ANNUAL REPORT
& ACCOUNTS
2018
INTERNATIONAL GENERAL
INSURANCE HOLDINGS
LIMITED
2018
ANNUAL REPORT
& ACCOUNTS
INTERNATIONAL
GENERAL
INSURANCE
HOLDINGS
LIMITED
2018 ANNUAL REPORT
& ACCOUNTS
In 2018, the
Group surpassed
the $300 million
gross written
premium
(GWP) mark.
In 2018, Standard &
Poor’s and AM Best
both reaffirmed IGI’s
rating of A-
International General Insurance Holdings Limited
Annual Report & Accounts 2018
CONTENTS
ABOUT US
BOARD OF DIRECTORS
LETTER FROM THE
BOARD: IGI CONTINUES
TO STRIVE
FINANCIAL HIGHLIGHTS
FINANCIAL STATEMENTS
& ACCOUNTS
1
3
5
7
9
International General Insurance Holdings Limited
Annual Report & Accounts 2018
ABOUT US
We are a leading international specialist commercial insurer and reinsurer,
underwriting a diversified portfolio of specialty lines.
Established in 2001, we are an entrepreneurial business with a worldwide
portfolio. Registered in the Dubai International Financial Centre with operations
in Bermuda, London, Dubai, Amman, Kuala Lumpur and Casablanca, we are
renowned for delivering outstanding levels of service to our clients and brokers.
OFFICE
LOCATIONS
1. BERMUDA
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
3. LONDON
15-18 Lime Street
London EC3M 7AN
England
2. CASABLANCA
32-42, Bd Abdelmoumen
Residence Walili 25
4th Floor P.O. Box 20000
Casablanca
Morocco
4. AMMAN
74 Abdel Hamid Sharaf St.
P.O. Box 941428
Amman 11194
Jordan
3
5. DUBAI
Office 606, Level 6, Tower 1
Al Fattan Currency House
Dubai International
Financial Centre
P.O. Box 506646, Dubai
United Arab Emirates
7. KUALA LUMPUR
29th Floor, Menara TA One
Jalan P Ramlee 50250
Kuala Lumpur
Malaysia
6. LABUAN
Level 1, LOT 7, Block F
Saguking Commercial
Building
Jalan Patau – Patau
87000 Labuan
Malaysia
1
2
4
5
6
7
1
ENERGY
MARINE & AVIATION
PROPERTY
Upstream Energy
Downstream Energy
Renewable Energy
Ports & Terminals
Marine Liability
General Aviation
Property
Forestry
Construction & Engineering
Political Violence
Denial of Access
Business Interruption
Casualty
PROFESSIONAL &
FINANCIAL LIABILITIES
Financial Institution
Professional Indemnity
Directors’ & Officers’
Legal Expenses
BUSINESS
CLASSES
REINSURANCE
Treaty reinsurance
International General Insurance Holdings Limited
Annual Report & Accounts 2018
2
International General Insurance Holdings Limited
Annual Report & Accounts 2018
BOARD OF DIRECTORS
MOHAMMAD ABU GHAZALEH
Chairman
(Chairman and CEO, Fresh Del
Monte Produce Inc. – Miami)
WASEF JABSHEH
CEO & Vice Chairman
KHALIFA AL MULHEM
Director
(Chairman, National Polypropylene
Company Limited – Saudi Arabia)
DAVID KING
Director
(Non-executive Director of the Board of
Directors of Forex Capital Markets Limited)
DAVID ANTHONY
Director
HANI JABSHEH
Director
(Co-founder Albawaba.com)
ANWAR AL JABRI
Director
(CEO Jabreen Capital – Oman)
3
International General Insurance Holdings Limited
Annual Report & Accounts 2018
4
International General Insurance Holdings Limited
Annual Report & Accounts 2018
In 2018, the
Group surpassed
the $300 million
gross written
premium (GWP)
mark.
In 2018, Standard &
Poor’s and AM Best
both reaffirmed
IGI’s rating of A-
LETTER FROM THE BOARD:
IGI CONTINUES TO STRIVE FOR PROFITABLE GROWTH
2018 was the year in which IGI demonstrated the results of a
clear and focused vision of growth in new and existing markets,
and the Board of Directors is pleased to announce a strong
performance and the continuation of the Group’s clear strategy
for controlled and profitable growth.
The insurance industry was shaken by Mother
Nature in 2017, after a series of extreme
weather events resulted in one of the most
expensive years for natural catastrophes,
creating a market-wide impact on
underwriting profit. However, the Board fully
understands that it is the insurance industry’s
role to be a supportive partner in time of need
and provide cover and relief to help restore
businesses, properties and communities
when disasters occur.
Last year, IGI resumed its strategy of
profitable growth, with the Group steadily
building an international business based on
specialist regional expertise and judicious
underwriting. The Group generated a net
profit of US$26.5 million for the 2018 year,
compared to US$7.9 million the year before.
The increase in net profit was aided by an
18% growth in gross earned premium, and a
9% positive variance in net claims. IGI posted
a combined ratio of 88.97%, compared to
103.08% in 2017.
Meanwhile, IGI surpassed the $300 million
gross written premium (GWP) mark for the
first time, achieving a 9.5% growth from
US$275.3 million in 2017 to US$301.6 million
in 2018.
ON TRACK
Our balance sheet remains strong and the
tracks we have been laying down for future
success mean we are well placed to act on
the opportunities presented by the
changing market.
As a company, our balance in product and
geography has benefited all our stakeholders,
including our clients, brokers, policyholders
and shareholders. IGI’s expansion into
Casablanca and Kuala Lumpur, has opened
up new business opportunities, while the
Group has seen noticeable results from our
newest lines of business in London, including
Directors & Officers, Legal Expenses and
Renewable Energy.
IGI also continued to strengthen its global
expertise and capabilities in technology and
data with key appointments to the Amman
and London offices, as well as making some
important hires to its Board to help with the
Group’s initiatives to further strengthen its
core operations.
IGI’S REGIONAL OPERATIONS EXPAND
Despite a competitive trading environment,
Asia continues to offer significant
opportunities. IGI will further strengthen its
offering in Asia Pacific, with a planned growth
strategy from the Kuala Lumpur office, now
serving as the Group’s regional hub.
Meanwhile in the UK, delegates from the
London office attended the British Insurance
Brokers Association (BIBA) Conference in
May to raise the company’s profile in the UK
regional broker market. The event surpassed
expectations and it will now become a regular
feature in the calendar for the London team
as the office continues to expand business
lines and underwriting teams in the UK.
ACHIEVEMENTS IN 2018
At IGI, we continued our strategy of investing
in our people and our business during 2018
and will continue this throughout 2019 on our
journey to be a truly international (re)insurer
of choice.
In November 2018, IGI Chief Executive Officer
Wasef Jabsheh was awarded Ernst & Young’s
5
International General Insurance Holdings Limited
Annual Report & Accounts 2018
Entrepreneur of the Year for Jordan. Mr.
Jabsheh will join entrepreneurs from all over
the world in June 2019 as a nominee for the
‘EY World Entrepreneur of the Year’.
Meanwhile, in July 2018, rating agency
Standard & Poor’s reaffirmed IGI’s financial
strength rating of A- with a stable outlook,
followed by A.M. Best also reaffirming the
company’s rating at A- (Excellent), with a
positive outlook in August.
During 2018, IGI continued its support of
cancer research and charitable organisations
and put ‘diversity and inclusion’ under
the spotlight by backing various local and
international initiatives.
IGI continued its support of Equal Playing
Field, an initiative that challenges gender
disparity in sports, and also hosted the ‘Dive-
In Festival’ in Jordan in September. Dive-In is
an annual Lloyd’s of London-backed initiative
that aims to encourage an inclusive culture in
insurance organisations all over the globe. IGI
also partnered with the Jordanian-founded
social enterprise ‘The World of Letters’, which
spearheaded a collective women’s movement
called Women as Partners in Progress (WPP),
that looks to address gender imbalance in the
work place.
stable environment by increasing rates and
bringing pricing back to a point where they
reflect technical adequacy.
OUTLOOK
The strength of the IGI brand and the
company’s values are important drivers
of our growth and they have helped us to
navigate the shifting tides in the markets in
which we operate. The service we provide
to our clients and brokers stems from a
strong corporate culture of honesty and
transparency, which is shared by the Board
and the management team right through to
our very newest recruits.
Our growth has continued and IGI has
profitably diversified into 15 different classes
of business and set up five operations around
the world.
The market continues to bring opportunities
in the classes of business and territories in
which IGI operates, and the outlook for our
industry looks positive. Important measures
are being made by industry bodies and
individual companies to facilitate a more
Internally, IGI has taken important steps to
invest in our people, products, infrastructure
and technology, and together with a
balanced business portfolio and a strict
ethos of prudent underwriting, we are well-
placed to take advantage of the changing
market conditions.
The outlook for our industry is more positive
than it was last year, and IGI is looking
forward to more profitable years like 2018.
We would like to thank all our brokers and
clients for the support and the confidence
they continue to place in IGI.
At IGI, it is our people who differentiate us,
and our successful growth is due to the great
women and men who work here. It is the hard
work, commitment and entrepreneurship
of IGI’s employees that have allowed the
company to achieve what it has to date, and
we would like to thank them for their loyalty
and dedication.
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International General Insurance Holdings Limited
Annual Report & Accounts 2018
FINANCIAL HIGHLIGHTS
PROFIT FOR
THE YEAR
$26.5m
SHAREHOLDER’S
EQUITY
$309.8m
POSITIVE OUTLOOK
RATING
A- by A.M. Best
STABLE OUTLOOK
RATING
A- by S&P
7
International General Insurance Holdings Limited
Annual Report & Accounts 2018
INVESTMENT
INCOME
$10.4m
GROSS WRITTEN
PREMIUM
$301.6m
NET UNDERWRITING
PROFIT
$55.8m
8
International General Insurance Holdings Limited
Annual Report & Accounts 2018
FINANCIAL STATEMENTS & ACCOUNTS
Independent auditor’s report to the shareholders of
International General Insurance Holdings ltd.
Dubai - United Arab Emirates
REPORT ON THE AUDIT OF THE
FINANCIAL STATEMENTS
OPINION
We have audited the 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
2018, and the consolidated statement
of comprehensive income, consolidated
statement of changes in equity and
consolidated statement of cash flows for
the year then ended, and notes to the
consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, the accompanying
consolidated financial statements present
fairly, in all material respects, the financial
position of the Group as at 31 December 2018
and its financial performance and its cash
flows for the year then ended in accordance
with International Financial Reporting
Standards (“IFRSs”).
BASIS FOR OPINION
We conducted our audit in accordance
with International Standards on Auditing
(“ISAs”). Our responsibilities under those
standards are further described in the
Auditor’s responsibilities for the audit of
the consolidated financial statements
section of our report. To the fullest extent
permitted by law, we do not accept or assume
responsibility to anyone other than the Group
and the shareholders of the Group (as a
body), for our audit work, for this report, or
for the opinions we have formed. We are
independent of the Group in accordance with
the International Ethics Standards Board for
Accountants’ Code of Ethics for Professional
Accountants (the “IESBA Code”) together with
the ethical requirements that are relevant
to our audit of the consolidated financial
statements in the Dubai International
Financial Centre (“DIFC”), and we have
fulfilled our other ethical responsibilities in
accordance with these requirements and
the IESBA Code. We believe that the audit
evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
RESPONSIBILITIES OF MANAGEMENT
AND THOSE CHARGED WITH
GOVERNANCE FOR THE CONSOLIDATED
FINANCIAL STATEMENTS
Management is responsible for the
preparation and fair presentation of the
consolidated financial statements in
accordance with IFRSs and in compliance
with the applicable provisions of the
Companies Law pursuant to DIFC Law No.
5 of 2018, and for such internal control
as management determines is necessary
to enable the preparation of consolidated
financial statements that are free from
material misstatement, whether due to
fraud or error.
In preparing the consolidated financial
statements, management is responsible for
assessing the Group’s ability to continue as
a going concern, disclosing, as applicable,
matters related to going concern and using
the going concern basis of accounting unless
the Directors either intend to liquidate the
Group or to cease operations, or have no
realistic alternative but to do so.
Those charged with governance are
responsible for overseeing the Group’s
financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR
THE AUDIT OF THE CONSOLIDATED
FINANCIAL STATEMENTS
Our objectives are to obtain reasonable
assurance about whether the consolidated
financial statements as a whole are free
from material misstatement, whether due
to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable
assurance is a high level of assurance, but
is not a guarantee that an audit conducted
in accordance with ISAs will always detect
a material misstatement when it exists.
Misstatements can arise from fraud or error
and are considered material if, individually
or in the aggregate, they could reasonably
be expected to influence the economic
decisions of users taken on the basis of these
consolidated financial statements.
As part of an audit in accordance with ISAs,
we exercise professional judgment and
maintain professional skepticism throughout
the audit. We also:
• Identify and assess the risks of material
misstatement of the consolidated financial
statements, whether due to fraud or error,
design and perform audit procedures
responsive to those risks, and obtain audit
evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk
of not detecting a material misstatement
resulting from fraud is higher than for one
resulting from error, as fraud may involve
collusion, forgery, intentional omissions,
misrepresentations, or the override of
internal control.
• Obtain an understanding of internal control
relevant to the audit in order to design audit
procedures that are appropriate in the
circumstances, but not for the purpose of
expressing an opinion on the effectiveness
of the Group’s internal control.
• Evaluate the appropriateness of accounting
policies used and the reasonableness
of accounting estimates and related
disclosures made by management.
• Conclude on the appropriateness of
management’s use of the going concern
basis of accounting and, based on the audit
evidence obtained, whether a material
uncertainty exists related to events or
conditions that may cast significant doubt
on the Group’s ability to continue as a going
concern. If we conclude that a material
uncertainty exists, we are required to draw
attention in our auditor’s report to the
related disclosures in the consolidated
financial statements or, if such disclosures
are inadequate, to modify our opinion.
Our conclusions are based on the audit
evidence obtained up to the date of our
auditor’s report. However, future events or
9
International General Insurance Holdings Limited
Annual Report & Accounts 2018
conditions may cause the Group to cease to
continue as a going concern.
REPORT ON OTHER LEGAL AND
REGULATORY REQUIREMENTS
• Evaluate the overall presentation, structure
and content of the consolidated financial
statements, including the disclosures,
and whether the consolidated financial
statements represent the underlying
transactions and events in a manner that
achieves fair presentation.
We communicate with those charged with
governance regarding, among other matters,
the planned scope and timing of the audit
and significant audit findings, including any
significant deficiencies in internal control that
we identify during our audit.
