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NEM INSURANCE PLC REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2014

NEM Insurance 2014

Contents Page

Corporate Information 2

Results at a Glance 5

Report of the Directors 6

Statement of Directors’ Responsibilities 18

Certification Pursuant to Section 60 (2) of Investment and Securities Act No. 29 of 2007 19

Report of the Independent Auditors 20

Report of the Audit Committee 21

Statement of Significant Accounting Policies 22

Statement of Financial Position 49

Statement of Comprehensive Income 50

Statement of Change in Equity 51

Statement of Cash Flows 53

Segment Information 54

Segment Income Statement 55

Notes to the Financial Statements 56

Segments Report 75

Claim Development Table 77

Financial Risk Management Policy 83

Capital Management Policy 98

Value Added Statement 100

Group Financial Summary 102

Parent Financial Summary 103


NEM Insurance 2014

Corporate Information

Directors Chief Adewale Teluwo Chairman

Mr. Tope Smart Group Managing Director/CEO

Mrs. Susan Abisola Giwa-Osagie DMD (WEF June 2014)

Mr. Alani Olojede Executive Director (WEF June 2014)

Mrs. Yinka Aletor Director

Mr. Olusesan Adekunle Director

Dr. Fidelis Ayebae Director

Company Secretary Mrs. Omolara Oyetunde

NEM Insurance Plc

138/146, Broad Street

Lagos

Registered Office 138/146 Broad Street

Lagos

FRCN Number FRC/2012/0000000000249

Registration Number 6971

Corporate Head Office NEM House

199, Ikorodu Road

Obanikoro, Lagos

Registrars Africa Prudential Registrars Plc

Registrars’ Department

220B, Ikorodu Road

Palmgrove

Lagos

Tel: 01-841153, 7301004

E-mail: info@africaprudential registrars.com

Bankers Access Bank Plc

Diamond Bank Plc

Ecobank Nigeria Limited

First Bank of Nigeria Limited

First City Monument Bank Plc

GT Bank Plc

Keystone Bank Plc

Standard Chartered Bank Limited

Sterling Bank Plc

United Bank for Africa Plc

Zenith Bank Plc

Auditors SIAO (Chartered Accountants) 18b, Olu Holloway Road

Off Alfred Rewane Road

Falomo- Ikoyi

P.O.Box 55461, Falomo

Ikoyi, Lagos.

Tel: +234 01 463 0871-2

Website: www.siao-ng.com

E-mail: [email protected]

http://www.siao-ng.com/

mailto:[email protected]


NEM Insurance 2014

Corporate Information (Cont’d)

Solicitors Koya & Kuti Solicitors

5th Floor, 3, Ajele Street

Lagos.

Sola Abidakun & Co

9th Floor, UBA House

57, Marina

Lagos.

Reinsurers African Reinsurers Corporation Continental Reinsurance Corporation

WAICA Reinsurance Pool

Nigerian Reinsurance Corporation

Aveni Reinsurance

Branch Networks

Subsidiary C587/13, Olu Obasanjo Highway

Accra Girls Area

P.M.B AN, Accra

Ghana

Tel: 021-220797,021-220798

Managing Director, Iyiola Saraki

Mobile No: 08033143823

Abuja - Garki Kano

10, Onitsha Crescent 3rd Floor, Union Bank Building

Off Gambiya Street 37, Niger Street

Area II, Garki, Abuja P.O. Box 1185, Kano

Branch Manager: Michael A. Giwa Tel: 064-649374

Tel:09-6714952, 5233083,7805440 Branch Manager: Peter I. Agono

Mobile Nos: 08033208141 Mobile No: 08035923740

070228243127, 07029909242

Abuja – Wuse Kaduna

Plot 960, Ahmadu Bello Way Ground Floor, Turaki Ali House

Wuse II, Abuja 3, Kanata Road

Branch Manager: Mr. Martins Ilegoma P.O Box 822, Kaduna

Mobile Nos: 08077284843 Tel: 062-217683

08078153184, 08037020262 Branch Manager: Eyitayo Ogboyomi

Mobile Nos: 07028243118

Akure Jos 3rd Floor, BIO Building Alagabaka 10, Rwang Pam Street

Akure, Ondo State P.O. Box 1261

Tel: 034-215829 Jos, Plateau State

Branch Manager: Kehinde Agbelade Tel: 073-454216

Mobile No: 08033509419 Branch Manager: Thomas Nkom

Mobile No: 08098376292

Tel:09-6714952


NEM Insurance 2014

Corporate Information (Cont’d)

Apapa Warri

3rd Floor, Commercial Road 57, Effurun Sapele Road

Apapa, Lagos Effurun, Delta State

Tel: 01-7375546, 07028442653 Branch Manager: Kayode Arimoro

Branch Manager: Uzor Enubuzor Mobile No: 08034221374

Mobile Nos: 08059301673, 08028968842 08023288188,07029554541

07029096131

Calabar Lagos Mainland

2nd Floor, 26, Etta-Agbor Road 284, Ikorodu Road

Calabar Anthony Lagos

Cross River State Tel: 01-8171844, 01-4824737, 01-2710060

Tel No: 087-239571 Branch Manager: Andrew M. Ikekhua

Branch Manager: Nkume Omoghogie Mobile Nos: 08076175287, 08023123006

Moblie Nos: 08054642551 07028243123

08033542048

Ibadan Onitsha

3rd Floor, Broking House 2nd Floor, (AIB) Building

1, Alhaji Jimoh Odutola Street 107, Upper New Market Road, Onitsha

PMB 5328, Ibadan Tel: 046-410736

Oyo State Branch Manager: Cyracus Akinjobi

Tel: 02-2411992 Mobile Nos: 08033457426, 07029219983

Branch Manager: Rufus Olumide

Mobile Nos: 08033463697

08055899976, 07028243124

Osogbo Port Harcourt

1st Floor, Former Afribank Building House 2, Road 2

Opposite Fakunle Comprehensive High School Circular Road, Residential Estate

Fakunle, Gbongan/Ibadan Road Port Harcourt, Rivers State

Osogbo, Osun Sate Tel: 084-233513

Tel: 035-214844 Branch Manager: Yemi Mayadenu

Branch Manager: Victor Eweme Mobile Nos: 08063670020,

Mobile Nos: 08023276477, 08033698967 08052653797

Vision

To be the preferred choice of the insuring public.

Mission

To build a customer-satisfying Insurance Institution that is passionate about adding value to the

interests of all stakeholders.

Core Values

Discipline

Integrity

Humility

Excellence

Empathy


NEM Insurance 2014

Result at a Glance

31 Dec. 2014

31 Dec. 2013

Change

Financial Position N'000

N'000

N'000 %

Cash and cash equivalents 3,446,995

3,865,965

(418,970) -11

Trade receivable 209,493

496,007

(286,514) -58

Financial assets 3,161,059

2,624,638

536,422 20

Reinsurance Asset 717,121

65,496

651,624 995

Property and equipment 2,213,264

1,284,191

929,073 72

Other receivables and prepayments 137,232

278,712

(141,480) -51

Deferred acquisition cost 482,385

513,387

(31,002) -6

Investment properties 485,830

468,974

16,856 4

Statutory deposit 340,112

349,200

(9,088) -3

Intangible asset 5,627

18,851

(13,224) -70

Income tax credit -

80,456

(80,456)

Total Assets 11,199,118

10,045,877

1,153,242 11

Insurance contract liabilities 4,660,059

4,787,052

(126,993) -3

Trade payables 9,733

48,510

(38,777) -80

Other payables 175,213

167,874

7,339 4

Book overdraft 4,364

9,848

(5,484) -56

Retirement benefit obligations 187,848

170,838

17,009 10

Income tax liability 15,212

-

15,212

Deferred tax liability 280,913

166,062

114,851 69

Total Liabilities 5,333,341

5,350,184

(16,843) 0

Issued share capital 2,640,251

2,640,251

- 0

Share premium 272,551

272,551

- 0

Contingency reserve 1,995,456

1,696,986

298,470 18

Retained earnings 560,109

30,366

529,743 1745

Shareholders Fund 5,865,777

4,695,693

1,170,084 25

Comprehensive Income Gross premiums 9,836,596

8,933,345

903,251 10

Net premiums 8,545,534

7,424,740

1,120,795 15

Other revenue 721,215

858,255

(137,040) -16

Total Revenue 9,266,749

8,282,995

983,755 12

Claims paid (2,655,818)

(3,070,271)

414,454 -13

Other expenses (4,844,159)

(4,668,314)

(175,845) 4

Total Benefits, Claims and Other Expenses (7,499,977)

(7,738,585)

238,608 -3

Profit before tax 1,766,772

544,410

1,222,362

Income tax expense (241,451)

(149,350)

(92,101)

Profit For the Year 1,525,321

395,060

1,130,261 Other Comprehensive Income for the year, net of tax 341,870

(12)

341,882

Total comprehensive income for the year net of tax 1,867,191

395,048

1,472,143

Basic Earnings Per Share (Kobo) 29

7


NEM Insurance 2014

REPORT OF THE DIRECTORS

The Directors present their annual reports on the affairs of NEM Insurance Plc together with the

financial statements and auditor’s reports.

1. LEGAL FORM

The Company was incorporated in 1970 as a Nigerian Company in accordance with the

Companies Act 1968. The Company became listed on the Nigerian Stock Exchange in 1989

following its privatization by the Federal Government of Nigeria.

2. PRINCIPAL ACTIVITIES

The Company is engaged in General Insurance business which includes marine, motor

vehicle, fire etc.

2.1 SUMMARY OF THE RESULT

Comprehensive Income 2014

N’000

Gross premiums 9,836,596

Net premiums 8,545,534

Other revenue 721,215

Total Revenue 9,266,749

Claims paid (2,655,818)

Other expenses (4,844,159)

Total Benefits, Claims and Other Expenses (7,499,977)

Profit before tax 1,766,772

Income tax expense (241,451)

Profit For the Year 1,525,321

Other Comprehensive Income for the year, net of tax 341,870

Total comprehensive income for the year net of tax 1,867,191

Basic Earnings Per Share (Kobo) 29


NEM Insurance 2014

Directors Report (Cont’d)

3. CORPORATE GOVERNANCE REPORT

Introduction

The business of NEM Insurance Plc is conducted under a corporate governance structure that

incorporates the Board, the Committees, and a functional Management System with the

Board as the apex decision making body. This is in accordance with the “Code of Good

Corporate Governance for the Insurance Industry in Nigeria” and Best Practice. The Company

adheres to a high standard of ethics, integrity and professionalism as a demonstration of its

avowed commitment to excellent corporate governance practices. At NEM Insurance Plc, we

have ensured that our business activities are implicitly transparent.

A summary of the key components of our Corporate Governance System is provided

hereunder.

The Board

The Board of the Company is responsible for establishing the policy framework that would

ensure that the Company fully discharges its legal, financial as well as regulatory

responsibilities. The Board is ultimately responsible to deliver sustainable value to the

shareholders. The Board monitors the performance of the Company, monitors the

effectiveness of the governance structure under which it operates, renders the accounts of its

stewardship of the organization’s resources to the shareholders.

The Board of Directors of the Company is composed of a mix of non-executives and

executives whereby the number of non-executives exceeds the executives while the position of

the Chairman of the Board is clearly delineated from the Chief Executive Officer.

The Chairman

The Chairman of NEM Insurance Plc was duly appointed. The Chairman’s primary role is to

ensure that the Board carries out its governance role in the most effective manner. The

Chairman manages the operations of the Board effectively in order to ensure that members

make concrete contributions towards the decisions of the Board and that the Board operates

in harmony.

The Chief Executive Officer (CEO)

The CEO has the overall responsibilities for developing, implementing and monitoring the

strategic 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 in

order to ensure profitability of its operations and that all significant matters affecting the

Company are brought to the attention of the Board.

Independent Director

The Board appointed one independent director who has remained truly independent since his

appointment.

Annual Board Appraisal

In accordance with the requirement of the NAICOM Code, the Board commissioned New

Version Consultants Limited, 5, Lanre Da-Silva Close, Dolphin Extension, Ikoyi, Lagos to

conduct the appraisal exercise of its performance.


NEM Insurance 2014

Director Report (Cont’d)

Activities of the Board

The Board met four times during the year (27th May, 30th July, 12th November and 16th

December, 2014) to discuss critical issues affecting the organization and performs other

responsibilities that fall within its purview as provided in the Company’s Article of Association

and by other relevant regulatory authorities. Meetings were well attended with sufficient

notice given well in advance of the meetings.

Composition of the Board/Schedule of Attendance at Meetings

S/N Name of Director Status No of Meetings

Attended per

Director

1.

2.

3.

4.

5.

6.

7.

Chief Adewale Teluwo

Mr. Tope Smart

Mrs. Susan Giwa-Osagie

Mrs. Yinka Aletor

Mr. Olusesan Adekunle

Dr. Fidelis Ayebae

Mr. Alani Olojede

Chairman

Group Managing Director/CEO

Deputy Managing Director

Non-Executive Director



Executive Director

4

4

4

4

4

4

3

Board Committee

The Board has put in place a committee structure specified in the NAICOM code and

adequate for the complexity of the operation of the Company. The Committees are:

Finance and General Purpose Committee.

Investment Committee.

Enterprise Risk Management Committee.

Audit and Compliance Committee.

Establishment and Governance Committee

The established Committees namely: Finance and General Purpose, Investment, Enterprise

Risk Management and Establishment and Governance 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

Expenses Control

The Committee met twice during the year (17th April and 8th September 2014).


NEM Insurance 2014


Composition of Committee/Attendance

Name Status Attendance


Mr. Tope Smart


Chairman

Group Managing Director


2

2

2

Investment Committee

The essential responsibilities of the Committee are:

Setting Investment Policies of the Company;

Approving Investment Plans;

Evaluating Investment Performance; and

Reviewing the adequacy of the Investment Charter of the Company.

The Committee held two meetings (4th April and 2nd October 2014).

Composition of the Committee/Attendance


Mrs. Yinka Aletor

Mr. Tope Smart


Chairman



2

2

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.

Assess adequacy of risk mitigants for major risk indicators.

The Committee met twice during the year (16th April and 22nd October 2014).



Dr. Fidelis Ayebae

Mr. Tope Smart


Chairman



2

2

2


NEM Insurance 2014


Establishment and Corporate Governance Committee

The Terms of Reference of the Committee are to:

To ensure that money and properties are used and managed to meet the aims and objectives

of the Company;

To ensure that the organization adheres to regulations, its governing instrument/constitution

and agreed procedures;

To recommend the number of directors who shall serve on the Board;

To identify individuals acknowledged to be qualified as Board members; and

To agree on evaluation process to be employed in evaluating the performance of the Board,

the Board Committees and Management.

The Committee met twice during the year (16th April and 22nd October 2014).


Audit and Compliance Committee

The NAICOM Code makes the following provisions in respect of the responsibilities of the

Audit and Compliance 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 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 the Shareholders.

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

The committee performance shall be evaluated periodically.

S.359 (6) of the Companies and Allied Matters Act Cap (20) Laws of the Federation of Nigeria

2004 provides for the functions of this committee.

The committee met four times during the year (5th February, 19th March, 21st May and 23rd

December, 2014) and covered the basic components of these responsibilities.


Dr. Fidelis Ayebae

Mr. Tope Smart


Chairman



2

2

2


NEM Insurance 2014


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

4. DIVIDEND

The Directors recommend a declaration of dividend of N…....................................... which

translates to…..................................per ordinary share of 50 kobo each subject to the

approval of the shareholders at the next Annual General Meeting.

5. DIRECTORS AND DIRECTORS’ INTERESTS

i. Directors

No director has disclosed any declarable interest in any contract with the Company during

the year in pursuant to Section 277 of the Companies and Allied Matters Act CAP C20 LFN

2004.

ii. Directors’ interest

The interests of the directors in the issued share capital of the Company as recorded in the

register of shareholdings and/or as notified by them for the purposes of Sections 275 and

276 of the Companies and Allied Matters Act CAP C20 LFN 2004 are as follows:

Name Indirect Direct

Total

2014 2013 2014 2013 2014 2013

Chief Adewale Teluwo 337,054,367 337,054,369 112,621,359 112,621,359 449,675,726 449,675,728

Tope Smart Esq - - 118,243,848 118,243,848 118,243,848 118,243,848

Suzan Giwa-Osagie (Mrs) - - 2,125,008 2,125,008 2,125,008 2,125,008

Olusesan Adekunle Esq - - 50,848,252 50,848,252 50,848,252 50,848,252

Yinka Aletor (Mrs) 383,492,958 387,378,703 - - 387,492,958 387,378,703

Dr. Fidelis Ayebae - - - - - -

Mr. Alani Olojede - - 837,373 - 837,373 -

6. DIRECTORS RESPONSIBILITIES

The Directors are responsible for the preparation of the consolidated financial statements

which give a true and fair view of the state of affairs of the Company at the end of each

financial 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 the

Companies and Allied Matters Act CAP C20 LFN 2004.


Mr. Peter Okoh

Mr. Taiwo Oderinde

Mr. Samuel Mpamaugo



Mrs. Yinka Aletor

Chairman-Shareholders’ Rep

Shareholders’ Representative

Shareholders’ Representative




4

4

4

4

4

4


NEM Insurance 2014


7. SHAREHOLDINGS

The Registrars have advised that the called-up and fully paid up shares of the Company as at

31 December, 2014 were beneficially held as follow:

Range

No. of

Holders

Holders

%

Holders

Cum Units

Units

% Units Cum.

1 - 1,000 4,444 9.3 4,444 2,833,375 0.05 2,833,375

1,001 - 5,000 11,618 24.3 16,062 37,397,601 0.71 40,229,976

5,001 - 10,000 8,985 18.8 25,047 75,615,607 1.43 115,844,583

10,001 - 50,000 15,722 32.89 40,769 401,483,496 7.60 517,328,07

50,001 - 100,000 3,766 7.88 44,535 299,777,166 5.68 817,105,245

100,000 - 500,000 2,573 5.38 47,108 556,546,322 10.54 1,373,651,567

500,001 - 1,000,000 334 0.7 47,442 260,081,900 4.93 1,633,733,467

1,000,001 - 999,999,999,999 362 0.76 47,804 3,646,769,446 69.06 5,280,502,913

47,804

5,280,502,913

Shareholders with 5% and above of the company’s issued and fully paid shares as at 31st December, 2014

Holding %

1. Capital Express Assurance Limited 383,492,958 7.26

2. Jeidoc Limited 368,445,497 6.98

3. Bukson Investment Limited 337,054,367 6.38

Retirement by Rotation and Re-election

In accordance with the Articles of Association of the Company, Mr. Olusesan Adekunle will

retire by rotation and being eligible offer himself for re-election.

Change in the Composition of the Board

Since the last Annual General Meeting of the Company, Mrs. Susan Giwa-Osagie Executive

Director (Business Development) was elevated to the position of Deputy Managing Director

while Mr. Alani Olojede was appointed an executive director of the company with effect from

1st June, 2014.

8. RECORD OF DIRECTORS ATTENDANCE

In accordance with section 258(2) of the Companies and Allied Matters Act CAP C20 LFN

2004, the records of the Directors attendance at Directors’ meeting in 2014 are available for

inspection at the Annual General Meeting.


NEM Insurance 2014


9. PROPERTY, PLANT AND EQUIPMENT

Movements in property, plant & equipment are shown in note 11 on pages 61 and 62. In the

opinion of the directors, the market value of the Company’s properties is not less than the

value shown in the consolidated financial statements.

10. REINSURERS

During the financial year under review, the Company had business transactions with the

following re-insurance companies in compliance with the relevant Insurance Act of 2003. The

re-insurance companies are:

African Reinsurance Corporation

Continental Reinsurance Plc.,

WAICA Reinsurance Pool,

Nigerian Reinsurance Corporation and

Aveni Reinsurance.

11. AGENTS AND BROKERS

The Company maintains a network of licensed agents and renders services to its customers

through Insurance Licensed Brokers and Registered Agents.

12. DONATIONS

Donations during the year ended December 31, 2014 amounted to N 5,045,000 (2013:

N1,760,000) as follows: N

Ikoyi Club 1938 250,000

The Pearl Awards 250,000

Nigerian Council of Regulatory Insurance Brokers 420,000

Insurance Consumer Association 500,000

Chartered Insurance Institute of Nigeria 750,000

Charity Homes & Less Privilege 600,000

Assbhi NEM Unit 200,000

Professional Insurance Ladies Association 750,000

Industrial Relations and Personnel Management 50,000

Actuarial Science Insurance Associate 50,000

Almond Production Limited 300,000

Nigerian Insurance Association 350,000

National Institute of Marketing 50,000

Fame Production 500,000

National Association of Insurance Correspondence 25,000

5,045,000


NEM Insurance 2014


13. EVENTS AFTER REPORTING DATE

There were no significant events after reporting date which could have had a material effect

on the consolidated financial statements for the year ended 31 December, 2014 which have

not been adequately provided for or disclosed in the financial statements except the

promotion and appointment of Mrs Susan Giwa-Osagie & Mr. Alani Olojede as Deputy

Managing Director & Executive Director respectively both with effect from 6 June, 2014.

14. EMPLOYMENT AND EMPLOYEES

It is the policy of the Company not to adopt discriminatory criteria for considering

applications for employment including those from disabled persons. All employees whether

or not disabled are given equal opportunities to develop their experience and knowledge and

to qualify for promotion.

When an employee becomes disabled during the course of his or her employment, the

Company endeavours to retain the individual for employment in spite of his disability, when

this is reasonably possible. As at 31st December, 2014 one disabled person was in the

employment of the Company.

15. EMPLOYEES INVOLVEMENT, TRAINING AND DEVELOPMENT

i. Information dissemination

“The employees are regularly provided with information on matters that are of

concern to them through established channels of communication.”

ii. Consultation with employees

There are regular consultations between the senior and junior staff unions and

Management, particularly on matters affecting staff welfare.

iii. Encouraging employees’ involvement and training

The employees are the Company’s most valuable and cherished resource. The

Company is therefore committed to their continuous training and development. In

line with this policy of continuous development of the human resources, members of

staff are sent on training programmes. The courses are aimed at broadening their

technical/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. Medical

facilities are provided for staff and their families at private hospitals retained in their

respective localities.Transportation, housing and lunch subsidies are provided to all

levels of employees. Fire fighting equipments are also installed in strategic positions

in the office building.


