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ROYAL EXCHANGE

ANNUAL REPORT & ACCOUNTS 2016ROYAL EXCHANGE PLC 3

Corporate Information 5

Corporate Profile 6

Results at a Glance 7-8

The Notice of Annual General Meeting 9-10

Proxy/Authority to Admit Form 11-12

Important Notice 13-14

Mandate for E-Dividend Payment 15-16

Chairman’s Statement and Reports 18-21

Group Managing Director’s Statement and Reports 22-25

Report of Corporate Governance 26-32

Risk Management Statement 33-37

Board of Directors 39

Brief Particulars of our Directors 40-42

Executive Management Team 43

Executive Management Team’s Profile 44-47

Directors & Regional Directors 48

Report of the Directors 49-54

Statement of Directors’ Responsibilities in relation to the Financial Statements 55

Report of Audit Committee 56

Independent Auditor’s Report 58-61

Consolidated and Separate Statement of Financial Position 62

Consolidated and Separate Statement of Profit or Loss and Other Comprehensive Income 63

Statement of Change in Equity - Group 64

Statement of Change in Equity - Company 65

Consolidated Statement of Cash Flows . 66

Notes to the Consolidated Financial Statements 68-186

Statement of Value Added 188

Financial Summary - Group 189

Financial Summary - Company 190

Management (Group and Subsidiaries) 192-197

Branch/Office Network cum Directory 198

Friendship Centre Network 199

Corporate Events 200-201

Notes 202

CONTENTS

ROYAL EXCHANGE PLC4 ANNUAL REPORT & ACCOUNTS 2016

WHO WE ARE

OUR VALUES

C - Customer orientationC - CreativityI - IntegrityL - Learning organisationP - ProfessionalismT - Teamwork

VISION STATEMENT

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

MISSION STATEMENT

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


DIRECTORSChairman - Mr. Kenny Ezenwani Odogwu

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

Group Managing Director - Alhaji Auwalu Muktari

Group Company Secretary - Ms. Sheila Ezeuko

REGISTERED OFFICE - 31, Marina, Lagos

AUDITORS - KPMG Professional Services

BANKERS - Access Bank Plc Diamond Bank Plc Ecobank Plc FCMB Plc First Bank of Nigeria Plc Guaranty Trust Bank Plc Heritage Bank Plc Stanbic IBTC Bank Plc Keystone Bank Ltd Mainstreet Bank Ltd (Now Skye Bank Plc) Sterling Bank Plc UBA Plc UBN Plc Wema Bank Plc Zenith Bank Plc

REGISTRARS - CardinalStone (Registrars) Limited, 358, Herbert Macauley Street, Yaba, Lagos.

RC NUMBER. - 6752

CORPORATE INFORMATION

ANNUAL REPORT & ACCOUNTS 2016ROYAL EXCHANGE PLC6

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

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

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

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

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

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

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

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

• Royal Exchange Finance & Asset Management Limited (previouly called Royal Exchange Finance & Investment Ltd) was incorporated as a wholly-owned subsidiary of Royal Exchange Plc in October 2004 and licensed in April 2005 by Central Bank of Nigeria, to carry on the finance and assets management functions of the group;

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

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

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

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

OUR DIRECTORS:

ROYAL EXCHANGE PLC 1. Mr. Kenny Ezenwani Odogwu - Chairman2. Chief Anthony Ikemefuna Idigbe (SAN) - Director 3. Mr. Daniel Maegerle (Swiss) - Director4. Chief Uwadi Okpa-Obaji - Director5. Alhaji Ahmed Rufa’i Mohammed - Director6. Alhaji Rabi’u Muhammad Gwarzo, OON - Director 7. Mr. Adeyinka Ojora - Director 8. Alhaji Auwalu Muktari - Group Managing Director

ROYAL EXCHANGE GENERAL INSURANCE COMPANY LIMITED (REGIC)1. Alhaji Auwalu Muktari - Chairman2. Mr. Benjamin Agili - Managing Director 3. Mr. Donald Nosiri - Director4. Mr. Nelson Akerele - Director 5. Mr. Austin Nwankwo - Director6. Mr. Ejike Osisioma - Director

ROYAL EXCHANGE PRUDENTIAL LIFE PLC (REPRU)1. Alhaji Auwalu Muktari - Chairman2. Mr. Olawale Banmore - Managing Director3. Mr. Adekunle Kasim - Director4. Mr. Nelson Akerele - Director5. Dr. Pius Ofulue - Director6. Mr. Ben Azi - Independent Director

ROYAL EXCHANGE HEALTHCARE LIMITED (REHL)1. Alhaji M. S. Hammid (fwc) - Chairman2. Dr. Pius Ofulue - Managing Director3. Alhaji Auwalu Muktari - Director4. Mr. Olawale Banmore - Director5. Mr. Nnamdi Melie - Director6. Mrs. Jane Ekomwereren - Director7. Mr. Ben Azi - Independent Director

ROYAL EXCHANGE FINANCE AND ASSET MANAGEMENT LIMITED (REFAM)1. Alhaji Auwalu Muktari - Chairman2. Mr. Abiola Sanni - Managing Director3. Mr. Benjamin Agili - Director4. Mr. Olawale Banmore - Director

ROYAL EXCHANGE MICROFINANCE BANK LIMITED (REMFB)1. Alhaji Auwalu Muktari - Chairman2. Mrs. Elizabeth Elghoche - Managing Director3. Mr. Abiola Sanni - Director4. Mr. Ben Azi - Independent Director

CORPORATE PROFILE


Group Parent 2016 2015 % 2016 2015 % =N=’000 =N=’000 Growth =N=’000 =N=’000 Growth

MAJOR STATEMENT OF COMPREHENSIVE INCOME ITEMS Gross Premium Written 12,517,381 10,790,628 16.00 - - Gross Premium Income 12,435,442 10,809,176 15.05 - - Net Premium Income 8,172,005 8,084,851 1.08 - - Investment and Other Income 800,126 807,792 (0.95) 81,289 223,669 (63.66)Loss Before Tax (743,838) (896,961) 17.07 (368,735) (116,707) (215.95)

Loss for the period (980,252) (1,298,960) 24.54 (368,735) (129,807) (184.06)

2016 2015 2016 2015 =N=’000 =N=’000 =N=’000 =N=’000

MAJOR STATEMENT OF FINANCIAL POSITION ITEMS Total Assets 31,676,729 26,525,242 19.42 9,810,075 8,889,570 10.35Insurance Contract Liabilities 10,158,280 8,263,204 22.93 - - - Investment Contract Liabilities 339,456 336,271 0.95 - - -

RESULTS AT A GLANCE

(2,000,000)

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

GrossPremiumWri6en

GrossPremiumEarned

NetPremiumIncomeInvestmentandOtherIncome

ProfitBeforeTax Profit/Lossfortheperiod

Thou

sand

sofN

aira

Group-MajorStatementofComprehensiveIncomeItems

2016₦'000

2015₦'000

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

TotalAssets InsuranceContractLiabili:es InvestmentContractLiabili:es

Thou

sand

sofN

aira

Group-MajorStatementofFinancialPosi;onItems

2016₦'000

2015₦'000


RESULTS AT A GLANCE

-400,000

-300,000

-200,000

-100,000

-

100,000

200,000

300,000

InvestmentandOtherIncome ProfitBeforeTax Profit/Lossfortheperiod

Parent-MajorStatementOfComprehensiveIncomeItems

2016₦'000

2015₦'000

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

TotalAssets

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sofN

aira

PARENT-MajorStatementofFinancialPosi<onItems

2016₦'000

2015₦'000


NOTICE OF AGM

ORDINARY BUSINESS:

1. To lay before the meeting, the Consolidated Financial Statements of the Group for the year ended December 31, 2016 together with the Reports of the Directors, the Audit Committee and the Auditors thereon.

2. To re-elect directors.

3. To approve the remuneration of the directors.

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

5. To elect shareholders as members of the Statutory Audit Committee.

BY ORDER OF THE BOARD

SHEILA EZEUKO COMPANY SECRETARY/GM (LEGAL SERVICES)FRC/2013/NBA/00000004059

New Africa House31, Marina, Lagos.

September 25, 2017

NOTICE is hereby given that the Forty-Eighth Annual General Meeting of Royal Exchange Plc will be held at the Al’Murjan Hall, Bristol Palace Hotel Ltd., 54/56 Guda Abdullahi Street, Farm Center, Kano, Kano State on Thursday, 19th October, 2017 at 11.00 o’clock in the forenoon to transact the following business:


NOTES

• Proxy

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

• Dividend Warrants

The company will not recommend any dividend for the year ended December 31, 2016.

• Closure of Register of Members and Transfer Books

The Register of Members and the Transfer Books will be closed from 5 October, 2017 to 11 October, 2017, both dates inclusive.

• Appointment of Members of the Audit Committee

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

• Unclaimed Share Certificates and Dividend Warrants

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

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

Furthermore, all shareholders with unclaimed dividend warrants Nos. 1 – 12 should address their claims to the Company Secretary or call at the registered office of the company during normal working hours for processing of their claims or assistance. Shareholders, with unclaimed dividend warrants Nos. 13 – 17 should address their claims to The Registrars, CardinalStone (Registrars) Limited.

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

• Right of Securities’ Holders to ask Questions

Securities’ Holders have a right to ask questions not only at the Meeting, but also in writing prior to the Meeting, and such questions must be submitted to the company on or before 14th day of October, 2017.

NOTICE OF AGM


Tear off from here

The Annual General Meeting of Royal Exchange Plc to be held at the Al’Murjan Hall, Bristol Palace Hotel Ltd., 54/56 Guda Abdullahi Street, Farm Center, Kano, Kano State, on Thursday, 19th October, 2017 at 11.00 am in the forenoon.

I/We………………………………. being a member/members of Royal Exchange Plc hereby appoint …….…….………...................………………………………………or failing him, the chairman of the meeting as my/our proxy to vote for me/us and on my/our behalf at the 48th Annual General Meeting of the Company to be held on Thursday, 19th October, 2017 and at every adjournment thereof.

Dated this 25th day of September, 2017.

NOTES:

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

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

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

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

Nos. RESOLUTIONS FOR AGAINST

1. To re-elect Chief Anthony Idigbe (SAN)

2. To re-elect Mr. Daniel Maegerle

3. To fix the remuneration of directors 4. To authorize the directors to fix the remuneration of auditors 5. To elect members of the Audit Committee

AUTHORITY TO ADMIT

Please admit …………………………………………………………. at the 48th Annual General Meeting of Royal Exchange Plc to be held at the Al’Murjan Hall, Bristol Palace Hotel Ltd., 54/56 Guda Abdullahi Street, Farm Center, Kano, Kano State on Thursday, 19th October, 2017, 11.00 am in the forenoon.

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

NOTES:

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

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

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

FOR REGISTRAR/COMPANY USE ONLY

NAME OF SHAREHOLDER:

NUMBER OF SHARES:

CAUTION: TO BE VALID THIS FORM MUST BE STAMPED ACCORDINGLY

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

PROXY FORM


Tear off from here

Please AffixPostage Stamp

Here

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

PROXY/AUTHORITY TO ADMIT


To:

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

ROYAL EXCHANGE PLCREQUEST FOR E-BONUS

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

Account Details:

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

Name of Shareholder:

Address of Shareholder:

Investor’s Account No:

CSCS Account No. (CHN):

GSM No:

E-mail Address:

Yours faithfully,

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

Signature: ) Name: ) ) of Shareholder



Official stamp and authorized signatures of stockbroker

1. Signatory: Seal of stockbroker

2. Signatory:

IMPORTANT NOTICE



Here


IMPORTANT NOTICE


MANDATE FOR E-DIVIDEND PAYMENT

NAME OF COMPANYACORN PET. PLCAFRIK PHARMACEUTICALS PLCAG HOMES SAVINGS & LOANSAG LEVENTISARBICO PLCASHAKACEM PLCBANKERS WAREHOUSEBETA GLASSCAPITAL HOTEL PLCELLAH LAKESEVANS MED PLCFCMB BONDFCMB GROUP PLCFIDSON BONDG. CAPPA PLCGUINEA PLCIMB ENERGY MASTER FUNDJOS INT. BREWERIES PLCKOGI SAVINGS & LOAN LTDLAFARGE AFRICA PLCLAFARGE BONDLAW UNION & ROCK PLCLEGACY FUNDLIVESTOCK FEEDS PLCMORISON PLCMRS OIL PLCNAHCO BONDNAHCO PLCNEWPAK PLCN.G.C PLCNGC STERILENPF MICROFINANCE BANKNULEC INDUSTRIES PLCOKOMU OIL PALM PLCPREMIER PAINT PLCREAN PLCSKYE BANK PLCTOTAL NIG. PLCTRANEX PLCWOMEN INVESTMENT FUND

TICK ACCOUNT NO.SHAREHOLDER’S

S L



Here


MANDATE FOR E-DIVIDEND PAYMENT


STATEMENTS & REPORTS


Distinguished fellow shareholders, members of the board of directors, ladies and gentlemen.

It is my pleasure to welcome you to the 48th Annual General Meeting of our company, taking place this 19th Day of October, 2017 here in Kano. I am pleased to present an overview of the 2016 macroeconomic environment, a review of our operating results for the year and synopsis of our expectations for 2017, all for your consideration, and in accordance with the mandate of my office as Chairman.

MACROECONOMIC REVIEWThe global economy decelerated in the final quarter of 2016 due to a combination of improved conditions in emerging market countries and stronger growth in developed economies. It expanded 2.7% year-on-year in Q4, above the 2.5% rise in Q3 and the strongest print in the full year. Q4’s strong reading brought total growth for 2016 to 2.6%, a notch above the 2.5% previously forecast but well below 2015’s 3.0%. Despite the deceleration in 2016, the global economy managed to navigate its way through troubled waters and perform at a still decent rate. Geopolitical risks remained high in 2016 as a result of the Brexit vote, a still-inflamed Middle East, the impeachment of Dilma Rousseff in Brazil and the election of Donald Trump in the U.S. presidential elections, among others. Challenging weather conditions, led by a severe El Niño weather effect, seriously damaged the agricultural sector in some countries, particularly in emerging markets.

This year, many developed economies are still benefiting from accommodative monetary policies due to the low global inflation environment. While cheap money is buttressing business and consumer confidence, ultra-low interest rates cannot last forever. This situation is raising doubts about how authorities will stimulate these economies once inflation starts to take off. The main exception is the United States, where an already well-performing economy could receive a further boost if a new stimulus plan is approved by President Trump. This situation could force the Federal Government to accelerate the pace of its monetary policy tightening, which would reverberate across the world mostly via rising volatility in the financial and exchange rate markets.

Economic dynamics among developing economies are gradually improving following some quarters of sluggish growth. The increase in commodity prices that started in the final quarter of 2016 is good news for the majority of emerging market nations. That said, the recovery in raw material costs is expected to be limited, thereby hampering the possibility of a sharp and sustained recovery. Against this backdrop, many governments will have to continue dealing with tough fiscal positions and the need for structural reforms appears inevitable.

CHAIRMAN’S STATEMENT & REPORT

MR. KENNY EZENWANI ODOGWU - Chairman

Despite the daunting challenges posed by the hostile operating environment, Royal Exchange Group was able to deliver a mixed result in 2016 through cost optimization initiatives, innovation in key categories and extensive retail market expansion, all of which helped to offset further deterioration of margins during the year.



Across Sub-Saharan Africa, growth slowed markedly in 2016 to 1.5%, and is projected to recover moderately in 2017 to 2.6%. However, the recovery remains fragile with most of the uplift coming from Africa’s three largest economies – Angola, Nigeria and South Africa – as they rebound from a sharp slowdown in 2016.

With rising debt levels and an environment of tighter and more volatile financial conditions, many African countries face the challenge of undertaking their much-needed development spending without jeopardizing their hard-won debt sustainability.

Nigeria’s economy continued to weaken in the third quarter. GDP contracted 2.24% year-on-year in Q3, marking a sharper drop than the 2.06% decline observed in the previous quarter.

The third quarter reading was underpinned by a contraction in the oil sector, largely due to militant attacks on oil infrastructure. Oil output in Q3 slid to 1.63 million barrels per day (mbpd) from 1.69 mbpd in Q2, which marks the fourth quarterly decline. Compared to the same quarter of the previous year, oil output declined 24.9% (Q3 2015: 2.17 mbpd) and the oil industry has contracted 22.01%.

From an average 9.0% in 2015, inflation averaged 15.66% over the year 2016, rising from 9.6% in January to 18.55% at the latest print in December. Much of this has been structural rather than demand driven, with hikes to energy tariffs, the removal of fuel subsidies and the depreciation of the naira on the black market being principally responsible.

In its final Monetary Policy Committee meeting for 2016, the Central Bank of Nigeria (CBN) held its main interest rate, the Monetary Policy Rate (MPR), at 14% in November, retaining its tighter monetary stance, which began with a two percentage point rate hike at its July meeting.

Nigeria’s unemployment situation deteriorated in Q3 2016, with unemployment rate rising to 13.9% from 13.3% as at Q2 2016. This represents the eight consecutive rise in unemployment rate since Q4, 2014.

Gross official external reserves as at December 2016 stood at $25.84 billion compared with opening levels of $29.07 billion. The depletion was triggered by market interventions made by the CBN in a bid to stabilize the naira exchange rate. This left the country’s external reserves vulnerable to absorbing less than six months of imports.

The local currency was under persistent pressure both at the interbank and parallel foreign exchange markets throughout 2016 owing to acute shortage of the dollar.

Over the year, the naira has seen a drastic depreciation in value, moving from =N=197/$ to =N=282/$ at the launch of the current “floating” foreign exchange rate policy in June 2016.

As at December 31st 2016, the interbank exchange rate closed at =N=305/$, about 8% weaker than in June. At the parallel market, the exchange rate weakened significantly to around =N=490/$ on December 30th compared to around =N=278/$ and =N=352/$ respectively at the beginning of the year and June. The weakening of the local unit at the parallel market took the spread or premium between the two market rates to a high of =N=185 at the end of 2016 compared to about =N=110 at the beginning of the year.

The socio-political scene witnessed several developments The 2016 budget passage was delayed after the two arms of the National Assembly (the Senate and House of Representatives) discovered it was full of inaccuracies. The budget titled ‘Budget of Change’ was eventually signed by President Muhammadu Buhari on May 6 after the Senate had passed it earlier on March 23. The delay was caused by accusations and counter-accusations by both the Legislature and Executive that the budget contained inaccurate figures.

In May, the Federal Government announced that a litre of petrol would be sold for =N=145 from the previous price of =N=98. Nigerians reacted to the hike with mixed feelings which led to a failed attempt by the Nigerian Labour Congress (NLC) to organise a nationwide strike.

The anti-corruption drive of the administration gained further traction in 2016. In what it described as a sting operation, the Department of State Services raided the houses of some judges in different parts of the country between October 7 and 8, 2016. The operation saw four serving judges, including two Justices of the Supreme Court, arrested for alleged corruption allegations.

The insurance sectorThe insurance sector, like other sectors of the economy shared in the negative effects of the economic recession which left many businesses stagnant in 2016. However, industry also reaped the fruit of improved awareness of insurance by Nigerians.



The insurance industry’s activities were also slowed down by the effects of the recession as operators lamented that given its usual position as the last in the scale of preference of an average Nigerian, patronage of the industry was at a very low ebb during the year while premium payment suffered major setback in spite of the ‘no premium no cover’ regime in the country.

Apparently, the industry’s abysmal performance had its root cause from the overall poor performance of the economy due to the recession.

The National Insurance Commission (NAICOM) in 2016 made repeated attempts to increase awareness of insurance, in order to deepen insurance penetration, however, the much desired insurance inclusiveness and insurance penetration to the grass root with the proposed introduction of micro-insurance, was not totally achieved even though the Commission introduced guidelines for the operation of “Takaful”, a model of micro-insurance based on Islamic principles.

Towards the end of the year, NAICOM introduced the use of alternative channels of distribution tagged Referral/Partners/agents, while it suspended previously existing alternative channels for security reasons.

Though insurers in 2015 celebrated timely premium payment by the Federal Government for its workers’ group Life Insurance, 2016 contrarily witnessed delay in payment of Group life insurance by government as up till date, the Federal Government is yet to fulfill its annual insurance (group life insurance) obligations to the federal civil servants as well as the renewal of insurance of its assets located in various parts of the country.

