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PRESTIGE ASSURANCE PLC
LAGOS, NIGERIA
REPORT OF THE DIRECTORS
AND
AUDITED FINANCIAL STATEMENTS
FOR THE Y EAR ENDED 31 DECEMBER 2017
PRESTIGE ASSURANCE PLC
REPORT OF THE DIRECTORS AND AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
Contents Page
Corporate Information 3
Results at a Glance 4
Corporate Governance Report 5 - 9
Certificate Pursuant to Section 60(2) of Investment and Securities Act 10
Report of Audit and Compliance Committee 11
Sustainability and Corporate Responsibility Report 12 - 14
Management Discussion and Analysis 15 - 16
Report of the Directors 17 – 19
Statement of Directors’ Responsibilities in Relation to the Preparation of the Financial Statements 20
Independent Auditors’ Report 21 - 24
Summary of Significant Accounting Policies 25 - 51
Statement of Profit or Loss and Other Comprehensive Income 52
Statement of Financial Position 53
Statement of Changes in Equity 54
Statement of Cash Flows 55
Notes to the Financial Statements 56 - 96
Other National Disclosures:
Revenue Accounts 97
Statement of Value Added 98
Five-Year Financial Summary 99 – 100
PRESTIGE ASSURANCE PLC
CORPORATE INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2017
Directors
Mr. Hassan T. M. Usman (Nigerian) - Chairman Dr. Balla Swamy (Indian) - Managing Director/CEO Mr. Sarbeswar Sahoo (Indian) - Executive Director Mr. Gopalan Srinivasan (Indian) - Non-Executive Director Mr. Muftau Olakunle Oyegunle (Nigerian) - Non-Executive Director Mr. Gopalan Raghu (Indian) - Non-Executive Director Mr. Hermant G. Rokade (Indian) - Non-Executive Director (Retired 05 May, 2017) Mr. Sibharth Prandan - Non-Executive Director (Appointed 05 May, 2017)
Registered Number 6753
NAICOM Reg. Number 033
Company Secretary Abayomi Odulana FRC/2013/ICSAN/000000003201
Registered Office Ligali Ayodrinde Street
Victoria Island, Lagos P.O.Box 650 Marina, Lagos [email protected] www.prestigeassuranceplc.com
Actuaries Zamara Consulting Actuaries Nigeria Limited
FRC/2017/NAS/000000016912
70 Adetokunbo Ademola Street
Victoria Island Lagos
Registrars First Registrar Nigeria Limited
Plot 2, Abebe Village Road
Iganmu, Lagos
FRC/2013/00000000001946
Auditors Ernst & Young 10th & 13th Floors, UBA House
57, Marina Lagos
Bankers Access Bank Plc Guaranty Trust Bank Plc
Citi Bank Nigeria Limited Heritage Bank Plc First Bank of Nigeria Limited Keystone Bank Limited Stanbic IBTC Bank Limited Bank of India Limited Sterling Bank Plc Union Bank Plc United Bank for Africa Plc Skye Bank Plc Fidelity Bank Plc Providus Bank Limited
Re-insurers African Reinsurance Coporation Aveni Reinsurer
Continental Reinsurance Zep Reinsurer NCA Reinsurer
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PRESTIGE ASSURANCE PLC
RESULTS AT A GLANCE
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 2016 ₦’000 ₦’000
Gross premium written 3,808,516 2,614,264
========= =========
Net premium income 1,448,481 1,101,808
Underwriting expenses 1,615,034 1,213,657
Investment income 830,939 417,824
Other operating income 30,774 146,361
Result from operating activities 706,215 350,996
Profit for the year 531,841 221,992
Net assets 7,508,121 6,228,262
Total assets 11,775,553 9,689,587
Basic earnings per share (Kobo) 9.90 4.13
Diluted earnings per share (Kobo) 9.90 4.13
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PRESTIGE ASSURANCE PLC
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
Introduction Prestige Assurance Plc (“the Company”) has remained committed to the principles and practice that promote
Good Corporate Governance. We recognize that sound corporate governance practices are necessary for
effective management and control of the Company’s business with a view to maximizing the Shareholders value
and meeting the expectations of other Stakeholders. In furtherance of the commitment to high ethical conduct,
we regularly review our processes and practices to ensure compliance with the legislative and best practice
changes in the global corporate governance environment.
The Company continues to comply with its Internal Governance Policies and the Code of Corporate Governance
for Public Companies in Nigeria. As an Insurance company, Prestige also complies with the Code of Good
Corporate Governance for the Insurance Industry in Nigeria, issued by the National Insurance Commission in
March 2015. The NAICOM’s Code of Corporate Governance covers a wide range of issues including Board
structure, quality of Board Members, duties of the Board, conduct of the Board of Directors, rights of
Shareholders and Committees of the Board.
Board of Directors The Board of Directors has the ultimate responsibility for the overall functioning of the Company. The
responsibilities of the Board include setting the Company’s strategic objectives and policies, providing
leadership to put them into effect, supervising the management of the business, ensuring implementation of
decisions reached at the Annual General Meeting, ensuring value creation to shareholders and employees,
determination of the terms of reference and procedures of all Board Committees, ensuring maintenance of
ethical standard as well as compliance with the Laws of Nigeria. At the moment, the Board is composed of seven
members including a Non-Executive Chairman, MD/CEO and four Non-Executive Directors and one Executive
Director. The Directors are experienced stakeholders with diverse professional backgrounds in Insurance,
Accounting, Commerce, Management, Information Technology, etc. The Directors are men of impeccable
character and high integrity.
The Company is indeed delighted to have a versatile Board with deep understanding of its responsibilities to
Shareholders, Regulatory Authorities, Government and other Stakeholders. The Board always takes proactive
steps to master and fully appreciate all cultural, legislative, ethical, institutional and all other factors, which
impact our operations and operating environment. This has ensured that a culture of compliance with rules and
regulation is entrenched at all levels of operations within the Company. The meetings of the Board are
scheduled well in advance and highlights from the sub-committees of the Board are circulated to all the
Directors. During the year under review, the Board met on 9 March, 5 May, 18 August and 26 October. Details
of attendance by the Directors at Board meetings are as follows:
S/N DIRECTORS CATEGORY OF DIRECTORSHIP
NUMBER OF MEETINGS
HELD
NUMBER OF MEETINGS
ATTENDED 1 Mr. Hassan T.M Usman Chairman 4 4 2 Dr. Balla Swamy Managing Director/CEO 4 4 3 Mr. Gopalan Srinivasan Non-Executive Director 4 3 4 Mr. Muftau Olakunle Oyegunle Non-Executive Director 4 4 5 Mr. Gopalan Raghu Non-Executive Director 4 4 6 Mr. Sarbeswar Sahoo Executive Director 4 4 7 Mr. Sibharth Prandan Non-Executive Director 3 3
Mr. Sibharth Prandan joined the Board on 5th of May 2017.
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PRESTIGE ASSURANCE PLC
CORPORATE GOVERNANCE REPORT- CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2017
Board Committees The Board performed its functions through a total of four Standing Committees during the period under review.
The Committees have clearly defined responsibilities, scope of authority and procedures for reporting to the
Board. Membership of the Committees is structured to take optimum advantage of the skills and experience of Non-Executive Directors. The following are the standing Committees of the Board during the year under review:
Audit and Compliance Committee The Company established an Audit Committee in compliance with Section 359(6) of the Companies and Allied
Matters Act, CAP C20 Law of the Federation of Nigeria 2004, which comprises of three representatives of
Shareholders (elected annually at the AGM), Two Non-Executive Directors and one Executive Director during
the year under review. The Audit Committee met four times during the year under review - 8 March, 27 April, 27 J uly and 26 October.
Membership and attendance at the meetings are as follows:
S/N MEMBERS NUMBER OF MEETINGS
HELD NUMBER OF MEETINGS
ATTENDED 1 Mrs. Funmi Oyetunji * 1 1 2 Mr. Sarbeswar Sahoo 4 4 3 Engr. Olayiwola Tobun 4 4 4 Mr. Muftau Olakunle Oyegunle 4 4 5 Mr. Gopalan Raghu 4 4 6 Mrs Anike Odusote 4 4
*Mrs. Funmi Oyetunji joined the committee on 18th August 2017.
Investment Committee The Investment Committee comprises of the MD/CEO, 2 Non-executive Directors and one Executive Director.
The Committee meets to review the investment guidelines of the Company, ensure that investments embarked
upon by the Management are in line with Regulatory and Board Guidelines and also considers other
miscellaneous issues. Mr. Gopalan Raghu Chaired the Committee during the year under review. The Committee
met thrice times in the year under review as follows: 23 February, 25 August and 10 November 2017.
S/N MEMBERS NUMBER S OF MEETINGS
HELD NUMBER OF MEETINGS
ATTENDED 1 Mr. Gopala Raghu 3 3 2 Dr. Balla Swamy 3 3 3 Mr. Muftau Olakunle Oyegunle 3 3 4 Mr. Sarbeswar Sahoo 3 3
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PRESTIGE ASSURANCE PLC
CORPORATE GOVERNANCE REPORT- CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2017
Establishment Committee The Establishment Committee comprises the MD/CEO, Executive Director and two Non-Executive Directors. Mr.
Muftau Olakunle Oyegunle chaired the Committee which primarily considers general staff matters. The
Committee met on 23 February, 27 April and 13 September 2017 as reflected below:
S/N MEMBERS NUMBER MEETINGS HELD NUMBER OF MEETINGS ATTENDED 1 Mr. Muftau Olakunle Oyegunle 3 3 2 Dr. Balla Swamy 3 2 3 Mr. Sarbeswar Sahoo 3 3 4 Mr. Gopalan Raghu 3 3
Risk Management Committee The Risk Management Committee comprises of MD/CEO, 2 Non-executive Directors and Executive Director,
namely Mr. Muftau Olakunle Oyegunle, Mr. Goplan Raghu, Dr. Balla Swamy and Mr. Sarberswar Sahoo. The
Committee’s term of reference is to fundamentally ensure that the Company’s operations comply with the
Enterprise Risk Policy as approved by the Board in line with regulatory requirements. The Committee met on
15 August, 13 September and 10 November 2017.
S/N MEMBERS NUMBER MEETINGS HELD NUMBER OF MEETINGS ATTENDED
1 Mr. Gopalan Raghu 3 3 2 Dr. Balla Swamy 3 3 3 Mr. Muftau Olakunle Oyegunle 3 3 4 Mr. Sarbeswar Sahoo 3 3
Roles of Key Members of the Board The positions of the Chairman of the Board and the Chief Executive Officer are separate and held by different
persons. The Chairman and the Chief Executive Officer are not members of the same extended family.
The Chairman The main responsibility of the Chairman is to lead and manage the Board to ensure that it is administered
effectively and fully discharges its legal and regulatory responsibilities. The Chairman is responsible for
ensuring that Directors receive accurate, timely and clear information to enable the Board to take informed
decisions, monitor effectively and provide advice to promote the success of the Company.
The Chairman also manages the input of Non-executive Directors to promote effective relationships and open
communications, both inside and outside the Boardroom, between Executive and Independent Non-executive
Directors. The Chairman strives to ensure that any differences on the Board are resolved amicably.
The Chief Executive Officer The Board has delegated the responsibility for the day-to-day management of the Company to the Chief
Executive Officer (CEO), who is responsible for leading management, making and implementing operational
decisions. The CEO is responsible to the Board of Directors and ensures that the Company complies strictly with
regulations and policies of both the Board and Regulatory Authorities. The CEO ensures that optimization of
the Company’s resources is achieved at all times and has the overall responsibility for the Company’s financial
performance.
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PRESTIGE ASSURANCE PLC
CORPORATE GOVERNANCE REPORT- CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2017
The Company Secretary The Company Secretary is a point of reference and support for all Directors. He is responsible to update the
Directors with all requisite information promptly and regularly. The Board may through the Company Secretary
obtain information from external sources, such as consultants and other advisers, if there is a need for outside
expertise, via the Company Secretary or directly. The Company Secretary is further responsible to assist the
Chairman and Chief Executive Officer to formulate an annual Board Plan with the administration of other
strategic issues at the Board level; organize Board meetings and ensure that the minutes of Board meetings
clearly and properly capture Board’s discussions and decisions.
Director Nomination Process The Board agrees upon the criteria for the desired experience and competencies of new Directors. The Board
has power under the Articles of Association to appoint a Director to fill a casual vacancy or as an additional
Director. The criteria for the desired experience and competencies of new Non-executive Directors are agreed
upon by the Board. The balance and mix of appropriate skills and experience of Non-executive Directors is taken
into account when considering a proposed appointment. In reviewing the Board composition, the Board ensures
a mix with representatives from diverse background. The Shareholding of an individual in the Company is not
considered a criterion for the nomination or appointment of a Director. The appointment of Directors is subject
to the approval of NAICOM. The following core values are considered critical in nominating a new director; (i)
Integrity (ii) Professionalism (iii) Career Success (iv)Goodwill (v) Ability to add value to the Organization
Induction and Continuous Training of Board Members.
Training of Board Member On appointment to the Board and to Board Committees, all Directors receive a formal induction tailored to meet
their individual requirements. The New Directors are oriented about the Company and its operations through
the Company Secretary via the provision of the Company’s Articles of Association, relevant statutory books
and regulations and adequate information on operations. The Directors are also given a mandate and terms of
reference to aid in performance of their functions. Management further strives to acquaint the new Directors
with the operations of the Company via trainings/seminars to the extent desired by new Directors to enable
them function in their position. The training and education of Directors on issues pertaining to their oversight
functions is a continuous process, in order to update their knowledge and skills and keep them informed of new
developments in the insurance industry and operating environment.
Annual Board Appraisal The Code of Corporate Governance for the Insurance Industry recognizes the fact that good corporate
governance framework must be anchored on an effective and accountable Board of Directors whose
performance is assessed periodically. The annual appraisal covered all aspects of the Board’s structure,
composition, responsibilities, processes, relationships, individual members’ competencies and respective roles
in Board performance, as well as the Company’s compliance status with the provisions of NAICOM.
The General Meeting of the Company This is the highest decision making body of the Company. The Company is driven by its desire to deliver
significant returns on its shareholders investment. The shareholders have an opportunity to express their
concerns (if any) and opinions on the Company’s financial results and all other issues at the Annual General
Meeting of the Company. The Meetings are conducted in a fair and transparent manner where the regulators
are invited such as The National Insurance Commission, the Securities and Exchange Commission, Corporate
Affairs Commission, the Auditors as well as other Shareholder’s Associations. The Company also dispatches its
annual reports, providing highlights of all the Company’s activities to its shareholders.
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PRESTIGE ASSURANCE PLC
CORPORATE GOVERNANCE REPORT- CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2017
Protection of Shareholders Rights
The Board ensures the protection of the statutory and general rights of shareholders at all times, particularly
their right to attend and vote at general meetings. All shareholders are treated equally, regardless of volume
of shareholding or social status.
Communication Policy It is the responsibility of Executive Management under the direction of the Board, to ensure that the Board
receives adequate information on a timely basis, about the Company’s businesses and operations at
appropriate intervals and in an appropriate manner, to enable the Board to carry out its responsibilities.
Furthermore, the Board and Management of the Company ensures that communication and dissemination of
information regarding the operations and management of the company to shareholders, stakeholders and the
general public is timely, accurate and continuous, to give a balanced and fair view of the Company’s financial
and non-financial matters. Such information, which is in plain language, readable and understandable, is
available on the Company’s website, www.prestigeassuranceplc.com. In order to reach its overall goal on
information dissemination, the Company is guided by the following Principles, legislation and codes of
corporate governance of the jurisdictions within which it operates. These include the Insurance Act, the
NAICOM Operational Guidelines, the Companies and Allied Matters Act (CAMA) and the codes of Corporate
Governance issued by NAICOM and SEC. The Company operates in a multicultural environment and accordingly
recognizes the need to be sensitive to the cultural peculiarities of its operating environment.
Feedback The Company actively and regularly seeks feedback on its image and communication activities both from the
media as well as from its key target groups. This feedback is used in future activities.
Independent Advice The Board of Directors are at their own discretion and at the Company’s expense required to seek Independent
professional advice when required to enable a Member of the Board effectively perform certain responsibilities.
Insider Trading and Price Sensitive Information The Company is clear in its prohibition of insider trading by its Board, management, Officers and related
persons who are privy to confidential price sensitive information. Such persons are further prohibited from
trading in the Company’s securities where such transactions would amount to insider trading. Directors,
insiders and related parties are prohibited from disposing, selling, buying or transferring their shares in the
Company for a period commencing from the date of receipt of such insider information until such a period when
the information is released to the public or any other period as defined by the Company from time to time.
Code of Professional Conduct for Employees The Company has an internal Code of Professional Conduct, which all members of staff are expected to
subscribe to upon assumption of duties. All members of staff are expected to strive to maintain the highest
standards of ethical conduct and integrity in all aspects of their professional life as contained in the Code of
Professional Conduct which prescribes the common ethical standards, culture and policies of the Group relating
to employee values.
Abayomi Odulana
Company Secretary FRC/2013/ICSAN/000000003201
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PRESTIGE ASSURANCE PLC
CERTIFICATE PURSUANT TO SECTION 60(2) OF INVESTMENT AND SECURITIES ACT
FOR THE YEAR ENDED 31 DECEMBER 2017
We, the undersigned, hereby certify the following with regards to our audited financial statements for the year
ended 31 December 2017 that:
(a) We have reviewed the financial statements;
(b) To the best of our knowledge, the financial statements does not contain: · Any untrue statement of a material fact, or · Omit to state a material fact, which would make the statements, misleading in the light of
circumstances under which such financial statements were made;
(c) To the best of our knowledge, the financial statements and other financial information included in the report fairly present in all material respects the financial condition and results of operations of the
Company as at, and for the years presented in the report;
(d) We: are responsible for establishing and maintaining internal controls; have designed such internal controls to ensure that material information relating to the Company is
made known to such officers by others within the entity particularly during the period in which the
periodic reports are being prepared; have evaluated the effectiveness of the Company’s internal controls as of date within 90 days prior
to the report; have presented in the report our conclusions about the effectiveness of our internal controls based
on our evaluation as of that date;
(e) We have disclosed to the auditors of the Company and the Audit Committee: all significant deficiency in the design or operations of internal controls which would adversely affect
the Company’s ability to record, process, summarize and report financial data and have identified for
the Company’s auditors any material weakness in internal controls, and; any fraud, whether or not material, that involves management or other employees who have
significant role in the Company’s internal controls; we have identified in the report whether or not there were significant changes in internal controls or
other factors that could significantly affect internal controls subsequent to the date of our evaluation,
including any corrective actions with regard to significant deficiencies and material weaknesses.
.............................................. ...................................... ......... Dr. Balla Swamy Mr. Emmanuel Oluwadare Managing Director/CEO Chief Financial Officer FRC/2015/CIIN/00000011228 FRC/2013/ICAN/0000003649
9th March 2018
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PRESTIGE ASSURANCE PLC
REPORT OF AUDIT AND COMPLIANCE COMMITTEE
FOR THE YEAR ENDED 31 DECEMBER 2017
In accordance with the provision of Section 359 (6) of the Companies and Allied Matters Act, CAP C20, Laws
of the Federation of Nigeria, 2004, we have reviewed the audited financial statements of the Company for the
year ended 31 December 2017 and report as follows:
The accounting and reporting policies of the Company are consistent within legal requirements and agreed
ethical practices, and also in accordance with International Financial Reporting Standard.
The scope and planning of the external audit was adequate.
The Company maintained effective systems of accounting and internal control during the year.
Having reviewed the External Auditors' findings and recommendations on management matters, we are
satisfied with management responses thereon.
Dated this 9th March 2018
MRS. FUNMI OYETUNJ I
CHAIRMAN - AUDIT COMMITTEE
FRC/2018/ICAN/00000017879
Members of the Audit Committee
Mrs. Funmi Oyetunji - Shareholder/Chairman Engr. Olayiwola Tobun - Shareholder Mrs. Olatunbosun Odusote - Shareholder Mr. Muftau Olakunle Oyegunle - Non-Executive Director Mr. Sarbeswar Sahoo - Executive Director Mr. Gopalan Raghu - Non-Executive Director
Abayomi Odulana
Company Secretary FRC/2013/ICSAN/000000003201
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PRESTIGE ASSURANCE PLC
SUSTAINABILITY AND CORPORATE RESPONSIBILITY REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
As Insurance services provider with an obligation to comply with international best practices and Corporate
Governance, Prestige Assurance Plc ensures that its operations comply with international performance
standards and applicable national environmental and social regulations.
The principles of Sustainability are deeply entrenched in Prestige’s core values and system, so sustainability is
in our ‘Modus Operandi’.
We are conscious of the economic, social and environmental impact of our activities; placing importance on
people and our environment, even as we try to make it a better place.
At Prestige, we look at sustainability from a broad horizon and in an all-encompassing way.
In conducting our business, we take into consideration ethical values in our business relationship and at the
same time addressing some of the biggest challenges faced by our society.
Product development has always been at the apex of Prestige’s drive for market share and coverage. We have
opened a new branch in Ikeja, Kaduna, and other branches have been proposed in order to attract patronage
and getting closer to members of the public for opening of Insurance relationship with us.
During the 2017 financial year under review, new accounts were opened for various categories of people and
businesses. The Company has also strived to meet the needs of Clients and making our products more
accessible with the opening of our E business unit further reducing barriers to Insurance services by increasing
number of people with access to these services by providing more digital options.
Also during the Year under review, two new products were introduced in the market namely terrorism, Prestige
salary protection shield and Mediclaim insurance which are already making headway in the industry.
Human Resources Management is important for retaining and attracting the best human resources for
sustainable development.
At Prestige we respect both human and labour Laws in all our business operations and activities.
We belief that social equity needs to be fair and just distribution of economic and environmental resources
should be taken into consideration.
Costs Benefits Analysis (CBA) are tools used to participate in decision-making processes which is thoroughly
integrated into the working conditions of the Company. Health and safety of our employees and clients is of
utmost importance at Prestige. This is that we were at the fore-front of the Eye care treatment with visits to
the Eye Bank of Nigeria, creating awareness about key health issues. We at Prestige are aware that “poor
environmental quality’’ is directly responsible for around 25% of all preventable ill health in the world today,
with diarrheal diseases and acute respiratory infections (ARI), such as pneumonia heading the list. Other
diseases such as malaria, schistosomiasis, other vector-borne diseases, chronic respiratory diseases, childhood
infections are also strongly influenced by adverse environmental conditions.
We encourage our staff to carry out routine health check-ups to ensure that they are in perfect health, as
human capital is vital for our sustainability going forward.
Also, waste production and mismanagement of resources, for example, are both conditions that affect health.
Poor health and a decreasing quality of life dis-empower the most vulnerable set of people.
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PRESTIGE ASSURANCE PLC
SUSTAINABILITY AND CORPORATE RESPONSIBILITY REPORT- CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2017
Corporate Governance on environmental and social life is an important aspect of our commitment to
sustainable practices an Insurance institution. We strive to achieve a high level of corporate governance by
essentially balancing the interest of all our stakeholders. We acknowledge that it is not enough for a company
to be profitable but also strive to demonstrate a global standard practice of corporate governance. Typically,
the board is charged with overseeing corporate governance practices Group wide. One of the tenets of
corporate governance is ensuring that there are clear lines of responsibility, authority and accountability and
making sure appropriate responsibilities and measures are in place.
The Company in 2016, appointed an Executive Director Operation/Risk who in conjunction with the Management staff continued in their efforts to guide, implement and promote the sustainable principles in the
Company.
Environmental and Social Risk Management has been incorporated into our enterprise risk management
framework, especially in the delivery of our core business activity. Our customers in the major sectors are
subject to a Social and Environmental Impact Assessment and Environmental Impact Assessment as requested
for Know Your Customers (KYC).