NEM Insurance 2014


16. AUDITORS

In compliance with Section 33(2) of the Securities and Exchange Commission’s Code of

Corporate Governance and Section 22(1) of National Insurance Commission 2010 guidelines

on the tenure of External Auditors, Messrs SIAO (Chartered Accountants) has shown

willingness to continue in office as the auditors in accordance with Section 357(2) of the

Companies and Allied Matters Act 2004, as amended. A resolution will be proposed at the

Annual General Meeting to authorize the Directors to determine their remunerations.

BY ORDER OF THE BOARD

OMOLARA OYETUNDE (MRS.) COMPANY SECRETARY

Lagos, Nigeria

FRC/2013/NBA/00000003153

Date:


NEM Insurance 2014

REPORT OF EXTERNAL CONSULTANTS ON BOARD APPRAISAL

NEM INSURANCE PLC

In compliance with the requirement of the NAICOM “Code of Good Corporate Governance for the

Insurance Industry in Nigeria” “The Code” the Board of NEM Insurance Plc commissioned New

Version Consultants Limited to conduct an appraisal of the performance of the Board of the

Company. The exercise was guided by the provisions of The NAICOM Code and other recognised

Codes 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 the

non-executives are in greater proportion than the executives. The proportion of executives to

non-executives is 1:2. Members are individuals of diverse professional backgrounds and

business experience. Among the non-executives are: A legal practitioner, foremost

industrialist and investment expert as well as astute businessmen with interests in key

sectors of the economy including: Insurance, Pharmaceuticals, Real Estate and

Manufacturing who have established successful track records in their chosen fields of

endeavours 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 in

their areas of specialization and a vast knowledge of Insurance business and its operating

terrain. Members have been bringing their experience to bear in directing the affairs of the

Company which has since stabilized its operations post-consolidation.

In accordance with The NAICOM Code, the Board Chairman is a Non-Executive Director; there

is a clear delineation of responsibilities between the position of the GMD and the Chairman

while no one individual occupies the two positions at the same time thereby avoiding the

issue 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 regulatory

requirements and in accordance with Best Practices. Accordingly, the Board held four

meetings during the year under review and attendance was outstanding whereby each

member met the 75% minimum requirement prescribed in The Code in respect of

attendance. A Committee structure comprising of the minimum requirement of the NAICOM

Code was institutionalized and the Committees were provided with the required Terms of

Reference. The agenda contained issues meant for the attention of the Board and the

preparation of the agenda was flexible in allowing all members to introduce relevant subject

matters to the Board.

Adequate notice was given for meetings and Board materials were circulated promptly to

members which allowed them adequate time to prepare for the meetings. Members were

given equal opportunity and they made cogent contributions to deliberations and most

decisions were arrived at by consensus. The Board enjoys a cordial working relationship and

meetings were conducted in an atmosphere devoid of rancour. The above review suggests

that the Composition and Processes/Operations of the Board meet most of the parameters of

The NAICOM Code.

iii. Members performed their oversight responsibilities with respect to the activities of

management in particular as regards the Company’s growth strategy, its Financial

Performance, Business Prospects as well as status of Regulatory Compliance.


NEM Insurance 2014

Report of External Consultant (Cont’d)

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 in

order to enhance its governance practices.

BY ORDER OF THE BOARD

MOSUNMOLA OYERINDE (MRS.)

MANAGING CONSULTANT

Lagos, Nigeria

Date:


NEM Insurance 2014

Statement of Directors’ Responsibilities

In accordance with the provisions of Section 334 and 335 of the Companies and Allied Matters Act

2004 and Sections 24 and 28 of the Banks and Other Financial Institutions Act 1991, the Directors

are responsible for the preparation of annual financial statements which give a true and fair view of

the financial position at the end of the financial year of the Company and of the operating result for

the year then ended.

The responsibilities include ensuring that:

Appropriate and adequate internal controls are established to safeguard the assets of the

Company and to prevent and detect fraud and other irregularities;

The Company keeps proper accounting records which disclose with reasonable accuracy

the financial position of the Company and which ensure that the financial statements

comply with the requirements of the Companies and Allied Matters Act, 2004, Banks and

Other Financial Institutions Act, 1991, Insurance Act 2003, Financial Reporting Council

and the yearly Operational Guidelines issued by NAICOM.

The Company has used appropriate accounting policies, consistently applied and

supported by reasonable and prudent judgments and estimates, and that all applicable

accounting standards have been followed; and

The financial statements are prepared on a going concern basis unless it is presumed that

the Company will not continue in business.

The Directors accept responsibility for the year’s financial statements, which have been prepared

using appropriate accounting policies supported by reasonable and prudent judgments and

estimates 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 of

the 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 be

relied upon in the preparation of the financial statements, as well as adequate systems of financial

control. Nothing has come to the attention of the Directors to indicate that the Company will not

remain 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 Teluwo

GMD Chairman, Board of Directors


NEM Insurance 2014

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 for

the year ended December 31, 2014 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 in

this report fairly present in all material respects the financial condition and results of operation

of 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 within

those 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 days

prior to the report;

- have presented in the report our conclusions about the effectiveness of our internal controls

based 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 would

adversely affect the company’s ability to record, process, summarize and report financial

data and have identified for the company’s auditors any material weakness in internal

controls, and

- any fraud, whether or not material, that involves management or other employees who have

significant role in the company’s internal controls;

We have identified in the report whether or not there were significant changes in internal controls or

other 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 CFO FRC/2013/CIIN/00000001331 FRC/2013/ICAN/00000001238


NEM Insurance 2014

Independent Auditor’s Report

To the members of NEM Insurance Plc We have audited the accompanying financial

statements of NEM Insurance Plc (“the Company), and its subsidiary (“together referred

to as the Group”), which comprise the

Consolidated Statement of Financial Position as at

December 31, 2014, Statement of changes in

Equity, the Consolidated Statement of

Comprehensive Income and Other Comprehensive

Income, Consolidated Cash Flows Statements and

the statement of significant accounting policies on

pages 22 to 48 and explanatory notes to the financial statements, as set out on pages 56 to 99.

Directors’ Responsibility for the Financial

Statements The directors are responsible for the preparation

and fair presentation of these financial statements

in accordance with International Financial

Reporting Standard (IFRSs) and in the manner

required by the Companies and Allied Matters Act,

CAP C20, LFN 2004, Financial Reporting Council

Act 2011, the Insurance Act 2003 of Nigeria, the

Investments and Securities Act 2007 and National

Insurance Commission (NAICOM) circulars. This

responsibility includes: designing, implementing

and maintaining internal controls relevant to the

preparation and fair presentation of financial

statements that are free from material

misstatement, whether due to fraud or error;

selecting and applying appropriate accounting

policies; and making accounting estimates that

are reasonable in the circumstances.

Auditor’s Responsibility Our responsibility is to express an opinion on

these financial statements based on our audit. We

conducted our audit in accordance with Nigerian

Standard on Auditing (NSA) and International

Standard on Auditing (ISA). Those standards

require that we comply with ethical requirements

and plan and perform the audit to obtain

reasonable assurance on whether the financial

statements are free from material misstatement.

An audit involves performing procedures to obtain

audit evidence about the amounts and disclosures

in the financial statements. The procedures

selected depend on the auditor’s judgment,

including the assessment of the risks of material

misstatement of the financial statements whether

due to fraud or error. In making those risk

assessments; the auditor considers internal

controls relevant to the entity’s preparation and

fair presentation of the financial statements in

order to design audit procedures that are

appropriate in the circumstances, but not for the

purpose of expressing an opinion on the

effectiveness of the entity’s internal controls. An

audit also includes evaluating the appropriateness

of accounting policies used and the

reasonableness of accounting estimates made by

the directors, as well as evaluating the overall

presentation of the financial statements.

We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a

basis for our audit opinion.

Opinion In our opinion, the consolidated financial

statements give a true and fair view of the

financial position of NEM Insurance Plc and its subsidiary as at December 31, 2014 and of its

financial performance and cash flows for the year

then ended in accordance with International

Financial Reporting Standards (IFRSs) applicable

and in the manner required by the Financial

Reporting Council Act 2011, Companies and

Allied Matters Act, CAP C20 LFN 2004, the

Insurance Act 2003 of Nigeria, the Investments

and Securities Act 2007 and the relevant NAICOM

circulars.

Report on Other Legal Regulatory Requirements The Company contravened the following guidelines in

the year

- Violation of approved format on rendition of

quarterly returns

- Late submission of documents on IFRS

- Late filing of 2013 Audited Accounts

- Late payment on Staff pension.

Appropriate penalties have been paid by the company

Compliance with the requirements of the Companies

and Allied Matters Act, 2004.

In our opinion, proper books of account have been

kept by the Company, so far as appears from our

examination of those books and Company’s

financial position and comprehensive income are

in agreement with the books of accounts.

Joshua Ansa, FCA FRC/2013/ICAN/00000001728 For: SIAO (Chartered Accountants) Lagos, Nigeria Date…………..


NEM Insurance 2014

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, Cap

59 of the Laws of the Federation of Nigeria 2004, we the Members of the Audit Committee of NEM

Insurance Plc, is 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 December 31,

2014 and we confirm that they were adequate.

The Company’s reporting and accounting policies as well as internal control systems

conform to legal requirements and agreed ethical practices.

We are satisfied with the departmental responses to the External Auditors’ findings on

management matters for the year ended December 31, 2014

Finally, we acknowledge and appreciate the co-operation of Management and Staff in the conduct of

these duties.

----------------------------

Mr. Peter Okoh

Chairman of the Audit Committee

FRC/2013/NIM/00000002860

Date.........................

Members of the Audit Committee

Mr. Peter Okoh - (Shareholders’ Representative)- Chairman

Mr. Taiwo Oderinde - ,, ,, Member

Mr. Samuel Mpamaugo - ,, ,, Member

Mr. Olusesan Adekunle - (Non Exec Director) Member

Mrs. Yinka Aletor - ,, ,, Member

Mrs. Suzan Giwa Osagie - (Exc. Director) Member

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


NEM Insurance 2014

Statement of Significant Accounting Policies

The following are the significant accounting policies adopted by the Group in the preparation of

these financial statements. These accounting policies have been consistently applied for all years

presented.

1.0 General Information

NEM Insurance Plc (“NEM” or ‘‘the Company”) is a public limited liability company domiciled in

Nigeria. 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. Such

services include provision of non-life insurance services for both corporate and individual

customers. 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 30th March, 2015.

2.0 Summary of Significant Accounting Policies

The principal accounting policies applied in the preparation of these Financial Statements are set

out below. These policies have been consistently applied to all the years presented, unless

otherwise stated.

2.1 Going Concern Assessment

These financial statements have been prepared on the going concern basis. The Group has no

intention or need to reduce substantially its business operations, the management believes that the

going concern assumption is appropriate for the Group due to sufficient capital adequacy ratio and

projected liquidity, based on historical experience that short-term obligations will be refinanced in

the normal course of the business. Liquidity ratio and continuous evaluation of current ratio of the

group is carried out by the group to ensure that there are no going concerns threats to the

operation of the group.

2.2 Basis of Preparation and Compliance with IFRS

The Group’s financial statements for the year 2013 have been prepared in accordance with the

International Financial Reporting Standards (IFRS) as issued by the International Accounting

Standards Board (IASB), Company and Allied Matters Act, CAP C20 LFN 2004, Insurance Act 2003

of Nigeria and Investment and Securities Act 2007 to the extent that they do not conflict with the

requirements of International Financial Reporting Standard (IFRS).


NEM Insurance 2014

Statement of Significant Accounting Policies (Cont’d)

Functional and Presentation of Currency

The financial statements are presented in Nigerian currency (Naira) which is the Company’s

functional currency. Except otherwise indicated, financial information presented in Naira have been

rounded to the nearest thousand (₦ 000)

Basis of Measurement

The financial statements have been prepared under the historical cost basis except for the

following:

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 Assumptions

The preparation of financial statements in conformity with IFRS requires the use of certain critical

accounting estimates. It also requires management to exercise its judgment in the process of

applying the company’s accounting policies. The estimates and associated assumptions are based

on historical experience and various other factors that are believed to be reasonable under the

circumstances, the results of which form the basis of making judgments about carrying values of

assets and liabilities that are not readily apparent from other sources. Actual results may differ

from these estimates under different assumptions and conditions. Changes in assumptions may

have 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’s

financial statements therefore present the financial positions and results fairly. The areas involving

a higher degree of judgment or complexity, or areas where assumptions and estimates are

significant to the financial statements are disclosed in Note 2.4.

2.4 Judgment, Estimates and Assumption The estimates and underlying assumptions are reviewed on an on-going basis. Revision to

accounting estimates are recognized in the period in which the estimate is revised, if the revision

affects only that period or if the revision affects both current and future periods.

Information about significant areas of estimation uncertainty and critical judgments in applying

accounting policies that have the most significant effect on the amounts recognized in the financial

statements are described below:

2.4.1 Income Taxes Significant estimates are required in determining the provision for income taxes. There are many

transactions and calculations for which the ultimate tax determination is uncertain. The company

recognizes liabilities for anticipated tax issues based on estimates of whether additional taxes will

be due. Where the final tax outcome of these matters is different from the amounts that were

initially recorded, such differences will impact the income tax and deferred tax provisions.

2.4.2 Retirement Benefits

The present value of the retirement benefit obligations depends on a number of factors that are

determined on an actuarial basis using a number of assumptions. Any changes in these

assumptions will impact the carrying amount of gratuity obligations. The assumptions used in


NEM Insurance 2014


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 interest rate

that should be used to determine the present value of estimated future cash outflows expected to

be required to settle the gratuity obligations. In determining the appropriate discount rate, the

Company considers the interest rates of high-quality government bonds that are denominated in the

currency in which the benefits will be paid and that have terms to maturity approximating the terms

of the related gratuity liability. Other key assumptions for gratuity obligations are based in part on

current market conditions.

In most cases, no explicit assumptions are made regarding the future rates of claims inflation or

loss ratios. Instead, the assumptions used are those implicit in the historical claims development

data on which the projections are based. Additional qualitative judgment is used to assess the

extent to which past trends may not apply in future, (e.g. to reflect one-off occurrences, changes in

external or market factors such as public attitudes to claiming, economic conditions, level s of

claims 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 cost of

claims that present the likely outcome from the range of possible outcomes, taking account of all

the uncertainties involved.

Similar judgments, estimates and assumptions are employed in the assessment of adequacy of

provisions for unearned premium. Judgment is also required in determining whether the pattern of

insurance service provided by a contract requires amortization of unearned premium on a basis

other than time apportionment.

2.4.3 Fair Valuation of Investment Properties

The fair value of investment properties is based on the nature of investment properties is based on

the nature, location and condition of the specific asset. The fair value is determined by reference to

observable market prices. The fair value of investment property does not reflect the related future

benefits from this future expenditure. These valuations are performed annually by external

appraisers. Assumptions are made about expected future cash flows and the discounting rates

2.5 Improvements to IFRSs

Below are the IFRSs and International Financial Reporting Interpretations Committee (IFRIC)

interpretations that are effective for the first time for the financial period beginning on or after 1

January 2014 that would be expected to have an impact on the company.

IFRS Updates (Effective in 2014 and beyond) and IFRS Updates in 2014 List of amendments

Amendments Issued 2014

IFRIC 21 LEVIES- Effective for annual periods beginning on or after 1 January 2014

IFRIC 21 is applicable to all levies other than outflows that are within the scope of other standards

(e.g. IAS 12 Income Taxes) and fines or other penalties for breaches of legislation. IFRIC 21

provides guidance on when to recognise a liability for a levy imposed by a government, both for

levies that are accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and

Contingent Assets and those where the timing and amount of the levy is certain. The Interpretation


NEM Insurance 2014


covers the accounting for outflows imposed on entities by governments (including government

agencies and similar bodies) in accordance with laws and/or regulations. However, it does not

include income taxes (IAS 12 Income Taxes), fines and other penalties, liabilities arising from

emissions trading schemes and outflows within the scope of other Standards.

Levies are defined as outflows of resources embodying economic benefits imposed by governments

on entities in accordance with legislation.

The interpretation clarifies that an entity recognizes a liability for a levy when the activity that

triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability

is accrued progressively only if the activity that triggers payment occurs over a period of time, in

accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum

threshold, the interpretation clarifies that no liability is recognized before the specified minimum

threshold is reached.

However, the interpretation does not address the accounting for the debit side of the transaction

that arises from recognizing a liability to pay a levy. Entities would need to look to other standards

to decide whether the recognition of a liability to pay a levy would give rise to an asset or an

expense under the relevant standard

Transition

The interpretation must be applied retrospectively.

Impact

The interpretation is intended to eliminate the current diversity in practice on the treatment for the

obligation to pay levies. The scope of this interpretation is very broad and captures various

obligations that are imposed by governments in accordance with legislation and sometimes not

always described as “levies”. Therefore, entities need to consider the nature of payments to

government carefully when determining if the payment is in the scope of IFRIC 21.

Amendments to IFRS 10 Amended by Investment Entities (Amendments to IFRS 10, IFRS 12 and

IAS 27) - Effective for annual periods beginning on or after 1 January 2014

The IASB has published 'Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)',

providing an exemption from consolidation of subsidiaries under IFRS 10 'Consolidated Financial

Statements' for entities which meet the definition of an 'investment entity', such as certain

investment funds. Instead, such entities would measure their investment in particular subsidiaries

at fair value through profit or loss in accordance with IFRS 9 'Financial Instruments' or IAS 39

'Financial Instruments: Recognition and Measurement'

The key amendments include

The amendments define an 'investment entity' as an entity that: obtains funds from one or

more investor for the purpose of providing those investor(s) with investment management

services commits to its investor(s) that its business purpose is to invest funds solely for

returns from capital appreciation, investment income, or both, and measures and evaluates

the performance of substantially all of its investments on a fair value basis.

An entity is required to consider all facts and circumstances when assessing whether it is an

investment entity, including its purpose and design. The amendments provide that an

investment entity should have the following typical characteristics:

1. more than one investment


NEM Insurance 2014


2. more than one investor

3. investors that are not related to the entity or other members of the group containing

the entity

4. ownership interests, typically in the form of equity or similar interests (e.g.

partnership interests), to which proportionate shares of the net assets of the

investment entity are attributed.

If an entity does not meet one or more of these typical characteristics, it is required to justify and

disclose how its activities continue to be consistent with that of an investment entity. Additional

guidance is provided on detailed specifics in determining whether an entity is an investment entity,

such as the impacts of being involved in the day-to-day management of an investee or providing

investment-related services to third parties, the nature of the entity, and how the entity measures

and manages its financial liabilities.

The types of entities which may meet the definition of an investment entity may include private

equity organisations, venture capital organisations, pension funds, sovereign wealth funds and other

investment funds.

Where an entity meets the definition of an investment entity, it is not permitted to consolidate its

subsidiaries and is required to measure its investments in those subsidiaries at fair value through

profit or loss. However, an investment entity is still required to consolidate a subsidiary where that

subsidiary provides services that relate to the investment entity’s investment activities.

The amendments also: introduce new disclosure requirements related to investment entities in IFRS

12 Disclosure of Interests in Other Entities and IAS 27 Separate Financial Statements provide an

scope exemption for investment entities from IFRS 3 Business Combinations (meaning such entities

do not need to apply business combination accounting to the acquisition of subsidiaries) include

various consequential amendments to numerous standards.

The amendments do not introduce any new accounting requirements for investments in associates

or joint ventures. IAS 28 Investments in Associates and Joint Ventures already permits a venture

capital organisation, mutual funds, unit trusts and similar entities including investment-linked

insurance funds to elect to measure investments in associates and joint ventures at fair value

through profit or loss in accordance with IFRS 9 or IAS 39, and the IASB expects that investment

entities would apply these requirements.

Transition

The amendments must be applied retrospectively.

Impact

The concept of an investment entity is new in IFRS. The amendments represent a significant change

for investment entities, which are currently required to consolidate investees that they control.

Significant judgement of facts and circumstances may be required to assess whether an entity

meets the definition of investment entity.

IAS 32 Offsetting Financial Assets and Financial Liabilities- Amendments to IAS 32

Effective for annual periods beginning on or after 1 January 2014 The amendments to IAS 32 clarify the meaning of “currently has a legally enforceable right set off”.

The amendments also clarify the application of the IAS 32 offsetting criteria to settlement system

(such as central clearing house systems), which apply to gross settlement mechanisms that are not

simultaneous. The amendments clarify that rights of set-off must not only be legally enforceable in

the normal course of business, but must also be enforceable in the event of default and the event of

bankruptcy or insolvency of all of the counterparties to the contract, including the reporting entity

itself. The amendments also clarify that rights of set-off must not be contingent on a future event.


NEM Insurance 2014


The IAS 32 offsetting criteria require the reporting entity to intent either to settle on a net basis, or

to realize the asset and settle the liability simultaneously. The amendments clarify that only gross

settlement mechanism with features that eliminate or result in insignificant credit and liquidity risk

and that process receivables and payables in a single settlement and therefore meet the net

settlement criterion.

Transition The amendments must be applied retrospectively. Early application is permitted. If an entity

chooses to early adopt, it must disclose that fact and also make the disclosure required by IFRS 7

Disclosures- Offsetting Financial Assets and Financial Liabilities- Amendments to IFRS 7.

Impact

Entities will need to review legal documentation and settlement procedures, including those applied

by the central clearing houses they deal with to ensure that offsetting of financial instruments is still

possible under the new criteria. Changes in offsetting may have significant impact on financial

statement presentation. The effect on leverage ratios, regulatory capital requirement etc will need to

be considered.

IAS 36 Amended by Recoverable Amount Disclosures for Non-Financial Assets (clarification of disclosures required) - Effective for annual periods beginning on or after 1 January 2014

The amendments clarify the disclosure requirements in respect of fair value less costs of disposal.

