Contents
About IGIH
Board of Directors
Letter from the Board of Directors
Financial Statements
IGI Offices
2
4
6
8
50
About IGIH
International General Insurance Holdings Limited (IGIH) is
registered in the Dubai International Financial Centre (DIFC)
with operations in Bermuda, Jordan, Malaysia and a wholly
owned subsidiary in the U.K.
IGI Bermuda is a class 3B (re)insurer regulated by the
Bermuda Monetary Authority (BMA). This subsidiary is the
principal underwriting entity for the Group. The Group also
has a branch in Labuan, Malaysia, registered as a first-tier
offshore reinsurer.
Both Bermuda and UK subsidiaries are rated A- (Excellent)
by A.M. Best Company Inc.
IGI Group of companies underwrites a worldwide portfolio
of energy, property, marine, engineering, casualty, financial
institutions, general aviation, ports & terminals, political
violence and non-proportional reinsurance treaty business
with the main geographical focus being the Afro-Asian
markets.
IGIH has assets in excess of US$ 600 million as at 31st
December, 2012.
4 International General Insurance Holdings Limited | BoARd of dIRecToRS
International General Insurance Holdings Limited | BoARd of dIRecToRS 5
Board of
directors
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)
Al Sayyida Rawan Al Said
MD and Group CE of ONIC Holding
6 International General Insurance Holdings Limited | LeTTeR fRoM THe BoARd of dIRecToRS
International General Insurance Holdings Limited
LeTTeR fRoM THe BoARd of dIRecToRS
7
Letter from the Board of Directors
It gives us pleasure to include herewith the full Report on our 2012 performance. The past year was one where IGI’s underwriting
strategy and international reach brought its own rewards. While 2012 was met by the residual effects from the massive insurance
market losses incurred in 2011, IGI was in a prime position to take advantage of the market situation and subsequent increase in
prices.
Worldwide insured catastrophe losses in 2012 amounted to an estimated $65 billion in 2012 compared to $119 billion in 2011. Of the
insurance market’s 2012 losses, 90% were wrought from US catastrophes – mainly due to superstorm Sandy and an extreme drought
that devastated crop yields. Although losses were significantly less compared to the extraordinary year of 2011, 2012’s catastrophe
losses still stood out as above the 10-year industry average of $50 billion.
While the Afro-Asian market remained the backbone of our revenues, we also managed to expand out more confidently into Australasia,
leveraging our comparatively greater capacity to move into a hardening market when others were forced to reduce their capacity.
That region, alongside Europe and MENA, remained the main source of our healthy growth in underwriting profits, as we continue to
capture new business in our core geographic areas.
Given that the ongoing Arab Spring has continued to hold the geopolitical landscape hostage, we have navigated adeptly in the face
of political challenges presented, to seek new opportunities. Meticulous market research and portfolio review was behind our decision
to introduce Political Violence as a new line of business. This is a testament to our tried and tested philosophy of building on our
specialist knowledge to add niche underwriting business lines.
Again, we achieved a record year beating our bottom line forecasts by keeping our eye on our core geographic areas, while adding
underwriting capabilities and growing our book of business in Asia Pacific and Europe. Although we continue to face low investment
returns, our underwriting profits have more than compensated our investment income shortfalls.
2012 performed strongly as the following financials attest. This year the Company recorded a compounded annual growth rate of
43.2% on gross premiums from 2002 – 2012.
Our conservative actuarial practices and strict risk parameters have continued to keep IGI protected. As a result of a frequent review
of our insurance portfolio and risk appetite, we have adjusted our exposure in certain parts of our marine portfolio and we will continue
to monitor this line of business in the future, as generally, market conditions remain challenging.
We continue to assess the geopolitical risks associated with our operations in the region, yet, we see the silver lining in increased
MENA government spending in construction and energy. This investment boon has and will continue to filter into our insurance
portfolio.
Highlights for the year 2012 include the following:
• Gross written premium in 2012 was US$ 225.6 million, an increase of 11% compared to US$ 202.8 million for 2011.
• Underwriting profit grew to US $36.8 million for 2012, an increase of 9% from US$ 33.6 million in 2011.
• Investment income for the year stood at $ 7.5 million, an increase of 3% compared to US$ 7.3 million for 2011.
• The combined ratio for 2012 was 88% compared to 87% for 2011.
• The Net Profit amounted to US$ 25.3 million for 2012 against US$ 23.2 million for 2011, an increase of 9%.
• Total assets were US$ 608.9 million at the end of 2012, an increase of 8% compared to US$ 563.9 million as of 31st December,
2011.
• Shareholders’ equity rose to US$ 232.1 million at the end of 2012, up 13% compared to US$ 205.4 million as of 31st December,
2011.
In conclusion, the year left us with record profits, at the same time increasing our reserves and solidifying our balance sheet. This in
turn allowed the Board to give an interim dividend in July 2012 and further increase the dividend from US¢ 4 per share in 2011 to US¢
7 per share for fiscal year 2012.
IGI will push into 2013, confident in the knowledge that it took the right steps over the last 12 months, consolidating core geographical
and business lines, but importantly diversifying these by a continued expansion into Europe and the Far East. Our strong position
leaves us well-placed to respond to any challenges posed by the insurance industry in the coming year, while enabling us to enter
new markets and niche business lines. We aim to build on these gains and performances going forward, in order to cement our pole
position as a leading regional niche underwriter.
As always, we would like to extend a thank you to all our clients and producers for their unremitting support throughout 2012. We
would also like to thank all our employees for their significant effort and contribution this year. We look forward to working together
in 2013 to fulfill the visions and ambitions of the Company and to further promote our position as the lead underwriting operation in
the region.
8 International General Insurance Holdings Limited
AUdIToRS’ RePoRT
9
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 AUdIToR’S RePoRT To THe SHAReHoLdeRS of
INTeRNATIoNAL GeNeRAL INSURANce HoLdINGS Ltd
Report on the consolidated financial statements
We have audited the accompanying consolidated financial statements of International General Insurance Holdings Ltd (“the Company”)
and its subsidiaries (together “the Group”), which comprise the consolidated statement of financial position as at 31 December 2012
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 consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards and the applicable provisions of the Companies Law pursuant to DIFC Law No. 2 of 2009,
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 auditor’s judgement, including the assessment of the risks of material misstatement of the
consolidated 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 consolidated 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 consolidated 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 at 31
December 2012 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. 2 of 2009. 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 Law No. 2 of 2009
have occurred during the year which would have had a material effect on the business of the Company or on its financial position.
20 March 2013
Dubai, United Arab Emirates
10 International General Insurance Holdings Limited
Financial Results
11
12
International General Insurance Holdings Limited
coNSoLIdATed STATeMeNT of fINANcIAL PoSITIoN
AT 31 DeceMBer 2012
13
ASSETS
Premises and equipment
Intangible assets
Investment in associated companies
Investment properties
Investments
Deferred policy acquisition costs
Insurance receivables
Trade receivables
Other assets
Deferred tax assets
Reinsurance assets
Cash and bank balances
ToTAL ASSeTS
eQUITY ANd LIABILITIeS
equity
Issued share capital
Foreign currency translation reserve
Cumulative changes in fair values
Retained earnings
Total equity
Liabilities
Insurance contracts liabilities
Other liabilities
Insurance payables
Unearned commissions
Total liabilities
ToTAL eQUITY ANd LIABILITIeS
Notes
2012
USD
2011
USD
3
4
5
6
7
8
9
10
11
23
13
14
3,525,920
250,498
12,228,572
29,339,762
3,191,687
210,238
11,702,917
29,163,154
151,216,442
134,452,231
30,754,592
97,742,261
137,982
2,167,665
841,900
86,177,127
194,500,512
608,883,233
29,451,946
100,402,233
236,294
2,552,132
118,532
94,332,057
158,083,737
563,897,158
15
143,375,678
143,375,678
(230,995)
15,325,027
73,671,131
(286,652)
5,326,279
57,018,481
232,140,841
205,433,786
12
17
18
19
344,808,524
308,536,375
3,649,283
19,567,472
8,717,113
376,742,392
608,883,233
2,885,594
37,827,012
9,214,391
358,463,372
563,897,158
The consolidated financial statements were authorised for issue in accordance with a resolution of the Board of Directors on 19 March 2013.