We have continued in our efforts to reduce the use of paper in our general operations. The use of e-mails,
workflows, portals and other e-channels is encouraged as work tools for members of staff. Information to
customers is sent electronically via text, phone calls and e-mails.
In terms of community support, we have continued to invest in the communities in which we have presence
through our Corporate Social Responsibility efforts.
Capacity Building in this area of sustainability is a work-in-progress at Prestige Assurance Plc. Sustainability is
included and considered in all aspect of the Companies operation. Reporting. Sustainability issues will get
reported to the Board through its Risk Management Committee, which meets quarterly. That way, the Board
will get briefed of progress being made in implementing the sustainability policy to be approved by the Board
as part of its responsibility of setting the sustainability tone from the top.
The implementation of the Sustainability Principles and Policy of the Company remains a work in progress –
progress at ingraining the sustainability culture in the Company as we strive to regain our industry leadership
position in an economically viable, socially relevant and environmentally responsible way.
Corporate Social Responsibility Report Prestige Assurance Plc is committed to the principles and best practices of corporate social responsibility and
prides itself as being a model corporate citizen.
The Company pursues its corporate social responsibility goals through. The Company plays this role by
contributing in strategic areas that are of immense importance to community development: Education,
Environment and Economic Empowerment.
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PRESTIGE ASSURANCE PLC
SUSTAINABILITY AND CORPORATE RESPONSIBILITY REPORT- CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2017
The Company recognizes that doing business in a sustainable manner means doing business in a way that
empowers the present generation of Nigeria without compromising the future.
As in previous years, Prestige Assurance Plc in 2017 continued to intervene in the critical areas of the socio-
economic environment that has the biggest potential to improve the livelihood and long term sustainability of
the Company and Country.
Education Quality education is crucial in developing the manpower needed by the Company to exploit emerging
opportunities and propel the Company to higher levels of development.
The Company is therefore actively involved in a number of educational initiatives and projects with payment of
educational allowance to Staff and the scholarships to children of staff who have exceled in their academic
endeavors.
Environment and economic empowerment The Company has a scheme where-in students are engaged for their industrial attachment programme and
stipends paid to them for the period of engagement.
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PRESTIGE ASSURANCE PLC
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED 31 DECEMBER 2017
In accordance with the provision of Section 359 (6) of the Companies and Allied Matters Act, CAP C20, Laws
of the Federation of Nigeria, 2004, Management has reviewed the audited financial statements of the Company
for the year ended 31 December 2017 and report as follows:
The accounting and reporting policies of the Company are consistent within legal requirements and agreed
ethical practices.
The scope and planning of the external audit was adequate.
The Company maintained effective systems of accounting and internal control during the year.
The Nature of the Business
Prestige Assurance Plc is a non–life insurance business with over sixty years’ experience in Nigeria. The
Company’s core areas of business include motor, marine, bond, engineering, fire, aviation, oil and gas and
general accident.
The Company is known for providing expertise knowledge especially in high risk businesses such as aviation,
marine, oil and gas.
Our Company is known by populace for prompt settlement of claims and other support as it may be necessary.
The major bulk of our business comes from brokers market and support from the parent company in form of
referral.
Management Objectives (i) To be in the forefront of risk carrying in Nigerian insurance market, with a penchant for quality
products and efficient service delivery to our esteemed customers.
(ii) To position the Company amongst the best insurance companies in Nigeria.
(iii) To ensure that values are created for the stakeholders.
(iv) To be an ethical company among the listed institution in Nigeria and the world at large.
Our Strategies In order to meet the above objectives, the management of the Company have put the following strategies in
place.
(i) The Company has instituted sound corporate governance in order to drive both the internal process and the business environment.
(ii) Adequate reinsurance has been put in place to absorb the impact of high risk which may likely
occur due to the area of specialisation of the Company.
(iii) Aside from the normal business, the Company also provides add on services such as customer education, policy audit and lease financing.
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PRESTIGE ASSURANCE PLC
MANAGEMENT DISCUSSION AND ANALYSIS – CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2017
Our Strategies – Continued
(iv) The Company engages in training and empowerment of her workforce to meet up with the challenges of modern business.
(v) It is also in the current agenda of the Company to recruit more hands with specialised skills to
compete favourably in the industry.
(vi) The Company has also met up with her civil responsibility and promised to do more to better the interest of stakeholders at large.
Our Resources, Risks and Relationship
Our most valuable resources are our human capital. The staff welfare is paramount to the Company. Non-
human resources are of small relevance without appropriate personnel to drive the system.
Insurance business is a kind of business that is full of risk known as insurable risks.
This is a known risk but which the likelihood and magnitude of the occurrence is not certain.
The Company has put in place a balanced re-insurance policy to absorb the impact of such risks at any time in
future.
Aside from this, the Company is also faced with diverse risks which are financial and non-financial in nature.
Several strategies are already in place to mitigate their negative impact on the business and the Company itself.
Prestige Assurance Plc is a subsidiary of The New India Assurance Company Limited, Mumbai, India. Our parent
company is one of the largest insurance business undertakers across the Afro-Asia continent (except J apan).
The parent company provides support to us in all ramifications which had impact positively in term of skills and
financial status to underwrite high risk businesses rarely underwritten by the local companies.
Financial Results and Prospects For the year ended 31 December 2017, the gross premium income by the Company increased by N837.547million compared with previous year as result of branch expansion and turning in of new product into
the market as part strategy for growing the company.
Underwriting profit for the year went up by N81.321 million when compared with the previous year. Whilst
profit for the year increased by N309.849 million over that of last year.
The total assets of the Company also increased by N2,085.966 million when compared with 31 December
2016. In view of the recent upheavals. We have adopted a more proactive approach to the management of our
capital, liquidity and investments towards endowing our Company with needed financial strength to withstand
any market-related shocks and building an enduring platform for world class products and services.
16
PRESTIGE ASSURANCE PLC
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2017
The Directors hereby submit their report together with the financial statements for the year ended 31
December 2017.
PRINCIPAL ACTIVITIES The principal activities of the Company continue to be insurance business. There were no changes in the
activities of the Company during the year under review.
STATE OF AFFAIRS In the opinion of the Directors, the state of the Company’s affairs is satisfactory.
RESULTS FOR THE YEAR
2017 2016 ₦’000 ₦’000
Profit before income tax expense 697,989 340,394
Income tax expense (166,148) (118,402)
-------------- -------------- Profit for the year 531,841 221,992
======== ========
DIVIDEND Dividend will be declared for the year ended 31 December 2017 (2016: Nil).
DIRECTORS
The names of the Directors as at the date of this report and those who held office during the year are as follows:
Mr. Hassan T. M. Usman (Nigerian) Chairman Dr. Balla Swamy (Indian) Managing Director/CEO Mr. Gopalan Srinivansan (Indian) Non-Executive Director Mr. Hermant .G. Rokade (Indian) Non-Executive Director (Retired 05 May, 2017) Mr. Gopalan Raghu (Indian) Non-Executive Director Mr. Muftau Olakunle Oyegunle (Nigerian) Non-Executive Director Mr. Sarbeswar Sahoo (Indian) Executive Director Mr. SIbharth Prandan Non-Executive Director (Appointed 05 May, 2017)
In accordance with Article 96 of the Company’s Articles of Association, retiring and appointed director during
the year under review have been disclosed above
17
PRESTIGE ASSURANCE PLC
REPORT OF THE DIRECTORS - CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2017
Directors’ Interests in Share Capital The interest of the Directors in the issued share capital of the Company as recorded in the registrar of Members
is as follows:
S/N NAMES NO. OF SHARES AS AT 31 DECEMBER
2017 NO. OF SHARES AS AT
31 DECEMBER 2016 1 Mr. Hassan Usman - - 2 Dr. Balla Swamy - - 3 Mr. Gopalan Srinivasan - - 4 Mr. Muftau Olakunle Oyegunle 49,997 49,997 5 Mr. Gopalan Raghu - - 6 Mr. Sibharth Prandan - - 7 Mr. Sarbeswar Sahoo - -
Directors’ Interest in Contracts No Director has given notice for the purpose of Section 277 of the Companies and Allied Matters Act CAP
C20, Laws of the Federation of Nigeria 2004, to the effect that he is a member of a Company which could be
regarded as interested in a contract with the Company.
Major Shareholders As at the date of this report, no person or Company held more than 5%of the Issued Share Capital except:
2017 2016
50k Share % 50k Share % Number Number
The New India Assurance Company Limited, Mumbai 3,732,491,383 69.50 3,732,491,383 69.50
Leadway Assurance Company 616,107,411 11.47 616,107,411 11.47
Employment of Disabled Persons The Company has no employee recorded as disabled. It is however, the Company’s policy to consider persons
for employment bearing in mind the aptitudes and abilities of the applicants concerned and facilities available
to them.
Health and Welfare of Employees The Company subsidizes the medical and transportation expenses of staff and grants them Housing and
Lunch allowances. There is a Group Life Insurance Policy for all categories of staff and gratuity and pension
scheme.
In addition, the Company offers Scholarship in Higher Institutions to the very brilliant children of employees.
18
PRESTIGE ASSURANCE PLC
REPORT OF THE DIRECTORS - CONTINUED
FOR THE YEAR ENDED 31 DECEMBER 2017
Auditors
Ernst & Young have expressed their willingness to continue as the Company’s auditors in accordance with
Section 357 (2) of the Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria 2004.
Audit Committee The members of the Audit Committee elected at the last Annual General Meeting have met and will, in
accordance with the provisions of the Companies and Allied Matters Act, CAP C20, Law of the Federation of
Nigeria 2004, present their report at this Annual General Meeting.
BY ORDER OF THE BOARD
Abayomi Odulana
Company Secretary
FRC/2013/ICSAN/000000003201
19, Ligali Ayorinde Street Victoria Island, Lagos
Dated: 9th March 2018
19
PRESTIGE ASSURANCE PLC
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RELATION TO THE PREPARATION OF THE
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
The Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria 2004, requires the Directors
to prepare financial statements for each financial year that present fairly, in all material respects, the state of
financial affairs of the Company at the end of the year and of its profit or loss and other comprehensive income.
The responsibilities include ensuring that the Company:
a) keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the Company and comply with the requirements of the Companies and Allied Matters Act, CAP C20 Laws
of the Federation of Nigeria 2004;
b) establishes adequate internal controls to safeguard its assets and to prevent and detect fraud and other irregularities; and
c) prepares its financial statements using suitable accounting policies supported by reasonable and
prudent judgments and estimates, and are consistently applied.
The Directors accept responsibility for the preparation and fair presentation of the annual financial statements,
which have been prepared using appropriate accounting policies supported by reasonable and prudent
judgments and estimates, in conformity with International Financial Reporting Standards, and the relevant
provisions of the Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria 2004, the
Insurance Act 2003 and the Financial Reporting Council of Nigeria Act, No. 6, 2011 .
The Directors are of the opinion that the audited financial statements present fairly, in all material respects, the
state of the financial affairs of the Company and of its profit and other comprehensive income. The Directors
further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation
of the audited financial statements, as well as adequate systems of internal financial control.
Nothing has come to the attention of the Directors to indicate that the Company will not remain a going concern
for at least twelve months from the date of this statement.
.............................................. ............................................... Mr. HassanT.M. Usman Dr. Balla Swamy Chairman Managing Director/CEO FRC/2013/IODN/0000003601 FRC/2015/CIIN/00000011228
9th March 2018
20
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF PRESTIGE ASSURANCE PLC
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Prestige Assurance PLC (“the Company”), which comprise the
statement of financial position as at 31 December 2017, and the statement of profit or loss and other
comprehensive income, the statement of changes in equity and the statement of cash flows for the year then
ended, and notes to the financial statements, including a summary of significant accounting policies and other
explanatory notes.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as at 31 December 2017, and its financial performance and cash flows for the year then ended in
accordance with International Financial Reporting Standards and the provisions of the Companies and Allied
Matters Act, CAP C20 Laws of the Federation of Nigeria 2004, the Insurance Act 2003, the Financial Reporting
Council Act No. 6, 2011 and the National Insurance Commission guidelines and circulars.
Basis of Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities
under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial
Statements section of our report. We are independent of the Company in accordance with the International
Ethics Standard Board for Accountants’ Code of Ethics for Professional Accountants (IESBA code) and other
independence requirements applicable to performing the audit of Prestige Assurance Plc. We have fulfilled our
other ethical responsibilities in accordance with the IESBA Code, and in accordance with other ethical
requirements applicable to performing the audit of Prestige Assurance Plc. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the financial statements of the current period. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter is
provided in that context.
We have fulfilled the responsibilities described in the Auditors’ Responsibilities for the Audit of the Financial
Statements section of our report, including in relation to these matter. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement of the
financial statements. The results of our audit procedures, including the procedures performed to address the
matter below, provide the basis for our audit opinion on the accompanying financial statements.
21
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF PRESTIGE ASSURANCE PLC – Continued
Key Audit Matters- continued
Key Audit Matter
How the matter was addressed in the audit
The Company has insurance contract liabilities of
W e used our actuarial specialist to assist us in
N2.64 billion as at 31 December 2017 performing the audit procedures in the area of representing 63% of the Company’s total reviewing the Company’s Actuarial reports on non-life liabilities. This is an area that involves significant
judgement over uncertain future outcomes and business which included among others:
therefore we considered it a key audit matter for i. Consideration of the appropriateness of our audit. assumptions used in the valuation of the Insurance
Contracts by reference to Company and industry Insurance contract liabilities are disclosed in Note data and expectations. 24 to the financial statements. ii. Consideration of the appropriateness of non-
Consistent with the insurance industry practice,
economic assumptions used in the valuation of the
Insurance Contracts in relation to lapse or extension the Co mp any engages an actuary to test the assumptions by reference to Company specific and adequacy of this valuation of non-life business as industry data. at year end. The complexity of the valuation model s m a y give rise to errors as a result o f Other Key audit procedures included: inadequate/incomplete data or the design or
application of the models. Economic assumptions i. We reviewed and documented management’s
such as interest rates and future inflation rates process for estimating insurance contracts. and actuarial assumptions such as customer ii. Performed file review of specific underwriting behavior and uniform risk occurrence throughout
the period are key inputs used to determine these contracts in order to maximize our understanding of
the business and validate initial loss estimates. liabilities. Significant judgement is applied in iii. Performed subsequent year claim payments to setting these assumptions. confirm the reasonableness of initial loss estimates.
Other Information The Directors are responsible for the other information. The other information comprises the Result at a
Glance, Corporate Governance Report, Report of Audit and Compliance Committee, Sustainability and
Corporate Responsibility Report, Management Discussion and Analysis, Directors’ Report, Revenue Account,
Statement of Value Added and Five Year Financial Summary, which we obtained prior to the date of this report,
and the Annual Report, which is expected to be made available to us after that date. 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 an audit opinion or 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 obtained prior to the date of this auditors
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.
22
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF PRESTIGE ASSURANCE PLC – Continued
Directors’ Responsibilities for the Financial Statements The Directors are responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards and the provisions of the Companies and Allied
Matters Act, CAP C20 Laws of the Federation of Nigeria 2004, the Insurance Act 2003, the Financial Reporting
Council Act No 6, 2011 and the National Insurance Commission guidelines and circulars 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.
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.
Auditors’ Responsibilities for the Audit of the Financial Statements Our 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 auditors’ 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
skepticism 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 related 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 auditors’ 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 auditors’ report. However,
future events or conditions may cause the Company to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
23
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF PRESTIGE ASSURANCE PLC – Continued
Auditors’ Responsibilities for the Audit of the Financial Statements - continued
- 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 audit. We remain solely responsible for our audit opinion.
We communicate with 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 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 Directors, we determine those matters that were of most significance
in the audit of the financial statements of the current period and are therefore the key audit matters. W e
describe these matters in our auditors’ 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 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 requirement of Schedule 6 of the Companies and Allied Matters Act, CAP C20 Laws of
the Federation of Nigeria 2004 and Section 28(2) of the Insurance Act 2003, we confirm that:
i) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;
ii) in our opinion, proper books of account have been kept by the Company, in so far as it appears from our examination of those books;
iii) the Company’s statement of financial position and statement of profit or loss and other comprehensive
income are in agreement with the books of account; iv) in our opinion, the financial statements have been properly prepared in accordance with the relevant
provisions of the Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria 2004 and
Section 28(2) of the Insurance Act 2003 so as to present fairly, in all material respects, the statement of
financial position and statement of profit or loss and other comprehensive income.
Contraventions We are not aware of any penalties incurred in respect of contraventions of the requirement of certain sections
of the National Insurance Commission’s Operational Guidelines 2015 during the financial year.
Dayo Babatunde, FCA
FRC/2013/ICAN/0000000702
For: Ernst & Young Lagos, Nigeria
….. ………….. 2018
24
PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. General information
a. The financial statements for the year ended 31 December 2017 were authorized for issue in accordance
with a resolution of the Directors on 9th March 2018. Prestige Assurance Plc was incorporated on 6 J
anuary 1970. The Company is a subsidiary of New India Assurance Limited which was established on 18
August 1918.
Its registered office is located at 19, Ligali Ayorinde Street, Victoria Island, Lagos, Nigeria.
The Company is regulated by the National Insurance Commission of Nigeria (NAICOM).
b. Principal activity
The Company is licensed to carry non-life insurance business. The Company provides cover in all classes
of insurance, basically non-life treaty and facultative insurance, backed by reinsurer in the London and
African reinsurance markets. The products and services by the Company cuts across general accident,
energy, fire, marine, workers compensation, terrorism and bond.
2. Summary of significant accounting policies
2.1 Introduction to summary of accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated.
2.2 Basis of preparation These are the financial statements of Prestige Assurance Plc and is presented in order of liquidity.
2.2.1 Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Additional information
required by national regulations, the Company and Allied Matters Act CAP C20 Law of the Federation of
Nigeria 2004, the Financial Reporting Council of Nigeria Act No. 6, 2011, Insurance Act 2003 and its
interpretations issued by the National Insurance Commission in its Insurance Industry Policy Guidelines is
included where appropriate.
The financial statements comprise the statement of financial position, the statement of profit or loss and
other comprehensive income, the statement of changes in equity, the statement of cash flows and the
notes to the financial statements.
2.2.2 Basis of measurements
The financial statements have been prepared in accordance with the going concern principle under the
historical cost convention, except for available-for-sale financial assets, financial assets designed at fair
value through profit or loss, investment properties and land and building which are measured at fair value.
25
PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.3 New standards and improvements
These improvements are effective for annual periods beginning on or after 1 J anuary 2017. They include:
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
Assets (or disposal groups) are generally disposed of either through sale or distribution to owners. The
amendment clarifies that changing from one of these disposal methods to the other would not be
considered a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no
interruption of the application of the requirements in IFRS 5. This amendment must be applied
prospectively. This does not have impact on Prestige Assurance Plc.
IFRS 7 Financial Instruments: Disclosures
Servicing contracts The amendment clarifies that a servicing contract that includes a fee can constitute continuing
involvement in a financial asset. An entity must assess the nature of the fee and the arrangement against
the guidance for continuing involvement in IFRS 7 in order to assess whether the disclosures are required.
The assessment of which servicing contracts constitute continuing involvement must be done
retrospectively. However, the required disclosures would not need to be provided for any period beginning
before the annual period in which the entity first applies the amendments.
Applicability of the amendments to IFRS 7 to condensed interim financial statements The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim
financial statements, unless such disclosures provide a significant update to the information reported in
the most recent annual report. This amendment must be applied retrospectively. This amendment does
not have any impact on Prestige Assurance plc
IAS 1 Presentation of financial statements Amendments to IAS 1 to further encourage companies to apply professional judgement in determining
what information to disclose and how to structure it in their financial statements. The amendments do not
have any impact on the Company
Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and
Amortisation The amendments clarify the principle in IAS 16 Property, Plant and Equipment and IAS 38 Intangible
Assets that revenue reflects a pattern of economic benefits that are generated from operating a business
(of which the asset is a part) rather than the economic benefits that are consumed through use of the
asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment
and may only be used in very limited circumstances to amortise intangible assets. The amendments are
applied prospectively and do not have any impact on the entity, given that it has not used a revenue-based
method to depreciate its non-current assets.
Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception
The amendments address issues that have arisen in applying the investment entities exception under IFRS
10. The amendments to IFRS 10 clarify that the exemption from presenting consolidated financial
statements applies to a parent entity that is a subsidiary of an investment entity, when the investment
entity measures all of its subsidiaries at fair value. Furthermore, the amendments to IFRS 10 clarify that
only a subsidiary of an investment entity that is not an investment entity itself and that provides support
services to the investment entity is consolidated. All other subsidiaries of an investment entity are
measured at fair value. The amendments to IAS 28 allow the investor, when applying the equity method,
to retain the fair value measurement applied by the investment entity associate or joint venture to its
interests in subsidiaries.
26
PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.3 New standards and improvements - continued
The accounting policies adopted in the preparation of the 2017 Interim Financial Statements are consistent
with those followed in the preparation of the Company’s 2016 financial statements.
The nature and impact of each new standard /amendment is described below:
(i) Amendments to IAS 12 – Income Taxes
Amends IAS 12 to clarify accounting treatment for deferred tax assets for unrealised losses on debt
instruments measured at fair value. The amendments clarify that an entity needs to consider whether tax
law restricts the sources of taxable profits against which it may make deductions on the reversal of that
deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should
determine future taxable profits and explains in which circumstances taxable profit may include the
recovery of some assets for more than their carrying amount.The effective date of the 2016 amendments
to IAS 12. Recognition of deferred tax assets for Unrealised Losses was issued on 19 J anuary 2016. The
amendments are effective for annual years beginning on or after 1 J anuary 2017. Earlier application is
permitted.
The Company applied amendments retrospectively, however, their application has no effect on the
Company’s financial statements.
(ii) Amendments to IAS 7 - Statement of Cash Flows
Disclosure Initiative (Amendments to IAS 7), issued in J anuary 2016, added paragraphs 44A–44E. An
entity shall apply those amendments for annual years beginning on or after 1 J anuary 2017. Earlier
application is permitted. Amendment to IAS 7 include disclosures that enable users of Financial Statements
to evaluate changes in liabilities arising from financing activities. The amendment specifies that the
following changes arising from financing activities are disclosed (to the extent necessary): (i) changes from
financing cash flows; (ii) changes arising from obtaining or losing control of subsidiaries or other
businesses; (iii) the effect of changes in foreign exchange rates; (iv) changes in fair values; and (v) other
changes.
The Company is assessing the potential effect of the amendments on its financial statements.
(iii) Annual Improvements 2014-2016 Cycle
These improvements were issued on 8 December 2-16 and ammedments to IFRS 12 are effective for
annual periods beginning on or after 1 J anuary 2017. The improvements ammended the following
standards:
Amendments to IFRS 12 Disclosure of Interests in Other Entities The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10–
B16, apply to an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest
in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held
for sale. These amendments are not expected to have an impact on the Company.
2.4 Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying its
accounting policies. Changes in assumptions may have a significant impact on the financial statements in
the period the assumptions changed. Management believes that the underlying assumptions are
appropriate and that the financial statements therefore present the financial position and results fairly.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates
are significant to the financial statements are disclosed below:
27
PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.4 Significant accounting judgements, estimates and assumptions - continued
J udgements
In the process of applying the Company’s accounting policies, management has made the following
judgement, which has the most significant effect on the amounts recognised in the financial statements:
Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the
reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year, are described below. The Company based its
assumptions and estimates on parameters available when the financial statements were prepared. Existing
circumstances and assumptions about future developments, however, may change due to market changes
or circumstances arising beyond the control of the Company. Such changes are reflected in the
assumptions when they occur.
