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ANNUAL
REPORT
2010
International General Insurance Holdings Limited | ConsoLIdated statement of InCome
Contents
About IGIH
Board of Directors
Letter from the Board of Directors
Financial Statements
Corporate Officers
IGI Offices
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About IGIH
International General Insurance Holdings Limited
(IGIH) is registered in the Dubai International
Financial Centre with operations in Bermuda
(IGI Bermuda), the United Kingdom, Jordan and
Malaysia.
IGI Bermuda is a class 3B (Re)insurer regulated
by the Bermuda Monetary Authority and is rated
A-(“Excellent”) by A.M. Best Company Inc. This
subsidiary is the principal underwriting entity
for the Group with the Jordan office providing
all management, underwriting and operational
functions. The Group also has subsidiary
companies in the United Kingdom, Dubai and in
Labuan, Malaysia registered as a first tier reinsurer.
IGI Group (companies) underwrite a worldwide
portfolio of energy, property, marine, construction
and engineering, financial institutions, general
aviation, casualty and non-proportional reinsurance
treaty business with the main geographical focus
on the Afro-Asian markets.
IGIH has assets of more than US$ 488 million as at
31st December, 2010.
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International General Insurance Holdings Limited | Board of dIreCtors
International General Insurance Holdings Limited
Board of Directors as of December 31st, 2010
mr. mohammed abu Ghazaleh
Chairman (Chairman and CEO, Fresh Del Monte Produce Inc. – Miami)
mr. Wasef Jabsheh
CEO & Vice Chairman
mr. Khalifa al mulhem
Director (Chairman, National Polypropylene Company Limited – Saudi Arabia)
mr. Hani tarazi
Director (Saba IP & Co. – Dubai, UAE)
mr. Khaled sifri
Director (CEO, Arab Emirates Investment Bank – Dubai, UAE)
mr. Hani Jabsheh
Director (CEO, Al Bawaba.com)
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International General Insurance Holdings Limited | Letter from tHe Board of dIreCtors
Letter from the Board of Directors
2010 witnessed a combination of good and bad news. On the positive side, it has been pleasing to see some initial signs of
recovery in the world economy. However, during the course of the year, we did observe some fluidity in the strength of this recovery.
Nonetheless, we have confidence that the anticipated recovery process will consolidate and gather more momentum during 2011.
Recovery in the Middle East and North Africa (MENA) region, which represents the largest geographical segment in IGIH’s portfolio,
outpaced that in other parts of the world. This has been largely driven by rising oil prices and increased spending budgets, especially
on infrastructure projects, allocated by various countries, but particularly in the GCC region where economic resources remain buoyant.
We do expect this development to continue at an impressive pace, and in saying this, we are encouraged by recent announcements
made by these governments. The IGI Group stands to benefit greatly from these developments in view of our lead position in various
core lines of business in the region.
Turning to the bad news, 2010 witnessed a high level of natural catastrophe losses along with significant risk losses such as the
sinking of the Transocean Deep Water Horizon rig in the Gulf of Mexico. The financial impact of these losses to the insurance market
was substantial, and although IGI were affected by some of these, our exposures remain comfortably within our risk and catastrophe
loss tolerances avoiding any impact to our capital. This is clearly reflected in the Company’s results and comparisons shown within
the financial highlights hereafter.
On a more uplifting note, we are pleased to share with you major developments that have been achieved during 2010:
• We have been granted licensing for International General Insurance Company (U.K.) Limited enabling our Company to participate
on business derived from the European Union and facilitating licensing in other parts of the world. Our U.K. Company is a wholly
owned subsidiary of IGI Bermuda and is mandated to underwrite certain niche lines of business for the Group.
• In the Company’s commitment to grow its regional offices, we took practical measures to add underwriting capabilities in our Dubai
operation in the Dubai International Financial Centre. In time, we plan to further strengthen said operations as and when market
conditions become more attractive.
• As mentioned in last year’s annual report, IGI entered into a Managing General Underwriting agreement with Energy Insurance Oslo
(EIO), an underwriting agency specializing in Norwegian and Scandinavian energy and utility business. We are pleased to report
that this has proved to be a rewarding decision. This arrangement has generated a healthy volume of profitable new business to
the Company from ‘blue chip’ entities in Norway. We hope that we will be able to expand our cooperation with EIO in other areas
where we are confident that we will be able to achieve similar success.
Turning to the Company’s financial results, we are glad to report that we have once again exceeded net income targets. We are
confident that with the expansion plans now in place and the expected turnaround of economic conditions, especially in the MENA
region, our Group will continue to achieve its planned, measured growth with commensurately rewarding results going forward.
We give hereunder financial highlights of 2010 results:
• Gross written premium in 2010 was US$ 179.33 million, an increase of 17.32 % compared to US$ 152.87 million for 2009.
• Net underwriting profit grew to US$ 22.4 million for 2010, an increase of 67.7 % from US$ 13.35 million in 2009. This net underwriting
profit represents 22.92 % of the gross earned premium for the period, against 13.73 % for 2009.
• Investment income for the year stood at US$ 9.88 million, an increase of 36.4 % compared to US$ 7.24 million for 2009.
• The combined ratio for 2010 was 92.52 %, compared to 98.12 % for 2009.
• Total assets were US$ 488.9 million at the end of 2010, an increase of 7.1 % compared to US$ 456.6 million as of 31st December,
2009.
• Shareholders’ equity rose to US$ 187.8 million at the end of 2010, an increase of 9.6 % compared to US$ 171.3 million as of 31st
December, 2009.
We would like to welcome Mrs. Rawan Al Said, Chief Executive Officer of Oman National Investment Corporation, to the Board of
Directors of IGIH. We have no doubt that her experience in the region will provide a positive contribution to the existing Board.
We would like to thank all our clients and producers for their continued support throughout 2010. We would also like to thank all our
employees for their significant effort and contribution this year.
We look forward to working together in 2011 to fulfill the visions and ambitions of the Company and to further establish IGI as the
(Re)insurer of choice for the region.
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International General Insurance Holdings Limited | fInanCIaL statements
aUdItors’ rePort
P.O. Box 9267
28th Floor - Al Attar Business Tower
Sheikh Zayed Road
Duabi, United Arab Emirates
Tel: +971 4 332 4000
Fax:+971 4 332 4004
dubai.uae@ae.ey.com
www.ey.com/me
IndePendent aUdItors’ rePort to tHe sHareHoLders of
InternatIonaL GeneraL InsUranCe HoLdInGs LImIted
We have audited the accompanying consolidated financial statements of International General Insurance Company Holdings Limited
(“the Company”) and its subsidiaries (together “the Group”), which comprise the consolidated statement of financial position as at 31
December 2010 and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year
then ended, and a summary of significant accounting policies and other explanatory information.
management’s responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International
Financial Reporting Standards and the applicable provisions of the Companies Law pursuant to DIFC Law No. 3 of 2006, and for such
internal control as management determines is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the Company and the shareholders of the Company as a body, for our
audit work, for this report, or for the opinions we have formed. We conducted our audit in accordance with International Standards
on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate for
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31
December 2010 and its financial performance and its cash flows for the year then ended, in accordance with International Financial
Reporting Standards.
report on other legal and regulatory requirements
We also confirm that, in our opinion, the consolidated financial statements include, in all material respects, the applicable requirements
of the Companies Law pursuant to DIFC Law No. 3 of 2006. We have obtained all the information and explanations which we required
for the purpose of our audit. To the best of our knowledge and belief, no violations of the companies law pursuant to DIFC Law No.
3 of 2006 have occurred during the period which would have had a material effect on the business of the Company or on its financial
position.