14 International General Insurance Holdings Limited
coNSoLIdATed INcoMe STATeMeNT
For The yeAr eNDeD 31 DeceMBer 2012
International General Insurance Holdings Limited
coNSoLIdATed STATeMeNT of coMPReHeNSIVe INcoMe
For The yeAr eNDeD 31 DeceMBer 2012
15
2012
USD
2011
USD
Profit for the year
25,255,190
23,221,943
other comprehensive income
Fair value changes
Currency translation differences
other comprehensive income for the year
Total comprehensive income for the year
9,998,748
55,657
10,054,405
35,309,595
(1,250,471)
(17,562)
(1,268,033)
21,953,910
Gross written 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
Net premiums earned
Claims
Reinsurers’ share of claims
Commissions earned
Policy acquisition costs
Net underwriting result
Net investment income
Share of profit from associated companies
General and administrative expenses
Other income
Loss on exchange
Profit before tax
Tax credit on subsidiary losses
PRofIT foR THe YeAR
Notes
2012
USD
2011
USD
12 (a)
225,569,256
12 (a)
12 (a)
(19,265,207)
206,304,049
(49,760,815)
(8,100,260)
12 (a)
(57,861,075)
148,442,974
202,786,867
(17,544,900)
185,241,967
(69,745,208)
3,779,284
(65,965,924)
119,276,043
12 (b)
12 (b)
19
8
20
5
(111,182,933)
(110,425,705)
28,746,306
14,361,470
44,590,694
15,782,822
(43,579,118)
(35,586,760)
36,788,699
33,637,094
6,937,296
525,655
6,910,012
552,864
(19,739,392)
(18,605,669)
50,700
(9,778)
796,743
(187,633)
24,553,180
23,103,411
23
702,010
118,532
25,255,190
23,221,943
16 International General Insurance Holdings Limited
coNSoLIdATed STATeMeNT of cASH fLoWS
For The yeAr eNDeD 31 DeceMBer 2012
International General Insurance Holdings Limited
coNSoLIdATed STATeMeNTS of cHANGe IN eQUITY
For The yeAr eNDeD 31 DeceMBer 2012
17
Issued
share
capital
Foreign
currency
translation
reserve
Cumulative
change in
fair value of
investments
Retained
earnings
Total
USD
USD
USD
USD
USD
At 1 January 2012
Profit for the year
Other comprehensive income
Total comprehensive income
Dividends paid during the year (note 16)
143,375,678
(286,652)
5,326,279
57,018,481
205,433,786
-
-
-
-
-
55,657
55,657
-
-
25,255,190
25,255,190
9,998,748
-
10,054,405
9,998,748
25,255,190
35,309,595
-
(8,602,540)
(8,602,540)
At 31 december 2012
143,375,678
(230,995)
15,325,027
73,671,131
232,140,841
At 1 January 2011
Profit for the year
Other comprehensive income
Total comprehensive income
Dividends paid during the year (note 16)
143,375,678
(269,090)
6,576,750
38,097,808
187,781,146
-
-
-
-
-
(17,562)
(17,562)
-
-
23,221,943
23,221,943
(1,250,471)
-
(1,268,033)
(1,250,471)
23,221,943
21,953,910
-
(4,301,270)
(4,301,270)
At 31 december 2011
143,375,678
(286,652)
5,326,279
57,018,481
205,433,786
oPeRATING AcTIVITIeS
Profit before tax
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 vehicle
Loss on revaluation of held for trading investments
Dividends and interest income
Share of profit from associated companies
Reinsurance assets
Insurance contracts liabilities
Deferred policy acquisition costs
Insurance receivables
Trade receivables
Other assets
Unearned commission
Insurance payables
Other liabilities
Notes
2012
USD
2011
USD
24,553,180
23,103,411
3,4
20
20
20
20
5
785,420
(366,140)
900,000
1,231,640
(6,127)
63,782
(8,073,959)
(525,655)
18,562,141
8,154,930
36,272,149
(1,302,646)
1,759,972
98,312
418,766
(497,278)
(18,259,540)
763,689
856,714
(170,757)
900,000
537,220
(8,206)
153,532
(7,531,438)
(552,864)
17,287,612
(25,180,233)
49,073,928
(3,721,476)
(15,541,840)
801,366
3,327,379
1,437,670
6,969,099
187,582
Net cash from operating activities
45,970,495
34,641,087
INVeSTING AcTIVITIeS
Purchase of premises and equipment
Proceeds from sale of vehicle
Purchase of intangible assets
Purchase of available-for-sale investments
Proceeds from maturity of held to maturity investments
Proceeds from sale of available-for-sale investments
Purchase of investment properties
Dividends received from associated companies
Matured time deposits – long term
Dividends and interest income
Net cash from 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
3
4
5
16
14
(1,009,428)
(216,909)
8,454
(152,812)
8,206
(7,667)
(24,705,631)
(17,578,443)
169,492
16,841,394
(176,608)
-
5,444,160
8,073,959
4,492,980
(8,602,540)
(8,602,540)
41,860,935
152,639,577
194,500,512
-
36,354,199
(167,028)
130,835
1,760,394
7,531,438
27,815,025
(4,301,270)
(4,301,270)
58,154,842
94,484,735
152,639,577
18 International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
19
1. AcTIVITIeS
2. BASIS of PRePARATIoN (continued)
International General Insurance Holdings Ltd (“the Company”) is incorporated as a company limited by shares under the Companies
Law, DIFC Law No. 2 of 2009 on 7 May 2006. The Company’s registered office is at unit 1, Gate Village 01, P. O. Box 506646,
International Financial Centre, Dubai.
changes in accounting policies
The accounting policies adopted in the preparation of the consolidated financial statements are consistent with those of the previous
financial year, except for the following amended IFRS effective as of 1 January 2012:
The Company and its subsidiaries (together “the Group”) operate in the United Arab Emirates, Bermuda, United Kingdom, Jordan
and Malaysia.
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.
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.
Basis of consolidation
The financial statements of the subsidiaries are prepared for the same reporting year as the Group, using consistent accounting
policies.
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.
The Group has the following subsidiaries:
Country of
incorporation
Activity
International General Insurance
Underwriting
Jordan
Underwriting agency
Ownership
2012
100%
2011
100%
North Star Underwriting Limited
United Kingdom
Underwriting agency
100%
100%
International General Insurance Company
Ltd.
The following entities are wholly owned by
the subsidiary International General Insurance
company Ltd. Bermuda
International General Insurance Company
Ltd. Labuan Branch
International General Insurance Company
(UK) Limited
Bermuda
Reinsurance and insurance
100%
100%
Malaysia
Reinsurance and insurance
100%
100%
United Kingdom
Reinsurance and insurance
100%
100%
International General Insurance Company
Dubai Ltd.
United Arab
Emirates
Insurance intermediation
and insurance management
100%
100%
Specialty Malls Investment Co.*
Jordan
Real estate properties
development and lease
100%
100%
* During 2012, the ownership of 100% of equity shares of Specialty Malls Investments co. was transferred from the subsidiary International
General Insurance Underwriting company - Jordan to the subsidiary International General Insurance company Ltd. Bermuda.
