2
CONTENTS
ABOUT IGIH
BOARD OF DIRECTORS
LETTER FROM THE BOARD OF DIRECTORS
FINANCIAL STATEMENTS
IGI OFFICES
3
2
5
7
8
52
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013 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 second-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$ 672 million as at 31st December, 2013.
4
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. - USA)
Mr. Wasef Jabsheh
CEO & Vice Chairman
Mr. Khalifa Al Mulhem
Director ( Chairman, National Polypropylene Company Limited - KSA)
Mr. Hani Tarazi
Director ( Saba IP & Co. - UAE)
Mr. Khaled Sifri
Director (CEO of Arab Emirates Investment Bank - UAE)
Mr. Hani Jabsheh
Director (CEO,Al Bawaba.com)
Al Sayyida Rawan Al Said
Director (Managing Director & Group Chief Executive of ONIC Holding Group)
6
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
LETTER FROM THE BOARD OF DIRECTORS 7
Letter From the Board of Directors
It gives us great pleasure to include herewith the full report on our 2013 performance. The past year has proven to be
another successful year for IGI, achieving record profits over the Company’s twelve year history.
Despite a flood of new capital entering the insurance market in 2013, IGI was able to realize a healthy growth rate. Our
top line growth represented a 6.4% increase, with net income growing by 23.8%. 2013 saw the highest income levels in the
Company’s career, allowing it to offer investors a 12.7% return on equity. 2013’s figures confirm that IGI’s business strategy,
underwriting management and cost efficiency collectively are able to withstand the current competitive environment.
2013 was a year of minimal catastrophes, with hail storms in Germany, flooding in the UK and Europe, and super typhoon
Haiyan as the only major incidents to afflict the international insurance market. Estimated costs to the industry were US$ 31
billion which falls well below the average figures of the past 10 years of US$56 billion.
The continued civil and political unrest in the Middle East region with its resounding negative effects on global political and
economic dynamics has galvanized the Company to integrate and innovate relevant lines of business to counteract market
turbulence. In early 2013, we further diversified our overall portfolio in response to such changing market conditions. We
introduced political violence as a new class of business, which has gained traction and proven to be a valuable addition. We
also continued to grow our Ports and Terminals book profitably.
For 2014, we anticipate a greater level of competition, ultimately placing the insurance industry in a softer market. IGI will remain
vigilant in seeking out geographical expansion over the coming year, and will continue to be opportunistic, whether through
current business line expansion or new product offerings. We expect our casualty book to grow robustly in 2014 and we intend
to increase IGI’s presence in leading complex business.
We continue to grow our operations in Dubai and the UK. We have boosted our capacity by expanding underwriting resources
in both office locations. Alongside seeking out further expansion, we will press on with our strategy of optimizing resources
and increasing efficiency of assets deployed to further increase shareholder equity.
Finally, one activity which we expect to remain generally unchanged in the financial year of 2014 is investments: last year’s return
of 2.11% reflected our management team’s successful hands-on approach, and an improvement on the previous year’s 1.92%.
Although we do not expect to see any major changes in the portfolio mix, we will remain vigilant in seeking out investment
opportunities which provide the best return for our shareholders whilst keeping our conservative principles intact.
Highlights for 2013 include the following:
• Gross written premium in 2013 was US$ 240 million, an increase of 6.4% compared to US$ 225 million for 2012.
Underwriting profit grew to US $ 43.5 million for 2013, an increase of 18.5% from US$ 36.7 million in 2012.
•
Investment income for the year stood at $9.4 million, an increase of 27% compared to US$ 7.4 million for 2012.
•
The Combined Ratio for 2013 was 87.93% compared to 88.01% for 2012.
•
Net Profit amounted to US$ 31.2 million for 2013 against US$ 25.2 million for 2012, an increase of 24%.
•
•
Total assets were US$ 672 million at the end of 2013, an increase of 10.4% compared to US$ 623 million as of 31st
December, 2012.
•
December, 2012.
Shareholders’ equity rose to US$ 246.3 million at the end of 2013, up 7.8% compared to US$ 232.1 million as of 31st
As always, we would like to extend a thank you to all our clients and producers for their untiring support throughout 2013. We
would also like to express our appreciation to all our employees for their unique efforts and contributions this year. We look
forward to working together in 2014 to fulfill the visions and ambitions of the Company and to further raising the bar on
industry standards. We plan to replicate our successes while consolidating our position as a leading underwriting operation in
the region.
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
AUDITORS` REPORT
8
9
Ernst & Young
P.O.Box 9267
28th Floor, Al Attar Business Tower
Sheikh Zayed Road
Dubai, United Arab Emirates
Tel: +971 4 332 4000
Fax: +971 4 332 4004
dubai.uae@ae.ey.com
ey.com/mena
INDEPENDENT AUDITORS’ 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 2013 and the consolidated statements of income, other 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 consolidated 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 consolidated financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
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 2013 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.
16 March 2014
Dubai , United Arab Emirates
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
FINANCIAL RESULTS
10
FINANCIAL RESULTS
11
12
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2013
13
Notes
2013
USD
2012
USD
3
4
5
6
7
8
9
10
11
24
13
14
15
16
12
18
19
20
3,849,915
3,525,920
180,389
250,498
11,703,630
12,228,572
28,550,500
29,339,762
202,096,288
151,216,442
27,621,280
30,754,592
95,109,788
97,742,261
73,933
2,705,346
730,618
137,982
2,189,023
820,542
93,727,503
99,989,127
205,658,242
194,500,512
672,007,432
622,695,233
143,375,678
143,375,678
(12,000,000)
-
(214,298)
(230,995)
22,821,709
15,325,027
92,346,727
73,671,131
246,329,816
232,140,841
391,695,955
358,620,524
3,111,273
24,241,201
6,629,187
3,649,283
19,567,472
8,717,113
425,677,616
390,554,392
672,007,432
622,695,233
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
Treasury shares
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
The consolidated financial statements were authorised for issue in accordance with a resolution of the Board of Directors on 16 March 2014.
