Generac Holdings Inc
Annual Report 2014

Plain-text annual report

Annual Report 2014 Building on solid foundation 2014General Accident 2014 Annual Report For more information, visit www.genac.com Peace of mind PEACE OF MIND CALL YOUR BROKER OR A GE NAC RE PRE SEN TATIV E FO R FUR THE R DE TAIL S 876-929-8451 // 876-929-8454 HEAD OFFICE: 58 HAL F WAY TRE E RO AD, KINGSTON 10, JAM AICA W.I. WWW .GENAC. COM PEACE OF MIND Statement of the Chairman ..................... Notice of Annual General Meeting.......... Directors Report .......................................... Our Performance Financial Statistics ....................................... Management Discussion and Analysis .... Our Team Board of Directors ...................................... Leadership Team ........................................ Accountability Corporate Data .......................................... Disclosure of Shareholding......................... 4 6 7 10 14 18 22 24 26 Our Community Corporate Social Responsibility ................ 29 Appendices Audited financial statements Form of Proxy CALL YOUR BROKER OR A GE NAC RE PRE SEN TATIV E FO R FUR THE R DE TAIL S 876-929-8451 // 876-929-8454 For more information, visit www.genac.com HEAD OFFICE: 58 HAL F WAY TRE E RO AD, KINGSTON 10, JAM AICA W.I. WWW .GENAC. COM Contents THE YEAR AT A GLANCE 16 $5.1 Consecutive years of premium growth Billion in gross written premiums $320 21% Million in net profit Return on average equity 2 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2014 THE YEAR AT A GLANCE $5.1 Billion in gross written premiums 21% Return on average equity Statement of the Chairman General Accident navigated a difficult operating environment last year and made a profit of $320 million or slightly less than in 2013. Insurance and investment operations Commercial property insurance rates, the price of our highest selling product, declined sharply. In spite of this drop, General Accident grew its revenues and wrote over $5 billion of premiums for the first time in its history. Reflecting our disciplined approach to underwriting, we grew our premiums while underwriting profitably. In fact, General Accident has now generated an underwriting profit for six years in a row. Unfortunately, we were only able to generate a 9.5% return on our $2.5 bil- lion float this year or considerably less than our investment returns in recent years. Capital management General Accident is now the largest underwriter of commercial property risks in Jamaica. Our ability to write these risks depends largely on the support of our reinsurance partners. These partners, some of most the prominent reinsurers in the world, trust us with their capital and reputation. I am pleased to report that we’ve strengthened our relationships with our reinsurers in 2014. General Accident made a return on average equity of 21% last year. In line with our dividend policy, we returned over $203 million to shareholders while continuing to strengthen our equity base. Outlook With the Jamaican economy officially back in recession, the demand for insurance is unlikely to grow in the immediate future. Insurance rates are likely to remain compressed. At the same time, low interest rates will make it harder to increase investment returns. As a result, we expect General Accident to face an ever tougher environment in 2015. The Board and management team is committed to tackling these challenges head on. General Accident’s culture, brand and relationships with policyholders, brokers and reinsurers are all strong. I look forward to working with our team to continue to build our business next year and beyond. Sincerely, P.B. Scott Chairman 4 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2014 Statement of the Chairman P.B. Scott Chairman For more information, visit www.genac.com 5 “In many ways, our financial perfor-mance this year was a testimony to the resilience of our business.”Notice Of Annual General Meeting GENERAL ACCIDENT INSURANCE COMPANY JAMAICA LIMITED NOTICE IS HEREBY GIVEN THAT the annual general meeting of General Ac- cident Insurance Company Jamaica Limited (the “Company”) will be held at 10 am on June 8, 2015, at 58 Half Way Tree Road for shareholders to consider and, if thought fit, to pass the following resolutions: Ordinary Resolutions 1. To receive the report of the Board of Directors and the audited accounts of the Company for the financial year ended December 31, 2014. 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 accordance with the Articles of Incorporation of the Company and, being eligible, have consented to act on re-appointment: (a) To re-appoint Geoffrey Messado as a Director of the Board of the Company. (b) To re-appoint Ralph Thompson as a Director of the Board of the Company. (c) To re-appoint Duncan Stewart 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 December2014, being $203,878,125 or 19.77 cent per ordinary share, as the final dividend for that year. Dated this the 14th day of April 2015 By order of the Board. P.B. Scott Chairman 6 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2014 Directors Report The Directors are pleased to present their report for General Accident Insurance Company Jamaica Limited for the financial year ended December 31, 2014. Financial Results The Statement of Comprehensive Income for the Company shows pre-tax profits for the year of $319.9 million, taxation recoverable of $.11 million and a net profit after tax of $320 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, 2014 are: P.B. Scott, Melanie Subratie, SharonDonaldson, Ralph Thompson, Geoffrey Messado, Chris- topher Nakash, Jennifer Scott, Nicholas Scott, Nigel Clarke and Duncan Stewart. The Directors to retire by rotation in accordance with the Articles of Incorporation are: GeoffreyMessado, Ralph Thompson and Duncan Stewart but being eligible, will offer themselves for re-election. Auditors The auditors of the Company, PricewaterhouseCoopers of Scotiabank Centre, Duke Street, Kingston, Jamaica have expressed their willingness to con- tinue in office. The Directors recommend their re-appointment. Dividend A dividend of $0.1213 per share paid on December 31, 2014 is proposed to be the final dividendin respect of the financial year ended December 31, 2014. On behalf of the Board of Directors, P.B. Scott Chairman For more information, visit www.genac.com 7 Our Performance General Accident today Policies in force 16,087 Employees 78 Gross written premiums $5.1b Investment portfolio $2.5b Net worth $1.6b For more information, visit www.genac.com 9 8-Year Financial Statistics Employee 2014 78 2013 83 2012 77 2011 74 Policies in force 16,087 16,015 15,876 15,247 Gross written premiums 5,072,375 4,479,755 3,788,969 3,626,395 Net written premiums 1,066,538 1,018,398 991,175 Net earned premiums 1,069,098 994,193 Claim 678,558 646,791 932,818 540,775 Management expenses 441,628 381,073 332,903 Underwriting profit 101,941 58,503 Investment income (1) 240,374 Profit before tax Profit after tax Cash Dividends 319,965 320,078 203,878 284,788 323,702 327,914 140,025 117,362 186,114 285,269 290,537 100,031 866,513 819,490 420,142 300,592 161,589 1,015,010 1,341,478 1,284,816 90,925 Investment assets (2) 2,540,368 2,104,201 1,780,642 1,602,732 Insurance reserves 1,988,573 2,364,658 2,199,132 2,042,511 Shareholders equity 1,579, 382 1,456,944 1,288,850 1,140,743 10 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2014 8-Year Financial Statistics 2011 74 2010 2009 2008 69 66 64 2007 61 15,247 13,466 11,727 11,187 12,787 3,626,395 2,203,074 1,683,911 1,504,687 1,101,424 866,513 784,562 592,741 434,117 819,490 693,085 599,663 356,433 420,142 426,624 391,416 360,568 300,592 241,641 204,357 169,613 161,589 68,862 33,818 (124,899) 1,015,010 204,565 134,106 288,007 1,341,478 244,775 141,300 142,810 1,284,816 213,944 105,299 149,018 90,925 95,000 270,000 - 502,721 477,774 273,074 150,519 31,997 89,834 94,685 86,221 40,000 1,602,732 1,727,588 1,357,765 1,265,838 1,177,126 2,042,511 1,511,904 1,163,257 1,100,096 854,434 1,140,743 1,270,502 1,034,229 1,157,244 1,028,409 For more information, visit www.genac.com 11 8-Year Financial Statistics Market Share (3) Growth in gross written premiums Loss ratio Expense ratio (4) Underwriting margin (5) Investment return Return on average equity (6) Dividend yield on average equity Increase in net worth Total return to shareholders (7) NOTES: 2014 15% 13% 63% 9% 2% 9.8% 21% 13% 8% 21% 2013 2012 15% 18% 65% 9% 1% 13.5% 24% 10% 13% 23% 13% 4% 58% 9% 3% 10% 24% 8% 13% 21% 1. Includes Foreign exchange gains. 2. Cash, cash equivalents, fixed income securities, equities and other investment assets 3. Based on gross written premium data from the Insurance Association of Jamaica 4. Management expenses divided by gross written premiums 5. Excludes gains from the sale of available for sale securites and subsidiary in 2011 and dividend from former subsidiary in 2010 6. Excludes gains from the sale of available for sale securites, subsidiary and property in 2011 and dividend from former subsidiary in 2010 7. Includes dividends and capital distributions paid to shareholders and 12 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2014 8-Year Financial Statistics 2012 2011 2010 2009 2008 2007 13% 4% 58% 9% 3% 10% 24% 8% 13% 13% 10% 7% 7% 65% 31% 12% 37% 51% 62% 65% 101% 8% 11% 12% 11% 4% 3% 2% -8% 9% 8% 2% 12% 26% 11% 10% 14% 88% 8% 25% 0% (-11%) 23% (-11%) 13% 21% 77% 31% 14% (13%) For more information, visit www.genac.com 13 Management Discussion and Analysis Operating Performance We are happy to report that 2014 is yet another success- ful year in the General Accident journey especially as this year’s results were generated in a more challenging envi- ronment. We continue to focus on customers, disciplined underwriting and on being better prepared to serve our customers and business partners. Despite the challenging economic environment we believe that we have the cor- porate ingredients to continue the growth story. The 2014 performance was buoyed by increased revenue and a reduced loss experience that produced a most reward- ing outcome of improved underwriting profit. Sharon Donaldson Managing Director • • • • • Financial Performance Highlights 16th consecutive year of premium growth Profit for the year of $320.1 million Earnings per share of $0.31 Book value of $1.6 billion (2013: $1.46 billion) Annualized return on average equity of 21% Underwriting Performance Premium income growth was reasonably satisfactory resulting in Gross Written Premiums of $5.07 billion, an increase of 13%, with net written premiums, before excess of loss reinsurance costs, increasing to $1.194 billion over prior year of $1.165 billion. While net premiums earned (premiums after all reinsurance outflows) increased marginally over prior year [$1.069 billion compared to $994 million], our underwriting profit increased to $101.9 million, well above prior year of $58.5 million due primarily to significant increases in our commission income. An- 14 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2014 other positive metric is the fact that our incurred losses of $678.6 million remained relatively flat compared to prior year of $646.8 million. Our loss ratio improved marginally, 63.5% compared to 65.0% in 2013. Investment Performance The economic environment over the last 12 months remained relatively weak. Despite this we continue to reap the rewards of leveraging our institutional strength. General Accident dedicates significant resources to actively manage our insurance float as we seek to balance our desire to maximize returns with our need to limit the risk of loss relative to our capital and to ensure that our liquidity exceeds our claims obligations. Based on a balanced and prudent investment strategy our investment portfolio performed fairly well in 2014 with our investment assets gener- ating income of $160.4 million. Profitability During 2014, the company maintained the financial strength that provided the platform for us to faithfully keep our promises to our stakeholders. Investment returns continue to be an important lever in driving the overall profitability of the company. For this year we were able to deliver a solid performance driven by a high performance culture, operational efficiency, revenue growth and deepening of our business relationships. Strong capital management is an integral component of our corporate governance policy and we will continue to give our shareholders an appropriate share in the company’s success. We continue our dividend policy as the compa- ny’s consistent performance has enabled us to increase the dividend payout ratio with a distribution of $203.8 million in cash to our shareholders or $0.1977 per share, compared to $0.13578 cents in 2013. General Accident ended 2014 with a return on average equity for shareholders of 21%. Capital Position Our business operations are in part dependent on our financial strength and the market’s perception of our financial strength, measured by shareholder’s equity, stood at $1.6 billion at December 31, 2014. For more information, visit www.genac.com 15 Management Discussion and Analysis General Accident remains in compliance with the main capital adequacy and liquidity metrics prescribed by the Financial Services Commission that require the company to maintain a minimum of 250% capital to risk weighted assets [MCT] and a liquidity ratio of 95%. At year-end our MCT ratio was 270%. The company’s liquidity is ensured by means of detailed liquidity planning. At December 31st, 2014 our liquidity ratio of108% exceeds the regulatory minimum of 95%. We strive to maintain excess liquidly and capital positions as we believe this provide us with an inherent advantage that will allow us to respond aggressively to market changes. In addition, we successfully renewed our treaty agreements with our inter- national reinsurance partners for 2015. Marketing The company writes business for many different customers with varied lines of business thereby obtaining a portfolio of risk that is broadly spread. Our extensive range of insurance products is specifically designed to protect our insureds at every step, while they focus on pursuing their strategic objectives. Our business is written through two major distribution channels, the broker/agents channel and the direct market. Direct written premiums grew by 3.8%, from $489.1 million to $ 507.7 million in 2014, reflecting growth across all lines of business. The commercial line of business continues to lead the premium growth with strong sales in both commercial prop- erty and engineering products. In 2014, broker generated business accounted for 90% of our gross written premiums with the remaining 10% written directly. Business Strategy and Outlook 2015 The renewal of 2015 supplier agreements took place in a very competi- tive market and the year ahead is expected to be equally challenging. Demand for insurance is expected to remain fairly stable but with some pressure on pricing. Against this backdrop, we expect to see even more pronounced market volatility as our industry is likely to become fiercely competitive driven by a further softening 16 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2014 of the suppliers market that generally produces a trending down of prices. How- ever we are confident about our strategic direction and will maintain our core busi- ness principles that have serve us well over the years. Disciplined financial management and an investment policy geared to- wards stable and reliable returns support our business model. Our selection of in- vestments takes into account maturity dates, currency risk and inflation. Because of our active capital management we are able to maintain our capitalization well above regulatory requirement. Although the country faces significant economic challenges, we believe we are well positioned to meet the challenges of the up- coming year. We will continue to look for growth opportunities while maintaining effective fiscal control and management of our liquidity. Our priorities for 2015 include, inter alia: • • • meeting our financial target maintaining underwriting discipline and improving productivity doing things differently to generate value for our shareholders, customers, employees and business partners. We wish to thank all our policyholders, brokers and reinsurance partners for their loyal support and the trust placed in us, and our management and staff, whose commitment and dedication has resulted in the continued success of your company. We will continue to make every effort to fulfill justified expectations of all our stakeholders. Sharon E. Donaldson Managing Director Managing Director For more information, visit www.genac.com 17 
 Board Of Directors P.B. Scott Chairman Sharon Donaldson Managing 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 coun- tries including Facey Group Limited, T. Geddes Grant Limited, and others. Mr. Scott serves as a Director of several lo- cal companies and organisations including, Seprod and its subsidiaries (Chairman), Scotia Life Insurance Company Limited, the Jamaica Chamber of Com- merce and the American International School in Kingston. He currently serves as Honorary Consul Gen- eral in Jamaica for the Republic of Guatemala. Sharon Donaldson is the Managing Di- rector of the Company. She has been responsible for driving its recent growth and for overseeing its prudent underwriting and risk management strat- egy. Ms. Donaldson has been with the Company for over 20 years, first joining as the Financial Con- troller in 1989 before becoming Managing Direc- tor 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 Uni- versity 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. Melanie Subratie Deputy Chairman Dr. Nigel L. Clarke Director Melanie Subratie is the Deputy Chairman of the Company and Chairman of the Investment and Loan Committee of the Board. Mrs. Subratie is also Vice Chairman of the Musson Jamaica Limited 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 Divi- sion of Deloitte & Touche and also worked for startup political newswire service DeHavilland prior to return- ing to Jamaica in 2002 and joining the Musson Board. Dr. Nigel Clarke is a Non Executive Direc- tor of the Company. Dr. Clarke is also the Musson Group Deputy Chairman, CFO and previously CEO oF Facey Group. He also serves as a director of many of the Musson Group’s subsidiaries and affili- ated 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 Chair- man 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 Univer- sity of the United Kingdom, in Numerical Analysis. 18 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2014 Board Of Directors Geoffrey Messado Director Jennifer Scott Director 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 Con- troller of the Musson Group, and he serves as a di- rector of certain subsidiaries and affiliated compa- nies. He also serves as Chairman of Mapco Printers Limited and as a director of Edgechem (Jamaica) Limited, the KRB Lea Jamaica Rums Limited, Cor- rpak Jamaica Limited, Clarendon Distillers Limited, Spirits Pool Association and Caribbean Molasses Company (Jamaica) Limited. Mr. Messado is a Chartered Accoun- tant, FCA, FCAA, ATII. He is also the Past President of the Jamaica Exporters Association. Jennifer Scott is a non executive direc- tor 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 Di- ploma 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 Attor- ney-at-Law of the Supreme Court of Jamaica. She is a member of the legal practice of Clinton Hart & Co., Attorneys-at-Law. Nicholas A. Scott Director Dr. Ralph Thompson, C.D. Director Nicholas Scott is a non executive direc- tor of the Company. Mr. Scott is the Chief Invest- ment Officer of the Investment and Financial Ser- vices businesses of the Musson Group and in this capacity serves as the Managing Director of Ep- pley Limited. He is also a Director of Seprod Lim- ited. 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 M.P.A. from the Harvard Kennedy School of Government. 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 Director of C.D. Alexander Realty Company Limited and was formerly the Chief Executive Officer of Se- prod 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. For more information, visit www.genac.com 19 Board Of Directors Duncan Stewart Director Christopher Nakash 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 business operating under the umbrella of Stewart’s Automotive Group. Mr. Stewart joined as a third generation member af- ter graduating from McGill University with a B.Eng. (Mech). Mr. Stewart is also a director of the Auto- mobile Dealers Association and the Richard and Di- ana 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. Christopher Nakash is an independent non executive Director of the Board of the Com- pany. Mr. Nakash brings to the Board his manage- ment experience, gained as Chief Executive Offi- cer 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 Intelli- gent Multimedia Limited. Mr. Nakash holds a BBA from University of New Brunswick, Canada. 