IAS 12 Income Taxes (Amendment) – Deferred Taxes: recovery of Underlying Assets
The amendment clarified the determination of deferred tax on investment property measured at fair value and introduces a rebuttable
presumption that deferred tax on investment property measured using the fair value model in IAS 40 should be determined on the
basis that its carrying amount will be recovered through sale. It includes the requirement that deferred tax on non-depreciable assets
that are measured using the revaluation model in IAS 16 should always be measured on a sale basis. The amendment is effective for
annual periods beginning on or after 1 January 2012 and there has been no effect on the Group’s financial position, performance or
its disclosures.
IFrS 1 First-Time Adoption of International Financial reporting Standards (Amendment) – Severe hyperinflation and removal of
Fixed Dates for First-Time Adopters
The IASB provided guidance on how an entity should resume presenting IFRS financial statements when its functional currency ceases
to be subject to hyperinflation. The amendment is effective for annual periods beginning on or after 1 July 2011. The amendment had
no impact to the Group.
IFrS 7 Financial Instruments: Disclosures — enhanced Derecognition Disclosure requirements
The amendment requires additional disclosure about financial assets that have been transferred but not derecognised to enable the
user of the Group’s financial statements to understand the relationship with those assets that have not been derecognised and their
associated liabilities. In addition, the amendment requires disclosures about the entity’s continuing involvement in derecognised assets
to enable the users to evaluate the nature of, and risks associated with, such involvement. The amendment is effective for annual
periods beginning on or after 1 July 2011. The Group has no assets with these characteristics so there has been no effect on the
presentation of the consolidated financial statements.
Standards and interpretations issued at 31 December 2012 but not yet effective
Standards and interpretations issued but not yet effective up to the date of issuance of the Group’s financial statements are listed below.
This listing of standards and interpretations issued are those that the Group reasonably expects to have an impact on disclosures,
financial position or performance when applied at a future date. The Group intends to adopt these standards when they become
effective.
IAS 1 Financial Statement Presentation – Presentation of Items of other comprehensive Income
The amendments to IAS 1 change the grouping of items presented in other comprehensive income (OCI). Items that could be
reclassified (or ‘recycled’) to profit or loss at a future point in time (for example, upon derecognition or settlement) would be presented
separately from items that will never be reclassified. The amendment affects presentation only and has no impact on the Group’s
financial position or performance. The amendment becomes effective for annual periods beginning on or after 1 July 2012.
IAS 19 employee Benefits (revised)
The IASB has issued numerous amendments to IAS 19. These range from fundamental changes such as removing the corridor
mechanism and the concept of expected returns on plan assets to simple clarifications and re-wording. The Group does not expect
the amendments to have any impact on its financial position or performance. The amendment becomes effective for annual periods
beginning on or after 1 January 2013.
IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)
As a consequence of the new IFRS 11 and IFRS 12, IAS 28 has been renamed IAS 28 Investments in Associates and Joint Ventures,
and describes the application of the equity method to investments in joint ventures in addition to associates. The amendment becomes
effective for annual periods beginning on or after 1 January 2013.
IAS 32 offsetting Financial Assets and Financial Liabilities — Amendments to IAS 32
These amendments clarify the meaning of “currently has a legally enforceable right to set-off”. The amendments also clarify the
application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement
mechanisms that are not simultaneous. These amendments are not expected to impact the Group’s financial position or performance
and become effective for annual periods beginning on or after 1 January 2014.
IFrS 1 Government Loans – Amendments to IFrS 1
These amendments require first-time adopters to apply the requirements of IAS 20 Accounting for Government Grants and Disclosure
of Government Assistance, prospectively to government loans existing at the date of transition to IFRS. Entities may choose to apply
the requirements of IFRS 9 (or IAS 39, as applicable) and IAS 20 to government loans retrospectively if the information needed to do so
had been obtained at the time of initially accounting for that loan. The exception would give first-time adopters relief from retrospective
measurement of government loans with a below-market rate of interest. The amendment is effective for annual periods on or after
1 January 2013. The amendment has no impact on the Group.
20 International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
21
2. BASIS of PRePARATIoN (continued)
changes in accounting policies (continued)
2. BASIS of PRePARATIoN (continued)
changes in accounting policies (continued)
IFrS 7 Disclosures — offsetting Financial Assets and Financial Liabilities — Amendments to IFrS 7
These amendments require an entity to disclose information about rights to set-off and related arrangements (e.g., collateral
agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an
entity’s financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with
IAS 32. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement
or similar agreement, irrespective of whether they are set off in accordance with IAS 32. These amendments will not impact the
Group’s financial position or performance and become effective for annual periods beginning on or after 1 January 2013.
Financial Instruments: Presentation.
The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar
agreement, irrespective of whether they are set off in accordance with IAS 32. These amendments will not impact the Group’s financial
position or performance and become effective for annual periods beginning on or after 1 January 2013.
IFrS 9 Financial Instruments: classification and Measurement
IFRS 9, as issued, reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies to classification and measurement
of financial assets and financial liabilities as defined in IAS 39. The standard was initially effective for annual periods beginning on or
after 1 January 2013, but amendments to IFRS 9 mandatory effective date of IFRS 9 and transition disclosures, issued in December
2011, moved the mandatory effective date to 1 January 2015. In subsequent phases, the IASB will address hedge accounting and
impairment of financial assets. The adoption of the first phase of IFRS 9 will have an effect on the classification and measurement
of the Group’s financial assets, but will not have an impact on classification and measurements of financial liabilities. The Group will
quantify the effect in conjunction with the other phases, when the final standard including all phases is issued.
IFrS 10 consolidated Financial Statements
IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for
consolidated financial statements. It also includes the issues raised in SIC-12 Consolidation — Special Purpose Entities. IFRS 10
establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10
will require management to exercise significant judgement to determine which entities are controlled, and therefore, are required to be
consolidated by a parent, compared with the requirements that were in IAS 27. This standard becomes effective for annual periods
beginning on or after 1 January 2013.
IFrS 11 Joint Arrangements
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities — Non-monetary Contributions by Ventures.
IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet
the definition of a joint venture must be accounted for using the equity method. This standard becomes effective for annual period
beginning on or after 1 January 2013 and is to be applied retrospectively for joint arrangements held at the date of initial application.
IFrS 12 Disclosure of Interests in other entities
IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the
disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint
arrangements, associates and structured entities. A number of new disclosures are also required, but has no impact on the Group’s
financial position or performance. This standard becomes effective for annual periods beginning on or after 1 January 2013.
IFrS 13 Fair Value Measurement
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an
entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required
or permitted. The Group is currently assessing the impact that this standard will have on the financial position and performance, but
based on the preliminary analysis, no material impact is expected. This standard becomes effective for annual periods beginning on
or after 1 January 2013.
IAS 1 Presentation of Financial Statements
This improvement clarifies the difference between voluntary additional comparative information and the minimum required comparative
information. Generally, the minimum required comparative information is the previous period.
IAS 16 Property, Plant and equipment
This improvement clarifies that major spare parts and servicing equipment that meet the definition of property, plant and equipment
are not inventory.
IAS 32 Financial Instruments, Presentation
This improvement clarifies that income taxes arising from distributions to equity holders are accounted for in accordance with IAS 12
Income Taxes.
IAS 34 Interim Financial reporting
The amendment aligns the disclosure requirements for total segment assets with total segment liabilities in interim financial statements.
This clarification also ensures that interim disclosures are aligned with annual disclosures.
These improvements are effective for annual periods beginning on or after 1 January 2013.
Summary of significant accounting policies
revenue recognition
Gross premiums
Gross general insurance written premiums comprise the total premiums receivable for the whole period of cover provided by contracts
entered into during the accounting period. They are recognised on the date on which the policy commences. Premiums include
any adjustments arising in the accounting period for premiums receivable in respect of business written in prior accounting periods.
