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NEM INSURANCE PLCANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2012

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Contents Page

Corporate Information 2

Results at a Glance 5

Report of the Directors 6

Statement of Directors’ Responsibilities 17

Certification Pursuant to Section 60 (2) of Investment and Securities Act No. 29 of 2007 18

Report of the Independent Auditors 19

Report of the Audit Committee 20

Statement of Significant Accounting Policies 21

Statement of Financial Position 47

Statement of Comprehensive Income 49

Statement of Change in Equity 51

Statement of Cash Flows 53

Notes to the Financial Statements 55

Segments Report 73

Claim Development Table 75

Financial Risk Management Policy 79

Capital Management Policy 96

Transition to IFRS 98

Equity Reconciliation 99

Comprehensive Income Reconciliation 103

Breakdown of Reclassification and Remeasurement of Statement of Financial Position 105

Breakdown of Reclassification and Remeasurement of Comprehensive Income 109

Explanatory Notes to Reconciliation of Equity and Total Comprehensive Income 111

Value Added Statement 113

Three Year Financial Summary 115


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Corporate Information

Directors Chief Adewale Teluwo ChairmanMr. Tope Smart Group Managing Director/CEOMrs. Susan Abisola Giwa-Osagie Executive DirectorMrs. Yinka Aletor DirectorMr. Olusesan Adekunle DirectorDr. Fidelis Ayebae Director

Company Secretary Mrs. Omolara OyetundeNEM Insurance Plc138/146, Broad StreetLagos

Registered Office 138/146 Broad StreetLagos

Registration Number 6971

Corporate Head Office 138/146 Broad StreetLagos

Registrars Africa Prudential Registrars PlcRegistrars’ Department220B, Ikorodu RoadPalmgroveLagosTel: 01-841153, 7301004E-mail: info@africaprudentila registrars.com

Bankers Access Bank PlcDiamond Bank PlcFirst Bank of Nigeria LimitedGT Bank PlcUnion Bank of Nigeria PlcUnited Bank for Africa PlcZenith Bank Plc

Auditors SIAO (Chartered Accountants)18b, Olu Holloway RoadOff Alfred Rewane RoadFalomo- IkoyiP.O.Box 55461, FalomoIkoyi, Lagos.Tel: +234 01 463 0871-2Website: www.siao-ng.comE-mail: [email protected]


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Corporate Information (Cont’d)

Solicitors Koya & Kuti Solicitors5th Floor, 3, Ajele StreetLagos.

Sola Abidekun & Co9th Floor, UBA House57, MarinaLagos.

Reinsurers

African Reinsurers Corporation Continental Reinsurance Corporation WAICA Reinsurance Pool Nigerian Reinsurance Corporation Aveni Reinsurance

Branch Networks

Abuja Jos3, Lokoja Street 10, Rwang Pam StreetArea 8, Garki P.O Box 1261Abuja Jos, Plateau StateBranch Manager: Michael A. Giwa Tel: 073-454216Tel:09-6714952, 5233083,7805440 Branch Manager: Thomas NkomMobile Nos: 08033208141 Mobile Nos: 081917772374070228243127, 07029909242 080983766292, 07095087999

Akure Kaduna3rd Floor, BIO Building Alagabaka Ground Floor, Turaki Ali HouseAkure, Ondo State 3, Kanata RoadTel: 034-215829 P.O Box 822, KadunaBranch Manager:Kehinde Agbelade Tel: 062-217683Mobile No: 08033509419 Branch Manager: Eyitayo Ogboyomi

Mobile Nos: 07028243118

Apapa Kano3rd Floor 3rd Floor Union Bank BuildingCommercial Road 37, Niger StreetApapa, Lagos P.O Box 1185, KanoTel: 01-7375546, 07028442653 Tel: 064-649374Branch Manager: Uzor Enubuzor Branch Manager: Peter I. AgonoMobile Nos: 08059301673, 08028968842 Mobile No: 0803592374007029096131


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Corporate Information (Cont’d)Calabar Lagos Mainland2nd Floor 26, Etta-Agbor Road 284, Ikorodu RoadCalabar Anthony LagosCross River State Tel: 01-8171844, 01-4824737, 01-2710060Tel No: 087-239571 Branch Manager: Andrew M. IkekhuaBranch Manager: Nkume Omoghogie Mobile No: 08076175287, 08023123006Moblie Nos: 08054642551 0702824312308033542048

Ibadan Onitsha3rd Floor, Broking House 2nd Floor (AIB) Building1, Alhaji Jimoh Odutola Street 107, Upper New Market Road, OnitshaPMB 5328, Ibadan Tel: 046-410736Oyo State Branch Manager: Cyracus AkinjobiTel: 02-2411992 Mobile Numbers: 08033457426, 07029219983Branch Manager: Rufus OlumideMobile Nos: 0803346369708055899976, 07028243124

Osogbo Port Harcourt1st Floor, Former Afribank Building House 2, Road 2Opposite Fakunle Comprehensive High School Circular Road, Residential EstateFakunle, Gbongan/Ibadan Road Port Harcourt, Rivers StateOsogbo, Osun Sate Tel: 084-233513Tel: 035-214844 Branch Manager: Yemi MayadenuBranch Manager: Victor Eweme Mobile Nos: 08063670020,Mobile Nos: 08023276477, 08033698967 08052653797

Warri57, Effurun Sapele Road SubsidiaryEffurun, Delta State C587/13, Olu Obasanjo HighwayBranch Manager: Kayode Arimoro Accra Girls AreaMobile No: 08034221374 P.M.B AN, Accra08023288188, 07029554541 Ghana

Tel: 021-220797, 021-220798Managing Director: Iyiola SarakiMobile No: 08033143823

VisionTo be the preferred choice of the insuring public.

MissionTo build a customer-satisfying Insurance Institution that is passionate about adding value to theinterests of all stakeholders.

Core Values Discipline Integrity Humility Excellence Empathy


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Result at a Glance31 Dec. 2012 31 Dec. 2011 Change

Financial Positions N'000 N'000 N'000 %

Cash and cash equivalents 3,125,679 2,427,729 697,950 29

Trade receivable 981,032 575,766 405,266 70

Financial Assets 1,350,967 1,066,499 284,468 27

Property and equipment 828,586 705,922 122,664 17

Other Receivables and Prepayments 237,634 281,683 (44,048) (16)

Deferred acquisition cost 325,944 247,923 78,021 31

Statutory deposit 342,879 414,839 (71,960) (17)

Intangible asset 27,085 13,875 13,210 95

Total Assets 7,809,120 6,311,340 1,497,780 24

Trade payables 192,092 37,966 154,126 406

Insurance Contract Liabilities 3,027,556 1,905,361 1,122,196 59

Current tax payable 21,949 - 21,949 -

Total liabilities 3,508,474 2,163,031 1,345,443 62

Issued share capital 2,640,251 2,640,251 - -

Share premium 272,551 272,551 - -

Contingency reserve 1,434,193 1,147,115 287,078 25

Retained earnings (101,902) (6,111) (95,791) 1,568

Shareholders Fund 4,300,645 4,148,309 152,336 4

Comprehensive Income

Gross premiums 9,652,556 8,381,196 1,271,360 15

Net Premiums 9,117,035 7,029,740 2,087,294 30

Other Revenue 510,286 412,255 98,031 24

Total Revenue 9,627,321 7,441,995 2,185,325 29

Claims paid (2,934,435) (1,810,688) (1,123,746) 62

Other Expenses (6,012,292) (3,567,662) (2,444,630) 69

Total Benefits, Claims and Other Expenses (8,946,727) (5,378,351) (3,568,376) 66

Profit Before Tax 680,594 2,063,645 (1,383,051) (67)

Income tax expense (225,282) (133,810) (91,472) 68

Profit For the Year 455,312 1,929,835 (1,474,523) (76)

Other Comprehensive Income for the year, net of tax (38,951) (12,282) (26,669) 100

Total comprehensive income for the year net of tax 416,361 1,917,553 (1,501,192) (78)

Basic Earnings Per Share (Kobo) 8 5 3 73


NEM 2012

REPORT OF THE DIRECTORS

The Directors present their annual reports on the affairs of NEM Insurance Plc together with thefinancial statements and auditor’s reports.

1. LEGAL FORM

The Company was incorporated in 1970 as a Nigerian Company in accordance with theCompanies Act 1968. The Company became listed on the Nigerian Stock Exchange in 1989following its privatization by the Federal Government of Nigeria.

2. PRINCIPAL ACTIVITIESThe Company is engaged in General Insurance business which includes marine, motorvehicle, fire etc.

2.1 SUMMARY OF THE RESULT

2012 2011

N'000 N'000

Gross premiums 9,652,556 8,381,196

Net premiums 9,117,035 7,029,740

Other revenue 510,286 412,255

Total revenue 9,627,321 7,441,995

Net benefit and claims (2,934,435) (1,810,688)

Other expenses (6,012,292) (3,567,662)

Total benefits, claims and other expenses (8,946,727) (5,378,351)

Profit before tax 680,594 2,063,645

Income tax expenses (225,282) (133,810)

Profit for the year 455,312 1,929,835

Other Comprehensive Income

Other Comprehensive Income for the year 2,141 -

- -

457,453 1,929,835


NEM 2012

Directors Report (Cont’d)

3. CORPORATE GOVERNANCE REPORT

Introduction

The business of NEM Insurance Plc is conducted under a corporate governance structure thatincorporates the Board, the Committees, and a functional Management System with theBoard as the apex decision making body. This is in accordance with the “Code of GoodCorporate Governance for the Insurance Industry in Nigeria” and Best Practice. The Companyadheres to a high standard of ethics, integrity and professionalism as a demonstration of itsavowed commitment to excellent corporate governance practices. At NEM Insurance Plc, wehave ensured that our business activities are implicitly transparent.

A summary of the key components of our Corporate Governance System is providedhereunder.

The Board

The Board of Directors of the Company is responsible for establishing the policy frameworkthat would ensure that the Company fully discharges its legal, financial as well as regulatoryresponsibilities. The Board is ultimately responsible to deliver sustainable value to theshareholders. The Board monitors the performance of the Company, monitors theeffectiveness of the governance structure under which it operates, and renders the accountsof its stewardship of the organization’s resources to the shareholders. The Board of Directorsof the Company is composed of a mix of non-executives and executives whereby the numberof non-executives exceeds the executives while the position of the Chairman of the Board isclearly delineated from the Chief Executive Officer.

The Chairman

The Chairman of NEM Insurance Plc was duly appointed. The Chairman’s primary role is toensure that the Board carries out its governance role in the most effective manner. TheChairman manages the operations of the Board effectively in order to ensure that membersmake concrete contributions towards the decisions of the Board and that the Board operatesin harmony.

The Chief Executive Officer (CEO)

The CEO has the overall responsibilities for developing, implementing and monitoring thestrategic and financial plans of the Company with the cooperation and support of the Board.The CEO ensures the effective operation and management of the Company’s resources inorder to ensure profitability of its operations and that all significant matters affecting theCompany are brought to the attention of the Board.

Independent Director

The Board appointed one independent director who has remained truly independent since hisappointment.

Annual Board Appraisal

In accordance with the requirement of the NAICOM Code, the Board commissioned NewVersion Consultants Limited, 5, Lanre Da-Silva Close, Dolphin Extension, Ikoyi, Lagos toconduct the appraisal exercise of its performance. The report of the appraisal will bepresented at the Company’s Annual General Meeting as required by the NAICOM Code.


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Director Report (Cont’d)

Activities of the Board

The Board meets quarterly to discuss critical issues affecting the organisation and performsother responsibilities that fall within its purview as provided in the Company’s Article ofAssociation and by other relevant regulatory authorities. Meetings were well attended withsufficient notice given well in advance of the meetings.

Composition of the Board/Schedule of Attendance at Meetings

S/N Name of Director Status No. Meeting Attended1 Chief Adewale Teluwo Chairman 42 Mr. Tope Smart Group MD 43 Mrs. Suzan Giwa-Osagie Executive Director 44 Mrs. Yinka Aletor Non-ExecutiveDirector 45 Mr. Olusesan Adekunle Non-Executive Director 46 Dr. Fidelis Ayebae Non-Executive Director 3

Board Committees

The Board has put in place a committee structure specified in the NAICOM Code andadequate for the complexity of the operations of the Company. The Committees are:

i. Finance and General Purposes Committeeii. Investment Committeeiii. Enterprise Risk Management Committeeiv. Audit and Compliance Committeev. Establishment And Governance Committee

The Committees were provided with specified ‘Terms of Reference’ to guide their activities.

Finance and General Purposes Committee (F&GPC)

The key responsibilities of the Finance and General Purposes Committee are:

- Monitoring Budget;- Monitoring Sources of Income Generation;- Ensuring Integrity of Financial Reporting;- Control of expenses.

The Committee met twice during the financial year under review.


NEM 2012

Director Report (Cont’d)

Composition of Committee/Attendance

The composition and attendance of the Finance and General Purposes Committee (F&GPC) are asstated below:Name Status AttendanceMr. Olusesan Adekunle Chairman 2Mr. Tope Smart Group Managing Director 2Mrs. Suzan Giwa-Osagie Executive Director 2

Investment Committee

The essential responsibilities of the Committee are:

- Setting Investment Policies of the Company;- Approving Investment Plans;- Evaluating Investment Performance; and- Review the Adequacy of the Investment Charter of the Company.

The Committee held two meetings during the financial year ended December 31, 2012.

Composition of the Committee/Attendance

Name Status AttendanceMrs. Yinka Aletor Chairman 2Mr. Tope Smart Group Managing Director 2Mrs. Suzan Giwa-Osagie Executive Director 2

Enterprise Risk Management Committee

The key responsibilities of the Committee are:

- Determine the policies in respect of Risk Profile and Risk Limits;- Review Policies as required by the emerging dynamics of the operating

environment;- Ensure that all the departments of the Company are adequately

sensitized to the level of risks inherent in their operations; and- Assess adequacy of risk mitigants for major risk indicators.

The Committee held three meetings during the year as stated below:


Name Status Attendance

Dr. Fidelis Ayebae Chairman 3

Mr. Tope Smart Group Managing Director 3

Mrs. Suzan Giwa-Osagie Exec. Director 3


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Establishment and Corporate Governance Committee

The Terms of Reference of the Committee are to:

ensure that money and properties are used and managed to meet the aims and objectives ofthe Company;

ensure that the organisation adheres to regulations, its governing instrument/constitutionand agreed procedures;

recommend the number of directors who shall serve on the Board; identify individuals acknowledged to be qualified as Board members; agree on evaluation process to be employed in evaluating the performance of the Board, the

Board Committees and Management.

The Committee held three meetings during the financial year under review.


Name Status AttendanceDr. Fidelis Ayebae Chairman 3Mr. Tope Smart Group Managing Director 3Mrs. Suzan Giwa-Osagie Executive Director 3

Audit and Compliance Committee

The NAICOM Code makes the following provisions in respect of the responsibilities of the Audit andCompliance Committee:

- The Committee shall have a written mandate and Terms of Reference;- The Committee shall be responsible for the review of integrity of the data

and information provided in the Audit and/or Financial Report;

The main responsibilities or the Committee are as stated below: The Committee shall provide oversight functions with regards to both the Company’s

Financial Statement and its Internal Control and Risk Management Functions; The Committee shall review the terms of engagement and recommend the appointment

or reappointment and compensation of External Auditors to the Board and theShareholders;

Review the procedure put in place to encourage honest whistle blowing; The Audit Committee shall meet at least three times in a year and at least once with the

External Auditors; and The Committee performance shall be evaluated periodically.


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The Committee met thrice during the year and covered the basic components of theseresponsibilities.

The Composition of the Committee and schedule of attendance are as follows:

Name Status AttendanceMr. Peter Okoh Chairman- Shareholders' Rep 3Mr.Taiwo Oderinde Shareholders' Rep 3Mr. Samuel Mpamaugo Shareholders' Rep 3Mr. Olusesan Adekunle Non Exec. Director 3Mrs. Suzan Giwa-Osagie Exec. Director 3Mrs. Yinka Aletor Non Exec. Director 3

4. DIVIDEND

The Directors recommend a declaration of dividend of………………………………………. which translates to ……………… per ordinary share of ……….Each subject to the approval of the shareholders at the next Annual General Meeting.

5. DIRECTORS AND DIRECTORS’ INTERESTS

i. DirectorsNo director has disclosed any declarable interest in any contract with the Company duringthe year in pursuant to Section 277 of the Companies and Allied Matters Act CAP C20 LFN2004.

ii. Directors’ interestThe interests of the directors in the issued share capital of the Company as recorded in theregister of shareholdings and/or as notified by them for the purposes of Sections 275 and276 of the Companies and Allied Matters Act CAP C20 LFN 2004 are as follows:

Indirect Direct Total2012 2011 2012 2011 2012 2011

Chief Adewale Teluwo 337,057,367 337,057,367 112,621,359 112,621,359 449,678,726 449,678,726Tope Smart Esq - - 101,985,909 101,985,909 101,985,909 101,985,909

Suzan Giwa-Osagie (Mrs) - - 2,125,008 2,125,008 2,125,008 2,125,008Olusesan Adekunle Esq - - 49,458,252 44,558,252 49,458,252 44,558,252Yinka Aletor (Mrs) 382,457,035 322,286,765 - - 382,457,035 322,286,765Dr. Fidelis Ayebae - - - -


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Directors Report (Cont’d)6. DIRECTORS RESPONSIBILITIES

The directors are responsible for the preparation of the consolidated financial statementswhich give a true and fair view of the state of affairs of the Company at the end of eachfinancial year and of the income statement for that year and comply with the Insurance Act,2003, Financial Reporting Council of Nigeria Act, No 6 2011 CAP 117 LFN 2004 and theCompanies and Allied Matters Act CAP C20 LFN 2004

7. SHAREHOLDINGS

“The Registrars have advised that the called-up and fully paid up shares of the Company asat 31 December, 2012 were beneficially held as follow:

RangeNo. of

HoldersHolders

%Holders

Cum UnitsUnits

%UnitsCum.

(000) (000)1 - 1,000 4241 8.33 4241 2,743 0.05 2,743

1,001 - 5,000 11934 23.45 16175 38,363 0.73 41,1065,001 - 10,000 9477 18.62 25652 80,027 1.52 121,134

10,001 - 50,000 17045 33.49 42697 439,085 8.32 560,21950,001 - 100,000 4354 8.56 47051 348,423 6.60 908,642

100,001 - 500,000 3031 5.96 50082 658,520 12.47 1,567,162500,001 - 1,000,000 402 0.79 50484 314,910 5.96 1,882,072

1,000,001 - 999,999,999,999 409 0.80 50893 3,398,431 64.36 5,280,50350893 5,280,503

8. RECORD OF DIRECTORS ATTENDANCE

In accordance with section 258(2) of the Companies and Allied Matters Act CAP C20 LFN2004, the records of the Directors attendance at Directors’ meeting in 2012 are available forinspection at the Annual General Meeting.

9. PROPERTY AND EQUIPMENT

Movements in property & equipment are shown in note 11 on pages 61 and 62. In theopinion of the directors, the market value of the Company’s properties is not less than thevalue shown in the consolidated financial statements.


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10. DONATIONS

Donations during the year ended December 31, 2012 amounted to N4,057,861(2011:N1,500,000) as follows:

NNigerian Insurers Association 1,150,000Less Priviledged 190,000Joseph Ayo Babalola University 50,000Chartered Insurance Institute of Nigeria 570,000West African Examination Council 200,000Kingdom Wealth Imperial 75,000Pearl Award 250,000Higher International Institute 370,000Lagos Leadership Conference 100,000Nigeria National Secretariat (ECOWAS) 552,861Apostle of Peace Society 100,000The Nigerian Council of Registered Insurance Brokers 100,000Professional Insurance Ladies Association 250,000Rotary Club of Ikeja District 100,000

4,057,861

11. AGENTS AND BROKERS

The Company maintains a network of licensed agents and renders services to its customersthrough insurance licensed Brokers and Registered Agents.

12. REINSURERSDuring the financial year under review, the Company had business transactions with thefollowing re-insurance companies in compliance with the relevant Insurance Act of 2003. There-insurance companies are:

- African Reinsurance Corporation- Continental Reinsurance Plc.,- WAICA Reinsurance Pool,- Nigerian Reinsurance Corporation and- Aveni Reinsurance.-

13. EVENTS AFTER REPORTING DATE

There were no significant events after reporting date which could have had a material effecton the consolidated financial statements for the year ended 31 December, 2012 which havenot been adequately provided for or disclosed in the financial statements.

14. EMPLOYMENT AND EMPLOYEES

It is the policy of the Company not to adopt discriminatory criteria for consideringapplications for employment including those from disabled persons. All employees whether


NEM 2012

Directors Report (Cont’d)or not disabled are given equal opportunities to develop their experience and knowledge andto qualify for promotion.

When an employee becomes disabled during the course of his or her employment, theCompany endeavours to retain the individual for employment in spite of his disability, whenthis is reasonably possible. As at 31st December, 2012 one disabled person was in theemployment of the Company.

15. EMPLOYEES INVOLVEMENT, TRAINING AND DEVELOPMENT

i. Information dissemination

“The employees are regularly provided with information on matters that are ofconcern to them through established channels of communication.”

ii. Consultation with employees

There are regular consultations between the senior and junior staff unions andManagement, particularly on matters affecting staff welfare.

iii. Encouraging employees’ involvement and training

The employees are the Company’s most valuable and cherished resource. TheCompany is therefore committed to their continuous training and development. Inline with this policy of continuous development of the human resources, members ofstaff are sent on training programmes. The courses are aimed at broadening theirtechnical/professional knowledge and managerial skills.

iv. Health, safety at work and welfare of employees

The Company places high premium on health and welfare of its employees. Medicalfacilities are provided for staff and their families at private hospitals retained in theirrespective localities. Transportation, housing and lunch subsidies are provided to alllevels of employees. Fire fighting equipments are also installed in strategic positionsin the office building.

16. AUDITORS

In compliance with Section 33(2) of the Securities and Exchange Commission’s Code ofCorporate Governance and Section 22(1) of National Insurance Commission 2010 guidelineson the tenure of External Auditors, Messrs SIAO Partners (Chartered Accountants) has beenappointed as the auditors in accordance with Section 357(2) of the Companies and AlliedMatters Act 2004, as amended. A resolution will be proposed at the Annual General Meetingto authorize the Directors to determine their remunerations.


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REPORT OF EXTERNAL CONSULTANTS ON BOARD APPRAISAL

NEM INSURANCE PLC

In compliance with the requirement of the NAICOM “Code of Good Corporate Governance for theInsurance Industry in Nigeria” “The Code” the Board of NEM Insurance Plc commissioned NewVersion Consultants Limited to conduct an appraisal of the performance of the Board of theCompany. The exercise was guided by the provisions of The NAICOM Code and other recognisedCodes of Best Practices which promote enhanced governance values. Our findings are as follows:

i. The Board is composed of a mix of executives and non-executives which indicates that thenon-executives are in greater proportion than the executives. The proportion of executives tonon-executives is 1:2. Members are individuals of diverse professional backgrounds andbusiness experience. Among the non-executives are: A legal practitioner, foremostindustrialist and investment expert as well as astute businessmen with interests in keysectors of the economy including: Insurance, Pharmaceuticals, Real Estate andManufacturing who have established successful track records in their chosen fields ofendeavours and are well exposed to taking business and financial decisions in their day-to-day activities. The Executive Directors are qualified professionals with cognate experience intheir areas of specialisation and a vast knowledge of Insurance business and its operatingterrain. Members have been bringing their experience to bear in directing the affairs of theCompany which has since stabilised its operations post-consolidation.

In accordance with The NAICOM Code, the Board Chairman is a Non-Executive Director; thereis a clear delineation of responsibilities between the position of the GMD and the Chairmanwhile no one individual occupies the two positions at the same time thereby avoiding theissue of executive duality. The two individuals are not members of the same family.

ii. The Operations/Processes of the Board were managed within the context of regulatoryrequirements and in accordance with Best Practices. Accordingly, the Board held fourmeetings during the year under review and attendance was outstanding whereby eachmember met the 75% minimum requirement prescribed in The Code in respect ofattendance. A Committee structure comprising of the minimum requirement of the NAICOMCode was institutionalised and the Committees were provided with the required Terms ofReference. The agenda contained issues meant for the attention of the Board and thepreparation of the agenda was flexible in allowing all members to introduce relevant subjectmatters to the Board.

Adequate notice was given for meetings and Board materials were circulated promptly tomembers which allowed them adequate time to prepare for the meetings. Members weregiven equal opportunity and they made cogent contributions to deliberations and mostdecisions were arrived at by consensus. The Board enjoys a cordial working relationship andmeetings were conducted in an atmosphere devoid of rancour. The above review suggeststhat the Composition and Processes/Operations of the Board meet most of the parameters ofThe NAICOM Code.

iii. Members performed their oversight responsibilities with respect to the activities ofmanagement in particular as regards the Company’s growth strategy, its FinancialPerformance, Business Prospects as well as status of Regulatory Compliance.


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Following the recommendation made to the Board, particularly the regularization of its size,we observed that the Board has instituted the required mechanism to address the issue inorder to enhance its governance practices.

BY ORDER OF THE BOARD

OMOLARA OYETUNDE (MRS.)COMPANY SECRETARYLagos, NigeriaFRC/2013/NBA/00000003153Date:


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Statement of Directors’ Responsibilities

In accordance with the provisions of Section 334 and 335 of the Companies and Allied Matters Act2004 and Sections 24 and 28 of the Banks and Other Financial Institutions Act 1991, the Directorsare responsible for the preparation of annual financial statements which give a true and fair view ofthe financial position at the end of the financial year of the Company and of the operating result forthe year then ended.

The responsibilities include ensuring that:

Appropriate and adequate internal controls are established to safeguard the assets of theCompany and to prevent and detect fraud and other irregularities;

The Company keeps proper accounting records which disclose with reasonable accuracythe financial position of the Company and which ensure that the financial statementscomply with the requirements of the Companies and Allied Matters Act, 2004, Banks andOther Financial Institutions Act, 1991, Insurance Act 2003, Financial Reporting Counciland the yearly Operational Guidelines issued by NAICOM.

The Company has used appropriate accounting policies, consistently applied andsupported by reasonable and prudent judgments and estimates, and that all applicableaccounting standards have been followed; and

The financial statements are prepared on a going concern basis unless it is presumed thatthe Company will not continue in business.

The Directors accept responsibility for the year’s financial statements, which have been preparedusing appropriate accounting policies supported by reasonable and prudent judgments andestimates in conformity with;

Insurance Act 2003 International Financial Reporting Standards; Companies and Allied Matters Act 2004; Banks and Other Financial Institutions Act, 1991; NAICOM Operational Guidelines; and Financial Reporting Council Act, 2011.

The Directors are of the opinion that the financial statements give a true and fair view of the state ofthe financial affairs of the Company and of its operating result for the year ended.

The Directors further accept responsibility for the maintenance of accounting records that may berelied upon in the preparation of the financial statements, as well as adequate systems of financialcontrol. Nothing has come to the attention of the Directors to indicate that the Company will notremain a going concern for at least twelve months from the date of this statement.

Signed on behalf of the Directors on ……………………. by:…………………………. ………………………………….Mr. Tope Smart Chief Adewale TeluwoGMD Chairman, Board of Directors


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Certification Pursuant to Section 60 (2) of Investment and Securities Act No. 29 of 2007

We the undersigned hereby certify the following with regards to our Audited Financial Statements forthe year ended December 31, 2012 that:

We have reviewed the report;

To the best of our knowledge, the report does not contain:- Any untrue statement of a material fact, or- Omit to state a material fact, which would make the statements, misleading in the light of

circumstances under which such statements were made;

To the best of our knowledge, the financial statement and other financial information included inthis report fairly present in all material respects the financial condition and results of operationof the company as of, and for the periods presented in this report.