A plan to increase the capital base of underwriters was mooted in 2016 and we strongly believe that NAICOM will follow up this plan in 2017 in order to increase the competitiveness of insurance companies and make them to underwrite bigger projects. Meanwhile, as the directive for recapitalization of insurance companies is still being awaited, NAICOM, however, has recorded a pass mark in instilling good corporate governance on the operators.

The Commission also took a major step in its bid to place Nigeria insurance industry on the global best practices pedestal through the introduction of the Risk Base Supervision (RBS) model. NAICOM, has released a blue print document for the implementation of the model for the insurance industry.

The clamour for greater government’s participation and enforcement of compulsory insurance regulations as provided by the Market Development and Restructuring Initiative (MDRI) will be most likely one of the top agenda items and policy thrust for NAICOM in 2017.

OPERATING RESULTSDespite the daunting challenges posed by the hostile operating environment, Royal Exchange Group was able to deliver a mixed result in 2016 through cost optimization initiatives, innovation in key categories and extensive retail market expansion, all of which helped to offset further deterioration of margins during the year.

During the period under review, your company generated gross written premium of =N=12.52billion, while that of the preceding year was =N=10.79billion, an increase of 16%. Claims expense for the year amounted to =N=3.59billion in comparison with =N=3.04billion reported in 2015; signaling an increase of 18%. Underwriting expenses decreased by 7% from =N=2.64 billion in 2015 to =N=2.47 billion in 2016. Provisions of =N=670million were made to cater mainly for our Life insurance contract liabilities during the year against the sum of =N=1.16billion, provided in the previous year of 2015. These translated into net income before overhead expenses of =N=2.72billion, an increase of 14% when compared with 2015 value of =N=2.38billion.

Management expenses were =N=3.47billion in 2016 in comparison with =N=3.27billion in 2015 showing an increment of 6%. The increase is largely due to cost of doing business which spiked during the year.

EXPECTATIONS FOR 2017The outlook for 2017 will depend, largely, on the quality of policy and on the effective implementation of various reform initiatives of the Federal Government of Nigeria. Ability of Government to curb or substantially reduce militancy activities in Niger Delta in 2017 would go a long way in boosting oil production and improving foreign exchange earnings and Government’s revenues.

Another important area of emphasis in 2017 is the diversification of the non-oil sector. The 2017 budget will seek to encourage local production, by optimizing the use of local content and empowering local businesses. Related to this are the ongoing efforts to upgrade Nigeria’s infrastructure, in order to enhance long-term growth, capital flows and development.

During 2017, most economic variables, real growth, inflation and exchange rate, can be expected to improve towards conditions prevalent in 2015 when inflation was a single digit while real growth was just below three percent, and the naira exchange rate was about =N=200/US$.

Worthy of mention is the Economic Recovery and Growth Plan that was recently launched by the Federal Government. Effective implementation of this this plan will help to tackle the constraints to growth and improve the overall business environment.



Ultimately, rebuilding Nigeria’s external reserves, improving the liquidity of the foreign exchange market, strengthening the Naira, managing interest rates and inflation, developing vital infrastructure and the growth of the non-oil sector will remain critical success factors for 2017. The bright outlook could be threatened by any adverse shock to oil price or oil production.

Focusing more specifically on your Company, Royal Exchange in 2017 we will be consolidating the initiatives that we started in 2016, support growth and working capital and restructuring across the group.

As always, Royal Exchange stays abreast with many of the initiatives mentioned above in our quest to grow market share and attain market leadership position. The group is presently streamlining major components of her businesses, service delivery, processes and operations to deliver superior returns in the short-term to our shareholders. This we believe will reposition our great Company as not only a major industry player but as a potential game changer.

To sum it up, your board is confident about the future of our company.

DIVIDENDSThe Board of Directors do not recommend the payment of a dividend for the year ended December 31, 2016.

CONCLUSION

Future OutlookDistinguished shareholders, I am confident that your company is already on the path of sustainable growth and profitability. As we look forward to improved performance in the years ahead, I seek your understanding and cooperation with the Board and management in their concerted efforts to further improve the fortunes of the Company.

The management and staff of the Company are highly commended for their deep sense and display of loyalty, commitment, honesty and dedication to duty during the year under review. The Board assures you of its continued commitment to the delivery of optimal returns whilst keeping the company a responsible corporate citizen of our great nation, Nigeria.

Finally, I must also appreciate our esteemed clients, agents and brokers for their patronage and shareholders for the trust bestowed upon the Board. We assure you of our commitment to you always and continue to solicit your support now and always.

The future of our company and our plans for 2017 are well on course notwithstanding the vulnerabilities imminent in our domestic economy.

Thank you.

Kenny Ezeanwani OdogwuChairman


AUWALU MUKTARI- Group Managing Director

GROUP MANAGING DIRECTOR’S

STATEMENT

GROUP MANAGING DIRECTOR’S BUSINESS REVIEWDistinguished Shareholders, members of the Board of Directors and Colleagues, it is my pleasure to present to you the report of our stewardship for the financial year ended 2016. The Nigerian economy continues to be dominated by a range of structural problems, specifically volatile oil production, lack of optimal FX liquidity, weak fiscal policy and governance issues for the major part of 2016.

Nigeria major source of revenue, oil production stabilized somewhat at around 1.7mn b/d, having dropped significantly to 1.4mn b/d mid-year, from an estimated 2.17mn b/d in February 2016.

At current level, oil production remains below the 2016 budget projection of 2.2mn b/d owing to spate of attacks by militants (Niger Delta Avengers) after initial talks for a ceasefire failed.

The Nigerian economy entered economic recession in 2016 and the insurance sector, like other sectors of the economy shared in the negative effects of the economic recession which left many businesses stagnant during the year under review. A delay in the passage of the National Budget resulted in delayed payment of insurance premium, as the government are the major buyers of insurance in Nigeria. This led to attendant challenges for insurance companies and businesses operating in the country. However, industry also reaped the fruit of improved awareness of insurance by Nigerians, while National Insurance Commission (NAICOM) was equal to the task in ensuring improvement in corporate governance and the introduction of Risk Based Supervision in 2016 shows the seriousness of the regulator to ensure business sustainability within the insurance sector of the economy.

For the group, the board and management of Royal Exchange remained resolute in accomplishing its long term strategic objectives. Our Company continued through the year 2016 with her Strategic Plan aimed at steering the company towards market leadership. We shall continue to proactively take measures to mitigate the impact of the

During the year, Royal Exchange kept to its promise of being a socially responsible corporate citizen by engaging in insurance education and advocacy. In future, we intend to be more active in promoting Micro insurance to bridge insurance needs of the yearning public.



STATEMENT

adverse business environment by continuing to drive change in our business processes and strategies. Having said all these, our loss position for the year is not reflective of a poor performance, but rather the need to accommodate mandatory provisioning in respect of our Life insurance business as recommended and in accordance with global best practices.

Our performance for the year 2016 at Royal Exchange was a good show of spirit and tenacity. At the Group level, business retention levels were solid giving room for us to focus on our new business areas. Our revenue diversification, away from traditional markets, might still be at its preliminary stages but we are recording good progress in deepening our tentacles in some frontier markets; most especially retail business. Looking at the figures, our top line rose 16% year-on-year from =N=10.79 billion in 2015 to =N=12.52 billion in 2016. Results from core operating activities grew with underwriting profit increasing by 22% from =N=1.57 billion in the corresponding year to =N=1.92 billion in 2016. However, management expenses was tamed, only able to rise by 6% year-on-year to =N=3.47 billion in 2016 despite unexpected surge in the cost of doing business during the year.

A Loss before tax of =N=743.84 million was reported in 2016. As pointed out above, the occurrence of this loss is traceable to a =N=0.670 billion provisions made to Insurance contract liabilities during the year as well as impairment charges recognized. Our Healthcare, Microfinance bank and Royal Exchange Prudential Life posted negative figures due to hostile business environment during the year.

Moving ahead, we reassure our shareholders of more stringent cost monitoring measures in place in the forthcoming year to improve our efficiency levels. The Group is investing in products and driving new product launches. We have also gone far in setting up another micro-insurance subsidiary called Royal Exchange Takaful Insurance Ltd. This we believe will improve our margin considerably. Regulatory approval is almost concluded. These self-help actions are progressing to plan and some further actions are being taken to drive profitable medium-term growth despite uncertain market conditions. The management remains confident about the Company’s future as it is stable and looks promising.

At subsidiary level, our objectives were clear and precise; continue to expand the market share for our core insurance subsidiaries and ensure a sustained increase in the contributions of our non-core insurance businesses i.e. asset management and microfinance banking divisions to the pool. On our insurance businesses, growth was extended through our retail footprint with on-going creation of new alliances and engagement in key strategic partnerships.

Generally, bottom-line performances were down in some of our subsidiaries due to a very volatile business operating environment. Notwithstanding, the board and management are determined to reverse this trend especially for our life business, Royal Exchange Prudential Life Plc, which was a major drag on our profitability for the year. OPERATING RESULTS

GROUPThe company’s wholly owned subsidiaries at the end of 2016 were:(a) Royal Exchange General Insurance Company Ltd(b) Royal Exchange Prudential Life Plc(c) Royal Exchange Healthcare Ltd(d) Royal Exchange Finance & Asset Management Ltd(e) Royal Exchange Microfinance Bank Ltd

Royal Exchange General Insurance Company LimitedRoyal Exchange General Insurance Company Limited (REGIC) being the major income earner of the group contributed about 70% of the gross earning of the group.

Gross Premium Income (GPI) at =N=8.76 billion rose 26% above 2015 results of =N=6.97 billion. Without the considerable cutbacks by government on its annual insurance spend, the premium collected would have surpassed the amount recorded. Reinsurance cost year –on-year rose by 72% impacting negatively on net premium earned. Net premium income of =N=4.78 billion was recorded in the year; 3% higher than that of 2015.



STATEMENT

Net Claims incurred (excluding reinsurance recoverable) was =N=1.72 billion as against =N=1.48 billion recorded in 2015 displaying an increase of 16%. The company’s claims ratio also dropped marginally from 21% in 2015 to 20% in 2016.Underwriting expenses at =N=1.88 billion declined by 12% over 2015 levels. Hence, we recorded an underwriting profit of =N=1.61 billion in 2016, as against =N=1.32 billion in 2015.

Management expenses at =N=1.89 billion increased marginally by 16% against 2015 levels.

Consequently, a profit before tax of =N=285.40 million is reported for the company in 2016.

Royal Exchange Prudential Life PlcDespite the challenges of 2016 especially for Life underwriters, Royal Exchange Prudential Life was able to maintain her growth potential within the group.

Gross Premium Income at =N=3.47 billion dropped marginally by 3% in comparison with 2015. However, underwriting profit spiked from =N=225 million in 2015 to =N=464 million in 2016 even with the provisions of =N=0. 706 billion made in respect of life insurance contract liabilities.

Management expenses at =N=1.11 billion was 11% lower than =N=1.24 billion recorded in 2015. The reduction in management expenses was attributed to operational efficiency and cost optimization during the year. Consequently, the company realized a Loss before tax of =N=616 million in 2016.

Royal Exchange Healthcare LtdGross written premium dipped by 31% to =N=288 million in 2016 from =N=419.8 million in 2015.

Gross Underwriting expenses rose slightly by 9% to =N=348 million in 2016 as against =N=319 million in 2015 as a result of large medical claims incurred during the period. Operating expenses declined by 13% from =N=130 million in 2016 to =N=150 million in 2015.

A loss before tax of =N=103.7 million is reported for 2016.

Royal Exchange Finance & Asset Management LtdThe Company achieved total income of =N=229 million as against =N=162 million in 2015, an increase of 41%.

The Company re-energized its credit creation business during the year 2016 and this resulted in an improved bottom line for the Company.

A profit before tax of =N=51.0 million is reported for 2016 as against =N=9 million in 2015.

Royal Exchange Microfinance Bank LtdThe audited account shows a total income of =N=73 million in 2016, within close proximity of its 2015 level at =N=77million with a dip of 5%.

Operating expense increased from =N=67 million in 2015 to =N=84 million in 2016. Loss before tax of =N=11 million is reported for 2016 as against a profit of =N=9 million in 2015.



STATEMENT

CORPORATE SOCIAL RESPONSIBILITYDuring the year, Royal Exchange kept to its promise of being a socially responsible corporate citizen by engaging in insurance education and advocacy. In future, we intend to be more active in promoting Micro insurance to bridge insurance needs of the yearning public.

CONCLUSIONFor the future that we behold, our goal is to continuously redefine, reinvent and differentiate ourselves in the marketplace. The focus would be on achieving long-term sustainable growth for our company through the deepening of our revenue base, improving service delivery support systems and at same time keeping a lid on our group-wide costs.

Once again, I use this medium to appreciate the firm commitments of our executive and senior management team as well as staff who put in their best during the year. I am indeed grateful for the trust, contributions and sacrifices made by all in the course of this journey.

Thank you

Auwalu MuktariGroup Managing Director


INTRODUCTIONRoyal Exchange, with the understanding that corporate governance stands for responsible and transparent management and is essential to achieving its vision, consistently developed corporate policies, standards and governance framework to avoid potential conflicts of interest between all stakeholders with a view to earning and retaining the confidence and trust of its stakeholders. Royal Exchange understands that good corporate governance goes beyond just adhering to rules and policies of the regulators; but also consistently creating value through going the extra mile, hence the Company continually strives to carry out its business operations based on its core values and pledges to safeguard and increase investor value through transparent corporate governance practices.

To ensure consistency in its practice of good corporate governance, Royal Exchange continuously reviews its practice to align with the various applicable Codes of Corporate Governance, such as the Securities and Exchange Commission (SEC) Code and the National Insurance Commission (NAICOM) Code with particular reference to compliance, disclosures and structure and complies with all other requirements.

GOVERNANCE STRUCTURE

The Board Having the right people with an appropriate balance of skills, knowledge and experience is an important aspect of corporate governance. The Board’s size thus provides for sufficient diversity among its members to enable them exercise their business judgment in the best interest of Royal Exchange’s shareholders, while facilitating substantial discussions in which each director can participate meaningfully.

The Board membership comprises eight (8) members, including the Chairman, six (6) Non-Executive Directors, and one (1) Executive Director. The Company is presently in consultation for the appointment of an Independent Director to replace the erstwhile Independent Director. The Independent Director is not expected to have any significant shareholding interest or any special business relationship with the Company.

The Board of DirectorsThe Board of Directors through the Chairman directs the strategic affairs of Royal Exchange and is responsible for the governance of the Company and also accountable to the shareholders for creating and delivering sustainable value through the management of the company’s business. All the current Non-Executive Directors served on the Board throughout 2016. Members of the Board of Directors of the subsidiaries are appointed from the Group Executive Management as well as an independent director for each subsidiary.

In addition to the Board’s direct oversight, the Board exercises its oversight responsibilities through six (6) Committees, namely, Risk Management, Board Investment, Board Strategy, Establishment and Governance, Finance and General Purpose, and the Board Audit.

The Board is required to meet at least four times each year. The Board met seven (7) times in 2016 and the average attendance was 92%.

REPORT OF CORPORATE GOVERNANCE


Internal OrganizationThere is an effective structure for cooperation amongst the members of the Board, Management and Internal Control functions in Royal Exchange. These structures define the powers and responsibilities of its corporate bodies and employees and are reviewed periodically to ensure proper organization.

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

Board Code of EthicsTo avoid unethical and unwholesome practice and conflict of interest in any business relationship with the Company, the board has established a Code of Business Ethics to provide guidance for the board and staff to maintain strong ethical standards.

Board Performance Evaluation In compliance with the provisions of the Securities and Exchange Commission (SEC) Code of Corporate Governance, the performance of the Board, its committees, the chairman and individual directors was appraised by an independent consultant. Furthermore, an annual board appraisal is also conducted by an Independent Consultant appointed by the Company.

Board Meetings Attendance

Directors Status Designation Attendance % Attendance

Expected Meetings 4

Actual Meetings 7

Mr. K. E. Odogwu Non-Executive Director Chairman 7 100%

Chief A. I. Idigbe (SAN) Non-Executive Director Member 7 100%

Mr. D. Maegerle Non-Executive Director Member 6 86%

Chief U. Okpa-Obaji Non-Executive Director Member 6 86%

Alhaji A. R. Mohammed Non-Executive Director Member 7 100%

Alhaji R. M. Gwarzo, OON Non-Executive Director Member 7 100%

Mr. A. A. Ojora Non-Executive Director Member 7 100%

Alhaji A. Muktari Group Managing Director Member 7 100%

Average Attendance 92%



CODE OF CORPORATE GOVERNANCE

Board CommitteesIn order to increase the efficiency of its work and enable a more detailed analysis of certain issues, the Board appointed Committees for specific areas from among its members and established terms of reference and rules with respect to delegated authority and reporting to the Board. The primary objective of the Committees is to provide preparatory and administrative support to the Board. The issues considered at Committee meetings are recorded in minutes and reported at the subsequent Board meetings.

The Board has the following standing committees which regularly report to the Board, as well as submit proposals for discussions and decision making.

Establishment and Governance CommitteeThe Committee comprises five (5) members (Four Non-Executives and One Executive) and oversees the Group’s governance and measures its governance program against best practice to ensure that the rights of the shareholders are fully protected. It is also responsible for determining the remuneration of the executive and non-executive members of the Board, nominations for approval of the Board candidates to fill Board vacancies, and for the continuous review of senior management succession plans. To assist in the review of the compensation structures and practices, the Committee has retained its own independent advisor – Leading Edge Consultants.

The Committee met four (4) times with average attendance of 90%.

Audit CommitteeThe Committee comprises of six (6) members made up of three Non-Executives, and three shareholder representatives. The Committee serves as a focal point for the communication and oversight regarding Financial Accounting Reporting, Internal Control and Compliance among Management, as stated in section 359 (6) of the Companies and Allied Matters Act. The Audit Committee, at least annually, reviews the standards of internal control, including the activities, plans, organization and quality of Internal Audit and Group Compliance.

The Committee met five (5) times in 2016 with an average attendance of 88%.

Risk Management CommitteeThe Committee oversees the Group-wide risk governance framework, including risk management and control, risk policies and their implementation as well as the risk strategy and monitoring of operational risks. It reviews the business management and group risk management function, the Group’s general policies and procedures and satisfies itself that the effective systems of risk management are established and maintained. It oversees the Group’s risk appetite statements to ensure alignments with the Group’s strategic objectives.

The Committee comprises of five (5) members. The Committee met four (4) times in 2016 with average attendance of 64%.

Finance and General Purpose CommitteeThe Committee assists the board in fulfilling its financial oversight responsibilities with specific reference to corporate finance, resources and assets utilization, capital structure, cash management, equity and debt financing, financial planning and reporting, as well as the overall financial performance of the Group.

The Committee comprises of six (6) members. The Committee met four (4) times in 2016 with attendance of 68%.



Investment CommitteeThe Committee assists the Board in its oversight functions with respect to investment strategies, investment portfolio performance, investment mix and the overall investment performance of the Group.

The Committee consists of five (5) members and met four times in 2016 with attendance of 67%.

Strategy CommitteeThe committee’s responsibilities includes but not limited to advising and assisting the board in carrying out:i) the development, articulation and execution of the Group’s long term strategic plan, andii) it’s advisory oversight responsibilities relating to potential mergers, acquisitions and other key strategic

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

The Committee comprises of four (4) members and met four times in 2016 with the average attendance of 58%.


Board Committee Meetings Attendance

LegendBIC - Board Investment CommitteeF & GP - Finance and General Purpose CommitteeRMC - Risk Management CommitteeAC - Audit CommitteeBSC - Board Strategy CommitteeE & GC - Establishment and Governance Committee

Directors BIC E&GC F&GP RMS AC BSC

Expected Meetings 4 4 4 4 4 4

Actual Meetings 4 4 4 4 5 4

Mr. K. E. Odogwu N/A N/A N/A N/A N/A N/A

Chief A. I. Idigbe (SAN) 4 2 2 2 N/A 3

Mr. D. Magerle 1 4 1 2 N/A 2

Chief U. Okpa–Obaji 2 4 4 4 5 N/A

Alhaji A. R. Mohammed 4 N/A 4 2 3 2

Alhaji R. M. Gwarzo (OON) N/A 4 2 2 2 2

Mr. A. Ojora 2 N/A 2 2 5 1

Alhaji A. Muktari 4 4 4 4 5 4

Alhaja A. S. Kudaisi N/A N/A N/A N/A 5 N/A

Mr. T. Olawuyi N/A N/A N/A N/A 5 N/A

Mr. A. Benkunmi N/A N/A N/A N/A 5 N/A

Average Attendance 67% 90% 68% 64% 88% 58%


GROUP STRUCTURE AND SHAREHOLDERS

Operational Group StructureTo effectively manage the complexity associated with group structure both in operations and governance, Royal Exchange Plc manages its exposure to group governance on a matrix depicting lines of business and functionalities which reflect in the areas of responsibility.