Rebates that form part of the premium rate, such as no-claim rebates, are deducted from the gross premium; others are recognised
as an expense. Premiums collected by intermediaries, but not yet received, are assessed based on estimates from underwriting or
past experience and are included in premiums written.
Unearned premiums are those proportions of premiums written in a year that relate to periods of risk after the reporting date. Unearned
premiums are calculated on a pro rata basis. The proportion attributable to subsequent periods is deferred as a provision for unearned
premiums.
reinsurance premiums
Gross general reinsurance premiums written comprise the total premiums payable for the whole cover provided by contracts entered
into the period and are recognised on the date on which the policy incepts.
Premiums include any adjustments arising in the accounting period in respect of reinsurance contracts incepting in prior accounting
periods.
Unearned reinsurance premiums are those proportions of premiums written in a year that relate to periods of risk after the reporting
date. Unearned reinsurance premiums are deferred over the term of the underlying direct insurance policies for risks-attaching
contracts and over the term of the reinsurance contract for losses occurring contracts.
commission income
Insurance and investment contract policyholders are charged for policy administration services, investment management services,
surrenders and other contract fees. These fees are recognised as revenue over the period in which the related services are performed.
If the fees are for services provided in future periods, then they are deferred and recognised over those future periods.
IFrIc 20 Stripping costs in the Production Phase of a Surface Mine
This interpretation applies to waste removal (stripping) costs incurred in surface mining activity, during the production phase of the
mine. The interpretation addresses the accounting for the benefit from the stripping activity. The interpretation is effective for annual
periods beginning on or after 1 January 2013. The new interpretation will not have an impact on the Group.
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.
Annual Improvements 2012 to IfRSs
These improvements will not have any impact on the Group, but include:
IFrS 1 First-time Adoption of International Financial reporting Standards:
This improvement clarifies that an entity that stopped applying IFRS in the past and chooses, or is required, to apply IFRS, has the
option to re-apply IFRS 1. If IFRS 1 is not re-applied, an entity must retrospectively restate its financial statements as if it had never
stopped applying IFRS.
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.
Policy acquisition costs
Policy acquisition costs represent commissions paid to intermediaries and other direct costs incurred in relation to the acquisition
and renewal of insurance contracts which are deferred and expense over the terms of the insurance contracts to which they relate as
premiums are earned.
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2. BASIS of PRePARATIoN (continued)
Summary of significant accounting policies (continued)
2. BASIS of PRePARATIoN (continued)
Summary of significant accounting policies (continued)
Liability adequacy test
At each 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 unearned
premiums (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 Group does not discount its liability for unpaid claims as substantially all claims are expected be paid within one year of the
statement of financial position date.
reinsurance
The Group cedes insurance risk in the normal course of business for all of its businesses. Reinsurance assets represent balances due
from reinsurance companies. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims
provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contract.
Reinsurance assets are reviewed for impairment at each reporting date, or more frequently, when an indication of impairment arises
during the reporting year. Impairment occurs when there is objective evidence as a result of an event that occurred after initial
recognition of the reinsurance asset that the Group may not receive all outstanding amounts due under the terms of the contract
and the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer. The impairment loss is
recorded in the consolidated statement of income.
Gains or losses on buying reinsurance are recognised in the consolidated statement of income immediately at the date of purchase
and are not amortised.
Ceded reinsurance arrangements do not relieve the Group from its obligations to policyholders.
The Group also assumes reinsurance risk in the normal course of business for life insurance and non-life insurance contracts where
applicable. Premiums and claims on assumed reinsurance are recognised as revenue or 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 estimated in a manner consistent with
the related 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.
Reinsurance contracts that do not transfer significant insurance risk are accounted for directly through the statement of financial
position. These are deposit assets or financial liabilities that are recognised based on the consideration paid or received less any
explicit identified premiums or fees to be retained by the reinsured.
Investment income on these contracts is accounted for using the effective interest rate method when accrued.
Interest income
Interest income included in investment income 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 income
Dividend revenue included in investment income is recognised when right to receive the payment is established.
Premises and equipment
Premises and equipment are stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on
a straight-line basis over the estimated useful lives using the following are the estimated useful lives (Note 3).
years
Office buildings
Office furniture
Computers
Equipment
Leasehold improvement
Vehicles
20
5
3
4
5
5
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future
economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the
difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated income statement
when the asset is derecognised.
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.
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 original effective interest rates.
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.
Impairment is recognised in the income statement. If, in a subsequent period, the amount of the impairment loss decreases, the carrying
value of the asset is increased to its recoverable amount. The amount of the reversal is recognised in the income statement except
for equity instruments classified as available for sale investments for which the reversal is recognized in the of other comprehensive
income.
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
The Group’s investment in its associate is accounted for using the equity method of accounting. An associate is an entity in which the
Group has significant influence and which is neither a subsidiary nor a joint venture.
Under the equity method, the investment in the associate is carried in the statement of financial position at cost plus post-acquisition
changes in the Group’s share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the
investment and is neither amortised nor individually tested for impairment.
The consolidated statement of income reflects the share of the results of operations of the associate. Where there has been a change
recognised directly in the equity of the associate, the Group recognises its share of any changes and discloses this, when applicable,
in the consolidated statement of changes in equity. Profits or losses resulting from transactions between the Group and the associate
are eliminated to the extent of the interest in the associate.
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2. BASIS of PRePARATIoN (continued)
Summary of significant accounting policies (continued)
2. BASIS of PRePARATIoN (continued)
Summary of significant accounting policies (continued)
The share of profit of the associate is shown on the face of the consolidated statement of income. This is profit attributable to equity
holders of the associate and, therefore, is profit after tax and non-controlling interests in the subsidiaries of the associates.
The financial statements of the associate are prepared for the same reporting period as the Group. Where necessary, adjustments are
made to bring its accounting policies in line with the Group’s.
After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on
the Group’s investment in associates. The Group determines at each reporting date, whether there is any objective evidence that the
investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between
the recoverable amount of the associate and its carrying value and recognises the amount in the ‘share of profit of an associate’ in
the consolidated income statement.
Upon loss of significant influence over the associate, the Group measures and recognises any remaining investment at its fair value.
Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the remaining
investment and proceeds from disposal is recognised in profit or loss.
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.
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.
Share based payment
A phantom share option plan linked to the value of an ordinary share of the Group as approved by the Board of directors has been
declared during 2011. The scheme is applicable to senior executives with more than 12 months service. The amount of bonus is
determined by reference to the increase in the book value of shares covered by the option. No shares are actually issued or transferred
to the option holder on the exercise of the option.
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.
The options vest equally over a span of 5 years from the grant date. The incentive amounts to the excess of book value on vesting date
over grant date with an additional 20% on the excess.
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.
Financial assets
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:
Insurance receivables
Insurance companies and intermediaries receivables are recognised when due and measured on initial recognition at the fair value
of the consideration received or receivable. Subsequent to initial recognition, insurance receivables are measured at amortised cost,
using the effective interest rate method. The carrying value of insurance receivables is reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be recoverable, with the impairment loss recorded in the consolidated
income statement.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include 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 consolidated income statement.
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.
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
Group. 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 consolidated statement of 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.
Taxation
current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to
the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted,
at the reporting date in the countries were the group operates and generates taxable income.
26 International General Insurance Holdings Limited
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2. BASIS of PRePARATIoN (continued)
Summary of significant accounting policies (continued)
2. BASIS of PRePARATIoN (continued)
Summary of significant accounting policies (continued)
Deferred tax
Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses,
to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry
forward of unused tax credit and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable
that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the
liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
Leasing
The Group has no finance lease.
The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement at the
inception date and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or
assets and the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement.