Dubai, United Arab Emirates
_________________________
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International General Insurance Holdings Limited | ConsoLIdated statement of InCome
Financial Results
GROSS WRITTEN PREMIUM
NET PROFIT
180
160
140
120
100
80
60
40
20
0
500
450
400
350
300
250
200
150
100
50
0
179
153
125
117
89
20
15
20
15
10
5
0
-5
17
9
-4
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
TOTAL ASSETS
SHAREHOLDER’S EQUITY
488
456
426
117
293
187
188
171
154
153
200
180
160
140
120
100
80
60
40
20
0
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
12
13
International General Insurance Holdings Limited | fInanCIaL statements
ConsoLIdated statement of fInanCIaL PosItIon
AT 31 DeceMBer 2010
assets
Premises and equipment
Intangible assets
Investment in associated companies
Investment property
Investments
Deferred policy acquisition costs
Insurance receivables
Trade receivables
Other assets
Reinsurers’ share of insurance reserves
Cash and bank balances
totaL assets
eQUItY and LIaBILItIes
equity
Issued share capital
Foreign currency translation reserve
Cumulative changes in fair value of investments
Retained earnings
total equity
Liabilities
Insurance reserves
Other liabilities
Reinsurance payable
Reinsurance deposit
Unearned commissions
total liabilities
totaL eQUItY and LIaBILItIes
Notes
2010
USD
2009
USD
3
4
5
6
7
8
9
10
11
12
13
3,735,073
298,990
11,280,888
28,996,126
3,720,305
475,438
11,032,729
28,672,789
154,998,453
123,656,287
25,730,470
85,985,756
1,037,660
12,185,890
62,863,007
20,003,250
94,330,538
-
4,778,040
61,063,626
101,689,289
108,855,584
488,801,602
456,588,586
14
143,375,678
143,375,678
(269,090)
6,576,750
(208,050)
4,389,708
38,097,808
23,769,816
187,781,146
171,327,152
12
16
17
259,462,447
235,220,774
2,698,012
31,083,276
-
7,776,721
301,020,456
488,801,602
1,310,846
24,755,439
17,318,875
6,655,500
285,261,434
456,588,586
The consolidated financial statements were authorised for issue in accordance with a resolution of the Board of Directors on 20 March 2011.
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15
International General Insurance Holdings Limited | fInanCIaL statements
ConsoLIdated statement of InCome
AT 31 DeceMBer 2010
International General Insurance Holdings Limited | fInanCIaL statements
ConsoLIdated statement of CasH fLoWs
AT 31 DeceMBer 2010
Gross earned premiums
Reinsurers’ share of gross earned premiums
net premiums
Claims
Reinsurers’ share of claims
Commission income
Policy acquisition costs
net underwriting result
Investment income
Share of profit from associated companies
Gain on sale of premises equipment
General and administrative expenses
Provision for doubtful debts
Gain on exchange
Goodwill impaired
ProfIt for tHe Year
Attributable to:
Equity holders of the parent
Non-controlling interest
Profit for the year
other comprehensive income
Fair value changes during the year
Currency translation differences
other comprehensive income for the year
total comprehensive income for the year
Notes
18
12
12
17
19
5
4
2010
USD
2009
USD
159,169,279
148,366,598
(61,466,935)
(51,106,248)
97,702,344
97,260,350
(94,168,856)
(89,879,032)
37,614,741
13,268,394
20,087,962
9,733,389
(32,024,216)
(23,849,829)
22,392,407
13,352,840
9,510,260
575,159
-
5,589,866
1,240,368
3,815
oPeratInG aCtIVItIes
Profit for the year
adjustments for:
Depreciation and amortisation
Gain on sale of available-for-sale investments
Provision for doubtful debts
Impairment of available-for-sale investments
Gain on sale of premises and equipment
Loss on revaluation of held for trading investments
Dividends and interest income
Share of profit from associated companies
Reinsurers’ share of insurance reserves
(15,079,396)
(10,683,787)
Insurance reserves
-
84,562
(287,486)
(847,800)
409,811
-
17,195,506
9,065,113
17,195,506
9,095,131
Deferred policy acquisition costs
Insurance receivables
Trade receivables
Other assets
Unearned commission
Held for trading investments
-
(30,018)
Other liabilities
17,195,506
9,065,113
Net cash from operating activities
2010
USD
2009
USD
17,195,506
9,065,113
2,187,042
(61,040)
2,126,002
9,399,751
38,123
9,437,874
19,321,508
18,502,987
InVestInG aCtIVItIes
Purchase of premises and equipment
Proceeds from sale of premises equipment
Purchase of intangible assets
Purchase of available-for-sale investments
Proceeds from sale of available-for-sale investments
Purchase of held to maturity investments
Purchase of investment property
Dividends received from associated companies
Deposits maturing after three months
Dividends and interest income
Net cash used in investing activities
fInanCInG aCtIVItIes
Dividends paid
Net cash used in financing activities
net CHanGe 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
Notes
2010
USD
2009
USD
17,195,506
9,065,113
19
19
19
5
3
4
5
15
13
1,071,959
(1,463,230)
-
1,280,060
-
42,060
(8,579,242)
(575,159)
(1,799,381)
24,241,673
31,414,246
(5,727,220)
(2,707,296)
(1,037,660)
(7,407,850)
1,121,221
109,231
1,387,166
578,999
(368,524)
847,800
526,290
(3,815)
1,109,941
(6,857,573)
(1,240,368)
2,035,256
15,445,292
21,138,411
(1,929,806)
13,787,107
-
(2,541,354)
3,069,619
949,281
(545,849)
17,151,838
33,927,409
(706,468)
(2,511,150)
-
(203,811)
3,815
(9,845)
(44,384,574)
(23,079,200)
18,261,329
(3,000,000)
(323,337)
327,000
(5,505,342)
8,579,242
4,613,939
-
(20,767,749)
405,351
2,386,183
6,857,573
(26,955,961)
(32,101,083)
(2,867,514)
(2,867,514)
(12,671,637)
107,156,372
94,484,735
-
-
1,826,326
105,330,046
107,156,372
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17
International General Insurance Holdings Limited | fInanCIaL statements
ConsoLIdated statement of CHanGe In eQUItY
AT 31 DeceMBer 2010
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
Attributable to equity holders of the parent
1. aCtIVItIes
Issued
share
capital
foreign
currency
translation
reserve
Cumulative
change in
fair value of
investments
retained
earnings
total non- controlling
interests
total equity
International General Insurance Holdings Limited [the Company] is incorporated as a company limited by shares under the Companies
Law, DIFC Law No. 2 of 2004 on 7 May 2006 and is engaged in the business of re-insurance and insurance. The Company’s
registered office is in Dubai International Financial Centre.
USD
USD
USD
USD
USD
USD
USD
The Company and its subsidiaries [together the Group] operate in the United Arab Emirates, Bermuda, Jordan and Malaysia.
At 1 January 2009
Profit for the year
Other comprehensive
income
Total comprehensive
income (loss)
Acquisition of non
controlling interest
-
-
-
-
143,375,678
(231,658)
(5,010,043)
14,674,685
152,808,662
529,981
153,338,643
-
-
9,095,131
9,095,131
(30,018)
9,065,113
23,608
9,399,751
-
9,423,359
14,515
9,437,874
2. BasIs of PreParatIon
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).
The consolidated financial statements have been presented in United States Dollars “USD” which is the Group’s functional currency.
23,608
9,399,751
9,095,131
18,518,490
(15,503)
18,502,987
The consolidated financial statements are prepared under the historical cost convention modified to include the measurement at fair
value of financial assets available-for-sale, financial assets held for trading and investment properties.
