General Accident Insurance Company Jamaica Limited
Annual Report 2012
Building on solid foundations
General Accident 2012
Annual Report
For more information, visit www.genac.com
PEACE OF MIND
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// 876-929-8454
HEAD OFFICE: 58 HAL F WAY TRE E RO AD, KINGSTON 10, JAM AICA W.I.
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Contents
Statement of the Chairman
Notice of Annual General Meeting
Directors Report
Our Performance
Financial Statistics
Management Discussion and Analysis
Our Team
Corporate Governance
Board of Directors
Leadership Team
Accountability
Corporate Data
Disclosure of Share holding
Our Community
Corporate Social Responsibility
Appendices
Audited financial statements
Form of Proxy
4
6
7
9
1 2
16
1 8
2 0
23
24
2 6
For more information, visit www.genac.com
THE YEAR AT A GLANCE 14
$3.8
Consecutive years of
premium growth
Billion in gross written premiums
$291
Million in net profit
24%
Return on average equity
2
General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2012
Statement of the Chairman
General Accident had another strong year
in 2012. In many ways, our financial performance
this year was a testimony to the resilience of our
business. We faced several negative headwinds,
among them: a recession, a hurricane and record
low interest rates. Nevertheless, General Accident
recorded the highest level of premiums and profits
in our history. This was made possible because of our
adherence to the principles that have served us well
throughout the years: disciplined underwriting, con-
servative risk management and a focus on serving
the needs of our customers.
Operating performance
General Accident recorded a net profit of
$290.5 million in 2012. If non-recurring gains are ex-
cluded from last year’s results, our core profitability
increased 32%. Importantly, we continued to under-
write profitably this year. We have now made an
underwriting profit in five of the last six years, outper-
forming the industry by a significant margin over this
period. This enviable record is directly attributable to
the skill, judgment and prudence of our underwriting
team.
We also improved the management of our
insurance float this year. Despite the lowest interest
rates in decades and regulations that greatly limit
our investment flexibility, last year we increased our
investment income by 39%. I am also pleased to re-
port that the direct impact of the JDX on our portfo-
lio was inconsequential or less than 0.1% of our capi-
tal.
Underwriting profitably and investing our in-
surance float wisely are the two most important driv-
ers of our business. Unsurprisingly, in years like 2012
when we were fortunate enough to do both well, our
business was very profitable.
Capital management
Outlook
General Accident writes some of the largest
and most complicated commercial property, engi-
neering and marine risks in Jamaica. Our capacity
to do so is a function or our own resources as well
as the support of our international reinsurance part-
ners. I am pleased to report that General Accident
deepened and extended our relationships with our
reinsurance partners this year.
The Jamaican economy is likely to get worse
before it gets better. Continued weak economic
growth is likely to dampen the demand for insurance
and keep insurance rates depressed. The Govern-
ment of Jamaica’s precarious fiscal situation is likely
to lead to even more turbulent markets for its secu-
rities. Fortunately, neither a stagnant economy nor
choppy financial markets are new to our Board or
our Management.
Our reinsurance partners are some of the
largest and best capitalized in the world. They can
choose to do business with any insurance company
in any country in the world. In most instances, their
fortunes will rise and fall with those of the people
they support. We are aware that we are the stewards
of their capital and their reputation and are deeply
appreciative of their continued support.
We believe we have an enduring high qual-
ity business capable of continuing a long-term tra-
jectory of profitable growth even in the face of these
challenges. I would like to thank all of the employees,
management and directors for their commitment
and hard work throughout the year. I look forward
to working with them in the coming year to maintain
our positive momentum.
As a result of our solid underwriting and in-
vestment results this year, we made a return on aver-
age equity of 24% on our capital base of $1.29 billion.
We were also able to maintain our dividend policy
by returning over $100 million to our shareholders
while still growing our equity base.
Governance
This year I invited Max Rochester, a former
partner and country head of Price water house Coo-
pers to join the Board as an independent director.
Mr. Rochester brings a wealth of accounting exper-
tise to Board and will be a strong independent voice
on financial matters. I am delighted that he accept-
ed my invitation.
Sincerely,
P.B. Scott
Chairman
4
General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2012
“In many ways, our financial performance
this year was a testimony to the resilience of
our business.”
P.B. Scott / Chairman
For more information, visit www.genac.com 5
Notice of Annual General Meeting
GENERAL ACCIDENT INSURANCE COMPANY
(JAMAICA) LIMITED
$100,031,250 or 9.7 cents per ordinary share, as the
total dividend for that year.
NOTICE IS HEREBY GIVEN THAT the annual general
meeting of General Accident Insurance Company
(Jamaica) Limited (the “Company”) will be held at
10am on June 18th, 2013 at 58 Half Way Tree Road
for shareholders to consider and, if thought fit, to
pass the following resolutions:
Ordinary Resolutions
Dated this the 19th day of April 2013 By order of the
Board.
1. To receive the report of the Board of Direc-
tors and the audited accounts of the Company for
the financial year ended December 31, 2012.
P.B. Scott
Chairman
2. To authorise the Board of Directors to re-
appoint PWC as the auditors of the Company, and
to fix their remuneration.
3. To re-appoint the following Directors of
the Board, who have resigned by rotation in accor-
dance with the Articles of Incorporation of the Com-
pany and, being eligible, have consented to act on
re-appointment:
(a) To re-appoint Melanie Subratie as a
Director of the Board of the Company.
(b) To re-appoint Sharon Donaldson as a
Director of the Board of the Company.
(c) To re-appoint Christopher Nakash as a
Director of the Board of the Company.
4. To authorise the Board of Directors to fix
the remuneration of the Directors.
5. To approve the aggregate amount of
interim dividends declared by the Board during the
financial year ended 31st December 2012, being
6
General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2012
Dividend
A dividend of $0.0485 per share paid on
September 28, 2012 is proposed to be the final divi-
dend in respect of the financial year ended Decem-
ber 31, 2012.
On behalf of the Board of Directors,
P.B. Scott
Chairman
Directors Report
The Directors are pleased to present their
report for General Accident Insurance Company
Jamaica Limited for the financial year ended
December 31, 2012
Financial Results
The Statement of Comprehensive Income
for the Company shows pre-tax profits for the year of
$285 million, taxation of $5.3 million and a net prof-
it after-tax of $290.4 million. Details of these results,
along with a comparison with the previous year’s
performance and the state of affairs of the
Company are set out in the Management Discussion
and Analysis and the Financial Statements which are
included as part of this Annual Report.
Directors
The Directors of the Company as at
December 31, 2012 are: P.B. Scott, Melanie Subratie,
Sharon Donaldson, Ralph Thompson, Geoffrey
Messado, Christopher Nakash, Jennifer Scott,
Nicholas Scott, Nigel Clarke, Duncan Stewart and
Maxim Rochester.
The Directors to retire by rotation in
accordance with the Articles of Incorporation are:
Melanie Subratie, Sharon Donaldson and Christp-
pher Nakash but being eligible, will offer themselves
for reelection.
Auditors
The auditors of the Company, Pricewate-
houseCoopers of Scotiabank Centre, Duke Street,
Kingston, Jamaica have expressed their willingness
to continue in office. The Directors
recommend their reappointment.
For more information, visit www.genac.com 7
Our Performance
Our Performance
General Accident today
Policies in force 15,876
Employees 77
Gross written premiums $3.8b
Investment portfolio
$1.8b
Net worth $1.3b
For more information, visit www.genac.com 9
6-Year Financial Statistics
Employees
2012
77
2011
74
2010
2009
2008
2007
69 66 64
61
Policies in force
15,876
15,247
13,466
11,727
11,187
12,787
Gross written premiums
3,788,969
3,626,395
2,203,074
1,683,911
1,504,687
1,101,424
Net written premiums
991,175
866,513
784,562
592,741
434,117
502,721
Net earned premiums
932,818
819,490 693,085
599,663
356,433
477,774
Claims
540,775
420,142 426,624
391,416
360,568
273,074
Management expenses
332,903
300,592 241,641
204,357
169,613
150,519
Underwriting profit
117,362
161,589 68,862
33,818
(124,899)
31,997
Investment income
Profit before tax
Profit after tax
Cash Dividends
186,114
285,269
290,537
100,031
1,015,010
204,565
134,106
288,007
89,834
1,341,478
244,775
141,300
142,810
94,685
1,284,816
213,944
105,299
149,018
86,221
90,925
95,000
270,000
-
40,000
Investment assets
1,780,642
1,602,732
1,727,588
1,357,765
1,265,838
1,177,126
Insurance reserves
2,199,132
2,042,511
1,511,904
1,163,257
1,100,096
854,434
Shareholders equity
1,288,850
1,140,743
1,270,502
1,034,229
1,157,244
1,028,409
10
General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2012
2012
2011 2010
2009
2008 2007
(2)
Market Share
Growth in gross written premiums
Loss ratio
Expense ratio
(3)
Underwriting margin
Investment return
(4)
Return on average equity
(5)
Dividend yield on average equity
Increase in net worth
Total return to shareholders
(6)
13%
4%
58%
9%
3%
10%
24%
8%
13%
21%
13% 10%
7%
7%
5%
65%
31% 12% 37% 40%
51%
62%
65%
101% 57%
11%
12%
11%
14%
3%
2%
2%
-8%
12%
26%
8%
11%
10% 14%
88%
8%
25%
0%
3%
8%
8%
4%
8%
4%
9%
(-11%)
23%
(-11%)
13% (-7%)
77%
31%
14%
(13%)
(-3%)
Notes:
1. Cash, cash equivalents, fixed income securities, equities and other investment assets
2. Based on gross written premium data from the Insurance Association of Jamaica
3. Management expenses divided by gross written premiums
4. Excludes gains from the sale of available for sale securities and subsidiary in 2011 and dividend from former subsidiary in 2010
5. Excludes gains from the sale of available for sale securities, subsidiary and property in 2011 and dividend from former subsidiary in 2010
6. Includes dividends and capital distributions paid to shareholders and increases in shareholders equity
For more information, visit www.genac.com 11
Management Discussion and Analysis
Our Business
The Company’s principal business, conduct-
ed through its operating segments, is the underwrit-
ing of insurance risks in Jamaica. We write our busi-
ness primarily through brokers and increasingly within
the framework of a few exclusive strategic partner-
ships.
Our underwriting strategy promotes under-
writing profitability over merely growing premium
income. This strategy includes the key elements of
careful risk selection, adequate pricing through strict
underwriting discipline and responsive business mix
changes as per market dictates.
2012 was a challenging year in many
respects. General Accident had to absorb higher
claims costs due to a very busy loss year. On top
of this we had to contend with upheavals in the
government bond markets and persistent low interest
rates due to the continuing financial crisis. Not-
withstanding the challenges, the company posted
another strong year. We were able to close the year
with improved profitability and capital efficiency.
Financial Performance Highlights
•14th consecutive year of premium growth
•Net profit of $290.5 million, an increase of
32% (2011: $220.9 million, excluding non-recurring
items)
•Earnings per share of $0.28 (2011: $0.25, excluding
non-recurring items)
•Book value of $1.29 billion (2011: $1.14 billion)
•Annualized return on average equity of 24%
Underwriting Performance
This year gross written premiums grew to $3.8
billion, an increase of 4%. This marks the 14th year
in a row that General Accident has grown its gross
written premiums. Net premiums earned on the
other hand grew by 14% to $932 million as our motor
portfolio outpaced growth in our other lines of busi-
ness. Typically, we retain a greater share of premiums
(and risk) in our motor business as compared to our
commercial property, homeowners and liability busi-
nesses.
Despite increasing our net premiums earned
considerably, our underwriting profit fell to $117.4
million. This is well below our record underwriting
performance of $161.4 million last year. In fact, our
combined ratio worsened from 88% in 2011 to 94% in
2012. The combined ratio, a widely used measure of
insurance underwriting performance, is the sum of
claims and management expenses divided by net
premiums earned. Since we slightly improved our
management expense efficiency, the increase in our
combined ratio was caused solely by an uptick in
claims. Our loss ratio worsened from 51% last year to
58% in 2012. This increase was as a result of three fac-
tors: Hurricane Sandy, a large commercial property
claim and an increase in the frequency and severity
of our motor claims. Despite these challenges, we
are proud of our underwriting performance. In the
face of difficult market conditions, we have made
an underwriting profit in 5 of the last 6 years and con-
tinue to outperform our peers.
Investment Performance
Our principal investment objectives are to
ensure that funds are available to meet our insur-
ance and reinsurance obligations and to maximize
after-tax investment income while maintaining a high
quality diversified investment portfolio.
Our investment portfolio performed well in
2012. Last year, when non-recurring items are ex-
cluded, General Accident’s investment income was
12
General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2012
$133.9 million. This year, we generated investment
income of $186.2 million or approximately 9.5% of our
average investment portfolio. Including declines in
the fair value of our holdings, our total investment re-
turn was $141.3 million or 7.5%. Improved investment
performance was the result of increases in our float
and the more active and efficient management of
our capital in the face of low interest rates.
We are pleased to report that the impact
on our financial performance following the National
Debt Exchange was immaterial due to the composi-
tion of our portfolio.
Profitability
General Accident’s core profitability in-
creased significantly this year as greater investment
income more than compensated for decreases in
underwriting profits. Net profit for the year was $290.5
million or $0.28 per share. Last year, we reported a
net profit of $1.29 billion. However, as we stressed at
the time and have repeated since, this included over
$1.06 billion of gains from the sale of long-term equity
investments and real estate, which occurred just
before our IPO. These gains had absolutely nothing
to do with our core insurance business and are non-
recurring. When we exclude these gains, our core net
profit last year was $220.9 million or $0.25 per share.
As a result, our core net profit increased by 32% in
2012.
We continued our dividend policy in 2012, paying
just over $100 million in cash to our shareholders or
$0.097 per share, a slight increase over 2011. Gen-
eral Accident ended 2012 with a book value of $1.29
billion and generated a return on average equity for
shareholders of 24%.
Capital Position
Our business operations are in part depen-
dent on our financial strength and the market’s
perception of our financial strength, measured by
Management Discussion and Analysis
Sharon E. Donaldson
Managing Director
shareholder’s equity, which stood at $1.29 billion at
December 31, 2012.
loyal support. We will continue to make every effort
to fulfill the expectations of all our stakeholders.
I look forward to working with our team to continue
to build our business.
Sincerely,
Sharon E. Donaldson
Managing Director
General Accident remains in compliance
with the main capital adequacy and liquidity metrics
prescribed by the Financial Services Commission that
requires the company to maintain a minimum of
225% capital to risk weighted assets (MCT). At year-
end our MCT ratio was 251%.
The Company’s liquidity is ensured by means
of detailed liquidity planning. As a rule, the com-
pany generates significant liquidity from its premium
income, regular investment income including maturi-
ties. At December 31st, 2012 our liquidity ratio of 117%
exceeds the regulatory minimum of 95%.
In addition, we successfully renewed our
treaty with our international reinsurance partners for
2013.
Outlook 2013
The slowdown in the economic growth, cou-
pled with decreasing real incomes, is expected to
produce a curbing effect on the purchase of insur-
ance. However, we believe that even in this difficult
economic environment, there are opportunities for
growth in a number of areas and our strong capital
base and management competence enable us to
systematically relocate capacity to such attractive
business prospects.
As we enter 2013, we have every reason
to believe that market volatility will continue to be
significant given the on going strong political events
on the financial markets. However, by continuing our
disciplined underwriting principles and sticking to our
conservative approach to risk management, we also
expect to generate satisfactory returns for our share-
holders over the long-term.
We wish to thank our all of our policyholders,
brokers, reinsurers, and employees for their trust and
14
General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2011
Our Team
Our Team
Corporate Governance
The Board of Directors of General Accident
is responsible for the corporate governance of the
company and is committed to establishing and
maintaining the highest standards of corporate
governance. The Board accepts and embraces
the fundamental principles of transparency and
accountability and is robust in the protection of all
stakeholders’ interest.
Our corporate governance policies are
overseen by the Board who is vested with the re-
sponsibility to ensure that prudent and effective con-
trols are in place to promote sustainability and the
achievement of strategic objectives. This includes
the prudent management of risk and business assets
in order to meet legal and regulatory requirements
including attaining a high level of compliance.
Board Selection
The Board consists of eleven (11) members.
