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2023 ReportMAKING Peace OF MIND COMMON PLACE Annual Report 2015 For more information, visit www.genac.com Your risk solution partner Homeowners premiums increased by 19 % when compared to 2014. Property premiums grew to $3.9 billion, up 23 % from 2014. This portfolio contributed more than half of our total written premiums for 2015. The motor portfolio is the second largest contributor to our total gross written premium and during 2015 we grew by 11 % recording a gross written premium of $990 million. General Accident resides at the intersection of intelligent protection and utmost good faith We offer products that help a wide range of customers to manage their risks and exposures General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 About General Accident OUR PROMISE the changing regulatory and operating environment. As one of the leading providers of We aim to provide first-rate risk management risk transfer solutions we have implemented best solutions. We pledge to put our customers at the practices in our everyday activities. centre of what we do by understanding their needs, going the extra mile to ensure that our products We measure our long-term success by our ability contribute positively to their risk management to deliver value for our shareholders, meet our while we provide prompt and efficient service. customers’ needs and attract and develop the best talent and support to the communities where OUR PURPOSE we live and work. General Accident has a clear and simple purpose Our Annual Report and accounts for 2015 are - To make available an affordable risk transfer presented into two (2) parts: mechanism through a wide range of insurance products designed to transfer the risk to our shoulders enabling businesses to strive which we 1. Strategic Report Our Strategic Report provides details about us, believe will ultimately help families to realize their our business model and how we create value ambitions and fulfill their hopes and aspirations. for our stakeholders. It also includes market and key performance indicators as well as our We believe that this is the best long-term growth approach to sustainable risk management. path. Our defined purpose and our operational efficiencies will help us to keep our promise to all our stakeholders and realize our vision of accelerating growth. 2. Governance and Financial Report The Governance and Financial Report contain corporate governance information, committee Our purpose and vision are consistent with the reports, risk mitigation procedures plus our ever-changing needs of our customers. Our Audited Financial Statements and Notes. unwavering commitment to our business model has made us not only competitive but an insurer of choice delivering consistent profitable growth for more than a decade. Online Information HOW WE MEASURE OUR PREFORMANCE Additional information about us may be found on line at www.genac.com. Our full Financial Report We track our progress by using a variety of financial and Annual Report may be viewed on our website. and non-financial key performance indicators. In 2015, we revised our targets to easily respond to For more information, visit www.genac.com Contents Overview Financial Highlights Chairman’s Statement Board of Directors Notice of Annual General Meeting Director’s Report Strategic Priorities Business Model Chief Executive Officer’s Review Management Discussion and Analysis Our Community Governance Corporate Governance General Accident Board Leadership Team Corporate Data Shareholders Information Disclosure of Shareholding Appendices Audited Financial Statements Proxy Form 1 4 9 11 12 13 14 17 18 21 24 26 29 33 34 For more information, visit www.genac.com We are a Great Force $6.1Billion GROSS IN WRITTEN $4.4Billion IN TOTAL ASSETS IN NET PROFI T IN UNDERWRITING PROFITS Our long term goal of creating value for our employees, customers, shareholders and business partners remains steadfast. General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 1 Who We Are General Accident is the leading general insurer in Jamaica. Market share Policies in force Employees (December 31, 2015) Market capitalization Our Shareholders For more information, visit www.genac.com 2 Where We Operate We operate in Jamaica and our offices are located at 58 Halfway Tree Road, Kingston 10. We are, however, serviced island wide through an extensive broker and agency network. This distribution channel means that we can be reached in all Parishes. 3 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 Business growth: overall Business growth: segments Business Segments General Accident offers a wide range of product lines designed to meet the evolving needs of our customers. We offer a suite of commercial solutions to help business owners protect their legacies. We help individuals and their families protect what matters to them most. We provide an opportunity for professionals to protect their businesses. General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 5 Key Performance Indicators For more information, visit www.genac.com 6 9-Year Financial Statistics General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 7 For more information, visit www.genac.com 8 Chairman’s Report CONSISTENT DELIVERY OF LONG TERM GROWTH FOR SHAREHOLDERS After a challenging start to the year, General customers and stand behind some of largest and Accident recovered and recorded another full most complicated risks in Jamaica. year of solid financial results. Operating Performance This year Management was able to underwrite profitably while growing premiums for 17 years in As a result of our underwriting and investment results, General Accident produced an 18% return our average shareholders’ equity in 2015. In line with our dividend policy we returned $172 million to shareholders while still growing our net worth. a row. This accomplishment is impressive in light of the continued decline in premium rates in Jamaica Outlook and across the world. Insuring an asset of equal value than in 2015 was significantly cheaper than in In the immediate future we expect the demand 2014. To maintain our premiums (let alone increase for general insurance services to remain stagnant, premium volume) our underwriters insured more premium rates to remain depressed and interest homes, commercial properties and motor vehicles rates to hover at historic lows. These forces create for a growing number of clients. In addition, despite a difficult operating environment for all general fierce competition from other insurers also seeking insurers including General Accident. to defend premiums General Accident generated an underwriting profit. This profitable growth is the Thankfully we have built a strong franchise over many direct product of strong relationships with brokers years capable of weathering such conditions. More and policyholders built over many years and the recently, we’ve developed new growth initiatives strict adherence to our core underwriting principles. that will come to market in 2016. The combination of the resilience of our existing core business and Our profitable growth also increased our investment the potential these new opportunities present will float or the premiums we receive and invest before drive General Accident going forward. we pay claims to our clients. Last year, we invested this float prudently. Considering the rent, interest On behalf of the Board of Directors, and dividends we received as well as the increase in the value of the shares we own, General Accident enjoyed a return of 12% on our investment portfolio. P.B. Scott Chairman Capital Management We are privileged to enjoy the support of some of largest and best capitalized reinsurers in the world. Their vast financial resources compliment our own capital base and allow us to serve thousands of General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 9 P.B. Scott Chairman For more information, visit www.genac.com 10 Developing responsible policy products with integrity lies at the heart of our business philosophy and we have made it a priority to develop and deliver products and services that promote the culture of good risk management practices and protect our clients in the face of adversity. Board of Directors Paul B. Scott Chairman Melanie Subratie Deputy Board Chair Sharon Donaldson Chief Executive Officer Nicholas Scott Non-Executive Director Nigel Clarke Non- executive Director Christopher Nakash Non- executive Director Geoffrey Messado Company Secretary Ralph Thompson Non-executive Director Jennifer Scott Non- executive Director Duncan Stewart Non-executive Officer Mathew Lyn Non- executive Director 11 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 Notice of the Annual General Meeting 4. To authorise the Board of Directors to fix the remuneration of the Directors. 5. To approve the aggregate amount of interim dividends declared by the Board during the financial year ended 31st December 2015, being $72,187,500 or 7.0 cent per ordinary share, as the final dividend for that year. Dated this the 15th day of April 2016 By order of the Board. P.B. Scott Chairman GENERAL ACCIDENT INSURANCE COMPANY (JAMAICA) LIMITED NOTICE IS HEREBY GIVEN THAT the annual general meeting of General Accident Insurance Company (Jamaica) Limited (the “Company”) will be held at 10 am on 1 June, 2016 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, 2015. 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 Paul Scott as a Director of the Board of the Company. (b)To re-appoint Melanie Subratie as a Director of the Board of the Company. (c)To re-appoint Christopher Nakash as a Director of the Board of the Company. For more information, visit www.genac.com 12 Directors Report The Directors are pleased to present their report but being eligible, will offer themselves for re- for General Accident Insurance Company election. Jamaica Limited for the financial year ended December 31, 2015. Auditors Financial Results The auditors of the Company, Pricewater houseCoopers of Scotiabank Centre, Duke The Statement of Comprehensive Income for Street, Kingston, Jamaica have expressed their the Company shows pre-tax profits for the year willingness to continue in office. The Directors of $303.4 million, taxation recoverable of $0.97 recommend their re-appointment. million and a net profit after tax of $304.4 million. Details of these results, along with a comparison with the previous year’s performance and the state of affairs of the Company are set out in the Management Discussion and Analysis and Dividend the Financial Statements which are included as part of this Annual Report. A dividend of $0.07 per share paid on December 31, 2015 is proposed to be the final dividend in respect of the financial year ended December 31, 2015. On behalf of the Board of Directors, P.B. Scott Chairman Directors The Directors of the Company as at December 31, 2015 are: P.B. Scott, Melanie Subratie, Sharon Donaldson, Ralph Thompson, Geoffrey Messado, Christopher Nakash, Jennifer Scott, Nicholas Scott, Nigel Clarke, Duncan Stewart and Mathew Lyn. The Directors to retire by rotation in accordance with the Articles of Incorporation are: Paul Scott, Melanie Subratie and Christopher Nakash 13 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 Our Strategic Priorities VALUE CREATION AND LONG TERM SUSTAINABILITY Our strategy drives how we conduct our together to create a facility for our customers to business. We create value by using extensive securely and conveniently protect their assets. risk knowledge and disciplined underwriting We work hard to make sure that we are easy techniques to ensure that risks from private and to deal with and we work together with our business life are manageable for our customers intermediaries in the mutual interest of retaining and us. our customers. Our 2015 strategic priorities include, inter alia: Claims Service Operating a high performance culture We strive to make our claims service meet our customers expectations so that our brokers and This is achieved by pursuing a responsible policyholders will want to insure with us rather investment approach, protecting our distribution than someone else. It is conventional wisdom channels and delivering excellent claims service. that claims service is the shop window of the insurance business where our products are on Investment Position display. Solid financial management based on effective We consider claims and complaints fairly and risk management, an investment policy geared we will never seek to avoid our responsibilities. towards proper asset liability needs and robust We want to make sure that we give our brokers capital management supports our business and insureds the kind of service they would like model. Our investment policy takes into account by being collaborative and technically sound, cash flow imperatives, currencies and inflation making our processes simple and effective. At sensitivity of our underwriting liabilities. We try at the heart of our claims strategy is a culture that all times to ensure that our capital base meets focuses on fairness, a proactive process and regulatory benchmarks. Distribution Channel speed of turnaround time. We accept that one size does not fit all and the unit is so structured to ensure that the appropriate resources are available for different types of claims. We write business directly and through an extensive broker network. Our distribution partners are essential to our business. We make available to our intermediaries our many years Nurture a culture of excellence of experience in assessing, identifying risks and The efforts of our staff are crucial to our success structuring insurance solutions which we believe and we take seriously our promise to deliver will redound to our mutual benefit as we work the best possible operational performance. For more information, visit www.genac.com 14 Our Strategic Priorities Our staff is the single most important resource provide us with the financial strength to pursue together with our financial capital. It is essential new opportunities consistent with our long-term that we find the right people, retain them and strategy of profitable growth. keep them engaged and motivated while we instill a culture of excellence and opportunity. Training Risk and effective capital management is an and development are crucial to us and we strive ongoing process that drives a culture from top to create a working environment that promotes management. equality for all staff. Meet Shareholders Expectations We create value for our employees by investing in their capabilities and expertise so each may fulfill Profitable Growth his or her potential. Robust Risk and Capital Management only by our profitability objective and our ability to Our goal is to grow as fast as we can constrained deliver excellent customer service. We believe that Our business is subject to risks and uncertainties. profitable growth should be responsible growth. We employ a risk management framework at all This approach guides our path and determines our levels of the organization. Our risk policy ensures strategic road map. Our business model begins that our risk profile remains conservative and with our customers’ needs, which informs our is aligned with our risk appetite. Our strategic policy innovation, often times in collaboration with priorities reflect our risk management priorities. our business partners. Our principal business risks are liquidity risks, We aim to sustain our performance by focusing on funding risks, capital adequacy, compliance the following priorities: risk, reputational risk and sustainability risk. Our operations are increasingly dependent on I.T 1. Growth of the overall business and systems and management information as clients dividends. In order to create value and drive place greater reliance on reliable and secure I.T sustainable profit growth we ensure that risk is systems. Disruption of our IT systems could impede maintained at acceptable and appropriate our business operations in many ways that could levels. negatively impact our profit objectives. 