We:- are responsible for establishing and maintaining internal controls.- have designed such internal controls to ensure that material information relating to the

Company and its consolidated subsidiary is made known to such officers by others withinthose entries particularly during the period in which the periodic reports are being prepared;

- have evaluated the effectiveness of the Company’s internal controls as of date within 90 daysprior to the report;

- have presented in the report our conclusions about the effectiveness of our internal controlsbased on our evaluation as of that date;

We have disclosed to the auditors of the Company and Audit Committee:

- all significant deficiencies in the design or operation of internal controls which wouldadversely affect the company’s ability to record, process, summarize and report financialdata and have identified for the company’s auditors any material weakness in internalcontrols, and

- any fraud, whether or not material, that involves management or other employees who havesignificant role in the company’s internal controls;

We have identified in the report whether or not there were significant changes in internal controls orother factors that could significantly affect internal controls subsequent to the date of our evaluation,including any corrective actions with regard to significant deficiencies and material weaknesses.

_____________________ ______________________Mr. Tope Smart (GMD) Miss Stella Omoraro CFOFRC/2013/CIIN/00000001331 FRC/2013/ICAN/00000001238


NEM 2012

Independent Auditor’s Report

To the members of Nem Insurance Plc

We have audited the accompanying financialstatements of Nem Insurance Plc (“theCompany), and its subsidiary (“together referredto as the Group”), which comprise theConsolidated Statement of Financial Position as atDecember 31, 2012, and the ConsolidatedStatement of Comprehensive Income and OtherComprehensive Income, Consolidated Cash FlowsStatements and the statement of significantaccounting policies on pages 21 to 46 andexplanatory notes to the financial statements, asset out on pages 55 to 112.

Directors’ Responsibility for the FinancialStatementsThe directors are responsible for the preparationand fair presentation of these financial statementsin accordance with International FinancialReporting Standard (IFRSs) and in the mannerrequired by the Companies and Allied Matters Act,CAP C20, LFN 2004, Financial Reporting CouncilAct 2011, the Insurance Act 2003 of Nigeria, theInvestments and Securities Act 2007 and NationalInsurance Commission (NAICOM) circulars. Thisresponsibility includes: designing, implementingand maintaining internal controls relevant to thepreparation and fair presentation of financialstatements that are free from materialmisstatement, whether due to fraud or error;selecting and applying appropriate accountingpolicies; and making accounting estimates thatare reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion onthese financial statements based on our audit. Weconducted our audit in accordance with NigerianStandard on Auditing (NSA) and InternationalStandard on Auditing (ISA). Those standardsrequire that we comply with ethical requirementsand plan and perform the audit to obtainreasonable assurance on whether the financialstatements are free from material misstatement.An audit involves performing procedures to obtainaudit evidence about the amounts and disclosuresin the financial statements. The proceduresselected depend on the auditor’s judgment,including the assessment of the risks of materialmisstatement of the financial statements whetherdue to fraud or error. In making those riskassessments; the auditor considers internalcontrols relevant to the entity’s preparation andfair presentation of the financial statements in

order to design audit procedures that areappropriate in the circumstances, but not for thepurpose of expressing an opinion on theeffectiveness of the entity’s internal controls. Anaudit also includes evaluating the appropriatenessof accounting policies used and thereasonableness of accounting estimates made bythe directors, as well as evaluating the overallpresentation of the financial statements.

We believe that the audit evidence we haveobtained is sufficient and appropriate to provide abasis for our audit opinion.

OpinionIn our opinion, the consolidated financialstatements give a true and fair view of thefinancial position of NEM Insurance Plc and itssubsidiary as at December 31, 2012 and of itsfinancial performance and cash flows for the yearthen ended in accordance with InternationalFinancial Reporting Standards (IFRSs) applicableand in the manner required by the FinancialReporting Council Act 2011, Companies andAllied Matters Act, CAP C20 LFN 2004, theInsurance Act 2003 of Nigeria, the Investmentsand Securities Act 2007 and the relevant NAICOMcirculars.

Report on Other Legal Regulatory RequirementsCompliance with the requirements of the Companiesand Allied Matters Act, 2004.

In our opinion, proper books of account have beenkept by the Company, so far as appears from ourexamination of those books and Company’sfinancial position and comprehensive income arein agreement with the books of accounts.

Lagos, Nigeria

Date……………

FRC/2013/ICAN/00000001548


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Report of the Audit Committee

To the members of NEM Insurance Plc

In accordance with the provisions of Section 359(6) of the Companies and Allied Matters Act, Cap59 of the Laws of the Federation of Nigeria 2004, we the Members of the Audit Committee of NemInsurance Plc, having carried out our statutory functions under the Act, hereby report as follows:

We have reviewed the scope and planning of the audit for the year ended December31, 2012 and we confirm that they were adequate.

The Company’s reporting and accounting policies as well as internal control systemsconform to legal requirements and agreed ethical practices.

We are satisfied with the departmental responses to the External Auditors’ findings onmanagement matters for the year ended December 31, 2012

Finally, we acknowledge and appreciate the co-operation of Management and Staff in the conductof these duties.

----------------------------Mr. Peter OkohChairman of the Audit CommitteeFRC/2013/NIM/00000002860Date.........................

Members of the Audit Committee

Mr. Peter Okoh - (Shareholders’ Representative)- ChairmanMr. Taiwo Oderinde - ,, ,, MemberMr. Samuel Mpamaugo - ,, ,, MemberMr.Olusesan Adekunle - (Non Exec Director) MemberMrs. Yinka Aletor - ,, ,, MemberMrs. Suzan Giwa Osagie - (Exc. Director) Member

The Company Secretary/Legal Adviser acted as the Secretary to the Committee.


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Statement of Significant Accounting Policies

The following are the significant accounting policies adopted by the Group in the preparation ofthese financial statements. These accounting policies have been consistently applied for all yearspresented.

1.0 General Information

NEM Insurance Plc (“NEM” or ‘‘the Company”) is a public limited liability company domiciled inNigeria. The Company’s registered and corporate office is 138/146 Broad Street, Lagos Island,Lagos. The Company is principally engaged in the business of general Insurance activities. Suchservices include provision of non-life insurance services for both corporate and individualcustomers. In 2009 the Company opened a subsidiary in Ghana (NEM Insurance Ghana Limited)to transact the same line of business.

The financial statement was authorised by Board on 18th June, 2013.

2.0 Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these Financial Statements are setout below. These policies have been consistently applied to all the years presented, unlessotherwise stated.

An explanation of how the transition to International Financial Reporting Standards (IFRS) hasaffected the reported financial position, financial performance and Cash flows of the Company isprovided on page 98. This note includes reconciliations of equity and profit or loss forcomparative periods reported under Nigerian GAAP (previous GAAP) to those reported for thisperiod under IFRS.

2.1 Going Concern Assessment

These financial statements have been prepared on the going concern basis. The Group has nointention or need to reduce substantially its business operations, the management believes thatthe going concern assumption is appropriate for the Group due to sufficient capital adequacy ratioand projected liquidity, based on historical experience that short-term obligations will berefinanced in the normal course of the business. Liquidity ratio and continuous evaluation ofcurrent ratio of the group is carried out by the group to ensure that there are no going concernsthreats to the operation of the group.

2.2 Basis of Preparation and Compliance with IFRS

The Group’s financial statements for the year 2012 have been prepared in accordance with theInternational Financial Reporting Standards (IFRS) as issued by the International AccountingStandards Board (IASB).

These are the first annual financial statements of NEM Insurance prepared in accordance withIFRS and IFRS 1 – First-time Adoption of IFRS (IFRS 1) has been applied.

An explanation of how the transition from Nigerian GAAP to IFRS has affected the Company’sfinancial position is contained on page 100.


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Statement of Significant Accounting Policies (Cont’d)

Functional and Presentation of CurrencyThe financial statements are presented in Nigerian currency (Naira) which is the Company’sfunctional currency. Except otherwise indicated, financial information presented in Naira havebeen rounded to the nearest thousand (₦ 000)

Basis of Measurement

The financial statements have been prepared under the historical cost basis except for thefollowing: Financial instruments at fair value through profit or loss. Financial assets classified as available for sale which are measured at fair value through

other comprehensive income. Loans and receivables and held to maturity financial assets and financial liabilities which are

measured at amortized cost Investment properties which are measured at fair value

2.3 Critical Accounting Estimates, Judgments and AssumptionsThe preparation of financial statements in conformity with IFRS requires the use of certain criticalaccounting estimates. It also requires management to exercise its judgment in the process ofapplying the company’s accounting policies. The estimates and associated assumptions arebased on historical experience and various other factors that are believed to be reasonable underthe circumstances, the results of which form the basis of making judgments about carrying valuesof assets and liabilities that are not readily apparent from other sources. Actual results may differfrom these estimates under different assumptions and conditions. Changes in assumptions mayhave a significant impact on the financial statements in the period the assumptions changed.Management believes that the underlying assumptions are appropriate and that the company’sfinancial statements therefore present the financial positions and results fairly. The areasinvolving a higher degree of judgment or complexity, or areas where assumptions and estimatesare significant to the financial statements are disclosed in Note 2.4.

2.4 Judgment, Estimates and AssumptionThe estimates and underlying assumptions are reviewed on an on-going basis. Revision toaccounting estimates are recognized in the period in which the estimate is revised, if the revisionaffects only that period or if the revision affects both current and future periods.Information about significant areas of estimation uncertainty and critical judgments in applyingaccounting policies that have the most significant effect on the amounts recognized in thefinancial statements are described below:

2.4.1 Income TaxesSignificant estimates are required in determining the provision for income taxes. There are manytransactions and calculations for which the ultimate tax determination is uncertain. The companyrecognizes liabilities for anticipated tax issues based on estimates of whether additional taxes willbe due. Where the final tax outcome of these matters is different from the amounts that wereinitially recorded, such differences will impact the income tax and deferred tax provisions.

2.4.2 Retirement BenefitsThe present value of the retirement benefit obligations depends on a number of factors that aredetermined on an actuarial basis using a number of assumptions. Any changes in theseassumptions will impact the carrying amount of gratuity obligations. The assumptions used in


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determining the net cost (income) for gratuity include the discount rate, rate of return on assets,future salary increments and mortality rates.

The Group determines the appropriate discount rate at the end of the year. This is the interestrate that should be used to determine the present value of estimated future cash outflowsexpected to be required to settle the gratuity obligations. In determining the appropriate discountrate, the Company considers the interest rates of high-quality government bonds that aredenominated in the currency in which the benefits will be paid and that have terms to maturityapproximating the terms of the related gratuity liability. Other key assumptions for gratuityobligations are based in part on current market conditions.In most cases, no explicit assumptions are made regarding the future rates of claims inflation orloss ratios. Instead, the assumptions used are those implicit in the historical claims developmentdata on which the projections are based. Additional qualitative judgment is used to assess theextent to which past trends may not apply in future, (e.g. to reflect one-off occurrences, changesin external or market factors such as public attitudes to claiming, economic conditions, level s ofclaims inflation, judicial decisions and legislation, as well as internal factors such as portfolio mix,policy features and claims handling procedures) in order to arrive at the estimated ultimate costof claims that present the likely outcome from the range of possible outcomes, taking account ofall the uncertainties involved.

Similar judgments, estimates and assumptions are employed in the assessment of adequacy ofprovisions for unearned premium. Judgment is also required in determining whether the patternof insurance service provided by a contract requires amortization of unearned premium on a basisother than time apportionment.

2.4.3 Fair Valuation of Investment PropertiesThe fair value of investment properties is based on the nature of investment properties is basedon the nature, location and condition of the specific asset. The fair value is determined byreference to observable market prices. The fair value of investment property does not reflect therelated future benefits from this future expenditure. These valuations are performed annually byexternal appraisers. Assumptions are made about expected future cash flows and the discountingrates

2.5 Improvements to IFRSs2.5.1 Amendments to IFRSs affecting presentation and disclosure only

Amendments to IAS 1 Presentation of items of other Comprehensive Income

The Group has applied the amendments to IAS 1 Presentation of items of other ComprehensiveIncome in advance of the effective date (annual periods beginning on or after 1 July 2012). Theamendments introduce new terminology for the statement of comprehensive income and incomestatement. Under the amendments to IAS 1, the statement of comprehensive income is renamedthe statement of profit or loss and other comprehensive income and the income statements isrenamed the statements of profit or loss. The amendments to IAS 1 retain the option to presentprofit or loss and other comprehensive income in either a single statement or in two separate butconsecutive statements. However, the amendments to IAS 1 require items of other comprehensiveincome to be grouped into two categories in the other in the other


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Statement of Significant Accounting Policies (Cont’d)comprehensive income section: (a) items that will not be reclassified subsequently to profit or lossand (b) items that may be reclassified subsequently to profit or loss when specific conditions aremet. Income tax on items of other comprehensive income is required to be allocated on the samebasis- the amendments do not change the option to present items of other comprehensive incomeeither before tax or net of tax. The amendments have been applied retrospectively, and hence thepresentation of items of other comprehensive income has been modified to reflect the changes.Other than the above mentioned presentation changes, the application of the amendments to IAS1 does not result in any impact on profit or loss, other comprehensive income and totalcomprehensive income.

The adoption of this amendment will have no impact on the financial position and performance ofthe Group.

2.5.2 Amendment to IFRSs affecting the reported financial performance and/or financial position

Amendments to IAS 12 Deferred Taxes: Recovery of Underlying Assets

The Company has applied the amendments to IAS 12 Deferred Tax: Recovery of Underlying Assetsin the current year. Under the amendments, investment properties that are measured using thefair value model in accordance with IAS 40 (Investment Property) are presumed to be recoveredentirely through sale for the purposes of measuring deferred taxes unless the presumption isrebutted. The directors have determined that the amendments have no effect on the CompanyFinancial Statements as the Company does not engage in such activities.


New and revised IFRSs in issue but not yet effective

The Company has not yet applied the following new and revised IFRSs that have been issued butare not yet effective:

IFRS 9 Financial InstrumentsIFRS 10 Consolidated Financial StatementsIFRS 11 Joint ArrangementsIFRS 12 Disclosure of Interest in Other EntitiesIFRS 13 Fair value measurement

Amendments to IFRS 7 Disclosures- Offsetting Financial Assets and FinancialLiabilities

Amendments to IFRS 9 and IFRS 7 Mandatory Effective Dates of IFRS 9 and TransitionDisclosures

Amendments to IFRS 10, IFRS 11 Consolidated Financial Statements, JointArrangements andAnd IFRS 12 Disclosure of interest in other entities: Transition

GuidanceIAS 19 (as revised in 2011) Employee BenefitsIAS 27 (as revised in 2011) Separate Financial StatementsIAS 28 (as revised in 2011) Investments in Associates and Joint VenturesAmendments to IAS 32 Offsetting Financial Assets and Financial Liabilities


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Amendment to IFRSs Annual Improvements to IFRSs 2009-2011 Cycle

i. Effective for annual periods on or after 1 January 2013.ii. Effective for annual periods on or after 1 January 2014.iii. Effective for annual periods on or after 1 January 2015.

IFRS 9 Financial Instruments

IFRS 9, issued in November 2009, introduced new requirements for the classification andmeasurement of financial assets. IFRS 9 was amended in October 2010 to include requirementsfor the classification and measurement of financial liabilities and for derecognition.

Key requirements of IFRS 9

All recognised financial assets that are within the scope of IAS 39 Financial Instruments:Recognition and Measurement to be subsequently measured at amortised cost or fair value.Specifically, debt investments that are held within a business model whose objective is to collectthe contractual cash flows, and that have contractual cash flows that are solely payments ofprincipal and interest on the principal outstanding are generally measured at amortised cost atthe end of subsequent accounting periods. All other debt investments and equity investments aremeasured at their fair value at the end of subsequent accounting periods. In addition, under IFRS9, entities may make an irrevocable election to present subsequent changes in the fair value of anequity investment (that is not held for trading) in other comprehensive income, with only dividendincome generally recognized in profit or loss.

With regard to the measurement of financial liabilities designated as at fair value through profit orloss, IFRS 9 requires that the amount of change in the fair value of the financial liability, that isattributable to changes in the credit risk of that liability, is presented in other comprehensiveincome, unless the recognition of the effects of changes in the liability’s credit risk in othercomprehensive income would create or enlarge an accounting mismatch in profit or loss. Changesin fair value attributable to a financial liability’s credit risk are not subsequently reclassified toprofit or loss. Previously, under IAS 39, the entire amount of the change in the fair value of thefinancial liability designated as fair value through profit or loss was presented in profit or loss.


New and revised standards on consolidation, joint arrangements, associates and disclosures

In May 2011, a package of five standards on consolidation, joint arrangements, associates anddisclosures was issued, including IFRS 10, IFRS 11, IFRS 12, IAS 27 (as revised in 2011) and IAS28 (as revised in 2011).

IFRS 10- Consolidated Financial Statements

IFRS 10 replaces the parts of IAS 27 Consolidated and Separate Financial Statements that dealwith consolidated financial statements. SIC 12 consolidations – Special Purpose Entities will bewithdrawn upon the effective date of IFRS 10. Under IFRS 10, there is only one basis forconsolidation, that is, control. In addition, IFRS 10 includes a new definition of control that


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contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returnsfrom its involvement with the investee, and (c) the ability to use its power over the investee toaffect the amount of the investor’s returns. Extensive guidance has been added in IFRS 10 to dealwith complex scenarios.


IFRS 11 Joint Arrangements

IFRS 11 replaces IAS 31 interests in Joint Ventures. IFRS 11 deals with how a joint arrangementof which two or more parties have joint control should be classified. SIC 13 Jointly ControlledEntities – Non-monetary contributions by Ventures will be withdrawn upon the effective date ofIFRS 11. Under IFRS 11, joint arrangements are classified as joint operations or joint ventures,depending on the rights and obligations of the parties to the arrangements.

In contrast, under IAS 31, there are three types of joint arrangements: jointly controlled entities,jointly controlled assets and jointly controlled operations. In addition, joint ventures under IFRS11 are required tobe accounted for using the equity method of accounting, whereas jointly controlled entities underIAS 31 can be accounted for using the equity method of accounting or proportional consolidation.


IFRS 12 Disclosure of Interest in Other Entities

IFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries,joint arrangements, associates and /or unconsolidated structured entities. In general, thedisclosure requirements in IFRS 12 are more extensive than those in current standards.In June 2012, the amendments to IFRS 10, IFRS 11 and IFRS 12 were issued to clarify certaintransitional guidance on the application of these IFRSs for the first time.


IFRS 13 Fair Value Measurement

IFRS 13 establishes a single source of guidance for fair value measurements and disclosuresabout fair value measurements. The Standard defines fair value, establishes a framework formeasuring fair value, and requires disclosures about fair value measurements. The scope of IFRS13 is broad; it applies to both financial instrument items and non-financial instrument items forwhich other IFRSs require or permit fair value measurements and disclosures about fair valuemeasurements, except in specified circumstances. In general, the disclosure requirements inIFRS 13 are more extensive than those required in the current standard. For example, quantitativeand qualitative disclosures based on the three-level fair value hierarchy currently required forfinancial instruments only under IFRS 7 Financial Instruments: Disclosures will be extended byIFRS 13 to cover all assets and liabilities within its scope. IFRS 13 is effective for annual periodsbeginning on or after 1 January 2013, with earlier application permitted. The directors anticipatethat the application of the new Standard may affect certain amounts reported in the financialstatements.


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These five standards together the amendments regarding the transition guidance are effective forannual periods beginning on or after 1 January 2013, with earlier application permitted providedall of these standards are applied at the same time. The directors anticipate that the applicationof these five standards will have a/an significant/insignificant impact on amounts reported in theconsolidated financial statements. For example, the application of IFRS 10 may affect theaccounting for the Company’s ownership. A detailed review will be performed by the directors toquantify the impact on the application of IFRS 10.The directors anticipate that IFRS 11 will have no effect to the Group’s financial statements as theGroup does not engage in such activities.


Amendments to IFRS 7 and IAS 32 Offsetting Financial Assets anf Financial Liabilities and therelated disclosures

The amendments to IAS 32 clarify existing application issues relating to the offset of financialassets and financial liabilities requirements. Specifically, the amendments clarify the meaning ofcurrently has a legally enforceable ‘right of set-off’ and ‘simultaneous realization and settlement’.The amendments to IFRS 7 require entities to disclose information about rights of offset andrelated arrangements (such as collateral posting requirements) for financial instruments under anenforceable master netting agreement or similar arrangement. The amendments to IFRS 7 areeffective for annual periods beginning on or after 1 january 2013 and interim periods within thoseannual periods. The disclosures should be provided retrospectively for all comparative periods.However, the amendments to IAS 32 are not effective until annual periods beginning on or after 1january 2014, with retrospective application required.The Directors anticipate that the application of these amendments to IAS 32 and IFRS 7 mayresult in more disclosures being made with regard to offsetting financial assets and financialliabilities in the future.


2.6 Foreign Currency Transactions

2.6.1 Functional and Presentation Currency

Items included in the financial statements are measured using the currency of the primaryeconomic environment in which the entity operates (‘the functional currency). The financialstatements are presented in thousands. Naira is the Company’s functional and presentationcurrency.

2.6.2 Transactions and BalancesTransactions denominated in foreign currencies are recorded in Naira at the rate of exchangeruling at the date of each transaction. Any gain or loss arising from a change in exchange ratessubsequent to the date of the transaction is included in the profit and loss account. Monetaryassets and liabilities denominated in foreign currencies at the balance sheet date are translated atthat date. Exchange gains arising from the revaluation of monetary assets and liabilities are


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recognized in the income statement while those on non-monetary items are recognized in othercomprehensive income. For non-monetary financial investments available-for-sale, unrealizedexchange differences are recorded directly in equity until the asset is disposed or impaired.

2.7Explanation of Transition to IFRSs2.7.1 Implementation of IFRSs

These are the Group’s first consolidated financial statements prepared in accordance withInternational Financial Reporting Standards (IFRS), the group publishes comparative informationfor the year in its financial statements, the date of transition to IFRSs is effectively, January 1,2011, which represents the start of the earliest period of comparative information presented. Theopening balance sheet as at January 1, 2011 has been restated accordingly. The accountingpolicies have been applied consistently to all periods presented in these consolidated financialstatements, and have been applied consistently by the group entities.

Comparative information at December 31, 2011 is restated to take account of the requirements ofall standards including IAS 32 – Financial Instruments: Presentation, IAS 39 – FinancialInstruments: Recognition and Measurement and IFRSs 7 – Financial Instruments: Disclosureeffective July 1, 2009.

The most significant IFRSs impact for the Group originated from the implementation of IAS 39 –Financial Instruments: Recognition and Measurement which requires the valuation of financialassets and liabilities at fair values and impairment of financial assets to only be accounted if thereis objective evidence that a loss events has occurred after initial recognition but before thebalance sheet date.

The effect of the group’s transition to IFRS is summarized as follows:

Transition Elections Explanation of material adjustments to cash and cash equivalents as at January 1, 2011

and December 31, 2011 Reconciliation of equity and comprehensive income as previously reported under Nigerian

GAAP to IFRS Adjustments to the statement of Cash flows.

2.7.2 Transition Elections

In preparing these financial statements in accordance with IFRS 1, the Group has applied themandatory exceptions from full retrospective application of IFRS. The optional exemptions fromfull retrospective application selected by the group are summarized below:

2.7.3 Business Combinations (IFRS 3) Fair value or revaluation as deemed cost (IAS 16 and IAS 38)

An entity may elect to measure an item of property, plant and equipment, investmentproperty or intangible assets at the date of transition to IFRS at its fair value and use thatfair value as its deemed cost at that date; or may elect to use a previous GAAP revaluationof these assets at, or before, the date of transition to IFRS as deemed cost at the date ofthe revaluation. The Group has property, plant and equipment and the Group has anoption to revalue its property, plant and equipment for the financial year ending January1, 2011 and the revalued amount represents the deemed cost in the company’s openingIFRS Statement of Financial Position under IFRS. Due to regulatory requirements, the


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Company has broadly classified its property and equipment at cost less depreciationunder NGAAP as the deemed cost under IFRS.

Investments in Subsidiaries, Jointly Controlled Entities and Associates (IAS 27)Where a first-time adopter measures its investment in subsidiaries, jointly controlledentities and associates at cost, it shall measure that investment in its separate openingIFRS statement of financial position either at cost determined in accordance with IAS 27or at deemed cost. The deemed cost for the first-time adopter shall be the investment’sfair value (determined in accordance with IAS 39) at the entity’s date of transition to IFRSin its separate financial statements or previous GAAP carrying amount at that date.

The entity has adopted to measure its investments in its subsidiary in its separate opening IFRSstatement of financial position at cost determined in accordance with IAS 27.

2.7.4 Designation of previously recognized financial instruments (IAS 39)IAS 39 permits a financial asset to be designated on initial recognition as available for sale or afinancial instrument (provided it meets certain criteria) to be designated as a financial asset orfinancial liability at fair value through profit or loss. Despite this requirement exceptions apply inthe following circumstances: an entity is permitted to make an available-for-sale designation atthe date of transition to IFRSs. An entity is permitted to designate, at the date of transition toIFRSs, any financial asset or financial liability as fair value through profit or loss provided theasset or liability meets the criteria in paragraph 9(b) (i), 9(b)(ii) or 11A of IAS 39 at that date.NEM has designated its financial assets or financial liability as either, held to maturity, loans andrecoverable, available for sale, held for trading, fair value through profit and loss for those thatmeets the criteria in IAS 39.

Fair Value Measurement of Financial Assets or Financial Liabilities at Initial Recognition(IAS 39)Provides an exemption from certain requirements from IAS 39 - instead of full retrospectiveapplication, an entity may choose to apply the requirements prospectively to certaintransactions entered into after October 25, 2002 or January 1, 2004.

De-recognition of Financial Assets and Financial LiabilitiesRequires an entity to avoid retrospective application of de-recognition requirements in IAS 39for transactions entered into before January 1, 2004.

2.7.5 EstimatesRequires estimates at the date of transition to be consistent with estimates made for the samedate in accordance with the previous GAAP unless there is objective evidence that those estimateswere in error. In short, this precludes the use of hindsight.An entity’s estimates under IFRS at the date of transition to IFRS shall be consistent withestimates made for the same date under previous GAAP (after adjustments to reflect anydifference in accounting policies), unless there is objective evidence that those estimates were inerror. An entity may receive information after the date of transition to IFRS about estimates that ithad made under previous GAAP. Under paragraph 31, an entity shall treat the receipt of thatinformation in the same way as non-adjusting events after the reporting period under IAS 10 onEvents after the Reporting Period.”

An entity may need to make estimates under IFRS at the date of transition to IFRS that were notrequired at that date under previous GAAP. To achieve consistency with IAS 10, those estimatesunder IFRS shall reflect conditions that existed at the date of transition to IFRS. In particular,


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estimates at the date of transition to IFRS of market prices, interest rates or foreign exchangerates shall reflect market conditions at that date. The above apply to the opening IFRS statementof financial position and to the comparative period presented in the entity’s first IFRS financialstatements.

The estimates made by NEM under the Nigerian GAAP at the transition date, i.e. 1 January 2011shall be consistent with estimates made in the Group’s opening IFRS statement of financialposition (after adjustments to reflect any difference in accounting policies).

2.8 Explanation of Material Adjustments to Cash and Cash Equivalents As At January 1, 2011and December 31, 2011

The net impact of application of IFRSs on cash and cash equivalents of the Group is an increase incash and cash equivalents at January 1, 2011 of N1, 488,541. There have been no materialadjustments to the cash flow statements in respect of cash utilized by operating activities beforetax, cash flows from investing activities and cash flows from financing activities as a result of theadoption of IFRSs.

A quantitative explanation of how the transition to International Financial Reporting Standards(IFRS) has affected the reported financial position, financial performance and cash flows of theGroup and the Parent is provided in page 101. This note includes reconciliations of equity andprofit or loss for comparative periods reported under Nigerian GAAP (previous GAAP) to thosereported for this period under IFRS.

The consolidated and separate financial statements have been prepared under the historical costconvention, as modified by the revaluation of investment property, available-for-sale financialassets, and financial assets and financial liabilities at fair value through profit or loss.