The attached notes 1 to 27 form part of these consolidated financial statements
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
15
2013
USD
2012
USD
Profit for the year
31,263,407
25,255,190
Other comprehensive income to be reclassified to profit
or loss in subsequent periods:
Fair value changes
Currency translation differences
Other comprehensive income for the year
Total comprehensive income for the year
7,496,682
16,697
7,513,379
9,998,748
55,657
10,054,405
38,776,786
35,309,595
14
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013
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
Notes
12 (a)
12 (a)
12 (a)
12 (a)
12 (b)
12 (b)
20
8
21
5
2013
USD
2012
USD
240,008,259
225,569,256
1,058,400
(19,265,207)
241,066,659
206,304,049
(58,767,697)
(49,760,815)
(1,649,773)
(8,100,260)
(60,417,470)
(57,861,075)
180,649,189
148,442,974
(123,021,028)
(106,735,933)
24,246,187
9,350,877
(47,667,348)
24,299,306
14,361,470
(43,579,118)
43,557,877
36,788,699
9,985,201
408,709
6,937,296
525,655
(21,663,540)
(19,739,392)
14,375
(949,291)
50,700
(9,778)
31,353,331
24,553,180
Tax (expense) credit on results of subsidiary
24
(89,924)
702,010
PROFIT FOR THE YEAR
31,263,407
25,255,190
The attached notes 1 to 27 form part of these consolidated financial statements
The attached notes 1 to 27 form part of these consolidated financial statements
16
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2013
OPERATING ACTIVITIES
Profit before tax
Adjustments for:
Depreciation and amortization
Gain on sale of available-for-sale investments
Provision for doubtful debts
Impairment of available-for-sale investments
Gain on sale of premises and equipment
Loss on revaluation of held for trading investments
Dividends and interest income
Share of profit from associated companies
Net foreign exchange differences
Cash from operations before working capital changes
Working capital adjustments
reinsurance assets
Insurance contracts liabilities
Deferred policy acquisition costs
Insurance receivables
Trade receivables
Other assets
Unearned commission
Insurance payables
Other liabilities
Net cash from operating activities
INVESTING ACTIVITIES
Purchase of premises and equipment
Proceeds from sale of premises and equipment
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
Proceeds from redemption of trading securities
Purchase of investment properties
Dividends received from associated companies
Matured time deposits – long term
Dividends and interest income
Net cash (used in) from investing activities
FINANCING ACTIVITIES
Dividends paid
Purchase of treasury shares
Net cash used in financing activities
NET CHANGE IN CASH AND CASH EQUIVALENTS
Net foreign exchange differences
Cash and cash equivalents at the beginning of the year
Notes
2013
USD
2012
USD
3,4
21
9
21
21
21
5
3
4
5
21
17
16
31,353,331
24,553,180
961,457
785,420
(1,622,258)
494,000
895,203
(14,375)
3,972
(9,628,530)
(366,140)
900,000
1,231,640
(6,127)
63,782
(8,073,959)
(408,709)
(525,655)
949,291
9,778
22,983,382
18,571,919
6,261,624
33,075,431
3,133,312
2,138,473
64,049
(499,626)
(2,087,926)
4,673,729
(538,010)
69,204,438
(432,633)
32,097
(11,170)
(64,367,635)
79,972
21,514,036
113,546
-
933,651
-
9,628,530
(32,509,606)
8,154,930
36,272,149
(1,302,646)
1,759,972
98,312
418,766
(497,278)
(18,259,540)
763,689
45,980,273
(1,009,428)
8,454
(152,812)
(24,705,631)
169,492
16,841,394
-
(176,608)
-
5,444,160
8,073,959
4,492,980
(12,587,811)
(12,000,000)
(24,587,811)
12,107,021
(949,291)
194,500,512
205,658,242
(8,602,540)
-
(8,602,540)
41,870,713
(9,778)
152,639,577
194,500,512
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CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
14
The attached notes 1 to 27 form part of these consolidated financial statements
7
1
18
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AT 31 DECEMBER 2013
1 - ACTIvITIES
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 and is engaged in the business of insurance and re-insurance.
The Company’s registered office is at unit 1, Gate village 01, P. O. Box 506646, International Financial Centre, Dubai.
The Company and its subsidiaries (together “the Group”) operate in the United Arab Emirates, Bermuda, United Kingdom,
Jordan and Malaysia.
2 - BASIS OF PREPARATION
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AT 31 DECEMBER 2013
19
A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction. If the
Group loses control over a subsidiary, it:
•
•
•
•
•
•
•
Derecognises the assets (including goodwill) and liabilities of the subsidiary;
Derecognises the carrying amount of any non-controlling interest;
Derecognises the cumulative translation differences, recorded in equity, if any;
recognises the fair value of the consideration received;
recognises the fair value of any investment retained;
Recognises any surplus or deficit in profit or loss; and
Reclassifies the parent’s share of components previously recognised in other comprehensive income to profit or loss or
retained earnings, as appropriate.
The consolidated financial statements have been prepared
(IFRS) as issued by the International Accounting Standards Board (IASB) and applicable requirements of UAE laws.
in accordance with International Financial Reporting Standards
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.
The consolidated financial statements have been presented in United States Dollars “USD” which is the Group’s functional
currency.
All intra-group balances, transactions, income and expenses and profits and losses, including dividends resulting from
intra-group transactions, are eliminated in full.
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.
The Group has the following subsidiaries
Basis of consolidation
The financial statements of the subsidiaries are prepared for the same reporting year as the Group, using consistent accounting
policies.