20 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2014 Board Of Directors Leadership Team Maureen Hall General Manager Cheryll Henry Human Resources & Facilities Manager Ms. Maureen Hall is the General Manag- er of the Company with direct responsibility for the Claims and Underwriting Departments. Ms. Hall has been with the Company for over 20 years. She joined the Company in 1989 as Credit Controller, was ap- pointed Marketing and Customer Service Manager in January 1991 and later Claims Manager 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 Insur- ance 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 coach- ing committee. Ms. Hall holds a B. Ed (Hons) degree from the University of Sussex, England, as well as a Di- ploma in Mass Communication from the University of the West Indies, and a M.B.A from Manchester, Univer- sity England. Ms. Hall is also an associate member of the Chartered Insurance Institute (UK). Ms. Cheryll Henry is the Human Resources and Facilities 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 ap- pointed Operations Manager of Orrett& Musson In- vestment Company Limited, a former subsidiary of the Company. Ms. Henry holds a Bachelors degree in Management Studies from the University ofthe West Indies and a Diploma in Human Resource Manage- ment from the Institute ofManagement & Produc- tion. Angella Reynolds Deputy General 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 experi- ence in the insurance industry, having previously held executive posts with the Grace Kennedy Group, Al- lied Insurance Brokers and Jamaica International In- surance Company. Ms. Reynolds is the holder of the Jamaican Insurance Diploma from the College of Insurance & Professional Studies. She is an associate member of the Chartered Insurance Institute (UK) and also holds a Diploma in Commercial Insurance Contract Word- ing from that organisation. Janette Cole Smith Compliance & Operations Manager Janette Cole Smith is the Compliance and Operations Officer of the Company. She re- joined the Company in January 2014. She has over 20 years of experience as a senior manager in the finance and insurance industry. Her last post was as the AVP of Operations at Proven Wealth Ltd. Mrs. Cole Smith is a Chartered Accoun- tant and a fellow member of the Institute of Char- tered Accountants of Jamaica. Leadership Team 22 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2014 Leadership Team Gregory St Hugh Foster Chief Financial Officer Douglas Hayden Information Technology Manager Mr. Gregory Foster is the Chief Financial Offer with responsibility for leading the finance, ac- counting and treasury function. Mr. Foster joined the Company in August 2014 after 8 years at Pricewa- terhouseCoopers where he held the position of an Assistant Manager in their Audit and Assurance De- partment. He has accumulated over seven years of experience in providing audit services to a wide spec- trum of clients, including government/public sector, fi- nancial services, and manufacturing and distribution. Mr. Foster is also part-time lecturer at Rich- mond Academy (an ACCA gold approved learning center. Mr. Foster obtained his ACCA professional qualification in 2006 and is also a member of Institute of Chartered Accountants of Jamaica (ICAJ) Mr. Douglas Hayden join the com- pany in December 2014. He came to us with over twenty years of experience in the Information Technology discipline, twelve of those years being at the management level. He holds a Bachelor’s degree in Computer Science from Florida International University, a diploma in Information Technology from the University of Technology and several pro- fessional certifications including Information Technology Infrastructure Library (ITIL v3). Andrea Muir Gibbs Asst. Broker Services Manager Mrs. Andrea Muir-Gibbs joined the company in 2013. She is the Assistant Manager for Broker Services of the Company. Mrs. Muir-Gibbs has over 15 years of experi- ence in the insurance industry. She is the holder of the Jamaican Insurance Diploma from the College of Insur- ance Professional Studies and a member of the Chartered Insurance Institute (UK) where she holds the Dip CII Designation. For more information, visit www.genac.com 23 Corporate Data .............................................................. Directors: P.B. Scott Melanie Subratie Sharon Donaldson Dr. Ralph Thompson Geoffery Messado Jennifer Scott Christopher Nakash Nicholas Scott Dr. Nigel Clarke Duncan Strewart Chairman Deputy Charman Managing Director ................................................................. Corporate Secretary: Geoffery Messado Appointed Actuary: Josh Worsham, FCAS, MAAA Auditors: PricewaterhouseCoopers Bankers: First Caribbean International Bank 24 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2014 .............................................................. Leadership Team: Sharon Donaldson Managing Director Maureen Hall General Manager Angella Reynolds Deputy General Manager Gregory Foster Chief Financial Officer Cheryll Henry Human Resources & Facilities Manager Andrea Muir Gibbs Asst. Broker Services Manager Douglas Hayden Information Technology Manager Janette Cole Smith Compliance & Operations 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 For more information, visit www.genac.com 25 Disclosure Of Shareholdings Shareholdings of Top 10 Shareholders Shareholders Shares %Owned 1. Musson Jamaica Limited 824, 999,989 2. Mayberry West Indes Limited 34, 414, 840 3. Mayberry Managed Client Account 12,183, 978 4. Apex Pharmacy 11,588,279 5. First Caribbean Int’l Sec. Ltd A/C B.U.T. 4,519, 240 6. P.A.M Ltd - Pooled Pension Equity Fund 4, 128, 000 80.00 3.14 1.28 1.12 0.44 0.38 7. Lloyd Baday 4,000,040 0.38 8. Barita Investment Ltd. - Long A/C(Trading) 3, 998, 561 0.36 9. Lannaman & Morris(shipping) Limited 3, 399, 260 10. Sharon Donaldson 3,200,198 0.32 0.31 26 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2014 Shareholdings of Directors Director/ Connected persons Shares P. B. Scott (Musson Jamaica Ltd. Melanie Subratie (Musson Jamaica Ltd. Sharon Donaldson Self And Junior Levine Junior Levine Nigel Clarke Duncan Stewart And Deborah Stewart And Diana Stewart Nicholas Scott Christopher Nakash Geoffrey Messado Ralph Thompson Jennifer Scott NIL 824,999,989) NIL 824,999,989) 3,000,000 200,198 177,758 2,475,248 2,475,190 1,980,198 1,698,020 1,000,000 NIL NIL Shareholdings of the Management team Manager/ connected person 1. Maureen Hall And Anthony Dunbar And Errol Kellyman 2. Cheryll Henry 3. Angela Reynolds 4. Gregory Foster 5. Douglas Hayden 6. Andrea Muir-Gibbs 7. Janette Cole Smith 2,362,000 38,000 1,980,198 500,000 NIL NIL NIL NIL For more information, visit www.genac.com 27 Our Community Corporate Social Responsibility For General Accident, corporate social responsibility is an important en- grained decree. We try to conduct our busi- ness in a manner consistent with excellent corporate citizenship and we seek to en- sure that our operations create value for our shareholders, employees, customers, com- munities and Jamaica. During the financial year under review, despite the financial challenges, we continue to play a significant role in nation building through our support in education, cultural heritage, sports, child welfare and the environment. Sports Sports not only touches the lives of everyone, it undoubtedly, is a uniting force for any nation. We reocognise the invaluable contribution of sports in the development of the nation’s youth as it not only builds patrio- tism, encourages friendships but inculcates important life skills and shapes character. General Accident continues to be an event sponsor for the Gibson Relays in February. One of our newest involvement was with the UTECH Tennis Championships. Child Welfare In conjunction with the staff sports club, General Accident provided much needed support in cash and kind to Sophie’s Places, a home for 27 children with disabilities. Environment A healthy natural environment is of vital importance to the insurance industry. General Accident believes all development should be sustainable and should not result in damage to natural resources. For the past 20 years, General Accident has contributed both resources and funding to the Jamaica Environment Trust (JET), one of Jamaica’s leading environmental non-profit groups. General Accident has worked in partner- ship with JET o educate young Jamaicans about environmental issues via the Schools’ Environment Programme, to clean our coun- For more information, visit www.genac.com 29 Our Community Corporate Social Responsibility try’s beaches, and has helped JET invest in training and development for its small staff complement. Other support At General Accident we encourage our staff to be innovative and to be a part of the nation building movement. Participation in the Sigma Run is an annual event that our staff members willingly take part in. 30 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2014 Corporate Social Responsibility “Our mission is to be “a general insurance company, which provides an innovative product, excellent service for our customers, fair remuneration to our staff and a fair return to our shareholders.” Appendices GENERAL ACCIDENT INSURANCE COMPANY JAMAICA LIMITED Financial Statements 31 December 2014 General Accident Insurance Company Jamaica Limited Index 31 December 2014 Actuary’s Report Independent Auditor’s 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 - 54 GENERAL ACCIDENT INSURANCE COMPANY JAMAICA LIMITED Financial Statements 31 December 2014 General Accident Insurance Company Jamaica Limited Statement of Changes in Equity Year ended 31 December 2014 (expressed in Jamaican dollars unless otherwise stated) Page 3 Note Share Capital $’000 470,358 Capital Reserves $’000 Fair Value Reserve $’000 Retained Earnings $’000 Total $’000 152,030 68,118 598,344 1,288,850 Balance at 31 December 2012 Comprehensive income : Net profit