Members are selected to provide a balance of pro-
ficiency and experience. The Board monitors the
company’s performance against budget on an on-
going basis. Meetings are held quarterly or more fre-
quently if the need arises.
Board Committees
The Board delegates specific duties to com-
mittees vested with the authority provide guidance
and oversight on strategic issues. There are four (4)
committees in place and each committee has its
own terms of reference, which is approved by the
Board.
Audit Committee
The Audit committee consists of five (5)
members, the majority of which must be indepen-
dent members. The primary role of the committee is
to review and approve annual returns, review inter-
nal and external audit plans and subsequent find-
ings, review external audit report and management
control memoranda. Mr. Geoffrey Messado chairs
the committee. During the period under review the
committee met four (4) times and there were no
known instances of fraud or reported irregularities.
Investment and Loan
The Investment and Loan committee con-
sists of five(5) members. The Committee is chaired
by Mrs. Melanie Subratie and has met four (4) times
for the year. The committee is charged with the re-
sponsibility of ensuring that the investment portfolio
meets regulatory requirements and is in keeping with
the Company’s investment policy.
Conduct Review
The conduct review committee consists of
six (6) members, the majority of which must be inde-
pendent members. The committee is chaired by Dr.
Ralph Thompson and has met four (4) times for the
year and is charged with the responsibility of ensur-
ing that written procedures are in place to identify
and prevent conflict of interest situations.
Compensation Committee
This committee consists of 4 members and is
chaired by Mr. Maxim Rochester.
16
General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2012
Board of Directors
Board of Directors
Board Of Directors
P.B. Scott
(appointed November 1998)
Chairman
Sharon Donaldson
(appointed March 2008)
Managing Director
Geoffrey Messado
(appointed May 2001)
Non Executive Director
P.B. Scott is the Chairman of the Company. In
addition to his role with the Company, Mr. Scott is
the Chairman, Chief Executive Officer and principal
shareholder of the Musson Group, one of the largest
privately held groups in the region with business units in
some 30 Caribbean and Central American countries
including Facey Group Limited, T. Geddes Grant Limited,
and others.
Mr. Scott serves as a Director of several local
companies and organisations including, Seprod and its
subsidiaries (Chairman), Scotia Life Insurance Company
Limited, the Jamaica Chamber of Commerce and the
American International School in Kingston. He currently
serves as Honorary Consul General in Jamaica for the
Republic of Guatemala.
Sharon Donaldson is the Managing Director of the
Company. She has been responsible for driving its recent
growth and for overseeing its prudent underwriting and risk
management strategy. Ms. Donaldson has been with
the Company for over 20 years, first joining as the Financial
Controller in 1989 before becoming Managing Director in
2001. In addition to her responsibilities at the Company, Ms.
Donaldson is a Director of Musson (Jamaica) Limited.
Ms. Donaldson holds an LLB from the University of
London, England, an M.B.A from University of Wales. She
is a Chartered Accountant, a fellow member of the Institute
of Chartered Accounts of Jamaica and an attorney at
law.
Geoffrey Messado is a non executive director of
the Company and is Chairman of the Audit Committee of
the Board.
Mr. Messado is also the Financial Controller of
the Musson Group, and he serves as a director of certain
subsidiaries and affiliated companies. He also serves as
Chairman of Mapco Printers Limited and as a director of
Edgechem(Jamaica) Limited, the Coffee Industry Board,
Clarendon Distillers Limited, Spirits Pool Association and
Caribbean Molasses Company (Jamaica) Limited.
Mr. Messado is a Chartered Accountant, FCA,
FCAA, ATII. He is also the Past President of the Jamaica
Exporters Association.
Melanie Subratie
(appointed March 2002)
Deputy Chairman
Melanie Subratie is the Deputy Chairman of the
Company and Chairman of the Investment and Loan
Committee of the Board. Mrs. Subratie is also Deputy
Chairman of the Musson Group and a director of all of its
principal subsidiaries and its affiliates.
Mrs. Subratie holds a B.Sc. (Hons) from the London
School of Economics. She began her career in the United
Kingdom in the Financial Services Division of Deloitte &
Touche and also worked for startup political news wire
service DeHavilland prior to returning to Jamaica in 2002
and joining the Musson Board.
Dr. Ralph Thompson, C.D.
(appointed January 1993)
Non Executive Director
Christopher Nakash
(appointed December 2006)
Independent Non Executive Director
Dr. Ralph Thompson is a non – executive director
of the Company. He is also the Chairman of the Conduct
Review Committee of the Board.
Dr. Thompson was formally the Managing Direc-
tor of C.D. Alexander Realty Company Limited and was
formerly the Chief Executive Officer of Seprod Limited. He
serves as a director of several entities within the Musson
Group including Musson (Jamaica) Limited and T. Geddes
Grant Limited. Dr. Thompson is also a former member of the
New York Bar.
Christopher Nakash is an independent
Non executive Director of the Board of the Company. Mr.
Nakash brings to the Board his management experience,
gained as Chief Executive Officer of Nakash Construction
& Equipment Limited. In the past, Mr. Nakash also served
as General Manager of Netstream Global (2003 to 2008),
and he was also a founding member and Director of the
Riverton Improvement Association and Intelligent
Multimedia Limited. Mr. Nakash holds a BBA from University
of New Brunswick, Canada.
18
General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2012
Jennifer Scott
(appointed December 2009)
Non Executive Director
Dr. Nigel L. Clarke
(appointed August 2011)
Non Executive Director
Jennifer Scott is a non executive director of the
Board of the Company. Mrs. Scott holds a B.Sc.(Hons) in
Psychology from Newcastle University, United Kingdom.
She later gained a Graduate Diploma in Legal Studies
from Keele University, UK, the Certificate of Legal Practice
from the College of Law, London and was admitted as
a Solicitor of Supreme Court of England and Wales. She
attended Norman Manley Law School, and was admitted
as an Attorney-at-Law of the Supreme Court of Jamaica.
She is a member of the legal practice of Clinton Hart & Co.,
Attorneys-at-Law.
Dr. Nigel Clarke is a Non Executive Director of the
Company. Dr. Clarke is also the Chief Operating Officer of
the Musson Group and the Chief Executive Officer of one
of its principal subsidiaries, Facey Group Limited. He also
serves as a director of many of the Musson Group’s
subsidiaries and affiliated companies.
Prior to his return to Jamaica, Dr. Clarke worked as
an Equity Derivatives Trader at Goldman Sachs in London,
England. Dr. Clarke is the Chairman of the National Youth
Orchestra of Jamaica. Dr. Clarke holds a B.Sc. In
Mathematics from the University of the West Indies, as well
as a M.Sc. from Oxford University and a D.Phil. from Oxford
University of the United Kingdom, in Numerical Analysis.
Maxim G. Rochester
(appointed July 2012)
Independent Non Executive Director
Maxim G. Rochester is an independent non exec-
utive director of the company. He holds a – B.Sc. (Account-
ing) Hons. FCA and FCCA certification. Max is a member
of the Chartered Association of Certified Accountants (UK)
and The Institute of Chartered Accountants of Jamaica. He
was also a member of the Accounting Standards Commit-
tee of the Institute of Chartered Accountants of Jamaica
(ICAJ) and played a significant role in the adoption of
International Financial Reporting Standards in Jamaica. He
also presented several papers at seminars hosted by ICAJ.
Max is a former Territory Senior Partner of Pricewa-
terhouseCoopers and was responsible for the quality and
delivery of the audit of the financial statements of several
major companies. As engagement partner, Max was
responsible for the overall planning and execution of audit
strategies and had the ultimate decision making responsibil-
ity on all audit matters.
Nicholas A. Scott
(appointed July 2011)
Non Executive Director
Nicholas Scott is a non executive director of the
Company. Mr. Scott is the Chief Investment Officer of the
Investment and Financial Services businesses of the
Musson Group. He is also a Director of Seprod Limited. He
returned to Jamaica in 2009 after working as a private
equity investor and investment banker at the Blackstone
Group and Morgan Stanley in New York and Brazil.
Mr. Scott holds a B.Sc. in Economics (Magna Cum
Laude) from the Wharton School at the University of
Pennsylvania, an M.B.A (Beta Gamma Sigma) from
Columbia Business School and a M.P.A. from the Harvard
Kennedy School of Government.
Duncan Stewart
(appointed August 2011)
Independent Non Executive Director
Duncan Stewart is an independent non
executive director of the Company. Mr. Stewart is the
General Manager of Stewart Motors Limited and is also
involved in related family businesses Stewart’s Auto Sales
Limited and its affiliated companies, Stewart’s Auto Paints
Limited, Tropic Island Training Company Limited and Silver
Star Motors Limited. Mr. Stewart joined as a third
generation member after graduating from McGill
University with a B.Eng. (Mech).
Mr. Stewart is also a director of the Automobile
Dealers Association and the Richard and Diana Stewart
Foundation. He is also a sponsor of the family charity, Kind
Hearts, which is run by his children and their cousins. Mr.
Stewart is a past National Rally Champion.
For more information, visit www.genac.com 19
Leadership Team
Cheryll Henry Lochinvar Lungren Sharon Donaldson Maureen Hall Angella Reynolds
20
General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2012
Sharon Donaldson
Managing Director
See Board of Directors.
Maureen Hall
General Manager
Ms. Maureen Hall is the General Manager of
the Company with direct responsibility for the Claims and
Underwriting Departments. Ms. Hall has been with the Com-
pany for over 20 years. She joined the Company in 1989 as
Credit Controller, was appointed Marketing and Customer
Service Manager in January 1991 and later Claims Man-
ager in June 1994. She was promoted to General Manager
in 2006.
Ms. Hall has also held executive posts at Kingston
Terminal Operators Limited and Allied Insurance Brokers
Limited. She also served as Coach of Jamaica’s National
Netball Team for many years and remains a member of the
sport’s international coaching committee. Ms. Hall holds a
B. Ed (Hons) degree from the University of Sussex, England,
as well as a Diploma in Mass Communication from the
University of the West Indies, and a M.B.A from Manchester,
University England. Ms. Hall is also an associate member of
the Chartered Insurance Institute (UK).
Lochinvar Lungren
Financial Controller
Mr. Lochinvar Lungren is the Financial Controller
of the Company with responsibility for leading the finance,
accounting and treasury functions. Mr. Lungren has been
with the Company for over 20 years, joining in 1988 as an
Accounting Clerk.
He advanced to the position of Credit Officer in
1996 and he was then seconded to the Company’s found-
ing joint venture partner, together with Musson (Jamaica)
Limited, General Accident Fire and Life Assurance Compa-
ny in Scotland. Mr. Lungren rejoined the Company in 1998.
He left briefly to work as General Manager of JN’s finance
arm before rejoining General Accident in 2005 as Financial
Controller.
Angella Reynolds
Deputy General Manager
Cheryll Henry
Human Resources & Facilities Manager
Ms. Angella Reynolds joined the Company in 2010.
She is the Deputy General Manager of the Company in
charge of Underwriting and Marketing.
Ms. Reynolds has over 20 years of experience in
the insurance industry, having previously held executive
posts with the Grace Kennedy Group, Allied Insurance
Brokers and Jamaica International Insurance Company.
Ms. Reynolds is the holder of the Jamaican Insur-
ance Diploma from the College of Insurance & Professional
Studies. She is an associate member of the Chartered Insur-
ance Institute (UK) and also holds a Diploma in Commercial
Insurance Contract Wording from that organisation.
Ms. Cheryll Henry is the Human Resources and Fa-
cilities Manager of the Company. Ms. Henry has been with
the Company for over 15 years. She joined the Company
in 1996 as an Administrative Supervisor and, notably, within
a 10 year period she rotated through every division, and
was also appointed Operations Manager of Orrett& Musson
Investment Company Limited, a former subsidiary of the
Company.
Ms. Henry holds a Bachelors degree in Manage-
ment Studies from the University of the West Indies and a Di-
ploma in Human Resource Management from the Institute
of Management & Production.
“Most of our executives have been with
“Most of our executives have been with
General Accident for over a decade”
General Accident for over a decade”
For more information, visit www.genac.com 21
For more information, visit www.genac.com 21
Cheryll Henry Lochinvar Lungren Sharon Donaldson Maureen Hall Angella Reynolds
Accountability
Accountability
Corporate Data
Chairman
Deputy Charman
Managing Director
.................................................................
Directors:
P.B. Scott
Melanie Subratie
Sharon Donaldson
Dr. Ralph Thompson
Geoffery Messado
Jennifer Scott
Christopher Nakash
Nicholas Scott
Dr. Nigel Clarke
t
Duncan Strewar
Maxim G. Rochester
.................................................................
Corporate Secretary:
Geoffery Messado
Appointed Actuary:
Josh Worsham, FCAS, MAAA
Auditors:
PricewaterhouseCoopers
Bankers:
First Caribbean International Bank
...........................................................................................
Leadership Team:
Sharon Donaldson
Maureen Hall
Angella Reynolds
Lochinvar Lungren
Cheryll Henry
Managing Director
General Manager
Deputy General Manager
Financial Controller
Human Resources & Facilities Manager
............................................................................................
Attorneys:
DunnCox
Patterson Mair Hamilton
Registered Office:
58 Halfway Tree Road
Kingston, Jamaica W.I.
Telephone: (876) 929-2451
Fax: (876) 929-1074
Email: info@genac.com
website: www.genac.com
Registrar:
Jamaica Central Securities Depository
General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2012
23
Shareholdings of Top 10 Shareholders
........................................................................................................................................................................................................................................................................
Shareholders
Shareholdings of Directors
Director/ Connected persons
%Owned
Shares
Shares
Disclosure Of Shareholdings
1. Musson Jamaica Limited
824, 999,989
2. Mayberry West Indes Limited
29,333,387
3. Apex Pharmacy
11,588,279
4. Mayberry Managed Client Account
6,874,102
5. First Caribbean Int’l Sec. Ltd A/C B.U.T.
4,413,539
80.00
2.85
1.12
0.67
0.43
6. Barita Investment Ltd. - Long A/C(Trading) 3,709,461
0.36
7. Sharon Donaldson
8. Colin Steele
9. Konrad Limited
3,000,000
2,887,774
2,688,854
10. Lannaman & Morris(shipping) Limited
2,599,260
0.29
0.27
0.26
0.25
24
For more information, visit www.genac.com
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P.B. Scott
NIL
824,999,989)
NIL
824,999,989)
1.
( Musson Jamaica Limited
2. Melanie Subratie
( Musson Jamaica Limited
3. Sharon Donaldson
3,000,000)
( Self
( Junior Levine 177,758)
4. Dr Ralph Thompson NIL
5. Geoffery Messado
1,000,000
6. Jennifer Scott
NIL
7. Christopher Nakash 1,698,020
1,980,198
8. Nicholas Scott
9. Duncan Stewart
2,475,190
( and Deborah Strewart)
( and Diana Strewart)
10. Dr. Nigel Clarke
2,475,248
Shareholdings of the Management team
............................................................................................................
Manager/ connected persons
1. Sharon Donaldson
( self
( Junior Levin
e
2. Maureen Hall
2,362,000)
(and Anthony Dunbar
38,000)
(and Errol Kellyman
3. Angella Reynolds
750,000
4. Lochinvar Lungren 645,482
1,980,198
5. Cheryll Henry
3,000,000)
177,758)
Our Community
Our Community
Corperate Social Responsibility
For General Accident, corporate social re-
sponsibility is an important entranched mandate.
We try to conduct our business in a manner consis-
tent with excellent corporate citizenship as we seek
to ensure that our operations create value for our
shareholders, employees, customers, communities
and the Jamaican environment. During the financial
year under review, despite the financial challeng-
es, we continued to play a significant role in nation
building through our support of education, cultural
heritage, sports, child welfare and the environment.
Education and Cultural Heritage
General Accident recognizes that the foster-
ing of educational opportunities for young people
plays a pivotal role in national development. The
company renewed its partnership with Next Move
Jamaica, with the provision of four (4) scholarships
for students pursuing tertiary education in Jamaica.
26
For more information, visit www.genac.com
of the nation’s youth as it not only builds patriotism,
encourages friendship but inculcates important life
skills and shapes character. General Accident is
committed to Jamaica’s world renowned sports pro-
gramme and our talented athletes. For more than
20 years, we have provided sponsorship of interna-
tional tours and the underwriting of travelling costs
for many athletes.