Group as a lessee
Finance leases that transfer to the Group substantially all of the risks and benefits incidental to ownership of the leased item, are
capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum
lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance cost in the consolidated
income statement.
Leased assets are depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain
ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease
term.
Leases that do not transfer to the Group substantially all the risks and benefits incidental to ownership of the leased items are
operating leases. Operating lease payments are recognised as an expense in the income statement on a straight line basis over the
lease term. Contingent rentals are recognised as an expense in the period in which they are incurred.
Group as a lessor
Leases in which the Group does not transfer substantially all of the risks and benefits of ownership of the asset are classified as
operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset
and recognised over the lease term on the same bases as rental income. Rental income from operating leases is recognised on a
straight-line basis over the term of lease.
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:
Operating lease commitments-group as lessor
The Group has entered into commercial property leases on its premises and equipment. The Group, as a lessor, has determined,
based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of
ownership of its property and so accounts for them as operating leases.
Impairment losses on available for sale investments
The Group treats available-for-sale equity investments as impaired when there has been a significant or prolonged decline in the fair
value below its cost or where other objective evidence of impairment exists. The determination of what is “significant” or “prolonged”
requires considerable judgement. Where fair values are not available, the recoverable amount of such investment is estimated to test
for impairment. In addition, the Group evaluates other factors, including normal volatility in share price for quoted equities and the
future cash flows and discount factors for unquoted equities.
Impairment losses on held-to-maturity investments
The Group reviews its individually significant held-to-maturity investments at each statement of financial position date to assess
whether an impairment loss should be recorded in the consolidated statement of income. In particular, management judgement is
required in the estimation of the amount and timing of future cash flows when determining the impairment loss. These estimates are
based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance.
Impairment losses on receivables
Receivables that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not
included in a collective assessment of impairment. This assessment of impairment requires judgment. In making this judgment, the
Company evaluates credit risk characteristics that consider past-due status being indicative of the inability to pay all amounts due as
per contractual terms.
Going concern
The Group’s management has made an assessment of the Group’s ability to continue as a going concern and is satisfied that the
Group has the resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any
material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Therefore, the financial
statements continue to be prepared on the going concern basis.
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.
Fair values
The fair value of financial instruments that are actively traded in organised 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.
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:
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.
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.
28 International General Insurance Holdings Limited
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3. PReMISeS ANd eQUIPMeNT
4. INTANGIBLe ASSeTS
Computer software / licenses
Office
building
Office
furniture
Computers Equipment
Leasehold
improvements
Vehicles
Work in
progress
Total
USD
USD
USD
USD
USD
USD
USD
USD
cost
At 1 January 2012
1,851,593
1,238,115
514,582
165,355
915,827
416,653
- 5,102,125
Additions
15,796
160,463
379,875
79,432
161,456
120,349
92,057 1,009,428
Written off and disposals
-
(79,808)
(96,724)
(977)
(50,880)
(21,243)
-
(249,632)
At 31 December 2012
1,867,389
1,318,770
797,733
243,810
1,026,403
515,759
92,057 5,861,921
depreciation
At 1 January 2012
170,093
504,280
434,043
123,334
438,006
240,682
Deprecation for the year
70,768
224,342
84,957
27,575
202,249
62,977
Written off and disposals
-
(79,808)
(96,724)
(792)
(50,880)
(19,101)
At 31 December 2012
240,861
648,814
422,276
150,117
589,375
284,558
- 1,910,438
-
-
672,868
(247,305)
- 2,336,001
Net carrying amount
At 31 December 2012
1,626,528
669,956
375,457
93,693
437,028
231,201
92,057 3,525,920
cost
At 1 January 2011
1,836,188
1,284,365
446,547
185,557
987,867
374,508
Additions
15,405
55,072
68,035
7,746
11,604
59,047
Written off and disposals
-
(101,322)
-
(27,948)
(83,644)
(16,902)
At 31 December 2011
1,851,593
1,238,115
514,582
165,355
915,827
416,653
depreciation
At 1 January 2011
99,413
347,352
345,610
108,697
281,083
197,804
Deprecation for the year
70,680
258,250
88,433
42,585
240,567
59,780
Written off and disposals
-
(101,322)
-
(27,948)
(83,644)
(16,902)
At 31 December 2011
170,093
504,280
434,043
123,334
438,006
240,682
- 5,115,032
-
-
216,909
(229,816)
- 5,102,125
- 1,379,959
-
-
760,295
(229,816)
- 1,910,438
cost
Beginning balance
Additions
Ending balance
Amortisation
Beginning balance
Amortisation for the year
Ending balance
Net book value
2012
USD
773,465
152,812
926,277
563,227
112,552
675,779
250,498
5. INVeSTMeNT IN ASSocIATed coMPANIeS
In 2002, the Group acquired a 33% equity ownership interest in companies registered in Lebanon as shown below:
Country of incorporation
Ownership
2012
Star Rock SAL Lebanon
Sina SAL Lebanon
Silver Rock SAL Lebanon
Golden Rock SAL Lebanon
Lebanon
Lebanon
Lebanon
Lebanon
Movement on investment in associates is as follows:
33%
33%
33%
33%
2012
USD
2011
USD
765,798
7,667
773,465
466,808
96,419
563,227
210,238
2011
33%
33%
33%
33%
2011
USD
Net carrying amount
Opening balance
At 31 December 2011
1,681,500
733,835
80,539
42,021
477,821
175,971
- 3,191,687
Share of profit of results of associated companies
Dividends received
The depreciation charge for the year of USD 672,868 (2011: USD 760,295) has been included in general and administrative expenses.
Fully depreciated premises and equipment still in use amounted to USD 565,134 as at 31 December 2012 (2011: 530,351).
11,702,917
11,280,888
525,655
-
552,864
(130,835)
12,228,572
11,702,917
30 International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
31
5. INVeSTMeNT IN ASSocIATed coMPANIeS (continued)
7. INVeSTMeNTS
The following table includes summarised information of the Group’s investments in associates:
Share of associates’ statement of financial position
Current assets
Non-current assets
Current liabilities
Net assets
Share of associates’ revenues and results
Revenues
Profit
2012
USD
467,624
16,910,445
(5,149,497)
12,228,572
2011
USD
553,840
16,901,477
(5,752,400)
11,702,917
796,590
800,090
525,655
552,864
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 PRoPeRTIeS
The following table includes summarised information of the Group’s investment properties:
Opening balance
Additions
closing balance
Opening balance
Additions
Closing balance
commercial building
USD
2012
Land*
USD
Total
USD
20,701,304
176,608
20,877,912
8,461,850
29,163,154
-
176,608
8,461,850
29,339,762
2011
commercial building
USD
Land*
USD
Total
USD
20,534,276
167,028
20,701,304
8,461,850
28,996,126
-
167,028
8,461,850
29,163,154
* Land amounting to USD 8,461,850 as at 31 December 2012 (2011: USD 8,461,850) is registered in the name of the Directors of the Group.
The Group has obtained an irrevocable proxy over this investment property.
The carrying amount approximates the fair value of the investment property based on valuations performed by independent valuer.
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 equities
* Maturity of these bonds as at 31 December 2012 are as follows:
6 December 2015
27 October 2017
2012
USD
2011
USD
4,520,649
4,690,141
1,461,920
1,525,702
69,409,224
64,017,190
4,476,243
7,331,216
145,233,873
151,216,442
69,711,890
44,555,931
6,681,449
7,287,118
128,236,388
134,452,231
Maturity
Carrying amount
Effective interest
rate
1,520,649
3,000,000
4,520,649
10%
5%
Provision for impairment for equity investments charged to the consolidated statement of income amounted to USD 1,231,640 (2011:
USD 537,220).