for the year Other comprehensive income Total comprehensive income Transactions with owners - - - - - - - - - 327,914 327,914 (19,795) (19,795) - (19,795) 327,914 308,119 - (140,025) (140,025) Dividends 17 Balance at 31 December 2013 470,358 152,030 48,323 786,233 1,456,944 Comprehensive income : Net profit for the year Other comprehensive income Total comprehensive income Transactions with owners Dividends 17 - - - - - - - - - 320,078 320,078 6,238 54,561 - 6,238 320,078 326,316 - (203,878) (203,878) Balance at 31 December 2014 470,358 152,030 54,561 902,433 1,579,382 General Accident Insurance Company Jamaica Limited Statement of Cash Flows Year ended 31 December 2014 (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 Amortisation of investment premium Gain on sale of investments Gain on disposal of property, plant and equipment Interest income Dividend income Deferred taxation Foreign exchange gains Increase in deferred policy acquisition cost (Decrease)/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 Tax deducted at source Net cash provided by operating activities Cash Flows from Investing Activities Acquisition of investments Acquisition of pooled real estate investment Leases receivable, net Acquisition of property, plant and equipment Acquisition of intangible asset Proceeds from disposal of property, plant and equipment Proceeds from disposal and maturity of investments Dividend received Interest received Net cash provided by /(used in) investing activities Cash Flows from Financing Activities Dividends paid Net cash used in by financing activities Increase/(decrease) in cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF THE YEAR (NOTE 18) Note 2014 $’000 2013 $’000 320,078 327,914 25 26 11 12 11 11 15 25 26 17 24,066 6,430 2,790 - - (147,653) (7,789) (113) (79,354) (39,273) (376,085) (296,903) 128,790 1,577 (2,076) (3,294) (2,153) 383,714 209,655 (26,162) 183,493 (486,646) (143,549) 51,514 (52,584) (730) - 543,377 6,972 148,579 66,933 17,352 9,947 (4,498) (1,378) (129,638) (7,271) (4,212) (146,495) (7,724) 165,526 219,523 4,775 (13,528) 70,418 12,125 628 (4,075) 289,866 (34,172) 255,694 (667,546) - (33,017) (26,923) (537) 1,415 218,787 7,271 123,000 (377,550) (203,878) (203,878) 46,548 56,449 1,169,530 1,272,527 (140,025) (140,025) (261,881) 114,208 1,317,203 1,169,530 Page 5 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 1. Identification and Activities General Accident Insurance Company Jamaica Limited (the company) is incorporated and domiciled in Jamaica. The company is a public listed company with its listing on the Jamaica Junior Stock Exchange. The company is an 80% subsidiary of Musson (Jamaica) Limited (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 principal activity is the underwriting of commercial and personal property and casualty insurance. insurance company under the Insurance Act, 2001. Its 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 management’s 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 2014 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.   IAS 32, (Amendment), ‘Financial instruments: Presentation’, (effective 1 January 2014). These amendments clarify some of the requirements for offsetting financial assets and a financial liability on the statement of financial position. There was no material impact on operations from the adoption of this amendment. IAS 36, (Amendment), Recoverabl Amount Disclosures for Non-Financial Assets’, (effective 1 January 2014). The amendments to IAS 36 require disclosure of the recoverable amount of an individual asset (including goodwill) or a cash – generating unit and additional information about the fair value less costs of disposal for which an impairment loss has been recognized or reversed during the reporting period. The requirement to disclose the recoverable amount of each cash-generating unit for which the carrying amount of goodwill or intangible assets with indefinite life intangible assets allocated to that unit is significant when compared to the total carrying amount of goodwill or indefinite life intangible assets has been removed. There is no impact from the adoption of this standard. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) Page 6 2. Summary of Significant Accounting Policies (Continued) (a) Basis of preparation (continued) Accounting pronouncements effective in 2014 which are relevant to the company’s operations (continued)  ‘Levies’, (effective 1 January 2014). This is an interpretation of ‘Provisions, IFRIC 21, contingent liabilities and contingent assets’. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation addresses what the obligating event is that gives rise to the payment of a levy and when a liability should be recognised. There is no material impact from the adoption of this standard. IAS 37, the date of authorisation of Standards, interpretations and amendments to published standards that are not yet effective At these financial statements, certain new standards, amendments and interpretations to existing standards have been issued which were not yet effective at reporting date, and which the company did not early adopt. The company has assessed the relevance of all such new standards, interpretations and amendments and has determined that the following may be relevant to its operations, and has concluded as follows:  Amendment to IAS 1, ‘Disclosure initiative’. These amendments clarify the existing requirements of IAS 1 and provide additional assistance to apply judgement when meeting the presentation and disclosure requirements in IFRS. The amendment does not affect recognition and measurement and is effective for accounting periods beginning on or after 1 January 2016. The amendment is not expected to have a significant impact on the financial statements.  instruments’, addresses the classification, measurement and recognition of IFRS 9, ‘Financial liabilities.The complete version of IFRS 9 was issued in July 2014. It financial assets and financial replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The company is yet to assess IFRS 9’s full impact. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) Page 7 2. Significant Accounting Policies (Continued) (a) Basis of preparation (continued) Standards, (continued) interpretations and amendments to published standards that are not yet effective IFRS 15, 'Revenue from Contracts with Customers'. The IASB has published its new revenue standard, IFRS 15 'Revenue from Contracts with Customers'. The U.S. Financial Accounting Standards Board (FASB) has concurrently published its equivalent revenue standard which is the IFRS 15 applies to nearly all contracts result of a convergence project between the two Boards. with customers: the main exceptions are leases, financial instruments and insurance contracts. It specifies how and when an entity will recognise revenue. It also requires entities to provide more IAS 11, informative, 'Construction Contracts' and a number of revenue-related interpretations. Application of the standard is mandatory for accounting periods beginning on or after 1 January 2017.The company is assessing the impact of future adoption of the standard.IASB Annual Improvements - The IASB annual improvements project for the 2010 - 2012 cycle resulted in amendments to the following standards which may be relevant to the company’s operations. The company is assessing the impact of future adoption of the amendments. relevant disclosures. The standard supersedes IAS 18, 'Revenue', Amendments effective for the accounting periods beginning on or after 1 July 2014: IFRS 8, ‘Operating Segments’. The standard is amended to require disclosure of the judgements made by management in aggregating operating segments. This includes a description of the segments which have been aggregated and the economic indicators which have been assessed in determining that the aggregated segments share similar economic characteristics. The standard is further amended to require a reconciliation of segment assets to the entity’s assets when segment assets are reported.  IFRS 13, ‘Fair value measurements’. When IFRS 13 was published, certain paragraphs of IAS 39 were deleted as consequential amendments. This led to a concern that entities no longer had the ability to measure short-term receivables and payables at invoice amounts where the impact of not discounting is immaterial. The IASB has amended the basis for conclusions of IFRS 13 to clarify that it did not intend to remove the ability to measure short-term receivables and payables at invoice amounts in such cases. Amendments effective for the accounting periods beginning on or after 1 January 2016:  IFRS 7, ‘Financial instruments: Disclosures’. The amendment clarifies, among other things, that the additional disclosure required by the amendments to IFRS 7, ‘Disclosure – Offsetting financial assets and financial liabilities’ is not specifically required for all interim periods, unless required by IAS 34.  IAS 34, ‘Interim financial reporting’. The amendment clarifies what is meant by the reference in the standard to ‘information disclosed elsewhere in the interim financial report’. The amendment further amends IAS 34 to require a cross-reference from the interim financial statements to the location of that information. There are no other standards, interpretations or amendments to existing standards that are not yet effective that would be expected to have a significant impact on the company. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (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(p)(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 instruments carried on the statement of financial position include investments, due to and from Financial 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 2014 (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) 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. 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. (ii) 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. less Equity securities for which fair values cannot be measured reliably are recognised at cost 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. (iii) Impairment of financial assets is considered impaired if A financial asset 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 If any such security below its cost is considered as an indicator that the securities are impaired. 