We have been particularly strong support-
ers of the Jamaica Netball Association and in 2012,
General Accident provided financial assistance in
the amount of J$1.50 million in cash and kind. Our
programmes with netball also began some 20 years
ago and apart from direct sponsorship of tours and
travel, we promote the development of life skills for
members of the national team.
We continue to support the Chess Founda-
tion of Jamaica through our sponsorship of chess
competition for high schools to the tune of $300,000.
St Jago High School won the 2012 competition.
General Accident has supported the Ja-
maica Cultural Development Commission (JCDC)
since 2008 and in 2012, was again a sponsor of the
Miss Festival Queen Competition.
Sports
Sports not only touches the lives of everyone,
it is a unifying force for any nation. We recognize the
invaluable contribution of sports in the development
We also support the Jamaica Athletic As-
sociation by providing sponsorship for Gibson Relays
in February of each year, and for individual events
such as the Phil Palmer Summer Tennis Camp held
annually at the Jamaica Pegasus for over 70 children
between the ages of 5 – 16.
Child Welfare
Environment
In conjunction with the staff sports club, we
provided much needed support in cash and kind to
Sophie’s Place, a home for 27 children with disabili-
ties. Each year, Our staff members organize a Christ-
mas treat at the home and both staff and children
are provided with gifts and day of fun and good
food and care.
A healthy natural environment is of vital im-
portance to the insurance industry. We firmly believe
all development should be sustainable and should
not result in damage to natural resources. Since
1995, We have been a major donor to the Jamaica
Environment Trust (JET), one of Jamaica’s leading en-
vironmental non profit groups.
General Accident has worked in partnership
with JET to educate young Jamaicans about envi-
ronmental issues via the Schools’ Environment Pro-
gramme, to clean our country’s beaches, and has
helped JET invest in training and development for its
small staff complement. In recognition of our long
standing support, JET recently named us a “Cham-
pion for the Environment.”
General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2012
27
Other support
At General Accident we encourage our
staff to be change leaders and to assit in the nation-
al building process. In keeping with this mandate
our staff also participated in a number of other CSR
events, such as Relay for Life, which raises money for
cancer patients; in addition to support for the Ja-
maica Fire Brigade with the provision of some much
needed office equipment.
28 For more information, visit www.genac.com
Appendices
Appendices
GENERAL ACCIDENT INSURANCE
COMPANY JAMAICA LIMITED
Financial Statements
31 December 2012
General Accident Insurance Company Jamaica Limited
Index
31 December 2012
Actuary’s Report
Independent Auditors’ Report to the Members
Financial Statements
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Page
1
2
3
4-5
6 - 61
Independent Auditors’ Report
To the Members of
General Accident Insurance Company Jamaica Limited
Report on the Financial Statements
We have audited the accompanying financial statements of General Accident Insurance Company Jamaica
Limited, set out on pages 1 to 61, which comprise the statement of financial position as at 31 December
2012 and the statements of comprehensive income, changes in equity and cash flows for the year then
ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fair view in
accordance with International Financial Reporting Standards and with the requirements of the Jamaican
Companies Act, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted
our audit in accordance with International Standards on Auditing. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation of financial statements that give a true and fair view in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Members of General Accident Insurance Company Jamaica Limited
Independent Auditors’ Report
Page 2
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of General
Accident Insurance Company Jamaica Limited as at 31 December 2012, and of its financial performance
and cash flows for the year then ended in accordance with International Financial Reporting Standards
and the requirements of the Jamaican Companies Act.
Report on Other Legal and Regulatory Requirements
As required by the Jamaican Companies Act, we have obtained all the information and explanations
which, to the best of our knowledge and belief, were necessary for the purposes of our audit.
In our opinion, proper accounting records have been kept, so far as appears from our examination of those
records, and the accompanying financial statements are in agreement therewith and give the information
required by the Jamaican Companies Act, in the manner so required
Chartered Accountants
27 March 2013
Kingston, Jamaica
General Accident Insurance Company Jamaica Limited
Statement of Comprehensive Income
Year ended 31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 1
Gross Premiums Written
Reinsurance ceded
Excess of loss reinsurance cost
Net premiums written
Changes in unearned premiums, net
Net Premiums Earned
Commission income
Commission expense
Claims expense
Management expenses
Underwriting Profit
Investment income
Other income
Other operating expenses
Profit before Taxation
Taxation
Net Profit for the Year
Note
2012
$’000
2011
$’000
3,788,969
3,626,395
(2,665,753)
(2,632,089)
(132,041)
(127,793)
991,175
(58,357)
932,818
295,485
866,513
(47,023)
819,490
294,374
(237,263)
(231,689)
10
(540,775)
(420,142)
11
12
(332,903)
(300,592)
117,362
161,441
136,062
1,015,010
61,711
193,669
(29,866)
(28,642)
285,269
1,341,478
15
5,268
(56,662)
290,537
1,284,816
Other Comprehensive Income:
Unrealised (losses)/gains on available-for-sale investments, net of tax
(30,959)
98,193
Gains recycled to profit or loss on disposal and maturity of available-for-
sale investments
Total Other Comprehensive Income
TOTAL COMPREHENSIVE INCOME
(11,440)
(847,201)
(42,399)
(749,008)
248,138
535,808
EARNINGS PER SHARE
16
$0.28
$1.46
General Accident Insurance Company Jamaica Limited
Statement of Changes in Equity
Year ended 31 December 2012
(expressed in Jamaican dollars unless otherwise stated)
Page 3
Balance at 31 December 2010
75,000
129,456
859,525
206,521
1,270,502
Share
Capital
Note
$’000
Capital
Reserves
$’000
Fair Value
Reserve
$’000
Retained
Earnings
$’000
Total
$’000
Comprehensive income :
Net profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners
Issue of shares
Dividends
Profits capitalised –
Capital distribution received
Total transactions with owners
Balance at 31 December 2011
Comprehensive income :
Net profit for the year
Other comprehensive income
Total comprehensive income
Transactions with owners
17
30
Dividends
17
-
-
-
395,358
-
-
395,358
470,358
-
-
-
-
-
-
-
-
-
22,574
22,574
-
1,284,816
1,284,816
(749,008)
-
(749,008)
(749,008)
1,284,816
535,808
-
-
-
-
-
395,358
(1,060,925)
(1,060,925)
(22,574)
-
(1,083,499)
(665,567)
152,030
110,517
407,838
1,140,743
-
-
-
-
-
290,537
290,537
(42,399)
-
(42,399)
(42,399)
290,537
248,138
-
(100,031)
(100,031)
Balance at 31 December 2012
470,358
152,030
68,118
598,344
1,288,850
General Accident Insurance Company Jamaica Limited
Statement of Cash Flows
Year ended 31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 4
Cash Flows from Operating Activities
Net profit
Adjustments for items not affecting cash:
Depreciation
Amortisation of intangible assets
Gain on sale of investments
Gain on sale of leases
Gain on disposal of subsidiary
Unrealised gain on Unit Trust Fund
Gain on disposal of property, plant and equipment
Interest income
Dividend income
Capital distribution received
Current taxation
Deferred taxation
Foreign exchange gains
Increase in deferred policy acquisition cost
Increase in insurance reserves
Changes in operating assets and liabilities:
Due from policyholders, brokers and agents
Other receivables
Loans receivable
Other liabilities
Due from related parties
Due from reinsurers and coinsurers, net
Taxation paid
Net cash provided by operating activities
Cash Flows from Investing Activities
Acquisition of investments
Leases receivable, net
Acquisition of property, plant and equipment
Acquisition of intangible asset
Disposal of subsidiary
Proceeds from disposal of property, plant and equipment
Proceeds from disposal and maturity of investments
Capital distribution received
Dividend received
Interest received
Net cash provided by/(used in) by investing activities
Note
2012
$’000
2011
$’000
290,537
1,284,816
24
25
11
11
12
11
11
11
15
15
24
25
30
15,057
14,808
(10,361)
(999)
-
(4,510)
(6,337)
(110,708)
(8,007)
-
-
(5,268)
(58,583)
(6,316)
156,621
265,934
(74,893)
(3,202)
(1,037)
(15,268)
406
79,789
251,729
(64,682)
187,047
(232,277)
(21,040)
(33,303)
(10,757)
-
9,207
210,025
-
8,007
112,376
42,238
15,563
13,079
(848,471)
-
(61,928)
(7,103)
(157,554)
(74,934)
-
(22,574)
49,993
6,669
(6,506)
(8,587)
530,607
713,070
46,656
3,182
(25,669)
23,982
12,693
(455,211)
318,703
(37,439)
281,264
(125,519)
(41,962)
(9,081)
(10,732)
(3,314)
12,315
31,271
22,574
20,000
72,868
(31,580)
General Accident Insurance Company Jamaica Limited
Statement of Cash Flows (Continued)
Year ended 31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Net cash provided by/(used in) investing activities brought forward
Cash Flows from Financing Activities
Proceeds from issue of shares
Dividends paid
Net cash (used in)/provided by financing activities
Increase in cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at beginning of year
2012
$’000
42,238
-
(100,031)
(100,031)
129,254
53,671
1,134,278
Page 5
2011
$’000
(31,580)
395,358
(90,925)
304,433
554,117
4,667
575,494
CASH AND CASH EQUIVALENTS AT END OF THE YEAR (NOTE 18)
1,317,203
1,134,278
Non- cash transactions
The principal non-cash transactions in the prior year were as follows:
Dividends declared and paid
Proceeds from sale of available-for-sale equity investments
Procceds from sale of subsidiary
Proceeds from disposal of property, plant and equipment
.
2012
$’000
-
-
-
-
-
2011
$’000
970,000
887,287
66,288
189,000
2,112,575
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 6
1.
Identification and Activities
General Accident Insurance Company Jamaica Limited is incorporated and domiciled in Jamaica. On 21
September 2012, the company issued ordinary shares to the public, and became listed on the Jamaica Junior
Stock Exchange. Consequent on the listing of its shares, the company became an 80% subsidiary of Musson
(Jamaica) Limited (Musson), having previously been a wholly owned subsidiary of Musson. The registered office
of the company is located at 58 Half-Way-Tree Road, Kingston 10. The Company’s ultimate parent company,
Musson, is incorporated and domiciled in Jamaica.
The company is licensed to operate as a general insurance company under the Insurance Act, 2001. Its
principal activity is the underwriting of commercial and personal property and casualty insurance.
2. Summary of Significant Accounting Policies
The principal financial accounting policies adopted 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.
(a) Basis of preparation
These financial statements have been prepared in conformity with International Financial Reporting Standards
(IFRS) and have been prepared under the historical cost convention as modified by the revaluation of certain
financial instruments carried at fair value.
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 the Company’s
accounting policies. Although these estimates are based on managements’ best knowledge of current events
and action, actual results could differ from those estimates. The areas involving a higher degree of judgement
or complexity, or areas where assumptions and estimates are significant to the financial statements are
disclosed in Note 7.
Accounting pronouncements effective in 2012 which are relevant to the Company’s operations
Certain new standards, amendments and interpretations to existing standards have been published that
became effective during the current financial year and are relevant to the Company’s operations. The
adoption of these new pronouncements has impacted the Company as discussed below.
•
IFRS 7, (Amendment) ‘Financial Instruments: Disclosures’ (effective 1 July 2011). This
amendment requires additional disclosures in respect of risk exposures arising from transferred
financial assets. The amendment includes a requirement to disclose by class of asset the nature,
carrying amount and a description of the risks and rewards of financial assets that have been
transferred to another party yet remain on the entity's statement of financial position. Disclosures are
also required to enable a user to understand the amount of any associated liabilities, and the
relationship between the financial assets and associated liabilities. The company has adopted the
amendment effective 1 January 2012, however there was no impact on the entity’s disclosures.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 7
2. Summary of Significant Accounting Policies (Continued)
(a) Basis of preparation (continued)
Accounting pronouncements that are not yet effective, and have not been early adopted
At the date of authorisation of these financial statements, certain new standards, interpretations and
amendments to existing standards have been issued which are mandatory for the Company’s accounting
periods beginning on or after 1 January 2012 or later periods, but were not effective at the date of the
statement of financial position, and which the Company has not early adopted. The Company has assessed
the relevance of all such new standards, interpretations and amendments, has determined that the following
may be relevant to its operations, and has concluded as follows:
•
•
•
•
•
IAS 1 (Amendment), ‘Presentation of financial statements’ (effective 1 July 2012). This
amendment changes the disclosure of items presented in other comprehensive income (OCI) in the
statement of comprehensive income. The amendment requires entities to separate items presented in
OCI into two groups, based on whether or not they may be recycled to profit or loss in the future. The
Company will adopt the amendments from 1 January 2013.
IFRS 9, ‘Financial instruments’ (effective 1 January 2015). The standard introduces new
requirements for the classification and measurement of financial assets and liabilities and is effective
from 1 January 2015 with early adoption permitted. The standard divides all financial assets and
liabilities that are currently in the scope of IAS 39 into two classifications – those measured at amortised
cost and those measured at fair value. This standard is a work in progress and will eventually replace
IAS 39 in its entirety. Management is currently assessing the impact this may have on the Company.
IFRS 11, ‘Joint arrangements,’ (effective 1 January 2013). The standard gives a more realistic
reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than
its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint
operations arise where a joint operator has rights to the assets and obligations relating to the
arrangement and hence accounts for its interest in assets, liabilities, revenue and expenses. Joint
ventures arise where the joint operator has rights to the net assets of the arrangement and hence equity
accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. The Company
is yet to assess IFRS 11’s full impact and intends to adopt IFRS 11 no later than the accounting period
beginning on or after 1 January 2013.
IFRS 12, 'Disclosures of interests in other entities' (effective 1 January 2013). This standard
includes the disclosure requirements for all forms of interests in other entities, including joint
arrangements, associates, special purpose vehicles and other off balance sheet vehicles. Management
is currently assessing the impact this may have on the Company.
IFRS 13, ‘Fair Value Measurement’, (effective 1 July 2013). This standard, aims to improve
consistency and reduce complexity by providing a precise definition of fair value and a single source of
fair value measurement and disclosure requirements for use across IFRSs. The requirements, which
are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but
provide guidance on how it should be applied where its use is already required or permitted by other
standards within IFRSs or US GAAP. The Company will adopt the standard from 1 January 2014.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
2. Summary of Significant Accounting Policies (Continued)
Page 8
(b) Revenue and income recognition
Revenue comprises the fair value of the consideration received or receivable for the provision of services in
the ordinary course of the Company’s activities. Revenue is shown net of General Consumption Tax and is
recognised as follows:
Insurance services
Gross premiums written are recognised on a pro-rated basis over the life of the policies written. The portion
of premiums written in the current year which relates to coverage in subsequent years is deferred as
unearned premiums (Note 2(q)(i)).
Commissions payable on premium income and commissions receivable on reinsurance of risks are charged
and credited to profit or loss, respectively, over the life of the policies.
Interest income
Interest income is recognised on a time-proportion basis using the effective interest method. When a
receivable is impaired, the Company reduces the carrying amount to its recoverable amount, being the
estimated future cash flow discounted at the original effective interest rate of the instrument, and continues
unwinding the discount as interest income.
Dividend
Dividend income for equities is recognised when the right to receive payment is established.
Rental income
Rental income is recognised on an accrual basis.
(c) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of the Company are measured using the currency of the
primary economic environment in which it operates (the functional currency). The financial statements
are presented in Jamaican dollars which is also the company’s functional currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Translation differences resulting from changes in the amortised cost of foreign currency monetary assets
classified as available-for-sale are recognised in profit or loss. Other changes in the fair value of these
assets are recognised in other comprehensive income. Translation differences on non-monetary financial
assets classified as available-for-sale are reported as a component of the fair value gain or loss in other
comprehensive income.
(d) Financial instruments
Financial instruments carried on the statement of financial position include investments, due to and from
related parties, due to and from reinsurers and coinsurers, due from policyholders, brokers and agents, loans
and other receivables, cash and short term investments, other liabilities and claims liabilities. The particular
recognition methods adopted are disclosed in the individual policy statements associated with each item.
The fair values of the company’s financial instruments are discussed in Note 6.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
2. Summary of Significant Accounting Policies (Continued)
Page 9
(e) Cash and cash equivalents
Cash and cash equivalents are stated at cost. For purposes of the cash flow statement, cash and cash
equivalents comprise balances with maturity dates of less than 90 days from the dates of acquisition including
cash and bank balances and deposits held on call with banks.