Fair value of financial instruments Where the fair values of financial assets recorded on the statement of financial position cannot be verified
from active markets, they are determined using a variety of valuation techniques that include the use of
mathematical models. The inputs to these models are derived from observable market data where possible,
but if this is not available, judgement is required to establish fair value. The judgements include
considerations of liquidity and model inputs such as volatility for discount rates, prepayment rates and
default rate assumptions for asset-backed securities.
Valuation of Non-life insurance contract liabilities: For non-life insurance contract, estimates have to be made for the expected ultimate cost of all future
payments attaching to incurred claims at the reporting date. These include incurred but not reported
("IBNR") claims. Due to the nature of insurance business, ultimate cost of claims is often not established
with certainty until after the reporting date and therefore considerable judgement, experience and
knowledge of the business is required by management in the estimation of amounts due to contract
holders. Actual results may differ resulting in positive or negative change in estimated liabilities.
The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims
projection techniques, such as Loss ratio method and BCL methods. The BCL method assumes that past
experience is indicative of future experience. i.e claims recorded to date will continue to develop in a similar
manner in the future while Loss ratio method is used for classes with limited claims payments or history
and therefore a BCL method would be inappropriate. The loss ratio method allows for an estimate of the
average ultimate loss ratio which needs to be assumed, it uses the incurred and paid to date loss ratio that
have been experienced to date in previous accident years.
Additional qualitative judgement is required as significant uncertainties remain such as future changes in
inflation, economic conditions, attitude to claiming, foreign exchange rates, judicial decisions and
operational process.
Similar judgements, estimates and assumptions are employed in the assessment of losses attaching to
unearned premium exposures. The methods used are based on time apportionment principles together
with significant judgement to assess the adequacy of theses liabilities and the attached uncertainty. The carrying value at the reporting date of non-life insurance contract liabilities is N2,643,592,000
(2016:N1,799,210,000). Further details on insurance contract liabilities are disclosed in Note 24 to the
financial statements.
Certain acquisition costs related to the sale of new policies are recorded as deferred acquisition costs (DAC)
and are amortised to the profit or loss over time. If the assumptions relating to future profitability of these
policies are not realised, the amortisation of these costs could be accelerated and this may also require
additional impairment write-offs to the profit or loss.
28
PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.4 Significant accounting judgements, estimates and assumptions - continued
Deferred tax assets and liabilities
The carrying value at the reporting date of net deferred tax liabilities is N461,856,000
(2016:N467,561,000). Further details on taxes are disclosed in Note 10 to the financial statements.
Valuation of pension benefit obligation The cost of defined benefit pension plans and other post-employments benefits and the present value of
the pension obligation are determined using actuarial valuations. The actuarial valuation involves making
assumptions about discount rates, expected rate of return on assets, future salary increases, mortality
rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and
its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All
assumptions are reviewed at each reporting date. Details of the key assumptions used in the estimates are
contained in Note 28 to the financial statements.
The carrying value at the reporting date of gratuity benefit obligation is N164,290,000
(2016:N107,646,000).
Valuation of investment properties The Company carries its investment properties at fair value, with changes in fair value being recognised in
profit or loss. The Company engaged an independent valuation specialist to assess fair value as at 31
December 2017. A valuation methodology based on discounted cash flow model was used as there is a lack
of comparable market data because of the nature of the properties.
The determined fair value of the investment properties is most sensitive to the estimated yield as well as
the long-term vacancy rate. The key assumptions used to determine the fair value of the investment
properties are further explained in Note 20 to the financial statements.
The International Financial Reporting Standards and interpretations that are issued, but not yet effective,
up to the date of issuance of the Company’s financial statements are disclosed below. The Company intends
to adopt these standards, if applicable, when they become effective.
(i) IFRS 15 - Revenue from contracts with customers IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from
contracts with customers. Under IFRS 15, revenue is recognised at an amount that reflects the
consideration to which an entity expects to be entitled in exchange for transferring goods or services to a
customer.
The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either
a full retrospective application or a modified retrospective application is required for annual periods
beginning on or after 1 J anuary 2018. Early adoption is permitted. The Company expects to apply IFRS 15
using the modified retrospective application. Given insurance contracts are scoped out of IFRS 15, the
Company expects the main impact of the new standard to be on the accounting for income from tenancy
contracts on investment properties as well as investment management services. The Company does not
expect the impact to be significant.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.5 Standards and interpretations issued but not yet effective
(i) IFRS 15 - Revenue from contracts with customers
Impact Assessment of IFRS 15
The standard expects on entity to apply a five-step model approach to determine when to recognize
revenue, and at what amount.
By virtue of insurance business especially non-life business, the five steps occurred simultaneously, the
contract are identified, premium are determined and which are paid for on the spot while the Insurer will
assume risk upon such payment.
In line with “no premium no cover” the revenue can only be recognized in our books when payment is
made.
In case of Brokers business, Insurance can only offer such service upon received of credit note which is
almost certain that the broker must remit the cash within 30 days.
In conclusion, insurance contract is out of scope of IFRS 15 therefore, no significant impact is expected on
our financial statements either qualitative or quantitative as contained in the standard.
(iii) IFRS 9 - Financial Instruments IFRS 9, published in J uly 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition
and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial
instruments, including a new expected credit loss model for calculating impairment on financial assets, and
the new general hedge accounting requirements. It also carries forward the guidance on recognition and
derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting years beginning
on or after 1 J anuary 2018, with early adoption permitted. Except for hedge accounting, retrospective
application is required but providing comparative information is not compulsory. For hedge accounting, the
requirements are generally applied prospectively, with some limited exceptions.
During 2017, the Company performed a high-level impact assessment of all three aspects of IFRS 9. This
preliminary assessment is based on currently available information and may be subject to changes arising
from further detailed analyses or additional reasonable and supportable information being made available
to the Company in the future. Overall, the Company expects no significant impact on its statement of
financial position and equity, except for the effect of applying the impairment requirements of IFRS 9.
Loans as well as trade receivables are held to collect contractual cash flows and are expected to give rise
to cash flows representing solely payments of principal and interest. The Company analysed the contractual
cash flow characteristics of those instruments and concluded that they meet the criteria for amortised cost
measurement under IFRS 9. Therefore, reclassification for these instruments is not required.
(b) Impairment IFRS 9 requires the Company to record expected credit losses on all of its debt securities, loans and
receivables, either on a 12-month or lifetime basis. The Company will apply the simplified approach and
record lifetime expected losses on all loans and receivables. The Company has determined that, due to the
unsecured nature of its loans and receivables, the loss allowance will increase with corresponding related
decrease in the deferred tax liability.
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2.5 Standards and interpretations issued but not yet effective - continued
(iii) IFRS 9 - Financial Instruments -continued
(c) Hedge accounting The Company determined that there are no existing hedge relationships that are currently designated in
effective hedging relationships. Though, this will continue to qualify for hedge accounting under IFRS 9.
As IFRS 9 does not change the general principles of how an entity accounts for effective hedges, applying
the hedging requirements of IFRS 9 will not have a significant impact on Company’s financial statements.
(d) Other adjustments In addition to the adjustments described above, on adoption of IFRS 9, other items of the primary financial
statements such as deferred taxes, assets held for sale and liabilities associated with them, will be adjusted
as necessary. The exchange differences on translation of financial instrument will also be adjusted.
Impact assessment of IFRS 9 IFRS 9 specifies how an entity should classify and measure financial assets, financial liabilities, and some
contracts to buy or sell non-financial items.
Any entity could have significant changes to its financial reporting as the result of this standard.
Possible consequences of IFRS 9 include:
- More Income statement volatility. IFRS 9 raises the risk that more assets will have to be measured at fair value with changes in fair value recognized in profit or loss as they arise.
- Earlier recognition of impairment losses on receivables and loans, including trade receivables with start proving for possible future.
- Significant new disclosure requirements
Comparing IFRS 9 and IAS 39 classification and measurement categories
Classification and Measurement in Financial Statements under IAS 39
Classification
Measurement
Loan and receivables
Amortized Cost
Held for Trading Financial
Asset
FVPL
Available – For –Sale FVOCI Held to maturity Amortized Cost
Under IFRS9. The Financial Assets, will now be classified thus;
1. Amortized Cost – This will covers loan and receivables, and Held to maturity Financial assets 2. Fair value through profit and loss (FVTPL) – This will covers held for trading and derivatives financial
instruments 3. Fair value other comprehensive income, no recycling (FVOCI) This will covers available for sale. Change
in fair value are recognized in OCI and are never recycled to profit or loss, even if the asset is sold or
impaired.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.5 Standards and interpretations issued but not yet effective - continued
Impairment of financial assets. IFRS 9 eliminates impairment assessment requirements in equity instrument since it will only be measured
at FVPL or FVOCI without recycling of fair value changes to profit and loss.
Loan and receivables will now be measured using the “expected credit loss” model. This is done by
calculating the allowance for credit losses by considering on a discounted basis the cash shortfalls it would
incur in various default scenarios for prescribed future periods and multiplying the shortfalls by the
probability of each scenario occurring .
The company shall applies 12months ECLS unless a significant increase in credit risk occurs, then lifetime
ECLS unless the increase reverses.
Quantitative implication of adoption of IFRS 9 Subsequent to adoption of IFRS9, the following lined term in financial statements, as per 2017 may require re-measurement thus as follows:
NO CLASSIFICATION BALANCE AS
AT 31ST DECEMBER,
2017(N’000)
1ST J ANUARY,
2018 (N’000)
IMPACT
1 FVTPL 259,006.00 259,006.00 NO ADJ USTMENT REQUIRED
2 FVOCI 1,878,385.00 1,878,385.00 NO ADJ USTMENT REQUIRED
3. AMORTISED
COST
i STAFF LOAN & ADVANCES
49,527.00 49,527.00 NO ADJ USTMENT REQUIRED
ii OTHER LOANS 52,260.00 52,260.00 FULLY IMPAIRED BASED ON EXPECTED
CREDIT LOSS MODEL SINCE IT HAS REMAINS
OUTSTANDING MORE THAN 2 YEARS.
iii CORPORATE
BONDS 115,287.00 115,287.00 THIS MAY SUBJ ECTED
TO IMPAIRMENT UPON
DEFAULT
ESPECTICIALLY DANA BOND.
iv FGN & STATE BONDS
732,065.00 732,065.00 NO DEFAULT IS EXPECTED THEREFORE
NO IMPAIRMENT IS REQUIRED.
v TREASURY BILL 1,565,000.00 1,565,000.00 NO DEFAULT IS EXPECTED, THEREFORE NO IMPAIRMENT IS REQIURED
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.5 Standards and interpretations issued but not yet effective - continued
(iv) IFRS 17 - Insurance Contracts
In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new accounting
standard for insurance contracts covering recognition and measurement, presentation and disclosure.
Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts (IFRS 4) that was issued in 2005. IFRS 17
applies to all types of insurance contracts (i.e., life, non-life, direct insurance and re-insurance), regardless
of the type of entities that issue them, as well as to certain guarantees and financial instruments with
discretionary participation features. A few scope exceptions will apply. The overall objective of IFRS 17 is
to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In
contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting
policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting
aspects. The core of IFRS 17 is the general model, supplemented by: · A specific adaptation for contracts with direct participation features (the variable fee approach) · A simplified approach (the premium allocation approach) mainly for short-duration contracts.
IFRS 17 is effective for reporting periods beginning on or after 1 January 2021, with comparative figures
required. Early application is permitted, provided the entity also applies IFRS 9 and IFRS 15 on or before
the date it first applies IFRS 17. The standard is generally expected to have an impact on the financial
statements of insurance businesses. The Company is not early adopting the standard.
The Company intends to start a project to implement IFRS 17 and will perform a high-level impact
assessment of IFRS 17. The Company expects that the new standard will result in an important change to
the accounting policies for insurance contract liabilities of the Company and is likely to have a significant
impact on profit and total equity together with presentation and disclosure.
(v) IFRS 16 – Leases This is a new standard introduced by IASB to replace existing standard IAS 17 - Leases. IFRS 16 is effective
for annual periods beginning on or after 1 J anuary 2019. Early application is permitted, but not before an
entity applies IFRS 15.
IFRS 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to
finance leases under IAS 17. The standard includes two recognition exemptions for lessees – leases of ’low-
value’ assets (e.g. personal computers) and short-term leases (i.e. leases with a lease term of 12 months
or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e. the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e. the right-of-use asset).
Lessees will be required to separately recognise the interest expense on the lease liability and the
depreciation expense on the right-of-use asset. Lessees will be required to remeasure the lease liability
upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments
resulting from a change in an index or rate used to determine those payments). The lessee will generally
recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.
Lessor accounting substantially carries forward the lessor accounting requirements in IAS 17. Accordingly,
a lessor continues to classify its leases as operating leases or finance leases, and to account for those two
types of leases differently.The Company is yet to perform the impact assessment of the standard but does
not expect the impact to be significant.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.5 Standards and interpretations issued but not yet effective - continued
(v) Amendments to IAS 40 Transfers of Investment Property
The amendments clarify when an entity should transfer property, including property under construction or
development into, or out of investment property. The amendments state that a change in use occurs when
the property meets, or ceases to meet, the definition of investment property and there is evidence of the
change in use. A mere change in management’s intentions for the use of a property does not provide
evidence of a change in use. Entities should apply the amendments prospectively to changes in use that
occur on or after the beginning of the annual reporting per iod in which the entity first applies the
amendments. An entity should reassess the classification of property held at that date and, if applicable,
reclassify property to reflect the conditions that exist at that date. Retrospective application in accordance
with IAS 8 is only permitted if it is without the use of hindsight. Effective for annual periods beginning on
or after 1 J anuary 2018. Early application of the amendments is permitted and must be disclosed. The
Company will apply amendments when they become effective. However, since Company’s current practice
is in line with the clarifications issued, the Company does not expect any effect on its financial statements.
2.6 Annual improvements 2014-2016 Cycle
These improvements were issued on 8 December 2016 and ammedments to IFRS 1 and IAS 28 are
effective for annual periods beginning on or after 1 J anuary 2018. The improvements ammended the
following standards:
IFRS 1 First-time Adoption of International Financial Reporting Sandards The short-term exemptions in paragraphs E3–E7 of IFRS 1 were deleted, because they have now served
their intended purpose. This amendment is not applicable to the Company.
IAS 28 Investments in Associates and J oint Ventures The amendments clarify that the election to measure at fair value through profit or loss an investment in
an associate or a joint venture that is held by an entity that is a venture capital organisation, or other
qualifying entity, is available for each investment in an associate or joint venture on an investment-by-
investment basis, upon initial recognition. These amendments are not expected to have an impact on the
Company.
(vii) Amendments to IFRS 4 - Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
The amendments address concerns arising from implementing the new financial instruments standard, IFRS
9, before implementing IFRS 17 Insurance Contracts, which replaces IFRS 4. The amendments introduce
two options for entities issuing insurance contracts: a temporary exemption from applying IFRS 9 and an
overlay approach. The temporary exemption is first applied for reporting periods beginning on or after 1
J anuary 2018. An entity may elect the overlay approach when it first applies IFRS 9 and apply that
approach retrospectively to financial assets designated on transition to IFRS 9. The entity restates
comparative information reflecting the overlay approach if, and only if, the entity restates comparative
information when applying IFRS 9. The Company is currently assessing the impact. See note b(iii) above.
(viii) IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration The Interpretation clarifies that, in determining the spot exchange rate to use on initial recognition of the
related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-
monetary liability relating to advance consideration, the date of the transaction is the date on which an
entity initially recognises the non-monetary asset or non-monetary liability arising from the advance
consideration. If there are multiple payments or receipts in advance, then the entity must determine the
transaction date for each payment or receipt of advance consideration. Entities may apply the amendments
On a fully retrospective basis. Alternatively, an entity may apply the Interpretation prospectively to all
assets, expenses and income in its scope that are initially recognised on or after:
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.6 Annual improvements 2014-2016 Cycle – Continued
(i) The beginning of the reporting period in which the entity first applies the interpretation
Or (ii) The beginning of a prior reporting period presented as comparative information in the financial
statements of the reporting period in which the entity first applies the interpretation.
The Interpretation is effective for annual periods beginning on or after 1 J anuary 2018. Early application
of interpretation is permitted and must be disclosed. However, since the Company’s current practice is in
line with the Interpretation, the does does not expect any effect on its financial statements.
(ix) IFRIC Interpretation 23 Uncertainty over Income Tax Treatment The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that
affects the application of IAS 12 and does not apply to taxes or levies outside the scope of IAS 12, nor does
it specifically include requirements relating to interest and penalties associated with uncertain tax
treatments. The interpretation specifically addresses the following:
Ø Whether an entity considers uncertain tax treatments separately Ø The assumptions an entity makes about examination of tax treatments by taxation authorities. Ø How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits
and tax. Ø How an entity considers changes in facts and circumstances.
An entity must determine whether to consider each uncertain tax treatment separately or together with
one or more other uncertain tax treatments. T he approach that better predicts the resolution o f the
uncertainty should be followed. The interpretation is effective for annual reporting periods beginning on or
after 1 J anuary 2019, but certain transition reliefs are available. The Company does not expect any effect
on its financial statements.
(x) Amendments to IFRS 2- Classification and Measurement of Share-based Payment Transactions The IASB issued amendments to IFRS 2 Share-based Payment that address three main areas: the effects
of vesting conditions on the measurement of a cash-settled share-based payment transaction; the
classification of a share-based payment transaction with net settlement features for withholding tax
obligations; and accounting where a modification to the terms and conditions of a share-based payment
transaction changes its classification from cash settled to equity settled. On adoption, entities are required to apply the amendments without restating prior periods, but
retrospective application is permitted if elected for all three amendments and other criteria are met. The
amendments are effective for annual periods beginning on or after 1 J anuary 2018, with early application
permitted. The Company is assessing the potential effect of the amendments on its financial statements.
(xi) Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its
Associate or J oint Venture
The amendments address the conflict between IFRS 10 and IAS 28 in dealing with the loss of control of a
subsidiary that is sold or contributed to an associate or joint venture. The amendments clarify that a full
gain or loss is recognised when a transfer to an associate or joint venture involves a business as defined in
IFRS 3 Business Combinations. Any gain or loss resulting from the sale or contribution of assets that does
not constitute a business, however, is recognised only to the extent of unrelated investors’ interests in the
associate or joint venture. The amendments are intended to eliminate diversity in practice and give
preparers a consistent set of principles to apply for such transactions. However, the application of the
definition of a business is judgemental and entities need to consider the definition carefully in such
transactions. Amendments must be applied prospectively and early application is permitted and must be
disclosed. These amendments have no impact on the Company.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.7 Regulatory authority and financial reporting
The Company is regulated by the National Insurance Commission (NAICOM) under the National Insurance
Act of Nigeria. The Act specifies certain provisions which have impact on financial reporting as follows:
i. Section 20 (1a) provides that provisions for unexpired risks shall be calculated on a time apportionment basis of the risks accepted in the year;
ii. Section 20 (1b) which requires the provision of 10 percent for outstanding claims in respect of claims incurred but not reported at the end of the year under review. See note 3(m)(vi) on accounting policy
for outstanding claims; iii. Sections 21 (1a) and 22 (1b) require maintenance of contingency reserves for general and life
businesses respectively at specified rates as set out under note (23) and note 3(t) to cover
fluctuations in securities and variation in statistical estimates; iv. Section 22 (1a) requires the maintenance of a general reserve known as life fund which shall be
credited with an amount equal to the net liabilities on policies in force at the time of the actuarial
valuation as set out under note 15(b). The valuation is done annually by the Company, using
independent experts; v. Section 24 requires the maintenance of a margin of solvency to be calculated in accordance with the
Act as set out under note 49.1; vi. Section 10(3) requires insurance companies in Nigeria to deposit 10 percent of the minimum paid-up
share capital with the Central Bank of Nigeria as set out under note 14; vii. Section 25 (1) requires an insurance company operating in Nigeria to invest and hold invested in
Nigeria assets equivalent to not less than the amount of policy holders' funds in such accounts of the
insurer. See note 51 for assets allocation that covers policy holders' funds.
The Financial Reporting Council of Nigeria Act No. 6, 2011 which requires the adoption of IFRS by all listed
and significant public interest entities provides that in matters of financial reporting, if there is any
inconsistency between the Financial Reporting Council of Nigeria Act No. 6, 2011 and other Acts which are
listed in section 59(1) of the Financial Reporting Council of Nigeria Act No. 6, 2011, the Financial Reporting
Council of Nigeria Act No. 6, 2011 shall prevail. The Financial Reporting Council of Nigeria acting under the
provisions of the Financial Reporting Council of Nigeria Act No. 6, 2011 has promulgated IFRS as the
national financial reporting framework for Nigeria. Consequently, the following provision of the National
Insurance Act, 2003 which conflict with the provisions of IFRS have not been adopted:
i) Section 22(1a) which requires additional 25 percent of net premium to general reserve fund. See note
3(m)(ii) on accounting policy for unexpired risk and unearned premium.
Reporting period The Statement of Financial Position has been prepared as of 31 December 2017, while the other primary
financial statements have been prepared for the nine months ended 31 December 2017, with comparative
figures for the preceding period.
· Significant financial difficulty of the issuer or debtor; · A breach of contract, such as a default or delinquency in payments; · It becoming probable that the issuer or debtor will enter bankruptcy or other financial reorganisation; · The disappearance of an active market for that financial asset because of financial difficulties; or · Observable data indicating that there is a measurable decrease in the estimated future cash flow from
a group of financial assets since the initial recognition of those assets, although the decrease cannot
yet be identified with the individual financial assets in the Company.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.8 Foreign currency translation
(a) Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The financial statements are
presented in Nigerian Naira which is the Company’s functional and presentation currency.
(b) Transactions and balances Foreign currency transactions are transactions denominated, or that require settlement, in a foreign
currency and these are translated into the functional currency spot rate prevailing at the dates of the
transactions.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency
spot rate of exchange prevailing at the reporting date. Foreign exchange gains and losses resulting from
the retranslation and settlement of these items are recognised in profit or loss.
2.9 Cash and cash equivalents
For the purposes of the statement of cash flows, cash comprises cash balances and deposits with banks
net of overdraft. Cash equivalents comprise highly liquid investments (including money market funds) that
are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in
value with original maturities of three months or less being used by the Company in the management of its short-term commitments. Cash and cash equivalents are carried at amortised cost in the statement of
financial position.
2.10. Financial assets
The Company classifies its financial assets into the following categories: financial assets sets as Held at fair
value through profit or loss (or held for trading), held-to-maturity, Available-for-sale and loans and
receivables. The classification is determined by management at initial recognition and depends on the
purpose for which the investments were acquired.
a. Financial assets at fair value through profit of loss A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is
designated at fair value through profit or loss upon initial recognition. The entity has no assets classified
as held-for-trading at the end of the year. The entity has designated certain financial assets upon initial
recognition at fair value through profit or loss (fair value option). This designation cannot subsequently be
changed. Financial assets are designated at fair value through profit or loss if the Company manages such
investments and makes purchase and sale decisions based on their fair value in accordance with the
Company’s documented risk management or investment strategy. The investments are carried at fair
value, with gains or losses arising from changes in this value recognized in the statement of profit or loss
in the period in which they arise. Composition/details are disclosed in notes.
b. Held-to-maturity. The Company classifies financial assets as held to maturity when the Company has positive intent and
ability to hold the securities to maturity. Held-to-maturity investments are recognized initially at fair value
plus any directly attributable transaction costs. Subsequent to initial recognition, held-to-maturity
investments are measured at amortized cost using the effective interest method, less any impairment
losses. Interest on held-to- maturity investments is included in the profit or loss and are reported as
‘investment income’.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.10 Financial assets – continued
c. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are classified as available-for-
sale or are not classified in any of the two preceding categories which may be sold in response to the need
for liquidity or changes in interest rates, exchange rates or equity prices. These investments are initially
recognised at fair value. After initial measurement, available-for-sale financial assets are subsequently
measured at fair value. Fair value gains and losses are reported as a separate component in other
comprehensive income until the investment is derecognised o r the investment is determined to be
impaired. On derecognition or impairment, the cumulative fair value gains and losses previously reported
in equity are transferred to profit or loss.
d. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market other than: · those that the Company intends to sell in the short term which are reclassified as fair value through profit
or loss and those that the Company upon initial recognition designates at fair value through profit or loss. · those that the Company upon initial recognition designates as Available for Sale · those for which the holder may not recover substantially all of its initial investment other than because
of credit risk. They include:
(i) Trade receivables Trade receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They are mainly receivables arising from insurance contracts. Trade
receivables are recognised initially at fair value plus any directly attributable transaction costs. Subsequent
to initial recognition, trade receivables are measured at amortized cost less any impairment losses. They
include receivables from Brokers and Co-insurance companies.