We also 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. 5 of 2018. We have obtained
all the information and explanations which
we required for the purpose of our audit and,
to the best of our knowledge and belief, no
violations of the Companies Law pursuant to
DIFC Law No. 5 of 2018 have occurred during
the year which would have had a material
effect on the business of the Group or on its
financial position.
Ernst and Young
25 March 2019
Dubai, United Arab Emirates
Ernst and Young Dubai
P.O. Box 9267, 28th floor,
Al Saqr Business Tower, Sheikh Zayed Road
Dubai, United Arab Emirates
Tel: +971 4 332 4000
dubai@ae.ey.com | ey.com/mena
In 2018, the
Group surpassed
the $300 million
gross written
premium (GWP)
mark.
In 2018, Standard
& Poor’s and AM
Best both
reaffirmed IGI’s
rating of A-
10
International General Insurance Holdings Limited
Annual Report & Accounts 2018
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2018
ASSETS
Property, premises and equipment
Intangible assets
Investment in associates
Investment properties
Investments
Deferred policy acquisition costs
Insurance receivables
Other assets
Deferred tax assets
Reinsurance share of unearned premiums
Reinsurance share of outstanding claims
Deferred XOL premiums
Cash and bank balances
TOTAL ASSETS
The attached notes 1 to 27 form part of these consolidated financial statements.
Notes
2018
USD
2017
USD
3
4
5
6
7
8
9
10
25
11
12
13
12,216,997
2,689,028
11,973,419
30,374,290
13,090,537
2,029,015
11,827,854
30,374,290
200,853,371
235,880,566
35,872,427
32,915,965
114,679,640
113,290,374
5,061,050
985,665
32,566,847
187,565,382
12,448,671
260,059,595
5,309,729
991,449
41,126,963
180,020,116
11,612,654
210,322,741
907,346,382
888,792,253
11
International General Insurance Holdings Limited
Annual Report & Accounts 2018
Notes
2018
USD
2017
USD
14
15
15
14
14
12
11
17
18
19
143,375,678
143,375,678
2,773,000
2,773,000
(15,050,000)
(294,929)
902,264
178,074,162
309,780,175
384,379,841
168,254,688
8,052,731
28,868,563
8,010,384
597,566,207
907,346,382
–
(269,206)
15,708,956
150,817,319
312,405,747
383,227,441
156,694,025
7,093,914
19,017,107
10,354,019
576,386,506
888,792,253
EQUITY AND LIABILITIES
EQUITY
Issued share capital
Additional paid in capital
Treasury shares
Foreign currency translation reserve
Fair value reserve
Retained earnings
TOTAL EQUITY
LIABILITIES
Gross outstanding claims
Gross unearned premiums
Other liabilities
Insurance payables
Unearned commissions
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
The consolidated financial statements were authorized for issue in accordance with a resolution of the Board of Directors on
21 of March 2019.
12
International General Insurance Holdings Limited
Annual Report & Accounts 2018
CONSOLIDATED STATEMENT OF INCOME
For the year ended 31 December 2018
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
Net share of profit from associates
General and administrative expenses
Provision for doubtful debts and expected credit losses
Other expenses – net
(Loss) gain on exchange
PROFIT BEFORE TAX
Tax (expense) benefit
PROFIT FOR THE YEAR
The attached notes 1 to 27 form part of these consolidated financial statements.
Notes
2018
USD
2017
USD
11
11
11
11
11
12
12
19
8
20
5
21
9
22
25
301,555,980
275,340,636
(11,560,663)
(23,023,130)
289,995,317
252,317,506
(99,381,593)
(106,497,204)
(8,560,116)
8,988,473
(107,941,709)
(97,508,731)
182,053,608
154,808,775
(211,044,400)
(252,154,218)
125,756,899
158,651,778
17,817,154
16,709,347
(58,780,676)
(52,941,057)
55,802,585
10,216,362
145,565
25,074,625
12,546,694
199,274
(35,351,679)
(31,252,936)
(376,113)
(683,531)
(3,220,822)
26,532,367
(62,241)
26,470,126
–
(609,502)
1,884,885
7,843,040
19,368
7,862,408
13
International General Insurance Holdings Limited
Annual Report & Accounts 2018
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2018
PROFIT FOR THE YEAR
OTHER COMPREHENSIVE INCOME TO BE RECLASSIFIED
TO PROFIT OR LOSS IN SUBSEQUENT PERIODS
Net change in fair value reserve during the year for available
for sale investments
Net change in fair value reserve during the year for bonds at
fair value through OCI
Currency translation differences
Changes in allowance for expected credit losses transferred
to income statement
OTHER COMPREHENSIVE INCOME WHICH WILL NOT BE
RECLASSIFIED TO PROFIT OR LOSS IN SUBSEQUENT PERIODS
Net change in fair value reserve during the year for equities at
fair value through OCI
OTHER COMPREHENSIVE (LOSS) INCOME FOR THE YEAR
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
The attached notes 1 to 27 form part of these consolidated financial statements.
2018
USD
2017
USD
26,470,126
7,862,408
–
4,714,533
(2,706,303)
(25,723)
29,903
(5,449,605)
(8,151,728)
18,318,398
–
93,529
–
–
4,808,062
12,670,470
14
International General Insurance Holdings Limited
Annual Report & Accounts 2018
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2018
OPERATING ACTIVITIES
Profit before tax
ADJUSTMENTS FOR:
Notes
2018
USD
2017
USD
26,532,367
7,843,040
Depreciation and amortization
3, 4
1,359,960
–
376,113
–
–
(2,048,908)
948,802
763,569
29,903
–
1,485,134
(3,133,556)
–
71,863
(18,967)
–
–
–
–
(95,582)
(10,741,945)
(10,123,067)
(145,565)
3,220,822
(199,274)
(1,884,885)
20,295,118
(6,055,294)
Gain on sale of available-for-sale investments
Provision for doubtful debts and expected credit losses
Impairment of available for sale investments
Gain on sale of premises and equipment
Realized gain on sale of financial assets at FVTPL
Loss on revaluation of financial assets at FVTPL
Loss on sale of bonds at fair value through OCI
Expected credit loss on bonds at fair value through OCI
Loss on revaluation of held for trading investments
Dividends and interest income
Net share of profit from associates
Net foreign exchange differences
CASH FROM (USED IN) OPERATIONS BEFORE WORKING
CAPITAL CHANGES
20
9
20
20
20
20
7
20
20
5
15
International General Insurance Holdings Limited
Annual Report & Accounts 2018
Notes
2018
USD
2017
USD
8,560,116
(8,988,473)
(7,545,266)
(36,954,408)
(836,017)
1,152,400
11,560,663
(2,956,462)
(3,531,380)
248,679
(2,343,635)
(2,733,686)
48,056,147
23,023,130
(4,629,717)
(25,206,326)
3,761,745
2,061,920
WORKING CAPITAL ADJUSTMENTS
Reinsurance share of unearned premiums
Reinsurance share of outstanding claims
Deferred XOL premiums
Gross outstanding claims
Gross unearned premiums
Deferred policy acquisition costs
Insurance receivables
Other assets
Unearned commission
Purchase of available-for-sale investments
–
(49,829,438)
Purchase of financial assets at FVTPL
Purchase of bonds through OCI
Proceeds from maturity of held to maturity investments
Proceeds from maturity of financial assets at amortized cost
Purchase of investment property
Proceeds from sale of available-for-sale investments
Proceeds from sale/maturity of bonds at fair value through OCI
Proceeds from sale of financial assets at FVTPL
Proceeds from redemption of trading securities
Term deposits (from 3 months to 1 year)
Insurance payables
Other liabilities
NET CASH FLOWS FROM OPERATING ACTIVITIES BEFORE TAX
INCOME TAX PAID
(1,380,207)
(36,245,110)
–
500,000
–
–
56,417,470
7,853,250
–
8,302,428
9,851,456
958,817
70,862,320
(56,457)
–
–
3,000,000
–
(264,111)
53,873,230
–
–
81,984
16,338,936
(6,015,735)
2,009,865
11,529,769
–
NET CASH FLOWS FROM OPERATING ACTIVITIES AFTER TAX
70,805,863
11,529,769
16
International General Insurance Holdings Limited
Annual Report & Accounts 2018
CONSOLIDATED STATEMENT OF CASH FLOWS continued
For the year ended 31 December 2018
INVESTING ACTIVITIES
Purchases of property, premises and equipment
Proceeds from sale of premises and equipment
Dividends and interest income
Purchases of intangible assets
NET CASH FLOWS FROM INVESTING ACTIVITIES
FINANCING ACTIVITIES
Dividends paid
Treasury shares
Net cash flows 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
2018
USD
(414,716)
–
2017
USD
(448,954)
50,394
10,741,945
10,123,067
(731,717)
9,595,512
(1,175,761)
8,548,746
16
(4,091,271)
(11,470,054)
(15,050,000)
(19,141,271)
61,260,104
(3,220,822)
116,605,713
–
(11,470,054)
8,608,461
1,884,885
106,112,367
116,605,713
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
13
174,644,995
The attached notes 1 to 27 form part of these consolidated financial statements.
17
International General Insurance Holdings Limited
Annual Report & Accounts 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
At 31 December 2018
Issued
share
capital
USD
Additional
paid in
capital
USD
Treasury
shares
USD
Foreign
currency
translation
reserve
USD
Fair value
reserve
USD
Retained
earnings
USD
Total
USD
AS AT 1 JANUARY 2018
143,375,678
2,773,000
Impact of adopting IFRS 9
(note 2)
AS AT 1 JANUARY 2018 –
(RESTATED)
Total comprehensive income
Purchase of treasury shares
Dividends paid during the
year (note 16)
–
–
143,375,678
2,773,000
–
–
–
–
–
–
–
–
–
–
(269,206)
15,708,956
150,817,319
312,405,747
–
(6,680,687)
4,877,988
(1,802,699)
(269,206)
9,028,269
155,695,307
310,603,048
(25,723)
(8,126,005)
26,470,126
18,318,398
(15,050,000)
–
–
–
–
–
–
(15,050,000)
(4,091,271)
(4,091,271)
AS AT 31 DECEMBER 2018
143,375,678
2,773,000
(15,050,000)
(294,929)
902,264
178,074,162
309,780,175
AS AT 1 JANUARY 2017
143,375,678
2,773,000
Total comprehensive income
Dividends paid during the
year (note 16)
–
–
–
–
AS AT 31 DECEMBER 2017
143,375,678
2,773,000
–
–
–
–
(362,735)
10,994,423
154,424,965
311,205,331
93,529
4,714,533
7,862,408
12,670,470
–
–
(11,470,054)
(11,470,054)
(269,206)
15,708,956
150,817,319
312,405,747
The attached notes 1 to 27 form part of these consolidated financial statements.
18
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
At 31 December 2018
1. ACTIVITIES
International General Insurance Holdings
Ltd (“the Company”) is incorporated as
a company limited by shares under DIFC
Law No. 5 of 2018 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, Dubai International
Financial Centre.
The Company and its subsidiaries (together
“the Group”) operate in the United Arab
Emirates, Bermuda, United Kingdom,
Jordan, Morocco, Malaysia, and the
Cayman Islands.
2. BASIS OF PREPARATION
The consolidated financial statements
have been prepared in accordance with
International Financial Reporting Standards
(IFRSs) as issued by the International
Accounting Standards Board (IASB) and
applicable requirements of UAE laws.
The consolidated financial statements
have been presented in United States
Dollars “USD” which is also the Group’s
functional currency.
The consolidated financial statements
are prepared under the historical cost
convention modified to include the
measurement at fair value of financial
assets at fair value through profit or
loss, financial asset at fair value through
other comprehensive income and
investment properties.
BASIS OF CONSOLIDATION
The financial statements of the subsidiaries
are prepared for the same reporting year
as the Group, using consistent accounting
policies.
The consolidated financial statements
comprise the financial statements of
International General Insurance Holdings
Ltd. and its subsidiaries as at 31 December
2018. 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:
• 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.
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.
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:
• Derecognizes the assets (including
goodwill) and liabilities of the subsidiary;
• Derecognizes the carrying amount of any
non-controlling interest;
• Derecognizes the cumulative translation
differences, recorded in equity, if any;
• Recognizes the fair value of the
consideration received;
• Recognizes the fair value of any
investment retained;
• Recognizes any surplus or deficit in profit
or loss; and
• Reclassifies the parent’s share of
components previously recognized in
other comprehensive income to profit or
loss or retained earnings, as appropriate.
Subsidiaries are fully consolidated from the
date of acquisition, being the date on which
the Group obtains control, and continue to
be consolidated until the date that such
control ceases.
All intra-group balances, transactions,
income and expenses and profits and losses,
including dividends resulting from intra-
group transactions, are eliminated in full.
19
International General Insurance Holdings Limited
Annual Report & Accounts 2018
The Group has the following subsidiaries:
Country of
incorporation
Activity
Ownership
International General Insurance Underwriting
Jordan
Underwriting agency
North Star Underwriting Limited
United
Kingdom
Underwriting agency
2018
100%
100%
2017
100%
100%
International General Insurance Co. Ltd.
Bermuda
Reinsurance and insurance
100%
100%
The following entities are wholly owned
by the subsidiary International General
Insurance Co. Ltd. Bermuda
International General Insurance Company Ltd.
Labuan Branch
Malaysia
Reinsurance and insurance
100%
International General Insurance Company
(UK) Limited
United
Kingdom
Reinsurance and insurance
100%
International General Insurance
Company Dubai Ltd.
Specialty Malls Investment Co.
United Arab
Emirates
Insurance intermediation
and insurance management
Jordan
Real estate properties
development and lease
IGI Services Limited
Cayman Islands
Owning and
chartering aircraft
100%
100%
100%
100%
100%
100%
100%
100%
CHANGES IN ACCOUNTING POLICIES
New standards, interpretations and
amendments adopted by the Group
The accounting policies used in the
preparation of the consolidated financial
statements are consistent with those
used in the preparation of the annual
consolidated financial statements for the
year ended 31 December 2017 except for
the following:
IFRS 15 Revenue from Contracts
with Customers
IFRS 15 supersedes IAS 11 Construction
Contracts, IAS 18 Revenue and related
Interpretations and it applies to all revenue
arising from contracts with customers,
unless those contracts are in the scope
of other standards. The new standard
establishes a five-step model to account
for revenue arising from contracts with
customers. Under IFRS 15, revenue is
recognized at an amount that reflects the
consideration to which an entity expects
to be entitled in exchange for transferring
goods or services to a customer.
The standard requires entities to exercise
judgement, taking into consideration all of
the relevant facts and circumstances when
applying each step of the model to contracts
with their customers. The standard also
specifies the accounting for the incremental
costs of obtaining a contract and the costs
directly related to fulfilling a contract.