(f)
Investments
Investments are classified as held-to-maturity, available-for-sale and fair value through profit or loss.
Management determines the appropriate classification of investments at the time of purchase. Purchases
and sales of investments are recognised on the trade date, which is the date that the Company commits to
purchase or sell the asset.
(i)
Held-to-maturity financial assets
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments
and fixed maturities that the Company’s management has the positive intention and ability to hold to
maturity. Were the Company to sell other than an insignificant amount of held-to-maturity assets, the
entire category would be tainted and reclassified as available-for-sale. Held-to-maturity investments are
initially recorded at fair value and subsequently measured at amortised cost.
(ii) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading or designated at
fair value through profit or loss at inception. The Company has designated certain of its equity
securities as fair value through profit or loss as they are managed and their performance evaluated on a
fair value basis. Investments classified as fair value through profit or loss, are initially recognised at fair
value and transaction costs are expensed through profit or loss. Investments at fair value through profit
or loss are subsequently measured at fair value. Gains or losses arising from changes in the fair value
of investments at fair value through profit or loss are presented in investment income in arriving at profit
or loss.
(iii) Available for sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not
classified in any of the other categories. Available-for-sale investments are initially recognised at fair
value, which includes transaction costs, and subsequently carried at fair value based on quoted bid
prices or amounts derived from cash flow models. Unrealised gains and losses arising from changes in
fair value of available-for-sale securities are recognised in other comprehensive income.
Equity securities for which fair values cannot be measured reliably are recognised at cost less
impairment. When securities classified as available-for-sale are sold or impaired, the accumulated fair
value adjustments in equity at the date of disposal or impairment are reclassified to profit or loss.
(iv) Reclassification of financial assets
Financial assets are reclassified if; as a result of a change in intention or ability, management has
determined that it is no longer appropriate to classify an investment as held-to-maturity.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 10
2. Summary of Significant Accounting Policies (Continued)
(f) Investments (continued)
(v) Impairment of financial assets
A financial asset is considered impaired if its carrying amount exceeds its estimated recoverable
amount. The Company assesses at each year end whether there is objective evidence that a financial
asset or group of financial assets is impaired. The amount of the impairment loss for assets carried at
amortised cost is calculated as the difference between the asset’s carrying amount and the present
value of expected future cash flows discounted at the original effective interest rate. The recoverable
amount of a financial asset carried at fair value is the present value of expected future cash flows
discounted at the current market interest rate for a similar financial asset. In the case of equity
securities classified as available-for- sale, a significant or prolonged decline in the fair value of the
security below its cost is considered as an indicator that the securities are impaired. If any such
evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference
between the acquisition cost and the current fair value, less any impairment loss on that financial asset
previously recognised in other comprehensive income – is recycled through other comprehensive
income and recognised in profit or loss for the current year. Impairment losses recognised in profit or
loss on equity instruments are not reversed through profit or loss.
(g) Loans and receivables
The Company classifies its financial assets other than investments in the loans and receivables category.
The classification depends on the purpose for which the financial assets were acquired. Management
determines the classification at initial recognition and re-evaluates this designation at every reporting date.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market.
Financial assets classified as loans and receivables either meet the definition of loans and receivables at
the date of acquisition, or at the date of reclassification from another category (fair value through profit or
loss or available-for-sale). Leases and loans receivable have been classified as loans and receivables.
(h) Loans receivable
Loans are recognised when the cash is advanced to borrowers. They are initially recorded at fair value,
which is the cash given to originate the loan including any transaction costs, and subsequently measured at
amortised cost using the effective interest rate method.
A provision for bad debts is established if there is objective evidence that a loan is impaired. A loan is
considered impaired when management determines that it is probable that all amounts due will not be
collected according to the original contractual terms. When a loan has been identified as impaired, the
carrying amount of the loan is reduced by recording specific provisions for bad debt to its estimated
recoverable amount, which is the present value of the expected future cash flows including amounts
recoverable from guarantees and collateral, discounted at the original effective interest rate of the loan.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
2. Summary of Significant Accounting Policies (Continued)
Page 11
(i) Leases
Leases of property, plant and equipment where the Company has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at
the lower of the fair value of the leased property or the present value of the minimum lease payments.
Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate
on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are
included in non-current borrowings. The interest element of the finance cost is charged to the statement of
comprehensive income over the lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. Property, plant and equipment acquired under finance
leases are depreciated over the shorter of the useful life of the asset or the lease term.
Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under operating leases (net of any incentives received from
the lessor) are charged to the statement of comprehensive income on a straight-line basis over the period of
the lease.
When an operating lease is terminated before the lease period has expired, any payment required to be
made to the lessor by way of penalty is recognised in profit or loss in the period in which termination takes
place
(j)
Insurance contracts
Insurance contracts are those contracts that transfer significant insurance risk. The Company’s insurance
contracts are classified as short-term insurance contracts which include casualty and property insurance
contracts.
Casualty insurance contracts protect the Company’s customers against the risk of causing harm to third
parties as a result of their legitimate activities. Damages covered include both contractual and
non-contractual events. The typical protection offered is designed for employers who become legally liable
to pay compensation to injured employees (employer’s liability) 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. Customers who undertake commercial activities on their
premises could also receive compensation for loss of earnings caused by the inability to use the insured
properties in their business activities (business interruption cover).
Premiums are recognised as revenue (earned premiums) proportionally over the period of coverage. The
portion of premium received on in-force contracts that relates to unexpired risk at the date of the statement
of financial position is reported as unearned premium in Insurance Reserves. Premiums are shown before
deductible commission.
Claims and loss adjustments expenses are charged to profit or loss as incurred based on estimated liability
for compensation owed to contract holders or third parties damaged by the contract holders. They include
direct and indirect claims settlement costs and arise from events that have occurred up to the date of the
statement of financial position even if they have not yet been reported to the Company. The Company does
not discount its liabilities for unpaid claims. Liabilities for unpaid claims are estimated using the input of
assessments for individual cases reported to the Company. Statistical analysis is used to estimate claims
incurred but not reported, as well as the expected ultimate cost of more complex claims that may be
affected by external factors.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
2. Summary of Significant Accounting Policies (Continued)
Page 12
(k) Receivables and payables related to insurance contracts
Receivables and payables related to insurance contracts are recognised when due. These include amounts
due to and from agents, brokers and insurance contract holders.
If there is objective evidence that the insurance receivable is impaired, the Company reduces the carrying
amount of the insurance receivable accordingly and recognises the impairment loss in profit or loss.
(l) Reinsurance ceded
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 are classified as reinsurance contracts.
The benefits to which the Company is entitled under its reinsurance contracts held are recognised as
reinsurance assets. These 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 amounts 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 recognised as an
expense when due.
Estimated amounts of reinsurance recoverable, which represent the portion of unearned premiums ceded to
the reinsurers, are included in recoverable from reinsurers on the statement of financial position.
The Company relies upon reinsurance agreements to limit the potential for losses and to increase its capacity
to write insurance. Reinsurance arrangements are effected under reinsurance treaties and by negotiation on
individual risks. Reinsurance does not relieve the Company from liability to its policyholders. To the extent that
a reinsurer may be unable to pay losses for which it is liable under the terms of the reinsurance agreement, the
Comapany is exposed to the risk of continued liability for such losses. However, in an effort to reduce the risk
of non-payment, the Company requires all of its reinsurers to have a Standard & Poor or equivalent rating of A-
or better.
The Company assesses its reinsurance assets for impairment. 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 profit or loss.
(m) Deferred policy acquisition costs
The cost of acquiring and renewing insurance contracts, including commissions, underwriting and policy
issue expenses, which vary with and are directly related to the contracts, are deferred over the unexpired
period of risk carried. Deferred policy acquisition costs are subject to recoverability testing at the time of
policy issue and at the end of each accounting period.
(n) Property, plant and equipment
Land is stated at historical cost. All other property, plant and equipment are stated at historical cost less
accumulated depreciation and impairment. Depreciation is computed on the straight line method at rates
estimated to write off the assets over their expected useful lives as follows:
Buildings
Furniture, fixtures and equipment
Motor vehicles
5% and 2.5%
10%
25%
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 13
2. Summary of Significant Accounting Policies (Continued)
(n) Property, plant and equipment (continued)
Property, plant and equipment are reviewed periodically for impairment. Where the carrying amount of an
asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable
amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount and
are included in operating profit.
Repairs and maintenance expenses are charged to profit or loss during the financial period in which they
are incurred. The cost of major renovations is included in the carrying amount of the asset when it is
probable that future economic benefits in excess of the originally assessed standard of performance of the
existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the
related asset.
(o) Intangible assets
Computer software
Acquired software licences are capitalised on the basis of the costs incurred to acquire and bring to use the
specific software. These costs are amortised on the basis of the expected useful life, which is between
three to five years.
(p) Impairment of long-lived assets
Long-lived assets are reviewed for impairment losses whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount
by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset’s
net selling price and value in use. For the purpose of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows.
(q) Insurance reserves
Under the Insurance Regulations, 2001, the Company is required to actuarially value its insurance reserves
annually. Consequently, provision for claims incurred but not reported (IBNR) has been independently
actuarially determined. The remaining components of the reserves are also reviewed by the actuary in
determining the overall adequacy of the provision for the Company’s insurance liabilities.
(i)
Provision for unearned premium
The provision for unearned premium represents that proportion of premiums written in respect of risks to
be borne subsequent to the year end, under contracts entered into on or before the date of the
statement of financial position and is computed by applying the “365th” method to gross written
premiums for the period, except for marine where the unearned premium reserve is calculated as 20%
of the year’s gross written premiums.
(ii) Unearned commission
The unearned commission represents the actual commission income on premium ceded on proportional
reinsurance contracts relating to the unexpired period of risk carried. The income is deferred as unearned
commission reserves, and amortised over the period in which the commissions are expected to be earned.
These reserves are calculated on the 365th method.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 14
2. Summary of Significant Accounting Policies (Continued)
(q) Insurance reserves (continued)
(iii) Claims outstanding
A provision is made to cover the estimated cost of settling claims arising out of events which occurred
by the year end, including claims incurred but not reported (IBNR), less amounts already paid in respect
of those claims. This provision is estimated by management (insurance case reserves) and the
appointed actuary (IBNR) on the basis of claims admitted and intimated.
(iv) Claims incurred but not reported
The reserve for IBNR claims has been calculated by an independent actuary using the Paid Loss
Development method, the Incurred Loss Development method, the Bornhuetter-Ferguson Paid Loss
method, the Bornhuetter-Ferguson Incurred Loss method, the Expected Loss Ratio method and the
Frequency-Severity method (Note 28). This calculation is done in accordance with the Insurance Act
2001.
(r) Accounts payable
Payables are recognised at fair value and subsequently measured at amortised cost.
(s) Taxation
Taxation on the profit or loss for the year comprises current and deferred tax. Current and deferred taxes
are recognised as income tax expense or benefit in net profit or loss in the statement of comprehensive
income except where they relate to items recorded in other comprehensive income or equity, in which case
they are also charged or credited to other comprehensive income or equity.
(i) Current taxation
Current tax is the expected taxation payable on the taxable income for the year, using tax rates enacted
at date of the statement of financial position, and any adjustment to tax payable and tax losses in
respect of the previous years.
(ii) Deferred income taxes
Deferred tax liabilities are recognised for temporary differences between the carrying amounts of assets
and liabilities and their amounts as measured for tax purposes, which will result in taxable amounts in
future periods. Deferred tax assets are recognised for temporary differences which will result in
deductible amounts in future periods, but only to the extent it is probable that sufficient taxable profits
will be available against which these differences can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period
in which the asset will be realised or the liability will be settled based on enacted rates.
(t) Employee benefits
(i) Pension obligations
The Company participates in the defined contribution pension plan of a related company, T. Geddes Grant
(Distributors) Limited. A defined contribution pension plan is a pension plan under which the Company
pays fixed contributions into a separate entity. The Company has no legal or constructive obligations to
pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits
relating to employee service in the current and prior periods. The contributions paid by the Company are
recorded as an expense in profit or loss.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 15
2. Summary of Significant Accounting Policies (Continued)
(t) Employee benefits (continued)
(ii) Accrued vacation
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is
made for the estimated liability for annual leave as a result of services rendered by employees up to the
date of the statement of financial position.
(iii) Termination benefits
Termination benefits are payable whenever an employee’s employment is terminated before the normal
retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits.
The Company recognises termination benefits when it is demonstrably committed to either terminating
the employment of current employees according to a detailed formal plan without possibility of
withdrawal or providing termination benefits as a result of an offer made to encourage voluntary
redundancy.
(iv) Profit-sharing and bonus plan
The Company recognises a liability and an expense for bonuses and profit-sharing, based on a formula
that takes into consideration the profit attributable to the Company’s shareholders after certain
adjustments. The Company recognises a provision where contractually obliged or where there is a past
practice that has created a constructive obligation.
(u) Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial
statements in the period in which the dividends are approved by the Company’s shareholders.
(v) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker, which is responsible for allocating resources
and assessing performance of the operating segments, has been identified as the Board of Directors that
makes strategic decisions.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
3. Responsibilities of the Appointed Actuary and External Auditors
Page 16
The Board of Directors, pursuant to the Insurance Act, appoints the Actuary. His responsibility is to carry out an
annual valuation of the Company’s claims liabilities and insurance reserves in accordance with accepted actuarial
practice and regulatory requirements and report thereon to the shareholders. In performing the valuation, the
Actuary analyses past experience with respect to number of claims, claims payment and changes in estimates of
outstanding liabilities.
The shareholders, pursuant to the Companies Act, appoint the external auditors. Their responsibility is to conduct
an independent and objective audit of the financial statements in accordance with International Standards on
Auditing and report thereon to the shareholders. In carrying out their audit, the auditors also make use of the work
of the appointed Actuary and his report on claims liabilities and insurance reserves.
4.
Insurance and Financial Risk Management
(a) Insurance risk
The Company’s activities expose it to a variety of insurance and financial risks and those activities
necessitate the analysis, evaluation, control and/or acceptance of some degree of risk or combination of
risks. Taking various types of risk is core to the financial services business and operational risks are an
inevitable consequence of being in business. The Company’s aim is therefore to achieve an appropriate
balance between risk and return and minimise potential adverse effects on the Company’s financial
performance.
The Board of Directors is ultimately responsible for the establishment and oversight of the risk management
framework. The Board of Directors has established committees and departments for managing and monitoring
risks, as follows:
(i)
Investment and Loan Committee
The Investment and Loan Committee is responsible for monitoring and approving investment
strategies for the Company.
(ii) Finance Department
The Finance Department is responsible for managing the Company’s assets and liabilities and the
overall financial structure. It is also primarily responsible for managing the funding and liquidity risks of
the Company.
(iii) Conduct Review Committee
The Conduct Review Committee is responsible for monitoring the Company’s adherence to regulatory
and statutory requirements.
(iv) Audit Committee
The Audit Committee oversees how management monitors compliance with the Company’s risk
management policies and procedures and reviews the adequacy of the risk management framework in
relation to the risks faced by the Company.
(v) Remuneration Committee
The remuneration committee is responsible for reviewing and recommending for approval, the
remuneration arrangements of the directors and senior officers.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 17
4. Insurance and Financial Risk Management (Continued)
(a) Insurance risk (continued)
The most important types of risk are insurance risk, reinsurance risk, credit risk, liquidity risk, market risk and
other operational risk. Market risk includes currency risk, interest rate and other price risk.
The Company issues contracts that transfer insurance risk. This section summarises these risks and the
way the Company manages them.
The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty
of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and
therefore unpredictable.
The principal risk that the Company faces under its insurance contracts is that the actual claim payments
exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of
claims and benefits are greater than estimated. Insurance events are random and the actual number and
amount of claims and benefits will vary from year to year from the level established using statistical
techniques.
Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability
about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across
the board by a change in any subset of the portfolio. The Company has developed its insurance underwriting
strategy to diversify the types of insurance risks accepted to achieve a sufficiently large population of risks to
reduce the variability of the expected outcome.
Factors that increase insurance risk include lack of risk diversification in terms of type and amount of risk and
geographical location.
