Generac Holdings Inc
Annual Report 2021

Plain-text annual report

GENERAL ACCIDENT ANNUAL REPORT | 2019 | 1 TABLE OF CONTENTS TABLE OF CONTENTS GENERAL ACCIDENT AT A GLANCE CORPORATE SOCIAL RESPONSIBILITY Our Purpose Our Vision Corporate Structure Key Financial Highlights • Earnings per share • Consistent Shareholder Dividend • Stock Prices 10 - Year Statistical Review Our Strategic Focus 5 6 7 9 11 NOTICE OF ANNUAL GENERAL MEETING 14 Notice of Annual General Meeting GOVERNANCE Chairman’s Report Directors’ Report Directors’ Profiles Corporate Governance Report 18 19 21 25 LEADERSHIP AND OPERATIONS Senior Leadership Team Management Team Regional Management Team Agent Network Management Discussion and Analysis Risk Management Risk Committee 27 29 31 33 35 40 41 43 46 49 50 51 64 65 66 67 69 70 71 72 74 Corporate Social Responsibility Employee Engagement DISCLOSURE OF SHAREHOLDINGS Top 10 Shareholders Directors’ Shareholdings Senior Leadership and Management Shareholdings CORPORATE DATA 53 54 Company Profile Contact Information • Jamaica - Kingston - Montego Bay • Trinidad • Barbados FINANCIAL STATEMENTS Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Company Statement of Comprehensive Income Company Statement of Financial Position Company Statement of Changes in Equity Company Statement of Cash Flows Notes to the Financial Statements PROXY FORM TABLE OF CONTENTS GENERAL ACCIDENT AT A GLANCE CORPORATE SOCIAL RESPONSIBILITY Our Purpose Our Vision Corporate Structure Key Financial Highlights • Earnings per share • Consistent Shareholder Dividend • Stock Prices 10 - Year Statistical Review Our Strategic Focus NOTICE OF ANNUAL GENERAL MEETING Notice of Annual General Meeting 14 GOVERNANCE Chairman’s Report Directors’ Report Directors’ Profiles Corporate Governance Report LEADERSHIP AND OPERATIONS Senior Leadership Team Management Team Regional Management Team Agent Network Management Discussion and Analysis Risk Management Risk Committee 5 6 7 9 11 18 19 21 25 27 29 31 33 35 40 41 43 46 Corporate Social Responsibility Employee Engagement DISCLOSURE OF SHAREHOLDINGS 49 50 51 Top 10 Shareholders Directors’ Shareholdings Senior Leadership and Management Shareholdings CORPORATE DATA 53 54 Company Profile Contact Information • Jamaica - Kingston - Montego Bay • Trinidad • Barbados FINANCIAL STATEMENTS 64 65 66 67 69 70 71 72 74 Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Company Statement of Comprehensive Income Company Statement of Financial Position Company Statement of Changes in Equity Company Statement of Cash Flows Notes to the Financial Statements PROXY FORM OUR PURPOSE General Accident offers a wide range of innovative, affordable general insurance products to deliver financial protection and peace of mind to individuals, families and businesses, while building a trained and well-compensated staff complement and delivering a fair return on investment to our shareholders. OUR VISION General Accident Insurance Company (GenAc) is a regional market leader in the general insurance sector contributing to Caribbean development through sound risk transfer mechanisms and excellent customer service. We build robust and long-term financial health through profitable, sustainable growth, supported by state-of-the- art digital technology and innovative corporate social responsibility programmes. CORPORATE STRUCTURE General Accident Insurance Group Jamaica Revenue J$ 12.974B Barbados Revenue J$ 330.648M Trinidad Revenue J$ 654.851M 170 Employees 6 Employees 53 Employees Net Assets J$ 2.870B Net Assets J$ 88.70M Net Assets J$ 387.47M 2021 | GENERAL ACCIDENT ANNUAL REPORT 6 KEY FINANCIAL HIGHLIGHTS PREMIUM MOVEMENT OVER FIVE YEARS 0.26 0.26 0.23 0.16 0.12 0.3 0.2 0.1 0 2017 2018 2019 2020 2021 7 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 8 125% 100% 75% 50% 25% 0% COMBINED RATIOS 101% 99% 95% 86% 78% 2017 2018 2019 2020 2021 Motor 26% Marine 1% Liability 7% HOC & Burgary 2% Misc. Accident & Engineering 5% Property 59% 7 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 8 10 - YEAR STATISTICAL REVIEW 9 2021 | GENERAL ACCIDENT ANNUAL REPORT EMPLOYEESGROSS WRITTEN PREMIUMS ($’000)CLAIMS INCURRED ($’000) UNDERWRITING PROFIT/(LOSS) ($’000)PROFIT BEFORE TAX ($’000)PROFIT AFTER TAX ($’000)CASH DIVIDENDS ($’000)SHAREHOLDER’S EQUITY ($’000)LOSS RATIORETURN ON EQUITYDIVIDEND YIELD ON AVERAGE EQUITYP/E RATIOCLOSING STOCK PRICEDIVIDEND PAYOUT RATIO MARKET CAPITALIZATION ($’000) 202120202019201820172016201520142013201220522912,044,9901,816,926 1,445259,536193,812222,6682,974,86666%6%7%25.86.1950%6,383,43813,959,8071,751,36080,317 259,695149,236196,7012,921,96458%5%7%22.75.950%6,084,37513210,727,8281,205,328442,136770,154651,558142,6843,003,56554%32%6%13.17.150%7,321,8751318,735,7971,023,022174,768352,569285,370150,0472,056,61263%15%8%12.63.5468%3,650,6251117,106,2541,087,590-35,532236,077221,236200,0011,937,77182%11%10%13.32.852%2,887,500915,649,097746,07345,609404,243386,879175,0031,964,42066%22%9%7.92.9957%3,083,438906,112,355696,480114,656303,448304,418172,2191,775,29762%19%10%6.82.0554%2,114,063785,072,375678,558101,941319,965320,078203,8781,579,38263%22%13%5.61.7562%1,804,688834,479,755646,79158,503323,702327,914140,0251,456,94465%25%10%5.61.848%1,856,250773,788,969540,775117,362285,269290,537100,0311,288,85058%25%8%6.31.7635%1,815,000 2021 | GENERAL ACCIDENT ANNUAL REPORT 10 EMPLOYEESGROSS WRITTEN PREMIUMS ($’000)CLAIMS INCURRED ($’000) UNDERWRITING PROFIT/(LOSS) ($’000)PROFIT BEFORE TAX ($’000)PROFIT AFTER TAX ($’000)CASH DIVIDENDS ($’000)SHAREHOLDER’S EQUITY ($’000)LOSS RATIORETURN ON EQUITYDIVIDEND YIELD ON AVERAGE EQUITYP/E RATIOCLOSING STOCK PRICEDIVIDEND PAYOUT RATIO MARKET CAPITALIZATION ($’000) 202120202019201820172016201520142013201220522912,044,9901,816,926 1,445259,536193,812222,6682,974,86666%6%7%25.86.1950%6,383,43813,959,8071,751,36080,317 259,695149,236196,7012,921,96458%5%7%22.75.950%6,084,37513210,727,8281,205,328442,136770,154651,558142,6843,003,56554%32%6%13.17.150%7,321,8751318,735,7971,023,022174,768352,569285,370150,0472,056,61263%15%8%12.63.5468%3,650,6251117,106,2541,087,590-35,532236,077221,236200,0011,937,77182%11%10%13.32.852%2,887,500915,649,097746,07345,609404,243386,879175,0031,964,42066%22%9%7.92.9957%3,083,438906,112,355696,480114,656303,448304,418172,2191,775,29762%19%10%6.82.0554%2,114,063785,072,375678,558101,941319,965320,078203,8781,579,38263%22%13%5.61.7562%1,804,688834,479,755646,79158,503323,702327,914140,0251,456,94465%25%10%5.61.848%1,856,250773,788,969540,775117,362285,269290,537100,0311,288,85058%25%8%6.31.7635%1,815,000OUR STRATEGIC FOCUS VALUE CREATION AND LONG-TERM SUSTAINABILITY GenAc provides risk transfer mechanisms to our customers, guided by 40 years of expertise and experience. We facilitate and support commerce by protecting the assets of people and businesses. Using sound investment decisions and a strategy of managed growth, we have built a strong balance sheet to ensure financial stability and strength. We create value for our shareholders, policyholders and employees while meeting all regulatory requirements. DISTRIBUTION CHANNELS Our head office is located in Kingston, Jamaica, and we write business through a network of valued insurance professionals islandwide. We have also embarked on a regional expansion programme and now offer our insurance products in Trinidad & Tobago and Barbados. We continue to look at other expansion opportunities within the Caribbean. FAST, FAIR CLAIMS SETTLEMENT We are committed to fast, fair claims settlement as a key element of efficient insurance services. We believe that the importance of insurance cover is tested at the time of a claim, and we seek to demonstrate to our clients that we are worthy of their trust and confidence. ROBUST RISK MANAGEMENT We have developed a comprehensive risk management framework to ensure risk tolerance limits are assessed and adhered to, particularly with regard to the acquisition of critical reinsurance support. UTILIZING INFORMATION TECHNOLOGY We have invested in continuous improvement of information technology to deliver simple, accessible online processes to our customers. We understand that ease of doing business brings a competitive advantage and we seek to ensure our customers receive the same superior level of service whether they contact us in person, by telephone or online. We place high priority on secure systems to handle payments, claims, new business and renewals. We believe our growing facility with data analytics allows us to respond quickly to changing markets for the benefit of our customers. DEVELOPING THE GENAC TEAM Insurance is a technical discipline and GenAc has a long history of recruiting, training and retaining expertise, providing all our employees with a culture of excellence and opportunity. We invest in the development of our staff members at every level by providing frequent training and mentorship programmes. MAXIMIZING OPERATIONAL EARNINGS Our growth and profitability initiatives remain: • Growth in value-priced and profitable product lines. • Payment of dividends to shareholders. • Steady strengthening of our balance sheet, liquidity base and capital to provide the essential foundation for growth. • Constant improvements in operational efficiencies to deliver excellent service to our policyholders. EMBRACING CORPORATE SOCIAL RESPONSIBILITY GenAc ensures its business model complies with the principles of good corporate citizenship. We are conscious of our impact on all aspects of society and we self-regulate our operations to make certain they benefit the economy, society and the environment. With the consistent guidance and expertise of our Board of Directors, we seek to: • Provide a productive, well-compensated and incentive- driven work environment for our employees. • Involve our staff in outreach efforts to support education, under-served children and the natural environment. • Ensure all we do is grounded in high standards of integrity and ethical conduct. 11 2021 | GENERAL ACCIDENT ANNUAL REPORT BRAND PROMISE Our values are at the heart of how we do business. They guide us in everything we do - from performing our regular daily responsibilities to making important decisions. PERFORMANCE We strive for service that exceeds customer expectations. INTEGRITY We are honest and fair in all our actions. RESPONSIBILITY We have a strong sense of responsibility towards our customers, society, the environment and each other. SOLID FOUNDATION We maintain financial strength to ensure consistent profitable growth. INNOVATION We are creative, willing to make bold decisions and challenge the status quo. 2021 | GENERAL ACCIDENT ANNUAL REPORT 12 NOTICE OF ANNUAL GENERAL MEETING 13 2021 | GENERAL ACCIDENT ANNUAL REPORT NOTICE OF ANNUAL GENERAL MEETING NOTICE OF ANNUAL GENERAL MEETING 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 9:00 am on September 14, 2022 at 58 Half Way Tree Road, Kingston 10 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 Financial Statements for the financial year ended December 31, 2021. 2. To authorize the Board of Directors to reappoint PricewaterhouseCoopers 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 Article of Incorporation of the Company and, being eligible, have consented to act on reappointment: (a) To reappoint Paul B. Scott as a Director of the Board of the Company. (b) To reappoint Melanie Subratie as a Director of the Board of the Company. (c) To reappoint Christopher Nakash as a Director of the Board of the Company. 4. To authorise the Board of Directors to fix the remuneration of the Directors. 5. To approve the aggregate amount of interim dividends declared by the Board during the financial year ended December 31, 2021 being $196,700,624 or 19.074 cents per ordinary share, as the final dividend for that year. Dated this the 27th day of June, 2022 by order of the Board Lesley Miller CORPORATE SECRETARY 2021 | GENERAL ACCIDENT ANNUAL REPORT 14 GOVERNANCE 17 2021 | GENERAL ACCIDENT ANNUAL REPORT CHAIRMAN’S REPORT General Accident successfully navigated the impact of the Covid 19 pandemic in 2021 while continuing to execute our strategy of building a leading regional general insurance company. Our brand, our people, our relationships, and our technology, allowed General Accident to deliver a record financial performance while executing on our long-term strategy. General Accident delivered a satisfactory financial result in 2021, recording the highest gross written premiums in our history. We wrote gross premiums of $14.0 billion, an increase of $1.9 billion or 16% over 2020. We achieved profit before tax of $259.7 million, produced a 9.7% return on equity and distributed $196.7 million of dividends to our shareholders. General Accident’s regional programme made significant progress in 2021. In Jamaica, we cemented our position as the largest underwriter of general insurance risks, with gross written premiums of $13.0 billion, an increase of $1.4 billion over 2020. In Trinidad, we grew gross written premiums to $654.9 million, an increase of $259.0 million over 2020, while in Barbados, we grew gross written premiums to $330.6 million, an increase of $271.9 million over 2020. In 2021, despite the impact of the pandemic and a large fire claim, General Accident’s Jamaican property and motor insurance operations had another year of strong premium growth and profitability. This is a testament to our prudent underwriting policies and strong reinsurance network. General Accident’s consolidated profits in 2021 reflect our investments in our emerging subsidiaries in Trinidad and Barbados. While these investments may have a short-term adverse impact on our financial results, over the long run they will create considerable value for the Company. Moreover, investing in organic growth involves considerably less risk than growing our business through large acquisitions. The increased adoption of technology in the Caribbean region, accelerated by the pandemic, has validated our commitment to a regional strategy. Our presence in all three of the Caribbean’s largest insurance markets diversifies our underwriting risk, creates economies of scale, and better enables General Accident to invest, develop and deploy digital insurance solutions. Going forward, General Accident is focused on strengthening our market leadership in Jamaica, expanding our operations in Trinidad and Barbados, and placing technology at the core of our operations. Paul B. Scott CHAIRMAN 2021 | GENERAL ACCIDENT ANNUAL REPORT 18 DIRECTORS’ REPORT The Directors are pleased to present their report for General Accident Insurance Company (Jamaica) Limited for the financial year ended December 31, 2021 FINANCIAL RESULTS The Statement of Comprehensive Income for the Group shows pre-tax profits for the year of $259.7 million, taxation of $110.5 million and a net profit after tax of $149.2 million. Details of these results, along with a comparison with the previous year’s performance and the state of affairs of the Group, are set out in the Management Discussion and Analysis and the Financial Statements, which are included as part of this Annual Report. DIRECTORS The Directors of the Company as at December 31, 2021, are: P.B. Scott, Melanie Subratie, Sharon Donaldson, Gregory Foster, Geoffrey Messado, Christopher Nakash, Jennifer Scott, Nicholas Scott, Duncan Stewart, Matthew Lyn and Brian Jardim. The Directors to retire by rotation in accordance with the Articles of Incorporation are: P.B. Scott, Melanie Subratie and Christopher Nakash but being eligible, will offer themselves for re-election. AUDITORS The auditors of the company, PricewaterhouseCoopers of Scotiabank Centre, Duke Street, Kingston, Jamaica, have expressed their willingness to continue in office. The Directors recommend their re-appointment. DIVIDEND A dividend of 19.074 cents per share paid on December 30, 2021, is proposed to be the final dividend in respect of the financial year ended December 31, 2021. 19 2021 | GENERAL ACCIDENT ANNUAL REPORT  2021 | GENERAL ACCIDENT ANNUAL REPORT 20 DIRECTORS’ PROFILES CHAIRMAN PAUL B. SCOTT (appointed November 1998) PB Scott is the Chairman, CEO and principal shareholder of the Musson Group. He joined the group in 1994, became CEO in 2004, and in 2009 was appointed Chairman of the Board. He is responsible for the strategic direction, performance and overall operations of the Musson Group and all of its subsidiaries, including the Facey Group, PBS Group, Seprod, T. Geddes Grant Distributors Ltd. and General Accident Insurance Company Ltd. among others. In addition to his responsibilities at Musson he serves on many public boards and commissions. He is a trustee of the American International School of Jamaica and currently is Chairman of the Development Bank of Jamaica. He is a past President of the Private Sector Organization of Jamaica. MANAGING DIRECTOR SHARON DONALDSON (appointed March 2008) Sharon Donaldson has been the Managing Director of the Company since 2008. She holds a Bachelor of Laws (LL.B.) from the University of London and an MBA from the University of Wales. She is a Chartered Accountant; a fellow member of the Institute of Chartered Accountants of Jamaica and an Attorney-at-Law. Ms. Donaldson represents the local general insurance industry in discussions with the Financial Services Commission, is treasurer for the Council of the Institute of Chartered Accountants of Jamaica and heads the committee of Professional Accountants in Business. Ms. Donaldson is also a Director of Musson (Jamaica) Limited, the parent company to General Accident and Eppley Limited. She serves as a Director and mentor of 138 Student Living Limited and Paramount Trading Jamaica Limited. She is also a member of the Jamaica Anti-Doping Commission. 21 2021 | GENERAL ACCIDENT ANNUAL REPORT DIRECTORS’ PROFILES DEPUTY CHAIR MAN MELANIE SUBRATIE (appointed March 2002) Melanie Subratie is a non-executive Director of the Company and holds a B.Sc. (Hons) from the London School of Economics. She is Chairperson of the Investment Committee of the Board. Mrs. Subratie is Chairperson and CEO of Stanley Motta Ltd. and Vice Chairman of Musson (Ja.) Ltd. She is also the Vice Chair of Eppley Ltd. and sits on the Executive Board of the Seprod Group of Companies and all its subsidiary boards. She chairs the Audit Committee for both Productive Business Solutions Ltd and Seprod Ltd. She is Chairperson of Seprod Foundation, Musson Foundation, Jamaica Girls Coding and RISE Life Management. Mrs. Subratie is an Angel investor and sits on the Boards of LoanCirrus, Bookfusion, and First Angels. She is fourth Vice President of the Jamaica Chamber of Commerce. EXECUTIVE DIRECTOR & COMPANY SECRETARY LESLEY MILLER (appointed April 2022) Lesley Miller is the Company Secretary and an executive Director of the Company. Mrs. Miller is the Group Chief Information Officer of General Accident Insurance. Prior to that Mrs. Miller was the Head of Business Operations at Digicel Jamaica where she spent several years in various senior roles. Mrs. Miller holds a B.Sc. in Computing & Information Technology (Hons.) from the University of Technology Jamaica and an M.B.A in Banking & Finance (with distinction) from the University of the West Indies. Lesley is certified by the Project Management Institute as a Project Management Professional (PMP®). NON EXECUTIVE DIRECTOR JENNIFER SCOTT (appointed December 2009) Jennifer Scott is a non-executive Director of the Company. Mrs. Scott holds a B.Sc.(Hons) in Psychology from Newcastle University, United Kingdom, a Graduate Diploma in Legal Studies from Keele University, UK, and Certificate of Legal Practice from the College of Law, London. She 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 in 2003. She is a consultant at Clinton Hart & Co., Attorneys-at-Law, specialising in financial securities and corporate law. 2021 | GENERAL ACCIDENT ANNUAL REPORT 22 DIRECTORS’ PROFILES NON EXECUTIVE DIRECTOR NICHOLAS A. SCOTT (appointed July 2011) Nicholas Scott is a non-executive Director of the Company and the Chief Investment Officer for the Musson Group. He also serves as the Managing Director of Eppley Ltd. and as a Director of many of the Musson subsidiaries and affiliates including Seprod. He returned to Jamaica in 2009 after working as a private equity investor and investment banker at the Blackstone Group in New York and Brazil. Mr. Scott holds a BSc. in Economics (Magna Cum Laude) from the Wharton School at the University of Pennsylvania, an MBA (Beta Gamma Sigma) from Columbia Business School and a MPA from the Harvard Kennedy School of Government. INDEPENDENT NON-EXECUTIVE DIRECTOR DUNCAN STEWART (appointed August 2011) Duncan Stewart is an independent, non-executive Director of the Company. He is one of the family leaders of Stewart’s Auto Sales Ltd. and its affiliated companies, Stewart’s Auto Paints Ltd., Tropic Island Trading Co. Ltd. and Silver Star Motors Ltd. He joined his family’s business as a 3rd generation member in 1985 after graduating with a B. Eng (Mech) degree from McGill University. He learned the business by working his way through the ranks, learning and following the family’s culture of service. INDEPENDENT NON-EXECUTIVE DIRECTOR CHRISTOPHER NAKASH (appointed December 2006) Christopher Nakash is an independent non-executive Director 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. 23 2021 | GENERAL ACCIDENT ANNUAL REPORT DIRECTORS’ PROFILES EXECUTIVE DIRECTOR GREGORY ST. HUGH FOSTER (appointed April 2018) Gregory Foster is an executive Director of the Company and a member of the Audit Committee of the Board. He serves as the Group’s Chief Operating Officer. He obtained his Association of Chartered Certified Accountant (Glasgow, UK) professional qualification in 2006, and is also a member of Institute of Chartered Accountants of Jamaica. INDEPENDENT NON-EXECUTIVE DIRECTOR BRIAN JARDIM (appointed August 2017) Brian Jardim is an independent non-executive Director of the Company. He is the founder and CEO of Rainforest Seafoods Ltd., the leading seafood harvester, processor and distributor in the Caribbean. Mr. Jardim currently serves as a director on the Board of the Jamaica Observer, We Care for Cornwall Regional Hospital, and Industrial Chemical Company among others. He is a Certified Public Accountant (CPA), a graduate of the University of Florida where he obtained a MSc. in Financial Accounting and a BSc. in Business Administration. He also holds a Diploma in Business Administration from Ryerson University. INDEPENDENT NON-EXECUTIVE DIRECTOR MATTHEW LYN (appointed July 2015) Matthew Lyn is an independent non-executive Director of the Company. Mr. Lyn is the Chief Operating Officer of the CB Group and its related companies, including CB Foods Ltd., Newport Mills Ltd. and Imagination Farms Ltd. He holds a B.B.A from the Goizuetta Business School at Emory University. 2021 | GENERAL ACCIDENT ANNUAL REPORT 24 CORPORATE GOVERNANCE REPORT values and the broad requirements of the Regulators. The Committee is tasked with the prevention, identification and management of conflicts of interest and the disclosures around any such conflicts. The Conduct Review Committe is comprised of three (3) directors. The committee meets at least three (3) times a year. THE AUDIT COMMITTEE The Committee is responsible for providing oversight and advice to the Board on all matters relating to financial reporting, internal controls, and approval of financial reports to be circulated to all regulatory bodies. The Audit Committee is comprised of three (3) non-executive directors and one (1) executive director. The Audit Committee meets at least five (5) times for the year. INVESTMENT AND LOAN COMMITTEE The Committee is responsible for driving the Group’s investment strategy and ensuring that the strategy meets all compliance requirements, inter alia, liquidity, quality, and term of investments. The Committee also ensures that any material financial arrangement meets regulatory standards and fits the credit risk appetite of the Company. The Investment and Loan Committee is comprised of (3) non-executive directors and one (1) executive director. The Committee meets at least four (4) times for the year. BOARD AND COMMITTEE MEETINGS The Committees and members continued to fulfill their mandate to the Group. In 2021 in person Board meetings reconvened as much as possible. CORPORATE GOVERNANCE Our Corporate Governance framework is designed to support the transparency and accountability of the people and processes in the Group as it expands its reach in the region. The framework is documented in our Corporate Governance Policy, wherein, prescribed practices are aligned with the rigor of global best practice, the Private Sector Organization of Jamaica’s Code on Corporate Governance and the Jamaica Stock Exchange’s Corporate Governance Guidelines. The Group’s corporate governance standards reflect the key tenets of responsibility, integrity, prudence, transparency and fair and equitable decision making. It is the collective responsibility of the Board to supervise and direct the company’s affairs in the interest of growth and profitability of the business. The members of the Board of Directors and those entrusted with administering our Corporate Governance embody diversity, experience, and proven excellence in their fields. Our Directors and Committees are aligned behind the strategic and corporate objectives set by management and are tasked with monitoring and ensuring that the efforts of all stakeholders support those objectives. The Board is composed to promote balanced decision making and independence. The Board is comprised of eleven (11) members, a non-executive Chairman, eight (8) non-executive directors and two (2) executive directors. THE COMPENSATION COMMITTEE The Compensation Committee is responsible for oversight of executive remuneration packages. These packages are designed to reward performance and incentivize growth and are driven by the core organization objectives and in alignment with necessary risk considerations. THE CONDUCT REVIEW COMMITTEE The Committee has responsibility for oversight of the policies and procedures to ensure that the company conducts its affairs responsibly and in keeping with our 25 2021 | GENERAL ACCIDENT ANNUAL REPORT LEADERSHIP AND OPERATIONS SENIOR LEADERSHIP TEAM CEO & MANAGING DIRECTOR SHARON DONALDSON Sharon Donaldson has been with the company for over 30 years, first joining as the Financial Controller in 1989 before becoming the Managing Director and CEO in 2008. Sharon’s primary responsibilities include making major corporate decisions, managing the overall operations and resources of the Group and acting as the main point of communication between the Board of Directors and corporate operations. CHIEF OPERATING OFFICER GREGORY FOSTER Gregory Foster is GenAc’s Chief Operating Officer with responsibility for the underwriting, claims and AutoSmart divisions. Mr. Foster joined GenAc in 2014 with a strong background as an audit manager and has held his current position since January 2019. 