creativity - royal exchange group … · annual report & accounts 2013 ‐ 100,000 200,000...

We stress CREATIVITY and imagination in everything we do.

We constantly strive to find better solutions to our customers’ problems.

We pride ourselves on having pioneered many of the practices, products and

techniques that have become standard in the industry in Nigeria.

Life Assurance

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Vision Statement“To responsibly and efficiently mobilize and utilize human, financial and technological capital to exceed stakeholders’ expectations”.

Our ValuesC - Customer orientationC- CreativityI - IntegrityL - Learning organisationP - ProfessionalismT - Teamwork

Who we are

Mission Statement“To attain leadership in the financial sector and provide the highest quality services in accordance with ethical practices and norms to our clients while ensuring adequate returns to our stakeholders”.

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Annual Report & Accounts 2013

Contents

Corporate Information 5Corporate Profile 6Results at a Glance 7-8The Notice of Annual General Meeting 9-10Consolidated Account Form 11-12Request for E-Dividend & Change of Address Form 13-14Proxy/Authority to Admit Form 15-16Important Notice 17-18Chairman’s Statement and Reports 20-25Group Managing Director’s Statement and Reports 26-29Report of Corporate Governance 30-35Risk Management Statement 36-39Board of Directors 40-41Brief Particulars of our Directors 44-45 Executive Management Team 46Executive Management Team’s Profile 47-49Team of Directors & Regional Directors 50Report of the Directors 51-56Statement of Directors’ responsibilities in relation to the financial statements 57Report of Audit Committee 58Independent Auditor’s Report 60-61Consolidated Statement of Financial Position 62Consolidated Statement of Profit or Loss and Other Comprehensive Income 63Consolidated Statement of Change in Equity - Group 64Consolidated Statement of Change in Equity - Company 65Consolidated Statement of Cash Flows 66Notes to the Consolidated Financial Statements 67-156Statement of Value Added 158Financial Summary - Group 159Financial Summary - Company 160Management (Group and Subsidiaries) 162-167Branch/Office Network cum Directory 168Friendship Centre Network 169Corporate Events 170-171Notes 172


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Corporate Information

DirectorsChairman - Mr. Kenneth Ezenwani Odogwu

Non-Executive Directors - Chief Anthony Ikemefuna Idigbe (SAN) Mr. Daniel Maegerle Chief Uwadi Okpa-Obaji Alhaji Ahmed Rufa’i Mohammed Alhaji Rabiu Muhammad Gwarzo, OON Mr. Adeyinka Ojora

Group Managing Director - Mr. Chike Mokwunye

Group Executive Director - Alhaji Auwalu Muktari

Independent Director - Mr. Charles Momoh

company secretary - Ms. Sheila Ezeuko

registereD office - 31, Marina, Lagos

auDitors - KPMG Professional Services

Bankers - Access Bank Plc Diamond Bank Plc Ecobank Plc FCMB Plc First Bank of Nigeria Plc Guaranty Trust Bank Plc Heritage Bank Plc Stanbic IBTC Bank Keystone Bank Ltd Mainstreet Bank Ltd Royal Exchange Microfinance Bank Sterling Bank Plc UBA Plc UBN Plc Wema Bank Plc Zenith Bank Plc

registrars - City Securities (Registrars) Limited, 358, Herbert Macauley Street, Yaba, Lagos.

rc no. - 6752

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Corporate Profile

In 1918 our company started operations in Nigeria represented by Barclays Bank DCO and on February 28, 1921 converted to a full branch of its then parent company, Royal Exchange Assurance, London.

Royal Exchange Assurance, London was originally founded in 1720 and was one of the first two insurance companies in Britain to receive legal status via Royal Charter. Originally established for marine business, it expanded within a year to include fire and life insurance as well, thereby becoming Britain’s first composite insurer. The establishment of its branch in Nigeria was the result of an overseas expansion drive in the early 20th century.

Some notable figures in the local insurance industry have headed our company, which was, for over twenty years, the only insurance company operating in Nigeria. Thus, our company can be said to be the beginning of insurance in Nigeria and today, has one of the largest branch networks in its sector, with thirty-three branches, four friendship centers and ten sales outlets.

Pursuant to section 396(2) of then companies Act of 1968, our company was on December 29, 1969, reconstituted and incorporated as a private limited liability company, Royal Exchange Assurance (Nigeria) Limited. The company went public July 18, 1989 and was duly listed on the Nigerian Stock Exchange on December 3, 1990.

In June 2007, our company entered into a merger with African Prudential Insurance Company and Phoenix of Nigeria Assurance Company Plc. The merger brought about a significant stronger company, better positioned to serve the needs of its clientele in the financial services sector.

In June 2008, our company was re-organized into a Group Structure, whereby it assumed the role of a group holding and asset management company to execute its strategic vision for financial services, namely insurances, funds management, finance and banking, through its five wholly owned subsidiaries namely:• Royal Exchange General Insurance Company Limited

established in January 2008 to carry on the non-life insurance business of the group;

• Royal Exchange Prudential Life Plc, established in February 2007 to carry on life assurance business of the group;

• Royal Exchange Finance & Asset Management Ltd previously called Royal Exchange Finance & Investment Ltd was established in December 4, 2013 to provide a wide range of services in Finance and Asset management;

• Royal Exchange Healthcare Limited, established in May 2006 to provide health management services and healthcare insurance;

• Royal Exchange Microfinance Bank Limited established in July 2009 and licensed to carry on the business of assisting all enterprises engaged in small scale industries, micro economic activities and co-operative related endeavors.

All subsidiaries are properly licensed by their respective regulators and are structured to fully exploit the significant opportunities that are available in the Nigerian economy.

The Royal Exchange brand is a significant brand in Nigeria especially in the field of insurance. The company will ensure its continued relevance in the environment in which it operates by continuously re-inventing its products and services.

OUR DIRECTORS:

ROYAL EXCHANGE PLC 1. Mr. Kenneth Ezenwani Odogwu - Chairman2. Chief Anthony Ikemefuna Idigbe (SAN) - Director 3. Mr. Daniel Maegerle (Swiss) - Director4. Chief Uwadi Okpa-Obaji - Director5. Alhaji Ahmed Rufa’i Mohammed - Director6. Alhaji Rabiu Muhammad Gwarzo, OON - Director 7. Mr. Adeyinka Ojora - Director 8. Mr. Charles Momoh - Independent Director 9. Mr. Chike Mokwunye - Group Managing Director10. Alhaji Auwalu Muktari - Group Executive Director

ROYAL EXCHANGE GENERAL INSURANCE COMPANY LIMITED1. Mr. Chike Mokwunye - Chairman2. Alhaji Auwalu Muktari - Vice Chairman3. Chief Gilbert Grant - Independent Director 4. Mr. Donald Nosiri - Director5. Mr. Mukesh Malhotra - Director6. Mr. Richard Borokini - Managing Director

ROYAL EXCHANGE PRUDENTIAL LIFE PLC1. Mr. Chike Mokwunye - Chairman2. Alhaji Auwalu Muktari - Vice Chairman3. Alhaji Sani Muhammad Hamid, FWC - Independent Director4. Mr. Donald Nosiri - Director5. Mr. Mukesh Malhotra - Director6. Mr. Olawale Banmore - Managing Director

ROYAL EXCHANGE HEALTHCARE LIMITED1. Mr. Chike Mokwunye - Chairman2. Alhaji Auwalu Muktari - Vice Chairman3. Dr. Nicholas Azinge - Independent Director4. Mr. Donald Nosiri - Director5. Dr. Pius Ofulue - Managing Director

ROYAL EXCHANGE FINANCE AND ASSET MANAGEMENT LIMITED1. Mr. Chike Mokwunye - Chairman2. Alhaji Auwalu Muktari - Vice Chairman3. Mr. Danladi Verheijen - Independent Director4. Mr. Mukesh Malhotra - Director5. Mr. Abiola Sanni - Managing Director

ROYAL EXCHANGE MICROFINANCE BANK LIMITED1. Mr. Chike Mokwunye - Chairman2. Alhaji Auwalu Muktari - Vice Chairman3. Mr. Ben Azih - Independent Director4. Mr. Abiola Sanni - Director5. Mr. Mukesh Malhotra - Director6. Mrs. Elizabeth Elghoche - Managing Director


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group parent 2013 2012 % 2013 2012 % n’000 n’000 growth n’000 n’000 growth

maJor statement of compreHensiVe income itemsGross Premium Written 9,083,092 7,614,209 19% - - -Gross Premium Earned 7,202,610 7,123,538 1% - - -Net Premium Income 5,253,042 5,368,092 -2% - - -Investment and Other Income 2,504,274 862,111 190% 559,721 362,348 54%Profit Before Tax 828,213 703,094 18% 311,803 205,608 52%

Profit for the Period 806,284 573,293 41% 281,277 160,468 75%

maJor statement of financiaL position itemsTotal Assets 20,273,551 16,626,010 22% 7,749,295 7,689,694 1%Insurance Liabilities 6,973,096 4,878,504 43% - - -Investment Contract Liabilities 599,106 573,494 4% - - -

Results at a Glance

‐

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

Gross

Premium

Wri8en

Gross

Premium

Earned

Net Premium

Income

Investment

and Other

Income

Profit Before

Tax

Profit for the

Period

Thousands of Naira

GROUP ‐ Major Statement of Comprehensive Income Items

2013

2012

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‐

100,000

200,000

300,000

400,000

500,000

600,000

Investment and Other

Income

Profit Before Tax Profit for the Period

Thousands of Naira

PARENT ‐ Major Statement of Comprehensive Income Items

2013

2012

‐

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

Total Assets Insurance Liabili8es Investment Contract

Liabili8es

Thousands of Naira

GROUP ‐ Major Statement of Financial Posi8on Items

2013

2012

7,650,000

7,660,000

7,670,000

7,680,000

7,690,000

7,700,000

7,710,000

7,720,000

7,730,000

7,740,000

7,750,000

7,760,000

Total Assets

Thousa

nds

of N

aira

PARENT ‐Major Statement of Financial PosiGon Items

2013

2012

Results at a Glance contd.

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The Notice of Annual General Meeting

NOTICE is hereby given that the Forty-Fifth Annual General Meeting of Royal Exchange Plc will be held at the Shell Hall, Muson Centre, Onikan, Lagos, Lagos State on Wednesday, September 24, 2014 at 11.00 o’clock in the forenoon to transact the following business:

a. ordinary Business:

1. To receive and consider the Reports of the Directors and the Audit Committee, the Financial Statements for the period ended December 31, 2013 and the Report of the Auditors thereon.

2. To declare a dividend.

3. To re-elect directors.

4. To approve the remuneration of the directors.

5. To authorize the directors to fix the remuneration of the auditors.

6. To elect shareholders as members of the statutory Audit Committee.

By order of the Board

sHeiLa eZeuko COMPANY SECRETARY/GH (LEGAL SERVICES)FRC/2013/NBA/00000004059

New Africa House31, Marina, Lagos.

september 1, 2014

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The Notice of Annual General Meeting cont’d

notes

• Proxy

A member of the company entitled to attend and vote is allowed to appoint a proxy to attend and vote in his stead. A proxy need not be a member of the company. A proxy form is contained in the Annual Report and Accounts. If it is to be valid for the purpose of the meeting, it must be completed, detached, duly stamped at the office of the Commissioner for Stamp Duties and deposited at the office of the Registrars, City Securities (Registrars) Limited, 358, Herbert Macauley Street, Yaba, Lagos, not later than 48 hours before the time appointed for holding the meeting.

• DividendWarrants

If the dividend recommended by the directors is approved by members at the Annual General Meeting, the dividend warrants will be posted on 29th September, 2014 to members whose names appear in the Register of Members at the close of business on 13th September, 2014.

• ClosureofRegisterofMembersandTransferBooks

The Register of Members and the Transfer Books will be closed from 15th September, 2014 to 19th September, 2014 both dates inclusive for the purpose of dividend.

• AppointmentofMembersoftheAuditCommittee

Any member may nominate a shareholder as a member of the Audit Committee of the company, by giving notice in writing of such nomination to the Company Secretary, at least 21 (Twenty- One) days before the Annual General Meeting.

• UnclaimedShareCertificatesandDividendWarrants

The company notes that some share certificates have been returned marked “unclaimed”. The company notes further that some dividend warrants sent to shareholders are yet to be presented for payment.

Therefore, all shareholders with unclaimed share certificates should write to The Registrars, City Securities (Registrars) Limited, the Company Secretary or call at the registered office of the company during normal working hours.

Furthermore, all shareholders with unclaimed dividend warrants Nos. 1-10 should address their claims to the Company Secretary or call at the registered office of the company during normal working hours for processing of their claims or assistance. Shareholders, with unclaimed dividends Nos. 10-15 should address their claims to The Registrars, City Securities (Registrars) Limited.

Members are urged to advise the Registrars or the Company Secretary of any change of address or situation particularly as it relates to share certificates and warrants.

• E–Dividend/Bonus

Notice is hereby given to all shareholders to open bank and stock broking accounts or CSCS accounts for the purpose of dividends and bonuses. A detachable application form for e-bonus and e-dividend is attached to this Annual Report and Accounts to enable all shareholders furnish particulars of their accounts to the Registrars as soon as possible.


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Consolidation of Account Form

Dear Shareholders,

Records with our registrars and as revealed by the Register of Members, show that some members have more than one account in their names.

This situation may have arisen as a result of multiple applications made during new issues or as a result of purchases made through the Nigerian Stock Exchange (NSE).

Servicing these accounts is posing significant administrative difficulties as well as incurring otherwise avoidable costs in respect of postage, maintenance, issuance of certificates, etc.

These ultimately have an impact on the profit of the company.

CONSOLIDATION OF ACCOUNTS FORM

S/N Name Address Units of Certificate A/C Date Shares Number Number Issued

1.2.3.4.5.6.7.8.9.10.

Shareholder’s Signature: Date:




The NSE has decided that efforts be made to consolidate multiple accounts, Certificates should not be forwarded more especially to facilitate the operations of the Central Securities and Clearing System (CSCS).

We ask for your co-operation in this regard.

At the next section of this notice, kindly complete the consolidation request form and mail it to the Registrar, City Securities (Registrars) Limited, 358, Herbert Macauley Street, Yaba, Lagos.

Please state in your request for consolidation the names/addresses of those persons you bought for during public offers and at the secondary market besides yourself i.e. family members.

Tear off from here

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Please AffixPostage Stamp

Here

Tear off from here

The Registrar,City Securities (Registrars) Limited,358, Herbert Macauley Street, Yaba, Lagos.

Consolidation of Account Form


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Tear off from here

Request for E-Dividend & Change of Address Form

To All ShareholdersRoyal Exchange Plc

Dear Shareholders,

Your board and management are concerned about the unhealthy state of the unclaimed dividends balance. The shareholders and registrars share the burden of ensuring that the balance on the unclaimed dividends is kept well reduced.

To this end, shareholders with unclaimed dividends are urged to come forward and claim their dividends.

Date:

The Registrars, Please state your formerCity Securities (Registrars) Limited address here and the new358, Herbert Macauley Street address (if any) in theYaba, space provided in the bodyLagos of this letter

ROYAL EXCHANGE PLCREQUEST FOR E-DIVIDEND AND CHANGE OF ADDRESS

Kindly direct my/our dividend payment in respect of all my/our shares in the above Company into my/our account stated below:

BANK DETAILS:

Name of BankBranch and Sort Code Stamp of BankAddress of BranchAccount Number (Current or Savings)Signature of ShareholderBank Authorized Signatory

Please note my/our change of address as follows:

Yours faithfully,Signature: ) Corporate shareholdersName: ) ) of Shareholder should please affix seal here and state RC No.

For Joint ShareholdersSignature: ) Name: ) ) of ShareholderSignature: ) Name: ) ) of ShareholderSignature: ) Name: ) ) of Shareholder

IMPORTANT NOTICE

Shareholders are also encouraged to:

• informtheRegistrarspromptlyofanychangeofaddress and to follow up to ensure rectification.

• havetheiraccountsmandatedfore-dividend.

To forestall a situation where complaints are made of non-payment, the registrars will, contemporaneously with remittance to the various banks for the mandated account of Shareholders, forward advice slips to such shareholders.

We do solicit your co-operation in this regard.

COMPANY SECRETARY

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Tear off from here


Here


Request for E-Dividend & Change of Address Form


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Proxy Form

Tear off from here

The Annual General Meeting of Royal Exchange Plc to be held at the Shell Hall, Muson Centre, Onikan, Lagos, Lagos State, on Wednesday, September 24, 2014 at 11.00 am in the forenoon.

I/We………………………………. being a member/members of Royal Exchange Plc hereby appoint

…….…….……………………………………………………………or failing him the chairman of the meeting as my/our proxy to vote for me/us and on my/our behalf at the 45th Annual General Meeting of the Company to be held on Wednesday, September 24, 2014 and at every adjournment thereof.

Dated this ………………… day of ……………………… 2014.

……………………………...........Shareholder’s Signature

NOTES:

1. Please indicate with an ‘X’ in the appropriate squares how you wish your votes to be cast on the resolutions set out above.

2. A member (shareholder) who is unable to attend the Annual General Meeting is allowed to vote by proxy. The above proxy form has been prepared to enable you to exercise your right to vote in case you cannot personally attend the meeting. Members wishing to vote by proxy should please ensure that the appropriate stamp duties due on the proxy form are paid. The proxy must produce the “Authority to Admit”, attached to this form to obtain entrance to the Meeting.

3. Provision has been made on this form for the chairman of the meeting to act as your proxy. However, if you so wish, you may insert in the space provided on the form the name of any person whether a member of the company or not who will attend the Meeting and vote on your behalf.

4. Please sign the above proxy form and post it so as to reach the registrars, City Securities Limited, 358, Herbert Macauley Street, Yaba Lagos, not later than 48 hours before the appointed time for holding the meeting. If executed by a corporation, the proxy form must bear the common seal of such corporation.

FOR REGISTRAR/COMPANY USE ONLY

NAME OF SHAREHOLDER:

NUMBER OF SHARES:

Nos. RESOLUTIONS FOR AGAINST

1. To declare a dividend 2. To re-elect Chief A. I. Idigbe (SAN)

3. To re-elect Mr. Daniel Maegerle

4. To fix the Remuneration of directors 5. To authorize the directors to fix the Remuneration of Auditors 6. To elect members of the Audit Committee

AUTHORITY TO ADMIT

Please admit …………………………………………………………. at the 45th Annual General Meeting of Royal Exchange Plc to be held at the Shell Hall, Muson Centre, Onikan, Lagos, Lagos State on Wednesday, September 24, 2014 11.00 am in the forenoon.

SHEILA EZEUKOCOMPANY SECRETARY/GH (LEGAL SERVICES)FRC/2013/NBA/00000004059

NOTES:

1. This authority to admit must be produced by the shareholder or his/her proxy in order to gain entry to the venue of the Annual General Meeting

2. Shareholders or their proxies must sign this authority for admission before attending the Meeting.

………………………………….............…Signature of person attending

CAUTION: TO BE VALID THIS FORM MUST BE STAMPED ACCORDINGLY

BEFORE POSTING THE ABOVE CARD PLEASE TEAR OFF THIS PART AND RETAIN IT.

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Tear off from here


Here


Proxy/Authority to Admit


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Important Notice

To:

The Registrar, City Securities (Registrars) Limited, 358, Herbert Macauley StreetYaba, Lagos.

ROYAL EXCHANGE PLCREQUEST FOR E-BONUS

I/We hereby request that henceforth all bonuses due to me/us with respect to my/our shareholding in Royal Exchange Plc be paid directly to my CSCS/stock broker account stated below:

Account Details:

Shareholder Account No: (Please look on the left hand corner of our certificate for your shareholder account number)

Name of Shareholder:

Address of Shareholder:

Investor’s Account No:

CSCS Account No. (CHN):

GSM No:

E-mail Address:

Yours faithfully,

Signature: ) Corporate shareholders ) should please affix sealName: ) here and state RC No. For Joint Shareholders

Signature: ) Name: ) ) of Shareholder



Official stamp and authorized signatures of stockbroker

1. Signatory: Seal of stockbroker

2. Signatory:

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Here


Important Notice

STATEM

EN

TS

&

REPO

RTS

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Mr. Kenneth Ezenwani Odogwu - Chairman

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Distinguished fellow shareholders, members of the board of directors, ladies and gentleman.It is my pleasure to welcome you all to the 45th Annual General Meeting of your company, holding this 24th Day of September, 2014 here in Lagos. I shall be presenting to you for your consideration, among other issues, the annual report and financial statements for the year ended December 31, 2013.

tHe operating enVironmentThe global economy displayed mixed results in 2013. Whereas growth resumed in advanced economies, most emerging markets witnessed considerable pullbacks. Global growth, which averaged 2.5% in the first half of 2013, propelled the United States (US), Japan and a few European countries out of recession riding on the back of accommodative monetary-policies by their central banks which kept interest rates at a record low. This also fuelled investment and portfolio capital into developing markets, in effect, driving demand and prices of energy and commodities in these economies northward.

Generally, there were marked improvements in the US economy as output grew by 2.9% in 2013 anchored by enhanced industrial production, strong private demand and improving job numbers (with unemployment rate lowering to 6.5% from 7.9% at the beginning of 2013). Even the political standoff over fiscal sustainability - which led to a shutdown of the US Government - in October 2013 was moderated by this momentum.

The Euro zone experienced a 0.3% expansion in the last quarter of 2013 bolstered by a tepid recovery which commenced from the second quarter of the year; after a protracted 18-month

recession. Germany regained its stride in the final three months with its GDP growing by 0.4% while France avoided falling back into a recession. Output rose by 1.9% in the United Kingdom in 2013, with stronger than expected returns from its manufacturing and construction sector- affirming the Bank of England’s (BOE) choice to leave both its interest rate unchanged at 0.5% and asset purchase program at 375 billion pound till the end of the year as effective.

The BRIC countries maintained sluggish growth in 2013. The Chinese economy was able to shrug off two earlier quarters of decline by displaying a 7.7% year-on-year growth in output. Furthermore, the People’s Bank of China (PBOC) revealed plans to speed up its currency liberalization campaign targeted at easing up its domestic exchange, interest rates and capital accounts. Although no timeline was indicated, the plan is supportive of a yuan appreciation and a tilt to a market-driven regime.

Elsewhere, the Indian economy remained lackluster, recording a 4.8% year on year growth in the third quarter of 2013 on account of shrinking exports and increasing trade deficits which contributed significantly to the plunge in the value of the rupee. The Russian economy also grew dismally by 1.2 % in same period, after growing by 2.9 % in the corresponding quarter of 2012 while Brazil’s economy expanded by 2.3% in 2013.

In Africa, Nigeria came tops as the number one investment destination overtaking South Africa for the first time in a decade. Domestically, provisional data from the National Bureau of Statistics showed Nigeria’s $269 billion economy accelerating to 7.67% in the fourth quarter of the year. Overall, growth for 2013 was at 6.87%, up from 6.58% in 2012, with expectations that the economy would display a steady growth trajectory stimulated by government and regulatory reforms.

Chairman’sStatement

“During the period under review, your company generated gross written premium of N9.08 billion, while that of the preceding year was N7.61 billion, an increase of 19%. Claims expense for the year amounted to N2.48 billion in comparison with N1.63 billion reported in 2012; signaling an increase of 52%.”

Mr. Kenneth Ezenwani Odogwu - Chairman

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Chairman’s Statement contd.

As predicted, the year kicked off on a promising note with a series of government reforms culminating in the execution of the following agenda: the implementation of the approved Sugar Master Plan in January 2013 to support local sugar production; the commencement of the National Identity Smart Card scheme in May 2013 to form part of the government’s electorate and financial inclusion strategy for its citizenry (to be concluded in 2014); the privatization of the Power Holding Company of Nigeria (PHCN) with private-sector owned distribution companies (discos) and generation companies (gencos) successfully taking over ownership of electricity infrastructures in November 2013; the introduction of the Mortgage Refinancing Company by the Federal Ministry of Finance (in collaboration with the Central Bank of Nigeria) in November 2013 with the mandate of liquefying our local mortgage subsector leveraging on a $300m (N48.6 billion) development finance received from the World Bank as seed capital; the on-going revitalization of the Abuja Securities & Commodity Exchange Plc and setting up of the pioneering National Warehouse Receipt Finance System by the Federal Ministry of Agriculture and Rural development (FMARD) to catalyze development in local agribusinesses and commodities markets; the adoption of the maiden National Automobile Policy (a sub-set of the National Industrial Revolution Plan) of the Federal Ministry of Trade & Investments in October 2013 to champion the manufacture and assembly of vehicles locally; the securing of $1.1 billion infrastructural loan facility from the Chinese Export-Import Bank for completion of the Abuja Light Rail project and the building of four new airport terminals across the country; and lastly the presidential approval to activate the process of privatization of the nation’s four refineries in 2014. Analysts believe that these initiatives, if properly implemented, would spur an industrial renaissance in Nigeria, provided the lingering Boko Haram crisis is contained in the North-Eastern axis of the country.

On the side of regulatory reforms, the Central Bank of Nigeria (CBN) kept an iron-grip on its Monetary Policy Rate (MPR) at 12% throughout

the year. In March 2013, the apex bank released its regulatory and supervisory framework for the operation of the Mortgage Refinancing Company (MRC) which upon commencement in 2014, would enhance the availability of mortgage credit locally. A N220 billion Micro, Small and Medium Enterprises Development (MSME) fund was also introduced by the CBN in August 2013 as intervention funding to deepen the provision of micro-credit facilities to Small and Medium-scale Enterprise (SMEs) nation-wide. The banking regulator extended the capitalization dead-line for Primary Mortgage Institutions (PMIs) from April 30, 2013 to December 31, 2013 to provide more time for operators to raise capital. In the third quarter of the year, the CBN’s pronouncement of an upward review of commercial banks’ Cash Reserve Ratio (CRR) on public sector deposits to 50% from its initial position of 12% - done to withdraw an estimated N1 trillion excess liquidity from circulation- sparked off a rally in fixed income instruments and kept inflation rate moderate at 7.9% at the end of the year. Consequently, this caused Open-Buy-Back and Overnight rates to settle at 10.50% and 10.75% respectively in close proximity to 2012 rates of 10.25% and 10.50%.

On the local Foreign Exchange (FX) market, the CBN’s decision to reintroduce the Retail Dutch-Auction System (RDAS), impose a cap on the amount of dollar sales by banks to Bureau De Change (BDC), place further regulations surrounding FX cash importation by banks contributed immensely to the naira performance, but at the same time widened the spread at the parallel market. Invariably, the naira depreciated against the U.S dollar at RDAS by approximately N0.93 to N157.26 from N156.35/US$ in 2012, with the interbank and the parallel market hovering at N159.60/US$ and N173/US$ respectively. External reserves which peaked at USD 48.5 billion in the first quarter of 2013 fell by 9.4% to USD43.93 billion (about 8 months import cover) at end of the year, raising concerns about the sustainability of the naira and the possibility of devaluation in 2014.

Our Bond market received a huge boost during the year with its inclusion in the Barclay’s


23


Emerging Market Bond Index (EMBI) in April 2013 - following its earlier admission in JP Morgan’s Local Currency Bond Index (LCBI) in October 2012. Offshore investors’ holdings of Federal Government of Nigeria (FGN) debt securities (i.e. combined bonds and treasury holdings) increased 127% to $11.6 billion at the end of third quarter of 2013 as against $5.1 billion recorded in the corresponding year. Furthermore, the Debt Management Office’s (DMO) insistence on achieving an optimal debt-mix ratio of 60 - 40 between domestic and external obligations by 2015; its successful selling of a $1 billion Eurobond mid-year and support in the launch of the Financial Markets Dealers Quotation (FMDQ) platform in November 2013 heightened the level of debt trading activities for the year. As at close of November 2013, the FGN 10-year bond due January 2022 recorded a yield of 12.72% in comparison to 10-year US Treasuries (maturing November 2023) with yields of 2.76%. On the flip side, the nation’s debt portfolio continued to show underlying weaknesses as gross obligation climbed to N10.04 trillion - although it remained within the fiscal ceiling of 40% acceptable under the Fiscal Responsibility Act 2007.

The recovery of the Nigerian capital market continued with growing market confidence and deal-making activities in diverse sectors. The Nigeria Stock Exchange (NSE) All Share Index (ASI) rose by 47% to 41,329.19 points with a market capitalization of N13.23 trillion for the year; riding on the back of strong corporate earnings and noticeable large ticket acquisitions evident in the consumer-goods, industrials and banking segments. Regulatory reforms were apparent with the official revamping and re-launching of the Alternative Securities Market (ASeM) board in April 2013 by the NSE as part of its initiative to attract small to mid-sized companies to the market to access long-term capital. In the last quarter of 2013, the board of the Securities and Exchange Commission (SEC) rolled out new minimum capital requirement for capital market operators to reinforce their operational capacity and capital. This we believe will surely instigate fresh rounds of mergers amongst operators in 2014.

Meanwhile, Nigeria’s petroleum sector performance was unimpressive and plagued by protracted cases of oil theft, rising incidences of divestments and rationalization of operations by the Oil Majors. Crude oil production was down, about 8.3% year-on-year at 1.9 million barrels per day (mbpd) as at September 2013 (compared to the projections of 2.53 mpbd), although Bonny Light oil price stayed upbeat at $115 per barrel for the same period. The non-passage of the Petroleum Industry Bill (PIB) and the disruptive impact of shale oil production in the United States kept the local industry vulnerable throughout the year. Albeit, we remain optimistic that oil prices will continue to trade above $100 per barrel and such support levels would be adequate in meeting the revenue requirements of the N4.64 trillion 2014 Appropriation bill regardless of unforeseen production cutbacks.

For the Nigerian Insurance sector, the general sentiment was that 2013 Gross Premium Income (GPI) would settle at N230 billion as a result of the “No Premium, No Cover” policy by the National Insurance Commission (NAICOM) which was implemented from January 2013, restricting only insurance policies paid for in advance to be recognized in insurers’ accounts. In the same vein, NAICOM rolled out operational frameworks, guidelines and sensitization programmes for the Takaful and Micro-Insurance initiatives as promised in 2012 and continued its enforcement exercise on compulsory insurance regulations throughout the year. As part of the Federal Government’s reform agenda for the industry, the newly inaugurated NAICOM board – led by Mr. Chibudum Nwuche – in September 2013 discontinued issuance of new insurance licenses, offering investors the option to acquire existing companies and recapitalize their balance sheets. The government also charged the insurance regulator to tow the path of self funding as it confirmed its readiness to cease budgetary allocation to the commission by 2014.

For a greater part of 2013, insurers grappled with the challenges of meeting solvency margin and International Financial Reporting Standards (IFRS) requirements in the preparation and

24


submission of their 2012 audited accounts to NAICOM. As at December 20 2013, only 38 companies’ accounts were approved by NAICOM out of the existing 59 companies, with 14 firms undergoing varying stages of review on their accounts, and 7 companies yet to submit their results for review. Interestingly, operators became more vocal in arousing government’s attention towards the industry, identifying the need for national advocacy campaigns to boost insurance literacy locally and encouraged government’s contribution in the enforcement of insurance regulations. In my article titled “ Insurance, the viable option for building long-term funding to sustain Nigeria’s economic growth and global competitiveness” published November 13, 2013 in the Guardian Newspaper, I placed particular emphasis on the need for intervention funding from government – mirroring the AMCON window available to commercial banks in the form of 2nd tier capital - to bolster insurers’ operational capacity to underwrite big ticket transactions, thereby insuring a larger portion of the Nigerian economy.

Consequently, we believe the privatization of the power sector in Nigeria will usher in a fresh vista of life to the corporate insurance market along with the anticipated expansion of manufacturing activities. Additionally, the retail insurance market demonstrated noticeable progress during the year with increasing levels of products, innovations and partnerships amongst insurance companies, telecommunication networks, on-line retail stores and banks, in disseminating and cross-selling insurance products to the public. This momentum is expected to continue well into 2014 and beyond.

On this note, we conclude with a positive outlook for the insurance industry taking into consideration an expanding economy with attractive demographic statistics and a low insurance penetration thrust.

operating resuLtsIn spite of the hostile operating environment

experienced by the insurance sub-sector and the financial-services industry in general, Royal Exchange Group furthered on its growth trajectory, expanding into new markets and maintaining a stronghold on its existing business in 2013.

During the period under review, your company generated gross written premium of N9.08 billion, while that of the preceding year was N7.61 billion, an increase of 19%. Claims expense for the year amounted to N2.48 billion in comparison with N1.63 billion reported in 2012; signaling an increase of 52%. Underwriting expenses increased by 3% from N2.13 billion in 2012 to N2.20 billion in 2013. These translated into net income before overhead expenses of N3.40 billion, as against N2.67 billion in 2012.

Management expenses were N2.53 billion in 2013 in comparison with N1.98 billion of 2012 showing an increment of 28%. The rise in management expenses was attributable to branch expansion, retail business development and investments in e-business and information technology.

The group achieved a Profit before taxation of N828 million, 18% higher than the N703 million achieved in 2012.

future outLookThe build-up to the 2015 general elections is expected to put considerable strain on economic activities in 2014 as the business climate may give way to mainstream politics. Typically, we expect higher government spending in the 2014 proposed budget with the resultant restrictive monetary policy stance from the Central Bank to maintain price stability.

The Oil & Gas sector would continue to be a major contributor of premium to the insurance market next year, although government’s rigorous revenue diversification drive, away from volatile hydrocarbon exports, would open up manufacturing and agriculture as one of the new frontier markets.



25

2014 would also mark the first full operational year of the privatized power sector which is billed to catalyze the growth of local manufacturing and affiliate industries. We foresee substantial growth in premium production stemming from the multiplier effect of stable energy generation and distribution in coming years and the industrialization prospects in Nigeria.

Substantial growth in Takaful and Micro-insurance services in the retail insurance space will likely occur to boost insurance penetration amongst the lower income class. Emphasis will be on channel and product innovation to reach a large portion of the economically disadvantaged section of the 160 million population. The explosion of on-line retail shopping platforms, telecommunications and microfinance banking are already providing alternative sales distribution channels to stretch retail insurance services to fingertips of the citizens.

Universal health insurance coverage would be another area of interest as National Health Insurance Scheme canvasses for 30% universal healthcare coverage in Nigeria by 2015. We expect Health Maintenance Organisations (HMO) business to be on the ascendancy in 2014.

The clamour for intervention funding in the insurance sector should take center-stage in prompting government’s involvement in building operators’ capacity to underwrite a larger proportion of insurance risk in the economy and provide a stable pool of capital to grow our local financial markets. There is need for greater government’s enforcement and adherence to the compulsory insurance regulations as provided by the Market Development and Restructuring Initiative (MDRI) to drive deeper insurance penetration locally.

In our usual fashion, Royal Exchange is bracing up to take advantage of many of these identified initiatives in our quest to grow market share and attain market leadership position. Moreover, our Three-Year Transformation Plan is on course and has contributed immensely in streamlining our performance parameters, developing our retail

businesses, reinforcing our asset management franchise and aligning our shared-services objectives.

Your Board is confident about the future of our company and the impact of its transformation initiatives in converting the group into a world class financial services conglomerate.

DiViDenDsThe Board of Directors recommend a dividend of 5k per 50k ordinary share to members for the year ended December 31, 2013.

BoarD cHangesThere were no changes in your board since the last Annual General Meeting.

concLusionIn conclusion, I wish to thank our distinguished shareholders, clients, brokers, agents, advisors, and other shareholders for your unwavering support.

I extend our utmost gratitude once again to the entire staff and management for their tireless dedication to the great Royal Exchange brand and their continual belief in our future and philosophy. I am ever so convinced about the future of our company and our plans for 2014. This year promises to bring Royal Exchange to a vantage point in our renewed commitment and aspiration towards reclaiming industry leadership. Above all, our core ideals and values for delivering responsibly, the highest quality of services to our clients and exceeding expectations of our other stakeholders remain uncompromised.

Thank You.

KennethEzeanwaniOdogwuChairman


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Mr. Chike Mokwunye - Group Managing Director


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GMD’sStatement

Over the course of the year, Royal Exchange displayed an exemplary role as a socially responsible corporate citizen by championing insurance education and advocacy. Part of our initiatives involved partnerships and sponsorships of programmes targeted at improving insurance literacy among secondary school students and deepening our foot-prints in the lower and informal segment of the insurance market.

Mr. Chike Mokwunye - GMD

It is with deep sense of humility and gratitude to the Board and Shareholders of Royal Exchange Plc that I present to you the report of our stewardship for the 2013 financial year. We have steadily stirred the course of our business towards the path of market leadership with firm support from our executive and senior management team as well as other staff. I am most appreciative of the trust, contributions and sacrifices made by all in the course of this journey.Royal Exchange commenced operations for the year flagging off its Three-Year Strategic Implementation Programme tagged ‘Road to 25’. This unique initiative – to be concluded in 2015 – is billed to have far-reaching transformative impact on our structure, operations and businesses and would reinvigorate our brand towards becoming a stronger, more market-oriented organization with deeper tentacles in the financial services value chain; most especially in the areas of retail insurance, asset management and banking services. Our objective is to build an enduring business premised on efficient service delivery and sharper market responsiveness by leveraging

on technology to strengthen our market penetration, product innovation and distribution channel.

That being said, our transformation exercise was extensive in 2013; ranging from the completion of our strategic recruitment exercise to the automation of our Human Resources (HR) operations, harmonization of administrative policies group wide and closing with an on-going deployment of a robust balance-score card appraisal system to drive corporate performance. More so, energies were directed at strengthening the group’s premium-generating capacity by supporting cross-selling of products through the existing branch network and e-business channels. We expanded the scope of our business operations, leveraging on our robust IT infrastructure, upgraded payment portal and adaptive call-center to stimulate customer traffic across mobile and electronic platforms. Interestingly, we began to notice appreciable rise in our business retention levels and a positive trajectory towards new businesses’ acquisition rate. We also took pragmatic steps at taming attendant spikes in our claims expenses triggered by industry-wide claims growth and we expect to see a downward trend in subsequent years attributable to improved operational efficiency and stringent monitoring of cost drivers within the group.

At the subsidiary level, our strategic focus was directed at increasing the market share of our core insurance subsidiaries whilst at the same time ensuring sustained increase in the contributions of our non-core insurance businesses i.e. asset management and microfinance banking divisions to the pool. In order to achieve this, the company embarked on the implementation of a well articulated retail and branch expansion strategy, thus enabling us to reach out to more customers. Also, the Third-party Fund Management services of our Asset Management division was introduced to beef up liabilities mobilization for the group and is slated for commercial launch in the third quarter of next year. Concurrently, plans are

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GMD’s Statement contd.

being fine-tuned to recapitalize our microfinance bank in 2014 and convert it to a state licensed microfinance bank; thereby bolstering its operating and lending capacity. We believe these initiatives would enable management harness the synergies inherent in our group-holding structure and impact meaningfully on the groups’ bottom-line in the medium term.