-
-
-
-
(514,478)
(514,478)
Basis of consolidation
The financial statements of the subsidiaries are prepared for the same reporting year as the Company, using consistent accounting policies.
at 31 december 2009
143,375,678
(208,050)
4,389,708
23,769,816
171,327,152
Profit for the year
Other comprehensive
income
Total comprehensive
income
Dividends paid during the
year (note 15)
-
-
-
-
-
-
17,195,506
17,195,506
(61,040)
2,187,042
-
2,126,002
(61,040)
2,187,042
17,195,506
19,321,508
-
-
(2,867,514)
(2,867,514)
at 31 december 2010
143,375,678
(269,090)
6,576,750
38,097,808
187,781,146
-
-
-
-
-
-
171,327,152
17,195,506
2,126,002
19,321,508
(2,867,514)
187,781,146
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to
be consolidated until the date that such control ceases.
All intra-group balances, transactions, income and expenses and profits and losses, including dividends resulting from intra-group
transactions, are eliminated in full.
Changes in accounting policies
The accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended
IFRS and IFRIC interpretations effective as of 1 January 2010:
Ifrs 2 share-based Payment: Group Cash-settled share-based Payment transactions
Ifrs 2 share-based Payment (revised)
The International Accounting Standards Board (IASB) issued an amendment to IFRS 2 that clarified the scope and the accounting for
group cash-settled share-based payment transactions. The Group adopted this amendment as of 1 January 2010. It did not have an
impact on the financial position or performance of the Group.
Ifrs 3 Business Combinations (revised) and Ias 27 Consolidated and separate financial statements (amended)
Ifrs 3 (revised) introduces significant changes in the accounting for business combinations occurring after becoming effective.
Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent
measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of
goodwill recognised, the reported results in the period that an acquisition occurs and future reported results.
as 27 (amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a
transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will it give rise
to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss
of control of a subsidiary. The changes by IFRS 3 (Revised) and IAS 27 (Amended) affect acquisitions or loss of control of subsidiaries
and transactions with non-controlling interests after 1 January 2010.
The change in accounting policy was applied prospectively and had no impact on the financial position or the performance of the Group.
IfrIC 17 distributions of non-cash assets to owners
This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders
either as a distribution of reserves or as dividends. The interpretation has no effect on either, the financial position or performance of
the Group.
standards issued but not effective
Standards issued but not yet effective up to the date of issuance of the Group financial statements are listed below. This listing is of
standards and interpretations issued, which the Group reasonably expects to be applicable at a future date. The Group intends to
adopt those standards when they become effective.
Ias 24 related Party disclosures (amendment)
The amended standard is effective for annual periods beginning on or after 1 January 2011. It clarified the definition of a related party
to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised standard introduces
a partial exemption of disclosure requirements for government related entities. The Group does not expect any impact on its financial
position or performance. Early adoption is permitted for either the partial exemption for government-related entities or for the entire standard.
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19
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
2. BasIs of PreParatIon (continued)
Changes in accounting policies (continued)
Ias 32 financial Instruments: Presentation – Classification of rights Issues (amendment)
The amendment to IAS 32 is effective for annual periods beginning on or after 1 February 2010 and amended the definition of a
financial liability in order to classify rights issues (and certain options or warrants) as equity instruments in cases where such rights
are given pro rata to all of the existing owners of the same class of an entity’s non-derivative equity instruments, or to acquire a fixed
number of the entity’s own equity instruments for a fixed amount in any currency. This amendment will have no impact on the Group
after initial application.
Ifrs 9 financial Instruments: Classification and measurement
IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to classification and measurement
of financial assets as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2013. In
subsequent phases, the IASB will address classification and measurement of financial liabilities, hedge accounting and derecognition.
The completion of this project is expected in early 2011. The adoption of the first phase of IFRS 9 will have an effect on the classification
and measurement of the Group’s financial assets. The Group will quantify the effect in conjunction with the other phases, when issued,
to present a comprehensive picture.
IfrIC 19 extinguishing financial Liabilities with equity Instruments
IFRIC 19 is effective for annual periods beginning on or after 1 July 2010. The interpretation clarifies that equity instruments issued to a
creditor to extinguish a financial liability qualify as consideration paid. The equity instruments issued are measured at their fair value. In
case that this cannot be reliably measured, the instruments are measured at the fair value of the liability extinguished. Any gain or loss is
recognized immediately in profit or loss. The adoption of this interpretation will have no effect on the financial statements of the Group.
Ceded reinsurance arrangements do not relieve the Group from its obligations to policyholders.
Premiums and claims on assumed reinsurance are recognised as income and expenses in the same manner as they would be if the
reinsurance were considered direct business, taking into account the product classification of the reinsured business.
Reinsurance liabilities represent balances due to reinsurance companies. Amounts payable are calculated in a manner consistent with
the associated reinsurance contract.
Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance.
Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expire or when the contract is
transferred to another party.
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. Depreciation is calculated on a
straight-line basis over the estimated useful lives of the assets ranging between 3 to 10 years.
The assets’ residual values, useful lives and method of depreciation are reviewed and adjusted if appropriate at each financial year-
end. Impairment reviews take place when events or changes in circumstances indicate that the carrying value may not be recoverable.
Impairment losses are recognised in the consolidated statement of income as an expense.
summary of significant accounting policies
Intangible assets
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 unearned period of coverage. The change in the provision for unearned premiums is
taken to the consolidated statement of income in order that revenue is recognised over the period of risk.
Premiums written include adjustments to premiums written in prior accounting periods and estimates for “pipeline” premiums. An
estimate is made at the consolidated statement of financial position date to recognise retrospective adjustments to premiums or
commissions. Outward reinsurance premiums are accounted for in the same accounting period as the premiums for the related direct
insurance or inwards reinsurance business.
a) Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination
over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired. Goodwill arising
from the investment in subsidiaries is separately shown under intangible assets, while that arising from the investment in associates
is shown as part of investment in associates and subsequently adjusted for any impairment losses.
For the purpose of impairment testing, goodwill acquired in a business combination is from the date of acquisition allocated to each
of the Group’s cash-generating units, or groups of cash-generating units. Where the recoverable amount of the cash-generating unit
is less than the carrying value, an impairment loss is recognised.
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 Group and those not reported at the consolidated statement of financial position date.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for
impairment, annually or more frequently, if events or changes in circumstances indicate that the estimated recoverable amount of
a cash-generating unit or group of cash-generating units is less than their carrying amount. Impairment losses are charged to the
consolidated statement of income.
The Group generally estimates its claims based on appointed loss adjusters or leading underwriters’ recommendations. In addition a
provision based on management’s judgement and the Group’s prior experience is maintained for the cost of settling claims incurred
but not reported at the consolidated statement of financial position date. Any difference between the provisions at the statement of
financial position 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 consolidated statement of financial position date the Group 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.
reinsurance
The Group cedes insurance risk in the normal course of business for all classes of business. Reinsurance assets represent balances
due from reinsurance companies. Recoverable amounts are calculated in a manner consistent with the outstanding claims provision
and are in accordance with the reinsurance contract.
An impairment review is performed at each reporting date or more frequently when an indication of impairment arises during the
reporting year. Impairment occurs when objective evidence exists that the Group may not recover outstanding amounts under the
terms of the contract and when the impact on the amounts that the Group will receive from the reinsurer can be measured reliably.
The impairment loss is recorded in the consolidated statement of income.
b) Intangible assets
Intangible assets acquired through business combinations are recorded at their fair value on that date. Other intangible assets are
measured on initial recognition at cost.