8. defeRRed PoLIcY AcQUISITIoN coSTS
Opening balance
Acquisition costs
Charged to consolidated income statement
2012
USD
2011
USD
29,451,946
44,881,764
(43,579,118)
30,754,592
25,730,470
39,308,236
(35,586,760)
29,451,946
32 International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
9. INSURANce ReceIVABLeS
Receivables from insurance companies and intermediaries
Less: Provision for doubtful debts
The movement in the provision of doubtful debts is as follows:
Opening balance
Provision for the year
2012
USD
2011
USD
99,542,261
(1,800,000)
97,742,261
101,302,233
(900,000)
100,402,233
2012
USD
(900,000)
(900,000)
(1,800,000)
2011
USD
-
(900,000)
(900,000)
All of the above amounts are due within twelve months of the statement of financial position date (Note 24). It is not the practice of the
Group to hold collaterals as security. Therefore the receivable are unsecured.
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. The aging of the trade receivables is less
than 180 days.
11. oTHeR ASSeTS
Accrued interest income
Prepaid expenses
Dividend receivable
Refundable deposits
Employees receivables
Others
12. INSURANce coNTRAcTS LIABILITIeS
2012
USD
1,290,773
567,412
43,459
125,144
10,444
130,433
2011
USD
1,687,268
322,620
-
88,732
284,842
168,670
2,167,665
2,552,132
International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
33
12. INSURANce coNTRAcTS LIABILITIeS (continued)
a) Unearned premiums
2012
reinsurers’
share
USD
Gross
USD
Net
USD
Gross
USD
2011
reinsurers’
share
USD
Net
USD
Opening balance
120,947,599
(31,886,053)
89,061,546
103,402,699
(28,106,769)
75,295,930
Premiums written
225,569,256
(49,760,815)
175,808,441
202,786,867
(69,745,208)
133,041,659
Premiums earned
(206,304,049)
57,861,075
(148,442,974)
(185,241,967)
65,965,924
(119,276,043)
140,212,806
(23,785,793)
116,427,013
120,947,599
(31,886,053)
89,061,546
b) outstanding claims
Movement in outstanding claims
2012
reinsurers’
share
USD
Gross
USD
Net
USD
Gross
USD
2011
reinsurers’
share
USD
Net
USD
At the beginning of the year
Reported claims
138,288,776
(55,956,166)
82,332,610
114,059,748
(34,756,238)
79,303,510
Claims incurred but
not reported
49,300,000
-
49,300,000
42,000,000
-
42,000,000
187,588,776
(55,956,166)
131,632,610
156,059,748
(34,756,238)
121,303,510
Claims paid
(94,175,991)
30,702,185
(63,473,806)
(78,896,677)
23,390,766
(55,505,911)
125,366,105
(25,247,317)
100,118,788
124,151,705
(47,970,694)
76,181,011
(14,183,172)
(3,498,989)
(17,682,161)
(13,726,000)
3,380,000
(10,346,000)
204,595,718
(54,000,287)
150,595,431
187,588,776
(55,956,166)
131,632,610
Provided during
the year related to
current accident year
Provided during
the year related to
previous accident
years
At the end of the
year
At the end of the
year
2012
reinsurers’
share
USD
Gross
USD
Net
USD
Gross
USD
2011
reinsurers’
share
USD
Net
USD
Reported claims
147,595,718
(54,000,287)
93,595,431
138,288,776
(55,956,166)
82,332,610
Claims incurred but
not reported
57,000,000
-
57,000,000
49,300,000
-
49,300,000
204,595,718
(54,000,287)
150,595,431
187,588,776
(55,956,166)
131,632,610
Unearned premiums
140,212,806
(23,785,793)
116,427,013
120,947,599
(31,886,053)
89,061,546
Outstanding claims
204,595,718
(54,000,287)
150,595,431
187,588,776
(55,956,166)
131,632,610
344,808,524
(77,786,080)
267,022,444
308,536,375
(87,842,219)
220,694,156
34
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9
,
4
0
1
(
)
2
8
0
,
3
6
1
,
8
4
(
)
6
4
3
,
9
3
1
,
4
3
(
)
9
2
7
,
4
8
8
,
4
4
(
)
0
3
5
,
6
6
6
,
7
(
)
8
9
0
,
6
9
2
,
3
(
)
8
6
5
,
7
6
2
(
e
t
a
d
o
t
s
t
n
e
m
y
a
p
l
e
v
i
t
a
u
m
u
C
8
1
7
5
9
5
,
,
4
0
2
f
o
t
n
e
m
e
t
a
t
s
d
e
t
a
d
i
l
o
s
n
o
c
e
h
t
n
i
d
e
d
u
c
n
l
i
y
t
i
l
i
b
a
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n
a
n
fi
International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
35
13. ReINSURANce ASSeTS
Reinsurance share of unearned premiums (note 12)
Reinsurance share of outstanding claims (note 12)
Deferred XOL premium
14. cASH ANd BANK BALANceS
Cash and bank balances
Time deposits – short term
Cash and cash equivalents
Time deposits – long term
2012
USD
23,785,793
54,000,287
8,391,047
86,177,127
2011
USD
31,886,053
55,956,166
6,489,838
94,332,057
2012
USD
2011
USD
63,992,637
130,507,875
194,500,512
-
49,753,074
102,886,503
152,639,577
5,444,160
194,500,512
158,083,737
The time deposits, which are substantially denominated in US Dollars, are made for varying periods between one month to one year
(2011: between one month to two years) depending on the immediate cash requirements of the Group.
All deposits earned an average variable interest rate of 2.21% (2011: 1.76%).
15. ISSUed SHARe cAPITAL
Shares of USD 1 each
16. dIVIdeNdS PAId
Authorised, issued and fully paid
2012
USD
2011
USD
143,375,678
143,375,678
At a meeting held on 7 March 2012, the shareholders resolved to pay dividend of USD 0.04 (2011: USD 0.03) per share amounting
to USD 5,735,027 (2011: USD 4,301,270) related to the year ended 31 December 2011. Further, the shareholders also resolved on 5
August 2012 to pay interim dividends of USD 0.02 per share amounting to USD 2,867,513 related to the current year.
17. oTHeR LIABILITIeS
Accounts payable
Accrued expenses
2012
USD
537,226
3,112,057
3,649,283
2011
USD
579,912
2,305,682
2,885,594
36 International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
37
18. INSURANce PAYABLeS
22. ReLATed PARTY TRANSAcTIoNS
Payables due to insurance companies and intermediaries
Reinsures – amounts due in respect of ceded premium
2012
USD
2,183,916
17,383,556
19,567,472
2011
USD
7,366,319
30,460,693
37,827,012
19. UNeARNed coMMISSIoNS
The movement in unearned commissions in the consolidated statement of financial position is as follows:
Opening balance
Commissions received
Commissions earned
20. INVeSTMeNT INcoMe
Interest
Dividends
Gain on sale of available-for-sale investments
Fair value changes of held for trading investments
Impairment of available-for-sale investments (note 7)
Investments custodian fees and other investments expenses
Rental income, net
2012
USD
2011
USD
9,214,391
13,864,192
7,776,721
17,220,492
(14,361,470)
(15,782,822)
8,717,113
9,214,391
2012
USD
6,482,521
1,591,438
366,140
(63,782)
(1,231,640)
(1,087,858)
880,477
6,937,296
2011
USD
6,067,068
1,464,370
170,757
(153,532)
(537,220)
(1,005,909)
904,478
6,910,012
21. coMMITMeNTS ANd coNTINGeNcIeS
As of the date of the financial statements, the Group is contingently liable for the following:
• Letters of Guarantee amounting to USD 9,181 (31 December 2011: USD 17,373) to the order of the Jordanian Ministry of Trade and
Industry with margin of USD 918 (31 December 2011: USD 1,737).