Generally, bottom-line performance improved across the subsidiaries, with Royal Exchange Prudential Life Plc returning to profitability. Furthermore, Royal Exchange HealthCare Limited posted decent numbers in the year with commendable low claims ratio indicating improved levels of operational efficiency while Royal Exchange Microfinance Bank Limited and Royal Exchange Finance and Asset Management Limited both displayed rising profitability trajectory. On the other hand, Royal Exchange General Insurance Company Limited demonstrated stability. However, because of the most recent regulatory guidelines which restricted admissible land and building and investment property to N1 billion, out of the available N4 billion, your non-life company, Royal Exchange General Insurance Company Limited, had a deficiency in its solvency margin. I am glad to report that your board and management had already commenced the process to realize some of the group’s investment properties and are therefore confident that the solvency deficit would be rectified without adverse impact on the operations of the subsidiary. operating resuLts:

groupThe company’s wholly owned subsidiaries at the end of 2013 were:(a) Royal Exchange General Insurance

Company Ltd(b) Royal Exchange Prudential Life Plc(c) Royal Exchange Healthcare Ltd(d) Royal Exchange Finance & Asset

Management Ltd(e) Royal Exchange Microfinance Bank Ltd

Your company achieved gross revenue of N9.08 billion in 2013, up from N7.61 billion recorded in 2012, which translated to net income before overhead expenses of N3.40 billion, as against N2.67 billion in 2012. The rise in gross revenue was due principally to increases in premium contributions from our Life insurance business i.e. Royal Exchange Prudential Life Plc.

Management expenses, on the other hand, rose to N2.53 billion as against an expense of N1.98 billion in 2012, signifying an increase of 28%. This increase was in accordance with our business expansion initiatives group-wide.

A profit before tax of N828.21 was achieved as against N703.09 million in 2012.

Royal Exchange General Insurance CompanyLimitedRoyal Exchange General Insurance Company Limited (REGIC) remained the major income earner of the group contributing 65% to the group’s bottom-line.

Gross written premium at N6.73 billion was approximately 9% higher than that of 2012, whilst earned premium income of N5.67 billion was 7% below that of 2012. The dip in earned premium was due to increases in unearned premium which rose from N0.11 billion in 2012 to N1.07billion in 2013. The increase of 3% in reinsurance cost over that of 2012 also impacted negatively on net premium earned, as N3.92 billion recorded in the year was 10% lower than that of the preceding year.

Net Claims incurred (excluding reinsurance recoverable) was N1.73 billion on gross written premium of N6.73 billion as against N1.18 billion recorded in 2012 on a gross written premium of N6.20 billion. The rise in claims expense during the year was as a result of build-up in risk incidence affecting the general insurance businesses industry-wide. Underwriting expenses at N1.84 billion increased by 21% over 2012 levels, in line with increased cost associated with business expansion. Hence, we recorded an underwriting profit of N0.64 billion in 2013, as against N1.89 billion in 2012.

Management expenses at N1.70 billion increased moderately by 5% as against 2012 levels. The increase was due largely to increased cost of doing business and expansion of our retail businesses nation-wide. During the period, major upgrades were made to our e-payment platform and online channels.

Consequently, a profit before tax and exceptional income of N539.52 million is reported for the company as against N729.45 million in 2012.

RoyalExchangePrudentialLifePlcIn 2013, Royal Exchange Prudential Life continued to demonstrate growth potential within the group,


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GMD’s Statement contd.

returning to profitability after two previous years of losses.

Gross written premium at N2.14 billion was approximately 77% higher than that of 2012, and earned premium at N1.36 billion was 64% above 2012 levels.

Management expenses at N579 million was higher in comparison with N190 million recorded in 2012; an increase of 84% which alludes to rising levels of business operations. Consequently, the company realized a profit before tax of N130 million for the year against a loss of N224 million in 2012.

RoyalExchangeFinance&AssetManagementLtdThe company achieved gross earnings of N169 million as against N166 million in 2012, an increase of 1.82%. Net interest margin also depreciated by 30.18%, from N169 million in 2012 to N119 million in 2013.

During the year the company bolstered its credit generation drive via an aggressive liabilities mobilization strategy and this boosted its income earning capacity.

A profit before tax of N46.2 million is reported for 2013 as against N45.9 million in 2012.

RoyalExchangeHealthcareLtdGross written premium decreased by 1.89% to N207 million in 2013 from N211 million in 2012. However, earned premium dropped from N211 million in 2012 to N181 million in 2013. This decline was occasioned by rationalization of health businesses with huge claims pay-out in the previous year.

Net Claims expenses increased by 4% to N118 million in 2013 as against N113 million in 2012. Likewise, operating expenses declined marginally from N181 million in 2012 to N127 million in 2013.

A profit before tax of N81 million is reported for 2013 as against a profit of N84 million in 2012.

Notwithstanding the reported dip in profitability, Royal Exchange Healthcare continues to show promise through aggressive marketing which has significantly increased the number of enrollees that are wide-spread across the country. The Board remains optimistic that the company would tow a positive course in subsequent years as it consolidates its hold on the market.

RoyalExchangeMicrofinanceBankLtdThe audited account shows a gross interest income of N69 million in 2013 as against N57 million generated in 2012. Net interest income stood at N8.7 million, against N48 million recorded in 2012.

Operating expenses increased marginally from N53 million in 2012 to N56 million in 2013. Profit before tax of N31 million is reported for 2013 as against a loss of N5 million in 2012.

corporate sociaL responsiBiLityOver the course of the year, Royal Exchange displayed an exemplary role as a socially responsible corporate citizen by championing insurance education and advocacy. Part of our initiatives involved partnership and sponsorship of programmes targeted at improving insurance literacy among secondary school students and deepening our foot-prints in the lower and informal segment of the insurance market. In the coming year, we intend to play more active roles in promoting microinsurance to the public and fostering a higher enrolment rate by developing innovative products that meet the needs of the yearning public.

concLusionFrom the foregoing, our philosophy of delivering value to our shareholders without compromising on service standards remains sustainable. This was reflective on our performance metrics in 2013 as earnings per share rose 45% from 11 kobo in 2012 to 16 kobo at the close of 2013.

Looking ahead, the potentials for further growth in insurance penetration levels locally remain buoyant due to the continuing reforms being undertaken by the National Insurance Commission (NAICOM). We believe that the group is now well positioned to drive businesses and extract value across the diverse product lines supported by our superior human capital and extensive distribution network. With the on-going implementation of our Three-year Strategic plan, we are confident of the prospects of regaining industry leadership and market dominance in coming years.

ChikeMokwunyeGroup Managing Director

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Report of Corporate Governance

Royal Exchange as a public quoted company is committed to effective governance for the purpose of improving all stakeholders’ value through best business practices of disclosure and transparency. It has over the years achieved laudable status through well articulated structures, charters, policies and processes designed to provide the organization with sound and effective governance structure in line with its Vision, Mission and Core values of Creativity, Integrity, Professionalism, Learning Organization and Customer Orientation.

Royal Exchange, understanding that good corporate governance is essential to earning and retaining the confidence and trust of its stakeholders as well as achieving its vision, provides structures upon which the objectives of the Group are set and the means of attaining those objectives. These structures define the powers and responsibilities of its corporate bodies and employees and are reviewed periodically, to ensure that proper organization and conduct of the business remain consistent within the Royal Exchange Group.

In line with its vision, Royal Exchange is committed to growing its profit and market share in a professional and ethical manner consistent with all applicable governance standards. Thus, the Group complies with all applicable laws and regulations such as the Security and Exchange Commission (SEC) Code of Best Practices on Corporate Governance in Nigeria (2003); the National Insurance Commission (NAICOM) Code of Corporate Governance (2009); the Central Bank of Nigeria (CBN) Code of Corporate Governance (2003) as well as the Companies and Allied Matters Act in relation to its activities.

The Board monitors compliance with the Code of Corporate Governance by receiving periodic management reports.

The Group is committed to continually pursue a disciplined approach to corporate governance in every facet of its business and cares about how profits are obtained, not just profits. The Board corporate governance committee which oversees the Group governance regularly measures governance against best practices and ensures compliance with all corporate governance requirements.

There is an effective structure for cooperation amongst the Board of Directors, Management and Internal Control functions in Royal Exchange. The structure establishes checks and balances and ensures that appropriate controls are in place to provide institutional independence of Board of Directors from the Group Managing Director and the Executive Committee (EXCO), responsible for managing the Group on day to day basis.

The Board of Directors of Royal Exchange Plc is composed of eight (8) Non-Executive Directors and two (2) Executive Directors. The roles of the Chairman of the Board and CEO are separate thus providing separation of powers between the two functions and ensuring autonomy of the Board.

BoardCodeofEthics:

The Group has a Code of Business Ethics approved by the Board. The policy provides guidance to members on how to avoid conflict of interest in any business relationship with the company.

Evaluation of Process and Summary ofEvaluationResults:

In accordance with the provisions contained in the SEC Code of Corporate Governance, the Board has established a system to undertake a formal and rigorous annual evaluation of its performance, that of its committees, the chairman and individual directors by an independent consultant.


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Groupstructureandshareholders

OperationalGroupStructure

Royal Exchange Plc is managed on a matrix depicting lines of business and functionalities which reflects in the area of responsibilities.

TheExecutiveCommittee(EXCO)

The Executive Committee (EXCO) is headed by the GMD and includes the Group Executive Director and the Group Heads of Finance & Accounts, Human Resources, Strategy & Business Improvement, Legal & Company Secretarial Services and the Managing Director of Royal Exchange Finance & Asset Management Ltd.

This management structure leads to the reporting of the Group based on the following primary business segments:• General insurance serves the property and

casualty insurance (inclusive of oil and gas business) need of a wide range of customers, from individual to small and medium sized businesses, commercial enterprises and multinationals corporations.

• PrudentialLifepursuesastrategywithmarket–leading proposition in investment linked and protection products through global distribution and proposition pillars to develop leadership position in its chosen segment.

• Healthcare provides qualitative healthcareservices to individuals and organizations. Their major strategy is to pursue blue chip companies that have large numbers of staff. The main benefits of the service is that apart from the easy access to healthcare delivery system, the enormous cash outlay needed by the organizations to settle medical bills of staff is significantly reduced.

• Finance and Asset Management provides

financial services to the Group and the public. It pursues a strategy of generating income in the course of garnering borrowings from the public, disbursing credits to individuals and corporate entities as well as asset management for individuals and corporate entities.

• MicrofinanceBankprovidesservicestothelessprivileged public having a total production assets of not exceeding N500,000.00 and monthly income not exceeding twice the monthly per capital income in Nigeria or minimum wage.

TheGroupManagementExecutiveCommittee(GMEC)

The GMEC is headed by the Group Managing Director and includes the Group Executive Director, Managing Directors of the subsidiaries and Group Heads of Departments.

The GMEC is responsible for:• ThedaytodayrunningoftheGrouponbehalf

of the Board.• The development and implementation of all

Board approved initiatives. • Theachievementofallbusinessandoperational

plans, targets, strategies and objectives within the company’s risk management framework; and,

• The development of advanced reportingprocedures to ensure the Board is fully informed at all times.

The GMEC also ensures that the processes, policies, procedures and controls within the Group are effective and regularly reviewed to deliver financial and operational accountability and success.

Shareholders

In line with Royal Exchange articles of association and existing statutory and regulatory requirements,

Report of Corporate Governance contd.

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shareholders’ meetings are properly arranged, held in an open manner and ample time given to shareholders to deliberate on issues affecting the Group. Furthermore, representatives of Corporate Affairs Commission (CAC), The Nigerian Stock Exchange (NSE), Securities and Exchange Commission (SEC), and members of the press normally observe the proceedings at the meeting. In 2013, the Annual General Meeting (AGM) was held and attendance was open to shareholders and their proxies.

In the financial year 2013, the members met in one general meeting as follows:

S/N Forum Date of No of shareholders

Meeting including proxies

1 Annual

General

Meeting 27/11/2013 412

CrossShareholding:

Royal Exchange has no interest in any other company exceeding 5% of the voting rights of that other company, where that other company has an interest in Royal Exchange Plc exceeding 5% of the voting rights in Royal Exchange Plc.

InformationtoShareholders

Royal Exchange Plc is committed to continually disclose all material information in a timely and transparent manner to its shareholders. In the light of the above, the Group posts all issues that might be of interest to shareholders on its web portal, including but not limited to its annual reports. Also, there is a blog where shareholders can post in their comments and communicate with other shareholders.

BoardofDirectors

The Board through the Chairman directs the affairs of Royal Exchange. The Directors’ fiduciary duty is to exercise their business judgment in the best interest of Royal Exchange’s shareholders. All the current Non-Executive Directors served on the Board throughout 2013. Members of the Board of Directors of the subsidiaries are appointed from the Group Executive Management and independent directors for each subsidiary. The size of the Board provides for sufficient diversity among Non-Executive Directors while facilitating substantial discussions in which each director can participate meaningfully.

InternalOrganization:

The Board is chaired by the Chairman. Board members are also subject to standards of business conduct policies, rules and regulations to avoid conflict of interest and use of insider information. The Board appoints committees to help carry out its duties. Given the separation of roles of the chairman and the CEO, the Board appoints Non-Executive Directors as chairmen of Board committees. Board committees work on key issues in greater details than would be possible at full Board meetings. Each committee reviews the results of its meeting with the full Board.

The Board is required to meet at least four times each year. The Board met five (5) times in 2013 and the average attendance was 74 percent. The members of the Board spent additional times participating in Board committee meetings and preparing for meetings with the full Board.

Board committeesThe Board appointed committees for specific areas from among its members and established terms of reference and rules with respect to delegated authority and reporting to the Board. The Board has



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the following standing committees which regularly report to the Board and submit proposals for resolutions to the Board.

EstablishmentandGovernanceCommittee

The committee which is composed of six members, oversees the Group’s governance and measures its governance program against best practice to ensure that the rights of the shareholders are fully protected. It also evaluates and proposes to the Board, the principles for remunerations, nominations, compositions and performance appraisal and particularly senior management staff for the Group and the Board. It proposes respective amendments to the Board which is responsible for the design, implementation and monitoring of the Group’s remuneration architecture. The establishment and governance committee is entrusted with succession planning with respect to the Board, the CEO, and members of EXCO. It also proposes directors’ remunerations to the Board for approval and reviews performance relating to senior management’s short term and long term incentive plans. To assist in the review of the compensation structures and practices, the committee has retained its own independent advisor – Leading Edge Consultants.

During the 2013 financial year, the committee met four (4) times with average attendance of 83%. The following directors served on the committee in 2013.• ChiefA.I.Idigbe(SAN)–Chairman• AlhajiR.M.Gwarzo,OON• Mr.D.Magerle• ChiefU.I.Okpa–Obaji• Mr.C.U.A.Mokwunye• AlhajiA.Muktari

audit committeeThe committee is established to perform the functions stated in section 359 (6) of the Companies

and Allied Matters Act and is composed of Seven (7) members, made up of three non-executive directors, three representatives of the shareholders with the Group Managing Director and the Chief Internal auditor in attendance, all of whom met the relevant requirements with respect to independence and qualification.

The committee serves as a focal point for the communication and oversight regarding Financial Accounting Reporting, Internal Control and Compliance among Management. The Audit committee, at least annually, reviews the standards of internal control, including the activities, plans, organization and quality of Internal Audit and Group Compliance.

In demonstration of the Board’s on-going commitment to independence and the highest standards of corporate governance, one of the three representatives of the shareholders is the chairman of the committee.

The following Non-Executive Directors and representatives of the shareholders served on the committee in 2013.

Non-Executive Representatives of Directors Shareholders

Alhaji A. R. Mohammed Alhaja A.S Kudaisi – (Chairman)

Chief U. I. Okpa –Obaji Mr. T Olawuyi

Mr. A. Ojora Mr. A.Bekunmi

The committee met five (5) times in 2013 with an average attendance for Non-Executive Directors at 91%.

RiskManagementCommittee

The committee oversees the Group risk management. In particular, the Group risk tolerance, including agreed limits that the Board regards as acceptable for Royal Exchange Plc to bear, the


34


aggregation of agreed limits across the Group, the measurement of adherence to agreed risk limit, and the Group risk tolerance in relation to anticipated capital levels. It further oversees the Group wide risk governance framework, including risk management and control, risk policies and their implementation as well as the risk strategy and monitoring of operational risks. It reviews the business management and Group risk management function, the Group general policies and procedures and satisfies itself that the effective systems of risk management are established and maintained.

The committee has five members and met four times in 2013 with average attendance of 95%. The following directors served on the committee in 2013.• AlhajiA.R.Mohammed–Chairman• ChiefU.Okpa–Obaji• AlhajiR.M.Gwarzo,OON• Mr.C.U.A.Mokwunye• AlhajiA.Muktari

FinanceandGeneralPurposesCommittee

The committee assists the board in fulfilling its financial oversight responsibilities with specific reference to corporate finance, resource and asset utilization, capital structure, cash management, equity and debt financing, capital structure, financial planning and reporting as well as the overall financial performance of the Group.

The committee consists of seven members and met four times in 2013 with average attendance of 82%. The following directors served on the committee in 2013.• AlhajiR.M.Gwarzo,OON–Chairman• ChiefA.I.Idigbe(SAN)• ChiefU.Okpa–Obaji• AlhajiA.R.Mohammed• Mr.A.Ojora• Mr.C.U.A.Mokwunye• AlhajiA.Muktari

InvestmentCommittee:

The committee assists the board in its oversight functions with respect to investment strategies, investment portfolio performance, investment mix and the overall investment performance of the group. The committee consists of six (6) members and met four times in 2013 with average attendance of 79%.

The following directors served on the committee in 2013. • ChiefU.Okpa–Obaji–Chairman• ChiefA.I.Idigbe(SAN)• AlhajiA.R.Mohammed• Mr.A.Ojora• Mr.C.U.A.Mokwunye• AlhajiA.Muktari



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StrategyCommittee

In line with the vision of Royal Exchange Plc and in accordance with its Board Charter, the board established the Board Strategy Committee whose primary responsibility includes but not limited to advising and assisting the board in carrying out:i) the development, articulation, and execution of the Group’s long term strategic plan andii) its advisory oversight responsibilities relating to potential mergers, acquisitions and other key strategic

transactions outside the ordinary course of the Group’s business.

The committee met Nine (9) times in 2013 with the average attendance of 65% on the following dates:• 15January,2013• 19February,2013• 20March,2013• 8May,2013• 25June,2013• 18July,2013• 4September,2013• 25November,2013• 19December,2013

The following served on the committee:• Mr.K.E.Odogwu-Chairman• ChiefA.I.Idigbe(SAN)• Alh.A.R.Mohammed• Mr.D.Verheijen• Mr.C.U.A.Mokwunye

Directors FREQUENCY OF MEETINGS/ATTENDANCE BOARD BIC E&GC F&GP RMC AC BSC AGM 5 4 4 4 4 5 8 1 Mr. K. E. Odogwu, Chairman 3 N/A N/A N/A N/A N/A 8 1 Chief A. I. Idigbe (SAN) * 4 1 3 1 N/A N/A 3 1 Mr. D. Magerle 3 N/A 3 N/A N/A N/A N/A 1 Chief U. Okpa-Obaji 5 4 3 4 3 4 N/A 1 Alhaji A. R. Mohammed 4 4 N/A 4 4 5 7 1 Alhaji R. M. Gwarzo, OON 4 N/A 3 4 4 N/A N/A 1 Mr. Adeyinka Ojora * 4 2 N/A 2 N/A 3 N/A 1 Mr. Charles Momoh AB N/A N/A N/A N/A N/A AB AB Mr. Chike Mokwunye 5 4 4 4 4 5 8 1 Alhaji Awalu Muktari 5 4 4 4 4 N/A N/A 1

Average attendance 74% 79% 83% 82% 95% 91% 65% 90%

note: 1. It is the policy of the Group that any director who will be absent from any meeting shall send his alternate

to attend the meeting. In compliance with the above, every director ab-initio has named and presented his permanent alternate details with the board. The directors with asterixes were represented by their alternates on the dates they were absent.

2. During the year, the Group contravened the provision of Appendix III Clause 14(c) of the Nigerian Stock Exchange Commission (NSE) Post-Listing Requirements and consequently, a penality of One Million Four Hundred Thousand Naira only (N1,400,000:00) was paid.


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Risk Management StatementIn line with our Vision and Mission statements, the Group, understanding the turbulent and challenging business environment within which it operates, has fully imbibed risk management as a key concept to the achievement of its objective.

The Group is thus committed to continually embrace the culture, processes and structures that are directed towards realizing potential business and growth opportunities, whilst managing the adverse effects of all the enterprise risk faced by the Group.

Our key Enterprise Risk Management(ERM)objectives:

• ProtecttheGroup’scapitalbasebymonitoringand ensuring that risks are not taken beyond the Group’s tolerance limit.

• Enhancevaluecreationandcontributetoanoptimal risk return profile by providing the basis for efficient capital deployment.

• SupporttheGroupdecisionmakingprocessesby providing consistent, reliable and timely risk information.

• Protect our reputation and brand bypromoting a sound culture of risk awareness and disciplined and informed risk taking.

Our key Enterprise Risk Managementframework:

Risk management has been effectively imbedded into the system through clearly articulated roles for the Board of Directors, Chief Executive Officer, business and functional areas. Our risk management framework is centered round a robust risk governance process with assigned responsibilities for identifying, managing, monitoring and reporting risk within the Group.

The Board risk management committee charter and the enterprise risk management policy are the Group’s main risk governance document. They specify authorities, reporting requirements, procedure to approve any exceptions and methods of referring any risk issues to senior management and the Board of Directors.

To support the governance process, the Group relies on documented policies and guidelines, regular reporting of the Group risk profile, current risk issues and adherence to risk policies and improvement actions within subsidiaries and on a Group level.

Risk management is not only embedded in our business but is also aligned within the Group strategic and operational planning process. Risks are assessed systematically from a strategic perspective through identification and evaluation of the probability of a risk scenario occurring and the severity of the consequences, should it occur. Similarly, the Group regularly measures and quantifies material risk to which it is exposed. These processes are performed annually, reviewed regularly and closely tied to the planning processes.

Riskculture

The Board and Management sustained the promotion of risk awareness across the Group to manage products, markets, portfolios, liquidity credit and interest rate risks where the associated risks are deemed unacceptable and higher than the residual risk target.

In addition, the Board of Directors and Management ensured that the long term survival and reputation of the company are not at risk. The Group’s objective is to have ERM rooted in the Group’s individual culture, management processes and strategic vision, leading to enhanced risk-based decisions.

The Group continually exposes the staff to training on principles and practice of ERM which has enhanced the skill level of the staff members.

RiskAppetite

The Board of Directors established the Group risk appetite statement to guide the Group to effectively discharge its functions. The management is thus guided to take decisions on managing different categories of risk within the purview of the risk appetite statement. Also,


37

Risk Management Statement contd.

the risk appetite level such as prudential limits were set by the Board of Directors to guide the management’s decision on the amount of risk they are prepared to accept, when decisions are taken to manage any mitigating measures. In line with the Group’s risk appetite statement, the subsidiaries’ risk appetites were scaled down from that of the Group to reflect the respective subsidiary’s need.

RiskGovernance

The primary objective of the Group’s risk and financial management framework is to protect the Group’s stakeholders from events that hinder the sustainable achievement of financial performance objectives, including failing to exploit opportunities.

The Group’s strategy for managing risk exposures is to establish and maintain a robust Enterprise Risk Management (ERM) programme that is embedded in all processes and driven by technology with emphasis on protection from unwanted risk while maintaining stakeholders’ value.

To this end, the Board established the Group’s corporate risk management framework. The ERM programme will help structure and coordinate all direct and indirect risk management activities within the company, while eliminating redundancies and ensuring consistency in the risk management process.

The risk management committee of the Board serves as the focal point for oversight regarding risk management. It reviews the risk management methodologies, policies, models, and reporting and risk strategies.

CapitalManagementApproach

The Group’s operations are subject to regulatory requirements of the National Insurance Commission (NAICOM), Central Bank of Nigeria (CBN), The Nigerian Stock Exchange (NSE) and The Securities and Exchange Commission (SEC).

Such regulations not only prescribe approval and monitoring of activities, but also impose certain restrictive provisions (e.g., capital adequacy) to minimize the risk of default and insolvency on the part of financial service companies and to meet unforeseen liabilities as these arise.

The Group’s capital management policy is therefore to hold sufficient capital to cover the statutory requirements based on regulators’ directives, including any additional amounts required by the regulators.

The Group has also established the following capital management objectives, policies and approach to managing the risks that affect its capital position:• Maintaintherequiredlevelofstabilityofthe

Group thereby providing a degree of security to policyholders;

• Allocate capital efficiently and supportthe development of business by ensuring that returns on capital employed meet the requirements of its capital providers and of its shareholders;

• Retain financial flexibility by maintainingstrong liquidity and access to a range of capital markets;

• Aligntheprofileofassetsandliabilities,takingaccount of risks inherent in the business;

• Maintain financial strength to support newbusiness growth and satisfy the requirements of the policyholders, regulators and other stakeholders;

In reporting financial strength, capital and solvency are measured using the rules prescribed by NAICOM. These regulatory tests are based upon required levels of solvency, capital and a series of prudent assumptions in respect of the type of assets held.

The capital management process is governed by the Board of Directors who has the ultimate responsibility for the capital management process. The Board of Directors is supported by the Board risk management committee, which has various inputs into the capital management process.

38


RegulatoryFramework

Regulators are primarily interested in protecting the rights of policyholders and depositors’ funds and monitoring them closely to ensure that the Group is satisfactorily managing affairs for their benefit. At the same time, regulators are also interested in ensuring that the Group maintains an appropriate solvency position to meet unforeseen liabilities arising from economic shocks or natural disasters.

The operations of the Group are thus subject to regulatory requirements. Such regulations not only prescribe approval and monitoring of activities, but also impose certain restrictive reserves (e.g. contingency reserve, limits on recognition of revaluation reserves for solvency purposes, limit of investment in fixed assets, permissible level of portfolio at risk and distribution to shareholders of actuarial surpluses) to minimize the risk of default and insolvency on the part of the companies to meet unforeseen liabilities as these arise.

AssetandLiabilityManagementFramework

The Assets and Liability Management framework is integrated in the overall risk management policy of the Group be it directly or indirectly associated with insurance and investment liabilities. Our insurance risk management policy is to ensure, in each period, sufficient cash flow is available to meet liabilities arising from insurance and investment contracts.

RiskManagement

The Group operations cut across the financial sector thus, the Group operations is exposed to various forms of risk, such as, Operational Risk, Insurance Risk, Credit Risk, Liquidity Risk, and Market Risk. To mitigate against all these risks, the Group has put in place approved policies, procedures and guidelines to identifying, measuring and controlling these risks.

OperationalRisk

The Group, recognizing it cannot completely eliminate the Group operational risk, such as human error, system failure, fraud and external events, has put in place adequate controls to ensure that the impact does not lead to damage to the reputation of the company, financial loss or legal and regulatory implications.

Controls such as segregation of duties, access control, authorization and reconciliation procedures, staff education and assessment processes including the use of internal audit, have been put in place. Business risks such as changes in environment, technology and industry are monitored through the Group’s strategic planning and budgeting process.

InsuranceRisk

Insurance business being the central part of the Group’s business, exposes the company to the risk of timing and expectations of claims and benefit payments. This is influenced by the frequency of claims, severity of claims, actual benefits paid and subsequent development of long-term claims.

The risk exposure is mitigated by diversification across a large portfolio of insurance contracts and ensuring that sufficient reserves are available to cover these liabilities. The variability of risks is also improved by careful selection and implementation of underwriting strategy guidelines, as well as the use of reinsurance arrangements.

Underwriting risk appetite is defined based on underwriting objectives, business acceptance guidelines, retention guidelines, net retention capacity, annual treaty capacity, regulatory guidelines, other operational considerations and the judgment of the Board and senior management.



39

CreditRisk

The Group’s credit risk appetite is in line with the Group’s strategic objectives, available resources and the provisions of the regulators’ operational guidelines. The Group credit risk policy is to ensure that an appropriate, adequate and effective system of risk management and internal control which addresses credit control is established and maintained.

The Group thus ensures the establishment of principles, policies and processes and structure for the management of risk exposure arising from direct default, counter party and concentration risks to ensure that these risks are properly managed within the Group’s risk appetite.

In setting these appetite limits, the corporate solvency level, risk capital and liquidity level, level of investments, reinsurance and coinsurance arrangements, nature and categories of its clients, are taken into consideration.

The following risk mitigation and control activities are in place to effectively manage exposures to default risk: client evaluation, credit analysis, credit limit setting, credit approval, security management and provision for impairments.

Similarly, the quality and performance of credit portfolios is monitored to identify early signs of decline in credit quality. Such activities include the review of ageing report, credit portfolio quality and delinquency management.

Reinsurance is placed with counterparties that have a good credit rating and concentration of risk is avoided by following policy guidelines in respect of counterparties’ limits that are set each year by the Board of Directors and are subject to regular reviews. At each reporting date, management performs an assessment of creditworthiness of reinsurers and updates the reinsurance purchase strategy, ascertaining suitable allowance for impairment.

LiquidityRisk

The Group continues to be proactive in implementing adequate risk management measures to mitigate all liquidity risks. The liquidity risk management governance structure comprises the Board, Management and Internal Audit department.

Our strategy is to continually maintain a good optimum balance between having stock of liquid assets, profitability and investment needs. Additionally, credit control and approval limits, effective management of receivables and contingency account to meet all claims payment are put in place.

MarketRisk

An unfavorable change in the market conditions exposes the Group to the possibility of loss of income or investment hence the Group has adopted a cautious and prudent approach to investment and trading activities.

The Group investment policy is that, except waived by the Board Investment Committee (BIC), investment/trading transactions that do not fall within the Group risk appetite, are not undertaken, no matter how profitable the transaction may seem.

Additionally, the Group does not enter into any transaction that is illegal, unethical or contravenes any applicable law, regulation, and professional code of conduct or is capable of damaging the Group’s corporate image or key officer.

The Group does not enter into any transaction with any organization with perceived likelihood of failure or showing signs of going concern challenges.


40

1. Mr. Kenneth Ezenwani Odogwu - Chairman2. Chief Anthony Ikemefuna Idigbe (SAN) - Director3. Mr. Daniel Maegerle - Director4. Chief Uwadi Okpa-Obaji - Director5. Alhaji Ahmed Rufa’i Mohammed - Director

Board of Directors

13 1067

41

6. Alhaji Rabiu Muhammad Gwarzo, OON - Director7. Mr. Adeyinka Adekunle Ojora - Director8. Mr. Chike Mokwunye - Group Managing Director9. Alhaji Auwalu Muktari - Group Executive Director (Marketing & Sales)10. Ms. Sheila Ezeuko - Company Secretary/Group Head, Legal Services

Board of Directors

8 2 4 5 9

BRIE

F P

ARTIC

ULA

RS

OF O

UR D

IREC

TO

RS

44


Brief Particulars of Our Directors

MR.KENNETHEZENWANIODOGWUHe is a Legal Practitioner. He was called to the Nigerian Bar in 1990 and was engaged as a counsel in the firm of Sofunde, Osakwe, Ogundipe & Belgore. He also worked as the Head (Legal Department) of Perfecta Investments Limited, a capital market operator and as Chief Executive Officer of Siotel, an IT company. He is currently on the Board of several publicly quoted and private companies and was the last Chairman of IMB Bank, before it merged into First Inland Bank (now FCMB). He is also the Chief Executive of the Odogwu Group of Companies. He was appointed to the Board of the company on September 1, 1997 and became Chairman on July 26, 2007.

CHIEFANTHONYIKEMEFUNAIDIGBE(SAN) He is a Legal Practitioner and Senior Advocate of Nigeria. He was called to the Nigerian Bar in 1983. He is the principal partner, Punuka Attorneys and Solicitors, which incorporates the legal firm of Idigbe & Idigbe. He is a Notary Public of the Federal Republic of Nigeria, Chairman, Capital Market Solicitors Association, Vice President, International Debt Management Association, Member, Nigerian Bar Association and Member, Faculty of ESUT Business School, Enugu, Enugu State. He was appointed to the Board of the company on August 20, 2002.

mr. DanieL maegerLe He is a Swiss national and holds a Degree in Law from the University of Zurich. He was called to the Zurich Bar in 1998. He is a Partner in the firm of Streiff Pellegrini & Von Kaenel, Switzerland; a firm established in 1962 and engaged in a broad range of legal activities both nationally and internationally. He was appointed to the Board of the company on November 24, 2004.

CHIEFUWADIOKPA-OBAJIHe holds a B.Sc (1980), an M.Sc (1982) both in Economics from the University of Lagos, Lagos State; an LL.B (2007) from the University of Abuja and was called to the Nigerian Bar in 2008. He is a Fellow of the Chartered Institute of Management Accountants, UK, the Institute of

Chartered Secretaries and Administrators UK and the Institute of Chartered Accountants of Nigeria. He is also an Associate of the Association of National Accountants of Nigeria and the Chartered Institute of Taxation of Nigeria. He is a member of the Chartered Institute of Stockbrokers of Nigeria and an Authorized Dealing Clerk of the Nigerian Stock Exchange. He also holds a Certificate in Macro-Economic Policy and Management from Harvard University in addition to a plethora of training programmes attended both locally and abroad. Chief Okpa-Obaji was a founding staff and former Director of the National Council on Privatisation/Bureau of Public Enterprises and is currently an Executive Director of the Odogwu Group of Companies. He was appointed to the Board of the company on March 15, 2007.

aLHaJi aHmeD rufa’i moHammeDHe is a graduate of the Ahmadu Bello University, Zaria, Kaduna State. He holds a Certificate in Banking and Development Finance from the Manchester Business School and is a Fellow of the Institute of Public Administration. He has undertaken several national assignments and is currently on the Board of several publicly quoted and private companies. He is a recipient of various national and international awards and honours. He was appointed to the Board of the company on May 16, 2007.

ALHAJIRABIUMUHAMMADGWARZO,OONHe is an Associate of the British Society of Commerce. He holds a Certificate in Accounting and Finance for Developing countries from the University of Strathclyde, Glasgow, Scotland Business School and Certificate in Wheat Marketing & Processing from Kansas State University, USA. He is also an Associate of the institute of Industrialists and Corporate Administrators (AIICA) and a Fellow of the Institute of Industrialists and Corporate Administrators (FIIC). He has undertaken several national assignments and is currently on the Board of several publicly quoted and private companies. He holds the national honour of the Officer of the Order of the Niger (OON). He was appointed to the Board of the company on November 21, 2008.


45

Brief Particulars of Our Directors contd.

mr. aDeyinka oJora He is a businessman. He started his business pursuits in 1992 when he joined Nigerlink from AT&T Global Information Services where he was a marketing support specialist for the MICR implementation for the Central Bank of Nigeria. He worked with Eco Securities Limited as an assistant registrar and broker from 1996-1998 and was later appointed managing director with specific responsibility for power generation. He also heads the defence procurement division of Nigerlink Industries Limited. He serves as a director on boards of different companies as well as advisor to numerous companies seeking entry into the Nigerian market place. As a philanthropist, he is a trustee of the Well Being foundation, whose goal is the reduction of maternal and infant mortality in Nigeria. He is a director, Ojora group and was appointed to the board of Royal Exchange on June 6, 2011.

MR.CHIKEMOKWUNYEHe is a graduate of the Ahmadu Bello University, Zaria, and the University of Benin. He holds a B.A. (Hons.) degree in Education/Economics and an M.Sc. in Banking and Finance respectively. He is an Associate Member of the Certified Pension Institute of Nigeria (ACIP) and is an Alumni of the Lagos Business School (LBS), Harvard Business School (HBS) and IESE Business School. He has acquired immense expertise in banking and finance having spent seventeen years in the industry. Prior to his appointment as an Executive Director in 2009, he was the Managing Director of Royal Exchange Finance & Investment Ltd, a wholly-owned subsidiary of Royal Exchange Plc. He became the Group Executive Director (Services) in 2009 and was appointed the Group Managing Director with effect from April 14, 2011.

ALHAJIAUWALUMUKTARIHe is a graduate of Ahmadu Bello University Zaria where he obtained Diploma in Insurance at Credit Level in 1993. He completed his 1st degree in Business Administration and Masters degree in Banking and Finance at Bayero University Kano in 1993 and 1999 respectively.

He started his working career with a Kano based insurance company called Kapital Insurance and rose through the ranks to become Head of Re-insurance Department before joining Royal Exchange Assurance in 1995 as a branch manager in Kano, and overseeing the activities of Bauchi, Maiduguri and Yola office. In 2003, he became the Regional Director, Abuja. He resigned from Royal Exchange to become the Managing Director/Chief Executive Officer of Yankari Insurance Co. Ltd in 2008, which later became Fin Insurance Co. Ltd. He returned to Royal Exchange as the Group Executive Director, (Marketing and Sales) in 2010.

Alhaji Muktari was elected in 2010 as an associate member of the Institute of Directors, Nigeria; he is also a professional member of the following bodies:

• Associatemember InstituteofManagementSpecialist, UK.

• MemberChartered Institute of Insurance ofNigeria.

• AssociateMember,InstituteofManagement.

mr. cHarLes momoHHe is a graduate of the University of Lagos where he obtained a Bachelor of Arts degree. He also holds an IHRDC in Petroleum Law & Finance, and Petroleum Business Management respectively from Boston, USA. He has attended several Management as well as Oil & Gas courses both home and abroad. He has immense expertise in the Nigerian Oil and Gas industry both in the up and down-stream sectors having spent over twenty years in the industry. He is currently the Managing Director/CEO of Atlantic Meridean. He was appointed an Independent Director to the Board of Royal Exchange Plc on June 27, 2012.

46

Mr.ChikeMokwunyeGroup

Managing Director

AlhajiAuwaluMukhtari

Group Executive Director

(Marketing & Sales)

Mr.RichardBorokiniManaging Director

(Royal Exchange General)

Dr.PiusOfulueManaging Director

(Royal Exchange Healthcare)

Mr.OlawaleBanmoreManaging Director

(Royal Exchange Prudential Life)

mr. Hosea Boman

Group Head (Enterprise

Risk Management)

Mrs.ElizabethElghoche

Managing Director (Royal Exchange

Microfinance Bank)

Mr.AbiolaSanniManaging Director

(Royal Exchange Finance & Asset Management)

Mr.PhilipAshinzeGroup Head (Finance & Accounts)

Ms.SheilaEzeuko

Group Head (Legal/

Secretariat Services)

Mr.Donaldnosiri

Group Head (Human

Resources)

Mr.Ejikeosisioma

Group Head (Information Technology)

MallamBashirBabajo

Group Head (Facilities

Management)

Mr.MukeshMalhotra

Group Head(Strategy

& Business Planning)

mr. amos Okoroh

Group Head (Audit &

Investigation)

Mr.WilsonOkoh-esene

AG Group Head(Corporate

Communications)

“The Royal Exchange brand is one that we are justifiably proud of and we will ensure our relevance in the environment in which we operate by continuously focusing on customer service and product enhancement, our technology platforms and our human capital.”

