INTERNATIONAL GENERAL INSURANCE
COMPANY LIMITED
FINANCIAL STATEMENTS
31 March 2006
International General Insurance Company Limited
BALANCE SHEET
At 31 March 2006
Notes
2006
USD
ASSETS
Premises and equipment
Intangible assets, net
Investment in associated companies
Deferred policy acquisition costs
Available-for-sale investments
Receivables arising from insurance contracts
Other receivables
Reinsurers’ share of unexpired risks
Reinsurers’ share of outstanding claims
Trading investments
Cash and short term deposits
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Share capital
Additional paid in capital
Statutory reserve
Special reserve
Cumulative changes in fair values
Retained earnings
Total equity
LIABILITIES
Liabilities arising from insurance contracts
Unexpired risks
Outstanding claims
Reinsurance payable
Reinsurance premium deposit
Other liabilities
Deferred ceded commission
Total liabilities
3
4
5
20
6
7
8
9
10
11
12
13
15
16
17
2005
USD
(Restated)
198,569
66,341
8,250,780
2,805,047
31,721,552
10,729,550
492,974
2,877,615
3,203,127
-
38,849,733
274,764
119,196
8,380,129
6,354,144
72,837,881
27,447,918
450,118
4,910,283
27,158,704
5,084,530
90,212,235
243,229,902
99,195,288
2,556,172
71,602,279
1,716,242
48,591,549
6,273,856
13,978,464
144,718,562
1,408,451
-
953,490
48,591,549
7,297,917
7,863,701
66,115,108
38,825,149
40,214,824
17,198,152
8,870,034
79,039,973
26,068,186
13,132,106
5,644,928
291,511
402,822
3,340,595
3,197,253
168,770
305,376
98,511,340
33,080,180
TOTAL EQUITY AND LIABILITIES
243,229,902
99,195,288
The attached notes 1 to 28 form part of these financial statements.
2
International General Insurance Company Limited
INCOME STATEMENT
Year ended 31 March 2006
Insurance premium revenue
Insurance premium ceded to reinsurers
Net insurance premium revenue
Claims
Reinsurers’ share of claims
Policy acquisition costs
NET UNDERWRITING RESULT
Investment income
Net realised gains on available-for-sale investments
Income from associated companies
Gain from trading investments
General and administrative expenses
(Loss)gain on exchange
Notes
2006
USD
2005
USD
(Restated)
18
18
19
19
20
21
22
5
35,852,793
(17,758,372)
19,365,753
(7,392,733)
18,094,421
(38,273,325)
25,976,514
(5,175,883)
621,727
2,548,214
2,434,010
359,952
4,577,629
(2,819,803)
(94,214)
11,973,020
(6,010,424)
2,040,786
(2,569,317)
5,434,065
1,115,486
851,060
302,546
(1,755,261)
80,830
PROFIT FOR THE YEAR
7,627,515
6,028,726
The attached notes 1 to 28 form part of these financial statements.
3
International General Insurance Company Limited
STATEMENT OF CASH FLOWS
Year ended 31 March 2006
OPERATING ACTIVITIES
Profit for the year
Adjustments for:
Notes
2006
USD
2005
USD
7,627,515
6,028,726
Depreciation and amortization
Profit on sale of premises and equipment
Net gains on disposal of available-for-sale investments
Unrealized gain from trading investments
Investment income
Gain from foreign exchange
Income from associated companies
Reinsurers’ share of unexpired risks
Movement in unearned premiums
Movement in outstanding claims
3, 4
22
21
Operating profit before changes in operating assets
and liabilities
Deferred policy acquisition costs
Receivables arising from insurance contracts
Other receivables
Reinsurers’ share of outstanding claims
Deferred ceded commission
Trading investments
Other liabilities
Net cash from operating activities
INVESTING ACTIVITIES
Purchase of premises and equipment
Proceeds from disposal of premises and equipment
Purchase of intangible assets
Purchase of available-for-sale investments
Proceeds from sale of available-for-sale investments
Dividends received from associates
Investment income
3
86,047
-
(2,434,010)
(4,371,907)
(2,548,214)
14,682
(359,952)
(2,032,668)
21,626,997
31,344,790
48,953,280
(3,549,097)
(16,718,368)
42,855
(23,955,577)
97,446
(712,623)
12,361,927
16,519,843
(138,991)
-
(76,105)
(45,496,007)
5,774,945
230,603
2,548,214
61,432
(33)
(851,060)
-
(1,115,486)
(21,339)
(302,546)
150,987
5,119,273
3,010,790
12,080,744
(1,064,822)
(2,876,648)
(448,813)
(1,335,970)
(74,646)
-
3,415,460
9,695,305
(82,542)
593
(19,766)
(7,667,599)
3,229,343
261,556
1,115,486
Net cash from investing activities
(37,157,341)
(3,162,929)
FINANCING ACTIVITIES
Dividends paid
Increase in capital and additional paid in capital
13
(750,000)
72,750,000
(750,000)
-
Net cash from (used in) financing activities
72,000,000
(750,000)
INCREASE IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents at the beginning of the year
CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR
22
22
51,362,502
18,849,733
5,782,376
13,067,357
70,212,235
18,849,733
The attached notes 1 to 28 form part of these financial statements.