Management maintains an appropriate balance between commercial and personal policies and type of
policies based on guidelines set by the Board of Directors. Insurance risk arising from the Company’s
insurance contracts is, however, concentrated within Jamaica.
The Company has the right to re-price the risk on renewal. It also has the ability to impose deductibles and
reject fraudulent claims. Where applicable, contracts are underwritten by reference to the commercial
replacement value of the properties or other assets and contents insured. Claims payment limits are always
included to cap the amount payable on occurrence of the insured event. The cost of rebuilding properties, of
replacement or indemnity for other assets and contents and time taken to restart operations for business
interruption are the key factors that influence the level of claims under these policies.
Claims on insurance contracts 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. This is however subject to the policy limit. Liability claims are settled over a long period of time
and a portion of the claims provision relates to incurred but not reported (IBNR) claims. 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 by individual contract holders and the risk management
procedures they adopted. The compensation paid on these contracts is the monetary awards granted for
bodily injury suffered by employees (for employer’s liability covers) or members of the public (for public liability
covers). Such awards are lump-sum payments that are calculated as the present value of the lost earnings
and rehabilitation expenses that the injured party will incur as a result of the accident.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 18
4.
Insurance and Financial Risk Management (Continued)
(a) Insurance risk (continued)
The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected
subrogation value and other recoveries. The Company takes all reasonable steps to ensure that it has
appropriate information regarding its claims exposures. However, given the uncertainty in establishing the
claims provisions, it is likely that the final outcome will prove to be different from the original liability
established. The liability for these contracts comprises a provision for IBNR, a provision for reported claims not
yet paid and a provision for unexpired risks at the date of financial position. The amount of casualty claims is
particularly sensitive to the level of court awards and to the development of legal precedent on matters of
contract and tort. Casualty contracts are also subject to the emergence of new types of latent claims, but no
allowance is included for this at the date of the statement of financial position.
In calculating the estimated cost of unpaid claims (both reported and not), the Company uses estimation
techniques that are a combination of loss-ratio-based estimates (where the loss ratio is defined as the ratio
between the ultimate cost of insurance claims and insurance premiums earned in a particular financial year
in relation to such claims) and an estimate based upon actual claims experience using predetermined
formulae where greater weight is given to actual claims experience as time passes.
The initial loss-ratio estimate is an important assumption in the estimation technique and is based on previous
years’ experience, adjusted for factors such as premium rate changes, anticipated market experience and
historical claims inflation. The initial estimate of the loss ratios used for the current year (before reinsurance) is
analysed by type of risk for current and prior year premiums earned.
The estimation of IBNR is generally subject to a greater degree of uncertainty than the estimation of the cost
of settling claims already notified to the Company, where information about the claim event is available.
IBNR claims may not be apparent to the insured until many years after the event that gave rise to the
claims. For casualty contracts, the IBNR proportion of the total liability is high and will typically display
greater variations between initial estimates and final outcomes because of the greater degree of difficulty of
estimating these liabilities.
In estimating the liability for the cost of reported claims not yet paid, the Company considers any information
available from loss adjusters and information on the cost of settling claims with similar characteristics in
previous periods. Large claims are assessed on a case-by-case basis or projected separately in order to
allow for the possible distortive effect of their development and incidence on the rest of the portfolio.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
4.
Insurance and Financial Risk Management (Continued)
Page 19
(a) Insurance risk (continued)
Management sets policy and retention limits based on guidelines set by the Board of Directors. The policy limit
and maximum net retention of any one risk for each class of insurance for the year are as follows:
Commercial property –
Fire and consequential loss
Personal property
Engineering
Liability
Marine, aviation and transport
Motor
Miscellaneous Accident –
All Risk
Burglary
Cash/Money
Fidelity
Bonds
Goods in Transit
Personal Accident
2012
2011
Policy
Limit
’000
Maximum
Net
Retention
’000
Policy
Limit
’000
Maximum
Net
Retention
’000
US$5,500
US$5,500
US$3,000
J$40,000
US$750
J$10,000
J$22,500
J$5,000
J$5,000
J$5,000
J$20,000
J$5,000
J$7,500
US$1,100
US$1,100
US$75
J$20,000
US$125
J$5,000
U$5, 000
US$5,000
US$2,000
J$40,000
US$500
J$10,000
J$1,500
J$1,000
J$1,000
J$1,000
J$4,000
J$1,000
J$1,500
J$10,000
J$5,000
J$5,000
J$5,000
J$20,000
J$5,000
J$7,500
US$1,000
US$1,000
US$62.50
J$20,000
US$100
J$5,000
J$1,000
J$1,000
J$1,000
J$1,000
J$4,000
J$1,000
J$1,500
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 20
4.
Insurance and Financial Risk Management (Continued)
(a) Insurance risk (continued)
Sensitivity Analysis of Actuarial Liabilities
The determination of actuarial liabilities is sensitive to a number of assumptions, and changes in those
assumptions could have a significant effect on the valuation results.
In applying the noted methodologies, the following assumptions were made:
(i) Claims inflation has remained relatively constant and there have been no material legislative changes in
the Jamaican civil justice system that would cause claim inflation to increase dramatically.
(ii) There is no latent environmental or asbestos exposure embedded in the Company’s loss history.
(iii) The Company’s case reserving and claim payments rates have remained, and will remain, relatively
constant.
(iv) The overall development of claims costs gross of reinsurance is not materially different from the
development of claims costs net of reinsurance. This assumption is supported by the following:
The majority of
agreements; and
the Company’s reinsurance program consists of proportional reinsurance
The Company’s non-proportional reinsurance agreements consist primarily of high attachment points.
(v) Claims are expressed at their estimated ultimate undiscounted value, in accordance with the requirement
of the Insurance Act, 2001.
Provision for adverse deviation assumptions
The basic assumptions made in establishing insurance reserves are best estimates for a range of possible
outcomes. To recognise the uncertainty in establishing these best estimates, to allow for possible deterioration
in experience and to provide greater comfort that the reserves are adequate to pay future benefits, the
appointed actuary is required to include a margin for adverse deviation in each assumption.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 21
4.
Insurance and Financial Risk Management (Continued)
(a) Insurance risk (continued)
Development Claim Liabilities
In addition to sensitivity analysis, the development of insurance liabilities provides a measure of the
Company’s ability to estimate the ultimate value of claims. The table below illustrates how the Company’s
estimate of the ultimate claims liability for accident years 2008 - 2012 has changed at successive year-ends,
up to 2012. Updated unpaid claims and adjustment expenses (UCAE) and IBNR estimates in each
successive year, as well as amounts paid to date are used to derive the revised amounts for the ultimate
claims liability for each accident year, used in the development calculations.
2008
2008
2009
2009
2010
2010
2011
2011
2012
and
prior
$’000
$’000
and
prior
and
prior
$’000
$’000
$’000
$’000
$’000
and
prior
$’000
$’000
2012
and
prior
$’000
2008
Paid during year
180,368
258,800
UCAE, end of year
150,154
305,606
IBNR, end of year
Ratio: excess
(deficiency)
30,030
58,733
2009 Paid during year
92,444
155,743
175,935
331,678
UCAE, end of year
IBNR, end of year
Ratio: excess
85,910
10,644
147,754
200,976
348,730
15,037
58,042
73,079
(deficiency)
(4.89%)
12.57%
2010 Paid during year
UCAE, end of year
IBNR, end of year
Ratio: excess
54,841
50,182
3,698
77,304
92,674
4,809
98,674
175,978
171,620
347,598
96,738
189,412
235,477
424,889
9,744
14,553
68,193
82,746
(deficiency)
(11.64%)
9.28%
20.79%
9.93%
2011 Paid during year
UCAE, end of year
IBNR, end of year
Ratio: excess
18,688
36,714
626
41,616
58,059
1,005
38,747
80,363
100,861
181,224
183,148
364,372
61,664
119,722
120,936
240,659
232,245
472,903
6,200
7,205
15,834
23,039
65,680
88,719
(deficiency)
(12.84%)
8.40%
20.75%
9.14%
21.75%
12.35%
2012
Paid during year
UCAE, end of year
IBNR, end of year
Ratio: excess
11,894
24,107
3,105
16,962
16,227
33,189
43,783
76,972
142,264
219,236
210,963
430,200
43,065
45,535
88,599
60,033
148,633
155,272
303,904
272,082
575,987
3,105
5,154
8,260
8,241
16,501
20,258
36,759
60,864
97,263
(deficiency)
(13.82%)
7,29%
21.11%
8.40%
29.89%
16.61%
(6.67%)
0.31%
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
4.
Insurance and Financial Risk Management (Continued)
Page 22
(b) Reinsurance risk
To limit its exposure of potential loss on an insurance policy, the insurer may cede certain levels of risk to a
reinsurer. The Company selects reinsurers which have established capability to meet their contractual
obligations and which generally have high credit ratings. The credit ratings of reinsurers are monitored.
Retention limits represent the level of risk retained by the cedant insurer. Coverage in excess of these limits is
ceded to reinsurers up to the treaty limit or as agreed. The retention programs used by the Company are
summarised below:
(a) Facultative reinsurance treaties are accepted on a per risk basis.
(b) The Company has treaty arrangements as follows:
(i) Property and allied perils 80%:20% Quota Share of premiums i.e. 80% ceded premiums and 20%
retention.
(ii) Excess of loss treaty for motor and third party liability, which covers losses in excess of J$5,000,000
for any one loss or event.
(iii) First surplus and a quota share treaty for engineering business with retention of US$75,000.
(iv) First surplus treaty for miscellaneous accident, losses covered in excess of J$1,500,000.
(v) Catastrophe excess of loss treaty which covers losses in excess of J$60,000,000 for any one
catastrophic event as defined.
(c) The Company reinsures with several reinsurers. Of significance are Munich Reinsurance Company,
Munich, Federal Republic of Germany and Swiss Reinsurance Company, Ontario, Canada. All other
reinsurers carry lines under 10%. The Company’s business model supports the placement of specialty
risk directly in the overseas market on a per risk basis. In keeping with the Company’s risk policy,
placement of these risks are with several reinsures. Of significance are Munich Reinsurance Company,
Swiss Reinsurance Company and Lloyds of London. At 31 December, the A. M. Best ratings for the
major reinsurers are as follows:
Munich Reinsurance Company
Swiss Reinsurance Company
2012
A+
A+
2011
A+
A
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 23
4.
Insurance and Financial Risk Management (Continued)
(b) Reinsurance risk (continued)
(d) The amount of reinsurance recoveries recognised during the period is as follows:
Property
Motor
Marine
Liability
Burglary
Miscellaneous Accidents
2012
$’000
51,454
9,779
2,736
4,272
2
15,936
84,179
2011
$’000
31,632
2,138
800
1,918
235
32,983
69,706
(c) Financial risk
The Company is exposed to financial risk through its financial assets, reinsurance assets and insurance
liabilities. In particular the key financial risk is that the proceeds from its financial assets are not sufficient to
fund the obligations arising from its insurance contracts. The most important components of this financial
risk are interest rate risk, market risk, cash flow risk, currency risk, price risk and credit risk.
These risks arise from open positions in interest rates, currency and equity products, all of which are
exposed to general and specific market movements. The risks that the Company primarily faces due to the
nature of its investments and liabilities are credit risk, interest rate risk and market risk. The Company’s
overall risk management programme focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects of the Company’s financial performance.
(i) Credit risk
The Company takes on exposure to credit risk, which is the risk that its reinsurers, brokers, customers,
clients or counterparties will cause a financial loss for the Company by failing to discharge their
contractual obligations. Credit risk is an important risk for the Company’s business; management
therefore carefully manages its exposure to credit risk. Credit exposures arise principally from the
amounts due from reinsurers, amounts due from insurance contract holders and insurance brokers and
investment contracts and loans receivable.
The Company structures the levels of credit risk it undertakes by placing limits on the amount of risk
accepted in relation to a single counterparty or groups of related counterparties.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 24
4.
Insurance and Financial Risk Management (Continued)
(c) Financial risk (continued)
(i) Credit risk (continued)
Credit review process
The Company’s senior management meets on a monthly basis to discuss the ability of customers and
other counterparties to meet repayment obligations.
(i) Reinsurance
Reinsurance is used to manage insurance risk. This does not, however, discharge the Company’s
liability as primary insurer. If a reinsurer fails to pay a claim for any reason, the Company remains
liable for the payment to the policyholder. The creditworthiness of reinsurers is considered on an
annual basis by reviewing their financial strength prior to finalisation of any contract. The
Company’s senior management assesses the creditworthiness of all reinsurers and intermediaries
by reviewing credit grades provided by rating agencies and other publicly available financial
information.
(ii) Premium receivables
The Company’s senior management examines the payment history for significant contract holders
with whom they conduct regular business. Management information reported to the Company
includes details of provisions for impairment on premium receivables and subsequent write-offs.
Exposures to individual policyholders and groups of policyholders are collected within the ongoing
monitoring of the controls associated with regulatory solvency. Where significant exposure to
individual policyholders or homogenous groups of policyholders exists, a financial analysis is
carried out by senior management and where necessary cancellation of policies is effected for
amounts deemed uncollectible.
(iii) Loans and leases receivable
The Company’s management of exposure to loans and leases receivable is influenced mainly by
the individual characteristics of each customer. Management has established a credit policy under
which each customer is analysed individually for creditworthiness prior to the Company offering
credit facilities. Customers are required to provide a letter of guarantee and proof of collateral to be
held as security.
(iv) Investments
The Company limits its exposure to credit risk by investing mainly in liquid securities, with
counterparties that have high credit quality and Government of Jamaica securities. Accordingly,
management does not expect any counterparty to fail to meet its obligations.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 25
4.
Insurance and Financial Risk Management (Continued)
(c) Financial risk (continued)
(i) Credit risk (continued)
Maximum exposure to credit risk
The maximum exposure to credit risk, of the company, equal the respective carrying amounts on the
statements of financial position, for all financial assets which are subject to credit risk.
Ageing analysis of premium receivables past due but not impaired:
Premium receivables that are less than forty-five (45) days old are not considered impaired. At year
end, premium receivables of $161,168,000 (2011 - $136,841,000) were past due but not impaired.
These relate to a number of independent customers for whom there is no recent history of default. The
ageing analysis of these receivables is as follows:
46 to 60 days
61 to 90 days
More than 90 days
2012
$’000
41,863
80,895
38,410
2011
$’000
32,550
86,009
18,282
161,168
136,841
There are no premium receivables balances that are considered impaired.
Premium receivables
The following table summarises the Company’s credit exposure for premium receivables at their
carrying amounts, as categorised by brokers and direct business:
Brokers and Insurance Companies
Direct
2012
$’000
335,488
133,708
469,196
2011
$’000
261,794
132,509
394,303
All premium receivables are receivable from policyholders, brokers and agents in Jamaica.
Debt securities
The following table summarises the Company’s credit exposure for debt securities at their carrying
amounts, as categorised by issuer:
Government of Jamaica
2012
$’000
354,963
2011
$’000
312,499
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 26
4. Insurance and Financial Risk Management (Continued)
(c) Financial risk (continued)
(ii) Liquidity risk
Liquidity risk is the risk that the Company is unable to meet its payment obligations associated with its
financial liabilities when they fall due and to replace funds when they are withdrawn. The consequence
may be the failure to meet obligations to fulfil claims and other liabilities incurred.
Liquidity risk management process
The Company’s liquidity management process, as carried out within the Company and monitored by the
Board of Directors, includes:
(i) Monitoring future cash flows and liquidity on a daily basis. This incorporates an assessment of
expected cash flows and the availability of high grade collateral which could be used to secure
funding if required;
(ii) Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection
against any unforeseen interruptions to cash flow;
(iii) Optimising cash returns on investments;
(iv) Monitoring statement of
financial position
liquidity ratios against
internal and regulatory
requirements; and
(v) Managing the concentration and profile of debt maturities.
Monitoring and reporting take the form of cash flow measurement and projections for the next day, week
and month, as these are key periods for liquidity management. The starting point for those projections is
an analysis of the contractual maturity of the financial liabilities and the expected collection date of the
financial assets.
The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is
fundamental to the management of the Company. It is unusual for companies ever to be completely
matched since business transacted is often of uncertain term and of different types. An unmatched
position potentially enhances profitability, but can also increase the risk of loss.