ExecutiveManagement

Team


47

Executive Management Team’s Profile

MR.CHIKEMOKWUNYEHe is a graduate of the Ahmadu Bello University, Zaria, and the University of Benin. He holds a B.A. (Hons.) degree in Education/Economics and an M.Sc. in Banking and Finance respectively. He is an Associate Member of the Certified Pension Institute of Nigeria (ACIP). He has acquired immense expertise in banking and finance having spent seventeen years in the industry. Prior to his appointment as an Executive Director in 2009, he was the Managing Director of Royal Exchange Finance & Investment Ltd, a wholly- owned subsidiary of Royal Exchange Plc. He was appointed the Group Managing Director with effect from April 14, 2011. He is an alumnus of the Harvard Business School and Lagos Business School.

ALHAJIAUWALUMUKTARIHe a graduate of Ahmadu Bello University Zaria where he obtained Diploma in Insurance at Credit Level in 1993. He completed his 1st degree in Business Administration and Masters degree in banking and Finance at Bayero University Kano in 1993 and 1999 respectively. He is an alumnus of the Harvard Business School.

He started his working career with Kano based insurance company called Kapital Insurance and rose through the ranks to become Head of Re-insurance Department before joining Royal Exchange Assurance in 1995 as a branch manager in Kano, and overseeing the activities of Bauchi, Maiduguri and Yola office. In 2003, he became the Regional Director, Abuja. He resigned from Royal Exchange to become the Managing Director/Chief Executive Officer of Yankari insurance Co. Ltd in 2008, now called Fin Insurance Co. Ltd. He returned to Royal Exchange as the Group Executive Director in 2010.

mr. ricHarD Borokini He is a graduate of the University of Ife, now Obafemi Awolowo University, Ile Ife, where he bagged a degree in the social sciences. He is also a barrister & solicitor of the Supreme Court of Nigeria. An Associate member of the Chartered Insurance Institute of London and Nigeria, he has worked in senior technical positions in some notable insurance companies and was the Deputy General Manager (Technical) for the former Phoenix of Nigeria Assurance which merged with Royal Exchange Plc. He was the Deputy General Manager (Technical Services) coordinating the activities of the technical division of the Company. He was appointed the Managing Director of Royal

Exchange General Insurance Company Limited on 26, July, 2010. He is an alumnus of the Harvard Business School and Lagos Business School.

Dr. pius ofuLueHe is the Managing Director/Chief Executive Officer of Royal Exchange Healthcare Limited, a wholly owned subsidiary of Royal Exchange Plc. He graduated from the University of Ibadan with MBSS in 1986 and holds an MBA in Insurance and Risk Management from Enugu State University. He is also an alumnus of the Lagos Business School. A medical practitioner of over twenty-five years and an active player in the Health Maintenance Organization (HMO) industry with fifteen years cognate experience, he was the Chief Executive Officer of Managed Healthcare Services Limited and the Group Practice Manager of Critical Rescue International (CRI). Dr. Ofulue is the pioneer Managing Director/CEO of Royal Exchange Healthcare Limited, a position he assumed in 2006.

MR.OLAWALEBANMOREHe is a graduate of the University of Ibadan, Oyo State. He holds a Bachelor of Science degree in Sociology and a Masters degree in Managerial Psychology from the same institution. He is an associate of the Chartered Insurance Institute of Nigeria (ACIIN). He started his career in 1987 with Odips Fishing Industries and later joined UNIC insurance Plc in 1992 as a Management Trainee where he rose to become the Group Head (Operations). Prior to joining Royal Exchange in 2003, he was the Regional Director (West) of First Chartered Insurance Company Limited.

He was promoted Assistant General Manager in 2007 and was redeployed to the Technical Services Division as Head (Technical Services) in 2010. He has attended various courses both within and outside the country. He was appointed Managing Director of Royal Exchange Prudential Life Plc, a subsidiary of Royal Exchange Plc in 2011. He is also an alumnus of the Lagos Business School.

mr. aBioLa sanniHe is a graduate of the Obafemi Awolowo University, Ile-Ife and holds a Bachelor of Science degree in Accounting and a Masters degree in Finance (Economic Policy) from the University of London, UK. He started his professional career in the Lagos office of Arthur Andersen now, (KPMG Professional Services). He acquired immense expertise in Investment Banking at IBTC

48


Limited now Stanbic IBTC Bank, where he gained a wealth of experience across a broad spectrum of Investment Banking and Asset Management functions. He headed the asset management team responsible for structuring investment portfolios for HNIs and the biggest of Nigeria’s corporate benefits and pension funds.

A Nigerian Certified Public Accountant; he is an authorized dealing clerk of the Nigerian Stock Exchange and a graduate member (2011) of the Chartered Institute of Stockbrokers. He is a Chartered Banker and Accountant (FCA). Biola is also an associate member of the National Institute of Marketing of Nigeria (Chartered). He joined Royal Exchange in February, 2013 as the Group Head, Asset Management and was appointed the Managing Director Royal Exchange Finance & Asset Management Ltd. on July 1, 2013.

mrs. eLiZaBetH eLgocHeShe is a graduate of the University of Lagos with a B.Sc in Education, a M.ED Educational Administration well as an MBA. She has over 20 years cognate experience spanning Banking & Finance, Manufacturing and Bureau de Change where she served as Chief Operating Officer before joining Royal Exchange Microfinance Bank (REMFB). She is a Fellow of the Chartered Institute of Bankers of Nigeria (FCIB), and an Associate of the Chartered Institute of Marketing (ACIM). She was appointed Managing Director of Royal Exchange Microfinance Bank (REMFB) in 2010.

mr. pHiLip asHinZeHe is a graduate of Accounting of the University of Benin. He holds an MBA from the University of Lagos and passed his professional accounting examinations in 1988 and was admitted to associate membership of the Institute of Chartered Accountants of Nigeria in 1991 and the Chartered Institute of Taxation of Nigeria in 2003. He is also a Certified Information Systems Auditor. Before joining Royal Exchange Plc in September 2010 as Group Head (Finance & Accounts), he had worked in various sectors of the economy spanning manufacturing, banking, consulting and the public service. A former Special Assistant in the Government of Delta State, his last engagement before joining Royal Exchange was as the Managing Consultant of a Finance and Information Technology consulting firm. He is also an alumnus of the Lagos Business School.

mr. DonaLD nosiriHe is a graduate of the University of Nigeria, Nsukka, Enugu State. He holds a Bachelor of Science and Masters degree in Mass Communication from the same institution and the University of Lagos respectively. He holds a Certificate in Personnel Practice from the Chartered Institute of Personnel and Development in London. He is an alumnus of the Lagos Business School (LBS) having undergone the Senior Management Programme (SMP24). He is also an Associate Member of the Chartered Institute of Personnel Management of Nigeria (CIPM), Associate Member of the Chartered Institute of Personnel and Development (CIPD) London and Honorary Senior Member (HCIB) of the Chartered Institute of Bankers of Nigeria. He joined Royal Exchange as a Group Head (Human Resources) in 2012. He also serves as a director on three subsidiary boards within the Group.

mr. mukesH maLHotraHe is an Indian National and holds an Engineering Degree from PEC Institute of Technology along with Masters in Business Economics from Delhi University from where he had his specialization in Finance & Econometrics. Before joining Royal Exchange Plc as Group Head (Strategy & Business Planning), he headed Business Planning department for Airtel, was Chief Financial Officer for eBay. He was in Strategic Planning department for Coca Cola. He has over eighteen years experience in the areas of Finance, Corporate Strategy and Mergers & Acquisition in diverse industries such as Telecom, Internet, ecommerce, FMCG, IT and Manufacturing. He is a strategic planner with expertise in heading functions involving identification of growth opportunities-organic, Mergers & Acquistion, joint ventures/partnerships. In his career spanning over 18 years, he has been driving financial controls, capex optimization & cost controls, corporate restructuring, growth strategy and market entry initiatives for start-ups and for global multi-billion dollar organization. He also serves as a director on the subsidary boards within the group.

ms. sHeiLa eZeuko She is a graduate of the University of Nigeria, Nsukka, Enugu State. She holds a Bachelor of Arts in History and a Bachelor of Law from the same university, and was called to the Nigerian Bar in 1999. She worked in the Chambers of G.E. Ezeuko (SAN) before going into corporate practice. She has served as Company Secretary to General

Executive Management Team’s Profile contd.


49

Executive Management Team’s Profile contd.

Cotton Mill Limited and also Sosoliso Airlines Limited. She has undergone various management and professional courses. She was appointed Company Secretary of Royal Exchange Plc in 2007 and is currently the Group Head (Company Secretariat/Legal Services) with responsibility for the management and execution of Legal Services and Company Secretariat across the Group. She is also an alumna of the Lagos Business School having undergone the Advanced Management Programme (AMP 24). She is an associate member of the Institute of Chartered Arbitrators, Nigeria. She is a member of some professional bodies notably the International Bar Association and the Nigerian Bar Association. She was also appointed the Group Chief Compliance Officer on November 1, 2013.

mr. Hosea BomanHe is a Chartered Accountant, a Chartered Stockbroker as well as a member of the Chartered Institute of Taxation of Nigeria with over 25 years experience spanning through publishing, banking, finance, stock broking and a brief stint in the media. He joined Royal Exchange Finance Ltd. in 2005 as the pioneer Head of Finance and Administration and was appointed Managing Director/CEO in 2009. He is also an alumnus of the Lagos Business School and IESE Business School, Barcelona, Spain. A fellow of the Institute of Chartered Accountants of Nigeria (FCA), he is currently the Group Head (ERM) since June 2013.

mr. eJike osisiomaHe is an IT professional and is a Microsoft Certified Professional (MCP), Member, Nigeria Computer Society (MNCS) and Computer Professionals Registration Council of Nigeria (MCPN). He holds a first degree in computer science from the University of Nigeria, Nsukka (1995) and an MBA from the ESUT Business School (2005).

Prior to joining Royal Exchange, he was managing an IT organization and was a Consultant/Resource person on Basel II to banks and other financial institutions. He was at various times with Data Links Nigeria Limited as Head, Software/IT consulting and later AGM, Technical Services where he was responsible for all technical matters, business generation, project management, software development and banking software implementation from start to finish. He is a highly skilled IT professional with expertise in database design, implementation and management, software design and development,

amongst others. He joined Royal Exchange Plc in 2011 as Group Head, Information Technology.

maLLam BasHir BaBaJoHe is a graduate of the Ahmadu Bello University, Zaria. He holds a Bachelor of Science degree in Business Administration and an MBA from the same institution. He started his career in 1988 in the Public sector and has over the years served in various capacities before joining Royal Exchange in May 2008. He is currently the Group Head, Facilities Management. He is also an alumnus of the Lagos Business School.

mr. amos okoroHHe is a seasoned Internal Auditor and joined Royal Exchange Plc in 2002. In 2010, he was appointed the Group Head, Internal Audit. Amos has an MBA from the University of Calabar and a PGD in Financial Management from Ladoke Akintola University of Technology.

He is an associate of both the Institute of Chartered Accountants of Nigeria (ICAN) and the Chartered Institute of Taxation of Nigeria (CITN), and has garnered over 25 years cognate working experience spanning manufacturing, industry, insurance and financial institutions.

MR.WILSONOKOH-ESENEHe is a graduate of the University of Nigeria, Nsukka (UNN). He holds a Bachelor of Arts in Mass Communication and is an Associate of the Nigerian Institute of Management (Chartered) and is currently pursuing additional professional qualifications in Public Relations and Advertising.

A Corporate Communication professional with over 14 years experience in various capacities, Wilson joined Royal Exchange Plc as Deputy Manager, Corporate Affairs, from Oando Plc, where he was in charge of communications activities for three (3) subsidiaries of the Oil Company. Wilson started his professional career in 1998 after his youth service with United Bank for Africa Plc (UBA) as Trainee Officer, Corporate Affairs Unit and later moved to Fidelity Bank Plc in 2001. He then joined Hallmark Bank Plc and moved to Oando Plc in 2006 as Coordinator, Corporate Communications. He joined Royal Exchange Plc in 2010 and is currently the Ag. Group Head, Corporate Communications, and Editor, Royal News, the in-house new journal of Royal Exchange Group.

50

mr. austin NwankwoDirector

(Lagos/West Directorate)

mr. Ben Agili

Director (South-South/

South-East Directorate)

mr. nnamdi Melie

Regional Director

(South-East)

Mr.NelsonAkereleRegional Director

(Lagos-South)

Mr.SteveOkoh

Regional Director

(North-West)

Mrs.VivianEluemeRegional Director

(South-South)

mrs. Jane Ekonwereren

Regional Director

(Lagos-Central)

mr. rotimi Ajana

Regional Director (West)

Mr.PatrickOji

Regional Director

(Lagos-West)

Dir

ecto

rs &

Reg

ion

al D

irec

tors

“We expanded the scope of our business operations leveraging on our robust IT infrastructure, upgraded payment portal and adaptive call-center to stimulate customer traffic across mobile and electronic platforms.”


51

Report of the Directors

The directors are pleased to submit to the members of the company, their forty-fifty annual report, together with the audited financial statements for the year ended December 31, 2013.

1. LegaL form anD principaL actiVities: The company was incorporated as a private limited liability company on December 29, 1969,

converted to a public limited liability company on July 15, 1989 and was listed on the Nigerian Stock Exchange on December 3, 1990.

The principal activities of the company include life, healthcare and general insurance, financing, asset management and micro finance banking services.

2. resuLts for tHe year: The highlights of the company’s trading results for the year ended December 31, 2013.

group group company company 31Dec2013 31Dec2013 31Dec2012 31Dec2012 restated restated

Profit/(loss) before taxation 828,213 703,094 311,803 205,608 Taxation (21,929) (129,801) (30,526) (45,140)

Profit/(loss) after taxation 806,284 573,293 281,277 160,468 Other Comprehensive Income, net of tax 108,379 (56,934) (1,606) (2,200)

Total comprehensive income for the period 914,663 516,359 279,671 158,268

Total assets 20,273,551 16,626,010 7,749,295 7,689,694

Shareholders funds 9,028,866 8,320,018 6,941,439 6,867,583

3. REVIEWOFBUSINESSANDFUTUREPROSPECTS: The review of the company’s business and future prospects contained in the Group Managing

Director’s statement are an integral part of the Directors Report and should be read in conjunction with the Directors Report.

4. DiViDenD anD scrip:

4.1 The directors recommend a dividend payment of 5k (2012: 4k) per 50k ordinary share to members for the year ended, December 31, 2013.

5. Directors’ interest anD sHareHoLDing: A board of 10 (ten) directors determined the general strategy and policy of the company in the

year under review.

For the Year Ended 31 December 2013

52


5.1 The names of directors who served during the year were: Mr. K. E. Odogwu - Chairman Chief A. I. Idigbe (SAN) - Non-Executive Director Mr. D. Maegerle - Non-Executive Director Chief U. Okpa-Obaji - Non-Executive Director Mr. A. A. Ojora - Non-Executive Director Alhaji A. R. Mohammed - Non-Executive Director Alhaji R. M. Gwarzo, OON - Non-Executive Director Mr. C. Momoh - Independent Director Mr. C. U. A. Mokwunye - Group Managing Director Alhaji A. Muktari - Group Executive Director

5.2 In accordance with the Articles of Association, Chief A. I. Idigbe (SAN) and Mr. D. Maegerle are the directors retiring by rotation. Chief A. I. Idigbe (SAN) and Mr. D. Maegerle being eligible offer themselves for re-election.

5.3 The directors’ interests in the issued share capital of the company as recorded in the Register of Members and in the Register of Directors’ Holdings and Contracts, as notified by them for the purposes of Section 276 and 277 of The Listing Requirements of the Nigerian Stock Exchange, are as follows:

Number Number Number of 50k of 50k of 50k Ordinary Ordinary Ordinary Holdings Shares Holdings Shares Holdings Shares as at Held as at as at Held as at as at Held as at July 31, July 31, December 31, December 31, December 31, December 31, 2014 2014 2013 2013 2012 2012

Number Number Number Number Number Number Direct Indirect Direct Indirect Direct Indirect

Mr. K. E. Odogwu Nil 2,013,119,834 Nil 2,013,119,834 Nil 2,013,119,834 Chief A. I. Idigbe (SAN) Nil 970,276 Nil 970,276 Nil 970,276 Mr. D. Maegerle Nil Nil Nil Nil Nil -Nil Chief U. Okpa-Obaji 645,468 Nil 645,468 Nil 645,468 Nil Alhaji A. R. Mohammed Nil Nil Nil Nil Nil Nil Alhaji R. M. Gwarzo, OON 3,782,319 Nil 3,782,319 Nil 3,782,319 Nil Mr. C.U.A Mokwunye 590,644 Nil 590,644 Nil 590,644 Nil Mr. A. A. Ojora Nil 183,529,858 Nil 183,529,858 Nil 183,529,858 Alhaji A. Muktari 546,410 Nil 546,410 Nil 546,410 Nil Mr. C. Momoh Nil Nil Nil Nil Nil Nil

Grand Total 100,131,795 2,014,090,110 5,564,841 2,197,619,968 5,564,841 2,197,619,968

Report of the Directors contd.For the Year Ended 31 December 2013


53

6. sHare capitaL anD sHareHoLDing: The company did not purchase its own shares during the year.

6.1 Authorized Share Capital: The authorized share capital of the company is N5billion made up of 10,000,000,000 ordinary

shares of 50k each.

6.2 Called Up, Issued and Fully Paid Share Capital:

6.2.1 The issued and paid-up share capital of the company is currently N2,572,685,037 made up of 5,145,370,074 ordinary shares of 50k each.

No. of % No. of % No of % Ordinary Holdings Ordinary Holdings Ordinary Holdings

Shares Held as at Shares Held as at Shares held as at as at July July as at December December as at December December 31, 2014 31, 2014 31, 2013 31, 2013 31, 2012 31, 2012

Spennymoor Limited, Jersey C.I: 2,013,119,834 39.12 2,013,119,834 39.12 2,013,119,834 39.12 Royal Exchange Assurance (U.K): 3,776 0.00 3,776 0.00 3,776 0.00 Nigerian Government: 20,654,487 0.40 20,654,487 0.40 9,364,555 0.18

Dantata Investments & Securities Company Limited: 921,833,885 17.92 921,833,885 17.92 966,810,596 18.79

Chief (Dr.) S. I. Odogwu, OFR 266,870,509 5.19 266,870,509 5.19 266,870,509 5.19 Helen and Troy Holdings Limited/ Decanon Investment Limited (Under Litigation - Suit No 261,058,784 5.07 - - - - FHCL/CS/547908) 159,388,632 3.10 159,388,632 3.10 157,321,235 3.06

Phoenix Holdings Limited: 183,529,858 3.57 183,529,858 3.56 183,529,858 3.57 Other Nigerian Citizens &

Associations: 1,318,910,309 25.63 1,579,969,093 30.71 1,548,349,711 30.09

Grand Total 5,145,370,074 100 5,145,370,074 100 5,145,370,074 100

6.3 Share Range Analysis:

Share Range Analysis No. of % of Units % of as at December 31, 2013 Holders Units Held Held Units Held

1 - 500 855 5.6473 205,441 0.004 501 - 1,000 656 4.3329 487,766 0.0095 1,001 - 5,000 5,064 33.4478 14,127,384 0.2746 5,001 - 10,000 2,801 18.5007 19,449,918 0.378 10,001 - 50,000 3,760 24.8349 83,508,312 1.623 50,001 - 100,000 803 5.3038 58,596,618 1.1388 100,001 - 500,000 884 5.8388 187,612,021 3.6462 500,001 - 1,000,000 140 0.9247 98,321,202 1.9109 1,000,001 - 5,000,000 128 0.8454 270,990,174 5.2667 5,000,001 - 10,000,000 25 0.1651 169,747,851 3.299 10,000,001 - 5,145,370,074 24 0.1585 4,242,323,387 82.4493

Grand Total 15,140 100 5,145,370,074 100


54


7. recorDs of Directors attenDance: Further to the provisions of Section 258 (2) of the Companies and Allied Matters Act, Cap C20,

Laws of the Federation of Nigeria 2004, the Record of Directors’ Attendance at Board Meetings held in 2013 is available at the venue of annual general meeting and is contained in the Report on Corporate Governance.

8. property anD eQuipment: Information relating to property and equipment during the year is shown in note 16.

9. Donations: The Group made several donations in the sum of N4,900,000.00 (Four million, nine hundred

thousand naira only) (2012: N100,000) during the year ended 31 December 2013. 10. eVents after reporting Date: There were no significant events after reporting date, which could have had a material effect on

the financial statements for the year ended December 31, 2013 which have not been recognised and/or disclosed.

11. agents, Brokers anD intermeDiaries: The group maintains a network of licensed agents, brokers as well as other intermediaries

throughout the country.

12. empLoyees’ DeVeLopment:

12.1Employmentofphysicallychallengedpersons:

It is the policy of the Group that there be no discrimination in the consideration of all applications for employment, including physically challenged persons.

All employees whether physically challenged or not, are given equal opportunities to develop their expertise and knowledge and qualify for promotion in furtherance of their careers. In the event of members of staff becoming physically challenged, every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that training, career development and promotion of physically challenged persons should, as far as possible, be identical with that of other employees.

12.2Healthandsafetyatworkandwelfareofemployees:

The Group is concerned about the health, safety and welfare of its employees. Therefore the Group, through its subsidiary, Royal Exchange Healthcare Limited provides health insurance for all group staff.



55

12.3Employees’involvementandconsultation: The Group’s consultation machinery was fully utilized in the year to disseminate management

policies and encourage employee involvement in its affairs.

Employee representatives are consulted regularly on a wide range of matters affecting their current and future interests.

Circulars and newsletters on significant corporate issues are published. In order to facilitate the exchange of information, a house journal titled “Royal News” is published featuring contributions from and about employees of the Group.

12.4Training: The Group recognizes that the acquisition of knowledge is ongoing. The Group also recognizes

that to foster commitment, its employees need to hone their awareness of factors economic, financial or otherwise, that affect the Group. To this end, the Group, in the execution of its training programs, encourages and provides the opportunity for its staff to develop and enhance their skills awareness and horizons.

13. auDit committee: The members of the statutory Audit Committee appointed at the annual general meeting held on

November 27, 2013, in accordance with S359 (3) of the Companies and Allied Matters Decree Cap C20, Laws of the Federation of Nigeria 2004, were:

A. Alhaja A. S. Kudaisi B. Mr. T. Olawuyi C. Mr. B. Akinsolu D. Chief U. Okpa-Obaji E. Alhaji A. R. Mohammed F. Mr. A. A. Ojora

The committee met in accordance with the provisions of S 359 of the Companies and Allied Matters Act, Cap C20, Laws of Federation of Nigeria 2004 and will present their report.

14. sHareHoLDers information Build up of Share capital history

1. SHARE CAPITAL HISTORY

YEAR SHARE CAPITAL MODE OF ACTION

1990 21,600,000 INITIAL SHARE CAPITAL 1991 27,000,000 BONUS 1991 5,400,000 SHARES 1992 33,750,000 BONUS 1992 6,750,000 SHARES 1995 50,625,000 BONUS 1995 16,875,000 SHARES 1996 75,937,500 BONUS 1996 25,312,500 SHARES 1997 227,812,500 RIGHT OFFER 151,875,000 SHARES 2000 341,718,750 BONUS 2000 113,906,250 SHARES 2001 512,578,125 BONUS 2001 170,859,375 SHARES 2003 683,437,500 RIGHTS OFFER 170,859,375 SHARES 2003 854,296,875 BONUS 2003 170,859,375 SHARES 2004 1,067,871,094 BONUS 2004 213,574,218 SHARES 2005 1,601,806,641 BONUS 2005 533,935,547 SHARES 2006 2,818,608,785 RIGHTS OFFER 1,216,802,144 SHARES 2007 3,359,898,835 SCHEME SHARES 541,290,050 SHARES 2008 3,695,888,719 BONUS 2008 335,989,884 SHARES 2009 4,065,477,591 BONUS 2009 369,588,872 SHARES 2010 4,573,662,289 BONUS 2010 508,184,698 SHARES 2011 5,145,370,074 BONUS 2011 571,707,786 SHARES


56


2. BONUS HISTORY

YEAR BONUS ISSUES

1991 5,400,000 1992 6,750,000 1995 16,875,000 1996 25,312,500 2000 113,906,250 2001 170,859,375 2003 170,859,375 2004 213,574,218 2005 533,935,547 2008 335,989,884 2009 369,588,872 2010 508,184,698 2011 571,707,786

TOTAL BONUS 3,042,943,505

3. RIGHTS ISSUES

YEAR RIGHTS ISSUES

1997 151,875,000 2003 170,859,375 2006 1,216,802,144

TOTAL RIGHTS 1,539,536,519

4. SUMMARY

INITIAL SHARE CAPITAL 21,600,000 BONUS ISSUES 3,042,943,505 RIGHTS ISSUES 1,539,536,519 SCHEME SHARES 541,290,050 PAID UP CAPITAL 5,145,370,074

15. auDitors: The External Auditors, Messers KPMG have indicated their willingness to continue in office in

accordance with section 357(2) of the Companies and Allied Matters Act 2004, Cap 20. A resolution will be proposed authorising the Directors to fix their remuneration.

By orDer of tHe BoarD

SHEILAIFEYINWAEZEUKOCOMPANY SECRETARY/ GH (LEGAL SERVICES)FRC/2013/NBA/00000004059

LAGOS, NIGERIA31 July 2014



57

The directors accept responsibility for the preparation of the annual financial statements set out on page 60 to 156 that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the Companies and Allied Matters Act of Nigeria and the Financial Reporting Council of Nigeria Act, 2011.

The directors further accept responsibility for maintaining adequate accounting records as required by the Companies and Allied Matters Act of Nigeria and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error.

The directors have made an assessment of the Company’s ability to continue as a going concern and have no reason to believe the Company will not remain a going concern in the year ahead.

signeD on BeHaLf of tHe BoarD of Directors:

KENNETHEZENWANIODOGWU CHIKEMOKWUNYEChairman Group Managing DirectorFRC/2013/NBA/00000004195 FRC/2013/IODN/0000000407131 July 2014 31 July 2014

Statement of Directors’ responsibilities in relation to the financial statements


58


In compliance with Section 359 (6) of the Companies and Allied Matters Act Cap C20 Laws of the Federation of Nigeria 2004, (“The Act”) WE, the Members of the Audit Committee have reviewed and considered the financial statements of the Company for the year ended December 31, 2013 and the reports thereon and confirm as follows:

a) The accounting and reporting policies of the company are in accordance with legal requirements and agreed ethical practices.

b) The scope and planning of audit requirement were, in our opinion, adequate.

c) We have reviewed the findings on management matters, in conjunction with the external auditors and are satisfied with the response of management thereon.

d) The company’s systems of accounting and internal controls were adequate.

e) We have made the recommendation required to be made in respect of the auditors.

f) We discussed with the external auditors on the “Emphasis of matter” in their report and are satisfied, from explanations of management, that appropriate measures are being taken to remedy the solvency deficiency in the general insurance business, which arose from the restriction of admissible investment property and land and buildings to only N1 billion out of the available N4 billion, by the regulator, the National Insurance Commission (NAICOM).

DATED THIS July 31, 2014

aLHaJa a. kuDaisiCHAIRMAN OF THE AUDIT COMMITTEE

otHer memBersMR. T. OLAWUYIMR. A. BEKUNMICHIEF U. OKPA-OBAJIALHAJI A. R. MOHAMMEDMR. A. A. OJORA


Report of the Audit Committee

TH

E F

INA

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IAL

STATEM

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TS

60

Independent Auditor’s ReportTo the Members of Royal Exchange Plc

Report on the Financial StatementsWe have audited the accompanying financial statements of Royal Exchange Plc (“the Company”) and its subsidiaries companies (together “the Group”), which comprise the consolidated and separate statements of financial position as at 31 December 2013, and the consolidated and separate statements of profit or loss and other comprehensive income, the consolidated and separate statements of changes in equity, the consolidated and separate statements of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 67 to 156.

Directors’ Responsibility for the Financial StatementsThe Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and in the manner required by the Companies and Allied Matters Act of Nigeria, the Financial Reporting Council Act of Nigeria, 2011, the Bank and Other Financial Institutions Act, the Insurance Act of Nigeria 2003, relevant National Insurance Commission of Nigeria (“NAICOM”) circulars and for such internal control as the directors determine is necessary to enable preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal controls relevant to the entity’s preparation and fair presentation of the financial statements that give a true and fair view 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, these financial statements give a true and fair view of the financial position of Royal Echange Plc (“the Company”) and its subsidiaries (together “the Group”) as at 31 December 2013, and of the Group and Company’s financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Companies and Allied Matters Act of Nigeria, the Financial Reporting Council of Nigeria Act, 2011, the Bank and Other Financial Institutions Act, the Insurance Act of Nigeria 2003 and relevant National Insurance Commission of Nigeria (NAICOM) guidelines and circulars.

Emphasis of matterWithout modifying our opinion, we draw attention to Note 48(a) of the financial statements which indicates that the Group’s non-life business’s solvency margin as at 31 December 2013 was below the minimum solvency margin required for such business by NAICOM. The note also explains the Group’s plan to address the shortfall.


61

Other MatterThe consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2012 were audited by another auditor whose report dated 1 November, 2013 expressed an unmodified opinion on those financial statements.

Report on Other Legal and Regulatory Requirements

Compliance with the requirements of Schedule 6 of the Companies and Allied Matters Act of Nigeria

In our opinion, proper books of account have been kept by the Company, so far as appears from our examiniation of those books and the Company’s statement of financial position and the statement of profit or loss and other comprehensive income are in agreement with the books of account.

Compliance with the requirements of the National Insurance Commission of Nigeria Guidelines

The Group paid certain penalities in respect of contraventions of the requirement of certain sections of the National Insurance Commission of Nigeria’s Guidelines 2011 during the financial year. The details of these contraventions and penalities paid are disclosed in note 57 to the financial statements.

Signed:

AkinyemiJ.Ashade,ACAFRC/2013/ICAN/00000000786For: KPMG Professional ServicesChartered Accountants31 July 2014Lagos, Nigeria

62


group group group company companyIn thousands of Naira Note 31-Dec-13 31-Dec-12 1-Jan-12 31-Dec-13 31-Dec-12 restated restated restated

assetsCash and cash equivalents 5 1,810,882 1,338,057 1,266,680 35,595 579 Loans and advances to customers 6 812,571 435,830 285,401 - - Advances under finance lease 7 218,585 412,961 240,639 - - Financial assets 8 3,558,965 2,908,585 2,760,023 - - Investment in subsidiaries 9 - - - 7,620,464 7,620,464 Trade receivables 10 421,637 418,381 327,406 - - Reinsurance assets 11 2,044,041 1,584,733 1,590,172 - - Deferred acqusition cost 12 469,160 216,448 182,453 - - Other receivables and prepayments 13 482,025 188,533 363,918 76,384 46,135 Investment in associates 14 213,694 220,734 188,002 - - Investment properties 15 7,092,569 6,356,474 6,169,307 - - Property and equipment 16 1,690,707 1,379,719 1,438,620 16,852 20,641 Intangible assets 17 37,418 38,035 41,210 - 1,875 Employees retirement benefit asset (Net) 18(a) 166,963 49,370 26,839 - - Statutory deposits 19 555,000 555,000 555,000 - - Deferred tax assets 20 699,334 523,150 378,652 - -

TotalAssets 20,273,551 16,626,010 15,814,322 7,749,295 7,689,694

LiaBiLitiesBank borrowing 5 114 - - - 1,688 Deferred Income 21 84,797 92,675 139,491 - - Trade Payables 22 528,509 369,863 641,530 - - Other liabilities 23 1,170,110 635,069 754,108 452,819 436,014 Depositors’ funds 24 595,449 593,225 403,231 - - Insurance Contract Liabilities 25 6,973,096 4,878,504 4,387,131 - - Investment Contract Liabilities 26 599,106 573,494 530,960 - - Dividend Payable 27 80,525 80,525 - 80,525 80,525 Current income tax liabilities 28 494,388 519,109 501,333 254,373 289,039 Employees benefit liability 18(b) 550,660 475,150 369,732 20,139 14,845 Deferred tax liabilities 20 167,931 88,378 77,332 - -

TotalLiabilities 11,244,685 8,305,992 7,804,848 807,856 822,111

eQuityShare capital 29 2,572,685 2,572,685 2,572,685 2,572,685 2,572,685 Share premium 30 2,690,936 2,690,936 2,690,936 2,690,936 2,690,936 Contingency reserve 31 947,734 722,231 525,193 - - Treasury shares 32 (500,000) (500,000) (500,000) - - Retained earnings 33 3,096,193 2,803,330 2,632,890 1,677,257 1,601,795 Other component of equity 34 221,318 30,836 87,770 561 2,167

TotalEquity 9,028,866 8,320,018 8,009,474 6,941,439 6,867,583

TotalEquity&Liabilities 20,273,551 16,626,010 15,814,322 7,749,295 7,689,694

The financial statements was approved by the board of directors on 31 July 2014 and signed on its behalf by:

KennethOdogwu ChikeMokwunye Chairman Managing Director (FRC/2013/NBA/00000004195) (FRC/2013/IODN/00000004071)

Additionally certified by:

PhilipAshinze Chief Financial Officer (FRCN/2012/ICAN/00000000394)

The statement of significant accounting policies and the accompanying notes form an integral part of these financial statements.

Consolidated Statement of Financial PositionFor the Year Ended 31 December 2013


63

group group company companyIn thousands of Naira Note 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12 restated restated

Gross premium written: 9,083,092 7,614,209 - - Unearned premium (1,880,482) (490,671)

Gross Premium Income 7,202,610 7,123,538 - -Reinsurance Expenses 35 (1,949,568) (1,755,446) - -

Net Premium Income 5,253,042 5,368,092 - -Fees and commission income 36 331,400 195,973 - -

NetUnderwritingIncome 5,584,442 5,564,065 - -

Insurance claims and benefits incurred 37 (2,844,787) (2,246,100) - - Insurance claims and benefits incurred - recoverable from reinsurers 38 360,593 613,774 - -

Net claims expenses (2,484,194) (1,632,326) - - Underwriting Expenses 39 (2,200,527) (2,128,016) - -

TotalUnderwritingExpenses (4,684,721) (3,760,342) - -

UnderwritingProfit 899,721 1,803,723 - -

Net Interest Income 40 162,171 110,331 - - Investment and other income 41 398,226 628,563 297,333 133,800 Share of profit/loss on investment in associate 14(a) 12,342 46,196 - - Net fair value gain or loss on financial assets 42 1,511,555 732,753 - - Write-back/(charge) of impairment allowance 43 134,414 (896,821) - - Other operating income 44 285,566 241,089 262,388 228,548

NetIncome 3,403,995 2,665,834 559,721 362,348

Foreign Exchange Gains/(Losses) 45 (43,949) 13,967 - - Management expenses 46 (2,531,833) (1,976,707) (247,918) (156,740)

TotalExpenses (2,575,782) (1,962,740) (247,918) (156,740)

Profitbeforeminimumtaxandincometax 828,213 703,094 311,803 205,608Minimum tax 28(a) (69,275)Income taxes 28(a) 47,346 (129,801) (30,526) (45,140)

ProfitafterTaxation 806,284 573,293 281,277 160,468

OtherComprehensiveIncome,netoftaxItems that will never be reclassified subsequently to profit or loss:

Revaluation Surplus on PPE - - - -Net Actuarial Gains/Losses of Defined Benefit Obligations 18(c) 111,523 (67,462) (1,606) (2,200)Tax Effects on Other Comprehensive Income 18(c) 1,066 10,528 - -

Items that are or may be reclassified subsequently to profit or loss:Changes in fair value of AFS Investments (4,210) - - -

Total other comprehensive income, net of tax 108,379 (56,934) (1,606) (2,200)

Total comprehensive income for the period 914,663 516,359 279,671 158,268

Total comprehensive income attributable to shareholders

Earnings per share - Basic and diluted (kobo) 47 16 11 5 3

The statement of significant accounting policies and the accompanying notes form an integral part of these financial statements.

Consolidated Statement of Profit or Loss and Other Comprehensive Income


64

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66


In thousands of Naira notes group group company company 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12 restated restated

Operating profit for the year 806,284 573,293 281,277 160,468

Adjustments for:Impairment allowance on loans and advances to customers 43 8,152 20,697 - - Impairment / (write-back ) of allowance on advance under lease 43 29,143 (14,173) - - Impairment allowance on financial assets 43 5,343 38,500 - - Impairment / (write-back ) of impairment allowances on trade receivable 43 (194,705) 801,596 - - Impairment allowance on other receivables and prepayments 43 17,653 57,999 - - (Profit)/loss on investment properties 41 (49,153) (24,476) - - Fair value gain on investment properties 42 (816,095) (277,410) - - Depreciation on property and equipment 16 152,401 186,591 10,527 12,586 Amortization of intangible assets 17 13,372 21,877 1,875 1,875 Profit on disposal of property and equipment 44 (5,812) (788) - - Loss on revaluation of property and equipment 16 - 24,928 - - Increase/ (decrease) in unearned premium 1,880,482 490,671 - - Increase/ (decrease) in provision for outstanding claims 214,110 702 - - Increase/ (decrease) in provision for employees retirement benefits 18(b) 136,415 82,998 3,779 3,750 Contribution to employees retirement benefits 18(a)(i) - (41,945) - - Dividend income on equity investments (73,658) (83,558) - - Rental income 44 (61,541) (34,563) - - Interest Income 41 (301,675) (7,604) - - Fair value gain on financial assets through profit or loss 42 (695,460) (453,448) - -

1,065,256 1,361,887 297,458 178,679

Changes in working capital:Loans and advances to customers (384,893) (171,126) - - Advance under lease 165,233 (158,149) - - Trade receivables 191,449 (892,571) - - Re-insurance asset (459,308) 5,439 - - Deferred acquisition cost (252,712) (33,995) - - Other receivables and prepayment (311,145) 117,386 (30,249) 993 Deferred Income (7,878) (46,816) - - Trade and other payables 158,646 (271,667) - - Other liabilities 535,041 (38,514) 16,805 53,536 Depositors’ funds 2,224 189,994 - - Investment Contract Liabilities 25,612 42,534 - - Tax expense 28(a) 21,929 129,801 30,526 45,140

749,454 234,203 314,540 278,348

Income tax paid 28(b) (112,482) (234,949) (35,459) (56,704)Gratuity and Long service award paid 18 (66,975) (25,628) (91) (2,573)Withholding tax paid (29,733) - (29,733)

Net cash provided by operating activities 540,264 (26,374) 249,257 219,071

Cash flows from investing activities:Purchases of property and equipment 16 (428,307) (153,852) (6,738) (17,975)Purchases of intangible assets 17 (13,041) (18,702) - - Purchase of investment properties 15 (1,788) (250,660) - - Proceed from disposal of investment properties 90,941 365,379 - - Proceed from disposal of property and equipment 11,016 2,022 - 941 Net purchase of financial assets 35,527 266,386 - - Dividend received 73,658 83,558 - - Rent received 44 61,541 34,563 - - Interest received 301,675 7,604 - - Dividend received from associate 14(a) 19,382 13,464 - - Share of profit of associate 14(a) (12,342) (46,196) - -

Net cash provided by investing activities 138,262 303,566 (6,738) (17,034)

Cash flows from financing activities:Dividend paid (205,815) (205,815) (205,815) (205,815)

Net used in financing activities (205,815) (205,815) (205,815) (205,815)

Cash and cash equivalent at beginning of year 1,338,057 1,266,680 (1,109) 2,669 Net increase in cash and cash equivalent 472,711 71,377 36,704 (3,778)

Cashandcashequivalentatendofyear 1,810,768 1,338,057 35,595 (1,109)

Consolidated Statement of Cash FlowsFor the Year Ended 31 December 2013


67

StatementoftheGroup’sinformationandsignificantaccountingpolicies 1 ReportingEntity The Company was incorporated as Royal Exchange Assurance (Nigeria) Plc, a private limited liability Company on

29 December 1969. It was converted to a public limited Company on 15 July 1989 and then listed on the Nigerian Stock Exchange on 3 December 1990. On 28 July 2008, the Company changed its name to Royal Exchange Plc and transferred its life and general insurance businesses to newly incorporated subsidiaries, Royal Exchange General Insurance Company Limited and Royal Exchange Prudential Life Plc.