4
International General Insurance Company Limited
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2006
Balance as 1 April 2004
Recognised gains and losses on available for – sale
investments during the year
Net movement in fair value of available for sale investments
during the year
Total income and expenses for the year recognised directly in
equity
Profit for the year
Total income and expenses for the year
Dividends paid
Appropriations to statutory reserve
Paid- in
capital
USD
1,408,451
-
-
-
-
-
-
-
Balance as of 31 March 2005 (Restated)
1,408,451
Recognised gains and losses on available for – sale
investments during the year
Net movement in fair value of available for sale investments
during the year
Total income and expenses for the year recognised directly in
equity
Profit for the year
Total income and expenses for the year
Increase in capital
Dividends paid
Appropriations to statutory reserve
-
-
-
-
-
1,147,721
-
-
Balance as of 31 March 2006
2,556,172
71,602,279
The attached notes 1 to 28 form part of these financial statements.
5
Additional
paid in
capital
Statutory
reserve
USD
Special
reserve
USD
Cumulative
change in
fair value
USD
Retained
earnings
USD
Total
USD
-
-
-
-
-
-
-
-
-
-
-
-
-
-
71,602,279
-
-
354,716
48,591,549
2,493,290
3,183,749
56,031,755
-
-
-
-
-
-
598,774
953,490
-
-
-
-
-
-
-
762,752
1,716,242
-
-
-
-
-
-
-
(141,317)
4,945,944
4,804,827
-
4,804,827
-
-
-
-
-
6,028,726
6,028,726
(750,000)
(598,774)
(141,317)
4,945,944
4,804,827
6,028,726
10,833,353
(750,000)
-
48,591,549
7,297,917
7,863,701
66,115,108
-
-
-
-
-
-
-
-
(2,434,010)
1,409,949
(1,024,061)
-
(1,024,061)
-
-
-
-
-
-
7,627,515
7,627,515
-
(750,000)
(762,752)
(2,434,010)
1,409,949
(1,024,061)
7,627,515
6,603,454
72,750,000
(750,000)
-
48,591,549
6,273,856
13,978,464
144,718,562
International General Insurance Company Limited
NOTES TO THE FINANCIAL STATEMENTS
At 31 March 2006
1 ACTIVITIES
International General Insurance Limited is a limited liability company registered as an Exempt
Company and incorporated in Jordan under the Exempt Companies provision of Jordanian
Companies laws on 4 October 2001. The Company writes short-term non-life insurance contracts
covering marine, energy and property insurance business worldwide. International General
Insurance Limited’s registered head office is at 47 Al-Ameer Shaker Bin Zeid Street, Shmeisani,
Amman-Jordan.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS).
The financial statements have been presented in United States Dollars “USD” which is the
company’s measurement currency.
The financial statements are prepared under the historical cost convention modified to include the
measurement at fair value of available-for-sale investments.
Changes in accounting policies
The accounting policies are consistent with those used in the previous year except that the company
has adopted those new/revised standards that are mandatory for financial years beginning on or after
1 January 2005. The principal effects of this decision discussed below.
IFRS ‘4 Insurance Contracts’
The adoption of IFRS 4 has affected disclosures with respect to insurance contracts issued and
reinsurance contracts held. All comparative disclosures have been amended accordingly.
Investments in associated companies
In accordance with IAS 28, investment in associated companies, the company should use the equity
method for the investments in associated companies, while the company used to use the cost method
for these associated companies. The effect of the adjustment, and the reclassifications on the
financial statements for the year ended 31 March 2005 is illustrated in note 28.
Premiums earned
Premiums are taken into income over the terms of the policies to which they relate on a pro-rata
basis. Unearned premiums represent the portion of premiums written relating to the unexpired
period of coverage. The change in the provision for unearned premiums is taken to the income
statement in order that revenue is recognised over the period of risk.