(ii) Other receivables Other receivables are made up of amounts due from parties which are not directly linked to insurance or
investment contracts. Other receivables are stated after deductions of amount considered bad or doubtful
of recovery. When a debt is deemed not collectible, it is written-off against the related provision or directly
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.
e. Impairment of financial assets
(i) Financial assets carried at amortised cost The Company assesses at each end of the reporting period whether there is objective evidence that a
financial asset or group of financial assets is impaired. A financial asset or group of financial assets is
impaired and impairment losses are incurred only if there is objective evidence of impairment as a result
of one or more events that have occurred after the initial recognition of the asset (a ‘loss event’) and that
loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of
financial assets that can be reliably estimated. Objective evidence that a financial asset or group of assets
is impaired includes observable data that comes to the attention of the Company from the following events: Default or delinquency by a debtor; Restructuring of an amount due to the Company on terms that the Company would not consider
favourable; Indications that a debtor or issuer will enter bankruptcy; The disappearance of an active market for the security because of financial difficulties; and Observable data indicating that there is a measurable decrease in the estimated future cash flow
from a group of financial assets since the initial recognition of those assets, although the decrease
cannot yet be identified with the individual financial assets in the group.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.10 Financial assets – continued
The Company first assesses whether objective evidence of impairment exists individually for financial
assets that are individually significant. If the Company determines that no objective evidence of impairment
exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group
of financial assets with similar credit risk characteristics and collectively assesses them for impairment.
Assets that are individually assessed for impairment and for which an impairment loss is or continues to be
recognised are not included in a collective assessment of impairment. If there is objective evidence that an
impairment loss has been incurred on loans and receivables or held-to-maturity investments carried at
amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount
and the present value of estimated future cash flows (excluding future credit losses that have been
incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the
asset is reduced, and the amount of the loss is recognised in the statement of profit of loss. If a held-to-
maturity investment or a loan has a variable interest rate, the discount rate for measuring any impairment
loss is the original effective interest rate determined under contract. As is practically expedient, the
Company may measure impairment on the basis of an instrument’s fair value using an observable market
price.
For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of similar
credit risk characteristics. Those characteristics are relevant to the estimation of future cash flows for
groups of such assets by being indicative of the issuer’s ability to pay all amounts due under the contractual
terms of the debt instrument being evaluated. If in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively to an event occurring after the impairment was
recognised, the previously recognised impairment loss is reversed by adjusting the assets. The amount of
the reversal is recognised in the statement of profit or loss.
(i) Trade receivables These are initially recognised at fair value and subsequently measured at amortised cost less provision for
impairment. A provision for impairment is made when there is objective evidence (such as the probability
of insolvency, significant financial difficulties on the part of the counterparty or default or significant delay
in payment - over 30 days) that the Company will not be able to collect the entire amount due under the
original terms of the invoice. Allowances for impairment are made based on “incurred loss model” which
consider premiums outstanding and not received within one month subsequent to the year-end as lost,
given default for each customer and probability of default for the sectors in which the customer belongs.
The amount of such a provision being the difference between the carrying amount and the present value
of the future expected cash flows associated with the impaired receivable. For amounts due from policy
holders and reinsurers, which are reported net, such provisions are recorded in a separate impairment
account with the loss being recognised in statement of profit or loss. On confirmation that the amounts
receivable will not be collectable, the gross carrying value of the asset is written off against the associated
provision. Any subsequent recoveries are credited to the statement of profit or loss in the period the
recoveries are made.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.10 Financial assets – continued
(ii) Assets classified as available-for-sale The Company assesses at each date of the statement of financial position whether there is objective
evidence that a financial asset or a group of financial assets is impaired. In the case of equity investments
classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its
cost is an objective evidence of impairment resulting in the recognition of an impairment loss. In this
respect, a decline of 20%or more is regarded as significant, and a period of 1 year or longer is considered
to be prolonged. If any such quantitative evidence exists for available-for-sale financial assets, the asset is
considered for impairment, taking qualitative evidence into account. The cumulative loss – measured as
the difference between the acquisition cost and the current fair value, less any impairment loss on those
financial assets previously recognised in profit or loss – is removed from equity and recognised in the
statement of profit or loss. Impairment losses recognised in the istatement of profit or loss on equity instruments are not reversed
through the profit or los. If in a subsequent period the fair value of a debt instrument classified as available
for sale increases and the increase can be objectively related to an event occurring after the impairment
loss was recognised in profit or loss, the impairment loss is reversed through the profit or loss.
(f) Derecognition of financial instruments The Company derecognises a financial asset when the contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction
in which substantially all the risks and rewards of ownership of the financial asset are transferred, or has
assumed an obligation to pay those cash flows to one or more recipients, subject to certain criteria.
Impaired debts are derecognised when they are assessed as uncollectible
(g) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial posistion
only when there is a legally enforceable right to offset the recognised amounts and there is an intention to
settle on a net basis, or to realise the asset and settle the liability simultaneously.
2.11 Impairment of non-financial assets
The carrying amounts of the Company’s non-financial assets other than deferred tax assets are reviewed
at each reporting date to determine whether there is any indication of impairment. If any such indication
exists, then the asset’s recoverable amount is estimated.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its
recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash
flows that are largely independent from other assets and groups. Impairment losses are recognised in profit
or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the
carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other
assets in the unit (group of units) on a pro rata basis.
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PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.11 Impairment of non-financial assets -continued
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair
value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. 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.
2.12 Reinsurance receivables
Reinsurance assets consist of short-term balances due from reinsurers, as well as longer term receivables
that are dependent on the expected claims and benefits arising under the related reinsurance contracts.
Amounts recoverable from or due to reinsurers are measured consistently with the amounts associated
with the reinsurance contracts and in compliance with the terms of each reinsurance contract.
The reinsurers' share of unearned premiums (i.e. the reinsurance assets) are recognised as an asset using
principles consistent with the Company's method for determining unearned premium liability. The amount
reflected on the statement of financial position is on a gross basis to indicate the extent of credit risk
related to the reinsurance and its obligations to policy holders.
The Company assesses its reinsurance assets for impairment at each statement of financial position date.
If there is objective evidence that the reinsurance asset is impaired, the Company reduces the carrying
amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in the
profit or loss. The Company gathers the objective evidence that a reinsurance asset is impaired using the
same process adopted for financial assets held at amortised cost.
2.13 Deferred acquisition costs (DAC)
Commissions and other acquisition costs that are related to securing new contracts and renewing existing
contracts are capitalised as Deferred Acquisition Costs (DAC) if they are separately identifiable, can be
measured reliably and it is probable that they will be recovered. All other costs are recognised as expenses
when incurred. The DAC is subsequently amortised over the life of the contracts in line with premium
revenue using assumptions consistent with those used in calculating unearned premium. It is calculated by
applying to the acquisition expenses the ratio of unearned premium to written premium. The DAC asset is
tested for impairment annually and written down when it is not expected to be fully recovered.
2.14 Finance lease
Finance lease are recognised when the company transfers substantially all the risks and rewards of
ownership of the leased assets to the leasee. Investment in finance lease at commencement is initially
recorded as an asset and a liability at the lower of the fair value of the asset and the present value of the
minimum lease payments (discounted at the interest rate implicit in the lease, if practicable, or else at the
entity's incremental borrowing rate. The finance lease is recorded as a receivable, at an amount equal to
the net investment in the lease.
Interest income on investment in finance lease is recognised in the profit or loss as investment income in
the period the interest is due receivable. An investment in finance lease is impaired if the carrying amount
of the investment exceeds its recoverable or net realisable amount.
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PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.15 Investment property
Investment property is property (land or a building or part of a building or both) held (by the owner or by
the lessee under a finance lease) to earn rentals or for capital appreciation or both. Investment property,
including interest in leasehold land, is initially recognised at cost. Subsequently, investment property is
carried at fair value at the reporting date determined by annual valuations carried out by external
registered valuers. Gains or losses arising from changes in the fair value are included in determining the
profit or loss for the year to which they relate.
Subsequent expenditure on investment property where such expenditure increases the future economic
value in excess of the original assessed standard of performance is added to the carrying amount of the
investment property. All other subsequent expenditure is recognised as expense in the year in which it is
incurred.
Investment properties are derecognised when either they have been disposed of or when the investment
property is permanently withdrawn from use and no future economic benefit is expected from its disposal.
On disposal of an investment property, the difference between the disposal proceeds and the carrying
amount is charged or credited to comprehensive income.
Transfers are made to or from investment property only when there is a change in use. For a transfer from
investment property to owner occupied property, the deemed cost for subsequent accounting is the fair
value at the date of change in use. If an owner occupied property becomes an investment property, the
Company accounts for such property in accordance with the policy stated under property, plant and
equipment up to the date of the change in use.
2.16 Intangible assets
Intangible assets comprise computer software purchased from third parties. They are measured at cost
less accumulated amortisation and accumulated impairment losses. Purchased computer software are
capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These
costs are amortised on straight line basis over the useful life of the asset.
Expenditure that is reliably measurable and meets the definition of an assets is capitalized.
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 10years. The
residual values and useful lives are reviewed at the end of each reporting period and adjusted, if
appropriate. An Intangible asset’s carrying amount is written down immediately to its recoverable amount
if the asset’s carrying amount is greater than its estimated recoverable amount.
The estimated useful lives for the current and comparative period are as follows:
Computer software 10 years
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PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.17 Property, plant and equipment
(a) Recognition and measurement
All property, plant and equipment is initially recorded at cost. They are subsequently stated at cost less
accumulated depreciation and impairment losses. Historical costs includes expenditure that is directly
attributable to the acquisition of the assets. An assets is recognized when it is probable that the economic
benefits associated with the item flow to the entity and cost can be reliably measured.
(b) Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount
of the item if it is probable that the future economic benefits embodied within the part will flow to the
Company and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant
and equipment are recognised in profit or loss as incurred.
(c) Depreciation Depreciation is recognised in the statement of profit or loss on a straight-line basis over the estimated
useful lives of each item of property, plant and equipment. Leased assets are depreciated over the shorter
of the lease term and their useful lives. 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.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to
allocate their cost or re-valued amounts over their estimated useful lives.
The estimated useful lives for the current and comparative period are as follows:
Plant and machinery 12.5%
Leasehold land and buildings 2%of cost/valuation Furniture, fittings and office equipment 10% Computer equipment 33 1/3% Motor vehicles 25% Assets under lease Over the period of lease
The assets’ residual values and useful lives are reviewed at the end of each reporting period and adjusted,
if appropriate. An asset’s carrying amount is written down immediately to its recoverable amount if the
asset’s carrying amount is greater than its estimated recoverable amount.
(d) Revaluation of land and building Property, plant & equipment are initially recorded at cost. Land and building are subsequently carried at
revalued amount being the fair value at the date of revaluation less any subsequent accumulated
depreciation and subsequent accumulated impairment losses. Revaluations are made with sufficient
regularity such that the carrying amount does not differ materially from that which would be determined
using fair value at the end of the reporting period.
When a property is revalued, any increase in its carrying amount (as a result of revaluation) is transferred
to a revaluation reserve, except to the extent that it reverses a revaluation decrease of the same property
previously recognised as an expense in the of profit or loss.
When the value of a property is decreased as a result of a revaluation, the decrease is charged against any
related credit balance in the revaluation reserve in respect of that property. However, to the extent that it
exceeds any surplus, it is recognised as an expense in the statement of profit or loss.
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PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.17 Property, plant and equipment – continued
When revalued assets are being depreciated, part of the surplus is being realized as the asset is used. The
amount of the surplus realized is the difference between the depreciation charged on the revalued amount
and the lower depreciation which would be charged to property revaluation reserve and accumulated losses
but not through profit or loss.
(e) De-recognition An item of property, plant and equipment is derecognised on disposal or when no future economic benefits
are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as
the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit
or loss in the year the asset is derecognised.
2.18 Statutory deposit
Statutory deposit represents a fixed deposit with the Central Bank of Nigeria in accordance with section
10(3) of the Insurance Act, 2003. The deposit is recognised at the cost in the statement of financial
position being 10% of the statutory minimum capital requirement of N3 billion for General insurance
business. Interest income on the deposit is recognised in the statement of profit or loss in the period the
interest is earned.
2.19 Insurance contracts and insurance contract liabilities
In accordance with IFRS 4 insurance contracts, the Company has continued to apply the accounting policies
it applied in accordance with Nigerian GAAP. These contracts are accident, workmen’s compensation,
motor, marine and aviation and fire insurance.
Insurance contracts protect the Company’s customers against the risk of harm from unforeseen events to
their properties resulting from their legitimate activities. The typical protection offered is designed for
employers who become legally liable to pay compensation to injured employees (employers’ liability) and
for individual and business customers who become liable to pay compensation to a third party for bodily
harm or property damage (public liability).
Property insurance contracts mainly compensate the Company’s customers for damage suffered to their
properties or for the value of property lost.
Others forms of Insurance contracts include but are not limited to workmen’s compensation, motor, marine
and aviation insurance.
Claims and loss adjustment expenses are charged to income as incurred based on the estimated liability
for compensation owed to contract holders or third parties damaged by the contract holders. They include
direct and indirect claims settlement costs arising from events that have occurred up to the end of the
reporting period even if they have not yet been reported to the Company i.e. Claims incurred but not
reported (IBNR) which is actuarial valuation. The Company does not discount its liabilities for unpaid claims
other than for workmen compensation claims. Liabilities for unpaid claims are estimated using the impute
of assessments of provision reported to the Company and analysis for the claims incurred but not reported
(IBNR).
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PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.19 Insurance contracts and insurance contract liabilities - continued
Reinsurance contracts held
The Company holds the under-noted reinsurance contracts: · Treaty Reinsurance Outward is usually between the Company and Reinsurers. · Facultative Reinsurance Outward is usually between the Company and other insurance companies or
between the Company and Reinsurers. · Facultative reinsurance inwards is usually between the Company and other insurance Companies or
between the Company and Reinsurers.
Premiums due to the reinsurers are paid and all claims and recoveries due from reinsurers are received.
Contracts entered into by the Company with reinsurers under which the Company is compensated for
losses on one or more contracts issued by the Company and that meet the classification requirements for
insurance contracts are classified as reinsurance contracts held. Contracts that do not meet these
classification requirements are classified as financial assets.
The benefits to which the Company is entitled under its reinsurance contracts held are recognized as
reinsurance assets. These assets consist of short-term balances due from reinsurers, as well as long term
receivables that are dependent on the expected claims and benefits arising under the related reinsured
insurance contracts. Amounts recoverable from or due to reinsurers are measured consistently with the
amount associated with the reinsured insurance contracts and in accordance with the terms of each
reinsurance contract. Reinsurance liabilities are primarily premiums payable for reinsurance contracts and
are recognized as an expense when due.
The Company’s Insurance liabilities or balances arising from insurance contracts primarily include those
insurance contract liabilities that were valued by the Actuary. These include unearned premiums reserve
and outstanding claim reserve.
(i) Unearned premium reserve Unearned premium provision is calculated using a time - apportionment basis, in particular, the 365ths
method.
(ii) Outstanding claims reserve Individual loss estimates are provided on each claim reported. In addition, provisions are made for
adjustment expenses, changes in reported claims and for claims incurred but not reported (IBNR), based
on past experience and business in force.
The reserve for outstanding claims is maintained at the total amount of outstanding claims incurred and
reported plus claims incurred but not reported ("IBNR") as at the reporting date. The IBNR is based on the
liability adequacy test carried out by an Actuary.
(iii) Liability adequacy test At the end of each reporting period, liability adequacy tests are performed by an Actuary to ensure the
adequacy of the contract liabilities net of related D AC assets. In performing these tests, current best
estimates of future contractual cash flows and claims handling and administration expenses, as well as
investment income from the assets backing such liabilities, are used. Any deficiency is immediately charged
to profit or loss initially by writing off DAC and by subsequently establishing a provision for losses arising
from liability adequacy tests.
The provisions of the Insurance Act,CAP I17 LFN 2004 require an actuarial valuation for life reserves only
however, IFRS 4 requires a liability adequacy test for both life and non-life insurance reserves. The
provision of section 59 of the Financial Reporting Council Act No.6, 2011 gives superiority to the provisions
of IFRS and since it results in a more conservative reserving than the provision of the Insurance Act, CAP
I17 LFN 2004, it supports the Company's prudential concerns.
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PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.19 Insurance contracts and insurance contract liabilities - continued
(iv) Salvage and subrogation reimbursements
Some insurance contracts permit the Company to sell (usually damaged) property acquired in settling a
claim (for example, salvage). The Company may also have the right to pursue third parties for payment of
some or all costs (for example, subrogation). Estimates of salvage recoveries are included as an allowance
in the measurement of the insurance liability for claims, and salvage property is recognized in other assets
when the liability is settled. The allowance is the amount that can reasonably be recovered from the
disposal of the property.
Subrogation reimbursements are also considered as an allowance in the measurement of the insurance
liability for claims and are recognized in other assets when the liability is settled. The allowance is the
assessment of the amount that can be recovered from the action against the liable third party.
2.20 Trade payables
Trade payables (i.e insurance payables) are recognised when due and measured on initial recognition at
fair value less directly attributable transaction costs. Subsequent to initial recognition, they are measured
at amortised cost using the effective interest rate method. Trade payables include payables to agents and
brokers, payables to reinsurance companies, payables to coinsurance companies and commission payable.
The fair value of a non-interest bearing liability is its discounted repayment amount. Trade payables are
derecognised when the obligation under the liability is settled, cancelled or expired.
2.21 Provisions and other payables
Provision is recognised 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.
Provisions are measured at the best of estimate of the expenditure required to settle the obligation at the
end of the reporting period. The provisions are reviewed at the end of the reporting period and adjusted to
reflect the current best estimate.
Other payables are recognised initially at fair value and subsequently measured at amortised cost using
effective interest method.
2.22 Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and
the redemption value is recognised in the statement of profit or loss over the period of the borrowings
using the eff ective interest method.
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PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.23 Retirement obligations and employee benefits
The Company operates the following contribution and benefit schemes for its employees:
Defined benefit gratuity scheme
The Company has a defined benefit gratuity scheme for management and non-management staff. Under
this scheme, a specified amount as determined by actuarial valuation is contributed by the Company and
charged to the statement of profit or loss over the service life of each employee.
The Company recognizes the following changes in the net defined benefit obligation under ‘’the employee
benefit expense’’. Service costs comprising current service costs, past services costs, gains and losses on
curtailment and non-routine settlements.
Employees are entitled to gratuity after completing a minimum of five continuous full years of service. The
gratuity obligation is calculated annually by Independent Actuaries using the projected unit credit method.
The present value of the gratuity obligation is determined by discounting the estimated future cash
outflows using market yields on high quality corporate bonds. The liability recognized in the statement of
financial position in respect of defined benefit gratuity plan is the present value of the defined benefit
obligation at the reporting date less the fair value of plan assets. Actuarial gains or losses arising from the
valuation are credited or charged to statement of profit or loss and other comprehensive income in the
financial year in which they arise.
Re-measurement arising from actuarial gains and losses are immediately recognized in the statement of
financial position with corresponding debit or credit recognized in the retained earnings through OCI in
periods in which they occur. Re-measurement are not reclassified in subsequent periods. Past service costs
are recognized in the profit or loss on the earlier of:
The date of plan amendment or curtailment and; The date that the Group recognizes related restructuring costs
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset using the
rate at the beginning of the period. The Company recognizes the following changes in the net defined
benefit obligation under ‘’the employee benefit expense’’. Service costs comprising current service costs,
past services costs, gains and losses on curtailment and non-routine settlements.
Defined contribution pension scheme The Company operates a defined contributory pension scheme for eligible employees. The Company and
employees contribute 10%and 8%respectively of the employees' Basic, Housing and Transport allowances
in line with the provisions of the Pension Reform Act 2014. The Company pays the contributions to a
pension fund administrator. The Company has no further payment obligations once the contributions have
been paid. The contributions are recognised as employee benefits expense when they are due. Prepaid
contributions are recognised as an asset to the extent that a cash refund or a reduction in the future
payments is available.
Short-term benefits Wages, salaries, paid annual leave, bonuses and non-monetary benefits are recognised as employee benefit
expenses when the associated services are rendered by the employees of the Company.
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PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.24 Income taxes- Company income tax and deferred tax liabilities
Income tax expense comprises current and deferred tax. Income tax expense is recognised in the of profit
or loss except to the extent that it relates to items recognised directly in equity, in which case it is
recognised in equity or in other comprehensive income. Current income tax is the estimated income tax
payable on taxable income for the year, using tax rates enacted or substantively enacted at reporting date,
and any adjustment to tax payable in respect of previous years.
The tax currently payable is based on taxable results for the year. Taxable results differs from results as
reported in the profit or loss because it includes not only items of income or expense that are taxable or
deductible in other years but it further excludes items that are never taxable or deductible. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation and establishes provisions where appropriate.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability differs
from its tax base. Deferred taxes are recognized using the balance sheet liability method, providing for
temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes (tax bases of the assets or liability). The amount of
deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount
of assets and liabilities using tax rates that are expected to apply in the year when the asset is realised or
the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
at the reporting date.
Deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be
available against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date
and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as
the liability to pay the related dividend is recognised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities
relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable
entities where there is an intention to settle the balances on a net basis. The tax effects of carry-forwards
of unused losses or unused tax credits are recognised as an asset when it is probable that future taxable
profits will be available against which these losses can be utilised.
2.25 Share capital and share premium
Shares are classified as equity when there is no obligation to transfer cash or other assets. Any amounts
received over and above the par value of the shares issued are classified as ‘share premium’ in equity.
Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction
from the proceeds, net of tax.
2.26 Dividend on ordinary shares
Dividends on the Company’s ordinary shares are recognised in equity in the period in which they are paid
or, if earlier, approved by the Company’s shareholders. Dividends for the year that are declared after the
reporting date are dealt with in the subsequent events note.
2.27 Statutory Contingency reserve
In compliance with Section 21 (2) of Insurance Act, CAP I17 LFN 2004, the contingency reserve is credited
with the greater of 3% of gross premium written, or 20% of the net profits. This shall accumulate until it
reaches the amount of greater of minimum paid-up capital or 50 percent of net premium.
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PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.28 Retained earnings/accumulated losses
This reserve represents amount set aside out of the profits of the Company which shall at the discretion of
the Directors be applicable for meeting contingencies, repairs or maintenance of any works connected with
the business of the Company, for equalising dividends, for special dividend or bonus, or such other
purposes for which the profits of the Company may lawfully be applied.