The Group adopted IFRS 15 using the
modified retrospective approach.
The effect of adopting IFRS 15 was not
material and it did not impact the Group’s
accounting policy for revenue recognition as
the Group concluded that its main revenue
stream is covered under IFRS 4.
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments replaces
IAS 39 Financial Instruments: Recognition
and Measurement for annual periods
beginning on or after 1 January 2018,
bringing together all three aspects of
the accounting for financial instruments:
classification and measurement;
impairment; and hedge accounting.
The Group applied IFRS 9 prospectively, with
an initial application date of 1 January 2018.
The Group has not restated the comparative
information, which continues to be reported
under IAS 39. Differences arising from the
adoption of IFRS 9 have been recognized
directly in retained earnings and other
components of equity.
Classification and measurement
To determine their classification and
measurement category, IFRS 9 requires
all financial assets to be assessed based
on a combination of the Group’s business
model for managing the assets and the
instruments’ contractual cash
flow characteristics.
The IAS 39 measurement categories for
financial assets (held for trading, available
for sale (AFS), held-to-maturity (HTM) and
loans and receivables (L&R) at amortized
cost) have been replaced by:
• Financial assets at fair value through
profit or loss, including equity instruments
and derivatives.
• Bonds at fair value through other
comprehensive income, with gains or
losses recycled to profit or loss on
derecognition.
• Equity instruments at fair value through
other comprehensive income, with no
recycling of gains or losses to profit or
loss on derecognition.
• Bonds at amortized cost.
20
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
The Group’s classification of its financial
assets is explained in note 2 “Summary of
significant accounting policies”.
The following sets out the impact of
adopting IFRS 9 on the statement of
financial position, including the effect of
replacing IAS 39’s incurred credit loss
calculations with IFRS 9’s Expected Credit
Losses. A reconciliation between the
carrying amounts under IAS 39 and the
balances reported under IFRS 9 as of
1 January 2018 is, as follows:
Financial Assets
Type
IAS 39
Classification
IAS 39
Measurement
USD
IFRS 9
Classification
ECL*
USD
IFRS 9
Measurement
USD
Unquoted bonds
Held to maturity
3,987,288
Amortized cost
(36,698)
3,950,590
Quoted bonds
Available for sale
185,806,397
Quoted equities
Available for sale
32,017,989
Quoted funds &
alternative investments
Available for sale
7,971,825
Unquoted equities
Available for sale
5,936,647
Quoted funds
Held for Trading
160,420
Fair value through other
comprehensive income
Fair value through profit
and loss
Fair value through other
comprehensive income
Fair value through
profit and loss
Fair value through other
comprehensive income
Fair value through
profit or loss
Insurance receivables
Receivables
113,290,374
Insurance receivables at
amortized cost
235,880,566
(73,596)
185,732,801
–
–
–
–
–
11,269,961
20,748,028
7,971,825
5,936,647
160,420
235,770,272
(1,766,001)
111,524,373
349,170,940
(1,876,295)
347,294,645
* The change in carrying amount is a result of additional impairment allowance. See the note on impairment below.
The net impact of the reclassifications and the impairment related to the expected credit losses model as of 1 January 2018 on the Group’s retained
earnings was an increase by USD 4,877,988.
Under IFRS 9, debt instruments are
subsequently measured at fair value through
profit or loss, amortized cost, or fair value
through OCI. The classification is based on
two criteria: The Group’s business model
for managing the assets; and whether
the instruments’ contractual cash flows
represent ‘solely payments of principal
and interest’ on the principal amount
outstanding.
The assessment of the Group’s business
model was made as of the date of initial
application, 1 January 2018. The assessment
of whether contractual cash flows on
debt instruments are solely comprised of
principal and interest was made based on
the facts and circumstances as at the initial
recognition of the assets.
The classification and measurement
requirements of IFRS 9 did not have a
significant impact to the Group. The
Group continued measuring at fair value
all financial assets previously held at fair
value under IAS 39. The following are the
changes in the classification of the Group’s
financial assets:
• Debt instruments classified as Held
to Maturity financial assets as at 31
December 2017 continue to be classified
and measured as debt instruments at
amortized cost beginning 1 January 2018.
The Group expects to hold the assets to
collect contractual cash representing
solely payments of principal and interest.
• Quoted debt instruments classified
as Available-For-Sale (AFS) financial
assets as at 31 December 2017 continue
to be classified and measured as debt
instruments at fair value through OCI
beginning 1 January 2018. The Group
expects not only to hold the assets to
collect contractual cash flows, but also
to sell a significant amount on a relatively
frequent basis. The Group’s quoted debt
instruments are regular government and
corporate bonds that passed the SPPI test.
• Certain quoted equity shares and the
entire portfolio of alternative investments
& mutual funds designated as AFS
financial assets are reclassified and
remeasured as financial assets at fair
value through profit or loss beginning
1 January 2018. The Group elected to
classify irrevocably these investments
under this category at the date of initial
application as it intends to hold these
investments for trading. The AFS
reserve of USD 3,475,423 related to
those securities which was presented
as accumulated OCI, is reclassified to
retained earnings.
21
International General Insurance Holdings Limited
Annual Report & Accounts 2018
• Certain quoted equity shares designated
as AFS financial assets as at 31 December
2017 are reclassified and remeasured
as financial assets at fair value through
OCI beginning 1 January 2018. The Group
elected to classify these investments
under this category at the date of initial
application as it intends to hold these
investments for the foreseeable future.
• Unquoted equity investments designated
as AFS financial assets as at 31 December
2017 are reclassified and remeasured as
financial assets at fair value through OCI
beginning 1 January 2018.
The Group elected to classify irrevocably
its unquoted equity investments under
this category at the date of initial
application as it intends to hold these
investments for the foreseeable future.
As a result of the change in classification,
an impairment loss amounted to USD
3,278,860 that was recognized in profit
or loss during prior periods is reclassified
to accumulated OCI fair reserve as at
1 January 2018.
• Insurance receivables as at 31 December
2017 are held to collect contractual
cash flows and give rise to cash flows
representing solely payments of due
amounts. These are classified and
measured as financial asset at amortized
cost beginning 1 January 2018.
The Group has not designated any
financial liabilities as at fair value
through profit or loss. There are no
changes in classification and
measurement for the Group’s
financial liabilities.
Impairment
The adoption of IFRS 9 has fundamentally
changed the Group’s accounting for
impairment losses for financial assets by
replacing IAS 39’s incurred loss approach
with a forward-looking expected credit
loss (ECL) approach. IFRS 9 requires the
Group to recognize an allowance for ECLs
for all financial assets not held at fair value
through profit or loss and contract assets.
The following set out the impact of replacing
IAS 39’s incurred credit loss calculations
with IFRS 9’s ECLs. A reconciliation between
the carrying amounts under IAS 39 and
the balances reported under IFRS 9 as of 1
January 2018 is, as follows:
As at 1 January 2018
Insurance receivables
Debt instruments at amortized cost
Debt instruments at FVOCI
Allowance for
impairment under
IAS 39
USD
Re-measurement
USD
ECL under
IFRS 9 as at
1 January 2018
USD
2,864,350
1,766,001
4,630,351
–
250,000
3,114,350
73,596
36,698
73,596
286,698
1,876,295
4,990,645
The following table analyses the impact on transition to IFRS 9 on reserves and retained earnings at 1 January 2018:
As at 1 January 2018
Reclassifications
Reclassification of unrealized gains of equities and
other investments reclassified from AFS to FVTPL
Reversal of impairment of unquoted equities
reclassified from AFS to FVOCI
Recognition of Expected Credit Losses under IFRS 9
Insurance receivables
Debt instruments at FVOCI
Debt instruments at amortized cost
Fair value
reserve
USD
Retained
earnings
USD
Total
USD
15,708,956
150,817,319
166,526,275
(3,475,423)
3,475,423
(3,278,860)
3,278,860
–
–
–
73,596
–
(1,766,001)
(1,766,001)
(73,596)
(36,698)
–
(36,698)
Restated at 1 January 2018
9,028,269
155,695,307
164,723,576
22
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
IFRIC Interpretation 22 Foreign Currency
Transactions and Advance Considerations
The Interpretation clarifies that, in
determining the spot exchange rate to
use on initial recognition of the related
asset, expense or income (or part of it)
on the derecognition of a non-monetary
asset or non-monetary liability relating
to advance consideration, the date of the
transaction is the date on which an entity
initially recognizes the non-monetary asset
or non-monetary liability arising from the
advance consideration. If there are multiple
payments or receipts in advance, then
the entity must determine a date of the
transactions for each payment or receipt of
advance consideration.
This Interpretation does not have any
impact on the Group’s consolidated
financial statements.
Amendments to IAS 40 Transfers of
Investment Property
The amendments clarify when an entity
should transfer property, including property
under construction or development
into, or out of investment property. The
amendments state that a change in use
occurs when the property meets, or
ceases to meet, the definition of investment
property and there is evidence of the change
in use. A mere change in management’s
intentions for the use of a property does not
provide evidence of a change in use.
These amendments do not have any
impact on the Group’s consolidated
financial statements.
Amendments to IFRS 2 Classification and
Measurement of Share-based Payment
Transactions
The IASB issued amendments to IFRS 2
Share-based Payment that address three
main areas: the effects of vesting conditions
on the measurement of a cash-settled
share-based payment transaction; the
classification of a share-based payment
transaction with net settlement features for
withholding tax obligations; and accounting
where a modification to the terms and
conditions of a share-based payment
transaction changes its classification
from cash settled to equity settled. On
adoption, entities are required to apply the
amendments without restating prior periods,
but retrospective application is permitted if
elected for all three amendments and other
criteria are met.
If applicable – The Company’s accounting
policy for cash-settled share based
payments is consistent with the approach
clarified in the amendments. In addition,
the Company has no share-based
payment transaction with net settlement
features for withholding tax obligations
and had not made any modifications to the
terms and conditions of its share-based
payment transaction.
These amendments are not relevant to
the Group.
Amendments to IFRS 4 Applying
IFRS 9 Financial Instruments with
IFRS 4 Insurance Contracts
The amendments address concerns arising
from implementing the new financial
instrument standard, IFRS 9, before
implementing IFRS 17 insurance contracts,
which replaces IFRS 4. The amendments
introduce two options for entities issuing
contracts: a temporary exemption from
applying IFRS 9 and an overlay approach.
The Group has applied IFRS 9 with an initial
application date of 1 January 2018.
Amendments to IAS 28 Investments
in Associates and Joint Ventures –
Clarification that measuring investees
at fair value through profit or loss is an
investment-by-investment choice
The amendments clarify that an entity
that is a venture capital organization, or
other qualifying entity, may elect, at initial
recognition on an investment-by-investment
basis, to measure its investments in
associates and joint ventures at fair value
through profit or loss. If an entity, that
is not itself an investment entity, has an
interest in an associate or joint venture
that is an investment entity, the entity may,
when applying the equity method, elect to
retain the fair value measurement applied
by that investment entity associate or joint
venture to the investment entity associate’s
or joint venture’s interests in subsidiaries.
This election is made separately for each
investment entity associate or joint venture,
at the later of the date on which: (a) the
investment entity associates or joint venture
is initially recognized; (b) the associate or
joint venture becomes an investment entity;
and (c) the investment entity associate or
joint venture first becomes a parent.
These amendments do not have any
impact on the Group’s consolidated
financial statements.
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.
IFRS 16 Leases
During January 2016, the IASB issued IFRS
16 “Leases” which sets out the principles
for the recognition, measurement,
presentation and disclosure of leases.
IFRS 16 substantially carries forward the
lessor accounting requirements in IAS 17.
Accordingly, a lessor continues to classify
its leases as operating leases or finance
leases, and to account for those two types
of leases differently.
IFRS 16 introduced a single lessee
accounting model and requires a lessee
to recognize assets and liabilities for all
leases with a term of more than 12 months,
unless the underlying asset is of low value.
A lessee is required to recognize a right-of-
use asset representing its right to use the
underlying leased asset and a lease liability
representing its obligation to make
lease payments.
The new standard will be effective for annual
periods beginning on or after 1 January 2019.
Early application is permitted.
The Group has the option to adopt IFRS
16 retrospectively and restate each prior
reporting period presented or using the
modified retrospective approach by applying
the impact as an adjustment on the opening
retained earnings. The Group will elect to
apply the standard to contracts that were
previously identified as leases applying IAS
17 and IFRIC 4.
The Group will adopt IFRS 16 using the
modified retrospective approach. During
2018, the Group has performed a detailed
impact assessment of IFRS 16.
The Group expect the effect of adopting IFRS
16 to be USD 2,548,101 on the total assets
and USD 2,548,101 on the total liabilities.
IFRS 17 Insurance Contracts
IFRS 17 provides a comprehensive model for
insurance contracts covering the recognition
and measurement and presentation and
23
International General Insurance Holdings Limited
Annual Report & Accounts 2018
disclosure of insurance contracts and
replaces IFRS 4 -Insurance Contracts. The
standard applies to all types of insurance
contracts (i.e. life, non-life, direct insurance
and re-insurance), regardless of the type of
entities that issue them, as well as to certain
guarantees and financial instruments with
discretionary participation features. The
standard general model is supplemented by
the variable fee approach and the premium
allocation approach.
The new standard will be effective for annual
periods beginning on or after 1 January
2022. Early application is permitted.
IFRIC Interpretation 23 Uncertainty over
Income Tax Treatment
The Interpretation addresses the accounting
for income taxes when tax treatments
involve uncertainty that affects the
application of IAS 12 and does not apply to
taxes or levies outside the scope of IAS 12,
nor does it specifically include requirements
relating to interest and penalties associated
with uncertain tax treatments. An entity
must determine whether to consider each
uncertain tax treatment separately or
together with one or more other uncertain
tax treatments. The interpretation is
effective for annual reporting periods
beginning on or after 1January 2019, but
certain transition reliefs are available.
Amendments to IFRS 9: Prepayment
Features with Negative Compensation
Under IFRS 9, a debt instrument can be
measured at amortized cost or at fair value
through other comprehensive income,
provided that the contractual cash flows are
‘solely payments of principal and interest
on the principal amount outstanding’ (the
SPPI criterion) and the instrument is held
within the appropriate business model for
that classification. The amendments to
IFRS 9 clarify that a financial asset passes
the SPPI criterion regardless of the event
or circumstance that causes the early
termination of the contract and irrespective
of which party pays or receives reasonable
compensation for the early termination of
the contract.
The amendments should be applied
retrospectively and are effective from
1 January 2019, with earlier application
permitted.