The consolidated financial statements comprise the financial statements of International General Insurance Holdings ltd. and
its subsidiaries as at 31 December. Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the
Group controls an investee if and only if the Group has:
International General Insurance Underwriting
Jordan
Underwriting agency
North Star Underwriting Limited
United Kingdom
Underwriting agency
2013
100%
100%
2012
100%
100%
Country of
incorporation
Activity
Ownership
International General Insurance Co. Ltd.
Bermuda
reinsurance and insurance
100%
100%
•
•
•
Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)
Exposure, or rights, to variable returns from its involvement with the investee, and
The ability to use its power over the investee to affect its returns
The following entities are wholly owned by the
subsidiary International General Insurance Company
Ltd. Bermuda
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts
and circumstances in assessing whether it has power over an investee, including:
•
•
•
The contractual arrangement with the other vote holders of the investee
rights arising from other contractual arrangements
The Group’s voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to
one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the date the
Group gains control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of
the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When
necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the
Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
International General Insurance Company Ltd.
Labuan Branch
International General Insurance Company (UK)
Limited
International General Insurance Company Dubai Ltd.
Specialty Malls Investment Co.*
Malaysia
reinsurance and insurance
100%
100%
United Kingdom
reinsurance and insurance
100%
100%
United Arab
Emirates
Jordan
Insurance intermediation and
insurance management
100%
100%
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.
20
21
Changes in accounting policies
The accounting policies adopted are consistent with those of the previous financial year, except for the adoption of new and
amended standards and interpretations.
Several other amendments apply for the first time in 2013. However, they do not impact the annual consolidated financial
statements of the Group.
The nature and the impact of each new standard and amendment is described below:
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, net gain on hedge of net investment,
exchange differences on translation of foreign operations, net movement on cash flow hedges and net loss or gain on
available-for-sale financial assets) would be presented separately from items that will never be reclassified (for example,
actuarial gains and losses on defined benefit plans and revaluation of land and buildings). The amendment affects presentation
only and has no impact on the Group’s financial position or performance. The amendment became effective starting from 1
January 2013.
IAS 1 Clarification of the requirement for comparative information (Amendment)
These amendments clarify the difference between voluntary additional comparative information and the minimum required
comparative information. An entity must include comparative information in the related notes to the consolidated financial
statements when it voluntarily provides comparative information beyond the minimum required comparative period. The
amendments clarify that the opening statement of financial position (as at 1 January 2012 in the case of the Group), presented
as a result of retrospective restatement or reclassification of items in financial statements, does not have to be accompanied
by comparative information in the related notes. The amendments affect presentation only and have no impact on the Group’s
financial position or performance.
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
amendments did not have any impact on the Group’s financial position or performance. The amendment became 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 became effective for annual periods beginning on or after 1 January 2013.
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 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 became effective for
annual periods beginning on or after 1 January 2013 and did not impact the Group’s financial position or performance.
IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements
IFrS 10 establishes a single control model that applies to all entities including special purpose entities. IFrS 10 replaces the
parts of previously existing IAS 27 Consolidated and Separate Financial Statements that dealt with consolidated financial
statements and SIC-12 Consolidation – Special Purpose Entities. IFRS 10 changes the definition of control such that an investor
controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. To meet the definition of control in IFRS 10, all three criteria
must be met, including: (a) an investor has power over an investee; (b) the investor has exposure, or rights, to variable returns
from its involvement with the investee; and (c) the investor has the ability to use its power over the investee to affect the amount
of the investor’s returns. The application of this new standard did not impact the financial position and performance of the Group.
IFrS 11 Joint Arrangements and IAS 28 Investment in Associates and Joint Ventures
IFRS 11 replaces IAS 31 Interests in Joint ventures and SIC-13 Jointly-controlled Entities — Non-monetary Contributions by
Venturers.
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 under IFRS 11 must be accounted for using the equity method. The
application of this new standard did not impact the accounting of joint ventures held by the Group.
IFrS 12 Disclosure of Interests in Other Entities
IFRS 12 includes all of the disclosures that were previously in IAS 27 related to 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. The Group does not
have subsidiaries with material non-controlling interests which are considered significant at the Group level. There are no
unconsolidated structured entities and IFRS 12 disclosures are not considered significant for disclosure in the consolidated
financial statements.
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. This standard became effective for annual periods starting from 1 January 2013. The application of the
new standards did not have a significant impact on the financial position or performance of the Group.
Standards issued but not yet effective
Standards 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 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.
Investment entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
These amendments are effective for annual periods beginning on or after 1 January 2014 provide an exception to the
consolidation requirement for entities that meet the definition of an investment entity under IFRS10. The exception to
consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. It is not expected
that this amendment would be relevant to the Group, since none of the entities in the Group would qualify to be an investment
entity under IFrS 10.
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 November 2013 the IASB
amended the Financial Instruments (Hedge accounting and IFRS 9, IFRS7, and IAS39), moved the mandatory date. A new
mandatory date for IFRS 9 will be determined by the IASB when IFRS 9 is closer to completion.
IFrIC Interpretation 21 Levies (IFrIC 21)
IFrIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by
the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that
no liability should be anticipated before the specified minimum threshold is reached. IFRIC 21 is effective for annual periods
beginning on or after 1 January 2014. The Group does not expect that IFRIC 21 will have material financial impact in future
financial statements.
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013
22
23
IAS 39 Novation of Derivatives and Continuation of Hedge Accounting – Amendments to IAS 39
These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a
hedging instrument meets certain criteria. These amendments are effective for annual periods beginning on or after 1 January
2014. The Group has not novated its derivatives during the current period. However, these amendments would be considered
for future novations.
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.