2.29 Available-for-sale reserve
The available-for-sale reserve comprises the cumulative net change in the fair value of the group’s available-for-sale investments. Net fair value movements are recycled to profit or losss if an underlying available-for-sale investment is either derecognized or impaired.
2.30 Property revaluation reserve
Subsequent to initial recognition, an item of property, plant and equipment may be revalued to fair value.
However, if such item is revalued, the whole class of asset to which that asset belongs has to be revalued.
The revaluation surplus is recognized in equity, unless it reverses a decrease in the fair value of the same
asset which was previously recognized as an expense, in which case it is recognized in profit or loss. A
subsequent decrease in the fair value is charged against this reserve to the extent that there is a credit
balance relating to the same asset, with the balance being recognized in profit or loss.
2.31 Gratuity valuation reserve
The gratuity valuation reserve comprises the cumulative net change in the re-measurement gain/(loss) on
defined benefit plans.
2.32 Contingent assets and liabilities
A contingent asset is a possible asset 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. 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 but is not recognized because it is not likely that an outflow of resources will be
required to settle the obligation; or the amount cannot be reliably estimated.
Contingent liabilities and contingent assets are never recognized rather they are disclosed in the financial
statements when they arise.
2.33 Premium and unearned premium
Premiums written comprise the premium on contracts incepting in the financial year. Premiums written
are stated gross of commission payable to agents and exclusive of taxes levied on premiums. The Company
earns premium income evenly over the term of the insurance policy generally using the pro rata method.
The portion of the premium related to the unexpired portion of the policy at the end of the fiscal year is
reflected in unearned premium.
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PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.34 Reinsurance expenses
Reinsurance costs represent outward premium paid to reinsurance companies less the unexpired portion
as at the end of the accounting year.
2.35 Fees and commission income
Insurance and investment contract policyholders are charged for policy administration services,
investment management services, surrenders and other contract fees. These fees are recognised as
revenue over the period in which the related services are performed. If the fees are for services provided
in future periods, then they are deferred and recognised over those future periods.
2.36 Claims expense
Claims incurred consist of claims and claims handling expenses paid during the financial year together with
the movement in the provision for outstanding claims. (See policy for reserve for outstanding claims
above)The gross provision for claims represents the estimated liability arising from claims in current and
preceding financial years which have not yet given rise to claims paid. The provision includes an allowance
for claims management and handling expenses.
The gross provision for claims is estimated based on current information and the ultimate liability may vary
as a result of subsequent information and events and may result in significant adjustments to the amounts
provided. Adjustments to the amounts of claims provision for prior years are reflected in profit or loss in
the financial period in which adjustments are made, and disclosed separately if material.
2.37 Acquisition costs and maintenance expenses
Acquisition costs represent commissions payable and other expenses related to the acquisition of
insurance contract revenues written during the financial year. Deferred acquisition costs represent the
proportion of acquisition costs incurred which corresponds to the unearned premium provision (See policy
for Deferred Acquisition Cost above). Examples of these costs include, but are not limited to, commission
expense, supervisory levy, superintending fees and other technical expenses. Maintenance expenses are
those incurred in servicing existing policies/contract.
2.38 Investment income
This includes interest income and dividend income. Interest income is recognised in profit or loss as it
accrues and is calculated by using the effective interest rate method. Fees and commissions that are an
integral part of the effective yield of the financial asset or liability are recognised as an adjustment to the
effective interest rate of the instrument. Dividend income for equities is recognised when the right to
receive payment is established, this is the ex-dividend date for equity securities.
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PRESTIGE ASSURANCE PLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.39 Management expenses
Management expenses are expenses other than claims, investment expenses, employee benefits, expenses
for marketing and administration and underwriting expenses. They include wages, professional fee,
depreciation expenses and other non-operating expenses. Other Operating expenses are accounted for on
accrual basis and recognized in the statement of profit or loss upon utilization of the service or at the date
of their origin.
Finance income and expenses Finance income and expense for all interest-bearing financial instruments are recognised within 'finance
income' and 'finance costs' in the profit or loss using the effective interest method. The effective interest
method is a method of calculating the amortised cost of a financial asset or liability (or group of assets and
liabilities) and of allocating the finance income or finance costs over the relevant period. The effective
interest rate is the rate that exactly discounts the expected future cash payments or receipts through the
expected life of the financial instrument, or when appropriate, a shorter period, to the net carrying amount
of the instrument.
The application of the method has the effect of recognising income (and expense) receivable (or payable)
on the instrument evenly in proportion to the amount outstanding over the period to maturity or
repayment. In calculating effective interest, the Group estimates cash flows considering all contractual
terms redemption, are included in the calculation to the extent that they can be measured and are
considered to be an integral part of the effective interest rate.
Cash flows arising from the direct and incremental costs of issuing financial instruments are also taken into
account in the calculation. Where it is not possible to otherwise estimate reliably the cash flows or the
expected life of a financial instrument, effective interest is calculated by reference to the payments or
receipts specified in the contract, and the full contractual term. Once a financial asset or a group of similar
financial assets has been written down as a result of an impairment loss, interest income is recognised
using the rate of interest used to discount the future cash flows for the purpose of measuring the
impairment loss.
2.40 Income tax expense
Income tax expense comprises current income tax, education tax levy, information technology tax and
deferred tax. (See policy on taxation above).
2.41 Earnings per share
The Company presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated
by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit
or loss attributable to ordinary shareholders and the weighted average number of ordinary shares
outstanding for the effects of all dilutive potential ordinary shares.
51
Prestige Assurance Plc Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2017 2 0 1 7 2 0 1 6
=N='000 =N='000 Gross premium written 3 , 8 0 8 ,5 1 6 2 , 6 1 4 ,2 6 4
Gross premium income 1 3 , 3 8 5 ,0 7 8 2 , 5 4 7 ,5 3 1 Reinsurance expenses 2 (1 ,936 ,59 7) (1 ,445 ,723)
Net premium income 1 , 4 4 8 ,4 8 1 1 , 1 0 1 ,8 0 8
Fees and commission income 5 0 1 , 9 4 8 3 6 5 ,9 2 3 Net underwriting income 1 , 9 5 0 ,4 2 9 1 , 4 6 7 ,7 3 1
Claims expenses 3 6 5 5 , 7 3 5 4 2 9 ,7 9 0 Acquisition expenses 4 4 8 3 , 5 9 6 3 6 9 ,3 4 9 Maintenance expenses 5 4 7 5 , 7 0 3 4 1 4 ,5 1 8 Underwriting expenses 1 , 6 1 5 ,0 3 4 1 , 2 1 3 ,6 5 7
Underwriting profit 3 3 5 , 3 9 5 2 5 4 ,0 7 4 Investment income 6 8 3 0 , 9 3 9 4 1 7 ,8 2 4 Net fair value gain/(loss) on financial assets 1 4.1 4 0 ,6 0 2 (18 ,433) Net fair value gain/(loss) on investment property 20 1 5 2 , 4 3 8 (13 ,436)
1 , 3 5 9 ,3 7 4 6 4 0 ,0 2 9
Other operating income 7 3 0 ,7 7 4 1 4 6 ,3 6 1 1 , 3 9 0 ,1 4 8 7 8 6 ,3 9 0
Management expenses 8 (683 ,9 33) (435 ,394)
Results from operating activities 7 0 6 , 2 1 5 3 5 0 ,9 9 6
Finance costs (8 ,226) (10 ,602)
Profit before income tax expense 6 9 7 , 9 8 9 3 4 0 ,3 9 4 Income tax expense 9 (166 ,1 48) (118 ,402)
Profit for the year 5 3 1 , 8 4 1 2 2 1 ,9 9 2
Other comprehensive income:
Items within OCI that may be reclassified to
Profit or loss or in subsequent period net of tax:
Net Gain on valuation of Available-for-sale financial assets 11.1 7 7 9 , 4 1 3 1 7 7 ,0 5 4 Items within OCI that will not be reclassified to
profit/loss in subsequent periods net of tax: Re-measurement (loss)/gain on defined benefit plan 1 1.2 (23,274) 1 9 ,6 38 Loss on revaluation of land and buildings (8 ,121) - Total other comprehensive income for the year, net of tax 7 4 8 , 0 1 8 1 9 6 ,6 9 2
Total comprehensive income for the year, net of tax 1 , 2 7 9 ,8 5 9 4 1 8 ,6 8 4
Baic earnings per ordinary share (kobo) 12 9 .90 4.13 Diluted earnings per ordinary share (kobo) 9 .90 4.13
See accompanying summary of significant accounting policies and notes to the financial statements which form
an integral part of these financial statements.
52
Prestige Assurance Plc
Statement of Financial Position As at 31 December 2017 31 December 31 December
2017 2016 Assets =N='000 =N='000 Cash and cash equivalents 13 1,010 ,492 862,680 Financial assets: - Fair value through profit or loss 14.1 259,006 495,841 - Held-to-maturity 14.2 2,420 ,199 1,622 ,105 - Available-for-sale 14.3 1,878 ,385 1,098 ,213 - Loans and receivables 14.4 49,527 97,199
Trade receivables 15 6,517 7,931 Other assets 16 57,076 51,982 Reinsurance assets 17 1,705 ,937 1,339 ,406 Deferred acquisition costs 18 154,149 92,839 Finance lease receivables 19 184,030 132,943 Investment property 20 2,439 ,002 2,286 ,564 Intangible assets 21 44,475 9,162 Property, plant and equipment 22 1,266 ,758 1,292 ,722 Statutory deposit 23 300,000 300,000
Total assets 11,775 ,553 9,689 ,587
Liabilities Insurance contract liabilities 24 2,643 ,592 1,799 ,210 Trade payables 25 467,266 241,066 Other liabilities 26 295,978 565,557 Borrowings 27 72,078 152,335 Retirement benefits obligation 28 164,290 107,646 Current income tax payable 9 162,372 127,950 Deferred tax liabilities 10 461,856 467,561
Total liabilities 4,267 ,432 3,461 ,325
Equity Share capital 29 2,685 ,216 2,685 ,216 Share premium 30 1,127 ,599 1,127 ,599 Statutory contingency reserve 31 1,867 ,906 1,753 ,651 Retained earnings/(accumulated losses) 32 (347,325) (776,511) Gratuity valuation reserve 33.1 (13,433) 9,841 Available-for-sale reserve 33.2 1,450 ,955 671,542 Property revaluation reserve 33.3 737,203 756,924 Total equity 7,508 ,121 6,228 ,262 Total liabilities and equity 11,775 ,553 9,689 ,587
These financial statements were approved by the Board of Directors and authorized for issue on 9 t h M a r c h 2018 and signed on its
behalf by:
--------------------------------------------- --------------------------------------------- ----------------------------------------------- Mr. Hassan T. M. Usman Dr. Balla Swamy Emmanuel Oluwadare Chairman Managing Director/CEO Chief Financial Officer FRC/2013/IODN/0000003601 FRC/2015/CIIN/00000011288 FRC/2013/ICAN/00000003649
See accompanying summary of significant accounting policies and notes to the financial statements which form an integral part
of these financial statements.
53
Prestige Assurance Plc Statement of Changes in Equity For the year ended 31 December 2017
Notes
Share capital
(Note 29)
Share
premium
(Note 30)
Statutory
Contingency reserve
(Note 31)
Accumulated
losses (Note 32)
Gratuity
valuation reserve (Note
33.1)
Available-for-
sale reserve (Note 33.2)
Property
revaluation reserve
(Note 33.3)
Total equity
=N='000 =N='000 =N='000 =N='000 =N='000 =N='000 =N='000 =N='000
As at 1 J anuary 2017 2,685,216 1,127,599 1,753,651 (776,511) 9,841 671,542 756,924 6,228,262 Profit for the year - - - 531,841 531,841 Other comprehensive income net of tax - - - (23,274) 779,413 (8,121) 748,018 Transfer to statutory cont ingency reserve - - 114,255 (114,255) - - - - Reduction in accumulated losses - - - 11,600 - - (11,600) - At 31 December 2017 2,685,216 1,127,599 1,867,906 (347,325) (13,433) 1,450,955 737,203 7,508,121
As at 1 J anuary 2016 restated 2,685,216 1,127,599 1,675,223 (945,069) (9,797) 494,488 781,918 5,809,578 Profit for the year - - - 221,992 - - - 221,992 Other comprehensive income - - - - 19,638 177,054 - 196,692 Transfer of contingency reserve - - 78,428 (78,428) - - - - Transfer to accumulated losses - - - 24,994 - - (24,994) - At 31 December 2016 2,685,216 1,127,599 1,753,651 (776,511) 9,841 671,542 756,924 6,228,262
See accompanying summary of significant accounting policies and notes to the financial statements which form an integral part of these financial statements.
54
Prestige Assurance Plc Statement of Cash Flows For the year ended 31 December 2017
2017 2016 Notes =N='000 =N='000
Cash flows from operating activities Premiums received from policy holders 3,809,930 2,609,056 Commissions received 501,948 365,923 Commission paid (544,906) (375,058) Reinsurance premium paid (2,118,235) (1,429,607) Claims paid 3 (1,333,405) (1,896,206) Claims recoverable from re-insurers 3 927,416 1,333,188 Other operating cash payments 34.2 (1,129,920) (315,612) Other operating cash receipt 26,015 118,252 Cash flows (used in)/generated from operating activities 138,843 409,936 Income tax paid 9 (123,976) (145,651) Benefits paid 28 (14,894) (35,634) Net cash (used in)/from operating activities 34.1 (27) 228,651
(27)
Cash flows from investing activities Purchase of property, plant and equipment 22 (37,833) (18,799) Purchase of intangible assets 21 (41,000) (598) Proceeds from disposal of property, plant and equipment 1,924 589 Proceeds on disposal of held-for-trading assets 402,606 - Purchase of available-for-sale financial assets 14.3 - (100,972) Purchase of held-to-maturity financial assets 14.2 (1,002,321) (1,002,321) Proceeds on redemption of held-to-maturity financial assets 203,227 78,124 Interest received 561,918 324,385 Dividends received 130,635 93,439 Net cash from/(used in) investing activities 219,156 (626,153)
Cash flows from financing activities Repayments of borrowings during the year 27 (154,225) (68,255) Net cash used in financing activities (154,225) (68,255)
Net increase/(decrease) in cash and cash equivalents 64,904 (464,757) Cash and cash equivalents at beginning of year 856,344 1,293,162 Effects of exchange rate changes on cash and cash equivalents 17,166 27,939
Cash and cash equivalents at end of year 35 938,414 856,344
938,414 856,344
See accompanying summary of significant accounting policies and notes to the financial statements which form an
integral part of these financial statements.
Prestige Assurance Plc Notes to the financial statements
2017 2016 =N='000 =N='000
1 Gross premium income
Gross premium written 3,808,516 2,614,264 Changes in unearned income (423,438) (66,733)
3,385,078 2,547,531
2 Reinsurance expenses
Outward reinsurance 2,118,235 1,429,607 Decrease in prepaid reinsurance (181,638) 16,116
1,936,597 1,445,723
3 Claims expenses
Claims paid during the year (Note 24.2) 1,333,405 1,896,206 Increase/(decrease) in outstanding claims 420,944 (1,464,650) Cliams Incurred in the current accident year (Note 24.2) 1,754,349 431,556 Change in re-insurance assets (Note 17) (171,198) 1,331,422 Reinsurance claims recoveries (927,416) (1,333,188)
655,735 429,790
4 Acquisition expenses
At 1 J anuary 92,839 87,130 Commission for the year (Note 18) 544,906 375,058 Gross commission 637,745 462,188 At 31 December (154,149) (92,839)
483,596 369,349
5 Maintenance expenses
Wages and salaries - Technical Staff 211,269 186,433 Travelling 68,935 54,657 Entertainment & hotel expenses 42,139 25,037 Motor running expenses 23,480 15,293 Pension cost 18,533 31,851 Postage, telephone & telegrams 10,719 8,545 Leave encashment 7,684 8,409 Balance carried forward 382,759 330,225
56
Prestige Assurance Plc
Notes to the financial statements - continued 2017 2016
5 Maintainance expenses- continued =N='000 =N='000
Balance brought forward 382,759 330,225
Medical 28,145 25,442 Staff training 7,660 16,349 Insurance levy 14,957 16,420 Risk inspection survey 17,454 8,083 Conveyance 12,684 7,456 Industrial Training Fund 4,000 7,242 Staff welfare 8,044 3,301
475,703 414,518
6 Investment income
Interest income 539,569 290,883 Dividend income 130,635 93,439 Finance lease income 35,566 33,502 Profit on sale of shares 125,169 -
830,939 417,824
7 Other operating income
Net foreign exchange gain 3,709 27,939 Recovery of bad debt previously written off (Note 7.1) 609 108,634 Profit on disposal of property, plant and equipment 1,050 170 Sundry income (Note 7.2) 25,406 9,618
30,774 146,361
7.1
7.2
This relates to amount received on debts which had previously been written off in prior years
before the implementation of "no premium no cover". This relates to amount received on claims which had previously been written off in prior years
now recovered.
57
Prestige Assurance Plc Notes to the financial statements - continued
2017 2016 8 Management expenses =N='000 =N='000
Wages and salaries - Adminstrative Staff 172,857 160,399 Office expenses 117,044 43,858 VAT on commission 67,511 13,862 Professional fees 58,691 35,165 Impairment of other loans 52,260 - Depreciation (Note 22) 51,323 53,502 Administration expenses 43,024 38,775 Productivity bonus 34,899 17,020 Printing expenses 15,371 8,336 Insurance 13,810 11,064 Advertisement and publicity 11,814 4,987 Subscriptions 11,176 14,560 Audit fees 10,000 8,500 Directors expenses 8,828 6,549 Bank charges 6,366 4,453 Residential rent, rates and other expenses 3,271 12,776 Amortisation (Note 21) 5,688 1,588
683,933 435,394
9 Taxation
Per statement of profit or loss : Minimum tax 152,329 117,605 Education tax 6,069 10,210 Current income tax expense 158,398 127,815 Deferred tax expense (Note 10.1) 7,750 (9,413) Income tax expense 166,148 118,402
Per statement of financial position:
Current income tax payable At 1 J anuary 127,950 145,786 Charged to profit or loss 158,398 127,815 Payments during the year (123,976) (145,651)
162,372 127,950
58
Prestige Assurance Plc Notes to the financial statements - continued
2017 2016 9 Taxation - continued =N='000 =N='000
Reconciliation of tax charge Profit before income tax expense 697,989 340,394 Tax at Nigerian's statutory income tax rate of 30% 209,397 102,118
Non-deductible expenses 96,268 385,020 Tax exempt income (267,427) (381,632) Education tax levy 6,069 10,210 Tax rate differential on fair value gains (30,488) 2,686 Impact of minimum tax 152,329 - At effective income tax rate of 24%(2015:35%) 166,148 118,402
0 (118,402)
10 Deferred taxation Deferred income tax (assets)/liabilities are attributable to the following items:
2017 2016 Deferred tax liabilities =N='000 =N='000 Accelerated depreciation 369,056 380,030 Fair value gains on investment properties 135,069 119,826
504,125 499,856 Deferred tax assets Employee benefits (42,269) (32,295)
(42,269) (32,295)
Net 461,856 467,561
10.1 Movements in temporary differences during the year: As at 1 J anuary 467,561 468,559 Recognised in profit or loss on: Accelerated depreciation (7,494) (8,282) Fair value gains on investment properties 15,244 (1,343) Employee benefits - 212 Total recognised in profit or loss 7,750 (9,413) Recognised in other comprehensive income on: Revaluation loss on property plant and equipment (3,480) - Employee benefits (9,975) 8,415 Total recognised in other comprehensive income on: (13,455) 8,415
At 31 December 461,856 467,561
59
Prestige Assurance Plc Notes to the financial statements - continued
2017 2016 11 Other comprehensive income/(loss): =N='000 =N='000
11.1 Net gain on available-for-sale assets
Fair value gain on available-for-sale financial assets (Note 14.3) 779,413 177,054 779,413 177,054
11.2 Remeasurement (loss)/gain on defined benefit plan
Actuarial (loss)/gain - Assumption (Note 28) (26,074) 16,725 Actuarial (loss)/gain - Experience (Note 28) (7,175) 11,328
(33,249) 28,053 Income tax effect (Note 10.1) 9,975 (8,415)
(23,274) 19,638
11.3 Revaluation loss on land and buildings Arising during the year (Note 22) (11,601) - Income tax effect (Note 10.1) 3,480 -
(8,121) -
Other comprehensive income for the year, net of tax 748,018 196,692
12 Earnings per share (EPS)
Basic EPS amounts are calculated by dividing the profit for the year attributable to ordinary shareholders
by the weighted average number of ordinary shares outstanding during the year.
The following reflects the income and share data used in the basic
earnings per share computations: 2017 2016
Net profit attributable to ordinary shareholders (=N='000) 531,841 221,992
Weighted average number of shares for the year ('000) 5,370,432 5,370,432
Baic earnings per ordinary share (kobo) 9.90 4.13 Diluted earnings per ordinary share (kobo) 9.90 4.13
Except in prior year, there have been no other transactions involving ordinary shares or potential ordinary
shares between the reporting date and the date of completion of these financial statements.
60
Prestige Assurance Plc Notes to the financial statements - continued
2017 2016 13 Cash and cash equivalents =N='000 =N='000
Balances with local banks 115,169 355,326 Balances in foreign banks 3,094 45,981 Deposits and placements with local banks 892,229 156,024
Bankers acceptances - 305,349 1,010,492 862,680
14 Financial assets
Fair value through profit or loss (Note 14.1) 259,006 495,841 Held-to-maturity (Note 14.2) 2,420,199 1,622,105 Available-for-sale (Note 14.3) 1,878,385 1,098,213
Loans and receivables (Note 14.4) 49,527 97,199 4,607,117 3,313,358
14.1 Movement of the fair value through profit or loss
At 1 J anuary 495,841 514,274 Net fair value gain/(loss) 40,602 (18,433) Disposal during the year (Note 14.1.1) (277,437) - At 31 December 259,006 495,841
14.1.1 Disposal of fair value through profit or loss during the year
Proceed from disposal during the year 402,606 - Loss on disposal during the year 21 - Gain on disposal during the year (125,190) -
Cost of disposed during the year 277,437 -
14.2 Movement of the Held-to-maturity financial assets: At 1 J anuary 1,622,105 698,908 Additions during the year 614,312 862,998 Interest during the year 387,009 138,323
2,623,426 1,700,229 Redemption during the year (203,227) (78,124) At 31 December 2,420,199 1,622,105
- 14.3 Movement of available-for-sale financial assets
At 1 J anuary 1,098,213 820,187 Additions - 100,972
1,098,213 921,159 Net fair value gains (Note 11.1) 779,413 177,054 At 31 December 1,878,385 1,098,213
Available-for-sale financial assets comprise unquoted investments in: Leadway Pensure PFA Limited 1,629,613 844,436 Leadway Protea Hotel Limited 173,018 178,023 Other available-for-sale investments 75,754 75,754
1,878,385 1,098,213
61
Balance with local banks Balances with foreign banks Placement with local banks
Held for trading Held to maturity -Available-for-sale
-Available-for-sale
Prestige Assurance Plc Notes to the financial statements - continued 2017 2016
14.4 Loans and receivables =N='000 =N='000
Staff loans and advances 49,527 44,939 Other loans 52,260 52,260
Acc Impairment of other loans (52,260) - Staff loans and advances 49,527 97,199
Included in other loans is an amount granted to the former executive director and the former CFO that has
remained outstaning for a period of two years. These amount have been fully impaired in current year.