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. CEO - TRINIDAD & TOBAGO NATASHA PETTIER Natasha Pettier is the Chief Executive Officer of General Accident Insurance Company Trinidad and Tobago Limited. She joined the Company in October 2019 as head of underwriting and insurance operations. She holds a Bachelor of Laws (LL.B.), an MBA from the Heriot-Watt University, UK, is a Fellow of the Chartered Insurance Institute of London, a qualified Member of the Institute of Risk Management and a Health Insurance Associate. She has over 20 years’ experience in the insurance industry and is involved with various committees of both the Association of the Trinidad and Tobago Insurance Companies and the Trinidad and Tobago Insurance Institute. GENERAL MANAGER - BARBADOS WANDA MAYERS Wanda Mayers is the General Manager of General Accident Insurance Company (Barbados) Limited. Her experience in general insurance includes customer service, marketing, reinsurance underwriting and claims. After becoming an Associate of the Chartered Insurance Institute (ACII) in the United Kingdom, she rose in the ranks at the Insurance Corporation of Barbados Limited, from Supervisor of the Reinsurance Department in 1993 to Assistant Vice President of Direct Underwriting and Customer Experience in 2015. Her managerial experience was strengthened at Sagicor General Insurance Inc., as Vice-President for Underwriting in Barbados, ending in 2018. Myers has tutored various subjects at the Insurance Institute of Barbados and has served as Director of several companies in the public and private sector. 27 2021 | GENERAL ACCIDENT ANNUAL REPORT SENIOR LEADERSHIP TEAM CHIEF INFORMATION OFFICER LESLEY MILLER Lesley Miller joined GenAc as Chief Information Officer in January 2018 with responsibility for technology, business intelligence and digital marketing, bringing over 15 years’ experience in the insurance and telecommunications industries to the Company. Mrs. Miller holds a Bachelor of Science degree in Computing & Information Technology from the University of Technology (Jamaica) and an MBA in Banking and Finance from the University of the West Indies. She is a certified Project Management Professional and is a member of the Doctor Bird Chapter of the Project Management Institute. CHIEF INSURANCE OFFICER MICHELLE ROBINSON Michelle Robinson joined General Accident in October 1990. From 1990 to 2011, Michelle served in various roles, including Management Trainee, Claims Manager and Marketing Manager. Michelle’s varied experience developed her expertise in underwriting and claims for all lines of business. Michelle left General Accident in 2011, returning in 2021, after gaining invaluable experience in branch network management and regional oversight. In her current role, Michelle oversees the operations of the Underwriting and Claims Departments and provides technical advice to our regional operations. Michelle holds the ACII designation as a Chartered Insurer with the Chartered Insurance Institute, London. BUSINESS DEVELOPMENT OFFICER JAMALDA STANFORD-BROWN Jamalda Stanford-Brown joined GenAc as Business Development Officer in January 2018. She has a wealth of experience in auditing, risk assessment and reinsurance. Mrs. Stanford-Brown holds a Bachelor of Science degree in Economics and Accounting from the University of the West Indies. She is a Certified Public Accountant, a Chartered Property and Casualty Underwriter and holds an Associate Degree in Reinsurance. GENERAL MANAGER – AUTOSMART JANILLE JARRETT Janille Jarrett joined General Accident in May 2005, and has worked in the Customer Service, Underwriting and Broker Services departments. She advanced through the ranks and held the position of Management Trainee up to August 2015, when she migrated. She re-joined us in July 2016 and was appointed Underwriting Manager -AutoSMART, which is a specialized insurance business unit within General Accident. Janille went on to spend four (4) years as the Motor Underwriting Manager for General Accident, and, under her management we saw a significant growth in our motor portfolio.   In January 2021, Janille was promoted to Senior Portfolio Manager with responsibility for the AutoSMART Unit. She is a Certified Insurance Technician and is currently pursuing The Chartered Insurance Professional (CIP) Designation. 2021 | GENERAL ACCIDENT ANNUAL REPORT 28   MANAGEMENT TEAM CAREEN NOLAN Head of Property & Casualty Division ANGELLA REYNOLDS Underwriting Consultant PETAGAYE MCCOOK Legal Services Manager CAROL BARNETT Claims Manager JANILLE JARRETT General Manager AutoSmart 29 2021 | GENERAL ACCIDENT ANNUAL REPORT MANAGEMENT TEAM JOAN MCLEGGON Chief Human Resources Officer DOUGLAS HAYDEN Information Technology Manager CHERYLL HENRY Operations & Facilities Manager TANYA OAKLEY Business Intelligence Manager JANETTE COLE-SMITH Finance & Compliance Manager 2021 | GENERAL ACCIDENT ANNUAL REPORT 30 REGIONAL MANAGEMENT TEAM NATASHA PETTIER CEO Trinidad & Tobago ASHMIN MAHASE General Manager Trinidad & Tobago JESEANIA GLASGOW-BURNETT Manager, Underwriting and Business Development - Trinidad & Tobago DUNSTAN LODGE Head of Customer Support Trinidad & Tobago SHIVANNE RAMADHAR Accountant Trinidad & Tobago RAJIN MATADEEN Claims Manager Trinidad & Tobago WANDA MAYERS General Manager Barbados GAIL GRIFFITH Underwriter Barbados 31 2021 | GENERAL ACCIDENT ANNUAL REPORT  2021 | GENERAL ACCIDENT ANNUAL REPORT 32 AGENT NETWORK BARBARA SAMUELS Kingston CADDINE WILLIAMSON Mandeville , Manchester MARLENE DUFFUS Kingston DEBRA REID-GIBBS Portmore, St. Catherine ORAL MYLES Sav-la-mar, Westmoreland CHERRICE BROWN Ocho Rios, St. Ann ROCHELLE CLARKE Sav-la-mar, Westmoreland MARLON CREARY Kingston JONELLE JENKINS Morant Bay, St. Thomas 33 2021 | GENERAL ACCIDENT ANNUAL REPORT MANAGEMENT DISCUSSION AND ANALYSIS MANAGEMENT DISCUSSION AND ANALYSIS PROFITABILITY In 2021, the General Accident Group successfully navigated the impact of the Covid 19 pandemic and continued to execute our strategy of building a leading regional general insurance company. Indeed, our exceptional people, relationships, technology and brand allowed General Accident to deliver a solid financial performance. The General Accident Group recorded the highest gross written premiums in our history. We achieved gross written premiums of $14.0 billion, an increase of $1.9 billion or 16% over 2020. We achieved a profit before tax of $259.7 million, produced a 9.7% return on equity and distributed $196.7 million of dividends to our shareholders. Notwithstanding Covid 19’s continued impact on regional economies in 2021, we maintained high levels of customer service, expanded our digital competence, and provided effective communication for our customers and stakeholders. Notably, despite the impact of a large fire claim, General Accident’s Jamaican property and motor insurance operations had another year of solid premium growth and profitability. This is a testament to our prudent underwriting policies and strong reinsurance network. General Accident Jamaica produced revenue of $13.0 billion, up 12% on the prior year of $11.6 billion; underwriting profit of $428.1 million, up 144% on the previous year of $175.5 million; net profit of $501.2 million, up 27% million on prior year of $393.4 million. General Accident Trinidad and Tobago produced revenue of $654.9 million, an increase of $259.0 million or 67% over 2020, and a net loss of $244.4 million in its second full year of operation. Even though profitability fell below budget, we are incredibly encouraged by the significant increase in revenue. In 2021, GenacTT completed its rebranding exercise and evolved from offering only motor insurance products to offering seventeen (17) new lines of insurance products with solid support from our panel of reinsurers. GenacTT now works with all the 35 2021 | GENERAL ACCIDENT ANNUAL REPORT major insurance brokers in the Trinidad and Tobago market and is well-positioned for continued growth. General Accident Barbados experienced rapid growth in 2021, its first full year of operation. Revenue grew from $60.0 million for the eight (8) months of 2020 to $330.6 million for the 2021 financial year. This growth is primarily attributed to increased broker penetration and the expansion of our agent network. Although Group business continued to support our portfolio, personal lines insurance products, particularly motor insurance products, have exceeded our budgeted expectations. As General Accident Barbados established itself, a modest loss was budgeted. The company performed better than anticipated through careful cost management and a favourable loss ratio. The 2021 net loss was $99.9 million. General Accident Barbados doubled its staff complement and improved its operating efficiency by digitising its processes. MANAGEMENT DISCUSSION AND ANALYSIS CONT. Gross Written Premium Composition 2020 Motor 27% Casualty 15% Property 58% Gross Written Premium Composition 2021 Motor 27% Casualty 14% Property 59% 2021 | GENERAL ACCIDENT ANNUAL REPORT 36 MANAGEMENT DISCUSSION AND ANALYSIS CONT. FINANCIAL HIGHLIGHTS GENERAL ACCIDENT GROUP GENERAL ACCIDENT JAMAICA Consistent premium growth 20 years of premium growth Gross written premiums of $14.0 billion Gross written premiums of $13.0 billion Net Profit for the year of $149.2 million Net Profit for the year of $501.2 million Shareholders’ Equity of $2.92 billion Shareholders’ Equity of $2.87 billion Total assets of $12.5 billion Total assets of $10.2 billion Earnings per share of $0.25 Profit attributable to shareholders was $254.8 million in 2021. We paid dividends amounting to $196.7 million in the year under review. INVESTMENT INCOME Investment income decreased by 23% to $226.5 million, down from $293.9 million in 2020, with a loss of $7.5 million reported in Other Comprehensive Income. We are pleased that we could produce a minimum return on investment (ROI) of 5.0%. 37 2021 | GENERAL ACCIDENT ANNUAL REPORT MANAGEMENT DISCUSSION AND ANALYSIS CONT. FINANCIAL STRENGTH General Accident Group is well capitalised with an equity book value of $2.9 billion, providing stability to weather any potential economic headwinds of 2022. Total assets increased by 12% to $12.5 billion, up from $11.2 billion in 2020. Notably, Cash and Cash Equivalents increased by 91% to $1.4 billion, up from $756.5 million in 2020. CAPITAL MANAGEMENT General Accident Group allocates capital to maximise long-term shareholder value while maintaining financial strength. We consistently meet required regulatory and solvency ratios. Our policy is to allocate capital to investment opportunities earning the highest risk-adjusted returns as we seek to maintain a balance between higher returns and the security of a prudent capital position. We are pleased to report that we met the regulatory capital and liquidity requirements for all entities for 2021. DESCRIPTION Jamaica MCT BENCHMARK ACTUAL 200.80% 209.10% Trinidad & Tobago Solvency Margin 110% 133% Barbados Solvency Margin 500,000 BBD 700,000 BBD LOOKING AHEAD For much of 2021, Caribbean economies continued to experience the lingering impact of the pandemic. However, at the start of 2022, we have seen positive signals, with many Caribbean governments ending lockdowns and curfews, reopening schools and offices, and removing travel restrictions. We believe these actions bode well for increased economic activity, and as a result, we anticipate that this will lead to greater demand for our insurance products. General Accident’s presence in all three of the Caribbean’s most important insurance markets creates economies of scale that enable us to invest in, develop and deploy digital insurance solutions. Consequently, as a new entrant in Trinidad and Barbados, we derive a competitive advantage from our streamlined business processes resulting from our investment in digitisation made in 2020 and 2021. This positions us well for increased operating efficiency in 2022. In 2022, General Accident remains focused on solidifying our market leadership in Jamaica, growing our business in Trinidad and Barbados, and completing our digital transformation. We will continue to leverage our market reach, digital capabilities, and financial strength to capitalise on opportunities to provide a full suite of insurance products to the Caribbean. General Accident remains committed to delivering our strategic objectives. We look ahead with confidence and enthusiasm as we believe we have the right approach, culture, and products to compete in a new digitised, customer-focused marketplace. We are well-positioned to achieve robust financial performance and satisfy policyholders. I would like to sincerely thank the Board of Directors for providing insight, guidance and support to General Accident’s management and staff. To the hardworking staff members in Jamaica, Trinidad and Barbados, my heartfelt gratitude and appreciation to you for your continued commitment to the company’s success. To our brokers and insureds, thank you for your confidence in us. We take our brand promise of excellence seriously and will continue to deliver value to our customers, employees, business partners and shareholders. Sharon Donaldson MANAGING DIRECTOR 2021 | GENERAL ACCIDENT ANNUAL REPORT 38 39 2021 | GENERAL ACCIDENT ANNUAL REPORT RISK MANAGEMENT The Group’s business practices inherently expose General Accident to the risks associated with insurance contracts. Beyond that exposure, the Group faces regulatory, market and operational risks. For each class of risk, the Risk Management Framework identifies the Group’s risk appetite and the potential outcomes that pose a threat to the achievement of the Group’s strategic objectives. Risk governance is supported by an internal Risk Committee. The Group is guided by its Risk Management Policy. Within this framework the Board has established committees to monitor the mitigation and management of these risks. The Board has overall responsibility for the oversight of the Group’s risk management framework. The risk categories subject to Board oversight are set out below: TYPE OF RISK RISK DETAIL APPROACH UNDERWRITING RISK Adverse claims development. • The Company adopts prudent reserve practices as we maintain reserves equal to our estimated ultimate liability losses and loss adjustment expenses. Inadequate premiums. • We ensure risks are priced appropriately by regular review of underwriting results. • We practice effective diversification of risks. LIQUIDITY RISK The risk of insufficient cash flows to meet settlement obligations as they fall due. • We use cash flow forecasting. • We maintain sufficient liquid assets at required levels to meet our obligations at all times. OPERATIONAL RISK internal The risk of failure of processes and systems and loss of or inadequate human resources. • We carry out frequent review of internal processes to identify vulnerabilities. • We have in place a structured programme for building our staff members capacity. REGULATORY CAPITAL The risk of not meeting regulatory benchmarks. • We carry out frequent modelling of the company’s capital components to ensure transaction decisions are made in such a way to avoid a drag on capital ratio. MARKET RISK The risk of economic losses on our investment portfolio resulting from price changes in capital markets. • A diversified portfolio lies at the heart of our strategy. Investment duration and currency are managed to avoid any mismatch of assets and liabilities, whilst earning the maximum return at an acceptable level of risk. • We use appropriate limits and early warning ratios in our asset liability management to manage market risk. CREDIT RISK The risk arising from the likely default as a result of changes in the financial position of a counterparty. • We manage credit risk by reviewing the balance sheet of counter parties in addition to using available market data to determine default probabilities. 2021 | GENERAL ACCIDENT ANNUAL REPORT 40 THE RISK COMMITTEE The Risk Committee is responsible for examining major risks faced by the Company for both assets and liabilities, reviewing tools for monitoring and controlling such risks by using outside risk experts when necessary. The Committee examines the main technical and financial underwriting commitments, claims reserving, risk concentration, counterparty limits, liquidity and operational risks, as well as relevant changes in the regulatory environment. The Risk Committee is comprised of seven members and is chaired by a member of the senior management team. It meets at least four times a year. CORPORATE SOCIAL RESPONSIBILITY GENERAL ACCIDENT ANNUAL REPORT | 2020 | 42 CORPORATE SOCIAL RESPONSIBILITY The Covid 19 pandemic continued into 2021, resulting in another unprecedented year filled with global uncertainty. General Accident remained focused on a vibrant Corporate Social Responsibility programme to play its part in advancing national development and serving the wider community while cushioning the impact on some of Jamaica’s most vulnerable people. Through the collective effort of a dedicated team, we were able to support our long-standing causes as well as new undertakings. Here are the highlights: 40TH ANNIVERSARY CELEBRATION To celebrate General Accident Jamaica’s 40th anniversary, The Company hosted a series of events. Among the celebrations were giveaways open to staff and customers alike through a Spin the Wheel challenge. For approximately three weeks in November and December, customers visiting any General Accident branch had an opportunity to spin the wheel to win a prize. Staff also took their chances at the wheel as part of the festivities. General Accident marked the milestone anniversary with gifts of fruit and ornamental trees to selected customers, staff members and organizations. The trees were sourced from the Forestry Department and gifted to those with adequate space and resources to care for them. The Company has long supported environmental initiatives and regards tree planting as an important contribution to a sustainable future. We hope to receive updates on the growing trees from the recipients. General Accident’s Marketing Associate, ShaVaughn Rattigan hands over a Spin the Wheel prize to customer Hyacinth Redley who won herself a 40th anniversary memento during the company’s milestone celebration. 43 2021 | GENERAL ACCIDENT ANNUAL REPORT EARTH DAY On Earth Day, April 22nd, General Accident team members planted a garden of lantana flowers on the General Accident property to create a habitat for butterflies and beautify the premises. Staff members Romario Miller (left) and Monique Jordan (right) transplant lantanas to the company grounds as part of General Accident’s celebration of Earth day on April 22. BLOOD DRIVE In observance of World Blood Donor Day on June 14, General Accident invited the public to donate blood to the National Blood Transfusion Service (Blood Bank) on June 15. For the blood drive, Blood Bank technicians were stationed at the General Accident offices located at 58 Half-Way-Tree Road. This initiative was done in partnership with the Musson Foundation, Shop Box and Nupak and aimed to help replenish the Blood Bank’s resources. At the end of the drive, 81 registered persons (45 of which were staff members) donated 50 units of blood. From the 50 units CORPORATE SOCIAL RESPONSIBILITY CONT. collected at the GenAc Blood Drive, the Blood Bank can save up to 150 lives. General Accident Insurance Company (Jamaica) (GenAc) CEO Sharon Donaldson (standing left) and Musson Foundation Chairperson Melanie Subratie (standing right) watch as National Blood Transfusion Service (Blood Bank) registered nurse Huntley Walker goes through the pre-donation health screening with Orville McGhan of Axia Insurance Brokers. MAISIE GREEN LEARNING CENTRE The Company continued its support of the Maisie Green Learning Centre in 2021. For Labour Day, members of staff donated a combination of gently used books from their own children or childhood as well as newly bought books, including leisure and educational books, workbooks, charts, kid-sized puzzles and lesson playing cards. In addition to the over 100 books, General Accident donated two custom built bookshelves, built by Ronald Reid, a Genac member of staff in the facilities department. The Learning Centre also received assistance with renovations of the kitchen facilities in April 2021, including the provision of an industrial stove. Brittney Walters rests after her blood donation during GenAc-hosted blood drive on June 15, 2021 observance of World Blood Donor Day (June 14). Lesley Miller (right), Chief Information Officer at General Accident Insurance (Jamaica) company (GenAc) talks about the generosity of the staff from crafting the bookshelves and donating the books with Charmaine Bennett, principal of Maisie Green Learning Centre. Olinda Prescott-Jones posed for a picture after making a successful donation General Accident team members (from left to right) Kevin Morris, Ryan Douglas, Derrick Grant, Harvin Morris, and Colesha Mahoney present an industrial stove to Maise Green Learning Centre principal, Charmaine Bennett (second left). 2021 | GENERAL ACCIDENT ANNUAL REPORT 44 CORPORATE SOCIAL RESPONSIBILITY CONT. TENNIS JAMAICA TOURNAMENT General Accident donated $100,000 to the All-Jamaica Men’s and Women’s Open Singles Tennis Jamaica tournament as an event sponsor. This was the first sporting event of its kind in over a year and took place in December attracting a record 120 entrants. Roland Phillips emerged the winner in the men’s competition and Katherine Dibbs took the trophy for women. This donation highlights GenAc’s continued commitment to promoting health and wellness in Jamaica. READ ACROSS JAMAICA DAY For the past two years, the annual Read Across Jamaica Initiative has been held virtually across the parishes of Jamaica. This year, staff members from the General Accident family read to students of Dunrobin Primary School via the video conferencing platform, Zoom. The AutoSmart team was represented by Ramon Campbell and Nishara Senior. General Accident staff members Colesha Mahoney, Kerry-Ann Turnbull and Jamalda Stanford- Brown also read stories and books to children in videos shared on Instagram. Lisa Hurd (left) and Kerry-Ann Turnbull (right) from General Accident Insurance Jamaica gleefully engage with the students of Dunrobin Primary School during the Read Across Jamaica virtual reading on May 4, 2021. HONOURABLE MENTIONS General Accident also supports the following organizations and activities: Jamaica Environment Trust (JET) Best Care Foundation Janet Richards Foundation The Salvation Army 45 2021 | GENERAL ACCIDENT ANNUAL REPORT EMPLOYEE ENGAGEMENT As the global pandemic progressed into its second year, the General Accident team found innovative ways to engage with each other while observing all relevant Covid-19 protocols. INTERNATIONAL WOMEN’S DAY Under the 2021 theme ‘Choose to Challenge’, General Accident staff members created posters to document their vows to pursue equality in their everyday lives in support of International Women’s Day. Both men and women participated and created videos to showcase their support for the cause and the year’s theme. EARTH DAY PINK DAY General Accident team members dressed in pink on October 1st as they stood in solidarity with breast cancer survivors and marked the beginning of Breast Cancer Awareness Month. Staffers also created an informative video presentation performed as an altered version of the ‘Don’t Rush’ challenge to further demonstrate their support. PEACE DAY 2021 | GENERAL ACCIDENT ANNUAL REPORT 46 EMPLOYEE ENGAGEMENT CONT. JAMAICA DAY To celebrate Jamaica day, General Accident staff members donned their best reggae/ Jamaican outfit for a day filled with fun activities. Team members were treated to a lunch hour concert where they enjoyed reggae music and played Jamaican childhood games. CHRISTMAS DECOR COMPETITION Christmas brought a new activity as General Accident departmental teams challenged each other to a Christmas decorating competition. Each department was tasked to encourage holiday cheer by decorating a designated space in keeping with their own chosen theme. The competition was judged by interior decorator, Sherrille Foote, and winners walked away with additional vacation days as the prize. CONCLUSION Despite the constraints presented by the global pandemic, General Accident maintained its support of staff activities and awareness campaigns for issues faced by many. The enthusiastic involvement of staff members throughout the year continued to celebrate the values of the Company. 