6
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Claims
Claims, comprising amounts payable to contract holders and third parties and related loss
adjustment expenses, net of salvage and other recoveries, are charged to income as incurred. Claims
comprise the estimated amounts payable, in respect of claims reported to the company and those not
reported at the balance sheet date.
The company generally estimates its claims based on previous experience. Independent loss
adjusters normally estimate property claims. In addition a provision based on management’s
judgement and the company’s prior experience is maintained for the cost of settling claims incurred
but not reported at the balance sheet date. Any difference between the provisions at the balance
sheet date and settlements and provisions for the following year is included in the underwriting
account for that year.
Policy acquisition costs
Commissions paid to intermediaries and other direct costs incurred in relation to the acquisition and
renewal of insurance contracts are capitalised as an intangible asset. The deferred policy acquisition
costs are subsequently amortised over the terms of the insurance contracts to which they relate as
premiums are earned.
Liability adequacy test
At each balance sheet date the company assesses whether its recognised insurance liabilities are
adequate using current estimates of future cash flows under its insurance contracts. If that
assessment shows that the carrying amount of its insurance liabilities (less related deferred policy
acquisition costs) is inadequate in the light of estimated future cash flows, the entire deficiency is
immediately recognised in income and an unexpired risk provision created.
The company does not discount its liability for unpaid claims as substantially all claims are expected
to be paid within one year of the balance sheet date.
Reinsurance contracts held
In order to minimise financial exposure from large claims the company enters into agreements with
other parties for reinsurance purposes. Claims receivable from reinsurers are estimated in a manner
consistent with the claim liability and in accordance with the reinsurance contract. These amounts
are shown as “reinsurers’ share of outstanding claims” in the balance sheet until the claim is paid by
the company.
Premiums on reinsurance assumed are recognised as revenue in the same manner as they would be
if the reinsurance were considered direct business.
At each reporting date, the company assesses whether there is any indication that a reinsurance asset
may be impaired. Where an indicator of impairment exists, the company makes a formal estimate of
the recoverable amount. Where the carrying amount of a reinsurance asset exceeds its recoverable
amount the asset is considered impaired and is written down to its recoverable amount.
7
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Interest revenue
Interest revenue is recognised as the interest accrues using the effective interest method, under
which the rate used exactly discounts estimated future cash receipts through the expected life of the
financial asset to the net carrying amount of the financial asset.
Dividend revenue
Dividend revenue is recognised when right to receive the payment is established.
Premises and equipment
Premises and equipment is stated at cost less accumulated depreciation and any impairment in
value. Deprecation is calculated on a straight-line basis over the estimated useful lives of the assets
at rates ranging between 10% to 20%.
The carrying values of premises and equipment are reviewed for impairment when events or
changes in circumstances indicate the carrying value may not be recoverable. If any such indication
exists and where the carrying values exceed the estimated recoverable amount, the assets are
written down to their recoverable amount. Impairment losses are recognised in the income
statement.
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. Intangible assets
with finite lives are amortised over the useful economic life and assessed for impairment when there
is an indication that the intangible asset may be impaired.
Internally generated intangible assets are not capitalised and are expensed in the income statement
Intangible assets include computer software and programmes. These intangibles assets are
amortised evenly over their estimated economic useful lives of 5 years.
Impairment and uncollectibility of financial assets
An assessment is made at each balance sheet date to determine whether there is objective evidence
that a specific financial asset may be impaired. If such evidence exists, any impairment loss is
recognised in the income statement.
Impairment is determined as follows:
a) For assets carried at fair value, impairment is the difference between cost and fair value;
b) For assets carried at cost, impairment is the difference between cost and the present value of
future cash flows discounted at the current market rate of return for a similar financial asset.
Derecognition of financial instruments
The derecognition of a financial instrument takes place when the company no longer controls the
contractual rights that comprise the financial instrument, which is normally the case when the
instrument is sold, or all the cash flows attributable to the instrument are passed through to an
independent third party.
8
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investment in associated companies
These investments in associated companies are carried in the balance sheet at cost plus post –
acquisition changes in the company’s share of net assets of associates, less any impairment in value.
The statement of income reflects the share of the results of the operations of the associates .
Available-for-sale investments
Available-for-sale investments are recognised and derecognised, on a trade date basis, when the
company becomes, or ceases to be, a party to the contractual provisions of the instrument.
Investments designated as available-for-sale investments are initially recorded at cost and
subsequently measured at fair value, unless this cannot be reliably measured. Changes in fair value
are reported as a separate component of equity. On derecognition or impairment the cumulative
gain or loss previously reported in equity is included in the income statement for the period.