The Group currently comprises Royal Exchange Plc (Parent Entity), Royal Exchange General Insurance Company Limited, Royal Exchange Prudential Life Assurance Plc, Royal Exchange Finance and Investment Ltd, Royal Exchange Micro-Finance Bank Limited and Royal Exchange Healthcare Limited.

The principal activities of the Group are general and health insurance, life assurance, asset management, credit financing and microfinance banking.

The financial statements of the Group are as at and for the year ended 31 December 2013.

The registered office address of the Group is New Africa House, 31, Marina, Lagos, Nigeria. Goingconcern The financial statements have been prepared using appropriate accounting policies, supported by reasonable

judgments and estimates. The directors have a reasonable expectation, based on an appropriate assessment of a comprehensive range of factors, that the Group has adequate resources to continue as going concern for the foreseeable future.

2 Basis of preparation (a) StatementofcompliancewithInternationalFinancialReportingStandards The financial statements have been prepared in accordance with, and comply with, International Financial

Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and in the manner required by Companies and Allied Matters Act of Nigeria, the Insurance Act of Nigeria and the Financial Reporting Council of Nigeria Act. These financial statements were authorised for issue by the Group’s Board of Directors on 31 July 2014.

The financial statements include the statement of financial position, statement of profit or loss and other comprehensive income, the statement of cash flows, the statement of changes in equity and the notes to the account.

(b) Functionalandpresentationcurrency The financial statements are presented in Naira, which is the Group’s functional currency; except where indicated.

Financial information presented in Naira has been rounded to the nearest thousands. (c) Basisofmeasurement The financial statements have been prepared on a historical cost basis except for the following: (i) Carried at fair value: • financialinstrumentsatfairvaluethroughprofitorloss; • available-for-salefinancialassets; investment properties. (ii) Carried at a different measurement basis • Retirementbenefitobligationisrecognisedasthepresentvalueofthedefinedbenefitobligationusingthe

projected unit credit method less the net total of the plan assets. • Impairmentofreinsurancereceivablesismeasuredontheincurredlossbasis. (d) Reportingperiod The financial statements have been prepared for a 12 month period. (e) Useofestimatesandjudgment The preparation of financial statements requires management to make judgments, estimates and assumptions

that affect the application of policies and reported amounts of assets and liabilities, income, and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under circumstances, the results of which form the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. The estimates and underlying assumptions

Notes to the Consolidated Financial StatementFor the Year Ended 31 December 2013

68


are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

Judgments made by management in the application of IFRSs that have significant effect on the financial statements and estimates with a significant risk of material adjustment are disclosed in note 4 to the financial statements.

(f) Changesinaccountingpolicies Except for the changes below, the Group has consistently applied the accounting policies set out in note 3 to all

periods presented in these financial statements.

The Group has adopted the following new standards and amendments to standards including any consequential amendments to other standards, with the date of application of 1 January 2013. None of these amendments has a material impact on these financial statements.

(i) IFRS 13 Fair value measurement IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not

change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The application of IFRS 13 has not materially impacted the fair value measurements carried out by the Group, but the Group has included new disclosures in the financial statements, which are required under IFRS 13.

These new disclosure requirements are not included in the comparative information. However, to the extent that disclosures were required by other standards before the effective date of IFRS 13, the Group has provided the relevant comparative disclosures under those standards.

(ii) IAS 19 Employee benefits IAS 19R includes a number of amendments to the accounting for defined benefit plans, including actuarial gains

and losses that are now recognised in other comprehensive income (OCI) and permanently excluded from profit or loss; expected returns on plan assets that are no longer recognised on its own in profit or loss, instead, there is a requirement to recognise interest on the net defined benefit liability (asset) in profit or loss, calculated using the discount rate used to measure the defined benefit obligation, and; unvested past service costs are now recognised in profit or loss at the earlier of when the amendment occurs or when the related restructuring or termination costs are recognised. Other amendments include new disclosures, such as, quantitative sensitivity disclosures.

However, the adoption of the amendment to the standard has no significant impact on these financial statements. (iii) Offsetting financial assets and liabilities The amendment requires an entity to disclose information about rights to set-off financial instruments and

related arrangements (e.g., collateral agreements). The disclosures would provide users with information that is useful in evaluating the effect of netting arrangements on an entity’s financial position. The new disclosures are required for all recognised financial instruments that are set off in accordance with IAS 32. The disclosures also apply to recognised financial instruments that are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether the financial instruments are set off in accordance with IAS 32. The amendments to IFRS 7 had no significant impact on the Group.

(iv) Presentation of items of OCI As a result of the amendments to IAS 1, the Group has modified the presentation of items of OCI in its statement

of comprehensive income, to present items that would be reclassified to profit or loss in the future separately from those that would never be. Comparative information has been re-presented on the same basis.

(v) Amendment to IFRS 12, Disclosure of Interests in other Entities. IFRS 12 sets out the requirements for disclosures relating to an entity’s interest in subsidiaries, joint arrangements,

associates and structured entities.

The Group has abided by this standard by disclosing its interest in an associated company and changing its accounting policy to account for the interest using the equity accounting method.

(vi) Amendment to IFRS 10, Consolidated Financial Statements (2011). As a result of IFRS 10 (2011), the Group has changed its accounting policy for determining whether it has control

over and consequently whether it consolidates other entities. IFRS 10 (2011) introduces a new control model that focuses on whether the Group has power over an investee, exposure or rights to variable returns from its involvement with the investee and the ability to use its power to affect those returns.

Notes to the Consolidated Financial Statement contd.For the Year Ended 31 December 2013


69

In accordance with the transitional provisions of IFRS 10 (2011), the Group reassessed its control conclusions as of 1 January 2013 and this did not result in any change from the conclusion reached in prior years. The change in accounting policy did not have a material impact on the Group’s financial statements.

(g) New standards and interpretation not yet adopted A number of new standards, amendment to standards and interpretation are effective for annual periods

beginning after 1 January 2014, and have not been applied in preparing the financial statements. Those which may be relevant to the Group are set out below.

The Group does not plan to adopt these standards early. However, the Group is still evaluating the potential effect of the new standards.

(i) IFRS 9 Financial Instruments (2010) and IFRS 9 Financial Instruments (2009) (together, IFRS 9) IFRS 9 (2009) introduces new requirements for the classification and measurement of financial assets. IFRS 9

(2010) introduces additions relating to financial liabilities. The IASB currently has an active project to make limited amendments to the classification and measurement requirements of IFRS 9 and add new requirements to address the impairment of financial assets and hedge accounting.

IFRS 9 (2009) requirements represent a significant change from the existing requirements in IAS 39 in respect of financial assets. The standard contains two primary measurement categories for financial assets: amortised cost and fair value. A financial asset would be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and the asset’s contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets would be measured at fair value. The standard eliminates the existing IAS 39 categories of held to maturity, available-for-sale and loans and receivables. For an investment in an equity instrument which is not held for trading, the standard permits an irrevocable election, on initial recognition, on an individual share-by-share basis, to present all fair value changes from the investment in other comprehensive income unless they clearly represent a partial recovery of the cost of the investment.

Investment in equity instruments in respect of which an entity does not elect to present fair value changes in other comprehensive income would be measured at fair value with changes in fair value recognized in profit or loss.

IFRS 9 (2013) introduces new requirements for hedge accounting that align hedge accounting more closely with risk management. The requirement also establishes a more principle based approach to hedge accounting and addresses inconsistencies and weaknesses in the hedge accounting model of IFRS 9.

The effective date of IFRS 9 was 1 January 2013. The effective date has been postponed to 1 January 2018. The

Group will adopt the standard in the first annual period beginning on or after the mandatory effective date (once specified). The impact of the adoption of IFRS 9 has not yet been estimated as the standard is still being revised and impairment and macro-hedge accounting guidance is still outstanding.

(ii) Offsetting financial assets and financial liabilities (Amendment to IAS 32). The amendment to IAS 32 clarifies the offsetting criteria in IAS 32 by explaining when an entity currently has a

legally enforceable right to set off and when gross settlement is equivalent to net settlement. The amendments are effective for annual periods beginning on or after 1 January 2014 and interim periods within those annual periods. Early application is permitted.

This amendment is not expected to have any material impact on the Group’s financial statements. (iii) IFRIC 21 Levies IFRIC 21 defines a levy as an outflow from an entity imposed by government in accordance with legislations. It confirms that an entity recognises a liability for a levy -when and only when- the triggering events specified in

the legislation occurs. IFRIC 21 is not expected to have a material effect on the Group’s financial statement. (iv) Recoverable amount disclosures for non-financial assets (amendments to IAS 36) The amendments reverse the unintended requirement in IFRS 13 Fair Value Measurement to disclose the

recoverable amount of every cash-generating unit to which significant goodwill or indefinite-lived intangible assets have been allocated. Under the amendments, the recoverable amount is required to be disclosed only when an impairment loss has been recognised or reversed.

The amendments apply retrospectively for annual periods beginning on or after 1 January 2014 with early adoption permitted. The Group is currently assesing the impact of the amendments and will adopt the amendments for the year ending 31 December 2014.


70


3 SignificantAccountingPolicies Except for the changes explained in Note 2(f) above, the Group consistently applied the following accounting

policies to the periods presented in the financial statements. (a) Basisofconsolidation(i) Business combination Business combination is accounted for using the acqusition method as at the acqusition date-i.e. when control is

transferred to the Group. The consideration transferred in the acqusition is generally measured at fair value, as are the identifiable net assets acquired. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred , except if they are related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Any contigent consideration payable is measured at fair value at the acquisition date. If the contigent consideration is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise subsequent changes in the fair value of the contigent are recognised in profit or loss.

(ii) Non-controllling interest NCI are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date.

Changes in the Groups’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

(iii) Subsidiaries Subsidiaries are investees controlled by the Group. The Group ‘ controls’ an investee if it is exposed to, or has

rights to, variable returns from its involvement with investee and has the ability to affect those returns through its power over the investee. The Group financial statements incorporates the assets, liabilities and results of; Royal Exchange General Insurance Company Limited, Royal Exchange Prudential Life Plc, Royal Exchange Microfinance Bank, Royal Exchange Healthcare Limited and Royal Exchange Finance and Asset Management Limited. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

(iv) Associates The consolidated financial statements include the Group’s share of the total recognised gains and losses of

associates on an equity-accounted basis from the date that significant influence commences until the date that significant influence ceases.

When the Group’s share of losses exceeds its interest in an associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an associate.

(v) Loss of Control When the Group loses control over a subsidiary, the Group derecognizes the assets and liabilities of the subsidiary,

any non-controlling interests and the other components of equity related to the subsidiary. Any interest retained in the former subsidiary is measured at fair value when control is lost.

(vi) Transaction eliminated on consolidation Intra-group balances and transactions, and any unrealized income and expenses arising from intra-group

transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

(b) Foreigncurrencytransactions In preparing the financial statements of the Group, transactions in currencies other than the Group’s functional

currency (foreign currencies) are recognised at exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are retranslated at the rates prevailing as at the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined.

Non-monetary items, which are measured in terms of historical cost in a foreign currency, are not retranslated. Exchange differences on monetary items are recognised in profit or loss within ‘other operating income’ or ‘Other operating expenses’ in the period in which they arise.

(c) CashandCashEquivalents Cash and cash equivalents include cash in hand, bank and call deposits and other short-term highly liquid

investments with original maturities of three months or less, which are subject to insignificant risk of changes in their fair value and used by the Group to manage its short term commitments.



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Cash and cash equivalents are carried at amortised cost in the statement of financial position.

For the purpose of the statement of cash flows, cash and cash equivalents are net of outstanding overdrafts. “ (d) FinancialInstruments(i) Classification of Financial Assets The classification of the Group’s financial assets depends on the nature and purpose of the financial assets and

is determined at the time of initial recognition. The financial assets have been recognised in the statement of financial position and measured in accordance with their assigned classifications.

The Group classifies its financial assets into the following categories: • financialassetsatfairvaluethroughprofitorloss(FVTPL), • Available-for-sale’(AFS)financialassets,and • Loansandreceivables.

The Group’s financial liabilities are classified as other financial liabilities. They include: investment contract liabilities, trade and other payables.

Financial Assets at Fair Value through Profit or Loss (FVTPL) Financial instruments are classified at FVTPL when the financial instrument is either held for trading or it is

designated as at FVTPL. Financial instruments at FVTPL are stated at fair value. Available-for-sale financial assets (AFS) Available-for-sale financial instruments are non-derivatives that are either designated as AFS or are not classified

as:

(a) loans and receivables; (b) held-to-maturity investments; or (c) financial assets at fair value through profit or loss.

Listed redeemable notes held by the Group that are traded in an active market are classified as AFS and are stated at fair value at the end of each reporting period. The Group also has investments in unlisted shares that are not traded in an active market but that are also classified as AFS financial assets.

Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not

quoted in an active market. Loans and receivables are measured at amortized cost using the effective interest method, less any impairment.

(ii) Initial recognition and measurement All financial instruments are initially recognized at fair value, which includes directly attributable transaction

costs for financial instruments not classified as at fair value through profit or loss. Financial instruments are derecognized when the rights to receive cash flows from the financial instruments have expired or where the Group has transferred substantially all risks and rewards of ownership.

(iii) Subsequent measurement Subsequent to intial recognition, financial assets are measured either at fair value or amortised cost, depending

on their categorization:

Financial Assets at Fair Value through Profit or Loss (FVTPL) Financial assets at FVTPL are stated at fair value. Any gains or losses arising on re-measurement are recognized

in profit or loss in the period in which they arise. The net gain or loss recognized in the statement of profit or loss incorporates any dividend or interest earned on the financial asset and is included in the ‘investment income’ line item in the Group’s statement of profit or loss.

Available-for-sale financial assets (AFS) Available-for-sale financial assets are carried at fair value. The fair values for quoted instruments are determined

by reference to regulated exchange quoted ruling prices. If quoted market prices are not available, reference is also made to readily and regularly available broker or dealer price quotations.

The fair values of unquoted equities and other instruments for which there is no active market, are established using valuation techniques. These include the use of recent arm’s length transactions, reference to the current market value of other instruments that are substantially the same and discounted cash flow analysis. Where the fair value of financial assets is determined using discounted cash flow techniques, estimated future cash flows are based on management’s best estimates and the discount rate used is a market related rate for a similar instrument.

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Available for sale equity instruments for which fair value cannot be reliably determined are carried at cost less impairment allowance, if any.

Changes in the carrying amount of available-for-sale financial assets are recognized in the statement of other comprehensive income and accumulated in the statement of financial position as a separate component of equity under the heading of fair value reserves.

When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investment’s revaluation reserve is reclassified to profit or loss. Dividends on AFS equity instruments are recognized in profit or loss when the Group’s right to receive the dividends is established.

Loans and receivables Loans and receivables on the statement of financial position comprise state government bonds, corporate

bonds, mortgage loans, policyholer’s loans, loans and advances to customers, advance under lease and other receivables.

Loans and receivables, after initial measurement, are measured at amortized cost, using the effective interest rate method less any impairment (if any). Amortized cost is calculated by taking into account any discount or premium on acquisition and fee or costs that are an integral part of the effective interest rate.

Loans granted at below market rates are fair valued at initial recognition by reference to expected future cash flows and current market interest rates for instruments in a comparable or similar risk class and the difference between the historical cost and fair value is accounted for as employee benefits under staff costs.

Interest on loans and receivables is included in profit or loss and reported as “other operating income”.

When the asset is impaired, the impairment loss is reported on the statement of financial position as a deduction from the carrying amount of the loans and receivables and recognized in the statement of profit or loss as “impairment losses”.

Financial liabilities Subsequent to initial recognition, financial liabilities designated at fair value through profit or loss are measured

at fair value while other financial liabilities are measured at amortised cost. Fair value measurement Policy applicable from 1 January 2013 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 in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price - i.e. the fair value of the consideration given or received. If the Group determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

If an asset or liability measured at fair value has a bid price and an ask price, then the Group measures the assets and long positions at a bid price and liabilities and short positions at an ask price.

Portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Group on the basis of a price that would be received to sell a net long position (or paid to transfer a net short position) for a particular risk exposure. Those portfolio-level adjustments are allocated to the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio.


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The Group recognises transfers between levels of the fair value heirachy as of the end of the reporting period during which the change has occurred.

Policy applicable before 1 January 2013 Fair value is the amount for which an asset could be exchanged, or liability settled, between knowledgeable,

willing parties in an arm’s length transaction on the measurement date. The best evidence of the fair value of a financial instrument on initial recognition is the transaction price, i.e. the fair value of the consideration paid or received, unless the fair value is evidenced by comparison with other observable current market transactions in the same instrument, without modification or repackaging, or based on discounted cash flow models and option pricing valuation techniques whose variables include only data from observable markets.

Subsequent to initial recognition, the fair values of financial instruments are based on quoted market prices or dealer price quotations for financial instruments traded in active markets. If the market for a financial asset is not active or the instrument is unlisted, the fair value is determined by using applicable valuation techniques. These include the use of recent arm’s length transactions, discounted cash flow analyses, pricing models and valuation techniques commonly used by market participants.

Where discounted cash flow analyses are used, estimated cash flows are based on management’s best estimates and the discount rate is a market-related rate at the balance sheet date from a financial asset with similar terms and conditions. Where pricing models are used, inputs are based on observable market indicators at the balance sheet date and profits or losses are only recognised to the extent that they relate to changes in factors that market participants will consider in a setting price.

(iv) Impairmentoffinancialassets The Group assesses its financial assets, other than those at FVTPL, for indicators of impairment at the end of

each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For Available-for-sale (AFS) equity investments, a significant or prolonged decline in the fair value of the security below its cost is considered to be objective evidence of impairment.

Objective evidence that a financial asset or group of financial assets is impairment could include: •Significantfinancialdifficultyoftheissuerorcounterparty; •Breachofcontract,suchasadefaultordelinquencyininterestorprincipalpayments; •Itbecomingprobablethattheborrowerwillenterbankruptcyorotherfinancialre-organization; •Thedisappearanceofanactivemarketforthatfinancialassetbecauseoffinancialdifficulties. Loans and receivables For loans and receivables, the amount of the impairment loss recognized is the difference between the asset’s

carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

Available-for-sale financial assets (AFS) When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously

recognized in other comprehensive income are reclassified to profit or loss in the period. In respect of available-for-sale equity securities, impairment losses previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment is recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve.

In respect of AFS debt securities, impairment losses are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

(v) De-recognitionoffinancialassets The Group derecognizes a financial asset only when the contractual rights to the cash flows from the asset

expires, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, The Group continues to recognize the financial asset and financial liability separately.

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On de-recognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.

On de-recognition of a financial asset other than in its entirety (e.g. when the Group retains an option to repurchase part of a transferred asset), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair values of those parts.

(vi) Impairmentofothernon-financialassets At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible

assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest Group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

When an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(e) Tradereceivables Trade receivables comprises of premium receivables and reinsurance receivables.

Premium receivables are those for which credit notes issued by brokers are within 31days, in conformity with the “NO PREMIUM NO COVER” policy.

Reinsurance receivables are claims due to be recovered from Reinsurance companies.

Individual reinsurance receivables that are identified as impaired are assessed for specific impairment. All other reinsurance receivables are assessed for collective impairment. The model for collective impairment is based on incurred loss model. The probability of default and the age of the debts are also taken into account in arriving at the impairment amount. When a reinsurance receivable is considered uncollectible, it is written off against the impairment allowance account.

(f) ReinsuranceAssets The Group cedes reinsurance in the normal course of business in order to limit its net loss potential for losses

arising from certain exposures. The cost of reinsurance related to long-term contracts is accounted for over the life of the underlying reinsured policies, using assumptions consistent with those used to account for these policies. However, reinsurance arrangements do not relieve the Group from its direct obligations to its policyholders.


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Reinsurance assets include balances due from various reinsurance companies for ceded insurance contracts. Amounts recoverable from reinsurers are estimated in a manner consistent with the underlying reinsurance contract.

Reinsurance assets are assessed for impairment at each reporting date. If there is reliable objective evidence that a reinsurance asset is impaired, the Group reduces the carrying amount accordingly and recognizes the impairment loss in the statement of profit or loss.

The Group has the right to set off reinsurance payables against amounts due from reinsurers in line with the agreed arrangement between both parties.

(g) Deferredacquisitioncosts The incremental costs directly attributable to the acquisition of new business which had not expired at the

reporting date, are deferred by recognizing an asset. For non-life insurance contracts, acquisition costs include both incremental acquisition costs and other indirect costs of acquiring and processing new businesses.

Deferred acquisition costs are amortised systematically over the life of the contracts at each reporting date. (h) OtherReceivablesandPrepayments Other receivables balances include dividend, interGroup balances, accrued investment income and security

holding trust accounts. The Group has an internal system of assessing the credit quality of other receivables through establised policies and approval systems. The Group constantly monitors its exposure to their receivables via periodic reviews.

Prepayment are essentially prepaid rents and upfront payments to staff. Other receivables and prepayments are carried at cost less accumulated impairment losses.

(i) Investmentinassociates(equity-accountedinvestees) Associates are those entities in which the Group has significant influence, but not control, over the financial

and operating policies. Significant influence is primarily presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. However, where other factors are involved, these are taken into consideration in exercising judgment.

Investments in associates are accounted for using the equity method and are recognised initially at cost. The cost of the investment includes transaction costs.

(j) InvestmentProperties Investment properties are properties held to earn rentals or for capital appreciation (including property under

construction for such purposes) or for both purposes, but not for sale in the ordinary course of business.

Recognition and measurement Investment properties are measured initially at cost, including all transaction costs. Subsequent to initial recognition, investment properties are measured at fair value, which reflects market

conditions at the reporting date. Gains or losses arising from changes in the fair value of investment properties are included in the statement of profit or loss in the period in which they arise. Fair values are evaluated and assessed annually by a Financial Reporting Council’s accredited external valuer.

De-recognition An investment property is derecognized upon disposal or when the investment property is permanently

withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on de-recognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognized in the income statement in the period of de-recognition.

Transfers 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. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property and equipment up to the date of change. Subsequently, the property is re-measured to fair value and reclassified as investment property.

(k) PropertyandEquipment Recognition and measurement All properties of the Group are stated in the statement of financial position at their revalued amounts, being

the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amounts do not differ materially from those that would be determined using fair values at the end of each reporting period.

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Any revaluation increase arising on the revaluation of such land and buildings is recognized in other comprehensive income and accumulated in equity, except to the extent that it reverses a revaluation decrease for the same asset previously recognized in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously expensed. A decrease in the carrying amount arising on the revaluation of such land and buildings is recognized in profit or loss to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset.

Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Subsequent costs The cost of replacing part of an item of property or equipment is recognized in the carrying amount of the item

if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be reliably measured. The costs of the day-today servicing of property and equipment are recognized in the statement of profit or loss as incurred.

Depreciation Depreciation is recognized so as to expense the cost or revalued amount of the assets (other than freehold land)

less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

Depreciation on revalued buildings is recognized in profit or loss. On the subsequent sale or retirement of a revalued property, the revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings.

Freehold land is not depreciated.

The estimated useful lives for the current and comparative periods are as follows: Buildings 50 years Furniture and office equipment 5 years Motor vehicles - New 4 years - Salvage 3 years Computer hardware 4 years De-recognition An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits

are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the statement of profit or loss of the year that the asset is de-recognized.

(l) IntangibleAssets Software expenditure An internally-generated intangible asset arising from the Group’s software development is recognized if and only

if all of the following conditions are met: • Thetechnicalfeasibilityofcompletingtheintangibleassetsothatitwillbeavailableforuseorsale; • Theintentiontocompletetheintangibleassetanduseorsellit; • Theabilitytouseorselltheintangibleasset; • Howtheintangibleassetwillgenerateprobablefutureeconomicbenefits; • Theavailabilityofadequatetechnical,financialandotherresourcestocompletethedevelopmentandtouse

or sell the intangible asset; and • Theabilitytomeasurereliablytheexpenditureattributabletotheintangibleassetduringits

development. The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred

from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditure is recognized in profit or loss in the period in which it is incurred.

Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortization and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.


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Acquired computer software Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use

the specific software. Computer software is stated at cost less amortization and impairment losses. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. Costs associated with maintaining computer software programmes are recognized as an expense as incurred.

Amortization Computer software costs, whether developed or acquired, are amortized for a period of five years using the

straight line method. (m) Deferredtax Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the

Group’s financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets

are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill (arising in a business combination) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

Deferred tax asset and liabilities are offset when the entity has a legally enforceable right to offset current tax liabilities against current tax assets, and the deferred tax asset and liabilities relate to income taxes levied by the same tax authority on the Company; or on different taxable entities but they intend to settle current tax liabilities and current tax assets on a net basis; or the tax assets and liabilities will be realized simultaneously.

(n) StatutoryDeposits Statutory deposits are cash balances held with the Central Bank of Nigeria (CBN) in compliance with the Insurance

Act, CAP 117, LNF 2004 for the general insurance companies.

The deposits are only available as a last resort to the Group if it goes into liquidation. Statutory deposits are measured at cost.

(o) Borrowings Borrowings by way of bank overdrafts that are repayable on demand and form an integral part of the

Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Borrowing costs comprise interest payable on loans and bank overdrafts. They are charged to profit or loss as incurred, except those that relate to qualifying assets. Arrangement fees in respect of financing arrangements are charged to borrowing costs over the life of the related facility.

(p) Deferredincome Deferred Income comprises of Deferred Rental Income and Deferred Acquisition Income.

Deferred Rental Income relates to rents received in advance. These are amortized and transferred to the statement of profit or loss over the periods that they relate.

Deferred Acquisition Income relates to commissions received on ceded reinsurance businesses but not yet earned as at reporting date. Deferred Acquisition Income are amortized systematically over the life of the contracts at each reporting date.

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(q) Tradepayables Trade payables are recognized when due. These include amounts due to agents, reinsurers, co-assurers and

insurance contract holders. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. The fair value of a non-interest bearing liability is its discounted repayment amount. If the effect of discounting is immaterial , discounting is omitted.

(r) Provisionsandotherliabilities Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past

event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

Other liabilities Other payables are recognized initially at fair value and subsequently measured at amortized cost using the

effective interest rate method. The fair value of a non-interest bearing liability is its discounted repayment amount. If the effect of discounting is immaterial, discounting is omitted.

(s) Depositors’funds Depositors’ funds are Group’s sources of debt funding. Depositors’ funds are initially measured at fair value minus

incremental direct transaction costs, and subsequently measured at their amortised cost using the effective method,except where the Group designates liabilities at fair value through profit or loss.

(t) InsuranceLiabilities(i) Classification IFRS 4 requires contracts written by insurers to be classified as either ‘insurance contracts’ or ‘investment

contracts’ depending on the level of insurance risk transferred.

Insurance contracts are those contracts when the insurer has accepted significant insurance risk from another party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain future event (the insured event) adversely affects the policyholders.

The Group enters into insurance and investment contracts. Its insurance contract liabilities represent the Group’s liability to the policy holders. It comprises the unearned premium, unexpired risk, outstanding claims and the incurred but not reported claims. At the end of each accounting period, this liability is reflected as determined by the actuarial valuation report.

Investment contracts are those contracts that transfer significant financial risk. Financial risk is the risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of price or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract.

Unearned premium provision The provision for unearned premiums represents the proportion of premiums written in the periods up to the

accounting date that relate to the unexpired terms of policies in force at the end of the reporting date. This is estimated to be earned in subsequent financial periods, computed separately for each insurance contract using a time apportionment basis.

Reserve for unexpired risk A provision for additional unexpired risk reserve is recognised for an underwriting year where it is envisaged that

the estimated cost of claims and expenses exceed the unearned premium provision.

Reserve for outstanding claims Outstanding claims represent the estimated ultimate cost of settling all claims arising from incidents occurring

prior to the end of reporting date, but not settled at that date.

Reserve for incurred but not reported claims (IBNR) A provision is made for claims incurred but not yet reported as at the end of the financial year. This provision is

based on the liability adequacy test report.


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Liability Adequacy Test At the end of each reporting period, liability adequacy tests are performed to ensure that material and reasonably

foreseeable losses arising from existing contractual obligations are recognised. In performing these tests, current best estimates of future contractual cash flows, claims handling and administration expenses, investment income backing such liabilities are considered. Long-term insurance contracts are measured based on assumptions set out at the inception of the contract. Any deficiency is charged to the statement of profit or loss by increasing the carrying amount of the related insurance liabilities.

The Liability Adequacy Test (LAT) was carried out by HR Nigeria Limited (Consultant Actuaries). Insurance contract Some insurance and investment contracts contain a discretionary participating feature (DPF), which is a

contractual right to receive as, a supplement to guaranteed benefits, additional benefits that are: • Likelytobeasignificantportionofthetotalcontractualbenefits; • Theamountortimingiscontractuallyatthediscretionoftheinsurer;and • Thatarecontractuallybasedon: i. the performance of a specified pool of contracts or a specified type of contract; ii. realized and or unrealized investment returns on a specified pool of assets held by the issuer; or iii. the profit or loss of the Company. With-profits contracts and contracts with DPF are referred to as participating contracts. Insurance contracts

and investment contracts with DPF continue to be measured and accounted for under the existing accounting practices of the Company prior to the date of transition to IFRS as permitted by IFRS 4.

For all these contracts, premiums are recognized as revenue over the period of coverage. Premiums are shown before deductions of commissions and are gross of any taxes or duties levied on premiums.

Claims expenses are charged to income statement. Long-term insurance Insurance contract liabilities are determined following an annual actuarial valuation of the long term funds (LTFs)

in accordance with regulatory requirements. For non-participating insurance contracts, the liabilities are calculated on the basis of current information using

the gross premium valuation method. This brings into account the full premiums receivable under contracts written, having prudent regard to expected lapses and surrenders, estimated renewal and maintenance costs and contractually guaranteed benefits.

For participating contracts, the liabilities to policyholders are determined on a realistic basis in accordance with IFRS 4. This includes an assessment of the cost of any future options and guarantees granted to policyholders valued on a market consistent basis. The calculation also takes account of bonus decisions which are consistent with the terms and conditions of the contract. The shareholders’ share of the future cost of bonuses is excluded from the assessment of the realistic liability.

In determining the realistic value of liabilities for participating contracts, the value of future profits on non-participating business written in the with-profits part of the fund is accounted for as part of the calculation.

Short-term insurance Group Life Group life insurance policy covers members of a Group. The Group could be employees, members of a club,

society, association, church, mosque etc. It provides financial compensation in the event of death of a member of the Group.

(ii) RecognitionandMeasurementofInsuranceContract Premium Gross written premiums for general insurance, life insurance and investment contracts with discretionary

participating features comprise premiums received in cash as well as premiums that have been received and confirmed as being held on behalf of the Group by insurance brokers and duly certified thereto. Gross premiums are stated gross of commissions and taxes payable and stamp duties that are payable to intermediaries and relevant regulatory bodies respectively.

Unearned premiums represent the proportions of premiums written in the year that relate to the unexpired risk of policies in force at the reporting date.

Reinsurance Premiums, losses and other amounts relating to reinsurance treaties are measured over the period from inception

of a treaty to expiration of the related business. The actual profit or loss on reinsurance business is therefore not recognized at the inception but as such profit or loss emerges. In particular, any initial reinsurance commissions are recognized on the same basis as the acquisition costs incurred.

80



Premiums ceded, claims recovered and commission received are presented in the statement of profit or loss and statement of financial position separately from the gross amounts.

Amounts recoverable under reinsurance contracts are assessed for impairment at each reporting date. Such assets are deemed impaired if there is objective evidence, as a result of an event that occurred after its initial recognition, that the Group may not recover all amounts due under the contract terms and that the event has a reliably measurable impact on the amounts the Group will receive from the reinsurer.

Claims and policy holders benefits payable Claims incurred comprise claims and claims handling expenses paid during the financial year and changes in the

provision for outstanding claims. Claims and claims handling expenses are charged to profit or loss as incurred.

For long term insurance business, benefits are recorded as an expense when they are incurred. Claims arising on maturing policies are recognized when the claims become due for payment. Death claims are accounted for on notification. Surrenders are accounted for on payment.

(u) InvestmentContractLiabilities Investment contracts are those contracts that transfer significant financial risk. Financial risk is the risk of a

possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of price or rates, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. The investment contract comprises of the Royal Policy Product, (RPP), the Royal Insurance Savings Account (ISA) and the Deposit Administration (DA).

Interest accruing to the assured from investment of the savings is recognized in the income statement in the period it is earned while interest paid and due to depositors is recognized as an expense. The net result of the deposit administration revenue account is transferred to the income statement.

(v) IncomeTaxes Income tax expense comprises current and deferred tax. Income tax expense is recognized in the statement of

profit or loss except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the Group’s statement of profit or loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted by the end of the reporting period.

The current taxes include: Group Income Tax @ 30% of taxable profit; Education Tax @ 2% of assessable profit; Capital Gain Tax @ 10% of chargeable gains; and Information Technology Development levy @ 1% of accounting profit.

(w) EmployeeBenefitsLiabilities(i) Short-termbenefits Staff benefits such as wages, salaries, paid annual leave allowance, and non-monetary benefits are recognized

as employee benefit expenses. The expenses are accrued when the associated services are rendered by the employees of the Group.

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

(ii) DefinedContributionPlans The Group operates a defined contribution plan in accordance with the provisions of the Pension Reform Act

2004. The Group and employees contribute 7.5% each of the qualifying monthly emoluments in line with the Pension Reform Act.

The Group’s monthly contribution to the plan is recognized as an expense in profit or loss.

The Group pays contributions to privately administered pension fund administration on a monthly basis. The Group has no further payment obligation once the contributions have been paid. Prepaid contributions are recognized as an asset to the extent that a cash refund or reduction in the future payments is available. Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.


81


(iii) TerminationBenefits Termination benefits are payable when employment is terminated before the normal retirement date, or whenever

an employee accepts voluntary redundancy in exchange for these benefits. The Group recognizes termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy.

(iv) Gratuity The Group operates a staff gratuity scheme for some of its employees. The gratuity liability is valued by an

actuary using the projected unit credit method with discount rate used being the market yield on government bonds. Net actuarial gains and losses are recognised immediately in other comprehensive income. Past service cost is recognised immediately in the statement of profit or loss for all qualified employees.

The plan is unfunded and payments are made on a pay-as-you-go basis. Only the staff of the Group as at 1 June 2008 and who have completed a minimum of five years of service are eligible for the staff gratuity scheme.

(v) Pension The Group operated a funded pension scheme for its employees prior to the Pension Reform Act 2004. It

therefore has continuing pension obligation to its staff who had either retired prior to the commencement of the contributory pension scheme or who had qualified for pension but whose accrued pension amounts were neither shared to them nor transferred to their Pension Fund Managers.

Pensioners are entitled to 3% annual increment. Entitlement of staff that qualified for pension were actuarially valued as at 1st June 2008 and attracts 12% annual interest. Over 90% of the pension assets are being managed by a pension fund administrator while the balance is invested in marketable securities and bank placement.

(vi) LongServiceAward The Group operates a long service award plan for eligible staff who have rendered unbroken service to the

organization.

Benefits accrue after a minimum of 10 years and a maximum of 35 years. The main benefits payable on the scheme are both cash and gift items which vary according to the number of years of service.

The Group meets benefits on a pay-as-you-qualify basis as the plan is an unfunded scheme. (x) CapitalandReserves(i) Sharecapital The equity instruments issued by the Group are classified as equity in accordance with the substance of the

contractual arrangements and the definitions of an equity instrument.

Equity instruments issued by the Group are recognized as the proceeds are received, net of direct issue costs. Repurchase of the Group’s own equity instruments is recognized and deducted directly in 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.

(ii) Sharepremium This represents the excess amount paid by shareholders on the nominal value of the shares. This amount is

distributable to the shareholders at their discretion. The share premium is classified as an equity instrument in the statement of financial position.

(iii) Contingencyreserve The Group maintains Contingency reserves for the general business in accordance with the provisions of S.21 (1)

of the Insurance Act 2003.

In compliance with the regulatory requirements in respect of Contingency Reserve for general business, the Group maintains contingency reserve at the rate equal to the higher of 3% of gross premium or 20% of the total profit after taxation until the reserve reaches the greater of minimum paid up capital or 50% of net premium.

(iv) RetainedEarnings The reserve comprises undistributed profit/ (loss) from previous years and the current year. Retained Earnings is

classified as part of equity in the statement of financial position. (v) Fairvaluereserves Fair value reserves represent the cummulative net change in the fair value of available-for-sale financial assets

at the reporting date.

82



(vi) Assetrevaluationreserve The revaluation reserve relates to the surplus on revaluation of land and building at the end of the financial

period. Increases in the value of these assets are recognised in other comprehensive income and accumulated in assets revaluation reserve until the assets are derecognised.

(vii) Otherreserves-employeebenefitactuarialsurplus Actuarial (surplus)/deficit on employee benefits represent changes in benefit obligation due to changes in

actuarial valuation assumptions or actual experience differing from experience. The gains/losses for the year, net of applicable deferred tax asset/liability on employee benefit obligation, are recognized in other comprehensive income.

(viii) Treasuryshares Where the company or any member of the Group purchases the Company’s share capital, the consideration paid

is deducted from the shareholders’ equity as treasury shares until they are cancelled.Where such shares are subsequently sold or reissued, any consideration received is included in shareholders’ equity.