47 2021 | GENERAL ACCIDENT ANNUAL REPORT DISCLOSURE OF SHAREHOLDINGS 2021 | GENERAL ACCIDENT ANNUAL REPORT 48 TOP 10 SHAREHOLDERS AS AT DECEMBER 31, 2021 NAME NO. OF UNITS PERCENTAGE Musson Jamaica Ltd. 824,999,989 80.00 Mayberry Jamaican Equities Ltd. 19,642,677 QWI Investments Ltd. 15,032,119 JCSD Trustee Services – Barita Unit Trust 14,280,309 Apex Pharmacy 10,000,000 PAM – Pooled Equity Fund 9,343,293 Lancedale Farquharson 7,625,000 Mayberry Managed Clients Account 6,760,969 Sagicor Select Funds Ltd 5,066,798 K. Chandiram Ltd. 4,331,450 1.90 1.46 1.38 0.97 0.91 0.74 0.66 0.49 0.42 49 2021 | GENERAL ACCIDENT ANNUAL REPORT DIRECTORS’ SHAREHOLDINGS AS AT DECEMBER 31, 2021 DIRECTORS COMBINED HOLDING PERCENTAGE 2021 | GENERAL ACCIDENT ANNUAL REPORT 50 SENIOR LEADERSHIP AND MANAGEMENT TEAM SHAREHOLDINGS AS AT DECEMBER 31, 2021 MANAGER COMBINED HOLDING PERCENTAGE Cheryll Henry Lesley Miller Martin Miller et al Jamalda Stanford Janille Jarrett 159,445 0.0155 321,246 0.0315 92,857 25,000 0.0090 0.0024 51 2021 | GENERAL ACCIDENT ANNUAL REPORT Musson Jamaica Ltd. 824,999,989 80.000 Sharon Donaldson 3,862,431 0.3745 350,000 1,000,000 0.0340 0.0970 Duncan Stewart 2,475,190 0.2400 Paul B. Scott Melanie Subratie Junior Levine Gregory Foster Geoffrey Messado Deborah Stewart Diana Stewart Christopher Nakash Nicholas Scott Matthew Lyn Jodi Lyn 1,698,020 1,980,198 96,500 0.1647 0.1920 0.0094 CORPORATE DATA 2021 | GENERAL ACCIDENT ANNUAL REPORT 52 COMPANY PROFILE DIRECTORS: • P.B. Scott, Chairman • Melanie Subratie, Deputy Chairman • Sharon Donaldson, Managing Director • Lesley Miller • Jennifer Scott • Nicholas Scott • Duncan Stewart • Christopher Nakash • Matthew Lyn • Brian Jardim • Gregory Foster CORPORATE SECRETARY: • Lesley Miller APPOINTED ACTUARY: • Josh Worsham, FRAS, MAAA AUDITORS: • PricewaterhouseCoopers BANKERS: • CIBC First Caribbean International Bank • First Global Bank • Bank of Nova Scotia Jamaica Ltd. • National Commercial Bank ATTORNEYS: • Nunes Scholefield & DeLeon & Co: 6A Holborn Road Kingston • DunnCox 48 Duke Street, Kingston REGISTERED OFFICE: • 58 Half Way Tree Road, Kingston 10 Telephone No: (876) 929-8451 Fax No: (876) 929-1074 Email: info@genac.com Website: www.genac.com CONTACT INFORMATION JAMAICA • General Accident Insurance Company Jamaica Limited Kingston & St. Andrew 58 Half Way Tree Road, Kingston 10 Telephone : (876) 929-9643 (876) 929-8451/4 Email: info@genac.com Montego Bay Unit 8, Summit Business Center Fairview, Montego Bay, St. James TRINIDAD • General Accident Insurance Company Trinidad and Tobago Limited Cor. French Street & Ariapita Avenue, Woodbrook, Port of Spain Trinidad, W.I. Telephone: (868) 622-7292 (868) 622 -5614 (868) 622-8500 Email: infott@genac.com BARBADOS • General Accident Insurance Company Barbados Limited Suite 8, Dome Mall, Warrens, St. Michael BB22026 Telephone: (246) 257-3392 Email: infobb@genac.com GENERAL ACCIDENT INSURANCE COMPANY JAMAICA LIMITED 31 December 2021 FINANCIAL STATEMENTS Actuary’s Report Independent Auditor’s Report to the Members Financial Statements 64 65 66 Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity 67-68 Consolidated statement of cash flows 69 70 71 Company statement of comprehensive income Company statement of financial position Company statement of changes in equity 72 - 73 Company statement of cash flows 74 - 153 Notes to the financial statements 55 2021 | GENERAL ACCIDENT ANNUAL REPORT 3. EXPRESSION OF OPINION I have examined the financial condition and valued the policy and claims liabilities of GAICJL for its balance sheet as at December 31, 2021 and the corresponding change in the policy and claims liabilities in the statement of operations for the year then ended. I meet the appropriate qualification standards and am familiar with the valuation and solvency requirements applicable to general insurance companies in Jamaica. I have relied upon PriceWaterhouseCoopers for the substantial accuracy of the records and information concerning other liabilities, as certified in the attached statement. The results of my valuation together with amounts carried in the Annual Return are the following: Claims Liabilities (J$000) Carried in Annual Return Actuary’s Estimate Direct unpaid claims and adjustment expenses: Assumed unpaid claims and adjustment expenses: Gross unpaid claims and adjustment expenses: Ceded unpaid claims and adjustment expenses: Other amounts to recover: Other net liabilities: Net unpaid claims and adjustment expenses: 3,403,453 0 3,403,453 1,609,543 0 0 1,793,910 3,407,607 0 3,407,607 1,612,765 0 0 1,794,841 Policy Liabilities (J$000) Gross policy liabilities in connection with unearned premiums: Net policy liabilities in connection with unearned premiums: Gross unearned premiums: Net unearned premiums: Premium deficiency: Other net liabilities: Carried in Annual Return Actuary’s Estimate 1,301,993 992,871 2,226,796 1,289,126 0 0 2021 | GENERAL ACCIDENT ANNUAL REPORT 56 In my opinion: (i) (ii) (iii) (iv) (v) (vi) The methods and procedures used in the verification of the data are sufficient and reliable and fulfill acceptable standards of care; The valuation of policy and claims liabilities has been made in accordance with generally accepted actuarial practice with such changes as determined and directions made by the Commission; The methods and assumptions used to calculate the policy and claims liabilities are appropriate to the circumstances of the company and of the said policies and claims; The amount of policy and claims liabilities represented in the balance sheet of General Accident Insurance Company Jamaica Limited makes proper provision for the future payments under the company’s policies and meet the requirements of the Insurance Act and other appropriate regulations of Jamaica; A proper charge on account of these liabilities has been made in the statement of comprehensive income; There is sufficient capital available to meet the solvency standards as established by the Commission Josh Worsham, FCAS, MAAA ____________________________ Name of Appointed Actuary __________________________ Signature of Appointed Actuary April 5, 2022 Date 57 2021 | GENERAL ACCIDENT ANNUAL REPORT Independent auditor’s report To the Members of General Accident Insurance Company Jamaica Limited Report on the audit of the consolidated and stand-alone financial statements Our opinion In our opinion, the consolidated financial statements and the stand-alone financial statements give a true and fair view of the consolidated financial position of General Accident Insurance Company Jamaica Limited (the Company) and its subsidiaries (together ‘the Group’) and the stand-alone financial position of the Company as at 31 December 2021, and of their consolidated and stand-alone financial performance and their consolidated and stand-alone cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and with the requirements of the Jamaican Companies Act. What we have audited The Group’s consolidated and stand-alone financial statements comprise: (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) the consolidated statement of financial position as at 31 December 2021; the consolidated statement of comprehensive income for the year then ended; the consolidated statement of changes in equity for the year then ended; the consolidated statement of cash flows for the year then ended; the company statement of financial position as at 31 December 2021; the company statement of comprehensive income for the year then ended; the company statement of changes in equity for the year then ended; the company statement of cash flows for the year then ended; and the notes to the financial statements, which include significant accounting policies and other explanatory information. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated and stand-alone financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 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 B.L. Scott B.J. Denning G.A. Reece P.A. Williams R.S. Nathan C.I. Bell-Wisdom G.K. Moore T.N. Smith DaSilva K.D. Powell. 2021 | GENERAL ACCIDENT ANNUAL REPORT 58 Independence We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code. Our audit approach Audit scope As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated and stand-alone financial statements. In particular, we considered where management made subjective judgements; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including, among other matters, consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. How we tailored our group audit scope We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls, and the industry in which the Group operates. The Group comprises three components being the Company, and two subsidiaries located in Trinidad and Tobago and Barbados. Full scope audit procedures were performed on two components which were considered individually financially significant. The audit procedures covered 96% of total assets and 98% of total revenue of the Group. In establishing the overall group audit strategy and plan, we determined the type of work needed to be performed at the component level by the Group engagement team and by the PwC component auditors. We further determined the level of involvement we needed to have in the audit work of the component auditors to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the consolidated financial statements as a whole. 59 2021 | GENERAL ACCIDENT ANNUAL REPORT Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated and stand-alone financial statements of the current period. These matters were addressed in the context of our audit of the consolidated and stand-alone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Valuation of claims liabilities for general insurance contracts Refer to notes 2 (r), 4(a) and 33 to the consolidated and stand-alone financial statements for disclosures of related accounting policies, judgements and estimates As at year end, the total reserves set aside in relation to claims liabilities amounted to $4.8 billion for the Group and $3.4 billion for the Company. This represented 51% and 46% of total liabilities for the Group and Company, respectively. We focused on this area as the determination of the value of claims liabilities requires significant judgement in the selection of key assumptions and the application of actuarial methodologies. In particular, judgement arises over the estimation of liabilities for claims reported as well as those that have been incurred but not reported (IBNR) as at 31 December 2021. There is generally less information available in relation to IBNR claims which could lead to greater variability between initial estimates and final settlement. Management engaged an actuarial expert to assist in determining the value of the claims liabilities included in the consolidated and stand-alone statements of financial position. Our approach to addressing the matter, with the assistance of our actuarial expert, involved the following procedures, amongst others: (cid:120) (cid:120) (cid:120) (cid:120) Tested the operating effectiveness of certain relevant controls over the claims business process. Tested the completeness, accuracy and reliability of the underlying data utilized by management, and its external actuarial experts, to support the actuarial valuation by agreeing, on a sample basis, to source documentation, which included signed insurance contracts and claim submissions. Assessed the independence, experience and objectivity of management’s actuarial expert. Evaluated the suitability of the methodologies and assumptions used in establishing claims liabilities against established actuarial practices, those commonly used in the insurance industry and underlying claims information. The results of our procedures indicated that the methodologies and assumptions used by management in establishing the valuation of claims liabilities for general insurance contracts were consistently applied and appropriate in the circumstances. 2021 | GENERAL ACCIDENT ANNUAL REPORT 60 Other information Management is responsible for the other information. The other information comprises the Annual Report (but does not include the consolidated and stand-alone financial statements and our auditor’s report thereon), which is expected to be made available to us after the date of this auditor’s report. Our opinion on the consolidated and stand-alone financial statements does not cover the other information and we will not express any form of assurance conclusion thereon. In connection with our audit of the consolidated and stand-alone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the consolidated and stand-alone financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. Responsibilities of management and those charged with governance for the consolidated and stand-alone financial statements Management is responsible for the preparation of the consolidated and stand-alone financial statements that give a true and fair view in accordance with IFRS and with the requirements of the Jamaican Companies Act, and for such internal control as management determines is necessary to enable the preparation of consolidated and stand-alone financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated and stand-alone financial statements, management is responsible for assessing the Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group and Company’s financial reporting process. 61 2021 | GENERAL ACCIDENT ANNUAL REPORT Auditor’s responsibilities for the audit of the consolidated and stand-alone financial statements Our objectives are to obtain reasonable assurance about whether the consolidated and stand-alone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and stand-alone financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: (cid:120) Identify and assess the risks of material misstatement of the consolidated and stand-alone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (cid:120) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group and Company’s internal control. (cid:120) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. (cid:120) Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group or Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and stand-alone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group or Company to cease to continue as a going concern. (cid:120) Evaluate the overall presentation, structure and content of the consolidated and stand-alone financial statements, including the disclosures, and whether the consolidated and stand-alone financial statements represent the underlying transactions and events in a manner that achieves fair presentation. (cid:120) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 2021 | GENERAL ACCIDENT ANNUAL REPORT 62 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated and stand-alone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 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 consolidated and stand-alone financial statements are in agreement therewith and give the information required by the Jamaican Companies Act, in the manner so required. The engagement partner on the audit resulting in this independent auditor’s report is Kevin Powell. Chartered Accountants 27 June 2022 Kingston, Jamaica 63 2021 | GENERAL ACCIDENT ANNUAL REPORT General Accident Insurance Company Jamaica Limited Consolidated Statement of Comprehensive Income Year ended 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 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 Finance charge Other income Other operating expenses Profit before Taxation Taxation Net Profit for the Year Net Profit Attributable to: Owners of General Accident Insurance Company Jamaica Limited Non-controlling interests Note 10 13 11 12 13 15 38 2021 $’000 13,959,807 (10,488,851) (216,992) 3,253,964 (221,205) 3,032,759 892,857 (511,026) (1,751,360) (1,582,913) 80,317 226,526 (7,076) 124,591 (164,663) 259,695 (110,459) 149,236 254,750 (105,514) 149,236 Page 1 2020 $’000 12,044,990 (9,066,069) (167,314) 2,811,607 (71,047) 2,740,560 771,217 (465,634) (1,816,926) (1,227,772) 1,445 293,886 (14,642) 95,591 (116,744) 259,536 (65,724) 193,812 242,503 (48,691) 193,812 EARNINGS PER SHARE 16 $0.25 $0.24 Other Comprehensive Income, net of tax: Items that may not be subsequently reclassified to profit or loss Unrealised gains/(losses) on FVOCI investments Unrealised(losses)/ gains on revaluation of real estate investment Foreign currency translation adjustments Total Other Comprehensive Income TOTAL COMPREHENSIVE INCOME Total Comprehensive Income Attributable to: Owners of General Accident Insurance Company Jamaica Limited Non-controlling interests 38 14,880 (22,417) 2,100 (5,437) 143,799 249,807 (106,008) 143,799 (45,835) 18,696 88,863 61,724 255,536 274,673 (19,137) 255,536 2021 | GENERAL ACCIDENT ANNUAL REPORT 64 65 2021 | GENERAL ACCIDENT ANNUAL REPORT General Accident Insurance Company Jamaica Limited Consolidated Statement of Changes in Equity Year ended 31 December 2021 (expressed in Jamaican dollars unless otherwise stated) Page 3 Note Share Capital $’000 Capital Reserves $’000 470,358 152,030 Property Revaluation Reserve $’000 Fair Value Reserve $’000 Translation Reserve $’000 Retained Earnings $’000 Non- Controlling Interest $’000 Total $’000 58,812 79,112 (22,037) 1,791,743 473,547 3,003,565 - - - - - - - - - - (5,646) - - - 38 38 17 - - - 242,503 (48,691) 193,812 18,696 (45,792) 59,266 29,554 61,724 18,696 (45,792) 59,266 242,503 (19,137) 255,536 - - - - - - - - - - - - - - (41,030) (46,676) 40,874 40,874 (55,765) (55,765) - (222,668) - (222,668) As at 1 January 2020 Comprehensive income: Net profit for the year Other comprehensive income Total comprehensive income Transaction with non-controlling interest Capital contribution by non- controlling interest Dividends paid by subsidiary to non-controlling interest Transactions with owners Dividends Balance at 31 December 2020 470,358 146,384 77,508 33,320 37,229 1,811,578 398,489 2,974,866 Comprehensive income: Net profit for the year Other comprehensive income Total comprehensive income Transactions with owners Dividends Balance at 31 December 2021 17 - - - - - - - - 254,750 (105,514) 149,236 (28,491) 14,851 8,697 - (494) (5,437) (28,491) 14,851 8,697 254,750 (106,008) 143,799 - - - (196,701) - (196,701) 470,358 146,384 49,017 48,171 45,926 1,869,627 292,481 2,921,964 2021 | GENERAL ACCIDENT ANNUAL REPORT 66 General Accident Insurance Company Jamaica Limited Consolidated Statement of Cash Flows Year ended 31 December 2021 (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 revaluation of investment property Gain on disposal of investment property ECL on debt investments Gain on disposal of property, plant and equipment and adjustment Finance charge Interest income Dividend income Current taxation Deferred taxation Foreign exchange gains Increase in deferred policy acquisition cost Increase in insurance reserves Changes in operating assets and liabilities: Due from policyholders, brokers and agents Other receivables Other liabilities Due from related parties Due from reinsurers and coinsurers, net Tax deducted at source Net cash used in operating activities Cash Flows from Investing Activities Investments, net Loans receivable Lease receivables Net cash outflow from acquisition of subsidiary Acquisition of investment property Acquisition of property, plant and equipment Acquisition of intangible asset Proceeds from disposal of property, plant and equipment Proceeds from disposal and investment property Dividend received Interest received Net cash provided by investing activities Sub-total c/f 67 2021 | GENERAL ACCIDENT ANNUAL REPORT Note 2021 $’000 2020 $’000 149,236 193,812 27,31 28 11 11 12 11 11 15 15 27 28 142,215 14,506 (1,202) (6,803) - - (6,271) 7,402 106,312 14,139 (3,392) (21,811) (33,969) (6,872) (2,490) 8,428 (167,984) (173,233) (18,822) 97,857 12,602 (33,753) (66,088) 1,186,879 1,309,774 (162,497) (614,458) 138,860 17,327 (867,768) (178,762) (76,658) (255,420) 1,090,207 7,276 11,837 - (2,259) (127,134) (479) 6,239 18,822 187,839 1,192,348 936,928 (14,299) 72,607 (6,883) (58,639) (23,268) 120,461 170,903 (135,865) (76,167) 4,580 (28,184) (89,023) (153,756) (27,765) (181,521) 550,680 (251,464) (79,157) (46,676) (6,123) (151,679) (7,006) 52,643 298,758 14,299 176,628 550,903 369,382 2021 | GENERAL ACCIDENT ANNUAL REPORT 68 General Accident Insurance Company Jamaica Limited Consolidated Statement of Cash Flows (Continued) Year ended 31 December 2021 (expressed in Jamaican dollars unless otherwise stated) Page 5 Sub-total b/f Cash Flows from Financing Activities Investment made by non-controlling interest Lease payments Dividends paid Net cash used in by financing activities Decrease in cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF THE YEAR (NOTE 18) Note 2021 $’000 2020 $’000 936,928 369,382 17 - (82,921) (196,701) (279,622) 657,306 30,329 756,548 1,444,183 42,000 (59,787) (278,433) (296,220) 73,162 41,057 642,329 756,548 67 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 68 General Accident Insurance Company Jamaica Limited Company Statement of Comprehensive Income Year ended 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 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 Finance charge Other income Other operating expenses Profit before Taxation Taxation Net Profit for the Year Other Comprehensive Income, net of tax: Items that may not be subsequently reclassified to profit or loss Note 10 11 12 15 2021 $’000 12,974,308 (10,327,323) (129,519) 2,517,466 (24,197) 2,493,269 855,070 (451,199) (1,328,741) (1,140,317) 428,082 185,855 (7,076) 98,298 (98,573) 606,586 (105,433) 501,153 Page 6 2020 $’000 11,592,313 (9,037,477) (118,083) 2,436,753 (46,853) 2,389,900 765,404 (450,338) (1,562,480) (966,938) 175,548 278,956 (6,214) 90,030 (83,833) 454,487 (61,083) 393,404 Unrealised gains on FVOCI investments Unrealised gains on revaluation of real estate investment Total Other Comprehensive Income TOTAL COMPREHENSIVE INCOME 14,796 (22,417) (7,621) 493,532 (45,711) 18,696 (27,015) 366,389 69 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 70 69 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 70 General Accident Insurance Company Jamaica Limited Company Statement of Changes in Equity Year ended 31 December 2021 (expressed in Jamaican dollars unless otherwise stated) Page 8 Share Capital $’000 470,358 Capital Reserves $’000 152,030 Note Property Revaluation Reserve $’000 Fair Value Reserve $’000 Retained Earnings $’000 Total $’000 50,084 78,970 1,678,324 2,429,766 - - - 17 - 470,358 - - - - - - 393,404 393,404 18,696 (45,711) - (27,015) 18,696 (45,711) 393,404 366,389 - - (222,668) (222,668) 152,030 68,780 33,259 1,849,060 2,573,487 501,153 501,153 (22,417) 14,796 - (7,621) (22,417) 14,796 501,153 493,532 As at 1 January 2020 Comprehensive income: Net profit for the year Other comprehensive income Total comprehensive income Transactions with owners Dividends Balance at 31 December 2020 Comprehensive income: Net profit for the year Other comprehensive income Total comprehensive income Transactions with owners Dividends 17 - - - - (196,701) (196,701) Balance at 31 December 2021 470,358 152,030 46,363 48,055 2,153,512 2,870,318 71 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 72 General Accident Insurance Company Jamaica Limited Company Statement of Cash Flows Year ended 31 December 2021 (expressed in Jamaican dollars unless otherwise stated) Page 9 Cash Flows from Operating Activities Net profit Adjustments for items not affecting cash: Depreciation Interest expense Amortisation of intangible assets Amortisation of investment premium Gains on revaluation of investment property ECL on debt investments Adjustment to property, plant and equipment Gain on disposal of property, plant and equipment Interest income Dividend income Current taxation Deferred taxation Foreign exchange gains Increase in deferred policy acquisition cost Increase in insurance reserves Changes in operating assets and liabilities: Due from policyholders, brokers and agents Other receivables Other liabilities Due from related parties Due from reinsurers and coinsurers, net Tax deducted at source Net cash (used in)/ provided by operating activities Cash Flows from Investing Activities Investments, net Loans receivable Acquisition of investment property Acquisition of property, plant and equipment Acquisition of intangible assets Investment in subsidiary Proceeds from disposal of property, plant and equipment Dividend received Interest received Net cash used in investing activities Sub-total c/f Note 2021 $’000 2020 $’000 501,153 393,404 27,31 28 11 27 12 11 11 15 15 27 24 94,401 7,076 4,173 - (6,803) 1,990 (5,633) (131,042) (18,822) 91,306 14,127 (43,215) (34,531) 841,706 1,315,886 (51,314) (585,526) 76,321 (34,279) (831,301) (110,213) (53,764) (163,977) 464,117 11,837 (2,259) (70,115) - - 6,240 18,822 150,590 579,232 415,255 79,431 6,214 4,440 187 (20,015) - (2,933) (2,490) (111,170) (117,825) 66,441 (5,357) (40,092) (18,352) 281,269 513,152 (87,326) (64,621) (16,631) (29,847) (60,834) 253,893 (26,374) 227,519 118,416 (79,157) (6,124) (71,219) (3,026) (210,170) 52,638 117,825 102,535 21,718 249,237 71 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 72 General Accident Insurance Company Jamaica Limited Company Statement of Cash Flows (Continued) Year ended 31 December 2021 (expressed in Jamaican dollars unless otherwise stated) Page 10 Sub-total b/f Cash Flows from Financing Activities Lease payments Dividends paid Net cash used in by financing activities Decrease in cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF THE YEAR (NOTE 18) Note 2021 $’000 2020 $’000 17 415,255 249,237 (62,600) (196,701) (259,301) 155,954 75,704 452,964 684,622 (40,741) (222,668) (263,409) (14,172) 63,930 403,206 452,964 73 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 74 Page 11 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 1. Identification and Activities General Accident Insurance Company Jamaica Limited (the company) is incorporated and domiciled in Jamaica. The company is a public listed company with its listing on the Jamaica Junior Stock Exchange. The company is an 80% subsidiary of Musson (Jamaica) Limited (Musson). The registered office of the company is located at 58 Half-Way-Tree Road, Kingston 10. The company’s ultimate parent company, Musson, is incorporated and domiciled in Jamaica. The company is licensed to operate as a general insurance company under the Insurance Act, 2001. Its principal activity is the underwriting of commercial and personal property and casualty insurance. The company has two subsidiaries whose principal activities is also to provide property and casualty insurance (Note 2(b)). The company together with its subsidiaries are referred to as ‘the Group’. 