The Executive Committee (EXCO)The Executive Committee (EXCO) is headed by the Group Managing Director and includes the Group General Manager and the Group Heads of Finance and Accounts, Human Resources, Strategy and Business Improvement, and the Managing Directors of all the subsidiaries.

This management structure leads to the reporting of the Group based on the following primary business segments:

• General insurance serves the property and casualty insurance (inclusive of oil and gas business) need of a wide range of customers, from individual to small and medium sized businesses, commercial enterprises and multinational corporations.

• Prudential Life pursues a strategy with market-leading proposition in investment linked and protection products through global distribution and proposition pillars to develop leadership position in its chosen segment.

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

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

• Microfinance Bank provides services to the less privileged public, having a total production assets of not exceeding =N=500,000.00 and monthly income not exceeding twice the monthly per capita income in Nigeria or minimum wage.

The Group Management Executive Committee (GMEC)The GMEC is headed by the Group Managing Director and includes the Group General Manager, Managing Directors of the subsidiaries and Group Heads of Departments.

The GMEC is responsible for:• The day-to-day running of the Group on behalf of the Board• The development and implementation of all Board - approved initiatives • The achievement of all business and operational plans, targets, strategies and objectives within the company’s risk

management framework; and • The development of advanced reporting procedures to ensure the Board is fully informed at all times.

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

SUBSIDIARY GOVERNANCE Subsidiary governance is a vital ingredient of Royal Exchange Risk management framework. Royal Exchange’s governance strategy is implemented through the establishment of systems and processes which assures the Board that the subsidiaries reflect the same values, ethics, control and processes as that of the parent, while remaining independent in the conduct of their business. It provides the structure through which performance objectives of the subsidiaries are set, the means through which the set objectives are achieved and how performance monitoring is conducted.



Monthly subsidiaries business activities and operating environment are discussed at the Executive Committee (EXCO) level where strategic directions are set. The reports cover the subsidiaries’ financial performance, risk assessment and regulatory activities among others. To ensure an effective and consistent compliance culture across all entities, the Group Compliance function oversee compliance risk and promotes training and best practice implementation across the subsidiaries, therefore affirming the Group’s commitment to zero tolerance for regulatory breaches.

INFORMATION TO SHAREHOLDERS Shareholders have the opportunity to express their opinions on the company’s financial results and other issues affecting the Company. Royal Exchange Plc is thus committed to continually disclose all material information in a timely and transparent manner to its shareholders. To ensure the shareholders’ are adequately informed and their interest protected, the Company has an Investors Relations Unit domiciled in the company secretariat to deal directly with enquiries from shareholders and ensure that shareholders’ views are escalated to Management and the Board. Information relating to the goings on in the Company are periodically released to the investing public on quarterly, half-yearly and annual basis in widely read national newspapers.

Annual General MeetingIn compliance with statutory and regulatory requirements, the Annual General Meeting of the Company is annually held and provides the shareholders of the Company or their proxies with the opportunity and direct access to senior and executive Management to deliberate and take decisions on the issues affecting the Company. The Annual General Meetings are attended by representatives of regulators such as the Securities and Exchange Commission (SEC), the Nigerian Stock Exchange (NSE), Corporate Affairs Commission (CAC), as well as members of Shareholders’ Associations.

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

Communication PolicyThe Company ensures that communication and information dissemination regarding the company’s operations to stakeholders and the general public is timely, accurate and continuous. Such information is available on the company’s website, http://www.royalexchangeplc.com.

Whistle Blowing proceduresRoyal Exchange is committed to the highest standards of ethical, moral and legal business conduct. In line with this commitment and Royal Exchange’s philosophy of open dialogue and communications, the Company has established a whistleblowing procedure that ensures and provides an avenue for employees to raise concerns and be assured that they will be protected from reprisals or victimization for whistleblowing. This whistleblower policy is intended to provide protection for any whistleblower that raises concerns in good faith regarding Royal Exchange Plc, relating to:• Incorrect or inappropriate financial reporting;• A violation of a law or regulation;• Possible fraud and corruption;• Activities which otherwise amount to serious improper conduct;• Health and safety risks including risks to the public, as well as other staff;

The Company Secretary The Company Secretary provides reference and support for all Directors. She also consults regularly with Directors to ensure that they receive required information promptly. The Company Secretary is also responsible for assisting the Board and Management in the implementation of the Code of Corporate Governance, coordinating the orientation and training of new Directors and the continuous education of Non-Executive Directors.



Complaints Management Royal Exchange views complaints as any expression of dissatisfaction, resentment or grievance, whether justified or not, made by a person or corporate body about any aspect of Royal Exchange operations, services, personnel, policies, shares or dividends. We are thus committed to resolving customer’s complaints if and when they arise. Our complaints and feedback structure ensures the prompt resolution of customers’ complaints. There is a dedicated Complaints Unit responsible for receiving, ensuring prompt investigation and resolution of customers’ complaints.

Anti-Money laundering and combating the Financing of Terrorism (AML/CFT) frameworkRoyal Exchange is committed to ensuring that its products and services are not used for Money Laundering and Financing of Terrorism and Proliferation of Weapons of Mass Destruction; and that its processes and procedures are in compliance with all applicable laws and regulations on Money Laundering. In view of this, Royal Exchange annually exposes its Board, Management and staff across the nation to money laundering techniques and how to combat it.

NOTES:

1. It is the policy of the Group that any director, who will be absent from any meeting shall send his alternate to attend the meeting. In compliance with the above, every director ab-initio has named and presented his permanent alternates details with the board. The directors with asterisks were represented by their alternates on the dates they were absent.

2. The Company has an approved Share Dealing Policy and the Directors adhere to the policy in their dealings with the Company’s shares.

3. The Company has an approved Complaints Management Policy Framework in compliance with the rules and regulations of Securities and Exchange Commission.

SHEILA IFEYINWA EZEUKO COMPANY SECRETARY/GM (LEGAL SERVICES)FRC/2013/NBA/00000004059LAGOS, NIGERIA1 JUNE, 2017



The Royal Exchange Group is committed to continually embrace best practice in its enterprise risk management by aligning strategy, people, processes, technology and business intelligence with a view to minimizing the potential threats of risk events and maximizing potential business and growth opportunities for sustainable stakeholders’ value.

The Group, recognizing its major risk areas as Insurance, Credit, Operational, Information Technology, Market and Liquidity Risks has adopted risk management principles and processes which support, promote and embed its risk management and business objectives to sustain its risk management culture.

The risk management infrastructure encompasses a comprehensive and integrated approach to identifying, managing, monitoring and reporting risks with focus on the following inherent risk groups – Insurance, Liquidity, Credit, Market, Operation, and Technology.

In compliance with best global practices and in pro-activeness to National Insurance Commission (NAICOM) Risk-based Supervision guidelines, the Group has begun the strategic framework for efficient measurement and management of the insurance sector risks and capital.

Our key Enterprise Risk Management (ERM) objectives:

• Aligning risk appetite and corporate strategy• Protect the Group’s capital base by monitoring and ensuring that risks are not taken beyond the Group’s tolerance

limit• Enhance value creation and contribute to an optimal risk return profile by providing the basis for efficient capital

deployment• Support the Group’s decision-making processes by providing consistent, reliable and timely risk information• Protect our reputation and brand by promoting a sound culture of risk awareness, discipline and informed risk-

taking.

Our key Enterprise Risk Management (ERM) framework:

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

The Board of Directors has the overall responsibility for the establishment of the Group’s Risk Management framework and exercises its oversight function over all the Group’s prevalent risks via its various committees; Board Risk Management Committee (BRMC); Board Investment Committee (BIC); Board Strategy Committee (BSC); Board Finance and General Purpose Committee (BF & GPC); Board Establishment and Governance Committee (BE&GC) and Audit Committee (AC). These committees are responsible for developing and monitoring risk policies in their specific areas and report regularly to the Board of Directors.

To ensure adherence to and support the governance process, the Group relies on documented policies and guidelines, regular reporting of the Group risk profile and current risk issues. These are generated by the various business units such as Audit, Control, Risk and Compliance for Management’s decision-making. These reports include:

• Monthly Key Risk Indicator (KRI) Report • Monthly Internal Control Report• Quarterly Actuarial Valuation Report (AVR)• Quarterly Risk Assessment Report • Quarterly Compliance and Governance Report • Quarterly Internal Audit Report

RISK MANAGEMENT STATEMENT


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

Risk CultureThe Board of Directors and management ensures that the long-term survival and reputation of the Company are not at risk by sustaining the promotion of risk awareness across the Group to manage products, market, portfolio, liquidity, credit and interest rate risks where the associated risks are deemed unacceptable and may affect the strategic vision of the Company. In addition, the Company continually exposes staff to training on principles and practice of ERM which has enhanced the skill level of staff members.

Risk AppetiteThe Board of Directors established the Group risk appetite statement to guide the Group to effectively discharge its functions. The management is thus guided to take decisions on managing different categories of risk within the purview of the risk appetite statements. Also, the risk appetite levels, such as prudential limits were set by the Board of Directors to guide the management’s decision on the amount of risk they are prepared to accept, when decisions are taken to manage any mitigating measures. In line with the Group appetite statements, the subsidiaries’ risk appetites were scaled down from that of the Group to reflect the respective subsidiary’s need.

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

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

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

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

Capital Management ApproachThe Group’s operations are subject to regulatory requirements of the National Insurance Commission (NAICOM), Central Bank of Nigeria (CBN), the Nigerian Stock Exchange (NSE) and the Securities and Exchange Commission (SEC). Such regulations not only prescribe approval and monitoring of activities, but also impose certain restrictive provisions (e.g., capital adequacy) to minimize the risk of default and insolvency on the part of the financial service companies and to meet unforeseen liabilities as these arise.

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



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

• Maintain the required level of stability of the Group thereby providing a degree of security to policyholders;• Allocate capital efficiently and support the development of business by ensuring that returns on capital employed

meet the requirements of its capital providers and of its shareholders;• Retain financial flexibility by maintaining strong liquidity and access to a range of capital markets;• Align the profile of assets and liabilities, taking account of risks inherent in the business; and• Maintain financial strength to support new business growth and satisfy the requirements of the policyholders,

regulators and other stakeholders;

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

The capital management process is governed by the Board of Directors who has the ultimate responsibility for the capital management process. The Board of Directors is supported by the Board Risk Management Committee and the Board Credit Committee, all of whom have various inputs into the capital management process.

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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



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

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

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

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

Regulatory/Compliance RiskCompliance risk is exposure to legal penalties, financial forfeiture and material loss which an organization faces when it fails to act in accordance with industry laws and regulations, internal policies or prescribed best practices. This threat can lead to diminished reputation and limited business opportunities as the Company finds its franchises reduced in value and its potential for expansion curtailed.

Whilst Governance refers to the responsibility of the Company’s executives for maintaining organizational transparency and taking steps to reduce compliance risk by ensuring that established policies and procedures are followed, Risk management is the process by which a company sets its risk tolerance and, Compliance is the process that actually records and monitors the daily business activities to make sure that the Company is complying with the law, industry mandates, and internal policies.

Thus, the Company takes an integrated approach to compliance risk management because of these overlapping activities collectively referred to as Governance, Risk and Compliance (GRC).



BOARD OF DIRECTORS


Mr. Kenny Ezenwani Odogwu (Chairman)

Chief Anthony Ikemefuna Idigbe (SAN)

Director

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

BOARD OF DIRECTORS

Mr. Daniel MaegerleDirector

A seasoned legal practitioner with over 30 years experience, Chief Anthony Idigbe is the Senior Partner in Punuka Attorneys. He was elevated to the rank of Senior Advocate of Nigeria (SAN) in 2000 and was recently admitted to practice law in Ontario, Canada. He has advised clients on several complex transactions and has represented major companies and institutions in the highest courts of Nigeria.

He is a well-known capital markets legal adviser and has advised and acted as counsel to the Securities and Exchange Commission. He has also been involved as lead counsel in many ‘big ticket’ litigation briefs such as the Kano Trovan Clinical Trial Cases. He also possesses wealth of knowledge and experience in Telecommunications Law particularly the workings of the Nigerian Telecommunications Industry, having represented numerous clients in various telecommunications disputes.

Chief Anthony Idigbe, SAN, graduated from the University of Ife, (now Obafemi Awolowo University), Ile- Ife in 1982 with a 2nd Class Upper Degree (Hons). He also received the Hon. Justice Orojo Prize for the Best Student in Company Law. He finished from the Nigerian Law School, Lagos in 1983 also with a Second Class (Upper Division). He has an LLM from the University of Toronto, Canada (2015), the Robert Gordon University (RGU), Scotland, UK (2012) and the University of Lagos, Akoka (1988) respectively as well as MBA from the Enugu State University of Science and Technology (ESUT) Enugu (1997). He also has a Diploma in Advertising from Advertising Practitioners Council of Nigeria (APCON), (1999) and was a Lecturer at ESUT Business School, Enugu between 1999 and 2009 and APCON from 2000 – 2002.

Chief Idigbe is a Fellow of the Chartered Institute of Arbitrators, UK, Insolvency International and the International Bar Association. He is also a member of the Institute of Directors and the International Insolvency Institute. He was the immediate past President of the Business Recovery and Insolvency Practitioners Association of Nigeria (BRIPAN). He was the Founder and first Chairman, Capital Markets Solicitors Association (CMSA), and now functions as a Trustee of the Association. He has also served on various arbitration panels and is presently a member of the International Criminal Court (ICC) Arbitral Panel. He is the author of many published books and articles. He is currently the Chairman of the Strategy Committee.

He is a Swiss national and holds a degree in Law from the University of Zurich, Switzerland. He was called to the Zurich Bar in 2002 and qualified as a Certified Specialist of the Swiss Bar Association SBA in Employment Law in 2009. He was a Partner in the firm Streiff von Kaenel, a firm established in 1962 and engaged in a broad range of legal services both nationally and internationally, until 2015. Currently, he is the Founding and Managing Partner of his own law chambers, Maegerle Attorneys at Law, founded in 2016. He was appointed to the Board of the company on November 24, 2004. He is currently the Chairman of the Establishment and Corporate Governance Committee.


BOARD OF DIRECTORS

Chief Uwadi Okpa-ObajiDirector

Alhaji Ahmed Rufa’i MohammedDirector

Alhaji Rabiu Muhammad Gwarzo, OON

Director

Mr. Adeyinka OjoraDirector

He holds a B.Sc (1980), an M.Sc (1982) both in Economics from the University of Lagos, Lagos State; an LL.B (2007) from the University of Abuja and was called to the Nigerian Bar in 2008. He also has a certificate in Macro-Economic Policy and Management from Harvard University Institute for International Development. He participated and completed the Chief Executive Programme 14 (CEP 14) of the Pan Atlantic University, Lagos. He also attended Harvard Business School for a programme on Compensation Committee titled “New Challenges, New Solutions”. He is a Fellow of the Chartered Institute of Management Accountants, UK, the Institute of Chartered Secretaries and Administrators UK and the Institute of Chartered Accountants of Nigeria. He is also an Associate of the Association of National Accountants of Nigeria and the Chartered Institute of Taxation of Nigeria. He is a member of the Chartered Institute of Stockbrokers of Nigeria and an Authorized Dealing Clerk of the Nigerian Stock Exchange. Chief Okpa-Obaji was a founding staff and former Director of the National Council on Privatisation/Bureau of Public Enterprises and is currently an Executive Director of the Odogwu Group of Companies. He was appointed to the Board of the company on March 15, 2007. He is currently the Chairman of the Board Finance and General Purposes Committee of the company.

He is a graduate of the Ahmadu Bello University, Zaria, Kaduna State. He also holds a certificate in Banking and Development Finance from the Manchester Business School and is a Fellow of the Institute of Public Administration. He has undertaken several national assignments and is currently on the Board of several publicly quoted and private companies. He is currently the Chairman of the Institute of Directors (IOD). He is also the Chairman of the IOD Governing Board, and the IOD Centre for Corporate Governance. He is a recipient of various national and international awards and honours. He was appointed to the Board of the Company on May 16, 2007. He is currently the Chairman of the Board Investment Committee of the Company.

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

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


Alhaji Auwalu MuktariGroup Managing Director

Ms. Sheila I. EzeukoGroup General Manager

(Legal Secretariat & Compliance Services)

He is a graduate of Ahmadu Bello University Zaria where he obtained a Diploma in Insurance at Credit Level in 1983. He completed his 1st degree in Business Administration and Masters degree in Banking and Finance at Bayero University Kano in 1993 and 1999 respectively.

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

Alhaji Muktari was elected in 2010 as an associate member of the Institute of Directors, Nigeria; he is also a professional member of the following bodies:• Associate Member, Institute of Management Specialist, UK.• Member, Chartered Institute of Insurance of Nigeria.• Associate Member, Institute of Management.

He was appointed the Group Managing Director on June 14, 2016.

BOARD OF DIRECTORS

She is a graduate of the University of Nigeria, Nsukka, Enugu State. She holds a Bachelor of Arts in History, a Bachelor of Law from the same university, a post graduate certificate (Corporate and Commercial Law) from the University of London, a post graduate certificate of Law (Insurance Law) from the same University and was called to the Nigerian Bar in 1999. She worked in the Chambers of G. E. Ezeuko (SAN) before going into corporate practice. She served as Company Secretary to General Cotton Mill Limited and also Sosoliso Airlines Limited. She has undergone various management and professional courses. She was appointed Company Secretary of Royal Exchange Plc in 2007 and is currently the Group General Manager (Company Secretariat, Legal Services and Compliance) with responsibility for the management and execution of Legal Services and Company Secretariat across the Group. She is also an alumna of the Lagos Business School having undergone the Advanced Management Programme (AMP 24). She is an associate member of the Institute of Chartered Arbitrators, Nigeria and member of other professional bodies notably, the International Bar Association and the Nigerian Bar Association. In addition to her existing roles, she was also appointed the Group Chief Compliance Officer on November 1, 2013.


EXECUTIVE MANAGEMENT TEAM

Mr. Okoli FrancisGroup Chief

Financial Officer

Alhaji Auwalu MuktariGroup

Managing Director

Dr. Pius OfulueManaging Director (Royal Exchange

Healthcare)

Mr. Olawale Banmore

Managing Director (Royal Exchange Prudential Life)

Mr. Hosea BomanGroup Head

(Enterprise Risk Management)

Mrs. Elizabeth Elghoche

Managing Director (Royal Exchange

Microfinance Bank)

Mr. Abiola SanniManaging Director (Royal Exchange Finance & Asset Management)

Ms. Sheila EzeukoGroup General Manager

(Legal, Secretariat & Compliance

Services)

Mr. Donald NosiriGroup Head

(Human Resources)

Mr. Ejike OsisiomaGroup Head (Information Technology)

Mallam Bashir Babajo

Group Head (Facilities

Management)

Mr. Wilson Okoh-EseneGroup Head(Corporate

Communications)

Mr. Ben AgiliManaging Director (Royal Exchange

General Insurance)

Mr. Nnamdi MelieGroup Head

(Strategy & Business Planning)

Mr. Nelson AkereleGroup Head

(Retail)


ALHAJI AUWALU MUKTARIHe is a graduate of Ahmadu Bello University, Zaria where he obtained Diploma in Insurance at Credit Level in 1983. He completed his 1st degree in Business Administration and Masters degree in Banking and Finance at Bayero University Kano in 1993 and 1999 respectively. He is an alumnus of the Harvard Business School.