Intangible assets with finite lives are amortised over the useful economic lives, while intangible assets with indefinite useful lives are
assessed for impairment at each reporting date or when there is an indication that the intangible asset may be impaired.
Internally generated intangible assets are not capitalised and are expensed in the consolidated statement of income.
Indications of impairment of intangible assets are reviewed and their useful economic lives are reassessed at each reporting date.
Adjustments are reflected in the current and subsequent periods.
Intangible assets include computer software and software licenses. These intangible assets are amortised on a straight line basis over
their estimated economic useful lives of 5 years.
Impairment and uncollectibility of financial assets
An assessment is made at each consolidated statement of financial position 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 consolidated
statement of income.
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; and
c) For assets carried at amortised cost, impairment is based on estimated cash flows discounted at the effective interest rates.
20
21
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
2. BasIs of PreParatIon (continued)
summary of significant accounting policies (continued)
Derecognition of financial instruments
The derecognition of a financial instrument takes place when the Group 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.
Investment in associated companies
Investments in associated companies are carried in the consolidated statement of financial position at cost plus post – acquisition
changes in the Group’s share of net assets of associates, less any impairment in value. The consolidated statement of income reflects
the share of the results of the operations of the associates.
Investment properties
Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing
part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of
day to day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which
reflects market conditions at the reporting date. Gains or losses arising from changes in the fair values of investment properties are
included in the consolidated statement of income in the period in which they arise.
Investment properties are derecognised when either they have been disposed of or when the investment property is permanently
withdrawn from use and no future economic benefit is expected from its disposal.
The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the consolidated statement
of income in the period of derecognition.
Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to
owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner occupied
property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property,
plant and equipment up to the date of change in use.
Investments
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, held-to-maturity
investments or available-for-sale financial assets. The Group determines the classification of its financial assets at initial recognition.
All financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or loss, directly
attributable transaction costs.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the
marketplace (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.
The subsequent measurement of financial assets depends on their classification as follows:
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss includes financial assets held for trading and financial assets designated upon initial
recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of
selling or repurchasing in the near term. Financial assets at fair value through profit and loss are carried in the statement of financial
position at fair value with changes in fair value recognised in the consolidated statement of income. The Group has not designated any
financial assets upon initial recognition as at fair value through profit or loss.
Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the
Group has the positive intention and ability to hold it to maturity. After initial measurement held-to-maturity investments are measured
at amortised cost using the effective interest rate method, less impairment. Impairment losses are recognised in the consolidated
statement of income.
Available-for-sale financial investments
Available-for-sale financial investments include equity and debt securities. Equity investments classified as available-for sale are those,
which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are
those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in
response to changes in the market conditions. After initial measurement, available-for-sale financial investments are subsequently
measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until
the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or determined to
be impaired, at which time the cumulative loss is recognised in the consolidated statement of income and removed from the available-
for-sale reserve.
cash and cash equivalents
For the purpose of the consolidated 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.
Provisions
Provisions are recognised when the Group 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.
Offsetting
Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position only
when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise
the assets and settle the liability simultaneously. Income and expense is not offset in the consolidated statement of income unless
required or permitted by any accounting standard or interpretation.
Foreign currencies
The Group’s consolidated financial statements are presented in United States Dollars, which is also the functional currency of the
Company. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity
are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency rates prevailing at
the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency
spot rate of exchange ruling at the reporting date. All differences are taken to the consolidated statement of income. Non-monetary
items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the
initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the
date when the fair value is determined.
Group companies
The assets and liabilities of foreign operations are translated into United States Dollars at the rate of exchange prevailing at the
reporting date and their statements of income are translated at exchange rates prevailing at the date of the transactions. The
exchange differences arising on the translation are recognised in other comprehensive income. On disposal of a foreign operation, the
component of other comprehensive income relating to that particular foreign operation is recognised in the consolidated statement
of income.
Leases
The Group 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 consolidated statement of income on a straight-line basis over the
lease term.
Fair values
The fair value of financial instruments that are actively traded in organized financial markets is determined by reference to quoted
market bid prices for assets and offer prices for liabilities, at the close of business on the consolidated statement of financial position
date. If quoted market prices are not available, reference is also be made to broker or dealer price quotations.
For financial instruments where there is not an active market, the fair value is determined by using valuation techniques. Such
techniques include using recent arm’s length transactions, reference to the current market value of another instrument which is
substantially the same and/or discounted cash flow analysis. For discounted cash flow techniques, estimated future cash flows are
based on management’s best estimates and the discount rate used is a market related rate for a similar instrument.
If the fair value cannot be measured reliably, these financial instruments are measured at cost, being the fair value of the consideration
paid for the acquisition of the investment or the amount received on issuing the financial liability. All transaction costs directly attributable
to the acquisition are also included in the cost of the investment.
Judgements
In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those
involving estimations, which have the most significant effect in the amounts recognised in the financial statements:
Classification of investments
Management decides on acquisition of an investment whether it should be classified as held for trading or available for sale or held
to maturity.
The group classifies investments as trading if they are acquired primarily for the purpose of making a short term profit by the dealers.
Financial assets are classified as held to maturity if the Group has the positive intention and ability to hold up till maturity.
All other investments are classified as financial assets available -for- sale.
Impairment of investments
The group treats financial assets available-for-sale as impaired when there has been a significant or prolonged decline in the fair value
below cost or where other objective evidence of impairment exists. The determination of what is “significant” or “prolonged” requires
considerable judgement. In addition, the Group evaluates other factors, including normal volatility in share prices for quoted equities
and the future cash flows and discount factors for unquoted equities.
estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the consolidated statement of financial
position 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:
22
23
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
2. BasIs of PreParatIon (continued)
summary of significant accounting policies (continued)
Valuation of outstanding claims, whether reported or not
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 assumptions about several factors involving varying, and
possibly significant, degrees of judgement and uncertainty 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 consolidated statement of
financial position date and for the expected ultimate cost of claims incurred but not yet reported (IBNR) at the consolidated statement
of financial position 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 adjustors normally estimate property claims.
Management reviews its provisions for claims incurred, and claims incurred but not reported, on a quarterly basis.
Investment properties
Investment properties are stated at fair value which is determined based on valuations performed by professional independent valuers.
reinsurance
The Group is exposed to disputes with, and possibility of defaults by, its reinsurers. The Group monitors on a quarterly basis the
evolution of disputes with and the strength of its reinsurers.
3.
PremIses and eQUIPment
Office
building
USD
Office
furniture
Computers
Equipment
Leasehold
improvements
Vehicles
Total
USD
USD
USD
USD
USD
USD
Cost
At 1 January 2010
1,826,810
1,053,063
385,408
146,330
Additions
9,378
231,302
61,139
39,227
At 31 December 2010
1,836,188
1,284,365
446,547
185,557
743,382
244,485
987,867
253,571
4,408,564
120,937
706,468
374,508
5,115,032
depreciation
At 1 January 2010
Additions
At 31 December 2010
net carrying amount
-
99,413
99,413
146,197
201,155
347,352
246,803
98,807
72,768
35,929
345,610
108,697
72,139
150,352
47,452
688,259
691,700
197,804
1,379,959
208,944
281,083
4.