When IAS 36 originally changed as a consequence of IFRS 13, the IASB intended to require

disclosure of information about the recoverable amount of impaired assets if that amount was

based on fair value less costs to sell. However, as written, an entity was required to disclose the

recoverable amount for each cash generating unit for which the carrying amount of goodwill or

intangible assets with indefinite useful lives allocated to that unit was significant in comparison with

the entity’s total carrying amount of goodwill or intangible assets with indefinite useful lives. This

requirement has been deleted by the amendments.

In addition, the IASB added two disclosure requirements:

Additional information about the fair value measurement of impaired assets when the

recoverable amount is based on fair value less costs of disposal.

Information about the discount rates that have been used when the recoverable amount is

based on fair value less costs of disposal using a present value technique. The amendments

harmonise disclosure requirements between value in use and fair value less costs of

disposal.

Transition

The amendments must be applied retrospectively.

Impact

As a result of the amendments, entities are no longer required to disclose information that was

regarded as commercially sensitive by preparers. This might be a valid reason for entities to early

adopt the amendments. Nevertheless, additional information needs to be provided. In general, it is

likely that the information required to be disclosed will be readily available.


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IAS 39-AMENDMENT BY NOVATION OF DERIVATIVES AND CONTINUATION OF HEDGE

ACCOUNTING

Effective for annual periods beginning on or after 1 January 2014

The objective of the amendments is to avoid any impact on an entity’s hedge accounting from

derecognizing the derivative, following its novation. A novation indicates an event where the original

parties to a derivative agree that one or more clearing counterparties replace their original

counterparty to become the new counterparty to each of the parties. Specifically, the IASB was

concerned that the effectiveness for cash flow hedges might not be sufficient to maintain the

designation or to designate the novated derivative as a hedging instrument.

The amendments provide an exception to the requirement to discontinue hedge accounting in

certain circumstances in which there is a change in counterparty to a hedging instrument in order

to achieve clearing for that instrument. The amendments cover novations :

That arises as a consequence of law or regulations, or the introduction of laws or

regulations.

In which the parties to the hedging instrument agree that one or more clearing

counterparties replace the original counterparty to become the new counterparty to each of

the parties.

That did not result in changes to the terms of the original derivative other than changes

directly attributable to the change in counterparty to achieve clearing.

All of the above must be met to continue hedge accounting under this exception. The amendments

also cover novations to central counterparties, as well as to assess the changes to the hedging

instrument against the de-recognition criteria for financial instruments and the general conditions

for continuation of hedge accounting.

Transition

The amendments must be applied retrospectively. However, entities that discontinued hedge

accounting in the past, because of a novation that would be in scope of the amendments may not

reinstate that previous hedging relationship. Early application is permitted and must be disclosed.

Impact

The amendments are in effect, a relief from the hedge accounting requirements, and will allow

entities to better reflect hedge relationships in the circumstances in which the novation exception

applies.

AMENDMENT TO IFRS 1- MEANING OF EFFECTIVE IFRSs’

Effective from 1 July, 2014. Earlier application is permitted and must be disclosed The amendment clarifies the Basis for Conclusions that an entity may choose to apply either a

current standard or a new standard that is not yet mandatory, but permits early application,

provided either standard is applied consistently throughout the periods presented in the entity’s

first IFRS financial statements.

Transition

The amendment is effective immediately.


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IFRS 3 – BUSINESS COMBINATIONS SCOPE EXCEPTIONS FOR JOINT VENTURES

Effective from 1 July, 2014. Earlier application is permitted and must be disclosed

The amendment clarifies that:

Joint arrangements, not just ventures, are outside the scope of IFRS 3

The scope exception applies only to the accounting in the financial statements of the joint

arrangement itself.

The amendment must be applied prospectively.

IFRS 13 FAIR VALUE MEASUREMENT (PORFOLIO EXCEPTION)


The amendment clarifies that the portfolio exception in IFRS 13 can be applied not only to financial

assets and financial liabilities, but also to other contracts within the scope of IFRS 9 (or IAS 39, as

applicable).


IAS 40 INVESTMENT PROPERTY- INTERRELATIONSHIPS BETWEEN IFRS 3 AND IAS 40 Effective from 1 July, 2014. Earlier application is permitted and must be disclosed

The description of ancillary services in IAS 40 differentiates between investment property and owner

occupied property (i.e.PPE). The amendment clarifies that IFRS 3, not the description of ancillary

services in IAS 40 is used to determine if the transaction is the purchase of an asset or a business

combination.


IFRS 2 SHARE –BASED PAYMENT DEFINITIONS OF VESTING CONDITIONS Effective from 1 July, 2014. Earlier application is permitted and must be disclosed

The amendment defines ‘performance condition’ and ‘service condition’ in order to clarify various

issues, including the following:

A performance condition must contain a service condition

A performance target must be met while the counterparty is rendering service

A performance target may relate to the operations or activities of an entity, or to those of

another entity in the same group

A performance condition may be a market or non-market condition

If the counterparty, regardless of the reason, ceases to provide service during the vesting

period, the service condition is not satisfied.


IFRS 3 BUSINESS COMBINATION- ACCOUNTING FOR CONTINGENT CONSIDERATION IN A

BUSINESS COMBINATION Effective from 1 July, 2014. Earlier application is permitted and must be disclosed

The amendment clarifies that all contingent consideration arrangements classified as liabilities or

assets arising from a business combination must be subsequently measured at FVTPL whether or

not they fal within the scope of IFRS 9 (or IAS 39, as applicable)



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IFRS 8 OPERATING SEGMENTS


1. Aggregation of operating segment The amendment clarifies that an entity must disclose the judgements made by management in

applying the aggregation criteria in paragraph 12 of IFRS 8, including a brief description of

operating segments that have been aggregated and the economic characteristics (e.g. sales and

gross margins) used to assess whether the segments are similar.

The amendment must be applied retrospectively

2. Reconciliation of the total of the reportable segments’ assets to the entity’s assets

The amendment clarifies that the reconciliation of segment assets to total assets is only required to

be disclosed if the reconciliation is reported to the chief operating decision maker, similar to the

required disclosure for segment liabilities.

The amendment must be applied retrospectively

IFRS 13 FAIR VALUE MEASUREMENT-SHORT TERM RECEIVABLES AND PAYABLES


The amendment clarifies in the Basis for Conclusions that short term receivables and payables with

no stated interest rates can be measured at invoice amounts when the effect of discounting is

immaterial.

The amendment is effective immediately.

IAS 16 PROPERTY, PLANT AND EQUIPMENT AND IAS 38 INTANGIBLE ASSETS


The amendment clarifies that the asset may be revalued by reference to observable data on either

the gross or the net carrying amount. The amendment also clarifies that accumulated

depreciation/amortization is the difference between the gross and carrying amounts of the asset.

The amendment must be applied retrospectively.

IAS 24 RELATED PARTY DISCLOSURES


Key Management Personnel

The amendment clarifies that a management entity- an entity that provides key management

personnel services is a related party subject to the related party disclosures. In addition, an entity

that uses a management entity is required to disclose the expenses incurred for management

services.

The amendment must be applied retrospectively.

NEW, AMENDED STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE

IFRS 9- Financial Instruments


Classification and measurement of financial assets

IFRS 9 amendment clarifies the classification of financial assets and financial liabilities on the basis of contractual cash flows and the business model of the instrument. All financial assets are,

on initial recognition measured at fair value, adjusted for transaction costs if the instrument is not

accounted for at FVTPL. Subsequently, equity instruments are generally measured at FVTPL except

where there’s an irrevocable election on an instrument-by-instrument basis to present changes in


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the fair value of non-trading instruments in OCI. Debt instruments are, measured on the basis of

their contractual cash flows and business model under which they are held. Where the instrument

has contractual cash flows are solely payments of principal and interest on the principal

outstanding and is held with the business model objective of collecting contractual cash flows, it is

accounted for at amortized cost. However, where the contractual cash flows are solely payments of

principal and interest on the principal outstanding and the business model objective is that of

collecting contractual cash flows and selling financial assets, it is accounted for at FVTOCI with

subsequent reclassification to P or L. All other debt instruments are subsequently accounted for at

FVTPL.

IFRS 9 also proposes new impairment requirements based on an expected credit loss model (ECL) to replace the IAS 39 incurred loss model. The ECL model is applicable to debt instruments

accounted for at amortised cost or at FVOCI.

Hedge effectiveness testing must be prospective and can be qualitative, depending on the

complexity of the hedge. A risk component of a financial or non-financial instrument may be

designated as the hedged item if the risk component is separately identifiable and reliably

measured.

IFRS 11- Accounting for Acquisitions of Interests in Joint Operations- Amendments to IFRS 11 Effective for annual periods beginning on or after 1 January 2016

The amendments requires an entity acquiring an interest in a joint operation to apply, to the extent

of its shares, all of the principles on business combinations accounting in IFRS 3 business

combinations, and other IFRSs, that do not conflict with the requirements of IFRS 11. Also, entities

are required to disclose the information required in those IFRSs in relation to business combination.

The amendments also apply to an entity on a formation of a joint operation if, an existing business

is contributed by the entity of the joint operation on its formation.

The amendments also clarify that for the acquisition of an additional interest in a joint operation in

which the activity of the joint operation constitutes a business; previously held interests in the joint

operation must not be re-measured if the joint operator retains joint control

IFRS 14 Regulatory Deferral Accounts Effective for annual periods beginning on or after 1 January 2016

This standard is applicable to entities whose activities are subject to rate regulation. According to

IFRS 14, such entities are to continue applying most of its existing accounting policies for deferred

regulatory accounts on 1st time adoption. An entity whose current standards does not allow

recognition of rate- regulated assets and liabilities, or that has not previously applied this policy,

would not be allowed to recognize them(rate regulated assets and liabilities) on first time

application of IFRS. Entities that adopt this standard are to present on the face of the SOFP, the

regulatory deferral accounts as separate line items. Also, movements in these account balances are

to be presented as separate line items in the SPLOCI.

IFRS 14 requires disclosures on the nature, the risks associated, entity’s rate regulation and the

effects on its financial statements.

IFRS 15- Revenue from Contracts with Customers

Effective for annual periods beginning on or after 1 January, 2017

IFRS replaces all existing revenue requirements (IAS 11 Construction Contracts, IAS 18 Revenue,

IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for Construction of Real Estate,

IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue- Barter Transactions Involving

Advertising Services)in IFRS and applies to all revenue arising from contracts with customers. It

provides a model for recognizing and measuring of sales of some non-financial assets including PPE

and Intangible assets.


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IFRS 15 outlines the principles to apply to measure and recognize revenue. These principles are to

be applied using a five step model. Each step of the model requires entities to exercise judgment

and to consider all relevant facts and circumstances when applying the model to contracts with

customers. The standard also specifies how to account for the incremental costs of obtaining a

contract and the costs directly related to fulfilling a contract.

IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortization-

Amendments to IAS 16 and IAS 38

Key requirements

The amendment clarify the principle in IAS 16 property, plant and equipment and IAS 38 intangible

assets that revenue reflects a pattern of economic benefits that are generated from operating a

business (of which the assets is part) rather than the economic benefits that are consumed through

use of the asset. As a result, the ratio of revenue generated total revenue expected to be generated

cannot be used to depreciate property, plant and equipment and may only be used in very limited

circumstances to amortize intangible assets.

Impact

Entities currently using revenue based amortization methods for property, plant and equipment will

need to change their current amortization approach to an acceptable method that result in a

different amortization pattern.

IAS 16 and IAS 41 Agriculture: Bearer Plants- Amendments to IAS 16 and IAS 41


Key requirements

The amendments to IAS 16 and IAS 41 includes bearer plants in the scope of IAS 16.Bearer plants

will be subject to the recognition and measurement requirements in IAS 16. Also, government

grants relating to bearer plants will be accounted for in accordance with IAS 20, instead of IAS 41.

In the event of applying this amendment for the 1st time, any difference between the fair value used

as deemed cost and the previous carrying amount is recognized in retained earnings. Also, in the

application of this amendment, where the entity uses the revaluation model in the subsequent

measurement of bearer plants, fair value changes should be recognized in the other comprehensive

income and not profit or loss. Bearer plants should also be assessed for impairment at the end of

each reporting period, in line with IAS 36.

Early application of this amendment is permitted and must be disclosed.

IAS 27 Equity Method in Separate Financial Statements-Amendments to IAS 27

Effective for annual periods beginning on or after 1 January 2016 This amendment was made to restore the option to use the equity method to account for

investments in subsidiaries and associates in the entity’s financial statements. Therefore, an entity

can account for investment either:

At cost

In accordance with IFRS 9(or IAS 39)

Using equity method

Early application of this amendment is permitted and must be disclosed.


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IAS 19 Employee Benefits-Discount rate: Regulated Market Issue (Annual Improvements 2012-

2014 Cycle)

Effective for periods beginning on or after 1st January, 2016 This amendment clarifies that high quality bonds used in estimating the discount rate for post-

employment benefits should be denominated in the same currency as the benefits to be paid.

IAS 28- Amendment on Sale or Contribution of Assets between an Investor and its Associate or

Joint Venture Effective for annual periods beginning on or after 1st January, 2016

The amendments address a conflict between the requirements of IAS 28 “Investments in Associates

and Joint Venture” and IFRS 10 “Consolidated Financial Statements” and clarify that in a

transaction involving an associate or joint venture the extent of gain or loss recognized depends on

whether the assets sold or contributed constitute a business.

The requirements on gain/losses resulting from transactions between an entity and its associate or

joint venture have been amended to relate only to assets that do not constitute a business. Also,

gains and losses from downstream transactions involving assets that constitute a business between

an entity and its associate or joint venture must be recognized in full in the investor’s financial

statements. A requirement has been added as to whether assets that are sold or contributed in

separate transactions constitute a business and should be accounted for as a single transaction.

This amendment should be applied prospectively.

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 primary

economic environment in which the entity operates (‘the functional currency). The financial

statements are presented in thousands. Naira is the Company’s functional and presentation

currency.

2.6.2 Transactions and Balances Transactions denominated in foreign currencies are recorded in Naira at the rate of exchange ruling

at the date of each transaction. Any gain or loss arising from a change in exchange rates

subsequent to the date of the transaction is included in the profit and loss account. Monetary assets

and liabilities denominated in foreign currencies at the balance sheet date are translated at that

date. Exchange gains arising from the revaluation of monetary assets and liabilities are recognized

in the income statement while those on non-monetary items are recognized in other comprehensive

income. For non-monetary financial investments available-for-sale, unrealized exchange differences

are recorded directly in equity until the asset is disposed or impaired.

2.7 Consolidation

2.7.1 Subsidiaries

The financial statements of subsidiaries are consolidated from the date the Group acquires control,

up to the date that such effective control ceases. For the purpose of these financial statements,

subsidiaries are entities over which the Group, directly or indirectly, has the power to govern the

financial and operating policies so as to obtain benefits from their activities. Changes in the Group’s

interest in a subsidiary that do not result in a loss of control are accounted for as equity

transactions (transactions with owners). Any difference between the amount by which the non-


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controlling interest is adjusted and the fair value of the consideration paid or received is recognised

directly in equity and attributed to the Group.

Inter-company transactions, balances and unrealised gains on transactions between companies

within the Group are eliminated on consolidation. Unrealised losses are also eliminated in the same

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 consistency with

the policies adopted by the Group. Investment in subsidiaries in the separate financial statement 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 held equity

interest in the acquiree is re-measured to fair value at the acquisition date through profit or loss.

2.7.2 Disposal of Subsidiaries

On loss of control, the Group derecognises the assets and liabilities of the subsidiary, any

controlling interests and the other components of equity related to the subsidiary. Any surplus or

deficit 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 fair

value at the date that control is lost. Subsequently, that retained interest is accounted for as an

equity-accounted investee or as an available-for-sale financial asset depending on the level of

influence 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

3.2.1 Classification

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 the short

term.

These investments are initially recorded at fair value. Subsequent to initial recognition, they are

remeasured at fair value, with gains and losses arising from changes in this value recognized in the

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 quoted

equities for which there is no active market, are established using valuation techniques

corroborated by independent third parties. These may include reference to the current fair value of

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 or

loss are included in investment income.

3.2.3 Held-to-maturity

Held-to-maturity investments are non-derivative financial assets with fixed determinable payments

and fixed maturities that management has both the positive intention and ability to hold to maturity

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 are

carried at amortised cost, using the effective interest method, less any provisions for impairment.

3.2.4 Available-for-sale

Available for sale financial investments include equity and debt securities. The Company classifies

as available-for-sale those financial assets that are generally not designated as another category of

financial assets, and strategic capital investments held for an indefinite period of time, which may

be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity

prices.

Available-for-sale financial assets are carried at fair value, with the exception of investments in

equity instruments where fair value cannot be reliably determined, which are carried at cost. Fair

values 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 financial

assets are recognised in other comprehensive income while the investment is held, and are

subsequently 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 the

Company’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 payments

that are not quoted in an active market, other than those classified by the Company as at fair value

through profit or loss or available-for-sale.

Loans and advances consist primarily of commercial loans, staff loans, premium debtors, due from

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, less any

impairment losses. Loans granted at below market rates are fair valued by reference to expected

future cash flows and current market interest rates for instruments in a comparable or similar risk

class and the difference between the historical cost and fair value is accounted for as employee

benefits under staff costs.

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 for

specific debts considered doubtful of recovery. Trade receivables are reviewed at every reporting

period for impairment. They are initially recognised at fair value and subsequently measured at

amortised cost less provision for impairment. A provision for impairment is made when there is

objective evidence (such as the probability of solvency or significant financial difficulties of the

debtors) that the Group will not be able to collect the entire amount due under the original terms of

the invoice.

Allowances are made based on an impairment model which considers the loss given default for each

customer, probability of default for the sectors in which the customer belongs and emergence

period which serves as an impairment trigger based on the age of the debt. Impaired debts are

derecognized when they are assessed as uncollectible. If in a subsequent period the amount of the

impairment loss decreases and the decrease can be related objectively to an event occurring after

the impairment was recognised, the previous recognised impairment loss is reversed to the extent

that the carrying value of the asset does not exceed its amortised cost at the reversed date. Any

subsequent reversal of an impairment loss is recognized in the Income Statement.


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3.3.1 Derecognition

The Company derecognizes a financial asset only when the contractual rights to cash flows from

the asset expire or it transfers the financial asset expire or it transfers the financial asset and

substantially all the risks and rewards of ownership of the asset to another entity. If the Company

neither transfers nor retains substantially all the risks and rewards of ownership and continues to

control the transferred asset, the Company recognizes its retained interest in the asset and an

associated liability for amounts it may have to pay. If the Company retains substantially all the risks

and rewards of ownership of a transferred financial asset, the Company continues to recognize the

financial asset and also recognizes a collateralized borrowing for the proceeds received.

3.4 Reinsurance Assets

The Company cedes business to reinsurers in the normal course of business for the purpose of

limiting its net loss potential through the transfer of risks. Premium ceded comprise gross written

premiums. Reinsurance arrangements do not relieve the Company from its direct obligations to its

policy holders.

Reinsurance assets are recognized when the related gross insurance claim is recognized according

to the terms of the relevant contract. The Company has the right to set off reinsurance payables

against amounts due from reinsurers and brokers in line with the agreed arrangements between

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 Prepayments

Other 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 acquires

control, up to the date that such effective control ceases. For the purpose of these financial

statements, subsidiaries are entities over which the Group, directly or indirectly, has the power to

govern the financial and operating policies so as to obtain benefits from their activities. Changes in

the Company’s interest in a subsidiary that do not result in a loss of control are accounted for as

equity transactions (transactions with owners). Any difference between the amount by which the

non-controlling interest is adjusted and the fair value of the consideration paid or received is

recognised directly in equity and attributed to the Group.

Inter-company transactions, balances and unrealised gains on transactions between companies

within the Group are eliminated on consolidation. Unrealised losses are also eliminated in the same

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 consistency with

the policies adopted by the Group. Investment in subsidiaries in the separate financial statement of

the parent entity is measured at cost.


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Acquisition-related Costs are expensed as Incurred

If the business combination is achieved in stages, fair value of the acquirer’s previously held equity

interest in the acquiree is re-measured to fair value at the acquisition date through profit or loss.

3.7.2 Disposal of Subsidiaries

On loss of control, the Group derecognises the assets and liabilities of the subsidiary, any

controlling interests and the other components of equity related to the subsidiary. Any surplus or

deficit 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 fair value at the date that

control is lost. Subsequently, that retained interest is accounted for as an equity-accounted investee

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 or

capital appreciation or both. Investment property is initially recognized at cost including transaction

costs. The carrying amount includes the cost of replacing part of an existing investment property at

the time that cost is incurred if the recognition criteria are met; and

excludes cost of day to day servicing of an investment property. An investment property is

subsequently measured at fair value with any change therein recognised in profit or loss. Fair values

are determined individually, on a basis appropriate to the purpose for which the property is

intended and with regard to recent market transactions for similar properties in the same location.

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 the

purposes of the business. The Company separately accounts for a dual purpose property as

investment property if it occupies only an insignificant portion. Otherwise, the portion occupied by

the Company is treated as property plant and equipment. However, the Company considers an

occupation of 30% as significant.

3.8.2 Transfer

If an item of property and equipment becomes an investment property its use has changed, any

difference arising between the carrying amount and the fair value of this item at the date of transfer

is recognized in other comprehensive income as a revaluation of property, plant and equipment.

However, if a fair value gain reverses a previous impairment loss, the gain is recognized in the

Statement of Comprehensive Income. Upon the disposal of such investment property, any surplus

previously recorded in equity is transferred to retained earnings; the transfer is not made through

the statement of comprehensive income.


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3.8.3 De-recognition

Investment properties are derecognized either when they have been disposed of, or when the

investment property is permanently withdrawn from use and no future economic benefit is expected

from its disposal. Any gains or losses on the retirement or disposal of an investment property is

recognized in the statement of comprehensive income in the year of retirement or disposal.

3.9 Statutory Deposits Statutory deposits are cash balances held with the Central Bank of Nigeria and are only available to

the Company upon liquidation of the Company. They have been separately disclosed due to their

nature and liquidity. They represent 10% of the paid up capital of Company as stipulated by Section

10 (3) of the Insurance Act of 2003. Statutory deposits are measured at cost.