He started his career with Kapital Insurance and rose to become Head of Re-insurance Department before joining Royal Exchange Assurance in 1995 as a Branch Manager in Kano, and overseeing the activities of Bauchi, Maiduguri and Yola office. In 2003, he became the Regional Director, Abuja. He resigned from Royal Exchange to become the Managing Director/Chief Executive Officer of Yankari insurance Co. Ltd in 2008, now called Fin Insurance Co. Ltd. He returned to Royal Exchange as the Group Executive Director in 2010. He was appointed the Group Managing Director on June 14, 2016.

MS. SHEILA EZEUKO She is a graduate of the University of Nigeria, Nsukka, Enugu State. She holds a Bachelor of Arts in History, a Bachelor of Law from the same university, a post graduate certificate (Corporate and Commercial Law) from the University of London, a post graduate certificate of Law (Insurance Law) from the same University and was called to the Nigerian Bar in 1999. She worked in the Chambers of G. E. Ezeuko (SAN) before going into corporate practice. She served as Company Secretary to General Cotton Mill Limited and also Sosoliso Airlines Limited. She has undergone various management and professional courses. She was appointed Company Secretary of Royal Exchange Plc in 2007 and is currently the Group General Manager (Company Secretariat, Legal Services and Compliance) with responsibility for the management and execution of Legal Services and Company Secretariat across the Group. She is also an alumna of the Lagos Business School having undergone the Advanced Management Programme (AMP 24). She is an associate member of the Institute of Chartered Arbitrators, Nigeria and member of other professional bodies notably, the International Bar Association and the Nigerian Bar Association. In addition to her existing roles, she was also appointed the Group Chief Compliance Officer on November 1, 2013.

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

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

MR. BEN AGILIMr. Agili is a graduate of Building Technology of the Institute of Management and Technology, Enugu and holds an MBA in Financial Management from the Lagos State University, Ojo, Lagos State.

He started his insurance career with UNIC Insurance Plc. He joined Royal Exchange Plc in 2003 as an AGM, Eastern Operations and was later elevated to a Regional Director in 2007. He was appointed Managing Driector of Royal Exchange General Insurance Company Limited in November 2015.

EXECUTIVE MANAGEMENT TEAM’S PROFILE


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

MR. ABIOLA SANNIHe is a graduate of the Obafemi Awolowo University, Ile-Ife and holds a Bachelor of Science degree in Accounting and a Masters degree in Finance (Economic Policy) from the University of London, UK. He started his professional career in the Lagos office of Arthur Andersen (now KPMG Professional Services). He acquired expertise in Investment Banking at IBTC Limited (now Stanbic IBTC Bank), where he gained a wealth of experience across a broad spectrum of Investment Banking and Asset Management functions. He headed the asset management team responsible for structuring investment portfolios for HNIs and the biggest of Nigeria’s corporate benefits and pension funds.

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

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

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



MR. NNAMDI MELIEMr. Melie is an Insurance graduate of the University of Lagos and has an MBA from IESE Business School, Barcelona, Spain. He is a fellow of the Chartered Institute of Insurance, London.

Nnamdi has worked in various insurance broking and consulting firms with special emphasis on sales, performance and strategy.

He joined Royal Exchange Plc on July 4, 2005 and is currently the Group Head, Strategy and Business Planning.

MR. NELSON AKERELENelson is an Insurance graduate of the Kano State Polytechnic, Kano. He is an Associate of the Chartered Insurance Institute of London (ACII), Fellow, Institute of Direct Marketing Nigeria (FDMN) and an Alumnus of IBM Marketing College, Warbrook, London.

He is an astute insurance professional with in-depth knowledge of general insurance practice, life underwriting/marketing, engineering, special risk arrangement and bonds.

He joined Royal Exchange Plc on October 9, 2006. He is currently the Group Head, Retail Business of Royal Exchange Plc.

MR. FRANCIS OKOLIMr. Okoli is a graduate of Accounting of the University of Port Harcourt and holds a Masters Degree in Finance from the University of Lagos. He is a fellow of the Institute of Chartered Accountants of Nigeria (FCA), the Chartered Institute of Taxation of Nigeria (FCTI) and the Chartered Institute of Bankers of Nigeria (FCIB) respectively. He is also a Certified Information Systems Auditor (CISA), USA; a Certified Information Security Manager (CISM), USA; a Certified Information Systems Security Professional (CISSP) and a Certified Internal Auditor (CIA), USA as well as Member, Nigerian Institute of Management (NIM).

He has over 26 years experience in financial control and strategic financial management having worked in various financial services sectors.

He joined Royal Exchange Plc on December 2, 2010 and was appointed the Group Chief Financial Officer of the Company on November 9, 2015.

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

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




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

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

MR. WILSON OKOH-ESENEHe is a graduate of the University of Nigeria, Nsukka (UNN). He holds a Bachelor of Arts in Mass Communication and is an Associate of the Nigerian Institute of Management (Chartered) and a member of the Chartered Institute of Public Relations, MCIPR, UK.

Wilson started his professional career in 1998 after his youth service with United Bank for Africa Plc (UBA) as Trainee Officer, Corporate Affairs Unit and later moved to Fidelity Bank Plc in 2001. He then joined Hallmark Bank Plc and moved to Oando Plc in 2006 as Coordinator, Corporate Communications. He joined Royal Exchange Plc in 2010 and is currently the Group Head, Corporate Communications.


Directors & Regional Directors

Mr. Austin NwankwoDirector

(Lagos/West Directorate)

Mr. Steve OkohRegional Director

(Lagos-South)

Mrs. Vivian EluemeRegional Director

(South-South)

Mrs. Jane EkonwererenRegional Director (Lagos-Central)

Mr. Rotimi AjanaRegional Director

(West)

Mr. Patrick OjiRegional Director

(Lagos-West)

Mr. Nicholas Chukwuma

Regional Director (South-East)

DIRECTORS & REGIONAL DIRECTORS


The Directors are pleased to submit to the members of the Company, their forty-eighth annual report, together with the audited financial statements for the year ended December 31, 2016.

1. LEGAL FORM AND PRINCIPAL ACTIVITIES: The Company was incorporated as a private limited liability company on December 29, 1969, converted

to a public limited liability company on July 15, 1989 and was listed on the Nigerian Stock Exchange on December 3, 1990. The principal activities of the company include life, healthcare and general insurance, financing, asset management, trusteeship and micro–finance banking services.

2. RESULTS FOR THE YEAR: The highlights of the company’s trading results for the year ended December 31, 2016.

Group Group Company Company In thousands of Naira 31 Dec 2016 31 Dec 2015 31 Dec 2016 31 Dec 2015

(Loss)/profit before taxation (743,838) (896,961) (368,735) (116,707) Minimum tax (63,391) (63,532) - - Income taxes (173,023) (338,467) - (13,100)

(Loss)/profit after taxation (980,252) (1,298,960) (368,735) (129,807) Other comprehensive (loss)/income, net of tax (65,848) (55,514) 1,401 (3)

Total comprehensive (loss)/income for the year (1,046,100) (1,354,474) (367,334) (129,810)

Total assets 31,676,729 26,525,242 9,810,075 8,889,570

Shareholders fund/Total equity 6,380,136 7,426,236 6,151,556 6,518,890

3. DIVIDEND: 3.1 The Directors did not recommend any dividend on ordinary shares to its members for the year ended

December 31, 2016.

4. DIRECTORS’ INTEREST AND SHAREHOLDING: A board of 8 (eight) directors determined the general strategy and policy of the company in the year under

review.

For the Year Ended 31 December 2016

DIRECTORS’ REPORT


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

*Appointed as Group Managing Director with effect from June 14, 2016

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

Number of 50k Number of 50k Ordinary Shares Ordinary Shares Holdings as at Held as at Holdings as at Held as at December 31, December 31, December 31, December 31, 2016 2016 2015 2015

Number Number Number Number Direct Indirect Direct Indirect

Mr. K. E. Odogwu Nil 2,013,119,834 Nil 2,013,119,834Chief A. I. Idigbe (SAN) Nil 1,350,276 Nil 1,350,276Mr. D. Maegerle Nil Nil Nil NilChief U. Okpa-Obaji 645,468 Nil 645,468 NilAlhaji A. R. Mohammed Nil Nil Nil NilAlhaji R. M. Gwarzo, OON 3,782,319 Nil 3,782,319 NilMr. C. U. A. Mokwunye Nil Nil 590,644 NilMr. A. A. Ojora 100,000 183,529,858 Nil 183,529,858Alhaji A. Muktari 546,410 Nil 546,410 Nil

Grand Total 5,074,197 2,197,999,968 5,564,841 2,197,999,968

4.3 Board Changes

4.3.1 Alhaji Auwalu Muktari was appointed Group Managing Director on June 14, 2016.

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

5. SHARE CAPITAL AND SHAREHOLDING: The company did not purchase its own shares during the year.

5.1 Authorized Share Capital: The authorized share capital of the company is =N=5billion made up of 10,000,000,000 ordinary shares of

50k each.

5.2 Called Up, Issued and Fully Paid Share Capital:


DIRECTORS’ REPORT


5.2.1 The issued and paid-up share capital of the Company is currently =N=2,572,685,037 made up of 5,145,370,074 ordinary shares of 50k each.

No. of Ordinary No of Ordinary Shares Held % Holdings Shares held % Holdings as at December 31 as at December 31 as at December 31 as at December 31 2016 2016 2015 2015

Spennymoor Limited, Jersey C.I: 2,013,119,834 39.12 2,013,119,834 39.12 Royal Exchange Assurance (U.K): 3,776 0.00 3,776 0.00 Nigerian Government: 20,654,487 0.40 20,654,487 0.40 Dantata Investments & Securities Company Limited: 690,244,885 13.41 690,244,885 13.41 Chief (Dr.) S. I. Odogwu, OFR 266,870,509 5.19 266,870,509 5.19 Helen and Troy Holdings Limited 261,058,784 5.07 261,058,784 5.07 Phoenix Holdings Limited 183,529,858 3.57 183,529,858 3.57 De-Canon Investment Limited* (Under Litigation - Suit No FHCL/CS/5479/08) 159,388,632 3.10 159,388,632 3.10 Other Nigerian Citizens & Associations: 1,550,499,309 30.14 1,550,499,309 30.14

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

The Company hereby declares that aside from the listed person(s) in the above schedule, no other person(s) has 3% or more of the issued and fully paid share capital of the company.

* This represents ordinary shares held in trust by De-canon Investment Limited with respect to a law suit number FHCL/CS/5479/08.

5.3 Share Range Analysis as at December 31, 2016

Share Range Analysis No. of % of Units % of as at December 31, 2016 Holders Units Held Held Units Held

1 - 500 1,012 6.60 242,668 0.00 501 - 1,000 753 4.91 573,002 0.01 1,001 - 5,000 5,123 33.40 14,304,603 0.28 5,001 - 10,000 2,818 18.38 19,657,677 0.38 10,001 - 50,000 3,711 24.19 82,046,452 1.59 50,001 - 100,000 795 5.18 58,057,813 1.13 100,001 - 500,000 818 5.33 172,764,389 3.36 500,001 - 1,000,000 127 0.83 88,164,976 1.71 1,000,001 - 5,000,000 132 0.86 281,739,000 5.48 5,000,001 - 10,000,000 27 0.18 181,487,034 3.53 10,000,001 - 5,145,370,074 22 0.14 4,246,332,460 82.53

Grand Total 15,338 100 5,145,370,074 100


DIRECTORS’ REPORT


6. RECORDS OF DIRECTORS ATTENDANCE: Further to the provisions of Section 258 (2) of the Companies and Allied Matters Acts, Cap C20 Laws

of the Federation of Nigeria 2004, the Record of Directors’ Attendance at the Board Meetings held in 2015 is available at the venue of annual general meeting and is contained in the Report on Corporate Governance.

7. PROPERTY AND EQUIPMENT: Information relating to property and equipment during the year is shown in note 17.

8. DONATIONS: The Group made several donations in the sum of =N=475,000 during the year ended December 31, 2016 as

analysed below.

Beneficiaries Amount

Donation towards 2016 Annual CIIN Rahmadhan Tafsir 100,000 Donations towards hosting of the Nigeria CFO Awards Ceremony 125,000 Sponsorship of Healthcare Insurance Providers Association of Nigeria Mid Year General Meeting 100,000 Sponsorship of ASSBIFI - November 2016 National Conference 150,000

Total 475,000

9. EVENTS AFTER REPORTING DATE: There were no events subsequent to the financial position date which require adjustment to, or disclosure

in these financial statements.

10. AGENTS, BROKERS AND INTERMEDIARIES: The group maintains a network of licensed agents, brokers, as well as other intermediaries throughout

the country.

11. TRUSTEESHIP SERVICES Royal Exchange Company Plc (the Company) acts as a custodian, trustee or in other fiduciary capacity

for its clients.

The Company acts as a custodian of unclaimed debentures issued by various third party entities which have matured but have not been claimed by beneficiaries. These assets are held and managed by the Group in order to preserve their value. (See note 61 for more details).


DIRECTORS’ REPORT

5.4 Share Range Analysis as at December 31, 2015

Share Range Analysis No. of % of Units % of as at December 31, 2015 Holders Units Held Held Units Held

1 - 500 964 6.32 230,548 0.01 501 - 1,000 735 4.82 556,777 0.01 1,001 - 5,000 5,118 33.54 14,284,998 0.28 5,001 - 10,000 2,821 18.49 19,677,469 0.38 10,001 - 50,000 3,707 24.30 82,022,311 1.59 50,001 - 100,000 791 5.18 57,846,393 1.12 100,001 - 500,000 810 5.31 171,698,584 3.34 500,001 - 1,000,000 130 0.85 90,052,907 1.75 1,000,001 - 5,000,000 133 0.87 282,444,243 5.49 5,000,001 - 10,000,000 27 0.18 181,487,034 3.53 10,000,001 - 5,145,370,074 22 0.14 4,245,068,810 82.50

Grand Total 15,258 100 5,145,370,074 100


The Company also acts as a trustee for ARM Ethical Fund and Paramount Equity Fund. These funds are managed by Independent Fund Managers and the assets are held by appointed custodians. The Company has oversight responsibilities which include, monitoring the activities of the fund manager and fund custodian, ensuring that the funds are administered in line with the applicable Trust Deed of the fund and all relevant regulatory guidelines governing the fund, ensuring that relevant regulations are adhered to and ensuring that the interests of the unit holders in the funds are protected at all times.

12. EMPLOYEES’ DEVELOPMENT:

12.1 Employment of physically challenged persons: It is the policy of the Group that there be no discrimination in the consideration of all applications for

employment, including physically challenged persons.

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

12.2 Health and safety at work and welfare of employees: The Group is concerned about the health, safety and welfare of its employees. Therefore the Group,

through its subsidiary, Royal Exchange Healthcare Limited, provides health insurance for all group staff.

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

and encourage employee involvement in its affairs.

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

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

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

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

13. AUDIT COMMITTEE: The members of the statutory Audit Committee appointed at the annual general meeting held on July

30, 2016, in accordance with Section 359 (3) of the Companies and Allied Matters Decree Cap C20, Laws of the Federation of Nigeria 2004, were:

A. Alhaja A. S. Kudaisi - (Chairman) B. Mr. T. Olawuyi - (Shareholders’ representative) C. Mr. B. Akinsolu - (Shareholders’ representative) D. Chief U. Okpa-Obaji - (Member) E. Alhaji R. M. Gwarzo, OON - (Member) F. Mr. A. A. Ojora - (Member)

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

A waiver has been obtained from the Financial Reporting Council of Nigeria (FRC) to allow the Audit Committee Chairman sigh the 2016 financial statements because the Chairman is not a professional member of an accounting body established by Act of National Assembly in Nigeria as required by the Rule 2 of the FRC.


DIRECTORS’ REPORT


14. SHAREHOLDERS INFORMATION Build up of share capital history

1. SHARE CAPITAL HISTORY

YEAR SHARE CAPITAL MODE OF ACQUISITION

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

2. BONUS HISTORY

YEAR BONUS ISSUES

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

TOTAL BONUS 3,042,943,505

15. AUDITORS: Messrs, KPMG Professional Services, having satisfied the relevant corporate governances on their tenure

in office have indicated their willingness to continue in office as auditors of the Company. In accordance with Section 357(2) of the Companies and Allied Matters Act of Nigeria therefore, the auditors will be re-appointed at the next Annual General Meeting of the Company without any resolution being passed.

16. COMPLIANCE WITH THE CODE OF BEST PRACTICES ON CORPORATE GOVERNANCE The Directors confirm that they have reviewed the structure and activities of the Group in view of the Code

of Best Practices on Corporate Governance in Nigeria published in February, 2009. The Directors confirm that the Group has substantially complied with the provisions of the Code of Best Practices on Corporate Governance with regards to matters stated therein concerning the Board of Directors, the Shareholders and the Audit Committee.

BY ORDER OF THE BOARD

SHEILA IFEYINWA EZEUKO COMPANY SECRETARY/GM (LEGAL SERVICES)FRC/2013/NBA/00000004059LAGOS, NIGERIA1 JUNE, 2017

3. SUMMARY

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

4. RIGHTS ISSUES

YEAR RIGHTS ISSUE

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

TOTAL RIGHTS 1,539,536,519


DIRECTORS’ REPORT


The Directors accept responsibility for the preparation of the annual financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) and in the manner required by the Companies and Allied Matters Act, Cap C.20, Laws of the Federation of Nigeria and the Financial Reporting Council of Nigeria Act, 2011. The Directors further accept responsibility for maintaining adequate accounting records as required by the Companies and Allied Matters Act, Cap C.20, Laws of the Federation of Nigeria, 2004 and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error.

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

SIGNED ON BEHALF OF THE BOARD OF DIRECTORS:

KENNY ODOGWU AUWALU MUKTARI (Chairman) (Group Managing Director)(FRC/2013/NBA/00000004195) (FRC/2013/IODN/00000004058)1 June, 2017 1 June, 2017


STATEMENT OF DIRECTORS’ RESPONSIBILITIES

IN RELATION TO THE FINANCIAL STATEMENTS


In compliance with Section 359 (6) of the Companies and Allied Matters Act C20 Laws of the Federation of Nigeria 2004, (“The Act”) WE, the Members of the Audit Committee have reviewed and considered the financial statements of the Company for the year ended December 31, 2016 and the reports thereon and confirm as follows:

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

b) The scope and planning of both the external and internal audits for the year ended 31 December, 2016 were satisfactory and reinforce the Group’s internal control systems.

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

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

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

DATED THIS 1 JUNE, 2017

ALHAJA A. KUDAISIFRC/2013/IODN00000004197*CHAIRMAN OF THE AUDIT COMMITTEE

OTHER MEMBERSAlhaja A. Kudaisi - Chairman (Shareholders’ representative)Mr. T. Olawuyi - Member (Shareholders’ representative)Mr. A. Bekunmi - Member (Shareholders’ representative)Chief U. Okpa-Obaji - MemberMr. A. A. Ojora - MemberAhaji A. R. Mohammed - Member


REPORT OF THE AUDIT COMMITTEE

*During the year, the Group contravened Rule 2 (c) of the Financial Reporting Council certification for professionals engaged in financial reporting process and obtained a waiver from the council.


FINANCIAL STATEMENT


KPMG Professional Services Telephone 234 (1) 271 8955 KPMG Tower 234 (1) 271 8599Bishop Aboyade Cole Street Internet www.kpmg.com/ngVictoria IslandPMB 40014, FalomoLagos

Report on the Audit of the Consolidated and Separate Financial Statements

OpinionWe have audited the consolidated and separate financial statements of Royal Exchange Plc (“the Company”) and its subsidiaries (together, “the Group”), which comprise the consolidated and separate statement of financial position as at 31 December 2016, and the consolidated and separate statement of profit or loss and other comprehensive income, consolidated and separate statement of changes in equity and consolidated and separate statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 62 to 186.

In our opinion, the accompanying consolidated and separate financial statements give a true and fair view of the consolidated and separate financial position of the Company and its subsidiaries as at 31 December 2016, and of its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) and in the manner required by the Companies and Allied Matters Act, Cap C20, Laws of the Federation of Nigeria, 2004, and the Financial Reporting Council of Nigeria Act, 2011.

Basis for OpinionWe conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the consolidated and separate Financial Statements section of our report. We are independent of the Group and Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the consolidated and separate financial statements in Nigeria and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit MattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

It is noted that the key audit matters relate to the consolidated financial statements of the Group and not to the separate financial statements of the Company.