2017 2016 =N='000 =N='000
Analysis of investment securities Equity 2,137,391 1,594,054 Debt 2,469,726 1,719,304
4,607,117 3,313,358
Held-to-maturity FGN Bond 2,249,737 1,492,898 Corporate bond 170,462 129,207
2,420,199 1,622,105 Held-for-trading Quoted equities 259,006 495,841
Available-for-sale: Unquoted equity 1,878,385 1,098,213
Total 4,557,590 3,216,159
15 Trade receivables
Due from brokers 6,517 7,931
16 Other assets
Prepayments
50,902 35,392
Accrued interest - 15,658 WHT receivable 6,174 932 Other receivables 10,629 10,629 Impairment on other receivables (Note 16.1) (10,629) (10,629)
57,076 51,982
16.1 Impairment loss on other receivables relates to amount advanced to Company's staff cooperative for purchase of land.
62
staff loans and advances
staff loans and advances
Prestige Assurance Plc Notes to the financial statements - continued
2017 2016 17 Reinsurance assets =N='000 =N='000
Reinsurance share of claims expenses paid 243,360 275,659 Reinsurance debtors 132,975 - Reinsurance share of outstanding claims expenses 825,610 755,088
Impairment of claims recoverable (22,372) (36,067) Total outstanding claims recoverable 1,179,573 994,680 Reinsurance share of unearned premium 526,364 344,726
1,705,937 1,339,406
Movement on outstanding claims recoverable:
Outstanding claims recoverable: Balance at beginning 1,030,747 2,362,169 Change during the year (Note 3) 171,198 (1,331,422) Balance at end of the year 1,201,945 1,030,747
Impairment of claims recoverable (Note 17.1) (22,372) (36,067) 1,179,573 994,680
17.1 Impairment of claims recoverable
At 1 J anuary 36,067 36,067 Recovered during the year (13,695) - At 31 December 22,372 36,067
18 Deferred acquisition costs
At 1 J anuary 92,839 87,130 Commission paid during the year (Note 4) 544,906 375,058 Amortised to profit or loss (Note 4) (483,596) (369,349) At 31 December 154,149 92,839
19 Finance lease receivables
At 1 J anuary 132,943 129,070 Additions during the year 159,458 112,244 Repayment during the year (108,371) (108,371)
184,030 132,943
2017 =N='000 =N='000
The present value of the lease obligations are as follows:
Minimum payments
Present value
of payments
Not later than one year 148,422 148,422 Later than one year, not later than five years 35,608 35,608 Later than five years - - Total minimum lease payments 184,030 184,030 Less amount reprsenting finance charges (28,566) - Present value of minimum lease payments 155,464 184,030
63
Reinusrance debtors Claims recoverable from reinsurer
Prepaid reinsurance
Prestige Assurance Plc Notes to the financial statements - continued
19 Finance lease receivables- continued
2016
=N='000 =N='000
The present value of the lease obligations are as follows: Minimum
payments Present value
of payments
Not later than one year 118,739 118,739 Later than one year, not later than five years 14,204 14,204 Later than five years - - Total minimum lease payments 132,943 132,943 Less amount reprsenting finance charges (11,726) - Present value of minimum lease payments 121,217 132,943
The Company enter into finance lease arangement to finance certain motor vehicles with lease term of
maximum of twenty four months repayment period.
2017 2016 20 Investment property =N='000 =N='000
At 1 J anuary 2,286,564 2,300,000 Fair value gains/(loss) 152,438 (13,436) At 31 December 2,439,002 2,286,564
Investment properties are stated at fair value, which has been determined based on valuations performed
by J C Obasi & Co, a professional firm of Estate Surveyors and Valuers who are accredited independent
valuers, a s at 31 Dec emb er 2017 and 2016. These valuers are specialists in valuing these types of
investment properties. The fair value of the properties has not been determined on transactions
observable in the market because of the nature of the property and the lack of comparable data. Instead,
a valuation model , based on discounted cash f lows, in accordance with that r ecommended b y the
International Valuation Standards Committee has been applied. Valuations are performed on an annual
basis and the fair value gains and losses are recorded within the profit or loss.
The Company enters into operating leases for all of its investment properties. However, the property is
yet to be occup ied a nd the rental income expected to arise f rom the proper ty annual ly is
=N=228,200,000 which is expected to be included in other income. Direct operating expenses arising in
respect of such properties during the year are included in administrative expenses.
There are no restrictions on the realisability of investment property or the remittance of income and
proceeds of disposal. The Company has no contractual obligations to purchase, construct or develop
investment property or for repairs or enhancement.
2017 2016 =N='000 =N='000
Rental Income derived from investment properties - - Direct operating expenses (including repairs & maintenance)
generating income
Loss arising from investment properties carried at fair value
(1,555) (5,295) (1,555) (5,295)
64
Prestige Assurance Plc Notes to the financial statements - continued
20 Investment property - continued
The fair value disclosure on
investment properties is as
Quoted
prices in active
Fair value measurement using
Significant Significant observable unobservable
inputs inputs
Level 1 Level 2 Level 3 Total Date of valuation - 31 December 2017 =N='000 =N='000 =N='000 =N='000
Investment properties - - 2,439,002 2,439,002
The fair value disclosure on investment properties is as Fair value measurement using
Quoted
prices in active
market
Significant
observable
inputs
Significant
unobservable
inputs
Level 1 Level 2 Level 3 Total Date of valuation - 31 December 2016 =N='000 =N='000 =N='000 =N='000
Investment properties - - 2,286,564 2,286,564
Description of valuation techniques used and key inputs to valuation on investment properties
Office building Valuation technique Significant unobservable inputs
Estimated
Range (weighted average) =50,000 - =N=80,000
Income capitalization using
DCF Analysis rental per
square meter Average annual growth
=N=70,000
6%
Average annual 1.4% Discount rate (equated yield) 8.88%- 8.96%(9.20%)
Under the DCF method, fair value is estimated using assumptions regarding the benefits and liabilities of
ownership over the asset’s life including an exit or terminal value. This method involves the projection of a
series of cash flows on a real property interest. To this projected cash flow series, a market-derived discount
rate is applied to establish the present value of the income stream associated with the asset. The exit yield is
normally separately determined and differs from the discount rate.
65
Prestige Assurance Plc
20 Investment property - continued
The duration of the cash flows and the specific timing of inflows and outflows are determined by events such
as rent reviews, lease renewal and related re-letting, redevelopment, or refurbishment. The appropriate
duration is typically driven by market behaviour that is a characteristic of the class of real property. Periodic
cash flow is typically estimated as gross income less vacancy, non-recoverable expenses, collection losses,
lease incentives, maintenance cost, agent and commission costs and other operating and management
expenses. The series of periodic net operating income, along with an estimate of the terminal value
anticipated at the end of the projection period, is then discounted.
Location of investment property Valuation technique Significant unobservable input
No. 19B Ligali Ayorinde Street, Victoria Island Lagos
21 Intangible assets
The valuation was based on
the market va lue of the
property, with reference to to
the investment/income approach method of valuation. The method looks
only to a property’s future
income as may reasonably be
anticipated during the estimated economic life of the
property. Further value analysis was carried out using
market market comparison
method approach as check.
It is a purposely built office building on 7 floors
with a mezzanine floor. The 7 story office
building has office and parking spaces inside
the underground. The parking lot can take
about 43 vehicles at a time. The site is rec tangular in shape and appears
firm, level and well drained. It is fenced round
in block walls with a double leaf metal entrance
gate. The site area is approximately 1054sqm.
Computer software Total
Cost: =N='000 =N='000 At 1 J anuary 2016 15,280 15,280 Additions 598 598 At 31 December 2016 15,878 15,878 Additions 41,000 41,000 At 31 December 2017 56,878 56,878
Accumulated amortisation and impairment: At 1 J anuary 2016 5,128 5,128 Amortisation 1,588 1,588 At 31 December 2016 6,716 6,716 Amortisation 5,687 5,687 At 31 December 2017 12,403 12,403
Carrying amount: At 31 December 2017 44,475 44,475 At 31 December 2016 9,162 9,162
66
Prestige Assurance Plc Notes to the financial statements - continued
22 Property, plant and equipment
Plant & machinery
Leasehold
Land & building
Furniture &
fittings
Computer equipment
Motor
vehicles
Assets on
lease
Total
=N='000 =N='000 =N='000 =N='000 =N='000 =N='000 =N='000 Cost/Valuation: At 1 J anuary 2016 33,443 1 ,256 ,300 50,694 87,189 131 ,698 758 ,432 2,317,756 Additions 903 - 1,940 1,651 14,305 - 18,799 Disposals - - (1,285) - - - (1,285) At 31 December 2016 34,346 1 ,256 ,300 51,349 88,840 146 ,003 758 ,432 2,335,270 Additions 354 - 3,844 1,356 32,280 - 37,833 Revaluation - (47,660) - - - - (47,660) Disposals - - (1,467) - (8,695) - (10,162) At 31 December 2017 34,700 1 ,208 ,640 53,726 90,196 169 ,588 758 ,432 2,315,281
Accumulated depreciation: At 1 J anuary 2016 24,349 - 36,014 85,554 85,563 758 ,432 989,912 Charge for the year 2,302 17,840 3,411 2,931 27,018 - 53,502 Disposals - - (866) - - - (866) At 31 December 2016 26,651 17,840 38,559 88,485 112 ,581 758 ,432 1,042,548 Charge for the year 2,261 18,219 2,517 1,002 27,323 51,323 Tranfers to revaluation reserve (36,059) - - - - (36,059) Disposal - - (593) (8,695) - (9,288) At 31 December 2017 28,912 - 40,483 89,487 131 ,209 758 ,432 1,048,523
Net book value:
At 31 December 2017 5,788 1 ,208 ,640 13,243 709 38,379 - 1,266,758
At 31 December 2016 7,695 1 ,238 ,460 12,790 355 33,422 - 1,292,722
67
Prestige Assurance Plc Notes to the financial statements - continued
22 Property, plant and equipment- continued
Land and building is stated at fair value, which has been determined based on valuations performed by Messrs J .C Obasi & Co.
FRC/2013/NIESV/00000002148 w h o are accredited independent valuers, as at 31 December 2017. These valuers are specialists in valuing
these type of proper ty. The fair value of the proper ty has not been determined on transactions observable in the market because of the
nature of the property and the lack of comparable data. Instead, a valuation model based on discounted cash flows in accordance with that
recommended by the International Valuation Standards Committee has been applied.
The Head office building is used to secure the Company's borrowings.
The Head office building was constructed at a cost of N94,130,000 and the property in nature is a leasehold property. In 2009, the property
was revalued to N600,000 ,000 a nd a further revaluat ion on the proper ty wa s carried out on 3 1 Dec emb er 2013 in an open market b y
reference to the investment method of valuation and used the market comparison method as a check. Changes in revaluation are recognised
in property revaluation reserve. The earned portion for 2016 financial year was transferred f rom property revaluation reserve to
accumulated losses.
The Company's property located at flat C, Niger Towers, 51/55 Glover Road Ikoyi Lagos was acquired under a lease agreement with UACN
Property Development Company in 2005. the lease period is 42 years and Prestige Assurance Plc is allowed to sub-lease it for another term
after expiration of the current term. The cost of this building at the date of acquisition wa s N71,246,000 and has been valued in an open
market as at 31 December 2013 by reference to the investment method of valuation and used the market comparison method as a check.
The fair value disclosure on investment properties is as follows: Quoted
prices in
active market
Fair value measurement using
Significant Significant observable unobservable inputs inputs
Level 1 Level 2 Level 3 Total ₦ '000 ₦ '000 ₦ '000 ₦ '000
Property value at 31 December 2017 - - 2 ,439 ,002 2,439,002
Property value at 31 December 2016 - - 2 ,286 ,564 2,286,564
68
Prestige Assurance Plc Notes to the financial statements - continued
2 017 2016 23 Statutory deposit =N='000 =N='000
At 31 December 3 00,000 300,000
Statutory deposit represents the amount deposited with the Central Ban k of Nigeria in accordance wi th
Section 9(1) and Section 10(3) of the Insurance Act 2003. This is restricted cash as management does not
have access to the balances in its day to day activities. Statutory deposits are measured at cost.
24 Insurance contract liabilities 2 017 2016
=N='000 =N='000
Unearned Premium (Note 24.1) 1,100 ,232 676,794 Outstanding Claims (Note 24.2) 1,543 ,360 1,122 ,416
Total insurance liabilities 2,643 ,592 1,799 ,210
24.1 Reserve for Unearned Premium
At 1 J anuary 6 76,794 610,061 Premium written in the year (Note 1) 3,808 ,516 2,614 ,264 Premium earned during the year (Note 1) (3 ,385,078) (2,547,531) At 31 December 1,100 ,232 676,794
24.2 Reserve for Outstanding Claims
At 1 J anuary 1,122 ,416 2,587 ,066 Incurred in the current accident year (Note 3) 1,754 ,349 431,556
Claims paidPaid during the year (Note 3) (1 ,333,405) (1,896,206) At 31 December 1,543 ,360 1,122 ,416
24.3 Analysis of Insurance Contract Liabilities
2017 2016 Gross Reinsurance Net Gross Reinsurance Net
=N='000 =N='000 =N='000 =N='000 =N='000 =N='000
Outstanding Claims 1,123 ,128 582,757 540,371 722,671 536,812 19,732 IBNR 420,232 242,853 177,379 399,745 218,276 181,469 Total oustanding claims 1,543 ,360 825,610 717,750 1,122 ,416 755,088 201,201 Unearned premium 1,100 ,232 526,364 573,868 676,794 344,726 332,068 Total 2,643 ,592 1,351 ,974 1,291 ,618 1,799 ,210 1,099 ,814 533,269
69
Unearned premium reserve Oustanding claims reserve
Prestige Assurance Plc Notes to the financial statements - continued
2017 2016 25 Trade payables =N='000 =N='000
Due to agents 16,217 13,868 Due to brokers 8,085 10,511
Due to direct insured 84,771 71,020 Due to reinsurers 42,550 19,993 Due to insurance companies 172,680 42,989
Unexpired commission received 142,963 82,685 467,266 241,066
26 Other liabilities
IT FUND Industrial Training fund 3,815 7,211 Insurance levy 14,823 16,000 Profit sharingProvision for productivity bonus (Note 26.2) 46,938 18,880
Other payables (Note 26.1) 63,920 73,842 WHT tax Withholding tax 557 596
Related party payable (Note 36) 165,737 442,776 VAT VAT 188 6,252
295,978 565,557
26.1 Other payables comprises of amount yet to be presented for payment on Dana Air claims. Also
included here are amounts owed various suppliers.
26.2 Movement in Provision for productivity bonus At 1 january 18,880 1,860 Additions 34,899 17,020 Paid in the year (6,841) - At 31 December 46,938 18,880
27 Borrowings 2017 2016 =N='000 =N='000
Balance as at beginning of the year 145,999 203,652 Interest accrued 8,226 10,602 Repayments during the year (154,225) (68,255) Balance as at end of the year (Note 36) - 145,999 Overdrafts 72,078 6,336
72,078 152,335
The New India Assurance Company Limited granted a loan of N500,000,000 to the Company for the
completion of itss seven storey building. The loan was granted at a fixed rate of 8%per annum. The
loan is for a period of 2 years with a moratorium period of a year. Repayment of principal and
interest commenced on J uly 2014 and its expected to be repaid quarterly. In 2017 financial year,
the loan was fully repaid to the parent company.
28 Retirement benefits obligation The Group operates a defined benefit staff gratuity plan where qualifying employees receive a lump
sum payment based on the number of years served after an initial qualifying period of five years and
gross salary on date of retirement.
70
DUE TO DIRECT BUSINESS DUE TO REINSURANCE COMPANIES (TREATY BUSINESSES) DUE TO INSURANCE
Payable to parent company
Prestige Assurance Plc Notes to the financial statements - continued
28 Retirement benefits obligation- continued
The most recent actuarial valuations of the present value of the defined benefit obligation were
carried out at 31 December 2017 by HR Nigeria Limited. The present value of the defined benefit
obligation, and the related current service cost and past service cost, were measured us ing the
Projected Unit Credit Method.
The amount included in the statement of financial position arising from the entity's obligation in respect of its defined
benefit plans is as follows.
2017 2016
=N='000 =N='000
Balance at the beginning of the year 107,646 136,408 Current service cost 20,813 19,094 Interest cost 17,476 15,831 Benefits paid (14,894) (35,634) Actuarial loss/(gain) 33,249 (28,053)
164,290 107,646
The principal assumptions used for the purposes of the actuarial valuations were as follows.
Discount rate 14% 16% Rate of salary increase 13% 13% Rate of inflation 12% 12%
2017 2016
The amounts recognised in profit or loss =N='000 =N='000 Current service cost 20,813 19,094 Interest cost 17,476 15,831 Total, included in staff costs 38,289 34,925
The amounts recognised in other comprehensive income Actuarial (loss)/gains- change in assumption (Note 11.2) (26,074) 16,725 Actuarial (loss)/gains - experience adjustment (Note 11.2) (7,175) 11,328 Re-measurement (gain)/ loss on net defined benefit plans (33,249) 28,053
The plan is unfunded.
Sensitivity analysis Reasonable possible changes at reporting date to one of the relevant actuarial assumptions holding
other assumptions constant, would have affected the defined benefit obligation by the amount
shown below. Defined benefit obligation
Increase Decrease =N='000 =N='000
Discount rate (1%movement) 165 (165) Salary increase rate (1%movment) - - Mortality rate (1%movement) 0.04 0.04 The analysis does not take account of the full distribution of cashflow expected under the plan , it
does provide an approximation of sensitivity of the assumption shown.
71
Prestige Assurance Plc Notes to the financial statements - continued
28 Retirement benefits obligation- continued 2017 2016
=N='000 =N='000 The following payments are estimated contributions to the
defined benefit plan obligation in future years: Within the next 12 months (next annual reporting period) 16,927 14,719 Between 2 and 5 years 35,005 30,439 Between 5 and 10 years 67,461 58,662 Beyond 10 years 110,619 96,190 Total expected payments 230,012 200,010
Average duration of the defined benefit obligation at the end of the reporting period is 24.3 years
(2015: 23.3 years)
29 Share capital
Authorised 6,000,000 Ordinary shares of 50k each 3,000,000 3,000,000
Issued and fully paid 5,320,432,000 Ordinary shares of 50k each 2,685,216 2,685,216
30 Share premium At 31 December 1,127,599 1,127,599
Premiums from the issue of shares are reported in share premium.
31 Statutory contingency reserve
At 1 J anuary 1,753,651 1,675,223 Transfer from reatained earnings 114,255 78,428 At 31 December 1,867,906 1,753,651
This is maintained in compliance with Sections 21(1) and (2) and 22(16) of Insurance Act CAP I17,
LFN 2004 as indicated in the accounting policy number 2.26.
72
Prestige Assurance Plc Notes to the financial statements - continued
32 Accumulated losses 2017 2016
=N='000 =N='000 At 1 J anuary restated (776,511) (945,069) Transfer to statutory contingency reserve (114,255) (78,428) Transfer from property revaluation reserve 11,600 24,994 Profit for the year 531,841 221,992 At 31 December (347,325) (776,511)
Retained earnings/accumulated loss comprise the undistributed profits or loss from previous years,
which have not been reclassified to other reserves noted below.
33 Other reserves
33.1 Gratutiy valuation reserve 2017 2016 =N='000 =N='000
At 1 J anuary 9,841 (9,797) Actuarial (loss)/gain during the year (23,274) 19,638 At 31 December (13,433) 9,841
This comprise of the cumulative actuarial (loss)/gain on change in assumption and experience
adjustment
2017 2016 33.2 Available-for-sale reserve =N='000 =N='000
At 1 J anuary restated 671,542 494,488 Gains on valuation during the year 779,413 177,054 At 31 December 1,450,955 671,542
The fair value available-for-sale reserve shows the effects f rom the fair value measurement of
financial instruments of the category available-for-sale. Any gains or losses are not recognised in the
profit or loss until the asset has been sold or impaired. 2017 2016
33.3 Property revaluation reserve =N='000 =N='000 At 1 J anuary restated 756,924 781,918 Arising during the year (8,121) - Transfer to accumulated losses (11,600) (24,994)
737,203 756,924
This comprise cumulative fair value changes on valuation of leasehold land & building net of deffered
tax asset/liabilities
73
Prestige Assurance Plc Notes to the financial statements - continued
34.1 2017 2016
cash (used in)/from operating activities =N='000 =N='000 Profit before tax income tax expense 697,989 340,394 Adjustments to reconcile net income to
net cash provided by operating activities: Depreciation of property, plant and equipment 51,323 53,502 Amortisation of intangible assets 5,687 1,588 Profit on disposal of property, plant and equipment (1,050) (170) Investment income (830,939) (417,824) Fair value loss on held for trading financial assets (40,602) 18,433 (Gain)/loss on investment properties (152,438) 13,436 Exchange gains (3,709) (27,939) Interest costs on retirement benefit obligations 38,289 34,925 Finance cost 8,226 10,602 Changes in assets and liabilities Increase/(decrease) in trade receivables 1,414 (5,208) Decrease in other assets and receivables 42,578 28,669 (Increase)/decrease in reinsurance assets (366,531) 1,347,538 Increase in deferred acquisition costs (61,310) (5,709) Increase in finance lease assets (51,087) (3,873) Increase in unearned premium 423,438 66,733 Increase in claims provision 420,944 (1,464,650) Increase/(decrease) in trade payables 226,200 (38,478) Decrease/increasse in other liabilities (269,579) 457,967 Income tax paid (123,976) (145,651) Benefits paid (14,894) (35,634) Net cash (used in)/generated from operating activities (27) 228,651
34.2 Reconciliation of other operating cash payments 2017 2016
=N='000 =N='000 Auditors' remuneration (10,000) (8,500) Other expenses (1,054,336) (751,397) Change in other assets and receivables (22,205) 24,796 Change in trade payables and other liabilities (43,379) 419,489
(1,129,920) (315,612)
35 Cash and cash equivalents for purposes of the statement
of cash flows Bank and cash balances 118,263 401,307 Deposits and placements 892,229 156,024 Bankers acceptances - 305,349 Overdrafts (Note 27) (72,078) (6,336)
938,414 856,344
74
Reconciliation of profit before income tax expense to net
Prestige Assurance Plc Notes to the financial statements - continued
36 Related party transactions
Compensation of key management personnel Key management personnel of the Company includes all directors, executives and non-executive, and
senior management. The summary of compensation of key management personnel for the year is as follows:
2017 2016
Short-term employee benefits: =N='000 =N='000 Salaries and allowances 42,228 24,660
Long-term employee benefits: Post employment pension benefits - -
42,228 24,660 The number of directors who received fees and other
emoluments (excluding pension contributions and certain benefit) in the following ranges was: Number Number Below =N=1,000,000 2 2 =N=1,000,001 - =N=4,000,000 1 1 =N=4,000,001 - =N=7,000,000 - - =N=7,000,001 and above 2 2
5 5 Employees The following are the number of persons in employment of
the Company as at 31 December 2017:Number
Executive Directors 2 2 Management (Managers & above) 9 10 Senior staff 40 33 Junior Staff 29 29
80 74
Staff cost =N='000 =N='000 Salaries and allowances 409,234 346,832 Staff pension 18,534 31,851 Staff gratuity 53,184 34,925
480,952 413,608
The number of employees of the Company, other than Directors, who received emoluments in the
following ranges (excluding pension contribtions and certain benefits) were: 2017 2016
Emolument range Number Number N500,000 - N1,000,000 - - N1,000,001 - N1,500,000 - - N1,500,001 - N2,000,000 - - N2,000,001 - N2,500,000 - - N2,500,001 - N3,000,000 - - N3,000,001 - Above 9 6
9 6
75
Prestige Assurance Plc
Notes to the financial statements - continued
36 Related party transactions -continued 2017 2016
Balances with related parties Amount due to related parties are as follows: =N='000 =N='000
Payable to: New India Assurance Company Limited (Note 26) 165,737 442,776
Borrowings from: New India Assurance Company Limited (Note 27) - 145,999
Outstanding balances for intercompany payables relates to expenses settled on behalf of the
Company by the parent company as at the year-end. Intercompany outstanding balances, except for
those on borrowings, are unsecured and interest free and settlement is expected occurs in cash.