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. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (Continued) Page 10 (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. 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. (h) 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. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) Page 11 2. Summary of Significant Accounting Policies (Continued) (i) 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 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). their 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. (j) 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. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (Continued) Page 12 (k) 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 company 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.M. Best or Standard & Poors or equivalent rating of A- or better. The Company assesses its reinsurance assets for impairment. 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. there is objective evidence that If (l) 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. (m) 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 2014 (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (Continued) Page 13 (m) 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 company. Major renovations are depreciated over the remaining useful life of the related asset. (n) 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. (o) 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. (p) 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 financial position and is computed by applying the “365th” method to gross written statement of 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. (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. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) Page 14 2. Summary of Significant Accounting Policies (Continued) (p) Insurance reserves (continued) (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 30). This calculation is done in accordance with the Insurance Act 2001. (q) Accounts payable Payables are recognised at fair value and subsequently measured at amortised cost. (r) 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. (s) Pooled Real Estate Investment Pooled Real Estate Investment represents the company's beneficial interest in properties which are leased to third parties and held in trust for a group of investors under a Trust Deed. The company shares in the rental income from the lease of properties as well as fair value appreciation on the properties based on valuations carried out by independent valuators from time to time. The company's share of lease income is recorded in the statement of comprehensive income. The appreciation is recorded in OCI. (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 2014 (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 Board of Directors. (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 2014 (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 to a variety of The company’s activities expose it 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, remuneration arrangements of the directors and senior officers. the General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (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 fraudulent claims. Where applicable, contracts are underwritten by reference to the commercial reject 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 2014 (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, 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. the final outcome will prove to be different from the original is likely that it 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 2014 (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 2014 2013 Maximum Net Retention ’000 US$900 US$900 US$75 J$20,000 US$125 J$5,000 J$2,000 J$1,000 J$1,000 J$1,000 J$4,000 J$1,000 J$1,500 Policy Limit ’000 Maximum Net Retention ’000 US$6,000 US$6,000 US$3,000 J$40,000 US$750 J$10,000 J$30,000 J$5,000 J$5,000 J$5,000 J$20,000 J$5,000 J$7,500 US$1,200 US$1,200 US$75 J$20,000 US$125 J$5,000 J$2,000 J$1,000 J$1,000 J$1,000 J$4,000 J$1,000 J$1,500 Policy Limit ’000 US$6,000 US$6,000 US$3,000 J$40,000 US$750 J$10,000 J$30,000 J$5,000 J$5,000 J$5,000 J$20,000 J$5,000 J$7,500 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (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 assumptions could have a significant effect on the valuation results. liabilities is sensitive to a number of assumptions, and changes in those 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 development of claims costs net of reinsurance. This assumption is supported by the following: from the   The majority of the company’s reinsurance program consists of proportional reinsurance agreements; and 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 2014 (expressed in Jamaican dollars unless otherwise indicated) Page 21 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) Development Claim Liabilities the development of In addition to sensitivity analysis, 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 2010 - 2014 has changed at successive year-ends, up to 2014. 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. insurance liabilities provides a measure of 2010 $’000 2010 and prior $’000 2011 2012 2011 and prior $’000 $’000 $’000 2012 And Prior $’000 2013 $’000 2013 and prior $’000 2014 $’000 2014 and prior $’000 2010 Paid during year 98,674 175,978 171,620 347,598 UCAE, end of year 96,738 189,412 235,477 424,889 IBNR, end of year Ratio: excess (deficiency) 2011 Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) 2012 Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) 2013 Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) 2014 Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) 9,744 14,553 68,193 82,746 20.79% 38,747 61,664 6,200 20.75% 16,227 45,535 5,154 21.11% 11,394 35,281 2,993 9.93% 80,363 100,861 181,224 183,148 364,372 119,722 120,936 240,659 232,245 472,903 7,205 15,834 23,039 65,680 88,719 9.14% 33,189 88,599 8,260 8.40% 33,884 66.043 2,993 21.75% 12.35% 43,783 76,972 142,264 219,236 210,963 430,200 60,033 148,633 155,272 303,904 272,082 575,987 8,241 16,501 20,258 36,759 60,864 97,263 29.89% 16.61% (6.67%) 0.31% 23,866 57,750 69,298 127,048 156,978 284,026 239,700 523,726 43,048 109,091 111,383 220,474 161,264 381,738 291,198 672,936 5,225 8,218 12,732 20,950 25,397 46,347 70,085 116,433 21.30% 6.96% 28.61% 14.65% (12.67%) (4.64%) (3.21%) (5.72%) - - 9,973 30,927 4,476 28,154 81,360 6,654 46,319 74,473 54,090 128,563 152,205 280,768 222,509 503,277 89,683 171,043 120,005 291,048 187,444 478,492 337,765 816,257 6,418 13,072 18,724 31,796 34,383 66,179 78,835 145,014 29.64% 14.88% (18.82%) (7.70%) (5.06%) (9.18%) (3.53%) (4.57%) - - General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (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 85%:15% Quota Share of premiums i.e. 85% ceded premiums and 15% 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$2,000,000. (v) Catastrophe excess of loss treaty which covers losses in excess of J$100,000,000 for any one catastrophic event as defined. (c) The company reinsures with several reinsurers. Of significance are Munich Reinsurance, R & V Reinsurance, Scor Reinsurance and Swiss Reinsurance Company. 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 and Swiss Reinsurance Company. At 31 December, the A. M. Best ratings for the major reinsurers are as follows: Munich Reinsurance Company Swiss Reinsurance Company 2014 A+ A+ 2013 A+ A+ General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) (b) Reinsurance risk (continued) (d) The amount of reinsurance recoveries recognised during the period is as follows: Page 23 Property Motor Marine Liability Burglary Miscellaneous Accidents 2014 $’000 54,875 8,988 15,720 8,918 3,962 13,255 105,718 2013 $’000 87,973 11,312 5,424 162 558 10,234 115,663 (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 2014 (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 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 2014 (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 $174,406,000 (2013 - $138,724,000) 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 2014 $’000 37,708 53,092 83,606 2013 $’000 41,782 56,538 40,404 174,406 138,724 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 2014 $’000 272,378 108,228 380,606 2013 $’000 361,360 103,061 464,421 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 Other government Corporate 2014 $’000 513,319 139,597 94,852 747,768 2013 $’000 634,377 130,370 13,950 778,697 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (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 the company and its exposure to changes in interest rates and exchange rates. factors in assessing the liquidity of General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (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 2014: Cash and short term investments Due from policyholders, brokers 993,141 280,447 and agents 342,527 38,079 - - - - Due from reinsurers and coinsurers Other receivables Due from related parties Loans receivable Leases receivable Investment securities Total financial assets 22,625 90,564 18,099 36,199 - - 1,922 4,554 - - 3,844 7,089 32,053 1,396,822 10,451 430,474 - - 17,297 27,724 250,051 313,171 92,250 270,984 9,436 436,386 574,271 - 168,402 439,386 - - - - - - 1,273,588 - - 380,606 167,487 18,356 18,356 2,275 2,275 - - 386,297 48,803 - 20,631 897,343 3,174,755 - - - - - - - - 268,437 61,188 901,870 1,231,495 - - - - Due to reinsurers and coinsurers 32,393 236,044 - Other liabilities Claims liabilities 22,323 12,153 26,712 225,468 135,281 180,374 360,747 Total financial liabilities 280,184 383,478 Net Liquidity Gap 1,116,638 46,996 207,086 106,085 360,747 213,524 439,386 20,631 1,943,260 Cumulative gap 1,116,638 1,163,634 1,269,719 1,483,243 1,922,629 1,943,260 - General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (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 2013: Cash and short term investments 468,927 703,916 Due from policyholders, brokers and agents 162,547 301,874 - - - - Due from reinsurers and coinsurers 25,367 88,635 20,293 40,587 - - - - - - 1,172,843 - - 464,421 174,882 7,088 7,088 122 122 - - 409,360 114,271 - - 1,922 5,126 - - - - - - 3,844 17,297 92,250 294,047 10,252 46,134 52,759 - 11,325 675,214 244,988 1,353,509 181,924 265,648 264,237 449,833 195,153 489,200 156,690 1,054,317 163,900 3,397,304 Other receivables Due from related parties Loans receivable Leases receivable Investment securities Total financial assets Due to reinsurers and coinsurers - 361,147 - Other liabilities Claims liabilities 12,537 6,040 41,788 191,390 114,834 153,112 306,223 Total financial liabilities 203,927 482,021 194,900 306,223 - - - - - - - - - 361,147 60,365 765,559 - 1,187,071 Net Liquidity Gap Cumulative gap 471,287 871,488 70,748 143,610 489,200 163,900 2,210,233 471,287 1,342,775 1,413,523 1,557,133 2,046,333 2,210,233 - 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 2014 (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 is exposed to foreign exchange risk arising from currency exposures, primarily with respect to the US dollar. Foreign exchange risk arises primarily from transactions for re-insurance and investing activities. The statement of financial position at 31 December 2014 includes aggregate net foreign assets of approximately US$7,517,000 (2013 – US$5,677,000), in respect of such transactions. 