2. Implementation of best practices standards We continually assess these threats as they evolve We remain committed to best practices and adopt controls to mitigate them. We have standards that drive a conservative risk profile invested significantly in staff training and enhanced based on our core philosophy of maintaining multi-layered controls to protect our information technology infrastructure. balance sheet strength, liquidity and capital adequacy. Effective capital management remains a primary 3. Improvement in operational efficiencies focus and an essential element of our overall We aim to deliver service that exceeds our strategy. Strong capital and liquidity positions clients and our business partners’ expectations. 15 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 Our Strategic Priorities Central to this outcome is making it easier for our customers to do business with us. In support of this approach we have streamlined our processes and procedures, making them less complex and affording our clientele and business partners electronic transfer of data. Corporate Responsibility Our reputation is a long-term asset that we zealously guard. We seek to protect this asset by embedding corporate responsibility throughout our business. Our responsible approach includes our corporate governance procedures that are not just a matter of regulatory compliance. We are aware that good corporate governance promotes and supports integrity and ethical conduct. We create value for our shareholders by acting responsibly in all business transactions and paying attractive and sustainable dividends while seeking to increase the value of the company. Travel Insurance WHY PAY FOR LOST LUGGAGE AND OTHER EXPENSIVE FEES WHEN YOU CAN BE COVERED FOR: • 24 Hour Worldwide Emergency Medical Expenses • 24 Hour Accidental Death and Dismemberment • 24 Hour Total & Permanent Disability • Medical Expenses, Accident or Sickness • Emergency Medical Evacuation • Trip Cancellation •• Trip Interruption • Baggage Delay • Emergency Dental Expenses • In-hotel Recovery • Anticipated Return • Prescribed Drugs • Death Repatriation ALL AT A VERY AFFORDABLE COST! Contact your Broker or any GAJ Representative at Tel: (876) 929-9643-8 or 929-8450/1/4 58 Half Way Tree Road Kingston 10, Jamaica Email: gainfo@genac.com Website: www.genac.com For more information, visit www.genac.com 16 Business Model We aim to be a leader in the insurance market providing a well-established brand that offers intelligent solutions that anticipate the needs of our clientele. Our business model is supported by sound financial management based on disciplined risk management and a policy geared towards meeting our liquidity and capital requirements. 17 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 Management Discussion and Analysis favourably for 2015, General Accident posted a net profit of $304.04 million compared to prior year $320.1 million. Notwithstanding the year on year decreased performance, the positive technical results are gratifying and reflect the success of our strategy of a well-balanced insurance portfolio with a diverse spread of risk. Our premium income grew by 21% to $6.1 billion boosted by increased business from our commercial portfolio. Our performance in the motor segment was flat but we enjoyed good volume growth in all other significant lines of Sharon Donaldson Chief Executive Officer business. General Accident delivered yet another year of profitable growth in a market characterized by fierce global competition that continued unabated for the greater part of 2015. We achieved reasonably good financial results; improved underwriting profitability, net written premium growth and an improved combined ratio. We also made good progress in improving our above prior year by 13%, due in the main to operating efficiencies that contributed to our increases in our net premiums earned and profitability. relatively small marginal increases in technical Underwriting profit of $115 million was marginally FINANCIAL PERFORMANCE Profitability costs. Complementing our underwriting profit, Investment and other income were $221.5 million compared to $248.5 million for 2014. The adverse The year 2015 was a relatively quiet loss year for movement being entirely as a result of decreases the industry as the market completed another cycle without any major catastrophe or fire losses. However, the price levels of the insurance in foreign currency gains compared to prior year. The company enjoyed an overall increase in return on our investment portfolio from 10% in products trended downwards with the effect 2014 to 10.36% in 2015. Including the increase in that profitability margins fell below expectations. the value of our securities, our performance was Although the competitive landscape turned less 12%. For more information, visit www.genac.com 18 Management Discussion and Analysis HIGHLIGHTS FOR THE YEAR 2015($m) 2014 ($m) Gross written premium 6,100 5, 100 Underwriting profit 115 102 Investment and other income 222 249 Net Profit before tax 304 320 to prior year $183.5 million. This variance was as a result of Increases in premium due to strong sales performance in the last quarter of the year, payment of which is not due until early 2016. The net cash outflow from investing activities was $200.0 million higher than the prior year due to a strategic acquisition of investments. Equity at book value 1, 800 1, 600 Free cash flow is FINANCIAL STRENGTH During the year under review the stock market rebounded with the result that the company’s market capitalization improved over prior year to $2.144 billion, an increase of 33% up from $1.58 billion, an indication of investor’s confidence. During in 2015, we maintained our financial strength and we are pleased to present an improved balance sheet position for 2015. Total assets of $4.4 billion increased by 13% up from $3.9 billion of prior year. Investment portfolio of $2.376 billion grew by 6%, up from $2.25 billion. Cash and cash the aggregate of cash flows from operating activities less taxes deducted at source plus net cash from investing activities. equivalent were $3.45 million compared to $2.94 Capital Position million in 2014. General Accident’s capital base remains stable Insurance liabilities were $2.549 billion due mainly to and is in compliance with the main capital actuarial increases in our insurance reserves. adequacy and liquidity metrics prescribed by the The company continues to demonstrate careful company to maintain a minimum of 250% capital use of capital across all divisions, generating a to risk weighted asset [MCT] and a liquidity ratio of Financial Services Commission that requires the strong return on equity of 18%. Free Cash Flow 95%. At our reporting date the MCT ratio was 279% and our liquidity ratio 108%. Free cash flow for the year was relatively flat liquidity and capital positions, as we believe this when compared to prior year. Cash flow from provides us with a distinct advantage that will allow operating activities was $157.4 million compared us to respond promptly to market changes. We remain committed to maintaining excess 19 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 Management Discussion and Analysis We are pleased to report that we continue to We are mindful that information technology plays enjoy the support of our reinsurance partners and we successfully renewed our 2016 treaty. a key role in our growth strategy. Efforts are well in flight that will produce improvements in our Our combined ratio of 85% is a significant processes and we are optimistic that next year will bring even better results. We have entered improvement over prior year [2014 91%]; this 2016 with great momentum and we believe that provides an income coverage for claims costs and overheads. In the indication of premium our new website platform will give us the ability to transform the way we do business so that as our main we aim to keep the combined ratio as low as possible by employing disciplined underwriting customer expectations change we will be able to adapt and continue to produce the superior and judicious claims management. customer experience that they deserve. Looking Forward We are on solid financial ground and well position to deliver on our strategy to further strengthen our company with the help our General Accident expects the underlying staff. We work hard to attract the right talent profitability to continue despite the ongoing and we are cognizant of our responsibility to fierce competition in the market. We are provide a high morale-working environment. confident that our diversified investment portfolio We have implemented an intern programme, is well positioned to provide a stable yield. which has been very successful in attracting some of the country’s best graduate talent. Despite the challenges of today’s business environment that is generally characterized by Our strategy to create long-term value combines rapidly changing trends, we will continue to look clear portfolio choices supported by information for growth opportunities. We are prepared to technology. face the continuing fierce competition, which is still being fueled by an excessive liquid market. I would like to acknowledge the Board of Directors for providing insight, guidance and support to We intend to use innovation to garner profitable the management and staff. For the employees’ business and reduce overheads. Our 2016 hard work over the past year, I say thank you. Your strategy will see us combining greater personal dedication and commitment are what make lines coverage with wider business risk coverage. General Accident great. To our brokers, thank Although this will move us into unfamiliar market you for your continued support and involvement. segments we believe that we are well equipped You are important to our business. to deliver a profitable outcome. We remain committed to our strategic drivers of prioritizing investments in distinctive positions, growing operating earnings and pursuing other income streams. We believe this approach will produce increased growth, and allow us to maintain our profitability and meet our financial targets. We will continue to work hard and make every effort to fulfill your expectations again in 2016. For more information, visit www.genac.com 20 Our Community We aim to conduct our business in a manner Environment consistent with good corporate citizenship. We have long held the belief that we can create We remain committed to supporting the lasting changes in our communities if we work maintenance of a healthy natural environment. together. We believe this can be achieved For the past 25 years General Accident has through volunteerism, workplace-giving, support contributed both resources and funding to the in education, sports, child welfare and the Jamaica Environment Trust. environment. Sports We are a proud sponsor of Gibson Relays and other sporting events such as tennis and netball. We recognize the invaluable contribution of sports to the development of the nation’s youth. Jamaica has a rich sporting history and we are committed to making a contribution as long as we can. 21 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 Our Community Child Welfare General Accident continues its support of the sports club activities by providing much needed financial assistance in cash and kind to Sophie’s Place, a home for children with disabilities. Education We recognize that the fostering of educational opportunities will go a long way to promoting nation building. For the year under review we supported Chess Foundation of Jamaica through our sponsorship of the chess competition for high schools. This year we also extended much needed support to the Maisie Green Early Learning Development Centre in Grants Pen through the upgrading of the canteen, bathrooms, classrooms and playground. For more information, visit www.genac.com 22 Our Community Other Support We encourage our staff to be change leaders and to give of self and in keeping with this mandate our staff participated in a number of CSR events such as; Sigma Run, Relay for Life, The Digicel Run Walk and the annual Beach Clean Up of the Palisadoes strip. 