IntanGIBLe assets
Cost
Opening balance
Additions
Foreign currency transaction adjustment
Closing balance
amortization
Opening balance
Additions
Closing balance
net book value
Goodwill
Computer
software
2010
Total
2009
Total
USD
USD
USD
USD
287,486
-
-
561,987
203,811
-
849,473
203,811
-
287,486
765,798
1,053,284
-
287,486
287,486
-
374,035
92,773
466,808
298,990
374,035
380,259
754,294
298,990
804,108
76,195
(30,830)
849,473
243,628
130,407
374,035
475,438
Goodwill has been allocated to North Star Underwriting Limited which is considered to be a cash generating unit. The recoverable
amount of the cash generating unit has been determined by calculating cash flow projections based on financial budgets approved by
senior management covering a five year period. Goodwill allocated to the cash generating unit has been tested for impairment, and
since the recoverable amount of the cash generating unit during the year was nil, the goodwill was impaired in full.
5.
InVestment In assoCIated ComPanIes
In 2002, the Group acquired a 33% equity ownership interest in companies registered in Lebanon as shown below:
Star rock SAL Lebanon
Sina SAL Lebanon
Silver rock SAL Lebanon
Golden rock SAL Lebanon
country of incorporation
Ownership
Lebanon
Lebanon
Lebanon
Lebanon
2010
33%
33%
33%
33%
2009
33%
33%
33%
33%
At 31 December 2010
1,736,775
937,013
100,937
76,860
706,784
176,704
3,735,073
Movement on investment in associates was as follows:
Cost
At 1 January 2009
Additions
Transfers
Write off and disposals
-
1,826,810
-
-
482,000
184,646
466,225
(79,808)
273,011
112,397
136,601
18,518
946,447
314,040
198,832
2,036,891
54,739
2,511,150
-
-
(8,789)
-
(466,225)
At 31 December 2009
1,826,810
1,053,063
385,408
146,330
depreciation
At 1 January 2009
Charge for the year
Write off
At 31 December 2009
net carrying amount
-
-
-
-
69,165
156,840
(79,808)
146,197
138,035
108,768
-
246,803
39,692
41,865
(8,789)
72,768
(50,880)
743,382
45,288
77,731
(50,880)
72,139
-
-
-
(139,477)
253,571
4,408,564
86,964
63,388
379,144
448,592
-
(139,477)
150,352
688,259
Opening balance
Share of profit of associated companies
Share of fair value gain on investment properties
Dividends received
2010
USD
11,032,729
575,159
-
(327,000)
11,280,888
2009
USD
10,197,712
467,264
773,104
(405,351)
11,032,729
at 31 december 2009
1,826,810
906,866
138,605
73,562
671,243
103,219
3,720,305
the depreciation charge for the year of Usd 691,700 (2009: Usd 448,592) has been included in general and administrative expenses.
24
25
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
5.
InVestment In assoCIated ComPanIes (continued)
The following table includes summarised information of the Group’s investments in associates:
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
8. deferred PoLICY aCQUIsItIon Costs
Share of associates’ statement of financial position
Current assets
Non-current assets
Current liabilities
Net assets
Share of associates’ revenues and results
Revenues
Profit
2010
USD
604,829
16,955,064
(6,279,005)
11,280,888
2009
USD
549,809
16,915,258
(6,432,338)
11,032,729
829,018
1,492,587
575,159
1,240,368
Opening balance
Acquisition costs
Charged to consolidated statement of income
9.
InsUranCe reCeIVaBLes
Receivables from insurance companies and intermediaries
Reinsurers – amounts due in respect of claims paid
2010
USD
20,003,250
37,751,436
(32,024,216)
25,730,470
2010
USD
84,555,470
1,430,286
85,985,756
2009
USD
18,073,444
25,779,635
(23,849,829)
20,003,250
2009
USD
76,948,231
17,382,307
94,330,538
Investment properties of the associates are stated at fair value, which has been determined based on valuations performed by
professional independent valuers who are specialists in valuing these types of investment properties. The fair value represents the
amount, which the assets could be exchanged between a knowledgeable, willing seller in an arm’s length transaction at the date of
valuation. All the investment properties generated rental income during the current period and the prior years.
6.
InVestment ProPertY
The following table includes summarised information of the Group’s investment property:
Commercial building
Land*
2010
USD
20,534,276
8,461,850
28,996,126
2009
USD
20,429,402
8,243,387
28,672,789
*The land is registered in the name of the Directors of the Company. The Company has obtained an irrevocable proxy over this
investment property.
There is no significant difference between the carrying amount and fair value of the investment property based on valuations performed
by independent valuer.
7.
InVestments
Held to maturity
Unquoted bonds
Held for trading
Quoted funds
Available-for-sale
Quoted bonds and debt securities with fixed interest rate
Quoted equities
Quoted funds and alternative investments
Unquoted government bonds and debt securities with fixed interest rate
Unquoted equities*
2010
USD
2009
USD
4,690,141
1,690,141
1,679,234
1,830,525
71,847,200
61,360,659
5,623,167
1,410,934
8,387,118
148,629,078
154,998,453
59,362,794
43,511,474
7,463,301
1,410,934
8,387,118
120,135,621
123,656,287
*Carried at cost on account of the unpredictable nature of future cash flows and lack of suitable alternative methods to arrive at a reliable
fair value. There is no market for these investments and the Group intends to hold them for the long term.
Provision for impairment for equity investments charged to the consolidated statement of income amounted to USD 1,280,060 (2009:
USD 526,290).
26
The management believes that the insurance receivables are not impaired and will be recovered in full.
For the aging details please refer to note 23 “credit risk”.
10. trade reCeIVaBLes
This amount represents the balances due from the Specialty Mall customers against rental income. There are no impaired trade
receivables and management believes that the trade receivables will be recovered in full.
For the aging details please refer to note 23 “credit risk”.
11. otHer assets
Deferred XOL premium
Accrued interest income
Advance payment on investments
Prepaid expenses
Accrued dividend income
Refundable deposits
Employees receivables
Others
2010
USD
6,288,817
1,338,608
2,782,299
246,432
1,032,728
74,827
187,294
234,885
2009
USD
2,590,449
1,137,314
126,027
530,330
262,240
37,316
31,003
63,361
12,185,890
4,778,040
27
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
12. InsUranCe reserVes
Gross
USD
Reinsurers’
share
USD
2010
Net
USD
Gross
USD
Reinsurers’
share
USD
2009
Net
USD
Unearned premiums
103,402,699
(28,106,769)
75,295,930
83,238,624
(21,561,486)
61,677,138
Outstanding claims
156,059,748
(34,756,238)
121,303,510
151,982,150
(39,502,140)
112,480,010
259,462,447
(62,863,007)
196,599,440
235,220,774
(61,063,626)
174,157,148
a) Unearned premiums
Gross
USD
Reinsurers’
share
USD
2010
Net
USD
Gross
USD
Reinsurers’
share
USD
2009
Net
USD
Opening balance
Premiums written
Premiums earned
83,238,624
(21,561,486)
61,677,138
78,743,301
(13,427,326)
65,315,975
179,333,354
(68,012,218)
111,321,136
152,861,921
(59,240,408)
93,621,513
(159,169,279)
61,466,935
(97,702,344)
(148,366,598)
51,106,248
(97,260,350)
103,402,699
(28,106,769)
75,295,930
83,238,624
(21,561,486)
61,677,138
b) outstanding claims
Movement in outstanding claims
Gross
USD
Reinsurers’
share
USD
2010
Net
USD
Gross
USD
Reinsurers’
share
USD
2009
Net
USD
At the beginning of the year
Reported claims
112,482,150
(39,502,140)
72,980,010
110,800,288
(48,439,663)
62,360,625
Claims incurred but not
reported
39,500,000
-
39,500,000
30,231,893
(1,231,893)
29,000,000
151,982,150
(39,502,140)
112,480,010
141,032,181
(49,671,556)
91,360,625
Claims paid
(90,091,258)
42,360,643
(47,730,615)
(78,929,063)
30,257,378
(48,671,685)
Provided during the year
94,168,856
(37,614,741)
56,554,115
89,879,032
(20,087,962)
69,791,070
At the end of the year
156,059,748
(34,756,238)
121,303,510
151,982,150
(39,502,140)
112,480,010
At the end of the year
Reported claims
114,059,748
(34,756,238)
79,303,510
112,482,150
(39,502,140)
72,980,010
Claims incurred but not
reported
42,000,000
-
42,000,000
39,500,000
-
39,500,000
156,059,748
(34,756,238)
121,303,510
151,982,150
(39,502,140)
112,480,010
claims development
The following tables show the estimate of cumulative incurred claims, including both claims notified and IBNR for each successive
accident year at each statement of financial position date, together with cumulative payments to date.