3.10 Intangible assets (Software)

3.10.1 Recognition 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 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 future

economic benefits embodied in the specific asset to which it relates. All other expenditure is

expensed as incurred. Amortisation is recognised in profit or loss on a straight-line basis over the

estimated useful life of the software, from the date that it is available for use. The estimated useful

life of software is four years subject to annual reassessment.

3.11 Property, Plant and Equipment3.11.1 Recognition & Measurement

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

Company. Items of property, plant 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 or loss account during the financial period in which

they are incurred.


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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%

3.12 Insurance Contracts

NEM Insurance issues contracts that transfer insurance risk.

Insurance contracts are those contracts that transfer significant insurance risk. NEM Insurance

defines significant insurance risk as the possibility of having to pay benefits, on the occurrence of

an insured event, that are significantly more than the benefits payable if the insured event did not

occur.

These contracts are accident and casualty and property insurance contracts.

Accident and casualty insurance contracts protect the Company’s customer against the risk of

causing harm to third parties as a result of their legitimate activities. Damages covered include

both contractual and non contractual events. The typical protection offered is designed for

employers 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 a

third party for bodily harm or property damage (public holiday).

Property insurance contract mainly compensate the Company’s customer for damage suffered to

their properties or for the value of properties lost. Customers who undertake commercial activities

on their premises could also receive compensation for the loss of earnings caused by the inability

to 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 in

accordance with the prechange over from Nigerian GAAP.

3.12.1 Salvages

Some non-life insurance contracts permits the company to sell (usually damaged) property acquired

in the process of settling a claim. The Company may also have the right to pursue third parties 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.


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Statement of Significant Accounting Policies (Cont’d) 3.12.2 Subrogation

Subrogation is the right of an insurer to pursue a third party that caused an insurance loss to the

insured. This is done as a means of recovering the amount of the claim paid to the insured for the

loss. A receivable for subrogation is recognized in other assets when the liability is settled and the

Company has the right to receive future cash flow from the third party.

3.12.3 Insurance Contract Liabilities

These are computed in compliance with the provision of section 20, 21, and 22of the Insurance Act

2003 as follows:

3.12.3.1 Reserves for Outstanding Claims

The reserve for outstanding claims is maintained at the total amount of outstanding claims incurred

and reported plus claims incurred but not reported (“IBNR”) as at the balance sheet date. The IBNR

is based on the liability adequacy test (See 20 b (vii)

3.12.3.2 Reserves for Unexpired Risk

A provision for additional unexpired risk reserve (AURR) is recognized for an underwriting year

where it is envisaged that the estimated cost of claims and expenses would exceed the unearned

premium reserve (UPR)”

3.12.4 Liability Adequacy Test

3.13 Trade Payables

Trade payables are recognised when due and measured on initial recognition at the fair value of the

consideration received less directly attributable transaction costs. Subsequent to initial recognition,

they are measured at amortized cost using the effective interest rate method.

3.13.1 Derecognition of Trade Payables

Trade payables are derecognized when the obligation under the liability is settled, cancelled or

expired.

3.13.2 Other Payables and Accruals

A financial liability is derecognized when the obligation under the liability is discharged or cancelled

or expires. When an existing financial liability is replaced by another from the same lender on

substantially different terms, or the terms of an existing liability are substantially modified, such an

exchange or modification is treated as a derecognition of the original liability and the recognition of

a new liability, and the difference in the respective carrying amounts is recognised in the income

statement. Gains and losses are recognised in the income statement when the liabilities are

derecognized.

At each end of the reporting period, liability adequacy test are performed by an Actuary to ensure

the adequacy of the contract liability net of related DAC assets. In performing these tests, current

best 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 is

immediately charged to profit or loss initially by writing off DAC and by subsequently establishing a

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 the

provision of IFRS and since it results in a more conservative reserving than the provision of the

Insurance Act 2003, it serves the Company's prudential concern well.


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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

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 minimum

contributions of 10% to a separate entity – Pension Fund Administrators; employees also pay a

minimum of 8% 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


NEM Insurance 2014


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

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

are discounted to present value.

3.15 Taxation

Income tax comprises current income and deferred tax. Income tax expense is recognised in the

income statement except to the extent that it relates to items recognised directly in equity, in which

case it is recognised in equity.

3.15.1 Current Income Tax

Current income Tax assets and liabilities for the current period are measured at the amount

expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to

compute the amount are those that are enacted or substantively enacted by the reporting date.

Current income Tax asset and liabilities also include adjustments for tax expected to be payable or

recoverable in respect of previous periods.

Current income tax relating to items recognised directly in equity is recognised in other

comprehensive income and not in income statement. Management periodically evaluates positions

taken in the tax returns with respect to situations in which applicable tax regulations are subject to

interpretation and establishes provisions, where appropriate.

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.


NEM Insurance 2014


3.16 Issued Share Capital

The issued ordinary shares of the Company are classified as equity instruments. Incremental costs

directly attributable to the issue of an equity instrument are deducted from the initial measurement

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 they are

paid or, if earlier, approved by the Company’s shareholders.

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 classified as 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 earnings

The 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 Reserve

The available-for-sale reserve comprises the cumulative net change in the fair value of the

Company’s available-for-sale investments. Net fair value movements are recycled to income

statement 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 to

changes in actuarial valuation assumptions or actual experience differing from experience. The

gains/ losses for the year, net of applicable deffered tax assets /liability on employee benefit

obligation, 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.


NEM Insurance 2014


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 actuary 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 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 reinsurance

contract.

3.23 Reinsurance Cost

Reinsurance cost represents outward premium paid to reinsurance companies less the unexpired

portion 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 contract

fees. These fees are recognised as revenue over the period in which the related services are

performed.

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 and is

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 comprising

commission and policy expenses, proportion of staff cost and insurance supervision levy.

Underwriting expenses for insurance contracts are recognized as expense when incurred, with the

exception of acquisition costs which are recognized on a time apportionment basis in respect of

risk.


NEM Insurance 2014


3.27 Investment Income

Investment income comprises interest income earned on short-term deposits, rental income and

income 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 an

accrual basis.

Interest income is recognised in the income statement as it accrues and is calculated using the

effective interest rate method. Fees and commissions that form part of an integral part of the

effective yield of a financial instrument are recognised as an adjustment to the effective interest rate

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 Assets The carrying amounts of these assets are reviewed at each reporting date to determine whether

there is any objective evidence of impairment. A financial asset is considered to be impaired if

objective evidence indicates that one or more events that have occurred since the initial recognition

of the asset have had a negative effect on the estimated future cash flows of that asset and can be

reliably estimated. For financial assets measured at amortised cost, the Company first assesses

whether objective evidence of impairment exists individually for financial assets that are individually

significant and individually or collectively for financial assets that are not individually significant.

Individually significant financial assets are tested for impairment on an individual basis. The

remaining financial assets are assessed collectively in groups that share similar credit risk

characteristics. An impairment loss in respect of a financial asset measured at amortised cost is

calculated as the difference between its carrying value and the present value of the estimated future

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 the balance 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 was

previously recognized directly in equity as a reduction in fair value, the cumulative net loss that had

been recognized in equity is transferred to the income statement and is recognized as part of the

impairment loss. The amount of the loss recognized in the income statement is the difference

between the acquisition cost and the current fair value, less any previously recognized impairment

loss.

Subsequent decreases in the amount relating to an impairment loss, that can be linked objectively

to an event occurring after the impairment loss was recognized in the income statement, is reversed

through the income statement. An impairment loss in respect of an equity instrument classified as

available-for-sale is not reversed through the income statement but accounted for directly in equity.


NEM Insurance 2014


Impairment of non-financial assets

The carrying amounts of the Group’s non-financial assets are considered to be impaired when

existence of an 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 compensation from

third parties and any subsequent purchase or construction of replacement assets are separate

economic events and are accounted for separately.

Impairment losses recognised in prior periods are assessed at each reporting date for any

indications that the loss has decreased or no longer exists. An impairment loss is reversed if there

has been a change in the estimates used to determine the recoverable amount. An impairment loss

is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount

that would have been determined, net of depreciation or amortisation, if no impairment loss 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 assets

Provisions are liabilities that are uncertain in amount and timing. Provisions are recognized when

the Group has a present legal or constructive obligation as a result of past events and it is more

likely than not that an outflow of resources will be required to settle the obligation and the amount

can be reliably estimated.

Where there are a number of similar obligations, the likelihood that an outflow will be required in

settlement is determined by considering the class of obligations as a whole. A provision is

recognized even if the likelihood of an outflow with respect to any one item included in the same

class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle

the obligation using a pre-tax rate that reflects the current market assessments of the time value of

money and the risks specific to the obligation.

A contingent liability is a possible obligation that arises from past event and whose existence will be

confirmed only by the occurrence or non-occurrence of one or more uncertain future events not

wholly within the control of the company. Contingent assets are not recognized but are disclosed in

the financial statement as they arise.


NEM Insurance 2014

Statement of Significant Accounting Policies (Cont’d) 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 reporting

A segment is a distinguishable component of the Group that is engaged in providing products or

services (business segment), or in providing products or services within a particular economic

environment (geographical segment), which is subject to risks and rewards that are different from

those of other segments. The Group’s primary format for segment reporting is based on business

segments. Significant geographical regions have been identified as the secondary basis of reporting.


NEM Insurance 2014

Consolidated Statement of Financial Position

Group Parent

2014 2013 2014 2013

Notes N'000 N'000 N'000 N'000

Assets Cash and cash equivalent 1 3,446,995 3,865,965 3,425,121 3,836,821

Financial assets 2 3,161,059 2,624,638 2,914,575 2,373,132

Trade receivables 3 209,493 496,007 209,493 347,494

Reinsurance assets 4 717,121 65,496 717,121 65,496

Deferred acquisition cost 5 482,385 513,387 442,473 472,346

Other receivables and prepayments 6 137,232 278,712 89,159 219,552

Investment in subsidiary 7 - - 193,308 175,396

Investment properties 8 485,830 468,974 485,830 468,974

Statutory deposit 9 340,112 349,200 320,000 320,000

Intangible asset 10 5,627 18,851 4,459 15,772

Property, Plant and Equipment 11 2,213,264 1,284,191 2,175,775 1,245,149

Income tax credit 16.1 - 80,456 - 87,745

Total assets

11,199,118 10,045,877 10,977,314 9,627,877

Liabilities Insurance contract liabilities 12 4,660,059 4,787,052 4,444,126 4,419,597

Trade payables 13 9,733 48,510 9,733 48,510

Other payables 14 175,213 167,874 137,406 127,699

Book overdraft 1.2 4,364 9,848 4,364 9,848

Retirement benefit obligations 15 187,848 170,838 187,848 170,838

Income tax liability 16.1 15,212 - 12,212 -

Deferred tax liability 16.3 280,913 166,062 280,913 166,062

5,333,341 5,350,184 5,076,601 4,942,554

Equity Issued share capital 17.1 2,640,251 2,640,251 2,640,251 2,640,251

Share premium 18 272,551 272,551 272,551 272,551

Contingency reserve 19 1,995,456 1,696,986 1,966,395 1,664,960

Retained earnings 20 560,109 30,366 624,106 52,022

Available for sale reserve 21 329,232 9,978 329,232 9,978

Other Reserves-employee benefit

actuarial surplus 22 68,178 45,562 68,178 45,562

Total Equity

5,865,777 4,695,693 5,900,713 4,685,323

Total equity and liabilities

11,199,118 10,045,877 10,977,314 9,627,877

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 22 to 48 and the explanatory notes on pages 56 to 99 form an integral part of

these financial statements.


NEM Insurance 2014

Consolidated Statement of Comprehensive Income

Group Parent

2014 2013 2014 2013

Notes N'000 N'000 N'000 N'000

Gross premiums written 23 9,836,596 8,933,345 9,448,284 8,261,325

(Increase) in unearned income

(63,046) (1,142,383) (63,888) (1,010,503)

Gross premium income 23 9,773,550 7,790,962 9,384,396 7,250,821

Reinsurance expenses 24 (1,228,016) (366,222) (1,185,663) (324,527)

Net premium income 23 8,545,534 7,424,740 8,198,733 6,926,294

Fee and commission income 25 65,398 14,873 52,877 1,035

Net underwriting income

8,610,932 7,439,613 8,251,610 6,927,329

Claims expenses 26 (2,655,818) (3,070,271) (2,568,166) (2,965,052)

Underwriting expenses 27 (2,573,848) (2,538,188) (2,526,400) (2,488,051)

Underwriting profit

3,381,266 1,831,154 3,157,044 1,474,226

Investment Income 28 607,837 444,972 560,374 396,959

Fair value (loss)/gain 29 (434,769) 370,276 (434,769) 370,276

Other income 30 31,124 18,973 27,327 18,889

Revaluation gain on investment

properties 8 16,856 9,161 16,856 9,161

Impairments 31 (68,852) (355,627) - (225,302)

Other operating and admin. Expenses 32 (1,766,690) (1,774,500) (1,586,748) (1,537,320)

Profit before tax

1,766,772 544,410 1,740,084 506,889

Income taxes 16.2 (241,451) (149,350) (232,905) (137,981)

Profit after tax

1,525,321 395,060 1,507,179 368,908

Other Comprehensive Income

Fair value loss on available for sale 21 319,254 (43,433) 319,254 (43,433)

Actuarial profit on defined benefit plan 22 22,616 43,421 22,616 43,421

1,867,191 395,048 1,849,049 368,896

Basic earnings per share (kobo) 33 29 7 29 7

The accounting policies on pages 22 to 48 and the explanatory notes on pages 56 to 99 form an integral part of

these financial statements.


NEM Insurance 2014

Consolidated Statement of Change in Equity – Group

GROUP

Issued Share

Capital Share

Premium Retained Earnings

AFS Reserve

Other Reserves

Contingency Reserves Total

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

At January 1, 2014 2,640,251 272,551 30,366 9,978 45,562 1,696,986 4,695,694

Profit for the year -

1,525,321

1,525,321

Transfer to capital reserves

-

Transfer to contingency

reserves -

(312,088)

312,088 -

Actuarial gain on defined

benefit plan -

-

Exchange Difference

(49,830)

(13,618) (63,448)

Other comprehensive income

319,254 22,616

341,870

Distribution to Owners

-

Dividend paid during the year - - (633,660)

(633,660)

As at December 31, 2014 2,640,251 272,551 560,109 329,232 68,178 1,995,456 5,865,777

Exchange difference arose on conversion of balance on retained earnings of NEM Insurance (Ghana) Limited at N 56.92

to 1 Ghana Cedis.


NEM Insurance 2014

Statement of Change in Equity - Parent

Parent

Issued Share

Capital Share

Premium Retained Earnings

AFS Reserve

Other Reserves

Contingency Reserves Total

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

At January 1, 2014 2,640,251 272,551 52,022 9,978 45,562 1,664,960 4,685,324

Profit for the year -

1,507,179

1,507,179

Transfer to contingency

reserves -

(301,435)

301,435 -

Other Comprehensive Income

319,254

319,254

Actuarial gain on defined

benefit plan -

22,616

22,616

Distribution to Owners

-

Dividend paid during the year - - (633,660)

(633,660)

As at December 31, 2014 2,640,251 272,551 624,106 329,232 68,178 1,966,395 5,900,713


NEM Insurance 2014

Consolidated Statement of Cash Flows

Group Parent

Dec. 2014 Dec. 2013 Dec. 2014 Dec. 2013

Note N'000 N'000 N'000 N'000

Operating profit before taxation

1,766,772 544,410 1,740,084 506,889

Adjustment for items not involving movement of cash:

Depreciation of Property, Plant & Equipment 11.1 95,796 134,862 88,749 119,949

Amortization of intangible asset 10 11,597 12,340 11,313 11,313

Fixed Asset adjustment

10,597 Loss / (Profit) on disposal of assets

5,246 (2,384) 5,494 (2,384)

Fair Value Gain on investment property 8 (16,856) (9,161) (16,856) (9,161)

Exchange Gain 30 (28,063) (11,503) (24,577) (11,503)

Service & Interest cost on retirement benefit 15 54,499 59,633 54,499 59,633

Interest & Dividend Income 28 (607,837) (444,972) (560,374) (396,959)

Cashflow changes before changes in working capital

1,291,751 283,224 1,298,333 277,777

CHANGES IN WORKING CAPITAL Decrease in Trade receivables

286,514 512,890 138,001 539,514

(Increase) / Decrease in Reinsurance assets

(651,625) 27,015 (651,625) 27,015

Decrease/(Increase) in Deferred acquisition cost

31,002 (187,442) 29,873 (174,196)

Decrease in Other receivables and prepayments

141,480 (31,952) 130,394 4,599

(Decrease)/Increase in Insurance contract liabilities

(126,993) 1,759,495 24,529 1,600,202

(Decrease)/Increase in Trade payables

(38,777) 58,342 (38,777) 46,978

Increase/(Decrease) in Other payables

7,339 (34,052) 9,707 (34,052)

Net cash inflow from operating activities

940,691 2,387,521 940,433 2,287,838

Exchange gain 30 28,063 11,503 24,577 11,503

Foreign exchange difference

(63,448) - - -

Gratuity benefit to employee 15 (14,874) (5,579) (14,874) (5,579)

Tax paid 16.1 (30,932) (192,363) (18,097) (180,499)

859,500 2,201,082 932,040 2,113,263

CASH FLOW FROM INVESTING ACTIVITIES

Proceed of disposal of PPE

4,021 2,384 3,773 2,384

Investment in subsidiary

- - (17,912) -

Interest & Dividend Income 28 607,837 444,972 560,374 396,959

Statutory deposits

9,088 (6,321) - -

Bond maturity in the year 2.4.1 5,000 - 5,000 -

Purchase of bond 2.4.1 (104,110) (15,000) (104,110) (15,000)

Purchase of investment 2.1 (118,054) (1,302,107) (123,080) (1,050,599)

Purchase of intangible asset 10 - (4,106) - -

Purchase of plant and equipment 11.1 (1,043,108) (590,465) (1,028,643) (567,890)

Net cash outflow for investment activities

(639,326) (1,470,643) (704,598) (1,234,146)

CASH FLOW FROM FINANCIAL ACTIVITIES Dividends paid to equity holders of the parent

(633,660) - (633,660) -

Net cash outflow for financing activities

(633,660) - (633,660) -

Total cash outflow

(413,486) 730,438 (406,216) 879,117

Cash and cash equivalent at January 1

3,856,117 3,125,679 3,826,973 2,947,856

Cash and cash equivalent at December 31 1.3 3,442,631 3,856,117 3,420,757 3,826,973

Represented by: Cash and cash equivalent at December 31

3,442,631 3,856,117 3,420,757 3,826,973

The accounting policies on pages 22 to 48 and the explanatory notes on pages 56 to 103 form an integral part of these

financial statements.


NEM Insurance 2014

Segment Information

For Management purposes, the Group is organized into business units based on location and has

two reportable operating segments as follows:

NEM Insurance Plc in Nigeria comprises general insurance to corporate entities and

individuals. Non-life insurance products offered include motor, household, commercial

and business interruption insurance. These products offer protection of policyholder’s

assets and indemnification of other parties that have suffered damage as a result of

policyholder’s accident.

NEM Insurance Ltd in Ghana is a Subsidiary wholly owned (100%) by NEM Insurance

Plc Nigeria and its business comprises only general insurance to corporate entities

and individuals. Non-life insurance products offered include motor, household,

commercial and business interruption insurance. These products offer protection of

policyholder’s assets and indemnification of other parties that have suffered damage

as a result of policyholder’s accident.

Segment performance is evaluated based on profit or loss which, in certain respects, is measured

differently from profit or loss in the financial statements. The Company’s financing and income

taxes are managed on a group basis and are not allocated to individual operation segments.

No inter-segment transaction occurred in 2014 and 2013. If any transaction were to occur,

transfer prices between operating segment are set on an arm’s length basis in a manner similar

to transaction with third parties. Segment income, expenses and result will include those

transfers between business segment.


NEM Insurance 2014

Segment Statement of Comprehensive Income at 31st December, 2014

Nem Insurance (Nigeria) Plc

Nem Insurance (Ghana) Ltd

Group 31 Dec. 2014

N'000 N'000 N'000

Gross premiums written 9,448,284 388,311 9,836,596

Decrease/(Increase) in unearned income (63,888) 842 (63,046)

Gross premium income 9,384,396 389,153 9,773,550

Reinsurance expenses (1,185,663) (42,352) (1,228,016)

Net premiums income 8,198,733 346,801 8,545,534

Fee and commission income 52,877 12,521 65,398

Net underwriting income 8,251,610 359,322 8,610,932

Claims expenses (2,568,166) (87,652) (2,655,818)

Underwriting expenses (2,526,400) (47,448) (2,573,848)

Underwriting profit 3,157,044 224,222 3,381,266

Investment Income 560,374 47,463 607,837

Fair value (loss)/gain (434,769) - (434,769)

Other income 27,327 3,797 31,124

Revaluation loss on investment properties 16,856 - 16,856

Impairments - (68,852) (68,852)

Other operating and admin. Expenses (1,586,748) (179,942) (1,766,690)

Profit before tax 1,740,084 26,688 1,766,772

Income taxes (232,905) (8,546) (241,451)

Profit after tax 1,507,179 18,142 1,525,321

Other Comprehensive Income -

Fair value loss on Available for sale 319,254 - 319,254

Actuarial profit on defined benefit plan 22,616

22,616

Total Comprehensive income for the year, net of tax 1,849,049 18,142 1,867,191


NEM Insurance 2014

Notes to the Financial Statements 1 Cash and Cash Equivalent Group Parent

2014 2013 2014 2013

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

Cash and bank balances 473,613 920,514 451,739 891,370

Short - term deposits (Note 1.1) 2,973,382 2,945,451 2,973,382 2,945,451

Total cash and cash equivalents 3,446,995 3,865,965 3,425,121 3,836,821

Cash and Cash Equivalent

For Shareholders 618,877 200,000 600,000 443,672

For Policy Holders 2,640,270 3,495,127 2,637,273 3,222,311

Staff Benefit( Gratuity) 187,848 170,838 187,848 170,838

Total cash and cash equivalents 3,446,995 3,865,965 3,425,121 3,836,821

Short-term deposits are made for varying periods averaging between 1 - 90 days depending on the immediate

cash requirements of the Group. All deposits are subject to an average interest rate of 9%. The carrying

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

1.1 Short term deposit 2014 2013 2014 2013

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

Placements with Local Bank 2,973,382 2,945,451 2,973,382 2,945,451

1.2 Book Overdraft 2014 2013 2014 2013

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

Book Overdraft 4,364 9,848 4,364 9,848

This is not the same as Bank Overdraft as the Company has not borrowed any fund from any lending

institution. The sum represents debit balance as at 31st December 2014. The reason being that most of the

cheques raised in those Cashbooks have not been presented to the banks.