The preparation of financial statements in conformity with International Financial ReportingStandards (IFRS) requires the use of certain critical accounting estimates. It also requires theDirectors to exercise judgment in the process of applying the Group’s accounting policies. Theareas involving a higher degree of judgment or complexity, or areas where assumptions andestimates are significant to the consolidated financial statements are disclosed on page 22.

2.9 Consolidation

2.9.1 Subsidiaries

The financial statements of subsidiaries are consolidated from the date the Group acquirescontrol, up to the date that such effective control ceases. For the purpose of these financialstatements, subsidiaries are entities over which the Group, directly or indirectly, has the power togovern the financial and operating policies so as to obtain benefits from their activities. Changesin the Group’s interest in a subsidiary that do not result in a loss of control are accounted for asequity transactions (transactions with owners). Any difference between the amount by which thenon-controlling interest is adjusted and the fair value of the consideration paid or received isrecognised directly in equity and attributed to the Group.

Inter-company transactions, balances and unrealised gains on transactions between companieswithin the Group are eliminated on consolidation. Unrealised losses are also eliminated in thesame manner as unrealised gains, but only to the extent that there is no evidence of impairment.


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Accounting policies of subsidiaries have been changed where necessary to ensure consistencywith the policies adopted by the Group. Investment in subsidiaries in the separate financialstatement of the parent entity is measured at cost.

Acquisition-related Costs are expensed as Incurred

If the business combination is achieved in stages, fair value of the acquirer’s previously heldequity interest in the acquiree is re-measured to fair value at the acquisition date through profit orloss.

2.9.2 Disposal of Subsidiaries

On loss of control, the Group derecognises the assets and liabilities of the subsidiary, anycontrolling interests and the other components of equity related to the subsidiary. Any surplus ordeficit arising from the loss of control is recognised in income statement.

If the Group retains any interest in the previous subsidiary, then such interest is measured at fairvalue at the date that control is lost. Subsequently, that retained interest is accounted for as anequity-accounted investee or as an available-for-sale financial asset depending on the level ofinfluence retained.

3.0 Detailed Accounting Policies

3.1 Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and at bank, call deposits and short term highly

liquid financial assets with original maturities of three months or less from the acquisition date,

which are subject to insignificant risk of changes in their fair value, and are used by the Company

in the management of its short-term commitments. Cash and cash equivalents are carried at

amortised cost in the statement of financial position.

3.2 Financial assets

3.2.1Classification

The classification of financial assets depends on the purpose for which the investments were

acquired or originated. The Company classifies its financial assets into the following categories:

financial assets at fair value through profit or loss;

held-to-maturity investments;

loans and receivables, and

available-for-sale financial assets


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Statement of Significant Accounting Policies (Cont’d)3.2.2 Financial assets held at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading.Financial assets classified as trading are acquired principally for the purpose of selling in theshort term.

These investments are initially recorded at fair value. Subsequent to initial recognition, they areremeasured at fair value, with gains and losses arising from changes in this value recognized inthe income statement in the period in which they arise. The fair values of quoted investments in

active markets are based on current bid prices. The fair values of unquoted equities, and quotedequities for which there is no active market, are established using valuation techniquescorroborated by independent third parties. These may include reference to the current fair valueof other instruments that are substantially the same and discounted cash flow analysis.

Interest earned and dividends received while holding trading assets at fair value through profit orloss are included in investment income.

3.2.3 Held-to-maturity

Held-to-maturity investments are non-derivative financial assets with fixed determinable paymentsand fixed maturities that management has both the positive intention and ability to hold tomaturity other than:

Those that the Company designates as available for sale.

Those that meet the definition of loans and receivables.

Such instruments include corporate bonds, government bonds, convertible debt notes and arecarried at amortised cost, using the effective interest method, less any provisions forimpairment.

3.2.4 Available-for-sale

Available for sale financial investments include equity and debt securities. The Company classifiesas available-for-sale those financial assets that are generally not designated as another categoryof financial assets, and strategic capital investments held for an indefinite period of time, whichmay be sold in response to needs for liquidity or changes in interest rates, exchange rates orequity prices.

Available-for-sale financial assets are carried at fair value, with the exception of investments inequity instruments where fair value cannot be reliably determined, which are carried at cost. Fairvalues are determined in the same manner as for investments at fair value through profit or loss.Unrealised gains and losses arising from changes in the fair value of available-for-sale financialassets are recognised in other comprehensive income while the investment is held, and aresubsequently transferred to the income statement upon sale or de-recognition of the investment.

Dividends received on available-for-sale instruments are recognised in income statement when theCompany’s right to receive payment has been established.

3.2.5 Loans and receivables

Loans and receivables include non-derivative financial assets with fixed or determinable paymentsthat are not quoted in an active market, other than those classified by the Company as at fairvalue through profit or loss or available-for-sale.

Loans and advances consist primarily of commercial loans, staff loans, premium debtors, duefrom reinsurers, other debtors. These are managed in accordance with a documented policy.


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Loans and receivables are measured at amortised cost using the effective interest method, lessany impairment losses. Loans granted at below market rates are fair valued by reference toexpected future cash flows and current market interest rates for instruments in a comparable orsimilar risk class and the difference between the historical cost and fair value is accounted for asemployee benefits under staff costs.

3.2.6 Fair Value Measurement

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 an unlisted instrument, 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.

3.3 Trade Receivables

Trade receivables arising from insurance contracts are stated after deducting allowance made forspecific debts considered doubtful of recovery. Trade receivables are reviewed at every reportingperiod for impairment. They are initially recognised at fair value and subsequently measured atamortised cost less provision for impairment. A provision for impairment is made when there isobjective evidence (such as the probability of solvency or significant financial difficulties of thedebtors) that the Group will not be able to collect the entire amount due under the original termsof the invoice.

Allowances are made based on an impairment model which considers the loss given default foreach customer, probability of default for the sectors in which the customer belongs andemergence period which serves as an impairment trigger based on the age of the debt. Impaireddebts are derecognized when they are assessed as uncollectible. If in a subsequent period theamount of the impairment loss decreases and the decrease can be related objectively to an eventoccurring after the impairment was recognised, the previous recognised impairment loss isreversed to the extent that the carrying value of the asset does not exceed its amortised cost atthe reversed date. Any subsequent reversal of an impairment loss is recognized in the IncomeStatement.


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Statement of Significant Accounting Policies (Cont’d)3.3.1 Derecognition

The Company derecognizes a financial asset only when the contractual rights to cash flows fromthe asset expire or it transfers the financial asset expire or it transfers the financial asset andsubstantially all the risks and rewards of ownership of the asset to another entity. If the Companyneither transfers nor retains substantially all the risks and rewards of ownership and continues tocontrol the transferred asset, the Company recognizes its retained interest in the asset and anassociated liability for amounts it may have to pay. If the Company retains substantially all therisks and rewards of ownership of a transferred financial asset, the Company continues torecognize the financial asset and also recognizes a collateralized borrowing for the proceedsreceived.

3.4 Reinsurance AssetsThe Company cedes business to reinsurers in the normal course of business for the purpose oflimiting its net loss potential through the transfer of risks. Premium ceded comprise gross writtenpremiums. Reinsurance arrangements do not relieve the Company from its direct obligations toits policy holders.

Reinsurance assets are recognized when the related gross insurance claim is recognizedaccording to the terms of the relevant contract. The Company has the right to set off reinsurancepayables against amounts due from reinsurers and brokers in line with the agreed arrangementsbetween both parties.

3.5 Deferred Acquisition Costs (DAC)

Acquisition costs comprise insurance commissions, brokerage and other related expenses arising

from the generation and conclusion of insurance contracts. The proportion of acquisition costs

that correspond to the unearned premiums are deferred as an asset and recognized in the

subsequent period. They are recognised on a basis consistent with the related provisions for

unearned premiums.

3.6 Other Receivables and PrepaymentsOther receivables and prepayments are carried at cost less accumulated impairment losses.

3.7 Investment in Subsidiary

3.7.1 Subsidiaries

The financial statements of subsidiaries are consolidated from the date the Company acquirescontrol, up to the date that such effective control ceases. For the purpose of these financialstatements, subsidiaries are entities over which the Group, directly or indirectly, has the power togovern the financial and operating policies so as to obtain benefits from their activities. Changesin the Company’s interest in a subsidiary that do not result in a loss of control are accounted foras equity transactions (transactions with owners). Any difference between the amount by whichthe non-controlling interest is adjusted and the fair value of the consideration paid or received isrecognised directly in equity and attributed to the Group.


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Inter-company transactions, balances and unrealised gains on transactions between companieswithin the Group are eliminated on consolidation. Unrealised losses are also eliminated in thesame manner as unrealised gains, but only to the extent that there is no evidence of impairment.Accounting policies of subsidiaries have been changed where necessary to ensure consistencywith the policies adopted by the Group. Investment in subsidiaries in the separate financialstatement of the parent entity is measured at cost.

Acquisition-related Costs are expensed as Incurred

If the business combination is achieved in stages, fair value of the acquirer’s previously heldequity interest in the acquiree is re-measured to fair value at the acquisition date through profit orloss.

3.7.2 Disposal of SubsidiariesOn loss of control, the Group derecognises the assets and liabilities of the subsidiary, anycontrolling interests and the other components of equity related to the subsidiary. Any surplus ordeficit arising from the loss of control is recognised in income statement. If the Group retains anyinterest in the previous subsidiary, then such interest is measured at fair value at the date thatcontrol is lost. Subsequently, that retained interest is accounted for as an equity-accountedinvestee or as an available-for-sale financial asset depending on the level of influence retained.

3.8 Investment Property

Investment property comprises investment in land or buildings held primarily to earn rentals orcapital appreciation or both. Investment property is initially recognized at cost includingtransaction costs. The carrying amount includes the cost of replacing part of an existinginvestment property at the time that cost is incurred if the recognition criteria are met; andexcludes cost of day to day servicing of an investment property. An investment property issubsequently measured at fair value with any change therein recognised in profit or loss. Fairvalues are determined individually, on a basis appropriate to the purpose for which the property isintended and with regard to recent market transactions for similar properties in the samelocation.

3.8.1 Recognition and Measurement

Fair values are reviewed annually by independent valuer, holding a recognized and relevant

professional qualification and with relevant experience in the location and category of investment

property being valued. Any gain and loss arising from a change in the fair value is recognized in

the income statement.

Subsequent expenditure on investment property is capitalized only if future economic benefit will

flow to the Company; otherwise they are expensed as incurred.

Investment properties are disclosed separate from the property and equipment used for thepurposes of the business. The Company separately accounts for a dual purpose property asinvestment property if it occupies only an insignificant portion. Otherwise, the portion occupied by


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the Company is treated as property plant and equipment. However, the Company considers anoccupation of 30% as significant.

3.8.2 TransferIf an item of property and equipment becomes an investment property its use has changed, anydifference arising between the carrying amount and the fair value of this item at the date oftransfer is recognized in other comprehensive income as a revaluation of property, plant andequipment.However, if a fair value gain reserves a previous impairment loss, the gain is recognized in thestatement of Comprehensive Income. Upon the disposal of such investment property, any surpluspreviously recorded in equity is transferred to retained earnings; the transfer is not made throughthe statement of comprehensive income.

3.8.3 De-recognitionInvestment properties are derecognized either when they have been disposed of, or when theinvestment property is permanently withdrawn from use and no future economic benefit isexpected from its disposal. Any gains or losses on the retirement or disposal of an investmentproperty is recognized in the statement of comprehensive income in the year of retirement ordisposal.

3.9 Statutory DepositsStatutory deposits are cash balances held with the Central Bank of Nigeria and are only availableto the Company upon liquidation of the Company. They have been separately disclosed due totheir nature and liquidity. They represent 10% of the paid up capital of Company as stipulated bySection 10 (3) of the Insurance Act of 2003. Statutory deposits are measured at cost.

3.10 Intangible assets

Software

3.10.1Recognition and Measurement

Recognition of software acquired is only allowed if it is probable that future economic benefits to

this intangible asset are attributable and will flow to the Company. Software acquired is initially

measured at cost. The cost of acquired software comprises its purchase price, including any

import duties and non-refundable purchase taxes, and any directly attributable expenditure on

preparing the asset for its intended use. After initial recognition, software acquired is carried at its

cost less any accumulated amortisation and any accumulated impairment losses. Maintenance

costs should not be included.

Internally developed software is capitalized when the Company has the intention and

demonstrates the ability to complete the development and use of the software in a manner that

will generate future economic benefits, and can reliably measure the costs to complete the

development. The capitalised costs include all costs directly attributable to the development of


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the software. Internally developed software is stated at capitalised cost less accumulated

amortisation and impairment.Subsequent expenditure on software assets is capitalised only when it increases the futureeconomic benefits embodied in the specific asset to which it relates. All other expenditure isexpensed as incurred. Amortisation is recognised in profit or loss on a straight-line basis over theestimated useful life of the software, from the date that it is available for use. The estimateduseful life of software is four years subject to annual reassessment.

3.11 Property and Equipment

3.11.1 Recognition & Measurement

Property, Plant and Equipment comprise land and buildings and other properties owned by the

Company.

Items of property and equipment are carried at cost less accumulated depreciation and

impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the

assets.

3.11.2 Subsequent Costs

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset,

as appropriate, only when it is probable that future economic benefits associated with the item

will flow to the Company and the cost of the item can be measured reliably. All other repairs and

maintenance costs are charged to the profit and loss account during the financial period in which

they are incurred.

Subsequent costs on replacement parts on an item of property are recognized in the carrying

amount of the asset and the carrying amount of the replaced or renewed component is

derecognized.

3.11.3 Depreciation

Depreciation is calculated on property, plant and equipment on the straight line basis to write

down the cost of each asset to its residual value over its estimated useful life. Depreciation

methods, useful lives and residual values are reassessed at each reporting date. No depreciation

is charged on fixed assets until they are brought into use.

Depreciation reduces an asset's carrying value to its residual value at the end of its useful life, and

is allocated on a straight line basis over the estimated useful lives, as follows:

Land - over the lease period

Buildings - 2%

Office equipment - 20%

Computer hardware - 20%

Furniture and fittings - 20%

Motor vehicles - 20%


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3.12 Insurance Contracts

NEM Insurance issues contracts that transfer insurance risk.Insurance contracts are those contracts that transfer significant insurance risk. NEM Insurancedefines significant insurance risk as the possibility of having to pay benefits, on the occurrence ofan insured event, that are significantly more than the benefits payable if the insured event did notoccur.These contracts are accident and casualty and property insurance contracts.

Accident and casualty insurance contracts protect the Company’s customer against the risk ofcausing harm to third parties as a result of their legitimate activities. Damages covered includeboth contractual and non contractual events. The typical protection offered is designed foremployers who become legally liable to pay compensation to injured employee (employers’liability) and for individual and business customers who become liable to pay compensation to athird party for bodily harm or property damage (public holiday).

Property insurance contract mainly compensate the Company’s customer for damage suffered totheir properties or for the value of properties lost. Customers who undertake commercial activitieson their premises could also receive compensation for the loss of earnings caused by the inabilityto use the insured properties in their business activities (business interruption cover).In accordance to IFRS 4, the Company has continued to apply the accounting policies it applied inaccordance with the prechange over from Nigerian GAAP.

3.12.1 Salvages

Some non-life insurance contracts permits the company to sell (usually damaged) propertyacquired in the process of settling a claim. The Company may also have the right to pursue thirdparties for payment of some or all costs of damages to its client’s property (subrogation right).

Salvage recoveries are used to reduce the claim expenses when the claim is settled.

3.12.2 Subrogation

Subrogation is the right of an insurer to pursue a third party that caused an insurance loss to theinsured. This is done as a means of recovering the amount of the claim paid to the insured for theloss. A receivable for subrogation is recognized in other assets when the liability is settled andthe Company has the right to receive future cash flow from the third party.

3.12.3 Insurance Contract LiabilitiesThese are computed in compliance with the provision of section 20, 21, and 22of the InsuranceAct 2003 as follows:

3.12.3.1 Reserves for Outstanding ClaimsThe reserve for outstanding claims is maintained at the total amount of outstanding claimsincurred and reported plus claims incurred but not reported (“IBNR”) as at the balance sheetdate. The IBNR is based on the liability adequacy test (See 20 b (vii)


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Statement of Significant Accounting Policies (Cont’d)3.12.3.2 Reserves for Unexpired Risk

A provision for additional unexpired risk reserve (AURR) is recognized for an underwriting yearwhere it is envisaged that the estimated cost of claims and expenses would exceed the unearnedpremium reserve (UPR)”

3.12.4 Liability Adequacy Test

At each end of the reporting period, liability adequacy test are performed by an Actuary to ensurethe adequacy of the contract liability net of related DAC assets. In performing these tests, currentbest estimates of future contractual cash flows and claims handling and administration expenses,as well as invest income from the assets backing such liabilities, are used. Any deficiency isimmediately charged to profit or loss initially by writing off DAC and by subsequently establishinga provision for losses arising from Liability Adequacy test ''the unexpired risk provision.''

The provision of the Insurance Act 2003 requires an actuarial valuation of life reserves only.However, However, IFRS 4 requires a liability adequacy test for insurance reserves.The provision of Section 59 of the Financial Reporting Council Act 2011 gives superiority to theprovision of IFRS and since it results in a more conservative reserving than the provision of theInsurance Act 2003, it serves the Company's prudential concern well.

3.13 Trade PayablesTrade payables are recognised when due and measured on initial recognition at the fair value ofthe consideration received less directly attributable transaction costs. Subsequent to initialrecognition, they are measured at amortized cost using the effective interest rate method.

3.13.1 Derecognition of Trade PayablesTrade payables are derecognized when the obligation under the liability is settled, cancelled orexpired.

3.13.2 Other Payables and AccrualsA financial liability is derecognized when the obligation under the liability is discharged orcancelled or expires. When an existing financial liability is replaced by another from the samelender on substantially different terms, or the terms of an existing liability are substantiallymodified, such an exchange or modification is treated as a derecognition of the original liabilityand the recognition of a new liability, and the difference in the respective carrying amounts isrecognised in the income statement. Gains and losses are recognised in the income statementwhen the liabilities are derecognized.

3.14 Employee Benefits

3.14.1 Short-term benefits

Short-term employee benefit obligations include wages, salaries and other benefits which the

Company has a present obligation to pay, as a result of employees’ services provided up to the


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balance sheet date. The accrual is calculated on an undiscounted basis, using current salary

rates.

A provision is recognised for the amount expected to be paid under short-term cash bonus or

profit-sharing plans if the Company has a present legal or constructive obligation to pay this

amount as a result of past service provided by the employee and the obligation can be estimated

reliably.

3.14.2 Post-Employment Benefits

The Company operates a defined contributory retirement scheme as stipulated in the Pension

Reform Act 2004. Under the defined contribution scheme, the Company pays fixed contributions

of 7.5% to a separate entity – Pension Fund Administrators; employees also pay the same fixed

percentage to the same entity. Once the contributions have been paid, the Company retains no

legal or constructive obligation to pay further contributions if the Fund does not hold enough

assets to finance benefits accruing under the retirement benefit plan. The Company’s obligations

are recognized in the profit and loss account.

3.14.3 Gratuity Benefits

Prior to 31 December, 2004, the Company operated a gratuity scheme under which employees

were entitled to one month basic salary, transport and housing allowance for each completed year

of service.

Effective 31 December, 2004 the gratuity scheme was terminated. Under the terms of the

termination, amounts payable to employees who were in the employment of the Company as at

the termination date will be paid when such employees leave the service of the Company based on

benefits determined as at 31 December 2004. The gratuity assets are managed in-house.

3.14.4 Other Long-Term Employee Benefits

The company recognizes obligation for defined benefit plans in respect of its long term service

award as determined by actuarial valuation. The liability recognized is the net total of the present

value of the defined benefit obligations plus any unrecognized actuarial gains (less actuarial

losses) minus any unrecognized past service costs minus fair value of plan assets at the end of

the reporting period.

3.14.5 Termination Benefits

Termination benefits are payable whenever an employee’s employment is terminated before the

normal retirement date or whenever an employee accepts voluntary redundancy in exchange for

these benefits. The Company recognizes termination benefits when it is demonstrably committed

either to terminate the employment of current employees according to a detailed formal plan

without possibility of withdrawal, or to provide termination benefits as a result of an offer made to

encourage voluntarily redundancy if it is probable that the offer will be accepted and the numberof

acceptances can be estimated. Benefits falling due more than 12 months after balance sheet date

are discounted to present value.


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3.15 Taxation

Income tax comprises current and deferred tax. Income tax expense is recognised in the incomestatement except to the extent that it relates to items recognised directly in equity, in which caseit is recognised in equity.

3.15.1Current taxCurrent tax is the expected tax payable on taxable income for the year, using tax rates enacted orsubstantively enacted at the balance sheet date, and any adjustment to tax payable in respect ofprevious years.

3.15.2 Deferred tax

Deferred taxation, which arises from timing differences in the recognition of items for accounting

and tax purposes, is calculated using the liability method.

Deferred taxation is provided fully on timing differences, which are expected to reverse at the rate

of tax likely to be in force at the time of reversal. A deferred tax asset is recognized to the extent

that it is probable that future taxable profits will be available against which the associated unused

tax losses and deductible temporary differences can be utilized. Deferred tax assets are reduced

to the extent that it is no longer probable that the related tax benefit will be realized.

Deferred tax is not recognised for the following temporary differences: the initial recognition of

assets or liabilities in a transaction that is not a business combination and that affects neither

accounting nor taxable profit, differences relating to investments in subsidiaries to the extent that

they probably will not reverse in the foreseeable future and differences arising from investment

property measured at fair value whose carrying amount will be recovered through use. Deferred

tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer

probable that the related tax benefit will be realised. Additional income taxes that arise from the

distribution of dividends are recognised at the same time as the liability to pay the related

dividend is recognised.

3.16 Issued Share CapitalThe issued ordinary shares of the Company are classified as equity instruments. Incrementalcosts directly attributable to the issue of an equity instrument are deducted from the initialmeasurement of the equity instruments.

3.16.1 Dividends on ordinary share capital

Dividends on the Company’s ordinary shares are recognised in equity in the period in which theyare paid or, if earlier, approved by the Company’s shareholders.


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3.17 Share Premium

This represents the excess amount paid by the shareholder on the nominal value of its shares.This amount is distributable to the shareholders at the discretion. The share premium is classifiedas an equity instrument in the statement financial position.

3.18 Contingency Reserves

The Company maintains contingency reserves in accordance with the provisions of the Insurance

Act 2003 to cover fluctuations in securities and variations in statistical estimates at the rate equal

to the higher of 3% of total 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 for general business.

3.19 Retained earningsThe reserve comprises of undistributed profit/loss from previous years and the current year.Retained earnings are classified as part of equity in the statement of financial position.

3.20 Available-for-sale ReserveThe available-for-sale reserve comprises the cumulative net change in the fair value of theCompany’s available-for-sale investments. Net fair value movements are recycled to incomestatement if an underline available-for-sale investment is either derecognized or impaired.

3.21 Other Reserves- Employee Benefit Actuarial Surplus

Actuarial surplus/ deficit on employee benefit represent changes in benefit obligation due tochanges in actuarial valuation assumptions or actual experience differing from experience. Thegains/ losses for the year, net of applicable deffered tax assets /liability on employee benefitobligation, are recognized in other comprehensive income.

3.22 Gross Premiums Written

Gross written premiums comprise the premiums on insurance contracts entered into during the

year, irrespective of whether they relate in whole or in part to a later accounting period. These are

shown gross of any taxes or duties levied on premiums.

3.22.1 Gross premium earned

Gross premium earned includes estimates of premium due but not yet received, less unearned

premium.

3.22.2 Unearned premiums

Unearned premiums are those proportions of premiums written in the year that relate to periods

of risks after the reporting date. It is computed by a recognised professional actuarist separately

for each insurance contract or another suitable basis for uneven risk contracts. Provision for

unexpired risk is made for unexpired risks arising where the expected value of claims and

expenses attributable to the unexpired period of policies in force at the reporting date exceeds the


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unearned premium in relation to such policies after deduction of any deferred acquisition costs.

Specifically, provision for unexpired risk is based on time apportionment.

3.22.3 Reinsurance Premium

Reinsurance premiums are recognized as outflows in accordance with the tenor of the reinsurancecontract.

3.23 Reinsurance Cost

Reinsurance cost represents outward premium paid to reinsurance companies less the unexpiredportion as at the end of the accounting year.

3.24 Fees and Commission Income

Insurance contract policyholders are charged for policy administration services and other contractfees. These fees are recognised as revenue over the period in which the related services areperformed.

3.25 Claims Expenses

Claims expenses consist of claims and claims handling expenses paid during the financial year

together with the movement in the provision for outstanding claims. The provision for outstanding

claims represent the amount computed Company’s estimate of the ultimate cost of settling all

claims incurred but unpaid at the balance sheet date whether reported or not. The provision

includes an allowance for claims management and handling expenses.

The provision for outstanding claims for reported claims is estimated based on current

information and the ultimate liability may vary as a result of subsequent information and events

and may result in significant adjustments to the amounts provided. Adjustments to the amounts

of claims provision for prior years are reflected in the income statement in the financial period in

which adjustments are made, and disclosed separately if material.

Reinsurance recoverable is recognized when the Company records the liability for the claims andis not netted off. Claim expenses are presented separately in the income statement.

3.26 Underwriting expenses

Underwriting expenses are made up of acquisition and maintenance expenses comprisingcommission and policy expenses, proportion of staff cost and insurance supervision levy.

Underwriting expenses for insurance contracts are recognized as expense when incurred, with theexception of acquisition costs which are recognized on a time apportionment basis in respect ofrisk.


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3.27 Investment IncomeInvestment income comprises interest income earned on short-term deposits, rental income andincome earned on trading of securities including all realised and unrealised fair value changes,interest, dividends and foreign exchange differences. Investment income is accounted for on anaccrual basis.

Interest income is recognised in the income statement as it accrues and is calculated using theeffective interest rate method. Fees and commissions that form part of an integral part of theeffective yield of a financial instrument are recognised as an adjustment to the effective interestrate of the instrument.

When a receivable is impaired, the Company reduces the carrying amount to its recoverable

amount, being the estimated future cash flow discounted at the original effective interest rate of

the instrument, and continues unwinding the discount as interest income.

3.28.1 Dividend income

Dividend is recognized as earned when the quoted price of the related security is adjusted to

reflect the value of the dividend and is stated net of withholding tax. Scrip dividend is recognized

on the basis of the market value of the shares on the date they are quoted.

3.29 Impairment of Financial AssetsThe carrying amounts of these assets are reviewed at each reporting date to determine whetherthere is any objective evidence of impairment. A financial asset is considered to be impaired ifobjective evidence indicates that one or more events that have occurred since the initialrecognition of the asset have had a negative effect on the estimated future cash flows of that assetand can be reliably estimated. For financial assets measured at amortised cost, the Company firstassesses whether objective evidence of impairment exists individually for financial assets that areindividually significant and individually or collectively for financial assets that are not individuallysignificant. Individually significant financial assets are tested for impairment on an individualbasis. The remaining financial assets are assessed collectively in groups that share similar creditrisk characteristics. An impairment loss in respect of a financial asset measured at amortised costis calculated as the difference between its carrying value and the present value of the estimatedfuture cash flows discounted at the original effective interest rate.Available-for-sale financial assets are impaired if there is objective evidence of impairment,resulting from one or more loss events that occurred after initial recognition but before thebalance sheet date, that have an impact on the future cash flows of the asset.

All impairment losses are recognized through profit or loss. If any loss on the financial asset waspreviously recognized directly in equity as a reduction in fair value, the cumulative net loss thathad been recognized in equity is transferred to the income statement and is recognized as part ofthe impairment loss. The amount of the loss recognized in the income statement is the differencebetween the acquisition cost and the current fair value, less any previously recognized impairmentloss.

Subsequent decreases in the amount relating to an impairment loss, that can be linked objectivelyto an event occurring after the impairment loss was recognized in the income statement, isreversed through the income statement. An impairment loss in respect of an equity instrumentclassified as available-for-sale is not reversed through the income statement but accounted fordirectly in equity.