(y) RevenueRecognition(i) GrossPremiumWritten Gross written premiums for life insurance,non-life insurance (general) and investment contracts with discretinary

participating features comprise premiums that have been received in cash as well as premiums that have been received and confirmed as being held on behalf of the Group by insurance brokers and duly certified thereto. Gross written premiums are stated gross of commissions, net of taxes and stamp duties that are payable to intermediaries and relevant regulatory bodies respectively.

Unearned premiums represent the proportions of premiums written in the year that relate to the unexpired risk of policies in force at the reporting date.

Amounts collected from investment linked contracts with no discretionary participating features are reported as deposits in the statement of financial position as an investment contract liability.

(ii) Reinsuranceexpenses Reinsurance cost represents outward premium paid/payable to reinsurance companies less the unexpired portion

as at the end of the financial year. (iii) Feesandcommissionincome Fees and commission income consists primarily of insurance agency and brokerage commission, reinsurance

and profit commissions, policyholder administration fees and other contract fees. Reinsurance commissions receivable are deferred in the same way as acquisition costs. All other fee and commission income is recognized as the services are provided.

(iv) InvestmentIncome Investment income consists of dividends, interest and rental income on investment properties, interest income

on loans and receivables, realized gains and losses as well as unrealized gains and losses on fair value assets. Rental income is recognized on an accrual basis.

(v) Interestincome Interest income is recognized in the income statement as it accrues and is calculated by using the effective

interest rate method. Fees and commissions that are an integral part of the effective yield of the financial asset or liability are recognized as an adjustment to the effective interest rate of the instrument.

(vi) Dividendincome Dividend income from investments is recognized when the shareholders’ rights to receive payment have been

established. (vii) Realizedgainsandlossesandunrealizedgainsandlosses Realized gains and losses on investments include gains and losses on financial assets and investment properties.

Gains and losses on the sale of investments are calculated as the difference between net sales proceeds and the original or amortized cost and are recorded on occurrence of the sale transaction.

Unrealized gains or losses represent the difference between the carrying value at the year end and the carrying value at the previous year end or purchase value during the year, less the reversal of previously recognized unrealized gains and losses in respect of disposals during the year.

(viii) Otheroperatingincome Other operating income represents income generated from sources other than premium revenue and investment

income. It includes rental income, profit on disposal of fixed assets. Income is recognized when payment is received.


83


(z) ExpenseRecognition(i) Claimsexpenses Claims expenses consist of insurance claims and benefits incurred within the reporting period, less the amount

recoverable from the reinsurance companies. (ii) Insurancebenefitsandbenefitsincurred Gross benefits and claims consist of benefits and claims paid / payable to policyholders, which include changes in

the gross valuation of insurance contract liabilities, except for gross change in the unearned premium provision which are recorded in premium income. It further includes internal and external claims handling costs that are directly related to the processing and settlement of claims. Amounts receivable in respect of salvage and subrogation are also considered.

Salvage Some non-life insurance contracts permit the Group to sell (usually damaged) property acquired in the process

of settling a claim. Subrogation Subrogation is the right of an insurer to pursue a third party that caused an insurance loss to the insured. This

is done as a means of receiving the amount of the claim paid to the insured for the loss. (iii) Underwritingexpenses Underwriting expense include acquisition costs and maintenance expense. Acquisition costs comprise direct and

indirect costs associated with the writing of insurance contracts. These include commission expenses and other technical expenses. Maintenance expenses are expenses incurred in servicing existing policies and clients. All underwriting expenses are charged to income statement as they accrue or become payable.

(iv) Managementexpenses Management expenses are charged to profit or loss when goods are received or services rendered. They

are expenses other than claims, maintenance and underwriting expenses and include employee benefits, depreciation charges and other operating expenses.

(aa) SegmentReporting Operating segments are identified and reported in consonance with the internal reporting policy of the Group

that are regularly reviewed by the Chief Executive (being the chief operating decision maker) who allocates resources to the segment and assesses their performance thereof.

The Group’s reportable segments, for management purpose, are organized into business units based on the products and services offered as follows:

• Nonlifeinsurance • Lifeinsurance; • Financialservices; • Healthcare;and • AssetManagement

The other segments include corporate shared services and other activities not related to the core business segment and which are not reportable segments due to their immateriality. Certain expenses, finance costs and taxes are not allocated across the segments.

This is the measure used by the Group’s Chief Executive for the purposes of resource allocation and assessment of segment performance.

(ab) Earningspershare The Group presents ordinary and diluted basic earnings per share for its ordinary shares. Basic earnings per

share are calculated by dividing the profit or loss attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the year.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

84



4 Criticalaccountingestimatesandjudgments The Group makes estimates and assumptions that affect the reported amounts of assets and liabilities within the

financial year. Estimates and judgments are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Deferredtaxassetsandliabilities Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in

the Group’s financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill (arising in a business combination) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.


Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

(b) Fairvalueoffinancialassets The directors use their judgment in selecting an appropriate valuation technique for some financial assets.

Impairment for financial assets carried at amortized costs as well as the amount of impairment for trade receivables.The significant estimates and judgments applied in determination of fair value of financial assets are as shown in the statement of accounting policies note 3 (d)(iii).

(c) Impairmentoffinancialandnon-financialassets Management judgment is required to assess and determine the amount of impairment for financial assets carried

at amortized costs as well as the amount of impairment for trade receivables.The significant estimates and judgments applied in assessing the impairment on financial assets are as shown in the statement of accounting policies note 3 (d) (iv) and (vi).

(d) MeasurementofFinancialLiabilities Financial liabilities comprises of insurance contracts, trading liabilities and borrowings.

Financial liabilities are initially recognized at fair value, net of transaction costs that are directly attributable to

the raising of the funds. The fair value of financial liabilities is determined using discounted cash flow techniques. Estimated future cash

flows are based on management’s best estimates and the discount rate used is a market-related rate for a similar instrument adjusted for the credit risk of the Group.

Liabilitiesarisingfrominsurancecontracts Claims arising from non-life insurance contracts Liabilities for unpaid claims are estimated on a case by case basis. The liabilities recognised for claims fluctuate

based on the nature and severity of the claim reported. Claims incurred but not reported are determined using statistical analyses and the Group deems liabilities reported as adequate.


85


(e) Depreciationandcarryingvalueofpropertyandequipment The estimation of the useful lives of assets is based on management’s judgement. Any material adjustment to

the estimated useful lives of items of property and equipment will have an impact on the carrying value of these items.

(f) Determinationofimpairmentofpropertyandequipment,andintangibleassetsexcludinggoodwill Management is required to make judgements concerning the cause, timing and amount of impairment. In the

identification of impairment indicators, management considers the impact of changes in current competitive conditions, cost of capital, availability of funding, technological obsolescence, discontinuance of services and other circumstances that could indicate that impairment exists. The Group applies the impairment assessment to its separate cash generating units. This requires management to make significant judgements and estimates concerning the existence of impairment indicators, separate cash generating units, remaining useful lives of assets, projected cash flows and net realisable values. Management’s judgement is also required when assessing whether a previously recognised impairment loss should be reversed.

5 Cashandcashequivalents

In thousands of Naira group group group company company 31-Dec-13 31-Dec-12 1-Jan-12 31-Dec-13 31-Dec-12

Cash 4,973 3,694 4,094 33 33 Bank balances 1,170,100 186,851 334,147 35,562 546 Short-term deposits (including demand and time deposits) (see note (i) below) 635,809 1,147,512 928,439 - -

Cash and cash equivalents (as per statement of financial position) 1,810,882 1,338,057 1,266,680 35,595 579 Bank Overdarfts (see note (ii) below) (114) - - - (1,688)

Cash and cash equivalents (as per statement of cash flows) 1,810,768 1,338,057 1,266,680 35,595 (1,109)

(i) Short–term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group. All deposits are subject to an average variable interest rate of 9.7% (2012: 13%).

The carrying amounts disclosed above reasonably approximate fair value at the reporting date.

(ii) The balance represents amount used as integral part of the Group’s cash management.

6 Loansandadvancestocustomers

In thousands of Naira group group group company company 31-Dec-13 31-Dec-12 1-Jan-12 31-Dec-13 31-Dec-12 restated restated

Term Loan 865,973 481,080 314,622 - -

Gross Loans 865,973 481,080 314,622 - - Specific Impairment (52,386) (21,349) (14,443) - - Collective Impairment (1,016) (23,901) (14,778) - -

Total impairment (See 6(d) below) (53,402) (45,250) (29,221) - -

Carrying amount 812,571 435,830 285,401 - -

86



6(a) SectorialAnalysisofloansandadvancestocustomers


Agriculture 8,940 533 - - - Manufacturing 32,923 46,374 83,034 - - Trade And Commerce 529,322 287,979 190,017 - - Real Estate And Construction 66,418 18,313 8,410 - - Education 167,641 117,798 29,837 - - Others 60,729 10,083 3,324 - -

865,973 481,080 314,622 - -

6(b) Analysisofloansandadvancestocustomersbymaturity


1-30 days 73,236 23,074 17,940 - - 31-60 days 85,939 64,489 36,729 - - 61-90 days 217,812 183,734 120,039 - - 91-180 days 463,201 209,783 139,914 - - 181-360 days 25,785 - - - - Over 360 days - - - - -

865,973 481,080 314,622 - -

6(c) Analysisofloansandadvancestocustomersbycollateral


Secured against real estates - - - - - Otherwise secured 775,744 434,483 286,271 - - Not secured 90,229 46,597 28,351 - -

865,973 481,080 314,622 - -

6(d) Themovementsinimpairmentallowanceonloansandadvancestocustomersisanalyzedbelow;

In thousands of Naira group group company company 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12

Balance, beginning of year 45,250 29,221 - - Write-off during the year - (4,668) - - Impairment allowance recognised during the year (see note 43) 8,152 20,697 - -

Balance, end of year 53,402 45,250 - -


87


7 Advancesunderfinancelease


Gross investment in finance lease 255,186 420,419 262,270 - - Impairment allowance (36,601) (7,458) (21,631) - -

218,585 412,961 240,639 - -

7(a) Analysisofadvancesunderfinanceleasebymaturity


1-30 days - - - - - 31-90 days 14,826 24,595 22,111 - - 91-180 days 30,352 50,352 45,265 - - 181-360 days 82,805 239,512 90,275 - - Later than 1 year but less than 5 years 90,602 98,502 82,988 - - Later than 5 years - - - - -

218,585 412,961 240,639 - -

7(b) Themovementsinimpairmentallowanceonadvanceunderleaseisanalyzedbelow;


Balance, beginning of year 7,458 21,631 - - Write back of impairment - (14,173) - - Impairment allowance recognised during the year 29,143 - - -


8 Financialassets


Available for sale financial assets (see note 8(a) below) 271,210 281,444 278,057 - - Fair value through profit or loss (FVTPL) (see note 8(b) below) 2,762,870 2,107,398 2,166,211 - - Loans and receivables at amortised cost (see note 8(c) below) 524,885 519,743 315,755 - -

Totalfinancialassets 3,558,965 2,908,585 2,760,023 - -

Within one year 179,122 205,893 242,618 - - More than one year 3,379,843 2,702,692 2,517,405 - -

3,558,965 2,908,585 2,760,023 - -

88



8(a) Availableforsalefinancialassets:


Listed equities 5,237 - 156,103 - - Unlisted equities at cost 435,384 445,512 287,993 - - Specific impairment allowance (see note 8(a)(ii) below) (169,411) (164,068) (166,039) - -

271,210 281,444 278,057 - -

8(a)(i) Ananalysisofunlistedequitiesinavailableforsalefinancialassetsasat31December2013isasshownbelow

Nameofentity Carryingvalueofequities Percentageholding n’000 %

Sterling Assurance 200,428 7% Harliburton Technical Limited 21,309 4% African Reinsurance Corporation 14,577 3% Nigeria Liability Pool 10,000 11% Capital Bancorp 1,716 1% R.E.A Real property investment 1,449 5% DPMS 1,261 0% Others 20,470 2%

271,210

8(a)(ii) The Group’s available for sale financial assets includes investment in listed and unlisted equities.Unlisted equities are carried at cost less impairment allowance as the fair value could not be determined reliably. Listed available for sale equities are measured at fair value using the quoted prices in active markets and fair value changes recognised in other comprehensive income. The investments were assessed for impairment as at year end.

The movements in specific impairment allowance on listed and unlisted equities classified as available for sale is analyzed below;


Balance, beginning of year 164,068 166,039 - - Impairment allowance recognised during the year 5,343 38,500 - - Write-off during the year - (40,471) - -


8(b) Fairvaluethroughprofitorloss(FVTPL)


Federal government Bonds 171,458 205,417 24,893 - - Treasury bills 179,122 205,893 242,618 - - Listed equities 2,412,290 1,696,088 1,898,700 - -

2,762,870 2,107,398 2,166,211 - -


89


8(c) Loansandreceivablesatamortisedcost


State government bonds 132,247 122,797 - - - Corporate bonds 224,394 68,166 80,357 - - Unlisted Debenture 1,231 2,498 - - - Staff mortgage loans 158,149 172,260 174,075 - - Policy Holders Loan 8,864 3,275 6,729 - - Other Loans and Advance - (unquoted bonds) - 150,747 54,594 - -

524,885 519,743 315,755 - -

9 Investmentinsubisidiaries


Royal Exchange General Insurance Company Limited (see note (i) below) - - - 4,129,404 4,129,404 Royal Exchange Prudential Life Assurance Plc. (see note (ii) below) - - - 2,565,833 2,565,833 Royal Exchange Finance And Investment Company Limited (see note (iii) below) - - - 667,353 667,353 Royal Exchange Healthcare Company Lmimited (see note (iv) below) - - - 151,669 151,669 Royal Exchange Microfinance Bank Limited (see note (v) below) - - - 106,205 106,205

- - - 7,620,464 7,620,464

(i) This represents the Company’s 99.9% (2012: 99.9%) shareholdings in Royal Exchange General Company Limited, a Nigerian registered company involved in general insurance business.

(ii) This represents the Company’s 99.9% (2012: 99.9%) shareholdings in Royal Exchange Prudential Life Assurance Plc., a Nigerian registered company involved in life assurance business.

(iii) This represents the Company’s 99.9% (2012: 99.9%) shareholdings in Royal Exchange Finance and Asset Management Limited, a Nigerian registered company involved in the business of finance, financial advisory, fund management, leasing and investment management. The investment which has been carried at cost was impaired, based on management judgement, to the sum of N80.9million in 2011.

(iv) This represents the Company’s 30% (2012: 30%) shareholdings in Royal Exchange Healthcare Limited, a Nigerian registered company involved in the business of healthcare insurance service. The balance of 70% is owned by Royal Exchange General Insurance Company Limited and Royal Exchange Prudential Life Assurance Plc., two fully owned subsidiaries of the Company.

(v) This represents the Company’s 99.9% (2012: 99.9%) shareholdings in Royal Exchange Microfinance Bank Limited, a Nigerian registered company involved in the business of microfinance banking.

90


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94


10 Tradereceivables


Due from agents (see note 10(a) below) 302,819 384,746 293,644 - - Due from reinsurers (see note 10(b) below) 118,818 33,635 33,762 - -

421,637 418,381 327,406 - -

Within one year 374,742 154,535 100,471 - - More than one year 46,895 263,846 226,935 - -

421,637 418,381 327,406 - -

The carrying amount of the trade receivable is a reasonable approximation of fair value

10(a) Theanalysisofduefromagentsisasfollows:


Gross receivable from agents (see note 10(a)(i) below) 347,963 2,576,954 1,794,848 - - Less: Impairment allowance (see note 10a(ii) below) (45,144) (2,192,208) (1,501,204) - -

302,819 384,746 293,644 - -

10(a)(i) The implementation of Section 50 of the Insurance Act 2003 on “No Premium No Cover” by the regulator (NAICOM) with effect from 1st January 2013 has necessitated that any outstanding premium receivables as at that date should be written off. Consequently only outstanding premium backed by broker’s credit note and collectible within 30 days from the end of financial year is permissible.

10(a)(ii) The movements in impairment allowance on amount due from agents is analysed below;


Balance, beginning of year 2,192,208 1,501,204 - - Allowance made during the year 8,129 691,558 - - Write off (1,962,761) - - - Reversal during the year (192,432) (554) - -

Balance, end of the year 45,144 2,192,208 - -

10(b) The analysis of due from reinsurers is as follows:


Reinsurance Receivables 245,205 170,424 59,959 - - Less: Impairment allowance (see note 6(b)(i) below) (126,387) (136,789) (26,197) - -

118,818 33,635 33,762 - -

10(b)(i) The movements in impairment allowance on reinsurance receivables is analysed below;


Balance, beginning of year 136,789 26,197 - - Allowance made during the year 8,122 110,592 - - Write off - - - - Reversal during the year (18,524) - - -

Balance, end of the year 126,387 136,789 - -



95


11 Reinsuranceassets


Non-life business reinsurance share of insurance liabilities (see 11(a) below) 1,896,185 1,492,131 1,524,208 - - Life business reinsurance share of insurance liabilities (see 11(b) below) 147,856 44,285 32,845 - - JLT Reinsurance – profit commission - 48,317 33,119 - -

2,044,041 1,584,733 1,590,172 - -

Within one year 2,044,041 1,032,901 1,215,927 - - More than one year - 551,832 374,246 - -

2,044,041 1,584,733 1,590,172

11(a) Non-LifeBusinessReinsuranceshareofInsuranceLiabilities


Prepaid reinsurance premium 1,030,255 394,359 414,357 - - Reinsurance claims recoverable 865,930 1,097,772 1,109,851 - -

1,896,185 1,492,131 1,524,208 - -

11(a)(i) Analysis of Non-Life Business Reinsurance share of Insurance Liabilities by business classes are as follows:


Fire 448,557 682,548 713,727 - - General Accident 46,337 116,586 124,963 - - Motor 127,354 105,915 290,984 - - Marine 66,286 149,270 117,601 - - Oil & Gas 1,176,015 347,738 208,375 - - Engineering 20,161 87,210 67,343 - - Bonds 11,475 2,864 1,215 - -

1,896,185 1,492,131 1,524,208 - -

11(b) LifeBusinessReinsuranceshareofInsuranceLiabilities


Short-term Insurance Contract 63,792 42,038 32,224 - - Long-term Insurance Contract 84,064 2,247 621 - -

147,856 44,285 32,845

Reinsurance assets are valued after an allowance for their recoverability and the carrying amount is a reasonable approximation of fair value.

96



12 DeferredAcquisitionCosts This represents the unexpired portion of the commission paid to brokres and agents as at reporting date.

group group group company company In thousands of Naira 31-Dec-13 31-Dec-12 1-Jan-12 31-Dec-13 31-Dec-12 restated restated

Balance at start of the year 216,448 182,453 108,693 - - Additions in the year 954,775 816,889 698,645 - - Amortization in the year (702,063) (782,894) (624,885) - -

Balance as at year end 469,160 216,448 182,453 - -

13 OtherReceivablesandPrepayment


Intercompany receivables (see note 13(a) below) - - - 35,286 33,436 Accrued investment income (see note 13(b) below) 57,562 18,908 52,289 - - Other receivables (see note 13(c) below) 146,427 - 119,339 24,689 - Prepayments 278,036 169,625 192,290 16,409 12,699

482,025 188,533 363,918 76,384 46,135

Within one year 482,025 188,533 244,580 49,081 34,120 More than one year - 119,338 27,303 12,015

482,025 188,533 363,918 76,384 46,135

13(a) Intercompanyreceivables


Royal Exchange Microfinance Bank Limited - - - 2,849 6,133 Royal Exchange Healthcare Limited - - - 32,437 27,303

- - - 35,286 33,436

13(b) AccruedInvestmentIncome


Dividends receivable 57,562 18,908 52,289 - -

57,562 18,908 52,289 - -

13(c) OtherReceivables


Sundry receivables 941,276 1,025,703 1,177,020 24,689 - Impairment on other receivables (see 13(c)(i) below (794,849) (1,025,703) (1,057,681) - -

146,427 - 119,339 24,689 -


97


13(c)(i) The movements in impairment allowance on other receivables is analysed below;


Balance, beginning of year 1,025,703 1,057,681 - - Allowance made during the year 22,673 57,999 - - Write off (248,507) (89,976) - - Recoveries (5,020) - - -

Balance, end of year 794,849 1,025,704 - -

14 Investmentinassociates

14(a) The movement in balances of investment in associates are as shown below: In thousands of Naira group group group company company 31-Dec-13 31-Dec-12 1-Jan-12 31-Dec-13 31-Dec-12 restated restated

Balance, beginning of the year (see note 14(b) below (Restated)) 220,734 188,002 29,380 - - Additional investment during the year - - - - -

220,734 188,002 29,380 - -

Dividend income (19,382) (13,464) - - - Share of current year result 12,342 46,196 158,622 - -

Profit/loss on equity accounted investee (7,040) 32,732 158,622 - -

Balance, end of the year (Restated) 213,694 220,734 188,002 - -

14(b) Investment in associate represents the Group’s investment in the ordinary shares of CBCEMEA Limited incorporated in Nigeria, representing 22.92% (December 2012: 22.92%) equity interest in the company. The investee company has 31 December year end.

The summarised financial information of CBCEMEA Limited are as set out below:

In thousands of Naira 31-Dec-13 31-Dec-12 1-Jan-12 Total assets 2,742,055 3,215,038 2,907,408 Total liabilities (1,809,768) (2,252,040) (2,087,210)

Net assets 932,287 962,998 820,198

Profit for year 53,843 201,537 221,545

Company’s share of profit 12,342 46,196 50,782

Company’s share of net assets 213,695 220,735 188,003

98



15 InvestmentProperties


At 1 January 6,356,474 6,169,307 5,728,940 - - Additions during the year 1,788 250,660 3,100 - - Disposals during the year (41,788) (340,903) - - - Fair value Gains 816,095 277,410 437,267 - - Transfer to Property and Equipment (40,000) - - - -

At 31 December 7,092,569 6,356,474 6,169,307 - -

15(a) The items of investment properties are valued as shown below: Investment Name FRC NIESVA 2013 2012 properties of numbers Reg.no N’000 N’000 location valuer

2 Storey Building Yayok Associates Located At Kano Estate Surveyor & Valuer FRC/2013/NIESV/00000000834 A-1277 289,400 236,477

2 Storey Building Yayok Associates Located At Kaduna Estate Surveyor & Valuer FRC/2013/NIESV/00000000834 A-1277 202,500 168,241

No. 7,Usuma Cresent Emeka Orji Partnership Maitama Abuja FRC/2013/NIESV/00000000976 A-1672 430,000 403,766

No 6a/6b Usuma Emeka Orji Partnership FRC/2013/NIESV/00000000976 A-1672 442,862 414,375 Cresent, Maitama, Abuja.

No 1, Eleko Close, Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 520,000 375,000 1koyi, Lagos

No. 2,Eleko Close Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 580,000 450,000 Ikoyi Lagos

No. 26, Abduraman Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 550,000 370,000 Okene Cresent, Victoria Island, Lagos

Land At Odonla In Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 - 40,000 Odogunyan Area, Of Ikorodu,Lagos

29, Oroago Emeka Orji Partnership FRC/2013/NIESV/00000000976 A-1672 324,441 303,570 Crescent Garki 11, Abuja

776 Cadastral Emeka Orji Partnership FRC/2013/NIESV/00000000976 A-1672 939,182 911,087 Zone A00, Central Business Area, Abuja

15a Asa Road, Uma Uma & Company FRC/2013/NIESV/00000004050 A-421 74,000 73,000 Aba

36/38, Apapa Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 690,000 650,000 Oshodi Expressway Oshodi, Lagos

10, Bayo Kuku Street, Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 1,620,000 1,590,000

Ikoyi, Lagos Yayok Associates Estate FRC/2013/NIESV/00000000834 A-1277 290,600 201,600 12, Post Office Road, Surveyor & Valuer Kano

8, Bank Street, Jos. Yayok Associates Estate FRC/2013/NIESV/00000000834 A-1277 139,584 129,358 Surveyor & Valuer

4, Hectar Of Land Saibu Makinde & Associates FRC/2013/NIESV/00000000730 A-1878 - 40,000 At Odongiyan

7,092,569 6,356,474


99


15(b) Valuationtechniquesusedforfairvaluationofinvestmentproperties

Investment properties are stated at fair value, which has been determined based on valuations performed by Messrs Yayok Associates, Emeka Orji, Uma Uma & Company & Saibu Makinde Associates as at 31 December 2013. They are industry specialists in valuing these types of investment properties. The fair value is supported by market evidence and represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction at the date of valuation, in accordance with standards issued by the International Valuation Standards Committee. Valuations are performed on an annual basis and the fair value gains and losses are reported in profit or loss. The profits or losses on disposal are also reported in profit or loss as they occurred. The fair value measurement for the investment properties has been categorised as a Level 3 fair value based on the inputs into the valuation technique used.

The details of valuation techniques and significant observable inputs used in determining the fair value of investment properties are presented below:

LocationofInvestmentproperties

2 Storey Building located at Kano

2 Storey Building located at Kaduna

No. 7, Usuma Cresent, Maitama, Abuja

No 6A/6B Usuma Cresent, Maitama, Abuja.

No 1, Eleko Close, Ikoyi, Lagos

Valuationtechnique

The fair values are determined by applying the direct market evidence comparative method of valuation to derive the open market value. This valuation model reflects the current price on actual transaction for similar properties in the neighbourhood in recent time. References were made to prices of land and comparable properties in the neighbourhood. The data obtained were analysed and adjustment was made to reflect differences in site area and the actual location, quality of construction and off-site facilities.




The fair values are determined by applying the direct market evidence comparative method of valuation to derive the open market value. This valuation model reflects the current price on actual transaction for similar

Significantunobservableinputs - Prices per square meter (N191,402.12)- Rate of development in the area - the property is situated at the heart of the city, where its prominantly a commercial neighbourhood.- Quality of the building - the structure is of high quality materials commensurate to the standard of the users.-Influx of people and/or businesses to the area - its prominantly commercial area.

- Prices per square meter (N39,062.50)

- Rate of development in the area - 3rd populated city in Nigeria.

- Quality of the building - the structure is of high quality materials commensurate to the stardand of the users.

-Influx of people and/or businesses to the area - well populated.


- Rate of development in the area -the proprty is situated in a high brow low density Residual neighbourhood.- Quality of the building - the structure is of high quality materials commensurate to the stardand of the users.-Influx of people and/or businesses to the area - its prominantly a commercial area.”


Rate of development in the area -the proprty is situated in a high brow low density Residual neighbourhood.- Quality of the building - the structure is of high quality materials commensurate to the stardand of the users.-Influx of people and/or businesses to the area - its prominantly a commercial area.


- Rate of development in the area - the neighbourhood is fully developed and enjoys adequate infrastructural facilities.

100



No. 2, Eleko Close Ikoyi, Lagos

No. 26, Abduraman Okene Cresent,Victoria Island, Lagos

29,Oroago Crescent Garki 11,Abuja and 776 Cadastral Zone A00, Central Business Area, Abuja.

15a, Asa Road, Aba

36/38, Apapa Oshodi Expressway Oshodi, Lagos and 10, Bayo Kuku Street, Ikoyi, Lagos

12, Post Office Road, Kano

8, Bank Street, Jos.

properties in the neighbourhood in recent time. References were made to prices of land and comparable properties in the neighbourhood. The data obtained were analysed and adjustment was made to reflect differences in site area and the actual location, quality of construction and off-site facilities.



The fair values of the investment properties located at 29,Oroago Crescent Garki 11,Abuja and 776 Cadastral Zone A00, Central Business Area was determined by applying the investment method and also depreciated replacement cost (DRC) to derive open market value.These techniques reflect the cost of putting up same or similar structure based on today’s bill of quantities with percentage allowance(s) to reflect depreciation and obsolescence as may be applicable.”

The fair value of the investment property at 15a Asa road Abia State was determined by employing the Replacement Method to derive the open market value.The technique reflects the cost of acquiring other properties with similar features.Consideration has been given to the current unit cost rate of construction, provision for contingences and fees on land acquisition and improvement.

The fair values of the investment properties at 36/38,Apapa Oshodi Expressway Oshodi Lagos and 10 Bayo Kuku Street, Ikoyi Lagos were determined by applying the Investment Basis to derive the Open Market Capital value upon which prospective investor would likely make a bid The technique reflects the discounted information of the benefits derivable from the property over its useful economic life or the cost of erecting a similar property

The fair value of the investment property at 2 Post Office Road Kano was determined using the open market capital value and took into consideration the investment basis upon which a prudent purchaser may likely make his bid, this being his discounted summation of the net benefits derivable from the subject property over its useful economic life or in the alternative, what it would cost him to erect a substitute and competing structure having the same utilities as the one being appraised, making some allowances for physical, economic and financial obsolescence and also allowing for some form of developers project and land acquisition cost. The fair value of the investment property at 8, Bank Road, Jos, was determined by applying the investment basis to derive the Open Market Capital value upon which a prospective purchaser would likely make a bid. The technique reflects the discounted information of the benefits derivable from the property over its useful economic life or the cost of erecting a similar property.

- Quality of the building- its relatively new and of good construction with standardised finishing materials.-Influx of people and/or businesses to the area - fully developed area.


- Rate of development in the area - the neighbourhood is fully developed and enjoys adequate infrastructural facilities.- Quality of the building- its relatively new and of good construction with standardised finishing materials.-Influx of people and/or businesses to the area - fully developed area.


- Rate of development in the area - the neighbourhood is mostly developed and enjoys adequate infrastructural facilities.- Quality of the building- its relatively new and of good construction with standardised finishing materials.-Influx of people and/or businesses to the area - mostly developed neighbourhood.

- The market value of the property located at 29,Oroago Abuja is N324,440,831.The market value of the property located at 776 Cadastral Zone A00 is N939,182,265

The property has a market value of N74,000,000 and a Forced sale value of N50,000,000

The market value of the property located at 36/38, Apapa Oshodi expressway Oshodi is N690,000,000 and an estimated forced sale value of N552,000,000.The market value of the property located at 10 Bayo Kuku street, Ikoyi is N1,620,000,000 and an estimated forced sale value of N1,474,000,000”

The property has a market value of N290,600,000 and a forced sale value of N203,420,000.

The property has a market value of N139,582,000 and a forced sale value of N97,707,000.


101


16 Property,Plant&Equipment

16(a) Group

In thousands of Naira Freehold Computer Furniture Motor Total buildings Equipment andFittings Vehicles

cost Balance at 1 January 2013 1,148,841 289,607 451,163 537,183 2,426,794 Transfer from investment properties 40,000 - - - 40,000 Transfer to intangible assets - (1,891) - - (1,891) Additions 102,699 32,824 80,336 212,448 428,307 Disposals - (52,885) - (40,798) (93,683)

Balance at 31 December 2013 1,291,540 267,655 531,499 708,833 2,799,527

Balance at 1 January 2012 1,167,511 272,730 416,550 454,876 2,311,667 Additions 6,258 18,475 38,621 90,498 153,852 Disposals - (1,598) (4,008) (8,191) (13,797) Revaluation (24,928) - - - (24,928)


Depreciation


Balance at 1 January 2013 66,681 257,660 352,874 369,860 1,047,075 Charge for the year 7,200 15,288 35,904 94,009 152,401 Transfer to intangible assets - (2,177) - - (2,177) Disposals - (52,885) - (35,594) (88,479)

Balance at 31 December 2013 73,881 217,886 388,778 428,275 1,108,820

Balance at 1 January 2012 43,215 234,887 307,395 287,550 873,047 Charge for the year 23,466 24,083 48,547 90,495 186,591 Disposals - (1,310) (3,068) (8,185) (12,563)

Balance at 31 December 2012 66,681 257,660 352,874 369,860 1,047,075

Carrying amounts: Balance at 31 December 2013 1,217,659 49,769 142,721 280,558 1,690,707



(a) There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (2012: nil).

(b) In the opinion of the directors, the market value of the Group’s property and equipment is not less than the value shown in the financial statements.

(c) The Group had no capital commitments as at the balance sheet date (2012: nil)

(d) There was no property and equipment that has been pledged as security for borrowing as at year end. (2012: Nil)

102



16(b) Company


cost Balance as at 1 January 2013 - 12,473 21,151 22,500 56,124 Revaluation - - - - - Additions - 1,676 5,062 - 6,738 Disposals - - - - -

Balance as at 31 December 2013 - 14,149 26,213 22,500 62,862

Depreciation Balance as at 1 January 2013 - 10,564 13,294 11,625 35,483 Charge - 1,810 5,092 3,625 10,527 Disposals - - - - -

Balance as at 31 December 2013 - 12,374 18,386 15,250 46,010

Carrying amounts: Balance at 31 December 2013 - 1,775 7,827 7,250 16,852

Balance at 31 December 2012 - 1,909 7,857 10,875 20,641

(a) There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (2012: nil).

(b) In the opinion of the directors, the market value of the Company’s property and equipment is not less than the value shown in the financial statements.

(c) The Company had no capital commitments as at the balance sheet date (2012: nil)

(d) There was no property and equipment that has been pledged as security for borrowing as at year end. (2012: Nil)

17 Intangibleassets


cost: At 1 January 206,306 187,604 181,348 9,375 9,375 Additions 13,041 18,702 6,256 - - Reclassification - - - - - Transfer from property and equipment 1,891 - - - -

At 31 December 221,238 206,306 187,604 9,375 9,375

Accumulatedamortisation: At 1 January 168,271 146,394 115,415 7,500 5,625 Charge for the year 13,372 21,877 30,979 1,875 1,875 Reclassification - - - - - Transfer from property and equipment 2,177 - - - -

At 31 December 183,820 168,271 146,394 9,375 7,500

Carrying Amount as at 31 December 37,418 38,035 41,210 - 1,875

The intangible assets of the Group comprised computer software.The computer software is accounted for using the cost model less accumulated amortization and accumulated impairment. The amortization is charged to the income statements in accordance with the Group’s policy. As at 31 December 2013, these assets were tested for impairment, and Management has determined that no impairment is required of these intangibles.


103


18 Employeebenefitobligations The Group operates defined contribution pension plan based on the New Pension Act 2004, and a defined

benefit gratuity plan based on employee’s pensionable and other post-employment remuneration and length of service.

Definedbenefitplan: The Group offers its employees defined benefit plans in the form of gratuity scheme and long service awards.

The Gratuity Scheme covers all employees and it is payable to an employee on resignation only if the employee has served the entity for more than five years. The gratuity benefit is based on a percentage of an employee’s annual emolument.

The Group operates a Long Service Award scheme for its employees. Qualification for long service awards are 10 years, 15 years, 20 years, 25 years, 30 years and 35 years.

The defined benefit obligations are actuarially determined at the year end by H R Nigeria Limited with FRC number FRC/2012/NAS/00000000738. The actuarial valuation is done based on the “Projected Unit Credit” method. Gains and losses of changed actuarial assumptions are charged to other comprehensive income.

The details of the defined benefit plans are as below:

18(a) Employeesretirementbenefitasset(Net)


Company’s Asset for: Pension benefits (see note 18(a)(i) below) 166,963 49,370 26,839 - -

Total 166,963 49,370 26,839 - -

18(a)(i)Pensionbenefits The amounts recognised in the statement of financial position are determined as follows:


Present value of funded obligations (251,768) (302,326) (278,733) - - Fair value of plan assets 418,731 351,696 305,572 - -

Asset in the statement of financial position 166,963 49,370 26,839 - -


Current - - - - - Non-current 166,963 49,370 26,839 - -

Asset in the statement of financial position 166,963 49,370 26,839 - -

The movement in the defined benefit obligation over the year is as follows:


At 1 Januar 302,326 278,733 293,643 - - Current service cost - - - - - Interest cost 38,731 35,746 33,997 - - Past Service Cost (including Curtailments) - - - - - Benefits paid - (27,640) (27,073) - - Settlements (Transfer of plan liabilities) - - - - - Actuarial losses/(gains) (89,289) 15,487 (21,834) - -

At 31 December 251,768 302,326 278,733 - -

104



The movement in the fair value of plan assets of the year is as follows:

In thousands of Naira group group group company company 31-Dec-13 31-Dec-12 31-Dec-11 31-Dec-13 31-Dec-12

At 1 January 351,696 305,572 319,645 - - Expected return on plan assets 49,238 42,780 38,358 - - Employer contributions - 41,945 32,455 - - Employees’ contributions - - - - - Benefits paid - (27,640) (27,073) - - Settlements (Transfer of plan assets) - - - - - Actuarial Gains/(Losses) 17,797 (10,961) (57,813) - -

At 31 December 418,731 351,696 305,572 - -

The amounts recognised in the profit or loss are as follows:


Current service costs - - - - Net interest costs/income: - Interest costs 38,731 35,746 - - - Expected Return on plan asset (49,238) (42,780) - - Past service costs (including curtailment) - - - -

At 31 December (10,507) (7,034) - -

The periodic pension costs are included in the staff costs for the reporting period and treated as a single line item.

The principal actuarial assumptions used were as follows:

group group group company company 31-Dec-13 31-Dec-12 1-Jan-12 31-Dec-13 31-Dec-12

Discount rate 13% 14% 14% N/A N/A Future pension increases 3% 3% 3% N/A N/A Inflation rate 10% 10% 10% N/A N/A Rate of interest on accrued staff liabilities 12.5% 12.5% 12.5% N/A N/A Rate of return on assets 13% 14% 14% N/A N/A

The average life expectancy in years of a pensioner retiring at age 65, at the end of the reporting period is as follows:

In years group group group company company 31-Dec-13 31-Dec-12 1-Jan-12 31-Dec-13 31-Dec-12

Male 0 80 80 N/A N/A Female 84 84 84 N/A N/A

The average life expectancy in years of a pensioner retiring at age 65, 20 years after the end of the reporting period, is as follows:

In years group group group company company 31-Dec-13 31-Dec-12 1-Jan-12 31-Dec-13 31-Dec-12

Male 80 80 80 N/A N/A Female 84 84 84 N/A N/A

The sensitivity of overall pension liability to changes in the weighted principal assumptions is:

31-Dec-13 Change in assumption Impact on overall liability Discount rate -0.50% 0.50% 6,035 (5,711)

31-Dec-12 Change in assumption Impact on overall liability Discount rate -0.50% 0.50% 5,708 (5,410)

1-Jan-12 Change in assumption Impact on overall liability Discount rate -0.50% 0.50% 5,453 (5,162)


105


18(b) Employeesbenefitliability


Company’s obligations for: – Gratuity (see note 18(b)(i) below) 509,895 415,355 332,957 18,741 13,684 – Long Service Award (see note 18(b)(ii) below) 40,765 37,831 34,441 1,398 1,161 -Other pension liabilities - 21,964 2,334 - -

Total in the Statement of financial position 550,660 475,150 369,732 20,139 14,845

18(b)(i)GratuityBenefits

The amounts recognised in the statement of financial position are determined as follows:


Present value of funded obligations - - - - - Fair value of plan assets - - - - -

- - - - -

Present value of unfunded obligations 509,895 415,355 332,957 18,741 13,684

Liability in the statement of financial position (509,895) (415,355) (332,957) (18,741) (13,684)


Current - - - - - Non-current (509,895) (415,355) (332,957) (18,741) (13,684)




At 1 January 415,355 332,957 413,317 13,684 10,336 Current service cost 41,090 36,021 47,510 2,199 1,966 Interest cost 53,176 46,220 49,288 1,766 1,434 Past Service Cost (including Curtailments) 42,527 - - (503) - Benefits paid (42,971) (42,091) (65,024) - (1,135) Actuarial losses/(gains) 718 42,248 (112,134) 1,595 1,083

At 31 December 509,895 415,355 332,957 18,741 13,684

106





Current service costs 41,090 36,021 2,199 1,966 Net interest costs/income: - Interest costs 53,176 46,220 1,766 1,434 - Expected Return on plan asset - - - - Past service costs (including curtailment) 42,527 - (503) -

At 31 December 136,793 82,241 3,462 3,400

The periodic pension and gratuity costs are included in the staff costs for the reporting period and treated as a single line item.