Cash and cash equivalents
For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash in hand,
bank balances, and short-term deposits with an original maturity of three months or less, net of
outstanding bank overdrafts.
Provisions
Provisions are recognised when the company has an obligation (legal or constructive) as a result of a
past event, and the costs to settle the obligation are both probable and able to be reliably measured.
Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of
exchange ruling at the balance sheet date. All differences are taken to the income statement.
Leases
The company has no finance leases.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are
classified as operating leases. Operating lease payments are recognised as an expense in the income
statement on a straight-line basis over the lease term.
Fair values
For investments traded in an active market, fair value is determined by reference to quoted market
bid prices.
The fair value of interest-bearing items is estimated based on discounted cash flows using interest
for items with similar terms and risk characteristics.
For unquoted equity investments, fair value is determined by reference to the market value of a
similar investment or is based on the expected discounted cash flows.
9
2a SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet date, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below:
Provision for outstanding claims
Considerable judgement by management is required in the estimation of amounts due to contract
holders arising from claims made under insurance contracts. Such estimates are necessarily based
on significant assumptions about several factors involving varying, and possible significant, degrees
of judgement and uncertainly and actual results may differ from management’s estimates resulting
in future changes in estimated liabilities.
In particular, estimates have to be made both for the expected ultimate cost of claims reported at the
balance sheet date and for the expected ultimate cost of claims incurred but not yet reported (IBNR)
at the balance sheet date. The primary technique adopted by management in estimating the cost of
notified and IBNR claims, is that of using past claim settlement trends to predict future claims
settlement trends.
Claims requiring court or arbitration decisions are estimated individually. Independent loss adjusters
normally estimate property claims. Management reviews its provisions for claims incurred, and
claims incurred but not reported, on a quarterly basis.
Reinsurance
The company is exposed to disputes with, and possibility of defaults by, its reinsurers. The company
monitors on a quarterly basis the evolution of disputes with and the strength of its reinsurers.
10
3 PREMISES AND EQUIPMENT
Office
furniture
USD
Decorations &
leasehold
Computers Equipment
improvements Vehicles
USD
USD
USD
USD
Total
USD
Cost
At 1 April 2005
Additions
46,315
21,238
97,921
29,275
At 31 March 2006
67,553
127,196
Depreciation
At 1 April 2005
Additions
At 31 March 2006
Net carrying amount
At 31 March 2006
At 31 March 2005
11,162
5,360
16,522
51,031
35,153
37,102
14,915
52,017
10,432
7,071
17,503
35,833
15,042
73,083
58,521
290,254
138,991
50,875
131,604 429,245
19,292
8,639
27,931
16,869
19,136
91,684
62,797
36,005
154,481
33,929
22,591
56,520
70,676
63,991
34,514
26,670
22,944
16,541
95,599
274,764
56,214
198,569
The depreciation charge for the year of USD 62,797 (2005: USD 44,175) has been included in
general and administrative expenses.
4 INTANGIBLE ASSETS
Cost
At 1 April 2005
Additions
At 31 March 2006
Amortization
At 1 April 2005
Additions
At 31 March 2006
Net book value 2006
Net book value 2005
Intangible assets represent software licenses.
Computer
software
101,230
76,105
177,335
34,889
23,250
58,139
119,196
66,341
11
5 INVESTMENT IN ASSOCIATED COMPANIES
During July 2002 the company acquired a 33% equity ownership interest in real estate limited
liabilities companies registered in Lebanon.
The Company has the following investments in associates:
Star Rock SAL Lebanon
Sina SAL Lebanon
Silver Rock SAL Lebanon
Golden Rock SAL Lebanon
Country of
incorporation
Ownership
Lebanon
Lebanon
Lebanon
Lebanon
2006
33%
33%
33%
33%
2005
33%
33%
33%
33%
The following table illustrates summarised information of the Company’s investments in associates:
2006
USD
2005
USD
1,587,119
14,858,249
(6,900,332
)
(1,164,907
)
8,380,129
1,486,201
14,551,579
(6,700,915)
(1,086,085)
8,250,780
600,455
523,278
359,952
302,546
2006
USD
2005
USD
15,659,121
51,576,893
5,601,867
15,281,961
-
16,439,591
72,837,881
31,721,552
Share of associates’ balance sheets:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Share of associates’ revenues and results:
Revenues
Results
6 AVAILABLE-FOR-SALE INVESTMENTS
Available for sale investments by currency
Jordanian Dinars
US Dollars
Other currencies
12
The breakdown of the available for sale investments is as follows:
Fixed income securities
Unquoted stocks*
Common stock in listed companies
2006
USD
2005
USD
51,266,353
5,601,867
15,969,661
16,170,420
-
15,551,132
72,837,881
31,721,552
Common stock have no fixed maturity dates and are generally not exposed to interest rate risk.