Valuation of insurance contract liabilitiesThe Group has recognised insurance contract liabilities amounting to =N=l0.2 billion which have arisen from its life, non-life general and healthcare insurance activities. The valuation of the insurance contract liabilities entails high estimation uncertainties and significant judgment over uncertain future outcomes, which can be broken down in the following components:• The estimation of the ultimate total settlement value of liabilities on long term insurance contracts is based on

assumptions regarding economic and demographic factors such as investment returns, applicable discount rates and mortality rates.

• Provisions in relation to reported claims are determined using data on historical experience. As this historical data is only an indicator for the determination of the provision, the eventual paid amounts to settle the claims may differ from the recorded provisions.

KPMG Professional Services, a Partnership established under Abayomi D. Sanni Adebisi O. Lamikanra Adekunle A. Elebute Adetola P. AdeyemiNigeria law, is a member of KPMG International Cooperative Adewale K. Ajayi Ajibola O. Olomola Ayodele A. Soyinka Ayodele H. Othihiwa(“KPMG International”), a swiss entity. All rights reserved. Ayo I. Salami Chibuzor N. Anyanechi Goodluck C. Obi Ibitomi M. Adepoju Joseph O. Tegbe Kabir O. Okunola Mohammed M. Adama Oladapo R. OkubadejoRegistered in Nigeria No BN 986925 Oladimeji I. Salaudeen Olanike I. James Olumide O. Olayinka Olusegun A. Sowande Oluseyi T. Bickersteth Olufemi O. Awotoye Oluwatoyin A. Gbagi Tayo I. Ogungbenro Victor U. Onyenkpa

To the Shareholders of Royal Exchange Plc

INDEPENDENT AUDITOR’S REPORT



• The estimated liability for incurred but not yet reported claims in relation to non-life insurance contracts involve assumptions on economic factors including inflation and discount rates.

The estimation of these amounts, the assumptions applied and the related judgement and level of complexity made the valuation of the insurance contract liabilities an area of focus for our audit.

ProceduresOur audit procedures included amongst others the following:• Assessment of the appropriateness of the actuarial methods applied by management’s Extenal actuary. The assessed

methods included basic chain ladder and expected loss ratio methods taking into account available industry data and specific product features of the Group.

• Evaluation of the reasonableness of the actuarial assumptions used by management’s external actuary. These assumptions included amongst others projected cash flows, basic chain ladder run off period, expected loss ratio, projected investment returns and applicable inflation, discount and mortality rates, by comparing them to Company specific and our knowledge of industry data and market trends.

• Assessment of the accuracy of the data provided to the actuary, including data on the actual claims reported and demographic characteristics of the insurance contracts, by comparing the data used by the actuary to the data in the claims and insurance contract files.

The Group’s accounting policy on insurance contract liabilities and related disclosures are shown in notes 3(r), 4B(ii), note 27 and note 55 respectively.

Recoverability of deferred tax assetsThe Group has recognised deferred tax assets of 365 million and unrecognised deferred tax assets of =N=990 million as at 31 December 2016, which have arisen from unrelieved tax losses, unutilised capital allowances and other deductible temporary differences. To determine the amount of recognised deferred tax assets, an assessment was required as to whether sufficient future taxable profits are likely to be generated to support the recoverability of the recognised deferred tax assets.

We focused on this area in our audit since the estimation of future taxable profits is inherently judgemental.

ProceduresOur procedures included amongst others the following:• We assessed the information prepared by management for the recoverability assessment of the deferred tax

asset and we tested the calculations to check that the recognised amount of the asset is appropriate based on the temporary differences identified, the estimated future taxable profits and the tax rate applied.

• We challenged management assessment of the recoverability, including the estimated future taxable profits and the underlying assumptions by using our knowledge of the business, industry and past performance.

• We assessed whether the relevant tax laws were applied to determine the unrelieved tax losses, unutilised capital allowance and other deductible temporary differences.

The Group’s accounting policy on deterred tax and related disclosures are shown in notes 3(i), 4B(i) and note 22 respectively.

Information Other than the Financial Statements and Audit Report thereonThe Directors are responsible for the other information, which comprises other information obtained prior to the date of this auditor‘s report and other information, which is expected to be made available to us after that date (but does not include the consolidated and separate financial statements and our audit report thereon).

The other information obtained prior to the date of this auditor’s report consists of the Corporate information, Directors’ report, Report of corporate governance, Statement of Directors’ responsibilities, Report of the Audit Committee, and the Value added statement and Five year financial summary.



The other information, which is expected to be made available to us after the date of this auditor’s report consists of the Corporate profile, Results at a glance, The notice of annual general meeting, Proxy/authority to admit form, Important notice, Mandate for e-dividend payment, Chairman’s statement and reports, Group Managing Director’s Statement and Reports, Risk management statement, Board of directors, Brief particulars of the directors, Executive management team, Executive management team’s profile, Directors and regional director, Management (Group and Subsidiaries), Branch/office network cum directory, Friendship centre network, Corporate events and Notes.

Our opinion on the consolidated and separate financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated and separate financial statements, our responsibility is to read the other information and in doing so, consider whether the other information is materially inconsistent with the consolidated and separate financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor‘s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read the reports which have not been made available to us at the date of this report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of the Directors for the Consolidated and Separate Financial StatementsThe Directors are responsible for the preparation of consolidated and separate financial statements that give a true and fair view in accordance with IFRSs and in the manner required by the Companies and Allied Matters Act, Cap C.20, Laws of the Federation of Nigeria, 2004 Nigeria, and the Financial Reporting Council of Nigeria Act, 2011,and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated and separate financial statements, the Directors are responsible for assessing the Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group and Company or to cease operations, or has no realistic alternative but to do so.

Auditor‘s Responsibilities for the Audit of the Consolidated and Separate Financial StatementsOur objectives are to obtain reasonable assurance about whether the consolidated and separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated and separate financial statements, whether

due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group and Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.

• Conclude on the appropriateness of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant



doubt on the Group and Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated (and separate) financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated and separate financial statements, including the disclosures, and whether the consolidated and separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Audit Committee regarding, among other matters,the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the consolidated and separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory RequirementsCompliance with the requirements of Schedule 6 of the Companies and Allied Matters Act, Cap C.20, Laws of the Federation of Nigeria, 2004In our opinion, proper books of account have been kept by the Company, so far as appears from our examination of those books and the Company’s statement of financial position and statement of profit or loss and other comprehensive income are in agreement with the books of account.

Signed:

Kabir O. Okunlola, FCAFRC/2012/ICAN/00000000428For: KPMG Professional Services Chartered Accountants5 June 2017Lagos, Nigeria


for the year ended 31 December 2016

Group Group Company CompanyIn thousands of Naira Note 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15

ASSETSCash and cash equivalents 5 11,105,440 7,035,842 127,279 105,452 Loans and advances to customers 6 992,011 1,278,434 - - Advances under finance lease 7 206,890 123,269 - - Investments securities 8 5,632,949 3,448,883 82,644 17,935 Investment in subsidiaries 9 - - 8,689,990 8,660,464 Trade receivables 10 247,851 528,399 - - Reinsurance assets 11 2,660,526 1,889,750 - - Deferred acquisition cost 12 351,076 382,490 - - Other receivables and prepayments 13 436,881 387,396 319,967 79,119 Investment in associates 14(a) 179,146 274,088 - - Investment properties 15 5,419,858 6,807,743 - - Property and equipment 17 2,283,270 2,219,584 90,195 26,600 Intangible assets 18 33,116 39,088 - - Employees retirement benefit asset (net) 19(a) 234,011 154,016 - - Statutory deposits 20 555,000 555,000 - - Deferred tax assets 22 365,065 427,621 - - Assets classified as held for sale 16 973,639 973,639 - - Deposit for shares 21 - - 500,000 -

Total assets 31,676,729 26,525,242 9,810,075 8,889,570

LIABILITIESBorrowings 30 2,585,324 1,020,083 2,482,327 872,257 Deferred income 23 162,942 122,169 - - Trade payables 24 8,355,104 5,387,629 - - Other liabilities 25 1,616,032 1,469,737 920,200 1,199,985 Depositors’ funds 26 1,203,456 1,196,324 - - Insurance contract liabilities 27 10,158,280 8,263,204 - - Investment contract liabilities 28 339,456 336,271 - - Current income tax liabilities 29 537,200 488,713 255,109 255,109 Employees retirement benefit liability 19 39,269 570,008 883 43,329 Deferred tax liabilities 22 299,530 244,868 - -

Total liabilities 25,296,593 19,099,006 3,658,519 2,370,680

EQUITYShare capital 31 2,572,685 2,572,685 2,572,685 2,572,685 Share premium 32 2,690,936 2,690,936 2,690,936 2,690,936 Contingency reserve 33 1,728,852 1,422,919 - - Treasury shares 34 (500,000) (500,000) - - Retained earnings 35 (647,828) 834,374 886,114 1,254,849 Other component of equity 36 535,491 405,322 1,821 420

Total equity 6,380,136 7,426,236 6,151,556 6,518,890

Total equity & liabilities 31,676,729 26,525,242 9,810,075 8,889,570

The financial statements was approved by the board of directors on 1 June 2017 and signed on its behalf by:

Kenneth Odogwu Auwalu Muktari Francis OkoliChairman Group Managing Director Chief Financial Officer(FRC/2013/NBA/00000004195) (FRC/2013/IODN/00000004058) (FRC/2013/ICAN/00000002399)

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

CONSOLIDATED AND SEPARATE STATEMENTS OF FINANCIAL POSITION




Gross premium written: 12,517,381 10,790,628 - - Unearned premium (81,939) 18,548 - -

Gross premium income 12,435,442 10,809,176 - -Reinsurance expenses 37 (4,263,437) (2,724,325) - -

Net premium income 8,172,005 8,084,851 - -Fees and commission income 38 477,328 330,561 - -

Net underwriting income 8,649,333 8,415,412 - -

Gross Insurance claims and benefits incurred 39 (4,869,893) (4,040,292) - - Insurance claims and benefits incurred - recoverable from reinsurers 40 1,284,485 1,000,936 - -

Net claims expenses (3,585,408) (3,039,356) - - Changes in insurance contract liabilities (670,393) (1,162,291) - - Underwriting expenses 41 (2,469,497) (2,644,148) - -

Total underwriting expenses (6,725,298) (6,845,795) - -

Underwriting profit 1,924,035 1,569,617 - -

Net interest income/(expense) 42 283,788 216,351 (166,549) (142,087)Investment and other income 43 (27,172) 284,970 446 131,000 Share of loss on investment in associate 14(a) (88,954) (36,628) - - Net fair value gain on financial assets 44 359,955 327,550 (5,973) 6,385 Charge of impairment allowance 45 (274,487) (357,535) - (2,289)Other operating income 46 562,120 316,629 253,365 230,660 Foreign exchange gains 47 (15,124) 56,455 - -

Net Income 2,724,161 2,377,409 81,289 223,669

Management expenses 48 (3,467,999) (3,274,370) (450,024) (340,376)

Total expenses (3,467,999) (3,274,370) (450,024) (340,376)

(Loss)/profit before tax (743,838) (896,961) (368,735) (116,707)Minimum tax 29(a) (63,391) (63,532) - - Income tax expense 29(a) (173,023) (338,467) - (13,100)

(Loss)/profit after taxation (980,252) (1,298,960) (368,735) (129,807)

Other comprehensive (loss)/income, net of taxItems that will never be reclassified subsequently to profit or loss: Revaluation surplus on PPE - - - - Net actuarial gain/(losses )of defined benefit obligations 19.1(c)ii 81,321 (75,145) 1,401 (3)Tax effects on other comprehensive (loss)/income 22 (4,890) 7,413 - - Share of returns in associates 14(a) (5,988) - - - Adjustments to gratuity reserves 832 - - - Items that are or may be reclassified subsequently to profit or loss: Changes in fair value of AFS investments (121,899) 12,218 - - Net amount reclassified to profit or loss (15,224) - - -

Total other comprehensive (loss)/income, net of tax (65,848) (55,514) 1,401 (3)

Total comprehensive (loss)/income for the period (1,046,100) (1,354,474) (367,334) (129,810)

Total comprehensive income attributable to shareholders

(Loss)/earnings per share - Basic and diluted (kobo) 49 (19) (25) - -

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

CONSOLIDATED AND SEPARATE STATEMENT OF PROFIT OR LOSS AND

OTHER COMPREHENSIVE INCOME


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016

2,5

72,6

85

2,6

90,9

36

1,42

2,91

9

834

,374

(5

00,0

00)

298

,229

4

1,753

6

5,34

0

405

,322

7,

426,

236

Loss

for t

he y

ear

-

-

-

(980

,252

) -

-

-

-

-

(9

80,2

52)

Tran

sfer

to co

ntin

genc

y re

serv

e -

-

3

05,9

33

(305

,933

) -

-

-

-

-

-

Tr

ansf

er to

regu

lato

ry re

serv

e -

-

-

(1

96,0

17)

-

196,

017

-

-

19

6,01

7

-Ot

her c

ompr

ehen

sive

inco

me/

(loss

):Ch

ange

s in

fair

valu

e of

AFS

inve

stm

ents

-

-

-

-

-

-

-

(1

21,8

99)

(121

,899

) (1

21,8

99)

Shar

e of

retu

rns i

n as

soci

ates

-

- -

- -

- -

(5,9

88)

(5,9

88)

(5,9

88)

Net a

ctua

rial g

ains

-

-

-

-

-

-

8

1,321

-

8

1,321

8

1,321

Ad

just

men

ts to

gra

tuity

rese

rves

-

- -

- -

- 8

32

- 8

32

832

Ne

t am

ount

recl

assifi

ed to

pro

fit o

r los

s -

- -

- -

-

(15,

224)

(1

5,22

4)

(15,

224)

Tax

effe

cts o

n ot

her c

ompr

ehen

sive

inco

me/

(loss

) -

-

-

-

-

-

(4,

890)

-

(4

,890

) (4

,890

)

Tota

l com

preh

ensiv

e in

com

e/(lo

ss)

-

-

305

,933

(1

,482

,202

) -

19

6,01

7

77,

263

(1

43,11

1)

130,

169

(1

,046

,100)

Tran

sact

ions

with

in e

quity

:Di

vide

nd p

aid

-

-

-

-

-

-

-

-

-

-

As a

t 31 D

ecem

ber 2

016

2,5

72,6

85

2,6

90,9

36

1,72

8,85

2

(647

,828

) (5

00,0

00)

494

,246

11

9,01

6

(77,7

71)

535

,491

6

,380

,136

Oth

er c

ompo

nent

of e

quity

Ot

her

Ac

tuar

ial

Fair

Co

mpo

nent

Shar

e Sh

are

Cont

inge

ncy

Reta

ined

Tr

easu

ry

Regu

lato

ry

Gain

/Los

s

valu

e of

Equ

ity

Tota

lIn

thou

sand

s of N

aira

Ca

pita

l Pr

emiu

m

Rese

rve

Earn

ings

Sh

ares

ri

sk re

serv

e Re

serv

e re

serv

e (T

otal

) Eq

uity

As a

t 1 J

anua

ry 2

015

2,5

72,6

85

2,6

90,93

6

1,17

6,37

5

2,6

57,4

34

(500

,000

) 12

3,580

10

9,485

5

3,122

2

86,18

7

8,8

83,6

17

Prio

r yea

r adj

ustm

ent

-

- -

- -

-

-

- -

-Lo

ss fo

r the

yea

r -

-

-

(1

,298,

960)

-

-

-

-

-

(1

,298,

960)

Tran

sfer

to co

ntin

genc

y re

serv

e -

-

24

6,54

4

(246

,544

) -

-

-

-

-

-

Tr

ansf

er to

regu

lato

ry re

serv

e -

-

-

(1

74,6

49)

-

174,

649

-

-

17

4,64

9

-Ot

her c

ompr

ehen

sive

inco

me/

(loss

): Ch

ange

s in

fair

valu

e of

AFS

inve

stm

ents

-

-

-

-

-

-

-

12

,218

12

,218

12

,218

Shar

e of

retu

rns i

n as

soci

ates

-

-

Net a

ctua

rial l

osse

s -

-

-

-

-

-

(7

5,145

) -

(7

5,145

) (7

5,145

)Ta

x ef

fect

s on

othe

r com

preh

ensiv

e in

com

e/(lo

ss)

-

-

-

-

-

-

7,41

3

-

7,41

3

7,41

3

Tota

l com

preh

ensiv

e in

com

e/(lo

ss)

-

-

246,

544

(1

,720,

153)

-

17

4,64

9

(67,7

32)

12,21

8

119,1

35

(1,35

4,47

4)

Tran

sact

ions

with

in e

quity

:Di

vide

nd p

aid

-

-

-

(1

02,90

7)

-

-

-

-

-

(102

,907)

As a

t 31 D

ecem

ber 2

015

2,572

,685

2

,690

,936

1,

422,9

19

834

,374

(5

00,0

00)

298

,229

4

1,753

6

5,34

0

405

,322

7,

426,

236


as a

t 31 D

ecem

ber 2

016

ST

AT

EM

EN

T O

F C

HA

NG

ES

IN

EQ

UIT

Y -

CO

MP

AN

Y

Ot

her c

ompo

nent

of e

quity

Ot

her

Equi

ty

Ac

tuar

ial

Com

pone

nt

attr

ibut

able

No

n-

In th

ousa

nds o

f Nai

ra

Shar

e Sh

are

Reta

ined

Ga

in/L

oss

of

Equ

ity

to P

aren

t’s

cont

rolli

ng

Tota

l

Capi

tal

Prem

ium

Ea

rnin

gs

Rese

rve

(Tot

al)

Shar

ehol

ders

In

tere

sts

Equi

ty

As a

t 1 J

anua

ry 2

016

2,5

72,6

85

2,6

90,9

36

1,25

4,84

9

420

4

20

6,5

18,8

90

-

6,5

18,8

90Lo

ss fo

r the

yea

r -

-

(3

68,7

35)

-

-

(368

,735

) -

(3

68,7

35)

Othe

r com

preh

ensiv

e lo

ss:

Net a

ctua

rial g

ains

-

-

-

1,

401

1,40

1 1,

401

-

1,40

1

Tota

l com

preh

ensiv

e lo

ss

-

-

(368

,735

) 1,

401

1,40

1 (3

67,3

34)

-

(367

,334

)

Tran

sact

ions

with

in e

quity

:Di

vide

nd p

aid

-

-

-

-

-

-

-

-

As a

t 31 D

ecem

ber 2

016

2,5

72,6

85

2,6

90,9

36

886

,114

1,

821

1,82

1 6

,151,5

56

-

6,15

1,556

Ot

her c

ompo

nent

of e

quity

Ot

her

Equi

ty

Ac

tuar

ial

Com

pone

nt

attr

ibut

able

No

n-

In th

ousa

nds o

f Nai

ra

Shar

e Sh

are

Reta

ined

Ga

in/L

oss

of

Equ

ity

to P

aren

t’s

cont

rolli

ng

Tota

l

Capi

tal

Prem

ium

Ea

rnin

gs

Rese

rve

(Tot

al)

Shar

ehol

ders

In

tere

sts

Equi

ty

As a

t 1 J

anua

ry 2

015

2,5

72,6

85

2,6

90,93

6

1,48

7,563

4

23

423

6

,751,6

07

-

6,75

1,607

Loss

for t

he y

ear

-

-

(129

,807

) -

-

(1

29,8

07)

-

(129

,807

)Ot

her c

ompr

ehen

sive

loss

:Ne

t act

uaria

l los

ses

-

-

-

(3)

(3)

(3)

-

(3)

Tota

l com

preh

ensiv

e lo

ss

-

-

(129

,807

) (3

) (3

) (1

29,8

10)

-

(129

,810

)

Tran

sact

ions

with

in e

quity

:Di

vide

nd p

aid

-

-

(1

02,90

7)

-

-

(102

,907)

-

(1

02,90

7)

As a

t 31 D

ecem

ber 2

015

2,5

72,6

85

2,6

90,93

6

1,25

4,84

9

420

4

20

6,5

18,8

90

-

6,5

18,8

90



CONSOLIDATED STATEMENTS OF CASHFLOWS


Loss for the year (980,252) (1,298,960) (368,735) (129,807)Add: Minimum tax 29(a) 63,391 63,532 - - Add: Income taxes 29(a) 173,023 338,467 - 13,100