• Letters of Credit amounting to USD 28,256,883 to the order of reinsurance companies for collateralising insurance contract liabilities
in accordance with the reinsurance arrangements (31 December 2011: USD 32,977,488).
• Letter of Guarantee amounting to USD 373,192 to the order of Friends Provident Life Assurance Ltd. for collateralising rent payment
obligation in one of the Group entity’s office premises (31 December 2011: USD 373,192).
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:
2012
USD
2011
USD
Consolidated statement of income
Commission paid
Eastern Insurance Brokers Ltd – Owned by immediate family member of the major
shareholder
278,412
140,353
Compensation of key management personnel of the Group, consisting of salaries and benefits was USD 4,884,474 (31 December
2011: USD 5,047,396). Out of the total amount of key management personnel compensation, an amount of USD 83,311 (2011: USD
13,824) represents long term benefits.
23. TAX cRedIT oN SUBSIdIARY LoSSeS
Tax credit on subsidiary losses resulted from the losses recorded in International General Insurance Company (UK) Ltd. which is
subject to the United Kingdom income tax laws. Following is the movement on the deferred tax assets:
Opening balance
Tax credit on losses of the subsidiary IGI UK
Others
ending balance
24. RISK MANAGeMeNT
2012
USD
118,532
702,010
21,358
841,900
2011
USD
-
118,532
-
118,532
The risks faced by the Group and the way these risks are mitigated by management are summarised below.
Insurance risk
Insurance risk includes the risks of inappropriate underwriting, ineffective management of underwriting, inadequate controls over
exposure management in relation to catastrophic events and insufficient reserves for losses including claims incurred but not reported.
To manage this risk, the Group’s underwriting function is conducted in accordance with a number of technical analytical protocols
which includes defined underwriting authorities, guidelines by class of business, rate monitoring and underwriting peer reviews.
The risk is further protected by reinsurance programmes which respond to various arrays of loss probabilities.
The Group has in place effective exposure management system. Aggregate exposure is modelled and tested against different stress
scenarios to ensure adherence to Group’s overall risk appetite and alignment with reinsurance programmes and underwriting strategies.
38 International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
39
24. RISK MANAGeMeNT (continued)
Loss reserve estimates are inherently uncertain. Reserves for unpaid losses are the largest single component of the liabilities of the
Group. Actual losses that differ from the provisions, or revisions in the estimates, can have a material impact on future earnings and
the statement of financial position. The Group has in house experienced actuarial set up reviewing and monitoring the reserving policy
and its implementation at quarterly intervals. They work closely with the underwriting and claims team to ensure understanding of the
Group’s exposure and loss experience.
In addition, the Group receives external independent analysis of its reserve requirements on quarterly basis.
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 affected under treaty, facultative and excess-of-loss reinsurance contracts.
Geographical concentration of risks
The Group’s insurance risk based on geographical concentration of risk is illustrated in the table below:
2012
Europe
Middle / Far East & Africa
North America
Rest of the World
2011
Europe
Middle / Far East & Africa
North America
Rest of the World
Gross written
premiums
Concentration
Percentage
USD
37,502,898
95,355,232
3,204,828
89,506,298
225,569,256
%
17%
42%
1%
40%
Gross written
premiums
Concentration
Percentage
USD
38,529,505
91,254,090
8,111,475
64,891,797
202,786,867
%
19%
45%
4%
32%
24. RISK MANAGeMeNT (continued)
Line of business concentration of risk
The Group’s insurance risk based on line of business concentration is illustrated in the table below:
2012
Energy
Property
Engineering
Marine
Reinsurance
Financial
Casualty
Aviation
Ports & Terminals
2011
Energy
Property
Engineering
Marine
Reinsurance
Financial
Casualty
Aviation
Ports & Terminals
Gross written
premiums
USD
85,296,674
40,592,533
20,925,530
20,978,588
20,416,389
16,497,299
3,110,218
11,228,325
6,523,700
225,569,256
Concentration
Percentage
%
38%
18%
9%
9%
9%
7%
1%
5%
3%
Gross written
premiums
Concentration
Percentage
USD
82,569,712
26,073,716
16,975,720
28,955,914
21,038,007
16,643,005
1,545,213
8,843,203
142,377
202,786,867
%
41%
13%
8%
14%
10%
8%
1%
4%
-
Sensitivities
The analysis below shows the estimated impact on gross and net insurance contracts claims liabilities and on profit before tax, of an
ultimate development on net claims liabilities of 5% different from that reported in the statement of financial position (2011: 5%). The
impact on gross claims liabilities assumes that recovered rates remain constant
%
+ 5
+ 5
2012
2011
Impact on gross insurance
contract claims liabilities
Impact on net insurance
contract claims liabilities
USD
USD
Impact
on profit
USD
10,229,786
7,529,772
(7,529,772)
9,379,439
6,581,631
(6,581,631)
40 International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
41
24. RISK MANAGeMeNT (continued)
24. RISK MANAGeMeNT (continued)
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, investment in associates, investment properties and reinsurance contracts, 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:
Less
than 1 year
1 to 5 years
More than 5
years
Non-interest
bearing items
Total
Effective
Interest Rate
on interest
bearing
assets
2012
USD
USD
USD
USD
USD
(%)
Investments held for trading
-
-
-
1,461,920
1,461,920
Available-for-sale investments
13,231,115
31,427,215
24,750,898
75,824,645
145,233,873
Held to maturity investments
1,520,649
Cash and bank balances
194,500,512
-
-
3,000,000
-
-
-
4,520,649
194,500,512
209,252,276
31,427,215
27,750,898
77,286,565
345,716,954
2011
Investments held for trading
Available-for-sale investments
-
-
-
1,525,702
1,525,702
9,708,299
33,939,644
26,063,947
58,524,498
128,236,388
Held to maturity investments
1,690,141
-
3,000,000
Cash and bank balances
152,638,877
5,444,860
-
-
-
4,690,141
158,083,737
164,037,317
39,384,504
29,063,947
60,050,200
292,535,968
There is no significant difference between contractual repricing or maturity dates.
-
4.75
6.86
1.48
-
5.72
5.99
1.16
The following table demonstrates the sensitivity of income statement to reasonably possible changes in interest rates, with all other
variables held constant.
The sensitivity of the income statement 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.
2012
2011
Increase/
decrease
in basis points
Effect on profit
for the year
USD
671,076
(1,342,152)
576,571
(1,153,142)
+ 25
- 50
+ 25
- 50
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 predominantly 88% of the
business 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.
The Group is exposed to credit risk primarily from unpaid insurance receivables and fixed income instruments.
The Group has in place credit appraisal policies and procedures for inward business and receivables from insurance transactions are
monitored on an ongoing basis to restrict Group’s exposure to doubtful debts.
The Group has in place security standards applicable to all reinsurance purchases and monitors the financial status of all reinsurance
debtors at regular intervals.
The Group’s portfolio of fixed income investment is managed by the investments committee in accordance with the investment policy
established by the board of directors which has various credit standards for investment in fixed income securities.
Reinsurance and fixed income investments are monitored for the occurrence of a downgrade or other changes that might casue them
to fall below the Group’s security standards. If this occurs, management takes appropriate action to mitigate any loss to the Group.
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.