IAS 36 recoverable Amount Disclosures for Non-Financial Assets – Amendments to IAS 36 Impairment of Assets
These amendments remove the unintended consequences of IFRS 13 on the disclosures required under IAS 36. In addition,
these amendments require disclosure of the recoverable amounts for the assets or CGUs for which impairment loss has been
recognised or reversed during the period. These amendments are effective retrospectively for annual periods beginning on or
after 1 January 2014.
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.
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 include any adjustments arising in the accounting period in respect of reinsurance contracts incepting in prior
accounting periods.
Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance.
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.
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.
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 expensed over the terms of the insurance contracts to which
they relate as premiums are earned.
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).
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013 24
Office Buildings
Office Furniture
Computers
Equipment
Leasehold Improvement
Vehicles
Years
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.
25
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
statement 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.
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.
The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the consolidated
statement of income in the period of derecognition.
Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property
to owner occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner
occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated
under property, plant and equipment up to the date of change in use.
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013 26
27
Financial assets
loss,
Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or
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.
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.
Cash settled - Share based payment plan
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 options vest equally over a span of 5 years from the grant date. The bonus due amounts to the excess of book value on
vesting date over grant date plus an additional 20% on the value of the excess.
Treasury shares
Own equity instruments that are reacquired (treasury shares) are recognised at cost and deducted from equity. No gain
or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any
difference between the carrying amount and the consideration, if reissued, is recognised in share premium.
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.
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 arrangements.
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.
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013 28
29
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.
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.
For financial instruments where there is not an active market, the fair value is determined by using valuation techniques. Such
techniques include using recent arm’s length transactions, reference to the current market value of another instrument which is
substantially the same and/or discounted cash flow analysis. For discounted cash flow techniques, estimated future
cash flows are based on management’s best estimates and the discount rate used is a market related rate for a similar
instrument.
If the fair value cannot be measured reliably, these financial instruments are measured at cost, being the fair value of the
consideration paid for the acquisition of the investment or the amount received on issuing the financial liability. All transaction
costs directly attributable to the acquisition are also included in the cost of the investment.
Judgements
In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those
involving estimations, which have the most significant effect in the amounts recognised in the financial statements:
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.
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.
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:
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.
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.
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013 30
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AT 31 DECEMBER 2013
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AT 31 DECEMBER 2013
31
3 - PREMISES AND EqUIPMENT
4 - INTANGIBlE ASSETS
Cost
At 1 January 2013
Additions
Transfers
Office
Office
Leasehold
Work in
building
furniture Computers Equipment
improvements Vehicles
progress
USD
USD
USD
USD
USD
USD
USD
Total
USD
1,867,389
1,318,770
797,733
243,810
1,026,403
515,759
92,057
5,861,921
1,943
91,396
14,042
23,552
250,000
51,700
432,633
-
-
78,034
Transfers from investment
properties (note 6)
789,262
-
Written off and disposals
-
(132,497)
(2,810)
(2,192)
-
-
-
-
14,023
-
-
-
-
-
(92,057)
-
-
-
789,262
(137,499)
At 31 December 2013
2,656,651 1,266,250
886,319
255,660
1,063,978 765,759
51,700 6,946,317
Depreciation
At 1 January 2013
240,861
648,814
422,276
Deprecation for the year
100,969
246,784
176,354
Written off and disposals
-
(116,796)
(2,810)
150,117
35,851
(171)
589,375
284,558
237,075
83,145
-
-
At 31 December 2013
341,830
778,802
595,820
185,797
826,450
367,703
-
-
-
-
2,336,001
880,178
(119,777)
3,096,402
Cost
Opening balance
Additions
CLOSING BALANCE
Amortisation
Opening balance
Amortisation for the year
Closing balance
Net book value
Computer software / licenses
2013
USD
926,277
11,170
937,447
675,779
81,279
757,058
2012
USD
773,465
152,812
926,277
563,227
112,552
675,779
180,389
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:
Net carrying amount
At 31 December 2013
Cost
At 1 January 2012
Additions
2,314,821
487,448
290,499
69,863
237,528 398,056
51,700 3,849,915
1,851,593
1,238,115
514,582
165,355
915,827
416,653
-
5,102,125
15,796
160,463
379,875
79,432
161,456
120,349
92,057
1,009,428
Star rock SAL Lebanon
Sina SAL Lebanon
Silver rock SAL Lebanon
Golden rock SAL Lebanon
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
Movement on investment in associates is as follows:
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
Net carrying amount
-
-
-
-
1,910,438
672,868
(247,305)
2,336,001
At 31 December 2012
1,626,528
669,956
375,457
93,693
437,028 231,201
92,057 3,525,920
The depreciation charge for the year of USD 880,178 (2012: USD 672,868) has been included in general and administrative
expenses.
Fully depreciated premises and equipment still in use amounted to USD 589,615 as at 31 December 2013 (2012: 565,134).
Opening balance
Share of profit of results of associated companies
Dividends received
Country of incorporation
Lebanon
Lebanon
Lebanon
Lebanon
Ownership
2013
2012
33%
33%
33%
33%
33%
33%
33%
33%
2013
USD
12,228,572
408,709
(933,651)
2012
USD
11,702,917
525,655
-
11,703,630
12,228,572
32
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AT 31 DECEMBER 2013
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AT 31 DECEMBER 2013
33
The following table includes summarised information of the Group’s investments in associates:
7 - INvESTMENTS
Share of associates’ statement of financial position
Current assets
Non-current assets
Current liabilities
Net assets
Share of associates’ revenues and results
Revenues
Profit
2013
USD
2012
USD
904,393
16,908,960
(6,109,723)
467,624
16,910,445
(5,149,497)
11,703,630
12,228,572
650,485
796,590
408,709
525,655
Held to maturity
Unquoted bonds*
Held for trading
Quoted funds
Available-for-sale
2013
USD
2012
USD
4,440,677
4,520,649
1,344,402
1,461,920
quoted bonds and debt securities with fixed interest rate
107,360,804
69,409,224
quoted equities
Quoted funds and alternative investments
Unquoted equities
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.