Amendments to IFRS 10 and IAS 28: Sale or
Contribution of Assets between an Investor
and Its Associate or Joint Venture
The amendments address the conflict
between IFRS 10 and IAS 28 in dealing
with the loss of control of a subsidiary that
is sold or contributed to an associate or
joint venture. The amendments clarify that
the gain or loss resulting from the sale
or contribution of assets that constitute a
business, as defined in IFRS 3, between an
investor and its associate or joint venture, is
recognized in full.
Any gain or loss resulting from the sale or
contribution of assets that do not constitute
a business, however, is recognized only to
the extent of unrelated investors’ interests
in the associate or joint venture. The IASB
has deferred the effective date of these
amendments indefinitely, but an entity that
early adopts the amendments must apply
them prospectively.
The Group will apply these amendments
when they become effective.
Amendments to IAS 19: Plan Amendment,
Curtailment or Settlement
The amendments to IAS 19 address the
accounting when a plan amendment,
curtailment or settlement occurs during
a reporting period. The amendments also
clarify that an entity first determines any
past service cost, or a gain or loss on
settlement, without considering the effect of
the asset ceiling. This amount is recognized
in profit or loss.
An entity then determines the effect of the
asset ceiling after the plan amendment,
curtailment or settlement. Any change in
that effect, excluding amounts included
in the net interest, is recognized in other
comprehensive income.
The amendments apply to plan
amendments, curtailments, or settlements
occurring on or after the beginning of the
first annual reporting period that begins
on or after 1 January 2019, with early
application permitted. These amendments
will apply only to any future plan
amendments, curtailments, or settlements
of the Group.
Amendments to IAS 28: Long-term
interests in associates and joint ventures
The amendments clarify that an entity
applies IFRS 9 to long-term interests in
an associate or joint venture to which the
equity method is not applied but that, in
substance, form part of the net investment
in the associate or joint venture (long-term
interests). This clarification is relevant
because it implies that the expected credit
loss model in IFRS 9 applies to such long-
term interests.
The amendments also clarified that, in
applying IFRS 9, an entity does not take
account of any losses of the associate or
joint venture, or any impairment losses
on the net investment, recognized as
adjustments to the net investment in the
associate or joint venture that arise from
applying IAS 28 Investments in Associates
and Joint Ventures.
The amendments should be applied
retrospectively and are effective from
1 January 2019, with early application
permitted.
Summary of significant accounting policies
Property, premises and equipment
Property, 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
estimated useful lives:
Office buildings
Aircraft (Average)
Office furniture
Computers
Equipment
Leasehold improvements
Vehicles
Years
20
12.5
5
3
4
5
5
An item of property, plant and equipment
and any significant part initially recognized
is derecognized 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 statement of
income when the asset is derecognized.
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
recognized in the consolidated statement
of income as an expense.
24
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
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
amortized 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 amortized on a
straight line basis over their estimated
economic useful lives of 5 years.
Work in progress assets
Work in progress assets are stated at cost,
and include other direct costs and it is not
depreciated until it is available for use.
Investments in associates
The Group’s investment in its associates 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 consolidated
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 amortized 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 recognized directly in the equity of
the associate, the Group recognizes 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.
25
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 recognize an additional impairment loss
on the Group’s Investments 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
recognizes the amount in the ‘share of
profit of an associate’ in the consolidated
statement of income.
Upon loss of significant influence over
the associate, the Group measures and
recognizes 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 recognized 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. Fair values are
evaluated annually by an accredited external,
independent valuator.
Investment properties are derecognized
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 recognized 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.
Financial assets
a) Initial recognition and measurement
Financial assets are classified, at initial
recognition, as subsequently measured at
amortized cost, fair value through other
comprehensive income (OCI), and fair
value through profit or loss.
The classification of financial assets
at initial recognition depends on the
financial asset’s contractual cash flow
characteristics and the Group’s business
model for managing them.
Financial instruments are initially
recognized on the trade date measured
at their fair value. Except for financial
assets and financial liabilities recorded
at FVTPL, transaction costs are added to
this amount.
The Group classifies all of its financial
assets based on the business model for
managing the assets and the asset’s
contractual terms. The categories include
the following:
• Amortized cost
• FVOCI
• FVTPL
i) Bonds and debt instruments
measured at amortized cost
Bonds and debt instruments are
held at amortized cost if both of the
following conditions are met:
• The instruments are held within a
business model with the objective
of holding the instrument to collect
the contractual cash flows.
• The contractual terms of the debt
instrument give rise on specified
dates to cash flows that are solely
payments of principal and interest
(SPPI) on the principal amount
outstanding.
The details of these conditions are
outlined below.
Business model assessment
The Group determines its business
model at the level that best reflects
how it manages groups of financial
assets to achieve its business
objective.
The Group holds financial assets
to generate returns and provide a
capital base to provide for settlement
of claims as they arise. The Group
considers the timing, amount and
volatility of cash flow requirements to
support insurance liability portfolios
in determining the business model
for the assets as well as the potential
to maximise return for shareholders
and future business development.
The Group business model is not
assessed on an instrument-by-
instrument basis, but at a higher
level of aggregated portfolios that is
based on observable factors such as:
• How the performance of the
business model and the financial
assets held within that business
model are evaluated and reported
to the Group’s key management
personnel.
• The risks that affect the
performance of the business
model (and the financial assets
held within that business model)
and, in particular, the way those
risks are managed.
• How managers of the business are
compensated (for example,
whether the compensation is
based on the fair value of
the assets managed or on the
contractual cash flows collected).
• The expected frequency, value
and timing of asset sales are also
important aspects of the Group’s
assessment.
The business model assessment
is based on reasonably expected
scenarios without taking ‘worst
case’ or ‘stress case’ scenarios into
account. If cash flows after initial
recognition are realized in a way
that is different from the Group
original expectations, the Group
does not change the classification
of the remaining financial assets
held in that business model, but
incorporates such information when
assessing newly originated or newly
purchased financial assets going
forward.
The SPPI test
As a second step of its classification
process the Group assesses the
contractual terms to identify whether
they meet the SPPI test.
‘Principal’ for the purpose of this
test is defined as the fair value of the
financial asset at initial recognition
and may change over the life of
the financial asset (for example, if
there are repayments of principal
or amortization of the premium/
discount).
The most significant elements of
interest within a debt arrangement
are typically the consideration for
the time value of money and credit
risk. To make the SPPI assessment,
the Group applies judgement and
considers relevant factors such as
the currency in which the financial
asset is denominated, and the period
for which the interest rate is set.
ii) Bonds and debt instruments
measured at fair value through
other comprehensive income
The Group applies the new category
under IFRS 9 for debt instruments
measured at FVOCI when both of the
following conditions are met:
• The instrument is held within a
business model, the objective of
which is both collecting contractual
cash flows and selling financial
assets.
• The contractual terms of the
financial asset meet the SPPI test.
These instruments largely comprise
debt instruments that had previously
been classified as available-for-
sale under IAS 39. Bonds and debt
instruments in this category are
those that are intended to be held to
collect contractual cash flows and
International General Insurance Holdings Limited
Annual Report & Accounts 2018
which may be sold in response to
needs for liquidity or in response to
changes in market conditions.
iii) Financial assets measured at fair
value through profit or loss
Financial assets in this category are
those assets which have been either
designated by management upon
initial recognition or are mandatorily
required to be measured at fair
value under IFRS 9. Management
designates an instrument as
FVTPL that otherwise meet the
requirements to be measured at
amortized cost or at FVOCI only
if it eliminates, or significantly
reduces, an accounting mismatch
that would otherwise arise. Financial
assets with contractual cash flows
not representing solely payment
of principal and interest are
mandatorily required to be measured
at FVTPL.
Financial assets at FVTPL are
subsequently measured at fair
value. Changes in fair value are
recognized in the consolidated
statement of income. Interest income
is recognized using the effective
interest method.
Dividend income from equity
investments measured at FVTPL
is recognized in the consolidated
statement of income when the right
to the payment has been established.
iv) Financial assets measured at fair
value through other comprehensive
income
Financial assets measured at fair
value through other comprehensive
income include equities investments.
Equity investments classified as
financial assets measured at fair
value through other comprehensive
income are those, which are not
classified as financial assets
measured at fair value through profit
or loss.
v) Insurance receivables
Insurance companies and
intermediaries receivables except for
reinsurance assets are recognized
when due and measured on initial
recognition at the fair value of the
consideration received or receivable.
26
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
vi) Reclassification of financial assets
ii) Financial assets at fair value
and liabilities
The Group does not reclassify its
financial assets subsequent to their
initial recognition, apart from the
exceptional circumstances in which
the Group acquires, disposes of, or
terminates a business line.
b) Subsequent measurement
For purposes of subsequent measurement,
financial assets in the scope of IFRS 9 are
classified in four categories:
• Financial assets at amortized cost
(bonds, debt instruments and insurance
receivables)
• Financial assets at fair value through
OCI with recycling of cumulative gains
and losses (bonds and debt instruments)
• Financial assets designated at fair
value through OCI with no recycling
of cumulative gains and losses upon
derecognition (equity instruments)
• Financial assets at fair value through
profit or loss.
i) Financial assets at amortized
cost (bonds, debt instruments and
insurance receivables)
The Group measures financial assets
at amortized cost if both of the
following conditions are met:
• The financial asset is held within
a business model with the
objective to hold financial assets
in order to collect contractual cash
flows, and
• The contractual terms of the
financial asset give rise on
specified dates to cash flows that
are solely payments of principal
and interest on the principal
amount outstanding.
Financial assets at amortized cost
are subsequently measured using
the effective interest (EIR) method
and are subject to impairment. Gains
and losses are recognized in profit or
loss when the asset is derecognized,
modified or impaired.
The Group’s debt instruments at
amortized cost includes investments
in unquoted debt instruments and
insurance receivable.
27
through OCI (debt instruments)
The Group measures debt
instruments at fair value through
OCI if both of the following conditions
are met:
• The financial asset is held within a
business model with the objective
of both holding to collect
contractual cash flows and
selling, and,
• The contractual terms of the
financial asset give rise on
specified dates to cash flows that
are solely payments of principal
and interest on the principal
amount outstanding.
For debt instruments at fair value
through OCI, interest income, foreign
exchange revaluation and impairment
losses or reversals are recognized
in the statement of income and
computed in the same manner as
for financial assets measured at
amortized cost. The remaining fair
value changes are recognized in OCI.
Upon derecognition, the cumulative
fair value change recognized in OCI is
recycled to profit or loss.
The Group’s debt instruments at
fair value through OCI includes
investments in quoted debt
instruments and insurance
receivables.
iii) Financial assets designated at
fair value through OCI (equity
instruments)
Upon initial recognition, the Group
can elect to classify irrevocably
its equity investments as equity
instruments designated at fair value
through OCI when they meet the
definition of equity under IAS 32
Financial Instruments: Presentation
and are not held for trading. The
classification is determined on an
instrument-by-instrument basis.
Gains and losses on these financial
assets are never recycled to profit
or loss. Dividends are recognized as
investment income in the statement
of income when the right of payment
has been established, except when
the Group benefits from such
proceeds as a recovery of part of the
cost of the financial asset, in which
case, such gains are recorded in OCI.
Equity instruments designated at fair
value through OCI are not subject to
impairment assessment.
The Group elected to classify
irrevocably its unquoted equity
investments and some quoted equity
investments under this category.
iv) Financial assets at fair value
through profit or loss
Financial assets at fair value through
profit or loss include financial assets
held for trading, financial assets
designated upon initial recognition
at fair value through profit or loss,
or financial assets mandatorily
required to be measured at fair
value. Financial assets are classified
as held for trading if they are
acquired for the purpose of selling
or repurchasing in the near term.
Derivatives, including separated
embedded derivatives, are also
classified as held for trading unless
they are designated as effective
hedging instruments. Financial
assets with cash flows that are not
solely payments of principal and
interest are classified and measured
at fair value through profit or loss,
irrespective of the business model.
Notwithstanding the criteria for
debt instruments to be classified
at amortized cost or at fair value
through OCI, as described above,
debt instruments may be designated
at fair value through profit or loss
on initial recognition if doing so
eliminates, or significantly reduces,
an accounting mismatch.
Financial assets at fair value through
profit or loss are carried in the
statement of financial position at fair
value with net changes in fair value
recognized in the statement
of income.
This category includes quoted funds,
alternative investments and quoted
equity investments which the Group
had not irrevocably elected to classify
at fair value through OCI.
Dividends on quoted equity
investments are also recognized as
investment income in the statement
of income when the right of payment
has been established.
c) Derecognition
A financial asset (or, where applicable, a
part of a financial asset or part of a group
of similar financial assets) is primarily
derecognized (i.e., removed from the
Group’s consolidated statement of
financial position) when:
• The rights to receive cash flows from the
asset have expired, or
• The Group has transferred its rights
to receive cash flows from the asset
or has assumed an obligation to pay
the received cash flows in full without
material delay to a third party under
a ‘pass-through’ arrangement; and
either (a) the Group has transferred
substantially all the risks and rewards
of the asset, or (b) the Group has neither
transferred nor retained substantially all
the risks and rewards of the asset, but
has transferred control of the asset.
d) Impairment of financial assets in scope
of IFRS 9
The Group recognizes an allowance
for expected credit losses (ECLs) for
debt instruments not held at fair value
through profit or loss. ECLs are based on
the difference between the contractual
cash flows due in accordance with the
contract and all the cash flows that the
Group expects to receive, discounted
at an approximation of the original
effective interest rate. The expected
cash flows will include cash flows from
the sale of collateral held or other credit
enhancements that are integral to the
contractual terms.
ECLs are recognized in two stages. For
credit exposures for which there has not
been a significant increase in credit risk
since initial recognition, ECLs are provided
for credit losses that result from default
events that are possible within the next
12-months (a 12-month ECL). For those
credit exposures for which there has
been a significant increase in credit risk
since initial recognition, a loss allowance
is required for credit losses expected
over the remaining life of the exposure,
irrespective of the timing of the default
(a lifetime ECL).
For insurance receivables, the Group
applies a simplified approach in
calculating ECLs. Therefore, the Group
does not track changes in credit risk, but
instead recognizes a loss allowance based
on lifetime ECLs at each reporting date.
The Group has established a provision
matrix that is based on its historical credit
loss experience, adjusted for forward-
looking factors specific to the debtors
and the economic environment, The
Group considers an insurance premium
receivable in default when contractual
payments are 360 days past due.
For debt instruments at fair value through
OCI, the Group applies the low credit
risk simplification. At every reporting
date, the Group evaluates whether the
debt instrument is considered to have
low credit risk using all reasonable and
supportable information that is available
without undue cost or effort. In making
that evaluation, the Group reassesses the
credit rating of the debt instrument. In
addition, the Group considers that there
has been a significant increase in credit
risk when contractual payments are more
than 90 days past due.