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 accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements 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 Group’s accounting policies. Although these estimates are based on management’s best knowledge of current events and action, actual results could differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 7. Accounting pronouncements effective in 2021 which are relevant to the Group’s operations. Certain new standards, amendments and interpretations to existing standards have been published that became effective during the current financial year and are relevant to the Group’s operations. The adoption of these new pronouncements has impacted the Group as discussed below. Amendments to IFRS 7, IFRS 4 and IFRS 16 Interest rate benchmark reform – Phase 2 (effective for annual periods beginning on or after 1 January 2021). The Phase 2 amendments address issues that arise from the implementation of the reforms, including the replacement of one benchmark with an alternative one. The Phase 2 amendments provide additional temporary reliefs from applying specific IAS 39 and IFRS 9 hedge accounting requirements to hedging relationships directly affected by IBOR reform. There was no impact from the adoption of these amendments. 73 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 74 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 12 2. Summary of Significant Accounting Policies (Continued) (a) Basis of preparation (continued) Standards, interpretations and amendments to published standards that are not yet effective At the date of authorisation of these financial statements, certain new standards, interpretations and amendments to existing standards have been issued which are mandatory for the group’s accounting periods beginning on or after 1 January 2022 or later periods but were not effective at the statement of financial position date. The Group has assessed the relevance of all such new standards, interpretations and amendments and has determined that the following, as shown below, may be immediately relevant to its operations.  IFRS 17, ‘Insurance contracts’, (effective for annual periods beginning on or after 1 January 2021). IFRS 17 replaces IFRS 4 which currently permits a wide variety of practices in accounting for insurance contracts. IFRS 17 will fundamentally change the accounting by all entities that issue insurance contracts and investment contracts with discretionary participation features. The standard requires a current measurement model where estimates are re-measured each reporting period. Contracts are measured using the building blocks of discount probability – weighted cash flows, an explicit risk adjustment, and a contract service margin (CSM) representing the unearned profit of the contract which is recognised as revenue over the coverage period. This IFRS provides a common global insurance accounting standard leading to consistency in recognition, measurement, presentation and disclosure. The Group is currently assessing the impact of this standard.  Amendment to IFRS 16, ‘Leases’ – COVID-19 related rent concessions Extension of the practical expedient (effective for annual periods beginning on or after 1 January 2022). As a result of the coronavirus (COVID-19) pandemic, rent concessions have been granted to lessees. In May 2020, the IASB published an amendment to IFRS 16 that provided an optional practical expedient for lessees from assessing whether a rent concession related to COVID-19 is a lease modification. On 31 March 2021, the IASB published an additional amendment to extend the date of the practical expedient from 30 June 2021 to 30 June 2022. Lessees can select to account for such rent concessions in the same way as they would if they were not lease modifications. In many cases, this will result in accounting for the concession as variable lease payments in the period(s) in which the event or condition that triggers the reduced payment occurs. The Group is currently assessing the impact of this amendment.  Amendments to IAS 1, ‘Presentation of financial statements’ (effective for annual periods beginning on or after 1 January 2022). These amendments clarify that liabilities are classified as either current or non- current, depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date. The amendments also clarify what IAS 1 means when it refers to the ‘settlement’ of a liability. The Group is currently assessing the impact of this amendment.   Narrow scope amendments to IAS 1, Practice statement 2 and IAS 8 (effective for annual periods beginning on or after 1 January 2023). The amendments aim to improve accounting policy disclosures and to help users of the financial statements to distinguish between changes in accounting estimates and changes in accounting policies. The Group is currently assessing the impact of this amendment.  Amendment to IAS 12 – deferred tax related to assets and liabilities arising from a single transaction (effective for annual periods beginning on or after 1 January 2023). These amendments require companies to recognise deferred tax on transactions that, on initial recognition give rise to equal amounts of taxable and deductible temporary differences. The Group is currently assessing the impact of this amendment. 75 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 76 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 13 2. Summary of Significant Accounting Policies (Continued) (a) Basis of preparation (continued) Standards, interpretations and amendments to published standards that are not yet effective  Amendments to IFRS 3, ‘Business combinations’ (effective for annual periods beginning on or after 1 January 2022). Minor amendments were made to update the references to the Conceptual Framework for Financial Reporting and add an exception for the recognition of liabilities and contingent liabilities within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets and Interpretation 21 Levies. The amendments also confirm that contingent assets should not be recognised at the acquisition date. The Group will apply this amendment to future transactions.  Amendments to IAS 37, ‘Provisions, contingent liabilities and contingent assets’ (effective for annual periods beginning on or after 1 January 2022). This amendment specifies which costs a company includes when assessing whether a contract will be loss making. It clarifies that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts. Before recognising a separate provision for an onerous contract, the entity recognises any impairment loss that has occurred on assets used in fulfilling the contract. The Group is currently assessing the impact of this amendment.  Annual improvements to IFRSs 2019 – 2021 cycles (effective for annual periods beginning on or after 1 January 2022). These amendments include minor changes to the following standards: - IFRS 9, ‘Financial instruments’ - IFRS 16, ‘Leases’ - IFRS 1, ‘First-time adoption of International Financial Reporting Standards - IAS 41, ‘Agriculture. The Group is currently assessing the impact of these improvements. There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group. (b) Basis of consolidation Subsidiaries are all entities (including structured entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control. De-facto control may arise in circumstances where the size of the Group’s voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies, etc. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non- controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non- controlling interest’s proportionate share of the recognised amounts of acquiree’s identifiable net assets. 75 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 76 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 14 2. Summary of Significant Accounting Policies (Continued) (b) Basis of consolidation (continued) Acquisition-related costs are expensed as incurred. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity. Goodwill is initially measured as the excess of the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest over the fair value of the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. 77 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 78 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 15 2. Summary of Significant Accounting Policies (Continued) (b) Basis of consolidation (continued) When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. The company’s subsidiaries are listed below, which together with the company are referred to as ‘the Group’ Entity General Accident Insurance Company (Trinidad) Limited (formerly Motor One Insurance Limited) (i) Country of Incorporati on and place of business Trinidad and Tobago General Accident Insurance Company (Barbados) Limited (ii) Barbados Proportion of ordinary shares held by the Group % Proportion of ordinary shares held by non- controlling interests% 65 80 35 20 Nature of business General Insurance Services General Insurance Services (i) In June 2020, the company increased its shareholding in Motor One Insurance Company Limited from 55% to 65%. In October 2020, it was re-named General Accident Insurance Company (Trinidad) Limited (GENACTT). (ii) General Accident Insurance Company (Barbados) Limited (GENACBB) was incorporated in 2019 but was not capitalised until February 2020. The company commenced trading in March 2020. (c) 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 Group’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(s)(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 Group 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. 77 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 78 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 16 2. Summary of Significant Accounting Policies (Continued) (c) Revenue and income recognition (continued) Rental income Rental income is recognised on an accrual basis. (d) Cash and cash equivalents Cash and cash equivalents are stated at amortised 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. (e) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of the Group 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 Group’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. Changes in the fair value of monetary assets denominated in foreign currencies and classified at amortised cost are analysed between translation differences resulting from changes in the amortised cost of the asset and other changes. Translation differences resulting from the changes in amortised cost are recognised in the profit or loss, and other changes are recognised in other comprehensive income (OCI). (f) 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 Group’s financial instruments are discussed in Note 6. (g) Financial assets (i) Classification The Group classifies its financial assets in the following measurement categories:  At fair value (either through OCI or through profit or loss); and  At amortised cost. The classification is based on the Group’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses are recorded in profit or loss or OCI. The Group will reclassify debt investments when and only when its business model for managing those assets changes. 79 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 80 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 17 2. Summary of Significant Accounting Policies (Continued) (g) Financial assets (continued) (ii) Recognition and derecognition Purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. (iii) Measurement At initial recognition, the Group measures a financial asset at its fair value plus transaction cost directly attributable to the acquisition of the financial asset in the case of a financial asset not at fair value through profit or loss (FVPL). Transaction costs that are directly attributable to the acquisition of the financial asset carried at FVPL are expensed in profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Debt instruments Subsequent measurement of debt instruments is based on the Group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its debt instruments:  Amortised cost - Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets are included in investment income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in gains/(losses). Impairment losses are presented as separate line item in profit or loss.  FVOCI – Financial assets that are held for collection of contractual cash flows and for selling, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognized in other gains/(losses). Interest income from these financial assets is included in investment income using the effective interest rate method. Foreign exchange gains and losses are presented in gains/(losses) and impairment expenses are presented as separate line item in the statement of profit or loss.  FVPL - Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. Gains or losses on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises. Equity instruments The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss when the Group’s right to receive payment is established. 79 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 80 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 18 2.Summary of Significant Accounting Policies (Continued) (g) Financial Assets (continued) Changes in the fair value of financial assets at FVPL are recognised in gains/(losses) in profit or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value. (iii) Impairment The Group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost (include cash and cash equivalent, excluding bank balances) and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables, see note 4 for further details. (h) 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. (i) Leases The Group’s leases originate from the rental agreements for various office buildings. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leases asset is available for use by the Group. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: i) ii) iii) iv) v) Fixed payments (including in-substance fixed payments), les any lease incentives receivables Variable lease payments that are based on an index or a rate Amounts expected to be payable by the lessee under residual value guarantees The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. To determine the incremental borrowing rate, the Group uses existing borrowing rates from our existing banks, as no entity within the Group have existing borrowings. The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or a rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. 81 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 82 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 19 2. Summary of Significant Accounting Policies (Continued) (i) Leases (continued) Right-of-use assets are measures at cost comprising the following:  The amount of initial measurement of lease liability  Any lease payments made at or before the commencement date less any lease incentives received  Any initial direct costs, and  Restoration costs. Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. The lease term is determined as the non-cancellable period of the lease and takes account of extension and termination options if it is reasonably certain to be exercised. Majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the Group. (j) Insurance contracts Insurance contracts are those contracts that transfer significant insurance risk. The Group’s insurance contracts are classified as short-term insurance contracts which include casualty and property insurance contracts. Casualty insurance contracts protect the Group’s customers against the risk of causing harm to third parties as a result of their legitimate activities. Damages covered include both contractual and non-contractual events. The typical protection offered is designed for employers who become legally liable to pay compensation to injured employees (employer’s liability) and business customers who become liable to pay compensation to a third party for bodily harm or property damage (public liability). Property insurance contracts mainly compensate the Group’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 Group. The Group 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 Group. 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. 81 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 82 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (Continued) Page 20 (k) 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. (l) Reinsurance ceded Contracts entered into by the Group with reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group are classified as reinsurance contracts. The benefits to which the Group 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 Group 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 Group 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 Group is exposed to the risk of continued liability for such losses. However, in an effort to reduce the risk of non-payment, the Group requires all of its reinsurers to have A.M. Best or Standard & Poors or equivalent rating of A- or better. If there is objective evidence that the reinsurance asset is impaired, the Group reduces the carrying amount of the reinsurance asset to its recoverable amount and recognises that impairment loss in profit or loss. (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% 20% Property, plant and equipment are reviewed periodically for impairment. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in operating profit. Repairs and maintenance expenses are charged to profit or loss during the financial period in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related asset. 83 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 84 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 21 2. Summary of Significant Accounting Policies (Continued) (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. Renewal rights Renewal rights are recorded at cost and represent the value of consideration paid to acquire polices in force with high renewal probability. These costs are amortised over the estimated useful life of the rights, which ranges from 4- 5 years. Distribution relationships Distribution relationships are recorded at cost and represent the value of consideration paid to acquire existing intermediary distribution channels. These costs are amortised over the estimated useful life these relationships which is approximately 8 years. Licence Licence are recorded at cost and represent the value of consideration paid to acquire regulatory licence to operate in a regulatory environment. Licence have an indefinite useful live and is assessed annually for impairment and are carried at cost less accumulated impairment losses. (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) Investment properties Investment property comprise significant portions of freehold residential buildings that are held for long-term rental yield and/or for capital appreciation. Investment properties are treated as a long-term investment, initially recognized at cost and subsequently carried at fair value, based on fair market valuation exercise conducted annually by independent qualified values. Changes in fair values are recorded in the income statement. (q) Real estate investment Real estate investment represents the Group'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 Group 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 Group's share of lease income is recorded in the statement of comprehensive income. The appreciation is recorded in OCI. 83 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 84 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (Continued) Page 22 (r) Insurance reserves Under the Jamaican Insurance Regulations, 2001, the Group 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 Group’s insurance liabilities. A statutory reserve is maintained in accordance with the provisions of Section 171 of the Insurance Act, 1980 of Trinidad and Tobago whereby companies are required to appropriate towards statutory reserve at least 25% of the profit of the preceding year until the excess of assets over liabilities equals or exceeds the reserve in respect of its unearned premiums. (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. (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 32). 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. 85 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 86 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (Continued) (s) Accounts payable Payables are recognised at fair value and subsequently measured at amortised cost. Page 23 (t) 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. (u) Employee benefits (i) Pension obligations The Group 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 Group pays fixed contributions into a separate entity. The Group 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 Group 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 Group 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 Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the Group’s shareholders after certain adjustments. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. 85 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 86 Page 24 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 2. Summary of Significant Accounting Policies (Continued) (v) Dividend distribution Dividend distribution to the company’s shareholders is recognised as an appropriation in the Group’s financial statements in the period in which the dividends are approved by the Board of Directors. (w) 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. 3. Responsibilities of the Appointed Actuary and External Auditors The Board of Directors, pursuant to the Insurance Act, appoints the Actuary. His responsibility is to carry out an annual valuation of the Group’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. 87 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 88 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 25 4. Insurance and Financial Risk Management (a) Insurance risk The Group’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 Group’s aim is therefore to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Group’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 Group. (ii) Finance Department The Finance Department is responsible for managing the Group’s assets and liabilities and the overall financial structure. It is also primarily responsible for managing the funding and liquidity risks of the Group. (iii) Conduct Review Committee The Conduct Review Committee is responsible for monitoring the Group’s adherence to regulatory and statutory requirements. (iv) Audit Committee The Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. (v) Remuneration Committee The remuneration committee is responsible for reviewing and recommending for approval, the remuneration arrangements of the directors and senior officers. 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 Group issues contracts that transfer insurance risk. This section summarises these risks and the way the Group 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 Group 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 87 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 88 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 26 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) 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 Group 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 Group’s insurance contracts are, however, concentrated within Jamaica and Trinidad and Tobago. The Group 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 Group 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. The estimated cost of claims includes direct expenses to be incurred in settling claims, net of the expected subrogation value and other recoveries. The Group 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 Group 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. 89 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 90 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 27 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) 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 Group, 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 Group 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. 