* Maturity of these bonds as at 31 December 2013 are as follows:
6 - INvESTMENT PROPERTIES
The following table includes summarised information of the Group’s investment properties:
Commercial building
USD
2013
Land*
USD
Total
USD
Maturity
6 December 2015
27 October 2017
76,818,015
5,704,315
6,428,075
64,017,190
4,476,243
7,331,216
196,311,209
145,233,873
202,096,288
151,216,442
Carrying amount
Effective interest
rate
1,440,677
3,000,000
4,440,677
10%
2%
Opening balance
Transfers to office building (Note 3) **
Closing balance
20,877,912
(789,262)
8,461,850
-
29,339,762
(789,262)
20,088,650
8,461,850
28,550,500
Provision for impairment for equity investments charged to the consolidated statement of income amounted to USD 895,203 (2012:
USD 1,231,640).
8 - DEFERRED POlICy ACqUISITION COSTS
Opening balance
Additions
Closing balance
2012
Commercial building
USD
Land*
USD
Total
USD
Opening balance
Acquisition costs
20,701,304
176,608
8,461,850
-
29,163,154
176,608
20,877,912
8,461,850
29,339,762
Charged to consolidated income statement
9 - INSURANCE RECEIvABlES
* Land amounting to USD 8,461,850 as at 31 December 2013 (2012: 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.
** During the year there was an addition to the portion of commercial building used as an office premises for an amount of USD 789,262 which
has reduced the share of building treated as an investment property.
The carrying amount approximates the fair value of the investment property based on valuations performed by independent
valuer.
receivables from insurance companies and intermediaries
less: Provision for doubtful debts
2013
USD
2012
USD
30,754,592
29,451,946
44,534,036
44,881,764
(47,667,348)
(43,579,118)
27,621,280
30,754,592
2013
USD
2012
USD
97,109,788
99,542,261
(2,000,000)
(1,800,000)
95,109,788
97,742,261
34
35
The movement in the provision of doubtful debts is as follows:
a) Unearned premiums
Opening balance
Provision for the year
Bad debts written off
2013
USD
2012
USD
(1,800,000)
(494,000)
294,000
(900,000)
(900,000)
-
(2,000,000)
(1,800,000)
2013
Reinsurers’
share
USD
Gross
USD
Net
USD
Gross
USD
2012
Reinsurers’
share
USD
Net
USD
Opening balance
140,212,806
(23,785,793)
116,427,013
120,947,599
(31,886,053)
89,061,546
Premiums written
240,008,259
(58,767,697)
181,240,562
225,569,256
(49,760,815)
175,808,441
Premiums earned
(241,066,659)
60,417,470 (180,649,189)
(206,304,049)
57,861,075
(148,442,974)
139,154,406 (22,136,020)
117,018,386 140,212,806 (23,785,793)
116,427,013
Out of the above amounts, only USD 17,951 (2012: Nil) are due for more than twelve months of the statement of financial
position date (Note 25). 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.
b) Outstanding claims
Movement in outstanding claims
11 - OTHER ASSETS
Accrued interest income
Prepaid expenses
Dividend receivable
refundable deposits
Employees receivables
Income tax receivables
Others
2013
USD
1,532,759
647,662
-
108,746
9,550
175,332
231,297
2012
USD
1,290,773
567,412
43,459
125,144
10,444
89,200
62,591
2,705,346
2,189,023
12 - INSURANCE CONTRACTS lIABIlITIES
2013
Reinsurers’
share
USD
Gross
USD
Net
USD
Gross
USD
2012
Reinsurers’
share
USD
Net
USD
2013
Reinsurers’
share
USD
Gross
USD
Net
USD
Gross
USD
2012
Reinsurers’
share
USD
Net
USD
At the beginning of the year
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
70,812,000
(13,812,000)
57,000,000
67,559,000
(18,259,000)
49,300,000
218,407,718
(67,812,287)
150,595,431
205,847,776
(74,215,166)
131,632,610
Claims paid
(88,887,197)
28,755,669
(60,131,528)
(94,175,991)
30,702,185
(63,473,806)
Provided during the
year related to current
accident year
Provided during the
year related to previous
accident years
159,549,092
(35,996,585)
123,552,507
133,595,104
(33,476,316)
100,118,788
(36,528,064)
11,750,398
(24,777,666)
(26,859,171)
9,177,010
(17,682,161)
At the end of the year
252,541,549 (63,302,805)
189,238,744
218,407,718
(67,812,287)
150,595,431
At the end of the year
reported claims
164,884,549
(47,020,671)
117,863,878
147,595,718
(54,000,287)
93,595,431
Unearned premiums
139,154,406
(22,136,020)
117,018,386
140,212,806
(23,785,793)
116,427,013
Outstanding claims
252,541,549
(63,302,805)
189,238,744
218,407,718
(67,812,287)
150,595,431
Claims incurred but not
reported
87,657,000
(16,282,134)
71,374,866
70,812,000
(13,812,000)
57,000,000
391,695,955 (85,438,825) 306,257,130 358,620,524
(91,598,080)
267,022,444
252,541,549 (63,302,805)
189,238,744
218,407,718
(67,812,287)
150,595,431
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013
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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
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
NOTES aTO THE CONSOLIDATED FINANCIAL STATEMENTS
AT 31 DECEMBER 2012
37
2013
USD
22,136,020
63,302,805
8,288,678
2012
USD
23,785,793
67,812,287
8,391,047
93,727,503
99,989,127
2013
USD
2012
USD
97,573,580
108,084,662
205,658,242
63,992,637
130,507,875
194,500,512
The time deposits, which are substantially denominated in US Dollars, are made for varying periods between one month to
one year (2012: between one month to one year) depending on the immediate cash requirements of the Group.