The Group’s debt instruments at fair
value through OCI comprise solely of
quoted bonds that are graded in the top
investment category (Very Good and Good)
by the Accredited Rating Agency and,
therefore, are considered to be low credit
risk investments. It is the Group’s policy
to measure ECLs on such instruments on
a 12-month basis. However, when there
has been a significant increase in credit
risk since origination, the allowance will
be based on the lifetime ECL. The Group
uses the ratings from the Accredited
Rating Agency both to determine whether
the debt instrument has significantly
increased in credit risk and to estimate
ECLs.
The ECLs for debt instruments measured
at FVOCI do not reduce the carrying
amount of these financial assets in the
statement of financial position, which
remains at fair value. Instead, an amount
equal to the allowance that would
arise if the assets were measured at
amortized cost is recognized in OCI with
a corresponding charge to profit or loss.
The accumulated gain recognized in
OCI is recycled to the profit or loss upon
derecognition of the assets.
The Group considers a financial asset in
default when contractual payments are 90
days or for insurance receivables 360 days
past due. However, in certain cases, the
Group may also consider a financial asset
to be in default when internal or external
information indicates that the Group
is unlikely to receive the outstanding
contractual amounts in full before taking
International General Insurance Holdings Limited
Annual Report & Accounts 2018
into account any credit enhancements
held by the Group.
A financial asset is written off when
there is no reasonable expectation of
recovering the contractual cash flows.
In its ECL models, the Group relies
on a broad range of forward looking
information as economic inputs, such as:
• Real GDP growth by region
• Projected GDP growth by region
Financial assets are written off either
partially or in their entirety only when the
Group has stopped pursuing the recovery.
If the amount to be written off is greater
than the accumulated loss allowance, the
difference is first treated as an addition
to the allowance that is then applied
against the gross carrying amount. Any
subsequent recoveries are credited to
credit loss expense. There were no write-
offs over the periods reported in these
consolidated financial statements.
For cash flow purposes the Group
classifies the cash flow for the
acquisition and disposal of financial
assets as operating cash flows, as
the purchases of these investments
is funded from the net cash flows
associated with the origination of
insurance and investment contracts and
payment of benefits and claims incurred
for such insurance contracts, which are
respectively treated under operating
activities.
Gross written premiums
Gross written premiums comprise the
total premiums receivable for the whole
period of cover provided by contracts
entered into during the accounting
period. They are recognized 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 recognized as an expense.
Premiums also include estimates
for pipeline premiums, representing
amounts due on business written but
not yet notified. The Group generally
estimates the pipeline premium based
on management’s judgment and prior
experience.
28
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
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 recognized on the date on which the
policy incepts.
Premiums include any adjustments arising
in the accounting period in respect of
reinsurance contracts incepting in prior
accounting periods.
Unearned reinsurance premiums are
those proportions of premiums written in
a year that relate to periods of risk after
the reporting date. Unearned reinsurance
premiums are deferred over the term of
the underlying direct insurance policies
for risks-attaching contracts and over
the term of the reinsurance contract for
losses occurring contracts.
Commission income
Insurance and investment contract
policyholders are charged for policy
administration services, investment
management services, surrenders and
other contract fees. These fees are
recognized 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
recognized 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
29
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.
Liability adequacy test
At each statement of financial position
date the Group assesses whether its
recognized 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 recognized in income and an
unexpired risk provision created.
The Group does not discount its liability for
unpaid claims as substantially all claims
are expected be paid within one year of the
statement of financial position date.
Reinsurance
The Group cedes insurance risk in the
normal course of business for all of
its businesses. Reinsurance assets
represent balances due from reinsurance
companies. Amounts recoverable from
reinsurers are estimated in a manner
consistent with the outstanding claims
provision or settled claims associated
with the reinsurer’s policies and are in
accordance with the related reinsurance
contract.
Reinsurance assets are reviewed for
impairment at each reporting date, or
more frequently, when an indication of
impairment arises during the reporting
year. Impairment occurs when there is
objective evidence as a result of an event
that occurred after initial recognition of
the reinsurance asset that the Group may
not receive all outstanding amounts due
under the terms of the contract and the
event has a reliably measurable impact on
the amounts that the Group will receive
from the reinsurer. The impairment loss is
recorded in the consolidated statement
of income.
Gains or losses on buying reinsurance are
recognized in the consolidated statement
of income immediately at the date of
purchase and are not amortized.
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 non-life insurance contracts where
applicable. Premiums and claims on
assumed reinsurance are recognized as
revenue or expenses in the same manner
as they would be if the reinsurance were
considered direct business, taking into
account the product classification of the
reinsured business. Reinsurance liabilities
represent balances due to reinsurance
companies. Amounts payable are
estimated in a manner consistent with
the related reinsurance contract.
Premiums and claims are presented on a
gross basis for both ceded and assumed
reinsurance.
Reinsurance assets or liabilities are
derecognized 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
recognized based on the consideration
paid or received less any explicit identified
premiums or fees to be retained by
the reinsured.
Cash and cash equivalents
Cash and cash equivalents consist of
cash in hand, bank balances, and short-
term deposits with an original maturity
of three months or less after deducting
bank overdraft balances and short-term
deposits with an original maturity ranges
from three months to one year.
Provisions
Provisions are recognized 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
International General Insurance Holdings Limited
Annual Report & Accounts 2018
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
recognized at cost and deducted from
equity. No gain or loss is recognized 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 recognized 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 recognized
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
recognized 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 recognized
in the consolidated statement of income.
Taxation
The charge or credit for taxation is based
upon the profit or loss for the year and
takes into account taxation deferred
because of timing differences between the
treatment of certain items for taxation and
accounting purposes.
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 utilized.
Deferred tax assets and liabilities are
measured at the tax rates that are
expected to apply in the year when the
asset is realized or the liability is settled,
based on tax rates (and tax laws) that have
been enacted or substantively enacted at
the reporting date.
Interest income
Interest income included in investment
income is recognized 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 recognized when right to receive
the payment is established.
Chartered flights revenues
Chartered flights revenues are recognized
when the transportation is provided.
Current income tax
Leasing
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 recognized 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 utilized.
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.
Group as a lessee
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 recognized as an
expense in the income statement on a
straight line basis over the lease term.
Contingent rentals are recognized as an
expense in the period in which they
are incurred.
30
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
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 recognized over the
lease term on the same bases as rental
income. Rental income from operating
leases is recognized on a straight-line
basis over the term of lease.
Fair values
Fair value is the price that would
be received to sell an asset or paid
to transfer a liability in an orderly
transaction between market participants
at the measurement date. The fair value
measurement is based on the presumption
that the transaction to sell the asset or
transfer the liability takes place either:
In the principal market for the asset or
liability, or
In the absence of a principal market, in the
most advantageous market for the asset
or liability
The principal or the most advantageous
market must be accessible to by the
Group.
The fair value of an asset or a liability is
measured using the assumptions that
market participants would use when
pricing the asset or liability, assuming that
market participants act in their economic
best interest.
A fair value measurement of a non-
financial asset takes into account a market
participant’s ability to generate economic
benefits by using the asset in its highest
and best use or by selling it to another
market participant that would use the
asset in its highest and best use.
The Group uses valuation techniques that
are appropriate in the circumstances and
for which sufficient data are available to
measure fair value, maximizing the use of
relevant observable inputs and minimizing
the use of unobservable inputs.
All assets and liabilities for which fair
value is measured or disclosed in the
consolidated financial statements are
categorized within the fair value hierarchy,
described as follows, based on the lowest
level input that is significant to the fair
value measurement as a whole:
31
Level 1 – Quoted (unadjusted) market
prices in active markets for identical
assets or liabilities
Level 2 – Valuation techniques for which
the lowest level input that is significant to
the fair value measurement is directly or
indirectly observable
Level 3 – Valuation techniques for which
the lowest level input that is significant
to the fair value measurement is
unobservable.
For assets and liabilities that are
recognized in the financial statements on
a recurring basis, the Group determines
whether transfers have occurred between
Levels in the hierarchy by re-assessing
categorization (based on the lowest level
input that is significant to the fair value
measurement as a whole) at the end of
each reporting period.
The Group’s management determines the
policies and procedures for both recurring
fair value measurement, such as unquoted
available for sales financial assets, and
for non-recurring measurement, such as
assets held for distribution in discontinued
operation.
At each reporting date, the management
analyses the movements in the values of
assets and liabilities which are required
to be re-measured or re-assessed as
per the Group’s accounting policies. For
this analysis, the management verifies
the major inputs applied in the latest
valuation by agreeing the information in
the valuation computation to contracts and
other relevant documents.
For the purpose of fair value disclosures,
the Group has determined classes of
assets and liabilities on the basis of the
nature, characteristics and risks of the
asset or liability and the level of the fair
value hierarchy as explained above.
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 recognized in the consolidated
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
Financial assets are classified, at initial
recognition, as subsequently measured at
amortized cost, fair value through other
comprehensive income (OCI), and fair
value through profit or loss.
The classification of financial assets
at initial recognition depends on the
financial asset’s contractual cash flow
characteristics and the Group’s business
model for managing them.
Financial instruments are initially
recognized on the trade date measured at
their fair value. Except for financial assets
and financial liabilities recorded at FVTPL,
transaction costs are added to
this amount.
The Group classifies all of its financial
assets based on the business model for
managing the assets and the asset’s
contractual terms. The categories include
the following:
• Amortized cost
• FVOCI
• FVTPL
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 right:
International General Insurance Holdings Limited
Annual Report & Accounts 2018
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.
Expected credit loss
The Group uses a provision matrix to
calculate ECLs for insurance receivables.
The provision rates are based on days
past due for groupings of various policy
holder’s segments that have similar
loss patterns.
The provision matrix is initially based
on the Group’s historical observed
default rates. The Group will calibrate
the matrix to adjust the historical credit
loss experience with forward-looking
information. For instance, if forecast
economic conditions (i.e., gross domestic
product) are expected to deteriorate
over the next year which can lead to
an increased number of defaults in the
sector, the historical default rates are
adjusted. At every reporting date, the
historical observed default rates are
updated and changes in the forward-
looking estimates are analyzed.
The amount of ECLs is sensitive to
changes in circumstances and of forecast
economic conditions. The Group’s
historical credit loss experience and
forecast of economic conditions may also
not be representative of policy holder’s
actual default in the future.
In determining impairment of financial
assets, judgement is required in the
estimation of the amount and timing
of future cash flows as well as an
assessment of whether the credit risk
on the financial asset has increased
significantly since initial recognition
and incorporation of forward-looking
information in the measurement of ECL.
32
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
3. PROPERTY, PREMISES AND EQUIPMENT
COST
At 1 January 2018
Additions
At 31 December 2018
DEPRECIATION
At 1 January 2018
Depreciation for the year
At 31 December 2018
NET CARRYING AMOUNT
At 31 December 2018
COST
At 1 January 2017
Additions
Written off and disposals
Transfers
At 31 December 2017
DEPRECIATION
At 1 January 2017
Depreciation for the year
Written off and disposals
At 31 December 2017
NET CARRYING AMOUNT
At 31 December 2017
Office
buildings
USD
Aircraft*
USD
2,669,763
11,290,405
4,758
–
2,674,521
11,290,405
704,219
52,981
757,200
903,232
903,232
1,806,464
Office
furniture
USD
1,513,831
119,483
1,633,314
1,273,047
52,522
1,325,569
1,917,321
9,483,941
307,745
255,850
3,107
100,173
148,860
12,216,997
2,661,944
7,819
–
–
2,669,763
635,188
69,031
–
704,219
–
93,554
–
11,196,851
11,290,405
1,439,242
67,268
–
7,321
1,177,342
11,239,732
18,959,862
–
(11,239,732)
1,513,831
1,413,182
274,433
1,177,342
964,531
–
1,173,601
903,232
–
99,446
–
903,232
1,273,047
1,965,544
10,387,173
240,784
229,065
1,827
Computers
USD
Equipment
USD
Leasehold
improvements
USD
Work in
Progress
USD
1,413,182
140,607
1,553,789
1,184,117
113,822
1,297,939
1,224,416
159,565
(6,359)
35,560
1,039,597
150,271
(5,751)
1,184,117
274,433
6,937
281,370
272,606
5,657
278,263
272,105
2,328
–
–
267,238
5,368
–
272,606
1,177,342
142,931
1,320,273
1,177,341
42,759
1,220,100
–
–
–
–
1
1,139,393
37,948
1,177,341
Vehicles
USD
964,531
–
964,531
698,388
117,283
815,671
945,081
118,420
(98,970)
625,004
141,535
(68,151)
698,388
266,143
Total
USD
19,303,487
414,716
19,718,203
6,212,950
1,288,256
7,501,206
448,954
(105,329)
–
19,303,487
4,880,021
1,406,831
(73,902)
6,212,950
13,090,537
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
* The aircraft is registered in the name of IGI Services Limited being a company registered in Cayman Islands and wholly owned
subsidiary of IGI Co. Ltd. (subsidiary). The aircraft was put in use on 1 January 2017 after the completion of the pre-commissioning
testing. The depreciation of the aircraft which amounted to USD 903,232 was allocated proportionally between the other expenses
and general and administrative expenses based on the of flight hours of chartered trips and business-related trips.