37 Contingencies and commitments
a Legal proceedings and regulations
The Company operates in the insurance industry and is subject to legal proceeding in the normal
course of business. While it is not practicable to forecast or determine the final results of all pending
or threatened legal proceedings, management does not believe that such proceedings (including
litigation) will have a material effect on its results and financial position.
The Company is also subject to insurance solvency regulations in all the territories where it operates
and has complied with all these solvency regulations. There are no contingencies associated with the
Company's compliance or lack of compliance with such regulations.
b Compliance with Insurance regulations The Company contravened certain Sections of Securities Exchange Commission (SEC) Act. Details of the contravention and penalty is as follows:
2017 2016 =N='000 =N='000
Late filling of annual returns to Securities and Exchange
Commission (SEC), this relates to previous years (2008 - 2010).
c Capital commitments and operating lease
- 10,675
The Company has no capital commitments and operating lease at the reporting date.
38 Events after the reporting period
There were no events after the reporting period which could have a material effect on the financial
position of the Company as at 31 December 2017 and on its profit and other comprehensive income
for the year then ended.
76
Prestige Assurance Plc Notes to the financial statements - continued
39 Asset and Liability Management
Asset and Liability Management (ALM) attempts to address financial risks the Company is exposed to
which includes interest rate risks, foreign currency risks, equity price risks and credit risks. The major
financial risk is that in the long run its investment proceeds are not sufficient to fund the obligations
arising from its insurance contracts. A L M ensures that specific assets of the company is allocated to
cover reinsurance and liabilities of the company.
The Company manages these positions within an ALM framework that has been developed to achieve long-term investment returns in excess of its obligations under insurance and investment contracts.
The notes below show how the company has managed its financial risks.
Shareholders Insurance funds ' funds 2017
ASSETS =N='000 =N='000 =N='000
Cash and cash equivalents 1,010,492 - 1,010,492 Financial assets: -Fair value through profit or loss 259,006 - 259,006 -Held-to-maturity - 2,420,199 2,420,199 -Available-for-sale - 1,878,385 1,878,385 -Loans and receivables - 49,527 49,527 Trade receivables 6,517 - 6,517 Other asstes - 57,076 57,076 Reinsurance assets 1,705,937 - 1,705,937 Deferred acquisition costs - 154,149 154,149 Finance lease receivables - 184,030 184,030 Investment property - 2,439,002 2,439,002 Intangible assets - 44,475 44,475 Property, plant and equipment - 1,266,758 1,266,758 Statutory deposit - 300,000 300,000
2,981,952 8,793,601 11,775,553 LIABILITIES Insurance contract liabilities 2,643,592 - 2,643,592 Trade payables - 467,266 467,266 Provisions and other liabilities - 295,978 295,978 Borrowings - 72,078 72,078 Retirement benefits obligation - 164,290 164,290 Current income tax payable - 162,372 162,372 Deferred tax liabilities - 461,856 461,856
2,643,592 1,623,840 4,267,432
Gap 338,360 7,169,761 7,508,121
77
Prestige Assurance Plc Notes to the financial statements - continued
39 Asset and Liability Management- continued
Insurance funds
Shareholders
' funds 2016
ASSETS =N='000 =N='000 =N='000
Cash and cash equivalents 862,680 - 862,680 Financial assets: -Held-for-trading 495,841 - 495,841 -Held-to-maturity - 1,622,105 1,622,105 -Available-for-sale - 1,098,213 1,098,213 -Loans and receivables - 97,199 97,199 Trade receivables 7,931 - 7,931 Other receivables and prepayments - 51,982 51,982 Reinsurance assets 1,339,406 - 1,339,406 Deferred acquisition costs - 92,839 92,839 Finance lease receivables - 132,943 132,943 Investment properties - 2,286,564 2,286,564 Intangible assets - 9,162 9,162
Property, plant and equipment - 1,292,722 1,292,722 Statutory deposit - 300,000 300,000
2,705,858 6,983,729 9,689,587 LIABILITIES Insurance contract liabilities 1,799,210 - 1,799,210 Trade payables - 241,066 241,066 Provisions and other payables - 565,557 565,557 Borrowings - 152,335 152,335 Retirement benefits obligation - 107,646 107,646 Current income tax liabilities - 127,950 127,950 Deferred tax liability - 467,561 467,561
1,799,210 1,662,115 3,461,325
Gap 906,648 5,321,614 6,228,262
78
Prestige Assurance Plc Notes to the financial statements - continued
40 Management of insurance and financial risk
The Company issues contracts that transfers insurance risk. This section summarises the main risks
linked to short-term insurance business and the way they are managed.
a Insurance risk The risk under any one insurance contract i s the possibili ty that the insured event occurs and the
uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk
is fortuitous and therefore unexpected and unpredictable.
For a portfolio of insurance contracts where the theory of probability is applied to pricing and
provisioning, the principal risk that the Company faces under its insurance contracts is that the actual
claims and indemnity payments exceed the carrying amount of the insurance liabilities.
The Company has developed its insurance underwriting strategy to diversify the type of insurance risks
accepted and within each of these categories to achieve a sufficiently large population of risks to reduce
the variability of the expected outcome.
ii Frequency and severity of claims The frequency and severity of claims can be affected by several factors the most significant resulting
from events like fire and allied perils and their consequences and liability claims. Inflation is another
factor that may affect claims payments.
Underwriting measures are in place to enforce appropriate risk selection criteria or not to renew an
insurance contract if the perceived level of risk is very high.
The reinsurance arrangements for proportional and non-proportional treaties are such that the
Company is adequately protected and would only suffer predetermined amounts.
iii Concentration of insurance risk The following table discloses the concentration of claims by class of business gross and net of
reinsurance.
31 December 2017 Outstanding claims No. of claims Gross Net
Class of Business =N='000 =N='000 Accident 67 176,899 155,672 Fire 101 968,539 347,166 Workmen's compensation 32 30,757 27,140 Motor 80 31,579 30,105 Marine and Aviation 33 113,668 60,320 Engineering 18 31,968 2,964 Oil and Gas 29 22,075 10,506 Bonds 1 61,670 61,670 Goods in transit 53 106,205 22,207
414 1,543,360 717,750
79
Prestige Assurance Plc
Notes to the financial statements - continued
40 Management of insurance and financial risk- continued
31 December 2016
Outstanding claims No. of claims Gross Net
Class of Business =N='000 =N='000
Accident 47 100,207 64,591 Fire 88 608,546 38,103 Workmen's compensation 53 34,301 34,301 Motor 49 58,327 40,171 Marine and Aviation 47 271,459 11,197 Engineering 6 14,900 5,226 Oil and Gas 30 32,568 6,558 Bonds - 2,108 1,054
320 1,122,416 201,201
The Company manages insurance risks through the underwriting strategy, adequate reinsurance
arrangements and proactive claims handling. The underwriting strategy attempts to ensure that the
underwritten risks are well diversified in terms of type and amount of risk and class of business.
iv Sources of uncertainty in the estimation of future claim payments
Claims are payable on a claims-occurrence basis. The Company is liable for all insured events that
occurred during the term of the contract, even if the loss is discovered after the end of the contract
term. As a result, liability claims are settled over a long period of t ime and a larger element of the
claims provision relates to incurred but not reported claims (IBNR). There are several variables that
affect the amount and timing of cash flows from these contracts. These mainly relate to the inherent
risks of the business activities carried out b y individual contract holders and the risk management
procedures they adopted. The compensation paid on these contracts is the monetary awards granted.
The Company claims are short tail and are settled within a short t ime and the Company's estimation
processes reflect with a higher degree of certainty all the factors that influence the amount and timing.
The Compa ny takes all reasonable steps to ensure that it has appropriate information regarding its
claims exposures. However, given the uncertainty establishing claims provisions, it is likely that the
final outcome will prove to be different from the original liability established. The liability for these
contracts comprise a provision for IBNR and a provision for reported claims not yet paid at the balance
sheet date. The Company has ensured that liabilities on the balance sheet at year end for existing
claims whether reported or not, are adequate.
The Company has in place a series of quota-share and excess of loss covers in each of the last five years
to cover for losses on these contracts.
80
Prestige Assurance Plc Notes to the financial statements - continued
40 Management of insurance and financial risk
Claims Paid Triangulations as at 31 December 2017
Fire Development Accident Period
2011
2012
2013
2014
2015
2016
2017
0 1 2 3 4 5 6 - - - 388,972,319
644,884,584 811,991,121 439,513,249 414,642,981 305,550,573 300,822,400 416,513,894 429,237,886 443,046,037
222,930,345 247,178,667 611,269,973 622,335,785 967,429,478 804,871,392 328,213,527 382,836,487 310,361,573
274,145,428
608,081,429
983,952,017
240,924,778
608,081,429 241,506,474
General Accident Development Accident Period
2011
2012
2013
2014
2015
2016
2017
0 1 2 3 4 5 6 - - - 176,181,521
330,992,390 359,962,727 136,418,348 88,295,210
77,583,461 83,618,499 54,027,155 59,520,850
116,604,256
47,769,830 54,833,906 205,642,427 186,757,589 318,605,700 227,127,890
53,615,927 78,868,971 90,679,635
52,876,888
166,395,434
245,657,571
41,366,841
166,145,434 43,020,636
Good-in--Transit Development Accident Period
2011
2012
2013
2014
2015
2016
2017
0 1 2 3 4 5 6 - - - 41,564,602
66,123,133 62,229,723 99,605,265 88,683,943 61,677,246 54,065,181 75,640,532 107,521,983
187,628,221
2,528,871 2,341,371 32,800,363 30,050,363 56,223,460 56,223,460 82,123,527 82,123,527 51,978,764
1,541,371
32,050,363
56,223,460
1,441,371
28,050,363 1,441,371
Prestige Assurance Plc Notes to the financial statements - continued
40 Management of insurance and financial risk
Bond
Development Accident Period
2011
2012
2013
2014
2015
2016
2017
0 1 2 3 4 5 6 - - - - - - - - - - - 100,150,000 -
- - - - - - - - -
- - -
- -
-
Mediclaim
Development Accident Period
2011
2012
2013
2014
2015
2016
2017
0 1 2 3 4 5 6 - - - - - - - - - - - - -
- - - - - - - - -
- - -
- -
-
Terrorism Development Accident Period
2011
2012
2013
2014
2015
2016
2017
0 1 2 3 4 5 6 - - - - - - - - - - - 2,172,288 -
- - - - - - - - -
- - -
- -
-
82
Prestige Assurance Plc Notes to the financial statements - continued
40 Management of insurance and financial risk
Motor
Development Accident Period
2011
2012
2013
2014
2015
2016
2017
0 1 2 3 4 5 6 - - - 56,160,296
63,938,545 68,719,001 81,191,819 93,589,482
110,075,590 102,296,031 127,992,132 126,794,750 176,832,772
5,762,888 4,174,288 50,466,032 48,248,432 64,941,243 64,206,037 91,721,283 91,721,283
100,822,331
3,247,188
47,879,232
64,356,037
2,021,688
47,879,232 3,063,788
Marine & Aviation
Development Accident Period
2011
2012
2013
2014
2015
2016
2017
0 1 2 3 4 5 6 7,829,998 8,732,796 5,654,252 129,164,993
257,411,480 227,854,971 314,468,162 166,559,146
61,780,341 54,107,473 83,048,219 95,914,569 84,112,790
66,556,711 68,116,279 206,614,079 115,868,972 157,793,515 151,193,515 142,720,960 140,103,452
52,028,486
91,085,533
117,317,946
151,193,515
103,395,905
151,747,327 103,441,693
Workmen's Compensation Development Accident Period
2011
2012
2013
2014
2015
2016
2017
0 1 2 3 4 5 6 - - - 26,477,775
36,137,342 44,641,404 41,886,785 45,541,336 29,553,307 30,679,696
7,907,691 16,015,536 17,629,335
11,884,504 20,271,658 57,218,278 36,082,287 36,187,253 31,898,418 34,426,388 36,051,521 32,514,416
18,501,316
37,619,545
31,898,418
16,491,869
37,619,545 16,491,869
83
Prestige Assurance Plc Notes to the financial statements - continued
b Financial risk management
The Company is exposed to financial risks through its financial assets, financial liabilities and insurance and reinsurance assets and liabilities.
In particular, the key financial risk is that investment proceeds are not sufficient to fund obligations arising from insurance contracts.
The most important components of this financial risk are:
-Market risk (which includes currency risk, interest rate risk and equity price risk) -Credit risk; -Liquidity risk; -Capital management; and -Fair value estimation
These risks arise from open position in interest rate, currency and equity products, all of which are exposed to general and open market
movements.
The Company's risk management policies are designed to identify and analyse risks, to set appropriate risk limits and control, and monitor
the risks and adherence to limits by means of reliable and up-to-date administrative and information systems.
The Co mpany regularly reviews its risk management policies and sys tems to reflect changes in markets, products and emerging best
practice.
The Board recognises the critical importance of having efficient and effective risk management policies and systems in place.
To this end, there is a clear organisational structure with delegated authorities and responsibilities from the Board to Board Committees,
executives and senior management, individual responsibility and accountability are designed to deliver a disciplined, conservative and
constructive culture of risk management and control.
i Market risk
Market risk is the risk of adverse financial impact due to changes in fair value of future cashflows of financial instruments from fluctuations in
foreign currency exchange rates, interest rates and equity prices.
The Company has established policies which set out the principles that they expect to adopt in respect of management of the key market risks
to which they are exposed. The Company monitors adherence to this market risk policy through the Company's Investment Committee. The
Company's Investment Committee is responsible for managing market risk.
The financial impact from market risk is monitored at board level through investment reports which examine impact of changes in market risk
in investment returns and asset values. The Company's market risk policy sets out the principles for matching liabilities with appropriate
assets, the approaches to be taken when liabilities cannot be matched and the monitoring processes that are required.
ia Interest rate risk
Interest rate risk arises from the Company's investments in long term debt securities and fixed income securities (Held to-Maturity financial
assets), bank balances and deposits which are exposed to fluctuations in interest rates. Exposure to interest rate risk on short term business
is monitored by the Investment Commit tee through a close matching o f assets and liabilities. The impact of exposure to sustained low
interest rates is also regularly monitored.
The sensitivity analysis for interest rate risk illustrates ho w changes in the fair va lue or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates at the reporting date.
84
Prestige Assurance Plc Notes to the financial statements - continued
b Financial risk management - continued
(b) Equity price risk
The Co mpa ny equity price r isk exposure relates to financial assets whose va lue fluctuate as a result of changes in market prices. The
Company also has unquoted equities classified as available-for-sale whose fair value is determined using a valuation technique because of the
lack of active market for these instruments.
The sensitivity analysis for equity price risk illustrates how changes in the fair value of equity securities will fluctuate because of changes in
market prices, whether those changes are caused by factors specific to the individual equity issuer, or factors affecting all s imilar equity
securities traded in the market.
A 1%movement in market prices will result in an unrealised gain or loss for the of =N=0.184 million (December 2015: =N=1.544 million).
Management monitors movements of financial assets and equity price risk movements on a monthly basis by assessing the expected changes
in the different portfolios due to parallel movements of a 10%increase or decrease in the Nigeria All share index with all other variables held
constant and all the Company’s equity instruments in that particular index moving proportionally.
ib Currency risk
The Company purchases reinsurance contracts internationally, thereby being exposed to foreign currency fluctuations.
The Company's primary exposures are with respect to the US Dollar.
The Company has a number of investments in foreign currencies which are exposed to currency risk. The Investment Commit tee closely
monitors currency risk exposures against pre-determined limits. Exposure to foreign currency exchange risk is not hedged.
Sensitivity risk
If the Naira had weakened/strenthened against the following currencies with all variables remaining constant, the impact on the results for
the year would have been as shown below mainly as a result of foreign exchange gains/losses:
The Company financial assets and financial liabilities by currency is detailed below:
A 1%movement in foreign exchange rate in USD against the Naira will result in =N=2.117 million gain or loss (2015: =N=0.810 million). In
Euro, =N=0.08 million (2015: =N=0.253 million). And in pounds sterling, =N=0.054 million (2015: =N=0.1 million).
Naira USD Euro Pounds Total 31 December 2017 =N='000 =N='000 =N='000 =N='000 =N='000
Cash and cash equivalents 785,260 211,748 8,084 5,400 1,010,492
31 December 2016 Cash and cash equivalents 637,448 211,748 8,084 5,400 862,680
85
Prestige Assurance Plc Notes to the financial statements - continued
b Financial risk management - continued
ic Credit Risk
Credit Risk is the risk that one party to a financial instrument will fail to honour its obligations and cause the Group to incur a financial loss.
Credit risk arises mainly from 3 sources: Insurance and reinsurance receivables and cash and investment securities.
Maximum exposure
Maximum exposure to credit risk before collateral held or other credit
enhancements: 2017 2016
=N='000 =N='000
Cash and cash equivalents 1,010,492 862,680 Available-for-sale 1,878,385 1,098,213 Trade receivables 6,517 7,931 Loans and other receivables 55,701 113,789 Held-to-maturity 2,420,199 1,622,105 Total assets bearing credit risk 5,371,294 3,704,718
Age analysis for past due and impaired Cash and cash Loans and other equivalents Trade receivables receivables Held-to-maturity Total
=N='000 =N='000 =N='000 =N='000 =N='000 31 December 2017 Neither past due nor impaired 1,010,492 6,517 66,330 2,420,199 3,503,538 Past due but not impaired - - - - - Impaired - - (10,629) - (10,629) Net 1,010,492 6,517 55,701 2,420,199 3,492,909
31 December 2016 Neither past due nor impaired 862,680 7,931 124,418 1,622,105 2,617,134 Past due but not impaired - - - - - Impaired - - (10,629) - (10,629) Net 862,680 7,931 113,789 1,622,105 2,606,505 Reinsurance credit exposures
The Company is however exposed to concentrations of risks with respect to their reinsurers due to the nature of the reinsurance market and
the restricted range of reinsurers that have acceptable credit ratings. The Company is exposed to the possibility of default by their reinsurers
in respect of share of insurance liabilities and refunds in respect of claims already paid.
The Company manages its reinsurance counterparty exposures and the reinsurance department has a monitoring role over this risk.
This exposure is monitored on a regular basis for any shortfall in the claims history to verify that the contract is progressing as expected and
that no further exposure for the Company will arise.
Management also monitors the financial strength of reinsurers and there are policies in place to ensure that risks are ceded to top-rated and
credit worthy reinsurers only.
86
Prestige Assurance Plc Notes to the financial statements - continued
b Financial risk management - continued
id Liquidity Risk
Liquidity risk is the risk that the Company will not be able to meet its insurance liabilities as they fall due. Prestige mitigates this risk by having
an investment strategy which focuses on liquidity and capital preservation before investment returns.
The table below presents the cash flows receivable/payable by the Company. The amounts disclosed in the table are the contractual
undiscounted cash flows. All liabilities are presented on a contractual cash flow basis except for the insurance liabilities, which are presented
with their expected cash flows.