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: Jamaica 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 2021 2020 Policy Limit ’000 Maximum Net Retention ’000 Policy Limit ’000 Maximum Net Retention ’000 US$8,000 US$8,000 US$5,000 J$93,000 US$2,000 J$10,000 J$30,000 J$6,250 J$5,000 J$5,000 J$100,000 J$5,000 J$10,000 US$800 US$800 US$125 J$5,000 US$125 J$5,000 US$8,000 US$8,000 US$5,000 J$93,000 US$2,000 J$10,000 J$2,000 J$1,250 J$1,000 J$1,000 J$20,000 J$1,000 J$2,000 J$30,000 J$6,250 J$5,000 J$5,000 J$100,000 J$5,000 J$10,000 US$800 US$800 US$125 J$5,000 US$125 J$5,000 J$2,000 J$1,250 J$1,000 J$1,000 J$20,000 J$1,000 J$2,000 2021 | GENERAL ACCIDENT ANNUAL REPORT 90 89 2021 | GENERAL ACCIDENT ANNUAL REPORT General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 28 2021 2020 Policy Limit ’000 Maximum Net Retention ’000 Policy Limit ’000 Maximum Net Retention ’000 TT$50,000 TT$50,000 TT$5,200 TT$5,200 TT$2,010 TT$435 TT$335 TT$335 TT$2,500 TT$670 TT$335 BB$16,000 BB$16,000 BB$16,000 BB$22,500 BB$400 BB$16,000 BB$600 BB$130 BB$100 BB$100 BB$2,000 BB$100 BB$200 TT$5,000 TT$5,000 TT$800 TT$800 - - - TT$5,200 - - - TT$800 TT$134 TT$87 TT$67 TT$67 TT$500 TT$134 TT$67 - - - - - - - - - - - - - - BB$1,600 BB$1,600 BB$1,600 BB$150 BB$400 BB$1,600 BB$16,000 BB$16,000 BB$16,000 BB$22,500 BB$400 BB$16,000 BB$40 BB$26 BB$20 BB$20 BB$400 BB$20 BB$40 BB$600 BB$130 BB$100 BB$100 BB$2,000 BB$100 BB$200 BB$1,600 BB$1,600 BB$1,600 BB$150 BB$400 BB$1,600 BB$40 BB$26 BB$20 BB$20 BB$400 BB$20 BB$40 Trinidad and Tobago Commercial property – Fire and consequential loss Personal property Liability Motor Miscellaneous Accident – All Risk Burglary Cash/Money Fidelity Bonds Goods in Transit Personal Accident Barbados 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 91 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 92 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 29 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 Group’s loss history. (iii) The Group’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 Group’s reinsurance program consists of proportional reinsurance agreements; and  The Group’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. Scenario Testing: 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 stochastically modeled using various confidence intervals to determine the impact on the net reserves. The net reserves of $4,187,987,000 for the Group and $1,793,911,000 for th Company (Note 33) were determined at interval increase/(decrease) by $106,877,000/ the net increased/(decreased) by 10%, ($136,095,000) for the Group and $70,946,000/($88,682,000) for the Company. the 50% confidence reserves would the confidence interval. Had Provision for adverse deviation assumptions The basic assumptions made in establishing insurance reserves are best estimates for a range of possible outcomes. To recognise the uncertainty in establishing these best estimates, to allow for possible deterioration in experience and to provide greater comfort that the reserves are adequate to pay future benefits, the appointed actuary is required to include a margin for adverse deviation in each assumption. 91 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 92 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) Page 30 Development Claim Liabilities In addition to sensitivity analysis, the development of insurance liabilities provides a measure of the Group’s ability to estimate the ultimate value of claims. The table below illustrates how the Group’s estimate of the ultimate claims liability for accident years 2013 - 2021 has changed at successive year-ends, up to 2021. 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. 2014 $’000 314,016 514,158 432,663 2014 and prior $’000 1,265,108 1,569,903 1,525,849 2015 $’000 2015 And Prior $’000 2016 $’000 2016 and prior $’000 2017 $’000 2017 and prior $’000 2018 2019 2020 2018 and prior $’000 2019 and prior $’000 $’000 $’000 $’000 2020 and prior $’000 2021 $’000 2021 and prior $’000 303,654 350,290 156,241 14.43% 1,139,749 1,903,341 1,239,328 -38.33% 346,094 515,330 241,648 1,485,852 2,418,670 1,480,976 97,621 403,168 195,802 -5.64% 582,261 1,502,479 815,504 -30.50% 295,468 456,157 218,220 -28.12% 877,729 1,958,636 1,033,724 0.76% 379,721 550,051 200,066 1,257,450 2,508,687 1,233,790 107,645 399,848 214,595 376,174 1,247,817 388,041 132,979 430,798 322,845 509,153 1,678,615 710,885 411,945 424,106 384,889 921,097 2,102,720 1,095,774 407,102 658,944 426,773 1,328,199 2,761,664 1,522,547 -18.65% 76,584 301,702 73,834 -20.62% 267,793 933,857 149,877 -56.16% 65,710 414,858 140,974 3.16% 333,503 1,348,714 290,851 -62.77% 84,396 364,568 200,408 -10.08% 417,899 1,713,283 491,259 419,091 403,829 251,701 836,990 2,117,111 742,960 704,090 702,263 361653 1,541,080 2,819,374 1,104,613 -1.50% 194,470 11.43% 499,086 -38.71% 249,011 13.84% 748,097 -41.49% 149,021 5.32% 897,118 1.02% 158,262 13.70% 1,055,380 495868 1,551,248 2,193,341 102,272 349,416 220,240 569,656 211,293 780,949 258,251 1,039,200 367971 1,407,171 2,132,124 35,327 51,272 84,726 135,999 138,151 274,150 172,455 446,604 217,437 664,041 1,016,918 3.09% -5.49% -38.46% 18.60% -32.62% 12.06% 7.15% 21.15% -1.63% 7.68% 642,092 724,954 352,877 - 20.19% 69,505 45,593 (1,057) 199,438 199,014 (22,771) 127,829 142,321 25,142 327,267 341,335 2,371 120,131 179,586 70,651 447,397 520,920 73,022 146,510 244,074 91,988 593,908 764,994 165,010 146478 498,845 148,783 740,385 621,611 1,361,996 677,161 1,113,839 498,791 313,793 159,783 1,612,630 473,577 734,770 337,154 2,039,157 2,347,401 810,773 -5.58% 9,622 36,832 44,739 4.68% 37.18% -19.49% 35.41% -12.43% -2.38% -20.26% 7.15% -5.22% 18.77% 9.50% - - 76,048 62,350 91,800 33,826 48,318 41,178 109,874 162,386 132,978 69,548 167,737 51,722 179,422 330,123 184,700 100,762 142,130 72,827 280,184 472,253 257,527 74,660 265,274 120,474 354,844 84,965 737,527 266,214 539,809 1,003,741 577,580 461,939 1,112,715 682,569 1,465,681 671,032 1,795,284 2,136,712 378,001 57,080 535,081 81,527 616,608 392,469 1,009,077 24.81% (32.65%) 1.41% (24.31%) (23.58%) (25.43%) (9.03%) (10.21%) (0.31%) (0.86%) (7.64%) (0.36%) 4.58% 1.17% - - 2014 Paid during year 2015 2016 2017 2018 UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) 2019 Paid during year 2020 2021 UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) 93 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 94 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) Development Claim Liabilities In addition to sensitivity analysis, the development of insurance liabilities provides a measure of the Group’s ability to estimate the ultimate value of claims. The table below illustrates how the Group’s estimate of the ultimate claims liability for accident years 2013 - 2021 has changed at successive year-ends, up to 2021. 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. 2014 Paid during year 2014 and prior $’000 $’000 314,016 1,265,108 514,158 432,663 1,569,903 1,525,849 2014 2015 2016 2015 And Prior $’000 $’000 $’000 2016 and prior $’000 2017 $’000 2017 and prior $’000 2018 $’000 2018 and prior $’000 2019 $’000 2019 and prior $’000 2020 $’000 2020 and prior $’000 2021 $’000 2021 and prior $’000 Page 30 303,654 350,290 156,241 14.43% 1,139,749 1,903,341 1,239,328 -38.33% 346,094 515,330 241,648 1,485,852 2,418,670 1,480,976 97,621 403,168 195,802 -5.64% 582,261 1,502,479 815,504 -30.50% 295,468 456,157 218,220 -28.12% 877,729 1,958,636 1,033,724 0.76% 379,721 550,051 200,066 1,257,450 2,508,687 1,233,790 107,645 399,848 214,595 376,174 1,247,817 388,041 132,979 430,798 322,845 509,153 1,678,615 710,885 411,945 424,106 384,889 921,097 2,102,720 1,095,774 407,102 658,944 426,773 1,328,199 2,761,664 1,522,547 -18.65% 76,584 301,702 73,834 -20.62% 267,793 933,857 -56.16% 65,710 414,858 3.16% 333,503 1,348,714 -62.77% 84,396 364,568 149,877 140,974 290,851 200,408 -10.08% 417,899 1,713,283 491,259 419,091 403,829 251,701 836,990 2,117,111 742,960 704,090 702,263 361653 1,541,080 2,819,374 1,104,613 2019 Paid during year -1.50% 11.43% -38.71% 13.84% -41.49% 5.32% 1.02% 194,470 499,086 249,011 748,097 149,021 897,118 158,262 13.70% 1,055,380 495868 1,551,248 2,193,341 102,272 349,416 220,240 569,656 211,293 780,949 258,251 1,039,200 367971 1,407,171 35,327 51,272 84,726 135,999 138,151 274,150 172,455 446,604 217,437 664,041 642,092 724,954 352,877 2,132,124 1,016,918 3.09% -5.49% -38.46% 18.60% -32.62% 12.06% 7.15% 21.15% -1.63% 2020 Paid during year 69,505 45,593 (1,057) 199,438 199,014 (22,771) 127,829 327,267 142,321 341,335 25,142 2,371 120,131 179,586 70,651 447,397 520,920 73,022 146,510 244,074 91,988 593,908 764,994 165,010 146478 498,845 148,783 7.68% - 20.19% 740,385 621,611 1,113,839 498,791 313,793 159,783 1,361,996 1,612,630 473,577 677,161 734,770 337,154 2,039,157 2,347,401 810,773 -5.58% 9,622 36,832 44,739 4.68% 37.18% -19.49% 35.41% -12.43% -2.38% -20.26% 7.15% -5.22% 18.77% 9.50% - - 76,048 62,350 91,800 33,826 48,318 41,178 109,874 162,386 132,978 69,548 167,737 51,722 179,422 330,123 100,762 142,130 184,700 72,827 280,184 472,253 257,527 74,660 265,274 120,474 84,965 354,844 737,527 266,214 57,080 378,001 539,809 1,003,741 535,081 577,580 461,939 81,527 1,112,715 1,465,681 616,608 682,569 671,032 392,469 1,795,284 2,136,712 1,009,077 24.81% (32.65%) 1.41% (24.31%) (23.58%) (25.43%) (9.03%) (10.21%) (0.31%) (0.86%) (7.64%) (0.36%) 4.58% 1.17% - - 2015 2016 2017 2018 2021 UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) UCAE, end of year IBNR, end of year Ratio: excess (deficiency) UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) 93 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 94 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) Page 31 Development Claim Liabilities In addition to sensitivity analysis, the development of insurance liabilities provides a measure of the Group’s ability to estimate the ultimate value of claims. The table below illustrates how the Group’s estimate of the ultimate claims liability for accident years 2013 - 2021 has changed at successive year-ends, up to 2021. 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. 2015 $’000 2015 and prior $’000 2016 $’000 2016 and prior $’000 2017 $’000 2017 and prior $’000 2018 2019 2020 2021 $’000 $’000 $’000 $’000 2018 and prior $’000 2019 and prior $’000 2020 and prior $’000 2021 And Prior $’000 2014 $’000 222,509 322,488 76,216 2014 and prior $’000 503,277 827,396 145,014 185,354 207,194 31,594 344,291 564,367 72,982 269,589 334,705 84,310 613,880 899,072 157,292 - 369,737 582,738 57,679 (12.36%) 240,436 478,099 37,731 - 316,867 395,079 90,131 - 354,039 231,093 34,818 - 686,604 977,817 147,810 - 594,475 709,192 72,549 - 211,295 190,777 29,963 (9.96%) 102,601 132,225 17,247 (10.59%) 33,231 77,148 6,642 (6.59%) 138,163 289,229 30,814 (27.77%) 64,897 151,792 16,902 (22.26%) 203,060 441,021 47,716 (6.38%) 65,100 148,774 15,338 (4.37%) 158,442 391,961 27,716 (9.00%) 60,515 119,584 4,937 (9.23%) 31,282 77,816 6,979 (4.22%) 137,835 345,874 20,484 (3.55%) 104,932 212,081 24,172 376,268 491,870 128,131 - 357,070 217,186 39,187 970,743 1,201,062 200,680 - 560,130 658,207 86,903 (6.47%) 42,867 (0.96%) 74,820 32,278 607 111,834 4,739 (2.84%) 22,270 52,473 871 (1.14%) 97,090 (21.11%) 30,938 (14.27%) 128,028 1.06% 70,661 6.88% 198,689 164,307 5,610 89,194 (863) 253,501 4,747 122,988 7,542 376,489 12,289 294,613 24,022 671,102 36,311 693,840 168,069 1,364,942 204,380 657,745 610,706 112,632 1,217,875 1,268,913 199,535 - - 391,239 589,928 593,953 1,183,881 4.22% 7,632 27,545 2,937 -3.64% 40,856 88,478 6,010 0.26% 11,446 44,459 2,341 -3.88% 52,302 132,937 8,351 10.92% 23,741 77,776 2,481 5.17% 76,043 210,713 10,832 -9.96% 29,570 97,345 2,581 -18.13% 105,613 308,058 13,413 -1.86% 89,000 217,201 11,894 -11.65% 194,613 577,520 772,133 619,746 1,391,879 525,259 391,730 916,989 631,504 1,548,493 25,307 35,763 61,070 191,432 252,502 6.15% 4,348 (1.72%) 17,431 2.06% 6,931 (1.64%) 24,362 14.15% 24,531 8.66% 48,893 (10.12%) 25,329 (15.40%) 74,222 (1.94%) 55,988 (9.08%) 16.60% 11.53% - - 130,210 132,087 262,297 508,866 771,163 618,721 1,389,884 19,997 1,855 62,350 2,821 36,425 2,468 98,775 5,289 63,689 2,371 162,464 7,660 65,004 6,780 227,468 14,440 144,380 5,903 371,848 20,343 222,793 18,887 594,641 39,230 341,734 34,819 936,375 74,049 599123 184,364 1,535,498 258,413 4.44% (2.94%) 1.83% (2.86%) 16.28% 8.44% (10.58%) (15.78%) (5.09%) (11.00%) 10.37% 6.31% 7.59% (1.08%) - - 2014 2015 2016 2017 2018 2019 Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) 2020 Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) 2021 Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) 95 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 96 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) Development Claim Liabilities In addition to sensitivity analysis, the development of insurance liabilities provides a measure of the Group’s ability to estimate the ultimate value of claims. The table below illustrates how the Group’s estimate of the ultimate claims liability for accident years 2013 - 2021 has changed at successive year-ends, up to 2021. 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. 2014 2015 2016 2017 2018 $’000 $’000 $’000 $’000 2015 and prior $’000 2016 and prior $’000 2017 and prior $’000 2018 and prior $’000 2019 $’000 2019 and prior $’000 2020 $’000 2020 and prior $’000 2021 $’000 2021 And Prior $’000 2014 and prior $’000 503,277 827,396 145,014 $’000 222,509 322,488 76,216 Page 31 185,354 207,194 31,594 344,291 564,367 72,982 269,589 334,705 84,310 613,880 899,072 157,292 (6.38%) (4.37%) - - 65,100 148,774 15,338 158,442 391,961 27,716 211,295 190,777 29,963 369,737 582,738 57,679 316,867 395,079 90,131 686,604 977,817 147,810 - - - - (9.00%) 60,515 119,584 4,937 (4.22%) 137,835 345,874 20,484 (9.96%) (12.36%) 102,601 132,225 17,247 240,436 478,099 37,731 354,039 231,093 34,818 594,475 709,192 72,549 (9.23%) (3.55%) (10.59%) (6.59%) (27.77%) (22.26%) 31,282 77,816 6,979 104,932 212,081 24,172 33,231 77,148 6,642 138,163 289,229 30,814 64,897 151,792 16,902 203,060 441,021 47,716 970,743 1,201,062 200,680 - 376,268 491,870 128,131 - 357,070 217,186 39,187 560,130 658,207 86,903 657,745 610,706 112,632 1,217,875 1,268,913 199,535 (6.47%) (0.96%) (2.84%) (1.14%) (21.11%) (14.27%) 1.06% 6.88% 42,867 74,820 22,270 97,090 30,938 128,028 70,661 198,689 - 391,239 32,278 111,834 52,473 164,307 89,194 253,501 122,988 607 4,739 871 5,610 (863) 4,747 7,542 376,489 12,289 294,613 24,022 4.22% -3.64% 0.26% -3.88% 10.92% 5.17% 7,632 27,545 2,937 40,856 88,478 6,010 11,446 52,302 23,741 76,043 44,459 132,937 77,776 210,713 2,341 8,351 2,481 10,832 2,581 -9.96% 29,570 97,345 -18.13% 105,613 308,058 13,413 -1.86% 89,000 217,201 11,894 - 589,928 671,102 36,311 -11.65% 194,613 525,259 25,307 593,953 1,183,881 693,840 168,069 1,364,942 204,380 577,520 391,730 35,763 772,133 916,989 61,070 619,746 631,504 191,432 1,391,879 1,548,493 252,502 2021 Paid during year 4,348 17,431 6,931 24,362 24,531 48,893 25,329 6.15% (1.72%) 2.06% (1.64%) 14.15% 8.66% (10.12%) (15.40%) 74,222 (1.94%) 55,988 (9.08%) 130,210 16.60% 132,087 11.53% 262,297 - 508,866 - 771,163 618,721 1,389,884 19,997 1,855 62,350 2,821 36,425 2,468 98,775 5,289 63,689 2,371 162,464 7,660 65,004 6,780 227,468 14,440 144,380 5,903 371,848 20,343 222,793 18,887 594,641 39,230 341,734 34,819 936,375 74,049 599123 184,364 1,535,498 258,413 4.44% (2.94%) 1.83% (2.86%) 16.28% 8.44% (10.58%) (15.78%) (5.09%) (11.00%) 10.37% 6.31% 7.59% (1.08%) - - 2014 2015 2016 2017 2018 2019 Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) Paid during year UCAE, end of year IBNR, end of year Ratio: excess (deficiency) UCAE, end of year IBNR, end of year Ratio: excess (deficiency) UCAE, end of year IBNR, end of year Ratio: excess (deficiency) 2020 Paid during year 95 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 96 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 32 4. Insurance and Financial Risk Management (Continued) (a) Insurance risk (continued) The concentration of insurance risk before and after reinsurance 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. The Group 31 December 2021 The Group 31 December 2020 The Company 31 December 2021 31 December 2020 Gross Net Gross Net Gross Net Gross Net Motor Property Other types of risk Total $Millions $Millions $Millions $Millions 57,448 246,145 116,499 49,094 18,905 40,291 420,092 108,290 Motor Property Other types of risk Total $Millions $Millions $Millions $Millions 60,724 52,222 193,910 710,082 14,440 55,454 964,716 121,589 Motor Property $Millions $Millions 52,796 213,975 44,509 15,896 Other types of risk $Millions 99,696 25,612 Total $Millions 366,467 86,017 Motor Property Other types of risk Total $Millions $Millions $Millions $Millions 60,188 52,045 152,901 116,705 329,794 14,098 45,938 74,681 97 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 98 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 33 (b) Reinsurance risk To limit its exposure of potential loss on an insurance policy, the insurer may cede certain levels of risk to a reinsurer. The Group 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 Group are summarised below: (a) Facultative reinsurance treaties are accepted on a per risk basis. (b) The group 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) Motor 60%:40% Quota Share of premiums i.e 60% ceded premiums and 40% retained (iii) Excess of loss treaty for motor and third-party liability, which covers losses in excess of J$7,500,000 for any one loss or event. (iv) Excess of loss treaty for motor and third-party liability, which covers losses in excess of TT$800,000 for any one loss or event. (v) First surplus and a quota share treaty for engineering business with retention of US$75,000. (vi) First surplus treaty for miscellaneous accident, losses covered in excess of J$2,000,000. (vii) Catastrophe excess of loss treaty which covers losses in excess of J$125,000,000 for any one catastrophic event as defined. (c) The Group 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 Group’s business model supports the placement of specialty risk directly in the overseas market on a per risk basis. In keeping with the Group’s risk policy, placement of these risks are with several reinsurers. A.M Best (Best) and Standard & Poor’s (S & P) ratings for the major reinsurers are as follows: Munich Reinsurance Company R & V Reinsurance Scor Reinsurance Company Swiss Reinsurance Company A.M Best 2021 2020 A+ A A+ A+ A+ A A+ A+ S & P 2021 AA- AA- AA- AA- (d) The amount of reinsurance recoveries recognised during the period is as follows: Group Company Property Motor Marine Liability Engineering Miscellaneous Accidents 2021 $’000 936,986 349,629 2,348 956 10,849 9,919 1,310,687 2020 $’000 41,186 366,243 1,442 17,623 1,958 10,027 438,479 2021 $’000 936,986 276,567 2,348 956 10,849 9,919 1,237,625 2020 AA- AA- AA- AA- 2020 $’000 43,512 357,388 1,442 17,623 1,958 10,027 431,950 97 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 98 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 34 (c) Financial risk The Group 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 Group primarily faces due to the nature of its investments and liabilities are credit risk, interest rate risk and market risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects of the Group’s financial performance. (i) Credit risk The Group 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 Group by failing to discharge their contractual obligations. Credit risk is an important risk for the Group’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 Group 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. Credit review process The Group’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 Group’s liability as primary insurer. If a reinsurer fails to pay a claim for any reason, the Group 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 Group’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 Group’s senior management examines the payment history for significant contract holders with whom they conduct regular business. Management information reported to the Group 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 Group’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 Group offering credit facilities. Customers are required to provide a letter of guarantee and proof of collateral to be held as security. 99 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 100 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 35 (c) Financial risk (continued) (i) Credit risk (continued) Credit review process (continued) (iv) Investments The Group 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. Impairment of Financial Assets The following financial assets that are subject to expected credit loss model:  Premium receivables  Debt investments carried at amortised cost.  Lease receivables While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, all bank balances are assessed to have low credit risk at each reporting date as they are held with reputable banking institutions and the identified impairment loss was immaterial. As loans receivables is also fully collateralised and the debtors are not experiencing any financial difficulty, the Group does not expect any financial losses on these amounts. Premium receivables The Group applies the IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for these assets. To measure the expected credit losses, premium receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of premium over a period of 24 months and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. The Group has identified the GDP and the unemployment rate of Jamaica to be most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these factors For unemployment rate, we anticipate a decline in unemployment resulting in better payment patterns from our broker partners. In determining the classification of our brokers, we considered the payment pattern for the past 24 months. Maximum exposure to credit risk The following table contains an analysis of the credit risk exposure of premium receivables for which an ECL is recognized. The gross carrying amount of financial assets below also represents the Group’s maximum exposure to credit risk on these assets. Gross carrying amount Loss allowance Carrying amount The Group The Company 2021 $’000 1,431,458 (16,124) 1,415,334 2020 $’000 1,267,130 (14,293) 1,252,837 2021 $’000 1,270,242 (16,124) 1,254,118 2020 $’000 1,217,097 (14,293) 1,202,804 2021 | GENERAL ACCIDENT ANNUAL REPORT 100 99 2021 | GENERAL ACCIDENT ANNUAL REPORT General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 36 4. Insurance and Financial Risk Management (Continued) (c) Financial risk (continued) Loss allowance The movement on the loss allowance for insurance receivables was as follows: Opening loss allowance as at 1 January Increase in allowance recognised in profit or loss during the period Closing loss allowance as at 31 December 2021 The Group and Company 2021 $’000 14,293 1,831 16,124 2020 $’000 6,960 7,333 14,293 The loss allowance as at 31 December 2021 and 31 December 2020 was determined as follows for premium receivables: The Group Less than 45 days Within 45 days to 3 months Over 3 months 2021 $’000 599,692 309,812 521,954 Gross amount 1,431,458 Loss Allowance Expected loss rate 2020 $’000 Loss Allowance 100 436 15,588 16,124 0.02% 625,955 0.15% 200,033 3.20% 441,142 1,267,130 87 100 14,106 14,293 Expected loss rate 0.013% 0.050% 3.197% The Company Less than 45 days Within 45 days to 3 months Over 3 months 2021 $’000 494,758 287,912 487,572 Gross amount 1,270,242 Loss Allowance Expected loss rate 2020 $’000 Loss Allowance 100 436 15,588 16,124 0.02% 575,922 0.15% 200,033 3.20% 441,142 1,217,097 86 100 14,107 14,293 Expected loss rate 0.015% 0.050% 3.197% Loss allowance for receivables have not been accounted for within the subsidiary as the entity operates primarily on a cash basis. 101 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 102 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 37 (c) Financial risk (continued) (i) Credit risk (continued) Premium receivables The following table summarises the Group’s credit exposure for premium receivables at their carrying amounts, as categorised by brokers and direct business: Brokers and insurance companies Direct 1,073,638 341,696 1,415,334 The Group 2021 $’000 2020 $’000 922,313 330,524 The Company 2021 $’000 912,422 341,696 2020 $’000 893,414 309,390 1,252,837 1,254,118 1,202,804 All premium receivables are receivable from policyholders, brokers and agents in Jamaica. Debt securities The following table summarises the Group’s credit exposure for debt securities at their carrying amounts, as categorised by issuer: Group Company Government of Jamaica 2021 $’000 31,717 2020 $’000 31,717 Government of Trinidad and Tobago 308,669 1,105,016 2021 $’000 31,717 - 2020 $’000 31,717 - Other government Certificate of deposits Corporate 302,681 122,401 306,786 122,401 1,746,653 2,370,477 1,424,017 2,112,509 230,061 2,619,781 98,538 106,926 98,538 3,728,148 1,869,446 2,365,165 Significant increase in credit risk  Qualitative assessment – Credit ratings are associated with ranges of default probabilities based on historical information. Rating outlooks, which are inherently forward-looking, are used to determine the probability of default to be applied to a specific security within its respective range. Issuer-specific default risk estimates incorporate forward-looking information directly. In calculating the probability of default, the Group uses credit ratings along with rating outlooks from recognised rating agencies, as well as issuer-specific default risk estimates where available and appropriate. The ratings and risk estimates are mapped to an internal credit risk grading model in order to standardise across different rating systems and to clearly demarcate significant changes in credit risk over time. A qualitative assessment is done at initial recognition and subsequently at each statement of financial position date and where it is determined that there is a significant increase in the probability of default the security is categorise as stage 2 for the purpose of calculating the ECL. If the financial instrument is credit impaired, the financial instrument is then moved to ‘Stage 3. Purchased or originated credit- impaired financial assets are those financial assets that are credit-impaired on initial recognition. Their ECL is always measured on a lifetime basis (Stage 3).  