33
COST
At 1 January 2018
Additions
At 31 December 2018
DEPRECIATION
At 1 January 2018
Depreciation for the year
At 31 December 2018
NET CARRYING AMOUNT
At 31 December 2018
COST
At 1 January 2017
Additions
Written off and disposals
Transfers
At 31 December 2017
DEPRECIATION
At 1 January 2017
Depreciation for the year
Written off and disposals
At 31 December 2017
NET CARRYING AMOUNT
At 31 December 2017
2,669,763
11,290,405
4,758
–
2,674,521
11,290,405
704,219
52,981
757,200
2,661,944
7,819
–
–
–
2,669,763
635,188
69,031
903,232
903,232
1,806,464
93,554
11,196,851
11,290,405
903,232
–
–
–
–
Office
furniture
USD
1,513,831
119,483
1,633,314
1,273,047
52,522
1,325,569
1,439,242
67,268
–
7,321
1,173,601
99,446
–
Office
buildings
USD
Aircraft*
USD
Computers
USD
Equipment
USD
Leasehold
improvements
USD
1,413,182
140,607
1,553,789
1,184,117
113,822
1,297,939
274,433
6,937
281,370
272,606
5,657
278,263
1,177,342
142,931
1,320,273
1,177,341
42,759
1,220,100
Vehicles
USD
964,531
–
964,531
698,388
117,283
815,671
1,917,321
9,483,941
307,745
255,850
3,107
100,173
148,860
1,224,416
159,565
(6,359)
35,560
272,105
2,328
–
–
1,177,342
–
–
–
945,081
118,420
(98,970)
–
–
–
(11,239,732)
1,513,831
1,413,182
274,433
1,177,342
964,531
704,219
903,232
1,273,047
1,039,597
150,271
(5,751)
1,184,117
267,238
5,368
–
272,606
1,139,393
37,948
–
1,177,341
625,004
141,535
(68,151)
698,388
1,965,544
10,387,173
240,784
229,065
1,827
1
266,143
–
–
–
–
–
–
International General Insurance Holdings Limited
Annual Report & Accounts 2018
Work in
Progress
USD
–
–
–
–
–
–
–
Total
USD
19,303,487
414,716
19,718,203
6,212,950
1,288,256
7,501,206
12,216,997
11,239,732
18,959,862
448,954
(105,329)
–
19,303,487
4,880,021
1,406,831
(73,902)
6,212,950
13,090,537
34
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
The depreciation and amortization (note 4) charges for the year 2018 and 2017 was allocated as follows:
Property premises and equipment depreciation charge for the year
Intangible assets amortization charge for the year (note 4)
Aircraft depreciation allocated to other expenses
TOTAL DEPRECIATION AND AMORTIZATION ALLOCATED TO G&A
2018
USD
1,288,256
71,704
(490,820)
869,140
2017
USD
1,406,831
78,303
(462,184)
1,022,950
Fully depreciated property, premises and equipment still in use amounted to USD 5,303,179 as at 31 December 2018
(2017: USD 3,881,072).
4. INTANGIBLE ASSETS
COST
Computer
software /
licenses
USD
2018
Work in
progress*
USD
Computer
software /
licenses
USD
Total
USD
2017
Work in
progress*
USD
Total
USD
Beginning balance
1,171,134
1,874,003
3,045,137
1,168,633
700,743
1,869,376
Additions
Ending balance
AMORTIZATION
Beginning balance
Additions
Ending balance
12,207
719,510
731,717
2,501
1,173,260
1,175,761
1,183,341
2,593,513
3,776,854
1,171,134
1,874,003
3,045,137
1,016,122
71,704
1,087,826
–
–
–
1,016,122
71,704
937,819
78,303
1,087,826
1,016,122
–
–
–
937,819
78,303
1,016,122
NET CARRYING AMOUNT
95,515
2,593,513
2,689,028
155,012
1,874,003
2,029,015
* Work in progress balance represents the payments towards purchase of new insurance software. The management expects that the software
will be installed during the second quarter of 2019.
35
International General Insurance Holdings Limited
Annual Report & Accounts 2018
5. INVESTMENTS IN ASSOCIATES
The Group holds 33% equity ownership interest in companies registered in Lebanon as shown below, the investments in
associated companies are accounted for using the equity method:
Country of
incorporation
Ownership
Star Rock SAL Lebanon
Sina SAL Lebanon
Silver Rock SAL Lebanon
Golden Rock SAL Lebanon
Movement on investment in associates is as follows:
Opening balance
Net share of profit from associated companies
Lebanon
Lebanon
Lebanon
Lebanon
2018
33%
33%
33%
33%
2018
USD
2017
33%
33%
33%
33%
2017
USD
11,827,854
145,565
11,973,419
11,628,580
199,274
11,827,854
36
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
The following table includes summarized information of the Group’s investments in associates:
2018
Current assets
Non-current assets
Current liabilities
NET ASSETS
Star Rock SAL
Lebanon
USD
Sina SAL
Lebanon
USD
Silver Rock SAL
Lebanon
USD
Golden Rock SAL
Lebanon
USD
Total
USD
44,501
46,251
91,487
587,587
769,826
4,869,500
3,872,800
5,696,251
36,813,179
51,251,730
(2,328,240)
(2,478,735)
(1,830,695)
(9,100,798)
(15,738,468)
2,585,761
1,440,316
3,957,043
28,299,968
36,283,088
THE GROUP’S SHARE OF NET ASSETS
853,301
475,304
1,305,824
9,338,990
11,973,419
ASSOCIATES’ REVENUES AND RESULTS
Revenues
Profit (loss)
THE GROUP’S SHARE OF PROFIT (LOSS)
86,774
25,056
8,269
68,183
26,653
8,795
109,958
1,165,729
1,430,644
(10,350)
(3,416)
399,747
131,917
441,106
145,565
2017
Current assets
Non-current assets
Current liabilities
NET ASSETS
Star Rock SAL
Lebanon
USD
Sina SAL
Lebanon
USD
Silver Rock SAL
Lebanon
USD
Golden Rock
Lebanon
USD
Total
USD
141,254
31,382
181,360
688,654
1,042,650
4,869,502
3,872,799
5,703,348
36,838,278
51,283,927
(2,450,051)
(2,490,518)
(1,917,315)
(9,626,711)
(16,484,595)
2,560,705
1,413,663
3,967,393
27,900,221
35,841,982
THE GROUP’S SHARE OF NET ASSETS
845,032
466,509
1,309,240
9,207,073
11,827,854
ASSOCIATES’ REVENUES AND RESULTS
Revenues
(Loss) profit
THE GROUP’S SHARE OF (LOSS) PROFIT
162,808
(39,853)
(13,151)
52,727
39,627
13,077
148,125
1,271,123
1,634,783
41,352
13,646
562,733
185,702
603,859
199,274
The associates’ main business is investing in investment properties. The Investment properties of the associates are stated at fair value,
which has been determined based on valuations performed by professional independent third party 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 year and the prior years.
37
International General Insurance Holdings Limited
Annual Report & Accounts 2018
6. INVESTMENT PROPERTIES
The following table includes summarized information of the Group’s investment properties:
2018
Opening balance
ENDING BALANCE
2017
Opening balance
Additions
ENDING BALANCE
Commercial building
USD
20,192,458
20,192,458
Commercial building
USD
20,189,934
2,524
Land*
USD
10,181,832
10,181,832
Land*
USD
9,920,245
261,587
Total
USD
30,374,290
30,374,290
Total
USD
30,110,179
264,111
20,192,458
10,181,832
30,374,290
* Land amounting to USD 10,181,832 as at 31 December 2018 (2017: USD 10,181,832) is registered in the name of one of the Directors of the Group.
The Group has obtained an irrevocable proxy over this investment property.
The carrying amount of the investment property approximates its fair value as of 31 December 2018 based on valuations
performed by professional third-party valuator and accordingly no fair value adjustments were recorded. The valuation model
used was in accordance with that recommended by the International Valuation Standards Committee. The investment properties
are valued using the market comparable approach. Under the market comparable approach, a property’s fair value is estimated
based on comparable transactions. The market comparable approach is based upon the principle of substitution under which a
potential buyer will not pay more for the property than it will cost to buy a comparable substitute property. The unit of comparison
applied by the Group is the price per square metre (sqm).
38
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
7. INVESTMENTS
The details of the Groups financial investments for the year 2018 and 2017 are as follows:
31 December 2018
Unquoted bonds
Quoted bonds
Quoted funds and alternative investments
Quoted equities
Unquoted equities
Amortized
Cost
USD
3,737,287
–
–
–
–
Fair value
through other
comprehensive
income
USD
–
162,161,914
Fair value
through
statement of
income
USD
Total
USD
–
–
3,737,287
162,161,914
–
8,383,593
8,383,593
15,320,310
5,594,070
20,914,380
5,936,647
–
–
5,936,647
(280,450)
Expected credit losses and impairment
(280,450)
–
The loss allowance for bonds at FVTOCI for the year 2018 of USD 29,903 does not reduce the carrying amount of these investments
(which are measured at fair value, but gives rise to an equal and opposite gain in OCI).
3,456,837
183,418,871
13,977,663
200,853,371
31 December 2017
Unquoted bonds
Quoted funds and alternative investments
Quoted equities
Quoted bonds
Unquoted equities
Held to
maturity
USD
3,987,288
Available
for sale
USD
Held for
trading
USD
Total
USD
–
–
3,987,288
–
–
–
–
7,971,825
160,420
8,132,245
32,017,989
185,806,397
5,936,647
–
–
–
32,017,989
185,806,397
5,936,647
3,987,288
231,732,858
160,420
235,880,566
The movement on the expected credit losses and impairment provision for the bonds at amortized cost is as follows:
BEGINNING BALANCE UNDER IAS 39
Re-measurement ECL – Impact of IFRS 9 adoption
ECL release for investment in debt securities
ENDING BALANCE UNDER IFRS 9
39
2018
USD
250,000
36,698
(6,248)
280,450
8. DEFERRED POLICY ACQUISITION COSTS
Opening balance
Acquisition costs
Charged to consolidated income statement
9. INSURANCE RECEIVABLES
International General Insurance Holdings Limited
Annual Report & Accounts 2018
2018
USD
32,915,965
61,737,138
2017
USD
28,286,248
57,570,774
(58,780,676)
(52,941,057)
35,872,427
32,915,965
2018
USD
2017
USD
Receivables from insurance companies and intermediaries
119,686,104
116,154,724
Less: Provision for doubtful debts and expected credit losses
(5,006,464)
(2,864,350)
The movement in the provision of doubtful debts and expected credit losses is as follows:
Opening balance
Impact of IFRS 9 adoption
RESTATED OPENING BALANCE
Provision for the year
114,679,640
113,290,374
2018
USD
2,864,350
1,766,001
4,630,351
376,113
5,006,464
2017
USD
2,864,350
–
2,864,350
–
2,864,350
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
USD
Up to
90 days
USD
91 to
180 days
USD
181 to
270 days
USD
271 to
360 days
USD
Over
360 days
USD
Total
USD
31 December 2018
83,710,059
18,030,100
7,520,870
4,155,322
1,263,289
–
114,679,640
31 December 2017
89,809,095
16,133,317
5,995,891
1,137,328
–
214,743
113,290,374
40
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
10. OTHER ASSETS
Accrued interest income
Prepaid expenses
Refundable deposits
Employees receivables
Funds held in trust accounts
Income tax receivables
Trade receivables*
Others
2018
USD
1,830,722
1,284,738
221,779
445,374
1,006,735
187,604
9,366
74,732
2017
USD
1,784,012
1,078,932
107,099
652,723
826,217
161,650
436,126
262,970
5,061,050
5,309,729
* This amount represents the balances due from the Specialty Malls (Subsidiary) 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.
The following table provides an aging analysis of trade receivables arising from Specialty Malls customers past
due but not impaired:
Past due but not impaired
Neither past due
nor impaired
USD
31 December 2018
31 December 2017
–
–
Up to
90 days
USD
–
–
91 to
180 days
USD
9,366
436,126
Total
USD
9,366
436,126
41
International General Insurance Holdings Limited
Annual Report & Accounts 2018
11. UNEARNED PREMIUMS
2018
2017
Gross
USD
Reinsurers’
share
USD
Net
USD
Gross
USD
Reinsurers’
share
USD
Net
USD
Opening balance
156,694,025
(41,126,963)
115,567,062
133,670,895
(32,138,490)
101,532,405
Premiums written
301,555,980
(99,381,593)
202,174,387
275,340,636
(106,497,204)
168,843,432
Premiums earned
(289,995,317)
107,941,709
(182,053,608)
(252,317,506)
97,508,731
(154,808,775)
168,254,688
(32,566,847)
135,687,841
156,694,025
(41,126,963)
115,567,062
12. OUTSTANDING CLAIMS
Movement in outstanding claims
AT THE BEGINNING
OF THE YEAR
2018
2017
Gross
USD
Reinsurers’
share
USD
Net
USD
Gross
USD
Reinsurers’
share
USD
Net
USD
Reported claims
303,254,937
(172,045,315)
131,209,622
244,216,392
(122,735,801)
121,480,591
Claims incurred
but not reported
79,972,504
(7,974,801)
71,997,703
90,954,902
(20,329,907)
70,624,995
383,227,441
(180,020,116)
203,207,325
335,171,294
(143,065,708)
192,105,586
Claims paid
(209,892,000)
118,211,633
(91,680,367)
(204,098,071)
121,697,370
(82,400,701)
Provided during the
year related to current
accident year
Provided during the
year related to previous
accident years
196,708,805
(102,442,564)
94,266,241
278,298,318
(161,385,081)
116,913,237
14,335,595
(23,314,335)
(8,978,740)
(26,144,100)
2,733,303
(23,410,797)
At the end of the year
384,379,841
(187,565,382)
196,814,459
383,227,441
(180,020,116)
203,207,325
AT THE END
OF THE YEAR
Reported claims
285,770,257
(170,124,934)
115,645,323
303,254,937
(172,045,315)
131,209,622
Claims incurred but
not reported
98,609,584
(17,440,448)
81,169,136
79,972,504
(7,974,801)
71,997,703
384,379,841
(187,565,382)
196,814,459
383,227,441
(180,020,116)
203,207,325
42
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
CLAIMS DEVELOPMENT
The following tables show the estimate of cumulative incurred claims, including both reported claims and claims incurred but not
reported for each successive accident year at each statement of financial position date, together with cumulative payments to date.