2006
USD
2007
USD
2008
USD
2009
USD
2010
USD
Total
USD
At end of accident year
6,958,339
21,043,300
48,321,100
28,528,100
48,892,848
153,743,687
One year later
Two years later
Three years later
Four years later
Current estimate of
cumulative claims
incurred
Cumulative payments
to date
Liability recognised in
the statement of financial
position
Liability in respect
of years prior to 2006
33,226,096
59,651,500
63,821,433
64,953,900
49,255,000
79,736,254
68,920,200
47,765,268
79,324,900
47,922,100
-
-
-
-
-
-
-
-
-
-
221,652,929
197,911,454
127,090,168
47,922,100
47,922,100
79,324,900
68,920,200
64,953,900
48,892,848
310,013,948
(41,739,000)
(57,941,600)
(47,886,600)
(30,656,500)
(25,383,200)
(203,606,900)
6,183,100
21,383,300
21,033,600
34,297,400
23,509,648
106,407,048
Incurred but not reported claims
total liability included in the consolidated statement of financial position
13. CasH and BanK BaLanCes
Cash and bank balances
Time deposits
Cash and cash equivalents
Demand deposits
7,652,700
114,059,748
42,000,000
156,059,748
2009
USD
34,002,791
73,153,581
107,156,372
1,699,212
108,855,584
2010
USD
24,495,024
69,989,711
94,484,735
7,204,554
101,689,289
The time deposits, which are substantially denominated in US Dollars, are made for varying periods of time between one month to
two years depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.
14. IssUed sHare CaPItaL
Shares of USD 1 each
15. dIVIdends PaId
Authorised, issued and fully paid
2010
USD
2009
USD
143,375,678
143,375,678
At a meeting held on 19 April 2010, the shareholders resolved to pay dividend of USD 0.02 per share amounting to USD 2,867,514
related to the year ended 31 December 2009 (2009: no dividend paid or proposed).
28
29
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
16. otHer LIaBILItIes
20. InVestment In sUBsIdIaIres
Accounts payable
Accrued expenses
17. Unearned CommIssIons
Opening balance
Commissions received
Commissions earned
18. net InsUranCe PremIUm reVenUe
Gross premiums
Change in unearned premiums
Gross earned premiums
Reinsurers’ share of insurance premiums
Reinsurers’ share of change in unearned premiums
Reinsurers’ share of gross earned premiums
19. InVestment InCome
Interest
Dividends
Gain on sale of available-for-sale investments
Loss on revaluation of held for trading investments
Impairment on available-for-sale investments (note 7)
Rental income, net
2010
USD
1,342,525
1,355,487
2,698,012
2010
USD
6,655,500
14,389,615
(13,268,394)
7,776,721
2010
USD
179,333,354
(20,164,075)
159,169,279
(68,012,218)
6,545,283
(61,466,935)
97,702,344
2010
USD
6,178,579
2,400,663
1,463,230
(42,060)
(1,280,060)
789,908
9,510,260
2009
USD
780,360
530,486
1,310,846
2009
USD
3,585,881
12,803,008
(9,733,389)
6,655,500
2009
USD
152,861,921
(4,495,323)
148,366,598
(59,240,408)
8,134,160
(51,106,248)
97,260,350
2009
USD
5,924,319
933,254
368,524
(1,109,941)
(526,290)
-
5,589,866
International General Insurance
Company Limited
International General Insurance
Underwriting
North Star Underwriting Limited1
Specialty Malls Investment Co.2
Country of
incorporation
Bermuda
Jordan
United Kingdom
Jordan
2010
100%
100%
100%
100%
Ownership
2009
100%
100%
100%
100%
1. During the previous year, an employment and contractual dispute arose between Mr Stephen Bishop and North Star Underwriting
Limited (previously known as SR Bishop Underwriting Limited) during August 2009. This culminated in Mr Bishop and Skalama
issuing legal proceedings against the Company, North Star Underwriting Limited and three directors of the Board of North Star in
the English court in October 2009.
Based on legal advice received to date, the law suit was settled in March 2011 with no significant financial impact on the Group.
2. In 2009, the Group acquired 100% of the ownership of Specialty Malls Investment Company, a real estate company in Amman
owning and managing a commercial building treated as “investment property” as per IAS 40. The fair value of the identifiable
assets and liabilities of Specialty Malls Investment Company as at the date of acquisition were:
Premises and equipment
Investment property
Cash and bank balances
Other liabilities
Purchase consideration
Fair value on acquisition
USD
1,826,810
20,338,628
93,891
(3,117)
22,256,212
22,256,212
The building has generated rental income during the year.
As at 31 December 2010, financial statements of the subsidiary are consolidated with the Group’s financial statements.
21. CommItments and ContInGenCIes
As of the date of the financial statements, the Company is contingently liable for the following:
•
Letters of Guarantee amounting to USD 12,225 (31 December 2009: USD 7,125) to the order of the Jordanian Ministry of Trade
and Industry with margin of USD 1,222 (31 December 2009: USD 713).
•
Letters of Credit amounting to USD 30,030,741 to the order of reinsurance companies (31 December 2009: USD 42,883,867).
30
31
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
22. related party transactions
Related parties represent major shareholders, associates, directors and key management personnel of the Group and entities
controlled, jointly controlled or significantly influenced by such parties, Pricing policies and terms of these transactions are approved
by the Group’s management.
Transactions with related parties included in the consolidated financial statements are as follows:
consolidated statement of financial position
2010
USD
2009
USD
Purchase of subsidiary (note 20)
-
22,256,212
consolidated statement of income
2010
USD
2009
USD
Commission paid
63,054
50,332
Compensation of key management personnel of the Group, consisting of salaries and benefits was USD 3,386,601 (31 December
2009: USD 2,651,913).
23. rIsK manaGement
The risks faced by the Group 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 Group only issues
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 Group underwrites mainly fire and accident and marine
risks. These are regarded as insurance contracts as claims are normally advised. 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 Group has mostly
underwritten policies for properties containing fire detection equipment.
To minimise its exposure to significant losses from reinsurer insolvencies, the Group evaluates the financial condition of its reinsurers.
The Group only deals with reinsurers approved by the board of directors, which are generally rated A or above by international rating
agencies.
Financial risk
The Group’s principal financial instruments are financial assets available-for-sale, financial assets held for trading, financial assets held
to maturity, receivables arising from insurance and reinsurance contracts, trading investments and cash and cash equivalents.
The Group does not enter into derivative transactions.
The main risks arising from the Group’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 Group is exposed to interest rate risk on certain of its investments and cash and cash equivalents. The Group 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.