The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing
liabilities as they mature, are important factors in assessing the liquidity of the Company and its
exposure to changes in interest rates and exchange rates.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 27
4.
Insurance and Financial Risk Management (Continued)
(c) Financial risk (continued)
(ii) Liquidity risk (continued)
Liquidity risk management process (continued)
Financial assets and financial liabilities cash flows
The tables below present the undiscounted cash flows of the company’s financial assets and liabilities
based on contractual repayment obligations:
Within 1
Month
$’000
Within 3
Months
$’000
3 to 12
Months
$’000
1 to 5
Years
$’000
Over
5 Years
$’000
No Specific
Maturity
$’000
Total
$’000
At 31 December 2012:
Cash and short term investments
667,289
651,191
Due from policyholders, brokers
and agents
149,496
319,700
Due from reinsurers and
coinsurers
Other receivables
Due from related parties
Loans receivable
Leases receivable
Investment securities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,318,480
469,196
213,418
10,286
10,286
750
750
-
-
499,424
77,759
1,922
70,846
17,297
92,250
317,109
2,499
4,998
22,488
47,774
-
7,264
15,892
200,877
74,844
134,564
108,476
541,917
213,418
-
-
-
-
Total financial assets
828,470 1,276,045
240,662
214,868
451,673
119,512
3,131,230
Due to reinsurers and coinsurers
-
343,361
-
Other liabilities
Claims liabilities
10,424
8,324
32,365
205,562
123,337
164,449
328,898
Total financial liabilities
215,986
475,022
196,814
328,898
-
-
-
-
-
-
-
-
-
-
343,361
51,113
822,246
1,216,720
Net Liquidity Gap
612,484
801,023
43,848
(114,030)
451,673
119,512
1,914,510
Cumulative gap
612,484 1,413,507
1,457,355 1,343,325
1,794,998
1,914,510
-
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 28
4.
Insurance and Financial Risk Management (Continued)
(c) Financial risk (continued)
(ii) Liquidity risk
Financial asset and financial liabilities cash flows (continued)
Within 1
Month
Within 3
Months
3 to 12
Months
1 to 5
Years
Over
5 Years
No Specific
Maturity
$’000
$’000
$’000
$’000
$’000
$’000
Total
$’000
At 31 December 2011:
Cash and short term investments
638,964
499,230
Due from policyholders, brokers and
agents
139,213
255,090
Due from reinsurers and coinsurers
-
178,730
563
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,746
1,156
1,138,194
394,303
178,730
7,309
1,156
-
-
517,684
52,778
1,922
66,043
17,297
92,250
340,172
1,882
3,764
16,940
30,192
-
1,844
18,529
10,611
221,665
105,543
155,955
514,147
784,388 1,021,386
44,848
344,107
445,715
163,857
2,804,301
Other receivables
Due from related parties
Loans receivable
Leases receivable
Investment securities
Total financial assets
Other liabilities
Claims liabilities
Due to reinsurers and coinsurers
-
253,009
-
32,252
9,268
37,000
41,009
117,028
371,737
158,333
-
-
Total financial liabilities
73,261
379,305
408,737
158,333
-
-
-
-
-
-
-
-
253,009
78,520
688,107
1,019,636
Net Liquidity Gap
Cumulative gap
711,127
642,081 (363,889)
185,774
445,715 163,857
1,784,665
711,127 1,353,208
989,319 1,175,093 1,620,808
1,784,665
-
Assets available to meet all of the liabilities and to cover financial liabilities include cash and bank
balances and investment securities. The Company is also able to meet unexpected net cash outflows
by selling securities and accessing additional funding sources from its parent company and other
financial institutions.
(iii) Market risk
The Company takes on exposure to market risks, which is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in market prices. Market risks mainly arise
from changes in foreign currency exchange rates, interest rates and prices of quoted equities. Market
risk is monitored by the finance department which carries out research and monitors the price
movement of financial assets on the local and international markets.
There has been no change to the Company’s exposure to market risks or the manner in which it manages
and measures the risk.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 29
4.
Insurance and Financial Risk Management (Continued)
(c) Financial risk (continued)
(iii) Market risk (continued)
Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates.
The Company manages its foreign exchange risk by ensuring that the net exposure in foreign assets
and liabilities is kept to an acceptable level by monitoring currency positions.
The Company also has transactional currency exposure. Such exposure arises from having financial
assets in currencies other than those in which financial liabilities are expected to settle. The Company
ensures that its net exposure is kept to an acceptable level by buying or selling foreign assets to
address short term imbalances.
Concentrations of currency risk
The tables below summarise the company’s exposure to foreign currency exchange rate risk at 31
December:
At 31 December 2012:
Financial Assets
Cash and short term investments
Due from policyholders, brokers and agents
Due from reinsurers and coinsurers
Other receivables
Due from related parties
Loans receivable
Leases receivable
Investment securities
Total financial assets
Financial Liabilities
Due to reinsurers and coinsurers
Other liabilities
Claims liabilities
Total financial liabilities
Net financial position
Jamaican$
J$’000
US$
J$’000
GBP
J$’000
Total
J$’000
515,470
323,573
160,737
10,286
750
237,933
64,565
801,613
145,623
52,681
-
-
-
-
120
-
1,317,203
469,196
-
-
-
-
-
213,418
10,286
750
237,933
64,565
386,224
77,215
1,699,538 1,077,132
-
120
463,439
2,776,790
179,068
47,888
782,040
1,008,996
164,293
3,225
40,206
207,724
690,542
869,408
-
-
-
-
120
343,361
51,113
822,246
1,216,720
1,560,070
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 30
4.
Insurance and Financial Risk Management (Continued)
(c) Financial risk (continued)
(iii) Market risk (continued)
Currency risk (continued)
Concentrations of currency risk (continued)
At 31 December 2011:
Financial Assets
Cash and short term investments
Due from policyholders, brokers and agents
Due from reinsurers and coinsurers
Other receivables
Due from related parties
Loans receivable
Leases receivable
Investment securities
Total financial assets
Financial Liabilities
Due to reinsurers and coinsurers
Other liabilities
Claims liabilities
Total financial liabilities
Net financial position
Jamaican$
J$’000
US$
J$’000
GBP
J$’000
Total
J$’000
468,035
237,709
163,331
7,309
1,156
236,896
41,962
420,576
1,576,974
126,564
78,520
641,431
846,515
666,137
150,225
15,399
-
-
-
-
47,878
879,639
126,445
-
46,676
173,121
730,459
706,518
106 1,134,278
394,303
178,730
7,309
1,156
236,896
41,962
6,369
-
-
-
-
-
-
468,454
6,475 2,463,088
253,009
-
78,520
-
688,107
-
- 1,019,636
6,475 1,443,452
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
4.
Insurance and Financial Risk Management (Continued)
Page 31
(c) Financial risk (continued)
(iii) Market risk (continued)
Currency risk (continued)
Foreign currency sensitivity
The following tables indicate the currencies to which the company had significant exposure on its
monetary assets and liabilities and its forecast cash flows. The change in currency rates below
represents management’s assessment of the possible change in foreign exchange rates. The
sensitivity analysis shows the impact of translating outstanding foreign currency denominated monetary
items, assuming changes in currency rates shown in the table below. The sensitivity analysis includes
cash and short term deposits, investment securities, premium and other receivables and claims
liabilities. The percentage change in the currency rate will impact each financial asset/liability included
in the sensitivity analysis differently. Consequently, individual sensitivity analyses were performed. The
effect on pre-tax profit below is the total of the individual sensitivities done for each of the
assets/liabilities. There was no impact on the other components of equity.
% Change in
Currency Rate
2012
1%
10%
Effect on
Pre-tax
Profit
2012
$’000
(8,694)
86,941
% Change in
Currency Rate
2011
0.5%
0.5%
Effect on
Pre-tax
Profit
2011
$’000
(35,326)
35,326
USD – J$Revaluation
USD – J$Devaluation
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 32
4.
Insurance and Financial Risk Management (Continued)
(c) Financial risk (continued)
(iii) Market risk (continued)
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market interest rates.
Floating rate instruments expose the Company to cash flow interest risk, whereas fixed interest rate
instruments expose the Company to fair value interest risk.
The Company’s interest rate risk policy requires it to manage interest rate risk by maintaining an
appropriate mix of fixed and variable rate instruments. The policy also requires it to manage the
maturities of interest bearing financial assets and interest bearing financial liabilities.
The following tables summarise the Company’s exposure to interest rate risk. It includes the Company’s
financial instruments at carrying amounts, categorised by the earlier of contractual repricing or maturity
dates.
Within 1
Month
$’000
Within 3
Months
$’000
3 to 12
Months
$’000
1 to 5
Years
$’000
Over
5 Years
$’000
Non-
Interest
Bearing
$’000
Total
$’000
At 31 December 2012:
Cash and short term investments
668,420
648,780
Due from policyholders, brokers
and agents
Due from reinsurers and coinsurers
Other receivables
Due from related parties
Loans receivable
Leases receivable
Investment securities
Total financial assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3 1,317,203
469,196
469,196
213,418
213,418
10,286
10,286
750
750
171,799
64,565
-
-
-
237,933
64,565
-
-
-
-
66,134
-
-
-
-
-
-
-
139,518
111,273
9,314
94,858
108,476
463,439
668,420
854,432
111,273
73,879
266,657
802,129
2,776,790
Due to reinsurers and coinsurers
Other liabilities
Claims liabilities
Total financial liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
343,361
343,361
51,113
51,113
822,246
822,246
- 1,216,720 1,216,720
Total interest repricing gap
668,420
854,432
111,273
73,879
266,657
(414,591) 1,560,070
Cumulative gap
668,420 1,522,852 1,634,125 1,708,004 1,974,661 1,560,070
-
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
4.
Insurance and Financial Risk Management (Continued)
Page 33
(c) Financial risk (continued)
(iii) Market risk (continued)
Interest rate risk (continued)
At 31 December 2011:
Cash and short term investments
Due from policyholders, brokers and
agents
Due from reinsurers and coinsurers
Due from related parties
Leases receivable
Loans receivable
Other receivables
Investment securities
Total financial assets
Within 1
Month
Within 3
Months
3 to 12
Months
1 to 5
Years
Over
5 Years
Non-Interest
Bearing
$’000
$’000
$’000 $’000
$’000
$’000
Total
$’000
547,882
586,396
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,041
2,152
10,954
27,815
-
-
-
-
-
182
62,568
1,755
12,541
159,850
-
1,134,278
394,303
394,303
178,730
178,730
1,156
-
-
1,156
41,962
236,896
-
-
39
102,445
-
-
-
-
7,309
7,309
134,763
75,252
155,955
468,454
549,144
753,561
12,709
175,119
235,102
737,453
2,463,088
Due to reinsurers and coinsurers
Other liabilities
Claims liabilities
Total financial liabilities
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
253,009
253,009
62,134
62,134
688,107
688,107
- 1,003,250
1,003,250
Total interest repricing gap
549,144
753,561
12,709
175,119
235,102
(265,797)
1,459,838
Cumulative gap
549,144 1,302,705 1,315,414 1,490,533 1,725,635 1,459,838
-
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
4.
Insurance and Financial Risk Management (Continued)
Page 34
(c) Financial risk (continued)
(iii) Market risk (continued)
Interest rate risk (continued)
Interest rate sensitivity
The following table indicates the sensitivity to a reasonably possible change in interest rates, with all
other variables held constant, on the Company’s profit or loss and shareholders’ equity.
The sensitivity of the profit or loss is the effect of the assumed changes in interest rates on income
based on the floating rate non-trading financial assets and financial liabilities. The sensitivity of other
components of equity is calculated by revaluing fixed rate financial assets and liabilities for the effects
of the assumed changes in interest rates. The change in the interest rates will impact the financial
assets and liabilities differently. Consequently, individual analyses were performed. The effect on pre-
tax profit and other components of equity below is the total of the individual sensitivities done for each
of the assets and liabilities. It should be noted that the changes in the pre-tax profit and other
components of equity as shown in the analysis are non-linear.
Change in
Basis
points:
2012
JMD/USD
-100/50
+400/250
Effect on
Profit before
Taxation
Effect on Other
Components of
Equity
2012
$’000
(729)
2,915
2012
$’000
474
(10,689)
Change in
Basis
points:
2011
JMD/USD
-50/-50
+50/+50
Effect on
Profit before
Taxation
Effect on Other
Components of
Equity
2011
$’000
-
-
2011
$’000
(413)
387
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 35
4.
Insurance and Financial Risk Management (Continued)
(c) Financial risk (continued)
(iii) Market risk (continued)
Price risk
The Company is exposed to equity securities price risk because of investments held by the Company.
These investments are classified on the statement of financial position as available-for-sale and fair
value through profit or loss.
The table below summarises the impact of increases/decreases on the Company’s pre-tax profit for the
year and on equity. The analysis is based on the assumption that the equity prices had
increased/decreased by 10% (2011 - 10%) with all other variables held constant.
Effect on
Profit
before
Taxation
Effect on
Other
Components
of Equity
Effect on
Profit
before
Taxation
Effect on
Other
Components
of Equity
2012
$’000
2012
$’000
2011
$’000
2011
$’000
-
-
(10,847)
10,847
(5,817)
5,817
(9,782)
9,782
Change in index:
-10% (2011 -10%)
+10% (2011 + 10%)
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 36
5. Capital Management
The Company’s objectives when managing capital, which is a broader concept than the ‘equity’ on the face of
statement of financial position, are:
(a) To comply with the capital requirements set by the regulators of the insurance markets where the
Company operates;
(b) To safeguard the Company’s ability to continue as a going concern so that it can continue to provide
returns for stockholders and benefits for other stakeholders; and
(c) To maintain a strong capital base to support the development of its business.
To assist in evaluating the current business and strategies, a risk-based capital approach is used in the form of
the Minimum Capital Test (MCT) as stipulated by the regulators. The MCT is calculated by management. This
information is required to be filed with the Financial Services Commission on a monthly, quarterly and annual
basis. The required MCT ratio was initially set at 200% and will be gradually increased to 250%. The MCT for
the company for the year ended 31 December 2012 is as follows:
MCT
6. Fair Value Estimation
Actual
Required
Actual
2012
251
2012
225
2011
226%
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable,
willing parties in an arm’s length transaction.
In accordance with IFRS 7, the Company discloses fair value measurements for items carried on the statement
of financial position at fair value, by level of the following fair value measurement hierarchy:
(a) Quoted prices (unadjusted) in active markets for identical assets or liabilities are disclosed as Level 1.
(b) Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices) are disclosed as Level 2.
(c) Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) are
disclosed as Level 3.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
6. Fair Value Estimation (Continued)
Page 37
The following table presents the Company’s assets that are measured at fair value. There are no liabilities that
are measured at fair value at the year end, and the Company had no instruments classified in Level 3 during
the year.
At 31 December 2012
Assets
Available-for-sale financial assets –
Equity securities
Debt securities
Total assets measured at fair value
At 31 December 2011
Assets
Financial assets at fair value through profit or loss –
Equity securities
Available-for-sale financial assets –
Equity securities
Debt securities
Total assets measured at fair value
Level 1
Level 2
$’000
$’000
Total
balance
$’000
108,476
-
108,476
-
296,415
296,415
108,476
296,415
404,891
Level 1
Level 2
$’000
$’000
Total
balance
$’000
-
58,174
58,174
97,781
-
97,781
-
292,445
292,445
97,781
350,619
448,400
Market price is used to determine fair value where an active market (such as a recognised stock exchange) exists
as it is the best evidence of the fair value of a financial instrument. The quoted market price used for financial
assets held by the Company is the current bid price. These instruments are included in Level 1.
However, market prices are not available for all financial assets held by the Company. Therefore, for financial
instruments where no market price is available, the fair values presented have been estimated using present
value or other estimation and valuation techniques. These valuation techniques maximise the use of
observable market data where it is available and rely as little as possible on entity specific estimates. If all
significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one
or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.
The following methods have been used to value financial instruments:
(a) Investment securities classified as available-for-sale and fair value through profit or loss are measured at fair
value by reference to quoted market prices when available. If quoted market prices are not available, then fair
values are estimated on the basis of pricing models or other recognised valuation techniques;
Page 38
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
6. Fair Value Estimation (Continued)
(b) The fair value of short-term assets and liabilities maturing within one year is assumed to approximate their
carrying amount. This assumption is applied to liquid assets and the short-term elements of all other financial
assets and financial liabilities;
(c) The fair value of variable rate financial instruments is assumed to approximate their carrying amounts, as
these instruments are expected to reprice at the prevailing market rates;
(d) Loans and leases are carried at amortised cost which is assumed to approximate fair value as loans are
issued at terms and conditions available in the market for similar transactions.