23 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 Governance Good corporate governance promotes sustainable value for all our stakeholders. Our corporate governance report describes the structure, rules and procedures that we believe are necessary for effective governance of the company’s affairs. affairs of the company and is responsible for reviewing the strategic plans and performance objectives, financial plans and annual budget, key operational initiatives, major funding and investment proposals, financial performance and corporate governance practices. This is achieved through the Board Committees. General Accident is subject to the supervision of the Financial Services Commission and as public interest entity we are required to establish and maintain strong corporate governance and risk management system as well as effective internal controls that are appropriate for our business activities. Our corporate governance principles are incorporated in our corporate governance policies, which are reviewed annually to ensure continuing relevance and appropriateness. Board of Directors The Board consists of eleven (11) members under the leadership of the chairman, Mr. Paul Scott, and is responsible for determining the overall strategy of the company and the supervision of senior management. Board members are elected by shareholders at the AGM. We recognize that the directors’ contribution is a key factor in our success and so board selection is carefully considered. Our Board consists of individuals with wide-ranging relevant backgrounds, experience, skills and knowledge that create a good balance. The Board benefits from broad educational, professional and cultural backgrounds of its members, which collectively include financial services, engineering, accounting and manufacturing as well as legal and regulatory experience. The primary function of the Board is to provide effective leadership and direction to enhance long-term value to the shareholders and other stakeholders. The Board operates the business General meetings Face to face meetings are held at least four (4) times each year and more often if so warrant- ed. This year the Board met 5 times with good attendance from all members including a presen- tation on the company’s reinsurance strategies. Board committees Board appointed committees are in place to provide guidance and oversight on all opera- tional and strategic matters. There are four (4) committees currently in place: - the Compensation Committee, the Conduct Review Committee, the Audit Committee and the Investment and Loan Committee. The Compensation Committee This committee is responsible for overseeing the decisions on the remuneration package and to ensure that it promotes a high performance culture and is aligned with our risk management principles. This committee met two (2) times during the year and all members were present. The Conduct Review Committee The conduct review committee has responsibil- ity for oversight of and advice to the Board on policies and procedures to ensure that the company conducts its affairs responsibly and in keeping with our values and the broad regulatory requirements. This committee met 4 times during 2015. For more information, visit www.genac.com 24 Governance The Audit Committee Audit Committee The committee has responsibility for the oversight and advice to the Board on all matters relating to financial reporting, internal controls and approval of financial reports for distribution to external bod- ies. The Audit Committee held five (5) meetings with good attendance from all members. (Chair) Geoffery Messado Mathew Lyn Christopher Nakash Duncan Stewart Nigel Clarke Investment and Loan Committee Investment and Loan Committee The Investment and Loan Committee has the respon- sibility to drive the company’s investment strategy ensuring that all compliance requirements are met, inter alia liquidity, quality and term of investments. This Committee met four (4) times and all members were present. Melanie Subratie Nicholas Scott Sharon Donaldson Duncan Stewart Christopher Nakash Mathew Lyn (Chair) Committees composition The composition of Board committee is governed by regulatory dictates designed to ensure that adequate independence is preserved. Compensation Committee Paul B. Scott (Chair) Christopher Nakash Duncan Stewart Sharon Donaldson Conduct Review Committee (Chair) Dr. Ralph Thompson Mathew Lyn Christopher Nakash Duncan Stewart Jennifer Scott 25 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 General Accident Board P.B. Scott (appointed November 1998) Chairman Sharon Donaldson (appointed March 2008) 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 countries including Facey Group Limited, T. Geddes Grant Mr. Scott serves as a Director of several local companies and organisations including, Seprod and its subsidiaries (Chairman), Scotia Life Insurance Company Limited, the Jamaica Chamber of Commerce and the American International School in Kingston. He currently serves as Honorary Consul General in Jamaica for the Republic of Guatemala. Sharon Donaldson is the Managing Director of the Company. She has been responsible for driv- ing its recent growth in and for overseeing its prudent underwriting and risk management strategy. Ms. Donaldson has been with the Company for over 25 years, first joining as the Financial Controller in 1989 before becoming Managing Director in 2001. In addition to her responsibilities at the Company, Ms. Donaldson is a Director of Musson (Jamaica) Limited. Ms. Donaldson holds an LLB from the University of London, England, an M.B.A from University of Wales. She is a Chartered Accountant, a fellow member of the Institute of Chartered Accounts of Jamaica and an attorney at law. Christopher Nakash (appointed December 2006) Independent Non Executive Director Christopher Nakash is an independent non executive Director of the Board of the Company. Mr. Nakash brings to the Board his management experience, gained as Chief Executive Officer of Nakash Construction & Equipment Limited. In the past, Mr. Nakash also served as General Manager of Netstream Global (2003 to 2008), and he was also a founding member and Director of the Riverton Improvement Association and Intelligent Multimedia Limited. Mr. Nakash holds a BBA from University of New Brunswick, Canada. Melanie Subratie (appointed March 2002) Deputy Chairman Melanie Subratie is the Deputy Chairman of General Accident Insurance Company Jamaica Ltd, and Chairman of the Investment and Loan Committee of the Board. Mrs. Subratie is Vice Chairman of T. Geddes Grant Ltd. She is on the Executive Board at Seprod Ltd, and an Executive Board member at Facey Commodity Co. Ltd. She also serves on the board of Falmouth Heritage Renewal. Mrs. Subratie holds a B.Sc. (Hons) from the London School of Economics. She began her career in the United Kingdom in the Financial Services Division of Deloitte & Touche and also worked for startup political newswire service DeHavilland prior to returning to Jamaica in 2002 and joining the Musson Board at that time with responsibility for Business Development, and specifically Managing Director of Productive Business Solutions Ltd. For more information, visit www.genac.com 26 General Accident Board Geoffrey Messado (appointed May 2001) Non Executive Director Jennifer Scott (appointed December 2009) Non Executive 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 Controller of the Musson Group, and he serves as a director of certain subsidiaries and affiliated companies. He also serves as Chairman of Mapco Printers Limited and as a director of Edgechem(Jamaica) Limited, the Coffee Industry Board, Clarendon DistillersLimited, Spirits Pool Association and Caribbean Molasses Company (Jamaica) Limited. Jennifer Scott is a non executive director of the Board of the Company. Mrs. Scott holds a B.Sc. (Hons) in Psychology from Newcastle University, United Kingdom. She later gained a Graduate Diploma in Legal Studies from Keele University, UK, the Certificate of Legal Practice from the College of Law, London and was admitted as a Solicitor of Supreme Court of England and Wales. She attended Norman Manley Law School, and was admitted as an Attorney-at-Law of the Supreme Court of Jamaica. She is a member of the legal practice of Clinton Hart & Co., Attorneys-at-Law. Mr. Messado is a Chartered Accountant, FCA, FCAA, ATII. He is also the Past President of the Jamaica Exporters Association. Nicholas A. Scott (appointed July 2011) Non Executive Director Dr. Ralph Thompson, C.D. (appointed January 1993) Non Executive Director Nicholas Scott is a non executive director of the Company. Mr. Scott is the Chief Investment Officer of the Investment and Financial Services businesses of the Musson Group. In that capacity he is the Manag- ing Director of Eppley Limited. He is also a Director of Sperod Limited. He returned to Jamaica in 2009 after working as a private equity investor and investment banker at the Blackstone Group and Morgan Stanley in New York and Brazil. Mr. Scott holds a B.Sc. in Economics (Mag- na Cum Laude) from the Wharton School at the University of Pennsylvania, an M.B.A (Beta Gamma Sigma) from Columbia Business School and a M.P.A. from the Harvard Kennedy School of Government. Thompson Dr. Ralph 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 Manag- ing Director of C.D. Alexander Realty Company Limited and was formerly the Chief Executive Officer of Seprod Limited. He serves as a director of several entities within the Musson Group including Musson (Jamaica) Limited and T. Geddes Grant Limited. Dr. Thompson is also a former member of the New York Bar. 27 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 General Accident Board Duncan Stewart (appointed August 2011) Independent Non Executive Director Dr. Nigel L. Clarke (appointed August 2011) Non Executive Director Duncan Stewart is an independent non executive director of the Company. Mr. Stewart is the General Manager of Stewart Motors Limited and is also involved in related family businesses Stewart’s Auto Sales Limited and its affiliated companies, Stewart’s Auto Paints Limited, Tropic Island Traing Company Limited and Silver Star Motors Limited. Mr. Stewart joined as a third generation member after graduating from McGill University with a B.Eng. (Mech). Mr. Stewart is also a director of the Automobile Dealers Association and the Richard and Diana Stewart Foundation. He is also a sponsor of the family charity, Kind Hearts, which is run by his children and their cousins. Mr. Stewart is a past National Rally Champion. Matthew Lyn (appointed July 2015) Non Executive Director Matthew Lyn independent non- executive Director of the Board of the Company. Mr. Lyn is the Chief Operating Officer of CB Group. is an Mr. Lyn is a past student of Campion College and holds a Bachelor of Business Administration (Accounting) from Emory University. Dr. Nigel Clarke is a Non Executive Director of the Company. Dr. Nigel Clarke is Deputy Chairman and Chief Financial Officer of the Musson Group. He joined the Group in 2003 as Chief Operating Officer and played a leadership role in the expansion of the Group from a substantially Jamaican base to a presence in over 30 countries. In 2009 he assumed the additional responsibilities of CEO of the Facey Group where he led transformative transactions, improving performance. Dr. Clarke is a director of all the Group’s subsidiaries and associate companies and is Deputy Chairman of the PBS Group, and Chairman of Eppley Limited. He is Chairman and co-founder of the National Youth Orchestra of Jamaica and co-founder and host of TEDx Jamaica, both public education non-profit organisations. In addition, he has been a Director of several large private and public sector companies. He is a recipient of the “50 Under 50 Business Leader Award” as well as the Kiwanis Community Service Award. Dr. Clarke holds a B.Sc. in Mathematics from the University of the West Indies, as well as M.Sc. and D.Phil. degrees in Mathematics from Oxford University. In his academic career he has been a Jamaica Independence Scholar, a Commonwealth Scholar and a Rhodes Scholar. For more information, visit www.genac.com 28 Leadership Team Maureen Hall General Manager Ms. Maureen Hall is the General Manager of the Company with direct responsibility for the Claims and Underwriting Departments. Ms. Hall has been with the Company for over 20 years. She joined the Company in 1989 as Credit Controller, was appointed Marketing and Customer Service Manager in January 1991 and later Claims 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 Insurance Brokers Limited. She also served as Coach of Jamaica’s National Netball Team for many years and remains a member of the sport’s international coaching committee. Ms. Hall holds a B. Ed (Hons) degree from the University of Sussex, England, as well as a Diploma in Mass Communication from the University of the West Indies, and a M.B.A from Manchester, University England. Ms. Hall is also an associate member of the Chartered Insurance Institute (UK). Cheryll Henry Human Resources & Facilities Manager Ms. Cheryll Henry is the Human Re¬sources and Facilities Manager of the Company. Ms. Henry has been with the Company for over 20 years. She joined the Company in 1996 as an Administrative Supervisor and, notably, within a 10 year period she rotated through every division, and was also appointed Operations Manager of Orrett & Musson Investment Company Limited, a former subsidiary of the Company. Ms. Henry holds a Bachelors degree in Management Studies from the University of the West Indies and a Diploma in Human Resource Management from the Institute of Management & Production. 29 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 Leadership Team Gregory St Hugh Foster Chief Financial Officer. Mr. Gregory Foster is the Chief Financial Offer with responsibility for leading the finance, accounting 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 Department. He has accumulated over seven years of experience in providing audit services to a wide spectrum of clients, including government/public sector, financial services, and manufacturing and distribution. Mr. Foster is also part-time lecturer at Richmond 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) Douglas Hayden Information Technology Manager Mr. Douglas Hayden join the company 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 professional certifications including Information Technology Infrastructure Library (ITIL v3). For more information, visit www.genac.com 30 Leadership Team Janette Cole Smith Compliance Manager Janette Cole Smith is the Compliance Manager of the Company. She rejoined 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 Accountant and a fellow member of the Institute of Chartered Accountants of Jamaica. Andrea Muir Gibbs Underwriting Manager Mrs. Andrea Muir-Gibbs joined the company in 2013. She is the Underwriting Manager in charge of Underwriting and Broker Services.Mrs. Muir-Gibbs has over 15 years of experience in the insurance industry. She is the holder of the Jamaican Insurance Diploma from the College of Insurance Professional Studies and a member of the Chartered Insurance Institute (UK) where she holds the Dip CII Designation. 