

930

3,4

51

-

-

-

-

-

-

2015

1,4

35

5,3

39

2016

4,5

51

-

-

-

-

-

-

-

-

Cu

mu

lativ

e ta

ble

Cu

mu

lativ

e C

hain

lad

der-A

nn

ual P

roje

ctio

ns (

N’0

00

)

Accid

en

t year

1

2

3

4

5

6

7

8

9

10

2007

81,7

89

105,3

84

111,2

36

113,5

98

115,4

51

116,8

12

116,8

12

116,8

12

116,8

12

116,8

12

2008

60,5

05

88,1

59

101,2

63

109,0

02

111,3

81

111,3

81

111,3

81

111,3

81

111,3

81

2009

57,9

60

87,4

92

108,6

80

114,2

32

114,2

32

114,6

71

114,6

71

116,7

82

2010

40,6

72

113,8

97

127,3

48

141,8

27

142,4

61

143,6

02

143,8

57

2011

44,7

19

64,8

61

68,3

31

69,2

66

72,8

23

76,2

83

2012

34,9

60

74,3

13

78,1

84

79,5

11

80,6

95

2013

4,5

78

7,0

97

8,5

73

9,5

80

2014

34,2

83

35,3

85

38,8

36

2015

1,7

00

7,0

40

2016

4,5

51

No

tes T

o T

he F

inan

cia

l Sta

tem

en


ecember 2016

101


101

No

tes T

o T

he F

inan

cia

l S

tate

men

tsFo

r the

yea

r end

ed 3

1 Dec

embe

r 201

6

Cum

ulat

ive

Cla

ims

Dev

elop

men

t Pa

tter

n: M

OTO

R

Ta

ble

of c

laim

s pa

id

In

crem

enta

l Cha

in la

dder

-Yea

rly P

roje

ctio

ns

(N’0

00)

A

ccid

ent y

ear

1

2

3

4

5

6

7

8

9

10

20

07

49,8

75

10,2

59

8,59

6

5,8

96

3,59

0

90

-

-

-

20

08

25,8

41

14,7

38

11,8

96

9,56

6

2,36

5

-

-

-

-

20

09

34,9

65

49,0

27

11,8

78

1,12

5

-

-

-

-

-

20

10

19,0

90

19,1

60

6,8

97

168

2,

500

-

-

-

-

2011

21

,365

16

,776

1,

963

10

7

-

-

-

-

-

20

12

16,8

07

46,7

81

48

1,13

2

-

-

-

-

-

20

13

50,8

31

21,2

92

4,20

6

-

-

-

-

-

-

20

14

16,0

43

14,6

13

6,06

1

-

-

-

-

-

-

20

15

21,8

75

17,4

14

2016

52

,236

-

-

-

-

-

-

-

-

C

umul

ativ

e ta

ble

C

umul

ativ

e C

hain

ladd

er-A

nnua

l Pro

ject

ions

(N

’000

)

A

ccid

ent y

ear

1

2

3

4

5

6

7

8

9

10

20

07

115,

766

140,

278

158,

310

169,

374

175,

480

175,

616

175,

616

175,

616

175,

616

175,

616

20

08

61,7

42

92,6

58

114,

979

131,

252

134,

844

134,

844

134,

844

134,

844

134,

844

134,

844

20

09

73,3

45

165,

334

185,

539

187,

248

187,

248

187,

248

187,

248

187,

248

187,

248

187,

248

20

10

35,8

19

68,4

12

78,8

86

79,1

23

82,3

70

82,3

70

82,3

70

82,3

70

82,3

70

82,3

70

20

11

36,3

43

61,8

22

64,5

82

64,7

21

64,7

21

64,7

21

64,7

21

64,7

21

64,7

21

64,7

21

20

12

25,5

26

91,3

15

91,3

77

92,7

19

92,7

19

92,7

19

92,7

19

92,7

19

92,7

19

92,7

19

20

13

71,4

85

99,1

34

104,

117

104,

117

104,

453

104,

453

104,

453

104,

453

104,

453

104,

453

20

14

20,8

33

38,1

47

44,2

08

52,2

93

52,4

83

52,4

83

52,4

83

52,4

83

52,4

83

52,4

83

20

15

25,9

18

43,3

32

52,7

28

53,1

10

53,3

31

53,3

31

53,3

31

53,3

31

53,3

31

53,3

31

20

16

52,2

36

71,4

09

74,3

13

74,9

19

75,2

70

75,2

70

75,2

70

75,2

70

75,2

70

75,2

70

102


No

tes T

o T

he F

inan

cia

l Sta

tem

en


ecember 2016

Results table

Summ

ary of Results

Accident Year

Paid to date (N,000)