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Impairment of non-financial assetsThe carrying amounts of the Group’s non-financial assets are considered to be impaired whenthere exists any indication that the asset’s recoverable amount is less than the carrying amount.Impairment losses are recognised in profit or loss.Impairments or losses of non-financial assets, related claims for or payments of compensationfrom third parties and any subsequent purchase or construction of replacement assets areseparate economic events and are accounted for separately.

Impairment losses recognised in prior periods are assessed at each reporting date for anyindications that the loss has decreased or no longer exists. An impairment loss is reversed if therehas been a change in the estimates used to determine the recoverable amount. An impairmentloss is reversed only to the extent that the asset’s carrying amount does not exceed the carryingamount that would have been determined, net of depreciation or amortisation, if no impairmentloss had been recognised. Reversals of impairment losses are recognised in profit or loss.

3.30 Administrative expenses

Management expenses are expenses other than claims and underwriting expenses. They include

depreciation expenses and other expenses. They are accounted for on an accrual basis.

3.31 Earnings per share

The Group presents basic earnings per share for its ordinary shares. Basic earnings per share are

calculated by dividing the profit attributable to ordinary shareholders of the Group by the number

of shares outstanding during the year. Adjusted earnings per share is determined by dividing the

profit or loss attributable to ordinary shareholders by the weighted average number of ordinary

shares adjusted for the bonus shares issued.

3.32 Provisions, contingent liabilities and assetsProvisions are liabilities that are uncertain in amount and timing. Provisions are recognized whenthe Group has a present legal or constructive obligation as a result of past events and it is morelikely than not that an outflow of resources will be required to settle the obligation and the amountcan be reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required insettlement is determined by considering the class of obligations as a whole. A provision isrecognized even if the likelihood of an outflow with respect to any one item included in the sameclass of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settlethe obligation using a pre-tax rate that reflects the current market assessments of the time valueof money and the risks specific to the obligation.A contingent liability is a possible obligation that arises from past event and whose existence willbe confirmed only by the occurrence or non-occurrence of one or more uncertain future events notwholly within the control of the company. Contingent assets are not recognized but are disclosedin the financial statement as they arise.


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3.33 Comparatives

Except when a standard or an interpretation permits or requires otherwise, all amounts are

reported or disclosed with comparative information. Where IAS 8 applies, comparative figures

have been adjusted to conform to changes in presentation in the current year.

3.34 Segment reportingA segment is a distinguishable component of the Group that is engaged in providing products orservices (business segment), or in providing products or services within a particular economicenvironment (geographical segment), which is subject to risks and rewards that are different fromthose of other segments. The Group’s primary format for segment reporting is based on businesssegments. Significant geographical regions have been identified as the secondary basis ofreporting.


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Consolidated Statement of Financial PositionDec. 2012 Dec. 2011 1 Jan.2011

Notes N'000 N'000 N'000Assets

Cash and cash equivalents 1 3,125,679 2,427,729 1,773,360

Financial Assets 2 1,350,967 1,066,499 1,475,884Trade receivables 3 981,032 575,766 546,805Reinsurance assets 4 129,501 93,983 140,264Deferred Acquisition cost 5 325,944 247,923 184,468

Other Receivables and Prepayments 6 237,634 281,683 66,990

Investment in a subsidiary 7 - - -

Investment properties 8 459,813 483,120 483,120Statutory Deposit 9 342,879 414,839 399,759Intangible asset 10 27,085 13,875 13,500

Property and equipment 11 828,586 705,922 598,215

Total assets 7,809,120 6,311,340 5,682,364

Liabilities

Insurance contract liabilities 12 3,027,556 1,905,361 1,258,119Trade payables 13 192,094 37,966 14,810Retirement benefit obligations 14 160,205 113,033 -Current income tax 15 21,949 - 129,122Deferred tax liability 15 106,671 106,671 108,992

3,508,475 2,163,031 1,511,043

Equity

Issued share capital 16 2,640,251 2,640,251 2,640,251Share premium 17 272,551 272,551 272,551Contingency reserve 18 1,434,193 1,147,115 850,415Retained earnings 19 (101,902) (6,111) 301,321Available for sale reserve 20 53,411 94,503 106,785Other Reserves-employee benefit actuarialsurplus 21 2,141 - -Total Equity 4,300,645 4,148,309 4,171,322

Total equity and liabilities 7,809,120 6,311,340 5,682,364

These accounts were approved by Board on………………………….. and signed on its behalf by:

________________________ _________________________ _______________________

Chief Adewale Teluwo (Chairman) Mr. Tope Smart (GMD/CEO) Miss. Stella Omoraro (CFO)

FRC/2013/IODN/00000003151 FRC/2013/CIIN/00000001331 FRC/2013/ICAN/00000001238

The accounting policies on pages 20 to 45 and the accompanying notes on pages 54 to 112 form an

integral part of these financial statements.


NEM 2012

Statement of Financial Position- CompanyDec. 2012 Dec. 2011 1 Jan.2011

Notes N'000 N'000 N'000Assets

Cash and cash equivalents 1 2,947,856 2,371,375 1,733,238Financial Assets 2 1,350,967 1,066,499 1,475,884Trade receivables 3 887,009 569,480 509,524Reinsurance assets 4 92,512 83,937 131,497Deferred Acquisition cost 5 298,151 228,758 164,280Other Receivables and Prepayments 6 224,150 274,021 58,565Investment in a subsidiary 7 175,396 175,396 175,396Investment properties 8 459,813 483,120 483,120Statutory Deposit 9 320,000 320,000 320,000Intangible asset 10 27,085 13,875 13,500Property and equipment 11 797,208 671,675 566,865

Total assets 7,580,146 6,258,136 5,631,869

Liabilities

Insurance contract liabilities 12 2,819,395 1,831,307 1,179,225Trade payables 13 163,283 21,797 12,744Retirement benefit obligations 14 160,205 113,033 -Current income tax 15 14,164 - 129,226Deferred tax liability 15 106,671 106,671 108,992

3,263,718 2,072,808 1,430,187

Equity

Issued share capital 16 2,640,251 2,640,251 2,640,251Share premium 17 272,551 272,551 272,551Contingency reserve 18 1,417,120 1,137,642 852,496Retained earnings 19 (69,047) 40,381 329,599Available for sale reserve 20 53,411 94,503 106,785Other Reserves-employee benefit actuarialsurplus 21 2,141 - -Total Equity 4,316,427 4,185,328 4,201,682

Total equity and liabilities 7,580,146 6,258,136 5,631,869

These accounts were approved by Board on………………………….. and signed on its behalf by:

________________________ _________________________ ______________________

Chief Adewale Teluwo (Chairman) Mr. Tope Smart (GMD/CEO) Miss. Stella Omoraro (CFO)

FRC/2013/IODN/00000003151 FRC/2013/CIIN/00000001331 FRC/2013/ICAN/00000001238




NEM 2012

Consolidated Statement of Comprehensive Income

2012 2011

Notes N'000 N'000

Gross premiums written 22 9,652,556 8,381,196

Decrease(/Increase) in unearned income (317,374) (563,928)

Gross premium income 22 9,335,182 7,817,268

Reinsurance expenses 23 (218,147) (787,528)

Net premiums income 22 9,117,035 7,029,740

Fee and commission income 24 13,737 136,698

Net underwriting income 9,130,771 7,166,438

Claims expenses 25 (2,934,435) (1,810,688)

Underwriting expenses 26 (2,567,359) (2,098,763)

Underwriting profit 3,628,978 3,256,987

Investment Income 27 274,717 202,137

Fair value (loss)/gain 28 215,582 (303,924)

Other income 29 6,250 73,420

Revaluation loss on investment properties 8 (23,307) -

Impairments 30 (1,960,905) (1,676,541)

Other operating and admin. Expenses 31 (1,460,720) (1,164,975)

Profit before tax 680,594 387,104

Income taxes 15.2 (225,282) (133,810)

Profit after tax 455,312 253,294


Fair value loss on Available for sale 20 (41,092) (12,282)

Actuarial profit on defined benefit plan 21 2,141 -

416,361 241,012

Basic Earnings Per Share (kobo) 32 9 5

The accounting policies on pages 20 to 45 and the accompanying notes on pages 54 to 112 forman integral part of these financial statements.


NEM 2012

Statement of Comprehensive Income- Company

2012 2011

Notes N'000 N'000

Gross premiums written 22 9,246,217 8,178,886

Decrease(/Increase) in unearned income (202,335) (559,582)

Gross premium income 22 9,043,882 7,619,304

Reinsurance expenses 23 (180,163) (745,599)

Net premiums income 22 8,863,719 6,873,705

Fee and commission income 24 1,951 128,098

Net underwriting income 8,865,670 7,001,803

Claims expenses 25 (2,879,691) (1,795,573)

Underwriting expenses 26 (2,533,363) (2,075,359)


Investment Income 27 258,062 183,606

Fair value (loss)/gain 28 215,582 (303,923)

Other income 29 5,011 66,258

Revaluation loss on investment properties 8 (23,307) -

Impairments 30 (1,960,905) (1,618,265)

Other operating and admin. Expenses 31 (1,294,309) (1,073,010)

Profit before tax 652,749 385,536

Income taxes 15.2 (218,674) (125,583)

Profit after tax 434,075 259,953


Fair value loss on Available for sale 20 (41,092) (12,282)

Actuarial profit on defined benefit plan 21 2,141 -

395,124 247,671

Basic Earnings Per Share (kobo) 32 8 5




NEM 2012

Consolidated Statement of Change in EquityIssuedShare Share Retained AFS Other Contingency

Capital Premium Earnings Reserve Reserves Reserves Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

At January 1, 2011 2,640,251 272,551 301,321 106,785 - 850,415 4,171,323

Profit for the year - - 253,294 (12,282) - - 241,012Transfer tocontingency reserves - - (296,700) - 296,700 -Other comprehensiveincome - - - - - -Distribution toOwners -Dividend paid duringthe year - - (264,025) - - (264,025)As at December 31,2011 2,640,251 272,551

-6,111 94,503 - 1,147,115 4,148,309

At January 1, 2012 2,640,251 272,551 -6,111 94,503 - 1,147,115 4,148,309

Profit for the year - - 455,312 (41,092) - - 414,220Transfer to capitalreserves - -Transfer tocontingency reserves - - (287,078) - 287,078 -Acturial gain ondefined benefit plan - - - 2,141 - 2,141Distribution toOwners -Dividend paid duringthe year - - (264,025) - - (264,025)As at December 31,2012 2,640,251 272,551 (101,902) 53,411 2,141 1,434,193 4,300,645


NEM 2012

Statement of Change in Equity-Company

IssuedShare Share Retained AFS Other Contingency

Capital Premium Earnings Reserve Reserves Reserves Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

At January 1, 2011 2,640,251 272,551 329,599 106,785 - 852,496 4,201,682

Profit for the year - - 259,953 (12,282) - - 247,671Transfer to contingencyreserves - - (285,146) - 285,146 -Other comprehensiveincome - - - - - -

Distribution to Owners -Dividend paid during theyear - - (264,025) - - (264,025)

As at December 31, 2011 2,640,251 272,551 40,381 94,503 - 1,137,642 4,185,328

At January 1, 2012 2,640,251 272,551 40,381 94,503 - 1,137,642 4,185,328

Profit for the year - - 434,075 (41,092) - - 392,983Transfer to contingencyreserves - - (279,478) - 279,478 -Other ComprehensiveIncome -Acturial gain on definedbenefit plan - - - 2,141 - 2,141

Distribution to Owners -Dividend paid during theyear - - (264,025) - - (264,025)

As at December 31, 2012 2,640,251 272,551 (69,047) 53,411 2,141 1,417,120 4,316,427


NEM 2012

Consolidated Statement of Cash FlowsDec. 2012 Dec. 2011

N'000 N'000Operating profit before taxation 680,594 387,104

Adjustment for items not involving the movement of cash:Depreciation 120,146 120,146Increase/(Decrease) in insurance payables 1,122,196 813,824(Increase) in deferred insurance asset (113,539) (59,110)Profit/(loss) on disposal of assets 3,440 -Fair value loss on quoted investmentFair value loss/(gain) on quoted investment (256,674) 291,641

Cashflow changes before changes in working capital 1,556,162 1,553,605

CHANGES IN WORKING CAPITAL(Increase)/Decrease in insurance receivables (405,266) (28,961)Decrease/(Increase) in loans and receivables (284,468) 409,385(Increase)/Decrease in other debtors & prepayment (30,192) (215,456)Increase/(Decrease) in other payable 154,126 196,354Tax paid (129,090) (338,124)

Net cash flow from operating activities 861,273 1,576,804

CASH FLOW FROM INVESTING ACTIVITIESIntangible assets (13,210) (375)Proceed of disposal 1,071 -Unrealized gain/Loss on equity 215,582 (303,923)Statutory deposit 71,960 (15,079)Disposal/(purchase of investments) 78,021 (116,164)Purchase of plant and equipment (252,721) (222,870)

Net cash flow investment activities 100,702 (658,411)

CASH FLOW FROM FINANCING ACTIVITIES

Dividends paid to equity holders of the parent (264,025) (264,025)

Net cash flows from financing activities (264,025) (264,025)

Total cash flow 697,951 654,369

Cash and cash equivalent at January 1 2,427,729 1,773,360

Cash and cash equivalent at December 31 3,125,679 2,427,729

Represented by:

Cash and cash equivalent at December 31 3,125,679 2,427,729The accounting policies on pages 20 to 45 and the accompanying notes on pages 54 to 112 form anintegral part of these financial statements.


NEM 2012

Statement of Cash Flows-CompanyDec. 2012 Dec. 2011

N'000 N'000Operating profit before taxation 652,749 385,536

Adjustment for items not involving the movement of cash:Depreciation 109,118 92,326Increase/(Decrease) in trade payables 988,088 812,097(Increase) in deferred insurance asset (69,393) (64,478)Profit/(loss) on disposal of assets 3,440 -Fair value loss/(gain) on investment (256,674) 291,641

Cashflow changes before changes in working capital 1,427,327 1,517,122

CHANGES IN WORKING CAPITAL(Increase)/Decrease in insurance receivables (317,529) (59,956)Decrease/(Increase) in loans and receivables (284,468) 409,385(Increase)/Decrease in other debtors & prepayment (31,296) (215,456)Increase/(Decrease) in other payable 138,739 193,942Tax paid (123,344) (338,296)

Net cash flow from operating activities 809,430 1,506,742

CASH FLOW FROM INVESTING ACTIVITIESIntangible assets (13,210) (375)Proceed of disposal 1,071Unrealized gain/Loss on equity 215,582 (303,923)Disposal/(purchase of investments) 72,195 (88,347)Purchase of plant and equipment (244,562) (211,936)

Net cash flow investment activities 31,076 (604,581)

CASH FLOW FROM FINANCING ACTIVITIES

Dividends paid to equity holders of the parent (264,025) (264,025)

Net cash flows from financing activities (264,025) (264,025)

Total cash flow 576,481 638,137

Cash and cash equivalent at January 1 2,371,375 1,733,238


Represented by:


The accounting policies on pages 20 to 45 and the accompanying notes on pages 54 to 112 form anintegral part of these financial statements. -


NEM 2012

Notes to the Financial Statements

1 CASH AND CASH EQUIVALENTS

2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000 N'000

Cash and bank balances 577,229 305,854 284,820 547,907 298,352 251,186

Short - term deposits Note a below 2,548,450 2,121,875 1,488,541 2,399,949 2,073,023 1,482,053

Total cash and cash equivalents 3,125,679 2,427,729 1,773,360 2,947,856 2,371,375 1,733,238

Short-term deposits: are made for verying period averaging between 1 - 90 days depending on the immediate cash

requirements of the Group. All deposits are subject to an average interest rate of 6%.

2 FINANCIAL ASSETS

The financial assets are as summarised below:

2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000 N'000

Financial assets at fair value through profit or loss685,461 469,879 773,802 685,461 469,879 773,802

Available for Sale 618,677 565,112 678,582 618,677 565,112 678,582

Held to maturity financial assets 46,829 31,508 23,500 46,829 31,508 23,500

Total financial assets 1,350,967 1,066,499 1,475,884 1,350,967 1,066,499 1,475,884

Current 618,677 565,112 678,582 618,677 565,112 678,582

Non- current 732,289 501,387 797,302 732,289 501,387 797,302

1,350,967 1,066,499 1,475,884 1,350,967 1,066,499 1,475,884

The following table compares the fair values of the financial assets to their carrying values:

2012 2011 2010 2012 2011 2010

Fair Fair Fair Fair Fair Fair

Value Value Value Value Value Value

N'000 N'000 N'000 N'000 N'000 N'000

Financial asset at FVTPL 685,461 469,879 773,802 685,461 469,879 773,802

Available for Sale 618,677 565,112 678,582 618,677 565,112 678,582

Held to maturity financial assets 46,829 31,508 23,500 46,829 31,508 23,500

1,350,967 1,066,499 1,475,884 1,350,967 1,066,499 1,475,884

CompanyGroup


NEM 2012

Notes to the Financial Statements (Cont’d)Finacial assets at FVTPL analysis

Quoted eqtuities at Market value

STOCKS UNITS MPS MKT. VALUE(N) MKT. VALUE(N) UNITS MKT. VALUE(N) MKT. VALUE(N)

2012 2011 2012 2011

First Bank Plc 356,861 5,609,855 3,176,063 356,861 5,609,855 3,176,063

Oando Nigeria Plc 5,467 67,517 120,274 5,467 67,517 120,274

Flour Mills Plc 19,554 1,271,010 1,279,809 19,554 1,271,010 1,279,809

Union Bank Plc 66,337 487,577 703,172 66,337 487,577 703,172

United Bank for Africa Plc 1,714,425 7,817,778 4,440,361 1,714,425 7,817,778 4,440,361

First City Monument Bank Plc 300,000 1,125,000 1,254,000 300,000 1,125,000 1,254,000

Skye Bank Plc 584,166 2,511,914 2,243,197 584,166 2,511,914 2,243,197

Fidelity Bank Plc 1,991,250 4,559,963 2,907,225 1,991,250 4,559,963 2,907,225

Access Bank Plc 54,329 491,677 582,830 54,329 491,677 582,830

Zenith Bank Plc 12,821,875 249,898,344 156,170,438 12,821,875 249,898,344 156,170,438

Ecobank - Transnational 75,555 853,016 793,328 75,555 853,016 793,328

ARM Discovery Fund 5,000 965,000 965,000 5,000 965,000 965,000

FIRSTCITY MONUMENT BANK 125,000 468,750 2,508,000 125,000 468,750 2,508,000

Guaranty Trust Bank Plc 33,333 766,659 474,995 33,333 766,659 474,995

Access Bank Plc 258,373 2,338,276 1,240,190 258,373 2,338,276 1,240,190

Tripple Gee Plc(Bonus only) 6,000 13,740 17,640 6,000 13,740 17,640

Dangsugar Plc 3,337,595 20,025,570 15,686,697 3,337,595 20,025,570 15,686,697

Ecobank - Transnational 136,000 1,535,440 1,428,000 136,000 1,535,440 1,428,000

FBN HOLDINGS 400,000 6,288,000 3,560,000 400,000 6,288,000 3,560,000

Oceanic Bank Plc 1,091,649 - 573,116 1,091,649 - 573,116

Skye Bank Plc 84,000 361,200 322,560 84,000 361,200 322,560


Unilever Plc 400,000 18,600,000 11,600,000 400,000 18,600,000 11,600,000

Zenith Bank Plc 195,000 3,800,550 2,375,100 195,000 3,800,550 2,375,100

ETI- Preference shares 14,801 - 155,411 14,801 - 155,411

ETI- Preference shares 2,140 - 22,470 2,140 - 22,470

Dangsugar Plc 589,350 3,536,100 419,945 589,350 3,536,100 419,945

Diamond Bank Plc 2,599,310 12,840,591 2,014,675 2,599,310 12,840,591 2,014,675

Nigerian Breweries Plc - 14,824 - 14,824

Access Bank Plc 3,500,000 31,675,000 12,836,928 3,500,000 31,675,000 12,836,928

FCMB PLC 1,500,000 5,625,000 1,500,000 5,625,000

Cornerstone Insurance Plc 1,152,000 576,000 576,000 1,152,000 576,000 576,000

Sterling Bank Plc 4,535,942 7,847,180 4,581,301 4,535,942 7,847,180 4,581,301

Skye Bank Plc 2,060,892 8,861,836 233,825 2,060,892 8,861,836 233,825



NEM 2012

Notes to the Financial Statements (Cont’d)UNITS MPS MKT. VALUE(N) MKT. VALUE(N) UNITS MKT. VALUE(N) MKT. VALUE(N)

2012 2011 2012 2011

Japaul Oil & Marketing Plc - 900,000 - 900,000

Zenith - 10,168,814 - 10,168,814

Nascon 1,602,740 12,821,920 6,986,723 1,602,740 12,821,920 6,986,723

CCNN 2,000,000 10,600,000 10,910,096 2,000,000 10,600,000 10,910,096

Ashaka Cement - 1,300 - 1,300

UBN - 6,406,598 - 6,406,598

Mobil 2,820 308,085 24,481,426 2,820 308,085 24,481,426

Old Intercontinental 1,035,538 - 1,242,646 1,035,538 - 1,242,646

Fidelity Bank plc 5,000,000 11,450,000 4,380,000 5,000,000 11,450,000 4,380,000

FBN HOLDINGS 4,000,000 62,880,000 53,761,593 4,000,000 62,880,000 53,761,593

GTBank plc - 4,096,077 - 4,096,077

Guinness plc - 160,750 - 160,750

Intercontinental Bank plc 147,934 - 177,521 147,934 - 177,521

Oando plc - 28,976,706 - 28,976,706

OLD STERBANK 200,000 346,000 202,000 200,000 346,000 202,000

RT BRISCOE 324,000 492,480 329,400 324,000 492,480 329,400

Old UBN 3,232,027 23,755,398 34,259,486 3,232,027 23,755,398 34,259,486

Total plc - 191,110 - 191,110

JULIUS BERGER 100,000 3,465,000 100,000 3,465,000

OKOMUOIL 300,000 12,750,000 300,000 12,750,000

Ashaka Cement 58,050 1,041,998 655,965 58,050 1,041,998 655,965

CCNN 52,000 275,600 226,200 52,000 275,600 226,200

Costain 131,000 348,460 348,460 131,000 348,460 348,460

Custodian Insurance 270,000 351,000 615,600 270,000 351,000 615,600

Dangote Flour 42,254 346,483 211,270 42,254 346,483 211,270

Dangote Sugar 52,968 317,808 248,950 52,968 317,808 248,950

Fidelity Bank plc 210,000 480,900 306,600 210,000 480,900 306,600

Fidson 70,000 74,200 55,300 70,000 74,200 55,300

FBN HOLDINGS 78,750 1,237,950 700,875 78,750 1,237,950 700,875

FTN Cocoa 543,000 271,500 271,500 543,000 271,500 271,500

MANSARD 200,000 370,000 284,000 200,000 370,000 284,000

GTBank plc 211,444 4,863,212 3,013,077 211,444 4,863,212 3,013,077

NAHCO 138,000 743,820 591,100 138,000 743,820 591,100

RTBRISCOE 239,040 363,341 221,112 239,040 363,341 221,112

UBA plc 102,000 465,120 259,000 102,000 465,120 259,000

Zenith Bank plc 70,000 1,364,300 852,600 70,000 1,364,300 852,600

Less Vigilant stock (5,478,467)

TOTAL 690,941,251 469,880,570 685,462,784 469,880,570


NEM 2012

Notes to the Financial Statements (Cont’d)

Available for Sale 2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000 N'000

Short term Investment over 90 days 55,138 155,389 334,795 55,138 155,389 334,795

Unquoted investments 563,540 409,723 343,787 563,540 409,723 343,787

618,678 565,112 678,582 618,678 565,112 678,582

Held to maturity financial assets

Lagos State Bond 9,000 9,000 9,000 9,000 9,000 9,000

Ondo State Bnd 10,000 - - 10,000 - -

FAML Euro Bond - 22,508 14,500 - 22,508 14,500

GT Bank Euro Bond 27,829 - - 27,829 - -

46,829 31,508 23,500 46,829 31,508 23,500

a Fair value through profit or loss

Management valued the Company's quoted investment at market value which is a reasonable measuremnt of fair value

since the prices of the shares are quoted in an active market. This prompted the classfication of quoted investment as

Financial assets at FVTPL (Fair Value Through Profit or Loss).

b. Available for sales

c. The details of Held to maturity investment are as follow:

2012 2010 2012 2010

N'000N'000 N'000 N'000 N'000

As at January 1 31,508 23,500 31,508 23,500

Purchased during the year 15,321 - 15,321

As at December 31 46,829 23,500 46,829 23,500

The held to maturity investment relates to the fixed rate bond of the Lagos State Government. The first one has a tenure spanning

2008 to 2011. It was purchased in 2009. The second one has a tenure spanning 2010 to 2017. I t was purchased in 2010

The coupon rates are 13% and 10% repectively payable half yearly. The bonds were issued at par with no discount and they

are redeemable at par on their respective due dates. Based on all these facts, management is of the opinion that the fair values

of these bonds are equal to their face values.

The fair value of unquoted equities was determined on market based evidence for the MTN shares which constituted over 70% of the total value. Theover the counter price (OTC) that was used in the last transaction before the reporting date was used as a reflection of fair value.

Fixed deposit with tenor of more than 90 days are classified as available for sale. This could easily be turned to liquidity if there is urgent need forcash usage. It is valued at cost because there is no active market or other similar market that could be used for its valuation.


NEM 2012

Notes to the Financial Statements (Cont’d)Group Company

3 TRADE RECEIVABLES 2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000 N'000

Opening Balance 3,736,007 2,048,629 1,688,432 3,671,444 2,011,348 1,651,151

Addition 1,289,068 1,687,378 360,197 2,164,369 1,660,096 360,197

5,025,075 3,736,007 2,048,629 5,835,813 3,671,444 2,011,348

Impairment for trade receivables (5,007,080) (3,160,240) (1,501,824) (4,948,804) (3,101,964) (1,501,824)

981,032 575,767 546,805 887,009 569,480 509,524

3.1 Movement in Impairment

Opening Balance 3,160,240 1,501,824 1,501,824 3,101,964 1,501,824 1,501,824

Addition 1,846,840 1,658,416 - 1,846,840 1,600,140 -

5,007,080 3,160,240 1,501,824 4,948,804 3,101,964 1,501,824

3.2 ANALYSIS OF TRADE RECEIVABLE

Insurance Companies 436,094 84,307 146,523 317,027 53,588 144,678

Insurance Agents 776,966 108,055 269,092 617,142 76,533 258,162

Direct Business 5,361 3,824 2,963 3,478 2,796 2,925

Insurance Brokers 3,806,654 3,539,821 1,630,052 4,898,166 3,538,527 1,605,583

5,025,075 3,736,007 2,048,629 5,835,813 3,671,444 2,011,348

-

3.3 The age analysis of trade receivable

Under 90 days 442,290 287,883 273,403 395,279 284,740 254,762

91-180 days 884,580 575,766 546,805 790,557 569,480 509,524

Above 180 days 3,698,205 2,872,358 1,228,422 4,649,978 2,817,224 1,247,062

5,025,075 3,736,007 2,048,629 5,835,813 3,671,444 2,011,348

4 Reinsurance Assets

Opening Balance 93,983 140,264 140,264 83,937 131,497 131,497

Adjustment to reinsurance assets 36,989 (46,281) 8,576 (47,560) -

129,501 93,983 140,264 92,512 83,937 131,497

4.1 Analysis of Reinsurance Assets

Prepayment 40,287 10,046 8,868 - - -

Recoverable 89,214 83,937 131,396 92,512 83,937 131,497

129,501 93,983 140,264 92,512 83,937 131,497

5 Deferred acquisition cost

At January 1 247,923 184,468 184,468 228,758 164,280 164,280

Acquisition cost during the year 1,777,658 1,453,744 - 1,735,034 1,431,363 -

Apportionment during the year (1,699,637) (1,390,289) - (1,665,641) (1,366,885) -

325,944 247,923 184,468 298,151 228,758 164,280

Deferred acquisition cost represents commissions paid on unearned premium relating to the unexpired risk.