Discount rate 13.5% 13% 14% 13.5% 13% Future salary increases 12% 12% 12% 12% 12% Inflation rate 9% 10% 10% 9% 10% Average liability duration 1.99 years 19.18 years 20.07 years 1.99 years 19.18 years

The mortality rates assumed for the employees are the rates published in the A67/70 Ultimate Tables published jointly by the Institute and Faculty of Actuaries in the United Kingdom.

The sensitivity of overall gratuity liability to changes in the weighted principal assumptions is:

31-Dec-13 Change in assumption Impact on overall liability

Discount rate -0.50% 0.50% 3,363,491 (3,326,699) Future salary increases -0.50% 0.50% (4,517,893) 4,538,010



1-Jan-12 Change in assumption Impact on overall liability



107


18(b)(ii) LongServiceAwards


Present value of funded obligations - - - - - Fair value of plan assets - - - - -

- - - - -

Present value of unfunded obligations 40,765 37,831 34,441 1,398 1,161



Current - - - - - Non-current (40,765) (37,831) (34,441) (1,398) (1,161)




At 1 January 37,831 34,441 37,994 1,161 1,132 Current service cost 5,403 3,239 3,868 172 202 Interest cost 4,726 4,552 4,371 145 148 Past Service Cost (including Curtailments) - - - - - Benefits paid 2,040) (3,167) (177) (91) (1,438) Settlements (Transfer of plan liabilities) - - - - - Actuarial losses/(gains) (5,155) (1,234) (11,615) 11 1,117

At 31 December 40,765 37,831 34,441 1,398 1,161



Current service costs 5,403 3,239 172 202 Net interest costs/income: - Interest costs 4,726 4,552 145 148 - Expected Return on plan asset - - - - Past service costs (including curtailment) - - - -

At 31 December 10,129 7,791 317 350

108





Discount rate 13.5% 13% 14% 13.5% 13% Future salary increases 12% 12% 12% 12% 12% Inflation rate 9% 10% 10% 9% 10% Average liability duration 8.17 years 15.24 years 13.16 years 8.17 years 15.24 years

The mortality rates assumed for the employees are the rates published in the A67/70 Ultimate Tables published jointly by the Institute and Faculty of Actuaries in the United Kingdom.

The sensitivity of overall pension liability to changes in the weighted principal assumptions is:


Discount rate -0.50% 0.50% 6,035,373 (5,710,737) Future salary increases -0.50% 0.50% (6,763,051) 7,121,232 Inflation rate -0.50% 0.50% N/A N/A



1-Jan-12 Change in assumption Impact on overall liability


18(c) Incomestatementchargefor:

– Pension benefits (10,507) (7,034) (4,360) - - – Gratuity 136,793 82,241 96,798 3,462 3,400 – Long Service Award 10,129 7,791 8,239 317 350

Total 136,415 82,998 100,677 3,779 3,750

18(d) Gain/(loss)onothercomprehensiveincome

- Adjustments for Net Pension Assets 107,086 (26,448) (35,979) - - - Adjustments for Gratuity Obligations (718) (42,248) 112,134 (1,595) (1,083) - Adjustments for Long-Service Awards Obligations 5,155 1,234 11,615 (11) (1,117)

111,523 (67,462) 87,770 (1,606) (2,200)

Tax effect of remeasurement (1,066) 10,528 - - -

Total in other comprehensive income 221,980 (124,396) 175,540 (3,212) (4,400)


109


19 statutory Deposits In line with section 10 (3) of the Insurance Act of Nigeria, a deposit of 10% of the regulatory share capital is

kept with the Central Bank of Nigeria. The cash amount held is considered to be a restricted cash balance.


Deposits with CBN 555,000 555,000 555,000 - -

The analysis of the statutory deposit is as follows:

Deposit with CBN for Non-Life Business 340,000 340,000 340,000 - - Deposit with CBN for Life Business 215,000 215,000 215,000 - -

555,000 555,000 555,000 - -

20 DeferredTaxation The movement in the net deferred tax assets/(liabilities) during the year are shown below:

group

In thousands of Naira 2013 Note Net Recognised Recognised Net balance inprofit inOCI balance asat1 orloss asat31 January December

2013 Net Deferred tax assets Property and equipment, and software (139,401) 39,606 - (99,795) Allowances for loans and receivables 543,695 (505,779) - 37,916 Unrelieved loss - 617,442 - 617,442 Employee benefits 118,856 23,849 1,066 143,771

Deferredtaxassets 523,150 175,118 1,066 699,334

Deferred tax liabilities Investment properties (88,378) (79,553) - (167,931)

Deferredtaxassets/(liabilities) 434,772 95,565 1,066 531,403

2012(Restated) Net Recognised Recognised Net balance inprofit inOCI balance asat1 orloss asat31 January December

2012 2012 Net Deferred tax assets Property and equipment, and software (116,612) (22,789) - (139,401) Allowances for loans and receivables 396,896 146,799 - 543,695 Employee benefits 98,368 9,960 10,528 118,856

Deferredtaxassets 378,652 133,970 10,528 523,150


Deferredtaxassets/(liabilities) 301,320 122,924 10,528 434,772

2011(Restated) Net Recognised Recognised Net balance inprofit inOCI balance asat1 orloss asat31 January December

2011 2011

Property and equipment, and software (41,798) (74,814) - (116,612) Allowances for loans and receivables 228,986 167,910 - 396,896 Employee benefits 121,942 (23,574) - 98,368

Deferredtaxassets 309,130 69,522 - 378,652


Deferredtaxassets/(liabilities) 252,228 49,092 - 301,320

Deferred tax assets have been recognised in the account because it is probable that future taxable profit will be available against which the Group can utilise the benefits therefrom.

110



20(a) Unrecognizeddeferredtaxassets


The deferred tax assets of Royal Exchange Prudential Life Assurance Plc and Royal Exchange Plc, components of the group, which relates primarily to timing difference in the recognition of depreciation and capital allowances on property and equipment, impairment on premium receivables, employee benefit liabilities and unrelieved tax losses were not recognized in these financial statements.

This is due to the uncertainty about the availability of future taxable profits against which deferred tax assets can be utilized.

The unrecognized deferred tax asset during the year is attributable to the following:

In thousands of Naira 31-Dec-13 31-Dec-12 Property and equipment 57,440 35,670 Impairment of premium receivables 92,689 90,335 Impairment on other receivables - (4,414) Employee benefit liabilities 13,918 5,978

Unrelieved tax losses 676,488 399,046

840,535 526,616

The movement in the unrecognized deferred tax asset during the year was as follows:

In thousands of Naira 31-Dec-13 31-Dec-12

Balance, beginning of year 574,899 - Credit for the year 265,635 574,899

840,534 574,899

21 DeferredIncome


Deferred Rental Income (see 21(a) below) 17,350 48,192 67,194 - - Deferred Acquisition Income (see 21(b) below) 67,447 44,483 72,297 - -

At 31 December 84,797 92,675 139,491 - -

21(a) DeferredRentalIncome

At 1 January 48,192 67,194 8,071 - - Additions during the year - - 59,123 - - Amortised for the year (30,842) (19,002) - - -

At 31 December 17,350 48,192 67,194 - -


111


21(b) Deferredacquisitionincome

This represents the unexpired portion of commission received from businesses ceded to Reinsurers as at the reporting date.


Balance at start of the year 44,482 72,298 24,674 - - Additions in the year 312,471 187,039 378,474 - - Amortization in the year (289,506) (214,854) (330,851) - -

At 31 December 67,447 44,483 72,297 - -

Analysis of deferred acquisition income by class of insurance are as follow:


Fire 21,957 18,225 13,565 - - Accident 4,830 3,118 8,053 - - Motor 18,869 12,725 13,013 - - Marine and aviation 7,338 7,842 20,147 - - Oil & Gas 9,083 90 8,000 - - Engineering 3,610 2,141 9,137 - - Bond 1,760 341 383 - -

67,447 44,482 72,298 - -

22 Tradepayables

Reinsurance payables 456,448 358,744 585,337 - - Individual life payables - - 9,888 - - Deposit for premium (see note 22(a) below) - - 37,189 - - Premium payables to Co-insurers 72,061 11,119 9,116 - -

528,509 369,863 641,530 - -

Within one year 528,509 369,863 641,530 - - More than one year - - - - -

528,509 369,863 641,530 - -

The carrying amount disclosed above approximate fair value at the reporting date. All amounts are payable within one year.

22(a) Deposit for premium represents premium collected in advance at the reporting date that are yet to be recognised as at year end.

23 Otherliabilities


Due to related parties (see 23(a) below) - - - 64,461 45,443 Other liabilities (see 23(b) below) 1,170,110 635,069 754,108 388,358 390,571

1,170,110 635,069 754,108 452,819 436,014

Within one year 1,096,487 576,313 475,530 215,287 198,482 More than one year 73,623 58,756 278,578 237,532 237,532

1,170,110 635,069 754,108 452,819 436,014

112



23(a) Duetorelatedparties


Royal Exchange General Insurance Company - - - 40,245 39,810 Royal Exchange Prudential Life Limited - - - 20,089 1,968 Royal Exchange Finance and Asset Management - - - 4,127 3,665

- - - 64,461 45,443

23(b) Analysisofotherliabilitiesisasfollows:


Defferred Income 4,265 6,569 6,913 - - Accruals 138,897 67,185 185,219 - - PAYE and Witholding tax payables 25,644 64,303 68,861 20,771 5,861 NAICOM Levy 45,048 39,681 38,483 - - Staff payables 4,664 2,314 2,100 - - Dividend payable held as collateral 237,193 237,193 237,193 237,193 237,193 Sundry Creditors 714,399 217,824 215,339 130,394 147,517

1,170,110 635,069 754,108 388,358 390,571

24 Depositors’ funds


Royal exchange investment notes 28,517 55,000 12,000 - - High yield investment papers 491,054 278,258 303,838 - - Savings 48,503 21,194 12,835 - - Demand deposit 10,034 98,168 31,825 - - Term deposit and call borrowings 17,341 140,605 42,733 - -

595,449 593,225 403,231 - -

24(a) Analysisbyofdepositor’sfundsmaturity


Up to 1 month 12,365 349,714 190,148 - - 3 - 6 months 480,871 112,573 168,990 - - 6 - 12 months 102,213 130,938 44,094 - -

595,449 593,225 403,232 - -


113


25 InsuranceContractLiabilities


Non-life general Insurance (see note 25(a) below) 4,802,573 3,764,306 3,625,853 - - Healthcare Insurance (see note 25(b) below) 114,655 115,989 184,444 - - Life insurance (see note 25(c) below) 2,055,868 998,209 576,834 - -

6,973,096 4,878,504 4,387,131 - -

25(a) Non-lifegeneralInsurance


Unexpired risk (See note 25(a)(ii) below) 2,506,089 1,437,549 1,364,109 - - Outstanding claims: (See note 25(a)(iii) below) - - - Claims outstanding 1,441,397 1,209,953 1,385,491 - - - Incurred but not reported 855,087 1,116,804 876,253 -

Total outstanding claims 2,296,484 2,326,757 2,261,744 - -

Total 4,802,573 3,764,306 3,625,853 - -

25(a)(i) The concentration of non-life insurance by type of contract is summarised below by reference to liabilities.


Fire 1,011,536 939,441 887,906 - - Accident 483,040 548,021 386,945 - - Motor 1,030,689 918,930 1,154,925 - - Marine 193,989 260,692 392,304 - - Oil and Gas 1,901,988 636,707 425,327 - - Engineering 152,931 451,523 374,218 - - Bond 28,400 8,992 4,228 - -

4,802,573 3,764,306 3,625,853 - -

25(a)(ii) Unexpired Risk is summarised by type below


Fire 330,197 118,534 127,735 - - Accident 124,707 128,565 130,017 - - Motor 550,569 462,736 436,329 - - Marine 65,616 69,418 222,684 - - Oil and Gas 1,338,775 499,603 322,848 - - Engineering 80,373 153,273 121,447 - - Bond 15,852 5,420 3,049 - -

2,506,089 1,437,549 1,364,109 - -

114



25(a)(iii) Outstanding claims represent the estimated ultimate cost of settling all claims arising from incidents occurring as at the reporting date.

Analysis of outstanding claims per class of non-life insurance business is shown below:


Fire 681,339 820,907 760,171 - - Accident 358,333 419,456 256,928 - - Motor 480,120 456,194 718,596 - - Marine 128,373 191,274 169,620 - - Oil and Gas 563,213 137,104 102,479 - - Engineering 72,558 298,250 252,771 - - Bond 12,548 3,572 1,179 - -

2,296,484 2,326,757 2,261,744 - -

25(b) HealthcareInsurance


Claims and loss adjustment expenses (see note 25(b)(i)) 38,831 66,187 102,485 - - Provisions for unearned premiums and unexpired short term insurance risks (see note 25(b)(ii)) 75,824 49,802 81,959 - -

114,655 115,989 184,444 - -

25(b)(i) Analysis of claims and loss adjustment expenses are as follows:


Claims outstanding as at 1 January 66,187 102,486 40,158 - - Increase in the expected cost of claims for unexpired risks - 7,972 4,880 - -

66,187 110,458 45,038 - -

Cash paid for claims settled in the year 93,733 100,277 155,668 - - – Arising from current-year claims (61,941) (53,859) (48,694) - - – Arising from prior year claims (59,148) (90,689) (49,527) - -

Balance, as at 31 December 38,831 66,187 102,485 - -

25(b)(ii) Provisions for unearned premiums and unexpired short term insurance risks

The movements for the year are summarised below:


Balance at 1 January 49,802 81,959 72,412 - - Increase in period 154,919 - 9,547 - - Release in the period (128,897) (32,157) - - -

Balance, as at 31 December 75,824 49,802 81,959 - -

These provisions represent the liability for short-term insurance contracts for which the Group’s obligations are not expired at the end of the reporting period. The unexpired risk provision relates to the casualty insurance contracts for which the Group expects to pay claims in excess of the related unearned premium provision. This assessment is performed using geographical aggregation of portfolios of liability insurance contracts within the casualty segment.


115


25(c) Lifeinsurance


Outstanding claims - Group life (see note 25(c)(i) below) 363,613 178,905 129,587 - - Outstanding claims - Individual life (see note 25(c)(ii) below) 3,665 7,327 4,028 - -

367,278 186,232 133,615 - - Life insurance contract liabilities (see note 25(c)(iii) below) 1,688,590 811,977 443,219 - -

2,055,868 998,209 576,834 - -

25(c)(i) Outstandingclaims-GroupLife

The movement in the provision for outstanding claims during the year was as follows:


Beginning of the year 178,905 129,587 81,393 - - Increase during the year 184,708 49,318 48,194 - -

As at year end 363,613 178,905 129,587 - -

25(c)(ii) Outstandingclaims-IndividualLife

The movement in the provision for outstanding claims during the year was as follows:


Beginning of the year 7,327 4,028 12,242 - - (Decrease)/increase during the year (3,662) 3,299 (8,214) - -

As at year end 3,665 7,327 4,028 - -

Outstanding claims represent the estimated ultimate cost of settling all claims arising from incidents occurring as at the reporting date. The ageing analysis for claims reported and loss adjusted for life insurance contracts is as stated below:-


Days 0 - 90 162,758 33,410 26,723 - - 91 - 180 51,616 42,105 30,733 - - 181 - 270 31,088 1,678 8,017 - - 271 - 360 24,004 25,337 28,057 - - Above 360 97,812 83,702 40,085 - -

367,278 186,232 133,615 - -

25(c)(iii)Lifeinsurancecontractliability

The movement on the Life funds account during the year was as follows:


Beginning of the year 811,976 443,219 507,442 - - Increase/(decrease) during the year 90,694 368,758 (64,223) - - Unearned premium 785,920 - - -

As at year end 1,688,590 811,977 443,219 - -

116



26 InvestmentContractLiabilities


Deposit Administered funds (see note 26(a)) 433,701 427,454 349,352 - - Investment Managed Funds (see note 26(b)) 165,405 146,040 181,608 - -

599,106 573,494 530,960 - -

26(a) DepositAdministeredfunds


At 1 January 427,454 349,352 410,820 - - Deposits received in the year 89,484 83,172 71,923 - - Interest Paid 16,094 24,146 22,496 - - Withdrawals (99,331) (29,216) (155,887) - -

Balance at 31 December 433,701 427,454 349,352 - -

Current 89,484 29,216 155,887 - - Non Current 344,217 398,238 193,465 - -

433,701 427,454 349,352 - -

The Group has a total sum of N433.7 million (2012:N427 million) in deposit administered funds with guaranteed interest which has been in existence since 2010.The outstanding balance in the account is attributable to clients who are yet to reclaim their investment.

26(b) InvestmentManagedFunds


At 1 January 146,040 181,608 180,783 - - Deposits 163,251 145,214 196,675 - - Interest accrued thereon 3,353 2,493 4,918 - - Withdrawals (147,239) (183,275) (200,768) - -

Balance at 31 December 165,405 146,040 181,608 - -

Current 163,251 72,105 51,905 - - Non Current 2,154 73,935 129,703 - -

165,405 146,040 181,608 - -

27 Dividendpayable


80,525 80,525 - 80,525 80,525

The dividend payable represents part of the dividends declared for the year ended 31st December, 2012 but unpaid as at the end of the year.


117


28 Taxation

28(a) Chargefortheyear

Recognised in profit or loss In thousands of Naira notes group group company company 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12

Recognised in profit or loss

Income tax 6,477 249,609 - 37,587 (Over)/under provision in prior years 2,870 (33,868) - - Capital gains Tax - 4,853 - - Education Tax 1,876 18,565 793 1,692 Technology Tax 7,263 13,566 - 5,861

18,486 252,725 793 45,140

Minimum tax (see note (ii) below for details) 69,275 - - -

87,761 252,725 793 45,140

WHT Expense 29,733 - 29,733 - Deferred tax credit 20 (95,565) (122,924) - -

21,929 129,801 30,526 45,140

Recognised in other comprehensive income

Deferred tax on remeasurement of defined benefit scheme (1,066) (10,528) - -

(i) The charge for income tax in these financial statements is based on the provisions of the Companies Income Tax Act, CAP C21 LFN 2004 as amended and Education Tax Act, CAP E4 LFN 2004.

(ii) Royal Exchange Prudential Life and Royal Exchange General Insurance, components of the group, were assessed based on the minimum tax legislation for the year ended 31 December 2013 because there were no taxable profit due to tax exemption, granted by the Federal Inland Revenue Service on fair value gain on investment properties and equities via its circular on the “Tax Implications of the adoption of the International Financial Reporting Standards (IFRS)” published in March 2013.

In addition, a significant portion of the above components’ income is derived from the fair value gain on investment properties and equity investments, as a result, the current income tax assessment for the year under review yields a tax credit in their favour. Consequently, the Companies have applied the provisions of the Companies Income Tax Act that mandate a minimum tax assessment, where a tax payer does not have any tax liability arising from its tax assessment.

group company 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12 Taxrate Amount Taxrate Amount Taxrate Amount Taxrate Amount % n’000 % n’000 % n’000 % n’000

Profit/(loss) before tax 828,213 703,094 311,803 205,608 Income tax using the domestic corporation tax rate 30% 248,464 30% 210,928 30% 93,541 30% 61,682 Effect of minimum tax/dividend tax 8% 69,275 5% 37,587 0% - 18% 37,587 Non-deductible expenses -121% (1,003,971) 56% 391,964 3% 8,590 0% 242 Tax exempt income 92% 761,984 -56% (390,870) -33% (102,131) -30% (61,924) Recognition of previously unutilized tax losses -12% (95,565) -17% (122,924) 0% - 0% - Effect of (Over)/under provision in prior years 0% 2,870 -5% (33,868) 0% - Capital gains tax 0% - 1% 4,853 0% - 0% - Information technology tax levy 1% 7,263 2% 13,566 0% - 3% 5,861 Tertiary education tax 0% 1,876 3% 18,565 0% 793 1% 1,692 WHT Expense 4% 29,733 0% - 10% 29,733 0% -

-1% 21,929 18% 129,801 0% 30,526 22% 45,140

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28(b) Currentincometaxliabilities


At 1 January 519,109 501,333 213,376 289,039 300,603 Charge for the year 87,761 252,725 469,335 793 45,140 Payment during the year (112,482) (234,949) (181,378) (35,459) (56,704)

At 31 December 494,388 519,109 501,333 254,373 289,039

29 ShareCapitalandPremium


Share capital comprises Authorized share capital 10,000,000,000 ordinary share of 50k each 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000

Issued share capital

5,145,370,074 ordinary share of 50k each 2,572,685 2,572,685 2,572,685 2,572,685 2,572,685

30 share premium


As at year end 2,690,936 2,690,936 2,690,936 2,690,936 2,690,936

31 Contingencyreserve

In compliance with Section 21(1) of Insurance Act 2003, the contingency reserve for general business is credited with the greater of 3% of gross premium or 20% of Net Profit and accumulated until it reaches the amount of greater of minimum Paid up Capital or 50 percent of Net Premium, where as, the contingency reserve for life business is credited with the greater of 1% of gross premium or 10% of Net Profit and accumulated until it reaches the amount of greater of minimum Paid up Capital or 50 percent of net premium.


Beginning of the year 722,231 525,193 - - Transfer from profit or loss account 225,503 197,038 - -

As at year end 947,734 722,231 - -

32 treasury shares


As at year end (500,000) (500,000) (500,000) - -

Treasury shares represent the cost of the 250,000,000 ordinary shares of the company (2012:N500,000,000) held by the Security holding trust Ltd as share ownership scheme for staff of a subsidiary as at 31 December 2013.


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33 Retainedearnings

The amount represents the retained earnings available for dividend distribution to the equity shareholders of the company (if approved at the Annual General Meeting). For the analysis of movement in Retained Earnings, see the ‘Statement of Changes in Equity’


At the beginning of the year 2,803,330 2,632,890 1,601,795 1,647,142 Transfer from profit and loss 806,284 573,293 281,277 160,468 Transfer to contingency reserve (225,503) (197,038) - - Transfer to regulatory reserve (82,103) - - - Deferred tax effects - - - - Dividend paid during the year (205,815) (205,815) (205,815) (205,815)

At the end of the year 3,096,193 2,803,330 1,677,257 1,601,795

34 other component of equity

Other component of equity comprises of actuarial gains or losses on employee benefit obligation, cumulative net change in the fair value of available-for-sale financial assets until assets are derecognized and transfers to regulatory risk reserve.

34(a) Actuarialgainsorlossesonemployeebenefitobligation


At the beginning of the year 30,836 87,770 2,167 4,367 Actuarial gain/(losses) 111,523 (67,462) (1,606) (2,200) Tax Effects on Other Comprehensive Income 1,066 10,528 - -

At the end of the year 143,425 30,836 561 2,167

34(b) Fairvaluereserves


At the beginning of the year - - - - Fair value (losses) (4,210) - - -

At the end of the year (4,210) - - -

34(c) Regulatoryriskreserve


At the beginning of the year - - - - Transfer from profit or loss account 82,103 - - - At the end of the year 82,103 - - -

Total other component of equity 221,318 30,836 561 2,167

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35 ReinsuranceExpenses


Non-life reinsurance premiums: Gross written reinsurance premiums 2,384,000 1,671,922 - - Change in reinsurance unearned premiums (635,897) 19,999 - -

1,748,103 1,691,921 - -

Life reinsurance premiums: Insurance Premium ceded to reinsurers 201,465 63,525 - -

1,949,568 1,755,446 - -

36 Feeandcommissionincome


Reinsurance commissions on Non-life Business 289,506 187,038 - - Reinsurance commissions on Life Business 41,894 8,935 - -

331,400 195,973 - -

37 Insuranceclaimsandbenefitsincurred


Insurance claims and benefits incurred on Non-life busines: Motor and Accident 819,263 456,189 - - Fire and IAR 395,725 742,827 - - Marine 108,206 163,060 - - Engineering (190,275) 256,249 - - Bond 8,976 2,451 - - Special Risk 831,410 144,082 - -

1,973,305 1,764,858 - -

Insurance claims and benefits incurred on life busines: Short term insurance contract 469,853 286,590 - - Long term insurance contract 45,929 28,576 - - Increase/ Decrease in Outstanding claims short term insurance contract 184,707 49,318 - - Increase/ Decrease in Outstanding claims long term insurance contract (3,662) 3,299 - - Increase/ Decrease investment contract liabilities 56,461 - - -

753,288 367,783 - -

Insurance claims and benefits incurred on Healthcare business: Short term insurance contract 102,859 105,487 - - Increase/ Decrease in Outstanding claims short term insurance contract 15,335 7,972 - -

118,194 113,459 - -

Total 2,844,787 2,246,100 - -



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38 Insuranceclaimsandbenefitsincurred-recoverablefromreinsurers


Insurance claims and benefits incurred on Non-life busines: Motor and Accident 45,519 (103,150) - - Fire and IAR (30,863) 416,955 - - Marine (20,677) 107,600 - - Engineering (61,703) 69,182 - - Bond 3,826 1,879 - - Special Risk 309,422 96,037 - -

245,524 588,503 - -

Insurance claims and benefits incurred on life busines: Short term insurance contract 115,069 25,271 - - Long term insurance contract - - - - Increase/ Decrease in Outstanding claims short term insurance contract - - - - Increase/ Decrease in Outstanding claims long term insurance contract - - - - Increase/ Decrease investment contract liabilities - - - -

115,069 25,271 - -

Insurance claims and benefits incurred on Healthcare business: Short term insurance contract - - - - Increase/ Decrease in Outstanding claims short term insurance contract - - - -

- - - -

Total 360,593 613,774 - -

39 Underwritingexpenses


Acquisition costs: Non-life business 1,081,263 739,609 - - Acquisition costs: Life 128,870 83,719 - - Acquisition costs: Healthcare 9,332 28,165 - - Salaries & Allowances - Underwriting employees 470,078 967,626 - - Guaranteed interest on Life products 19,446 26,639 - - Other commissions 491,538 282,258 - -

2,200,527 2,128,016 - -

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40 NetInterestIncome


Gross Interest Income: Interest income on placement with local banks 28,053 12,914 - - Interest income on loans and receivables 176,903 111,198 - - Interest income on advances under finance lease 51,449 37,856 - -

256,405 161,968 - -

Interest expense: Interest income on placement with local banks (5,136) (142) - - Interest income on loans and receivables (89,098) (51,495) - - Interest income on advances under finance lease - - - -

Net interest income 162,171 110,331 - -

41 Investmentandotherincome

group group group group company company 31-Dec-13 31-Dec-13 31-Dec-12 31-Dec-12 31-Dec-13 31-Dec-12

in thousands of naira net net net net net net investment realised investment realised investment investment income gainsand income gainsand income income losses losses

restated

Debt securities: *Available-for-sale - - - - - - *At fair value through profit/loss 155,238 - 211,181 - - - *Loans & receivables (amortised cost) 30,321 - 31,475 - - - Equity Securties: Dividend from Investment in Susidiaries - - - - 297,333 133,800 *Available-for-sale 8,290 - 25,246 - - - *At fair value through profit/loss 65,368 - 58,312 106,526 - - Derivative financial instruments: Investment properties 49,153 - 24,476 - - - Cash and cash equivalents - - - - - - Deposits with credit institutions 88,265 - 171,112 - - - Investment management income 1,591 - 235 - - -

398,226 - 522,037 106,526 297,333 133,800

Net total 398,226 628,563 297,333 133,800


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42 Netfairvaluegainorlossonfinancialassets

group group group group company company InthousandsofNaira 31-Dec-13 31-Dec-13 31-Dec-12 31-Dec-12 31-Dec-13 31-Dec-12 Changes Impairment Changes Impairment Changes Changes in fair on in fair on in fair in fair value investments value investments value value

Debt securities:

*At fair value through profit/loss - - 33,819 - - - *Loans & receivables (amortised cost) - - - (1,085) - - Equity Securties: - - - - - - *At fair value through profit/loss 695,460 - 420,714 - - - Derivative financial instruments: - - - - - - Investment properties 816,095 - 277,410 - - - Cash and cash equivalents - - 1,895 - - -

1,511,555 - 733,838 (1,085) - -

Net total 1,511,555 732,753 - -

43 Write-back/(charge)ofimpairmentallowance


Allowance on premium receivables (184,303) 691,004 - - Allowance on reinsurance receivables - (10,402) 110,592 - - Allowance on Loans and advances 8,152 6,524 - - Allowance on advance under lease 29,143 - - - Allowance on other receivables 22,673 50,201 - - Write back of impairment on cash & cash equivalents (5,020) - Allowance on financial assets 5,343 38,500 - -

(134,414) 896,821 - -

44 Otheroperatingincome


Rental Income 61,541 34,563 - - Profit/(loss) on disposal of furniture & vehicles 5,812 788 - - Interest on loan & advances 26,260 755 - - Management fee income from subsidiaries - - 254,622 228,548 Renewal Incentive Bonus on Oil & Gas - 39,692 - - Other income 144,203 19,799 7,766 - Other commission income - 48,316 - - Derecognized items - 54,462 - - Fees for services rendered 47,750 42,714 - -

285,566 241,089 262,388 228,548

45 ForeignExchangeGains/(Losses)


(Loss)/gains on translation of foreign currency transactions (43,949) 13,967 - -

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46 Managementexpenses


Salaries and allowances of other employees 1,140,557 415,023 76,669 74,190 Post employment defined benefit expenses 136,415 82,998 3,779 3,750 Audit fees 23,275 16,321 5,725 5,070 Amortization and impairment charges 13,372 21,877 1,875 1,875 Depreciation on property and equipment 152,402 186,591 10,527 12,586 Promotional and advert expenes 36,675 83,554 7,689 28,277 Rent and Rates 47,772 50,316 3,200 17,300 Directors’ fees 32,333 15,932 11,838 - Donations 4,907 2,196 1,515 100 Bank Charges 64,843 59,776 1,496 869 Legal fee 24,811 15,116 3,533 5,480 Insurance Premium 102,369 38,449 2,098 46 Accounting Consultancy Fee 41,406 17,688 2,203 4,045 Investment Expenses 11,609 50,940 - - Finance cost 8,992 - 7,304 - Power charges 62,464 88,504 3,276 - Government charges 80,930 95,415 6,345 - Stationeries 8,189 14,002 703 - Printing external 42,958 66,318 14,737 - Repairs and maintenance 104,587 87,115 11,258 - Transport expenses 91,747 84,954 - - Transport fare 151,109 - 19,990 - Software expenses 23,290 19,745 - - Subscription and journals 10,716 12,855 48 - E-business - - - - Fine paid (Contravention) 9,598 1,195 3,868 925 Other Administrative expenses 104,507 449,827 48,245 2,227

2,531,833 1,976,707 247,918 156,740

47 Earningspershare

group group company company 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12

Basic and diluted earnings per share (kobo) 16 11 5 3

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:


Profit for the year attributable to owners of the company 806,284 573,293 281,277 160,468

Unit in thousands group group company company 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12

Weighted average number of ordinary shares for the purpose of basic and diluted earnings per share 5,145,370 5,145,370 5,145,370 5,145,370


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48 Capitalmanagement The group manages its capital to ensure that it will be able to continue as a going concern and comply with

the regulators’ capital requirements for every of its subsidiaries whose capital is regulated, while maximizing return to stakeholders through the optimisation of the equity balance.

The capital structure of the group consist of only equity attributable to equity holders of the company, comprising issued capital, reserves and retained earnings.

The regulatory capitals of the subsidiaries in insurance and banking and asset management have been maintained and preserved over the reporting periods. The regulatory capital within the insurance industry in Nigeria, in which the entity has its major operations, is N3billion and N2billion for Non-life and Life businesses respectively. Also, the regulatory capital for unit microfinance bank is N20million, same as for the group’s finance house business.

The insurance industry regulator, NAICOM, measures the financial strength of Non-life underwriters through a solvency margin model. The Insurance Act, under section 24, defines solvency margin of a Non-life underwriter as the difference between the admissible assets and liabilities which shall not be less than 15% of Net premium income or the minimum capital base of N3billion, whichever is higher. The regulation requires non-life underwriters to maintain a minimum of 100% solvency margin.

48(a) ShortfallinSolvencyMargin The Group’s non-life business’s solvency margin as at 31 December 2013 was N1.96 billion. This is N1.04 billion

below the required minimum solvency margin of N3 billion based on the most recent regulatory guidelines which restricted admissible land and building and investment property to N1 billion out of the available N4 billion.

The Insurance Act 2003 requires that the deficit be made good by way of fresh cash injection and that satisfactory evidence of such payment be provided to the National Insurance Commission (“the Commission” or “NAICOM”) within 60 days from being notified of the deficit by the Commission.

The directors have commenced a process to realise some of the investment properties of the non-life business and are therefore confident that the solvency deficit will be rectified without any adverse impact on the operations of that business and the group.

49 Financialriskmanagement Factors relating to general economic conditions, such as consumer spending, business investment,

government spending, the volatility and strength of both debt and equity markets, and inflation, all affect the profitability of businesses in Nigeria.

In a sustained economic phase of low growth, characterized by higher unemployment, lower household income, lower corporate earnings, lower business investment and lower consumer spending, the demand for financial and insurance products could be adversely affected.

The Group’s risk management process includes the identification and measurement of various forms of risk, the establishment of risk thresholds and the creation of processes intended to maintain risks within these thresholds while optimizing returns on the underlying assets and minimizing costs associated with liabilities. Risk range limits are established for each type of risk, and are approved by the Board’s Investment Committee and subject to ongoing review.

The Group’s risk management strategy is an integral part of managing the Group’s core businesses, and utilizes a variety of risk management tools and techniques such as:

- Measures of price sensitivity to market changes (e.g., interest rate and foreign exchange rate);

- Asset/Liability management;

- Periodic Internal Audit and Control, and;

- Risk management governance, including risk oversight committee, policies and guidelines, and approval limits.

In addition, the Group monitors and manages the financial risks relating to the operations of the organization through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (currency risk, interest rate risk and price risk), credit risk and liquidity risk.

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50 Fairvalueoffinancialinstruments 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 in the principal or, in its absence, the most advantageous market to which the Group has access at that date. Fair values are determined at prices quoted in active markets. In our environment, such price information is typically not available for all instruments and the Group applies valuation techniques to measure such instruments. These valuation techniques make maximum use of market observable data but in some cases management estimate other than observable market inputs within the valuation model. There is no standard model and different assumptions could generate different results.

Fair values are subject to a control framework designed to ensure that input variables and output are assessed independent of the risk taker. The Group has minimal exposure to financial assets which are valued at other than quoted prices in an active market.

Fairvaluehierarchy IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques

are observable or unobservable. Observable input reflect market data obtained from independent sources; unobservable inputs reflect the Group’s market assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and debt instruments on exchanges.

Level 2 - Valuation techniques based on observable inputs. This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

Level 3 - This includes financial instruments, the valuation of which incorporate significant inputs for the asset or liability that is not based on observable market data (unobservable inputs). Unobservable inputs are those not readily available in an active market due to market illiquidity or complexity of the product. These inputs are generally determined based on inputs of a similar nature, historic observations on the level of the input or analytical techniques.

This hierarchy requires the use of observable market data when available. The Group considers relevant and observable market prices in its valuations where possible.

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, analyzed into Levels 1 to 3 based on the degree to which the fair value is observable.

group 31 December 2013 In thousands of Naira Level1 Level2 Level3 Total

FinancialAssets: Fair value through profit or loss:- Quoted equity shares 8(b) 2,412,290 - - 2,412,290 Treasury bills 8(b) 179,122 - - 179,122 Federal Government Bonds 8(b) 171,458 - - 171,458

2,762,870 - - 2,762,870

Available for sale financial assets:- Quoted equity shares 8(b) 5,237 - - 5,237 Unquoted equity shares 8(b) - 1,722 264,251 265,973

Totalfinancialassetsmeasuredatfairvalue 2,768,107 1,722 264,251 3,034,080


127


31December2012In thousands of Naira Level1 Level2 Level3 Total

FinancialAssets:Fair value through profit or loss:-Quoted equity shares 8(b) 1,696,088 - - 1,696,088 Treasury bills 8(b) 205,893 - - 205,893 Federal Government Bonds 8(b) 205,417 - - 205,417

2,107,398 - - 2,107,398

Available for sale financial assets:-Unquoted equity shares 8(b) - - 281,444 281,444

Totalfinancialassetsmeasuredatfairvalue 2,107,398 - 281,444 2,388,842

Financial instruments not measured at fair value

No fair value disclosures are provided for cash and cash equivalents, loans and receivables, trade receivables, other receivables, bank borrowings, trade payables and other liabilities that are measured at cost because their carrying amount reasonably approximate their fair value.

Cash and cash equivalents

Cash and cash equivalents consists of cash on hand and current balances with banks.

The carrying amounts of current balances with banks is a reasonable approximation of fair value which is the amount receivable on demand.

Loans and receivables

Loans and receivables consists of state government bonds, corporate bonds, unlisted debentures, loans and advances, advance under lease and staff mortgage loans. The carrying amounts of state government bonds and corporate bonds is reasonable approximation of their fair value.

The estimated fair value of staff mortgage loans represents the market values of the loans, arrived at by recalculating the carrying amount of the loans using the estimated market rate.

The fair value of unlisted debenture, loans and advances, advance under lease approximates the gross value of the asset net of impairment.

Trade receivables and Other receivables

The carrying amounts of trade receivables and other receivables are reasonable approximation of their fair values which are receivable on demand.

Bank borrowings, Trade payables and other liabilities

The carrying amounts of bank borrowings, trade payables and other liabilities are reasonable approximation of their fair values which are repayable on demand.

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50(a) Financialrisks

The Group is exposed to the following categories of risk as a consequence of offering different financial products and services by the Group:-

(i) Market risk

This reflects the possibility that the value of the Group’s investments will fall as a result of changes in market conditions, whether those changes are caused by factors specific to the individual investment or factors affecting all investments traded in the market. The Group is exposed to this risk through its financial assets and comprises of currency risk, interest rate risk and price risk.

Currency risk

This is the risk of the fair value of financial instruments being affected by changes in foreign exchange rates.