1.3 Cash & Cash Equivalent for Cash flow

Cash & Cash Equivalent 3,446,995 3,865,965 3,425,121 3,836,821

Book Overdraft (4,364) (9,848) (4,364) (9,848)

Cash & Cash Equivalent for Cash flow 3,442,631 3,856,117 3,420,757 3,826,973

2 Financial Assets

The financial assets are as summarised below: 2014 2013 2014 2013

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

Financial assets at fair value through profit or loss

(Note 2.2) 665,837 1,055,737 665,837 1,055,737

Available for sale (Note 2.3) 2,334,283 1,507,072 2,087,799 1,255,566

Held to maturity financial assets(Note 2.4) 160,939 61,829 160,939 61,829

Total financial assets 3,161,059 2,624,638 2,914,575 2,373,131

Current 2,334,284 1,507,073 2,087,799 1,255,566

Non- current 826,775 1,117,566 826,776 1,117,566

3,161,059 2,624,638 2,914,575 2,373,132

2.1 Movement in financial asset

Opening balance 2,624,638 1,350,967 2,373,131 1,350,967

Purchase of investment 118,054 1,302,107 123,080 1,050,599

Fair value gain/(loss) on available for sale 319,254 (43,433) 319,254 (43,433)

Change in held to maturity 99,110 15,000 99,110 15,000

Closing balance 3,161,059 2,624,638 2,914,575 2,373,131


NEM Insurance 2014

Notes to the Financial Statements (Cont’d) 2.2 Fair value through profit and loss 2014 2013 2014 2013

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

Opening balance 1,055,737 685,463 1,055,737 685,463

Fair value loss / (gain) (434,769) 370,274 (434,769) 370,274

Addition during the year 44,869 - 44,869

Quoted equity securities at fair value 665,838 1,055,737 665,838 1,055,737

Quoted equities are shares held in publicly quoted Companies and these shares are valued at their market

prices.

2.3 Available for Sale

Short term Investment over 90 days 860,485 553,544 614,001 302,038

Unquoted investments 1,473,798 953,528 1,473,798 953,528

2,334,283 1,507,072 2,087,799 1,255,566

2.3.1 Movement in Available for Sale

Opening balance 1,507,072 618,677 1,255,566 618,677

Movement in the year 507,956 931,829 512,979 680,322

Fair value gain/(loss) on available for sale 319,254 (43,433) 319,254 (43,433)

Closing balance 2,334,283 1,507,072 2,087,799 1,255,566

2.4 Held to maturity financial assets

Lagos State Bond 4,000 9,000 4,000 9,000

Ondo State Bond 10,000 10,000 10,000 10,000

Osun State Bond 15,000 15,000 15,000 15,000

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

Niger State Bond 54,110 - 54,110 -

Fidson Bond 50,000 - 50,000 -

160,939 61,829 160,939 61,829

Fair value through profit or loss

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

value since the prices of the shares are quoted in an active market. This prompted the classification of quoted

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

Available for sale

The fair value of unquoted equities was determined on market price as at year end. The over the counter price

(OTC) that was used in the last transaction before the reporting date was used as a reflection of fair value.

Fixed deposits 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 for cash usage. It is valued at cost because there is no active market or other

similar market that could be used for its valuation.

2.4.1 The details of Held to maturity investment are as follow:

2014 2013 2014 2013

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

As at January 1 61,829 46,829 61,829 46,829

Purchased during the year 104,110 15,000 104,110 15,000

Matured (5,000)

(5,000)

As at December 31 160,939 61,829 160,939 61,829

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. It

was purchased in 2010 whose coupon rates are 13% and 10% respectively payable half yearly.

Other investment relates to the fixed rate bond of GT Bank Euro, Ondo State Government and Osun State

Government with coupon rate of 7.5%, 15.5% and 14.75% with tenure period of 2012 to 2016, 2012 to 2017 and

2013 to 2020 respectively.

During the year, Lagos State Bond of N 5m matured, Fidson Bond and Niger State Bond were purchased with

coupon rate of 15.5% and 14% 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.


NEM Insurance 2014

Notes to the Financial Statements (Cont’d)

Group

Parent 3 Trade Receivables 2014 2013

2014 2013

N'000 N'000

N'000 N'000

Opening Balance 4,612,097 5,025,075

4,333,260 5,835,813

Prior year collection (347,494) -

(347,494) -

Addition 209,493 (412,978)

209,493 (1,502,553)

4,474,096 4,612,097

4,195,259 4,333,260

Impairment for trade receivables (4,264,603) (4,116,091)

(3,985,766) (3,985,766)

209,493 496,007

209,493 347,494

3.1 Movement in Impairment

Opening Balance 4,116,091 5,007,080

3,985,766 4,948,804

Reversed 148,512 (890,989)

- (963,038)

4,264,603 4,116,091

3,985,766 3,985,766

3.2 Analysis of Trade Receivables

Insurance Companies - -

- -

Insurance Agents - -

- -

Direct Business - -

- -

Insurance Brokers 209,493 496,007

209,493 347,494

209,493 496,007

209,493 347,494

3.3 The age analysis of trade receivable

Under 90 days 209,493 496,007

209,493 347,494

91-180 days - -

- -

Above 180 days - -

- -

209,493 496,007

209,493 347,494

The Group's policy in line with the provisions of “No Premium, No Cover” on impairment of trade receivables

recognize trade receivables from Brokers only. Such receivables should not exceed a period of 30 days.

4 Reinsurance Asset 2014 2013

2014 2013

N'000 N'000

N'000 N'000

Reinsurance share of outstanding claims

reported 371,186 -

371,186 -

Reinsurance claim recoverable - 65,496

- 65,496

Reinsurance share of Incurred but not reported 59,377 -

59,377 -

Prepaid Reinsurer 286,557 -

286,557 -

Total Reinsurance Asset 717,121 65,496

717,121 65,496

4.1 Movement in reinsurance Asset

Opening Balance 65,496 129,501

65,496 92,512

For the year reinsurance assets 651,625 161,297

651,625 198,286

Transfer to Impairment - (225,302)

(225,302)

717,121 65,496

717,121 65,496

4.2 Analysis of Reinsurance Assets

Prepayments 286,557 -

286,557 -

Recoverables 430,563 65,496

430,563 65,496

717,121 65,496

717,121 65,496

5 Deferred acquisition cost

At January 1 513,386 325,944

472,346 298,151

Acquisition cost during the year 1,511,232 1,627,934

1,464,911 1,564,549

Apportionment during the year (1,542,233) (1,440,492)

(1,494,784) (1,390,354)

482,385 513,386

442,473 472,346

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


NEM Insurance 2014


Group Parent

2014 2013 2014 2013

N'000 N'000 N'000 N'000 6 Other Receivables and Prepayments

Prepayments 18,789 31,844 12,873 17,150

Accrued Income 38,442 34,776 38,442 34,776

Other Debtors 5,887 755 5,887 755

Other receivables 74,114 211,337 31,957 166,870

137,232 278,712 89,159 219,552

6.1 Other Receivables

Mortgage Loan 18,573 158,934 18,573 158,934

Staff Loan Parent Company 13,384 7,936 13,384 7,936

Staff Loan Subsidiary 42,157 44,467 - -

74,114 211,337 31,957 166,870

7 INVESTMENT IN SUBSIDIARY 2014 2013 2014 2013

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

Investment in a subsidiary - - 193,308 175,396

The Company's investment in a subsidiary in Ghana (NEM Insurance (Ghana) Limited) is wholly

owned (100%) by NEM Insurance Plc, Nigeria. 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. During the year, additional approx. N 17.9m capital was invested in the

subsidiary NEM Insurance (Ghana) Ltd.

8 INVESTMENT PROPERTIES

2014 2013 2014 2013

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

Opening Balance 468,974 459,813 468,974 459,813

Revaluation surplus/deficit 16,856 9,161 16,856 9,161

As at December 31. 485,830 468,974 485,830 468,974

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

performed by independent valuation experts, Diya Fatimileyin & Co. - Our Estate Surveyors and

Valuers owned by Messrs Diya Maurise Kolawole (FRC/2013/NIESV/0000002773) and Messrs

Fatimileyin Adegboyega (FRC/2013/NIESV/0000000754)

The valuers are the industry specialists in valuing these types of investment properties. The fair

value is supported by market evidence and represents the amount at which the assets could be

exchanged between knowledgeable, willing buyers and knowledgeable, willing seller in an arm's

length transaction at the date of valuation, in accordance with standards issued 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.

9 Statutory deposit

This represents the amount deposited with the Central Bank of Nigeria as at 31 December, 2014:

N 320,000,000 (2013; N320million) which was in accordance with section 9(1) and section 10 (3)

of Insurance Act 2003 Statutory deposits are measured at cost.

Group Parent

2014 2013 2014 2013

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

Statutory deposit 340,112 349,200 320,000 320,000


NEM Insurance 2014


10 INTANGIBLE ASSET

Group

Parent

2014

2013

2014

2013

Cost

N'000

N'000

N'000

N'000

At January 1,

49,359

45,253

45,253

45,253

Addition

-

4,106

-

-

Adjustment

(1,769)

-

-

-

Reclassification from non-current asset

-

-

-

-

At December 31

47,590

49,359

45,253

45,253

Amortization

At January 1,

30,507

18,168

29,481

18,168

Adjustment

(142)

Written off

-

-

-

-

Amortization during the year

11,597

12,340

11,313

11,313

At December 31

41,963

30,507

40,794

29,481

Net Book Value

5,627

18,851

4,459

15,772

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 recognized under intangible asset.


NEM Insurance 2014


11.1 PROPERTY, PLANT AND EQUIPMENTS - GROUP

Cost/Valuation

Building under

Construction

Office Partitioning

Machinery & equipt

Motor Vehicles

Furniture &

fittings

Computer Equipt

Total

N'000

N'000

N'000

N'000

N'000

N'000

N'000

As at Jan. 1 2014 1,028,446

37,107

28,106

334,777

45,610

146,961

1,621,006

Addition 911,854

5,017

9,333

101,882

7,564

7,457

1,043,108

Adjustments

(8,935)

(5,158)

8,969

(9,619)

(8,007)

(22,750)

Written off -

(25,310)

-

-

-

-

(25,310)

Disposal -

-

(2,046)

(64,251)

(4,660)

(113,191)

(184,148)

At Dec. 31, 2014 1,940,300

7,879

30,236

381,377

38,895

33,220

2,431,906

Depreciation

As at Jan. 1 2014 -

31,162

12,854

142,027

23,364

127,408

336,816

Charged for the

year -

1,894

6,913

74,848

5,777

6,364

95,796

Adjustments

(3,568)

(2,036)

(4,369)

(2,463)

(1,343)

(13,779)

Written off -

(25,310)

-

-

-

-

(25,310)

Disposal -

-

(2,046)

(54,984)

(4,659)

(113,191)

(174,880)

At Dec. 31, 2014 -

4,178

15,685

157,522

22,020

19,238

218,642

NET BOOK VALUE

At December 31, 2014 1,940,300

3,701

14,551

223,856

16,876

13,982

2,213,264

At December 31,

2013 1,028,446

5,945

15,252

192,749

22,245

19,553

1,284,191


NEM Insurance 2014


11.2 PROPERTY, PLANT AND EQUIPMENTS – PARENT

Cost/Valuation

Building under

Construction

Office Partitioning

Machinery &

equipment

Motor Vehicles

Furniture &

fittings

Computer Equipment

Total

N'000

N'000

N'000

N'000

N'000

N'000

N'000

As at Jan. 1 2014 1,028,445

25,310

23,353

289,574

33,115

136,023

1,535,820

Addition 911,854

550

6,754

101,882

2,754

4,849

1,028,643

Written off

(25,310)

(25,310)

Disposal -

-

(2,046)

(59,169)

(4,659)

(113,191)

(179,065)

At Dec. 31, 2014 1,940,299

550

28,061

332,287

31,210

27,681

2,360,088

Depreciation

As at Jan. 1 2014 -

25,310

9,786

115,901

18,721

120,955

290,672

Charge for the

year

110

5,894

72,664

4,545

5,536

88,749

Written off

(25,310)

(25,310)

Disposal

(2,046)

(49,902)

(4,659)

(113,191)

(169,798)

At Dec. 31, 2014 -

110

13,634

138,663

18,606

13,300

184,313

NET BOOK VALUE

At December 31, 2014 1,940,299

440

14,427

193,624

12,604

14,381

2,175,775

At December

31, 2013 1,028,445

-

13,567

173,674

14,394

15,068

1,245,149


NEM Insurance 2014


12 Insurance Contract Liabilities Group Parent

2014 2013 2014 2013

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

As at January 1

Reserve for unexpired Premium 3,060,236 1,917,853 2,740,749 1,730,246

Reserve for outstanding claims 1,726,816 1,109,703 1,678,848 1,089,148

Additions/(Reduction) during the year

Reserve for unexpired Premium (74,609) 1,142,383 63,888 1,010,503

Reserve for outstanding claims (52,385) 617,113 (39,361) 589,700

As at December 31. 4,660,059 4,787,052 4,444,126 4,419,597

Reserve for unexpired Premium (12.2) 2,985,627 3,060,236 2,804,638 2,740,749

Reserve for outstanding claims (12.1) 1,674,432 1,726,816 1,639,488 1,678,848

4,660,059 4,787,052 4,444,126 4,419,597

12.1 Outstanding Claims

Provision for reported claims by

policyholders 1,095,110 1,360,639 1,063,343 1,317,032

Provision for claims incurred but not reported

(IBNR) 579,322 366,177 576,145 361,816

1,674,432 1,726,816 1,639,488 1,678,848

12.2 Unexpired Premium

Opening Balance 3,060,236 1,917,853 2,740,749 1,730,246

Adjustment due to Exchange difference (137,654) - - -

Gross premium written 9,836,596 8,933,345 9,448,284 8,261,325

Gross premium earned (9,773,551) (7,790,962) (9,384,396) (7,250,822)

2,985,627 3,060,236 2,804,638 2,740,749

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 Group Parent

2014 2013 2014 2013

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

Cash and cash equivalents 2,640,270 3,495,127 2,637,273 3,222,311

Financial assets 2,019,789 1,291,925 1,806,853 1,197,286

4,660,059 4,787,052 4,444,126 4,419,597

12.4 Cash and Cash equivalents

Policy holders Fund 2,640,270 3,495,127 2,637,273 3,222,311

Shareholders Fund 618,877 200,000 600,000 443,672

Staff Gratuity 187,848 170,838 187,848 170,838

3,446,995 3,865,965 3,425,121 3,836,821

12.5 Financial Assets

Policy holders Fund 2,019,789 1,291,925 1,806,853 1,197,286

Shareholders Fund 1,141,270 1,332,713 1,107,722 1,175,846

3,161,059 2,624,638 2,914,575 2,373,132


NEM Insurance 2014


12.6 Investment Property

Policy holders Fund - - - -

Shareholders Fund 485,830 468,974 485,830 468,974

459,830 468,974 485,830 468,974

12.7 Plant, Equipment and Others



2,213,264 1,284,191 2,175,775 1,245,149

12.8 Work in Progress



1,940,299 1,028,446 1,940,299 1,028,446

13 Trade Payables Group Parent

2014 2013 2014 2013

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

Trade Creditor 9,733 48,510 9,733 48,510

The carrying amount disclosed above reasonably approximates fair value at the reporting date. All amounts

are payable within one year.

14 Other Payables Group Parent

2014 2013 2014 2013

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

Accruals 83,042 107,671 75,848 67,496

Other creditors 92,171 60,203 61,558 60,203

175,213 167,874 137,406 127,699

The carrying amount disclosed above reasonably approximates fair value at the reporting date. All amounts

are payable within one year.

15 Retirement Benefit Obligations

The Company has a defined benefit gratuity scheme covering its entire employee who has spent an average

minimum number of five years. The scheme is funded; therefore, no contribution is made to any fund.

The amounts recognized in the income statement (other operating and administrative expenses) are as

follows:

Group Parent

2014 2013 2014 2013

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

Current service cost 32,042 39,070 32,042 39,070

Interest cost on benefit obligation 22,457 20,563 22,457 20,563

54,499 59,633 54,499 59,633

The amounts recognized in the statement of financial position at the reporting date are as follows:

Group Parent

2014 2013 2014 2013

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

Present value of the defined benefit obligation 187,848 170,838 187,848 170,838

Total defined benefit obligation 187,848 170,838 187,848 170,838


NEM Insurance 2014


The movement in the defined benefit obligation is, as follows:

Group Parent

2014 2013 2014 2013

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

At 1 January 170,838 160,205 170,838 160,205

Current service cost 32,042 39,070 32,042 39,070

Interest cost 22,457 20,563 22,457 20,563

Benefits paid (14,874) (5,579) (14,874) (5,579)

Actuarial gains - Due to change in assumption (25,775) 8,510 (25,775) 8,510

Actuarial losses - Due to experience adjustment 3,160 (51,931) 3,160 (51,931)

At 31 December 2014 187,848 170,838 187,848 170,838

Actuarial Assumptions

The principal actuarial assumptions used in determining the pension benefit obligation for the Company's

plan are as follows:

Financial Assumptions (expressed as weighted

averages)

Group Parent

Long Term Average 2014 2013 2014 2013

Average Pay Increase (p.a) 13.0% 13.0% 13.0% 13.0%

Average Rate Inflation (p.a) 9.0% 9.0% 9.0% 9.0%

Discount Rate (p.a) 15.0% 13.5% 15.0% 13.5%

Mortality rate

Less than or equal to 30 3 3 3 3

31-39 2 2 2 2

40-44 2 2 2 2

45-50 0 0 0 0

The discount rate is the assumption that has the largest impact on the value of the obligation. A 1%

increase in this rate would reduce the present value of the defined benefit obligation.

The mortality base table used for the schemes is A49/52 Ultimate Tables, published jointly by the

Institute and Faculty Actuaries in the United Kingdom.

Amounts for the current and previous period are as follows:

Group Parent

2014 2013 2014 2013

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

Defined benefit obligation 187,848 170,838 187,848 170,838

Experience adjustments on plan liabilities 3,160 (51,931) 3,160 (51,931)

191,008 118,907 191,008 118,907


NEM Insurance 2014


16 Taxation Group Parent

2014 2013 2014 2013

16.1 Per Financial Position N'000 N'000 N'000 N'000

At January 1, (80,456) 21,949 (87,745) 14,164

Income tax for the year 126,600 89,959 118,054 78,590

Paid during the year (30,932) (192,364) (18,097) (180,499)

At December 31, 15,212 (80,456) 12,212 (87,745)

2014 2013 2014 2013

16.2 Per Income Statement N'000 N'000 N'000 N'000

Income tax 111,951 80,263 103,405 68,894

Education tax 14,649 9,696 14,649 9,696

126,600 89,959 118,054 78,590

Deferred tax 114,851 59,391 114,851 59,391

241,451 149,350 232,905 137,981

16.3 Deferred tax

At January 1, 166,062 106,671 166,062 106,671

Release/ charge for the year 114,851 59,391 114,851 59,391

At December 31, 280,913 166,062 280,913 166,062

TAX EXPENSE RECONCILIATION

Profit before tax differs from the theoretical amount that would arise using the basic tax rate as

follows:

2014 2013 2014 2013

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

Profit before income tax 1,766,771 544,410 1,740,084 506,889

Tax calculated at the corporate tax rate (30%) 530,031 163,323 522,025 152,067

Effect of:

Non-deductible expenses 136,294 259,614 131,957 259,417

Education tax levy 14,649 9,696 14,649 9,696

Effect of Capital allowance on income tax (391,544) (255,149) (391,544) (255,149)

Tax exempt income (47,980) (28,134) (44,183) (28,050)

Tax incentive - - - -

Total income tax expense in income statement 241,451 149,350 232,905 137,981

Effective tax Rate 13.7% 27.4% 13.4% 27.2%

17 Issued Share Capital 2014 2013 2014 2013

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

17.1 Ordinary shares At January 1 issued and fully paid:

5,280,502,913 ordinary shares of 50k each 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


NEM Insurance 2014


Group Parent

2014 2013 2014 2013

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

18 Share Premium 272,551 272,551 272,551 272,551

Premium from the issue of shares are reported in share premium

19 Contingency Reserve

As at 1 January 1,696,986 1,434,193 1,664,960 1,417,120

Transfer from retained earnings 312,088 262,793 301,435 247,840

Exchange Difference (13,618) - - -

1,995,456 1,696,986 1,966,395 1,664,960

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. During the current year,

this is calculated based on 20% of total profit after tax.

20 Retained earnings

As at 1 January 30,367 (101,902) 52,022 (69,047)

Transfer from comprehensive income 579,572 132,268 572,084 121,069

Exchange Difference (49,830) - - -

560,109 30,366 624,106 52,022

Retained earnings consist of undistributed profits/loss from previous years. Exchange difference arose from

the consolidation of the balance on NEM Insurance (Ghana) Limited at the closing rate of N 55.59 to 1

Ghana Cedis.

21 Available for sale reserve

Opening Balance 9,978 53,411 9,978 53,411

Movement 319,254 (43,433) 319,254 (43,433)

329,232 9,978 329,232 9,978

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 recognised in the comprehensive income statement

until the asset has been sold or impaired. The negative movement was due to change in the long term

Unquoted Investment.