Details of maturities of the major classes of financial assets are as follows:
2010
Less than
1 year
1 to 5
years
More than
5 years
Non-interest
bearing items
Total
Effective Interest
Rate on interest
bearing assets
USD
USD
USD
USD
USD
(%)
Trading investments
-
-
-
1,679,234
1,679,234
Available-for-sale investments
12,553,656 43,472,492
15,821,051
76,781,879 148,629,078
Held to maturity investments
-
1,690,141
3,000,000
Cash and short term deposits
96,245,129
5,444,160
-
-
4,690,141
- 101,689,289
108,798,785 50,606,793
18,821,051
78,461,113 256,687,742
2009
Trading investments
-
-
Available-for-sale investments
2,707,380 56,235,842
Held to maturity investments
-
1,690,141
Cash and short term deposits
108,855,584
-
111,562,964 57,925,983
-
-
-
-
-
1,830,525
1,830,525
61,192,399 120,135,621
-
1,690,141
- 108,855,584
63,022,924 232,511,871
5.23
5.98
2.20
4.77
9.50
2.55
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.
There is no significant difference between contractual repricing or maturity dates.
The following table demonstrates the sensitivity of consolidated statement of income to reasonably possible changes in interest rates,
with all other variables held constant.
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, 59%, 19%, 4% and 18% of the Group’s insurance risk relates to policies written in the Middle/Far East and Asia,
Europe, USA and the rest of the world respectively. (2009: 38%, 19%, 15% and 28% respectively)
reinsurance risk
In common with other insurance companies, in order to minimise financial exposure arising from large claims, the Group, 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.
32
The sensitivity of the consolidated statement of income is the effect of the assumed changes in interest rates on the Group’s profit for
the year, based on the floating rate financial assets and financial liabilities held at 31 December:
2010
2009
Increase/
decrease
in basis points
Effect on profit
for the year
+25
-50
+25
-50
USD
445,567
(891,134)
419,197
(838,994)
33
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
23. rIsK manaGement (continued)
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 since most of the Group’s
transactions are in US Dollars and consequently the Group does not hedge its foreign currency exposure.
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 Group, the maximum credit risk exposure to the Group is the carrying value
as disclosed in the consolidated statement of financial position.
The Group only enters into insurance and reinsurance contracts with recognised, credit worthy third parties. It is the Group’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 Group’s exposure to bad debts.
The Group portfolio is managed by the Vice-Chairman and CEO in accordance with the investment policy established by the board
of directors.
The Group’s bank balances are maintained with a range of international and local banks in accordance with limits set by the board of directors.
The following table provides an aging analysis of receivables arising from insurance and reinsurance contracts past due but not
impaired:
Neither past
due nor
impaired
Past due but not impaired
Up to
90 days
91 to
180 days
181 to
270 days
271 to
360 days
above
360 days
USD
USD
USD
USD
USD
Total
USD
31 december 2010
59,491,199
13,407,158
6,581,777
2,249,866
2,536,041
1,719,715
85,985,756
31 December 2009
65,792,501
9,891,422
4,620,417
8,270,366
4,759,999
995,833
94,330,538
The following table provides an aging analysis of trade receivables arising from Specialty Mall customers past due but not impaired:
Past due but not impaired
Neither past due nor
impaired
USD
647,737
Up to 90 days
USD
389,923
Total
USD
1,037,660
There are no significant concentrations of credit risk within the Group. The table below provides information regarding the credit risk
exposure of the Group by classifying assets according to the Group’s credit rating of counterparties:
31 december 2010
Neither past due nor impaired
Investment
grade
Non investment
grade
(satisfactory)
Non investment
grade
(un-satisfactory)
Past due
or impaired
Total
USD
USD
USD
USD
USD
2010
Financial assets available-for-sale
75,145,910
73,483,168
Financial assets held for trading
Financial assets held to maturity
-
3,000,000
Insurance receivables
Trade receivables
Reinsurers’ share of unearned premium
-
-
-
1,679,234
1,690,141
85,985,756
1,037,660
28,106,769
Reinsurers’ share of outstanding claims
27,246,336
7,509,902
Cash and bank balances
42,584,763
59,104,526
147,977,009
258,597,156
Neither past due nor impaired
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
148,629,078
1,679,234
4,690,141
85,985,756
1,037,660
28,106,769
34,756,238
101,689,289
406,574,165
Investment grade Non investment
grade
(satisfactory)
Non investment
grade
(un-satisfactory)
Past due
or impaired
USD
USD
USD
USD
Total
USD
2009
Financial assets available-for-sale
54,447,039
65,688,582
Financial assets held for trading
Financial assets held to maturity
Insurance receivables
Reinsurers’ share of unearned premium
-
-
-
-
1,830,525
1,690,141
94,330,538
21,561,486
Reinsurers’ share of outstanding claims
35,175,897
4,326,243
Cash and bank balances
66,153,710
42,701,874
155,776,646
232,129,389
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
120,135,621
1,830,525
1,690,141
94,330,538
21,561,486
39,502,140
108,855,584
387,906,035
For assets to be classified as ‘past due and impaired’ contractual payments are in arrears for more than 360 days and an impairment
adjustment is recorded in the consolidated statement of income for this. When the credit exposure is adequately secured, arrears more
than 360 days might still be classified as ‘past due but not impaired”, with no impairment adjustment recorded.
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 (other than those
arising from interest rate risk or currency risk), 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’s equity price risk exposure relates to financial assets whose values will fluctuate as a result of changes in market prices.
The following table demonstrates the sensitivity of the profit for the period and the cumulative changes in fair value to reasonably
possible changes in equity prices, with all other variables held constant. The effect of decreases in equity prices is expected to be
equal and opposite to the effect of the increases shown.
Change in
equity price
Effect on
equity
Effect on
profit
Change in
equity price
Effect on
equity
2010
2009
Effect on
profit
USD
USD
USD
USD
USD
USD
Amman Stock Exchange
Saudi Arabia
Dubai International Financial Exchange
Other quoted
5%
5%
5%
5%
472,882
480,134
1,205,183
-
-
-
909,834
83,962
5%
5%
5%
5%
459,050
749,931
455,109
511,484
-
-
-
91,526
The Group also has unquoted investments carried at cost where the impact of changes in equity prices will only be reflected when the
investment is sold or deemed to be impaired, when the consolidated statement of income will be impacted.
The Group limits market risk by maintaining a diversified portfolio and by monitoring of developments in equity markets.
Liquidity risk
Liquidity risk is the risk that the Group 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.
All liabilities are non-interest bearing liabilities.