Loss before taxes (743,838) (896,961) (368,735) (116,707)Adjustments for:Depreciation on property and equipment 17 261,948 255,789 16,508 9,760 Amortization of intangible assets 18 14,104 9,785 - - Interest income 42 (576,324) (506,456) (5,460) (3,700)Interest expense 42 292,536 290,105 172,009 145,787 Loss/(Profit) on disposal of Investment property 43 187,206 - - - Dividend from investment in subsidiaries 43 - - - (131,000)Dividend income on equity investments (AFS &FVTPL) 43 (81,970) (105,252) - - Fair value gain/(loss) on investment securities 44 251,467 272,980 5,973 (6,385)Fair value gain on investment properties 44 (611,422) (600,530) - - Charge/(write-back) of impairment allowance 45 274,487 357,535 - 2,289 Loss/(Profit) on disposal of property and equipment 46 7,060 7,233 - - Rental income 46 (147,765) (71,352) - - Foreign exchange (gains)/losses 47 15,124 (56,455) - -

(857,387) (1,043,579) (179,705) (99,956)

Changes in working capital:Loans and advances to customers 51(viii) 248,467 32,532 - - Advance under finance lease 51(ix) (61,053) 7,565 - - Trade receivables 51(iii) 89,218 (525,062) - - Re-insurance asset 51(iv) (770,776) 26,511 - - Deferred acquisition cost 31,414 (15,598) - - Other receivables and prepayment 51(ii) (57,290) 40,410 (240,848) 512 Deferred income 40,773 19,935 - - Trade payables 2,967,475 235,786 - - Other liabilities 156,770 195,178 (290,260) 475,362 Depositors’ funds 51(x) (384,210) 75,013 - - Investment contract liabilities 3,185 78,308 - - Changes in unearned premium 51(vii) 81,939 (7,282) - - Changes in provision for outstanding claims 51(vi) 1,813,138 1,176,261 - - Changes in employee retirement benefits 51(i) 25,093 87,209 422 22,143

3,326,756 383,187 (710,391) 398,061

Income tax paid 28(b) (77,863) (104,887) - - Contribution to employees retirement benefits 18(d) - (11,170) - - Employee benefits paid 51(i) (554,506) (110,199) (41,467) (3,191)Interest expense paid (220,556) - (170,992) -

Net cash provided by operating activities 2,473,831 156,931 (922,850) 394,870



CONSOLIDATED STATEMENTS OF CASHFLOWS


Cash flows from investing activities:

Purchases of property and equipment 17 (352,942) (292,772) (85,421) (18,872)Purchases of intangible assets 18 (8,132) (2,010) - - Proceed from disposal of investment properties 1,812,100 - - - Proceed from disposal of property and equipment 17,662 25,230 5,318 - Proceed from redemption/disposal of investment securities 51(v) 519,018 809,177 - - Additional investment in associates 14(a) - (30,000) - - Additional investment in subsidiary - - (29,526) - Deposit for shares 21 - - (500,000) -Purchase of investment securities 51(v) (3,248,955) (496,709) (64,256) - Dividend received 62,980 136,262 - 117,900 Rent received 150,083 73,016 - - Interest received 666,536 227,796 - 3,700 Dividend received from associate 14(a) - 14,534 - -

Net cash provided by investing activities (381,650) 464,524 (673,885) 102,728

Cash flows from financing activities:

Repayment of borrowings (798,339) (364,237) (752,968) (379,541)Proceeds from new borrowings 2,751,266 220,877 2,361,055 - Unclaimed dividend received 10,475 42,847 10,475 42,847 Unclaimed dividend paid - (2,151) - (2,151)Dividend paid - (102,907) - (102,907)

Net cash (used)/provided in financing activities 1,963,402 (205,571) 1,618,562 (441,752)

Cash and cash equivalent at beginning of year 7,035,842 6,619,958 105,452 49,606 Effect of exchange rate flunctuations on cash and cash equivalents - - - - Net increase in cash and cash equivalent 4,055,583 415,884 21,827 55,846

Cash and cash equivalent at end of year 50 11,091,425 7,035,842 127,279 105,452


1 Reporting Entity The Company was incorporated as Royal Exchange Assurance (Nigeria) Plc, a private limited liability Company on

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

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

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

The financial statements of the Group are as at and for the year ended 31 December 2016.

The registered office address of the Group is New Africa House, 31, Marina, Lagos, Nigeria.

2 Basis of preparation

(a) Statement of compliance with International Financial Reporting Standards These financial statements are the Company’s separate and consolidated financial statements of the Company, and its

subsidiaries (together, ”the Group”).The Group’s consolidated financial statements for the year ended 31 December 2016 have been prepared in accordance with, and comply with the, International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and in the manner required by the Companies and Allied Matters Act of Nigeria, the Financial Reporting Council of Nigeria Act, 2011, the Insurance Act of Nigeria 2003 and relevant National Insurance Commission of Nigeria (”NAICOM”) circulars.

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

(b) Functional and presentation currency The financial statement is presented in Naira, which is the group’s functional currency. Financial information presented

in Naira has been rounded to the nearest thousands except where otherwise indicated.

(c) Basis of measurement These consolidated and seperate financial statements have been prepared on a historical cost basis except for the

following items:

(i) Carried at fair value: • financial instruments at fair value through profit or loss; • available-for-sale investment securities; • investment properties; • plan assets for defined benefits obligations

(ii) Carried at a different measurement basis • Retirement benefit obligations are measured in terms of the projected unit credit method; • Insurance contract liabilities are measured using a gross premium valuation approach for indivdual and group

life risk business while discounted cashflows approach are used for measuring annuity and the risk reserve for individual deposit based businesses.

(d) Reporting period These consolidated and seperate financial statements have been prepared for a 12 month period.


NOTES TO THE FINANCIAL STATEMENTS




(e) Use of estimates and judgment In preparing these financial statements in conformity with the International Financial Reporting Standards (IFRS)

which requires the use of certain critical accounting estimates, management has made judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

Information about significant areas of estimation uncertainties and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are disclosed in Note 4.

(f) Changes in accounting policies The accounting policies adopted in the preparation of the Group’s financial statements are consistent with those

followed in the preparation of the financial statements for the year ended 31 December 2016, except for changes/amendments highlighted below:

Standards, amendments and interpretations effective during the reporting period

The following standards, amendments and interpretations which became effective in the reporting period from 1 January 2016, do not have any material impact on the accounting policies, financial position or performance of the Group.

(i) Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11) (ii) Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) (iii) Agriculture: Bearer Plants (Amendments to IAS 16 and IAS 41) (iv) Equity Method in Separate Financial Statements (Amendments to IAS 27) (v) Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 12 and IAS 28) (vi) Disclosure initiative (Amendments to IAS 1) (vii) Annual improvements to IFRSs 2012-2014 cycle-various standards

(g) Standards, amendments and interpretations issued but not yet effective A number of new standards and amendments to standards are effective for annual periods beginning after 1 January

2017, and have not been applied in preparing these financial statements. The Group does not plan to adopt these standards early.

(i) Effective for the financial year commencing 1 January 2017

(a) Disclosure Initiative (Amendments to IAS 7) The amendments provide for disclosures that enable users of financial statements to evaluate changes in liabilities

arising from financing activities, including both changes arising from cash flow and non-cash changes. This includes providing a reconciliation between the opening and closing balances arising from financing activities.

The Group will adopt the amendments for the year ending 31 December 2017.

(b) Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12) The amendments provide additional guidance on the existence of deductible temporary differences, which depend

solely on a comparison of the carrying amount of an asset and its tax base at the end of the reporting period, and is not affected by possible future changes in the carrying amount or expected manner of recovery of the asset.

The amendments also provide additional guidance on the methods used to calculate future taxable profit to establish whether a deferred tax asset can be recognised.


Guidance is provided where an entity may assume that it will recover an asset for more than its carrying amount, provided that there is sufficient evidence that it is probable that the entity will achieve this.

Guidance is provided for deductible temporary differences related to unrealised losses are not assessed separately for recognition. These are assessed on a combined basis, unless a tax law restricts the use of losses to deductions against income of a specific type.

The amendment is not expected to have any significant impact on the financial statements of the Group. The Group will adopt the amendments for the year ending 31 December 2017.

(ii) Effective for the financial year commencing 1 January 2018

(a) IFRS 9 Financial Instruments On 24 July 2014, the IASB issued the final IFRS 9 Financial Instruments Standard, which replaces earlier versions of

IFRS 9 and completes the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement.

IFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39.

The Group is currently in the process of performing a more detailed assessment to determine the impact that the initial application of IFRS 9 could have on its business; however, the Group will adopt the standard for the year ending 31 December 2018.

(b) IFRS 15 Revenue from contracts with customers This standard replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC

15 Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers and SIC-31 Revenue-Barter of Transactions involving Advertising Services.

The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time. The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised.

This new standard will most likely have a significant impact on the Group, which will include a possible change in the timing of when revenue is recognised and the amount of revenue recognised.

The Group is currently in the process of performing more detailed assessment of the impact of this standard on the Group.

The standard is effective for annual periods beginning on or after 1 January 2018, with early adoption permitted. The Group will adopt the amendments for the year ending 31 December 2018.

(c) Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts The differing effective dates of IFRS 9 Financial Instruments and the new insurance contracts standard could have a

significant impact on insurers.

In response to concerns regarding temporary accounting mismatches and volatility, and increased costs and complexity, the IASB has issued amendments to IFRS 4 Insurance Contracts.

The amendments reduce the impacts, but companies need to carefully consider their IFRS 9 implementation approach to decide if and how to use them. The two optional solutions raise some considerations which require detailed analysis and management judgement.




The optional solutions are:

1. Temporary exemption from IFRS 9 – Some Companies will be permitted to continue to apply IAS 39 Financial Instruments: Recognition and Measurement. To qualify for this exemption the Group’s activities need to be predominantly connected with insurance.

2. Overlay approach – This solution provides an overlay approach to alleviate temporary accounting mismatches and volatility. For designated financial assets, a Group is permitted to reclassify between profit or loss and other comprehensive income (OCI), the difference between the amounts recognised in profit or loss under IFRS 9 and those that would have been reported under IAS 39.

The Group is currently in the process of performing a more detailed assessment of the impact of these ammendments together with the analysis on the impact of IFRS 9.


(d) Foreign currency transactions and advance consideration (IFRIC 22) The amendments provide guidance on the transaction date to be used in determining the exchange rate for translation

of foreign currency transactions involving an advance payment or receipt.

The amendments clarifies that the transaction date is the date on which the entity initially recognises the prepayment or deferred income arising from the advance consideration. For transactions involving multiple payments or receipts, each payment or receipt gives rise to a separate transaction date.

The interpretation applies when an entity: • pays or receives consideration in a foreign currency; and • recognises a non-monetary asset or liability – eg. non-refundable advance consideration – before recognising the

related item.


Based on preliminary assessment of the Group, the new accounting policies are not expected to have signifcant impact on the financial statements, except for possibly the above.

(e) Transfer of Investment property (Amendments to IAS 40) The IASB has amended the requirements of IAS 40 Investment Property on when a Company should transfer a

property to, or from, investment property.

The amendments state that a transfer is made when and only when there is a change in use: – i.e. an asset ceases to meet the definition of investment property and there is evidence of a change in use. A change

in management intention alone does not support a transfer.

A company has a choice on transition to apply: • the prospective approach – i.e. apply the amendments to transfers that occur after the date of initial application

– and also reassess the classification of property assets held at that date; or • the retrospective approach – i.e. apply the amendments retrospectively, but only if it does not involve the use of

hindsight. The Group will adopt the amendments for the year ending 31 December 2018.




(f) Classification and measurement of share based payment transactions (Amendments to IFRS 2) Currently, there is ambiguity over how a company should account for certain types of share-based payment

arrangements. The IASB has responded by publishing amendments to IFRS 2 Share-based Payment.

The amendments cover three accounting areas: * Measurement of cash-settled share-based payments – There is currently no guidance in IFRS 2 on how to measure

the fair value of the liability in a cash-settled share based payment. The amendments clarify that a cash-settled share-based payment is measured using the same approach as for equity-settled share-based payments – i.e. the modified grant date method. Therefore in measuring the liability market and non-vesting conditions are taken into account in measuring its fair value and the number of awards to receive cash is adjusted to reflect the best estimate of those expected to vest as a result of satisfying service and any non-market performance conditions. The new requirements do not change the cumulative amount of expense that is ultimately recognised, because the total consideration for a cash-settled share-based payment is still equal to the cash paid on settlement.

* Classification of share-based payments settled net of tax withholdings – The company may be obligated to collect or withhold tax related to a share-based payment, even though the tax obligation is often a liability of the employee and not the company. Currently, it is unclear whether the portion of the share-based payment that is withheld in these instances should be accounted for as equity-settled or cash-settled. The amendments introduce an exception stating that, for classification purposes, a share-based payment transaction with employees is accounted for as equity-settled if certain criteria are met.

* Accounting for a modification of a share-based payment from cash-settled to equity-settled. There is no specific guidance in IFRS 2 that addresses the accounting when a share-based payment is modified from cash-settled to equity-settled. The amendments clarify the approach that companies are to apply.

The new requirements could affect the classification and/or measurement of these arrangements – and potentially the timing and amount of expense recognised for new and outstanding awards.


(iii) Effective for the financial year commencing 1 January 2019

(a) IFRS 16 Leases IFRS 16 replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating

Leases – Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, i.e. the customer(‘lessee’) and the supplier (‘lessor’). IFRS 16 eliminates the classification of leases as operating leases or finance leases as required by IAS 17 and introduces a single lessee accounting model. Applying that model, a lessee is required to recognise:

a. assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value; and

b. depreciation of lease assets separately from interest on lease liabilities in the profit or loss.

For the lessor, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17. Accordingly, a lessor continues to classify its leases as operating leases or finance leases, and to account for those two types of leases differently.

The Group is yet to carry out an assessment to determine the impact that the initial application of IFRS 16 could have on its business; however, the Group will adopt the standard for the year ending 31 December 2019.




(iv) Effective for the financial year commencing 1 January 2021

(a) IFRS 17 Insurance Contracts IFRS 17 requires insurance liabilities to be measured at a current fulfillment value and provides a more uniform

measurement and presentation approach for all insurance contracts. These requirements are designed to achieve the goal of a consistent, principle-based accounting for insurance contracts. IFRS 17 supersedes IFRS 4 Insurance Contracts as of 1 January 2021.

The Group is yet to carry out an assessment to determine the impact that the initial application of IFRS 17 could have on its business; however, the Group will adopt the standard for the year ending 31 December 2021.

3 Summary of significant accounting policies Except for the changes explained in Note 2(f) above, the Group consistently applied the following accounting policies

to the periods presented in the financial statements.

(a) Basis of consolidation

(i) Business combination The Group applies IFRS 3 Business Combinations in accounting for business combinations. Business combinations

are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on bargain purchase is recognised in profit or loss immediately.

The Group measures goodwill at the acquisition date as the total of: - the fair value of the consideration transferred, which is generally measured at fair value; plus - the recognized amount of any non-controlling interests in the acquiree; plus if the business combination is

achieved in stages, the fair value of the existing equity interest in the acquiree; less - the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses.The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Transactions costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

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

When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to pre-combination service.

In the separate financial statements of the Company, investments in subsidiaries are accounted for at cost.

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

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




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

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

(iv) Associates Associates are those entities in which the Group has significant influence, but not control or joint control, over the

financial and operating policies.

Investments in associates are accounted for using the equity method of accounting. They are initially recognised at cost, which includes transaction costs.

Subsequent to initial recognition, the Group’s share of its associates’ post-acquisition profits or losses is recognised in the consolidated profit or loss; its share of post-acquisition movements is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Intra-group gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Intra-group losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. For preparation of consolidated financial statements, equal accounting policies for similar transactions and other events in similar circumstances are used. Dilution gains and losses in associates are recognised in the consolidated profit or loss.

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

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

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

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

(b) Foreign currency transactions Foreign currency transactions are translated into the respective group entities’ functional currencies at exchange

rates prevailing at the date of the transactions.

The Group consolidated and separate financial statements are presented in Nigerian Naira which is the functional and presentation currency of Royal Exchange Plc.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates, are recognised in profit or loss. Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated using the exchange rate at the transaction date and those measured at fair value are translated at the exchange rate at the date that the fair value was measured.




Exchange rate differences on non-monetary items such as property and equipment, prepayment, intangible assets are accounted for based on the classification of the underlying items.

However, foreign currency differences arising from the translation of the following item is recognised in OCI: • available-for-sale equity investments (except on impairment, in which case foreign currency differences that have

been recognised in OCI are reclassified to profit or loss).

• available for sale debt securities investments, in which case foreign currency differences on the fair value difference are recognised in OCI.

(c) Cash and cash equivalents Cash comprises cash in hand and demand deposits. Cash equivalents are short-term highly liquid investments that

are readily convertible to known amounts of cash and that are subject to insignificant risk of changes in their fair value. Cash equivalents comprise investments with original maturities of three months or less and used by the Group to manage its short-term commitments.

Subsequent to initial recognition, cash and cash equivalents are carried at amortised cost in the statement of financial position. For the purpose of the statement of cash flows, cash and cash equivalents are net of outstanding overdrafts.

Interest income on cash and cash equivalents is recorded in net interest income in profit or loss.

(d) Financial instruments The classification of the Group’s financial instruments depends on the nature and purpose of the instruments and are

determined at the time of initial recognition.

(i) Classification of financial assets The financial assets have been recognised in the statement of financial position and measured in accordance with

their assigned classifications.

The Group classifies its financial assets into the following categories: • Financial assets at fair value through profit or loss (FVTPL), • Available-for-sale (AFS) financial assets, • Held to maturity and • Loans and receivables

Financial assets at fair value through profit or loss (FVTPL) Financial instruments are classified at FVTPL when the financial instrument is either held for trading or it is designated

as at FVTPL. Financial instruments at FVTPL are stated at fair value.

Available-for-sale financial assets (AFS) Available-for-sale financial instruments are non-derivatives that are either designated as AFS or are not classified as:

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

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

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

maturities that the Group has the positive intent and ability to hold to maturity, and which are not designated as at fair value through profit or loss or as available-for-sale.




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

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

(ii) Classification of financial liabilities A financial liability is classified as at fair value through profit or loss if it is classified as held-for-trading or is designated

as such on initial recognition. Directly attributable transaction costs are recognised in profit or loss as incurred.

Financial liabilities at fair value through profit or loss are measured at fair value and changes therein, including any interest expense, are recognised in profit or loss.

Other financial liabilities are initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.

Financial liabilities have been recognised in the statement of financial position and measured in accordance with their assigned classifications.

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

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

financial instruments not classified as at fair value through profit and loss. For financial instruments held at fair value through profit and loss (FVTPL), the transaction costs are immediately expensed in the profit and loss.

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

their categorization:

Financial Assets at fair value through profit or loss (FVTPL) Financial assets at FVTPL are stated at fair value. Any gains or losses arising on re-measurement are recognized in

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

Available-for-sale financial assets (AFS) 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. The fair values for quoted instruments are determined by reference to regulated exchange quoted ruling prices. If quoted market prices are not available, reference is also made to readily and regularly available broker or dealer price quotations.

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

Available-for-sale equity instruments for which fair value cannot be reliably determined are carried at cost less impairment allowance, if any. Impairment losses are recognised in profit or loss and reflected in an allowance account in the statement of financial position.

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




When an available-for-sale instrument carried at fair value is disposed of, the cumulative gain or loss previously accumulated in the Fair value reserve is reclassified to Investment and other income in profit or loss.

Dividends on available-for-sale equity instruments are recognized in profit or loss as Investment and Other Income when the Group’s right to receive the dividends is established.

Interest income recognized on available-for-sale instruments are recognized in profit or loss as net interest income as it accrues and is calculated by using the effective interest method.

Loans and receivables Loans and receivables on the statement of financial position comprise cash and cash equivalent, loans and advances

to customers, advances under finance lease, trade receivables, other receivables and statutory deposits.

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

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

Interest on loans and receivables are included in net interest income in profit or loss.