The increase in the provision was due to the determination of the management using different basis under IFRS from NGAAP. UnderNGAAP, the provision was lower as management assessed debtors outstanding for for 90 days and below as fully performing while50% was provided for on debtors outstanding from 90- 180 days and trade debtors outstanding for over 180 days were provided infull.


NEM 2012

Notes to the Financial Statements (Cont’d)2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000 N'000

6 Other Receivables and Prepayments

Prepayments 35,041 28,716 31,206 21,814 14,141 15,137

Accrued Income 25,032 18,881 11,547 25,032 18,881 11,547

Other receivables 177,562 159,842 24,237 177,305 159,832 31,881

Recoverables and prepayments Note 15 - 74,243 - - 81,166 -

237,634 281,683 66,990 224,150 274,021 58,565

In 2011, net tax of N74,243,000 represents the backduty audit which occassioned the debit balance on income tax.

This was reclassfied to recoverable and prepayments under other receivables and prepayment

6.1 Other Receivables

Mortgage Loan 166,745 141,245 - 166,745 141,245 -

Staff Loan Parent Company 10,560 18,597 23,114 10,560 18,587 31,881

Staff Loan Subsidiary 257 - 1,123 - - -

177,562 159,842 24,237 177,305 159,832 31,881

- -

7 INVESTMENT IN SUBSIDIARY

2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000 N'000

Investment in a subsidiary - - - 175,396 175,396 175,396

The Company's investment in a subsidiary established in Ghana was treated as unquoted investment from which we

are reclassifying it. Subsidiary is wholly owned (100%) by NEM Insurance PLc Nigeria. Since this investment was

initially recorded as such, it must be reclassified from unquoted investment to stand alone. The investment was

fully funded by the Company. Therefore no goodwill could arise from this transaction since it is not an IFRS 3

transaction i.e. not a business combination.

8 INVESTMENT PROPERTIES

2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000 N'000

Opening Balance 483,120 483,120 483,120 483,120 483,120 483,120

Revaluation deficit (23,307) - - (23,307) - -

As at December 31. 459,813 483,120 483,120 459,813 483,120 483,120

Investment properties are held at fair value, which has been determined based on valuations performed by independent

valuations performed by independent valuation experts, Kennedy Egbukichi & Co 1st Floor (Suite 4 Right Wing),

NUJ Lighthouse, 3/5 Adeyemo Alakija Street, Victoria Island, Lagos and Laide Oshikoya and Associates,13, Bode Thomas

Road, Palmgroove, Lagos.

The valuers are the industry specialists in valuing these types of investment properties. The fair value is supported by

market evidence and represent the amount at which the assets cuold be exchanged between knowlegeable, willing

buyers and knowlegeable, willing seller in an arm's length transaction at the date of valuation, in accordance with

standards issueed by International Valuation Standards Committee. Valuations are performed on an annual basis and

the fair value gains and losses are recorded within the statement of comprehensive income.

This is an investment in land and building held primarily for generating income or capital appreciation and occupied

substantially for use in the operations of the Company. This is carried in the statement of financial position at their market

value.

However in comformity with some provisions of IAS 40 some leasehold land and building were reclassified from

Property, Plant and Equipment because they were not occupied by the Company as at December 31, 2010. Some of

them were rented out and were generating income.

9 Statutory deposit

This represents the amount deposited with the Central Bank of Nigeria as at 31 Decenber, 2012 (31 December, 2011:

414,839,000, 1 January, 2011:N399,759,000) in accordance with section 9(1) and section 10 (3) of Insurance Act 2003

Statutory deposits are measured at cost.

Group Company

2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000 N'000

342,879 414,839 399,759 320,000 320,000 320,000


NEM 2012


10 INTANGIBLE ASSET

2012 2011 2010 2012 2011 2010

Cost N'000 N'000 N'000 N'000 N'000 N'000

At January 1, 32,000 13,500 13,500 32,000 13,500 13,500

Addition - - - - - -

Written off (13,500) (13,500)

Reclassification from non-current asset 26,753 18,500 - 26,753 18,500 -

At December 31 45,253 32,000 13,500 45,253 32,000 13,500

Amortisation

At January 1, 18,125 - - 18,125 - -

Writtre off (13,500) (13,500) - -

Impairment during the year 13,543 18,125 - 13,543 18,125 -

At December 31 18,168 18,125 - 18,168 18,125 -

Net Book Value 27,085 13,875 13,500 27,085 13,875 13,500

The only intangible asset of the Company was a software named "perfect policy' used in posting the business transactions

of the Company and this was acquired. It was formerly treated as Office Computer Equipment. In accordance with IAS 38,

it is now being reclassified there from.

11.1 PROPERTY AND EQUIPMENTS- GROUP

Buildg under Office Machinery Motor Furniture Computer

Cost/Valuation Construction Partitioning & equipt Vehicles & fittings Equipt Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

January 1 2011 333,137 36,923 13,579 298,066 46,191 232,534 960,430

Addition 137,796 - 7,884 44,389 3,953 28,848 222,870

Disposal - - - (62,401) (1,763) (4,585) (68,749)

Adjustment - (18,500) (18,500)

As at Dec. 31 2011 470,933 36,923 21,463 280,054 48,381 238,297 1,096,051

Addition 132,590 184 7,709 91,899 3,633 16,706 252,721

Disposal - - - (37,782) - - (37,782)

Reclass - - 165 - - (13,665) (13,500)

Dercognition/witten of - - (10,252) (76,053) (13,549) (87,316) (187,170)

At Dec. 31, 2012 603,523 37,107 19,085 258,118 38,465 154,022 1,110,320

Depreciation

January 1 2011 - 24,177 8,454 177,681 21,931 129,972 362,215

Charged for the year - 3,692 3,010 51,768 4,838 37,055 100,363

Disposal - - - (62,401) (1,763) (4,585) (68,749)

Reclass - - - - - (3,700) (3,700)

As at Dec. 31 2011 - 27,869 11,464 167,048 25,006 158,742 390,129

Charged for the year - 2,113 5,499 68,618 4,133 39,783 120,146

Disposal - - - (33,272) - - (33,272)

Reclass - - 132 - - (8,232) (8,100)


At Dec. 31, 2012 - 29,982 6,843 126,342 15,590 102,977 281,734

NET BOOK VALUE

At December 31, 2012 603,523 7,125 12,242 131,776 22,875 51,045 828,586

At December 31, 2011 470,933 9,054 9,999 113,006 23,375 79,555 705,922

At January 1, 2011 333,137 12,746 5,125 120,385 24,260 102,562 598,215

Group Company


NEM 2012


11.2 PROPERTY AND EQUIPMENTS- COMPANY

Buildg under Office Machinery Motor Furniture Computer

Cost/Valuation Construction Partitioning & equipt Vehicles & fittings Equipt Total

N'000 N'000 N'000 N'000 N'000 N'000 N'000

January 1 2011 333,137 25,310 12,962 279,755 38,366 227,385 916,915

Addition 137796 - 4,600 37,331 3,278 28,931 211,936

Disposal - - - (62,401) (1,763) (4,585) (68,749)

Reclassification - (18,500) (18,500)

As at Dec. 31 2011 470,933 25,310 17,562 254,685 39,881 233,231 1,041,602

Addition 132,590 - 7,709 88,510 1,907 13,846 244,562

Disposal - - - (37,782) - - (37,782)

Reclass - - 165 - - (13,665) (13,500)


At Dec. 31, 2012 603,523 25,310 15,184 229,360 28,239 146,096 1,047,712

Depreciation

January 1 2011 - 21,854 8,287 171,422 20,410 128,077 350,050

Charge for the year - 2,531 2,230 46,694 3,988 36,883 92,326

Disposal - - - (62,401) (1,763) (4,585) (68,749)

Reclass - - - - - (3,700) (3,700)

As at Dec. 31 2011 - 24,385 10,517 155,715 22,635 156,675 369,927

Charge for the year - 925 4,719 62,866 3,110 37,498 109,118

Disposal - - - (33,272) - - (33,272)

Reclass - - 132 - - (8,232) (8,100)


At Dec. 31, 2012 - 25,310 5,116 109,257 12,196 98,625 250,504

NET BOOK VALUE

At December 31, 2012 603,523 - 10,068 120,103 16,043 47,471 797,208

At December 31, 2011 470,933 925 7,045 98,970 17,246 76,556 671,675

At January 1, 2011 333,137 3,456 4,675 108,333 17,956 99,308 566,865


NEM 2012

Notes to the Financial Statements (Cont’d)12 INSURANCE CONTRACT LIABILITIES

2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000 N'000

As at January 1

Reserve for unexpired Premium 1,600,478 1,036,550 700,282 1,527,911 968,328 632,059

Reserve for outstanding claims 304,883 221,567 27,185 303,396 210,897 16,514

- - -

Additions during the year - - -

Reserve for unexpired Premium 317,375 563,928 336,269 202,335 559,583 336,269

Reserve for outstanding claims 804,821 83,315 194,383 785,752 92,499 194,383

As at December 31. 3,027,556 1,905,360 1,258,119 2,819,394 1,831,307 1,179,225

Reserve for unexpired Premium 1,917,853 1,600,478 1,036,551 1,730,246 1,527,911 968,328

Reserve for outstanding claims 1,109,703 304,882 221,568 1,089,148 303,396 210,897

3,027,556 1,905,360 1,258,119 2,819,395 1,831,307 1,179,225

12.1 Outstanding Claims

Provision for reported claims by policyholders 1,008,821 277,165 201,425 990,135 275,815 191,725

Provision for claims incurred but not reported (IBNR)100,882 27,717 20,143 99,013 27,581 19,172

1,109,703 304,882 221,568 1,089,148 303,396 210,897

12.2 Unearned Premium

Opening Balance 1,600,480 1,036,551 1,036,551 1,527,911 968,328 968,328

Gross premium written 9,652,555 8,381,196 9,246,217 8,178,886

Gross premium earned (9,335,181) (7,817,268) (9,043,881) (7,619,304)

1,917,853 1,600,480 1,036,551 1,730,246 1,527,911 968,328

The above balances represent the amounts payable on direct insurance business and assumed reinsurance business.

The carrying amounts disclosed above approximate fair value at the reporting date. All amounts are payable within one year

12.3 Allocation of Assets to Policy Holders Fund

2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000

Cash and cash equivalents 2,294,512 1,500,000 800,000 2,067,651 1,561,428 680,000

Financial assets 733,044 405,364 458,119 751,744 269,879 499,225

Fixed Assets and others - - - - -

3,027,556 1,905,364 1,258,119 2,819,395 1,831,307 1,179,225

12.4 Cash and cash equivalents

Policy holders Fund 2,249,512 1,500,000 800,000 2,067,651 1,561,428 680,000

Shareholders Fund 670,962 814,696 973,360 720,000 696,914 1,053,238

2,920,474 2,314,696 1,773,360 2,787,651 2,258,342 1,733,238

12.5 Financial Assets

Policy holders Fund 733,044 405,364 458,119 751,744 269,879 499,225

Shareholders Fund 617,923 661,138 1,017,765 599,223 796,620 976,659

1,350,967 1,066,502 1,475,884 1,350,967 1,066,499 1,475,884

CompanyGroup


NEM 2012

Notes to the Financial Statements (Cont’d)Group

2012 2011 2010 2012 2011 2010

12.6 Work in Progress N'000 N'000 N'000 N'000 N'000

Policy holders Fund - - - - -

Shareholders Fund 603,523 565,118 603,523 565,118

603,523 565,118 603,523 565,118 -

12.7 Investment Property


Shareholders Fund 459,813 388,935 459,813 388,935

459,813 388,935 - 459,813 388,935 -

12.8 Plant, equipment and others


Shareholders Fund 828,586 705,922 1,081,335 1,257,020 1,154,795 1,049,985

828,586 705,922 1,081,335 1,257,020 1,154,795 1,049,985

13 TRADE PAYABLES

2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000 N'000

Accruals 167,107 26,568 12,744 161,751 21,797 12,744

Trade Creditor 23,367 7,925 2,066 1,532 - -

Witholding tax 1,233 113 - - - -

Loan - 194 - - - -

Rent 140 3,123 - - - -

Other creditos 245 43 - - - -

192,092 37,966 14,810 163,283 21,797 12,744

The carrying amount disclosed above reasonably approximates fair value at the reporting date.

All amounts are payable within one year.

14 RETIREMENTS BENEFITS OBLIGATIONS

2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000 N'000

As at January 1 113,033 - - 113,033 - -

Addition 49,313 113,033 - 49,313 113,033 -

Gain- employee benefit actuarial surplus (2,141) - - (2,141) - -

Gratuity 160,205 113,033 160,205 113,033

This related to gratuity payable to all qualifying staff members of the Company for past services rendered as at December 31, 2012.

The liability remained largely unfunded. In 2010, no provision was made for gratuity because as at that time no staff met the condition

of the service which stipulates a minimum of five (5) years and above . The reason for this is due to the fact the new NEM after the

merger of the defunct Vigilant Insurace Company Limited and fomer NEM Insurace Plc commenced operation on July 1st, 2007.

The obligation is being funded using part of Company's short term placement in banking institutions.

Group Company

Company


NEM 2012

Notes to the Financial Statements (Cont’d)14.1 Summary of the Company's defined benefit plan

Main benefit

Eligibility: A minimum of five (5) years continuos service

Normal Retirement Age (NRA): This is 60 years for both male and female staff.

Total Emolument: This is the addition of annual Basic Salary , Housing, Lunch, Utility and and

Transport Allowances.

Benefit at Exit: This scheme provides for gratuity payment at exit as indicatred in the scale overleaf.

Withdrawal/Retirement Benefit: The scheme provides for gratuity at withdrawal as indicated in the scale below.

Scale of benefits

Years of Service End of Service Gratuity expresssed as a % of Total Emoluments

Less than 5 -

5 50%

6 60%

7 70%

8 80%

9 90%

10 100%

11 & above 110%

14.2 Movement in the Present Value of Defined Benefit Obligation

2012 2011

N'000 N'000

Defined Benefit Obligation at the beginning of the year 113,033 113,033

Service Cost 33,754 -

Interest Cost 15,559 -

Employees Contribution - -

Actuarial (Gains)/Losses- Assumption (878) -

Actuarial (Gains)/Losses- Experience (1,263) -

curtailment (Gains)/Losses - -

Settlement - -

Benefit paid by employer - -

Defined Benefit Obligation at the end of the year 160,205 113,033

14.3 Movement in the Present Value of Plan Asset

2012 2011

N'000 N'000

Fair value of Plan Asset at the Beginnig of the year - -

Employer Contributions made in the financial year - -

Benefit paid by the employer - -

Expected Return on Plan Assets - -

Actuarial Gains/(Losses) on Plan Assets - -

Closing fair value of Plan Asset - -


NEM 2012

Notes to the Financial Statements (Cont’d)2012

N'000

14.4 Expenses Recognised in Profit or Loss 33,754

Current Service Cost 15,559

Net Interest Cost -

Past Service Cost 49,313

Net Periodic Benefit Cost

The expense is recognised in the following line item in Statement of Comprehensive Income: 2012

N'000

Other Operating and Administrative Expenses 49,313

14.5 Actuarial Gains and Losses Recognised in Other Comprehensive Income

2012 2011

N'000 N'000

Actuarial (Gains)/ Losses at the beginning of the year - -

Actuarial (Gains)/ Losses on liability during the year (2,141) -

Actuarial (Gains)/ Losses on assets during the year - -

Actuarial (Gains)/ Losses at the end of the year (2,141) -

14.6 Actaurial Assumptions

14.6.1 Finacial Assumptions (exprerssed as weighted averages)

Long Term Average 2012 2011

Discount Rate (p.a) 13% 14%

Average Pay Increase (p.a) 12% 13%

Average Rate Inflation (p.a) 10% 10%

14.6.2 Demographic Assumptions

Assumptions regarding mortality rates are based on published statistics and mortality tables

14.6.2.1 Mortality in Service

Sample age Number of deaths in year out 10,000 lives

25 7

30 7

35 9

40 14

45 26


NEM 2012


15 TAXATION

2012 2011 2010 2012 2011 2010

15.1 Per Financial Position N'000 N'000 N'000 N'000 N'000 N'000

At January 1, (74,243) 129,226 133,081 (81,166) 129,226 133,081

Income tax for the year 225,282 134,655 137,249 218,674 127,904 137,353

Paid during the year (129,090) (338,124) (141,208) (123,344) (338,296) (141,208)

At December 31, 21,949 (74,243) 129,122 14,164 (81,166) 129,226

-

2012 2011 2010 2012 2011 2010

15.2 Per Income Statement N'000 N'000 N'000 N'000 N'000 N'000

Income tax 194,690 111,062 115,878 188,082 104,311 115,878

Education tax 15,244 9,526 11,025 15,244 9,526 11,025

Technology tax 15,348 14,067 10,450 15,348 14,067 10,450

225,282 134,655 137,353 218,674 127,904 137,353

Deferred tax - (845) 63489 - (2,321) 63,489

225,282 133,810 200,842 218,674 125,583 200,842

15.3 Deferred tax - -

At January 1, 106,671 108,992 45,503 106,671 108,992 45,503

Realease/ charge for the year - (2,321) 63,489 (2,321) 63,489

At December 31, 106,671 106,671 108,992 106,671 106,671 108,992

16 ISSUED SHARE CAPITAL 2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000 N'000

Authorised share:

8,400,000,000 ordinary shares of 50k each 4,200,000 4,200,000 4,200,000 4,200,000 4,200,000 4,200,000

Ordinary shares issued and fully paid:

At January 1, 5,280,502,913 ordinary

shares of 50k each 2,640,251 2,640,251 2,640,251 2,640,251 2,640,251 2,640,251

At December 31, 2,640,251 2,640,251 2,640,251 2,640,251 2,640,251 2,640,251

Group Company


NEM 2012


2012 2011 2010 2012 2011 2010

N'000 N'000 N'000 N'000 N'000 N'000

17 Share Premium 272,551 272,551 272,551 272,551 272,551 272,551

Premium from the issue of shares are reported in share premium

18 Contigencey Reserve

As at 1 January 1,147,115 850,415 - 1,137,642 852,496 -

Transfer from retained earnings 287,078 296,700 850,415 277,387 285,146 852,496

1,434,193 1,147,115 850,415 1,415,029 1,137,642 852,496

Contingency reserve is calculated in accordance with the provisions of Section 21(2) of the Insurance Act, 2003 at the higher of 3% of the

total premium or 20% of total profit after tax. This shall accumulate until it reaches the amount of greater of minimum paid-up capital

or 50% of net premium.

19 Retained earnings

As at 1 January (6,110) 301,321 - 40,381 329,599 -

Transfer from comprehensive income (95,791) (307,431) 301,321 (109,428) (289,218) 329,599

(101,901) (6,110) 301,321 (69,047) 40,381 329,599

Retained earnings consist of undistributed profits/loss from previous years.

20 Available for sale reserve

Opening Balance 94,503 106,785 - 94,503 106,785 -

Movement (41,092) (12,282) 106,785 (41,092) (12,282) 106,785

53,411 94,503 106,785 53,411 94,503 106,785

2012 2011 2012 2011

21 Other Reserve- N'000 N'000 N'000 N'000

Actuarial gains on retirement benefit 2141 - 2141 -

This represents actuarial gains on employee retirement benefit

22 GROSS PREMIUM WRITTEN 2012 2011 2012 2011

N'000 N'000 N'000 N'000

The analysis of gross premium by business class is as follows:

Fire 1,260,554 1,278,778 1,191,892 1,237,173

Oil and Gas 972,023 410,002 972,023 410,002

General accident 2,484,527 2,180,019 2,389,105 2,123,226

Marine 1,469,500 1,565,640 1,465,478 1,563,654

Motor 3,381,606 2,878,109 3,143,373 2,776,183

Inward reinsurance 84,346 68,648 84,346 68,648

Gross premium written 9,652,556 8,381,196 9,246,217 8,178,886

(Increase) in unearned premium (317,374) (563,928) (202,335) (559,582)

Gross premium income 9,335,182 7,817,268 9,043,882 7,619,304

Re-insurance cost (218,147) (787,528) (180,163) (745,599)

Net premiun income 9,117,035 7,029,740 8,863,719 6,873,705

2012 2011 2012 2011

23 Reinsurance expense N'000 N'000 N'000 N'000

Motor 92,054 369,084 69,785 347,456

Marine 22,671 85,740 22,295 85,343

Fire 33,324 121,407 26,905 112,889

General Accident 70,099 211,297 61,179 199,911

Oil & Gas -

218,148 787,528 180,164 745,599

24 Fee and commission income

Fee income represents commission received on direct business and transactions ceded to re-insurance during the year under review.

Group Company

2012 2011 2012 2011

N'000 N'000 N'000 N'000

Motor 794 46,693 189 42,221Marine 23 12,411 1 12,325Fire 6,134 18,461 - 16,741General Accident 6,786 59,133 1,761 56,811Oil & Gas - - - -

13,737 136,698 1,951 128,098

Group Company

The fair value reserve shows the effect from the fair value measurement of financial instruments of the category available for sale. Any gains or losses are not recognisedin the comprehensive income statements until the asset has been sold or impaired.


NEM 2012

Notes to the Financial Statements (Cont’d)25 Claims Expenses 2012 2011 2012 2011

N'000 N'000 N'001 N'000

The analysis of claim expenses by business class is as follows:

Motor 854,562 670,764 837,934 665,165Marine 406,393 189,354 398,843 187,773

Fire 644,737 352,286 632,438 349,345

General Accident 995,870 588,108 977,579 583,199Oil & Gas 32,872 10,176 32,896 10,090

2,934,435 1,810,688 2,879,691 1,795,573

Claim expenses consist of claims paid during the financial year together with the movement in the

provision for outstanding claims.

26 Underwriting Expenses 2012 2011 2012 2011

N'000 N'000 N'000 N'000

Commission expense (25.1) 1,699,637 1,390,289 1,665,641 1,366,885

Maintenance expense (25.2) 867,722 708,474 867,722 708,474

2,567,359 2,098,763 2,533,363 2,075,359

26.1 Commission expense 2012 2011 2012 2011

The analysis of commission expenses by business class is as follows: N'000 N'000 N'000 N'000

Motor 425,780 335,627 417,264 329,977

Marine 304,418 312,150 298,330 306,895

Fire 276,639 257,953 271,106 253,611General Accident 487,116 403,717 477,373 396,921Oil & Gas 205,683 80,841 201,569 79,480

1,699,637 1,390,289 1,665,641 1,366,885

2012 2011 2012 2011

26.2 Maintenance expense N'000 N'000 N'000 N'000

Motor 446,165 354,237 446,165 354,237

Marine 104,824 92,102 104,824 92,102

Fire 57,008 85,017 57,008 85,017

General Accident 194,363 170,034 194,363 170,034

Oil & Gas 65,362 7,085 65,362 7,085

867,722 708,474 867,722 708,474

Underwriting expenses consist of acquisition and maitenance expenses which include commission and

policy expenses, proportion of staff cost and insurance supervision levy. Underwriting expenses for

insurance contracts are recognised as expense when incured.

2012 2011 2012 2011

27 Investment Income N'000 N'000 N'000 N'000

Dividend income 72,071 47,317 72,071 47,317

Interest from fixed deposit 164,732 136,106 148,077 117,575

Interest from statutory deposit 37,914 18,714 37,914 18,714

274,717 202,137 258,062 183,606

27.1 Investment Income

Investment Income attributable to Policy holders 130,166 183,606 118,055 183,606

Investment Income attributable to Share holders 144,551 18,531 140,007 -

274,717 202,137 258,062 183,606

2012 2,011 2,012 2011

28 Fair Value Gain through profit or loss N'000 N'000 N'000 N'000

Financial Assets at Fair Value Through Profit or Loss at bebining of the year (469,881) (773,805) (469,881) (773,805)

Financial Assets at Fair Value Through Profit or Loss at end of the year 685,463 469,881 685,463 469,881

Gain on Financial Assets at Fair Value Through Profit or Loss at end of the year 215,582 (303,924) 215,582 (303,924)

2012 2011 2012 2011

29 Other Income N'000 N'000 N'000 N'000

Sundry Income 1,250 7,167 11 5

Rental Income 5,000 1,250 5,000 1,250

Exchane Gain - 64,329 - 64,329

Profit on disposal of Property, Plant and Equipment - 674 - 674

6,250 73,420 5,011 66,258

Group Company


NEM 2012


2012 2,011 2,012 2011

30 Impairments N'000 N'000 N'000 N'000

Unquoted investment 100,523 - 100,523 -

Trade receivable 1,846,840 1658416 1,846,840 1,600,140

Intangible assets 13,543 18,125 13,543 18,125

1,960,905 1,676,541 1,960,905 1,618,265

2012 2011 2012 2011

N'000 N'000 N'000 N'000

31 Other Operating & Administrative Expenses

Auditors Remuneration 7,442 8,530 6,000 7,500

Employee Benefits (30a) 855,108 635,513 791,088 592,953

Other Management Expenses (30b) 473,839 422,736 383,918 383,931

Depreciation 124,331 98,196 113,303 88,626

1,460,720 1,164,975 1,294,309 1,073,010

2012 2011 2012 2011

31.1 Employee benefit expenses N'000 N'000 N'000 N'000

Salaries and Wages 492,383 512,197 436,456 472,125

Medical Expenses 111,836 24,075 108,804 22,681

Staff Training 25,756.38 23,895 24,976.28 23,445

Staff Uniform/Welfare 152,093.90 48,797 147,812.60 48,153

Gratuity 51,570.00 2,984 51,570.00 2,984

Employers' Contribution Fund 21,468.45 23,565 21,468.45 23,565

855,108 635,513 791,088 592,953

2012 2011 2012 2011

31.2 Other Management Expenses N'000 N'000 N'000 N'000

Advertising 44,053 23,870 27,559 13,761

Occupancy Expenses 30,757 27,029 23,786 21,897

Communication and Postages 9,149 8,086 7,950 7,042

Office Supply and Stationery 30,917 26,840 24,822 19,749

Fees and Assessments 146,034 121,899 120,536 113,314

Furnitures, Equipments and Miscellaneous Expenses 212,930 215,011 179,265 208,168

473,839 422,736 383,918 383,931

32 Earnings Per Share 2012 2011 2012 2011

N'000 N'000 N'000 N'000

Net profit attributable to ordinary shareholders for basic and diluted 455,312 253,294 434,075 259,953

Weighted average number of ordinary shares for basic EPS 5,280,503 5,280,503 5,280,503 5,280,503

Basic Earnings Per Share (kobo) 9 5 8 5

There have been no other transaction involving ordinary shares or potential ordinary shares between the reporting date and

date of completion of these financial statements.

Group Company


NEM 2012

Notes to the Financial Statements (Cont’d)2012 2011 2012 2011

33 Chairman's and Directors' Emoluments N'000 N'000 N'000 N'000

Fees

Chairman 3,230 2,870 2,300 2,250

Other Directors 5,275 4,525 4,500 3,750

8,505 7,395 6,800 6,000

Emoluments as Executives 52,400 31,000 38,000 31,000

60,905 38,395 44,800 37,000

The number of Directors excluding the Chairman whose emoluments were

within the following ranges were:

N N

5,000,001 - 6,000,000 - - - -

8,000,001 - 9,000,000 2 1 2 1

9,000,001 - 10,000,000 2 2 2 2

10,000,001 - Above 1 1 1 1

5 4 5 4

The Highest paid Director earned N 22,100,000 in 2012 (2011 N16,770,000)

34 Staff CostsThe average number of persons employed (excluding Directors ) in the2012 2011 2012 2011

financial year and staff costs were as follows:

Managerial 18 16 14 12

Senior 130 121 123 115

Junior 78 84 63 72

226 221 200 199

The related staff costs were N523,746,994 (2011 N399,164,154)

35 Related party transactions

Transaction with Key Personnel Management

Short term Benefits (Board of Directors) 2012 2011 2012 2011Fees: N'000 N'000 N'000 N'000

Chairman 3,230 2,870 2,300 2,250

Other Directors 5,275 4,525 4,500 3,750

8,505 7,395 6,800 6,000

Other Emoluments:

Other Directors 52,400 31,000 38,000 31,000

60,905 38,395 44,800 37,000

Short term Benefits (Management Team)

Salaries and Allowances: 178,877 148,102 178,877 148,102

Total Short term benefits 248,287 193,892 230,477 191,102

Other Long Term Benefits (Management Team)

Loan 166,745 - 166,745 -

Total Long Term benefits 166,745 - 166,745 -

Post Employment Benefits (Management Team)

Pension 10,037 8,387 10,037 8,387

Total Post Employment benefits 10,037 8,387 10,037 8,387

Total Benefits to Key Personnel Management 425,069 202,279 407,259 199,489

The key Management personnel of the Company comprises of both the Board of Directors and theManagement Team of the company.