* Included in unquoted equities are investments carried at cost with value of USD 5,601,867. The
investments were stated at cost since the fair value could not be measured reliably and there is no
indication of impairment in the values as of the balance sheet date.
7 RECEIVABLES ARISING FROM INSURANCE CONTRACTS
Customers
2006
USD
2005
USD
27,447,918
10,729,550
All of the above amounts are due within twelve month of the balance sheet date.
8 OTHER RECEIVABLES
Prepaid expenses
Refundable deposits
Payment on purchase of investment
Employees receivables
Checks under collection
Trade receivables
Others
9 REINSURERS’ SHARE OF OUTSTANDING CLAIMS
Reinsures’ share of outstanding claims
2006
USD
58,510
704
-
87,940
29,967
238,964
34,033
450,118
2005
USD
27,264
704
267,252
89,149
-
81,967
26,638
492,974
2006
USD
2005
USD
27,158,704
3,203,127
Substantially all of the amounts due from reinsurers are expected to be received within twelve
months of the balance sheet date.
13
10 CASH AND SHORT TERM DEPOSITS
Cash and cash equivalents included in the statement of cash flows include the following balance
sheet amounts:
Cash and bank balances
Time deposits
Demand deposit
2006
USD
2005
USD
1,750,552
68,461,683
20,000,000
960,261
17,889,472
20,000,000
90,212,235
38,849,733
The time deposits, which are substantially denominated in Jordanian dinars, are made for varying
periods of between one week and one month depending on the immediate cash requirements of the
company, and earn interest at the respective short-term deposit rates.
Demand deposits mature on 30 March 2007 and have been excluded from cash and cash
equivalents. (note 23).
11 SHARE CAPITAL
Authorised
2006
USD
2005
USD
Issued and fully paid
2005
2006
USD
USD
Shares of JD 1 each(USD 1.408)
2,556,172
1,408,451
2,556,172
1,408,451
The company issued additional 814,882 shares in private placement on 8 March 2006 at par value
of 1 Jordanian Dinars (equivalent to USD 1,147,721).
12 ADDITIONAL PAID IN CAPITAL
On 8 March 2006; the Company issued additional 814,882 shares in private placement at par value
of 1 Jordanian Dinars (Equivelent to 1,147,721) with shares’ premium of USD 71,602,279
13 STATUTORY RESERVE
The accumulated amounts in this account represents 10% of the Company’s net income according
to the Companies Law. The Company has the option to cease such appropriation when the balance
of this reserve reaches 100% of the Company’s authorized capital. The statutory reserve will not be
available for distribution to partners.
14 DIVIDENDS PAID
The Board of directors and partner’s approved on their meeting held in 1 July 2005 to distribute
interim cash dividends amounting to USD 750,000 (USD 0.532 per share).
14
15 UNEXPIRED RISKS
2006
Reinsurers’
share
USD
Gross
USD
Net
USD
Gross
USD
2005
Reinsurers’
share
USD
Net
USD
Unearned premiums
38,825,149
(4,910,283) 33,914,866 17,198,152(2,877,615)
14,320,537
Details of the movements of the provision for unearned premiums, and the related reinsurers’ share,
is contained in (Note 18).
16 OUTSTANDING CLAIMS
The movement in the provision for outstanding claims, and the related reinsurers’ share, was as
follows:
2006
Reinsurers’
share
USD
Gross
USD
Net
USD
Gross
USD
2005
Reinsurers’
share
USD
Net
USD
At 1 April
Claims incurred
Claims incurred but not
reported
Insurance claims paid in the
year
Provided during the year
7,517,913
(3,203,127)
4,314,786 5,109,235
(1,867,156)
3,242,079
1,352,121
8,870,034 (3,203,127)
-
1,352,121
750,009
-
750,009
5,666,907 5,859,244
(1,867,156)
3,992,088
(4,907,598) (2,999,634)
(6,928,535) 2,020,937
38,273,325 (25,976,514) 12,296,811 6,010,424
704,815
(2,040,786)
(2,294,819)
3,969,638
At 31 March
40,214,824 (27,158,704) 13,056,120 8,870,034
(3,203,127)
5,666,907
Analysis of outstanding
claims
At 31 March
Claims incurred
Claims incurred but not
reported
38,214,824 (27,158,704) 11,056,120 7,517,913
(3,203,127)
4,314,786
2,000,000
40,214,824 (27,158,704) 13,056,120 8,870,034
2,000,000 1,352,121
-
-
1,352,121
(3,203,127)
5,666,907
There are no material amounts for which amount and timing of claims payment is not resolved
within one year of the balance sheet date.