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. 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 The represents management’s assessment of 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 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 assets/liabilities. There was no impact on the other components of equity. the possible change in foreign exchange rates. the individual sensitivities done for each of term deposits, % Change in Currency Rate 2014 1% 10% Increase/ (decrease) in Pre-tax Profit 2014 $’000 (8,512) 85,122 % Change in Currency Rate 2013 1% 15% Increase/ (decrease) in Pre-tax Profit 2013 $’000 (10,191) 152,870 USD – J$ Revaluation USD – J$ Devaluation General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) Page 30 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 2014: Cash and short term investments 993,164 279,360 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 - - - - - - - - - - - - - - - 169,591 - - - - - - 27,349 17,207 - - - - - - - 3 1,272,527 380,606 380,606 76,989 18,356 2,275 - - 76,989 18,356 2,275 169,591 44,556 244,904 114,272 90,950 208,291 89,351 162,377 910,145 1,238,068 393,632 287,890 225,498 89,351 640,606 2,875,045 Due to reinsurers and coinsurers Other liabilities Claims liabilities Total financial liabilities - - - - - - - - - - - - - - - - - - - - 268,437 268,437 60,365 60,365 901,870 901,870 1,230,672 1,230,672 Total interest repricing gap 1,238,068 393,632 287,890 225,498 89,351 (590,066) 1,644,373 Cumulative gap 1,238,068 1,631,700 1,919,590 2,145,088 2,234,439 1,644,373 - General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 31 (c) Financial risk (continued) (iii) Market risk (continued) Interest rate risk (continued) At 31 December 2013: 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 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 $’000 468,860 700,667 3 1,169,530 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 167,515 97,582 - 464,421 174,883 7,088 122 - - 464,421 174,883 7,088 122 167,515 97,582 934,671 117,867 293,196 196,952 169,966 156,690 468,860 818,534 293,196 294,534 337,481 803,207 3,015,812 Due to reinsurers and coinsurers Other liabilities Claims liabilities Total financial liabilities - - - - - - - - - - - - - - - - - - - - 361,147 60,365 765,559 361,147 60,365 765,559 1,187,071 1,187,071 Total interest repricing gap 468,860 818,534 293,196 294,534 337,481 (383,864) 1,828,741 Cumulative gap 468,860 1,287,394 1,580,590 1,875,124 2,212,605 1,828,741 - General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 32 (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: 2014 JMD/USD -100/-50 +250/+200 Increase/(decrease) in Profit before Taxation Increase/(decrease) in Other Components of Equity 2014 $’000 (3,725) 9,312 2014 $’000 305 (5,174) Change in Basis points: 2013 JMD/USD -100/-50 +250/+200 Increase/(decrease) in Profit before Taxation Increase/(decrease) in Other Components of Equity 2013 $’000 (1,973) 4,932 2013 $’000 3,438 (11,965) Price risk The company is exposed to equity securities and real estate price risk because of investments held by the company. These investments are classified on the statement of financial position as available-for- sale, 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% (2013 - 10%) with all other variables held constant. Equity Securities Pooled real estate investment Effect on Other Components of Equity Effect on Other Components of Equity Effect on Other Components of Equity Effect on Other Components of Equity 2014 $’000 (16,238) 16,238 2013 $’000 (15,597) 15,597 2014 $’000 (14,355) 14,355 2013 $’000 - - Change in index: -10% (2013 -10%) +10% (2013+ 10%) General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 5. Capital Management Page 33 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 is 250%. The MCT for the company as at 31 December 2014 is as follows: MCT 6. Fair Value Estimation Actual Required 2014 270% 2014 250% Actual 2013 308% 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 13, 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 2014 (expressed in Jamaican dollars unless otherwise indicated) 6. Fair Value Estimation (Continued) Page 34 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 2014 Assets Available-for-sale financial assets – Equity securities Debt securities Pooled real estate investment Total assets measured at fair value At 31 December 2013 Assets Available-for-sale financial assets – Equity securities Debt securities Total assets measured at fair value Level 1 Level 2 $’000 $’000 Level 3 $’000 162,377 - - - 451,892 - 162,377 451,892 - - 143,549 143,549 Total balance $’000 162,377 451,892 143,549 757,818 155,974 - - 541,557 155,974 541,557 - - - 155,974 541,557 697,531 There were no transfers between levels during the year. 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 These valuation techniques maximise the use of value or other estimation and valuation techniques. If all observable market data where it is available and rely as little as possible on entity specific estimates. 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; (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. The disclosure in relation to the sensitivity of the item classified as level 3 is shown under price risk in Note 4 ciii). General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 7. Critical Accounting Estimates and Judgements in Applying Accounting Policies Page 35 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 the Bornhuetter- Incurred Loss Development method, 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. the Bornhuetter-Ferguson Paid Loss method, 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. (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. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 8. Segment Information Page 36 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 six 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) Motor - Losses involving motor vehicles, this includes liabilities to third parties. (b) Fire and allied perils - Loss, damage or destruction to insured property as specified on the policy schedule. (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. (e) Homeowners and Burglary- 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. 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 2014 (expressed in Jamaican dollars unless otherwise indicated) 8. Segment Information (Continued) Page 37 The segment information provided to the board of directors for the reportable segments for the year ended 31 December 2014 is as follows: 2014 Fire $’000 Motor $’000 Marine Liability Homeowners & Burglary Misellaneous Accident $’000 $’000 $’000 $’000 Total $’000 Gross Premiums Written 3,207,181 891,040 165,940 386,021 122,004 300,189 5,072,375 Reinsurance ceded (3,123,481) (13,176) (136,139) (264,636) (102,399) (238,366) (3,878,197) Excess of loss reinsurance cost (76,253) (31,791) - (5,151) (14,445) - (127,640) Net premiums written 7,447 846,073 29,801 116,234 5,160 61,823 1,066,538 Changes in unearned premiums, net Net Premiums Earned Commission income Commission expense Claims expense 4,832 (5,082) 60 2,024 12,279 840,991 29,861 118,258 348 5,508 378 2,560 62,201 1,069,098 222,645 2,217 26,081 18,182 19,501 47,341 335,967 (81,770) (54,802) (1,971) (6,621) (12,139) (25,635) (182,938) Management expenses (30,954) (324,649) (11,021) (44,890) (6,970) (591,043) (6,029) (64,702) (1,568) (7,250) (8,246) (678,558) (22,864) (441,628) Segment results Unallocated income - Investment income Other income Depreciation and amortisation- Profit before tax Taxation Net profit 115,230 (127,286) 36,921 20,227 4,052 52,797 101,941 160,396 88,124 248,520 (30,496) 319,965 113 320,078 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 8. Segment Information (Continued) Page 38 2013 Fire $’000 Motor $’000 Marine Liability $’000 $’000 Gross Premiums Written 2,788,787 850,344 128,746 302,810 Reinsurance ceded (2,682,216) (20,308) (103,411) (185,108) Excess of loss reinsurance cost (86,233) (29,564) - (5,569) Homeowner & Burglary Misellaneous Accident $’000 120,166 (95,212) (25,635) (681) 232 (449) 20,214 (12,670) (3,897) (8,187) $’000 Total $’000 288,902 4,479,755 (228,101) (3,314,356) - (147,001) 60,801 1,018,398 (2,715) (24,205) 58,086 994,193 35,074 269,094 (24,264) (176,920) (1,855) (646,791) (18,696) (381,073) 20,338 800,472 25,335 112,133 (2,128) (19,186) 821 (1,229) 18,210 781,286 26,156 110,904 183,368 3,330 18,162 8,946 (62,118) (72,402) (1,309) (4,157) (7,860) (541,913) (5,516) (85,750) (34,962) (272,303) (8,312) (38,613) 96,638 (102,002) 29,181 (8,670) (4,989) 48,345 58,503 141,407 151,091 292,498 (27,299) 323,702 4,212 327,914 2014 $’000 52,584 730 53,314 2013 $’000 26,923 537 27,460 Net premiums written Changes in unearned premiums, net Net Premiums Earned Commission income Commission expense Claims expense Management expenses Segment results Unallocated income - Investment income Other income Depreciation and amortisation Profit before tax Taxation Net profit Total capital expenditure was as follows: Property, plant and equipment Intangible assets Assets, liabilities and capital expenditure are not reported by segment to the Board of Directors. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) Page 39 9. Related Party Transactions and Balances (a) Related party transactions are as follows: Interest income - Fellow subsidiary (Note 11) Parent Affiliated company Rental and maintenance income - Affiliated company Rental expense Fellow subsidiary Premium income - Key management Parent company Fellow subsidiaries Affiliates Claims expense - Key management Parent company Fellow subsidiaries Affiliates Dividends declared - Key management Parent company Key management compensation - Salaries and other short term benefits Directors emoluments Directors’ fees (included above) 2014 $’000 25,741 104 72 25,917 2013 $’000 21,522 - - 21,522 959 868 15,630 14,132 2,311 31,414 243,750 211,669 489,144 506 8,129 20,693 7,549 36,877 3,644 35,079 124,800 127,223 290,746 94 1,264 18,867 4,484 24,709 3,818 166,072 169,890 2,657 112,018 114,675 68,243 54,512 1,853 2,040 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 9. Related Party Transactions and Balances (Continued) (b) The statement of financial position includes the following balances with group companies: Page 40 Due from related parties - Receivables - Fellow subsidiary Due from policyholders, brokers and agents - Fellow subsidiary Parent company Affilated company Loans receivable - Fellow subsidiary (Note 21) Investment securities - Shares in affiliated entity (Note 23) Claims liabilities Parent company Affiliated company Fellow subsidiary 2014 $’000 2013 $’000 2,275 122 114,223 81,369 146 1,152 - - 115,521 81,369 169,591 167,515 83,198 79,867 6,917 26,482 6,550 650 7,556 14,152 26,840 - Included in the investments of the company are shares in related parties. At 31 December 2014, these shares represented 2.13% of the total assets (2013 – 1.87%). Affiliates represents companies that are associated with the parent company, which are are not subsidiaries of the parent company and also entities that directors have significant influence. No provisions made for receivables from related parties for either year. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 10. Claims Expense Page 41 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 parent Loan due from fellow subsidiary (Note 9(a)) Loan due from associated company Cash and deposits and investment securities Bond premium amortisation Gain on sale of investments Dividend income Pooled real estate investment income 12. Other Income Foreign exchange gains Rental income Gain on disposal of property, plant and equipment Miscellaneous income 2014 $’000 2013 $’000 784,291 762,454 (105,733) (115,663) 678,558 646,791 2014 $’000 2013 $’000 11,966 18,018 104 - 25,741 21,522 72 - 109,769 (2,790) 91,312 (1,214) 144,862 129,638 - 7,789 7,745 4,498 7,271 - 160,396 141,407 2014 $’000 79,978 2,654 - 5,492 2013 $’000 143,381 2,082 1,378 4,250 88,124 151,091 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 13. Expenses by Nature Management and other expenses by nature are as follows: Advertising costs Audit fees Computer expenses Directors fees Depreciation and amortisation Insurance Other operating expenses Professional fees Printing and stationery Registration fees Rent Repairs and maintenance Staff costs (Note 14) Transportation expenses Utilities 14. Staff Costs Wages and salaries Statutory contributions Pension costs Other Page 42 2013 $’000 13,810 4,982 16,859 2,040 27,299 1,779 28,861 14,830 4,493 12,505 14,132 15,148 2014 $’000 9,841 5,073 19,142 1,853 30,496 2,208 53,730 13,913 4,284 13,232 15,630 17,223 259,939 231,662 7,164 18,396 4,541 15,431 472,124 408,372 2014 $’000 2013 $’000 199,948 174,915 17,055 3,817 39,119 15,722 3,500 37,525 259,939 231,662 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) Page 43 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 Years 6 to 10 100% 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 $117,015,000 (2013 - $115,024,000). (b) Taxation is based on the profit for the year adjusted for taxation purposes and represents income tax at 33 1/3%: Deferred income taxes (Note 29) 2014 $’000 (113) (113) 2013 $’000 (4,212) (4,212) (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 tax remission Income not subject to tax Expenses not deductible for tax Net effect of other charges and allowances 2014 $'000 2013 $'000 319,965 323,702 106,655 107,901 (117,015) (115,024) (24,985) (14,543) 29,829 5,403 (113) 19,993 (2,539) (4,212) 16. Earnings Per Share The calculation of earnings per share is based on the net profit for the year and 1,031,250,000 (2013 - 1,031,250,000) ordinary shares in issue. Net profit from continuing operations ($’000) Weighted average number of ordinary shares in issue (‘000) Earnings per share ($) 2014 320,078 1,031,250 0.31 2013 327,914 1,031,250 0.32 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 17. Dividends per Share The dividends paid in 2014 and 2013 were as follows: Interim dividends:- 4.85 cents per stock unit – March 2013 8.72 cents per stock unit – October 2013 7.64 cents per stock unit – April 2014 12.13 cents per stock unit – December 2014 18. Cash and Cash Equivalents Cash and bank balances Short term deposits Short term investments Page 44 2013 $’000 50,017 90,008 - - 140,025 2014 $’000 - - 78,787 125,091 203,878 2014 $’000 290,378 966,917 15,232 1,272,527 2013 $’000 96,007 1,026,917 46,606 1,169,530 Short term deposits comprise term deposits and repurchase agreements with an average maturity of 57 days (2013 – 67 days), and include interest receivable of $5,927,000 (2013 – $4,648,000). The weighted average effective interest rate on short term investments and deposits were as follows: J$ US$ 2014 % 7.0 2.1 The weighted average effective interest rates on cash balances for the year were as follows: J$ US$ GBP 2014 % 1.0 0.1 0.1 2013 % 7.6 3.2 2013 % 1.0 0.1 0.1 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 19. Due from Reinsurers and Coinsurers Page 45 Reinsurers’ portion of unearned premium (Note 30) Reinsurers’ portion of claims liabilities (Note 30) Other amounts recoverable from reinsurers and coinsurers 20. Other Receivables Prepayments Other receivables 21. Loans Receivable Mortgage receivable from fellow subsidiary (Note 9) 2014 $’000 361,097 90,498 76,989 2013 $’000 880,411 101,468 73,415 528,584 1,055,294 2014 $’000 7,917 18,356 26,273 2013 $’000 19,946 7,088 27,034 2014 $’000 169,591 2013 $’000 167,515 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. . 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 2014 $’000 39,366 9,437 48,803 (4,247) 44,556 36,675 7,881 44,556 2013 $’000 71,384 42,887 114,271 (16,689) 97,582 60,187 37,395 97,582 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) Page 46 23. Investment Securities Debt securities - Available for sale – at fair value Government of Jamaica Securities Benchmark Investment Notes United States Dollar Benchmark Notes Certificate of Deposits United States Dollar Indexed Notes United States Dollar Corporate Bond Other Government Securities Interest receivable Equity securities - 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 Corporate Bonds Other Government Securities 2014 $’000 2013 $’000 216,668 3,830 284,478 - 504,976 93,786 137,608 11,398 747,768 216,741 7,127 224,815 176,575 625,258 12,613 128,502 12,324 778,697 162,377 155,974 105 (105) - 162,377 910,145 105 (105) - 155,974 934,671 2014 % 8.00 4.00 6.25 6.12 2013 % 7.96 6.13 11.00 6.34 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 23. Investment Securities (Continued) Page 47 Included in investments, are Government of Jamaica Benchmark Investment Notes valued at $45,000,000 (2013-$45,000,000) which have been pledged with the FSC, pursuant to Section 8(1)(b) of the Insurance Regulations, 2001. Included in investments are shares in Seprod Limited, a related party, with a fair value of approximately $55,385,000 (2013 - $52,127,000). 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. 24. Pooled Real Estate Investment This represents the company's beneficial interest in a property which is leased to third parties and held in trust for a group of investors under a Trust Deed managed by Scotia Investments Jamaica Limited. Rental income from the pooled real estate investment for the year was $7,745,000. The property was last valued at current market value in February 2014 by The C.D. Alexander Company Realty Limited. The fair value of the investment is at level 3 in the fair value hierarchy, as is consistent with the requirements of IFRS 13 (Note 6). General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 25. Property, Plant and Equipment Furniture, Fixtures & Equipment $’000 Motor Vehicles $’000 Buildings $’000 Page 48 Total $’000 128,839 26,923 (2,150) 153,612 52,584 (1,555) 71,753 17,352 (2,113) 86,992 24,066 (1,555) 67,281 204,641 22,395 2,915 - 25,310 22,396 - 47,706 7,116 1,265 - 8,381 2,385 - 10,766 61,538 15,142 44,906 8,866 (150) (2,000) 76,530 14,679 (1,555) 89,654 51,772 15,509 - 36,053 8,395 28,584 7,692 (113) (2,000) 44,335 10,112 (1,555) 52,892 34,276 11,569 - 45,845 109,503 36,940 16,929 36,762 32,195 21,436 17,496 95,138 66,620 At Cost - At 1 January 2013 Additions Disposals At 31 December 2013 Additions Disposals At 31 December 2014 Depreciation - At 1 January 2013 Charge for the year On disposals At 31 December 2013 Charge for the year On disposals At 31 December 2014 Net Book Value - 31 December 2014 31 December 2013 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 26. Intangible Assets At Cost - At 1 January 2013 Additions At 31 December 2013 Additions At 31 December 2014 Amortisation - At 1 January 2013 Charge for the year At 31 December 2013 Charge for the year At 31 December 2014 Net Book Value - 31 December 2014 31 December 2013 27. Due to reinsurers and coinsurers Local reinsurers Overseas reinsures 28. Other Liabilities Statutory contributions payable Accrued expenses General consumption tax Other payables 2014 $’000 14,220 254,217 268,437 2014 $’000 4,144 41,917 9,901 19,197 75,159 Page 49 Computer Software $’000 76,154 537 76,691 730 77,421 53,581 9,947 63,528 6,430 69,958 7,463 13,163 2013 $’000 17,158 343,989 361,147 2013 $’000 4,293 51,780 11,755 10,625 78,453 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 29. Deferred Income Taxes Page 50 Deferred income taxes are calculated in full on temporary differences under the liability method using a principal tax rate of 16.57⅓% (33⅓% restricted to 50% based on remission year 5 to 10). Deferred income tax assets Deferred income tax liabilities Net assets The net movement on the deferred income tax account is as follows: Balance as at 1 January Credited to profit or loss (Note 15) Credited to other comprehensive income Balance as at 31 December Deferred income tax assets and liabilities are attributable to the following items: Deferred income tax assets Unrealised fair value losses Deferred income tax liabilities Accelerated tax depreciation 2014 $’000 1,200 (701) 499 2014 $’000 340 113 46 499 2013 $’000 1,155 (815) 340 2013 $’000 (5,027) 4,212 1,155 340 2014 $’000 2013 $’000 1,200 1,155 (701) (815) General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) Page 51 30. 