31 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 Leadership Team Tracey-Ann Thompson Operations Manager Miss Tracey-Ann Thompson joined the company in 2008. She is the Operations Manager for Underwriting Department of the Company. Miss Thompson has over 7 years of experience in the insurance industry. She is the holder of a Bachelor of Science Degree in Banking and Finance and is currently pursuing a Master of Science Degree in Enterprise Risk Management and is a Certified Insurance Technician from the College of Insurance Professional Studies. Joseyane Nevers Assistant Claims Manager Miss Joseyane Nevers joined the company in 2009. She is the Assistant Claims Manager for the Claims Department of the Company. Miss Nevers has over 7 years of experience in the insurance industry. She is the holder of a Bachelor of Science Degree in Marketing and International Business and a LLB and holds certificates in Property, Motor and Liability Insurance form the College of Insurance Professional Studies. For more information, visit www.genac.com 32 Corporate Data Chairman Deputy Chair Managing Director Directors: P.B. Scott Melanie Subratie Sharon Donaldson Ralph Thompson Geoffrey Messado Jennifer Scott Christopher Nakash Nicholas Scott Nigel Clarke Duncan Stewart Matthew Lyn CORPORATE SECRETARY: Geoffrey Messado APPOINTED ACTUARY: Josh Worsham, FCAS, MAAA AUDITORS: PricewaterhouseCoopers BANKERS First Caribbean International Bank LEADERSHIP TEAM: Managing Director Sharon Donaldson Maureen Hall General Manager Gregory Foster Cheryll Henry Human Resources & Facilities Manager Andrea Muir Gibbs Douglas Hayden Janette Cole Smith Compliance Manager Tracey-Ann Thompson Joseyane Nevers Underwriting Manager Information Technology Manager Operations Manager Assistant Claims Manager Chief Financial Officer ATTORNEYS: DunnCox Kingston, Jamaica W.I. Patterson Mair Hamilton REGISTERED OFFICE: 58 Half Way Tree Road Telephone: (876) 929-2451 Fax: (876)929-1074 Email: info@genac.com Website: www.genac.com Registrar: Jamaica Central Securities Depository 33 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 Disclosure of Shareholdings SHAREHOLDINGS OF TOP 10 SHAREHOLDERS Shareholders Shares Percentage 1. Musson Jamaica Limited 824,999,989 80.00 2. Mayberry West Indies Limited 3. Apex Pharmacy 4. Mayberry Managed Client Account 5. First Caribbean Int’l Sec. Ltd. A/C B.U.T 6. Lloyd Badal 32,081,629 11,588,279 6,235,894 5,174,666 5,000,000 7. JCSD Trustee Services Ltd. Sigma Optima 4,801,700 8. Barita Investments Ltd Long A/C (Trading) 4,571,693 9. Sagicor Pooled Equity Fund 10. P.A.M Ltd – Pooled Pension Equity Fund 4,251,700 4,128,000 3.11 1.12 0.60 0.50 0.48 0.47 0.44 0.41 0.40 Shareholdings of Directors Director/Connected persons P.B. Scott Musson Jamaica Limited Melanie Subratie Musson Jamaica Limited 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 Matthew Lyn Shares Nil 824,999.989 Nil 824,999,989 3,250,000 200,198 177,758 2,475,248 2,475,190 1,980,198 1,698,020 1,000,000 Nil Nil Nil For more information, visit www.genac.com 34 Disclosure of Shareholdings Shareholdings of the Management Team Manager/Connected Person Maureen Hall And Anthony Dunbar And Errol Kellyman Cheryll Henry Gregory Foster Douglas Hayden Andrea Muir Gibbs Janette Cole-Smith Tracey Thompson Joseyane Nevers 2,362,000 38,000 1,980,198 350,000 Nil Nil Nil 50,000 Nil 35 General Accident Insurance Company Jamaica Limited. ANNUAL REPORT 2015 Appendices For more information, visit www.genac.com General Accident Insurance Company Jamaica Limited Financial Statements 31 December 2015 General Accident Insurance Company Jamaica Limited Index 31 December 2015 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 - 55 Independent Auditor’s Report To the Members of General Accident Insurance Company Jamaica Limited Report on the Financial Statements We have audited the accompanying financial statements of General Accident Insurance Company Jamaica Limited, set out on pages 1 to 55, which comprise the statement of financial position as at 31 December 2015, and the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and with the requirements of the Jamaican Companies Act, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. PricewaterhouseCoopers, Scotiabank Centre, Duke Street, Box 372, Kingston, Jamaica T: 876 922 6230, F: 876 922 7581, www.pwc.com/jm L.A. McKnight P.E. Williams L.E. Augier A.K. Jain B.L. Scott B.J. Denning G.A. Reece P.A. Williams R.S. Nathan C.I. Bell-Wisdom D.D. Dodd G.K. Moore Members of General Accident Insurance Company Jamaica Limited Independent Auditor’s Report Page 2 Opinion In our opinion, the financial statements give a true and fair view of the financial position of General Accident Insurance Company Jamaica Limited as at 31 December 2015 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Jamaican Companies Act. Report on Other Legal and Regulatory Requirements As required by the Jamaican Companies Act, we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. In our opinion, proper accounting records have been kept, so far as appears from our examination of those records, and the accompanying financial statements are in agreement therewith and give the information required by the Jamaican Companies Act, in the manner so required. Chartered Accountants 31 March 2016 Kingston, Jamaica General Accident Insurance Company Jamaica Limited Statement of Comprehensive Income Year ended 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 1 Gross Premiums Written Reinsurance ceded Excess of loss reinsurance cost Net premiums written Changes in unearned premiums, net Net Premiums Earned Commission income Commission expense Claims expense Management expenses Underwriting Profit Investment income Other income Other operating expenses Profit before Taxation Taxation Net Profit for the Year Other Comprehensive Income: Items that may be subsequently reclassified to profit or loss Unrealised gains on available-for-sale investments Tax credit Total Other Comprehensive Income TOTAL COMPREHENSIVE INCOME Note 2015 $’000 2014 $’000 6,112,355 5,072,375 (4,832,142) (3,878,197) (89,248) (127,640) 1,190,965 1,066,538 (70,910) 2,560 1,120,055 1,069,098 361,886 (224,443) 10 (696,480) (446,362) 114,656 175,653 45,391 (32,252) 303,448 970 11 12 15 335,967 (182,938) (678,558) (441,628) 101,941 160,396 88,124 (30,496) 319,965 113 304,418 320,078 61,288 2,428 63,716 6,192 46 6,238 368,134 326,316 EARNINGS PER SHARE 16 $0.30 $0.31 General Accident Insurance Company Jamaica Limited Statement of Changes in Equity Year ended 31 December 2015 (expressed in Jamaican dollars unless otherwise stated) Page 3 Balance at 31 December 2013 470,358 152,030 48,323 786,233 1,456,944 Share Capital $’000 Capital Reserves $’000 Fair Value Reserve $’000 Retained Earnings $’000 Note Total $’000 Comprehensive income : Net profit for the year Other comprehensive income Total comprehensive income Transactions with owners Dividends 17 - - - - - - - - - 320,078 320,078 6,238 6,238 - 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 Comprehensive income : Net profit for the year Other comprehensive income Total comprehensive income Transactions with owners Dividends 17 - - - - - - - - - 304,418 304,418 63,716 63,716 - 63,716 304,418 368,134 - (172,219) (172,219) Balance at 31 December 2015 470,358 152,030 118,277 1,034,632 1,775,297 General Accident Insurance Company Jamaica Limited Statement of Cash Flows Year ended 31 December 2015 (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 Gains on unit trust funds Gain on disposal of property, plant and equipment Interest income Dividend income Deferred taxation Foreign exchange gains Increase in deferred policy acquisition cost Increase/(decrease) 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 repaid 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 (used in)/provided by investing activities Cash Flows from Financing Activities Dividends paid Net cash used in by financing activities (Decrease)/increase 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 2015 $’000 2014 $’000 304,418 320,078 25 26 11 11 12 11 11 15 25 26 17 27,665 4,587 5,166 (6,957) (1,741) (151,092) (11,961) (970) (26,159) (22,142) 174,792 295,606 (183,458) (16,505) (409) 24,887 4,726 55,235 180,082 (22,717) 157,365 (636,818) - 32,051 (59,767) (711) 2,710 252,345 12,778 131,397 (266,015) 24,066 6,430 2,790 - - (147,652) (7,789) (113) (79,354) (39,273) (376,085) (296,902) 128,790 1,577 (2,076) (3,294) (2,153) 383,714 209,656 (26,162) 183,494 (486,646) (143,549) 51,514 (52,584) (730) - 543,377 6,972 148,578 66,932 (172,219) (172,219) (280,869) 10,658 1,272,527 1,002,316 (203,878) (203,878) 46,548 56,449 1,169,530 1,272,527 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 5 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 insurance company under the Insurance Act, 2001. Its principal activity is the underwriting of commercial and personal property and casualty insurance. 2. Summary of Significant Accounting Policies The principal financial accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) Basis of preparation These financial statements have been prepared in conformity with International Financial Reporting Standards (IFRS) and have been prepared under the historical cost convention as modified by the revaluation of certain financial instruments carried at fair value. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company’s accounting policies. Although these estimates are based on 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. Standards, interpretations and amendments to published standards effective in the current year Certain new accounting standards, interpretations and amendments to existing standards have been published that became effective during the current financial year. The company has assessed the relevance of all such new standards, interpretations and amendments and and has adopted the following which are relevant to its operations: Annual Improvements 2012, (effective for annual periods beginning on or after 1 July 2014, unless otherwise stated below). The improvements comprise changes to a number of standards, the following of which are relevant to the company’s operations. IFRS 3 was amended to clarify that (1) an obligation to pay contingent consideration which meets the definition of a financial instrument is classified as a financial liability or as equity, on the basis of the definitions in IAS 32, and (2) all non-equity contingent consideration, both financial and non-financial, is measured at fair value at each reporting date, with changes in fair value recognised in profit and loss. Amendments to IFRS 3 are effective for business combinations where the acquisition date is on or after 1 July 2014. IFRS 8 was amended to require (1) disclosure of the judgements made by management in aggregating operating segments, including 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, and (2) a reconciliation of segment assets to the entity’s assets when segment assets are reported. The basis for conclusions on IFRS 13 was amended to clarify that deletion of certain paragraphs in IAS 39 upon publishing of IFRS 13 was not made with an intention to remove the ability to measure short- term receivables and payables at invoice amount where the impact of discounting is immaterial. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 6 2. Summary of Significant Accounting Policies (Continued) (a) Basis of preparation (continued) Standards, interpretations and amendments to published standards effective in the current year (continued) Annual Improvements 2012 (continued) IAS 24 was amended to include, as a related party, an entity that provides key management personnel services to the reporting entity or to the parent of the reporting entity (‘the management entity’), and to require to disclose the amounts charged to the reporting entity by the management entity for services provided. There was no significant impact from adoption of these amendments during the year. Annual Improvements 2013, (effective for annual periods beginning on or after 1 July 2014). The improvements consist of changes to a number of standards, of which the following are relevant to the company’s operations. IFRS 13 was amended to clarify that the portfolio exception in IFRS 13, which allows an entity to measure the fair value of a group of financial assets and financial liabilities on a net basis, applies to all contracts (including contracts to buy or sell non-financial items) that are within the scope of IAS 39 or IFRS 9. 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 was no significant impact from adoption of these amendments during the year. Standards, interpretations and amendments to published standards that are not yet effective At the date of authorisation of 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: 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. 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. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 7 2. Significant Accounting Policies (Continued) (a) Basis of preparation (continued) Standards, interpretations and amendments to published standards that are not yet effective (continued) IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities.The complete version of IFRS 9 was issued in July 2015. It 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. 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 result of a convergence project between the two Boards. IFRS 15 applies to nearly all contracts 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 informative, relevant disclosures. The standard supersedes IAS 18, 'Revenue', IAS 11, '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. IFRS 16, ‘Leases’, (effective for annual periods beginning on or after 1 January 2019). In January 2016, the IASB published IFRS 16 which replaces the current guidance in IAS 17. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance sheet) and an operating lease (off balance sheet). IFRS 16 now requires lessees to recognise a lease liability reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts. There is an optional exemption for lessees assets. The company is assessing the impact of future adoption of the amendments on its financial statements. short-term low-value certain leases leases and for of General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 8 2. Significant Accounting Policies (Continued) (a) Basis of preparation (continued) Standards, interpretations and amendments to published standards that are not yet effective (continued) Amendments to IAS 16 and IAS 38 (effective for annual period beginning on or after 1 January 2016) The amendments clarify that a revenue-based method of depreciation or amortisation is generally not appropriate. The IASB has amended IAS 16 Property, Plant and Equipment to clarify that a revenue- based method should not be used to calculate the depreciation of items of property, plant and equipment. IAS 38 Intangible Assets now includes a rebuttable presumption that the amortisation of intangible assets based on revenue is inappropriate. This presumption can be overcome if either (i) (ii) The intangible asset is expressed as a measure of revenue (ie where a measure of revenue is the limiting factor on the value that can be derived from the asset), or It can be shown that revenue and the consumption of economic benefits generated by the asset are highly correlated Amendment to IAS 1, ‘Presentation of Financial Statements’, (effective for annual periods beginning on or after 1 January 2016). This amendment forms part of the IASB’s Disclosure Initiative, which explores how financial statement disclosures can be improved. It clarifies guidance in IAS 1 on materiality and aggregation, the presentation of subtotals, the structure of financial statements and the disclosure of accounting policies. The amendment also clarifies that the share of other comprehensive income (OCI) of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, classified between those items that will or will not be subsequently reclassified to profit or loss. The company is currently assessing the impact of future adoption of the amendments on its financial statements. Annual Improvements 2014, (effective for annual periods beginning on or after 1 January 2016). The improvements consist of changes to a number of standards, of which the following may be relevant to the Company’s operations. The amendment of IFRS 13 clarifies that the portfolio exception in IFRS 13, which allows an entity to measure the fair value of a group of financial assets and financial liabilities on a net basis, applies to all contracts (including contracts to buy or sell non-financial items) that are within the scope of IAS 39 or IFRS 9. The company is currently assessing the impact of future adoption of the new standard on its financial statements. 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 2015 (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (Continued) Page 9 (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 Financial instruments carried on the statement of financial position include investments, due to and from related parties, due to and from reinsurers and coinsurers, due from policyholders, brokers and agents, loans and other receivables, cash and short term investments, other liabilities and claims liabilities. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. The fair values of the company’s financial instruments are discussed in Note 6. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (Continued) Page 10 (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. Equity securities for which fair values cannot be measured reliably are recognised at cost less impairment. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments in equity at the date of disposal or impairment are reclassified to profit or loss. (iii) Impairment of financial assets A financial asset is considered impaired if its carrying amount exceeds its estimated recoverable amount. The company assesses at each year end whether there is objective evidence that a financial asset or group of financial assets is impaired. The amount of the impairment loss for assets carried at amortised cost is calculated as the difference between the asset’s carrying amount and the present value of expected future cash flows discounted at the original effective interest rate. The recoverable amount of a financial asset carried at fair value is the present value of expected future cash flows discounted at the current market interest rate for a similar financial asset. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for- sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in other comprehensive income – is recycled through other comprehensive income and recognised in profit or loss for the current year. Impairment losses recognised in profit or loss on equity instruments are not reversed through profit or loss. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (Continued) Page 11 (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 2015 (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (Continued) Page 12 (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. result of Casualty insurance contracts protect the company’s customers against the risk of causing harm to third parties as a 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). legitimate activities. Damages covered 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 2015 (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (Continued) Page 13 (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. If there is objective evidence that the reinsurance asset is impaired, the Company reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in profit or loss. (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 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 14 2. Summary of Significant Accounting Policies (Continued) (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 statement of financial position and is computed by applying the “365th” method to gross written premiums for the period, except for marine where the unearned premium reserve is calculated as 20% of the year’s gross written premiums. (ii) Unearned commission The unearned commission represents the actual commission income on premium ceded on proportional reinsurance contracts relating to the unexpired period of risk carried. The income is deferred as unearned commission reserves, and amortised over the period in which the commissions are expected to be earned. These reserves are calculated on the 365th method. (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 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 15 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. (v) The provision for unexpired period of risks is determined by the appointed actuary and represents the expected future costs associated with the unexpired portion of policies in force as of the reporting date, in excess of the net unearned premium minus deferred policy acquisition costs (vi) At the end of each reporting period, liability adequacy tests are performed to ensure the adequacy of the policy liabilities, net of related deferred policy acquisition costs. In performing these tests, current best estimates of future contractual cashflows are compared to the carrying amount of policy liabilities and any deficiency is immediately recognised in profit or loss as unexpired risk provision. (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. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 16 2. Summary of Significant Accounting Policies (Continued) (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. (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 2015 (expressed in Jamaican dollars unless otherwise indicated) 3. Responsibilities of the Appointed Actuary and External Auditors Page 17 The Board of Directors, pursuant to the Insurance Act, appoints the Actuary. His responsibility is to carry out an annual valuation of the company’s claims liabilities and insurance reserves in accordance with accepted actuarial practice and regulatory requirements and report thereon to the shareholders. In performing the valuation, the Actuary analyses past experience with respect to number of claims, claims payment and changes in estimates of outstanding liabilities. The shareholders, pursuant to the Companies Act, appoint the external auditors. Their responsibility is to conduct an independent and objective audit of the financial statements in accordance with International Standards on Auditing and report thereon to the shareholders. In carrying out their audit, the auditors also make use of the work of the appointed Actuary and his report on claims liabilities and insurance reserves. 4. Insurance and Financial Risk Management (a) Insurance risk The company’s activities expose it to a variety of insurance and financial risks and those activities necessitate the analysis, evaluation, control and/or acceptance of some degree of risk or combination of risks. Taking various types of risk is core to the financial services business and operational risks are an inevitable consequence of being in business. The company’s aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects on the company’s financial performance. The Board of Directors is ultimately responsible for the establishment and oversight of the risk management framework. The Board of Directors has established committees and departments for managing and monitoring risks, as follows: (i) Investment and Loan Committee The Investment and Loan Committee is responsible for monitoring and approving investment strategies for the company. (ii) Finance Department The Finance Department is responsible for managing the company’s assets and liabilities and the overall financial structure. It is also primarily responsible for managing the funding and liquidity risks of the company. (iii) Conduct Review Committee The Conduct Review Committee is responsible for monitoring the company’s adherence to regulatory and statutory requirements. (iv) Audit Committee The Audit Committee oversees how management monitors compliance with the company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the company. (v) Remuneration Committee The remuneration committee is responsible for reviewing and recommending for approval, the remuneration arrangements of the directors and senior officers. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 18 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) The most important types of risk are insurance risk, reinsurance risk, credit risk, liquidity risk, market risk and other operational risk. Market risk includes currency risk, interest rate and other price risk. The company issues contracts that transfer insurance risk. This section summarises these risks and the way the company manages them. The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk is random and therefore unpredictable. The principal risk that the company faces under its insurance contracts is that the actual claim payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits are greater than estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year from the level established using statistical techniques. Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The company has developed its insurance underwriting strategy to diversify the types of insurance risks accepted to achieve a sufficiently large population of risks to reduce the variability of the expected outcome. Factors that increase insurance risk include lack of risk diversification in terms of type and amount of risk and geographical location. Management maintains an appropriate balance between commercial and personal policies and type of policies based on guidelines set by the Board of Directors. Insurance risk arising from the company’s insurance contracts is, however, concentrated within Jamaica. The company has the right to re-price the risk on renewal. It also has the ability to impose deductibles and reject fraudulent claims. Where applicable, contracts are underwritten by reference to the commercial replacement value of the properties or other assets and contents insured. Claims payment limits are always included to cap the amount payable on occurrence of the insured event. The cost of rebuilding properties, of replacement or indemnity for other assets and contents and time taken to restart operations for business interruption are the key factors that influence the level of claims under these policies. Claims on insurance contracts are payable on a claims-occurrence basis. The company is liable for all insured events that occurred during the term of the contract, even if the loss is discovered after the end of the contract term. This is however subject to the policy limit. Liability claims are settled over a long period of time and a portion of the claims provision relates to incurred but not reported (IBNR) claims. There are several variables that affect the amount and timing of cash flows from these contracts. These mainly relate to the inherent risks of the business activities carried out by individual contract holders and the risk management procedures they adopted. The compensation paid on these contracts is the monetary awards granted for bodily injury suffered by employees (for employer’s liability covers) or members of the public (for public liability covers). Such awards are lump-sum payments that are calculated as the present value of the lost earnings and rehabilitation expenses that the injured party will incur as a result of the accident. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 19 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected subrogation value and other recoveries. The company takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. However, given the uncertainty in establishing the claims provisions, it is likely that the final outcome will prove to be different from the original liability established. The liability for these contracts comprises a provision for IBNR, a provision for reported claims not yet paid and a provision for unexpired risks at the date of financial position. The amount of casualty claims is particularly sensitive to the level of court awards and to the development of legal precedent on matters of contract and tort. Casualty contracts are also subject to the emergence of new types of latent claims, but no allowance is included for this at the date of the statement of financial position. In calculating the estimated cost of unpaid claims (both reported and not), the company uses estimation techniques that are a combination of loss-ratio-based estimates (where the loss ratio is defined as the ratio between the ultimate cost of insurance claims and insurance premiums earned in a particular financial year in relation to such claims) and an estimate based upon actual claims experience using predetermined formulae where greater weight is given to actual claims experience as time passes. The initial loss-ratio estimate is an important assumption in the estimation technique and is based on previous years’ experience, adjusted for factors such as premium rate changes, anticipated market experience and historical claims inflation. The initial estimate of the loss ratios used for the current year (before reinsurance) is analysed by type of risk for current and prior year premiums earned. The estimation of IBNR is generally subject to a greater degree of uncertainty than the estimation of the cost of settling claims already notified to the company, where information about the claim event is available. IBNR claims may not be apparent to the insured until many years after the event that gave rise to the claims. For casualty contracts, the IBNR proportion of the total liability is high and will typically display greater variations between initial estimates and final outcomes because of the greater degree of difficulty of estimating these liabilities. In estimating the liability for the cost of reported claims not yet paid, the company considers any information available from loss adjusters and information on the cost of settling claims with similar characteristics in previous periods. Large claims are assessed on a case-by-case basis or projected separately in order to allow for the possible distortive effect of their development and incidence on the rest of the portfolio. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 20 (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 2015 2014 Policy Limit ’000 Maximum Net Retention ’000 Policy Limit ’000 Maximum Net Retention ’000 US$7,000 US$7,000 US$5,000 J$40,000 US$750 J$10,000 J$30,000 J$5,000 J$5,000 J$5,000 J$40,000 J$5,000 J$7,500 US$700 US$700 US$125 J$20,000 US$125 J$5,000 J$2,000 J$1,000 J$1,000 J$1,000 J$8,000 J$1,000 J$1,500 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$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 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 21 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) Sensitivity Analysis of Actuarial Liabilities The determination of actuarial liabilities is sensitive to a number of assumptions, and changes in those assumptions could have a significant effect on the valuation results. In applying the noted methodologies, the following assumptions were made: (i) Claims inflation has remained relatively constant and there have been no material legislative changes in the Jamaican civil justice system that would cause claim inflation to increase dramatically. (ii) There is no latent environmental or asbestos exposure embedded in the company’s loss history. (iii) The company’s case reserving and claim payments rates have remained, and will remain, relatively constant. (iv) The overall development of claims costs gross of reinsurance is not materially different from the development of claims costs net of reinsurance. This assumption is supported by the following: The majority of 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. ScenarioTesting: The two major assumptions that determine reserve levels are: The selection of a-priori loss ratios within the Bornhuetter-Ferguson methods The selection of loss development factors. These factors have been stochastistically modelled using various confidence intervals to determine the impact on the net reserves. The net reserves of $1,056,307,000 (Note 30) were determined at the 50% confidence interval. Had reserves would the confidence increase/(decrease) by $42,312,000/($52,761,000). increased/(decreased) by 10%, the net interval General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) Page 22 Development Claim Liabilities In addition to sensitivity analysis, the development of insurance liabilities provides a measure of the company’s ability to estimate the ultimate value of claims. The table below illustrates how the company’s estimate of the ultimate claims liability for accident years 2010 - 2015 has changed at successive year-ends, up to 2015. Updated unpaid claims and adjustment expenses (UCAE) and IBNR estimates in each successive year, as well as amounts paid to date are used to derive the revised amounts for the ultimate claims liability for each accident year, used in the development calculations. 2008 2008 2009 2009 2010 2010 2011 and prior $’000 $’000 and prior $’000 $’000 and prior $’000 $’000 $’000 2011 and prior $’000 2012 2012 2013 2013 2014 2014 2015 And Prior $’000 $’000 and prior $’000 and prior $’000 $’000 $’000 $’000 2015 and prior $’000 2008 Paid during year 180,368 258,800 UCAE, end of year 150,154 305,606 IBNR, end of year 30,030 58,733 Ratio: excess (deficiency) - - - - 2009 Paid during year 92,444 155,743 175,935 331,678 UCAE, end of year 85,910 147,754 200,976 348,730 IBNR, end of year 10,644 15,037 58,042 73,079 Ratio: excess (deficiency) 2010 Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) (4.89%) 12.57% - - - - 54,841 50,182 3,698 77,304 92,674 4,809 98,674 175,978 171,620 347,598 96,738 189,412 235,477 424,889 9,744 14,553 68,193 82,746 (11.64%) 9.28% 20.79% 9.93% - - - - 2011 Paid during year 18,688 41,616 38,747 80,363 100,861 181,224 183,148 364,372 UCAE, end of year 36,714 58,059 61,664 119,722 120,936 240,659 232,245 472,903 IBNR, end of year Ratio: excess 626 1,005 6,200 7,205 15,834 23,039 65,680 88,719 (deficiency) (12.84%) 8.40% 20.74% 9.14% 21.75% 12.35% 2012 Paid during year UCAE, end of year IBNR, end of year Ratio: excess 11,894 24,107 3,105 16,962 43,065 3,105 16,227 45,535 5,154 33,189 88,599 8,260 43,783 76,972 142,264 219,236 210,963 210,963 60,033 148,633 155,272 303,904 272,082 575,987 8,241 16,501 20,258 36,759 60,864 97,263 (deficiency) (13.82%) 7.29% 21.11% 8.4% 29.89% 16.61% (6.67%) 0.31% - - 2013 Paid during year UCAE, end of year IBNR, end of year Ratio: excess 14,337 13,342 - 22,490 31,074 - 11,394 35,281 2,993 33,884 66,043 2,993 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 (deficiency) (14.63%) 5.26% 21.35% 6.79% 28.44% 14.41% (13.13%) (5.11%) (3.91%) (6.44%) - - - - 2014 Paid during year UCAE, end of year IBNR, end of year Ratio: excess 6,057 5,645 3,488 14,240 24,046 4,463 4,151 31,526 2,399 18,391 55,572 6,862 9,763 35,219 4,258 28,154 90,791 11,120 46,319 94,206 5,984 74,473 54,090 128,563 152,205 280,768 222,509 503,277 184,997 129,287 314,284 190,624 504,908 322,488 827,396 17,104 17,729 34,833 33,965 68,798 76,216 145,014 (deficiency) (15.10%) 2.05% 21.58% 4.17% 28.29% 12.14% (20.19%) (10.90%) (7.55%) (13.08%) (2.97%) (6.95%) 2015 Paid during year UCAE, end of year IBNR, end of year Ratio: excess 501 5,496 1,700 5,776 9,200 18,688 23,763 1,701 4,329 14,976 42,451 6,030 8,438 22,031 3,542 23,414 64,482 9,572 25,812 49,226 49,137 98,363 60,574 158,937 185,354 344,291 269,589 613,880 69,795 134,277 83,192 217,469 139,704 357,173 207,194 564,367 334,705 899,072 5,463 15,035 7,898 22,933 18,455 41,388 31,594 72,982 84,310 157,292 (deficiency) (14.30%) 2.70% 20.28% 3.92% 30.09% 13.01% (20.48%) (10.27%) (5.51%) (11.54%) (1.37%) (4.93%) (6.38%) (0.95%) - - - - - - - - General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) Development Claim Liabilities 2008 Paid during year 180,368 258,800 UCAE, end of year 150,154 305,606 IBNR, end of year 30,030 58,733 Ratio: excess (deficiency) - - 2009 Paid during year 92,444 155,743 175,935 331,678 UCAE, end of year 85,910 147,754 200,976 348,730 IBNR, end of year 10,644 15,037 58,042 73,079 - - - - (4.89%) 12.57% 54,841 50,182 3,698 77,304 92,674 4,809 98,674 175,978 171,620 347,598 96,738 189,412 235,477 424,889 9,744 14,553 68,193 82,746 - - - - 2011 Paid during year 18,688 41,616 38,747 80,363 100,861 181,224 183,148 364,372 (11.64%) 9.28% 20.79% 9.93% - - UCAE, end of year 36,714 58,059 61,664 119,722 120,936 240,659 232,245 472,903 626 1,005 6,200 7,205 15,834 23,039 65,680 88,719 Ratio: excess (deficiency) 2010 Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) IBNR, end of year Ratio: excess 2012 Paid during year UCAE, end of year IBNR, end of year Ratio: excess 2013 Paid during year UCAE, end of year IBNR, end of year Ratio: excess 2014 Paid during year UCAE, end of year IBNR, end of year Ratio: excess 2015 Paid during year UCAE, end of year IBNR, end of year Ratio: excess Page 22 In addition to sensitivity analysis, the development of insurance liabilities provides a measure of the company’s ability to estimate the ultimate value of claims. The table below illustrates how the company’s estimate of the ultimate claims liability for accident years 2010 - 2015 has changed at successive year-ends, up to 2015. Updated unpaid claims and adjustment expenses (UCAE) and IBNR estimates in each successive year, as well as amounts paid to date are used to derive the revised amounts for the ultimate claims liability for each accident year, used in the development calculations. 2008 2008 2009 2009 2010 2010 2011 2012 2012 2013 2013 2014 2014 2015 and prior $’000 and prior $’000 and prior $’000 $’000 $’000 $’000 $’000 $’000 $’000 and prior $’000 $’000 and prior $’000 $’000 2011 and prior $’000 And Prior $’000 2015 and prior $’000 (deficiency) (12.84%) 8.40% 20.74% 9.14% 21.75% 12.35% 11,894 24,107 3,105 16,962 43,065 3,105 16,227 45,535 5,154 33,189 88,599 8,260 43,783 76,972 142,264 219,236 210,963 210,963 60,033 148,633 155,272 303,904 272,082 575,987 8,241 16,501 20,258 36,759 60,864 97,263 (deficiency) (13.82%) 7.29% 21.11% 8.4% 29.89% 16.61% (6.67%) 0.31% - - - - 14,337 13,342 - 22,490 31,074 - 11,394 35,281 2,993 33,884 66,043 2,993 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 (deficiency) (14.63%) 5.26% 21.35% 6.79% 28.44% 14.41% (13.13%) (5.11%) (3.91%) (6.44%) - - - - 14,240 24,046 4,463 4,151 31,526 2,399 18,391 55,572 6,862 9,763 35,219 4,258 28,154 90,791 11,120 46,319 94,206 5,984 74,473 54,090 128,563 152,205 280,768 222,509 503,277 184,997 129,287 314,284 190,624 504,908 322,488 827,396 17,104 17,729 34,833 33,965 68,798 76,216 145,014 (deficiency) (15.10%) 2.05% 21.58% 4.17% 28.29% 12.14% (20.19%) (10.90%) (7.55%) (13.08%) (2.97%) (6.95%) - - - - 5,776 9,200 18,688 23,763 1,701 4,329 14,976 42,451 6,030 8,438 22,031 3,542 23,414 64,482 9,572 25,812 49,226 49,137 98,363 60,574 158,937 185,354 344,291 269,589 613,880 69,795 134,277 83,192 217,469 139,704 357,173 207,194 564,367 334,705 899,072 5,463 15,035 7,898 22,933 18,455 41,388 31,594 72,982 84,310 157,292 (deficiency) (14.30%) 2.70% 20.28% 3.92% 30.09% 13.01% (20.48%) (10.27%) (5.51%) (11.54%) (1.37%) (4.93%) (6.38%) (0.95%) - - 6,057 5,645 3,488 501 5,496 1,700 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 23 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) The concentration of insurance risk before and after reinsurance by territory in relation to the type of insurance risk accepted is summarized below, with reference to the carrying amount of the insurance liabilities (gross and net of reinsurance) arising from insurance contract Territory Jamaica : Gross Net (b) Reinsurance risk Motor Liability Property $Millions $Million $Millions Other types of risk $Millions Total $Millions 24,495 23,996 32,299 32,299 107,921 20,805 185,520 8,863 3,482 68,640 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 90%:10% Quota Share of premiums i.e. 90% ceded premiums and 10% 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 2015 A+ A+ 2014 A+ A+ General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (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 24 Property Motor Marine Liability Burglary Miscellaneous Accidents 2015 $’000 27,507 10,257 19,167 5,120 138 22,544 84,733 2014 $’000 54,875 8,988 15,720 8,918 3,962 13,255 105,718 (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 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 25 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 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 26 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 $231,640,000 (2014 - $174,406,000) 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 2015 $’000 39,669 56,081 135,890 231,640 2014 $’000 37,708 53,092 83,606 174,406 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 2015 $’000 416,076 153,996 570,072 2014 $’000 272,378 108,228 380,606 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 2015 $’000 898,730 142,359 98,920 1,140,009 2014 $’000 513,319 139,597 94,852 747,768 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 27 4. Insurance and Financial Risk Management (Continued) (c) Financial risk (continued) (ii) Liquidity risk Liquidity risk is the risk that the company is unable to meet its payment obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn. The consequence may be the failure to meet obligations to fulfil claims and other liabilities incurred. Liquidity risk management process The company’s liquidity management process, as carried out within the company and monitored by the Board of Directors, includes: (i) Monitoring future cash flows and liquidity on a daily basis. This incorporates an assessment of expected cash flows and the availability of high grade collateral which could be used to secure funding if required; (ii) Maintaining a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen interruptions to cash flow; (iii) Optimising cash returns on investments; (iv) Monitoring statement of financial position liquidity ratios against internal and regulatory requirements; and (v) Managing the concentration and profile of debt maturities. Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and month, as these are key periods for liquidity management. The starting point for those projections is an analysis of the contractual maturity of the financial liabilities and the expected collection date of the financial assets. The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the company. It is unusual for companies ever to be completely matched since business transacted is often of uncertain term and of different types. An unmatched position potentially enhances profitability, but can also increase the risk of loss. The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature, are important factors in assessing the liquidity of the company and its exposure to changes in interest rates and exchange rates. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 28 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 2015: Cash and short term investments Due from policyholders, brokers 592,034 412,375 and agents 448,240 121,832 - - - - 16,883 115,416 13,506 27,012 - - - - 3,423 175,249 - - - - - - 1,347 2,585 5,439 65 - - - - - - - - - - 1,004,409 570,072 172,817 29,958 29,958 3,871 3,871 - - 178,672 9,436 36,187 1,098,114 56,398 883,855 561,893 580,838 500,900 527,977 129,563 129,563 256,424 290,253 1,541,365 3,510,600 Due from reinsurers and coinsurers Other receivables Due from related parties Loans receivable Leases receivable Investment securities Total financial assets Due to reinsurers and coinsurers Other liabilities Claims liabilities 21,156 3,352 55,600 - 239,189 143,513 191,351 382,702 - - - - 80,108 956,755 Total financial liabilities 260,345 146,865 246,951 382,702 - - 1,036,863 Net Liquidity Gap 837,769 736,990 333,887 145,275 129,563 290,253 2,473,737 Cumulative gap 837,769 1,574,759 1,908,646 2,053,921 2,183,484 2,473,737 - General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 29 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 $’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 - - - - - - - - 1,273,588 380,606 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 - - 167,487 - - - - - - - - - - 18,356 18,356 2,275 2,275 1,922 3,844 17,297 92,250 270,984 4,554 7,089 27,724 9,436 - - - 386,297 48,803 32,053 1,396,822 10,451 430,474 250,051 313,171 436,386 574,271 168,402 439,386 - 20,631 897,343 3,174,755 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 280,184 383,478 207,086 360,747 - - - - - - - - - - 268,437 61,188 901,870 1,231,495 Net Liquidity Gap 1,116,638 46,996 106,085 213,524 439,386 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 - 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 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 30 4. Insurance and Financial Risk Management (Continued) (c) Financial risk (continued) (iii) Market risk (continued) Currency risk 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 2015 includes aggregate net foreign assets of approximately US$6,175,000 (2014 – US$7,517,000), 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 represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis shows the impact of translating outstanding foreign currency denominated monetary items, assuming changes in currency rates shown in the table below. The sensitivity analysis includes cash and short term deposits, investment securities, premium and other receivables and claims liabilities. The percentage change in the currency rate will impact each financial asset/liability included in the sensitivity analysis differently. Consequently, individual sensitivity analyses were performed. The effect on pre-tax profit below is the total of the individual sensitivities done for each of the assets/liabilities. There was no impact on the other components of equity. % Change in Currency Rate 2015 1% 8% Increase/ (decrease) in Pre-tax Profit 2015 $’000 (7,387) 59,099 % Change in Currency Rate 2014 1% 10% Increase/ (decrease) in Pre-tax Profit 2014 $’000 (8,512) 85,122 USD – J$ Revaluation USD – J$ Devaluation General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 31 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 2015: Cash and short term investments 592,324 409,954 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 - - - - - 170,000 - - - - - - - - - - - - - - - - 1,229 2,397 5,188 63 - - - - - - - 38 1,002,316 570,072 570,072 105,286 105,286 29,958 29,958 3,871 3,871 - - 170,000 8,877 246,347 52,910 510,280 242,185 88,287 256,424 1,396,433 839,900 465,261 685,468 242,248 88,287 965,649 3,286,813 Due to reinsurers and coinsurers Other liabilities Claims liabilities Total financial liabilities - - - - - - - - - - - - - - - - - - - 378,768 378,768 80,108 80,108 956,755 956,755 - 1,415,631 1,415,631 Total interest repricing gap 839,900 465,261 685,468 242,248 88,287 (449,982) 1,871,182 Cumulative gap 839,900 1,305,161 1,990,629 2,232,877 2,321,164 1,871,182 - General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (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) 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 76,989 18,356 18,356 2,275 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 2015 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 33 (c) Financial risk (continued) (iii) Market risk (continued) Interest rate risk (continued) 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: Increase/(decrease) in Profit before Taxation Increase/(decrease) in Other Components of Equity 2015 JMD/USD -150/-50 +150/+100 2015 $’000 (6,154) 9,232 2015 $’000 2,771 (4,890) 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) 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 20% (2014 - 10%) with all other variables held constant. Increase/ (decrease) in Profit before Taxation 2015 $’000 (5,391) Change in index: -20% (2014 – 10%) +20% (2014 – 10%) 5,391 Equity Securities Pooled real estate investment Increase/ (decrease) in Profit before Taxation 2014 $’000 - - Effect on Other Components of Equity: 2015 JMD/USD (45,893) Effect on Other Components of Equity 2014 $’000 (16,238) Effect on Other Components of Equity 2015 $’000 (28,710) 45,893 16,238 28,710 Effect on Other Components of Equity 2014 $’000 (14,355) 14,355 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 34 5. Capital Management The company’s objectives when managing capital, which is a broader concept than the ‘equity’ on the face of statement of financial position, are: (a) To comply with the capital requirements set by the regulators of the insurance markets where the company operates; (b) To safeguard the company’s ability to continue as a going concern so that it can continue to provide returns for stockholders and benefits for other stakeholders; and (c) To maintain a strong capital base to support the development of its business. To assist in evaluating the current business and strategies, a risk-based capital approach is used in the form of the Minimum Capital Test (MCT) as stipulated by the regulators. The MCT is calculated by management. This information is required to be filed with the Financial Services Commission on a monthly, quarterly and annual basis. The required MCT ratio is 250%. The MCT for the company as at 31 December 2015 is as follows: MCT 6. Fair Value Estimation Actual Required Actual 2015 279 % 2015 250% 2014 270% 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 2015 (expressed in Jamaican dollars unless otherwise indicated) 6. Fair Value Estimation (Continued) Page 35 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 2015 Assets Financial assets at fair value through profit or loss Equity securities Available-for-sale financial assets – Equity securities Debt securities Pooled real estate investment Total assets measured at fair value At 31 December 2014 Assets Available-for-sale financial assets – Equity securities Debt securities Pooled real estate investment Total assets measured at fair value Level 1 Level 2 $’000 $’000 Levell 3 $’000 26,957 229,467 - - - - 569,076 - 256,424 569,076 - - - 143,549 143,549 Total balance $’000 26,957 229,467 569,076 143,549 969,049 162,377 - - - 451,892 - 162,377 451,892 - - 143,549 143,549 162,377 451,892 143,549 757,818 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 value or other estimation and valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. The following methods have been used to value financial instruments: (a) Investment securities classified as available-for-sale and fair value through profit or loss are measured at fair value by reference to quoted market prices when available. If quoted market prices are not available, then fair values are estimated on the basis of pricing models or other recognised valuation techniques; (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. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) 7. Critical Accounting Estimates and Judgements in Applying Accounting Policies Page 36 The company makes estimates and assumptions that affect the reported amounts of assets and liabilities in the future. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that will have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows: (a) Liabilities arising from claims made under insurance contracts The determination of the liabilities under insurance contracts represents the liability for future claims payable by the company based on contracts for the insurance business in force at the date of the statement of financial position using several methods, including the Paid Loss Development method, the Incurred Loss Development method, the Bornhuetter-Ferguson Paid Loss method, the Bornhuetter-Ferguson Incurred Loss method and the Frequency-Severity method. These liabilities represent the amounts that will, in the opinion of the actuary, be sufficient to pay future claims relating to contracts of insurance in force, as well as meet the other expenses incurred in connection with such contracts. A margin for risk or uncertainty (adverse deviations) in these assumptions is added to the liability. The assumptions are examined each year in order to determine their validity in light of current best estimates or to reflect emerging trends in the company’s experience. Claims are analysed separately between those arising from damage to insured property and consequential losses. Claims arising from damage to insured property can be estimated with greater reliability, and the company’s estimation processes reflect all the factors that influence the amount and timing of cash flows from these contracts. The shorter settlement period for these claims, allows the company to achieve a higher degree of certainty about the estimated cost of claims, and relatively little IBNR is held at year-end. However, the longer time needed to assess the emergence of claims arising from consequential losses makes the estimation process more uncertain for these claims. (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 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 37 8. Segment Information Management has determined the operating segments based on the reports reviewed by the board of directors that are used to make strategic decisions. All operating segments used by management meet the definition of a reportable segment under IFRS 8. The company is organised into 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 2015 (expressed in Jamaican dollars unless otherwise indicated) 8. Segment Information (Continued) Page 38 The segment information provided to the board of directors for the reportable segments for the year ended 31 December 2015 is as follows: 2015 Fire $’000 Motor Marine Liability Homeowners & Burglary Misellaneous Accident $’000 $’000 $’000 $’000 $’000 Total $’000 Gross Premiums Written 3,940,780 989,928 152,369 491,812 142,585 394,881 6,112,355 Reinsurance ceded (3,886,359) (18,296) (128,262) (361,035) (126,078) (312,112) (4,832,142) Excess of loss reinsurance cost (46,960) (27,138) - (4,445) (10,705) - (89,248) Net premiums written Changes in unearned premiums, net Net Premiums Earned Commission income Commission expense laims expense 7,461 944,494 24,107 126,332 1,990 9,451 (59,894) (1,475) (9,310) 884,600 22,632 117,022 5,802 (812) 4,990 82,769 1,190,965 (1,409) (70,910) 81,360 1,120,055 237,337 1,919 18,661 19,898 27,545 56,526 361,886 (85,876) (81,528) (1,951) (11,263) (15,703) (28,122) (224,443) (2,194) (602,474) 1,105 (77,548) (167) (15,202) (696,480) Management expenses (18,972) (338,723) (8,404) (45,590) (5,755) (28,918) (446,362) Segment results 139,746 (136,206) 32,043 2,519 10,910 65,644 114,656 Unallocated income - Investment income Other income Depreciation and amortisation- Profit before tax Taxation Net profit 175,653 45,391 221,044 (32,252) 303,448 970 304,418 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) 8. Segment Information (Continued) Page 39 2014 Fire $’000 Motor Marine Liability Homeowner & Burglary Misellaneous Accident $’000 $’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 Changes in unearned premiums, net Net Premiums Earned Commission income Commission expense Claims expense 7,447 846,073 29,801 116,234 5,160 61,823 1,066,538 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) (6,970) (591,043) (6,029) (64,702) Management expenses (30,954) (324,649) (11,021) (44,890) 115,230 (127,286) 36,921 20,227 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 (1,568) (7,250) 4,052 (8,246) (678,558) (22,864) (441,628) 52,797 101,941 160,396 88,124 248,520 (30,496) 319,965 113 320,078 2015 $’000 59,767 711 60,478 2014 $’000 52,584 730 53,314 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 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 40 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) 2015 $’000 32,399 - - 32,399 2014 $’000 25,741 104 72 25,917 1,106 959 16,514 15,630 1,835 30,506 205,751 160,107 398,199 109 7,225 34,158 - 41,492 2,311 31,414 243,750 211,669 489,144 506 8,129 20,693 7,549 36,877 2,955 137,775 140,730 3,818 166,072 169,890 76,021 68,243 1,720 1,853 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (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 41 Due from related parties - Receivables - Affiliated company Due from policyholders, brokers and agents - Fellow subsidiary Parent company Affilated