The Group seeks to manage its exposures to risk through control techniques which ensure that the residual risk exposures are within acceptable tolerances agreed by the Board. A description of the risks associated with the Group’s principal products and the associated control techniques is detailed below.

Foreign Currency risk

The Group accepts receipt of premiums in foreign currency, in addition to Naira, from its clients; hence, exposures to exchange rate fluctuations arise. The Group is exposed to foreign currency denominated in dollars through a domiciliary bank balance.

The Group has minimal exposure to currency risk as the Group’s financial assets are primarily matched to the same currencies as its insurance and investment contract liabilities. As a result, foreign exchange risk arises from other recognized assets and liabilities denominated in other currencies.

The carrying amounts of the Group’s foreign currency denominated assets and liabilities are as follows:

group 31December2013

In thousands of Naira Poundssterling Euro USDollars Total

Assets (Cash & Cash Equivalent) 1,861 12,204 308,490 322,555 Liabilities - - - -

1,861 12,204 308,490 322,555

31December2012 In thousands of Naira Poundssterling Euro USDollars Total

Assets (Cash & Cash Equivalent) 2,045 1,626 220,434 224,105 Liabilities - - - -

2,045 1,626 220,434 224,105

Foreigncurrencysensitivityanalysis The following table details the Group’s sensitivity to a 10% increase and decrease in foreign currency rates

against the Naira. A 10% sensitivity rate is used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. For each sensitivity scenario, the impact of change in a single factor is shown, with other assumptions or variables held constant.


129


The following tables show the effect on the Group’s profit as at 31st December 2013 from N155.22/$ closing rate and as at 31st December 2012 from N155.70/$ closing rate respectively.

31December2013In thousands of Naira Poundssterling Euro USDollars Total

10% increase 186 1,220 30,849 32,255 10% decrease (186) (1,220) (30,849) (32,255

Impactofincreaseon:Pre-tax Profit - - - 860,468 Shareholders’ Equity - - - 9,061,121

Impactofdecreaseon:Pre-tax Profit - - - 795,958 Shareholders’ Equity - - - 8,996,611

31December2012In thousands of Naira Poundssterling Euro USDollars Total10% increase 205 163 22,043 22,411 10% decrease (205) (163) (22,043) (22,411)

Impactofincreaseon:Pre-tax Profit - - - 725,505 Shareholders’ Equity - - - 8,297,607

Impactofdecreaseon:Pre-tax Profit - - - 680,683 Shareholders’ Equity - - - 8,297,607

Interest Rates Risk

The Group’s exposure to interest rate risk relates primarily to the market price and cash flow variability of assets and liabilities associated with changes in interest rates.

Changes in interest rates result to reduction in income ‘spread’ or the difference between the amounts that the Group is required to pay under the contracts and the rate of return the Group is able to earn on investments intended to support obligations under the contracts. Investment spread is, arguably, one of the key components of the net income of insurers.

The Group’s mitigation efforts with respect to interest rate risk are primarily focused on maintaining an investment portfolio with diversified maturities that has a weighted average duration or tenor approximately equal to the duration of its liability cash flow profile.

Also, the Group manages this risk by adopting close asset/liability matching criteria, to minimize the impact of mismatches between asset and liability values arising from interest rate movements.

Furthermore, the Group uses sensitivity analytics to measure the impact of interest rate changes and movements on the value of our financial assets scenarios.

The Group is very moderately exposed to interest rate risk as it invests in fixed income and money market instruments.

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Interest rate profile

At the end of the reporting period the interest rate profile of the Group’s interest bearing financial instruments as reported to the management of the Group are as follows:

FinancialinstrumentsIn thousands of Naira Notes 31-Dec-13 31-Dec-12

Cash and cash equivalents 5 635,809 1,147,512 Federal government Bonds 8(a) 171,458 205,417 Treasury bills 8(a) 179,122 205,893 State government bonds 8(c) 132,247 122,797 Corporate bonds 8(c) 224,394 68,166 Unlisted Debenture 8(c) 1,231 2,498 Staff mortgage loans 8(c) 158,149 172,260 Policy Holders Loan 8(c) 8,864 3,275 Loans and Advances 6 812,571 435,830 Advances under finance lease 7 218,585 412,961 Borrowings 5 (114) -

2,542,316 2,927,356

InterestratesensitivityanalysisThe sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the balance sheet date. A 0.5% increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

In thousands of Naira 31-Dec-13 31-Dec-12

Increase in interest rate by 50 basis points (+0.5%) 12,712 14,637 Decrease in interest rate by 50 basis point (-0.5%) (12,712) (14,637)

Impactofincreaseon:Pre-tax profit 840,925 717,731 Shareholders’ Equity 9,041,578 8,334,655

Impactofdecreaseon:Pre-tax profit 815,501 688,457 Shareholders’ Equity 9,016,154 8,305,381

Other price risk managementThe Group is exposed to equity price risks arising from equity investments primarily from investments not held for unit-linked business. The shares included in financial assets represent investments in listed securities that present the Group with opportunity for return through dividend income and capital appreciation.

The carrying amounts of the Group’s equity investments are as follows:

31-Dec-13 31-Dec-12 n’000 n’000

Equity Securities; - Listed 8(a) 2,417,527 1,696,088 Equity Securities; - Unlisted 8(a) 265,973 281,444

2,683,500 1,977,532

EquitypricesensitivityanalysisThe sensitivity analyses set out below show the impact of a 10% increase and decrease in the value of equities on profit before tax and shareholders’ equity based on the exposure to equity price risk at the reporting date.

31-Dec-13 31-Dec-12 n’000 n’000

10% increase 268,350 197,753 10% decrease (268,350) (197,753)

Impactofincreaseon:Pre-tax profit 1,096,563 900,847 Shareholders’ Equity 9,297,216 8,517,771

Impactofdecreaseon:Pre-tax profit 559,863 505,341 Shareholders’ Equity 8,760,516 8,122,265



131

(ii) Creditrisk

Credit risk refers to the risk that counterparties will default on their contractual obligations resulting in financial loss to the Group. The key areas of exposure to credit risk for the Group are in relation to its investment portfolio, reinsurance program and receivables from reinsurers and other intermediaries.

The Group has adopted a policy of dealing with only creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group transacts with only entities that have an investment grade rating and above.

This information is supplied by independent rating agencies, where available, and if not available, the Group uses other publicly available financial information and its own trading records to rate its major policyholders and reinsurers.

The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee periodically.

The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties. Concentration of credit, otherwise known as single obligor credit, did not exceed 5% of gross monetary assets at any time during the year. The credit risk on liquid funds and other near cash financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

The majority of debt securities are investment grade and the Group has very limited exposure to sub-standard credits.

Reinsurance assets are reinsurers’ share of outstanding claims and reinsurance receivables. They are allocated below on the basis of ratings for claims paying ability.

Loans and receivables from policyholders, agents and intermediaries generally do not have a credit rating.

The following table shows aggregated credit risk exposure for assets with external credit ratings:-


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Analysisoffinancialassetsbasedoncreditriskgrades

31 December 2013 Notes AAA AA A+ A BBB Not rated Carrying In thousands of Naira amount

Available for sale financial assets:- Unquoted equity securities 8(a) - - - - - 265,973 265,973- Quoted equity securities 8(a) - - - - - 5,237 5,237

271,210

Fair value through profit or loss carried at fair value (FVTPL)- FGN Bonds 8(b) - 171,458 - - - - 171,458 - Treasury bills (> 90 days) 8(b) 179,122 - - - - - 179,122 - Quoted equity securities 8(b) - - - - - 2,412,290 2,412,290

2,762,870

Loans and receivables:- Lagos State Government Bond 8(c) - - 105,097 - - - 105,097 - Kaduna State Government Bond 8(c) - - 27,150 - - - 27,150 - Corporate bonds 8(c) - - 224,394 - - - 224,394 - Unlisted debentures 8(c) - - - - - 1,231 1,231 - Staff mortgage loans 8(c) - - - 18,844 - 139,305 158,149 - Policy Holders Loan 8(c) - - - - - 8,864 8,864- Loans and Advances to customers 6 - - - - - 812,571 812,571 - Advances under finance lease 7 - - - - - 218,585 218,585

1,556,041

Cash and cash equivalents:Bank Balances 5 - - - - - 1,805,909 1,805,909

1,805,909

Reinsurance assets:Reinsurance claims recoverable 11(a) - - - - - 865,930 865,930 Short-term Insurance Contract 11(b) - - - - 63,792 - 63,792 Long-term Insurance Contract 11(b) - - - - 84,064 - 84,064

1,013,786

Trade/Insurance receivables 10 - - - - 421,637 - 421,637

7,831,453


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31December2012 Notes AAA AA A+ A BBB Notrated CarryingIn thousands of Naira amount

Available for sale financial assets:- Unquoted equity securities 8(a) - - - - - 281,444 281,444

281,444

Fair value through profit or loss carried at fair value (FVTPL)- FGN Bonds 8(b) 205,417 - - - - - 205,417 - Treasury bills (> 90 days) 8(b) 205,893 - - - - - 205,893 - Quoted equity securities 8(b) - - - - - 1,696,088 1,696,088

2,107,398

Loans and receivables:- Lagos State Government Bond 8(c) - - 107,169 - - - 107,169 - Kaduna State Government Bond 8(c) - - 15,628 - - - 15,628 - Corporate bonds 8(c) - - 68,166 - - - 68,166 - Unlisted debentures 8(c) - - - - - 2,498 2,498 - Staff mortgage loans 8(c) - - - - - 172,260 172,260 - Policy Holders Loan 8(c) - - - - - 3,275 3,275 - Other Loans and Advance 8(c) - - - - - 150,747 150,747 - Loans and Advances 6 - - - - - 435,830 435,830 - Advances under finance lease 7 - - - - - 412,961 412,961

1,368,534

Cash and cash equivalents:Bank balances 5 - - - - - 1,334,363 1,334,363

1,334,363

Reinsurance assets:Reinsurance claims recoverable 11(a) - - - - 1,097,772 1,097,772 Short-term Insurance Contract 11(b) - - - - 42,038 - 42,038 Long-term Insurance Contract 11(b) - - - - 2,247 - 2,247

1,142,057

Trade/Insurance receivables 10 - - - - 418,381 - 418,381

6,652,177

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Analysisoffinancialassetsbasedonpastduestatus

31December2013

Fair value Available through for sale Loans Recoverable Insurance/Past due status profit financial and from tradeIn thousands of Naira or loss assets receivables: reinsurers receivables

Past due and impaired - - 88,987 - - Past due more than 90 days - - 3,091 884,944 140,284Past due 31 to 90 days - - - 81,393 -Past due less than 30 days - - 144,555 34,233 7,845Neither past due nor impaired 2,762,870 271,210 1,319,408 13,216 273,508

Total Carrying Amount 2,762,870 271,210 1,556,041 1,013,786 421,637

31December2012

Fair value Available through for sale Loans Recoverable Insurance/Past due status profit financial and from tradeIn thousands of Naira or loss assets receivables: reinsurers receivables

Past due and impaired - - 28,807 - 235,321 Past due more than 90 days - - 3,273 1,142,057 156,949Past due 31 to 90 days - - - - -Past due less than 30 days - - 170,704 - 26,111Neither past due nor impaired 2,107,398 281,444 1,165,750 - -

Total Carrying Amount 2,107,398 281,444 1,368,534 1,142,057 418,381


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(iii) Liquidityrisk The Group’s principal objective in managing its liquidity and capital resources is to maximize the returns on

capital to shareholders, while enabling it to pay claims, pay dividends, pay staff and fulfill statutory obligations to regulators and the different tiers of government in the environment in which it operates. Effective and prudent liquidity is a priority across the Group.

Management monitors the liquidity of the Group on a daily basis and projects her financial needs over a multi-year time horizon through its quarterly budget and review process. Management believes that the cash flows from the sources of fund available to the Group are sufficient to satisfy the current liquidity requirements of the Group, including under reasonably foreseeable stress scenarios.

In managing liquidity (and of course, capital), the Group seeks to:

- Match the profile of assets and liabilities, taking into account the risks inherent in each line of product;

- Maintain financial strength to support new business growth whilst still satisfying the requirements of policyholders and regulators;

- Retain financial flexibility by maintaining strong liquidity, and;

- Allocate liquid resources efficiently to support growth while paying claims and other commitments promptly.

Sources of Liquidity In managing cash flow position, the Group has a number of sources of liquidity, including the following principal

sources:

- Premium Income; - Investment income - Investment maturities

Application of funds The principal uses of our liquidity include:

- Payment of Claims - Staff benefits; - Purchase of investments’ and; - Payment in connection with financing activities.

In practice, most of the Group’s assets are marketable securities which could be converted into cash when required.

Maturity Profile The following table shows the Group’s expected maturity for its non-derivative assets. The table has been

drawn up based on the undiscounted contractual maturities of the assets including interest that will be earned on those assets except where the Group anticipates that the cash flow will occur in a different period.

It also shows details of the expected maturity profile of the Group’s undiscounted obligations with respect to its financial liabilities and estimated cash flows of recognized insurance contract liabilities. It includes both interest and principal cash flows.

It should be noted that Unit-linked assets and liabilities and reinsurers’ share of unearned premiums are excluded from this analysis.

The following table details the Group’s expected maturity for its non-derivative assets. The tables below have been drawn up based on the undiscounted contractual maturities of the assets including interest that will be earned on those assets except where the Group anticipates that the cash flow will occur in a different period. Reinsurers’ share of unearned premiums are excluded from this analysis.

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31December2013

In thousands of Naira Notes CarryingContractual <1 1-3 3-12 1-5 >5 amount cashflow month months months years years

Non-derivative financial assets / insurance assets

Cash and cash equivalents 5 1,810,882 1,810,882 1,175,073 635,809 - - - Available for sale financial assets 8(a) 271,210 271,210 - - - 271,210 - Fair value through profit or loss carried at fair value (FVTPL) 8(b) 2,762,870 2,913,839 - 240,402 2,535,087 138,350 Loans and receivables 8(c) 524,885 524,885 - - - 524,885 - Loans and advances to customers 6 812,571 812,571 73,236 303,751 435,584 - - Advances under finance lease 7 218,585 218,585 - 14,826 113,157 90,602 - Insurance/trade receivables 10 421,637 438,302 137,169 301,133 - - - Reinsurance assets- recoverable from reinsurers 11 1,013,786 1,013,786 5,404 553,222 195,823 249,951 9,386

7,836,426 8,004,060 1,390,882 1,808,741 984,966 3,671,735 147,736

Non-derivative financial liabilities / insurance liability

Bank borrowing 5 114 114 114 - - - - Trade payables 22 528,509 528,509 - 269,691 258,818 - - Insurance contract liabilities - outstanding claims 25 4,391,183 4,346,042 1,098,086 856,217 1,177,416 543,219 671,104 Investment Contract Liabilities 26 599,106 599,106 26,313 45,935 130,451 52,190 344,217

4,919,806 4,874,665 1,098,200 1,125,908 1,436,234 543,219 671,104

Gap (asset - liabilities) 2,916,620 3,129,395 292,682 682,833 (451,268) 3,128,516 (523,368)

Cumulative liquidity gap 292,682 975,515 524,247 3,652,763 3,129,395


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31December2012

In thousands of Naira Notes CarryingContractual <1 1-3 3-12 1-5 >5 amount cashflow month months months years years


Cash and cash equivalents 1,338,057 1,338,057 190,545 1,147,512 - - -Available for sale financial assets 281,444 281,444 - - - 281,444 -Fair value through profit or loss carried at fair value (FVTPL) 2,107,398 2,107,398 - 205,893 - 1,901,505 -Loans and receivables 519,743 519,743 - - - 519,743 -Loans and advances to customers 435,830 435,830 23,074 248,223 164,533 - -Advances under finance lease 412,961 412,961 - 24,595 289,864 98,502 -Insurance/trade receivables 418,381 418,381 384,745 1,455 - 32,181 -Reinsurance assets - recoverable from reinsurers 11 1,142,057 1,142,057 45,480 127,648 581,606 387,323 -

6,655,871 6,655,871 643,844 1,755,326 1,036,003 3,220,698 -


Trade payables 369,863 369,863 - 165,407 204,456 - -Insurance contract liabilities - outstanding claims 25 3,391,153 3,391,153 480,351 723,028 845,894 845,256 496,624Investment Contract Liabilities 573,494 573,494 578 10,000 25,913 145,129 391,874

3,761,016 3,761,016 480,351 888,435 1,050,350 845,256 496,624

Gap (asset - liabilities) 2,894,855 2,894,855 163,493 866,891 (14,347) 2,375,442 (496,624)

Cumulative liquidity gap 163,493 1,030,384 1,016,037 3,391,479 2,894,855

Although the Group has access to financing facilities, the Group expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets and other sources listed in “Sources of Liquidity” above.

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50(b) Financialassetsandliabilities

Accountingclassification,measurementbasisandfairvalues

The table below sets out the Group’s classification of each class of financial assets and liabilities, and their fair values.

31December2013 other financial Loans Designated liabilitiesat Total and atfair Available- amortised carrying

In thousands of Naira receivables value for-sale cost amount

Cash and cash equivalents 1,810,882 - - - 1,810,882 Financial assets 524,885 2,762,870 271,210 - 3,558,965 Loans and advances to customers 812,571 - - - 812,571 Advances under finance lease 218,585 - - - 218,585 Trade receivables 421,637 - - - 421,637 Other receivables less prepayments 203,989 - - - 203,989 Statutory deposits 555,000 - - - 555,000

4,547,549 2,762,870 271,210 - 7,581,629

Borrowings - - - 114 114 Trade payables - - - 528,509 528,509 Other payables - - - 1,170,110 1,170,110

- - - 1,698,733 1,698,733

31December2012

other financial Loans Designated liabilitiesat Total and atfair Available- amortised carrying

In thousands of Naira receivables value for-sale cost amount

Cash and cash equivalents 1,338,057 - - 1,338,057 Financial assets 519,743 2,107,398 281,444 - 2,908,585 Loans and advances to customers 435,830 435,830 Advances under finance lease 412,961 412,961 Trade receivables 418,381 - - 418,381 Other receivables less prepayments 18,908 - - 18,908 Statutory deposits 555,000 - - 555,000

3,698,880 2,107,398 281,444 6,087,722

Borrowings - - - - - Trade payables - - - 369,863 369,863 Other payables - - - 635,069 635,069

- - - 1,004,932


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51 Insuranceriskmanagement The Group accepts insurance risk through its insurance contracts and certain investment contracts where it

assumes the risk of loss from persons or organisations that are directly subject to the underlying loss. The Group is exposed to the uncertainty surrounding the timing, frequency and severity of claims under these contracts.

The Group manages its risk via its underwriting and reinsurance strategy within an overall risk management framework. Pricing is based on assumptions which have regard to trends and past experience. Exposures are managed by having documented underwriting limits and criteria. Reinsurance is purchased to mitigate the effect of potential loss to the Group from individual large or catastrophic events and also to provide access to specialist risks and to assist in managing capital. Reinsurance policies are written with approved reinsurers on either a proportional or excess of loss treaty basis.

Regulatory capital is also managed (though not exclusively) by reference to the insurance risk to which the Group is exposed.

51(a) Non-lifeinsurance The Group writes fire, general accident, oil & gas, engineering, bond, marine and motor risks primarily over a

twelve month duration (usually longer for engineering policies). The most significant risks arise from natural disasters, climate change and other catastrophes (i.e. high severity, low frequency events). A concentration of risk may also arise from a single insurance contract issued to a particular demographic type of policyholder, within a geographical location or to types of commercial business. The relative variability of the outcome is mitigated if there is a large portfolio of similar risks.

The concentration of non-life insurance by the location of the underlying risk is summarised below by reference to liabilities.

Gross Reinsurance Net In thousands of Naira 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12

Non-life insurance: - Within Nigeria 4,802,573 3,764,306 1,896,185 1,492,131 2,906,388 2,272,175 - Outside Nigeria - - - - - -

4,802,573 3,764,306 1,896,185 1,492,131 2,906,388 2,272,175

The concentration of non-life insurance by type of contract is summarised below by reference to liabilities.

Gross Reinsurance Net In thousands of Naira 2013 2012 2013 2012 2013 2012

Fire 1,011,536 939,441 448,557 682,548 562,979 256,893 Accident 483,040 548,021 46,337 116,586 436,703 431,435 Motor 1,030,689 918,930 127,354 105,915 903,335 813,015 Marine 193,989 260,692 66,286 149,270 127,703 111,422 Oil and Gas 1,901,988 636,707 1,176,015 347,738 725,973 288,969 Engineering 152,931 451,523 20,161 87,210 132,770 364,313 Bond 28,400 8,992 11,475 2,864 16,925 6,128

4,802,573 3,764,306 1,896,185 1,492,131 2,906,388 2,272,175

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In thousands of Naira Gross Reinsurance Net 2013 2012 2013 2012 2013 2012

Outstanding Claims:Fire 681,339 820,907 358,341 601,381 322,998 219,526 Accident 358,333 419,456 30,011 107,507 328,322 311,949 Motor 480,120 456,194 66,053 69,558 414,067 386,636 Marine 128,373 191,274 42,043 125,930 86,330 65,344 Oil and Gas 563,213 137,104 358,394 113,903 204,819 23,201 Engineering 72,558 298,250 5,481 77,712 67,077 220,538 Bond 12,548 3,572 5,607 1,781 6,941 1,791

Total 2,296,484 2,326,757 865,930 1,097,772 1,430,554 1,228,985

In thousands of Naira Gross Reinsurance Net 2013 2012 2013 2012 2013 2012

Unexpired Risk:Fire 330,197 118,534 87,677 81,167 242,520 37,367 Accident 124,707 128,565 15,377 9,079 109,330 119,486 Motor 550,569 462,736 56,844 36,357 493,725 426,379 Marine 65,616 69,418 24,743 23,340 40,873 46,078 Oil and Gas 1,338,775 499,603 825,081 233,835 513,694 265,768 Engineering 80,373 153,273 14,664 9,498 65,709 143,775 Bond 15,852 5,420 5,869 1,083 9,983 4,337

Total 2,506,089 1,437,549 1,030,255 394,359 1,475,834 1,043,190

AssumptionsandsensitivitiesThe risks associated with the non-life insurance contracts are complex and subject to a number of variables which complicate quantitative sensitivity analysis. The Group uses several statistical and actuarial techniques based on past claims development experience. This includes indications such as average claims cost and expected loss ratio. The key method used by the Group for estimating liabilities is upward or downward adjustment based on documentation and professional judgement.

The Group has minimal exposure to these risks, the exposure of which is determined by the number of claims filed and the Court process.

The Group considers that the liability for non-life insurance claims recognised in the balance sheet is adequate. However, actual experience will differ from the expected outcome.

Some results of sensitivity testing are set out below, showing the impact on profit before tax and shareholders’ equity gross and net of reinsurance. For each sensitivity the impact of a unchanged.change in a single factor is shown, with other assumptions.


141


In thousands of Naira Pre-taxprofit Shareholders’equity 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12

Non-LifeInsurance:5% increase in loss ratios- Gross 494,702 479,908 8,695,355 8,096,832- Net 546,571 532,560 8,747,224 8,149,4845% decrease in loss ratios- Gross 1,110,412 784,503 9,311,065 8,401,427- Net 1,058,543 9,190,656 9,259,196 8,487,562

ClaimsdevelopmenttableforRoyalGeneralInsuranceThe following tables show the development of claims over a period of time on both a gross and net of reinsurance basis. In 2012, in the year of adoption of IFRS, only 5 years were required to be disclosed. This will be increased in each succeeding year, until 8 - 10 years of information is presented. The top half of the table shows how the estimates of total claims for each accident year develop over time. The lower half of the table reconciles the cumulative claims to the amount appearing in the Statement of Financial Position.

The cumulative claims estimates and payments for each accident year are translated into Nigerian Naira at the year rates that applied at the end of each accident year.

ClaimsDevelopmentPattern:Non-Lifeinsurance

31December2013 IncrementalChainladder-YearlyProjections(N)

Accidentyear 1 2 3 4 5 6 7 2007 90,368,895 130,759,805 40,800,776 16,493,311 20,453,461 4,601,487 2,386,435 2008 224,573,483 320,684,894 10,146,209 8,950,221 29,855,639 2,087,941 2009 267,762,942 144,616,664 172,928,830 35,249,178 23,591,657 - 2010 423,866,802 348,592,520 151,025,806 19,853,859 - - 2011 690,737,479 1,100,807,100 274,558,034 - - - 2012 484,692,545 976,235,934 - - - - - 2013 703,893,170 - - - - - -

Lifeinsuranceandinvestmentcontractswithdiscretionaryparticipatingfeatures(DPF)The Group writes life, annuities, and investment-linked contracts with or without discretionary participating features (DPF). The most significant risks arise from mortality, persistency, longevity, morbidity, expense variations and investment returns.

ConcentrationofinsuranceriskConcentration of risk may arise from geographic regions, epidemics, accumulation of risks and market risk. The concentration of life insurance and investment contracts with DPF by location of the underlying risk is summarized below by reference to liabilities.

In thousands of Naira Gross Reinsurance Net 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12

Life insurance:- Within Nigeria 2,055,868 998,209 53,247 19,014 2,002,621 979,195 - Outside Nigeria - - - - - -

2,055,868 998,209 53,247 19,014 2,002,621 979,195

Investment contracts with DPF:- Within Nigeria 599,106 573,494 - - 599,106 573,494 - Outside Nigeria - - - - - -

599,106 573,494 - - 599,106 573,494

142



The concentration of life insurance and investment contracts with DPF by type of contract is summarized below by reference to liabilities.

In thousands of Naira Gross Reinsurance Net 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12

Protection 2,055,351 997,328 53,247 19,014 2,002,104 978,314Pensions - - - - - -Annuities 517 880 - - 517 880 Others - - - - - -

2,055,868 998,208 53,247 19,014 2,002,621 979,194

Investment contracts With DPF 599,106 573,494 - - 599,106 573,494

AssumptionsandsensitivitiesThe risks associated with the life insurance and investment contracts with DPF are complex and subject to a number of variables which complicate quantitative sensitivity analysis. The key assumptions in quantifying these liabilities include mortality, persistency, longevity, morbidity, expense variations, investment return and discount rates. Some results of sensitivity testing are set out below showing the impact on profit before tax and shareholders’ equity before and after reinsurance. For each sensitivity scenario, the impact of a change in a single factor is shown, with other assumptions or variables unchanged.

Pre-taxprofit Shareholders’equity In thousands of Naira 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12

Lifeinsurance:5% increase in mortality/morbidity- Gross (2013: Nil; 2012: N1,437) - 701,657 - 8,318,581- Net (2013: N2,235; 2012:N1,416) 825,978 701,678 9,026,631 8,318,602 5% increase in longevity- Gross - - - -- Net - - - -10% increase in expenses- Gross (2013: Nil; 2012: N1,396) - 701,698 - 8,318,622- Net (2013: N2,244; 2012: N1,377) 825,969 701,717 9,026,622 8,318,641 1% increase in interest rates- Gross (2013: Nil; 2012: N1,363) - 701,731 - 8,318,655- Net (2013: N2,208; 2012: N1,344) 826,005 701,750 9,026,658 8,318,674

ClaimsdevelopmenttableforGroupLifeSchemeClaims on life insurance contracts are payable on a claims-occurrence basis and the Group is liable for all insured events that occurred during the term of the contract. There is however, uncertainty in the estimation of future benefits payments arising from the unpredictability of long term changes in overall levels of mortality and the variability in policy holder behavior.

Changes may occur in the amount of the Group’s obligations at the end of a contract period. In setting claims provisions, the Group gives consideration to the probability and magnitude of future claims experience being more adverse than assumed and exercises a degree of caution in setting reserves where there is considerable uncertainty.

The Group has taken advantage of the transitional rules of IFRS 4 that permit only five years of information to be disclosed upon adoption of IFRS.


143


The following table shows the estimates of cumulative incurred claims, including both claims notified and IBNR for each successive year at each reporting date, together with cumulative payments to date with respect to short-term insurance contract.

ClaimsDevelopmentPattern:GroupLife IncrementalChainladder-YearlyProjections(N)

Accidentyear 0 1 2 3 4 2007 122,699,831 34,905,315 577,411 3,633,646 1,261,552 2008 45,485,729 45,342,474 29,838,034 1,256,080 2,378,881 2009 25,378,136 54,497,734 31,967,515 18,098,940 2,696,593 2010 51,890,840 93,022,128 27,853,605 11,737,731 - 2011 76,113,193 70,611,981 52,699,284 - - 2012 84,733,218 171,188,065 - - - 2013 228,474,642 - - - -

52 SegmentReporting IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the

Group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. In contrast, the predecessor standard (IAS 14 Segment Reporting) required the Group to identify two sets of segments (business and geographical), using a risks and rewards approach. The Group has adopted IFRS 8 Operating Segments reporting.

Following adoption of IFRS 8, the Group’s reportable segments have not changed as the business segments reported to the monthly executive committee follow clear business lines with distinct risk and rewards which formed the basis under IAS 14.

The Group’s reportable segments under IFRS 8 are therefore identified as follows: - Non-life insurance; - Life insurance; - Financial services - Healthcare; and - Asset management;

The accounting policies of the reportable segments are the same as the Group’s accounting policies. Segment profit represents the profit earned by each segment without allocation of central corporate expenses, certain finance costs and tax expense. This is the measure reported to the Group’s Chief Executive for the purposes of resource allocation and assessment of segment performance.

144


52(a) OperatingSegment

The following is an analysis of the Group’s revenue and result by reportable segment in 2013

31December2013 In thousands of Naira Non-life Life Financial Asset insurance insurance services Healthcare management Elimination Group

Gross premium written: 6,733,550 2,142,457 - 207,085 - - 9,083,092 Unearned premium (1,068,540) (785,920) - (26,022) - - (1,880,482)

Gross Premium Income 5,665,010 1,356,537 - 181,063 - - 7,202,610 Reinsurance Expenses (1,748,103) (201,465) - - - (1,949,568)

Net Premium Income 3,916,907 1,155,072 - 181,063 - - 5,253,042 Fee and commission income 289,506 41,894 - - - 331,400

Net Underwriting Income 4,206,413 1,196,966 - 181,063 - - 5,584,442

Insurance claims and benefits incurred (1,973,305) (753,288) - (118,194) - - (2,844,787) Insurance claims and benefits incurred - recoverable from reinsurers 245,524 115,069 - - - - 360,593

Net claims expenses (1,727,781) (638,219) - (118,194) - - (2,484,194) Underwriting Expenses (1,841,499) (317,662) - (41,366) - - (2,200,527)

Total Underwriting Expenses (3,569,280) (955,881) - (159,560) - - (4,684,721)

Underwriting Profit 637,133 241,085 - 21,503 - - 899,721

Net Interest Income - - 162,171 - - - 162,171 Investment and other income 161,795 217,106 30,152 297,333 (308,160) 398,226 Share of profit/loss on investment in associate 12,342 - - - - - 12,342 Net fair value gain or loss on financial assets 1,159,315 233,145 12,976 106,119 - - 1,511,555 Write-back/(charge) of impairment allowance 177,597 (10,897) (33,191) 905 - - 134,414 Other operating income 134,557 29,520 64,096 49,627 262,388 (254,622) 285,566

Net Income 2,282,739 709,959 206,052 208,306 559,721 (562,782) 3,403,995

Foreign Exchange (Gains)/Losses (43,949) (43,949) Management expenses (1,699,273) (579,476) (128,506) (127,242) (247,918) 250,582 (2,531,833)

Total Expenses (1,743,222) (579,476) (128,506) (127,242) (247,918) 250,582 (2,575,782)

Segment profit before tax 539,517 130,483 77,546 81,064 311,803 (312,200) 828,213

Unallocated finace costs Tax attributable: Minimum tax (37,975) (31,300) - - - - (69,275) Income taxes 110,033 (21,155) (5,094) (5,912) (30,526) - 47,346

ProfitafterTaxation 611,575 78,028 72,452 75,152 281,277 (312,200) 806,284



145


The following is an analysis of the Group’s revenue and result by reportable segment in 2012

31December2012In thousands of Naira Non-life Life Financial Asset insurance insurance services Healthcare management Elimination Group

Gross premium written: 6,197,230 1,206,148 - 210,831 - - 7,614,209Unearned premium (113,478) (377,193) - - - - (490,671)

Gross Premium Income 6,083,752 828,955 - 210,831 - - 7,123,538Reinsurance Expenses (1,691,921) (63,525) - - - - (1,755,446)

Net Premium Income 4,391,831 765,430 - 210,831 - - 5,368,092Fee and commission income 187,038 8,935 - - - - 195,973

Net Underwriting Income 4,578,869 774,365 - 210,831 - - 5,564,065

Insurance claims and benefits incurred (1,764,858) (367,783) (113,459) (2,246,100)Insurance claims and benefits incurred - recoverable from reinsurers 588,504 25,271 - - - - 613,775

Net claims expenses (1,176,354) (342,512) - (113,459) - - (1,632,325)Underwriting Expenses (1,517,357) (582,495) (28,165) - - (2,128,017)

Total Underwriting Expenses (2,693,711) (925,007) - (141,624) - - (3,760,342)

Underwriting Profit 1,885,158 (150,642) - 69,207 - - 1,803,723

Net Interest Income - - 133,952 - - (23,621) 110,331Investment and other income 331,603 189,265 - 107,695 133,800 (133,800) 628,563 Share of profit/loss on investment in associate 46,196 - - - - - 46,196 Net fair value gain or loss on financial assets 537,373 69,829 37,264 88,287 - - 732,753Write-back/(charge) of impairment allowance (589,180) (301,117) (6,524) - - - (896,821)Other operating income 128,156 58,464 52,385 - 228,548 (226,464) 241,089

Net Income 2,339,306 (134,201) 217,077 265,189 362,348 (383,885) 2,665,834

Foreign Exchange (Gains)/Losses 13,967 13,967Management expenses (1,623,827) (89,918) (175,691) (180,795) (156,740) 250,264 (1,976,707)

Total Expenses (1,609,860) (89,918) (175,691) (180,795) (156,740) 250,264 (1,962,740)

Segment profit before tax 729,446 (224,119) 41,386 84,394 205,608 (133,621) 703,094

Unallocated finace costs -Tax attributable: -Income taxes (56,248) (24,442) (3,971) - (45,140) - (129,801)

Profit after Taxation 673,198 (248,561) 37,415 84,394 160,468 (133,621) 573,293

146



Segmentassets,liabilitesandotherinformation

The following is an analysis of the Group’s net assets by reportable segment in 2013


Segment assets 13,034,745 6,346,648 1,779,807 824,436 7,749,295 (9,461,380) 20,273,551Segment liabilities (6,804,204) (3,188,188) (1,041,337) (268,016) (807,856) 864,916 (11,244,685)

Segment net assets 6,230,541 3,158,460 738,470 556,420 6,941,439 (8,596,464) 9,028,866

Unallocated assets - - - - - - -

Total net assets 6,230,541 3,158,460 738,470 556,420 6,941,439 (8,596,464) 9,028,866

The following is an analysis of the Group’s net assets by reportable segment in 2012


Segment assets 10,948,949 5,267,453 1,426,376 708,567 7,689,694 (9,415,029) 16,626,010Segment liabilities (5,144,356) (2,180,578) (764,373) (228,006) (822,111) 833,432 (8,305,992)

Segment net assets 5,804,593 3,086,875 662,003 480,561 6,867,583 (8,581,597) 8,320,018

Unallocated assets - - - - - - -

Total net assets 5,804,593 3,086,875 662,003 480,561 6,867,583 (8,581,597) 8,320,018

For the purposes of monitoring segment performance and allocating resources between segments, the Group’s Chief Executive monitors the tangible, intangible and financial assets and liabilities attributable to each segment. All assets and liabilities are allocated to reportable segments with the exception of tax assets.

52(b) Geographicalinformation The Group’s revenue and information about its segment net assets by geographical location are as follows:

In thousands of Naira Revenue Net assets 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12

Within Nigeria 3,403,995 2,665,834 9,028,866 8,320,018 Outside Nigeria - - - -

3,403,995 2,665,834 9,028,866 8,320,018


147


53 RelatedParties Balances and transactions between the Company and its subsidiaries, which are related parties of the

Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.

53(a) Transactionswithrelatedparties The Group enters into transactions with its subsidiaries, associates, joint ventures and its key management

personnel in the normal course of business. The transactions with related parties are made at normal market prices and conducted at arms length.

In thousands of Naira Relationship 2013 2012

Bankbalances Royal Exchange Microfinance Bank Ltd Subsidiary 35,104 (1,688)

Payables Royal Exchange General Insurance Company Limited Subsidiary 40,245 39,810 Royal Exchange Prudential plc Subsidiary 20,089 1,969 Royal Exchange Finance and Investment Subsidiary 4,128 3,665

Receivables Royal Exchange Healthcare Ltd Subsidiary 32,437 27,303 Royal Exchange Microfinance Bank Ltd Subsidiary 2,849 6,133

premium paid Royal Exchange General Insurance Company Limited Subsidiary 2,098 7,360

Loans Royal Exchange Finance and Investment Subsidiary 66,840 71,324

FinanceLease Royal Exchange Finance and Investment Subsidiary 16,045 20,203

Managementfeesreceived Royal Exchange General Insurance Company Limited Subsidiary 169,111 121,806 Royal Exchange Prudential Plc Subsidiary 83,222 104,657 Royal Exchange Healthcare Ltd Subsidiary 2,288

Dividendreceived Royal Exchange General Insurance Company Limited Subsidiary 297,333 148,667

Solicitor’sfeepaid Punuka Attorneys and solicitors Director - 3,200

RoyalExchangeGeneralInsuranceCompanyLimited Cashbook Balance with Royal Exchange Microfinance Bank 25,778 8,695 Deposit fund with Royal Exchange Prudential Plc - 45,187 Deposit fund with Royal Exchange Finance and Investment 124,246 24,771 Deposit fund with Royal Exchange Microfinance Bank Ltd 32,169 49,815 Finance lease obligation to Royal Exchange Finance and Investment (41,820) (79,802) Overdraft facility with Royal Exchange Microfinance Bank Ltd 5,619 -

RoyalExchangePrudentialPlc Cashbook Balance with Royal Exchange Microfinance Bank 14,236 4,094 Deposit fund with Royal Exchange Finance and Investment 41,236 - Finance lease obligation to Royal Exchange Finance and Investment 17,617 -

RoyalExchangeFinanceandInvestment Cashbook Balance with Royal Exchange Microfinance Bank 7,246 16,945

RoyalExchangeHealthcareLimited Cashbook Balance with Royal Exchange Microfinance Bank (9,355) (9,471) Deposit fund with Royal Exchange Finance and Investment 92,353 -

The Group considered the outstanding balances at the reporting date are unsecured and non-interest bearing. The settlements will involve physical delivery of cash.

148



54 ContingenciesandCommitments

54(a) Commitmentsforexpenditure

The Group has no commitment for capital expenditure at the reporting date.