Amounts due from reinsurers are normally settled on a quarterly basis.
17 OTHER LIABILITIES
Accounts payable
Amounts due to related parties (note 24)
Accrued expenses
2006
USD
12,554
29,692
249,265
291,511
2005
USD
9,402
28,227
131,141
168,770
15
18 NET INSURANCE PREMIUM REVENUE
Insurance contracts premium receivable
Movement in provision for unearned premiums
Insurance premium revenue
Reinsurance contracts premium payable
Movement in provision for unearned premiums
Insurance premiums ceded to reinsurers
2006
USD
2005
USD
57,479,790
(21,626,997)
24,485,025
(5,119,272)
35,852,793
19,365,753
(19,791,040)
2,032,668
(7,844,646)
451,913
(17,758,372)
(7,392,733)
18,094,421
11,973,020
19
CLAIMS
2006
Reinsurers’
share
USD
Gross
USD
Net
USD
Gross
USD
2005
Reinsurers’
Share
USD
Net
USD
Claims incurred
6,928,535
(2,020,937) 4,907,598 2,999,634
(704,815)
2,294,819
3,010,790 (1,335,971)
1,674,819
6,010,424 (2,040,786)
3,969,638
2006
USD
2005
USD
2,805,047
8,724,980
(5,175,883)
1,740,225
3,634,139
(2,569,317)
6,354,144
2,805,047
Change in provision for
outstanding claims
(23,955,577
31,344,790
38,273,325 (25,976,514
)
) 7,389,213
12,296,81
1
20 DEFERRED POLICY ACQUISITION COSTS
At 1 April
Additions
Amortisation
At 31 March
16
21 INVESTMENT INCOME
Available-for-sale investments
Dividends
Interest
2006
USD
2005
USD
61,707
2,486,507
299,753
815,733
2,548,214
1,115,486
22 NET REALISED GAINS ON AVAILABLE-FOR-SALE INVESTMENTS
Realised gains
Equity securities
23 CASH AND CASH EQUIVALENTS
2006
USD
2005
USD
2,434,010
851,060
Cash and cash equivalent balances in the statement of cash flows consists of the following balances:
Cash and bank balances
Time deposit mature within 3 months
2006
USD
2005
USD
1,750,552
68,461,683
70,212,235
960,261
17,889,472
18,849,733
24 COMMITMENTS AND CONTINGENCIES
As of the date of the financial statements, the company is contingently liable to the followings:
§ Letter of Guarantee amounting to USD 7,042 to the order of the ministry of trade and
industry with margin of USD 704.
§ Letter of Credit to USD 9,904,878 to the order of Houston Casualty Company.
The company has entered into commercial leases on certain apartments and offices where it is not in
the best interest of the company to purchase these assets. These leases have an average life 1 year
with renewal terms included in the contracts. Renewals are at the option of the company.
17
25 RELATED PARTY TRANSACTIONS
Transactions with related party (Eastern Insurance Brokers Company) included in the income
statement are as follows:
Inter company balance
Commission paid
2006
USD
29,692
32,811
2005
USD
28,227
36,332
Compensation of key management personnel of the company, consisting of salaries and
benefits, was USD 779,426 (2005: USD 781,168).
26 RISK MANAGEMENT
The risks faced by the company and the way these risks are mitigated by management are
summarised below.
Insurance risk
Insurance risk is the risk that actual claims payable to contract holders in respect of insured events
exceed the carrying amount of insurance liabilities. This could occur because the frequency or
amounts of claims are more than expected. The company only issues short term insurance contracts
in connection with property and energy (collectively known as fire and accident), and marine risks.
Frequency and amounts of claims
The frequency and amounts of claims can be affected by several factors. The company underwrites
mainly fire and accident and marine risks. These are regarded as short-term insurance contracts as
claims are normally property advised and most are settled within one year of the insured event
taking place. This helps to mitigate insurance risk.
Property and energy
Property and energy insurance is designed to compensate contract holders for damage suffered to
properties or for the value of property lost. Contract holders could also receive compensation for the
loss of earnings caused by the inability to use the insured properties.
For property and energy insurance contracts the main risks are fire and business interruption. In
recent years the company has mostly underwritten policies for properties containing fire detection
equipment.