2014 2013 2014 2013

22 Other Reserve- N'000 N'000 N'000 N'000

Actuarial gains on retirement benefit

Opening Balance 45,562 2,141 45,562 2,141

Gain during the year 22,616 43,421 22,616 43,421

68,178 45,562 68,178 45,562

This represents actuarial gains on employee retirement benefit


NEM Insurance 2014


23 Gross Premium written 2014 2013 2014 2013

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

The analysis of gross premium by business class is as follows:

Fire 1,545,518 1,437,937 1,486,133 1,340,434

Oil and Gas 1,327,231 1,524,120 1,327,231 1,524,120

General accident 2,259,951 1,599,171 2,177,157 1,444,199

Marine 1,305,107 1,192,152 1,297,679 1,185,049

Motor 3,362,432 3,073,238 3,123,728 2,660,795

Inward reinsurance 36,357 106,727 36,357 106,727

Gross premium written 9,836,596 8,933,345 9,448,284 8,261,325

Increase in unearned premium (63,046) (1,142,383) (63,888) (1,010,503)

Gross premium income 9,773,550 7,790,962 9,384,396 7,250,821

Re-insurance expenses (Note 24) (1,228,016) (366,222) (1,185,663) (324,527)

Net premium income 8,545,534 7,424,740 8,198,733 6,926,294

2014 2013 2014 2013

24 Reinsurance expense N'000 N'000 N'000 N'000

Motor 27,183 25,590 1,148 -

Marine 78,830 441 78,020 -

Fire 118,923 8,413 112,446 2,364

General Accident 180,213 9,615 171,182 -

Oil & Gas 822,867 322,163 822,867 322,163

1,228,016 366,222 1,185,663 324,527

25 Fee and commission income

Fee income represents commission received on direct business and transactions ceded to re-insurance

during the year under review.

Group Parent

2014 2013 2014 2013

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

Motor 2,852 947 - -

Marine 11,508 73 10,718 -

Fire 40,394 8,954 34,561 1,035

General Accident 10,644 4,899 7,598 -

65,398 14,873 52,877 1,035


NEM Insurance 2014


26 Claims Expenses Group Parent

2014 2013 2014 2013

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

The analysis of claim expenses by business class is as follows:

Motor 1,060,364 989,146 978,952 892,322

Marine 257,100 327,664 257,100 327,664

Fire 723,832 414,883 722,919 413,552

General Accident 620,240 1,084,483 614,913 1,077,419

Oil & Gas (5,718) 254,095 (5,718) 254,095

2,655,818 3,070,271 2,568,166 2,965,052

Claim expenses consist of claims paid during the financial year together with the movement in the provision for

outstanding claims.

26.1 Component of Claims expenses 2014 2013 2014 2013

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

Claims paid during the year 3,645,554 2,674,258 3,537,336 2,575,235

Outstanding Claims at year end C/F 1,674,432 1,726,816 1,639,488 1,678,848

Foreign exchange difference 20,486 - - -

Total 5,340,472 4,401,074 5,176,824 4,254,084

Outstanding Claims at the beginning B/F (1,726,816) (1,109,703) (1,678,848) (1,089,148)

Gross Claim expense 3,613,656 3,291,371 3,497,976 3,164,935

Changes in Reinsurance Claims Recoverable (957,838) (221,100) (929,810) (199,883)

Net Claims expense 2,655,818 3,070,271 2,568,166 2,965,052

27 Underwriting Expenses 2014 2013 2014 2013

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

Commission expense (27.1) 1,671,749 1,440,492 1,624,301 1,390,354

Maintenance expense (27.2) 902,099 1,097,697 902,099 1,097,697

2,573,848 2,538,188 2,526,400 2,488,051

27.1 Commission expense 2014 2013 2014 2013

The analysis of commission expenses by

business class is as follows: N'000 N'000 N'000 N'000

Motor 468,774 353,987 436,974 320,810

Marine 294,462 227,629 294,357 227,616

Fire 329,035 281,028 325,021 275,021

General Accident 359,976 313,078 348,447 302,137

Oil & Gas 219,502 264,770 219,502 264,769

1,671,749 1,440,492 1,624,301 1,390,354

2014 2013 2014 2013

27.2 Maintenance expense N'000 N'000 N'000 N'000

Motor 299,398 481,454 299,398 481,454

Marine 124,378 129,893 124,378 129,893

Fire 142,440 129,628 142,440 129,628

General Accident 127,210 162,476 127,210 162,476

Oil & Gas 208,673 194,248 208,673 194,248

902,099 1,097,697 902,099 1,097,697

Underwriting expenses consist of acquisition and maintenance 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 incurred.


NEM Insurance 2014


Group Parent

2014 2013 2014 2013

28 Investment Income N'000 N'000 N'000 N'000

Dividend income 192,622 139,830 192,622 139,830

Interest from fixed deposit 375,206 263,686 327,743 215,673

Interest from statutory deposit 40,009 41,456 40,009 41,456

607,837 444,972 560,374 396,959

28.1 Investment Income

Investment Income attributable to Policy holders 298,365 335,864 275,292 289,435

Investment Income attributable to Share holders 309,472 109,108 285,082 107,524

607,837 444,972 560,374 396,959

2014 2013 2014 2013

29 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

beginning of the year (1,055,739) (685,463) (1,055,739) (685,463)

Addition during the year (44,869) - (44,869) -

(1,100,608) (685,463) (1,100,608) (685,463)

Financial Assets at Fair Value Through Profit or Loss at

end of the year 665,839 1,055,739 665,839 1,055,739

Gain on Financial Assets at Fair Value Through Profit or

Loss at end of the year (434,769) 370,276 (434,769) 370,276

2014 2013 2014 2013

30 Other Income N'000 N'000 N'000 N'000

Sundry Income 1,623 86 1,311 2

Rental Income 1,438 5,000 1,438 5,000

Exchange Gain 28,063 11,503 24,577 11,503

Profit on disposal of Property, Plant and Equipment - 2,384 - 2,384

31,124 18,973 27,326 18,889


NEM Insurance 2014


Group Parent

2014 2013 2014 2013

31 Impairments N'000 N'000 N'000 N'000

Trade receivable 68,852 130,325 - -

Reinsurance assets - 225,302 - 225,302

68,852 355,627 - 225,302

2014 2013 2014 2013

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

32 Other Operating & Administrative Expenses

Auditors Remuneration 9,437 9,957 8,000 8,000

Employee Benefits (32.1) 1,012,337 794,802 942,217 698,303

Other Management Expenses (32.2) 631,446 822,540 536,468 699,754

Depreciation & Amortisation 113,470 147,201 100,063 131,263

1,766,690 1,774,500 1,586,748 1,537,320

2014 2013 2014 2013

32.1 Employee benefit expenses N'000 N'000 N'000 N'000

Salaries and Wages 770,948 569,238 717,668 496,956

Medical Expenses 45,341 38,278 38,556 29,564

Staff Training 69,319 26,035 67,603 24,719

Staff Uniform/Welfare 39,466 69,294 35,869 61,741

Gratuity 54,499 59,633 54,499 59,633

Employers' Contribution Fund 32,763 32,324 28,022 25,690

1,012,337 794,802 942,217 698,303

2014 2013 2014 2013

32.2 Other Management Expenses N'000 N'000 N'000 N'000

Advertising 30,066 17,245 29,960 16,592

Occupancy Expenses 139,549 114,348 123,041 89,544

Communication and Postages 8,751 10,258 7,714 8,343

Office Supply and Stationery 30,976 31,998 27,413 25,912

Fees and Assessments 232,871 238,700 190,411 185,124

Furnitures, Equipments and Miscellaneous

Expenses 189,233 409,990 157,929 374,241

631,446 822,540 536,468 699,754

33 Earnings Per Share 2014 2013 2014 2013

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

Net profit attributable to ordinary shareholders

for basic and diluted 1,525,321 395,060 1,507,179 368,908

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) 29 7 29 7

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.


NEM Insurance 2014


2014

2013

2014

2013

34 Chairman's and Directors' Emoluments N'000

N'000

N'000

N'000

Fees

Chairman 4,460

3,750

3,500

2,250

Other Directors 10,060

12,171

7,500

3,750

14,520

15,921

11,000

6,000

Emoluments as Executives 52,000

69,640

50,200

48,300

66,520

85,561

61,200

54,300

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

2

2

2

9,000,001 - 10,000,000 1

1

1

1

10,000,001 - above 2

2

2

2

5

5

5

5

The Highest paid Director earned N 29,150,000 in 2014 (2013 N27,500,000)

Group

Parent

35 Staff Costs

The average number of persons employed

(excluding Directors ) in the financial year

and staff costs were as follows:

2014

2013

2014

2013

Managerial 18

18

14

14

Senior 127

121

116

114

Junior 107

96

77

74

252

235

207

202

The related staff costs was N 1,085,750,332 (2013 N797,694,674)


NEM Insurance 2014


36 Related party transactions

Transaction with Key Personnel

The key Management personnel of the Company comprises of both the Board of Directors and the

Management Team of the company.

Short term Benefits (Board of Directors) 2014

2013

2014

2013

Fees: N'000

N'000

N'000

N'000

Chairman 4,460

3,750

3,500

2,250


12,171

7,500

3,750

14,520

15,921

11,000

6,000

Other Emoluments:


69,640

50,200

48,300

66,520

85,561

61,200

54,300

Short term Benefits (Management Team)

Salaries and Allowances: 242,424

251,030

192,318

192,318

Total Short term benefits 308,944

336,591

253,518

246,618

Other Long Term Benefits (Management

Team)

Loan 18,573

188,934

18,573

188,934

Total Long Term benefits 18,573

188,934

18,573

188,934

Post Employment Benefits (Management

Team)

Pension 15,720

15,720

11,408

11,408

Total Post Employment benefits 15,720

15,720

11,408

11,408

Total Benefits to Key Personnel 343,237

541,245

283,499

446,960


NEM Insurance 2014


37 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 Parent

60,001 - 80,000

9 - - -

80,001 - 100,000

21

100,001 - 120,000

- - - -

120,001 - 140,000

- - - -

140,001 - 160,000

7

7

160,001 - 180,000

12 8 12 8

180,001 and Above

231 214 195 187

252 250 207 202

38 Financial Commitments

The Directors are of the opinion that all known liabilities and commitments relevant in assessing the Company's

state of affairs have been taken into account in the preparation of these financial statement.

39 Comparative Figures

Certain prior year figures have been reclassified to conform with the current year's presentation and meet

accounting standards disclosure requirements.

40 Contingencies and Commitments

(a) Capital Commitments

The company has spent N1.940 billion on ongoing building project and has been included in the consolidated

financial statements as at 31 December, 2014.

(b) Legal Proceedings and Regulations

At the balance sheet date, there were several law suits in various court against the Company. The directors are

of the opinion that the Company will not incur any significant loss with respect to these claims and accordingly,

no provisions have been made in the accompanying financial Statements.

41 Fines and Penalties

The company paid fines and penalties during the year as follows:

PAYEE DETAILS

Amount

N

NAICOM

Violation of approved format on rendition of

quarterly returns 2,045,000

NSE

For Late filing the 2013 Audited

Account

2,600,000

PREMIUM PENSION LTD For outstanding contribution & interest

514,485

ZPC/TRUST FUND PENSION For outstanding contribution & interest

1,355,431

FPCNL RE NLPC For outstanding contribution & interest

2,495,227

FRCN Late submission of documents on IFRS

1,000,000

10,010,143


NEM Insurance 2014

Underwriting Result Per Class of Business.

Group MOTOR MARINE FIRE GENERAL ACCIDENT

OIL & GAS

2,014 2013

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

Direct Business Premium 3,362,432 1,305,107 1,545,518 2,259,951 1,327,231 9,800,240 8,826,618

Reinsurance Inward 10,825 3,758 9,334 9,135 3,303 36,357 106,727

Gross Premium 3,373,257 1,308,865 1,554,852 2,269,086 1,330,534 9,836,596 8,933,345

(Increase)/Decrease in

Unexpired Risk (64,857) 32,519 23,471 (378,219) 324,039 (63,046) (1,142,383)

Gross Premium Earned 3,308,401 1,341,384 1,578,324 1,890,868 1,654,573 9,773,550 7,790,962

Reinsurance Cost (27,183) (78,831) (118,923) (180,213) (822,867) (1,228,016) (366,222)

Net Premium Earned 3,281,218 1,262,553 1,459,401 1,710,655 831,706 8,545,534 7,424,740

Commission Received 2,852 11,508 40,394 10,644 - 65,398 14,873

3,284,070 1,274,061 1,499,791 1,721,299 831,706 8,610,932 7,439,613

Direct Claim Paid (1,331,591) (337,624) (722,591) (890,036) (363,712) (3,645,554) (2,674,258)

Decrease in Prov. of

Outstanding Claims 121,602 19,122 (280,104) 6,873 164,405 31,899 (617,113)

Gross Claim Incurred (1,209,989) (318,501) (1,002,696) (883,163) (199,306) (3,613,655) (3,291,371)

Reinsurance Claim Recovery 149,625 61,401 278,864 262,923 205,025 957,838 221,100

Net Claim Expense (1,060,364) (257,100) (723,831) (620,240) 5,718 (2,655,818) (3,070,271)

Underwriting Expenses (869,956) (348,100) (403,891) (596,126) (355,775) (2,573,848) (2,538,188)

Total Deduction (1,930,320) (605,200) (1,127,722) (1,216,366) (350,057) (5,229,665) (5,608,458)

Underwriting Profit 1,353,750 668,861 372,069 504,933 481,650 3,381,266 1,831,154


NEM Insurance 2014

Underwriting Result Per Class of Business.

Parent MOTOR MARINE FIRE GENERAL ACCIDENT

OIL & GAS

2,014 2013

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

Direct Business Premium 3,123,728 1,297,679 1,486,133 2,177,157 1,327,231 9,411,928 8,154,597

Reinsurance Inward 10,825 3,758 9,334 9,135 3,304 36,357 106,727

Gross Premium 3,134,554 1,301,437 1,495,467 2,186,292 1,330,534 9,448,284 8,261,325

(Increase)/Decrease in

Unexpired Risk (57,742) 33,180 19,045 (382,410) 324,039 (63,888) (1,010,503)

Gross Premium Earned 3,076,812 1,334,617 1,514,513 1,803,882 1,654,573 9,384,396 7,250,821

Reinsurance Cost (1,148) (78,021) (112,446) (171,183) (822,867) (1,185,663) (324,527)

Net Premium Earned 3,075,664 1,256,596 1,402,067 1,632,699 831,706 8,198,733 6,926,294

Commission Received - 10,718 34,561 7,598 - 52,877 1,035

3,075,664 1,267,313 1,436,628 1,640,297 831,706 8,251,610 6,927,329

Direct Claim Paid (1,234,727) (337,624) (722,591) (878,682) (363,712) (3,537,336) (2,575,235)

Decrease in Prov. of

Outstanding Claims 125,596 19,122 (276,636) 6,873 164,405 39,361 (589,700)

Gross Claim Incurred (1,109,131) (318,501) (999,228) (871,809) (199,306) (3,497,975) (3,164,935)

Reinsurance Claim Recovery 130,179 61,401 276,309 256,896 205,025 929,809 199,883

Net Claim Expense (978,952) (257,100) (722,919) (614,913) 5,718 (2,568,166) (2,965,052)

Underwriting Expenses (838,156) (347,994) (399,877) (584,598) (355,775) (2,526,400) (2,488,051)

Total Deduction (1,817,108) (605,095) (1,122,795) (1,199,511) (350,057) (5,094,566) (5,453,103)

Underwriting Profit 1,258,556 662,219 313,833 440,786 481,650 3,157,044 1,474,226


NEM Insurance 2014

Claim Development Table 46 Extracts from HR Nigeria Limited Valuation Report

46a Claims Data

The claims data has five risk groups - Marine, Motor, Fire, Personal Accident and Oil and Gas.

The combined claims data for all lines of business between 2008 and 2014 are summarized in

the table below;

Incremental Development Pattern - Annual Projections (N'000)

A/Y Year/Dev

Years 1 2 3 4 5 6 7

2008 505,582 170,574 48,919 12,862 8,402 1,053 976

2009 491,747 167,581 43,179 25,012 5,953 34,365

2010 489,651 122,770 95,853 66,234 22,019 -

2011 507,856 357,673 263,383 311,361 - -

2012 1,111,150 700,187 604,317 - - -

2013 1,461,811 898,393

2014 1,665,349 - - - - -

46b Premium Data

The premium data received have been compared with the revenue account as at 31st

December, 2014.This certifies the accuracy of the data used in computing unearned risk

premium. The table below presents the distribution of premiums by class of business.

Class of Business

Gross Premium

Written Data

Gross Premium Written Account

General Accident 2,186,292 2,186,292

Fire 1,495,467 1,495,467

Marine 1,301,437 1,301,437

Motor 3,134,554 3,134,554

Oil and Gas 1,330,534 1,330,534

Total 9,448,284 9,448,284

46c Valuation Results

We present the results below for each of the valuation methods (The Chain Ladder and

Inflation Adjusted Chain Ladder Methods) and the estimated outstanding (including IBNR)

claim reserves as at December 31, 2014.

We estimate our reserves as the sum of the Unearned Premium Reserve (UPR), Outstanding

Claims including the Incurred But Not Reported (IBNR) and the Additional Unexpired Risk

Reserve (AURR) for each line of business as at 31st December, 2014.

Incremental Chain Ladder


Accident Years 1 2 3 4 5 6 7

2008 99,112 44,058 10,400 1,442 994 703 976

2009 108,729 44,503 10,009 7,615 4,530 25,045 -

2010 104,093 35,744 28,823 46,162 19,141 - -

2011 120,533 98,790 50,182 28,094 - - -

2012 391,308 221,809 247,231 - - - -

2013 353,511 262,022 - - - - -

2014 212,851 - - - - - -

This table illustrates that N99.112 million was paid from claims that year. At the end of 2009, the total

claims payment arising from accident in 2008 was N143.17 million, this increased to N153.569 million in

2010 e.t.c.


NEM Insurance 2014

Claim Development Table Cont’d

Cummulative Data

Cummulative Development Pattern - Annual Projections (N'000)

A/Y year/Dev

Years 1 2 3 4 5 6 7

2008 99,112 143,170 153,570 155,012 156,006 156,709 157,685

2009 108,729 153,232 163,241 170,856 175,386 200,431

2010 104,093 139,837 168,660 214,822 233,963

2011 120,533 219,323 269,505 297,599

2012 391,308 613,117 860,348

2013 353,511 615,533

2014 212,851

Loss dev Factors

1.600

1.273

1.110

1.046

1.078

1.006

We summarise Unearned Premium Reserve (UPR) estimation by class of business below. This

was calculated assuming risk will occur evenly over the period of insurance.

Unearned Premium

Reserve

Class of Business

Gross UPR (N'000)

Reinsurance UPR

(N'000) Net UPR (N'000)

Motor

819,045 (57,917) 761,128

Accident

390,490 (16,635) 373,855

Marine

389,825 (6,305) 383,520

Fire

907,445 (675) 906,770

Oil and Gas

297,834 (205,025) 92,809

Total 2,804,638 (286,557) 2,518,081


NEM Insurance 2014


Technical Reserves

We present Gross Claims Technical Reserves under Basic Chain Ladder and Inflation Adjusted Chain Ladder.

Technical Reserve Using Basic Chain Ladder Method

Class of Business

Gross Outstanding

Claim

Estimated Reinsurance Recoveries

Net Outstanding

Claims

General Accident

561,661,476 (111,819,476)

449,842,000

Fire

527,036,676 (244,863,682)

282,172,994

Marine

119,047,579 (23,606,168)

95,441,411

Motor

181,435,539 (14,802,673)

166,632,866

Oil and Gas*

219,702,194 -

219,702,194

Total 1,608,883,464 (395,091,999)

1,213,791,465

Accounts (Outstanding Claims) 1,063,342,858 (371,186,596)

692,156,262

Difference 545,540,606 (23,905,403)

521,635,203

* Reserve for Bond, Oil & Gas was based on Expected Loss

Ratio Approach

Technical Reserve - Using Discounted Basic Chain Ladder Method

Class of Business

Gross Outstanding

Claim


Net Outstanding

Claims

General Accident

462,034,818 (98,035,728)

363,999,090

Fire

450,638,252 (226,813,721)

223,824,531

Marine

97,838,434 (20,213,842)

77,624,592

Motor

153,596,013 (13,763,498)

139,832,515

Oil and Gas*

219,702,194

219,702,194

Total 1,383,809,711 (358,826,789)

1,024,982,922


692,156,262

Difference 320,466,853 12,359,807

332,826,660

* Reserve for Bond, Oil & Gas was based on Expected Loss

Ratio Approach

Should we allow for discounting, our gross claims reserve will reduce from N 1.61 billon to N

1.38 billion leading to a net position of N 1.02 billion


NEM Insurance 2014


We illustrate our estimates of reserve adjusting for inflation.

Technical Reserve - Using Inflation Adjusted Basic Chain Ladder Method

Class of Business

Gross Outstanding

Claim


Net Outstanding

Claims

General Accident

719,262,815 (127,735,800)

591,527,015

Fire

639,126,866 (259,319,448)

379,807,418

Marine

144,396,682 (27,972,468)

116,424,214

Motor

209,732,616 (15,535,697)

194,196,919

Oil and Gas*

219,702,194

219,702,194

Total 1,932,221,173 (430,563,413)

1,501,657,760


692,156,262

Difference 868,878,315 (59,376,817)

809,501,498

* Reserve for Bond, Oil & Gas was based on Expected Loss Ratio

Approach

Technical Reserve - Using Discounted inflation Adjusted Basic Chain Ladder Method – Discounted

Class of Business

Gross Claim Reserve


Net Outstanding

Claims

General Accident

581,795,752 (127,735,800)

454,059,952

Fire

544,026,729 (259,319,448)

284,707,281

Marine

118,143,725 (27,972,468)

90,171,257

Motor

175,819,259 (15,535,697)

160,283,562

Oil and Gas*

219,702,194

219,702,194

Total

1,639,487,659 (430,563,413)

1,208,924,246

Accounts

(Outstanding Claims)

1,063,342,858 (371,186,596)

692,156,262

Difference

576,144,801 (59,376,817)

516,767,984

* Reserve for Bond, Oil & Gas was based on Expected Loss Ratio

Approach

Should we allow for discounting, our gross claims reserve will reduce from N 1.93 billon to N 1.64 billion leading to a

net position of N 1.21 billion.