Group Company


NEM 2012

Notes to the Financial Statements (Cont’d)36 Employees Remunerated at Higher Rates

The number of employees in receipt of emoluments excluding allowance

and pension within the following ranges were:

N N Group Company

60,001 - 80,000 - - - -

80,001 - 100,000 15 16 15 16

100,001 - 120,000 13 9 - 2

120,001 - 140,000 - - - -

140,001 - 160,000 17 16 10 8

160,001 - 180,000 24 24 18 17

180,001 and Above 157 156 157 156

37 Financial CommitmentsThe Directors are of the opinion that all known liabilities and commitments relevant in assessing theCompany's state of affairs have been taken into account in the preparation of these financialstatements.

38 Comparative Figures

Certain prior year figure have been reclassified to conform with the current year's presentation

and meet accounting standards disclosure requirements.

39 Capital Commitments

There company has spent N603 million on ongoing building project has been included in the

consolidated financial statements as at 31 December 2012.

40 Fines and Penalties

The company paid fines and penalties during the year as follows:PAYEE DETAILS Amount

N

NAICOM For non-submissin of AML/CFR Annual Employee

Training Programme 250,000

NAICOM Late submissin of 2012 Reinsurance Treaty

arrangement/retrcession. 500,000

NAICOM Late submissin of 2012 Oil & Gass Reinsurance arrengement500,000

NAICOM Late submissin of 2012 Oil & Gass Reinsurance arrengement500,000

1,750,000


NEM 2012

Underwriting Result per Class of Business

MOTOR MARINE FIRE GENERAL OIL & GASS TOTAL 2011

Group ACCIDENT

INCOME N'000 N'000 N'000 N'000 N'000 N'000 N'000

Direct Business Premium 3,381,606 1,469,500 1,260,554 2,484,527 972,023 9,568,209 8,312,548

Reinsurance Inward 7,950 5,942 5,652 62,584 2,217 84,346 68,648

Gross Premium 3,389,556 1,475,442 1,266,206 2,547,111 974,240 9,652,555 8,381,196

(Increase)/Decrease in Unexpired Risk (157,438) 10,909 (38,518) (89,565) (42,763) (317,374) (563,928)

Gross Premium Earned 3,232,118 1,486,351 1,227,689 2,457,546 931,477 9,335,181 7,817,268

Reinsurance Cost (92,054) (22,671) (33,324) (70,099) - (218,147) (787,528)

Net Premium Earned 3,140,064 1,463,680 1,194,365 2,387,448 931,477 9,117,034 7,029,740

Commission Received 794 23 6,134 6,786 - 13,737 136,698

3,140,858 1,463,703 1,200,499 2,394,234 931,477 9,130,771 7,166,438

Gross Claim Paid (921,254) (402,680) (709,870) (989,607) (32,896) (3,056,308) (1,858,657)

Reinsurance Claim Recovery 31,244 3,837 76,103 10,690 - 121,874 47,969

(890,011) (398,843) (633,767) (978,918) (32,896) (2,934,434) (1,810,688)

Gross Claim Incurred (890,011) (398,843) (633,767) (978,918) (32,896) (2,934,434) (1,810,688)

Underwriting Expenses (884,963) (403,180) (332,713) (677,775) (268,729) (2,567,359) (2,098,763)

Total Deduction (1,774,973) (802,023) (966,480) (1,656,692) (301,625) (5,501,793) (3,909,451)

Underwriting Profit 1,365,885 661,681 234,019 737,541 629,852 3,628,978 3,256,987


NEM 2012

Underwriting Result per Class of Business

MOTOR MARINE FIRE GENERAL OIL & GASS TOTAL 2011

Company ACCIDENT

N'000 N'000 N'000 N'000 N'000 N'000 N'000

Direct Business Premium 3,143,373 1,465,478 1,191,892 2,389,105 972,023 9,161,871 8,110,238

Reinsurance Inward 7,950.44 5,942.27 5,652.04 62,583.77 2,217.04 84,346 68,648

Gross Premium 3,151,323 1,471,421 1,197,544 2,451,689 974,240 9,246,217 8,178,886

(Increase)/Decrease in Unexpired Risk (88,280) 12,459 (17,115) (66,637) (42,763) (202,335) (559,582)

Gross Premium Earned 3,063,043 1,483,880 1,180,429 2,385,052 931,477 9,043,881 7,619,304

Reinsurance Cost (69,785) (22,295) (26,905) (61,179) - (180,163) (745,599)

Net Premium Earned 2,993,259 1,461,585 1,153,524 2,323,874 931,477 8,863,718 6,873,705

Commission Received 189 1 - 1,761 - 1,951 128,098

2,993,448 1,461,586 1,153,524 2,325,635 931,477 8,865,669 7,001,803

Gross Claim Paid (869,178) (402,680) (708,542) (988,269) (32,896) (3,001,564) (1,837,312)

Reinsurance Claim Recovery 31,244 3,837 76,103 10,690 - 121,874 41,739

(837,934) (398,843) (632,438) (977,579) (32,896) (2,879,691) (1,795,573)

Gross Claim Incurred (837,934) (398,843) (632,438) (977,579) (32,896) (2,879,691) (1,795,573)

Underwriting Expenses (863,428) (403,153) (328,114) (671,736) (266,931) (2,533,363) (2,075,359)

Total Deduction (1,701,362) (801,996) (960,552) (1,649,316) (299,827) (5,413,054) (3,870,932)

Underwriting Profit 1,292,085 659,590 192,972 676,319 631,649 3,452,616 3,130,871


NEM 2012

Claim Development Table

Extracts from HR Nigeria Limited Valuation Report

Claims DataThe claims data has seven risk groups - Marine, Motor, Casualty, Fire, Personal Accident, Oil and Gasand Workmen Compensation. The combined claims data for all lines of business between 2008 and2012 are summarized in the table below;

Incremental Development Pattern - Annual ProjectionsA/Y

Year/DevYears 1 2 3 4 5

Claims Paid toDate

2008 99,111,612 44,057,892 10,399,669 1,441,813 993,857 156,004,8432009 108,728,528 44,503,316 10,009,322 7,614,519 170,855,6852010 104,093,265 35,743,594 28,823,492 - 168,660,3512011 120,533,106 98,789,871 - - 219,322,9772012 391,308,493 - - - 391,308,493

Premium DataThe premium data received have been compared with the revenue account as at 31st December,2012.This certifies the accuracy of the data used in computing unearned risk premium. The table belowpresents the distribution of premiums by class of business.

Class of Business GrossPremium -

Data

GrossPremiumWritten -RevenueAccount

Motor 3,151,323,326 3,151,323,326

Accident 2,451,689,187 2,451,689,187Marine 1,471,420,658 1,471,420,658Fire 1,197,544,000 1,197,544,000Oil and Gas 974,239,590 974,239,590Total 9,246,216,761 9,246,216,761

Valuation ResultsWe present the results below for each of the valuation methods (The Chain Ladder and InflationAdjusted Chain Ladder Methods) and the estimated outstanding (including IBNR) claim reserves as atDecember 31, 2012.

We estimates our reserves as the sum of the Unearned Premium Reserve (UPR), Outstanding Claimsincluding the Incurred But Not Reported (IBNR) and the Additional Unexpired Risk Reserve (AURR) foreach line of business as at 31st December, 2012.


NEM 2012

Claim Development Table Cont’d

Incremental Chain Ladder

Incremental Development Pattern - Annual Projections in Naira

A/Y year/DevYears 1 2 3 4 5

2008 99,111,612 44,057,892 10,399,669 1,441,813 993,857

2009 108,728,528 44,503,316 10,009,322 7,614,519

2010 104,093,265 35,743,594 28,823,492 -

2011 120,533,106 98,789,871 - -

2012 391,308,493 - - -

This table illustrates that N99.11 million of the claims arising were paid in the first year and N44.06million during the second year for accidents that occurred in 2008 etc.

Cumulative DataCumulative Development Pattern - Annual Projections in

Naira

A/Y year/DevYears 1 2 3 4 5

2008 99,111,612 143,169,504 153,569,172 155,010,985 156,004,843

2009 108,728,528 153,231,844 163,241,166 170,855,686 171,951,132

2010 104,093,265 139,836,859 168,660,351 173,481,671 174,593,954

2011 120,533,106 219,322,977 244,075,083 251,052,207 252,661,836

2012 391,308,493 593,171,153 660,114,599 678,984,618 683,337,947

We cumulate the data summing up the claims arising from each accident year until all claims areexhausted.

Unwinding the cumulative projections from table above, we expect claims projections to be made till2016 as follows;

Year ofPayment Amount N

2013 232,531,533.56

2014 75,032,851.97

2015 20,479,647.26

2016 4,353,329.19

Total 332,397,361.97


NEM 2012

Claim Development Table Cont’dWe summarize Unearned Premium Reserve (UPR) estimation by class of business below. This wascalculated assuming risk will occur evenly over the period of insurance.

Unearned Premium Reserve

Class of Business Gross UPRReinsurance

UPR Gross UPR

Motor 539,116,038 539,116,038

Accident 434,823,696 434,823,696

Marine 266,631,140 266,631,140

Fire 314,298,071 314,298,071

Oil and Gas 175,377,310 175,377,310

Total 1,730,246,255 - 1,730,246,255

Technical ReservesWe present Gross Claims Technical Reserves under Basic Chain Ladder and Inflation Adjusted ChainLadder.

Technical Reserve Using Basic Chain Ladder Method

Class of Business Gross Claim Reserve

EstimatedReinsuranceRecoveries

NetOutstanding

Claims

Fire 226,747,548 (13,452,500) 213,295,048

General Accident 332,397,362 (30,589,500) 301,807,862

Marine 132,020,250 (11,147,500) 120,872,750

Motor 237,166,528 (34,892,500) 202,274,028

Oil and Gas 48,594,992 (2,429,750) 46,165,242

Total 976,926,679 (92,511,750) 884,414,930Accounts (OutstandingClaims) 912,895,123 - 912,895,123

Difference 64,031,556 (92,511,750) (28,480,194)

Should we allow for discounting, our gross claims reserve will reduce from N976.93millon toN859.66million leading to a net position of N767.15million.


NEM 2012

Claim Development Table (Cont’d)

Technical Reserve - Using Inflation Adjusted Basic Chain LadderMethod

Class of BusinessGross Claim

Reserve

EstimatedReinsuranceRecoveries

NetOutstanding

Claims

Fire 259,817,801 (13,452,,500) 246,365,301General Accident 367,637,589 (30,589,500) 337,048,089Marine 144,979,411 (11,147,500) 133,831,911Motor 268,118,639 (34,892,500) 233,226,139Oil and Gas 48,594,992 (2,429,750) 46,165,242Total 1,089,148,432 (92,511,750) 996,636,682Accounts(OutstandingClaims) 912,895,123 912,895,123

Difference 176,253,308 (92,511,750) 83,741,559


NEM 2012

Financial Risk Management PolicyManagement of financial and insurance risk

NEM Insurance Plc issues contracts that transfer insurance risk or financial risk or both. Thissection summarizes these risks and the way the company manages them.Insurance risk

The risk, under any insurance contract, is the possibility that the insured event occurs and theuncertainty of the amount of the resulting claim. By the very nature of an insurance contract, thisrisk is random and therefore unpredictable. The Company manages its insurance risk by means ofestablished internal procedures that include underwriting authority levels, pricing policy, approvedreinsurers list and monitoring.NEM is exposed to underwriting risk through the insurance contracts that are underwritten. Therisks within the underwriting risk category are associated with both the perils covered by thespecific lines of insurance including General Accident, Motor, Fire, Marine and Aviation, Oil andGas and Miscellaneous insurance, as well as the specific processes associated with the conduct ofthe insurance business. The various subsets of underwriting risks are listed below;

Underwriting Process Risk: risk from exposure to financial losses related to the selection andacceptance of risks to be insured.Mispricing Risk: risk that insurance premiums will be too low to cover the Company’s expensesrelated to underwriting, claims, claims handling and administration.Individual risk: This include the identification of which is the risk inherent in an insured property(movable or unmovable), we shall ensure surveys are performed and reviewed as at when due andthat risks are adequately priced.

Claims Risk (for each peril): Risk that many more claims occur than expected or that someclaims that occur are much larger than expected claims resulting in unexpected losses to theCompany. The underwriting risk assessment shall also determine the likelihood of a claim arisingfrom an insured risk by considering various factors and probabilities, determined by informationobtained from the insured party, historical information on similar risks and available externaldata.

Concentration risk (including geographical risk): This includes identification of the concentrationof risks insured by NEM. NEM utilizes data analysis, software and market knowledge to determinethe concentration of its risks by insurance class, geographic location, exposure to a client orbusiness. The assessment of the concentration risk are consistent with the overall risk appetite asestablished by the Company.

Underwriting Risk Appetite

The following statements amongst others shall underpin NEM’s underwriting risk appetite:- We do not underwrite risks we do not understand;- We are cautious in underwriting unquantifiable risks;- We are extremely cautious in underwriting risk observed to poorly managed at proposal statee.g. those with low safety standards, shoddy construction or businesses with excessively high riskprofile;- We carefully evaluate businesses or opportunities that could create systemic risk exposures ( i.e.incidents of multiple claims occurring from one event e.g. natural catastrophe risks, and risksdependent on the macroeconomic environment);- We consider all applicable regulatory guidelines while carrying out our underwriting activities;- We established and adhere to internal standards for co-insurance, reinsurance transactions;- We exercise extreme caution when underwriting discrete (one-off) risks, particularly where we do


NEM 2012

Financial Risk Management Policy (Cont’d)

not have the requisite experience or know-how;

- Where the broker has inadequate knowledge of the trade of the client or the class of business, weexercise caution in taking on such risks into our books;- We exercise extreme prudence and caution when dealing with clients with financial difficulties orpoor payment records; and with transient clients who change insurers regularly; and- We ensure compliance with NAICOM’s guideline on KYC.

UNDERWRITING STRATEGYThe Company has developed its insurance underwriting strategy to diversify the type of insurance risksaccepted and within each of these categories to achieve a sufficiently large population of risks toreduce the variability of the expected outcome. Any risks exceeding the underwriting limits requirehead office approval. Factors that aggravate insurance risk include lack of risk diversification in termsof type and amount of risk, geographical location and type of industry covered. The Company managesthese risks through its underwriting strategy, adequate reinsurance arrangements and proactiveclaims handling. Underwriting limits are in place to enforce appropriate risk selection criteria. Forexample, the Company has the right not to renew individual policies, it can impose deductibles and ithas the right to reject the payment of a fraudulent claim. Insurance contracts also entitle the Companyto pursue third parties for payment of some or all costs (for example, subrogation).

PRODUCTS AND SERVICESNEM Insurance Plc is presently operating as a non-life insurance company and we have a wide rangeof insurance products and services that are tailored to meet the specific needs of the company’sclients. Insurance contracts are issued on an annual contract either directly to the customer orthrough accredited insurance brokers and agents. Premiums from brokers and agents are payablewithin six months, whereas from direct customers upfront. The following is a broad spectrum of theproducts and services the company is offering:

FIRE/EXTRANEOUS PERILS POLICYThis type of policy will provide indemnity to the insured in the event of loss or damage to propertycovered under it as a direct result of fire outbreak, lightning or explosion. Other extraneous perils suchas social disturbances like strike and riot, and natural disasters like storm damage, flood andearthquake can also be covered by an extension of the standard scope of the cover. The items to beinsured are usually made up of the following:a) Buildingsb) Office Furniture, Electrical & Electronic Equipmentc) Plant and Machineryd) Stock of Raw Materials and finished goodse) Loss of Annual Rent for alternative accommodation.The policy also contains various other extensions that are granted at no extra cost to the policyholder.The replacement cost of the items to be insured will have to be supplied to us for assessment tofacilitate quotation of the premium payable.

CONSEQUENTIAL LOSS POLICYThis type of policy, often referred to as "business interruption insurance" is designed to indemnify theinsured against loss of productive capacity or future earning power which may occur as a result of lossor damage to the premises and property insured under the Fire/Extraneous Perils in 1 above. Thispolicy is normally taken out in conjunction with the Fire Policy so that when the latter pays for thematerial damage to property insured under it, this will pick up the intangible loss that will flow from


NEM 2012


the primary loss of the Fire perils. The items usually covered under this policy are as follows:a)Gross Profitb)Salary and Wagesc)Auditor's feesThe sum insured to be indicated against the items of Gross Profit should represent the difference inturnover and the total of standing and variable charges. The sum insured on Salary and Wages will bethat which is required to maintain some key staff pending resumption of business while the suminsured on Auditor's Fees will represent charges that any firm of accountants will make in preparingpapers for insurance claim.

BURGLARY/HOUSEBREAKINGPOLICYThis type of policy is designed to indemnify the insured against loss or damage resulting from theftor attempted theft which is accompanied by actual forcible or violent entry into or out of thepremises or any attempt thereat. The items usually covered under this policy are similar to thoseunder the Fire/Extraneous Perils policy above with the exception of Buildings and Loss of Rent.The replacement cost of the relative items would have to be supplied to enable us submit ourquotation.

FIDELITY GUARANTEE POLICYThis is a form of policy that protects an organisation against loss of money or valuable stock as aresult of dishonesty or fraudulent activity of employees. It is possible to grant cover on namedbasis, positions basis or on a blanket basis. In any of these cases, the number of persons and thelimit of guarantee any one loss would be advised as well as aggregate amount of guarantee in agiven year. Once we have this information, we would be in a position to quote for premiumpayable.

PUBLIC LIABILITY POLICYThis policy also covers the insured against legal liability to third party for cost and expensesincurred in respect of accidental death, bodily injury and accidental damage to property occurringwithin the insured's premises or at work-away premises. The vicarious liability of the insured'semployee can also be covered provided it arose in the course of carrying out his official duties.Please indicate the limit of cover required to enable us advise the premium payable.MONEY POLICYThis is another type of All Risks policy which is designed to cover any fortuitous event that couldresult in the loss of cash while in the course of transit either to or from the bank. The cover willalso operate while the money is on the premises of the insured and while in a securely locked safe.The policy can also be extended to cover cash in the personal custody of selected managementstaff.

GOODS IN TRANSIT POLICYThis is also an "All Risks" policy covering goods being carried from one location to another. Anyloss not specifically excluded under the policy is covered and the insurance is suitable for anyorganization that is engaged in movement of goods either by road or rail and the cover will operatewhen the goods are being conveyed by the insured’s owned or hired vehicles. Losses arising fromFire and Theft are covered under this policy.GROUP PERSONAL ACCIDENT POLICYThis type of policy is designed to foster the welfare of employees as well as reduce the financial


NEM 2012

Financial Risk Management Policy (Cont’d)strain that an organization could undergo in the event of death or bodily injury to a member of staffarising as a result of any injury sustained through accidental, violent, external and visible means.The policy provides a world-wide cover on 24 hours basis and benefits payable in respect of Deathand Permanent Disability are usually expressed as multiple of salaries. Cover also extends to payweekly benefit in the event of temporary total disability resulting from bodily injury to the insuredperson as well as certain allowance for expenses incurred on medical treatment as a result ofaccidental injury. Death or injuries from natural causes are however not covered.

MOTOR INSURANCE POLICYThis class of insurance is made compulsory by Government through the legislation known as theMotor Vehicle (Third Party) Insurance Act of 1945. Third Party Only cover which is the minimumtype of insurance legislated upon provides indemnity to policyholder against legal liability to ThirdParties for death, bodily injury and property damage.The most popular type of cover under this policy is comprehensive insurance which, in addition tothe cover provided under the Third Party Only, will also indemnify the policyholder for loss ordamage to the vehicle resulting from road accident, fire and theft. The premium payable for thevarious forms of cover under this policy is regulated by a statistical table of rate known as "tariff"which is approved by Government.

MARINE POLICIESCARGO: The policy issued here is to provide indemnity for loss or damage to imported goods beingconveyed by sea or air. The All Risks type of cover known as Clauses "A" provides indemnity to theinsured in the event of total or partial loss of the goods while the restricted cover known as Clauses "C"would provide indemnity in the event of total loss only. To enable us determine the premium payablein this regard, we would require information on the nature and value of goods being imported as wellas the type of cover required.HULL: This type of policy is issued on vessels and yachts to provide indemnity for any loss, damage orliability that may arise from their use. The scope of cover provided is either an "all risks" or "total lossonly" while the policy usually carries a deductible of about 10% of the value of the vessel or yacht.

AVIATION POLICYThis policy provides comprehensive cover against loss or damage to insured aircraft while operatinganywhere in the world. Cover also extends to include the operator's legal liability to Third Parties fordeath, bodily injury and property damage. Liability to passengers is also covered up to a certain limitselected. In order to ensure full protection for our clients, we reinsure as much as 90% of this type ofrisk in the London Aviation Market through one of our overseas associates. The essence of thisarrangement is to obviate the problem of absorption in the Nigerian Market which has limited capacityfor Aviation Insurance and also to afford our clients the opportunity of having a dollar/sterling basedinsurance policy.

MACHINERY BREAKDOWN POLICYThis policy is designed to cover any damage to a plant or equipment while working or at rest, or beingdismantled for the purpose of cleaning, repairing or overhauling. In the same vein, boiler and pressurevessels can be covered under a separate but similar policy.

ELECTRONIC EQUIPMENT POLICYThis policy is designed to cover any loss or damage that could result while any computer and orequipment insured is working or at rest. The cover under this policy also extends to include loss or


NEM 2012


damage to external data media such as diskettes and tapes containing processed information whilesuch are kept within the premises. The increase in cost of working, as a result of damage to the maincomputer equipment, is also covered and indemnity is provided for alternative means of carrying onoperation. With payment of an additional premium, this policy can be extended to cover the risk oftheft.

ENERGY RISKS

The policies on offer in this area have been specifically developed to take advantage of the insuranceopportunities created by the Nigerian Content Policy. The Nigerian content policy is aimed at utilizingNigerian human and material resources in creating values in the country through all contracts awardedin the Oil and Gas industry and the Power sector of the economy. NEM Insurance Plc has carved aniche as the Leader in provision of Oil & Gas and Energy Insurance in Nigeria.Our focus is on the following areas:• Upstream Risks which includes Construction/Erection All Risks, Operators Extra Expense Insurance,Property Insurance and General Third Party Liability Insurance.

• Downstream Risks which includes the downstream properties (Refineries and Petrochemical plants,Onshore pipelines, Oil tank farm, Gas processing plants, Pumping and Metering stations, Gas turbinesand Boilers, Damage to Asset and other related downstream sector risks.

• Power, Solid Mineral and Other special products.

The above products have been packaged for marketing to the public sector as well as variousmanufacturing, industrial and commercial concerns. Financial institutions such as banks, mortgageand stock broking firms are also being offered these products. Our company is innovative inapproach and we specialize in packaging policies in line with the needs of the various segments ofthe economy. NEM Insurance Plc also provides comprehensive risk management services. Thecompany carries out various risk surveys and make appropriate recommendations towards riskimprovement and minimization of loss impacts.

APPROACH TO MANAGEMENT OF UNDERWRITING RISKS

The Company’s underwriting risk shall be managed by adhering to policies, principles andguidelines spelt out in the Annual Underwriting Plan.

Where the broker has inadequate knowledge of the trade of the client or the class of business andthe client not willing to disclose such information, the Company shall exercise caution in taking onsuch risks.The Company shall exercise extreme prudence and caution when dealing with clients with financialdifficulties or poor payment records; and with transient clients who change insurers regularly; andThe Company shall ensure compliance with the National Insurance Commission’s guidelines on“Know Your Customer” (KYC) requirement to get enough information about the transaction.

The company carries out timely pre-loss inspection/survey exercise of risks, preferably beforecommencement of cover but not later than 48 hours after commencement of risks.


NEM 2012


We limit acceptance of risks to a more convenient value/share while spreading excess through co-insurance or facultative basis.We ensure application/introduction/review of policy terms and conditions includingclauses/warranties that will deal with areas of concern which will at the end of the day make the riskworthy of being in the company’s portfolio.

RISK ACCEPTANCE RULES

The company shall follow the provisions (terms and conditions) of the reinsurance treaties that werearranged for the classes of insurance that any risk offered for insurance falls under in decidingwhether to accept the risk or not. This shall be the case on all cases where the sum insured of therisk is more than the company’s retention as contained and evidenced by the treaty cover notes.

For any risk that Reinsurance Treaty could not be arranged for, acceptance of such risks shall belimited to any limit set by the company for such risks at the beginning of each year and shown in theunderwriting plan.

ENERGY INSURANCE RISKS

No risks relating to the special covers in (as different from the standard covers) Energy, Oil and Gasshall be accepted without clarification from the Head of Energy Department or Head of BranchOperations Department (for risks coming from the Branch/Area/Agency offices).

MARINE INSURANCE RISKS

No Marine insurance risk (Hull or Cargo), Marine Cargo or any other special risks of different naturebut relating to Marine Insurance E.G. Marine Cargo Insurance export, shall be accepted withoutclarification from the Heads of Technical, Energy and Branch Operations Departments. Thecompany shall not accept Marine Cargo business in respect of fish head risks whether as import orexport. Where it must be covered for any reason, cover shall be limited to ICC “C” and on rate ofpremium of a minimum of 0.20%.

AVIATION RISKS

No Aviation risk, Marine Hull risk, Marine Cargo export and any other special risks of different natureshall be accepted without clarification from the Heads of Technical, Energy and Branch OperationsDepartments.

Approaches to Risk MitigationGenerally, we shall apply any of the following four (4) approaches to risk mitigations:

a) Risk Termination (Avoidance)Under the risk termination approach, we will take measures to avoid risks that are outside our riskappetite, not aligned to our strategy or offer rewards that are unattractive when compared to therisk undertaken. Specifically, we will discontinue activities that generate these risks, such asdivesting from certain geographical markets, product lines or businesses. Generally, we will utilisethese approach for high-risk events that remain unacceptably high even after we have appliedcontrols.


NEM 2012


b) Risk Treatment (Reduction)Under the risk treatment approach, we would accept the risks inherent in our transactions, butshall take measures, through our system of internal controls, to reduce the likelihood and/orimpact of these risks. Generally, we would utilise this approach for risks that occur frequently andhave low impact. Some of the measures we shall take under this approach may include formulatingor enhancing policies, defining boundaries and authority limits, assigning accountabilities andmeasuring performance, improving processes, strengthening existing controls or implementingnew controls and continuing education and training.

c) Risk Transfer (Sharing)Under the risk transfer approach, we would accept the risks inherent in our transactions, but shalltake measures to transfer whole or portions of the risk to an independent counterparty.Specifically, we shall transfer our risks to an independent counterparty such as co-insurance andreinsurance companies by utilising contracts and arrangements. We will retain accountability forthe outsourced risk and that outsourcing does not eliminate risk but only changes our risk profile.The relevant business units shall be responsible for identifying and incorporating the risks arisingfrom such risk transfer arrangements in their risk registers. The business units shall also beresponsible for managing the resultant risks and reviewing the risk transfer arrangement to ensurethat it is still capable of mitigating the initial risk.

d) Risk Tolerance (Acceptance)Under the risk tolerance approach, we would accept the risks inherent in our transactions andwould not take any action to change the likelihood and/or impact of the risks. We shall adopt thisapproach where the risk is low and the cost of further managing the risk exceeds the potentialbenefit should the risk crystallize.

d) Reinsurance Treaty CoverWe have arranged very adequate reinsurance treaties to enable us accommodate risks with highnecessary support in the event of large claims. Our treaties are arranged by UAIB RE and placedwith a consortium of reputable reinsurance companies.The types of re-insurance on NEM Treaty are:1) Quota share2) Surplus3) Excess of loss

1) Quota shareThis is the simplest type of Re-insurance whereby a Reinsurer agrees to reinsure a fixedproportion of every risk accepted by the ceding company, sharing proportionately in all lossesand receiving in the same proportion of all direct net premium, less the agreed reinsurancecommission.