Quantitative assessment - Investment securities considered to have experienced a significant increase in credit risk if it is more than 30 days past due on its contractual payments. 101 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 102 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 38 4. Insurance and Financial Risk Management (Continued) (c) Financial risk (continued) (i) Credit risk (continued) Expected credit loss measurement The Group assesses on a forward-looking basis the ECL associated with debt investments. The ECL recognised by the Group reflects an unbiased and probability weighted amounts that is determined by evaluating a range of possible outcomes, the time value of money and reasonable and supportable information that is available without undue cost at the reporting date. The ECL is the product of the Probability of Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD). The PD presents the likelihood of a borrower defaulting on its financial obligation, either over the next 12 months or over the remaining lifetime of the obligation. EAD is based on the amounts the Group expects to be owed at the time of default, over the next 12 months or over the remaining lifetime. LGD represents the Group’s expectation of the extent of loss on a defaulted exposure. LGD is calculated on a 12 month or a lifetime basis, where 12 month LGD is the percentage of loss expected to be made if the default occurs in the next 12 months and lifetime LGD is a percentage of loss expected to be made if the default occurs over the remaining expected lifetime of the loan. All of the Group’s debt investments at amortised cost is considered to have low credit risk, and the loss allowance recognised during the period was therefore limited to 12 months expected losses (Stage 1). Management considers ‘low credit risk’ for bonds to be those with an investment grade or high credit rating with at least one major rating agency. Other instruments are considered to be low credit risk when they have a low risk of default and the issuer has a strong capacity to meet its contractual cash flow obligations in the near term. There were no transfers between stages from the date of adoption to the reporting date. The loss allowance for debt investments at amortised cost as at 31 December 2021 reconciles to the opening at 31 December 2021 as follows: allowance January 2021 loss on as 1 Opening loss allowance as at 1 January Decrease in loss allowance recognised in profit or loss in the statement of comprehensive income during the year Closing loss allowance as at 31 December The Group The Company 2021 $’000 12,326 (1,803) 10,523 2020 $’000 12,326 2021 $’000 7,679 - (1,803) 12,326 5,876 2020 $’000 7,679 - 7,679 103 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 104 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 39 (c) Financial risk (continued) (i) Credit risk (continued) Total loss allowance on financial assets at 31 December 2021 total $26,647,000 (investment securities, $10,523,000 and trade receivable, $16,124,000). Sensitivity analysis Set out below are the changes in ECL as at 31 December 2021 that would result from a reasonably possible change in the PDs used by the Group: Impact on ECL 31 December 2021 The Group The Company Actual PD ranges applied % Change in PD Higher threshold Lower threshold Higher threshold Lower threshold Debt instruments at amortised cost Trade receivables and other receivables Total 1% - 4% +/- 20% 1,843 (1,843) 0.1% -3% +/- 20% 3,224 5,067 (3,224) (5,067) $’000 1,843 3,224 5,067 $’000 (1,843) (3,224) (5,067) Impact on ECL 31 December 2020 The Group The Company Financial Assets Actual PD ranges applied % Change in PD Higher threshold Lower threshold Higher threshold Lower threshold $’000 $’000 Debt instruments at amortised cost Trade receivables and other 1% - 4% +/- 20% 3,302 (3,302) 2,742 (2,742) receivables 0.1% -3% +/- 20% Total 2,456 5,758 (2,456) (5,758) 2,456 5,198 (2,456) (5,198) 103 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 104 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 40 4. Insurance and Financial Risk Management (Continued) (c) Financial risk (continued) (ii) Liquidity risk Liquidity risk is the risk that the Group 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 Group’s liquidity management process, as carried out within the Group 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. 105 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 106 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 41 (c) Financial risk (continued)` (ii) Liquidity risk (continued) The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Group. 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 Group and its exposure to changes in interest rates and exchange rates. Financial assets and financial liabilities cash flows The tables below present the undiscounted cash flows of the Group’s financial assets and liabilities based on contractual repayment obligations: Liquidity risk management process (continued) Within 1 Month $’000 Within 3 Months $’000 3 to 12 Months $’000 Group 1 to 5 Years $’000 Over 5 Years $’000 No Specific Maturity $’000 Total $’000 At 31 December 2021: Cash and short-term investments Due from policyholders, brokers and agents Due from reinsurers and coinsurers Deferred policy acquisition cost Other receivables Loan receivable Lease receivable Due from related parties Real estate investment Investment securities Total financial assets Due to reinsurers and coinsurers Other liabilities Lease liabilities Claims liabilities Total financial liabilities Net Liquidity Gap Cumulative gap 1,312,639 131,590 469,465 857,080 945,869 - 1,095,183 1,328,645 - - - 59,620 7,242 2,770 5,540 24,930 20,191 4,487 2,243 - - - - - 398,744 514,790 1,005,032 2,378,798 2,757,079 3,050,183 - - - - - - - 265,924 74,034 - 189,912 786,059 1,315,929 - - - - 1,444,229 - - 1,415,334 3,280,908 - 562,600 562,600 - - - - - 691,562 - - 5,383 - 64,132 447,709 1,707,254 64,132 758,424 299,164 100,955 5,383 189,912 3,216,466 11,273,375 - 143,825 56,763 461,076 14,318 13,604 604,433 359,193 7,545 1,065,509 549,644 104,300 1,757,365 952,026 1,238,969 3,863,248 - - 7,811,608 9,531,061 3,896,700 1,742,314 -2,580,771 - (3,828) 25,244 1,682,010 1,742,314 2,728,536 321,647 321,647 1,439,557 939,241 2,576,943 1,441,024 1,316,055 1,637,702 - 64,132 60,304 - 7,064 26,388 25,244 - - - - - 105 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 106 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 42 4. Insurance and Financial Risk Management (Continued) (c) Financial risk (continued)` (ii) Liqudity risk (continued) Liquidity risk management process (continued) At 31 December 2020: Cash and short-term investments Due from policyholders, brokers and agents Due from reinsurers and coinsurers Deferred policy acquisition cost Other receivables Loan receivable Lease receivable Due from related parties Real estate investment Investment securities Total financial assets Within 1 Month $’000 Within 3 Months $’000 3 to 12 Months $’000 Group 1 to 5 Years $’000 Over 5 Years $’000 No Specific Maturity $’000 Total $’000 620,664 135,884 - 341,319 562,000 911,518 689,634 - 1,050,615 - - - - - - - - - - - 756,548 1,252,837 2,302,249 496,512 496,512 7,636 2,920 2,243 - - 181,508 1,718,290 40,453 5,839 4,487 - - 437,841 2,225,656 - 26,277 20,191 - - 1,879,999 2,977,082 - 140,146 100,955 - 212,329 1,220,251 1,673,681 - 175,183 - - - 79,730 254,913 112,961 - 22,710 - 436,567 1,068,750 Due to reinsurers and coinsurers Other liabilities Lease liabilities Claims liabilities Total financial liabilities Net Liquidity Gap Cumulative gap 535,398 190,195 7,220 1,499,603 2,232,416 (514,126) (514,126) 419,220 11,958 14,115 1,552,907 1,998,200 227,456 (286,670) - 124,425 61,908 1,273,540 1,459,873 1,517,209 1,230,539 - 7,064 93,601 2,298,679 2,399,344 -725,663 504,876 - - - - 254,913 759,789 - 77,142 - - 77,142 991,608 1,751,397 161,050 350,365 127,876 22,710 212,329 4,235,896 9,918,372 954,618 410,784 176,844 6,624,729 8,166,975 1,751,397 - 107 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 108 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 43 4. Insurance and Financial Risk Management (Continued) (c) Financial risk (continued) (ii) Liquidity risk (continued) Liquidity risk management process (continued) Company Within 1 Month Within 3 Months 3 to 12 Months 1 to 5 Years Over 5 Years No Specific Maturity $’000 $’000 $’000 $’000 $’000 $’000 Total $’000 At 31 December 2021: Cash and short-term investments Due from policyholders, brokers and agents Due from reinsurers and coinsurers 675,772 8,877 308,249 945,869 - - - - 480,494 979,531 1,025,255 643,815 Deferred policy acquisition cost - - - - - - - - 7,216 59,620 - - 2,243 4,486 20,191 74,033 - - - 189,912 Other receivables Due from related parties Lease receivables Real estate investment Investment securities Total financial assets - - - - - - - - - - - 684,649 1,254,118 3,129,095 521,534 521,534 656,240 723,076 86,532 - - 86,532 100,953 189,912 309,545 355,956 941,882 340,610 20,638 447,709 2,416,340 1,783,519 2,354,339 1,987,328 1,248,370 20,638 1,712,015 9,106,209 Due to reinsurers and coinsurers 522,259 461,076 - - Other liabilities Lease liabilities 244,757 5,681 14,318 10,982 143,825 7,064 49,612 24,294 Insurance reserves 1,464,057 878,434 1,171,245 2,342,483 - - - - - - - - 983,335 409,964 90,569 5,856,219 Total financial liabilities Net Liquidity Gap Cumulative gap 2,236,754 1,364,810 989,529 (453,235) 1,364,682 622,646 2,373,841 -1,125,471 - - 20,638 1,712,015 7,340,087 1,766,122 (453,235) 536,294 1,158,940 33,469 54,107 1,766,122 - 107 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 108 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) (c) Financial risk (continued) (ii) Liquidity risk (continued) Liquidity risk management process (continued) Company Within 1 Month Within 3 Months 3 to 12 Months 1 to 5 Years Over 5 Years No Specific Maturity $’000 $’000 $’000 $’000 $’000 $’000 Page 44 Total $’000 452,964 At 31 December 2020: Cash and short-term investments Due from policyholders, brokers and agents Due from reinsurers and coinsurers 317,080 135,884 575,922 626,882 - - 562,000 786,800 899,200 Deferred policy acquisition cost - - - - - - - - - - - - - - - - - - 1,202,804 2,248,000 487,003 487,003 75,356 102,539 52,253 - - 52,253 127,876 212,329 - - - 2,246 24,937 - - 2,243 4,487 20,191 100,955 - - - 212,329 116,448 435,841 1,635,575 197,895 20,638 432,913 2,839,310 1,575,939 2,014,831 2,554,966 511,179 20,638 1,047,525 7,725,078 Other receivables Due from related parties Lease receivables Real estate investment Investment securities Total financial assets Due to reinsurers and coinsurers 452,779 480,762 - - Other liabilities Lease liabilities 190,195 11,958 124,425 7,065 4,925 9,764 44,175 79,111 Insurance reserves 1,253,628 1,504,354 1,253,628 1,002,903 - - - - - - - - 933,541 333,643 137,975 5,014,513 Total financial liabilities Net Liquidity Gap Cumulative gap 1,901,527 (325,588) 2,006,838 7,993 1,422,228 1,089,079 (577,900) 1,132,738 - - 20,638 1,047,525 6,419,672 1,305,406 (325,588) (317,595) 815,143 237,243 257,881 1,305,406 Assets available to meet all of the liabilities and to cover financial liabilities include cash and bank balances and investment securities. The Group 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. 109 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 110 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 45 (c) Financial risk (continued) (iii) Market risk The Group 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 Group’s exposure to market risks or the manner in which it manages and measures the risk. 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 Group 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 Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign assets to address short term imbalances. Concentrations of currency risk The tables below summarise the Group’s exposure to foreign currency exchange rate risk at 31 December: Jamaican$ J$’000 The Group US$ J$’000 TTD J$’000 BBD J$’000 Total J$’000 At 31 December 2021: Financial Assets Cash and short term investments Due from policyholders, brokers and agents Due from reinsurers and coinsurers Deferred policy acquisition cost Other receivables Loan receivables Lease receivables Due from related parties Real estate investment Investment securities Total financial assets Financial Liabilities Due to reinsurers and coinsurers Other liabilities Lease liabilities Insurance reserves Total financial liabilities Net financial position 109 2021 | GENERAL ACCIDENT ANNUAL REPORT 316,517 1,056,249 484,995 46,826 471,666 197,869 171,005 114,390 1,444,183 1,415,334 209,778 - - 2,913,270 521,534 639,160 83,054 31,726 77,599 244,188 - - 67,320 4,239 - 1,144 - - 189,912 1,877,855 465,516 758,296 7,582,961 1,726,684 1,349,068 74,806 9,340 41,665 - - 3,280,908 562,600 758,424 244,188 67,320 5,383 189,912 - 3,101,667 411,206 11,069,919 760,604 403,883 32,119 222,731 23,713 6,081 116,753 53,167 13,730 4,917,394 1,723,269 938,825 6,114,000 1,877,465 1,220,804 128,264 1,468,961 (150,781) 1,065,509 58,461 549,644 22,927 103,207 4,191 232,120 7,811,608 317,699 9,529,968 1,539,951 93,507 2021 | GENERAL ACCIDENT ANNUAL REPORT 110 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 46 (c) Financial risk (continued) (iii) Market risk (continued) Currency risk (continued) The tables below summarise the Group’s exposure to foreign currency exchange rate risk at 31 December: Jamaican$ J$’000 The Group US$ J$’000 TTD J$’000 BBD GBP $’000 J$’000 Total J$’000 At 31 December 2020: Financial Assets Cash and short term investments Due from policyholders, brokers Due from reinsurers and coinsurers Deferred policy acquisition cost Other receivables Loan receivables Lease receivables Due from related parties Real estate investment Investment securities Total financial assets Financial Liabilities Due to reinsurers and coinsurers Other liabilities Lease liabilities Insurance reserves Total financial liabilities Net financial position 195,278 979,035 2,077,933 496,512 150,257 - 79,157 22,710 212,329 317,106 93,033 223,769 3,388 170,067 33,870 - - - 4,915 - 251,464 - - - - - - 2,446,169 1,353,671 393,139 6,659,380 1,740,341 1,104,081 151,018 46,644 20,379 - 5,878 - - - - 17,807 241,726 113 756,548 - 1,252,836 - 2,302,249 496,512 161,050 - 251,464 - 79,157 - 22,710 - 212,329 - - 4,210,786 113 9,745,641 - 758,407 328,156 48,873 71,549 24,374 4,934,789 1,565,818 6,070,225 1,661,741 78,600 589,155 175,134 5,571 77,906 79,748 338,359 765,722 21,077 5,508 11,368 44,374 82,327 159,399 954,618 - 410,784 - 162,521 - - 6,624,729 - 8,152,652 113 1,592,989 111 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 112 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 47 4.Insurance and Financial Risk Management (Continued) (c) Financial risk (continued) (iii) Market risk (continued) Currency risk (continued) The tables below summarise the Company’s exposure to foreign currency exchange rate risk at 31 December: Jamaican$ J$’000 US$ BB$ J$’000 J$’000 J$’000 TT$ At 31 December 2021: Financial Assets Cash and short-term investments Due from policyholders, brokers and agents Due from reinsurers and coinsurers Deferred policy acquisition cost Other receivables Due from related parties Lease receivables Real estate investment Investment securities Total financial assets Financial Liabilities Due to reinsurers and coinsurers Lease liabilities Other liabilities Insurance reserves Total financial liabilities Net financial position 368,105 197,869 77,230 - - 64,584 - 316,517 1,056,249 3,051,865 521,534 723,075 6,082 67,230 189,912 1,881,152 462,219 7,813,615 1,170,007 - - - - - 12,252 - - - - - - 3,614 - - 12,252 - 3,614 222,731 760,604 53,167 32,119 6,081 403,883 4,917,394 938,825 6,114,000 1,220,804 (50,797) 1,699,616 - - - - - 12,252 - - - - - 3,614 Total J$’000 684,622 1,254,118 3,129,094 521,534 723,075 86,532 67,230 189,912 2,343,371 8,999,489 983,335 85,286 409,964 5,856,219 7,334,804 1,664,685 111 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 112 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 48 (c) Financial risk (continued) (iii) Market risk (continued) Currency risk (continued) The tables below summarise the Company’s exposure to foreign currency exchange rate risk at 31 December: The Company Jamaican$ J$’000 US$ BB$ J$’000 J$’000 J$’000 TT$ At 31 December 2020: Financial Assets Cash and short-term investments Due from policyholders, brokers and agents Due from reinsurers and coinsurers Deferred policy acquisition cost Other receivables Due from related parties Lease receivables Real estate investment Investment securities Total financial assets Financial Liabilities Due to reinsurers and coinsurers Lease liabilities Other liabilities Insurance reserves Total financial liabilities Net financial position 194,572 981,117 2,077,933 487,003 150,257 22,710 79,157 212,329 2,533,275 6,738,353 758,407 328,072 48,873 4,934,765 6,070,117 668,236 258,279 221,686 170,067 - - - - 306,035 956,067 175,134 5,571 77,906 79,748 338,359 617,708 - - - - - 17,037 - - - 17,037 - - - - - 17,037 - - - - 12,506 - - 12,506 - - - - - 12,506 GBP J$’000 Total J$’000 113 - - - - - - - - 113 - - - - - 113 452,964 1,202,803 2,248,000 487,003 150,257 52,253 79,157 212,329 2,839,310 7,724,076 933,541 333,643 126,779 5,014,513 6,408,476 1,315,600 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. 113 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 114 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 49 4. Insurance and Financial Risk Management (Continued) (c) Financial risk (continued) (iii) Market risk (continued) Foreign currency sensitivity The Group Increase/ (decrease) in Pre-tax Profit 2021 $’000 (2,565) 7,965 - - % Change in Currency Rate 2020 2% 6% 4% 6% The Company Increase/ (decrease) in Pre-tax Profit 2021 $’000 (2,032) 3,048 % Change in Currency Rate 2020 2% 6% Increase/ (decrease) in Pre-tax Profit 2020 $’000 (16,367) 24,551 - - Increase/ (decrease) in Pre-tax Profit 2020 $’000 (10,853) 32,560 % Change in Currency Rate 2021 2% 6% 4% 6% % Change in Currency Rate 2021 4% 6% USD – J$ Revaluation USD – J$ Devaluation TT – J$ Revaluation TT – J$ Devaluation USD – J$ Revaluation USD – J$ Devaluation 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 Group to cash flow interest risk, whereas fixed interest rate instruments expose the Group to fair value interest risk. The Group’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 Group’s exposure to interest rate risk. It includes the Group’s financial instruments at carrying amounts, categorised by the earlier of contractual repricing or maturity dates. 113 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 114 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 50 4. Insurance and Financial Risk Management (Continued) (c) Financial risk (continued) (iii) Market risk (continued) Interest rate risk (continued) Within 1 Month Within 3 Months 3 to 12 Months The Group 1 to 5 Years Over 5 Years Non-Interest Bearing $’000 $’000 $’000 $’000 $’000 $’000 Total $’000 At 31 December 2021: Cash and short term investments 1,312,639 131,544 - Due from policyholders and brokers Due from reinsurers and coinsurers - - - - - - Deferred policy acquisition costs - - - - - 3,280,908 - - - - - - - - 1,415,334 - 1,444,183 1,415,334 3,280,908 562,600 562,600 691,562 758,424 - - 5,383 244,188 67,320 5,383 189,912 189,912 - - - - - - 7,242 1,772 1,626 - - 59,620 3,545 2,271 - - - 15,951 222,920 10,950 52,473 - - - - 397,576 1,720,855 499,773 696,753 734,287 967,315 994,216 1,009,680 55,007 55,007 447,709 3,101,667 6,593,408 11,069,919 Other receivables Loan receivables Lease receivable Due from related parties Real estate investment Investment securities Total financial assets Due to reinsurers and coinsurers Other liabilities Lease liabilities Insurance reserves - - - - - - - - 6,983 12,808 56,509 26,907 - - - - Total financial liabilities 6,983 12,808 56,509 26,907 - - - - - 1,065,509 1,065,509 549,644 549,644 - 103,207 7,811,608 7,811,608 9,426,761 9,529,968 Total interest repricing gap 1,713,872 683,945 937,707 982,773 55,007 (2,833,353) 1,539,951 Cumulative gap 1,713,872 2,397,817 3,335,524 4,318,297 4,373,304 1,539,951 At December 2020 Cash and short-term investments Due from policyholders and brokers Due from reinsurers and coinsurers Deferred policy acquisition costs Other receivables Loan receivables Lease receivables Due from related parties Real estate investment Investment securities Total financial assets Lease liabilities Other liabilities Insurance reserves 620,664 135,884 - - - 7,636 1,453 960 - - - - - 40,452 2,932 1,956 - - The Group - - - - - - - - - - - 756,548 - 1,252,837 1,252,837 - 2,302,249 2,302,249 - - 496,512 112,962 13,620 86,008 147,451 9,432 66,809 - - - - - - - - 22,710 - 212,329 234,977 757,557 1,197,855 1,232,476 58,262 729,659 4,210,786 865,690 938,781 1,220,907 1,385,293 205,713 5,129,258 9,745,642 6,543 12,761 55,815 87,402 - - - 410,784 6,624,729 6,624,729 496,512 161,050 251,464 79,157 22,710 212,329 954,618 162,521 410,784 Due to reinsurers and coinsurers - - - - - 954,618 Total financial liabilities 6,543 12,761 55,815 87,402 - 7,990,131 8,152,652 Total interest repricing gap 859,147 926,020 1,165,092 1,297,891 205,713 (2,860,873) 1,592,990 Cumulative gap 859,147 1,785,167 2,950,259 4,248,150 4,453,863 1,592,990 - 115 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 116 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 51 4. Insurance and Financial Risk Management (Continued) (c) Financial risk (continued) (iii) Market risk (continued) Interest rate risk (continued) At 31 December 2021: Cash and short-term investments Due from policyholders and brokers Due from reinsurers and coinsurers Deferred policy acquisition costs Other receivables Due from related parties Lease receivables Real estate investment Investment securities Total financial assets Within 1 Month Within 3 Months 3 to 12 Months The Company 1 to 5 Years Over 5 Years Non-Interest Bearing $’000 $’000 $’000 $’000 $’000 $’000 Total $’000 675,772 - - - 7,216 - 1,626 - 8,850 - - - 59,620 - 2,271 - - - - - - 10,950 - - - - - - - - 52,473 - - - - - - - - 1,254,118 3,129,095 684,622 1,254,118 3,129,095 521,534 521,534 656,240 723,076 86,532 - 86,532 67,320 - 189,912 189,912 308,815 343,574 907,054 323,219 993,429 414,315 918,004 375,692 13,000 13,000 447,709 6,285,140 2,343,371 8,999,580 Due to reinsurers and coinsurers - - - - Lease liabilities Other liabilities Insurance reserves 5,119 10,186 46,564 23,417 - - - - - Total financial liabilities 5,119 10,186 46,564 23,417 - - - - - 983,335 983,335 - 85,286 409,964 409,964 5,856,219 5,856,219 7,249,518 7,334,804 Total interest repricing gap 988,310 404,129 871,440 352,275 13,000 (964,378) 1,664,776 Cumulative gap 988,310 1,392,439 2,263,879 2,616,154 2,629,154 1,664,776 At 31 December 2020: Cash and short term investments 317,080 135,884 Due from policyholders and brokers Due from reinsurers and coinsurers Deferred policy acquisition costs - - - - - - - 2,243 4,487 20,191 - - - 960 1,956 9,432 66,809 The Company - - - - - - - - - - - 452,964 1,202,804 1,202,804 2,248,000 2,248,000 487,003 487,003 123,336 150,257 52,253 - 52,253 79,157 212,329 212,329 234,977 757,557 1,119,976 245,756 13,000 468,044 2,839,310 555,260 899,884 1,149,599 312,565 13,000 4,793,769 7,724,077 Other receivables Due from related parties Lease receivables Real estate investment Investment securities Total financial assets 115 2021 | GENERAL ACCIDENT ANNUAL REPORT Due to reinsurers and coinsurers - - - - Lease liabilities Other liabilities Insurance reserves 4,199 8,599 39,387 74,593 - - - - - - - - Total financial liabilities 4,199 8,599 39,387 74,593 - - - - - 933,541 933,541 - 126,778 333,643 333,643 5,014,513 5,014,513 6,281,697 6,408,475 Total interest repricing gap 551,061 891,285 1,110,212 237,972 13,000 (1,487,928) 1,315,602 Cumulative gap 551,061 1,442,346 2,552,558 2,790,530 2,803,530 1,315,602 2021 | GENERAL ACCIDENT ANNUAL REPORT 116 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 4. Insurance and Financial Risk Management (Continued) Page 52 (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 Group’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 The Group 2021 JMD/USD -50/-100 300/100 2021 $’000 (1,488) 1,938 2021 $’000 - - The Company Change in Basis points: Increase/(decrease) in Profit before Taxation Increase/(decrease) in Other Components of Equity 2021 JMD/USD -50/-100 300/100 2021 $’000 (90) 540 2021 $’000 - - Change in Basis points: 2020 JMD/USD -100/-100 100/100 Change in Basis points: 2020 JMD/USD -100/-100 100/100 Increase/(decrease) in Profit before Taxation Increase/(decrease) in Other Components of Equity 2020 $’000 (5,415) 5,415 2020 $’000 - - Increase/(decrease) in Profit before Taxation Increase/(decrease) in Other Components of Equity 2020 $’000 (180) 180 2020 $’000 - - 117 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 118 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 53 4. Insurance and Financial Risk Management (Continued) (c) Financial risk (continued) Price risk The Group is exposed to equity securities and real estate price risk because of investments held by the Group. 