42 International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
43
24. RISK MANAGeMeNT (continued)
24. RISK MANAGeMeNT (continued)
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:
The following table provides an aging analysis of trade receivables arising from Specialty Mall customers past due but not impaired:
Neither past due nor impaired
Investment
grade
Non investment
grade
(satisfactory)
Non investment
grade
(un-satisfactory)
Past due but
not impaired
2012
USD
USD
USD
USD
Total
USD
Available-for-sale investments
58,705,108
86,528,765
Investments held for trading
Held to maturity investments
Insurance receivables
Reinsurance assets
-
3,000,000
-
-
1,461,920
1,520,649
73,585,206
86,177,127
Cash and bank balances
109,458,867
85,041,645
171,163,975
334,315,312
2011
Available-for-sale investments
67,375,228
60,861,160
Investments held for trading
Held to maturity investments
Insurance receivables
Reinsurance assets
-
3,000,000
-
-
1,525,702
1,690,141
68,876,450
94,332,057
Cash and bank balances
90,093,897
67,989, 840
160,469,125
295,275,350
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
145,233,873
1,461,920
4,520,649
24,157,055
97,742,261
-
-
86,177,127
194,500,512
24,157,055
529,636,342
-
-
-
128,236,388
1,525,702
4,690,141
31,525,783
100,402,233
-
-
94,332,057
158,083,737
31,525,783
487,270,258
The following table provides an aging analysis of receivables arising from insurance and reinsurance contracts past due but not
impaired:
Past due but not impaired
Neither past
due nor
impaired
Up to 90
days
91 to 180
days
181 to 270
days
271 to 360
days
Over 360
days
Total
USD
USD
USD
USD
USD
USD
USD
31 december 2012
73,585,206
14,359,342
5,226,747
2,664,185
1,906,781
-
97,742,261
31 December 2011
68,876,450
15,765,386
7,351,315
3,279,923
3,488,433
1,640,726 100,402,233
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.
Past due but not impaired
Neither past
due nor
impaired
Up to 90 days
91 to 180 days
USD
USD
USD
Total
USD
31 december 2012
31 December 2011
85,607
129,946
30,591
85,636
21,784
20,712
137,982
236,294
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 Group’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 profit for
the year
Effect on
equity
USD
USD
2012
New York Stock Exchange
Amman Stock Exchange
Saudi Stock Exchange
Qatar Stock Exchange
NASDAQ Dubai
Other quoted
2011
New York Stock Exchange
Amman Stock Exchange
Saudi Stock Exchange
Qatar Stock Exchange
NASDAQ Dubai
Other quoted
USD
+5%
+5%
+5%
+5%
+5%
+5%
-
-
-
-
-
73,096
Change in
equity price
Effect on profit for
the year
USD
+5%
+5%
+5%
+5%
+5%
+5%
USD
-
-
-
-
-
76,285
725,665
49,153
1,216,700
563,495
426,262
945,291
Effect on
equity
USD
302,082
79,190
701,272
512,236
393,980
541,119
44 International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
45
24. RISK MANAGeMeNT (continued)
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.
The Group continually monitors its cash and investments to ensure that the Group meets its liquidity requirements. The Group’s asset
allocation is designed to enable insurance liabilities to be met with current assets.
All liabilities are non-interest bearing liabilities.
The table below summarises the maturity profile of the company’s financial liabilities at 31 December based on contractual undiscounted
payments:
2012
Less than one
year
More than one
year
No term
USD
USD
USD
Total
USD
Insurance contracts liabilities
258,606,393
86,202,131
Other liabilities
Insurance payable
Unearned commissions
Total liabilities
2011
3,649,283
19,567,472
-
-
6,537,835
2,179,278
288,360,983
88,381,409
Insurance contracts liabilities
231,402,281
77,134,094
Other liabilities
Insurance payable
Unearned commissions
Total liabilities
2,885,594
37,827,012
-
-
6,910,793
2,303,598
279,025,680
79,437,692
-
-
-
-
-
-
-
-
-
-
344,808,524
3,649,283
19,567,472
8,717,113
376,742,392
308,536,375
2,885,594
37,827,012
9,214,391
358,463,372
24. RISK MANAGeMeNT (continued)
Maturity analysis of assets and liabilities
The table below shows analysis of assets and liabilities analysed according to when they are expected to be recovered or settled:
ASSeTS
Premises and equipment
Intangible assets
Investment in associated companies
Investments
Investment properties
2012
Less than one
year
More than one
year
No term
USD
USD
USD
Total
USD
-
-
-
3,525,920
250,498
-
-
3,525,920
250,498
-
12,228,572
12,228,572
14,751,763
59,178,109
77,286,570
151,216,442
-
-
29,339,762
29,339,762
Deferred policy acquisition costs
23,065,944
7,688,648
Insurance receivables
Trade receivables
Other assets
Reinsurance 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
97,742,261
137,982
2,854,158
-
-
155,407
66,730,607
19,446,520
194,500,512
-
-
-
-
-
-
-
30,754,592
97,742,261
137,982
3,009,565
86,177,127
194,500,512
399,783,227
90,245,102
118,854,904
608,883,233
-
-
-
-
-
-
-
-
-
-
143,375,678
143,375,678
(230,995)
(230,995)
15,325,027
15,325,027
73,671,131
73,671,131
232,140,841
232,140,841
Insurance contracts liabilities
258,606,393
86,202,131
Other liabilities
Insurance payable
Unearned commissions
Total liabilities
3,649,283
19,567,472
-
-
6,537,835
2,179,278
288,360,983
88,381,409
-
-
-
-
-
344,808,524
3,649,283
19,567,472
8,717,113
376,742,392
ToTAL eQUITY ANd LIABILITIeS
288,360,983
88,381,409
232,140,841
608,883,233
46 International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
International General Insurance Holdings Limited
NoTeS To THe coNSoLIdATed fINANcIAL STATeMeNTS
AT 31 DeceMBer 2012
47
24. RISK MANAGeMeNT (continued)
24. RISK MANAGeMeNT (continued)
2011
fair value
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques:
ASSeTS
Premises and equipment
Intangible assets
Investment in associated companies
Investments
Investment properties
Deferred policy acquisition costs
Insurance receivables
Trade receivables
Other assets
Reinsurance 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
Less than one
year
More than one
year
No term
USD
USD
USD
Total
USD
-
-
-
-
3,191,687
210,238
-
-
3,191,687
210,238
-
-
11,702,917
11,702,917
29,163,154
29,163,154
11,398,440
63,003,591
60,050,200
134,452,231
22,088,960
98,761,507
236,294
2,670,664
7,362,986
1,640,726
-
-
72,371,502
21,960,555
152,639,577
5,444,160
-
-
-
-
-
-
29,451,946
100,402,233
236,294
2,670,664
94,332,057
158,083,737
360,166,944
102,813,943
100,916,271
563,897,158
-
-
-
-
-
-
-
-
-
-
143,375,678
143,375,678
(286,652)
(286,652)
5,326,279
5,326,279
57,018,481
57,018,481
205,433,786
205,433,786
Insurance contracts liabilities
231,402,281
77,134,094
Other liabilities
Insurance payable
Unearned commissions
Total liabilities
2,885,594
37,827,012
-
-
6,910,793
2,303,598
279,025,680
79,437,692
-
-
-
-
-
308,536,375
2,885,594
37,827,012
9,214,391
358,463,372
ToTAL eQUITY ANd LIABILITIeS
279,025,680
79,437,692
205,433,786
563,897,158
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.
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 directly
or indirectly; and
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market
data.
Held for trading
Available-for-sale
Held for trading
Available-for-sale
Level 1
USD
1,461,920
137,902,657
139,364,577
Level 1
USD
1,525,702
120,949,270
122,474,972
31 December 2012
Level 2
USD
-
7,331,216
7,331,216
31 December 2011
Level 2
USD
-
7,287,118
7,287,118
Total
USD
1,461,920
145,233,873
146,695,793
Total
USD
1,525,702
128,236,388
129,762,090
There were no transfers between Level 1, 2 and 3 during the year or in either the years ended 31 December 2012 or 31 December
2011.
There are no level 3 investments.
25. comparative figures
Some of 2011 balances were reclassified to correspond with 31 December 2012. Classifications have no effect on net profit and
equity.
26. subsequent events
There have been no material events between 31 December 2012 and the date of this report which are required to be disclosed.
48
49
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