2) SurplusUnder this arrangement the ceding company can retain a risk up to the level of its agreedRetention amount. The proportion of the risk which is beyond the Retention amount is thenceded into the Surplus treaty and reinsurer receives a proportionate share of the premium, lessreinsurance commission.

3) Excess of LossThis arrangement protects the ceding company against a loss where the ceding company'sclaims liability exceeds its retention.


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Concentration of insurance riskThe Company monitors concentrations of insurance risk by product and sector. An analysis ofconcentrations of insurance risk at 31 December 2012 and 2011 for Gross Premiums written isset out below:

(a) By product 31 December 31 December2012 2011

N'000 N'000Motor business 3,379,790 2,878,109Fire & Property 1,324,761 1,278,778Marine & Aviation 1,465,418 1,565,640General Accident 2,426,341 2,180,019C.A.R & Engineering 971,900 410,002Energy business 84,345 68,648

9,652,555 8,376,850

(b) By sector 31 December2012

N'000Energy 976,839Financial Services 3,101,366IT/Telecoms & Other Corp. 2,522,213Manufacturing 2,256,766Retail 795,371

9,652,555

The Company did not monitor insurance risk by sector as at 31 December 2011.

Financial risk managementNEM Insurance Plc operates in a highly complex and competitive environment driven by the need tomeet all claim obligations, maximize returns to shareholders and comply with all statutory andregulatory requirements. The Company is in the business of managing risks for public and privateentities as well as individuals. In the ordinary course of its business activities, the Company is exposedto a variety of financial risks, including currency risk, liquidity risk, credit risk, country risk and marketrisk as well as operational and compliance risks.

Risk is the level of exposure to opportunity, threat and uncertainty – that should be identified,understood, measured and effectively managed, in the course of executing the Company’s businessstrategies. In terms of opportunity, we see risk in relation to returns in that the greater the risk, thegreater the potential return. We therefore manage risk by using several methods to maximize thepositive aspects within the constraints of our risk appetite and business environment.

In terms of threat, we see risk as the potential for the occurrence of negative events such as financialloss, fraud, damage to reputation or public image and loss of competitive advantage. We thereforemanage risk in this context by introducing risk management techniques to reduce the probability ofthese negative events occurring without incurring excessive costs or stifling the initiative, innovation, andentrepreneurial flair of our staff.


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In terms of uncertainty, we see risk as the distribution of all possible outcomes both positive andnegative. In this context, we manage uncertainty by seeking to reduce the variance between anticipatedoutcomes and actual results.

RISK MANAGEMENT PHILOSOPHY AND CULTURE

Our risk management philosophy and culture consist of our shared beliefs, values, attitudes andpractices with respect to how we consider risk in everything we do, from strategy development andimplementation to every aspect of our day-to-day activities.

“We shall underwrite all profitable transactions that we consider prudent and meets our risk appetiteand profile. We shall take calculated and informed risk while seeking to maximize returns andshareholders’ value. We shall continuously evaluate the risk and rewards inherent in our businesstransactions, from strategy development and implementation to our day-today activities. We believe thatto achieve this objective would require a good understanding of the risks we are taking and the effectivemanagement of these risks both at the individual and enterprise levels”.

We therefore manage and control risk by introducing new risk management techniques, enhancingexisting risk management practices and placing a greater emphasis on cooperation among departmentsto comprehensively manage the Company’s full range of risks as a whole. The Company proactivelyformulates strategies and plans that enable the identification and management ofevents/factors/occurrences that impact our ability to attain our business and strategic objectives.

Risk Management StrategyThe Company adopts the following strategy for managing risks:

i. Establish a clearly defined risk management process for identifying, measuring, controlling, monitoringand reporting risks.ii. Entrench and incorporate risk management principles in all functions across the Companyiii. Comprehensive implementation and maintenance of our risk management frameworkiv. Ensure good corporate governance practicesv. Board and senior management support to promote sound risk managementvi. Zero tolerance for non-compliance with risk and control proceduresvii. Avoid concentration of risk to any industry, market, sector or individual entity.viii. Deployed a risk management systems to facilitate the effective management of risks


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Financial Risk Management Policy (Cont’d)Short-term insurance contractsFor short-term insurance contracts, the Company funds the insurance liabilities with a portfolio of equityand debt securities exposed to market risk.The following tables indicate the contractual timing of cash flows arising from assets and liabilitiesincluded in the Company's ALM framework for management of short-term insurance contracts.

At 31 December2012

CarryingamountN'000

No statedmaturity

0 - 90days

91 - 180days

180 - 365days

1 - 2years

> 2years

Financial assetsCash &bank balances 547, 907 - 547, 907 - - - -

Short Term Deposits 2,399, 949 2,399,949 - - -

- Trade receivables 887,008 674,108 212,900 - - -

- Other Receivables 224,150 12,785 6,784 2,245 - 202,336-

Debt securities 46,829 - 46,829Equity securities- quoted 685,463 685,463 - - - - -- unquoted 510,129 510,129 - - - - -

5,301,435 1,195,592 3,634,749 219,684 2,245 - 249,165

Insurance liabilitiesOutstanding ClaimsReserve

2,819,395 - 2,819,395 - - - -

Less assets arisingfrom reinsurance

(92,512) - (92,512) - - - -

2,726,883 - 2,726,883 - - - -

At 31 December 2011

Carryingamount

No statedmaturity

0 - 90days

91 - 180days

180 -365days

1 - 2years

> 2years

Financial assetsCash & bank balances 298,352 - 298,352 - - - -- Trade receivables 569,480 - 484,058 85,422 - - -

- Other Receivables 274,021 4,567 4,322 3,876 1,376 259,880Debt securities 31,508 - - 31,508Equity securities- quoted 469,881 469,881 - - - - -- unquoted 315, 220 315,220 - - - - -

1,958,462 785,101 786,977 89,744 3,876 1,376 291,388Insurance liabilitiesOutstanding ClaimsReserve

1,831,307 - 1,831,307 - -

Less assets arising fromreinsurance

(83,937) - (83,937) - - - -

1,747,370 - 1,747,370 - - - -


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At 31 December 2010

Carryingamount

No statedmaturity

0 - 90days

91 - 180days

180 -365days

1 - 2years

> 2years

Financial assetsCash & cash equivalents 251,186 - 251,186 - - - -

- Trade receivables 509,524 382,143 127,381 - - -- Other Receivables 58, 565 - 21,083 13,470 24,012 -Debt securities 23,500 - - - - - 23,500Equity securities- quoted 773,802 773,802 - - - - -- unquoted 237,002 237,002 - - - - -

1,853,579 1,010,804 654,412 140,851 24,012 - 23,500Insurance liabilitiesOutstanding ClaimsReserve

1,179,225 - 1,179,225 - -

Less assets arising fromreinsurance

(131,497) - (131,497) - - - -

1,047,728 - 1,047,728 - - - -

The sensitivity analysis below are based on a change in one assumption while holding all otherassumptions constant. In practice this is unlikely to occur, and changes in some of theassumptions may be correlated - for example, change in interest rate and change in marketvalues.

(a) Sensitivity analysis - interest-rate risk

31 December 2012 (N'000)

AssetsCarryingamount

Fixed rate Floatingrate

Non-interestbearing

Cash and cash equivalent 2,947,856

-

- -

Trade receivables 887,008 834,408 - 52,600

Reinsurance Assets 92,512 - 92,512Debt securities 46,829 46,829 - -

3,974,205 881,237 - 145,112

Liabilities

Non-life insurance liability 2,819,395-

- 2,819,395

Other liabilities 163,283 - - 163,283

Debt security in issue --

- -

2,982,678 - - 2,982,678


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31 December 2011 (N'000)



Non-interestbearing

Cash and Cash equivalent 2,371,375 -

Trade receivables 569,480-

- 569,480

Reinsurance assets 83,937 - - 83,937Debt securities 31,508 31,508 - -

3,056,300 31,508 - 653,417

LiabilitiesNon-life insurance liability 1,831,307

-- 1,831,307

Other liabilities 21,797 - 21,797

Bank overdraft - - -

Debt security in issue - - -

1,853,104 - - 1,853,104

31 December 2010 (N'000)



Non-interestbearing

Cash and cash equivalent 1,733,239

Trade receivables 509,524-

- 509,524

Debt securities 23,500 23,500 - -2,266,263 23,500 - 509, 524

LiabilitiesNon-life insurance liability 1,179,225

-- 1,179,225

Other liabilities 12,744 - - 12,744Bank overdraft - - -Debt security in issue - - -

1,191,969 - - 1,191,969

The impact on the Company's profit before tax if interest rates on financial instruments held atamortised cost or at fair value had increased or decreased by 100 basis points, with all othervariables held constant are considered insignificant. This is due to the short term nature of themajority of the financial assets measured at amortised cost.

(b) Sensitivity analysis - equity riskThe sensitivity analysis for equity price risk illustrates how changes in the fair value of equitysecurities will fluctuate because of changes in market prices, whether those changes arecaused by factors specific to the individual equity issuer, or factors affecting all similar equitysecurities traded in the market.


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Financial Risk Management Policy (Cont’d)Management monitors movements of financial assets and equity price risk movements byassessing the expected changes in the different portfolios due to parallel movements of a 10%increase or decrease in the Nigeria All share index with all other variables held constant and allthe Company’s equity instruments in that particular index moving proportionally.

As at 31 December 2012, the market value of quoted securities held by the Company is N 691million (2011: N 470 million). If the all share index of the NSE moves by 100 basis points at31 December 2012, the effect on profit or loss would have been N 6.9 million (2011: N 4.7million).

The Company holds a number of investments in unquoted securities with a market value of N516 million as at 31 December 2012 (2011: N 315 million) of which investment in MTNNigeria Ltd is the significant holding. This investment was valued at N 382 million (cost N 382million) (2011: N 315 million, cost N 315 million) as at 31 December 2012. MTN Nigeria is aprivate limited liability company whose principal activity is the provision of mobiletelecommunications service using the Global System for Mobile Communications (GSM)platform.

Credit RiskThe Company’s assets are exposed to credit risk, which is the risk that a counterparty will beunable to pay amounts in full when due. The Company’s maximum exposure to credit risk isreflected in the carrying amounts of financial assets on the balance sheet. The main sources of theCompany’s incoming cash flow are the amounts of receivables from insureds and reinsurers. TheCompany manages the credit risk arising from such sources by aging and monitoring thereceivables. The Company conducts the review of current and non-current receivables on a monthlybasis and monitors the progress in the process of collection of the premiums in accordance withthe procedure stated in the Company’s internal control policy. The non-current receivables arechecked and assessed for impairment.

The overdue premiums are considered by the Company on case by case basis. If an overduepremium is recognized by the Company as uncollectible, a notification is sent to the policyholderand the insurance agreement is cancelled from the date of notification. The premium related to theperiod from the beginning of insurance cover until the date of cancellation of the insuranceagreement is considered a bad debt, and further steps right up to legal actions are planned withregard to that bad debt.

Other areas where the Company is exposed to credit risk are:• amounts due from reinsurers for the insurance risks ceded;• amounts due from insurance intermediaries.• amounts due from insured• amounts of deposits held in banks and correspondent accounts

NEM is exposed to the following categories of credit risk.Direct Default Risk - risk that NEM will not receive the cash flows or assets to which it is entitledbecause brokers, clients and other debtors which NEM has a bilateral contract defaults on theirobligations.Concentration Risk – is the exposure to losses due to excessive concentration of business activitiesto individual counterparties, groups of individual counterparties or related entities, counterpartiesin specific geographical locations, industry sectors, specific products, etcCounterparty Risk - the risk that a counterparty is not able or willing to meet its financial obligationsto the Company as they fall due.


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Credit Risk PrinciplesThe following principles underpin the Company’s credit risk management policies:- Individuals who create the credit risk and those who manage the risk clearly understand the natureof the risk;- The Company’s credit risk exposure is within the limits as approved by the Board;- Credit decisions are clear and explicit and in line with the business strategy and objectives asapproved by the Board;- Credit risk exposures shall be within the defined limits to ensure there is no excessiveconcentration and that credit control procedures for managing large exposures and relatedcounterparties are adhered to;- Appropriate classification of credit risk through periodic evaluation of the collectability of riskassets; and- Adequate loan loss provisioning to ensure that provisions or allowances are made to absorbanticipated losses.- The expected payoffs more than compensate for the credit risks taken by the Company;- Credit risk taking decisions are explicit and clear;- There shall be clear delegated authorization limits for transactions;- Sufficient capital as a buffer is available to take credit risk;

The Company’s credit risk appetite shall be in line with its strategic objectives, available resourcesand the provisions of NAICOM Operational Guidelines. In setting this appetite/tolerance limits, STItakes into consideration its corporate solvency level, risk capital and liquidity level , credit ratings,level of investments, reinsurance and coinsurance arrangements, and nature and categories of itsclients. In setting the credit limit, a few conditions were put into consideration and these actuallyassisted in the selection of the brokers that made this list. From the records available for thispurpose, the conditions used as yardstick are as follows: 1. Speed of payment; 2. Relationshipmanagement; 3. Volume of business and 4. Size of the accountsFrom the above conditions, the few Insurance Brokers identified have been categorized into three (3)groups namely A, B and C. Maximum exposure to credit risk before collateral held or other creditenhancements:

Maximum exposure

31 December31

December31

December2012 2011 2010

N'000 N'000 N'000Cash and bank balances 547,907 298,352 251,186Loans and receivables- Trade receivables 887,008 569,480 509,524- Other Receivables andPrepayments 224,150 274,021 58,565Reinsurance assets 92,512 83,937 131,493Debt securities 46,829 31,508 23,500Total assets bearingcredit risk 1,798,406 1,257,298 974,268

Liquidity RiskLiquidity risk is the inability of a company to meet obligations on a timely basis. It is also the inabilityof a company to take advantage of business opportunities and sustain the growth target in its


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business strategy due to liquidity constraints or difficulty in obtaining funding at a reasonable cost.Our liquidity risk exposure is strongly related to our credit and investment risk profile. The Companyis exposed to daily calls on its available cash resources from claims to be paid.At 31 December 2011, management does not believe the current maturity profile of the Companylends itself to any material liquidity risk, taking into account the level of cash and deposits and thenature of its securities portfolio at year end, as well as the reinsurance structure of the Company’sinsurance portfolio. The Company’s bank deposits and trading securities are able to be released atshort notice when and if required. The possible payments of significant insurance claims are securedby the reinsurance contracts’ clause that allows a cash call from the reinsurers for the lossesexceeding a certain amount based on line of business.

Sources of Liquidity RiskOur liquidity risk exposure depends on the occurrence of other risks. Some of the factors that couldlead to liquidity risks are:- Reputational loss or rating downgrade, leading to inability to generate funds;- Failure of insurance brokers and clients to meet their premium payment obligation as and whendue;- Lack of timely communication between Finance &Investment Division and Claims Departmentresulting in mismatch of funds;- Investment in volatile securities; and- Frequency and severity of major and catastrophic claims.

Liquidity Risk Management StrategyThe Company’s strategy for managing liquidity risks are as follows:- Maintain a good and optimum balance between having sufficient stock of liquid assets,profitability and investment needs;- Ensure strict credit control and an effective management of account receivables;- Ensure unrestricted access to financial markets to raise funds;- Develop and continuously update the contingency funding plan;- Adhere to the liquidity risk control limits; and- Communicate to all relevant staff on the liquidity risk management objectives and control limits.

Liquidity Risk Appetite/ToleranceOur liquidity risk appetite is defined using the following parameters:• Liquidity gap limits;• Scenario and Sensitivity Analysis• Liquidity Ratios such as:- Claims ratio- Cash ratio- Quick ratio- Receivable to capital ratio- Technical provision to capital ratio- Maximum exposure for single risk to capital ratio- Maximum exposure for a single event to capital ratio- Retention rate- Re-insurance receipts to ceded premium ratio- Solvency margin


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(b) Financial instruments measured at fair valueIFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to thosevaluation techniques are observable or unobservable. Observable input reflect market dataobtained from independent sources; unobservable inputs reflect the Group's marketassumptions. 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.Level 2: Inputs other than quoted prices included within Level 1 that are observable for the assetor liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3: Inputs for the asset or liability that are not based on observable market data(unobservable inputs)

This hierarchy requires the use of observable market data when available. The Group considersrelevant and observable market prices in its valuations where possible.

At 31 December 2012 (N'000) Level 1 Level 2 Level 3 Total

Financial assetsQuoted equity investments 685,465 - - 685,465

Unquoted equity investments - 510, 129 - 510, 129

Debt securities 31,508 31,508716,973 510,129 - 1,227,102



Unquoted equity investments - 315,220 - 315,220

Debt securities 31,508 31,508501,389 315,220 - 816, 609



Unquoted equity investments - 237,002 237,002773,802 237,002 - 1,010,804

(c) Fair valuation methods and assumptions(i) Cash and bank balancesCash and bank balances represent cash held with other banks. The fair value of these balancesis their carrying amounts.

(ii) Equity securitiesThe fair values of quoted equity securities are determined by reference to quoted prices(unadjusted) in active markets for identical assets. The fair value of the unquoted equitysecurities was determined on a net asset value basis.


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(iii) Debt securitiesTreasury bills represent short term instruments issued by the Central banks of the jurisdictionwhere the Company operates. The fair value of treasury bills and bonds at fair value aredetermined with reference to quoted prices (unadjusted) in active markets for identical assets.The estimated fair value of bonds (asset or liability) at amortised cost represents thediscounted amount of estimated future cash flows expected to be received. Expected cashflows are discounted at current market rates to determine fair value.

(iv) Other assetsOther assets represent monetary assets which usually have a short recycle period and as suchthe fair values of these balances approximate their carrying amount.


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Capital management Policy

NEM has over the years been deploying capital from earnings and additional equity funds tosupport growth in business volumes while striving to meet dividend commitments to shareholders.To be able to continue to generate and deploy capital both to grow core businesses and rewardshareholders, there is need for the Company to execute the right strategy, the right growthdynamics, the right cost structure and risk discipline as well as the right capital management.

NEM’s capital management strategy focus on the creation of shareholders’ value whilst meetingthe crucial and equally important objective of providing an appropriate level of capital to protectstakeholders’ interests and satisfy regulators.

The Company’s objectives when managing capital are as follows:- To ensure that capital is, and will continue to be, adequate for the safety, soundness and stabilityof the Company;- To generate sufficient capital to support the Company’s overall business strategy;- To ensure that the Company meets all regulatory capital ratios and the prudent buffer required bythe Board;- To ensure that the average return on capital over a 3 -5 years performance cycle is sufficient tosatisfy the expectations of investors;- To maintain a strong risk rating;- To ensure that capital allocation decisions are optimal, considering the return on economic andregulatory capital;- To determine the capital required to support each business activity based on returns generatedon capital to facilitate growth/expansion of existing businesses (i.e. capital allocation);- To establish the efficiency of capital utilization.

Minimum Capital RequirementThe Company complied with the minimum capital requirement of N3billion for non-life operations.This is shown under Shareholders' Fund in the Statement of Financial Position.

Solvency Status

The Company met the criteria for solvency margin as stated in section 24(1) of the Insurance Act2003, the solvency margin maintained is N3,226,939,000


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Capital Management Policy (Cont’d)

Solvency Margin

ADMISSIBLE ASSETS N'000 N'000

Cash and cash equivalents 2,947,856

Financial Assets 1,350,967

Statutory Deposits 320,000

Investment Property 459,813

Due from Reinsurers 92,512

Other Receivables & Prepayments 224,150

Deferred Acquisition Cost 298,151

Property & Equipment 797,208

A 6,490,657

ADMISSIBLE LIABILITIES

Insurance Liabilities 2,819,395

Debt Securities

Trade payables 163,283

Other Payable & Accruals

Taxation 120,836

Retirement Benefit Obligations 160,205

B (3,263,718)

Actual Solvency (A - B) C 3,226,939

Net Premium 8,863,719

Solvency Margin

Limit of Net premium i.e 15% of Net Premium 1,329,558

Minimum of paid up Capital - D 3,000,000

Since C>D - Positive Solvency Margin - (C-D) 226,939

Percentage of insolvency 8

2012


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Transition to International Financial Reporting Standards (IFRS)

Explanation of transition to IFRSAs stated on page 19, these are the Company's first financial statements prepared in accordance with IFRS. TheCompany has applied IFRS 1 in preparing these financial statements and the accounting policies set out in page19 have been applied in preparing the financial statements for the period ended 31 December 2012, thecomparative information presented in these financial statements for the period ended 31 December 2011, andin the preparation of an opening IFRS balance sheet at 1 January 2011 (the date of the Company's transition toIFRS).

In preparing its opening IFRS balance sheet, the Company has adjusted amounts reported previously in financialstatements prepared in accordance with Statements of Accounting Standards issued by the Nigerian AccountingStandards Board (“Nigerian GAAP”). An explanation of how the transition from Nigerian GAAP to IFRS hasaffected the Company's financial position, financial performance and cash flows is set out in the tables and thenotes below.

The most significant IFRS impact for the Company resulted from the implementation of IFRS 4 Insurancecontracts. The objective of IFRS 4 is to specify the financial reporting for insurance contracts by an entity thatissues such contracts until the IASB completes the second phase of its project on insurance contracts. Theimplication of this is that an insurer adopting IFRS for the first time can continue to use their existingaccounting policies to recognize and measure assets and liabilities arising from the issuance of insurancecontracts, provided existing policies meet certain minimum requirements set out in IFRS 4. The most significantof these requirements relates to the performance of a liability adequacy test.


NEM 2012

Reconciliation of Group Equity as at 31 December, 2011

Local GAAPat 31 Dec.2011 Reclass. Remeasu.

IFRS at 31Dec. 2011

Note N'000 N'000 N'000 N'000

Cash and Bank a 305,854 (305,854) -Cash and cash equivalent i (a,b) 2,427,729 2,427,729Short-term deposit b 2,277,264 (2,277,264) (0)Trade Receivable vi ( c ) 2,743,286 (2,167,520) 575,766Reinsurance assets vii ( c ) 83,103 10,880 93,983Financial assets at fair value through profitor loss ii (d) 469,879 469,879Available for sale iii (b,d) 470,609 94,503 565,112Held to maturity financial assets iv (d) 31,508 31,508Other receivables & prepayments v(c,j) 283,110 (1,427) 281,683Debtors and prepayment c 3,033,829 (3,033,829) -Deferred acquisition costs 247,923 247,923Long term investments d 816,607 (816,607) 0Investment in subsidiary - -Investment property ix(e) 388,935 94,185 483,120Statutory deposit 414,838 414,838Fixed Assets e 841,886 (841,886) -Property & Equipment xi(e) - 705,954 (32) 705,922Intangible Assets x(e) 32,000 (18,125) 13,875

Total Assets 8,327,136 65,923 (2,081,722) 6,311,338

-Liabilities -Creditors and accruals f 37,962 (37,962) -Trade Payable xii(f) 37,962 37,962Insurance funds g 1,564,325 (1,564,325) -Insurance Contract Liabilities xiii(g) 1,564,325 341,036 1,905,361Taxation J (75,670) 75,670 -Deferred taxation 106,671 106,671Gratuity xiv 113,033 113,033

Total Liabilities 1,633,288 75,670 454,068 2,163,026

Net Assets --

Equity -Share capital 2,640,251 2,640,251Share premium 272,551 272,551Capital reserve h 218,515 (218,515) -General reserve i 2,421,790 (2,421,790) -Available for sale reserve xvi 94,503 94,503Retained Earnings xvii(h,i,e) 2,624,184 (2,630,293) (6,109)Contingency reserve xv 1,140,741 6,374 1,147,115Total Equity 6,693,848 (9,747) (2,535,790) 4,148,311

Total liabilities & equity 8,327,136 65,923 (2,081,722) 6,311,337

-


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Reconciliation of Group Equity as at 1 January, 2011LocalGAAP at31Dec.2010 Reclassification Remeasu

IFRS at 1Jan. 2011

Note N'000 N'000 N'000 N'000Cash and Bank a 284,820 (284,820) -Cash and cash equivalents i (a,b) 1,773,361 1,773,361Short-term deposit b 1,823,336 (1,823,336) -Debtors and prepayment c 2,184,195 (2,184,195) -Financial assets at fair valuethrough profit or loss ii (d) 773,802 773,802Available for sale iii (b,d) 571,798 106,785 678,583Held to maturity financial assets iv (d) 23,500 23,500Trade Receivable vi (c) 2,055,791 (1,508,986) 546,805Reinsurance Assets vii( c) 61,413 78,850 140,263Deferred acquisition costs 184,468 184,468Investment in a subsidiary -Other Receivables & Prepayments v (-c) 66,990 66,990Long term investments d 1,034,304 (1,034,304) -Investment property ix(e) 388,935 94,185 483,120Statutory deposit 399,759 399,759Intangible assets x(e) 13,500 13,500Fixed Assets e 731,824 (731,824) -Property & Equipment xi(e) 598,218 598,218Total Assets 7,031,641 (25,922) (1,323,351) 5,682,368

Liabilities -Creditors and accruals f 14,814 (14,814) -Trade Payable xii(f) 14,814 14,814Dividend - -Insurance funds g 1,127,136 (1,127,136) -Insurance Contract Liabilities xiii(g) 1,127,136 130,983 1,258,119Taxation 129,122 129,122Deferred taxation 108,992 108,992Gratuity xiv - -Total Liabilities 1,380,064 - 130,983 1,511,047Net Assets -Equity -Share capital 2,640,251 2,640,251Share premium 272,551 272,551Capital reserve h 256,099 (256,099) -General reserve i 1,632,262 (1,632,262) -Available for sale reserve xvi 106,785 106,785Retained earnings xvii(h,i,e) 1,862,440 (1,561,119) 301,321Contingency reserve xv 850,415 850,415Total Equity 5,651,578 (25,922) (1,454,334) 4,171,322Total liabilities & equity 7,031,642 (25,922) (1,323,351) 5,682,369


NEM 2012

Reconciliation of Company Equity as at 31 December, 2011

Local GAAP at31 Dec. 2011 Reclass. Remeasu.