34
35
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
23. rIsK manaGement (continued)
Maturity analysis of assets and liabilities
The table below summarizes the maturity profile of the company’s financial liabilities at 31 December based on contractual undiscounted
payments:
The table below shows analysis of assets and liabilities analysed according to when they are expected to be recovered or settled:
2010
Insurance reserves
Other liabilities
Reinsurance payable
Reinsurance deposits
Unearned commissions
total liabilities
2009
Insurance reserves
Other liabilities
Reinsurance payable
Reinsurance deposits
Unearned commissions
total liabilities
Less than
one year
USD
More than
one year
USD
No term
USD
Total
USD
2010
194,596,835
64,865,612
2,698,012
31,083,276
-
-
-
-
5,832,541
1,944,180
234,210,664
66,809,792
165,363,926
69,856,848
1,310,846
24,755,439
-
-
-
17,318,875
4,991,625
1,663,875
196,421,836
88,839,598
-
-
-
-
-
-
-
-
-
-
-
-
259,462,447
2,698,012
31,083,276
-
7,776,721
301,020,456
235,220,774
1,310,846
24,755,439
17,318,875
6,655,500
285,261,434
assets
Premises and equipment
Intangible assets
Investment in associated companies
Investment property
Investments
Deferred policy acquisition costs
Insurance receivables
Trade receivables
Other assets
Reinsurers’ share of insurance reserves
Cash and bank balances
totaL assets
eQUItY and LIaBILItIes
Equity
Issued share capital
Foreign currency translation reserve
Cumulative changes in fair values of
investments
Retained earnings
total equity
Liabilities
Insurance reserves
Other liabilities
Reinsurance payable
Reinsurance deposits
Unearned commissions
Total liabilities
totaL eQUItY and LIaBILItIes
Less than
one year
USD
-
-
-
-
12,553,656
19,297,853
84,266,041
1,037,660
12,185,890
47,147,255
96,245,129
More than
one year
USD
3,735,073
298,990
11,280,888
-
63,983,684
6,432,617
1,719,715
-
-
15,715,752
5,444,160
No term
USD
-
-
-
28,996,126
78,461,113
-
-
-
-
-
-
Total
USD
3,735,073
298,990
11,280,888
28,996,126
154,998,453
25,730,470
85,985,756
1,037,660
12,185,890
62,863,007
101,689,289
272,733,484
108,610,879
107,457,239
488,801,602
-
-
-
-
-
-
-
-
-
-
143,375,678
143,375,678
(269,090)
(269,090)
6,576,750
6,576,750
38,097,808
38,097,808
187,781,146
187,781,146
194,596,835
64,865,612
2,698,012
31,083,276
5,832,541
234,210,664
234,210,664
-
-
1,944,180
66,809,792
66,809,792
-
-
-
-
-
259,462,447
2,698,012
31,083,276
7,776,721
301,020,456
187,781,146
488,801,602
36
37
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
International General Insurance Holdings Limited | fInanCIaL statements
notes to tHe ConsoLIdated fInanCIaL statements
AT 31 DeceMBer 2010
23. rIsK manaGement (continued)
2009
assets
Premises and equipment
Intangible assets
Investment in associated companies
Investment property
Investments
Deferred policy acquisition costs
Insurance receivables
Other assets
Cash and bank balances
totaL assets
eQUItY and LIaBILItIes
Equity
Issued share capital
Foreign currency translation reserve
Cumulative changes in fair values of investments
Retained earnings
total equity
Liabilities
Insurance reserves
Other liabilities
Reinsurance payable
Reinsurance deposits
Unearned commissions
total liabilities
Less than
one year
USD
More than
one year
No term
USD
USD
-
-
-
-
3,720,305
475,438
11,032,729
-
-
-
-
28,672,789
Total
USD
3,720,305
475,438
11,032,729
28,672,789
3,683,154
43,782,095
76,191,038
123,656,287
Capital management
The Group manages its capital by ‘Enterprise Risk Management’ techniques, using a dynamic financial analysis model. The Asset
Liability match is reviewed and monitored on regular basis to maintain a strong credit rating and healthy capital adequacy ratios to
support its business objectives and maximise shareholders’ value.
Adjustments to capital levels are made in light of changes in market conditions and risk characteristics of the Group’s activities.
Fair value
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either
Level 3:
directly or indirectly; and
techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable
market data.
Reinsurers’ share of insurance reserves
45,807,726
15,255,900
14,715,250
94,330,538
4,778,040
5,288,000
-
-
108,855,584
-
272,170,292
79,554,467
104,863,827
-
-
-
-
-
20,003,250
94,330,538
4,778,040
61,063,626
108,855,584
456,588,586
-
-
-
-
-
-
-
-
-
-
143,375,678
143,375,678
(208,050)
4,389,708
(208,050)
4,389,708
23,769,816
23,769,816
171,327,152
171,327,152
Held for trading
Available-for-sale
Held for trading
Available-for-sale
31 December 2010
Level 1
USD
Level 2
USD
Total
USD
1,679,234
138,831,026
140,510,260
-
-
-
1,679,234
138,831,026
140,510,260
31 December 2009
Level 1
USD
Level 2
USD
Total
USD
1,830,525
110,337,569
112,168,094
-
-
-
1,830,525
110,337,569
112,168,094
165,363,926
69,856,848
1,310,846
24,755,439
17,318,875
4,991,625
-
-
-
1,663,875
213,740,711
71,520,723
-
-
-
-
-
-
235,220,774
1,310,846
24,755,439
17,318,875
6,655,500
285,261,434
456,588,586
There were no transfers between Level 1 and 2 during the year or in either the years ended 31 December 2010 or 31 December 2009.
There are no level 3 investments.
Unquoted investments amounting to USD 14,488,193 (2009: USD 9,798,052) have been carried at cost in the absence of market
price or other appropriate method from which to derive a fair value.
totaL eQUItY and LIaBILItIes
213,740,711
71,520,723
171,327,152
38
39
International General Insurance Holdings Limited | CorPorate offICers
IGI OFFICERS
mr. Wasef Jabsheh,
Vice Chairman and Chief Executive Officer,
E-mail: wsj@iginsure.com
mr. Peter smith,
Chief Executive Officer,
International General Insurance Company (UK) Ltd
E-mail: peter.smith@iginsure.com
mr. Waleed Jabsheh,
Executive Vice President,
E-mail: waleedjabsheh@iginsure.com
mr. soumitra Biswas,
Senior Vice President, Finance
E-mail: soumitrabiswas@iginsure.com
ms. rachel Butler,
Senior Vice President, Operations
E-mail: rachelbutler@iginsure.com
mr. Ben Holborow,
Vice President, Energy
E-mail: benholborow@iginsure.com
mr. simon Levy,
Vice President, Reinsurance
E-mail: simon.levy@iginsure.com
mr. andrew Wood,
Underwriter, Financial Institutions
E-mail: awood@northstaruw.com
mr. darren shearwood,
Underwriter, General Aviation
E-mail: dshearwood@northstaruw.com
mr. Huib Van Zanten,
Underwriter, Casualty
E-mail: huib.vanzanten@iginsure.com
mr. mark Cockayne,
Underwriter, Engineering
E-mail: mark.cockayne@iginsure.com
mr. rod smith,
Senior Executive Officer,
International General Insurance Company (Dubai) Ltd
E-mail: rodsmith@iginsure.com
40
41
International General Insurance Holdings Limited | IGI offICes
International General Insurance Holdings
Limited
address:
International General Insurance
Company Limited
address:
P.o. Box 506646, dubai,
United Arab Emirates
Dubai International Financial Centre,
Unit 1, Level 1, Gate Village 1,
Dubai, UAE
Telephone: +971 4 363 3520
+971 4 425 5675
Facsimile:
IGI Underwriting Ltd. Co.
address:
P.o. Box 941428
Amman 11194, Jordan
74 Abdel Hamid Sharaf Street
Shmeisani, Amman
Jordan
Telephone: +962 6 562 2009
+962 6 566 2085
Facsimile:
Regulated by the Jordan Insurance Commission
44 Church street
Hamilton HM 12
Bermuda
Telephone: +1 (441) 295 3688
+1 (441) 295 2584
Facsimile:
Regulated by the Bermuda Monetary Authority
International General Insurance Company
(UK) Ltd.
address:
15-18 Lime street
London EC3M 7AN
England
Telephone: +44 (0) 20 7220 0100
+44 (0) 20 7220 0101
Facsimile:
Regulated by the UK Financial Services Authority
north star Underwriting Limited
address:
15-18 Lime street
London EC3M 7AN
England
Telephone: +44 (0) 20 7220 0100
+44 (0) 20 7220 0101
Facsimile:
Regulated by the UK Financial Services Authority
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