All deposits earned an average variable interest rate of 3.07% (2012: 2.21%).
15 - ISSUED SHARE CAPITAl
Shares of USD 1 each
16 - TREASURy SHARES
Authorised, issued and fully paid
2013
USD
2012
USD
143,375,678
143,375,678
The general shareholders meeting approved in its extraordinary meeting dated 24 November 2013 the purchase of 5.51% of
issued stock to be treated as treasury stock in accordance with the DIFC laws and regulations. The number of treasury shares
as of 31 December 2013 amounted to 7,900,000 shares. These shares were recorded at an amount of USD 12,000,000 as of
31 December 2013 (2012: Nil).
17 - DIvIDENDS PAID
At a meeting held on 20 March 2013, the shareholders resolved to pay dividend of USD 0.05 ( 2012: USD 0.04 ) per share
amounting to USD 7,168,784 ( 2012: USD 5,735,027 ) related to the year ended 31 December 2012. Further, the shareholders
also resolved on 28 July 2013 to pay interim dividends of USD 0.04 ( 2012: USD 0.02 ) per share amounting to USD 5,419,027
( 2012: USD 2,867,513 ) related to the current year.
38
39
18 - OTHER lIABIlITIES
22 -COMMITMENTS AND CONTINGENCIES
Accounts payable
Accrued expenses
19 - INSURANCE PAyABlES
Payables due to insurance companies and intermediaries
reinsurers – amounts due in respect of ceded premium
2013
USD
429,311
2,681,962
3,111,273
2012
USD
537,226
3,112,057
3,649,283
2013
USD
2012
USD
940,890
23,300,311
24,241,201
2,183,916
17,383,556
19,567,472
As of the date of the financial statements, the Group is contingently liable for the following:
•
letters of Guarantee amounting to USD 14,124 (31 December 2012: USD 9,181) to the order of the Jordanian Ministry of
Trade and Industry with margin of USD 1,412 (31 December 2012: USD 918).
letters of Credit amounting to USD 29,258,076 to the order of reinsurance companies for collateralising insurance
•
contract liabilities in accordance with the reinsurance arrangements (31 December 2012: USD 28,256,883).
•
letter of Guarantee amounting to USD 398,258 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 2012: USD 373,192).
23 - RElATED PARTy TRANSACTIONS
related parties represent major shareholders, associates, directors and key management personnel of the Group and entities
controlled, jointly controlled or significantly influenced by such parties, pricing policies and terms of these transactions are
approved by the Group’s management.
Transactions with related parties included in the consolidated financial statements are as follows:
20 -UNEARNED COMMISSIONS
The movement in unearned commissions in the consolidated statement of financial position is as follows:
As at 1 January
Commissions received
Commissions earned
As at 31 December
21 -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
2013
USD
2012
USD
8,717,113
7,262,951
(9,350,877)
6,629,187
9,214,391
13,864,192
(14,361,470)
8,717,113
2013
USD
2012
USD
7,679,292
1,949,238
1,622,258
(3,972)
(895,203)
(1,269,361)
902,949
9,985,201
6,482,521
1,591,438
366,140
(63,782)
(1,231,640)
(1,087,858)
880,477
6,937,296
Consolidated statement of income
Commision paid
Eastern Insurance Brokers Ltd – Owned by immediate family member
of the major shareholder
2013
USD
2012
USD
2,532
278,412
Compensation of key management personnel of the Group, consisting of salaries and benefits was USD 5,268,841 (31
December 2012: USD 4,884,474). Out of the total amount of key management personnel compensation, an amount of USD
285,533 (2012: USD 83,311) represents long term benefits. These long term benefits represents 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 options vest equally over a span of 5 years from the grant date. The
bonus due amounts to the excess of book value on vesting date over grant date plus an additional 20% on the value of
the excess.
24 - TAX (EXPENSE) CREDIT ON RESUlTS OF SUBSIDIARy
Tax (expense) credit on results of subsidiary resulted from the profit/ 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 (expense) credit on profit/ losses of the subsidiary IGI UK
Ending balance
2013
USD
820,542
(89,924)
2012
USD
118,532
702,010
730,618
820,542
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013 40
25 - RISK MANAGEMENT
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.
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:
2013
Europe
Middle / Far East & Africa
North America
Rest of the World
Gross written
premiums
Concentration
Percentage
USD
42,010,789
100,686,543
2,967,044
94,343,883
240,008,259
%
18%
42%
1%
39%
2012
Europe
Middle / Far East & Africa
North America
Rest of the World
41
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%
Line of business concentration of risk
The Group’s insurance risk based on line of business concentration is illustrated in the table below:
2013
Energy
Property
Engineering
Marine
reinsurance
Financial
Casualty
Aviation
Ports & Terminals
Political Violence
2012
Energy
Property
Engineering
Marine
reinsurance
Financial
Casualty
Aviation
Ports & Terminals
Gross written
premiums
Concentration
Percentage
USD
96,513,100
45,414,264
11,603,367
13,566,699
19,655,499
16,147,305
5,711,979
9,629,808
14,107,291
7,658,947
%
40%
19%
5%
6%
8%
7%
2%
4%
6%
3%
240,008,259
Gross written
premiums
Concentration
Percentage
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
38%
18%
9%
9%
9%
7%
1%
5%
3%
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013 42
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
(2012: 5%). The impact on gross claims liabilities assumes that recovered rates remain constant.
2012
Impact on gross insurance
contract claims liabilities
Impact on net insurance
contract claims liabilities
%
Impact on
profit
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
43
-
4.75
6.86
1.48
2013
2012
+ 5
+ 5
12,627,077
9,461,937
(9,461,937)
10,920,386
7,529,772
(7,529,772)
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:
2013
2012
There is no significant difference between contractual repricing or maturity dates.
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.