IFRS at 31Dec. 2011

Note N'000 N'000 N'000

Cash and Bank a 298,352 (298,352) -

Cash and cash equivalent i (a,b) 2,371,375 2,371,375

Short-term deposit b 2,228,412 (2,228,412) (0.00)

Trade Receivable vi-c 2,708,406 (2,138,926) 569,480

Reinsurance assets vii- c 73,057 10,880 83,937Financial assets at fair value throughprofit or loss ii (d) 469,879 469,879

Available for sale iii (b,d) 470,609 94,503 565,112

Held to maturity financial assets iv (d) 31,508 31,508

Other Receivables & Prepayments v(c,j) 274,020 274,020

Debtors and prepayment c 2,974,317 (2,974,317) -

Deferred acquisition costs vii 228,758 228,758

Long term investments d 992,003 (992,003) -

Investment in subsidiary viii 175,396 175,396

Investment property ix(e) 388,935 94,185 483,120

Statutory deposit x 320,000 320,000

Fixed Assets e 807,607 (807,607) -

Property & Equipment xi(e) - 671,675 - 671,675

Intangible Assets x(e) 32,000 (18,125) 13,875

Total Assets 8,238,384 71,419 (2,051,669) 6,258,134

-

Liabilities -

Creditors and accruals f 21,796 (21,796) -

Trade Payable xii(f) 21,796 21,796

Insurance funds g 1,520,271 (1,520,271) -

Insurance Contract Liabilities xiii(g) 1,520,271 311,036 1,831,307

Taxation J (81,166) 81,166 -

Deferred taxation 106,671 106,671

Gratuity xv 113,033 113,033

Total Liabilities 1,567,572 81,166 424,068 2,072,806

-

Equity -

Share capital 2,640,251 2,640,251

Share premium 272,551 272,551

Capital reserve h 218,515 (218,515) -

General reserve i 2,401,853 (2,401,853) -

Available for sale reserve xvi 94,503 94,503

Retained Earnings xvii(h,i,e) 2,610,621 (2,570,240) 40,381

Contingency reserve xv 1,137,642 1,137,642

Total Equity 6,670,812 (9,747) (2,475,737) 4,185,328

Total liabilities & equity 8,238,384 71,419 (2,051,669) 6,258,134

-


NEM 2012

Reconciliation of Company Equity as at 1 January, 2011LocalGAAP at31Dec.2010 Reclassification Remeasu

IFRS at IJan. 2011

Note N'000 N'000 N'000 N'000Cash and Bank a 251,186 (251,186) -Cash and cash equivalnets i (a,b) 1,733,239 1,733,239Short-term deposit b 1,816,848 (1,816,848)Debtors and prepayment c 2,122,559 (2,122,559) -Financial assets at fair valuethrough profit or loss ii (d) 773,802 773,802Available for sale iii (b,d) 571,798 106,785 678,583Held to maturity financialassets iv (d) 23,500 23,500Trade Receivable vi-c 2,011,348 (1,501,824) 509,524Reinsurance assets vii- c 52,646 78,850 131,496Deferred acquisition costs vii 164,280 164,280Investment in a subsidiary viii 175,396 175,396Other Receivables &Prepayments v-c 58,565 58,565Long term investments d 1,209,700 (1,209,700) -Investment property ix(e) 388,935 94,185 483,120Statutory deposit x 320,000 320,000

-Intangible Assets x(e) 13,500 13,500Fixed Assets e 700,471 (700,471) -Property & Equipment xi(e) 566,865 566,865Total Assets 6,973,979 (25,921) (1,316,189) 5,631,870

-Liabilities -Creditors and accruals f 12,745 (12,745) -Trade Payable xii(f) 12,745 12,745Insurance funds g 1,048,241 (1,048,241) -Insurance Contract Liabilities xiii(g) 1,048,241 130,983 1,179,224Taxation 129,226 129,226Deferred taxation 108,992 108,992Gratuity xv - -Total Liabilities 1,299,204 - 130,983 1,430,187

-Equity -Share capital 2,640,251 2,640,251Share premium 272,551 272,551Capital reserve h 256,099 (256,099) -General reserve i 1,653,378 (1,653,378) -Available for sale reserve xvi 106,785 106,785Retained earnings xvii(h,i,e) 1,883,556 (1,553,957) 329,599Contingency reserve 852,496 852,496Total Equity 5,674,775 (25,921) (1,447,172) 4,201,682Total liabilities & equity 6,973,979 (25,921) (1,316,189) 5,631,869


NEM 2012

Reconciliation of Group Comprehensive Income for the year ended 31st Dec.2011

Note

Local GAAP at31 Dec. 2011 Reclass. Remeasu.

IFRS at 31Dec. 2011

N'000 N'000 N'000 N'000

Gross premium wrtten 8,381,196 8,381,196

Increase in unearned premium i (375,025) (188,903) (563,928)

Gross Premium Income 8,006,171 7,817,268

Reinsurance cost (787,528) (787,528)

Net premium earned 7,218,643 7,029,740

Commission received 136,698 136,698

Total income 7,355,341 - 7,166,438

Gross benefit and claims paid -

Claims expenses ii(a,b,c) 1,721,568 89,120 1,810,688

Underwriting expenses iii(d,e) 2,098,763 2,098,763

Direct claim paid a 1,696,263 (1,696,263) -

Increase in outstanding claim b 62,164 (62,164) -

Gross claim incurred 1,758,427 (1,758,427) 3,909,451

Reinsurance recovery c (36,859) 36,859 -

Net claim incurred 1,721,568 (1,721,568) 3,909,451

Acquisition expenses d 1,390,289 (1,390,289) -

Maintenance expenses e 722,240 (722,240) -

Total deduction 3,834,097 (3,834,097) 3,909,451

Underwriting profit 3,521,244 3,834,097 3,256,987

-

Fair value (loss)/gain iv(g,h) (303,924) (303,924)

Impairments on trade receivables v(f) (978,954) (679,462) (1,658,416)

Investment income 202,137 202,137

Other income vii 66,258 7,162 73,420

3,789,639 1,570,204

Administrative expenses viii (1,068,084) 16,142 (113,033) (1,164,975)

Impaiment to intagible assets vi (18,125) (18,125)

Dimunition in value of quoted investments g (266,339) 266,339 -

Provision for bad and doubtful debts f (978,954) 978,954 -

Profit before tax 1,476,262 387,104

Taxation (132,383) (1,427) (133,810)

1,343,879 253,294

Profit for the year 1,343,879 - 253,294

Other comprehensive income -

Avaialable for sales ix (12,282) (12,282)

Total comprehensive income for the year - 1,343,879 - 241,012


NEM 2012

Reconciliation of Company Comprehensive Income for the year ended 31st Dec.2011

Note

Local GAAP at 31Dec. 2011 Reclass. Remeasu.

IFRS at 31 Dec.2011

N'000 N'000 N'000 N'000

Gross Premium Written 8,178,886 8,178,886

Increase in unearned premium i (400,679) (158,903) (559,582)

Gross Premium Earned 7,778,207 7,619,304

Reinsurance cost (745,599) (745,599)

Net premium earned 7,032,608 6,873,705

Commission received 128,098 128,098

Total income 7,160,706 - 7,001,803

Gross benefit and claims paid -

Claims expenses ii(a,b,c) 1,706,454 89,119 1,795,573

Underwriting expenses iii(d,e) 2,075,359 2,075,359

Direct claim paid a 1,671,429 (1,671,429) -

Increase in outstanding claim b 71,349 (71,349) -

Gross claim incurred 1,742,778 (1,742,778) 3,870,932

Reinsurance recovery c (36,324) 36,324 -

Net claim incurred 1,706,454 (1,706,454) 3,870,932

Acquisition expenses d 1,366,885 (1,366,885) -

Maintenance expenses e 708,474 (708,474) -

Total deduction 3,781,813 (3,781,813) 3,870,932


Fair value (loss)/gain iv(g,h) (303,924) (303,924)

Impairments on trade receivables v(f) (963,038) (637,102) (1,600,140)

Impairments on intangible assets vi (18,125) (18,125)

Investment income 183,606 183,606

Other income vii 66,258 66,258

3,628,757 1,458,546

Administrative expenses viii (976,151) 16,174 (113,033) (1,073,010)

Dimunition in value of quoted investments g (266,339) 266,339 -

Provision for bad and doubtful debts f (963,038) 963,038 -

Profit before tax 1,423,229 385,536

Taxation (125,583) (125,583)

1,297,646 - 259,953

Profit for the year 1,297,646 - - 259,953

Other comprehensive income

Avaialable for sales ix

(12,282) (12,282)

Total comprehensive income for the year - 1,297,646 - 247,671


NEM 2012

Breakdown of IFRS reclassification and remeasurement of Statement of financial position

2011 2010 2011 2010

N'000 N'000 N'000 N'000

a Cash and Bank

Cash and Bank as per GAAP 305,854 284,820 298,352 251,186

Reclassified to cash and cash equivalent (305,854) (284,820) (298,352) (251,186)

- - - -

b Short Term Deposits

Short Term Deposits as per GAAP 2,277,264 1,823,336 2,228,412 1,816,848

Reclassified to Available for sale (155,389) (334,795) (155,389) (334,795)

Recalssified to Cash and Cash Equivalent (2,121,875) (1,488,541) (2,073,023) (1,482,053)

- - - -

c Debtors and Prepayment

Debtors & Prepayments as per GAAP 3,033,829 2,184,195 2,974,317 2,122,559

Reclassified to Trade Receivable (2,743,286) (2,055,791) (2,708,406) (2,011,348)

Reclassified to Reinsurance assets (83,103) (61,413) (73,057) (52,646)

Reclassified to receivable & prepayments (207,440) (66,991) (192,854) (58,565)

- - - -

d Long Term Investments

Long term Investments as per GAAP 816,607 1,034,304 992,003 1,209,700

Reclassified to Financial assets at fair value (469,879) (773,802) (469,879) (773,802)

Held tomaturity (31,508) (23,500) (31,508) (23,500)

Reclassified to available for sale (315,220) (237,002) (315,220) (237,002)

Investment in susidiary (175,396) (175,396)

- - - -

IAS 32, 39 and IFRS 7 financial instruments

of accounting policy.

2011 2010 2011 2010

N'000 N'000 N'000 N'000

e Fixed Assets

As per NGAAP 841,886 731,824 807,607 700,471

Reclassified to retained earninigs (9,747) (25,921) (9,747) (25,921)

Reclassified to Intangible assets (32,000) (13,500) (32,000) (13,500)

Reclassified to investment propeties (94,185) (94,185) (94,185) (94,185)

Reclassifiedr to property and equipment (705,954) (598,218) (671,675) (566,865)

-

- - - -

The amount of N94,185,000 reclassified to investment property represents the cost of land at Oniru which was wrongly debited to land

and building. During the conversion, it was reclassified to investment property in order to correct and put in proper shape.

Group Company

Under IFRSs, financial assets and liabilities are required to be classified as held-for-trading, at fair value through profit or loss,

fair value through equity, loans and receivables, held-to-maturity, available for sale and other financial assets and liabilities.

Financial instruments are measured based on their classification. Local GAAP does not require such classification of financial

instruments and measurment. The basis of Valuation of individual instrument is provided in the accompanying statement


NEM 2012

Breakdown of IFRS reclassification and remeasurement of Statement of financial positionCont’d

2011 2010 2011 2010

N'000 N'000 N'000 N'000

f Creditors and accruals

As per NGAAP 37,962 14,814 21,796 12,745

Reclassified to trade payable (37,962) (14,814) (21,796) (12,745)

- - - -

g Insurance Fund

As per NGAAP 1,564,325 1,127,136 1,520,271 1,048,241

Reclassified to Insurance Contract Liabilities (1,564,325) (1,127,136) (1,520,271) (1,048,241)

- - - -

h Capital Reserves

Capital reserve as per GAAP 218,515 256,099 218,515 256,099

Reclassified to retained earnigs (256,099) (256,099) (256,099) (256,099)

Reclassified to fair value loss 37,584 37,584

- - - -

i General Reserve

As per NGAAP 2,421,790 1,632,262 2,401,853 1,653,378

Reclassified to retained earnings (2,421,790) (1,632,262) (2,401,853) (1,653,378)

- - - -

j Taxation

As per NGAAP (75,670) (81,166)

Reclassified to other receivables and prepayment 75,670 81,166

- - - -

i Cash and Cash Equivalent

2011 2010 2011 2010

N'000 N'000 N'000 N'000

Reclassified from Cash and Bank 305,854 284,820 298,352 251,186

Reclassified from Short Term Deposit 2,121,875 1,488,541 2,073,023 1,482,053

2,427,729 1,773,361 2,371,375 1,733,239

ii Financial assets at fair value through profit or loss

Reclassified from Long Term Investments 469,879 773,802 469,879 773,802

- -

469,879 773,802 469,879 773,802

iii Available for sale

Reclassified from Short term investment 155,389 334,795 155,389 334,795

Reclassified from Long term investments 315,220 237,002 315,220 237,002

Fair Value gain on unquoted investment 94,503 106,785 94,503 106,785

565,112 678,582 565,112 678,582

Adoption of IFRS resulted in a net gain of N94,503,000 (2010: N106, 785,000). The gain arose from available for sale investments thatwere carried at cost unsder NGAAP. Under IFRS , these investments are supposed to be fair valued. These investments were unquotedbut average traded price was used.

The net impacts of application of IFRSs on cash and cash equivalent of the group is an increase in cash and cash equivalent by

N2.12billion parent:(N2.07 billion) and N1.488billion (parent: N1.482billion) as at 31st December 2011 and 1 January 2011 respectively.


NEM 2012


2011 2010 2011 2010

iv Held to maturity financial assets N'000 N'000 N'000 N'000

Reclassified from Long Term Investments 31,508 23,500 31,508 23,500

v Other receivables & Prepayments

Reclassified from debtors & prepayments 207,440 66,991 192,854 58,565

Reclassified from taxation 75,670 81,166

Remeasurement adjustment (1,427)

281,683 66,991 274,020 58,565

vi Trade Receivable

Reclassified from Debtors and Prepayments 2,743,286 2,055,791 2,708,406 2,011,348

Impairment to trade receivable (2,167,520) (1,516,148) (2,138,926) (1,501,824)

575,766 539,643 569,480 509,524

vii Reinsurance Asset

Reclassified from Debtors and prepayments 83,103 61,413 73,057 52,646

Remeasurement adjustment 10,879 78,850 10,879 78,850

93,982 140,263 83,936 131,496

viii Deferred Acquisition Cost

As per NGAAP 247,923 184,468 228,758 164,280

Remeasurements - - - -

As per IFRS 247,923 184,468 228,758 164,280

ix Investment Properties

As per NGAAP 388,935 388,935 388,935 388,935

Reclassified from fixed assets 94,185 94,185 94,185 94,185

As per IFRS 483,120 483,120 483,120 483,120

Under Local GAAP, Investment property are measured at lower of cost and net realisable amount. Under IFRS, investment

property are measured at fair value with changes in fair value recognized in the profit or loss account. The impact of changes

in investment properties from the Local GAAP to IFRS balance were mainly attributable to the fair value loss of N23,307,000

in 2012 financial statements which resulted in fair value of N459, 813,000. This was charged to income statement.

x Intangible Assets

Reclassified from fixed assets 32,000 13,500 32,000 13,500

Impairment to intangible assets (18,125) - (18,125) -

Written off to retained earnings - - -

As per IFRS 13,875 13,500 13,875 13,500

xi Property and Equipment

Reclassified from Fixed assets 705,954 598,218 671,675 566,865

Depreciation adjustment (32) - - -

As per IFRS 705,922 598,218 671,675 566,865

In 2011, net tax of N74,243,000 represents the backduty audit which occassioned the debit balance on income tax. This was reclassfied to recoverableand prepayments under other receivables and prepayments.

The increase in the provision was due to the determination of the same using different basis under NGAAP and IFRS . Under NGAAP theprovision was lower as management assessed debtors outstanding for 90 days and below as fully performing while 50% was provided foron debtors outstanding from 90 to 180 days and trade debtors outstanding for over 180 days were provided in full. This was contrary tothe provision under IFRS where two categories of debtors were provided for , and these were :

Doubtful trade receivables for which insurance brokers and clients failed to meet their premium obligations when due, the policies onwhich the premiums were due had expired or had been cancelled

Uncollectable trade receivables being those on which the policies had been cancelled or expired, the clients were no longer in operationand were long outstanding, ie for more than 365 days.


NEM 2012


2011 2010 2011 2010

xii Trade payable N'000 N'000 N'000 N'000

Reclassified from creditors & accruals 37,962 14,814 21,796 12,745As per IFRS 37,962 14,814 21,796 12,745

xiii Insurance contract liabilities

Reclassified from insurance fund 1,564,325 1,127,136 1,520,271 1,048,241

Remeasurements 371,036 130,983 311,036 130,983As per IFRS 1,935,361 1,258,119 1,831,307 1,179,224

xiv Gratuity

Transfer to retained earnigs 113,033 - 113,033 -

xv Contingency Reserve

NGAAP balance 1,140,741 850,415 1,137,642 852,496

Reclassified from retained earnings 6,374 - - -

1,147,115 850,415 1,137,642 852,496

xvi Available for sale Reserve

Fair value gain on unquoted investment 94,503 106,785 94,503 106,785

xvii Retained Earnings

Reclassified from General reserve 2,421,790 1,632,262 2,401,853 1,653,378

Reclassified from capital reserve 256,099 256,099 256,099 256,099

Reclassified to fair value through profit or loss (37,584) (37,584)

Reclassified from fixed assets (9,747) (25,921) (9,747) (25,921)

Adjustment to contigency reserve (6,374)

Adjustment to Insurance contract liabilities

Provsion for gratuity (113,033) - (113,033) -

Impairment of intagible assets (18,125) (18,125)

Tax adjsutment (1,427)

Depreciation adjustment (32)

Impairment for trade receivable (2,167,520) (1,508,986) (2,138,926) (1,501,824)

Adjustment for reinsurance assets 10,880 78,850 10,880 -

Adjustment from insurance contract liabilities adequacy test (341,036) (130,983) (311,036) -

(6,109) 301,321 40,381 381,732

Unrealised net gains during the period N94,503,000 (2010: N106,785,000). This was taken to OCI as it relates to fair value adjustmentson the investments in the MTN shares which are classified as available for sale. Fair value adjustments on available for sale investmentsare recognised in OCI.

Under Local GAAP, the company operates a gratuity plan and recognised costs related to it on “pay-as-you-go basis”. Under IFRS, theplan qualifies as a defined benefit plan and is recognised and measured on an actuarial basis using Project Unit Credit Method (PUCM).At the date of transition to IFRS, the defined benefit obligation (DBO) which was actuarially determined at N113,033,000 was charged toretained earnings with a corresponding figure being recognised in retirement benefit obligations.

Under local GAAP, the company carries out periodic valuation of insurance contract liabilities in accordance with the Insurance Act of2003. IFRS requires regular assessment of liability adequacy test at the end of each reporting period whether the recognised insuranceliabilities are adequate using current estimates of future cash flows under the insurance contract liabilities. IFRS requires any deficiencyidentified to be recognised in profit or loss. At the date of transition to IFRS, this test was carried out by afirm of professional actuarist-HR Nigeria Limited who also separated investment contract liabilities embedded in insurance contract. This resulted in increase ofN311,036,000 (2010: Nill) and insurance liabilities increase accordingly. The increase had been recognised against income under grosschange in contract liabilities with corresponding increase in insurance contract liabilities. N1,048,241 insurance contract liabilities in2010 was transferred from insurance fund to insurance contract liabilities.


NEM 2012

Breakdown of IFRS Reclassification & Remeasurement Adjustment of Statement ofComprehensive Income

2011 2011Group Company

a Direct Claim Paid N'000 N'000As per NGAAP 1,696,263 1,671,429Reclassified to claim expenses (1,696,263) (1,671,429)

- -

b Increase in Outstanding CaimAs per NGAAP 62,164 71,349Reclassified to claim expenses (62,164) (71,349)

- -

c Reinsurance RecoveryAs per NGAAP 36,859 36,324Reclassified to claim expenses (36,859) (36,324)

- -

d Acquisition ExpenseAs per NGAAP 1,390,289 1,366,885Reclassified to Underwriting Expenses (1,390,289) (1,366,885)

- -

e Maintenance ExpenseAs per NGAAP 722,240 708,474Reclassified to Underwriting Expenses (722,240) (708,474)

- -

f Provision for Bad Debt 978,954 963,038Reclassified to Impairment for Doubtful Debt (978,954) (963,038)

- -

g Diminution in value of quoted investmentsAs per NGAAP 266,339 266,339Reclassified to fair value loss (266,339) (266,339)

- -

i Increase in unearned premiumAs per NGAAP 375,025 400679Actual adjustment on unearned premium 158,903 158,903Adjustment to subsidiary unearned premium 30,000As per IFRS 563,928 559,582

ii Claims expensesReclassified from Direct claim paid 1,696,263 1,671,429Reclassified from increase in outstanding claim paid 62,164 71,349Reclassified to Reinsurance asset (36,859) (36,324)Remeasurement 89,120 89,119As per IFRS 1,810,688 1,795,573


NEM 2012

Breakdown of IFRS Reclassification & Remeasurement Adjustment of Statement ofComprehensive Income

2011 2011Group CompanyN'000 N'000

iii Underwriting expensesReclassified from acquisition expenses 1,390,289 1,366,885Reclassified from maintenance expenses 722,240 708,474Reversal of over charged underwriting expenses (13,766) -

As per IFRS 2,098,763 2,075,359

iv Fair value lossReclassified from Diminution of Quoted Investment 266,339 266,339Reclassified from capital reserve 37,585 37,585

As per IFRS 303,924 303,924

v Impairments on trade receivablesReclassified from Provision for Bad Debt 978,954 963,038Remeasurement 637,102 637,102Adjustment on subsidiary trade receivable 42,360

As per IFRS 1,658,416 1,600,140

vi Impairment on intangible assetsImpairment to intangible assets 18,125 18,125

vii Other incomeAs per NGAAP 66,258 66,258Reversal of other income understated 7,162 -As per IFRS 73,420 66,258

viii Administrative ExpensesAs per NGAAP 1,068,084 976,151Reclassified from Gratuity 113,033 113,033Reversal of depreciation on intangible assets (3,700) (3,700)Reversal of depreciation on investment property (12,474) (12,474)Depreciation adjustment 32 -

As per IFRS 1,164,975 1,073,010

ix Available for sale 12,282 12,282


NEM 2012

Explanatory Notes to Reconciliation of Equity and Total Comprehensive Income (Cont’d)

income statement. At the date of transition to IFRS, this test was carried out and thedeficiency has been recognised in income statement.


NEM 2012

Statement of Value Added- Group2012 2011

N'000 % N'000 %

Gross Premium Written:

Local 9,652,556 8,381,196

Foreign -

Other Income:

Local 496,549 275,557

Foreign -

10,149,105 8,656,753

Bought in Matrial and Services:

Local (9,115,821) (7,923,281)

ForeignValue Added 1,033,284 100 733,472 100

Applied as follows:

Employees

Salaries and other employees benefits 492,383 47.65 512,197 69.83

Provider of Capital

Minority Interest - - - -

Government

Taxation 225,282 21.80 133,810 18.24

Retention and Expansion

Depreciation 124,331 12.03 98,196 13.39

Contigency reserves 287,078 27.78 296,700 40.45

Retained profits for the year (95,791) 9.27- (307,431) 41.91-

Value Added 1,033,284 100.00 733,472 100.00

Value added represents the additional wealth the company has been able to create by its own and its employees'efforts. This statement shows the allocation of the wealth between employees, shareholders, government and thatretained for the future creation of more wealth.


NEM 2012

Statement of Value Added- Company

2012 2011

N'000 % N'000 %

Gross Premium Written:

Local 9,246,217 8,178,886

Foreign -

Other Income:

Local 478,655 249,864

Foreign -

9,724,872 8,428,750

Bought in Matrial and Services:

Local (8,786,389) (7,746,488)

Foreign

Value Added 938,483 100 682,262 100

Applied as follows:

Employees

Salaries and other employees benefits 436,456 46.51 472,125 69

Government

Taxation 218,674 23.30 125,583 18

Retention and Expansion

Depreciation 113,303 12.07 88,626 13

Contigency reserves 279,478 29.78 285,146 42

Retained profits for the year (109,428) 11.66- (289,218) (42)

Value Added 938,483 100.00 682,262 100

Value added represents the additional wealth the company has been able to create by its own and its employees'efforts. This statement shows the allocation of the wealth between employees, shareholders, government and thatretained for the future creation of more wealth.


NEM 2012

Three Year financial Summary- Group31 Dec.

201231 Dec.

201131 Dec.

2010Assets N'000 N'000 N'000Cash and Cash Equivalents 3,125,679 2,427,729 1,773,360Trade Receivable 981,032 575,766 546,805Reinsurance Assets 129,501 93,983 140,264Deferred Acquisition Cost 325,944 247,923 184,468Financial Assets 1,350,967 1,066,499 1,475,884Investment Properties 459,813 483,120 483,120Intangible Assets 27,085 13,875 13,500Property and Equipment 828,586 705,922 598,215Other Receivables and Prepayments 237,634 281,683 66,990Statutory Deposit 342,879 414,839 399,759Total Assets 7,809,120 6,311,338 5,682,364

LiabilitiesTrade Payables 192,094 37,966 14,808Current Tax Payable 21,949 - 129,122Deferred Tax Liability 106,671 106,671 108,992Retirement Benefit Obligations 160,205 113,033 -Insurance Contract Liabilities 3,027,556 1,905,361 1,258,119Total liabilities 3,508,476 2,163,031 1,511,041

Net Assets 4,300,645 4,148,308 4,171,323

EquityIssued Share Capital 2,640,251 2,640,251 2,640,251Share Premium 272,551 272,551 272,551Other Reserves-employee benefit actuarial surplus 2,141 - -Available-For-Sale Reserve 53,411 94,503 106,785Contingency Reserve 1,434,193 1,147,115 850,415Retained Earnings (101,901) (6,110) 301,321Shareholders' Fund 4,300,646 4,148,310 4,171,323

Gross Premium Written 9,652,556 8,381,196Gross premiums income 9,335,182 7,817,268Net underwriting income 9,130,771 7,166,438Other Revenue 496,549 275,557Total Revenue 9,627,321 7,441,995Claims paid (2,934,435) (1,810,688)Impairment (1,960,905) (1,676,541)Other Expenses (4,051,387) (3,567,662)Total Benefits, Claims and Other Expenses (8,946,727) (7,054,891)Profit Before Tax 680,594 387,104Income tax expense (225,282) (133,810)Profit For the Year 455,312 253,294Other Comprehensive Income for the year, net of tax (38,951) (12,282)Total Comprehensive Income for the year, net of tax 416,361 241,012Basic Earnings Per Share 9 5


NEM 2012

Three Year financial Summary- Company31 Dec.2012

31 Dec.2011

31 Dec.2010

Assets N'000 N'000 N'000Cash and Cash Equivalents 2,947,856 2,371,375 1,733,238Trade Receivable 887,009 569,480 509,524Reinsurance Assets 92,512 83,937 131,497Deferred Acquisition Cost 298,151 228,758 164,280Financial Assets 1,350,967 1,066,499 1,475,884Investment in Subsidiary 175,396 175,396 175,396Investment Properties 459,813 483,120 483,120Intangible Assets 27,085 13,875 13,500Property and Equipment 797,208 671,675 566,865Other Receivables and Prepayments 224,150 274,021 58,565Statutory Deposit 320,000 320,000 320,000Total Assets 7,580,148 6,258,136 5,631,869

LiabilitiesTrade Payables 163,286 21,798 12,744Current Tax Payable 14,164 - 129,226Deferred Tax Liability 106,671 106,671 108,992Retirement Benefit Obligations 160,205 113,033 -Insurance Contract Liabilities 2,819,395 1,831,307 1,179,225Debt Security in IssueTotal liabilities 3,263,721 2,072,809 1,430,187

Net Assets 4,316,428 4,185,328 4,201,682EquityIssued Share Capital 2,640,251 2,640,251 2,640,251Share Premium 272,551 272,551 272,551Other Reserves-employee benefit actuarial surplus 2,141 94,503 106,785Available-For-Sale Reserve 53,411Contingency Reserve 1,417,120 1,137,642 852,496Retained Earnings (69,047) 40,381 329,599Shareholders' Fund 4,316,427 4,185,328 4,201,682

Gross Premium Written 9,246,217 8,178,886Gross premiums income 9,043,882 7,619,304Net underwriting income 8,865,670 7,001,803Other Revenue 478,655 249,864Total Revenue 9,344,325 7,251,667Claims paid (2,879,691) (1,795,573)Impairment (1,960,905) (1,676,541)Other Expenses (3,850,979) (3,452,292)Total Benefits, Claims and Other Expenses (8,691,575) (6,924,406)Profit Before Tax 652,749 327,261Income tax expense (218,674) (125,583)Profit For the Year 434,075 201,678Other Comprehensive Income for the year, net oftax (38,951) (12,282)Total Comprehensive Income for the year, net oftax 395,124 189,396Basic Earnings Per Share 8 5

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