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 2014 $’000 2013 $’000 844,525 1,063,053 80,995 1,988,573 (361,097) (90,498) (451,595) 483,428 972,555 80,995 1,536,978 2014 $’000 901,870 149,899 11,284 1,063,053 85,613 4,885 90,498 816,257 145,014 11,284 972,555 1,377,948 900,384 86,326 2,364,658 (880,411) (101,468) (981,879) 497,537 798,916 86,326 1,382,779 2013 $’000 765,559 125,278 9,547 900,384 92,623 8,845 101,468 672,936 116,433 9,547 798,916 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) 30. Insurance Reserves (Continued) Page 52 An actuarial valuation was performed to value the policy and claims liabilities of the company as at 31 December 2014 in accordance with the Insurance Act of Jamaica by the appointed actuary, Josh Worsham, FCAS, MAAA of Mid Atlantic Actuarial. The Insurance Act requires that the valuation be in accordance with accepted actuarial principles. The actuary has stated that his report conforms to the standards of practice as established by the Canadian Institute of Actuaries, with such changes as directed by the Financial Services Commission, specifically, that the valuation of some policy and claims liabilities not reflect the time value of money. In arriving at his valuation, the Incurred Loss Development method, the Bornhuetter-Ferguson Paid Loss method, the Bornhuetter-Ferguson Incurred Loss method and the Frequency-Severity method. the actuary employed the Paid Loss Development method, In using the Paid/Incurred Loss Development methods, ultimate losses are estimated by calculating past paid/incurred loss development factors and applying them to exposure periods with further expected paid/incurred loss development. The Bornhuetter-Ferguson Paid/Incurred Loss methods is a combination of the Paid/Incurred Loss Development methods and a loss ratio method; however, these expected losses are modified to the extent paid/incurred losses to date differ from what would have been expected based on the selected paid/incurred loss development pattern. Finally, the Frequency-Severity method is calculated by multiplying an estimate of ultimate claims with an estimate of the ultimate severity per reported claim. In his opinion dated 21 March 2015 the actuary found that the amount of policy and claims liabilities represented in the statement of financial position at 31 December 2014 makes proper provision for the future payments under the company’s policies and meets the requirements of the Insurance Act and other appropriate regulations of Jamaica; that a proper charge on account of these liabilities has been made in profit or loss; and that there is sufficient capital available to meet the solvency standards as established by the Financial Services Commission. The movement in claims outstanding was as follows: Net reserves for claims outstanding at beginning of year – Gross reserves for claims outstanding Reinsurance ceded Movement during the year – Claims incurred, including IBNR Claims paid Translation differences on foreign currency claims Net reserves for claims outstanding at end of year Reinsurance ceded 2014 $’000 2013 $’000 900,384 (101,468) 822,246 (148,637) 798,916 673,609 678,558 646,791 (506,353) 1,434 173,639 972,555 90,498 (523,643) 2,159 125,307 798,916 101,468 Gross reserves for claims outstanding at end of year 1,063,053 900,384 Significant delays occur in the notification of claims and a substantial measure of experience and judgement is involved in assessing outstanding liabilities, the ultimate cost of which cannot be known with certainty as at the reporting date. The reserve for claims outstanding is determined on the basis of information currently available; however, it is inherent in the nature of the business written that the ultimate liabilities may vary as a result of subsequent developments. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) Page 53 30. Insurance Reserves (Continued) (c) The movement in unearned premiums is as follows: Movement in unearned premiums: 2014 2013 Gross $’000 Reinsurance $’000 Net $’000 Gross $’000 Reinsurance $’000 Net $’000 Balance at 1 January 1,377,948 880,411 497,537 1,293,349 820,016 473,333 Premiums written during the year Premiums earned during the year Portfolio adjustment Balance at 31 December 5,072,375 4,005,837 1,066,538 4,479,755 3,461,358 1,018,397 (5,605,798) (4,536,700) (1,069,098) (4,395,156)) (3,400,963) (994,193) - 11,549 (533,423) (519,314) (11,549) (14,109) - 84,599 - - 60,395 24,204 844,525 361,097 483,428 1,377,948 880,411 497,537 The gross unearned premium reserve by class of business is as follows: Fire, consequential loss and liability Motor Marine Accident 31. Share Capital Authorised - 1,100,000,000 Ordinary shares of no par value Issued and fully paid - 2014 $’000 350,786 384,645 6,181 102,913 2013 $’000 854,900 390,118 8,507 124,423 844,525 1,377,948 2014 $’000 2013 $’000 1,031,250,000 Ordinary shares of no par value 470,358 470,358 . General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2014 (expressed in Jamaican dollars unless otherwise indicated) Page 54 32. Capital Reserves At beginning of and end of year The capital reserves at year end represent realised surpluses. 33. Fair Value Reserve 2014 $’000 152,030 2013 $’000 152,030 This represents the unrealised surplus, net of tax, on the revaluation of available-for-sale investments at the year end. 34. 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 $3,817,000 (2013 – $3,500,000), and are included in staff costs (Note 14). 35. Contingency The company is involved in certain legal proceedings incidental to the normal conduct of business. Management believes that none of these legal proceedings, individually or in the aggregate, will have a material effect on the company. 36. Commitments Operating lease commitments The company leases its office situated at 58 Half Way Tree Road from fellow subsidiary Unity Capital Incorporated under a non-cancellable operating lease agreement. The lease is for a term of five (5) years, and is renewable at the end of the lease period at market rate. The future aggregate minimum lease payments under non-cancellable operating leases are as follows No later than 1 year Later than 1 year and no later than 37. Subsequent Events 2014 US$’000 2013 US$’000 141 118 259 141 246 387 In a meeting held on 26 March 2015, the board of directors approved dividend payment of 9.7 cents per share to be paid on 27 April 2015 for shareholders on record as at 13 April 2015. Notes For more information, visit www.genac.com Notes For more information, visit www.genac.com Notes No. Resolution details Vote for or against (tick as appropriate) ORDINARY RESOLUTIONS 1. To receive the report of the Board of Directors and the audited accounts of the Company for the year ended December 31, 2014. 2. To authorise the Board of Directors to re-appoint PWC as the Auditors of the Company and to fix their remuneration. 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 Geoffrey Messadoas a Director of the Board of the Company.. 3.(b) To re-appoint Ralph Thompson as a Director of the Board of the Company. 3.(c) To re-appoint Duncan Stewart as a Director of the Board of the Company. 4(a) 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 2014, being $203, 878,125 or 19.77 cent per ordinary share, as the final dividend for that year. Signed this day of 2015: Signed: _____________________________________ (signature of primary shareholder) Signed: _____________________________________ (signature of joint shareholder, if any) For more information, visit www.genac.com Name: _____________________________________ (print name of primary shareholder) Name: _____________________________________ (print name of joint shareholder, if any) Form Of Proxy “ I/We _____________________________________________________________(insert name) of _________________________________________________________________(address) being a shareholder(s) of the above-named Company, hereby appoi nt:________________________________________________________________(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 Meet- ing of the Company to be held at 10 am on June 8, 2015, at 58 Half Way 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): No. Resolution details Vote for or against (tick as appropriate) ORDINARY RESOLUTIONS 1. To receive the report of the Board of Directors and the audited accounts of the Company for the year ended December 31, 2014. 2. To authorise the Board of Directors to re-appoint PWC as the Auditors of the Company and to fix their remuneration. For Against For Against 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 Geoffrey Messadoas a Director of the Board of the Company.. For Against 3.(b) To re-appoint Ralph Thompson as a Director of the Board of the Company. For Against 3.(c) To re-appoint Duncan Stewart as a Director of the Board of the Company. 4(a) 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 2014, being $203, 878,125 or 19.77 cent per ordinary share, as the final dividend for that year. For Against For Against For Against Signed this day of 2015: Signed: _____________________________________ (signature of primary shareholder) Signed: _____________________________________ (signature of joint shareholder, if any) Name: _____________________________________ (print name of primary shareholder) Name: _____________________________________ (print name of joint shareholder, if any) General Accident Insurance Company Jamaica Ltd. 58 Half Way Tree Road, Kingston 10, Jamaica. Email: info@genac.com 

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