Total Ultim

ate

Gross C

laims

Reserve

Gross Earned

Premium

Ultim

ate Loss Ratio

2007

175,616

175,616

499,612

35%

2008

134,844

134,844

499,612

27%

2009

187,248

187,248

499,612

37%

2010

82,370

82,370

499,612

16%

2011

64,721

64,721

499,612

13%

2012

92,719

92,719

512,994

18%

2013

104,453

104,453

292

329,654

32%

2014

44,208

51,382

7,174

249,404

21%

2015

43,332

51,936

8,604

228,387

23%

2016

52,236

71,703

19,467

162,486

44%

Total

35,537

103


103

No

tes T

o T

he F

inan

cia

l S

tate

men

tsFo

r the

yea

r end

ed 3

1 Dec

embe

r 201

6

Cum

ulat

ive

Cla

ims

Dev

elop

men

t Pa

tter

n: M

ARI

NE

Ta

ble

of c

laim

s pa

id

In

crem

enta

l Cha

in la

dder

-Yea

rly P

roje

ctio

ns (

N’0

00)

A

ccid

ent

year

1

2

3

4

5

6

7

8

9

10

2007

2,

590

1,

259

96

6

759

10

-

-

-

-

2008

2,

957

70

3

1,31

9

590

39

0

-

-

-

-

20

09

1,00

1

1,07

2

906

80

0

-

-

-

-

-

20

10

1,00

1

2,16

6

2,18

4

-

-

-

-

-

-

20

11

1,72

0

4,16

5

442

-

-

-

-

-

-

2012

3,

781

17

,143

-

-

-

-

-

-

-

2013

4,

299

92

-

-

-

-

-

-

-

2014

74

1

-

-

-

-

-

-

-

-

20

15

3,

735

20

16

1,25

0

-

-

-

-

-

-

-

-

C

umul

ativ

e ta

ble

C

umul

ativ

e C

hain

ladd

er-A

nnua

l Pro

ject

ions

(N

’000

)

Acc

iden

t ye

ar

1

2

3

4

5

6

7

8

9

10

2007

6,

011

9,

019

11

,04

5

12,4

69

12,4

85

12,4

85

12,4

85 12

,485

12

,485

12

,485

20

08

7,06

4

8,53

8

11,0

14

12,0

17

12,6

09

12,6

09

12,6

09 12

,609

12

,609

12

,609

20

09

2,09

9

4,11

0

5,65

1

6,86

6

6,86

6

6,86

6

6,86

6 6,

866

6,

866

6,

866

20

10

1,87

9

5,56

3

8,88

1

8,88

1

8,88

1

8,88

1

8,88

1 8,

881

8,

881

8,

881

20

11

2,92

5

9,25

1

9,87

2

9,87

2

9,87

2

9,87

2

9,87

2 9,

872

9,

872

9,

872

20

12

5,74

2

29,8

51

29,8

51

29,8

51

29,8

51

29,8

51

29,8

51 29

,851

29

,851

29

,851

20

13

6,04

6

6,16

5

6,16

5

6,16

5

6,21

9

6,21

9

6,21

9 6,

219

6,

219

6,

219

20

14

962

96

2

962

95

3

963

96

3

963

96

3

963

96

3

2015

0

37

35

3735

39

53

3998

39

98

3998

3998

39

98

3998

20

16

1,

250

7,

738

7,

738

8,

200

8,

296

8,

296

8,

296

8,29

6

8,

296

8,

296

104


No

tes T

o T

he F

inan

cia

l S

tate

men

tsFo

r the

yea

r end

ed 3

1 Dec

embe

r 201

6

Sum

mar

y of

Res

ults

To

talU

ltim

ate

G

ross

Cla

im

Rese

rve

G

ross

Ear

ned

Prem

ium

U

ltim

ate

Loss

Rat

ioA

cc Y

ear

Pai

d to

dat

e (N

,000

)