Increase/decrease in
basis points
+ 25
- 50
+ 25
- 50
Effect on profit
for the year
USD
793,649
(1,587,299)
671,076
(1,342,152)
Less
than 1 year
1 to 5 years
More than 5
years
Non-interest
bearing items
Total
Effective
Interest
Rate on
interest
bearing
assets
2013
USD
USD
USD
USD
USD
(%)
Investments held for trading
-
-
-
1,344,402
1,344,402
Available-for-sale investments
23,011,753
55,849,807
28,499,244
88,950,405
196,311,209
Held to maturity investments
1,440,677
Cash and bank balances
205,658,242
-
-
3,000,000
-
-
-
4,440,677
205,658,242
-
3.56
4.47
1.78
230,110,672 55,849,807
31,499,244 90,294,807 407,754,530
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
80% 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.
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013 44
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AT 31 DECEMBER 2013
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AT 31 DECEMBER 2013 45
Reinsurance and fixed income investments are monitored for the occurrence of a downgrade or other changes that might
cause 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.
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 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
USD
USD
USD
USD
USD
USD
Total
USD
Neither past due nor impaired
Investment
grade
Non investment
grade
(satisfactory)
Non investment
grade
(un-satisfactory)
Past due but
not impaired
USD
USD
USD
USD
Total
USD
2013
Available for sale investments - bonds and
debt securities
Held to maturity investments - bonds and
debt securities
Insurance receivables
reinsurance assets
Cash and bank balances
101,651,392
5,709,412
3,000,000
1,440,677
-
39,944,033
154,594,047
75,769,440
53,783,470
51,064,195
299,189,472
187,767,194
2012
Available for sale investments - bonds and
debt securities
Held to maturity investments - bonds and
debt securities
Insurance receivables
reinsurance assets
Cash and bank balances
58,705,108
10,704,116
3,000,000
1,520,649
-
45,619,688
109,458,867
73,585,206
54,369,439
85,041,645
216,783,663
225,221,055
-
-
-
-
-
-
-
-
-
-
-
-
-
-
107,360,804
4,440,677
19,340,348
95,109,788
-
-
93,727,503
205,658,242
19,340,348 506,297,014
-
-
69,409,224
4,520,649
24,157,055
97,742,261
-
-
99,989,127
194,500,512
24,157,055
466,161,773
31 December 2013
80,178,750
8,938,857 2,205,496 1,914,961
1,853,773
17,951
95,109,788
31 December 2012
73,585,206
14,359,342
5,226,747
2,664,185
1,906,781
-
97,742,261
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 or when collectability of the amount is
otherwise assessed as being doubtful. 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.
The following table provides an aging analysis of trade receivables arising from Specialty Mall customers past due but not
impaired:
Past due but not impaired
Neither past due
nor impaired
Up to 90 days 91 to 180 days
USD
USD
USD
Total
USD
31 December 2013
31 December 2012
-
85,607
73,933
30,591
-
21,784
73,933
137,982
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.
46
2013
New York Stock Exchange
Amman Stock Exchange
Saudi Stock Exchange
Qatar Stock Exchange
NASDAQ Dubai
Other quoted
2012
New York Stock Exchange
Amman Stock Exchange
Saudi Stock Exchange
Qatar Stock Exchange
NASDAQ Dubai
Other quoted
47
Change in
equity price
Effect on profit for
the year
Effect on
equit
USD
USD
USD
2013
Less than one year More than one year
No term
USD
USD
USD
Total
USD
Insurance contracts liabilities
293,771,966
97,923,989
Other liabilities
Insurance payable
Unearned commissions
Total liabilities
2012
3,111,273
24,241,201
4,971,890
-
-
1,657,297
326,096,330
99,581,286
Insurance contracts liabilities
268,965,393
89,655,131
Other liabilities
Insurance payable
Unearned commissions
Total liabilities
3,649,283
19,567,472
6,537,835
-
-
2,179,278
298,719,983
91,834,409
-
-
-
-
-
-
-
-
-
-
391,695,955
3,111,273
24,241,201
6,629,187
425,677,616
358,620,524
3,649,283
19,567,472
8,717,113
390,554,392
+5%
+5%
+5%
+5%
+5%
+5%
-
-
-
-
-
67,220
Change in
equity price
Effect on profit
for the year
USD
+5%
+5%
+5%
+5%
+5%
+5%
USD
-
-
-
-
-
73,096
964,694
53,085
1,244,885
739,153
554,637
284,447
Effect on
equity
USD
725,665
49,153
1,216,700
563,495
426,262
945,291
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:
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013 48
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:
2012
Less than one
year
More than one
year
No term
USD
USD
USD
49
Total
USD
ASSETS
Premises and equipment
Intangible assets
Investment in associated companies
Investments
Investment properties
-
-
-
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
2013
Less than one
year
More than one
year
No term
USD
USD
USD
Total
USD
-
-
-
3,849,915
180,389
-
-
3,849,915
180,389
-
11,703,630
11,703,630
24,452,430
87,349,051
90,294,807
202,096,288
-
28,550,500
28,550,500
-
20,715,960
95,091,837
73,933
2,596,601
-
6,905,320
17,951
-
108,745
730,618
72,367,797
21,359,706
205,658,242
-
-
-
-
-
-
-
-
27,621,280
95,109,788
73,933
2,705,346
730,618
93,727,503
205,658,242
Insurance receivables
Trade receivables
Other assets
Deferred tax assets
reinsurance assets
Cash and bank balances
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Issued share capital
420,956,800
120,501,695
130,548,937
672,007,432
Foreign currency translation reserve
Cumulative changes in fair values of investments
-
-
-
-
-
-
-
-
-
-
-
-
143,375,678
143,375,678
(12,000,000)
(12,000,000)
(214,298)
(214,298)
22,821,709
22,821,709
92,346,727
92,346,727
246,329,816
246,329,816
retained earnings
Total equity
LIABILITIES
Insurance contracts liabilities
Other liabilities
Insurance payable
Unearned commissions
Total liabilities
ASSETS
Premises and equipment
Intangible assets
Investment in associated companies
Investments
Investment properties
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
Treasury shares
Foreign currency translation reserve
Cumulative changes in fair values of investments
retained earnings
Total equity
LIABILITIES
97,742,261
137,982
2,033,616
-
-
-
155,407
820,542
77,089,607
22,899,520
194,500,512
-
-
-
-
-
-
-
-
30,754,592
97,742,261
137,982
2,189,023
820,542
99,989,127
194,500,512
409,321,685
94,518,644
118,854,904
622,695,233
-
-
-
-
-
-
-
-
-
-
143,375,678
143,375,678
(230,995)
15,325,027
73,671,131
(230,995)
15,325,027
73,671,131
232,140,841
232,140,841
268,965,393
89,655,131
3,649,283
19,567,472
6,537,835
-
-
2,179,278
298,719,983
91,834,409
-
-
-
-
-
358,620,524
3,649,283
19,567,472
8,717,113
390,554,392
Insurance contracts liabilities
293,771,966
97,923,989
Other liabilities
Insurance payable
Unearned commissions
Total liabilities
3,111,273
24,241,201
4,971,890
-
-
1,657,297
326,096,330
99,581,286
-
-
-
-
-
391,695,955
3,111,273
24,241,201
6,629,187
425,677,616
TOTAL EQUITY AND LIABILITIES
326,096,330
99,581,286
246,329,816
672,007,432
TOTAL EQUITY AND LIABILITIES
298,719,983
91,834,409 232,140,841
622,695,233
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.