When the asset is impaired, impairment losses are recognised in profit or loss and reflected in an allowance account against loans and receivables. Interest on the impaired assets continues to be recognised through the unwinding of the discount. If an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, then the decrease in impairment loss is reversed through profit or loss.

Held-to-maturity Held-to-maturity investments are carried at amortised cost using the effective interest method, less any impairment

losses. A sale or reclassification of a more than insignificant amount of held-to-maturity investments would result in the reclassification of all held-to-maturity investments as available-for-sale, and would prevent the Group from classifying investment securities as held-to-maturity for the current and the following two financial years. However, sales and reclassification in any of the following circumstances would not trigger a reclassification:

• sales or reclassifications that are so close to maturity that changes in the market rate of interest would not have a significant effect on the financial asset’s fair value;

• sales or reclassifications after the Group has collected substantially all of the asset’s original principal; and

• sales or reclassifications that are attributable to non-recurring isolated events beyond the Group’s control that could not have been reasonably anticipated.

• interest is recorded in interest income in the profit or loss.

Trade receivables Trade receivables arising under insurance contracts are recognized when due. These include premium due from agents,

brokers, co-insurers and insurance contract holders for which credit notes issued are within 31 days, in conformity with the “NO PREMIUM NO COVER” policy. Trade receivables are stated at cost less impairment.




Financial liabilities Subsequent to initial recognition, other financial liabilities are measured at amortised cost.

Trade payables are recognized when due. These include amounts due to agents, reinsurers, co-assurers and insurance contract holders. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. Other liabilities include accruals, staff payables, other payables, unclaimed dividend and dividend withheld .

(v) Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of an asset or liability reflects its non-performance risk.

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

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

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price - i.e. the fair value of the consideration given or received. If the Group determines that the fair value at initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price.

Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

The fair value of a non-interest bearing liability is its discounted repayment amount. If the due date is less than one year, discounting is omitted.

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

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

(vi) Impairment of financial assets The Group assesses its financial assets other than those at fair value through profit or loss, for indicators of impairment

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

Objective evidence that a financial asset or group of financial assets is impaired could include: • Significant financial difficulty of the issuer or counter party; • Breach of contract, such as a default or delinquency in interest or principal payments; • It becoming probable that the borrower will enter bankruptcy or other financial re-organization; • The disappearance of an active market for that financial asset because of financial difficulties.




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

Loans and receivables and held to maturity For loans and receivables and held to maturity instruments, the amount of the impairment loss recognized is the

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

When the asset is impaired, impairment losses are recognised in profit or loss and reflected in an allowance account against loans and receivables and held to maturity instruments. Interest on the impaired assets continues to be recognised through the unwinding of the discount. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through profit or loss.

Available-for-sale financial assets (AFS) Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the

fair value reserve to profit or loss. The amount reclassified is the difference between the acquisition cost (net of any principal repayment and amortisation) and the current fair value, less any impairment loss previously recognised in profit or loss.

If the fair value of an impaired available-for-sale debt security subsequently increases and the increase can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed through profit or loss.

Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available-for-sale are not reversed through profit or loss.

Trade receivables An impairment is established when there is objective evidence that as a result of one or more events that occurred

after the initial recognition, the estimated future cash flows have been impaired. The carrying amount of the financial asset is reduced by the impairment loss through the use of an allowance account and recognized as impairment loss in income statement.

The Group’s allowance for impairment is based on incurred loss model for each customer. The probability of default and the age of the debts are also taken into account in arriving at the impairment amount.

When a trade receivable is considered uncollectible, it is written off against the impairment allowance account.

(vii) De-recognition of financial assets The Group de-recognizes a financial asset only when the contractual rights to the cash flows from the asset expires or

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

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




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

The Group de-recognises a financial liability when its contractual obligations are discharged or cancelled or expired.

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when and only when the Group currently has a legally enforceable right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

(e) Impairment of other non-financial assets At the end of each reporting period, the Group reviews the carrying amounts of its non-financial assets (other than

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

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

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

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

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

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

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

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




Reinsurance assets are assessed for impairment at each reporting date. If there is reliable objective evidence that a reinsurance asset is impaired as a result of an event that occurred after initial recognition of the reinsurance asset, that the Group may not receive all amounts due to it under the terms of the contract and the event has a reliably measurable impact on the amounts that the Group will receive from the reinsurer.

The Group gathers the objective evidence that a reinsurance asset is impaired using the same process adopted for financial assets held at amortised cost. The impairment loss is calculated following the same method used for financial assets.

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

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

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

Deferred acquisition costs are amortised in the income statement systematically over the life of the contracts at each reporting date.

(h) Other receivables and prepayments Other receivables balances include dividend receivable, inter-group balances for Company accounts, accrued rental

income and security holding trust account

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

(i) Investment properties Investment properties are properties held for long-term rental yields or for capital appreciation (including property

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

Recognition and measurement Recognition of investment properties takes place only when it is probable that the future economic benefits that are

associated with the investment property will flow to the entity and the cost can be measured reliably.

Investment properties are measured initially at cost, including all transaction costs.

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

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

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

Transfers Transfers are made to or from investment property only when there is a change in use. For a transfer from investment

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




(j) Property and equipment

Recognition and measurement All property and equipment used by the Group is stated at historical cost less accumulated depreciation and any

accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. If significant parts of a property and equipment have different useful lives, then they are accounted for as seperate items (major components) of property and equipment.

Subsequent costs Subsequent expenditures are recognized in the carrying amount of the asset or as a seperate asset as appropriate

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

Depreciation Depreciation is recognized so as to allocate the cost of assets (other than freehold land) less their residual values

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

Freehold and leasehold land is not depreciated The estimated useful lives of property and equipment are as follows: Buildings 50 years Furniture and office equipment 5 years Motor vehicles - New 4 years - Salvage 3 years Computer hardware 4 years Plant and equipment 5 years

De-recognition An item of property, plant and equipment is de-recognized upon disposal or when no future economic benefits are

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

(k) Intangible assets

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

of the following conditions are met: • The technical feasibility of completing the intangible asset so that it will be available-for-use or sale; • The intention to complete the intangible asset and use or sell it; • The ability to use or sell the intangible asset; • How the intangible asset will generate probable future economic benefits; • The availability of adequate technical, financial and other resources to complete the development and to use or

sell the intangible asset; and • The ability to measure reliably the expenditure attributable to the intangible asset during its development.

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




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

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

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

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

line method.

Intangible assets which are not available for use are tested for impairment annually. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

An intangible asset shall be derecognized by the Group on disposal; or when no future economic benefit are expected from its use or disposal. Any gain or loss arising on de-recognition of the assets (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period the asset is recognised.

(l) Taxation Income tax expense comprises current and deferred tax. Income tax expense is recognized in the statement of profit

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

Current income taxes The Group is subject to the Companies Income Tax Act (CITA). Total amount of tax payable under CITA is determined

based on the higher of two components namely income tax (based on taxable income (or loss) for the year; and Minimum tax (determined based on the sum of the highest of 0.25% of revenue of =N=500,000, 0.5% of gross profit, 0.25% of paid up share capital and 0.5% of net assets and 0.125% of revenue in excess of =N=500,000). Taxes based on taxable profit for the period are treated as current income tax in line with IAS 12; whereas taxes which is based on gross amounts is outside the scope of IAS 12 and therefore are not treated as current income tax.

Where the minimum tax is higher than the Company Income Tax (CIT), a hybrid tax situation exists. In this situation, the CIT is recognized in the income tax expense line in the profit or loss and the excess amount is presented above income tax line as minimum tax.

The Group Income tax expense and payable is the sum of the individual tax expense and payable under the various tax laws governing each of the subsidiaries of the Group and the Company.

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

The current taxes include: Company Income tax at 30% of taxable profit; Education tax at 2% of assessable profit; Capital Gain Tax at 10% of chargeable gains; and Information technology development levy at 1% of accounting profit.




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

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

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

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

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

For the purposes of measuring deferred tax liabilities and deferred tax assets for properties held for sale that are measured using the fair value model, the carrying amount of such properties are presumed to be recovered entirely through the sale unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model whose objective is to consume substantially all the economic benefits embodied in the investment property over time, rather than through sale.

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

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

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

(n) Borrowings Borrowings by way of bank overdrafts that are repayable on demand and form an integral part of the Group’s

cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Borrowings have been measured in line with the Group’s accounting policy for financial instruments (see note 2(d)).

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

(o) Deferred income Deferred income comprises deferred rental income and deferred commission.

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

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




(p) Provisions and other liabilities

Provisions Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it

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

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

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

interest rate method. The fair value of a non-interest bearing liability is its discounted repayment amount. If the due date is less than one year, discounting is omitted.

(q) Finance and operating lease obligations These are the corresponding liabilities on assets acquired under finance lease. Lease payments are apportioned

between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognized immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Group’s general policy on borrowing costs.

Lease assets - lessee Assets held by the Group under leases that transfer to the Group substantially all of the risks and rewards of ownership

are classified as finance leases. The leased asset is initially measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Assets held under other leases are classified as operating leases.

Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the

lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Lease assets - lessor If the Group is the lessor in a lease agreement that transfers substantially all of the risks and rewards incidental to

ownership of the asset to the lessee, then the arrangement is classified as a finance lease and a receivable equal to the net investment in the lease is recognised and presented within loans and advances.

(r) Insurance contract liabilities

(i) Classification IFRS 4 requires contracts written by insurers to be classified as either ‘insurance contracts’ or ‘investment contracts’

depending on the level of insurance risk transferred.

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




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

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

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

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

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

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

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

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

on the liability adequacy test report.

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

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

The Liability Adequacy Test (LAT) was carried out by HR Nigeria Limited (Consultant Actuaries).

Insurance contract with discretionary participating features (DPF) Some insurance contracts and investment contracts contain a discretionary participating feature (DPF), which is a

contractual right to receive as, a supplement to guaranteed benefits, additional benefits that are:

• Likely to be a significant portion of the total contractual benefits;

• The amount or timing is contractually at the discretion of the insurer; and

• That are contractually based on: i. the performance of a specified pool of contracts or a specified type of contract;

ii. realized and or unrealized investment returns on a specified pool of assets held by the issuer; or

iii. the profit or loss of the Company.

Recognition and measurement Insurance contracts with DPF are classified into two main categories, depending on the duration of risk and whether

or not the terms and conditions are fixed.




(i) Short-term insurance contracts Short-duration life insurance contracts (Group Life) protect the Group’s clients from the consequences of events (such

as death or disability) that would affect the ability of the client or his/her dependants to maintain their current level of income. These contracts have no maturity or surrender value and the premiums are recognized as earned premiums proportionally over the period of coverage.

The proportion of premium received on in-force contracts that relates to unexpired risks at the reporting date is reported as unearned premium liability. Premiums are shown before deductions of commissions and are gross of any taxes or duties levied on premiums.

Claims expenses are recognized in the statement of profit or loss as incurred based on the estimated liability for compensation owed to contract holders. They include direct and indirect claims settlement costs that arise from events that have occurred up to the end of the reporting period even if they have not been reported to the Group. The Group does not discount it liabilities for unpaid claims. Liabilities for unpaid/outstanding claims are estimated using the input of assessments for individual cases reported to the Group and statistical analyses for the claims incurred but not reported.

(ii) Long-term insurance contracts with fixed and guaranteed terms These contracts insure events associated with human life (for example, death or survival) over a long duration.

Premiums are recognized as revenue when they become payable by the contract holder. Premiums are shown before deduction of commission. Benefits are recognized as an expense when they are incurred. A liability for contractual benefits that are expected to be incurred in the future is recorded when the premiums are recognized. The liability is actuarially determined based on assumptions such as mortality, persistency, maintenance expenses and investment income that are established at the time the contract is issued.

(iii) Annuity Annuity premium are recognised as income when received from policy holders, and payments to policy holders are

recognised as an expense when due. Annuities are valued by using a discounted cash flow approach. The reserves are set equal to the present value of future annuity payments plus expenses, with allowance being made for any guaranteed periods as required by the terms of the contract. Annuities collected in a year are credited to the Gross Premium written and the portion that extends beyond one year is taken out via the unearned premium. The assets representing the annuities are invested in near-cash money market financial instruments with a tenor of 30 days on rolling basis.

The annuity is valued at year end by a professional consultant actuary registered with the Financial Reporting Council (”FRC”). Also a liability adequacy test is required by law to be performed on annuity fund to determine its sufficiency in meeting the contractual liabilities. Some of the assumptions being considered in valuing the annuity fund at the year end are:

(a) a 10 year guaranteed minimum annuity payment (b) a valuation interest determined by a long-term FGN bond yield (c) a maintenance expenses and the mortality rates.

(s) Recognition and measurement of insurance contract

Premium Gross written premiums for general insurance contracts comprise premiums received in cash as well as premiums

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

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




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

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

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

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

Claims and policyholders benefit payable Claims incurred comprise claims and claims handling expenses paid during the financial year and changes in the

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

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

(t) Investment contract liabilities Investment contracts are those contracts that transfer significant financial risk. Financial risk is the risk of a possible

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

Amounts collected from investment linked contracts with no discretionary participating features are reported as deposits (i.e. as investment contract lialibilities) in the statement of financial position. Interest, usually agreed with clients, is credited per annum to each account holder and the amount expensed to statement of profit or loss. Payment of benefits are treated as withdrawal (reduction) from the balance standing in the credit account of the client.

(u) Employee benefits liabilities

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

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

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

(ii) Defined contribution plans The Group operates a defined contribution plan in accordance with the provisions of the Pension Reform Act 2014.

The Group contributes 10% and employees contribute 8% each of the qualifying monthly emoluments in line with the Pension Reform Act.

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




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

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

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

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

using the projected unit credit method with discount rate used being the market yield on government bonds. The plan is unfunded and payments are made on a pay-as-you-go basis. Only staff of the Group as at 1 June 2008 are eligible for the staff gratuity scheme. Benefits accrue after a minimum of five years of service.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, are recognised immediately in OCI. The Group determines the net interest expense (income) on the defined benefit liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability, taking into account any changes in the net defined benefit liability during the period as a result of benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.

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

has continuing pension obligation to its staff who retired prior to the commencement of the contributory pension scheme.

Pensioners are entitled to 3% annual increment. Over 90% of the pension assets are being managed by a pension fund administrator while the balance is invested in marketable securities and bank placement.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Group, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in OCI. The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in profit or loss. The Group recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.




(vi) Other long-term benefits The Group operates a long service award plan for eligible staff who have rendered continued service to the organization.

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

The liability is valued annually by a qualified actuary using the projected unit credit method.

Remeasurements of the obligation, which comprise actuarial gains and losses, are recognised immediately in OCI. The Group determines the net interest expense (income) on the obligation for the period by applying the discount rate used to measure the obligation at the beginning of the annual period to the liability, taking into account any changes in the liability during the period as a result of benefit payments. Net interest expense and other expenses related to obligation are recognised in profit or loss.

The Group meets benefits on a pay-as-you-qualify basis as the plan is an unfunded scheme.

(v) Capital and reserves

(i) Share capital The equity instruments issued by the Group are classified as equity in accordance with the substance of the contractual

arrangements and the definitions of an equity instrument.

Equity instruments issued by the Group are recognized as the proceeds are received, net of direct issue costs. Repurchase of the Group’s own equity instruments is recognized and deducted directly in equity. No gain or loss is recognized in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

(ii) Share premium This represents the excess amount paid by shareholders on the nominal value of the shares. This amount can be

utilized as provided in Section 120(3) of Companies and Allied Matters Act. The share premium is classified as an equity instrument in the statement of financial position.

(iii) Contingency reserve The Group maintains Contingency reserves for the general and life businesses in accordance with the provisions of

S.21 of the Insurance Act 2003.

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

In compliance with the regulatory requirements in respect of Contingency Reserve for Life business, the Group maintains contingency reserve at the rate equal to the higher of 1% of gross premium or 10% of the net profit accumulated until it reaches the amount of the minimum paid up capital.

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

classified as part of equity in the statement of financial position.

(v) Fair value reserves Fair value reserves represent the cummulative net change in the fair value of available-for-sale financial assets at the

reporting date.




(vi) Other reserves - employee benefit actuarial surplus Actuarial surplus/(deficit) on employee benefits represent changes in benefit obligation due to changes in actuarial

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

(vii) Treasury shares Where the Company or any member of the Group purchases the Company’s share capital, the consideration paid

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

(viii) Dividends on ordinary shares Dividends on ordinary shares are recognised in equity in the period in which they are approved by the Group’s

shareholders. Dividends for the year that are declared after the end of the reporting period are dealt with in the subsequent period.

Dividends proposed by the Directors but not yet approved by shareholders are disclosed in the financial statements in accordance with the requirements of the Company and Allied Matters Act of Nigeria.

(w) Revenue recognition

(i) Gross Written Premium Gross written premiums for non-life (general), life, health insurance and investment contracts with discretionary

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

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

Deposits collected from investment-linked contracts with non-discretionary participating features are reported as investment contract liabilities in the statement of financial position.

Outward facultative premiums and reinsurance premiums ceded are accounted for in the same accounting period as the premiums for the related direct insurance or facultative business assumed.

The earned portion of premiums received is recognized as revenue. Premiums are earned from the date of attachment of risk, over the indenmity period, based on the pattern of risks underwritten. Outward reinsurance premiums are recognized as an expense in accordance with the pattern of indenmity received.

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

at the end of the financial year.

(iii) Fees and commission income Fees and commission income consists primarily of insurance agency and brokerage commission, reinsurance and

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

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

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




The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Where the estimated cash flows on financial assets are subsequently revised, other than impairment losses, the carrying amount of the financial assets is adjusted to reflect actual and revised estimated cash flows.

Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.

(v) Investment Income Investment income consists of dividends, realized gains and losses, as well as unrealized gains and losses on financial

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

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

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

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

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

income. It includes rental income, profit on disposal of fixed assets, insurance brokerage commission, and fund management fee. Rental income is recognized on an accrual basis.

(x) Expense recognition

(i) Insurance claims and benefits incurred Gross benefits and claims consist of benefits and claims paid/payable to policyholders, which include changes in the

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

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

settling a claim.

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

as a means of receiving the amount of the claim paid to the insured for the loss.




(ii) Underwriting expenses Underwriting expense include acquisition costs and maintenance expense. Acquisition costs comprise direct and

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

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

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

(y) Segment reporting Operating segments are identified and reported in consonance with the internal reporting policy of the Group that are

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

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

• Non-life insurance - (Royal Exchange General Insurance Company Limited); • Life insurance - (Royal Exchange Prudential Life Plc); • Financial services - (Royal Exchange Micro-Finance Bank Limited); • Healthcare - (Royal Exchange Healthcare Limited); and • Asset Management (Royal Exchange Finance and Asset Management Ltd).

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

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

(z) Earnings per share The Group presents basic and diluted EPS data for its ordinary shares. Basic EPS is calculated by dividing the profit

or loss that is attributable to ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the period.

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

(aa) Fiduciary activities The Group acts as trustees and in other fiduciary capacities that results in the holding and placing of assets on behalf

of clients and oversight functions over certain funds. The value of the assets held on behalf of clients as at reporting date are excluded from the statement of financial position of the Group as they are not assets of the Group, but are disclosed in the financial statements (see note 61). The carrying value of the assets under custody were determined as follows:

- Cash and cash equivalents are carried at amortised cost. - Loans and receivables and Held-to-maturity investments are carried at amortised cost. - Other liabilities are measured at amortized cost using the effective interest rate method.

Fees and commissions earned from providing such services are generally recognised on an accrual basis in the statement of profit and loss in line with the agreement between the Group and the party for which the Group holds its assets.






4 Critical accounting estimates and judgments In preparing these consolidated financial statements, management has made judgements, estimates and assumptions

that affect the reported amounts of assets and liabilities within the financial year.

Estimates and underlying assumptions are reviewed on an ongoing basis and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are recognised prospectively.

A Judgements Management applies its judgement to determine whether the indicators set out in note 3(a)(iv) indicate that the Group

has significant influence over it’s investment in associates.

According to IAS 28, a 20% or more interest in an investee leads to a rebuttable presumption that the investor has significant influence over the investee.

The Group holds a direct interest of 26% in CBC EMEA. Management has considered the fact and circumstances, including the representation of the Company on the board of CBC EMEA and has concluded that the Group has significant influence over CBC EMEA and the entity is an associate of the Group.