These contracts are underwritten by reference to the replacement value of the properties and
contents insured. The cost of rebuilding properties and obtaining replacement contents and the time
taken to restart operations which leads to business interruptions are the main factors that influence
the level of claims.
18
26 RISK MANAGEMENT (continued)
Marine
Marine insurance is designed to compensate contract holders for damage and liability arising
through loss or damage to marine craft and accidents at sea resulting in the total or partial loss of
cargoes.
For marine insurance the main risks are loss or damage to marine craft and accidents resulting in the
total or partial loss of cargoes.
The underwriting strategy for the marine class of business is to ensure that policies are well
diversified in terms of vessels and shipping routes covered.
Geographical concentration of risks
Approximately 57%, 10% and 33% of the company’s insurance risk relates to policies written in
Asia, Europe and whole of the world respectively(2005: 53%, 13% and 34%).
Reinsurance risk
In common with other insurance companies, in order to minimise financial exposure arising from
large claims, the company, in the normal course of business, enters into contracts with other parties
for reinsurance purposes. Such reinsurance arrangements provide for greater diversification of
business, allow management to control exposure to potential losses arising from large risks, and
provide additional capacity for growth. A significant portion of the reinsurance is effected under
treaty, facultative and excess-of-loss reinsurance contracts.
To minimise its exposure to significant losses from reinsurer insolvencies, the company evaluates
the financial condition of its reinsurers. The company only deals with reinsurers approved by the
board of directors, which are generally rated A or above by international rating agencies.
Financial risk
The company’s principal financial instruments are available-for-sale investments, receivables arising
from insurance and reinsurance contracts, trading investments and cash and cash equivalents.
The company does not enter into derivative transactions.
The main risks arising from the company’s financial instruments are interest rate risk, foreign
currency risk, credit risk, market price risk and liquidity risk. The board reviews and agrees policies
for managing each of these risks and they are summarised below.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future
profitability or the fair values of financial instruments. The company is exposed to interest rate risk
on certain of its investments and cash and cash equivalents. The company limits interest rate risk by
monitoring changes in interest rates in the currencies in which its cash and interest bearing
investments and borrowings are denominated.
19
26 RISK MANAGEMENT (continued)
Details of maturities of the major classes of financial assets are as follows.
Less
than 1
year
USD
Non
interest
bearing
items
USD
Effective
interest
rate
(%)
Total
USD
31 March 2006
Available-for-sale investments 51,266,353
Receivables arising from
insurance and reinsurance
contracts
Other receivables
Time deposits
Demand deposits
Cash
-
-
63,791,388
24,670,295
-
21,571,528 72,837,881
2-4
27,447,918
450,118
27,447,918
450,118
- 63,791,388
24,670,295
1,750,552 1,750,552
-
2-4
1-2
139,728,03
6
51,220,116 190,948,15
2
Less
than 1
year
USD
Non
interest
bearing
items
USD
Effective
interest
rate
(%)
Total
USD
31 December 2005
Available-for-sale investments 16,170,420
Receivables arising from
insurance and reinsurance
contracts
Other receivables
Time deposits
Demand deposits
Cash
-
17,889,472
20,000,000
-
-
15,551,132 31,721,552
2-4
492,974
10,729,550 10,729,550
492,974
- 17,889,472
20,000,000
960,261
54,059,892 27,733,917 81,793,809
960,261
-
2-4
1-2
There is no significant difference between contractual repricing or maturity dates.
Foreign currency risk
Foreign currency risk is the risk that the value of a financial instrument will fluctuate due to changes
in foreign exchange rates.
Management believes that there is minimal risk of significant losses due to exchange rate
fluctuations and consequently the company does not hedge its foreign currency exposure.
20
26 RISK MANAGEMENT (continued)
Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and
cause the other party to incur a financial loss. For all classes of financial assets held by the company,
the maximum credit risk exposure to the company is the carrying value as disclosed in the balance
sheet.
The company only enters into insurance and reinsurance contracts with recognised, credit worthy
third parties. It is the company’s policy that all customers who wish to trade on credit terms are
subject to credit verification procedures. In addition, receivables from insurance and reinsurance
contracts are monitored on an ongoing basis in order to reduce the company’s exposure to bad
debts.
The company’ portfolio is managed by the Vice Chairman and CEO in accordance with the
investment policy established by the board of directors.
The company’s bank balances are maintained with a range of international and local banks in
accordance with limits set by the board of directors.
There are no significant concentrations of credit risk within the company.