7. Critical Accounting Estimates and Judgements in Applying Accounting Policies
The Company makes estimates and assumptions that affect the reported amounts of assets and liabilities in
the future. Estimates and judgements are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results.
The estimates and assumptions that will have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are as follows:
(a) Liabilities arising from claims made under insurance contracts
The determination of the liabilities under insurance contracts represents the liability for future claims
payable by the Company based on contracts for the insurance business in force at the date of the
statement of financial position using several methods, including the Paid Loss Development method, the
Incurred Loss Development method, the Bornhuetter-Ferguson Paid Loss method, the Bornhuetter-
Ferguson Incurred Loss method and the Frequency-Severity method. These liabilities represent the
amounts that will, in the opinion of the actuary, be sufficient to pay future claims relating to contracts of
insurance in force, as well as meet the other expenses incurred in connection with such contracts. A
margin for risk or uncertainty (adverse deviations) in these assumptions is added to the liability. The
assumptions are examined each year in order to determine their validity in light of current best estimates or
to reflect emerging trends in the Company’s experience.
Claims are analysed separately between those arising from damage to insured property and consequential
losses. Claims arising from damage to insured property can be estimated with greater reliability, and the
Company’s estimation processes reflect all the factors that influence the amount and timing of cash flows
from these contracts. The shorter settlement period for these claims, allows the Company to achieve a
higher degree of certainty about the estimated cost of claims, and relatively little IBNR is held at year-end.
However, the longer time needed to assess the emergence of claims arising from consequential losses
makes the estimation process more uncertain for these claims.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
7. Critical Accounting Estimates and Judgements in Applying Accounting Policies (Continued)
Page 39
(b) Income taxes
There are many transactions and calculations for which the ultimate tax determination is uncertain during the
ordinary course of business. The Company recognises liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different
from the amounts that were initially recorded, such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made.
(c) Fair value of financial assets determined using valuation techniques
As described in Note 6, where the fair values of financial assets recorded on the statement of financial
position cannot be derived from active markets, they are determined using a variety of valuation techniques
that include the use of discounted cash flows model and/or mathematical models. The inputs to these
models are derived from observable market data where possible, but where observable market data are
not available, judgment is required to establish fair values.
For discounted cash flow analysis, estimated future cash flows and discount rates are based on current
market information and rates applicable to financial instruments with similar yields, credit quality and
maturity characteristics. Estimated future cash flows are influenced by factors such as economic
conditions, types of instruments or currencies, market liquidity and financial conditions of counterparties.
Discount rates are influenced by risk free interest rates and credit risk.
Changes in assumptions about these factors could affect the reported fair value of financial instruments.
8. Segment Information
Management has determined the operating segments based on the reports reviewed by the board of directors that
are used to make strategic decisions. All operating segments used by management meet the definition of a
reportable segment under IFRS 8.
The Company is organised into seven operating segments. These segments represent the different types of risks
that are written by the entity through various forms of brokers, agents and direct marketing programmes, which
are all located in Jamaica. Management identifies its reportable operating segments by product line consistent with
the reports used by the board of directors. These segments and their respective operations are as follows:
(a) Fire and allied perils - Loss, damage or destruction to insured property as specified on the policy schedule.
(b) Homeowners - Loss, damage or destruction to insured property used for residential purposes as specified on
the policy schedule, resulting from fire and allied perils, burglary, theft, or accidental damage. This includes
liability to third parties and domestic employees.
(c) Marine - Loss or damage to goods from the perils of the seas and other perils whilst in transit from
destination to destination by sea, air or land and from warehouse to warehouse.
(d) Liability - Legal liability of the insured to third parties for accidental bodily injury, death and/or loss of or
damage to property occurring in connection with the insured’s business, subject to a limit of indemnity. In
the case of an employee liability this is legal liability of the insured to pay compensation to its employees in
respect of death, injury or disease sustained during and in the course of their employment, subject to a limit
of indemnity.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
8. Segment Information (Continued)
Page 40
(e) Burglary - Loss of or damage to the insured’s property involving forcible and/or violent entry into or exit
from the building including damage to the premises.
(f) Miscellanous Accidents - This operating segment covers the following policies:
•
Fidelity Guarantee - Loss of money or goods owned by the insured (or for which the insured is
responsible) as a result of fraud or dishonesty by an employee.
• Goods in Transit - Loss, destruction or damage to insured goods by fire and allied perils, including
loss or damage from accidental collision or overturning and whilst in, on or being loaded or unloaded
from any road vehicle or whilst temporarily housed overnight during the ordinary course of transit.
•
•
•
•
Engineering and machinery breakdown - Loss or damage by fire and allied perils including burglary,
theft and accidental damage to specified equipment, including loss or damage resulting from electrical
and mechanical breakdown subject to maintenance.
Loss of money - Loss, damage or destruction of money including hold-up on premises during and out
of business hours and in transit.
Plate glass - Accident breakage to plate glass windows and doors of buildings.
Personal accident - Compensation for bodily injury caused by violent, visible, external and accidental
means, which injury shall solely and independently of any other cause result in death or
dismemberment within 12 months of such injury. Subject to the limits specified on the policy schedule.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
8. Segment Information (Continued)
Page 41
The segment information provided to the board of directors for the reportable segments for the year ended 31
December 2012 is as follows:
2012
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Fire Homeowners
Motor
Marine
Liability Burglary
Misellaneous
Accident
Total
$’000
Gross Premiums Written
2,198,086
113,076
827,683
104,680
295,378
7,880
242,186 3,788,969
Reinsurance ceded
(2,096,574)
(90,584)
(26,125)
(85,749)
(174,767)
(5,173)
(186,781) (2,665,753)
Excess of loss reinsurance cost
(79,664)
(21,109)
(22,050)
-
(9,218)
-
-
(132,041)
Net premiums written
21,848
1,383
779,508
18,931
111,393
2,707
55,405
991,175
Changes in unearned premiums,
net
Net Premiums Earned
(2,886)
18,962
(512)
(47,841)
575
(6,457)
458
(1,694)
(58,357)
871
731,667
19,506
104,936
3,165
53,711
932,818
Commission income
187,129
21,641
2,962
18,478
14,600
1,271
49,404
295,485
Commission expense
(111,067)
(13,575)
(74,790)
(2,853)
(6,359)
(357)
(28,262)
(237,263)
Claims expense
(31,561)
1,767
(472,948)
(679)
(28,900)
(2)
(8,452)
(540,775)
Management expenses
(29,501)
(6,679)
(238,028)
(5,622)
(35,816)
(804)
(16,453)
(332,903)
Segment results
Unallocated income
Unallocated expenses
Profit before tax
Taxation
Net profit
33,962
4,025
(51,137)
28,830
48,461
3,273
49,948
117,362
197,773
(29,866)
285,269
5,268
290,537
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
8. Segment Information (Continued)
Page 42
2011
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Fire Homeowners
Motor
Marine
Liability Burglary
Misellaneous
Accident
Total
$’000
Gross Premiums Written
2,147,158
102,972
715,659
141,396
279,758
9,286
230,166 3,626,395
Reinsurance ceded
(2,058,611)
(82,509)
(25,786)
(118,113)
(159,060)
(5,593)
(182,417) (2,632,089)
Excess of loss reinsurance cost
(76,868)
(21,248)
(21,930)
-
(7,747)
-
-
(127,793)
Net premiums written
Changes in unearned premiums,
net
Net Premiums Earned
11,679
(4,689)
6,990
(785) 667,943
23,283
112,951
3,693
47,749
866,513
88
(45,058)
(114)
(1,891)
(133)
4,774
(47,023)
(697) 622,885
23,169
111,060
3,560
52,523
819,490
Commission income
198,314
19,709
2,737
27,904
12,726 1,354
31,630
294,374
Commission expense
(113,093)
(11,948) ( 63,298)
(2,595)
(14,111)
( 536)
(26,108)
(231,689)
Claims expense
(1,947)
( 4,300) (313,549)
(210)
(83,744)
(2,176)
(14,216)
(420,142)
Management expenses
(26,768)
(6,186) (208,558)
(7,038)
(36,488)
(1,118)
(14,436)
(300,592)
Segment results
Unallocated income
Unallocated expenses
Profit before tax
Taxation
Net profit
63,496
(3,422)
40,217
41,230
(10,557)
1,084
29,393
161,441
1,208,679
(28,642)
1,341,478
(56,662)
1,284,816
Profit from the reportable segments is reconciled to the Company’s profit before taxation as follows:
Profit from reportable segments
Unallocated income
Investment income
Other income
Unallocated expenses
Depreciation and amortisation
2012
$’000
117,362
2011
$’000
161,441
136,062
61,711
197,773
1,015,010
193,669
1,208,679
(29,866)
285,269
(28,642)
1,341,478
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 43
8. Segment Information (Continued)
Total capital expenditure was as follows:
Property, plant and equipment
Intangible assets
2012
$’000
33,303
10,757
44,060
2011
$’000
9,081
10,372
19,453
Assets, liabilities and capital expenditure are not reported by segment to the board of directors.
9. Related Party Transactions and Balances
(a) Related party transactions are as follows:
Interest income -
Fellow subsidiary (Note 11)
Subsidiary (Note 11)
Rental and maintenance income -
Fellow subsidiary
Rental expense
Fellow subsidiary
Capital distribution received -
Other related parties (Note 11)
Premium income -
Key management
Parent company
Fellow subsidiaries
Affiliates
2012
$’000
2011
$’000
25,497
-
25,497
6,907
5,110
12,017
1,022
429
12,509
3,056
-
22,574
2,696
37,371
119,557
63,776
223,400
2,506
17,562
226,554
65
246,687
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 44
9. Related Party Transactions and Balances (Continued)
(a) Related party transactions (continued)
Claims expense -
Key management
Parent company
Fellow subsidiaries
Affiliates
Gain on sale of investment -
Parent company (Note 11)
Gain on disposal of subsidiary -
Parent company
Gain on disposal of property, plant and equipment
Fellow subsidiary
Dividends declared -
Key management
Parent company
Key management compensation -
Salaries and other short term benefits
Directors emoluments
Directors’ fees (included above)
2012
$’000
2011
$’000
-
100
-
7,760
7,860
-
-
-
41
3,910
7,456
-
11,407
847,200
61,928
157,554
1,927
80,025
81,952
-
1,054,750
1,054,750
49,222
37,371
1,720
1,840
(b) The statement of financial position includes the following balances with group companies:
Due from related parties -
Receivables -
Fellow subsidiary
2012
$’000
2011
$’000
750
1,156
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 45
9. Related Party Transactions and Balances (Continued)
(b) Balances with group companies (continued)
Due from policyholders, brokers and agents -
Fellow subsidiary
Parent company
Key management
Loans receivable -
Fellow subsidiary (Note 21)
Investment securities -
Shares in affiliated entity (Note 27)
Claims liabilities
Parent company
Affiliated company
Fellow subsidiary
2012
$’000
2011
$’000
39,273
40,472
-
43,034
1,796
1,638
79,745
46,468
237,933
236,896
67,331
97,781
2,452
5,436
8,306
-
6,422
4,538
Included in the investments of the company are shares in a related party. At 31 December 2012, these shares
represented 1.73% of the total assets (2011 – 2.76 %).
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 46
10. Claims Expense
Gross claims expense
Reinsurers share of claims expense (Note 4(b) (d))
Net claims expense
11.
Investment Income
Interest income -
Leases receivable
Loan due from fellow subsidiary (Note 9(a))
Loan due from subsidiary (Note 9(a))
Cash and deposits and investment securities
Capital distribution (Note 9(a))
Gain on disposal of subsidiary
Gain on sale of investments
Dividend income
Realised gain on Unit Trust Fund
2012
$’000
2011
$’000
624,954
489,848
(84,179)
(69,706)
540,775
420,142
2012
$’000
2011
$’000
7,661
25,497
-
77,550
110,708
-
-
2,226
6,907
5,110
60,691
74,934
22,574
61,928
12,837
848,471
8,007
4,510
-
7,103
136,062
1,015,010
Included in gain on sale of investments for the prior year is the gain on sale of shares to the parent company
totalling $847,200.
12. Other Income
Foreign exchange gains
Rental income
Gain on disposal of property, plant and equipment
Miscellaneous income
2012
$’000
2011
$’000
50,052
28,020
2,126
6,715
6,337
157,554
3,196
1,380
61,711
193,669
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 47
13. Expenses by Nature
Management and other expenses by nature are as follows:
Advertising costs
Audit fees
Bad debt expense
Computer expenses
Directors fees
Depreciation and amortisation
Insurance
Professional fees
Printing and stationery
Registration fees
Rent
Repairs and maintenance
Staff costs (Note 14)
Transportation expenses
Utilities
Other operating expenses
14. Staff Costs
Wages and salaries
Statutory contributions
Pension costs
Other
2012
$’000
24,861
4,412
-
8,467
1,720
2011
$’000
16,093
3,920
4,741
6,619
1,840
29,866
28,642
715
9,733
4,413
11,782
12,509
13,915
6,118
8,207
4,757
11,015
3,056
14,677
201,108
182,518
6,969
14,093
18,206
5,637
13,149
18,245
362,769
329,234
2012
$’000
2011
$’000
150,091
138,488
12,841
2,889
9,461
3,002
35,287
31,567
201,108
182,518
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 48
15. Taxation
(a) The company’s shares were listed on the Junior Market of the Jamaica Stock Exchange, effective
21 September 2011. Consequently, the company is entitled to a remission of tax for ten (10) years in the
proportions set out below, provided the shares remain listed for at least 15 years:
Years 1 to 5 100%
Years 6 to 10 50%
The financial statements have been prepared on the basis that the company will have the full benefit of
the tax remissions. Subject to agreement with the Minister of Finance and Planning, the income tax
payable for which remission has been granted is $85,593,000 (2011 - $33,112,000).
(b) Taxation is based on the profit for the year adjusted for taxation purposes and represents income tax at 33
1/3%:
Current income taxes:
Income tax charge
Prior year income tax adjustment
Deferred income taxes (Note 27)
2012
$’000
2011
$’000
-
-
-
(5,268)
(5,268)
46,598
3,395
49,993
6,669
56,662
(c)
The tax charge on the company’s profit differs from the theoretical amount that would arise using the
statutory tax rate as follows:
Profit before tax
Tax calculated at a rate of 33 1/3%
Adjusted for the effects of:
Income relieved
Income not subject to tax
Expenses not deductible for tax
Prior year income tax adjustment
Net effect of other charges and
allowances
2012
$'000
2011
$'000
285,268
1,341,478
95,089
447,160
(118,987)
(33,120)
(15,935)
(373,581)
33,438
12,608
-
1,127
3,395
200
(5,268)
56,662
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
15. Taxation (Continued)
(d) The tax charge/credit relating to components of other comprehensive income is as follows:
Page 49
2012
$'000
2011
$'000
Fair value reserve -
Available-for-sale investments -
Unrealised (losses)/gains on available-for-sale investments, before tax
(33,377)
99,089
Unrealised gains on available-for-sale investments, tax (credit)/charge
(Note 27)
Unrealised gains on available-for-sale investments, after tax
Gains recycled to profit or loss on disposal and maturity of available-for-
sale investments
2,418
(30,959)
(896)
98,193
(11,440)
(42,399)
(847,201)
(749,008)
16. Earnings Per Share
The calculation of earnings per share is based on the net profit for the year and 1,031,250,000 (2011 -
882,071,000) ordinary shares in issue.