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013 50
51
Fair value
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation
techniques:
level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable,
either 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
31 December 2013
Level 1
USD
Level 2
USD
1,344,402
-
189,883,134
6,428,075
191,227,536
6,428,075
31 December 2012
Level 1
USD
Level 2
USD
1,461,920
-
137,902,657
7,331,216
139,364,577
7,331,216
Total
USD
1,344,402
196,311,209
197,655,611
Total
USD
1,461,920
145,233,873
146,695,793
There were no transfers between Level 1, 2 and 3 during the year or in either the years ended 31 December 2013 or 31
December 2012.
There are no level 3 investments.
26 - COMPARATIvE FIGURES
Some of 2012 balances were reclassified to correspond with 31 December 2013. Classifications have no effect on net profit
and equity.
Reported in
previous year
USD
Reclassifications
Reclassified in current year
USD
USD
Claims*
Reinsurers’ share of claims*
(111,182,933)
28,746,306
4,447,000
(4,447,000)
reinsurance assets*
86,177,127
13,812,000
Insurance contracts liabilities*
344,808,524
(13,812,000)
Other assets**
Deferred tax assets**
TOTAL
2,167,665
841,900
3,009,565
21,358
(21,358)
(106,735,933)
24,299,306
99,989,127
358,620,524
2,189,023
820,542
3,009,565
*The change represents grossing up the IBNR for the prior year to reflect Gross IBNR and Reinsurers’ share of IBNR separately. The grossing
up of IBNR had no effect on net profit or equity.
** The above reclassification has resulted from recording an amount of USD 21,358 in the deferred tax assets that should had been recorded
in other assets. Foregoing reclassification had no effect on net profit or equity.
27 - SUBSEqUENT EvENTS
There have been no material events between 31 December 2013 and the date of this report which are required to be
disclosed.
INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITEDNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2013 INTERNATIONAL GENERAL INSURANCE HOLDINGS LIMITED
IGI OFFICES
52
International General Insurance Holdings
LImited
International General Insurance Company
(Dubai) Limited
Address:
Office 606, Level 6, Tower 1
Al Fattan Currency House,
Dubai International Financial Centre,
P.O. Box 506646, Dubai
United Arab Emirates
Telephone: +971 4 441 6797
Facsimile: +971 4 441 6514
IGI Underwriting Company Limited
Address:
74 Abdel Hamid Sharaf St.
P.O. Box 941428
Amman 11194
Jordan
Telephone:+962 6 562 2009
Facsimile: +962 6 566 2085
regulated by the Jordan Insurance Commission
Office 606, Level 6, Tower 1
Al Fattan Currency House,
Dubai International Financial Centre,
P.O. Box 506646, Dubai
United Arab Emirates
Telephone: +971 4 441 6797
Facsimile: +971 4 441 6514
regulated by the Dubai Financial Services Authority
International General Insurance Company
limited-Labuan Branch
Address:
level 1, lOT 7, Block F,
Saguking Commercial Building
Jalan Patau - Patau,
87000 labuan,
Malaysia
Telephone: +6 (087) 410 745
Facsimile: +6 (087) 419 755
regulated by the Labuan Financial Services Authority
International General Insurance
Company Limited
Address:
44 Church Street
Hamilton HM 12
Bermuda
Telephone: +1 (441) 295 3688
Facsimile: +1 (441) 295 2584
North Star Underwriting Limited
Address:
15-18 lime Street
london EC3M 7AN
England
Telephone: +44 (0) 20 7220 0100
Facsimile: +44 (0) 20 7220 0101
regulated by the Bermuda Monetary Authority
regulated by the UK Financial Services Authority
International General Insurance
Company (UK) Limited
Address:
15-18 lime Street
london EC3M 7AN
England
Telephone: +44 (0) 20 7220 0100
Facsimile: +44 (0) 20 7220 0101
regulated by the UK Financial Services Authority
Kuala Lumpur Marketing Office
Address:
29th Floor, Menara TA One
Jalan P Ramlee 50250
Kuala Lumpur, Malaysia
Telephone: +6 (032) 166 1786
Facsimile: +6 (032) 171 1786