Market price risk
Market price risk is the risk that the value of a financial instrument will fluctuate as a result of
changes in market prices, whether those changes are caused by factors specific to the individual
security, or its issuer, or factors affecting all securities traded in the market.
The company is exposed to market risk with respect to its listed equity financial instruments.
The company limits market risk by maintaining a diversified portfolio and by monitoring of
developments in equity markets. The majority of the company’s equities are listed on the Jordanian
stock exchange.
Liquidity risk
Liquidity risk is the risk that the company will not be able to meet its commitments associated with
insurance contracts and financial liabilities as they fall due.
Liquidity requirements are monitored on a monthly basis and management ensures that sufficient
liquid funds are available to meet any commitments as they arise.
27 SEGMENTAL INFORMATION
For management purposes the company is organised into five business segments, property, energy,
engineering, reinsurance, and marine. These segments are the basis on which the company reports is
primary segment information.
An analysis of gross and net insurance premium revenue gross and net claims and policy acquisition
costs together with the net underwriting result for the company’s main classes of business is given
below.
As the company’s activities are performed on an integrated basis, a segmental analysis of assets and
liabilities and other income statement captions would not be meaningful.
21
International General Insurance Company Limited
NOTES TO THE FINANCIAL STATEMENTS
At 31 March 2006
27 SEGMENTAL INFORMATION (continued)
Property
Energy
Marine
Reinsurance
Engineering
Others
Total
Income
Gross written premiums
Movement in provision for
unearned premiums
Net premium revenue
Insurance premium ceded to
reinsurers
Net insurance premium revenue
Claims, net
Policy acquisition costs
Net underwriting result
Investment income
Income from associated
companies
Other unallocated costs
Profit for the year
2006
2005
USD 000 USD 000
2006
USD 000
2005
2006
USD 000 USD 000
2005
2006
USD 000 USD 000 USD 000
2005
2006
2005
USD 000 USD 000 USD 000
2006
2005
2006
USD 000 USD 000 USD 000
2005
40,776
14,733
7,466
8,029
4,363
1,685
3,187
14,637
26,139
5,576
9,157
1,943
5,523
(364)
8,393
1,348
3,015
(13,089)
13,050
(9,254)
(3,546)
250
(4,371)
4,786
(2,693)
(914)
1,179
(2,262)
3,261
(1,214)
(1,055)
992
(2,481)
5,912
(278)
(1,372)
4,262
(2,385)
630
(1,825)
(399)
(1,594)
(95)
1,780
(541)
1,239
(999)
(264)
(24)
2,338
849
-
849
(4)
(117)
728
-
-
-
-
-
-
-
-
1,660
1,361
299
(22)
277
-
(51)
226
-
-
-
-
-
-
-
-
28
38
57,480
24,485
-
-
-
28
28
(8)
20
2
36
21,627
35,853
5,119
19,366
-
-
36
(19)
17
(17,758)
18,095
(12,297)
(5,176)
622
9,466
(7,393)
11,973
(3,970)
(2,569)
5,434
2,047
360
(2,820)
303
(1,755)
7,628
6,029
Secondary segment information:
Although the management of the company is based primarily on business segments, the company operates in domestic and international markets. The following table shows
the distribution of the company’s operating income, total assets and capital expenditure by geographical segment:
Income
Operating income
Interest, dividend income,
income from associate and
realized gain on sale of
investments
Total income
Total assets
Capital expenditure
Domestic
International
Total
2006
USD 000
-
2005
USD 000
-
2006
USD 000
622
2005
USD 000
5,434
2006
USD 000
622
2005
USD 000
5,434
7,833
7,833
168,478
215
1,462
1,462
53,084
102
1,993
2,615
74,752
-
888
6,322
46,111
-
9,826
10,448
243,230
215
2,350
7,784
99,195
102
22
International General Insurance Company Limited
NOTES TO THE FINANCIAL STATEMENTS
At 31 March 2006
28 COMPARATIVE AMOUNTS
The 2005 figures have been reclassified in order to conform with the presentations in the current
year. Such reclassification does not affect previously reported net profit or equity except as set
below:
The change has been made in light of changes in International Financial Reporting Standards
In accordance with IAS 8, “Accounting Policies Changes in Accounting Estimates and Errors”, the
financial statements of 2005 have been restated to comply with the IFRS as follows:
Changes in asset
Changes in equity
Profit for the year
2005
After
restatement
Before
restatement
Amount of
change
99,195,288
66,115,108
6,028,726
99,154,288
66,074,118
5,987,736
40,990
40,990
40,990
The changes have been resulted from recording the company's share of associated companies'
results for the year.
23