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Tota

l

12,4

85

12,6

09

6,86

6

8,88

1

9,87

2

29,8

51

6,16

5

962

3735

1,25

0

12,4

85

12,6

09

6,86

6

8,88

1

9,87

2

29,8

51

6,21

2

962

3,92

9

7,25

0

- -

47 195

6,00

0

6,24

2

98,

570

98,5

70

98,5

70

98,5

70

98,5

70

77,0

39

57,4

07

34,8

43

35,6

50

25,1

03

13%

13% 7% 9% 10%

39%

11% 3% 11%

29%

Resu

lt T

able

105


105


Appendix

i Hypothecation of insurance assets Asset allocation was done in accordance with NAICOM guidelines enforced to meet the minimum requirements of

Section 26(1)(c)of the Insurance Act 2003 for hypothecation of investments representing the insurance funds. I Hypothecation of insurance assets

Insurance fund

shareholders fund

2016 Total

2015 Total

Assets N’000 N’000 N’000 Total

Cash and cash Equivalent 41,702 289,589 41,702 76,044

Placements with financial institutions 193,059 - 482,648 2,533,569

Financial assets: - - - -

Investment in equities 377,153 565,729 942,882 942,953

Investment in Treasury Bills and Bonds 533,812 800,718 1,334,530 269,505

Investment in Joint arrangement - 707,331 707,331 -

Statutory deposit - 300,000 300,000 300,000

Investment properties - 494,000 494,000 486,000

Total 1,145,726 3,157,367 4,303,093 4,608,071

�

106



Profit and loss account and other comprehensive income

(a) Placements with financial institutions

2016 2015 � ˙ Note N'000 N'000

Cash and Cash Equivalents Insurance funds 5 41,702 76,044 Placements with financial institutions Shareholders funds 289,589 2,026,855 Insurance funds-Unearned Premium 96,530 253,357 Insurance funds-Outstanding claims 96,530 253,357 � ˙ � ˙ 482,648 2,533,569

Assets

Placements with financial institution 5 482,648 2,533,569

(b) Investment in equities

Investment in equities Shareholders funds 6 565,729 754,363 Insurance funds-Unearned Premium 188,576 94,295 Insurance funds-Outstanding claims 188,576 94,295 � ˙ � ˙ 942,881 942,953

Assets

Quoted equities 6a(i) 198,073 97,474

Unquoted equities (iii) 744,810 845,480

� ˙ � ˙ 942,882 942,954

Investment in Treasury Bills and Bonds

Shareholders funds 800,717 207,403

Insurance funds-Unearned Premium 266,906 26,951

Insurance funds-Outstanding claims 266,906 35,151

� ˙ � ˙ � ˙ 1,334,529 269,505

Assets

Investment in Bonds 147,319 39,765

Investment in Treasury bills 1,187,210 229,740

� ˙ � ˙ 1,334,529 269,505

�

107


107


(c) Investment properties

2016 2015 � ˙ Note N'000 N'000

Investment properties Shareholders funds 494,000 486,000 Investment in Joint arrangement 707,331 Insurance funds-Outstanding claims � ˙ � ˙ 1,201,331 486,000

Assets

Investment properties 11 494,000 486,000

� ˙ � ˙ 494,000 486,000

(d) Insurance contracts liability accounts

Outstanding claims 15 328,045 564,485 Unexpired risk 15 305,983 192,907 Reinsurable Assets 8 (267,400) (113,466)

� ˙ � ˙ 366,628 643,926 Asset designated Cash and Cash Equivalents 41,702 Placements with financial institutions 193,059 506,714 Investment in equities 377,153 188,590 Investment in Treasury Bills and Bonds 533,812 62,102 - � ˙ � ˙ 1,145,725 757,406