Over 1 year but less
31 December 2017 0 - 30 days 31 - 90 days 91 - 180 days Over 5 years Total =N='000 =N='000 =N='000 =N='000 =N='000 =N='000 =N='000
Cash and cash equivalents 854,468 156,024 - - - - 1,010,492 Insurance receivables - - 6,517 - - - 6,517 Loans and other receivables - - 49,527 - - - 49,527 Other assets - - 57,076 - - - 57,076 Reinsurance assets 737,924 1,018,154 13,057 1,705,937 Finance lease receivables - 35,622 83,117 14,204 51,087 - 184,030 Debt Securities at amortised cost Equities at available for
sale
- - 880,925 142,893 1,396,381 - 2,420,199 - - - - - 1,878,385 1,878,385
Total financial assets 854,468 929,569 2,095,316 170,154 1,447,468 1,878,385 7,312,163
Financial liabilities Insurance contract liabilities
793,078 845,949 1,004,565 2,643,592 Trade payables 140,180 327,086 - - 467,266 Other liabilit ies - - 276,595 - - - 276,595 Borrowings - - - - - - - Total financial liabilities - - 276,595 - - - 276,595
Insurance contract liabilit ies 264,359 396,539 660,898 1,321,796 - - 2,643,592
31 December 2016
Cash and cash equivalents 706,656 156,024 - - - - 862,680 Insurance receivables - - 7,931 - - - 7,931 Loans and other receivables - - 97,199 - - - 97,199 Other assets - - 51,982 - - - 51,982 Reinsurance assets - 737,924 491,949 - - - 1,229,873 Finance lease receivables 35,622 83,117 14,204 - 132,943 Debt Securities at amortised cost Equities at available for
sale Total relevant financial
assets
Financial liabilities Insurance contract liabilities
- 208,532.00 738,032 142,893 - 741,180 1,830,637
- - - - - 1,098,213 1,098,213 706,656 1,138,101 1,470,210 157,097 - 1,839,393 5,311,458
539,763 575,747 683,700 1,799,210
Trade payables - - 72,120 168,746 - - 240,866 Other liabilit ies 535,498 - - - 535,498 Borrowings - - - 152,335 - 152,335 Total financial liabilities - - 607,618 321,081 - - 928,699
Insurance contract liabilit ies
179,921 269,882 449,803 89,961 809,645 - 1,799,210
87
181 - 365 days than 5 yrs
Prestige Assurance Plc Notes to the financial statements - continued
b Financial risk management - continued
The following tables indicate the contractual timing of cash flows in respect of arising from financial instruments and non-financial assets
impacted by this risk: Carrying
amount No stated
maturity 0 - 90 days 91 - 180 days 180 - 365 days 1 - 5 years > 5 years
At 31 December 2017 =N='000 =N='000 =N='000 =N='000 =N='000 =N='000 =N='000
Cash and cash equivalents 1,010,492 - 1,010,492 - - - - -Loans and receivables 49,527 - - 49,527 - - - Trade receivables 6,517 - 6,517 - - - - Other assets 6,174 - 6,174 - - - - Reinsurance assets 1,705,937 - 1,023,562 682,375 - - -
Finance lease receivables
-Financial asset at FVPL
Debt Securities - held to
maturity
184,030 - 44,527 103,895 35,608 - - 259,006 259,006 - - - - -
Listed 2,420,199 - 297,700 440,332 142,893 1,539,274 - Equities - available for
sale Unlisted 1,878,385 1,878,385 - - - - - Statutory deposit 300,000 - - - - - 300,000
7,820,267 2,137,391 2,388,972 1,276,129 178,501 1,539,274 300,000
Financial liabilities
Insurance contract liabilities 2,643,592 - 793,078 845,949 1,004,565 Other liabilities 276,595 - 276,595 - - - - Trade payables 467,266 - 140,180 327,086 - - - Borrowings 72,078 - 72,078 - - - -
815,939 - 488,853 327,086 - - -
Note: Other assets excludes prepayments whilst other liabilities exclude statutory deductions and rent received in advance
88
Prestige Assurance Plc Notes to the financial statements - continued
b Financial risk management - continued
The following tables indicate the contractual timing of cash flows in respect of arising from financial instruments and non-financial assets
impacted by this risk: Carrying
amount No stated
maturity 0 - 90 days 91 - 180 days 180 - 365 days 1 - 5 years > 5 years
At 31 December 2016 =N='000 =N='000 =N='000 =N='000 =N='000 =N='000 =N='000
Cash and cash equivalents 862,680 - 862,680 - - - - -Loans and receivables 97,199 - 97,199 - - - Trade receivables 7,931 - 7,931 - - - - Other assets 16,590 - 16,590 - - - - Reinsurance assets 1,339,406 - 803,644 535,762 - - -
Finance lease receivables
-Financial asset at FVPL
Debt Securities - held to
maturity
132,943 - 35,622 83,117 14,204 - - 495,841 495,841 - - - - -
Listed 1,622,105 - 297,700 440,332 142,893 741,180 Equities - available for
sale Unlisted 1,098,213 1,098,213 - - - - - Statutory deposit 300,000 - - - - - 300,000
5,972,908 1,594,054 2,024,167 1,156,410 157,097 741,180 300,000
Financial liabilities
Insurance contract liabilities 1,799,210 - 539,763 575,747 683,700 Other liabilities 535,498 - 535,498 - - - - Trade payable 241,066 - 72,320 168,746 - - - Borrowings 152,335 - 10,805 - 141,530 10,805 -
928,899 - 618,623 168,746 141,530 10,805 -
Note: Other assets excludes prepayments whilst other liabilities exclude statutory deductions and rent received in advance
89
Prestige Assurance Plc Notes to the financial statements - continued
b Financial risk management - continued
(a) Financial instruments not measured at fair value
At 31 December 2017 At 31 December 2016
Carrying Fair Carrying Fair value value value value
=N='000 =N='000 =N='000 =N='000 Financial assets Cash and cash equivalents 1,010,492 1,010,492 862,680 862,680 Trade receivables 6,517 5,865 7,931 7,138 Loans and other receivables 49,527 42,098 97,199 82,619 Other assets 57,076 51,368 51,982 46,784 Reinsurance assets 1,705,937 1,592,222 1,339,406 1,205,465 Debt securities at amortised cost Listed 2,420,199 2,178,179 1,622,105 1,459,895
Financial liabilities Trade payables 467,266 420,539 241,066 216,959 Other liabilit ies 295,978 254,541 565,557 486,379 Borrowings 72,078 61,266 152,335 129,485 Fair Value Hierarchy
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of fair value
hierarchy. This grouping is determined based on the lowest level of 'significant inputs used in fair value measurement, as follows:
· level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities
· level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e as prices) or
indirectly (ie derived from prices)
· level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The hierarchy of the fair value measurement of the Company’s financial assets and financial liabilities are as follows:
Level 1 Level 2 Level 3 Total 31 December 2017 =N='000 =N='000 =N='000 =N='000 Financial assets Financial assets designated at fair value
Equity securit ies at available for sale 259,006 - - 259,006
Unlisted - - 1,878,385 1,878,385 Asset for which fair value are disclosed
Loans and other recivables - - 42,098 42,098
31 December 2016
Financial assets Financial assets designated at fair value 495,841 - - 495,841 Equity securit ies at available for sale
Unlisted - - 1,098,213 1,098,213
Asset for which fair value are disclosed Loans and other recivables - - 82,619 82,619 Borrowings 61,266 61,266
90
Prestige Assurance Plc Notes to the financial statements - continued
b Financial risk management - continued
Maturity analysis on expected maturity basis
Current Non-current Total At 31 December 2017 =N='000 =N='000 =N='000
Cash and cash equivalents
Financial assets:
- Fair value through profit or loss
1 , 010, 492 - 1,010,492
259 , 006 - 259,006
- Held-to-maturity 880 , 925 1 , 539, 274 2,420,199 - Available-for-sale 1 , 878, 385 1,878,385 - Loans and receivables 49 , 527 - 49,527
Trade receivables 6,517 - 6,517 Other assets 57 , 076 - 57,076 Reinsurance assets 1 , 705, 937 - 1,705,937 Deferred acquisit ion costs
Finance lease receivables 154 , 149 - 154,149 161 , 531 22 , 499 184,030
Investment property - 2 , 439, 002 2,439,002 Intangible assets - 44 , 475 44,475 Property, plant and equipment - 1 , 266, 758 1,266,758 Statutory depos it - 300 , 000 300,000
Total assets 4 , 285, 160 7 , 490, 393 11,775,553
Liabilities Insurance contract liabilit ies 2,643,592 - 2,643,592 Trade payables 467,266 - 467,266 Other payable 295,978 - 295,978 Borrowings 72,078 - 72,078 Ret irement benefits obligat ion
Current income tax payable - 164,290 164,290
162,372 - 162,372
Deferred tax liabilit ies - 461,856 461,856
Total liabilities 3,641,286 626,146 4,267,432
Net maturity mismatch 643,874 6,864,247 7,508,121
91
Prestige Assurance Plc Notes to the financial statements - continued
b Financial risk management - continued
Maturity analysis on expected maturity basis
Current Non-current Total At 31 December 2016 =N='000 =N='000 =N='000
Cash and cash equivalents 862 , 680 - 862,680 Financial assets: - -Financial asset designated as fair value 495 , 841 - 495,841 - Held-to-maturity 880 , 925 741 , 180 1,622,105 - Available-for-sale - 1 , 098, 213 1,098,213 - Loans and receivables 97 , 199 - 97,199
Trade receivables 7,931 - 7,931 Other assets 51 , 982 - 51,982 Reinsurance assets 1 , 339, 406 - 1,339,406 Deferred acquisit ion costs
Finance lease receivables 92 , 839 - 92,839
110 , 531 22 , 412 132,943
Investment property - 2 , 286, 564 2,286,564 Intangible assets - 9,162 9,162 Property, plant and equipment - 1 , 292, 722 1,292,722 Statutory depos it - 300 , 000 300,000
Total assets 3 , 939, 334 5 , 750, 253 9,689,587
Liabilities Insurance contract liabilit ies 1,799,210 - 1,799,210 Trade payables 241,066 - 241,066 Other liabilit ies 565,557 - 565,557 Borrowings 152,335 - 152,335 Ret irement benefits obligat ion
Current income tax payable - 107,646 107,646
127,950 - 127,950
Deferred tax liabilit ies - 467,561 467,561
Total liabilities 2,886,118 575,207 3,461,325
Net maturity mismatch 1,053,216 5,175,046 6,228,262
92
Prestige Assurance Plc Notes to the financial statements - continued
Enterprise risk management
Prestige Assurance is committed to the management of various enterprise risks that could hinder the achievement of its strategic objectives.
In doing this, the company follows its internal control and enterprise r isk management policies which was developed according to the
provisions of the Committee of Sponsoring Organizations of Treadway Commission (COSO) and approved by the National Insurance
Commission, NAICOM. While this framework does not provide answers to all the questions and the challenges experienced in the market in
the past year, its engagement has strengthened our organization’s resilience to major risk exposures.
Our risk philosophy and objectives are clearly defined and has been integrated into our decision making process. Some of the components of
our enterprise risk management system are:
Governance System: The overall responsibility for the management of our enterprise risks resides with the Board through its Enterprise Risk
Management (ERM) Committee. This committee works closely with the Chief Risk Officer/ERM Steering Committee to ensure significant risks
are not only identified but escalated to the Management and Board. The functional Managers are saddled with the responsibility to carry out
regular assessment of existing, newly identified and emerging risk applicable to the functional operations.
Risk Identification & Assessment: Risks associated with Company’s operations that may affect its strategic objectives and annual
performance are regularly identified and evaluated by management. This process involves a dynamic and interactive procedure where the
staff, functional managers, chief risk officer and management staff attempt to identify significant risk situations, assess risk exposures from
them and suggest controls to combat them. In the course of the year the company encountered some significant risks:
Significant Risks Impact on Operations Reputation Risks Brand Image of the company Financial Risks Paid higher values on claims due to Naira devaluation. Legal Risks Increased management cost.
Risk Control & Mitigation: Risk control activities are engaged at different levels and by different functional units. Its major focus is to reduce
the impact of losses from identified risk categories and emerging significant risks. Some of our existing risk categories and control measures
are:
Risk Categories Control Measures Insurance Risks Finalization of underwriting policies and acceptance of risk defined to the Underwriting department
and branches. Financial Risks Interest rate gap analysis, reports, priority focus, measurement testing Strategic Risks Instituted Risk Strategy Committee Hazard Risks Risks and Control Assessment, Monitoring and Control Measures Reputational Risks Due diligence, Trend in Customer Complaints and customer feedback mechanism.
Internal & External Communication: in line with the Company’s philosophy of open communication, management provides relevant
information to staff, Board, shareholders and industry regulators. This enhances the achievement of our corporate objectives in various ways.
We do this by sharing regular information with staff, provision of standard operating systems and standard level agreement for effective
internal operations. W e also provide quarterly report to the Board, Securities and Exchange Commission, Nigerian Stock Exchange and the
National Insurance Commission on all aspects of the Company’s operations.
Risk Monitoring: management ensures an ongoing monitoring of the operations of the company through the activities of internal audit and
control and the risk management department of the Company. Adherences to existing policies are checked, control activities are evaluated
and deficiencies are identified and corrected.
93
Prestige Assurance Plc Notes to the financial statements - continued
Enterprise-wide Risk Management Principles
Prestige Assurance Plc try as much as possible to balance its portfolio while maximizing our value to stakeholders through an approach that
mitigate the inherent risk.
To ensure effective and economic use of resources, we operate strictly by the following principles: - The Company will not take any action that will compromise its integrity - The Company will at all times comply with all government regulations and uphold best international practice. - The Company will build an enduring risk culture, which shall pervade the entire organisation -
-
The Company will at all time hold a balanced portfolio and adhere to guidelines on investment issued by the regulator and Finance and General Purpose Committee of the company. The Company will ensure that there is adequate reinsurance in place for the business above its limit and also prompt payment of such
premiums. Approach to Risk Management In Prestige Assurance, there are levels of authority put in place for the oversight function and management of risk to create and promote a
culture that mitigate the negative impact of risks facing the company. The Board
The Board sets the organisat ion's object ives, risk appetite and approves the strategy for managing r isk. There are various commit tee
nominated to serve of whom their various functions are geared towards minimising likehood impacts of risks faced by the Company.
The Audit Committee:
The Board Audit Committee performs the following functions: 1.) Perform oversight function on accounting and Financial reporting 2.) Liase with the external auditors 3.) Ensure regulatory compliance 4.) Monitoring the effectiveness of internal control processes within the Company.
Board Risk Committee
This is more of a technical committee that oversee the business process. Their functions include: 1.) Reviewing of Company's risk appetite 2.) Oversee management's process for the identification of significant risk across the Company and the adequacy of prevention detection and reporting mechanisms. 3.) Reviews underwriting risks especially above limit for adequacy of reinsurance and company's participation. 4.) Review and recommend for approval of the Board risk management procedures and controls for new products and services
Board Investment Committee
1.) Sest the investments limit and the type of business the Company should invest in 2.) Reviews and approves the above Company's investment policy 3.) Approves investments over and above managements' approval limit 4.) Ensures that there is optimal asset location in order to meet the targeted goals of the Company.
The second level is the management of the Company. This comprises of Managing Director and the management staff of the Company.
They are responsible for strategy implementation of the Enterprise Risk Management policies and guidelines set by the regulator,
government and the board for risk mitigation. This is achieved through the business unit they supervised. The last level is that of independent
assurance. This comprises the internal audit function that provides independent and objective assurance of the effectiveness of the
company's sys tems of internal control established by the first and second lines of defence in management of enterprise r isks across the
organisation.
94
Prestige Assurance Plc Notes to the financial statements - continued
Risk Categorisation As a business entity and an underwriter, Prestige Assurance Plc is exposed to an array of risk through its operations. The company has
identified and categorised its exposure to these broad risks as listed below.
Financial risk
Business risk
Operational risk
Hazard risk
Underwriting risk
Financial Risk Financial risk comprises of market, liquidity and credit risk. Market risks are sub-divided into interest-rate risk, exchange risk, property price risk and equity risk. Liquidity risk includes liquidation value
risk, affiliated investment risk and capital funding risk. Credit risk includes default risk, downgrade or mitigation risk, indirect credit or spread
risk and concentration risk.
Business Risk
Business risk relates to the potential erosion of our market position. This includes customer risk, innovation risk and brand reputation risk.
Operational Risk
This is the risk of loss resulting from inadequacy or failure of internal processing arising from people, systems and or from external events.
Hazard Risk These are risk which are rare in occurrence but like ly impact ma y be major on the co mpany. Examples o f these are natura l d isaster,
terrorism, health and environmental risk, employee injury and illness, property damage and third-party liability.
Insurance/underwriting Risk Our activities involve various range of risk arising from the business itself. This manifest from underwriting, re-insurance, claims
management, reserve development risk, premium default, product design and pricing risk. Our company has a pragmatic approach in
identifying, assessing and mitigating risk of such approaches as stated above.
Capital Management The main objectives of the Company when managing capital are:
To ensure that the Minimum Capital Requirement of N3 billion as required by the Insurance Act CAP I17, LFN 2004, is maintained at all
times.
This is a risk based capital method of measuring the minimum amount appropriate for an insurance company to support its overall business
operations in consideration of its size and risk profile. The calculation is based on applying capital factors to amongst others, the Company's
assets, outstanding claims, unearned premium reserve and assets above a certain concentration limit.
To safeguard the Company's ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for
other stakeholders and;
To provide an adequate return to shareholders by pricing insurance contracts and other services commensurately with the level of risk.
The Insurance Act CAP I17, LFN 2004 specifies the amount of capital that must be held in proportion to the Company's liabilities, i.e in
respect of outstanding claims liability risk, unearned premium liability risk, investment risk, catastrophe risk and reinsurance ceded.
95
Prestige Assurance Plc Notes to the financial statements - continued
Capital Management - Continued
The Company is also subject to a solvency requirement under the Insurance Act CAP I17, LFN 2004 and is required to maintain its solvency
at the minimum capital required at all times. Solvency margin is the excess of admissible assets in Nigeria over admissible liabilities in Nigeria
and shall not be less than the minimum paid-up capital or 15%of the gross premium income less reinsurance premiums paid out during the
year, whichever is higher in accordance with section 24 of Insurance Act CAP I17 LFN, 2004.
The Company's capital requirement ratio and Solvency margin exceed the requirement of the Insurance Act CAP I17, LFN 2004.
Capital Adequacy Test Based on the capital adequacy claculation below, Prestige Assurance Plc has a surplus of N5.7 billion.
31 December 2017 =N='000 =N='000
Shareholders' fund as per Statement of Financial Position 7,508,121 Less: Intangible Assets (44,475) Deferred tax liabilities (461,856)
(506,331)
Capital base 7,001,790 Management uses regulatory capital ratios to monitor its capital base. Based on the capital base computed above, the Company capital base
is above the minimum capital requirement of N3 billion specified by NAICOM.
Determination of Solvency Margin 2017 2016 =N='000 =N='000
Cash and cash equivalents 1,007,398 781,673 Financial assets -Held-for-trading @FVTPL 259,006 495,841 -Held-to-maturity 2,420,199 1,622,105 -Available-for-sale 1,878,385 1,098,213 Reinsurance assets 1,501,624 1,339,406 Deferred acquisition costs 154,149 92,839 Trade receivables 6,517 7,931 Staff loans 49,527 97,199 Finance lease receivables 184,030 132,943 Investment properties 2,439,002 2,286,564 Intangible assets 44,475 9,162 Property, plant and equipment 1,266,758 1,292,722 Statutory deposit 300,000 300,000
Admissable assets 11,338,622 9,556,598
Liabilities Insurance contract liabilities 2,643,592 1,799,210 Trade payables 467,266 241,066 Provisions and other liabilities 295,978 565,557 Borrowings 72,078 152,335 Retirement benefit obligations 164,290 107,646 Current income tax payable 162,372 127,950
Admissible liabilities 3,805,576 2,993,764
Solvency margin 7,533,046 6,562,834 Minimum share capital 3,000,000 3,000,000 Surplus in solvency margin 4,533,046 3,562,834
The Company's capital requirement ratio and Solvency margin is above the requirements of the Insurance Act CAP I17, LFN 2004.
96
Prestige Assurance Plc Revenue account for the year ended 31 December 2017
Workmen CAR &
General Compen- Marine and Oil & Engineering Fire Accident Motor sation Aviation Energy All risk Bond GIT 2017 2016
REVENUE N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000
Direct premium 1,626,525 420,550 390,492 34,718 571,257 249,561 146,633 86,540 202,740 3,729,016 2,593,897 Inward premium 20,728 3,524 6,569 - 2,934 35,439 10,230 75 - 79,499 20,367
Gross premium written 1,647,253 424,075 397,061 34,718 574,191 285,000 156,864 86,615 202,740 3,808,516 2,614,264 Decrease in unearned premium (123,501) (61,515) (28,590) (1,202) (111,228) (23,442) (29,241) (19,811) (24,908) (423,438) (66,733)
Gross premium income 1,523,752 362,559 368,471 33,517 462,962 261,558 127,623 66,804 177,832 3,385,078 2,547,531 Outward reinsurance (1,303,992) (88,576) (14,278) - (377,708) (181,638) (92,145) (59,898) - (2,118,235) 1,429,607 Increase/(decrease) in prepaid re-insurance 84,129 3,164 (3,141) - 50,448 11,782 16,188 19,069 - 181,638 16,116
Net fees and premium income 303,889 277,148 351,052 33,517 135,702 91,701 51,665 25,975 177,832 1,448,481 1,101,808 Commission Income 322,550 26,002 2,177 - 87,894 26,718 24,275 12,322 - 501,938 365,923
Total income 626,439 303,150 353,229 33,517 223,597 118,419 75,940 38,297 177,832 1,950,419 1,467,731
EXPENSES Gross claims paid 418,066 199,799 184,507 22,173 180,124 85,037 31,922 45,150 166,627 1,333,405 1,896,206 (Decrease)/increase in outstanding claims 359,992 73,951 (26,748) (3,544) (125,144) (10,492) 19,351 59,562 73,559 420,487 (1,464,650)
Gross claims expenses 778,058 273,750 157,759 18,629 54,980 74,545 51,273 104,712 240,186 1,753,892 431,556
- - Movement in outstanding claims - - recoverables from reinsurance (175,331) (67,342) 13,267 - 115,048 4,416 (25,230) - (61,244) (196,415) 1,331,422
Reinsurance claims recoveries (440,645) (28,742) (13,746) - (354,009) (14,364) (28,091) - (22,145) (901,743) (1,333,188)
Net claims expenses 162,082 177,666 157,280 18,629 (183,981) 64,597 (2,048) 104,712 156,797 655,735 429,790 Acquisition cost 235,360 62,133 37,032 4,842 63,862 27,397 12,844 12,477 27,648 483,596 369,349 Maintenance costs 205,750 52,969 49,595 4,336 71,719 35,598 19,593 10,819 25,323 475,703 414,518
Total expenses 603,193 292,768 243,907 27,808 (48,399) 127,592 30,389 128,008 209,769 1,615,034 1,213,657
- - Underwriting (loss)/profit 23,246 10,382 109,322 5,709 271,995 (9,173) 45,551 (89,710) (31,937) 335,385 254,074
97
Prestige Assurance Plc Statement of value added for the year ended 31 December 2017
2017 2016
=N='000 % =N='000 %
Gross premium income 3,385,078 2,547,531 Other income - Local 30,774 146,361
3,415,852 2,693,892 Reinsurance,claims,commission and services - local (2,065,647) (1,806,372)
Value added 1,350,205 100 887,520 100
Applied as follows:
To pay employees: Salaries and other employees benefits 480,952 35.6 413,608 46.6
To pay government: Taxation 158,398 11.7 127,815 14.4
Retained for replacement of assets and
expansion of business: Deferred taxation 7,750 0.6 (9,413) (1.1) Depreciation and amortization 57,010 4.2 55,090 6.2 Statutory/contingency reserve 114,255 8.5 78,428 8.8 Result for the year 531,841 39.4 221,992 25.0
Value added 1,350,205 100 887,520 100
98
Prestige Insurance Plc Five-year financial summary
STATEMENT OF FINANCIAL POSITION <---------------------------------------31 DECEMBER --------------------------------->
AS AT 2017 2016 2015 2014 2013
=N='000 =N='000 =N='000 =N='000 =N='000 ASSETS Cash and cash equivalents 1,010,492 862,680 1,312,659 3,259,625 2,449,694 Financial assets (investments) 4,607,117 3,313,358 2,118,514 1,880,871 1,562,881 Trade receivables 6,517 7,931 2,723 1,092 222 Other assets 57,076 51,982 92,705 92,115 41,906 Reinsurance assets 1,705,937 1,339,406 2,686,944 2,814,046 3,168,227 Deferred acquisition costs 154,149 92,839 87,130 71,216 120,121 Intangible assets 44,475 9,162 10,152 5,400 6,300 Finance lease receivables 184,030 132,943 129,070 77,110 130,366 Investment property 2,439,002 2,286,564 2,300,000 2,100,000 - Property, plant and equipment 1,266,758 1,292,722 1,327,844 1,292,471 2,354,776 Statutory deposit 300,000 300,000 300,000 300,000 300,000 Total assets 11,775,553 9,689,587 10,367,741 11,893,946 10,134,493
LIABILITIES Insurance contract liabilities 2,643,592 1,799,210 3,197,127 4,173,905 3,877,074 Trade payables 467,266 241,066 279,544 532,101 383,526 Provisions and other payables 295,978 565,557 107,385 103,794 154,242 Borrowings 72,078 152,335 223,149 457,637 529,370 Deposit for shares - - - 1,504,989 - Retirement benefit obligations 164,290 107,646 136,408 113,873 116,958 Current income tax payable 162,372 127,950 145,991 170,090 391,091 Deferred tax liabilities 461,856 467,561 468,559 445,479 268,889 Total liabilities 4,267,432 3,461,325 4,558,163 7,501,868 5,721,150
EQUITY Share capital 2,685,216 2,685,216 2,685,216 1,254,157 1,254,157 Share premium 1,127,599 1,127,599 1,127,599 1,140,092 1,155,540 Statutory contingency reserve 1,867,906 1,753,651 1,675,223 1,602,307 1,522,696 Accumulated losses (347,325) (776,511) (945,069) (755,718) (742,695) Gratuity valuation reserve (13,433) 9,841 (9,797) (3,612) (29,058) Available-for-sale reserve 1,450,955 671,542 494,488 385,296 247,986 Property revaluation reserve 737,203 756,924 781,918 767,556 1,004,717 Total equity 7,508,121 6,228,262 5,809,578 4,390,078 4,413,343
Total liabilities and equity 11,775,553 9,689,587 10,367,741 11,891,946 10,134,493
99
Prestige Insurance Plc Five year financial summary - continued
STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED
<---------------------------------------31 DECEMBER --------------------------------->
2017 2016 2015 2014 2013 =N='000 =N='000 =N='000 =N='000 =N='000
Gross premium written 3,808,516 2,614,264 2,430,533 2,653,695 4,222,338
Profit before income tax expense 697,989 340,394 20,339 176,755 127,484 Income tax expense (166,148) (118,402) (157,342) (160,800) (217,045) Profit /(loss) for the year 531,841 221,992 (137,003) 15,955 (89,561)
Appropriations: Transfer to statutory contingency reserve 114,255 78,428 72,916 79,611 126,670
Transfer to retained earnings 417,586 143,564 (209,919) (63,656) (216,231)
Baic earnings per ordinary share (kobo)
Diluted earnings per ordinary share
(kobo)
9.90 4.13 (2.94) 0.57 3.62
9.9 4.1 (2.9) 0.6 3.6
Net assets per share (kobo) 140 116 112 182 176
Note: Earnings and dividend per share were computed based on the profit for the year and on the number of issued and
fully paid ordinary shares at the end of the year. Net assets per share were computed on the number of issued and fully paid
ordinary shares at the end of the respective years.
100
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