Net profit from continuing operations ($’000)
Weighted average number of ordinary shares in issue (‘000)
Earnings per share ($)
2012
290,537
1,031,250
0.28
2011
1,284,816
882,071
1.46
17. Dividends per Share
The dividends paid in 2012 and 2011 were as follows:
Interim dividends:-
27 cent per stock unit – April 2011
53 cents per stock unit – July 2011
1,293 cent per stock unit – August 2011
2.8 cents per stock unit – December 2011
4.85 cents per stock unit – June 2012
4.85 cents per stock unit – September 2012
2012
$’000
-
-
-
-
50,016
50,015
2011
$’000
20,000
40,000
970,000
30,925
-
-
100,031
1,060,925
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 50
18. Cash and Cash Equivalents
Cash and bank balances
Short term deposits
Short term investments
2012
$’000
103,822
1,077,926
135,455
1,317,203
2011
$’000
90,776
1,043,502
-
1,134,278
Short term deposits comprise term deposits and repurchase agreements with an average maturity of 61 days
(2011 – 67 days), and include interest receivable of $1,955,000 (2011 – $3,308,000).
The weighted average effective interest rate on short term investments and deposits were as follows:
J$
US$
2012
%
6.3
3.0
2011
%
6.7
3.9
The weighted average effective interest rates on cash balances for the year were as follows:
J$
US$
GBP
19. Due from Reinsurers and Coinsurers
Reinsurers’ portion of unearned premium (Note 28)
Reinsurers’ portion of claims liabilities (Note 28)
Other amounts recoverable from reinsurers and coinsurers
20. Other Receivables
Prepayments
Other receivables
2012
%
1.1
0.2
0.1
2011
%
1.5
0,8
0.1
2012
2011
$’000
$’000
820,016
148,637
64,781
844,140
126,485
52,245
1,033,434
1,022,870
2012
$’000
3,220
10,286
13,506
2011
$’000
2,995
7,309
10,304
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 51
21. Loans Receivable
Mortgage receivable from fellow subsidiary (Note 9)
Loans receivable from fellow subsidiary (Note 9)
2012
$’000
2011
$’000
171,799 174,420
62,476
237,933 236,896
66,134
Mortgage receivable represents a loan extended by the company to a fellow subsidiary for land and building sold
to that fellow subsidiary. The loan attracts an interest of 12% per annum and has tenure of 30 years.
Loans receivable from fellow subsidiary attracts interest at a rate of 5.25% and was repayable as at 31 December
2012. The loan has since been renegotiated and is now repayable in March 2013 at a rate of 5.25%.
.
22. Lease Receivables
=
Gross investment in finance leases –
Not later than one year
Later than one year and not later than five years
Less: Unearned income
Net investment in finance leases may be classified as follows:
Not later than one year
Later than one year and not later than five years
2012
$’000
2011
$’000
29,985
47,774
77,759
(13,194)
22,586
30,192
52,778
(10,816)
64,565
41,962
21,808
42,757
64,565
14,147
27,815
41,962
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 52
23. Investment Securities
Debt securities -
Available for sale – at fair value
Government of Jamaica Securities
Benchmark Investment Notes
United States Dollar Benchmark Notes
United States Dollar Bonds
Treasury Bills
Certificate of Deposits
United States Dollar Corporate Bond
Interest receivable
Equity securities -
Fair value through profit or loss
Units in Unit Trust Funds
Available for sale, at fair value –
Quoted shares
Available for sale, at cost –
Unquoted shares
Less: Provision for diminution in value
Weighted average effective interest rate:
Government of Jamaica Securities –
Benchmark Investment Notes
United States Dollars Benchmark Notes
United States Dollar Bonds
2012
$’000
2011
$’000
219,199
6,220
59,997
12,862
40,000
10,999
349,277
5,686
354,963
221,552
5,871
57,105
20,054
-
-
304,582
7,917
312,499
-
58,174
108,476
97,781
105
16,990
(105)
-
108,476
463,439
(16,990)
-
155,955
468,454
2012
%
7.93
6.88
9.47
2011
%
10.81
6.88
10.21
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
23. Investment Securities (Continued)
Page 53
Investment securities -
Available-for-sale -
Debt securities
Equity securities
Fair value through profit or loss
2012
2011
Carrying
Amount
$'000
Fair
Value
$'000
Carrying
Amount
$'000
Fair
Value
$'000
349,277
108,476
457,753
-
349,277
108,476
457,753
-
457,753
457,753
304,582
97,781
402,363
58,174
460,537
304,582
97,781
402,363
58,174
460,537
Included in investments, are Government of Jamaica Benchmark Investment Notes valued at $45,000,000
which have been pledged with the FSC, pursuant to Section 8(1)(b) of the Insurance Regulations, 2001. In the
prior year, the Unit Trust Funds valued at $50,000,000 were pledged with the FSC.
Included in investments are shares in Seprod Limited, a related party, with a fair value of approximately
$67,331,000 (2011 - $97,781,000). The company is the beneficial owner of these shares, which are held in
trust by the company’s parent, Musson Jamaica Limited, which is the registered owner.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
24. Property, Plant and Equipment
Page 54
At Cost -
At 1 January 2011
Additions
Disposals
At 31 December 2011
Additions
Disposals
At 31 December 2012
Depreciation -
At 1 January 2011
Charge for the year
On disposals
At 31 December 2011
Charge for the year
On disposals
At 31 December 2012
Net Book Value -
31 December 2012
31 December 2011
Furniture,
Fixtures &
Equipment
Buildings
$’000
$’000
Land
$’000
Motor
Vehicles
$’000
Total
$’000
4,569
-
80,260
1,392
50,941
7,272
45,642
181,412
417
9,081
(4,569)
(65,222)
(1,124)
(6,805)
(77,720)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16,430
5,965
57,089
5,853
39,254
21,485
112,773
33,303
-
(1,404)
(15,833)
(17,237)
22,395
61,538
44,906
128,839
31,960
890
(26,785)
6,065
1,051
-
25,200
6,034
32,300
8,639
89,460
15,563
(728)
(6,447)
(33,960)
30,506
6,275
34,492
7,731
71,063
15,057
(728)
(13,639)
(14,367)
7,116
36,053
28,584
71,753
15,279
10,365
25,485
26,582
16,322
4,762
57,086
41,709
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 55
25. Intangible Assets
At Cost -
At 1 January 2011
Additions
At 31 December 2011
Additions
At 31 December 2012
Amortisation -
At 1 January 2011
Charge for the year
At 31 December 2011
Charge for the year
At 31 December 2012
Net Book Value -
31 December 2012
31 December 2011
26. Other Liabilities
Statutory contributions payable
Accrued expenses
General consumption tax
Other payables
Computer
Software
$’000
54,665
10,732
65,397
10,757
76,154
25,694
13,079
38,773
14,808
53,581
22,573
26,624
2011
$’000
3,076
52,811
10,698
15,011
81,596
2012
$’000
4,083
43,989
8,265
9,991
66,328
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 56
27. Deferred Income Taxes
Deferred income taxes are calculated in full on temporary differences under the liability method using a
principal tax rate of 33⅓%.
Deferred income tax liabilities
Net liabilities
The net movement on the deferred income tax account is as follows:
Balance as at 1 January
Credited/(charged) to profit or loss (Note 15)
Credited/(charged) to other
comprehensive income (Note 15)
Balance as at 31 December
Deferred income tax assets and liabilities are attributable to the following items:
Deferred income tax liabilities
Accelerated tax depreciation
Unrealised fair value gains
2012
$’000
2011
$’000
(5,027)
(12,713)
(5,027)
(12,713)
2012
$’000
(12,713)
5,268
2011
$’000
(5,148)
(6,669)
2,418
(5,027)
(896)
(12,713)
2012
$’000
2011
$’000
(5,027)
(10,295)
-
(2,418)
(5,027)
(12,713)
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 57
28. Insurance Reserves
(a) These reserves are as follows:
Gross -
Unearned premiums
Claims liabilities
Unearned commission
Recoverable from reinsurers -
Reinsurers’ portion of unearned premiums (Note 19)
Reinsurers’ portion of claims liabilities (Note 19)
Net -
Unearned premiums
Claims liabilities
Unearned commission
(b) Claims liabilities comprise:
Gross -
Outstanding claims
IBNR
Unallocated loss adjustment expense
Recoverable from reinsurers -
Outstanding claims
IBNR
Net -
Outstanding claims
IBNR
Unallocated loss adjustment expense
2012
$’000
2011
$’000
1,293,349
822,246
83,537
2,199,132
1,259,115
688,107
95,289
2,042,511
(820,016)
(148,637)
(968,653)
(844,140)
(126,485)
(970,625)
473,333
673,609
83,537
1,230,479
414,975
561,622
95,289
1,071,886
2012
$’000
678,438
134,990
8,818
822,246
111,269
37,368
148,637
567,169
97,622
8,818
673,609
2011
$’000
532,840
147,719
7,548
688,107
67,485
59,000
126,485
465,355
88,719
7,548
561,622
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 58
28. Insurance Reserves (Continued)
(c) The gross unearned premium reserve by class of business is as follows:
Fire, consequential loss and liability
Motor
Marine
Accident
29. Share Capital
Authorised -
2012
$’000
814,511
376,297
11,141
91,400
2011
$’000
817,776
325,400
10,798
105,141
1,293,349
1,259,115
2012
$’000
2011
$’000
1,100,000,000 (2011 – 1,100,000,000) Ordinary shares of no par
Issued and fully paid -
1,031,250,000 (2011 – 1,031,250,000) Ordinary shares of no par
470,358
470,358
During the prior year, the company issued 750,000,000 ordinary shares to its existing shareholders by way of
an 11:1 stock split. The Company issued 206,250,000 shares on 21 September 2011 (20% of the total
ordinary share capital issued) to the public.The shares issued have the same rights as the other shares in
issue. The fair value of the shares issued amounted to $416,625,000 ($2.02 per share). The related transaction
costs amounting to $21,267,000 have been deducted from the proceeds of the share issue.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 59
30. Capital Reserves
At beginning of year
Movement during the year -
Capital distribution income transferred from retained earnings
At end of year
The capital reserves at year end represent realised surpluses.
31. Fair Value Reserve
2012
$’000
2011
$’000
152,030
129,456
-
152,030
22,574
152,030
This represents the unrealised surplus, net of tax, on the revaluation of available-for-sale investments at the year
end.
32. Pension Scheme
Employees participate in a defined contribution pension scheme operated by a related company, T. Geddes
Grant (Distributors) Limited. The scheme is open to all permanent employees, as well as the employees of certain
related companies. The scheme is funded by employees’ compulsory contribution of 5% of earnings and
voluntary contributions up to a further 5%, as well as employer’s contribution of 5% of employees’ earnings. The
scheme is valued triennially by independent actuaries. The results of the most recent actuarial valuation, as at
31 December 2009, indicated that the scheme was adequately funded at that date.
Pension contributions for the period totalled $2,889,000 (2011 – $3,002,000), and are included in staff costs
(Note 14).
33. Contingency
The Company is involved in certain legal proceedings incidental to the normal conduct of business. Management
believes that none of these legal proceedings, individually or in the aggregate, will have a material effect on the
Company.
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 60
34. Commitments
Operating lease commitments
The company leases its office situated at 58 Half Way Tree Road from fellow subsidiary Unity Capital
Incorporated under non-cancellable operating lease agreement.
The lease is for a term of five (5) years, and is renewable at the end of the lease period at market rate.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows
No later than 1 year
Later than 1 year and no later than
Later than 5 years
35. Subsequent Event
2012
US$’000
2011
US$’000
142
388
-
530
142
530
-
672
In February 2013, the Company participated in the National Debt Exchange (NDX) transaction under which it
exchanged its holdings of domestic debt instruments issued by the Government of Jamaica for new, longer-dated
debt instruments with lower coupon interest rates.
The key features of the NDX are as follows:
•
•
•
•
Jamaican-resident holders of certain domestic debt instruments (collectively referred to as the “Old
Notes”) were invited to exchange those Old Notes for new, longer-dated debt instruments (collectively
referred to as the “New Notes”). Participation in the NDX was voluntary.
The New Notes offered have a variety of payment terms, including but not limited to fixed and variable
rates in J$, CPI-indexed in J$, and fixed rates in USD.
Eligible investors had the option to choose New Notes based on the type and maturity of the Old Notes
which are offered for exchange based on certain election options. The election options only allow
investors to choose New Notes of longer tenor relative to Old Notes. Most New Notes have lower
coupon interest rates than Old Notes.
Introduction of new Fixed Rate Accreting Notes (“FRANs”) which were issued with J$80 of principal value
for every J$100 of principal value of Old Notes, whereby such principal will accrete to J$100 of principal
value by the maturity date in 2028. The Company elected not to receive any FRANs.
Eligible investors who made offers to the Government of Jamaica to exchange Old Notes received an
equivalent principal value (par-for-par value) of New Notes and the payment in cash of accrued interest, net
of applicable withholding taxes, on the Old Notes up to but excluding 22 February 2013 (the Settlement
Date).
35. Subsequent Event (Continued)
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 61
The NDX has had a significant impact on the expected future cash flows from the Company's investment
portfolio. The table below summarises the impact on coupon rates and maturities of the instruments that were
exchanged.
=
=
Jamaican dollar denominated instruments:
Total face value exchanged J$215 million
Pre NDX
Post NDX
Weighted average coupon rate
Weighted average tenor to maturity
8.69%
2.0 years
7.57%
6.8 years
US dollar denominated instruments:
Total face value exchanged US$34 thousand (including J$
denominated instruments indexed to US$)
Weighted average coupon rate
Weighted average tenor to maturity
6.75%
0.7 yea
5.25%
4.1years
General Accident Insurance Company Jamaica Limited
Notes to the Financial Statements
31 December 2012
(expressed in Jamaican dollars unless otherwise indicated)
Page 61
The NDX has had a significant impact on the expected future cash flows from the Company's investment
portfolio. The table below summarises the impact on coupon rates and maturities of the instruments that were
exchanged.
=
=
Jamaican dollar denominated instruments:
Total face value exchanged J$215 million
Pre NDX
Post NDX
Weighted average coupon rate
Weighted average tenor to maturity
8.69%
2.0 years
7.57%
6.8 years
US dollar denominated instruments:
Total face value exchanged US$34 thousand (including J$
denominated instruments indexed to US$)
Weighted average coupon rate
Weighted average tenor to maturity
6.75%
0.7 yea
5.25%
4.1years
General Accident 2012
Annual Report
For more information, visit www.genac.com
Notes
For more information, visit www.genac.com
Notes
For more information, visit www.genac.com
Form Of Proxy
GENERAL ACCIDENT INSURANCE COMPANY
(JAMAICA) LIMITED
No.
Resolution details
(tick as appropriate)
Vote for or against
“ I/We _______________________________________
______________________(insert name)
1.
ORDINARY RESOLUTIONS
To receive the report of the Board of Directors and the audited accounts of
the Company for the year ended December 31, 2012.
For Against
For Against
2.
Company and to fix their remuneration.
To authorise the Board of Directors to re-appoint PWC as the Auditors of the
To re-appoint the following Directors of the Board, who have resigned by rotation in accordance with the Articles of
Incorporation of the Company and, being eligible, have consented to act on re-appointment.
3.(a) To re-appoint Melanie Subratie as a Director of the Board of the Company..
For Against
3.(b) To re-appoint Sharon Donaldson as a Director of the Board of the Company.
For Against
3.(c) To re-appoint Christopher Nakash as a Director of the Board of the Company.
For Against
4(a)
To authorise the Board of Directors to fix the remuneration of the Directors.
To approve the aggregate amount of interim dividends declared by the
5.
Board during the financial year ended 31st December 2012, being
$100,031,250 or 9.7 cent per ordinary share, as the final dividend for that year.
For Against
For Against
of ___________________________________________
__________________________ (address)
being a shareholder(s) of the above-named
Company, hereby appoint:
______________________________________________
_____________________ (proxy name)
of ___________________________________________
__________________________(address)
or failing him, _________________________________
__________________(alternate proxy)
of ___________________________________________
__________________________(address)
as my/our proxy to vote for me/us on my/our
behalf at the Annual General Meeting of the
Company to be held at 10am on the 21 day of
June 18th, 2013 at 58 Halfway Tree Road and at
any adjournment thereof .
I desire this form to be used for/against
the resolutions as follows (unless directed the
proxy will vote as he sees fit):
Signed this day of 2013:
Signed: _____________________________________ (signature of primary shareholder) Name: _____________________________________ (print name of primary shareholder)
Signed: _____________________________________ (signature of joint shareholder, if any) Name: _____________________________________ (print name of joint shareholder, if any)
General Accident Insurance
Company Jamaica Limited
58 Halfway Tree Road
Kingston, Jamaica
www.genac.com