The Actuary adopted the Inflation Adjusted Basic Chain Ladder (Discounted) Method which presents a gross claims

reserve of N1.64 billion and reinsurance recoveries estimate of N430.56million (a net position of N1.21billion) as being

representative of the liability.

This Figure:

- Anticipates that total claims may be exposed to inflationary increase

- Recognizes that present value needs to be reserved for anticipated future payments.


NEM Insurance 2014

Claim Development Table Cont’d 46d Appendix

Cumulative Claims Development Pattern

General Accident

Accident Year


1 2 3 4 5 6 7 8

2008 99,112 44,058 10,400 1,442 994 703 976

2009 108,729 44,503 10,009 7,615 4,530 25,045 - -

2010 104,093 35,744 28,823 46,162 19,141 - - -

2011 120,533 98,790 50,182 28,094 - - - -

2012 391,308 221,809 247,231 - - - - -

2013 353,511 262,022 - - - - - -

2014 212,851 - - - - - - -

Cumulative Development Pattern - Annual Projections (N'000)

Accident Year 1 2 3 4 5 6 7 8

2008 99,112 143,170 153,569 155,011 156,005 156,707 157,683 58,572

2009 108,729 153,232 163,241 170,856 175,385 200,430 201,680 201,680

2010 104,093 139,837 168,660 214,823 233,964 240,029 241,524 241,524

2011 120,533 219,323 269,505 297,600 311,175 319,242 321,231 321,231

2012 391,308 613,118 860,349 955,289 998,866 1,024,760 1,031,145 1,031,145

2013 353,511 615,533 623,684 631,835 660,657 677,784 682,007 682,007

2014 212,851 330,801 421,187 467,665 488,999 501,675 504,801 504,801

Summary of Results (N'000)

Years

Latest Paid

Dev to Date Ultimate

Gross Oustanding Claims

2008 157,684

200,431

233,963

297,600

860,348

615,533

212,851

2,578,410

100%

99%

97%

93%

83%

90%

42%

82%

157,683

201,680

241,524

321,231

1,031,145

682,007

504,801

3,140,071

-

1,249

7,561

23,631

170,797

66,474

291,950

561,661

2009

2010

2011

2012

2013

2014

Total

Motor



2008 280,295 60,420 18,611 5,134 3,924 - - -

2009 294,076 52,370 13,978 9,965 548 114 - -

2010 291,789 39,416 28,686 11,229 2,095 - - -

2011 258,498 149,644 13,328 3,935 - - - -

2012 472,735 197,280 38,814 - - - - -

2013 578,128 304,586 - - - - - -

2014 890,220 - - - - - - -



2008 280,295 340,716 359,327 364,460 368,384 368,384 368,384 368,384

2009 294,076 346,445 360,424 370,389 370,937 371,051 371,051 371,051

2010 291,789 331,205 359,891 371,120 373,379 373,273 373,273 373,273

2011 258,498 408,143 421,470 425,406 427,932 427,998 427,998 427,998

2012 472,735 670,015 708,829 723,120 727,413 727,525 727,525 727,525

2013 578,128 882,714 930,466 949,226 954,861 955,008 955,008 955,008

2014 890,220 903,979 952,882 972,093 977,865 978,015 978,015 978,015


Years

Latest Paid

Dev to Date Ultimate

IBNR

2008 368,384

371,051

373,273

427,998

727,525

955,008

978,015

4,201,254

100%

100%

100%

101%

103%

108%

110%

105%

368,384

371,051

373,215

425,406

708,829

882,714

890,220

4,019,819

-

2009

-

2010

- 58

2011

- 2,592

2012

- 18,696

2013

2014

- 87,795

Total

(109,141)


NEM Insurance 2014

Claim Development Table Cont’d Fire



2008 70,236 31,105 13,693 2,986 1,535 - - -

2009 59,885 35,926 7,100 4,616 875 956 - -

2010 70,927 30,311 26,737 6,068 631 - - -

2011 77,014 59,343 40,018 45,125 - - - -

2012 163,490 116,685 129,592 - - - - -

2013 186,568 225,160 - - - - - -

2014 362,242 - - - - - - -



2008 70,236 101,341 115,034 118,021 119,556 119,556 119,556 119,556

2009 59,885 95,810 102,910 107,526 108,401 109,356 109,356 109,356

2010 70,927 101,238 127,975 134,043 134,674 135,239 135,239 135,239

2011 77,014 136,357 176,375 221,500 245,188 246,216 246,216 246,216

2012 163,490 280,176 409,768 498,713 502,930 505,039 505,039 505,039

2013 186,568 411,728 475,625 529,166 533,641 535,879 535,879 535,879

2014 362,242 438,820 572,101 636,503 641,886 644,577 644,577 644,577


Years Latest Paid Dev to Date Ultimate IBNR 2008 119,556

109,356

134,674

221,500

409,768

411,728

362,242

1,768,824

100%

100%

100%

90%

81%

77%

56%

77%

119,556

109,356

135,239

246,216

505,039

535,879

644,577

2,295,862

-

-

565

24,716

95,271

124,151

282,335

527,038

2009

2010

2011

2012

2013

2014

Total

Marine Incremental Development Pattern - Annual Projections (N'000)


2008 55,939 34,990 6,216 3,300 1,949 - - -

2009 29,059 34,783 12,092 2,817 - 497 - -

2010 22,842 17,299 11,607 2,774 152 - - -

2011 51,811 49,895 22,783 7,427 - - - -

2012 83,615 102,159 89,538 - - - - -

2013 141,967 65,199 - - - - - -

2014 197,203 - - - - - - -



2008 55,939 90,929 97,145 100,444 102,394 102,394 102,394 102,394

2009 29,059 63,841 75,933 78,750 78,750 79,247 79,247 79,247

2010 22,842 40,140 51,747 54,521 54,674 54,824 54,824 54,824

2011 51,811 101,706 124,489 131,916 133,103 133,468 133,468 133,468

2012 83,615 185,774 275,313 288,174 290,765 291,563 291,563 291,563

2013 141,967 207,166 208,765 218,517 220,482 221,087 221,087 221,087

2014 197,203 207,379 268,527 281,071 283,598 284,377 284,377 284,377


Years Latest Paid Dev to Date Ultimate IBNR 2008 102,394

79,247

54,674

131,916

275,313

207,166

197,203

1,047,913

100%

100%

100%

99%

94%

94%

69%

90%

102,394

79,247

54,824

133,468

291,563

221,087

284,377

1,166,960

-

-

150

1,552

16,250

13,921

87,174

119,047

2009

2010

2011

2012

2013

2014

Total


NEM Insurance 2014

Financial Risk Management Policy Management of financial and insurance risk

NEM Insurance Plc issues contracts that transfer insurance risk or financial risk or both. This section

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 the

uncertainty of the amount of the resulting claim. By the very nature of an insurance contract, this risk

is random and therefore unpredictable. The Company manages its insurance risk by means of

established internal procedures that include underwriting authority levels, pricing policy, approved

reinsurers list and monitoring.

NEM is exposed to underwriting risk through the insurance contracts that are underwritten. The risks

within the underwriting risk category are associated with both the perils covered by the specific lines

of insurance including General Accident, Motor, Fire, Marine and Aviation, Oil and Gas and

Miscellaneous insurance, as well as the specific processes associated with the conduct of the

insurance business. The various subsets of underwriting risks are listed below;

Underwriting Process Risk: risk from exposure to financial losses related to the selection and

acceptance of risks to be insured.

Mispricing Risk: risk that insurance premiums will be too low to cover the Company’s expenses

related to underwriting, claims, claims handling and administration.

Individual risk: This include the identification of the risk inherent in an insured property (movable or

unmovable), we shall ensure surveys are performed and reviewed as at when due and that risks are

adequately priced.

Claims Risk (for each peril): Risk that many more claims occur than expected or that some claims

that occur are much larger than expected claims resulting in unexpected losses to the Company. The

underwriting risk assessment shall also determine the likelihood of a claim arising from an insured

risk by considering various factors and probabilities, determined by information obtained from the

insured party, historical information on similar risks and available external data.

Concentration risk (including geographical risk): This includes identification of the concentration of

risks insured by NEM. NEM utilizes data analysis, software and market knowledge to determine the

concentration of its risks by insurance class, geographic location, exposure to a client or business.

The assessment of the concentration risk is consistent with the overall risk appetite as established 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 state e.g. those with

low safety standards, shoddy construction or businesses with excessively high risk profile;

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

risks dependent 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


NEM Insurance 2014

Financial Risk Management Policy (Cont’d)

Do 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,

we exercise caution in taking on such risks into our books;

We exercise extreme prudence and caution when dealing with clients with financial difficulties

or poor payment records; and with transient clients who change insurers regularly; and

We ensure compliance with NAICOM’s guideline on KYC for consistency.

Underwriting Strategy

The Company has developed its insurance underwriting strategy to diversify the type of insurance risks

accepted and within each of these categories to achieve a sufficiently large population of risks to

reduce the variability of the expected outcome. Any risks exceeding the underwriting limits require

head office approval. Factors that aggravate insurance risk include lack of risk diversification in terms

of type and amount of risk, geographical location and type of industry covered. The Company manages

these risks through its underwriting strategy, adequate reinsurance arrangements and proactive

claims handling. Underwriting limits are in place to enforce appropriate risk selection criteria. For

example, the Company has the right not to renew individual policies, it can impose deductibles and it

has the right to reject the payment of a fraudulent claim. Insurance contracts also entitle the Company

to pursue third parties for payment of some or all costs (for example, subrogation).

Products and Services

NEM Insurance Plc is presently operating as a non-life insurance company and we have a wide range

of insurance products and services that are tailored to meet the specific needs of the company’s

clients. Insurance contracts are issued on an annual contract either directly to the customer or

through accredited insurance brokers and agents. Premiums from brokers and agents are payable

within 30 days, whereas from direct customers immediately. The following is a broad spectrum of the

products and services the company is offering:

Fire/Extraneous Perils Policy

This type of policy will provide indemnity to the insured in the event of loss or damage to property

covered under it as a direct result of fire outbreak, lightning or explosion. Other extraneous perils such

as social disturbances like strike and riot, and natural disasters like storm damage, flood and

earthquake can also be covered by an extension of the standard scope of the cover. The items to be

insured are usually made up of the following:

a) Buildings

b) Office Furniture, Electrical & Electronic Equipment

c) Plant and Machinery

d) Stock of Raw Materials and finished goods

e) 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 to

facilitate quotation of the premium payable.


NEM Insurance 2014


Consequential Loss Policy

This type of policy, often referred to as "business interruption insurance" is designed to indemnify the

insured against loss of productive capacity or future earning power which may occur as a result of loss

or damage to the premises and property insured under the Fire/Extraneous Perils in 1 above. This

policy is normally taken out in conjunction with the Fire Policy so that when the latter pays for the

material damage to property insured under it, this will pick up the intangible loss that will flow from

the primary loss of the Fire perils. The items usually covered under this policy are as follows:

a)Gross Profit

b)Salary and Wages

c)Auditor's fees

The sum insured to be indicated against the items of Gross Profit should represent the difference in

turnover and the total of standing and variable charges. The sum insured on Salary and Wages will be

that which is required to maintain some key staff pending resumption of business while the sum

insured on Auditor's Fees will represent charges that any firm of accountants will make in preparing

papers for insurance claim.

Burglary/Housebreaking Policy

This type of policy is designed to indemnify the insured against loss or damage resulting from theft

or attempted theft which is accompanied by actual forcible or violent entry into or out of the

premises or any attempt thereat. The items usually covered under this policy are similar to those

under 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 our

quotation.

Fidelity Guarantee Policy

This is a form of policy that protects an organization against loss of money or valuable stock as a

result of dishonesty or fraudulent activity of employees. It is possible to grant cover on named

basis, positions basis or on a blanket basis. In any of these cases, the number of persons and the

limit of guarantee any one loss would be advised as well as aggregate amount of guarantee in a

given year. Once we have this information, we would be in a position to quote for premium

payable.

Public Liability Policy

This policy also covers the insured against legal liability to third party for cost and expenses

incurred in respect of accidental death, bodily injury and accidental damage to property occurring

within the insured's premises or at work-away premises. The vicarious liability of the insured's

employee can also be covered provided it arose in the course of carrying out his official duties.

The Company usually require the insured to indicate the limit of cover required to enable her

advise the premium payable.

Money Policy

This is another type of All Risks policy which is designed to cover any fortuitous event that could

result in the loss of cash while in the course of transit either to or from the bank. The cover will

also 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 management

staff.


NEM Insurance 2014

Financial Risk Management Policy

Goods in Transit Policy

This is also an "All Risks" policy covering goods being carried from one location to another. Any

loss not specifically excluded under the policy is covered and the insurance is suitable for any

organization that is engaged in movement of goods either by road or rail and the cover will operate

when the goods are being conveyed by the insured’s owned or hired vehicles. Losses arising from

Fire and Theft are covered under this policy.

Group Personal Accident Policy

This type of policy is designed to foster the welfare of employees as well as reduce the financial

constrain that an organization could undergo in the event of death or bodily injury to a member of

staff arising 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 Death and Permanent Disability are usually expressed as multiple of salaries. Cover also

extends to pay weekly benefit in the event of temporary total disability resulting from bodily injury

to the insured person as well as certain allowance for expenses incurred on medical treatment as a

result of accidental injury. Death or injuries from natural causes are however not covered.

Motor Insurance Policy

This class of insurance is made compulsory by Government through the legislation known as the

Motor Vehicle (Third Party) Insurance Act of 1945. Third Party Only cover which is the minimum

type of insurance legislated upon provides indemnity to policyholder against legal liability to Third

Parties for death, bodily injury and property damage.

The most popular type of cover under this policy is comprehensive insurance which, in addition to

the cover provided under the Third Party Only, will also indemnify the policyholder for loss or

damage to the vehicle resulting from road accident, fire and theft. The premium payable for the

various forms of cover under this policy is regulated by a statistical table of rate known as "tariff"

which is approved by Government.

Marine Policies

CARGO: The policy issued here is to provide indemnity for loss or damage to imported goods being

conveyed by sea or air. The All Risks type of cover known as Clauses "A" provides indemnity to the

insured 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 payable

in this regard, we would require information on the nature and value of goods being imported as well

as the type of cover required.

HULL: This type of policy is issued on vessels and yachts to provide indemnity for any loss, damage or

liability that may arise from their use. The scope of cover provided is either an "all risks" or "total loss

only" while the policy usually carries a deductible of about 10% of the value of the vessel or yacht.

Aviation Policy

This policy provides comprehensive cover against loss or damage to insured aircraft while operating

anywhere in the world. Cover also extends to include the operator's legal liability to Third Parties for

death, bodily injury and property damage. Liability to passengers is also covered up to a certain limit


NEM Insurance 2014


selected. In order to ensure full protection for our clients, we reinsure as much as 90% of this type of

risk in the London Aviation Market through one of our overseas associates. The essence of this

arrangement is to obviate the problem of absorption in the Nigerian Market which has limited capacity

for Aviation Insurance and also to afford our clients the opportunity of having a dollar/sterling based

insurance policy.

Machinery Breakdown Policy

This policy is designed to cover any damage to a plant or equipment while working or at rest, or being

dismantled for the purpose of cleaning, repairing or overhauling. In the same vein, boiler and pressure

vessels can be covered under a separate but similar policy.

Electronic Equipment Policy

This policy is designed to cover any loss or damage that could result while any computer and or

equipment insured is working or at rest. The cover under this policy also extends to include loss or

damage to external data media such as diskettes and tapes containing processed information while

such are kept within the premises. The increase in cost of working, as a result of damage to the main

computer equipment, is also covered and indemnity is provided for alternative means of carrying on

operation. With payment of an additional premium, this policy can be extended to cover the risk of

theft.

Energy Risks

The policies on offer in this area have been specifically developed to take advantage of the insurance

opportunities created by the Nigerian Content Policy. The Nigerian content policy is aimed at utilizing

Nigerian human and material resources in creating values in the country through all contracts awarded

in the Oil and Gas industry and the Power sector of the economy. NEM Insurance Plc has carved a

niche 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 turbines

and 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 various

manufacturing, industrial and commercial concerns. Financial institutions such as banks, mortgage

and stock broking firms are also being offered these products. Our company is innovative in

approach and we specialize in packaging policies in line with the needs of the various segments of

the economy. NEM Insurance Plc also provides comprehensive risk management services. The

company carries out various risk surveys and make appropriate recommendations towards risk

improvement and minimization of loss impacts.


NEM Insurance 2014


Approach to Management of Underwriting Risks

The Company’s underwriting risk shall be managed by adhering to policies, principles and

guidelines spelt out in the Annual Underwriting Plan.

Where the broker has inadequate knowledge of the trade of the client or the class of business and

the client not willing to disclose such information, the Company shall exercise caution in taking on

such risks.

The Company shall exercise extreme prudence and caution when dealing with clients with financial

difficulties or poor payment records; and with transient clients who change insurers regularly; and

The 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 before

commencement of cover but not later than 48 hours after commencement of risks.

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 including

clauses/warranties that will deal with areas of concern which will at the end of the day make the risk

worthy of being in the company’s portfolio.

Risk Acceptance Rules

The company shall follow the provisions (terms and conditions) of the reinsurance treaties that were

arranged for the classes of insurance that any risk offered for insurance falls under in deciding

whether to accept the risk or not. This shall be the case on all cases where the sum insured of the

risk 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 be

limited to any limit set by the company for such risks at the beginning of each year and shown in the

underwriting plan.

Energy Insurance Risks

No risks relating to the special covers in (as different from the standard covers) Energy, Oil and Gas

shall be accepted without clarification from the Head of Energy Department or Head of Branch

Operations 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 nature

but relating to Marine Insurance E.G. Marine Cargo Insurance export, shall be accepted without

clarification from the Heads of Technical, Energy and Branch Operations Departments. The

company shall not accept Marine Cargo business in respect of fish head risks whether as import or

export. Where it must be covered for any reason, cover shall be limited to ICC “C” and on rate of

premium of a minimum of 0.20%.


NEM Insurance 2014


Aviation Risks

No Aviation risk, Marine Hull risk, Marine Cargo export and any other special risks of different nature

shall be accepted without clarification from the Heads of Technical, Energy and Branch Operations

Departments.

Approaches to Risk Mitigation

Generally, 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 risk

appetite, not aligned to our strategy or offer rewards that are unattractive when compared to the

risk undertaken. Specifically, we will discontinue activities that generate these risks, such as

divesting from certain geographical markets, product lines or businesses. Generally, we will utilise

these approach for high-risk events that remain unacceptably high even after we have applied

controls.

b) Risk Treatment (Reduction)

Under the risk treatment approach, we would accept the risks inherent in our transactions, but

shall take measures, through our system of internal controls, to reduce the likelihood and/or

impact of these risks. Generally, we would utilise this approach for risks that occur frequently and

have low impact. Some of the measures we shall take under this approach may include formulating

or enhancing policies, defining boundaries and authority limits, assigning accountabilities and

measuring performance, improving processes, strengthening existing controls or implementing

new 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 shall

take 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 and

reinsurance companies by utilising contracts and arrangements. We will retain accountability for

the 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 arising

from such risk transfer arrangements in their risk registers. The business units shall also be

responsible for managing the resultant risks and reviewing the risk transfer arrangement to ensure

that 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 and

would not take any action to change the likelihood and/or impact of the risks. We shall adopt this

approach where the risk is low and the cost of further managing the risk exceeds the potential

benefit should the risk crystallize.

d) Reinsurance Treaty Cover

We have arranged very adequate reinsurance treaties to enable us accommodate risks with high

necessary support in the event of large claims. Our treaties are arranged by UAIB RE and placed

with a consortium of reputable reinsurance companies.

The types of re-insurance on NEM Treaty are:

1) Quota share

2) Surplus

3) Excess of loss


NEM Insurance 2014


1) Quota share This is the simplest type of Re-insurance whereby a Reinsurer agrees to reinsure a fixed proportion of

every risk accepted by the ceding company, sharing proportionately in all losses and receiving in the

same proportion of all direct net premium, less the agreed reinsurance commission.

2) Surplus Under this arrangement the ceding company can retain a risk up to the level of its agreed Retention

amount. The proportion of the risk which is beyond the Retention amount is then ceded into the

Surplus treaty and reinsurer receives a proportionate share of the premium, less reinsurance

commission.

3) Excess of Loss This arrangement protects the ceding company against a loss where the ceding company's claims

liability exceeds its retention.

Concentration of insurance risk

The Company monitors concentrations of insurance risk by product and sector. An analysis of

concentrations of insurance risk at 31 December 2014 and 2013 for Gross Premiums written is set

out below:

(a) By product 31-Dec 31-Dec

2014 2013

N'000 N'000

Motor business 3,134,554 2,663,837

Fire & Property 1,495,467 1,343,594

Marine & Aviation 1,301,437 1,187,072

General Accident 1,454,225 1,136,503

C.A.R & Engineering 732,067 406,199

Energy business 1,330,534 1524,120

9,448,284 8,261,325

(b) By sector 31-Dec 31-Dec

2014 2013

N’000 N'000

Energy 1,051,662 836,046

Financial Services 3,138,675 2,654,364

IT/Telecoms & Other Corp. 2,526,522 2,147,945

Manufacturing 1,944,093 1,931,497

Retail 787,332 660,906

9,448,284 8,261,325


NEM Insurance 2014


Financial risk management

NEM Insurance Plc operates in a highly complex and competitive environment driven by the need to

meet all claim obligations, maximize returns to shareholders and comply with all statutory and

regulatory requirements. The Company is in the business of managing risks for public and private

entities as well as individuals. In the ordinary course of its business activities, the Company is exposed

to a variety of financial risks, including currency risk, liquidity risk, credit risk, country risk and market

risk 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 business

strategies. In terms of opportunity, we see risk in relation to returns in that the greater the risk, the

greater the potential return. We therefore manage risk by using several methods to maximize the

positive 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 financial

loss, fraud, damage to reputation or public image and loss of competitive advantage. We therefore

manage risk in this context by introducing risk management techniques to reduce the probability of

these negative events occurring without incurring excessive costs or stifling the initiative, innovation, and

entrepreneurial flair of our staff.