The total assets designated for insurance fund amount of N1,145,726,000 (2015: N 757,406,000) is more than

the insurance contract net liability of N366,628,000 (2015: N643,926,000)

�

108


Other information

ii. VALUE ADDED STATEMENT 2016 2015 N’000 N’000 Gross premium-Local 687,607 824,473 Bought in materials and services (190,934) (158,726) Value added � ˙ 496,673 665,747 Distribution of value added % % To government Government (taxes) 94,752 19 26,632 4 To employees: Employees (staff cost) 227,797 46 301,418 45 Retained in business:

Depreciation 48,211 10 47,653 7 Amortisation 2,828 1,440 Retained earnings 98,468 20 230,883 35 To contingency reserve 24,617 5 57,721 9 Value added � ˙

�


109


109

496,673 100 665,747 100

Financial SummaryFor the year ended 31 December 2016

Company � ˙ 2016 2015 2014 2013 2012

Assets N'000 N'000 N'000 N'000 N'000 Cash and cash equivalents 524,350 2,609,613 1,509,118 3,835,448 3,494,843

Financial Assets 2,277,412 1,212,459 2,589,196 58,190 52,821

Investment in Joint arrangement 707,331 - - - -

Trade receivables 506 - - - 80,111

Reinsurance assets 267,400 113,466 190,229 117,016 108,097

Deferred acquisition cost 51,472 22,226 28,177 35,012 52,570

Other receivables and prepayments 37,948 9,721 22,822 58,757 212,666

Investment properties 494,000 486,000 454,000 428,000 420,000

Intangible assets 9,451 3,797 3,137 436 673

Property and equipment 1,429,808 1,299,263 1,355,115 1,174,642 1,004,222

Deferred tax asset - 39,916 44,053 89,015 123,163

Statutory deposits 300,000 300,000 300,000 300,000 300,000

Total Assets � ˙ 6,099,679 6,096,461 6,495,847 6,096,516 5,849,165

Liabilities

Inurance contract liabilities 634,028 757,392 955,400 572,769 713,254

Trade payables - 1,046 10,458 10,569 45,249

Provision and other payables 191,393 293,366 143,591 168,232 102,425

Current income tax liabilities 111,085 92,590 125,172 168,997 23,993

Deferred tax liability 177,948 -

Retirement Benefit Obligation - - 399,368 416,778 360,581

Total liabilities � ˙ 1,114,454 1,144,394 1,633,989 1,337,345 1,245,502

Net assets � ˙ 4,985,225 4,952,067 4,861,858 4,759,172 4,603,663

Equity

Ordinary share capital 3,300,000 3,300,000 3,300,000 3,300,000 3,300,000

Share premium 93,878 93,878 93,878 93,878 93,878

Other components of equity 1,591,345 1,558,189 1,467,980 1,365,294 1,209,785

Total equity � ˙ 4,985,223 4,952,068 4,861,858 4,759,172 4,603,663

�

111



Financial SummaryFor the year ended 31 December 2016

112

Profit and Loss account and other comprehensive income

2016 2012 N'000

Gross premium written 800,683 1,318,912

Net premium income 402,773 1,096,808

Profit before taxation 217,837 369,218 Taxation (94,752) (24,610) Profit after taxation 123,085 344,608 Transfer to contingency reserve (24,617) (39,567) Transfer to retained earnings 98,468 305,041

Earnings per share (basic) 3.7k

2015

'000N757,594

545,015

274,667

13,937

288,604

(57,721)

230,883

8.7k 10k

2014

795,729

574,845

(136,438)

5,998

(130,440)

(23,872)

(154,312)

1k

2013

856,097

759,162

98,255

(180,129) (81,874) (25,683)

(107,557)

(25k)

FIN INSURANCE COMPANY LIMITED

20 16 ANNUAL REPORT & ACCOUNTS

RC38815

A Member of the Cornerstone Group

BUSINESS

20

16

AN

NU

AL R

EP

OR

T &

AC

CO

UN

TS

34, Gana Street, Maitama, Abuja.Tel: 09-2913712Web: www.finsurance.com.ngEnquiries: [email protected]

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