However, the Group entered into a contract for the management and maintenance of some of its investment properties on annual basis, which will give rise to an annual expense of N1.275 million.

54(b) Contingencies

Litigation and claims There are certain pending litigations in some courts of law in Nigeria involving the Group and the Company

either as plaintiff or defendant amounting to N3.2 billion (2012: N1.6billion). However, three cases have been decided against the Group and necessary accruals have been made in the financial statements. The actions are being vigorously contested and the Directors are of the opinion that no significant liability will arise therefrom in excess of the provision made in the financial statements.

Contingent assets The Group has no contingent assets as at the reporting date.

55 Eventsafterthereportingperiod There were no major events after the reporting period.

56 Compensationofkeymanagementpersonnel Key management personnel of the Company includes all directors, executive and non-executive, and senior

mangement. The summary of compensation of key manangement personnel for the year is as follows:

56(a) Chairmananddirectors’emoluments:

56(a)(i)Emoluments


Chairman 5,515 6,282 5,515 5,486 Other directors 60,526 59,652 60,526 54,344

66,041 65,934 66,041 59,830

As directors’ fees 1,785 3,008 1,785 3,008 Emoluments as executive 64,256 62,926 64,256 62,926

66,041 65,934 66,041 65,934

The highest paid director 32,775 33,512 32,775 33,512

56(a)(ii) Number of directors (excluding the chairman) within the following emolument range

group group company company N 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12

400,000 - 500,000 7 4 7 - 500,000 - 600,000 - 1 - - 2,000,001 - 5,000,000 - 8 - 6 Above 5,000,000 2 6 2 2


149


56(b) Staff Average number of persons employed in the financial year and the related staff cost were as follows:

group group company company 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12

Managerial 26 27 1 1 Senior staff 268 197 7 5 Junior staff 74 81 0 0

368 305 8 6

56(b)(i)Staffcosts


Salaries , wages and allowances 1,531,392 1,425,840 71,612 73,573 Pension cost 59,162 39,808 5,057

1,590,554 1,465,648 76,669 73,573

56(b)(ii)PensionScheme


At January 1 14,969 14,969 - - Provision in the year 59,162 113,523 - - Remittance to pension fund administrators (70,771) (113,523) - -

At December 31 3,360 14,969 - -

56(b)(iii)Employeesremuneratedathigherrates

The number of employees in receipt of emoluments including allowances within the following ranges were:

group group company company N 31-Dec-13 31-Dec-12 31-Dec-13 31-Dec-12

Below 400,000 - - - - 400,001 - 500,000 8 - - - 500,001 - 600,000 5 10 - - 600,001 - 700,000 3 4 - - 700,001 - 800,000 8 7 - - 800,001 - 900,000 2 - - - 900,001 - 1,000,000 14 4 - - 1,000,001 - 2,000,000 86 8 - - 2,000,001 - 3,000,000 116 20 2 - 3,000,001 - 4,000,000 24 53 1 1 4,000,001 - 5,000,000 30 77 2 2 5,000,001 - 6,000,000 34 46 1 1 6,000,001 - 7,000,000 19 20 1 1 7,000,001 - 8,000,000 6 23 - - 8,000,001 - 9,000,000 3 12 - - 9,000,001 - 10,000,000 4 8 - - 10,000,001 - 12,000,000 3 4 - - 12,000,001 - 20,000,000 2 9 - 1 20,000,001 - 30,000,000 1 - 1 -

368 305 8 6

150



57 Contraventions During the year, the Group contravened certain sections of Insurance Act Cap 117 LFN 2004, NAICOM Guideline

2010 and the CBN Guideline for Microfinance banks in Nigeria as detailed below:

In thousands of Naira Company Regulatory Description Penaltypaid Authority 31-Dec-13 31-Dec-12

Royal Exchange General NAICOM Guideline Insurance Company Limited NAICOM Re-statement of 2012 financial statements 100 -

NAICOM NAICOM Guideline Non compliance with submission of personnel returns 2012 500 -

NAICOM NAICOM Returns for quarterly returns 2012 545 -

NAICOM NAICOM Guideline late submission of required information 70 -

NAICOM Penalty for Non compliance with approval guidelines 3,000 -

NAICOM Penalty for late rendition of returns for third quarter 2011 - 225

NAICOM Fine for late submission of 2nd quarter 2012 accounts - 45

Royal Exchange Prudential Life Plc NAICOM Penalty for late submission of 2012 Annual Accounts 295 -

NAICOM Sanction on Non-Rendition of Unremitted Premium Report for 2nd Quarter 2013 120 -

4,630 270


151


58 Restatementofpriorperiodfinancialinformation The financial information in 2012 and 2011 were restated to correctly state certain balances in 2013.

Certain prior period balances have been reclassified in line with current period presentation, the reclassification was done so as to ensure that the items were classed according to their type and that like items were disclosed together.

The summary of reclassifications and restatement to the 2011 and 2012 financial information are presented below:

58(a) SummaryofreclassificationsandadjustmenttotheGroup’s2011figures-StatementofFinancialPosition

group Reported Reclassi- Restated ficationsand adjustments In thousands of Naira 1-Jan-12 1-Jan-12

assets Cash and Cash Equivalents 1,266,680 - 1,266,680 Loans and advances to customers 285,401 - 285,401 Advances under finance lease 240,639 - 240,639 Financial Assets (i) 2,789,403 (29,380) 2,760,023 Investment in Subsidiaries - - - Trade Receivables 327,406 - 327,406 Reinsurance Assets 1,590,172 - 1,590,172 Deferred Acqusition Cost (iii) 110,156 72,297 182,453 Other Receivables and prepayments 363,918 - 363,918 Investment in Associates (ii) - 188,002 188,002 Investment Properties 6,169,307 - 6,169,307 Property and Equipment 1,438,620 - 1,438,620 Intangible Assets 41,210 - 41,210 Employees Retirement Benefits 26,839 - 26,839 Deferred Tax Assets (iv) 301,320 77,332 378,652 Statutory Deposits 555,000 - 555,000

Total Assets 15,506,071 308,251 15,814,322

Liabilities Bank borrowing - - - Deferred Income (iii) 67,194 72,297 139,491 Trade Payables 641,530 - 641,530 Other liabilities 754,108 - 754,108 Depositors’ funds 403,231 - 403,231 Insurance Contract Liabilities 4,387,131 - 4,387,131 Investment Contract Liabilities 530,960 - 530,960 Current income tax liabilities 501,333 - 501,333 Employees benefit liability 369,732 - 369,732 Deferred Tax Liabilities (iv) - 77,332 77,332

7,655,219 149,629 7,804,848

equity Share capital 2,572,685 - 2,572,685 Share premium 2,690,936 - 2,690,936 Contingency reserve 525,193 - 525,193 Treasury shares (500,000) - (500,000) Retained earnings 58(e) 2,474,268 158,622 2,632,890 Other component of equity 87,770 - 87,770

Total equity 7,850,852 158,622 8,009,474

Totalliabilitiesandequity 15,506,071 308,251 15,814,322

152



58(b) Summary of reclassifications and adjustment to the Group’s 2012 figures- Incomestatements

group company Reported Reclassi- Restated Reported Reclassi- Restated

ficationsand ficationsand adjustments adjustments In thousands of Naira 31-Dec-12 31-Dec-12 31-Dec-12 31-Dec-12

Gross premium written: 7,614,209 - 7,614,209 - - - Unearned premium (490,671) - (490,671) - - -

Gross Premium Income 7,123,538 - 7,123,538 - - - Reinsurance Expenses (1,755,446) - (1,755,446) - - -

Net premium income 5,368,092 - 5,368,092 - - - Fees and Commission income 195,973 - 195,973 - - -

Net underwriting income 5,564,065 - 5,564,065 - - -

Insurance claims and benefits incurred (2,246,100) - (2,246,100) - - - Insurance claims and benefits incurred - recoverable from reinsurers 613,774 - 613,774 - - -

Net claims expenses (1,632,326) - (1,632,326) - Underwriting expenses (2,128,016) - (2,128,016) - - -

Total underwriting expenses (3,760,342) - (3,760,342) - - -

Underwritingprofit 1,803,723 - 1,803,723 - - - Net Interest Income 110,331 - 110,331 - - - Investment and other income (ii) 642,027 (13,464) 628,563 133,800 - 133,800 Share of profit/loss on investment in associate (ii) - 46,196 46,196 - - - Net fair value gain or loss on financial assets 732,753 - 732,753 - - - Write-back/(charge) of impairment allowance (896,821) - (896,821) - - - Other operating income 241,089 - 241,089 228,548 - 228,548

Net income 2,633,102 32,732 2,665,834 362,348 - 362,348

Foreign Exchange (Gains)/Losses 13,967 - 13,967 - - - Management expenses (v) (1,903,861) (72,846) (1,976,707) (152,373) (4,367) (156,740)

Expenses (1,889,894) (72,846) (1,962,740) (152,373) (4,367) (156,740)

Profit/(loss)before taxation 743,208 (40,114) 703,094 209,975 (4,367) 205,608 Income taxes (vi) (119,273) (10,528) (129,801) (45,140) (45,140)

Profit/(loss)after taxation 623,935 (50,642) 573,293 164,835 (4,367) 160,468 Other Comprehensive Income, net of tax Items that will not be reclassified subsequently to profit or loss: Net actuarial gains/ (losses) on employee benefits (v) (140,308) 72,846 (67,462) (6,567) 4,367 (2,200) Tax effects on other comprehensive income (vi) - 10,528 10,528 - - -

Total comprehensive

income/(loss) for the period 483,627 32,732 516,359 158,268 - 158,268

Total comprehensive income attributtable to shareholders 483,627 32,732 516,359 158,268 - 158,268

Earnings per share - Basic (kobo) 12k 11k 3k 3k


153

58(c) SummaryofreclassificationtotheGroup’s2012figures-StatementofFinancialposition

The reclassification as shown below are not material enough to impact significantly the results of operations of the Group for 2012

group company Reported Reclassi- Restated Reported Reclassi- Restated

ficationsand ficationsand adjustments adjustments In thousands of Naira 31-Dec-12 31-Dec-12 31-Dec-12 31-Dec-12

Assets Cash and Cash Equivalents 1,338,057 - 1,338,057 579 - 579 Loans and advances to customers 435,830 - 435,830 - - - Advances under finance lease 412,961 - 412,961 - - - Financial Assets (i) 2,937,965 (29,380) 2,908,585 - - - Investment in Subsidiaries - - - 7,620,464 - 7,620,464 Trade Receivables 418,381 - 418,381 - - - Reinsurance Assets 1,584,733 - 1,584,733 - - - Deferred Acqusition Cost (iii) 171,965 44,483 216,448 - - - Other Receivables and prepayments 188,533 - 188,533 46,135 - 46,135 Investment in Associates (ii) - 220,734 220,734 - - - Investment Properties 6,356,474 - 6,356,474 - - - Property and Equipment 1,379,719 - 1,379,719 20,641 - 20,641 Intangible Assets 38,035 - 38,035 1,875 - 1,875 Employees Retirement Benefits 49,370 - 49,370 - - - Deferred Tax Assets (iv) 434,772 88,378 523,150 - - - Statutory Deposits 555,000 - 555,000 - - -

Totalassets 16,301,795 324,21516,626,010 7,689,694 -7,689,694

Liabilities Bank borrowing - - - 1,688 - 1,688 Deferred Income (iii) 48,192 44,483 92,675 - - - Trade Payables 369,863 - 369,863 - - - Other liabilities 635,069 - 635,069 436,014 - 436,014 Depositors’ funds 593,225 - 593,225 - - - Insurance Contract Liabilities 4,878,504 - 4,878,504 - - - Investment Contract Liabilities 573,494 - 573,494 - - - Dividend Payable 80,525 - 80,525 80,525 - 80,525 Current income tax liabilities 519,109 - 519,109 289,039 - 289,039 Employees benefit liability 475,150 - 475,150 14,845 - 14,845 Deferred Tax Liabilities (iv) - 88,378 88,378 - - -

Totalliabilities 8,173,131 132,8618,305,992 822,111 - 822,111

equity Share capital 2,572,685 - 2,572,685 2,572,685 - 2,572,685 Share premium 2,690,936 - 2,690,936 2,690,936 - 2,690,936 Contingency reserve 722,231 - 722,231 - - - Treasury shares (500,000) - (500,000) - - - Retained earnings 58(e) 2,695,350 107,980 2,803,330 1,606,162 (4,367) 1,601,795 Other component of equity 58(f) (52,538) 83,374 30,836 (2,200) 4,367 2,167

Totalequity 8,128,664 191,354 8,320,018 6,867,583 -6,867,583

Totalliabilities andequity 16,301,795 324,21516,626,010 7,689,694 -7,689,694


154



58(d) NotestothereclassificationsandadjustmentsmadetotheStatementofcomprehensiveincomeandStatementofFinancialpositionfortheyear2011and2012.

(i) Reclassification of investment in associate from financial assets.

group group company Financialassets 1-Jan-12 31-Dec-12 31-Dec-12 In thousands of Naira

Balance previously reported 2,789,403 2,937,965 - Reclassification of cost of investment in CBCEMEA to investment in equity accounted investee (29,380) (29,380) -

Balance Restated 2,760,023 2,908,585 -

The Group’s investments in CBCEMEA Limited which were previously warehoused under Avaliable for Sale financial asset in previous years were reclassified to investment in associate to appropriately state the balances in line with the relevant standard as these investment qualify as investment in associates.

(ii) Recognition of investment in equity accounted investee

group group company InvestmentinEquityAccountedInvestee 1-Jan-12 31-Dec-12 31-Dec-12 In thousands of Naira

Balance previously reported - - - Reclassification of cost of investment in CBCEMEA from financial assets. 29,380 29,380 - Recognition of previously unrecognised share of reserve of equity accounted investee 158,622 158,622 - Reclassification of the company’s share of dividend income - (13,464) - Recognition of 2012 share of profit of equity accounted investee - 46,196 -

Balance Restated 188,002 220,734 -

The Group’s investments in CBCEMEA Limited which was previously warehoused under Avaliable for Sale financial asset in previous years was reclassified to investment in associate and the effect of the equity accounting method on the Group’s investment in CBCEMEA Limited was reflected on the financial statement appropriately.

(iii) Reclassification of deferred acquisition cost to deferred income

group group company Deferredacquisitioncost 1-Jan-12 31-Dec-12 31-Dec-12 In thousands of Naira

Balance previously reported 110,156 171,965 - Restatement of deferred acquisition cost 72,297 44,483 -


group group company Deferredincome 1-Jan-12 31-Dec-12 31-Dec-12 In thousands of Naira

Balance previously reported 67,194 48,192 - Recognition of deferred income 72,297 44,483 -


The reclassification represents the effect of separating the deferred income in respect of reinsurance business which was reported net of the deferred acquisition cost in previous years.


155


(vi) Representation of deferred tax assets and liabilities

group group company Deferredtaxassets 1-Jan-12 31-Dec-12 31-Dec-12 In thousands of Naira

Balance previously reported 301,320 434,772 - Reclassification of deferred tax liabilities on investment properties 77,332 88,378 -


group group company Deferredtaxliabilities 1-Jan-12 31-Dec-12 31-Dec-12 In thousands of Naira

Balance previously reported - - - Reclassification from deferred tax assets 77,332 88,378 -


The reclassification represents the effect of separating deferred tax assets and liability due to the fact that the Group will not be able to realise the deferred tax asset and settle the deferred tax liability simultaneously as they are both administered under different tax legislation.

(v) Restatement of actuarial losses on defined employee benefit expenses

group group company Managementexpenses-Salariesandallowances 1-Jan-12 31-Dec-12 31-Dec-12 In thousands of Naira

Balance previously reported - 1,903,861 152,373 Restatement of actuarial loss on defined employee benefit expenses - 72,846 4,367

Balance Restated - 1,976,707 156,740

The reclassification represents the effect of reclassifying the actuarial loss on defined employee benefit, previously warehoused in the profit and loss account in previous years, to other comprehensive income appropriately.

(vi) Reclassification of tax effect of actuarial gain to other comprehensive income

group group company Incometaxes 1-Jan-12 31-Dec-12 31-Dec-12 In thousands of Naira

Balance previously reported - 119,273 - Reclassification of tax effect of actuarial gain to other comprehensive income - 10,528 -

Balance Restated - 129,801 -

This reclassification represents the tax effect of actuarial gain previously recognised in the profit or loss account now being reclassified to other comprehensive income.

156


58(e) Summaryofadjustmenttoretainedearnings

group group company Retainedearnings Notes 1-Jan-12 31-Dec-12 31-Dec-12 In thousands of Naira

Balance previously reported 2,474,268 2,695,350 1,606,162

Adjusted for: Recognition of previously unrecognised share of reserve of equity accounted investee (ii) 158,622 158,622 - Restatement of actuarial losses on employee benefit expenses (v) - (72,846) (4,367) Reclassification of the dividend income from associate to Investment in equity accounted investee (ii) - (13,464) - Recognition of 2012 share of profit of equity accounted investee (ii) - 46,196 - Reclassification of tax effect of actuarial gain/(loss) to other comprehensive income (vi) - (10,528) -

Restatedretainedearningasat31December 2,632,890 2,803,330 1,601,795

58(f) OtherComponentofEquity-Actuarialgain/lossreserve

group group company In thousands of Naira Notes 1-Jan-12 31-Dec-12 31-Dec-12

Balance previously reported 87,770 (52,538) (2,200) Reclassification of tax effect of actuarial gain/(loss) from income taxes (vi) - 10,528 - Reclassification of management expenses to actuarial gain/(loss) (v) - 72,846 4,367

Balance Restated 87,770 30,836 2,167


OTH

ER IN

FO

RM

ATIO

N

158


Statement of Value AddedFor the Year Ended 31 December 2013

group group company company In thousands of Naira 2013 2012 2013 2012 n’000 % n’000 % n’000 % n’000 %

Net premium income 5,584,442 5,564,065 Investment income 398,226 628,563 297,333 133,800 Interest income 162,171 110,331 Net fair value gain or loss on financial assets 1,511,555 732,753 Other income 253,959 301,252 262,388 228,548 Bought in goods and services (5,074,412) (4,197,895) (156,674) (69,332)

Value added 2,835,941 100 3,139,069 100 403,047 100 293,016 100

Applied as follows: In payment of employees: - Salaries, wages and other benefits 1,612,241 57 1,146,213 37 78,842 20 73,573 25

In payment to government: - Taxation 21,929 1 129,801 4 30,526 8 45,140 15

For future replacement of assets and expansion of business: Depreciation 165,774 6 1,092,724 35 12,402 3 13,835 5Contingency reserve 225,503 8 197,038 6 - - - -General reserve 806,284 28 573,293 18 281,277 70 160,468 55 Fair value loss 4,210 0 - - - - - -

2,835,941 100 3,139,069 100 403,047 100 293,016 100


159

Financial Summary For the Year Ended 31 December 2013

group

In thousands of Naira 31-Dec-13 31-Dec-12 31-Dec-11 1-Jan-11 restated restated

assetsCash and Cash Equivalents 1,810,882 1,338,057 1,266,680 1,123,235 Loans and advances to customers 812,571 435,830 285,401 136,681 Advances under finance lease 218,585 412,961 240,639 295,785 Financial Assets 3,558,965 2,908,585 2,760,023 3,021,115 Trade Receivables 421,637 418,381 327,406 250,294 Reinsurance Assets 2,044,041 1,584,733 1,590,172 557,250 Deferred Acqusition Cost 469,160 216,448 182,453 84,019 Other Receivables and prepayments 482,025 188,533 363,918 287,323 Investment in Associates 213,694 220,734 188,002 - Investment Properties 7,092,569 6,356,474 6,169,307 5,728,940 Property and Equipment 1,690,707 1,379,719 1,438,620 1,039,584 Intangible Assets 37,418 38,035 41,210 65,882 Employees Retirement Benefits 166,963 49,370 26,839 26,002 Statutory Deposits 555,000 555,000 555,000 555,000 Deferred Tax Assets 699,334 523,150 378,652 252,228

Total assets 20,273,551 16,626,010 15,814,322 13,423,338

LiabilitiesBank borrowing 114 - - 152,137 Deferred Income 84,797 92,675 139,491 8,071 Trade Payables 528,509 369,863 641,530 78,130 Other liabilities 1,170,110 635,069 754,108 724,231 Depositors’ funds 595,449 593,225 403,231 274,697 Insurance Contract Liabilities 6,973,096 4,878,504 4,387,131 2,645,664 Investment Contract Liabilities 599,106 573,494 530,960 591,603 Dividend payable 80,525 80,525 - - Income Tax 494,388 519,109 501,333 213,376 Employees benefit liability 550,660 475,150 369,732 466,807 Deferred tax liabilities 167,931 88,378 77,332 -

Total Liabilities 11,244,685 8,305,992 7,804,848 5,154,716

equityShare capital 2,572,685 2,572,685 2,572,685 2,286,831 Share premium 2,690,936 2,690,936 2,690,936 2,976,790 Contingency reserve 947,734 722,231 525,193 787,307 Treasury shares (500,000) (500,000) (500,000) - Retained earnings 3,096,193 2,803,330 2,632,890 2,217,694 Other component of equity 221,318 30,836 87,770 -

Total Equity 9,028,866 8,320,018 8,009,474 8,268,622

Total Equity and Liabilities 20,273,551 16,626,010 15,814,322 13,423,338

StatementofProfitorLossandOtherComprehensiveIncome

ifrs ifrs ifrs In thousands of Naira 31-Dec-13 31-Dec-12 31-Dec-11 restated restated

Gross premium 9,083,092 7,614,209 6,822,383

Net income 3,403,995 2,665,834 3,217,542

Profit/ (loss) before taxation 828,213 703,094 261,210Income tax expense (21,929) (129,801) (259,895)

Profit/(loss) after taxation 806,284 573,293 1,315

Earnings per share (kobo) 16 11 1

note:The financial information presented above reflects historical summaries based on International Financial Reporting Standards. Information related to prior periods has not been presented as it is based on a different financial reporting framework (Nigerian GAAP) and is therefore not comparable.

160


Financial SummaryFor the Year Ended 31 December 2013

company

In thousands of Naira 31-Dec-13 31-Dec-12 31-Dec-11 1-Jan-11 restated

assetsCash and cash equivalent 35,595 579 2,669 13,696 Loans and advances to customers - - - - Advances under finance lease - - - - Financial assets - - - - Trade Receivables - - - - Investment in subsidiaries 7,620,464 7,620,464 7,620,464 13,638,644 Reinsurance assets - - - - Deferred acquisition costs - - - - Other Receivables and prepayments 76,384 46,135 47,128 134,379 Investment in Associates - - - - Investment properties - - - - Property and Equipment 16,852 20,641 16,193 - Intangible Assets - 1,875 3,750 5,625Employees Retirement Benefits - - - 461,487 Statutory Deposits - - - - Deferred Tax Assets - - - -

Total assets 7,749,295 7,689,694 7,690,204 14,253,831

LiabilitiesBank borrowing - 1,688 - - Deferred Income - - - - Trade Payables - - - - Other liabilities 452,819 436,014 463,003 1,337,271 Depositors’ funds - - - - Insurance Contract Liabilities - - - - Investment Contract Liabilities - - - - Dividend payable 80,525 80,525 - - Current income tax liabilities 254,373 289,039 300,603 53,282 Employees benefit liability 20,139 14,845 11,468 13,145 Deferred tax liabilities - - - -

Total Liabilities 807,856 822,111 775,074 1,403,698

equityShare capital 2,572,685 2,572,685 2,572,685 2,286,831 Share premium account 2,690,936 2,690,936 2,690,936 2,976,790 Contingency reserve - - - 445,786 Treasury shares - - - - Retained earnings 1,677,257 1,601,795 1,647,142 7,140,726 Other component of equity 561 2,167 4,367 -

Shareholders’ funds 6,941,439 6,867,583 6,915,130 12,850,133

Total Equities and Liabilities 7,749,295 7,689,694 7,690,204 14,253,831

StatementofProfitorLossandOtherComprehensiveIncome

ifrs ifrs ifrs In thousands of Naira 31-Dec-13 31-Dec-12 31-Dec-11 restated Gross premium - - -

Net income 559,721 362,348 1,085,575

Profit/ (loss) before taxation 311,803 205,608 625,207Income tax expense (30,526) (45,140) (90,321)

Profit/(loss) after taxation 281,277 160,468 534,886

Earnings per share (kobo) 5 3 10

note:The financial information presented above reflects historical summaries based on International Financial Reporting Standards. Information related to prior periods has not been presented as it is based on a different financial reporting framework (Nigerian GAAP) and is therefore not comparable.

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REGIONAL DIRECTORS

South-EastMr. N. MelieBSc., MBA, FCII

Lagos-SouthMr. N. S. AkereleHND, CIIN, ACII

Lagos-CentralMrs. J. EkomwererenB.A., ACII

North-WestMr. S. T. OkohACII, MBA

WestMr. R. A. AjanaBSc., MMP

South-SouthMrs. V. O. EluemeHND, MBA

EXECUTIVE GROUP

ROYAL EXCHANGE PLC

Group Managing DirectorMr. C. MokwunyeB.A., MSc., ACIP, AIoD

Group Executive Director(Marketing and Sales)Alhaji A. MuktariBSc., MSc., AIoD, AMIN

General ManagerMr. P. AshinzeBSc., MBA, ACA, ACTI, CISA

Deputy General ManagersHuman ResourcesMr. D. NosiriBA, MSc, CIPD

Legal and CompanySecretariat ServicesMs. S. I. EzeukoB.Ed., LLB, BL, ACIARB

Assitant General Managers

Enterprise Risk ManagementMr. H. Y. BomanBSc., FCA, ACTI, ACS, ACPIN, MIoD

Information TechnologyMr. E. J. OsisiomaBSc., MBA

Senior Managers

Facilities ManagementMr. B. T. BabajoBSc., MBA

Audit and ControlMr. A. E. OkorohPGD, ACA, MBA

Legal and CompanySecretariat ServicesMrs. N. S. OnyemeLLB, BL, ACIARB

EXECUTIVE (SUBSIDIARIES)

Royal Exchange GeneralInsurance Company Limited

Managing DirectorMr. R. O. BorokiniBSc., LLB, BL, ACII

Director (Lagos & West)Mr. A. A. NwankwoHND, ACII, MBA

Director South-South & South-EastMr. B. C. AgiliHND, MBA, FCII, FIIM

Senior ManagerMr. H. A. NwosuACIIN, MBA

Royal Exchange Prudential Life PlcManaging DirectorMr. B. O. BanmoreBSc., MMP, ACII

Assistant General ManagerFinance and AccountsMr. F. C. OkoliBSc., ACIB, FCA, FCIT

Royal Exchange Finance and Asset Management LimitedManaging DirectorMr. Abiola SanniBSc., ACIA, NIMN, ACIB

Senior ManagerMrs. Funke OluyemiBSc., MBA.

Royal Exchange HealthcareManaging DirectorDr. C. P. OfulueMBBS, MBA

Senior ManagerMrs. A. OlatawuraBSc., MSc.

Royal Exchange Microfinance BankManaging DirectorMrs. E. O. ElgbocheBSc., (Ed.), MBA, FCB, ACIM

Management Group and Subsidiaries


163

Royal Exchange General Insurance Company Limited is a wholly owned subsidiary of Royal Exchange Plc, licensed by the National Insurance Commission to offer the full range of general and special risks insurance products. With over 90 years in the Nigerian market, Royal Exchange General Insurance has an enviable reputation for reliability, integrity, professionalism, technical competence and financial strength.

The company operates from thirty three (33) branches country wide to ensure maximum outreach and complete accessibility to its customer base. The recent implementation of a web-enabled backbone IT system will further enhance its ability to provide incomparable service. The company’s capacity to underwrite oil and gas risks is widely acknowledged throughout the industry and its oil and gas treaty is widely recognized to be one of the best in the market.

With its unwavering dedication to its core values, the company continues to maintain its lead on many of the major corporate risks in Nigeria.

Royal Exchange General

Mr. Richard BorokiniManaging Director

(Royal Exchange General)


164

Royal Exchange Prudential Life Plc is a wholly owned subsidiary of Royal Exchange Plc and is licensed to underwrite life insurance and related risks. Following the re-organization of the erstwhile Royal Exchange Assurance (Nigeria) Plc into a group holding company in April 2007, Royal Exchange Prudential Life Plc emerged as the subsidiary providing a variety of life and investment linked savings products to cater for individual and corporate needs.

Royal Exchange Prudential Life has pioneered the use of a GSM based electronic platform which enables some of our products to be purchased and activated via scratch cards. This platform, which is user friendly, has also aided the accessibility of our products to all branches, friendship centers and other outlets nationwide.

As part of our efforts aimed at adding value to the growing needs of our customers, we have also introduced a number of new products namely:• Annuity Policies (with four different

variants)• FuneralPolicies(BasicandCommonwealth)

In the coming months, our clients will also be able to enjoy new additions to our product bouquet covering medical health annuity schemes, disability benefit cover and dreaded illness cover.

At the corporate level, we are also at the forefront of providing cover under Compulsory Group Life Schemes for employees of both private and public sectors of the economy as required by the Pension Reform Act, 2004. We presently enjoy the partnership and collaboration of brokers and related organizations in providing quality services to the insuring public, in line with professional best practices.

Mr. Olawale BanmoreManaging Director

(Royal Exchange Prudential Life)

Royal Exchange PrudentialLife


165

Royal Exchange Healthcare Limited is a nationwide accredited NHIS health maintenance organization, providing financial intermediation within the health industry. We therefore act as a fulcrum between the enrollees and the healthcare providers selected purely on the quality of their services.

Royal Exchange Healthcare Limited’s primary function is the design of medical health plans that are both flexible and accommodating. Our provider network is spread across the country and through rigorous continuous quality auditing, we strive to ensure the highest possible standards in medical services to our clients.

We utilize the principle of risk pooling and managed care in controlling and hedging risks associated with our business.

In performing these functions, the risk bearing responsibility and its innovative management have been the distinguishing factor of the Royal Exchange Healthcare brand in the health insurance industry.

Royal Exchange Healthcare Limited will, in the long term, create a one-stop health solution for its customers.

Royal Exchange Healthcare

Dr. Pius OfulueManaging Director

(Royal Exchange Healthcare)


166

Royal Exchange Finance & Asset Management Ltd was incorporated as a wholly-owned subsidiary of Royal Exchange Plc in October 2004 and licensed in April 2005 by Central Bank of Nigeria to provide a wide range of professional services in the areas of credit-finance, funds mobilization and financial advisory services. The company is also licensed by Security and Exchange Commission to provide portfolio and fund management services.

We adopt a customer-centric approach to fill the service delivery gaps evident in Nigerian financial sector in the area of financing businesses, especially small and medium scale enterprises. We are also excellent team players.

Royal Exchange Finance & Asset Management Ltd recognizes the indispensability of technology to straight-through processing and rapid turnaround times. We are at the verge of upgrading our system to a more advanced multi-functional financial software package to execute large-scale business transactions without hitches.

The technical expertise of Royal Exchange Finance & Asset Management Ltd is reflected in our creative approach to financing engagements. Our in-depth transaction knowledge and customer-centric approach allow us develop mutually beneficial long-term relationship with our clients. Our variety of personalized products meets specific needs. These products include:

• HighYieldInvestmentPaper(HYIP)• RoyalInvestmentNote(RIN)• InvestmentPlan(I-Plan)• Leasing• Loans• MortgageFinancing• ProjectandL.P.OFinancing• FinancialAdvisoryServices

Royal Exchange Finance & Asset Management

Mr. Abiola SanniManaging Director

(Royal Exchange Finance)


167

Royal Exchange Microfinance Bank Limited is a wholly owned subsidiary of Royal Exchange Plc, licensed by the Central Bank of Nigeria on October 15, 2009 to provide comprehensive micro financial services to the unbanked and under banked in urban, semi-urban and rural areas of Nigeria. We commenced business on October 19, 2009.

In line with the vision of Royal Exchange Plc to be a one-stop financial service shop and with its passion to alleviate poverty, Royal Exchange Microfinance Bank was set up to provide micro finance services to improve the lives of the common people, alleviating poverty and building a better society. Our focus is on micro, small, medium and retail markets, leveraging on state of the art technology to deliver superior and quality services.

The bank is in the process of converting to a State Microfinance Bank. Royal Exchange Microfinance Bank offers a broad range of products and services, most of which are unique and tailored to meet the needs of our diverse clientele.

The bank offers the following products:

Savings Products:• Royal Target Micro Savings (ROTMIS)

Account• Royal Ordinary Micro Savings (ROMIS)

Account• Royal Mandatory Savings (REMAS)

Account• CurrentAccount(ROCA)• FixedDeposit(ROFID)Account

Loan Products:• Trade Group Loan (Royal Ordinary

Microcredit - ROMIC)• WorkingCapitalLoan(RoyalFlexibleCredit

- ReFlex)• Personalloanforsalaryearners(RoyalBail

Me Microcredit)• Assetacquisitionfinance• LPO financing (Royal Real Microcredit -

REMIC)

The corporate head office of Royal Exchange Microfinance Bank is located at 34/36 Apapa-Oshodi Expressway, Oshodi.

Mrs. E. O. ElghocheManaging Director

(Royal Exchange Microfinance Bank)

Royal Exchange MicrofinanceBank

168


Head OfficeNew Africa House, 31, Marina, P.O. Box 112, Lagos, Nigeria.Email: [email protected]: www.royalexchangeplc.comTel: 01-4606690 to 01-4606699

Control OfficePlot 34/36, Apapa-Oshodi Expressway, Charity Bus-stop, Oshodi, P.M.B. 1804, Ikeja, Lagos.Tel: 01-4606690 to 01-4606699

Group Retail Office103/7, Allen Avenue,4th Floor, Mosesola House,Opposite Alade Market, Ikeja,Tel: 01-2955662, 08023254096, 08033905798

Aba1, Asa Road, Aba, P. O. Box 604, Abia StateTel: 08037763428

AbeokutaModupeola House,Onikolobo Road, Abeokuta, Ogun StateTel: 08052210312 AbujaWing A 2nd Floor, U.L.O. Plaza Sokode Crescent, Zone 5, Abuja.Tel: 08065644038 AkureOld National Bank Building 34, Oyemekunb Road, P.M.B. 771, Akure.Tel: 08033887730

Alaba123, Olojo Drive, Ojo Alaba Int’l Market Road, Lagos.Tel: 08029314777 ApapaTop Floor, Front Building1A, Pleateau Road, Apapa, LagosP.O.Box 636 Apapa. Tel: 08055266886 Asaba14, Dennis Osadebey Way,Asaba, Delta State. Tel: 08034456720, 08053112096

AwkaNifson Millennim Plaza, Opposite Federal Prison, Along Ziks Avenue, Amawbia Anambra StateTel: 08036774177

Benin113, New Lagos Road, Benin City, Benin.Tel: 08068044177

Berger 1Agha Park Oshodi/Apapa Expressway, Berger, Lagos. Tel: 08033254262, 01-8115661 Berger 2The Lord Reigneth Plaza, 2nd Floor 8, Apapa / Oshodi ExpresswaySunrise Bus-Stop Trinity ApapaTel: 08033254262

Calabar103, Ndidem Usang Iso RoadEffio-ete Junction, Calabar Tel: 08037248052 EnuguCanute House, 19/25 Ogui Road, Enugu State.Tel: 04-2291080, 08023133497 IbadanOld Sketch Building (First Floor),Cocoa House Complex,Dugbe, Ibadan,P.O.Box 1370, Dugbe. Tel: 08094686750, 08155538272 Ikeja29, Adeniyi Jones Avenue, Off Oba Akran,Ikeja, Lagos. P.O.Box 1803, Ikeja.Tel: 01-8973858, 08033438683

IsoloPlot 34/36 Oshodi - Apapa ExpresswayCharity Bus-Stop, Oshodi, Lagos.Tel: 01-4540443, 08023207102

Jos1B, Richard Road, Muritala Mohammed Way, Jos.Tel: 08023634873

Kaduna2, Muritala Mohammed Square/Independence Way, P.O. Box 261, KadunaTel: 08054958587, 08025842947

Kano 2B, Post Office Road, KanoP.O.Box 301, KanoTel: 08028555554, 08037037031

Lagos Main Branch (Marina)New African House,31, Marina, Lagos. P.O.Box 112, LagosTel:014181750, 08033327946Fax: 01-2713248

Makurdi19, Railway Bye-Pass,High Level, Makurdi.08060105704

LekkiRoyal Exchange (Phoenix House) 26E Abdul-Rahman Okene Close,Off Ligali Ayorinde Street,Victoria Island, Lagos.Tel: 01-8428234, 08023405365

Owerri21 Wetheral Road, Owerri, Imo State.Tel: 08086156386, 08053112096

Port Harcourt42, Evo Road, GRA Phase II, Port Harcourt Tel: 084-234664, 08033105143, 08033373133

Sokoto3, Abdullahi Fodio Road,Opp. Zenith Bank, Sokoto.Tel: 07039836650

Uyo130, Atiku Abubakar Avenue, Uyo, Akwa-Ibom StateTel: 08038984255

Victoria IslandRoyal Exchange (Phoenix House)26E Abdul-Rahaman Okene Close,Off Ligali Ayorinde Street,Victoria Island, LagosTel: 01-7418620, 08033160496

WarriOgun House, 107, Effurun/Sapele Road,Effurun, Warri.Tel:08033516212, 08051996777

YabaAlhaja Falilat Abegbe Ipaye Villa2nd Floor, 371, Borno Way,Spencer, Yaba, Lagos.P.O.Box 1804, Ikeja.Tel: 01-2956805, 08055517419

YolaModibbo Raji House,2, Lamido Aliu Way, Jimeta, Yola.Tel: 08037468679

Branch/Office Network Cum Directory


169

Royal Exchange Group Retail Friendship Centres

Alaba Int. Market Ibadan 1st Floor, 123, Olojo Drive, Old Sketch Building,Ojo Alaba. Cocoa House Complex,08029314777 Dugbe, Ibadan. 08155538272

Royal Prudential Sales Outlets

S/N Name of Unit Manager Location Tel.

1 Ijeoma Anorue Regic Office Apapa 08025952430 2 Amobi Clara Regic Office Yaba 08054179487 3 Victor Omoniyi Regic Office Ibadan 08066617706 4 Omolade Agbelusi Regic Office Akure 08064945360 5 Lukman Baderinwa Regic Office Abuja 08038557974 6 Vincent Ojeagbase Regic Office P/H 08036642606 7 Chinedu Micah Regic Office Aba 07033447846 8 Akachukwu Okey Regic Office Enugu 08063497754 9 Emeka Ngwu Regic Office Awka 07061905562 10 Phina Inyokwe Regic Office Calabar 08139208056

Friendship Centre Network


Corporate170

AGM

AGMRoyal Exchange Prudential Management Retreat.


171

Events

AGM

AGM School Seminar for Secondary School Prefects.

172


Notes

creativity - royal exchange group … · annual report & accounts 2013 ‐ 100,000 200,000...

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