AT END OF ACCIDENT YEAR
27,313,047
25,254,263
37,939,544
114,560,922
94,375,639
122,323,418
128,498,162
133,595,104
159,549,092
152,384,186
174,601,048
175,094,042
278,298,318
196,708,806
2005
USD
2006
USD
2007
USD
2008
USD
2009
USD
2010
USD
2011
USD
2012
USD
2013
USD
2014
USD
2015
USD
2016
USD
2017
USD
2018
USD
Total
USD
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Ten years later
Eleven years later
Twelve years later
54,275,546
35,110,485
54,041,148
125,149,178
75,295,485
108,522,816
106,566,918
119,424,721
155,958,329
114,972,073
160,100,166
173,369,296
309,257,783
59,120,766
40,894,923
53,379,611
119,412,667
67,118,529
105,943,110
100,764,212
108,556,804
148,160,641
101,352,163
149,533,104
167,694,979
58,723,328
39,641,082
53,971,648
121,676,478
68,496,704
100,572,066
110,286,014
110,046,062
142,309,348
92,846,420
145,920,851
58,546,081
37,331,379
53,468,989
119,839,220
68,217,208
99,513,334
114,464,267
103,996,492
133,916,518
88,210,215
58,011,998
37,665,596
53,393,860
113,090,591
67,908,658
101,599,381
110,266,231
104,540,662
132,991,755
58,595,434
36,800,576
50,534,739
112,125,348
67,807,370
100,198,544
111,774,284
103,167,021
57,574,645
35,600,935
49,718,456
110,400,053
67,613,678
100,302,961
110,644,445
57,642,634
35,318,464
49,552,802
110,588,511
68,114,668
100,073,144
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
57,522,791
34,796,272
49,374,891
111,162,234
68,950,049
57,036,376
34,609,372
49,361,720
111,371,580
56,714,595
34,553,537
49,312,510
56,747,872
34,422,917
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Thirteen years later
56,852,834
–
Current estimate of cumulative
claims incurred
56,852,834
34,422,917
49,312,510
111,371,580
68,950,049
100,073,144
110,644,445
103,167,021
132,991,755
88,210,215
145,920,851
167,694,979
309,257,783
196,708,806
1,675,578,889
Cumulative payments to date
56,852,834
33,676,924
49,312,510
110,643,538
67,600,001
99,499,226
99,507,777
96,316,072
127,203,814
81,904,051
130,678,623
136,585,691
177,118,795
24,299,192
1,291,199,048
TOTAL LIABILITY INCLUDED IN
THE CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
384,379,841
43
International General Insurance Holdings Limited
Annual Report & Accounts 2018
AT END OF ACCIDENT YEAR
27,313,047
25,254,263
37,939,544
114,560,922
94,375,639
122,323,418
128,498,162
133,595,104
159,549,092
152,384,186
174,601,048
175,094,042
278,298,318
196,708,806
2005
USD
2006
USD
2007
USD
2008
USD
2009
USD
2010
USD
2011
USD
2012
USD
2013
USD
2014
USD
2015
USD
2016
USD
2017
USD
2018
USD
Total
USD
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Ten years later
Eleven years later
Twelve years later
54,275,546
35,110,485
54,041,148
125,149,178
75,295,485
108,522,816
106,566,918
119,424,721
155,958,329
114,972,073
160,100,166
173,369,296
309,257,783
59,120,766
40,894,923
53,379,611
119,412,667
67,118,529
105,943,110
100,764,212
108,556,804
148,160,641
101,352,163
149,533,104
167,694,979
58,723,328
39,641,082
53,971,648
121,676,478
68,496,704
100,572,066
110,286,014
110,046,062
142,309,348
92,846,420
145,920,851
58,546,081
37,331,379
53,468,989
119,839,220
68,217,208
99,513,334
114,464,267
103,996,492
133,916,518
88,210,215
58,011,998
37,665,596
53,393,860
113,090,591
67,908,658
101,599,381
110,266,231
104,540,662
132,991,755
58,595,434
36,800,576
50,534,739
112,125,348
67,807,370
100,198,544
111,774,284
103,167,021
57,574,645
35,600,935
49,718,456
110,400,053
67,613,678
100,302,961
110,644,445
57,642,634
35,318,464
49,552,802
110,588,511
68,114,668
100,073,144
57,522,791
34,796,272
49,374,891
111,162,234
68,950,049
57,036,376
34,609,372
49,361,720
111,371,580
56,714,595
34,553,537
49,312,510
56,747,872
34,422,917
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Cumulative payments to date
56,852,834
33,676,924
49,312,510
110,643,538
67,600,001
99,499,226
99,507,777
96,316,072
127,203,814
81,904,051
130,678,623
136,585,691
177,118,795
24,299,192
1,291,199,048
56,852,834
34,422,917
49,312,510
111,371,580
68,950,049
100,073,144
110,644,445
103,167,021
132,991,755
88,210,215
145,920,851
167,694,979
309,257,783
196,708,806
1,675,578,889
384,379,841
44
Thirteen years later
56,852,834
–
Current estimate of cumulative
claims incurred
TOTAL LIABILITY INCLUDED IN
THE CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
13. CASH AND BANK BALANCES
Cash and bank balances
Time deposits – short-term
2018
USD
159,478,364
100,581,231
260,059,595
2017
USD
74,161,936
136,160,805
210,322,741
The time deposits, which are denominated in US Dollars and dollar pegged currencies, are made for varying periods between one month
to one year depending on the immediate cash requirements of the Group.
All deposits are subject to an average variable interest rate of 2.75% (2017: 2.46%).
Cash and cash equivalents at 31 December 2018, in the consolidated statement of cash flows represent the balance of cash and short-
term deposits netted by the balance of term deposits from three months to one year as of 31 December 2018.
Cash and short-term deposits
2018
USD
2017
USD
260,059,595
210,322,741
Less: short-term deposits averages from three months to one year
(85,414,600)
(93,717,028)
Cash and cash equivalents
174,644,995
116,605,713
14. EQUITY
ISSUED SHARE CAPITAL
Shares of USD 1 each
FAIR VALUE RESERVE
The movement of this item are as follows:
Balance at the beginning of the year
Impact of IFRS 9 adoption (note 2)
Restated balance
Change in fair value during the year
ECL transferred to income statement
Balance at the end of the year
Authorised, issued and fully paid
2018
USD
2017
USD
143,375,678
143,375,678
2018
USD
15,708,956
(6,680,687)
9,028,269
(8,155,908)
29,903
902,264
2017
USD
10,994,423
–
10,994,423
4,714,533
–
15,708,956
FOREIGN CURRENCY TRANSLATION RESERVE
The foreign currency translation reserve is used to record the exchange difference arising from the translation of the financial
statements of foreign subsidiaries to the Group’s functional currency.
45
International General Insurance Holdings Limited
Annual Report & Accounts 2018
15. TREASURY SHARES
The general shareholders meeting approved in its extraordinary meeting dated 24 November 2013 the purchase of its own shares up to
15% of the issued shares to be treated as treasury shares in accordance with the applicable DIFC laws and regulations. Pursuant to the
above authorization, 7,000,000 treasury shares were purchased during the year which were recorded at an amount of USD 15,050,000 as
at 31 December 2018 (2017: Nil).
Additional paid in capital
The additional paid in capital of USD 2,773,000 had been recorded in year 2015 from sale transaction of 7,900,000 treasury shares at total
price of USD 14,773,0000. The foregoing treasury shares were originally purchased at total price of USD 12,000,000.
16. DIVIDENDS PAID
The Board of Directors resolved to pay the following dividends for the years 2018 and 2017:
– On 16 August 2018: USD 4,091,271 (Dividend per share excluding treasury shares: USD 0.030)
– On 9 March 2017: USD 5,735,027 (Dividend per share: USD 0.040)
– On 16 August 2017: USD 5,735,027 (Dividend per share: USD 0.040)
17. OTHER LIABILITIES
Accounts payable
Accrued expenses
18. INSURANCE PAYABLES
Payables due to insurance companies and intermediaries
Reinsurers – amounts due in respect of ceded premium
2018
USD
2,441,208
5,611,523
8,052,731
2018
USD
233,316
28,635,247
28,868,563
19. UNEARNED COMMISSIONS
The movement in unearned commissions in the consolidated statement of financial position is as follows:
2017
USD
2,676,641
4,417,273
7,093,914
2017
USD
707,704
18,309,403
19,017,107
2017
USD
8,292,099
18,771,267
2018
USD
10,354,019
15,473,519
(17,817,154)
(16,709,347)
8,010,384
10,354,019
46
AS AT 1 JANUARY
Commissions received
Commissions earned
AS AT 31 DECEMBER
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
20. NET INVESTMENT INCOME
Interest income
Dividends
Net gain on sale of available-for-sale investments
Realized loss on sale of bonds at FVTOCI
Realized gain on sale of FVTPL equities and mutual funds
Expected credit loss on financial assets at FVOCI
Release of expected credit loss on financial assets at amortized cost
Unrealized loss on revaluation of financial assets at FVTPL
Fair value changes of held for trading investments
Impairment on available for sale investments
Investments custodian fees and other investments expenses
Income from real estate
21. GENERAL AND ADMINISTRATIVE EXPENSES
Human resources expenses
Business promotion, travel and entertainment
Statutory, advisory and rating
Information technology and software
Office operation
Depreciation and amortization
Bank charges
Board of directors expenses
47
2018
USD
9,698,069
1,043,876
–
(763,569)
2,048,908
(29,903)
6,248
(948,802)
–
–
(1,445,327)
606,862
10,216,362
2017
USD
8,632,460
1,490,607
3,133,556
–
–
–
–
–
95,582
(71,863)
(1,741,631)
1,007,983
12,546,694
2018
USD
2017
USD
23,448,838
21,695,853
3,492,472
3,040,841
1,838,585
1,783,868
869,140
153,055
724,880
3,002,921
1,816,318
1,542,740
1,491,240
1,022,950
129,750
551,164
35,351,679
31,252,936
22. OTHER EXPENSES – NET
Chartered flights net revenue
Aircraft operational cost
Aircraft depreciation expense
Net loss of aircraft operations
Others
International General Insurance Holdings Limited
Annual Report & Accounts 2018
2018
USD
902,750
2017
USD
837,712
(1,095,461)
(1,003,858)
(490,820)
(683,531)
–
(683,531)
(462,184)
(628,330)
18,828
(609,502)
23. COMMITMENTS AND CONTINGENCIES
As of the date of the consolidated financial statements, the Group is contingently liable for the following:
• Letters of Credit amounting to USD 7,335,896 to the order of reinsurance companies for collateralizing insurance contract
liabilities in accordance with the reinsurance arrangements (31 December 2017: USD 9,039,158).
• Letter of Guarantee amounting to USD 307,936 to the order of Friends Provident Life Assurance Limited for collateralizing
rent payment obligation in one of the Group entity’s office premises (31 December 2017: USD 326,315).
• One of the Group’s entities has committed to contribute an amount of USD 1,250,000 to the University of California, San Francisco
Foundation to support cancer research projects in five instalments over five years. The entity has paid USD 1,000,000 up to 2018
and the entity is still committed to pay the remaining instalment amounted to USD 250,000 during year 2019.
Litigations
The Group has no significant outstanding litigations as of the date of the consolidated financial statements.
24. 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.
Compensation of key management
personnel of the Group, consisting of
salaries and benefits was USD 9,167,244
(2017: USD 8,379,883). Out of the total
amount of key management personnel
compensation, an amount of USD 423,547
(2017: USD 318,076) 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 during 2011. The scheme is
applicable to senior executives responsible
for the management, growth and protection
of business of the Group. 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 five years starting
on the first anniversary of continued
employment following the date on which it
is granted. The bonus due amounts to the
excess of book value of shares on vesting
date over grant date as determined in the
latest audited financial statements as of
31 of December of the year prior to vesting
and grant date respectively plus an
additional 20% on the value of the excess.
Moreover, the Group rented a boat for
business promotion from a company
owned by major shareholder, the total
expense charged to the general and
administrative expenses was USD 211,058
(2017: USD 211,739). In addition to this the
Group has paid an aircraft management fees
amounted to USD 84,000 (2017: USD 168,221)
to Arab wings Co. which is owned by a major
shareholder.
48
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
25. DEFFERRED TAX ASSETS
Following is the movement on the deferred tax assets:
Opening balance
Amortization of deferred tax assets
Deferred tax assets for the year
ENDING BALANCE
2018
USD
991,449
(5,784)
–
985,665
2017
USD
1,032,988
(60,907)
19,368
991,449
The deferred tax assets amounted to USD 985,665 are in respect to the Group’s subsidiary in United Kingdom trading losses using the tax
rate of 17% as per Finance Act 2016. The Group management expects to generate sufficient taxable profits to utilize this balance.
The income tax expense appearing in the consolidated statement of income represent the following:
Income tax (expense) benefit for IGI UK
Amortization of deferred tax assets
Income tax expense for IGI Underwriting
TAX (EXPENSE) BENEFIT FOR THE YEAR
26. RISK MANAGEMENT
2018
USD
(13,487)
(5,784)
(42,970)
(62,241)
2017
USD
19,368
–
–
19,368
The risks faced by the Group and the way these risks are mitigated by management are summarized 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 include defined
underwriting authorities, guidelines by
class of business, rate monitoring and
underwriting peer reviews.
The risk is further protected by reinsurance
programs which respond to various arrays
of loss probabilities.
The Group has in place effective exposure
management systems. Aggregate exposure
is modelled and tested against different
stress scenarios to ensure adherence
to Group’s overall risk appetite and
alignment with reinsurance programs 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 an in
house experienced actuarial function
reviewing and monitoring the reserving
policy and its implementation at quarterly
intervals. They work closely with the
underwriting and claims team to ensure an
understanding of the Group’s exposure and
loss experience.
In addition, the Group receives external
independent analysis of its reserve
requirements on a annual basis.
In order to minimize 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.
49
International General Insurance Holdings Limited
Annual Report & Accounts 2018
GEOGRAPHICAL CONCENTRATION OF RISKS
The Group’s insurance risk based on geographical concentration of risk is illustrated in the table below:
Africa
Asia
Australasia
Central America
Europe
MENA
North America
Caribbean Islands
South America
Worldwide
2018
2017
Gross written
premiums
USD
Concentration
percentage
%
Gross written
premiums
USD
Concentration
percentage
%
9,460,837
31,994,592
12,598,107
26,707,462
120,686,787
36,553,364
2,506,866
13,531,845
26,352,201
21,163,919
301,555,980
3
11
4
9
40
12
1
4
9
7
9,859,019
34,224,236
8,626,834
35,550,319
76,203,054
40,952,842
2,042,637
9,513,671
33,379,498
24,988,526
275,340,636
4
12
3
13
28
15
1
3
12
9
LINE OF BUSINESS CONCENTRATION OF RISK
The Group’s insurance risk based on line of business concentration is illustrated in the table below:
2018
2017
Gross written
premiums
USD
Concentration
percentage
%
Gross written
premiums
USD
Concentration
percentage
%
Energy
Property
Ports & Terminals
Casualty
Political Violence
Financial
Reinsurance
Engineering
Aviation
Marine
Forestry
81,377,114
40,851,543
19,079,843
73,665,448
11,406,211
16,147,579
17,757,047
18,194,161
17,996,462
2,146,617
2,933,955
301,555,980
27
14
6
24
4
5
6
6
6
1
1
87,937,007
51,272,773
17,263,245
43,119,887
9,730,839
14,271,496
17,890,905
10,375,952
18,998,073
2,014,461
2,465,998
275,340,636
31
19
6
16
4
5
6
4
7
1
1
50
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
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% greater than from that reported in the statement of financial position. The
impact on gross claims liabilities assumes that recovered rates remain constant.
Impact
on gross
insurance
contract claims
liabilities
USD
Impact
on net
insurance
contract claims
liabilities
USD
Impact
on profit
USD
19,218,992
9,840,723
9,840,723
19,161,372
10,160,366
10,160,366
%
+ 5
+ 5
2018
2017
FINANCIAL RISK
The Group’s principal financial instruments are financial assets financial assets at fair value through OCI, financial assets at fair value
through profit or loss, financial assets at amortized cost, receivables arising from insurance, Investments 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 summarized 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.