In terms of uncertainty, we see risk as the distribution of all possible outcomes both positive and

negative. In this context, we manage uncertainty by seeking to reduce the variance between anticipated

outcomes and actual results.

RISK MANAGEMENT PHILOSOPHY AND CULTURE

Our risk management philosophy and culture consist of our shared beliefs, values, attitudes and

practices with respect to how we consider risk in everything we do, from strategy development and

implementation to every aspect of our day-to-day activities.

“We shall underwrite all profitable transactions that we consider prudent and meets our risk appetite

and profile. We shall take calculated and informed risk while seeking to maximize returns and

shareholders’ value. We shall continuously evaluate the risk and rewards inherent in our business

transactions, from strategy development and implementation to our day-today activities. We believe that

to achieve this objective would require a good understanding of the risks we are taking and the effective

management of these risks both at the individual and enterprise levels”.

We therefore manage and control risk by introducing new risk management techniques, enhancing

existing risk management practices and placing a greater emphasis on cooperation among departments

to comprehensively manage the Company’s full range of risks as a whole. The Company proactively

formulates strategies and plans that enable the identification and management of

events/factors/occurrences that impact our ability to attain our business and strategic objectives.


NEM Insurance 2014


Risk Management Strategy The Company adopts the following strategy for managing risks:

i. Establish a clearly defined risk management process for identifying, measuring, controlling, monitoring and

reporting risks.

ii. Entrench and incorporate risk management principles in all functions across the Company

iii. Comprehensive implementation and maintenance of our risk management framework

iv. Ensure good corporate governance practices

v. Board and senior management support to promote sound risk management

vi. Zero tolerance for non-compliance with risk and control procedures

vii. 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

Short-term insurance contracts

For short-term insurance contracts, the Company funds the insurance liabilities with a portfolio of equity and debt

securities exposed to market risk. The following tables indicate the contractual timing of cash flows arising from

assets and liabilities included in the Company's ALM framework for management of short-term insurance contracts.

At 31 December 2014

Carrying amount N'000

No stated maturity

0 - 90 days

91 - 180 days

180 - 365 days

1 - 2 years > 2 years

Financial assets Cash &bank balances 451,739

451,739 -

Short Term Deposits 2,973,382

2,973,382

- Trade receivables 209,493

209,493

- Other Receivables 85,159

38,442

32,144

18,573

Debt securities 160,939

160,939

Equity securities

- quoted 665,837 665,837 - - - - -

- unquoted 1,473,798 1,473,798 - - - - -

6,089,858 2,139,635 3,789,286 - 32,144 - 179,512

Insurance liabilities Insurance Contract liability 4,444,126 - 4,444,126 - - - -

Reinsurance Asset (717,121) - (717,121) - - - -

3,727,005 - 3,727,005 - - - -

At 31 December 2013

Carrying amount N'000

No stated maturity

0 - 90 days

91 - 180 days

180 - 365 days

1 - 2 years > 2 years

Financial assets Cash &bank balances 891,370

891,370 -

Short Term Deposits 2,945,451

2,945,451 -

- Trade receivables 347,494

347,494 -

- Other Receivables 219,552

34,776 - 25,842

158,934

Debt securities 61,829 - - - - - 61,829

Equity securities

- quoted 1,055,737 1,055,737 - - - - -

- unquoted 953,528 953,528 - - - - -

6,474,961 2,009,265 4,219,091 - 25,842 - 220,763

Insurance liabilities Insurance Contract liability 4,419,597 - 4,419,597 - - - -

Reinsurance Asset (65,496) - (65,496) - - - -

4,354,101 - 4,354,101 - - - -


NEM Insurance 2014

Financial Risk Management Policy (Cont’d) The sensitivity analysis below is based on a change in one assumption while holding all other

assumptions constant. In practice this is unlikely to occur, and changes in some of the assumptions

may be correlated - for example, change in interest rate and change in market values.

(a) Sensitivity analysis - interest-rate risk 31 December 2014 (N'000)

Assets Carrying amount Fixed rate Floating rate

Non-interest bearing

Cash and cash equivalent 3,425,121 - - -

Trade receivables 209,493 - - 209,493

Reinsurance Assets 717,121 - - 717,121

Debt securities 160,939 160,939 - -

4,512,673 160,939 - 926,614

Liabilities

Non-life insurance liability 4,444,126 - - 4,444,126

Other liabilities 334,986 - - 334,986

Bank Overdraft 4,364

4,364

Debt security in issue - - - -

4,783,476 - 4,364 4,777,912

31 December 2013 (N'000)

Assets Carrying amount Fixed rate Floating rate

Non-interest bearing

Cash and cash equivalent 3,836,821 - - -

Trade receivables 347,494 - - 347,494

Reinsurance Assets 65,496 - - 65,496

Debt securities 61,829 61,829 - -

4,311,640 61,829 - 412,991

Liabilities

Non-life insurance liability 4,419,597 - - 4,419,597

Other liabilities 347,047 - - 347,047

Bank Overdraft 9,848

9,848

Debt security in issue - - - -

4,776,492 - 9,848 4,766,644

The impact on the Company's profit before tax if interest rates on financial instruments held at

amortised cost or at fair value had increased or decreased by 100 basis points, with all other

variables held constant are considered insignificant. This is due to the short term nature of the

majority of the financial assets measured at amortised cost.

(b) Sensitivity analysis - equity risk

The sensitivity analysis for equity price risk illustrates how changes in the fair value of equity

securities will fluctuate because of changes in market prices, whether those changes are caused by

factors specific to the individual equity issuer, or factors affecting all similar equity securities traded

in the market.

Management monitors movements of financial assets and equity price risk movements by

assessing 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 all the

Company’s equity instruments in that particular index moving proportionally.


NEM Insurance 2014

Credit Risk

The Company’s assets are exposed to credit risk, which is the risk that a counterparty will be

unable to pay amounts in full when due. The Company’s maximum exposure to credit risk is

reflected in the carrying amounts of financial assets on the balance sheet. The main sources of the

Company’s incoming cash flow are the amounts of receivables from insured and reinsurers. The

Company manages the credit risk arising from such sources by aging and monitoring the

receivables. The Company conducts the review of current and non-current receivables on a monthly

basis and monitors the progress in the process of collection of the premiums in accordance with

the procedure stated in the Company’s internal control policy. The non-current receivables are

checked and assessed for impairment.

The overdue premiums are considered by the Company on case by case basis. If an overdue

premium is recognized by the Company as uncollectible, a notification is sent to the policyholder

and the insurance agreement is cancelled from the date of notification. The premium related to the

period from the beginning of insurance cover until the date of cancellation of the insurance

agreement is considered a bad debt, and further steps right up to legal actions are planned with

regard 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 entitled

because brokers, clients and other debtors which NEM has a bilateral contract defaults on their

obligations.

Concentration Risk – is the exposure to losses due to excessive concentration of business activities

to individual counterparties, groups of individual counterparties or related entities, counterparties

in specific geographical locations, industry sectors, specific products, etc

Counterparty Risk - the risk that a counterparty is not able or willing to meet its financial obligations

to the Company as they fall due.


As at 31 December 2014, the market value of quoted securities held by the Company is N 665

million (2013: N 1.05 billion). If the all share index of the NSE moves by 100 basis points at 31

December 2014, the effect on profit or loss would have been N 6.65 million (2013: N 10.5 million).

The Company holds a number of investments in unquoted securities with a market value of N

1.47 billion as at 31 December 2014 (2013: N 954 million) of which investment in MTN Nigeria Ltd

is the significant holding. This investment was valued at N 1.15 billion (cost N 1.15 billion) (2013: N

741 million, cost N 741 million) as at 31 December 2014. MTN Nigeria is a private limited liability

company whose principal activity is the provision of mobile telecommunications service using the

Global System for Mobile Communications (GSM) platform.


NEM Insurance 2014


Credit Risk Principles

The 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

nature of 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

as approved by the Board;

Credit risk exposures shall be within the defined limits to ensure there is no excessive

concentration and that credit control procedures for managing large exposures and related

counterparties are adhered to;

Appropriate classification of credit risk through periodic evaluation of the collectability of

risk assets; and

Adequate loan loss provisioning to ensure that provisions or allowances are made to absorb

anticipated 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 resources and

the provisions of NAICOM Operational Guidelines. In setting this appetite/tolerance limits, NEM takes

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 its clients. In

setting the credit limit, a few conditions were put into consideration and these actually assisted in the

selection of the brokers that made this list. From the records available for this purpose, the conditions

used as yardstick are as follows:

1. Speed of payment;

2. Relationship management;

3. Volume of business and

4. Size of the accounts

From 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

credit enhancements:

Maximum exposure

31-Dec 31-Dec 31-Dec

2014 2013 2012

N'000 N'000 N'000

Cash and bank balances 451,739 891,370 547,907

Loans and receivables - Trade receivables 209,493 347,494 887,009

- Other Receivables and Prepayments 89,159 219,552 224,150

Reinsurance assets 717,121 65,496 92,512

Debt securities 160,939 61,829 46,829

Total assets bearing credit risk 1,628,451 1,585,741 1,798,407


NEM Insurance 2014


Liquidity Risk Liquidity risk is the inability of a company to meet obligations on a timely basis. It is also the inability of a company

to take advantage of business opportunities and sustain the growth target in its 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 Company is exposed to daily calls on its available cash resources from claims

to be paid.

At 31 December 2014, management does not believe the current maturity profile of the Company lends itself to any

material liquidity risk, taking into account the level of cash and deposits and the nature of its securities portfolio at

year end, as well as the reinsurance structure of the Company’s insurance portfolio. The Company’s bank deposits

and trading securities are able to be released at short notice when and if required. The possible payments of

significant insurance claims are secured by the reinsurance contracts’ clause that allows a cash call from the

reinsurers for the losses exceeding a certain amount based on line of business.

Sources of Liquidity Risk

Our liquidity risk exposure depends on the occurrence of other risks. Some of the factors that could lead

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 when

due;

Lack of timely communication between Finance &Investment Division and Claims Department

resulting in mismatch of funds;

Investment in volatile securities; and

Frequency and severity of major and catastrophic claims.

Liquidity Risk Management Strategy

The 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/Tolerance

Our 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


NEM Insurance 2014


(b) Financial instruments measured at fair value

IFRS 7 specifies a hierarchy of valuation techniques based on whether the inputs to those

valuation techniques are observable or unobservable. Observable input reflect market data

obtained from independent sources; unobservable inputs reflect the Group's market

assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for

the asset or 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

considers relevant and observable market prices in its valuations where possible.

At 31 December 2014 (N'000) Level 1 Level 2 Level 3 Total

Financial assets

Quoted equity investments 665,837 - - 665,837

Unquoted equity investments - 1,473,798 - 1,473,798


160,939

826,776 1,473,798 - 2,300,574

At 31 December 2013 (N'000) Level 1 Level 2 Level 3 Total

Financial assets

Quoted equity investments 1,055,737 - - 1,055,737

Unquoted equity investments - 953,528 - 953,528


61,829

1,117,566 953,528 - 2,071,094

(c) Fair valuation methods and assumptions (i) Cash and bank balances

Cash and bank balances represent cash held with other banks. The fair value of these balances is their carrying

amounts.

(ii) Equity securities

The 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 equity securities was determined on a net asset value

basis.

(iii) Debt securities

Treasury bills represent short term instruments issued by the Central bank of the jurisdiction where the Company

operates. The fair value of treasury bills and bonds at fair value are determined 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 the discounted amount of estimated future cash flows expected to be received.

Expected cash flows are discounted at current market rates to determine fair value.

(iv) Other assets

Other assets represent monetary assets which usually have a short recycle period and as such the fair values of

these balances approximate their carrying amount.


NEM Insurance 2014

Capital management Policy

NEM has over the years been deploying capital from earnings and additional equity funds to

support 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 reward

shareholders, there is need for the Company to execute the right strategy, the right growth

dynamics, 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 meeting

the crucial and equally important objective of providing an appropriate level of capital to protect

stakeholders’ 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

stability of 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 by the Board;

To ensure that the average return on capital over a 3 -5 years performance cycle is

sufficient to satisfy the expectations of investors;

To maintain a strong risk rating;

To ensure that capital allocation decisions are optimal, considering the return on economic

and regulatory capital;

To determine the capital required to support each business activity based on returns

generated on capital to facilitate growth/expansion of existing businesses (i.e. capital

allocation);

To establish the efficiency of capital utilization.

Minimum Capital Requirement The 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 Act

2003, the solvency margin maintained is N 2,928,195,000


NEM Insurance 2014

Capital Management Policy (Cont’d)

Solvency Margin

2014

ADMISSIBLE ASSETS N'000 N'000

Cash and cash equivalents

3,425,121

Financial Assets

2,914,575

Trade Receivables

209,493

Reinsurance assets

717,121

Deferred Acquisition Cost

442,473

Other Receivables & Prepayments

13,384

Investment Property

485,830

Statutory Deposits

340,112

Property & Equipment

2,175,775

A

10,723,884

ADMISSIBLE LIABILITIES

Insurance Liabilities 4,444,126

Trade payables 9,733

Other payables 137,406

Book Overdraft 4,364

Retirement Benefit Obligations 187,848

Income tax payable 12,212

B

(4,795,689)

Actual Solvency (A - B) C

5,928,195

Net Premium

8,198,732

Solvency Margin

Limit of Net premium i.e 15% of Net Premium

1,229,810

Minimum of paid up Capital - D

3,000,000

Since C>D - Positive Solvency Margin - (C-D)

2,928,195

Percentage of solvency

49%


NEM Insurance 2014

Statement of Value Added- Group

2014

2013

N'000

%

N'000

%

Gross Premium Income: Local 9,384,396

7,250,821

Foreign 389,154

540,140

Other Income: Local 657,433

426,044

Foreign 63,782

432,211

10,494,765

8,649,217

Bought in Services: Local (7,175,942)

(6,598,246)

Foreign (426,245)

(564,557)

Value Added 2,892,578

100

1,486,414

100

Applied as follows:

Employees Salaries and other employees benefits 1,012,337

35

794,802

53

Provider of Capital Dividend to Shareholder 633,660

22

-

-

Government Taxation 241,451

8

149,350

10

Retention and Expansion Depreciation 113,470

4

147,201

10

Contingency reserves 312,088

11

262,793

18

Retained profits for the year 579,572

20

132,269

9


100

1,486,414

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 that retained for the future creation of more wealth.


NEM Insurance 2014

Statement of Value Added- Parent

2014

2013

N'000

%

N'000

%

Gross Premium Income 9,384,396

7,250,821

Other Income 657,433

426,044

10,041,829

7,676,865

Bought in Services (7,259,465)

(6,340,410)


100

1,336,455

100

Applied as follows:

Employees Salaries and other employees benefits 942,217

34

698,303

52

Provider of Capital Dividend to Shareholder 633,660

23

-

-

Government Taxation 232,905

8

137,981

10

Retention and Expansion Depreciation 100,063

4

131,262

10

Contingency reserves 301,435

11

247,840

19

Retained profits for the year 572,084

21

121,069

9


100

1,336,455

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 that retained for the future creation of more wealth.


NEM Insurance 2014

Financial Summary – Group

Dec. 2014 Dec. 2013 Dec. 2012 Dec. 2011 Dec. 2010 Assets N'000 N'000 N'000 N'000 N'000 Cash and Cash Equivalents 3,446,995 3,865,965 3,125,679 2,427,729 1,773,360

Trade Receivable 209,493 496,007 981,032 575,766 546,805

Reinsurance Assets 717,121 65,496 129,501 93,983 140,264

Deferred Acquisition Cost 482,385 513,387 325,944 247,923 184,468

Financial Assets 3,161,059 2,624,638 1,350,967 1,066,499 1,475,884

Investment Properties 485,830 468,974 459,813 483,120 483,120

Intangible Assets 5,627 18,851 27,085 13,875 13,500

Property and Equipment 2,213,264 1,284,191 828,586 705,922 598,215

Other Receivables and Prepayments 137,232 278,712 237,634 281,683 66,990

Statutory Deposit 340,112 349,200 342,879 414,839 399,759

Income Tax Credit - 80,456 - - -

Total Assets 11,199,117 10,045,877 7,809,120 6,311,339 5,682,364

Liabilities

Trade Payables 9,733 48,510 23,367 37,966 14,808

Other Payables 175,213 167,874 168,727 - -

Current Income Tax Liabilities 15,212

21,949 - 129,122

Deferred Tax Liability 280,913 166,062 106,671 106,671 108,992

Retirement Benefit Obligations 187,848 170,838 160,205 113,033 -

Insurance Contract Liabilities 4,660,059 4,787,052 3,027,556 1,905,361 1,258,119

Bank Overdraft 4,364 9,848

Total liabilities 5,333,341 5,350,184 3,508,476 2,163,030 1,511,041

Net Assets 5,865,776 4,695,693 4,300,644 4,148,310 4,171,323

Equity

Issued Share Capital 2,640,251 2,640,251 2,640,251 2,640,251 2,640,251

Share Premium 272,551 272,551 272,551 272,551 272,551

Other Reserves-employee benefit actuarial

surplus 68,178 45,562 2,141 - -

Available-For-Sale Reserve 329,232 9,978 53,411 94,503 106,785

Contingency Reserve 1,995,456 1,696,986 1,434,193 1,147,115 850,415

Retained Earnings 560,109 30,366 (101,902) (6,110) 301,321

Shareholders' Fund 5,865,778 4,695,693 4,300,644 4,148,310 4,171,323

Gross Premium Written 9,836,596 8,933,345 9,652,556 8,381,196

Gross premiums income 9,773,550 7,790,962 9,335,182 7,817,268

Net Premium income 8,545,534 7,439,613 9,130,771 7,166,438

Other Revenue 721,215 834,221 496,549 275,557

Total Revenue 9,266,749 8,273,835 9,627,321 7,441,995

Claims expense (2,655,818) (3,070,271) (2,934,435) (1,810,688)

Impairment (68,852) (355,627) (1,960,905) (1,676,541)

Other Expenses (4,775,306) (4,303,527) (4,066,735) (3,567,662)

Total Benefits, Claims and Other Expenses (7,499,976) (7,729,425) (8,962,075) (7,054,891)

Profit Before Tax 1,766,774 544,410 665,246 387,104

Income tax expense (241,451) (149,350) (209,934) (133,810)

Profit For the Year 1,525,323 395,060 455,312 253,294

Other Comprehensive Income for the year, net

of tax 341,870 (12) (38,951) (12,282)

Total Comprehensive Income for the year, net

of tax 1,867,193 395,048 416,361 241,012

Basic Earnings Per Share (Kobo) 29 7 9 5


NEM Insurance 2014

Financial Summary – Parent

Dec. 2014 Dec. 2013 Dec. 2012 Dec. 2011 Dec. 2010

Assets N'000 N'000 N'000 N'000 N'000 Cash and Cash Equivalents 3,425,121 3,836,821 2,947,856 2,371,375 1,733,238

Trade Receivable 209,493 347,494 887,009 569,480 509,524

Reinsurance Assets 717,121 65,496 92,512 83,937 131,497

Deferred Acquisition Cost 442,473 472,347 298,151 228,758 164,280

Financial Assets 2,914,575 2,373,132 1,350,967 1,066,499 1,475,884

Investment in Subsidiary 193,308 175,396 175,396 175,396 175,396

Investment Properties 485,830 468,974 459,813 483,120 483,120

Intangible Assets 4,459 15,772 27,085 13,875 13,500

Property and Equipment 2,175,775 1,245,149 797,208 671,675 566,865

Other Receivables and Prepayments 89,159 219,552 224,147 274,021 58,565

Statutory Deposit 320,000 320,000 320,000 320,000 320,000

Income Tax Credit - 87,745

- -

Total Assets 10,977,313 9,627,878 7,580,144 6,258,136 5,631,869

Liabilities Trade Payables 9,733 48,510 1,532 21,798 12,744

Other Payables 137,406 127,699 161,751 - -

Current Income Tax Liabilities 12,212

14,164 - 129,226

Deferred Tax Liability 280,913 166,062 106,671 106,671 108,992

Retirement Benefit Obligations 187,848 170,838 160,205 113,033

Insurance Contract Liabilities 4,444,126 4,419,597 2,819,395 1,831,307 1,179,225

Bank Overdraft 4,364 9,848 - - -

Total liabilities 5,076,601 4,942,554 3,263,718 2,072,809 1,430,187

Net Assets 5,900,712 4,685,324 4,316,427 4,185,328 4,201,682

Equity Issued Share Capital 2,640,251 2,640,251 2,640,251 2,640,251 2,640,251

Share Premium 272,551 272,551 272,551 272,551 272,551

Other Reserves-employee benefit actuarial

surplus 68,178 45,562 2,141 94,503 106,785

Available-For-Sale Reserve 329,232 9,978 53,411 - -

Contingency Reserve 1,966,395 1,664,960 1,417,120 1,137,642 852,496

Retained Earnings 624,106 52,022 (69,047) 40,381 329,599

Shareholders' Fund 5,900,714 4,685,324 4,316,427 4,185,328 4,201,682

Gross Premium Written 9,448,284 8,261,325 9,246,217 8,178,886

Gross premiums income 9,384,396 7,250,821 9,043,882 7,619,304

Net Premium income 8,198,732 6,927,329 8,865,670 7,001,803

Other Revenue 657,433 795,286 478,655 249,864

Total Revenue 8,856,166 7,722,614 9,344,325 7,251,667

Claims expense (2,568,166) (2,965,052) (2,879,691) (1,795,573)

Impairment - (225,302) (1,960,905) (1,676,541)

Other Expenses (4,547,916) (4,025,370) (3,866,327) (3,452,292)

Total Benefits, Claims and Other Expenses (7,116,083) (7,215,725) (8,706,923) (6,924,406)

Profit Before Tax 1,740,084 506,889 637,401 327,261

Income tax expense (232,905) (137,981) (203,326) (125,583)

Profit For the Year 1,507,179 368,908 434,075 201,678

Other Comprehensive Income for the

year, net of tax 341,870 (12) (38,951) (12,282)

Total Comprehensive Income for the year,

net of tax 1,849,049 368,896 395,124 189,396

Basic Earnings Per Share 29 8 8 5

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