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 Group’s pre-tax profit for the year and on equity. The analysis is based on the assumption that the equity prices had increased/decreased by 10% (2020 - 10%) with all other variables held constant. The Group Equity Securities Real estate investment Increase/ (decrease) in Profit before Taxation 2021 $’000 Increase/ (decrease) in Profit before Taxation 2019 $’000 Effect on Other Components of Equity: 2021 JMD/USD Effect on Other Components of Equity 2020 $’000 Effect on Other Components of Equity 2021 $’000 Effect on Other Components of Equity 2020 $’000 - - - - (44,771) (43,643) 44,771 43,643 (18,991) 18,991 (21,232) 21,232 Change in index: -10% (2021 – 10%) +10% (2021– 10%) The Company Equity Securities Real estate investment Increase/ (decrease) in Profit before Taxation 2021 $’000 Increase/ (decrease) in Profit before Taxation 2020 $’000 Effect on Other Components of Equity: 2021 JMD/USD Effect on Other Components of Equity 2020 $’000 Effect on Other Components of Equity 2021 $’000 Effect on Other Components of Equity 2020 $’000 - - - - (44,771) (43,291) 44,771 43,291 (18,991) 18,991 (21,232) 21,232 Change in index: -10% (2020 – 10%) +10% (2020 – 10%) 117 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 118 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 5. Capital Management Page 54 The Group’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 Group operates; (b) To safeguard the Group’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. Regulations in Jamaica 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 Jamaican regulator, the Financial Services Commission (FSC). The MCT is calculated by management. This information is required to be filed with the FSC on a monthly, quarterly and annual basis. The required MCT ratio is 250%. In January 2020, the FSC announced a measure to allow for the relaxation of the MCT ratio of 250% to 150% for a period of two years. The measure will reduce the amount of capital that he general insurance industry would need to hold for the purpose of meeting capital adequacy requirements. During this period of regulatory forbearance, the FSC will carry out a Quantitative Impact Study (QIS) to determine the optimal position for the MCT that balances growth and stability of the insurance industry. In this period, the amount of dividends paid to shareholders of the company should not exceed 50% of profit that was achieved for the previous year. To qualify for the special provisions for relaxed MCT ratio, investment proposals must be approved by the FSC and commence within the 2-year window provided for in the January 2020 advisory. The company took advantage of this relaxation through a strategic investment, and as such, the FSC has granted forbearance on the MCT ratio requirement allowing the company to maintain a minimum MCT ratio of 200.8%. The MCT ratio for the company for the years ended 31 December 2021 and 2020 are as follows: Actual MCT ratio Minimum Required MCT ratio Regulations in Trinidad and Tobago 2021 209.1% 200.8% 2020 240.4% 200.8% General Accident Insurance (Trinidad and Tobago) Limited (formerly Motor One Limited) is regulated by The Central Bank of Trinidad and Tobago under the Insurance Act 2018 which became effective 1 January 2021. Under the Act the transitional ratios applicable in year one (1) is a Minimum Regulatory Capital Ratio of 110%.As at year end the company’ solvency ratio was 133%. Regulations in Barbados General Accident Insurance (Barbados) Limited is regulated by The Financial Services Commission with legislative guidance from the Financial Services Act, the Insurance Act and the Exempt Insurance Act. The company is required to have a margin of solvency determined as the greater of BB$500,000 or 20% of its net written premium for the financial year. Based on the net admissible assets as at the financial year end, the company is deemed solvent by a margin of BB$0.7m. 119 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 120 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 6. Fair Value Estimation Page 55 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 Group 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. Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) are disclosed as Level 3. (c) The following table presents the Group’s assets that are measured at fair value. There are no liabilities that are measured at fair value at the year end, and the Group had no transfers between levels during the year. At 31 December 2021 Assets Equity securities Investment property Real estate investment Total assets measured at fair value At 31 December 2021 Assets Equity securities Investment property Real estate investment Total assets measured at fair value Group Level 1 $’000 Level 2 $’000 Level 3 $’000 451,567 - - 451,567 - - - 328,149 189,912 - 518,061 Total balance $’000 451,567 328,149 189,912 969,628 Company Level 1 $’000 Level 2 $’000 Level 3 $’000 Total balance $’000 447,709 - - 447,709 - - - 265,000 - 189,911 - 454,911 447,709 265,000 189,911 902,620 119 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 120 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 6. Fair Value Estimation (Continued) Page 56 At 31 December 2020 Assets Equity securities Investment property Real estate investment Total assets measured at fair value At 31 December 2020 Assets Equity securities Investment property Real estate investment Total assets measured at fair value The Group Level 1 $’000 Level 2 $’000 Level 3 $’000 Total balance $’000 436,567 - - 436,567 - - - 315,048 - 212,329 - 527,377 436,567 315,048 212,329 963,944 The Company Level 1 $’000 Level 2 $’000 Level 3 $’000 Total balance $’000 432,913 - - 432,913 - - - 255,938 - 212,329 - 468,267 432,913 255,938 212,329 901,180 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 Group 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 Group. 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 fair value through other comprehensive income 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) Financial assets at amortised cost are assumed to approximate fair value as these are issued at terms and conditions available in the market for similar transactions. 121 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 122 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 57 6. Fair Value Estimation (Continued) Fair Value of Investment Properties and Real Estate Fund An independent valuation of the Group’s Investment Properties and Real Estate Fund was performed by valuers to determine the fair value as at 31 December 2021. The revaluation surplus has been credited to other comprehensive income. Valuation process of the Group On an annual basis the Group engages external, independent and qualified valuers to determine the fair value of its Investment Properties and Real Estate Fund. Sales Comparison Approach The comparison method of valuation was taken in account by examining values of similar properties in and around surrounding areas. This approach incorporates unobservable inputs which in the valuer’s judgement reflects suitable adjustments regarding size, age, condition, time of sale, quality of land and buildings and improvements. The higher the price per square foot the higher the fair value. Income Approach The projected net income of the subject properties are discounted using an appropriate capitalisation rate. The most significant input to this valuation is the rental rate per square foot and the capitalisation rate. Rental rates of the subject properties are adjusted to reflect the market rent for properties of similar size, location and condition. The higher rental rate per square foot the higher the fair value. The higher the capitalisation rate the lower the fair value. The average rent per square foot ranges between $ US8 - $US14. Sensitivity Analysis Some of the investment properties and real estate investments held by the Group are measured using an income approach which considers rental rates and a capitalization rate. The capitalization factor is largely an unobservable input that have the greatest potential for volatility and have resulted in the classification of the investments in level 3. The capitalization rates used in the valuations range from 4% to 7%. Should the capitalization factors increase/decrease by 1 percentage point, it would result in decrease/increase in the carrying value of investment properties and real estate investments, with all other factors remaining constant, of $33,333,,000 (2020 - $49,865,000) for the Group and company. 7. Critical Accounting Estimates and Judgements in Applying Accounting Policies The Group 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 Group 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 Group’s experience. 2021 | GENERAL ACCIDENT ANNUAL REPORT 122 121 2021 | GENERAL ACCIDENT ANNUAL REPORT General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 7. Critical Accounting Estimates and Judgements in Applying Accounting Policies (Continued) (a) Liabilities arising from claims made under insurance contracts (continued) Page 58 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 Group’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 Group 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 Group 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. (d) Measurement of expected credit loss allowance The measurement of the expected credit loss allowance for financial assets measured at amortised cost and FVOCI requires that use of complex models and significant assumptions about future economic conditions and credit behaviour such as the likelihood of customers defaulting and the resulting losses. A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as i) Determining criteria for significant increase in credit risk ii) Choosing appropriate models and assumptions for the measurement of ECL iii) Establishing the number and relative weightings of forward-looking scenarios Further details about judgements and estimates by the Group are set out in 4 (c) 123 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 124 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 8. Segment Information Page 59 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 Group 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 programs, which are located in Jamaica, Trinidad and Barbados. 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. Management has aggregated homeowners’ and burglary for the purpose of segment reporting given that burglary coverage is usually covered under homeowners’ policy. (f) Miscellaneous 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.    123 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 124 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 8. Segment Information (Continued) Page 60 The segment information provided to the board of directors for the reportable segments for the year ended 31 December 2021 is as follows: Group 2021 Fire $’000 Motor Marine Liability $’000 $’000 $’000 Homeowners & Burglary $’000 Engineering & Miscellaneous Accident $’000 Total $’000 Gross Premiums Written 8,276,049 3,680,643 179,350 993,732 292,897 537,136 13,959,807 Reinsurance ceded (8,198,043) (604,441) (165,276) (824,582) (254,074) (442,435) (10,488,851) Excess of loss reinsurance cost (98,653) (92,797) - (5,184) (20,358) - (216,992) (20,647) 2,983,405 14,074 163,966 18,465 94,701 3,253,964 (4,817) (220,196) 198 3,087 Net Premiums Earned (25,464) 2,763,209 14,272 167,053 Commission income 396,940 309,450 19,566 43,208 (2,338) 16,127 35,214 2,861 (221,205) 97,562 3,032,759 88,479 892,857 Net premiums written Changes in unearned premiums, net Commission expense (110,792) (307,770) (2,597) (21,975) (33,802) (34,090) (511,026) Claims expense (74,450) (1,661,828) (160) (2) (1,299) (13,621) (1,751,360) Management expenses (20,207) (1,461,699) (546) (71,743) (10,591) (18,127) (1,582,913) Segment results Unallocated income - Investment income Finance charge Other Income Depreciation and amortisation Profit before tax Taxation Net profit 166,027 (358,638) 30,535 116,541 5,649 120,203 80,317 226,526 (7,076) 124,591 424,358 (164,663) 259,695 (110,459) 149,236 125 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 126 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 8. Segment Information (Continued) Page 61 2020 Fire $’000 Motor $’000 Marine $’000 Liability $’000 Homeowners & Burglary $’000 Engineering & Miscellaneous Accident $’000 Total $’000 Gross Premiums Written 7,027,919 3,224,116 202,416 772,467 211,559 606,513 12,044,990 Group Reinsurance ceded Excess of loss reinsurance cost Net premiums written Changes in unearned premiums, net (6,955,216) (618,116) (186,170) (605,809) (191,738) (509,020) (9,066,069) (71,296) (78,929) - (2,512) (14,577) - (167,314) 1,407 2,527,071 16,246 164,146 5,244 97,493 2,811,607 Net Premiums Earned 998 2,441,524 16,364 173,977 (409) (85,547) 118 9,831 (934) 4,310 5,894 (71,047) 103,387 2,740,560 Commission income 352,238 200,487 20,981 34,194 64,056 99,261 771,217 Commission expense (95,141) (282,664) (2,767) (21,089) (25,742) (38,231) (465,634) Claims expense 6,996 (1,724,288) (114) (80,327) Management expenses (17,084) (1,114,359) (318) (61,256) (542) (5,801) (18,651) (1,816,926) (28,954) (1,227,772) 248,007 (479,300) 34,146 45,499 36,281 116,812 1,445 Segment results Unallocated income - Investment income Finance charge Other income Depreciation and amortisation- Profit before tax Taxation Net profit Total capital expenditure was as follows: Property, plant and equipment Intangible assets 293,886 (14,642) 95,536 376,280 (116,744) 259,536 (65,724) 193,812 2020 $’000 151,819 7,006 158,825 2021 $’000 127,134 536 127,670 Assets, liabilities and capital expenditure are not reported by segment to the Board of Directors. 125 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 126 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 62 9. Related Party Transactions and Balances (a) Related party transactions are as follows: Dividend income Subsidiary Affliliated companies Interest income - Fellow subsidiary Parent Group Company 2021 $’000 2020 $’000 - 18,822 18,822 - 14,261 14,261 ¤ 10,609 6,232 16,841 6,484 5,245 11,729 2021 $’000 - 18,822 18,822 10,609 6,232 16,841 2020 $’000 103,563 14,262 117,825 6,484 5,245 11,729 Rental and lease payments- Affiliated company 38,803 35,458 38,803 35,458 Premium income - Key management Parent company Fellow subsidiaries Affiliates Claims expense - Parent company Fellow subsidiaries Affiliates Dividends declared - Key management Parent company Key management compensation - Salaries and other short-term benefits Post employment benefits Directors emoluments Directors’ emoluments (included above) Directors’ fees (included above) 2,042 22,053 547,207 69,188 640,490 650 21,992 3,098 28,710 2,217 157,360 159,577 2,269 32,199 466,615 20,853 521,936 736 11,892 2,056 14,684 2,586 178,134 180,720 2,042 22,053 547,207 69,188 640,490 650 21,992 3,098 28,710 2,269 32,199 466,615 20,853 521,936 736 11,892 2,056 14,684 2,217 157,360 159,577 2,586 178,134 180,720 305,374 12,153 252,220 11,316 257,534 12,153 208,002 11,316 107,768 4,069 73,013 3,128 104,729 1,030 70,915 1,030 127 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 128 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (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 63 Due from related parties - Subsidiary Affiliated company Due from policyholders, brokers and agents - Fellow subsidiary Parent company Affiliated company Investment securities - The Group The Company 2021 $’000 2020 $’000 2021 $’000 - 6,083 6,083 - 22,288 22,288 80,449 6,083 86,532 2020 $’000 29,543 22,710 52,253 44,865 - 37,018 81,883 19,797 7 32,449 52,253 44,865 19,797 - 37,018 81,883 7 32,449 52,253 Shares in affiliated entities (Note 23) 433,591 392,235 433,591 392,235 Claims liabilities Parent company Affiliated company Fellow subsidiary 8,292 11,337 892,355 911,984 15,867 549 54,167 70,583 8,292 11,337 892,355 911,984 15,867 549 54,167 70,583 Included in the investments of the Group are shares in related parties. At 31 December 2021, these shares represented 3.47% of the total assets (2020 – 4.64%). Affiliates represent companies that are associated with the parent company, which are not subsidiaries of the parent company and also entities over which the directors have significant influence. No provisions made for receivables from related parties for either year. 10. Claims Expense Gross claims expense Reinsurance share of claims (Note 4(b) (d)) Net claims expense The Group The Company 2021 $'000 2020 $'000 2021 $'000 2020 $'000 3,033,569 2,255,405 2,566,366 1,994,430 (1,282,209) (438,479) (1,237,625) (431,950) 1,751,360 1,816,926 1,328,741 1,562,480 Included in Gross claims expense is $1.1 billion paid to related parties most of which have been recovered from reinsurers. 2021 | GENERAL ACCIDENT ANNUAL REPORT 128 127 2021 | GENERAL ACCIDENT ANNUAL REPORT General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 11. Investment Income Page 64 Interest income Lease receivable Loan due from fellow subsidiary Loan due from parent The Group The Company 2021 $'000 2020 $'000 2021 $'000 11,062 10,609 6,233 4,880 6,484 5,245 11,062 10,609 6,233 2020 $'000 4,880 6,484 5,245 Cash and deposits and investment securities 140,080 156,624 103,138 94,561 Bond premium amortisation Dividend income Gain on disposal of investment property Real estate investment income Rental income from investment property Revaluation gains on investment property Loss allowance reversed on investments 12. Other Income Foreign exchange gains Gain on disposal of property, plant and equipment Roadside assistance Miscellaneous income 167,984 173,233 131,042 111,170 (965) (3,381) (976) (3,370) 167,019 169,852 130,066 107,800 18,822 - 11,119 19,981 6,803 2,782 14,299 33,969 13,628 38,117 21,811 2,210 18,822 117,825 - 11,119 19,045 6,803 - 13,628 19,688 20,015 - 226,526 293,886 185,855 278,956 The Group The Company 2021 $'000 102,094 6,271 36 16,190 2020 $'000 80,841 2,490 6,454 5,806 124,591 95,591 2021 $'000 102,094 5,633 - (9,429) 98,298 2020 $'000 82,607 2,490 - 4,933 90,030 129 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 130 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 65 13. Expenses by Nature Management and other expenses by nature are as follows: The Group The Company Advertising costs Asset tax Audit fees Bank charges and fees Computer expenses Directors fees 2021 $'000 113,289 13,546 19,957 17,269 82,038 5,437 2020 $'000 80,596 14,564 17,255 12,930 62,763 3,124 Depreciation and amortisation (Note (27,28,31) 157,030 120,451 2021 $'000 75,429 13,546 10,800 14,399 70,182 2,430 98,573 1,831 5,104 1,215 45,801 45,890 13,559 30,054 2,316 57,972 - 2020 $'000 75,550 14,564 9,800 11,762 62,071 1,030 83,871 7,333 4,583 615 34,930 31,681 13,848 19,843 444 47,674 - 4,667 6,056 3,447 7,006 16,066 85,362 79,335 21,478 36,224 1,414 61,189 28,155 12,222 7,333 6,370 10,011 38,691 45,480 19,463 24,848 709 49,903 23,384 8,649 927,913 752,010 709,040 590,758 4,753 54,446 8,059 37,923 4,754 31,328 4,175 30,183 1,747,576 1,344,516 1,238,890 1,050,771 The Group The Company 2021 $'000 726,755 59,420 14,980 126,758 2020 $'000 600,949 50,340 13,699 87,022 2021 $'000 555,826 50,390 14,620 88,204 2020 $'000 457,313 43,004 13,164 77,277 927,913 752,010 709,040 590,758 2021 | GENERAL ACCIDENT ANNUAL REPORT 130 ECL allowance Insurance Irrecoverable VAT Other operating expenses Professional fees Printing and stationery Registration fees Rent Repairs and maintenance Roadside assistance Security Staff costs (Note 14) Transportation expenses Utilities 14. Staff Costs Wages and salaries Statutory contributions Pension costs Other 129 2021 | GENERAL ACCIDENT ANNUAL REPORT General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 15. Taxation Page 66 (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 $102,978,000 (2020 - $66,441,000,000). As a result of the above, the tax rate for the company up to the 21 September 2022 was 16.67% and 33.33% for the rest of the year. (b) Taxation is based on the profit for the year adjusted for taxation purposes and represents income tax at 16.67% - 33 ⅓%: Current income tax Deferred income tax (Note 32) The Group The Company 2021 $'000 97,857 12,602 2020 $'000 72,607 (6,883) 2021 $'000 91,306 14,127 110,459 65,724 105,433 2020 $'000 66,440 (5,357) 61,083 (c) The tax charge on the Group’s profit differs from the theoretical amount that would arise using the statutory tax rate as follows: Profit before tax Tax calculated at applicable tax rate Adjusted for the effects of: Income tax remission Income not subject to tax Expenses not deductible for tax Unutilised tax losses Net effect of other charges and allowances The Group The Company 2021 $'000 259,695 2020 $'000 2021 $'000 2020 $'000 259,536 606,586 454,487 The Group The Company 2021 $’000 130,847 2020 $’000 114,575 2021 $’000 202,195 2020 $’000 151,492 (102,978) (66,441) (102,978) (19,573) (54,551) 11,391 86,762 4,010 110,459 19,075 43,499 9,567 65,724 - 7,231 - 1,015 105,433 (66,441) (41,193) 12,295 - (4,930) 61,083 131 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 132 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 16. Earnings Per Share Page 67 The calculation of earnings per share is based on the net profit for the year and 1,031,250,000 ordinary shares in issue. Net profit from continuing operations attributable to owners ($’000) Weighted average number of ordinary shares in issue (‘000) Earnings per share ($) 2021 2020 254,750 1,031,250 0.25 242,503 1,031,250 0.24 The net profit and retained earnings of the Group are reflected in the accounts of the company and its subsidiaries as follows: Net profit Company Subsidiaries Retained earnings. Company Subsidiaries 17. Dividends per Share The dividends paid in 2021 and 2020 were as follows: Interim dividends: - 19.07 cents per stock unit – December 2021 21.59cents per stock unit – December 2020 18. Cash and Cash Equivalents 2021 $’000 2020 $’000 501,153 393,404 (351,917) (199,592) 149,236 193,812 2021 $’000 2,153,512 (283,885) 1,869,627 2020 $’000 1,849,060 (37,482) 1,811,578 2021 $’000 2020 $’000 196,701 - 196,701 - 222,668 222,668 Cash and bank balances Short-term deposits The Group The Company 2021 $’000 2020 $’000 2021 $’000 1,312,639 500,162 675,772 131,544 256,386 8,850 1,444,183 756,548 684,622 2020 $’000 317,080 135,884 452,964 2021 | GENERAL ACCIDENT ANNUAL REPORT 132 131 2021 | GENERAL ACCIDENT ANNUAL REPORT General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 18. Cash and Cash Equivalents (Continued) Page 68 Short term deposits comprise term deposits and repurchase agreements with an average maturity of 90 days (2020 – 90 days) and include interest receivable of $245,000 (2020 – $644,000 ). The weighted average effective interest rate on short term investments and deposits were as follows: US$ The Group 2021 % 2.20 2020 % 2.20 The Company 2021 % 2.20 2020 % 2.20 The weighted average effective interest rates on cash balances for the year were as follows: BB$ J$ 19. Due from Reinsurers and Coinsurers Reinsurers’ portion of unearned premium Reinsurers’ portion of claims liabilities Other amounts recoverable from reinsurers and coinsurers The Group The Company 2021 % 0.5 1.0 2020 % 0.5 1.0 2021 % 0.5 1.0 2020 % 0.5 1.0 The Group The Company 2021 $’000 996,977 1,693,201 2020 $’000 925,356 960,838 2021 $’000 937,670 1,609,542 2020 $’000 907,621 829,802 590,730 416,055 581,883 510,577 3,280,908 2,302,249 3,129,095 2,248,000 133 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 134 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 69 20. Other Receivables Prepayments Other receivables The Group The Company 2021 $’000 2020 $’000 2021 $’000 2020 $’000 99,609 82,523 93,144 80,437 758,424 161,052 723,076 150,257 858,033 243,575 816,220 230,694 Included in other receivables are amounts due from third parties that are fully collaterised. 21. Loans receivables The Group 2021 $’000 2020 $’000 Mortgage loan 244,188 251,464 Current portion of loan receivable Non-current portion. 62,550 18,004 181,638 233,460 244,188 251,464 This is a mortgage loan secured on property located at 120 and 122 Eastern Main Road, Barataria and repayable by fixed monthly instalments over a period twelve (12) years with the following terms and conditions: (i) Variable interest rate based on commercial banks’ average lending rate as published by the Central Bank of Trinidad and Tobago with a floor of 5% adjustable at each anniversary date. The initial interest rate is 7%. (ii) Balloon repayment of capital from the assignment of monies due and payable under the share purchase agreement on the acquisition of subsidiary. (iii) Assignment of insurance policy on property. 133 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 134 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 22. Lease receivables Page 70 Gross investment in finance leases Not later than one year Later than one year and not later than five year Less: Unearned income Net investment in finance leases may be classified as follows: Note later than one year Later than one year and not later than five years The Group and Company 2021 $'000 2020 $'000 23,410 64,888 88,298 (20,978) 67,320 23,410 87,787 111,197 (32,040) 79,157 14,336 52,984 67,320 12,348 66,809 79,157 23. Investment Securities Debt securities - At amortised cost: The Group The Company 2021 2020 $’000 $’000 2021 $’000 2020 $’000 Government Jamaica Securities Government of Trinidad and Tobago Certificate of Deposits United States Dollar Long Term Deposits United States Dollar Corporate Bonds Other Government Securities Interest receivable Equity investments at fair-value through OCI 31,717 308,669 31,717 1,105,016 31,717 - 31,717 - 1,639,725 106,926 2,209,595 160,882 1,193,956 106,926 1,951,628 160,882 230,061 302,683 98,538 122,400 230,061 306,786 98,538 122,400 2,619,781 3,728,148 1,869,446 2,365,165 30,319 46,071 451,567 436,567 26,216 447,709 41,232 432,913 3,101,667 4,210,786 2,343,371 2,839,310 135 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 136 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 23. Investment Securities (Continued) Page 71 Weighted average effective interest rate: The Group The Company Government of Jamaica Securities Government of Trinidad and Tobago Certificate of Deposits United States Long Term Deposits United States Dollar Corporate Bonds Other Government Securities 2021 % 2020 % 2021 % 4.11 5.25 3.45 3.11 7.00 4.43 4.11 5.25 3.45 3.11 7.00 4.43 4.11 - 4.05 3.33 7.0 4.38 2020 % 4.11 - 3.45 3.11 7.00 4.43 Included in investments are Government of Jamaica securities valued at $18,000,000 and a Certificate of Deposit for $30,000,000.00 (2020 - $48,000,000) which have been pledged with the FSC, pursuant to Section 8(1)(b) of the Insurance Regulations, 2001. Bonds, securities, and other investments are pledged with the Inspector of Financial Institutions amounted to TT$60,076,997 (2020 - TT$89,422,848) Investments pledged with the Barbados FSC, pursuant to Exempt Insurance Act amounted to BBD $250,0000. The Group’s holdings in equity investments for 2021 and 2020 includes investment in affiliated companies (Note 9). 