51
International General Insurance Holdings Limited
Annual Report & Accounts 2018
Details of maturities of the major classes of financial assets are as follows:
Less
than
1 year
USD
1 to 5
years
USD
More than
5 years
USD
Non-interest
bearing
items
USD
Effective
Interest Rate
on interest
bearing
assets
%
Total
USD
2018
Financial assets at FVTPL
–
–
–
13,977,663
13,977,663
Financial assets at FVOCI
50,095,407
108,481,889
3,584,618
21,256,957
183,418,871
Financial assets at
amortized cost
3,456,837
Cash and bank balances
260,059,595
–
–
–
–
–
–
3,456,837
260,059,595
313,611,839
108,481,889
3,584,618
35,234,620
460,912,966
2017
Investments held
for trading
Available-for-sale
investments
Held to maturity
investments
–
–
–
160,420
160,420
40,433,675
135,457,031
9,915,691
45,926,461
231,732,858
Cash and bank balances
210,322,741
3,987,288
–
–
–
–
–
–
3,987,288
210,322,741
254,743,704
135,457,031
9,915,691
46,086,881
446,203,307
The following table demonstrates the sensitivity of profit or loss 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.
2018
2017
Increase /
decrease in
basis points
+ 25
- 50
+ 25
- 50
Effect on
profit for
the year
USD
665,500
1,331,000
814,886
1,629,772
52
–
5.72
2.92
1.88
–
2.78
3.87
1.59
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
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 70% of
the business transactions and investments
are in US Dollars and US Dollars pledged
currencies and consequently the Group does
not hedge its foreign currency exposure.
CREDIT RISK
Credit risk is the risk that one party to a
financial instrument will fail to discharge an
obligation and cause the other party to incur
a financial loss. The Group is exposed to
credit risk primarily from unpaid insurance
receivables and fixed income instruments.
The Group has in place credit appraisal
policies and procedures for inward business
and receivables from insurance transactions
are monitored on an ongoing basis to
restrict Group’s exposure to doubtful debts.
The Group has in place security standards
applicable to all reinsurance purchases
and monitors the financial status of all
reinsurance debtors at regular intervals.
The Group’s portfolio of fixed income
investment is managed by the Investments
Committee in accordance with the
investment policy established by the board of
directors which has various credit standards
for investment in fixed income securities.
Reinsurance and fixed income investments
are monitored for the occurrence of a
downgrade or other changes that might
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:
53
International General Insurance Holdings Limited
Annual Report & Accounts 2018
Past due
but not
impaired
USD
Total
USD
–
162,161,914
987,287
3,456,837
30,969,581
–
–
–
114,679,640
187,565,382
12,448,671
260,059,595
2018
FVOCI – debts securities
158,945,525
Neither past due nor impaired
Investment
grade
USD
Non investment
grade
(satisfactory)
USD
–
–
186,061,539
3,216,389
2,469,550
83,710,059
1,503,843
–
12,448,671
Cash and bank balances
184,747,414
75,312,181
Financial assets at amortized cost
Insurance receivables
Reinsurance share of
outstanding claims
Deferred XOL premium
2017
Available for sale investments –
bonds and debt securities
Held to maturity investments –
bonds and debt securities
Insurance receivables
Reinsurance share of
outstanding claims
Deferred XOL premium
529,754,478
178,660,693
31,956,868
740,372,039
183,175,820
2,630,577
–
185,806,397
3,000,000
987,288
3,987,288
–
–
160,665,999
89,809,095
19,354,117
–
11,612,654
23,481,279
–
–
–
113,290,374
180,020,116
11,612,654
210,322,741
Cash and bank balances
163,416,461
46,906,280
507,258,280
173,312,723
24,468,567
705,039,570
For assets to be classified as ‘past due and impaired’ contractual payments are in arrears for more than 90 days for the debt instruments
and 360 days for insurance receivables. 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.
54
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
The Schedule below shows the distribution of bonds and debt securities with fixed interest rate according to the international
agencies classification:
Bonds
USD
Unquoted bonds
USD
Total
USD
19,653,276
11,914,322
15,840,316
12,009,630
9,512,157
10,679,082
7,124,087
17,408,093
4,771,755
755,556
7,876,959
5,527,355
2,353,731
1,744,245
1,385,487
203,749
14,273,503
2,899,954
13,216,017
3,012,640
162,161,914
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,456,837
3,456,837
19,653,276
11,914,322
15,840,316
12,009,630
9,512,157
10,679,082
7,124,087
17,408,093
4,771,755
755,556
7,876,959
5,527,355
2,353,731
1,744,245
1,385,487
203,749
14,273,503
2,899,954
13,216,017
6,469,477
165,618,751
Rating grade
2018
A
A-
A+
A1
A2
A3
AA
AA-
AA+
Aa1
Aa2
Aa3
AAA
Baaa1
Baaa2
BB-
BBB
BBB-
BBB+
Not rated
TOTAL
55
Rating grade
2017
A
A-
A+
A1
A2
A3
AA
AA-
AA+
Aa2
Aa3
AAA
BB+
BBB
BBB-
BBB+
Not rated
TOTAL
International General Insurance Holdings Limited
Annual Report & Accounts 2018
Bonds
USD
Unquoted bonds
USD
Total
USD
31,581,864
23,326,258
20,561,108
4,002,610
5,267,194
17,680,818
7,553,019
23,361,272
5,602,497
2,621,590
750,180
3,320,507
208,999
10,515,726
6,653,025
20,378,152
2,421,578
185,806,397
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,987,288
3,987,288
31,581,864
23,326,258
20,561,108
4,002,610
5,267,194
17,680,818
7,553,019
23,361,272
5,602,497
2,621,590
750,180
3,320,507
208,999
10,515,726
6,653,025
20,378,152
6,408,866
189,793,685
56
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
The schedule below shows the geographical distribution of bonds and debt securities with fixed interest rate:
Country
2018
Australia
Bahrain
Canada
China
Europe
Finland
France
Germany
Global
Hong Kong
Italy
Japan
Jordan
Korea
KSA
Kuwait
Mexico
Netherlands
Norway
Pacific basin
Qatar
South Korea
UAE
UK
USA
TOTAL
57
Total
USD
3,207,541
203,750
9,769,854
5,477,734
1,407,141
1,016,430
1,947,095
15,825,716
910,686
1,183,742
1,602,864
11,252,935
3,456,838
4,681,965
2,262,838
978,170
1,015,749
1,844,370
2,239,722
3,466,916
5,048,451
815,744
12,683,997
8,195,522
65,122,981
165,618,751
Country
2017
Australia
Bahrain
Canada
Europe
Global
Jordan
KSA
Kuwait
Oman
Pacific basin
Qatar
Russia
South America
UAE
UK
USA
TOTAL
International General Insurance Holdings Limited
Annual Report & Accounts 2018
Total
USD
3,360,039
209,000
5,573,350
19,649,099
951,775
3,987,288
3,843,760
1,003,850
14,947
29,528,702
6,579,031
600,750
2,062,011
17,471,710
15,858,744
79,099,629
189,793,685
58
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
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.
2018
Amman Stock Exchange
Saudi Stock Exchange
Qatar Stock Exchange
Abu Dhabi Security Exchange
New York Stock Exchange
Kuwait Stock Exchange
Other quoted
Change in
equity price
USD
Effect on profit
for the year
USD
Effect on
equity
USD
+5%
+5%
+5%
+5%
+5%
+5%
+5%
60,718
–
25,369
57,175
109,111
–
446,510
60,718
665,120
25,369
57,175
147,031
2,012
507,473
59
International General Insurance Holdings Limited
Annual Report & Accounts 2018
Change in
equity price
USD
Effect on profit
for the year
USD
Effect on
equity
USD
+5%
+5%
+5%
+5%
+5%
+5%
+5%
+5%
–
–
–
–
8,021
–
–
–
233,869
45,559
902,416
30,688
96,348
234,419
22,264
485,735
2017
New York Stock Exchange
Amman Stock Exchange
Saudi Stock Exchange
Qatar Stock Exchange
Kuwait stock exchange
Abu Dhabi security exchange
NASDAQ Dubai
Other quoted
The Group also has unquoted investment carried at fair value determined based on valuation techniques as per level 3 of fair
value hierarchy.
The Group limits market risk by maintaining a diversified portfolio and by monitoring of developments in equity markets.
60
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
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 summarizes the maturity profile of the Group’s financial liabilities at 31 December based on contractual
undiscounted payments:
Less than
one year
USD
More than
one year
USD
Total
USD
269,065,888
115,313,953
384,379,841
82,444,797
8,052,731
28,868,563
3,925,088
85,809,891
168,254,688
–
–
4,085,296
8,052,731
28,868,563
8,010,384
392,357,067
205,209,140
597,566,207
268,259,209
114,968,232
383,227,441
109,685,817
47,008,208
156,694,025
7,093,914
19,017,107
7,247,814
–
–
3,106,205
7,093,914
19,017,107
10,354,019
411,303,861
165,082,645
576,386,506
2018
Gross outstanding claims
Gross unearned premiums
Other liabilities
Insurance payables
Unearned commissions
TOTAL LIABILITIES
2017
Gross outstanding claims
Gross unearned premiums
Other liabilities
Insurance payables
Unearned commissions
TOTAL LIABILITIES
61
International General Insurance Holdings Limited
Annual Report & Accounts 2018
MATURITY ANALYSIS OF ASSETS AND LIABILITIES
The table below shows analysis of assets and liabilities analyzed according to when they are expected to be recovered or settled:
31 December 2018
ASSETS
Premises and equipment
Intangible assets
Investment in associated companies
Investment property
Investments
Deferred policy acquisition costs
Insurance receivables
Other assets
Deferred tax assets
Reinsurance share of unearned premiums
Reinsurance share of outstanding claims
Deferred XOL premiums
Cash and short term deposits
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Share capital
Contributed capital
Treasury shares
Foreign currency translation reserve
Fair value reserve
Retained earnings
Total equity
Liabilities
Gross outstanding claims
Gross unearned premiums
Other liabilities
Insurance payables
Unearned commissions
Total liabilities
TOTAL EQUITY AND LIABILITIES
Less than
one year
USD
–
–
–
–
53,552,244
35,872,427
114,679,640
5,061,050
985,665
15,957,755
131,295,767
12,448,671
260,059,595
629,912,814
–
–
–
–
–
–
–
More than
one year
USD
12,216,997
2,689,028
–
–
112,066,507
–
–
–
–
16,609,092
56,269,615
–
–
No term
USD
Total
USD
–
–
11,973,419
30,374,290
35,234,620
–
–
–
–
–
–
–
–
12,216,997
2,689,028
11,973,419
30,374,290
200,853,371
35,872,427
114,679,640
5,061,050
985,665
32,566,847
187,565,382
12,448,671
260,059,595
199,851,239
77,582,329
907,346,382
–
–
–
–
–
–
–
143,375,678
143,375,678
2,773,000
2,773,000
(15,050,000)
(15,050,000)
(294,929)
902,264
178,074,162
309,780,175
–
–
–
–
–
–
(294,929)
902,264
178,074,162
309,780,175
384,379,841
168,254,688
8,052,731
28,868,563
8,010,384
597,566,207
309,780,175
907,346,382
62
269,065,888
115,313,953
82,444,797
8,052,731
28,868,563
3,925,088
392,357,067
392,357,067
85,809,891
–
–
4,085,296
205,209,140
205,209,140
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
At 31 December 2018
Less than
one year
USD
–
–
–
–
44,420,961
23,041,175
113,075,631
5,309,729
991,449
28,788,874
126,014,081
11,612,654
210,322,741
563,577,295
–
–
–
–
–
–
31 December 2017
More than
one year
USD
13,090,537
2,029,015
–
–
145,372,724
9,874,790
214,743
–
–
12,338,089
54,006,035
–
–
No term
USD
Total
USD
–
–
11,827,854
30,374,290
46,086,881
–
–
–
–
–
–
–
–
13,090,537
2,029,015
11,827,854
30,374,290
235,880,566
32,915,965
113,290,374
5,309,729
991,449
41,126,963
180,020,116
11,612,654
210,322,741
236,925,933
88,289,025
888,792,253
–
–
–
–
–
–
143,375,678
143,375,678
2,773,000
(269,206)
15,708,956
150,817,319
312,405,747
–
–
–
–
–
–
312,405,747
2,773,000
(269,206)
15,708,956
150,817,319
312,405,747
383,227,441
156,694,025
7,093,914
19,017,107
10,354,019
576,386,506
888,792,253
268,259,209
109,685,817
7,093,914
19,017,107
7,247,814
411,303,861
411,303,861
114,968,232
47,008,208
–
–
3,106,205
165,082,645
165,082,645
ASSETS
Premises and equipment
Intangible assets
Investment in associated companies
Investment property
Investments
Deferred policy acquisition costs
Insurance receivables
Other assets
Deferred tax assets
Reinsurance share of unearned premiums
Reinsurance share of outstanding claims
Deferred XOL premiums
Cash and short term deposits
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Share capital
Contributed capital
Foreign currency translation reserve
Cumulative changes in fair value
Retained earnings
Total equity
Liabilities
Gross outstanding claims
Gross unearned premiums
Other liabilities
Insurance payables
Unearned commissions
Total liabilities
TOTAL EQUITY AND LIABILITIES
63
International General Insurance Holdings Limited
Annual Report & Accounts 2018
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 maximize shareholders’ value.
Adjustments to capital levels are made in light of changes in market conditions and risk characteristics of the Group’s activities.
Capital comprises issued share capital, additional paid in capital, treasury shares, foreign currency translation reserve, fair value
reserve, and retained earnings and is measured at USD 309,780,175 as at 31 December 2018 (2017: USD 312,405,747).
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.
FVTPL
FVOCI
31 December 2018
Level 1
USD
13,977,663
177,482,224
Level 2
USD
–
–
Level 3
USD
Total
USD
–
13,977,663
5,936,647
183,418,871
Investment properties
–
30,374,290
–
30,374,290
191,459,887
30,374,290
5,936,647
227,770,824
31 December 2017
Level 1
USD
160,420
225,796,211
Level 2
USD
–
–
Level 3
USD
–
Total
USD
160,420
5,936,647
231,732,858
–
30,374,290
–
30,374,290
225,956,631
30,374,290
5,936,647
262,267,568
Held for trading
Available-for-sale
Investment properties
27. SUBSEQUENT EVENTS
There have been no material events between 31 December 2018 and the date of this report which are required to be disclosed.
64
International General Insurance Holdings Limited
Annual Report & Accounts 2018
NOTES
At 31 December 2018
65
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IGINSURE.COM