company Loans receivable - Parent (Note 21) Fellow subsidiary (Note 21) Investment securities - Shares in affiliated entity (Note 23) Claims liabilities Parent company Affiliated company Fellow subsidiary 2015 $’000 2014 $’000 3,871 2,275 121,397 114,223 207 - 146 1,152 121,604 115,521 170,000 - 170,000 - 169,591 169,591 117,197 83,198 10,356 - 12,305 22,661 6,917 26,482 6,550 39,949 Included in the investments of the company are shares in related parties. At 31 December 2015, these shares represented 2.65% of the total assets (2014 – 2.13%). Affiliates represents companies that are associated with the parent company, which 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. Intrest income was earned from shot term and mortgage loans. General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 42 10. Claims Expense Gross claims expense Reinsurers share of claims expense (Note 4(b) (d)) Net claims expense 11. Investment Income Interest income - Leases receivable Loan due from 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 money market fund 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 2015 $’000 2014 $’000 781,203 784,291 (84,723) (105,733) 696,480 678,558 2015 $’000 2014 $’000 3,688 11,966 - 104 32,399 25,741 - 72 115,005 109,769 151,092 147,652 (5,166) (2,790) 145,926 144,862 6,957 11,961 10,809 - 7,789 7,745 175,653 160,396 2015 $’000 2014 $’000 35,306 2,551 1,741 5,793 45,391 79,978 2,654 - 5,492 88,124 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 43 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 2015 $’000 9,717 5,352 25,465 1,720 32,252 1,609 36,488 20,421 4,340 13,333 16,514 17,037 2014 $’000 9,841 5,073 19,142 1,853 30,496 2,208 53,730 13,913 4,284 13,232 15,630 17,223 272,379 259,939 5,398 16,589 7,164 18,396 478,614 472,124 2015 $’000 2014 $’000 207,696 199,948 17,507 3,772 43,404 17,055 3,817 39,119 272,379 259,939 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 44 15. Taxation (a) The company’s shares were listed on the Junior Market of the Jamaica Stock Exchange, effective 21 September 2011. Consequently, the company is entitled to a remission of tax for ten (10) years in the proportions set out below, provided the shares remain listed for at least 15 years: Years 1 to 5 100% Years 6 to 10 50% The financial statements have been prepared on the basis that the company will have the full benefit of the tax remissions. Subject to agreement with the Minister of Finance and Planning, the income tax payable for which remission has been granted is $102,070,000 (2014 - $117,015,000). (b) Taxation is based on the profit for the year adjusted for taxation purposes and represents income tax at 33 ⅓ % Deferred income taxes (Note 29) 2015 $’000 (970) (970) 2014 $’000 (113) (113) (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 ⅓ % 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 2015 $'000 2014 $'000 303,448 319,965 101,149 106,655 (102,070) (117,015) (34,197) (24,985) 27,925 6,223 (970) 29,829 5,403 (113) 16. Earnings Per Share The calculation of earnings per share is based on the net profit for the year and 1,031,250,000 (2014 - 1,031,250,000) ordinary shares in issue. Net profit from continuing operations ($’000) Weighted average number of ordinary shares in issue (‘000) Earnings per share ($) 2015 304,418 1,031,250 0.30 2014 320,078 1,031,250 0.31 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 45 17. Dividends per Share The dividends paid in 2015 and 2014 were as follows: Interim dividends:- 9.7 cents per stock unit – April 2015 7.0 cents per stock unit – December 2015 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 2015 $’000 100,031 72,188 - - 172,219 2014 $’000 - - 78,787 125,091 203,878 2015 $’000 345,361 656,955 - 1,002,316 2014 $’000 290,378 966,917 15,232 1,272,527 Short term deposits comprise term deposits and repurchase agreements with an average maturity of 57 days (2014 – 47 days), and include interest receivable of $4,627,000 (2014 – $5,927,000). The weighted average effective interest rate on short term investments and deposits were as follows: J$ US$ 2015 % 6.1 2.1 The weighted average effective interest rates on cash balances for the year were as follows: J$ US$ GBP 2015 % 1.0 0.1 0.1 2014 % 7.0 2.1 2014 % 1.0 0.1 0.1 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) 19. Due from Reinsurers and Coinsurers Page 46 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 Short-term loan receivable from parent (Note 9) (a) Mortgage receivable from fellow subsidiary (Note 9) (b) 2015 $’000 2014 $’000 400,558 71,915 105,287 577,760 361,097 90,498 76,989 528,584 2015 $’000 12,003 29,958 41,961 2014 $’000 7,917 18,356 26,273 2015 $’000 170,000 - 170,000 2014 $’000 - 169,591 169,591 (a) Short-term loan represents loan extended by the company to parent company at rate of 12.25% for 6 months to mature June 2016. (b) Mortgage receivable which was repaid during the year represented a loan extended by the company to a fellow subsidiary for land and building sold to that fellow subsidiary. The loan attracted an interest of 12% per annum and had original 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 2015 $’000 9,341 95 9,436 (559) 8,877 8,814 63 8,877 2014 $’000 39,366 9,437 48,803 (4,247) 44,556 36,675 7,881 44,556 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 47 23. Investment Securities Debt securities - Available for sale – at fair value Government of Jamaica Securities Benchmark Investment Notes United States Dollar Benchmark Notes United States Dollar Indexed Notes Certificate of Deposits United States Dollar Corporate Bond Other Government Securities Interest receivable Equity securities - Available for sale, at fair value – Quoted shares Fair value through profit or loss Unit Trust Funds 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 2015 $’000 2014 $’000 328,323 4,022 52,642 487,199 872,186 97,826 138,903 31,094 1,140,009 216,668 3,830 - 284,478 504,976 93,786 137,608 11,398 747,768 229,467 162,377 26,957 - 105 105 (105) - 256,424 1,396,433 (105) - 162,377 910,145 2015 % 8.40 5.25 6.25 6.12 2014 % 8.00 4.00 6.25 6.12 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 48 23. Investment Securities (Continued) Included in investments, are Government of Jamaica Benchmark Investment Notes valued at $45,000,000 (2014- $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 $89,312,000 (2014 - $55,385,000). 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 $10,809,000. 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 2015 (expressed in Jamaican dollars unless otherwise indicated) 25. Property, Plant and Equipment Furniture, Fixtures & Equipment $’000 Buildings $’000 Motor Vehicles $’000 Work-In- Progress $’000 At Cost - At 1 January 2014 Additions Disposals At 31 December 2014 Additions Disposals 25,310 22,396 76,530 14,679 - (1,555) 47,706 25,539 89,654 19,769 - (2,540) At 31 December 2015 73,245 106,883 Depreciation - At 1 January 2014 Charge for the year On disposals At 31 December 2014 Charge for the year On disposals 8,381 2,385 44,335 10,112 - (1,555) 10,766 3,662 52,892 11,257 - (1,571) At 31 December 2015 14,428 62,578 51,772 15,509 - 67,281 8,879 (6,249) 69,911 34,276 11,569 - 45,845 12,746 (6,249) 52,342 Page 49 Total $’000 153,612 52,584 (1,555) 204,641 59,767 (8,789) - - - - 5,580 - 5,580 255,619 - - - - - - - 86,992 24,066 (1,555) 109,503 27,665 (7,820) 129,348 Net Book Value - 31 December 2015 31 December 2014 58,817 36,940 44,305 36,762 17,569 21,436 5,580 126,271 - 95,138 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) 26. Intangible Assets At Cost - At 1 January 2014 Additions At 31 December 2014 Additions At 31 December 2015 Amortisation - At 1 January 2014 Charge for the year At 31 December 2014 Charge for the year At 31 December 2015 Net Book Value - 31 December 2015 31 December 2014 27. Due to reinsurers and coinsurers Local reinsurers Overseas reinsures 28. Other Liabilities Statutory contributions payable Accrued expenses General consumption tax Other payables 2015 $’000 28,397 350,371 378,768 2015 $’000 4,329 40,756 15,609 39,354 100,048 Page 50 Computer Software $’000 76,691 730 77,421 711 78,132 63,528 6,430 69,958 4,587 74,545 3,587 7,463 2014 $’000 14,220 254,217 268,437 2014 $’000 4,144 41,917 9,901 19,197 75,159 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 51 29. Deferred Income Taxes 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 Accelerated depreciaton Unrealised fair value losses Deferred income tax liabilities Accelerated tax depreciation 2015 $’000 3,897 - 3,897 2015 $’000 499 970 2,428 3,897 2015 $’000 1,726 2,171 3,897 2014 $’000 1,200 (701) 499 2014 $’000 340 113 46 499 2014 $’000 - 1,200 1,200 - (701) General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 52 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 2015 $’000 2014 $’000 943,168 1,128,221 91,976 2,163,365 844,525 1,063,053 80,995 1,988,573 (400,558) (71,915) (472,473) (361,097) (90,498) (451,595) 542,610 1,056,306 91,976 1,690,892 483,428 972,555 80,995 1,536,978 2015 $’000 956,755 159,485 11,982 2014 $’000 901,870 149,899 11,284 1,128,222 1,063,053 69,723 2,192 71,915 887,032 157,293 11,982 1,056,307 85,613 4,885 90,498 816,257 145,014 11,284 972,555 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2015 (expressed in Jamaican dollars unless otherwise indicated) 30. Insurance Reserves (Continued) Page 53 An actuarial valuation was performed to value the policy and claims liabilities of the company as at 31 December 2015 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 actuary employed the Paid Loss Development method, the Incurred Loss Development method, the Bornhuetter-Ferguson Paid Loss method, the Bornhuetter-Ferguson Incurred Loss method and the Frequency-Severity method. 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 31 March 2016 the actuary found that the amount of policy and claims liabilities represented in the statement of financial position at 31 December 2015 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 Gross reserves for claims outstanding at end of year 2015 $’000 2014 $’000 1,063,053 (90,498) 972,555 900,384 (101,468) 798,916 696,480 678,558 (613,939) 1,210 83,751 1,056,306 71,915 1,128,221 (506,353) 1,434 173,639 972,555 90,498 1,063,053 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 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 54 30. Insurance Reserves (Continued) (c) The movement in unearned premiums is as follows: Movement in unearned premiums: 2015 2014 Gross $’000 Reinsurance $’000 Net $’000 Gross $’000 Reinsurance $’000 Net $’000 Balance at 1 January 844,525 (361,097) 483,428 1,377,948 (880,411) 497,537 Premiums written during the year Premiums earned during the year Portfolio adjustment Balance at 31 December 6,112,355 (4,921,390) 1,190,965 5,072,375 (4,005,837) 1,066,538 (6,013,712) 4,893,658 (1,120,054) (5,605,798) 4,536,700 (1,069,098) - 98,643 (11,729) (39,461) (11,729) - 59,182 (533,423) (11,549) 519,314 (11,549) (14,109) 943,168 (400,558) 542,610 844,525 (361,097) 483,428 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 - 2015 $’000 446,897 448,100 8,806 39,365 2014 $’000 350,786 384,645 6,181 102,913 943,168 844,525 2015 $’000 2014 $’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 2015 (expressed in Jamaican dollars unless otherwise indicated) Page 55 32. Capital Reserves At beginning of and end of year The capital reserves at year end represent realised surpluses. 33. Fair Value Reserve 2015 $’000 2014 $’000 152,030 152,030 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 2014, indicated that the scheme was adequately funded at that date. Pension contributions for the period totalled $3,772,000 (2014 – $3,817,000), and are included in staff costs (Note 14). 35. Contingency The company is involved in certain legal proceedings incidental to the normal conduct of business. Management believes that none of these legal proceedings, individually or in the aggregate, will have a material effect on the company. 36. Commitments Operating lease commitments The company leases its office situated at 58 Half Way Tree Road from fellow subsidiary Unity Capital Incorporated under a non-cancellable operating lease agreement. The lease is for a term of five (5) years, and is renewable at the end of the lease period at market rate. The future aggregate minimum lease payments under non-cancellable operating leases are as follows No later than 1 year Later than 1 year and no later than 2015 US$’000 2014 US$’000 118 - 118 141 118 259 Notes Notes For more information, visit www.genac.com Form Of Proxy “ I/We _____________________________________________________________(insert name)of _________________________________ ________________________________(address) being a shareholder(s) of the above-named Company, hereby appont:________________________________________________________________(proxy name) of ____________________________ _________________________________________(address) or failing him, ___________________________________________________.. ____________________________(alternate proxy) of _____________________________________________________________________ _______________________________________________________________(address) as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held at 10 am on June 1, 2016, 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, 2015. For Against 2. To authorise the Board of Directors to re-appoint PWC as the Auditors of the Company and to fix their remuneration. 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-appoint- ment. 3.(a) To re-appoint Paul B Scott a Director of the Board of the Company.. For Against 3.(b) To re-appoint Melanie Subratie as a Director of the Board of the Company. For Against 3.(c) To re-appoint Christopher Nakash as a Director of the Board of the Company. For Against 4(a) To authorise the Board of Directors to fix the remuneration of the Directors. For Against 5. To approve the aggregate amount of interim dividends declared by the Board during the financial year ended 31st December 2015, being $72, 187, 500 or 7.0 cent per ordinary share, as the final dividend for that year. For Against Signed this day of 2016: 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) For more information, visit www.genac.com
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