24. Investment in Subsidiaries General Accident Insurance (Trinidad and Tobago) Limited (formerly Motor One Insurance Company Limited) – (65% - 2020 (55%) 426,322 – (2020 - 360,374 Ordinary shares) General Accident Insurance (Barbados) Limited 2,400,000 Ordinary shares The Company 2021 $’000 2020 $’000 393,012 393,012 165,893 165,893 558,905 558,905 135 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 136 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 72 25. Investment Property At 1 January Additions Disposal Revaluation (credited to profit or loss) (Note 11) Translation differences At 31 December The Group The Company 2021 2020 2021 $'000 315,048 2,259 - 6,803 $'000 519,216 6,123 (264,789) 21,811 $'000 255,938 2,259 6,803 20,015 2020 $'000 229,800 6,123 - 4,039 32,687 - - 328,149 315,048 265,000 255,938 Property income and direct expenses including repairs and maintenance in relation to investment properties are as follows: Rental income Direct costs The Group The Company 2021 2020 2021 $'000 19,976 (11,732) $'000 38,117 (9,021) $'000 19,045 (11,732) 2020 $'000 19,688 (9,021) The properties of the Group were valued at current market value as at November 2020 by Bhanmati Seecharan in Trinidad and in December 2021 by NAI Jamaica Langford and Brown in Jamaica. Both parties are independent qualified property appraisers and valuators. The values for the properties have been established using the sales comparison method, which considers the values of similar properties in and around surrounding areas. The valuation of investment property have been classified as Level 3 of the fair value hierarchy under IFRS 13, Fair Value Measurement. The valuations have been performed using a comparable sales approach but, as there have been a limited number of similar sales in the location, unobservable inputs determined based on the valuators’ judgement regarding size, age, condition were utilised. 137 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 138 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 73 26. Real Estate Investment At 1 January Revaluation (charged to other comprehensive income) Closing The Group and Company 2021 $’000 212,329 (22,417) 2020 $’000 193,633 18,696 189,912 212,329 This represents the Group's beneficial interest in a property which is leased to third parties and held in trust for a Investments Jamaica Limited. group of investors under a Trust Deed managed by Scotia Rental income from the real estate investment for the year was $11,119,000 (2020 - $13,628,000 ). The property was last valued at current market value in December 2020 by NAI Jamaica Langford and Brown, independent qualified property appraisers and valuators. 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). 137 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 138 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 27. Property, Plant and Equipment Page 74 The Group Land and Buildings Furniture, Fixtures & Equipment Motor Vehicles Work in Progress Total $’000 $’000 $’000 $’000 $’000 Cost - At 1 January 2020 472,787 188,898 128,882 2,367 792,934 Transfer to intangible assets Transfers work-in-progress Additions Write-off Disposals Adjustment 2,367 19,493 (1,430) - 48 (16,353) - - - - - (16,353) (2,367) - 89,879 23,264 19,043 151,679 (66,798) (17,777) (203) (106,134) (20) - 170 - - - - (86,005) (106,337) 28 31,192 Translation differences 25,428 5,594 At 31 December 2020 518,693 200,997 28,405 19,043 767,138 Transfers Additions Disposals 33,531 24,414 - (33,531) - 80,136 9,155 13,429 127,134 - (3,318) (4,165) - (7,483) Translation differences 25,334 8,783 2,130 1,059 37,306 At 31 December 2021 601,972 286,598 35,525 Depreciation - At 1 January 2020 29,163 112,580 76,757 Transfer to intangible asset - (12,287) - Charge for the year 14,849 21,073 17,083 Write-off Relieved on disposal Translation differences At 31 December 2020 Charge for the year Relieved on disposal Translation differences At 31 December 2021 Net Book Value - 31 December 2021 31 December 2020 (1,430) (66,798) (17,777) (203) (55,981) 422 43,004 21,201 - 337 64,542 4,593 58,958 35,072 - 2,028 96,058 170 20,252 3,764 (3,560) 2,131 22,587 537,430 190,540 12,938 475,689 142,039 8,153 19,043 644,924 - - - - - - - - - - - - 924,095 218,500 (12,287) 53,005 (86,005) (56,184) 5,185 122,214 60,037 (3,560) 4,496 183,187 740,908 139 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 140 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 27. Property, Plant and Equipment (Continued) Page 75 The Company Land and Buildings Furniture, Fixtures & Equipment Motor Vehicles Work in Progress Total $’000 $’000 $’000 $’000 $’000 141,470 11,187 183,901 36,768 128,951 23,264 - (203) (106,129) 2,367 456,689 - - 71,219 (106,332) - (2,367) - 2,367 (1,430) 48 153,642 24,391 (66,798) (17,777) (20) 153,648 42,111 - 28,309 3,613 - (3,317) (4,166) Cost - At 1 January 2020 Additions Disposal Transfers/Reclassification (Note 28) Write-off Adjustments At 31 December 2020 Additions Disposal At 31 December 2021 178,033 192,442 27,756 Depreciation - At 1 January 2020 Charge for the year Relieved on disposal Write-off Adjustment At 31 December 2020 Charge for the year Disposals 37,483 8,304 - 114,784 18,664 76,826 17,083 (203) (55,981) (1,430) (66,798) (17,777) 16 44,373 9,172 - (2,921) 63,526 26,424 - 20,151 3,672 (1,327) (3,560) At 31 December 2021 53,545 88,623 20,263 Net Book Value - 31 December 2021 31 December 2020 124,488 109,269 103,819 90,122 7,493 8,158 - - - - - - - - - - - - - - - - - (86,005) 28 335,599 70,115 (7,483) 398,231 229,093 44,051 (56,184) (86,005) (2,905) 128,050 39,268 (4,887) 162,431 235,800 207,549 139 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 140 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 28. Intangible Assets Page 76 The Group Renewal Distribution Rights Relationships Licence Website Computer Software $’000 $’000 $’000 $’000 $’000 38,221 - - 38,221 - - 38,221 7,644 - 7,644 - 15,288 7,644 - 22,932 15,289 22,933 12,070 142,826 - - - - 12,070 142,826 - - 12,070 142,826 - - 1,509 - 1,509 - 3,018 1,509 - 4,527 - - - - - 7,543 142,826 9,052 142,826 9,462 - - 9,462 - - 9,462 1,192 - 2,933 - 4,125 3,122 - 7,247 2,215 5,337 86,373 16,353 7,006 1,612 111,344 479 1,255 113,078 82,433 12,287 2,053 1,114 97,887 2,231 819 100,937 12,141 13,458 Total $’000 288,952 16,353 7,006 1,612 313,923 479 1,255 315,657 92,778 12,287 14,139 1,114 120,318 14,506 819 135,643 180,014 193,605 At Cost - At 1 January 2020 Transfers Additions Translation differences At 31 December 2020 Addition January 2021 Translation differences At 31 December 2021 Amortisation - At 1 January 2020 Transfers Charge for the year Translation differences At 31 December 2020 Charge for the year Translation differences At 31 December 2021 Net Book Value - 31 December 2021 31 December 2020 141 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 142 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 28. Intangible Assets (Continued) Page 77 At Cost - At 1 January 2020 Additions At 31 December 2020 Additions At 31 December 2021 Amortisation - At 1 January 2019 Charge for the year At 31 December 2019 Charge for the year At 31 December 2021 Net Book Value - 31 December 2021 31 December 2020 29. Due to Reinsurers and Coinsurers Local reinsurers Overseas reinsurers The Company Computer Website Software $’000 $’000 9,462 - 9,462 - 9,462 1,192 2,933 4,125 3,123 7,248 2,214 5,337 86,373 3,025 89,398 - 89,398 82,433 1,507 83,939 1,050 84,989 4,409 5,458 Total $’000 95,835 3,025 98,860 - 98,860 83,625 4,440 88,065 4,173 92,238 6,623 10,795 The Group 2021 $'000 2020 $'000 The Company 2021 $'000 2020 $'000 208,215 857,294 1,065,509 128,429 826,189 954,618 140,947 107,353 842,388 826,188 983,335 933,541 141 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 142 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 30. Other Liabilities Page 78 Statutory contributions payable Accrued expenses Sales and premium tax payable Other payables Deferred consideration The Group The Company 2021 $’000 15,957 124,184 211,692 190,747 7,064 549,644 2020 $’000 11,074 185,466 124,900 82,280 7,064 410,784 2021 $’000 9,399 95,799 203,649 94,053 7,064 409,964 2020 $’000 8,561 126,973 126,549 64,496 7,064 333,643 31. Leases This note provides information for leases where the Group is a lessee. (a) Right of use assets Cost 1 January 2020 Adjustment Disposal (termination) Additions 1 January 2021 Disposal (termination) Additions Translation 31 December 2021 Accumulated Depreciation 1 January 2020 Charge for the year Disposal(termination) 1 January 2021 Charge for the year Disposal(termination) Translation difference 31 December 2021 Net Book Value 31 December 2020 31 December 2021 Right of Use-Asset The Group The Company $’000 158,827 - (5,148) 109,352 263,031 (1,382) 15,023 3,125 279,797 66,670 53,307 (5,148) 114,829 82,178 (307) 933 197,633 148,202 82,164 $’000 140,845 (228) (5,148) 61,888 197,357 (1,382) 9,685 - 205,660 54,346 35,380 (5,148) 84,578 55,133 (307) - 139,404 112,779 66,256 143 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 144 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 79 31. Leases (Continued) Amounts recognised in the statement of financial position Right-of-use assets Motor Vehicles Land and buildings Lease liabilities Current Non-current (b) Lease liabilities 1 January Additions Lease payments Interest on lease liability Termination Foreign exchange translation 31 December (c) Amounts recognised in profit or loss The Group 2021 $’000 2020 $’000 31,159 51,005 82,164 48,760 99,442 148,202 54,040 49,167 103,207 55,888 106,633 162,521 The Company 2021 $’000 2020 $’000 31,159 35,097 66,256 60,546 24,740 85,286 48,760 64,019 112,779 52,185 74,594 126,779 The Group 2021 $’000 2020 $’000 The Company 2021 $’000 2020 $’000 162,521 8,590 (82,921) 7,402 - 7,615 103,207 98,015 109,583 (59,788) 8,428 - 6,283 162,521 126,779 9,685 (62,600) 7,076 (1,095) 5,441 85,286 92,148 62,426 (40,741) 6,214 - 6,732 126,779 The statement of profit or loss shows the following amounts relating to right-of-use assets: Depreciation charge of right-of-use assets Motor Vehicle Land and buildings Interest expense The Group 2021 $’000 2020 $’000 The Company 2021 $’000 2020 $’000 16,526 65,652 82,178 1,393 51,914 53,307 7,401 8,428 16,526 38,606 55,132 7,076 1,393 33,987 35,380 6,214 143 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 144 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 80 32. Deferred Income Taxes Deferred income taxes are calculated in full on temporary differences under the liability method using a principal tax rate of 33.33%% (16.67⅓% restricted to 50% based on remission year 5 to 10). Deferred income tax assets The Group The Company 2021 $’000 3,772 2020 $’000 3,166 2021 $’000 3,772 2020 $’000 3,166 Deferred income tax liabilities (54,424) (41,216) (26,817) (12,084) Net liabilities (50,652) (38,050) (23,045) (8,918) The net movement on the deferred income tax account is as follows: The Group The Company 2021 $’000 2020 $’000 2021 $’000 2020 $’000 At the beginning of the year (38,050) (44,933) (8,918) (14,275) Profit or loss (Note 15) At end of year (12,602) 6,883 (14,127) 5,357 (50,652) (38,050) (23,045) (8,918) 145 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 146 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 32. Deferred Income Taxes (Continued) Deferred income tax assets and liabilities are attributable to the following items: Page 81 Deferred income tax assets Accelerated depreciation Accrued vacation Deferred income tax liabilities Unrealised foreign exchange gains Accelerated depreciation Intangible assets Interest receivable The Group The Company 2021 $'000 - 3,772 3,772 2020 $'000 1,878 3,167 5,045 2021 $'000 - 3,772 3,772 2020 $'000 1,878 3,167 5,045 The Group The Company 2021 $'000 3,885 12,794 27,607 10,138 54,424 2020 $'000 3,779 - 29,132 10,184 43,095 2021 $'000 3,885 12,794 - 10,138 26,817 2020 $'000 3,779 - - 10,184 13,963 The deferred tax movement in the profit or loss comprises the following temporary differences The Group The Company Accelerated depreciation 2021 $’000 14,672 2020 $’000 9,202 Unrealised foreign exchange gains 106 (3,779) Intangible assets Accrued vacation Interest receivable (1,525) (605) (46) (12,602) 1,526 1,807 (1,873) 6,883 2021 $’000 14,672 106 - (605) (46) 2020 $’000 9,202 (3,779) - 1,807 (1,873) 14,127 5,357 145 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 146 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 82 33. Insurance Reserves (a) These reserves are as follows: Gross - Unearned premiums Claims liabilities Unexpired risk reserve Unearned commission Recoverable from reinsurers - Reinsurers’ portion of unearned premiums (Note 19) Reinsurers’ portion of claims liabilities (Note 19) Net - Unearned premiums Claims liabilities Unexpired risk reserve 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 The Group 2021 $’000 2020 $’000 The Company 2021 $’000 2020 $’000 2,705,681 4,838,990 31,662 235,275 7,811,608 2,402,954 3,996,178 18,966 206,631 6,624,729 2,226,796 3,403,453 - 225,970 5,856,219 2,172,550 2,638,999 - 202,964 5,014,513 (996,977) (1,693,201) (2,690,178) (925,356) (937,670) (960,838) (1,609,542) (1,886,194) (2,547,212) (907,621) (829,802) (1,737,423) 1,708,704 3,145,789 31,662 235,270 5,121,425 1,477,590 3,035,349 18,976 206,597 4,738,512 1,289,126 1,793,911 - 225,970 3,309,007 1,264,929 1,809,197 - 202,964 3,277,090 The Group 2021 $’000 2020 $’000 The Company 2021 $’000 2020 $’000 3,442,824 1,375,793 20,373 4,838,990 1,326,485 366,716 1,693,201 2,116,339 1,009,077 20,373 2,865,813 2,767,597 2,066,896 1,110,043 20,331 3,996,187 615,483 20,373 551,772 20,331 3,403,453 2,638,999 661,568 1,252,472 299,270 357,070 960,838 1,609,542 530,532 299,270 829,802 2,204,244 810,773 20,331 1,515,125 1,536,364 258,413 20,373 252,502 20,331 3,145,789 3,035,349 1,793,911 1,809,197 147 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 148 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 33. Insurance Reserves (Continued) Page 83 An actuarial valuation was performed to value the policy and claims liabilities of the Group as at 31 December 2021 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. For consistency, the management also performed a valuation for the policy and claim liabilities of the subsidiaries as at 31 December 2021 using the same appointed actuary. 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 5 April 2022 for the Company, the actuary found that the amount of policy and claims liabilities represented in the statement of financial position at 31 December 2021 makes proper provision for the future payments under the Group’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 The Group 2021 $’000 2020 $’000 The Company 2021 $’000 2020 $’000 3,996,187 3,841,286 (960,838) (692,238) 3,035,349 3,149,048 2,638,999 (829,802) 1,809,197 2,260,567 (692,238) 1,568,329 Movement during the year – Acquisition of outstanding claims Claims incurred, including IBNR Claims paid Recovery from reinsurers - 1,895,641 1,851,057 (3,113,029) (2,407,858) 1,310,687 438,479 Translation differences on foreign currency claims 17,141 4,623 110,440 (113,699) Net reserves for claims outstanding at end of year 3,145,789 3,035,349 Reinsurance ceded 1,693,201 960,838 Gross reserves for claims outstanding at end of year 4,838,990 3,996,187 1,313,454 (2,566,366) 1,237,625 - (15,287) 1,793,910 1,609,543 3,403,453 1,803,348 (1,994,430) - 431,950 3 4 3 , 240,868 0 7 1 829,802 1,809,197 2,638,999 147 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 148 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 33. Insurance Reserves (Continued) Page 84 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. (c) The movement in unearned premiums for the group and company are as follows: The Group 2021 Gross $’000 Reinsurance $’000 Net $’000 2020 Reinsuranc e $’000 Gross $’000 Net $’000 2,402,954 (925,356) 1,477,598 2,431,720 (1,040,631) 1,391,089 13,959,807 (10,488,851) 3,470,956 12,044,990 (9,066,069) 2,978,921 (13,657,080) 10,417,230 (3,239,850) (12,073,764) 9,181,344 (2,892,420) 302,727 (71,621) 231,106 (28,774) 115,275 86,501 2,705,681 (996,977) 1,708,704 2,402,946 (925,356) 1,477,590 Balance at 1 January Premiums written during the year Premiums earned during the year Balance at 31 December The movement in unearned premiums for the company is as follows: The Company 2021 2020 Gross $’000 Reinsurance $’000 Net $’000 Gross $’000 Reinsurance $’000 Net $’000 2,172,550 (907,621) 1,264,929 2,258,707 (1,040,631) 1,218,076 12,974,308 (10,327,323) 2,646,985 11,592,313 (9,037,477) 2,554,836 12,920,062 (10,297,274) 2,622,788 11,678,470 (9,170,487) 2,507,983 54,246 (30,049) 24,197 (86,157) 133,010 46,853 2,226,796 (937,670) 1,289,126 2,172,550 (907,621) 1,264,929 Balance at 1 January Premiums written during the year Premiums earned during the year Balance at 31 December 149 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 150 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 33. Insurance Reserves (Continued) The gross unearned premium reserve by class of business is as follows: Page 85 Fire, consequential loss and liability Motor Other 34. Share Capital The Group The Company 2021 $’000 678,534 1,857,681 169,471 2,705,686 2020 $’000 622,962 1,611,075 168,909 2,402,946 2021 $’000 638,324 2020 $’000 605,199 1,429,033 1,400,497 159,439 166,854 2,226,796 2,172,550 2021 $’000 2020 $’000 Authorised - 1,100,000,000 Ordinary shares of no par value Issued and fully paid - 1,031,250,000 Ordinary shares of no par value 470,358 470,358 35. Capital Reserves At beginning of and end of year 2021 $’000 2020 $’000 152,030 152,030 The capital reserves at year end represent realised surpluses. 36. Property Revaluation Reserve This represents the unrealised surplus on the revaluation of real estate investment. 37. Fair Value Reserve This represents the unrealised surplus on the revaluation of investments classified as Fair Value through Other Comprehensive Income (FVOCI). 149 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 150 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 38. Non-Controlling Interest Page 86 Beginning of year Net transactions with NCI Purchase of additional shares GENACTT (ii) Investment in GENACBB (iii) Dividend NCI share of total comprehensive income 2021 $’000 398,489 2020 $’000 473,547 - - - - (106,008) 292,481 (41,030) 40,874 (156) (55,765) (19,137) 398,489 (i) All subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary undertakings held directly by the parent company do not differ from the proportion of ordinary shares held. (ii) In June 2020, the Group acquired an additional 10% of the issued shares of GENACTT for $46,676,000. Immediately prior to the purchase, the carrying value amount of the existing non-controlling interest in GENACTT was $41,030,000. The Group recognised a decrease in NCI of $41,030,000 and a decrease in equity attributable to owners of the parent of $5,646,000. (iii) This represented the NCI’s capital contribution of 20% in GENACBB. Summarised financial information on subsidiary with material non-controlling interests. General Accident Insurance Company(Trinidad) Limited (formerly Motor One Limited) (a) Summarised Statement of Financial Position Assets Liabilities Net Assets (b) Summarised Statement of Comprehensive Income Revenue Loss before taxation Taxation Loss after tax Other comprehensive income Total Comprehensive Income 2021 $’000 2020 $’000 2,297,978 2,507,000 (1,910,513) (1,725,000) 387,465 782,000 2021 $’000 687,882 (237,829) (6,550) (244,379) (6,206) (250,585) 2020 $’000 477,023 (121,424) (4,297) (125,721) 78,707 (47,014) Total comprehensive income allocated to non-controlling interest (87,704) (14,307) 151 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 152 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) 38. Non-Controlling Interest (Continued) General Accident Insurance Company (Trinidad) Limited (formerly Motor One Limited) (c) Summarised Statement of Cash Flows Page 87 Cash flows from operating activities Cash generated from operations Income taxes Net cash used in operating activities Net cash generated from investing activities Net cash used in financing activites Net increase in cash and cash equivalents Cash and cash equivalents at acquisition date Exchange gains on cash and cash equivalents 2021 $’000 2020 $’000 (190,931) (10,694) (201,625) 790,787 (164,935) 424,227 152,566 2,623 579,416 (774,569) 28,101 (746,468) 957,695 (1,215) 210,012 39,344 (10,233) 239,123 Summarised financial information on subsidiary with material non-controlling interests. General Accident Insurance Company (Barbados) Limited (a) Summarised Statement of Financial Position Assets Liabilities Net Assets (b) Summarised Statement of Comprehensive Income Revenue Loss before taxation Taxation Loss after tax Other comprehensive income Total Comprehensive Income 2021 $’000 $’000 444,439 (355,738) 88,701 2021 $’000 361,396 (99,909) - (99,909) 8,390 (91,519) 2020 $’000 $’000 275,091 (94,873) 180,218 2020 $’000 65,405 (32,311) (1,870) (34,181) 10,032 (24,149) Total comprehensive income allocated to non-controlling interest (18,304) (4,830) 151 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 152 General Accident Insurance Company Jamaica Limited Notes to the Financial Statements 31 December 2021 (expressed in Jamaican dollars unless otherwise indicated) Page 88 38. Non-Controlling Interest (Continued) General Accident Insurance Company (Barbados) Limited (c) Summarised Statement of Cash Flows Cash flows from operating activities Cash generated from operations Income taxes Net cash generated from operating activities Net cash generated from investing activities Net cash generated by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at acquisition date Exchange gains on cash and cash equivalents 2021 $’000 2021 $’000 55,577 - 55,577 (44,669) (8,842) 2,066 150,032 28,047 180,145 (7,908) (1,845) (9,753) (54,009) 205,251 141,489 - 8,543 150,032 39. 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 2018, indicated that the scheme was adequately funded at that date. Pension contributions for the period totalled $14,980,000 (2020 – $13,699,000) and are included in staff costs (Note 14). 40. Contingency The Group 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 Group. 41. Impact of COVID-19 The outbreak of the novel Coronavirus (COVID-19) became a pandemic in March 2021 and has adversely affected the global economy and way of life. The continuous impact of COVID-19 on the company’s operations and future financial performance are reviewed periodically by the Board and Management with mitigating strategies implemented to reduce any negative effects. The pandemic and the measures to control its human impact have resulted in disruptions to the Jamaican economic activities, business operations and to the insurance industry. The company continues to review its credit and financial risks while continuing to contain costs and manage cash flows. Management has considered the consequences of COVID-19 pandemic as well as other events and conditions, and it has determined that they do not create additional material uncertainty that casts significant doubt upon the entity’s ability to continue as a going concern. 153 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 154 FORM OF PROXY I/We __________________________________________________________________________________________________ of _____________________________________________________________________________________________________ being a shareholder(s) of the above-named Company, hereby appoint: _______________________________________________________________________________________________________ of _____________________________________________________________________________________________________ or failing him ___________________________________________________________________________________________ of _____________________________________________________________________________________________________ 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 9 am on September 14, 2022, 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 For ££ Against ££ Company for the year ended December 31, 2021. 2. To authorize the Board of Directors to re-appoint PwC as the Auditors of the For ££ Against ££ Company and to fix their remuneration. To re-appoint the following Directors of the Board, who have resigned by rotation in accordance with the Articles of Incorporation of the Company and, being eligible, have consented to act on re-appointment. 3. (a) To re-appoint P. B. Scott as 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 amount of interim dividends declared by the Board during the For ££ Against ££ financial year ended 31st December 2021, being $196,700,624 or 19.074 cent per ordinary share, as the final dividend for the year.. Signed this ____________________ day of _____________________ 2022: 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) 153 2021 | GENERAL ACCIDENT ANNUAL REPORT 2021 | GENERAL ACCIDENT ANNUAL REPORT 154 

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