B Assumptions and estimation uncertainties Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material

adjustment in the year ending 31 December 2016 is set out below in relation to the impairment of financial instruments and in the following notes in relation to other areas:

(i) Deferred tax assets Recognised deferred tax assets (see note 22) are measured at the tax rates enacted or substantively enacted at

the end of the reporting period and represents those amounts that are probable of realisation taking into account management’s estimates of future taxable profits. In determining estimates of future taxable profit against which deductible amount can be utilised, management has considered the existence of taxable temporary differences that will reverse in the same year that deductible amounts will reverse. Management’s estimate of future taxable profits has been determined on the basis of a five year profit forecast and their assessment of applicable tax regulations. Management affirms that assumptions underlying the five year forecast is reasonable given the Group’s restructured operations and there are no objective indicators to suggest that the projected earnings level will not be achieved.

(ii) Liabilities arising from insurance contracts Claims arising from non-life insurance contracts Liabilities for unpaid claims are estimated on case by case basis. The liabilities recognised for claims fluctuate based

on the nature and severity of the claim reported. Claims incurred but not reported are determined using statistical analyses and the Company deems liabilities reported as adequate. Assumptions used in determining the liabilities are disclosed in note 55.

(iii) Impairment of available-for-sale equity investment securities Investment in equity securities are evaluated for impairment on the basis described in accounting policies note 3(d)

(vi). The Group determines that available-for-sale equity investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. This determination of what is significant or prolonged requires judgment relating to the period over which the losses occur. In making this judgment, the Group evaluates among other factors, the volatility in share price. In addition, objective evidence of impairment may be deterioration in the financial health of the investee, decline in quoted market price that has lasted for 9 months, industry and sector performance, changes in technology, and operational and financing cash flows etc.




(iv) Impairment of other financial assets measured at amortised cost The directors use their judgment in selecting an appropriate valuation technique for some financial assets. Impairment

for financial assets is carried at amortized cost, as well as the amount of impairment for trade receivables. The impairment for financial assets is carried at amortized cost and trade receivables are evaluated on the basis described in accounting policies note 3(d)(vi).

The Group reviews its loans and other receivables portfolios to assess impairment at least on a quarterly basis. In determining whether a specific impairment loss should be recorded in profit or loss, the Group makes judgements as to whether there is any observable data indicating an impairment trigger. The trigger may include observable data indicating that the borrower is unable to fulfil the repayment obligations as per contractual terms e.g significant financial difficulty being experienced by the borrower, occurrence of default/delays in interest or principal repayments, restructuring of the credit facilities by giving extraordinary concessions to borrower or national or local economic conditions that correlate with defaults on assets in the Group. The Group uses estimates based on historical loss experience for assets with similar credit risk characteristics and objective evidence of impairment similar to those in the portfolio when scheduling future cash flows. In estimating these future cash flows, management makes judgements about a debtor’s financial situation and the net realisable value of any underlying collateral. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. Each impaired asset is assessed on its merits, and the workout strategy and estimate of cash flows considered recoverable are independently approved by the management.

(v) Fair value of financial instruments The directors use their judgment in selecting an appropriate valuation technique for some financial assets. Impairment

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

(vi) Determination of fair value of investment property Management employed the services of estate surveyors and valuers to value its investment properties. The estimated

open market value is deemed to be the fair value based on the assumptions that there will be willing buyers and sellers. Recent market prices of neighborhood properties were also considered in deriving the open market values. Other key assumptions are as disclosed in note 15 to the financial statements.

(vii) Defined benefit plan The present value of the employee benefit obligations depends on a number of factors that are determined in an

actuarial basis using a number of assumptions. Any changes in these assumptions will impact the carrying amount of obligations. The assumptions used in determining the net cost (income) for pensions include the discount rate.

The Group determines the appropriate discount rate at the end of the reporting period. In determining the appropriate discount rate, reference is made to the yield on Nigerian Government Bonds that have maturity dates approximating the terms of the related pension liability. Other key assumptions for pension obligations are based in part on current market conditions as disclosed in note 19.

(viii) Current income tax 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 during the ordinary course of business. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due and based on its assessment of the applicable tax regulations. 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 in the period in which such determination is made.




(ix) Determination of impairment of property and equipment, and intangible assets excluding goodwill Management is required to make judgements concerning the cause, timing and amount of impairment. In the

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

(x) Depreciation, amortisation and the carrying value of property and equipment and intangible assets The estimation of the useful lives of assets is based on management’s judgement. Any material adjustment to the

estimated useful lives of items of property and equipment will have an impact on the carrying value of these items. Depreciation and amortisation is recognised on the basis described in accounting policies note 3(j) and 3(k).




(i) Short–term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group. All deposits are subject to an average variable interest rate of 6% (2015: 12%).

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

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

(a) The movements in impairment allowance on loans and advances to customers is analyzed below:

Group Group Company CompanyIn thousands of Naira 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15

Cash 8,079 7,222 75 7 Bank balances 554,963 5,661,565 77,402 45,375 Short-term deposits (including demand and time deposits) 10,542,398 1,367,055 49,802 60,070

Cash and cash equivalents (as per statement of financial position) 11,105,440 7,035,842 127,279 105,452


Term loan 1,143,522 1,386,913 - - Specific impairment (150,929) (106,990) - -Collective impairment (582) (1,489) - -

Total impairment (see note 6(a) below) (151,511) (108,479) - -

Carrying amount 992,011 1,278,434 - -


Balance, beginning of year 108,479 59,963 - - Impairment allowance recognised during the year (see note 45) 43,032 48,516 - -

Balance, end of year 151,511 108,479 - -

Within one year 202,186 261,539 - - More than one year 789,825 1,016,895 - -

992,011 1,278,434 - -

5 Cash and cash equivalents

6 Loans and advances to customers




(a) The movements in impairment allowance on advance under lease is analyzed below:


Gross investment in finance lease 229,890 136,269 - - Impairment allowance (see note 7(a) below) (23,000) (13,000) - -

206,890 123,269 - -

(a) Analysis of advances under finance lease by maturity


1 - 30 days - 753 - - 31 - 90 days - 2,384 - - 91 - 180 days - 474 - - 181 -360 days - 54,170 - - Later than 1 year but less than 5 years 229,890 78,488 - - Later than 5 years - - - -

229,890 136,269 - -


Balance, beginning of year 13,000 37,801 - - Write back of impairment allowance - (26,737) - - Impairment allowance recognised during the year (see note 45) 10,000 1,936 - -


Within one year - 57,781 - - More than one year 206,890 65,488 - -

206,890 123,269 - -

7 Advances under finance lease




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


Available for sale investment securities (see note 8(a) below) 1,504,826 415,263 - - Fair value through profit or loss (FVTPL) (see note 8(b) below) 3,138,789 1,936,874 82,644 17,935 Loans and receivables at amortised cost (see note 8(c) below) 989,334 1,096,746 - -

Total financial assets 5,632,949 3,448,883 82,644 17,935

Within one year 2,212,619 1,255,548 - - More than one year 3,420,330 2,193,335 82,644 17,935

5,632,949 3,448,883 82,644 17,935

(a) Available for sale investment securities:


Listed equities 495,419 90,012 - - Unlisted equities at cost 154,334 496,636 - - Bonds: Annuity fund 1,026,458 - - -Specific impairment allowance (see note 8(a)(iii) below) (171,385) (171,385) - -

1,504,826 415,263 - -

(i) An analysis of equities in available for sale financial assets as at 31 December 2016 is as shown below:

31-Dec-16 31-Dec-15 Carrying Percentage Carrying Percentage value holding value holding Name of entity N’000 % N’000 %

Sterling Assurance 232,095 44% 235,797 7%Capital Bancorp 3,432 1% 1,716 1%R.E.A Real property investment 1,449 0% 1,449 5%DPMS 1,261 0% 1,261 2%African Reinsurance Corporation 128,255 31% 82,766 3%Nigeria Liability Pool 21,160 5% 21,160 11%Nigeria Energy Liability Pool 67,000 4 Lines 67,000 4 LinesOthers 1,050,174 4,114

1,504,826 415,263

8 Investments securities




(iii) The movements in specific impairment allowance on listed and unlisted equities classified as available for sale is analyzed below:


Balance, beginning of year 171,385 169,411 - - Impairment allowance recognised during the year - 1,974 - -


(b) Fair value through profit or loss (FVTPL)


Federal Government bonds 351,506 298,531 - - Treasury bills 1,477,020 79,611 15,853 - Listed equities 1,310,263 1,558,732 66,791 17,935

3,138,789 1,936,874 82,644 17,935

(c) Loans and receivables at amortised cost


Unlisted debenture - - - - Staff personal loans 4,409 4,755 - - Staff mortgage loans 127,835 214,631 - - Policyholders loan 20,373 23,045 - - Placement with financial institutions 836,717 854,315 - -

989,334 1,096,746 - -

9 Investment in subsidiaries


Royal Exchange General Insurance Company Limited - - 5,169,404 5,169,404 Royal Exchange Prudential Life Plc. - - 2,565,833 2,565,833 Royal Exchange Finance and Asset Management Limited - - 777,802 748,276 Royal Exchange Healthcare Company Limited - - 151,669 151,669 Royal Exchange Microfinance Bank Limited - - 106,205 106,205

- - 8,770,913 8,741,387Allowance for impairment - - (80,923) (80,923)

- - 8,689,990 8,660,464




All subsidiaries are incorporated in Nigeria.

Indirect holdingsThe Company indirectly owns shares in Royal Exchange Healthcare Company Limited and Royal Exchange Microfinance Bank through some of its wholly owned subsidiaries as listed below:

(a) Movement in gross investment in subsidiaries


Balance as at the beginning of the year 8,741,387 8,741,387 Disposals - - Additions 29,526 -

Balance, end of year 8,770,913 8,741,387

There are no non-controlling interests in any of the subsidiaries.

Royal Exchange Healthcare Royal ExchangeHoldings Company Limited Microfinance Bank

Indirect holdingsRoyal Exchange General Insurance Company Limited 33.00 14.60 Royal Exchange Prudential Life Plc. 37.16 21.60 Royal Exchange Finance And Asset Management Limited - 10.80

70.16 47.00Direct holdings by the Company 29.84 53.00

100.00 100.00

(b) The subsidiary companies comprise of the following:

Ownership interest (%) Name of Entity Nature of Business Year End 31-Dec-16 31-Dec-15

Royal Exchange General Insurance Company Limited Non-Life Insurance 31 Dec 100.00 100.00Royal Exchange Prudential Life Plc. Life Insurance 31 Dec 100.00 100.00Royal Exchange Finance And Asset Management Limited Credit Financing and Asset Management 31 Dec 100.00 100.00Royal Exchange Healthcare Company Limited (see note (i) below) Health insurance 31 Dec 29.84 29.84Royal Exchange Microfinance Bank Limited (see note (ii) below) Microfinance Bank 31 Dec 53.00 53.00




(b)

The

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t 31 D

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Ro

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8

24,97

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12

Trea

sury

shar

es

(500

,000

) (5

00,0

00)

-

-

-

-

-

-

-

Reta

ined

ear

ning

s (6

47,8

28)

96,1

93

(744

,021

) 8

86,11

4

70,0

86

(1,0

45,74

6)

(507

,553

) (6

3,080

) (8

3,842

)Ot

her c

ompo

nent

of e

quity

53

5,49

1 (4

,956)

5

40,4

47

1,82

1 18

4,85

4

(173

,643

) 5

01,5

49

6,6

81

19,18

5

Tota

l equ

ity

6,38

0,13

6

(9,72

2,080

) 16

,102,2

16

6,15

1,556

6

,982,8

21

1,50

2,507

7

71,79

8

116,

211

577

,323

Tota

l equ

ity a

nd li

abili

ties

3

1,676

,729

(1

1,236

,864

) 4

2,913

,593

9

,810

,075

2

2,610

,441

7,

309,7

36

1,96

9,426

24

2,187

9

71,72

8




(b)

The

cond

ense

d fin

anci

al d

ata

of th

e co

nsol

idat

ed e

ntit

ies

as a

t 31 D

ecem

ber 2

015,

are

as

follo

ws

(ii)

Cond

ense

d st

atem

ent o

f pro

fit o

r los

s fo

r the

yea

r end

ed 3

1 Dec

embe

r 201

5

Ro

yal

Roya

l Ro

yal

Exch

ange

Ro

yal

Roya

l Ex

chan

ge

Exch

ange

Fi

nanc

e Ex

chan

ge

Roya

l

Grou

p El

imin

atio

n Gr

oss

Exch

ange

Ge

nera

l Pr

uden

tial

an

d As

set

Mic

rofin

ance

Ex

chan

ge

In th

ousa

nds o

f Nai

ra

bala

nces

en

trie

s am

ount

Pl

c In

sura

nce

Life

Plc

M

anag

emen

t Ba

nk

Heal

thca

re

Gros

s pre

miu

m in

com

e 10

,809

,176

(7

5,27

7)

10,8

84,4

53

-

6,96

8,69

3

3,4

95,95

9

-

-

419

,801

Re

insu

ranc

e ex

pens

es

(2,72

4,32

5)

-

(2,72

4,32

5)

-

(2,3

11,56

0)

(412

,765)

-

-

-

Net p

rem

ium

inco

me

8,08

4,85

1 (7

5,27

7)

8,16

0,12

8

-

4,6

57,13

3

3,0

83,19

4

-

-

419

,801

Fe

e an

d co

mm

issio

n in

com

e 33

0,56

1 -

3

30,5

61

-

279

,985

5

0,57

6

-

-

-

Net u

nder

writi

ng In

com

e 8,

415,

412

(7

5,27

7)

8,4

90,6

89

-

4,93

7,118

3

,133,7

70

-

-

419

,801

Tota

l und

erwr

iting

exp

ense

s (6

,845

,795)

-

(6

,845

,795)

-

(3

,618

,196)

(2

,909,0

37)

-

-

(318

,562

)

Unde

rwrit

ing

profi

t 1,5

69,6

17

(75,

277)

1,

644,

894

-

1,

318,

922

2

24,73

3

-

-

101,2

39

Shar

e of

(los

s) o

n in

vest

men

t in

asso

ciat

e (3

6,62

8)

(836

) (3

5,792

) -

(3

5,792

) -

-

-

-

Wr

ite-b

ack/

(cha

rge)

of i

mpa

irmen

t allo

wanc

e (3

57,5

35)

-

(357

,535

) (2

,289)

(2

84,93

5)

(19,8

84)

(20,

168)

(3

,547

) (2

6,712

)In

vest

men

t and

oth

er in

com

e 1,2

01,95

5

(363

,184)

1,

565,1

39

225

,958

76

9,412

2

18,4

00

182,1

85

80,

067

8

9,117

Net i

ncom

e 2,

377,4

09

(439

,297)

2

,816

,706

2

23,6

69

1,76

7,607

4

23,24

9

162,0

17

76,5

20

163,6

44

Tota

l exp

ense

s (3

,274,

370)

3

04,79

9

(3,5

79,16

9)

(340

,376)

(1

,626

,811)

(1

,241,7

76)

(152

,876

) (6

7,376

) (1

49,95

4)

(Los

s)/P

rofit

bef

ore

tax

(896

,961)

(134

,498

) (7

62,4

63)

(116

,707)

14

0,796

(8

18,5

27)

9,14

1 9

,144

13

,690

Mini

mum

tax

(63,5

32)

-

(62,7

84)

-

(43,7

36)

(15,1

12)

-

-

(3,93

6)In

com

e ta

x ex

pens

e (3

38,4

67)

-

(338

,234)

(1

3,100

) (3

00,72

2)

(13,6

92)

(8,75

0)

-

(1,97

0)

(Los

s)/P

rofit

aft

er ta

xati

on

(1,29

8,96

0)

(134

,498

) (1

,163,4

81)

(129

,807

) (2

03,6

62)

(847

,331

) 3

91

9,14

4

7,78

4




Cond

ense

d St

atem

ent o

f fina

ncia

l pos

itio

n a

s at

31 D

ecem

ber 2

015

Ro

yal

Roya

l Ro

yal

Exch

ange

Ro

yal

Roya

l Ex

chan

ge

Exch

ange

Fi

nanc

e Ex

chan

ge

Roya

l

Grou

p Co

nsol

idat

ion

Gros

s Ex

chan

ge

Gene

ral

Prud

enti

al

and

Asse

t M

icro

finan

ce

Exch

ange

In

thou

sand

s of N

aira

ba

lanc

es

entr

ies

amou

nt

Plc

Insu

ranc

e Li

fe P

lc

Man

agem

ent

Bank

He

alth

care

AS

SE

TS

Cash

and

cas

h eq

uiva

lent

s 7,

035,

842

(5

5,27

6)

7,09

1,118

10

5,45

2

5,5

34,75

0

406

,915

8

94,0

58

96,

214

5

3,729

Lo

ans a

nd a

dvan

ces t

o cu

stom

ers

1,27

8,43

4

(113

,812

) 1,

392,2

46

-

-

-

1,25

5,63

7

136,

609

-

Ad

vanc

es u

nder

fina

nce

leas

e 12

3,269

(1

3,995

) 13

7,264

-

-

-

13

7,264

-

-

In

vest

men

t sec

uriti

es

3,4

48,8

83

(82,6

06)

3,5

31,4

89

17,93

5

2,67

6,939

6

90,77

5

52,0

06

13,0

00

80,

834

Inve

stm

ent i

n su

bsid

iarie

s -

(8

,660

,464

) 8

,660

,464

8

,660

,464

-

-

-

-

-

Tr

ade

rece

ivab

les

528

,399

(2

7,407

) 5

55,8

06

-

170,

137

16

,778

-

-

3

68,8

91

Rein

sura

nce

asse

ts

1,88

9,750

-

1,

889,7

50

-

1,58

2,128

3

07,6

22

-

-

-

Defe

rred

acq

uisit

ion

cost

3

82,4

90

-

382

,490

-

3

01,96

5

64,

547

-

-

15

,978

Othe

r rec

eiva

bles

and

pre

paym

ents

3

87,39

6

(2,19

3,944

) 2

,581

,340

7

9,119

1,

530,

052

8

47,0

21

14,5

27

53,0

94

57,5

27

Inve

stm

ent i

n as

soci

ates

2

74,0

88

(525

,071

) 7

99,15

9

-

500

,669

2

83,21

7

15,27

3

-

-

Inve

stm

ent p

rope

rtie

s 6

,807

,743

-

6

,807

,743

-

3

,265,7

16

3,0

37,92

7

-

-

504

,100

Prop

erty

and

equ

ipm

ent

2,21

9,584

-

2

,219,5

84

26,

600

1,

912,2

42

233

,592

15

,960

10

,270

2

0,92

0 In

tang

ible

ass

ets

39,0

88

-

39,0

88

-

12,5

97

2,5

02

22,9

99

990

-

Em

ploy

ees r

etire

men

t ben

efits

15

4,01

6

-

154,

016

-

15

4,01

6

-

-

-

-

Stat

utor

y de

posit

s 5

55,0

00

-

555

,000

-

3

40,0

00

215

,000

-

-

-

De

ferr

ed ta

x as

sets

4

27,6

21

(5,71

2)

433

,333

-

4

01,9

15

-

-

-

31,4

18

Asse

ts c

lass

ified

as h

eld

for s

ale

973

,639

-

9

73,6

39

-

-

973

,639

-

-

-

Tota

l ass

ets

26,

525,

242

(1

1,678

,287)

3

8,20

3,529

8

,889

,570

18

,383

,126

7,

079,5

35

2,4

07,72

4

310

,177

1,

133,3

97

LIA

BIL

ITIE

SBo

rrow

ings

1,

020,

083

9

1,725

9

28,35

8

872

,257

5

,001

-

-

5

1,100

-

De

ferr

ed in

com

e 12

2,169

-

12

2,169

-

12

2,169

-

-

-

-

Tr

ade

paya

bles

5

,387

,629

(2

7,407

) 5

,415

,036

-

5

,376,

586

3

8,45

0

-

-

-

Othe

r lia

bilit

ies

1,46

9,737

(1

,976,

477)

3

,446

,214

1,

199,9

85

760,

545

6

96,6

03

548

,910

7,

762

2

32,4

09

Depo

sitor

s’ fu

nds

1,19

6,32

4

(55,

276)

1,

251,6

00

-

-

-

1,13

0,51

7

121,0

83

-

Insu

ranc

e co

ntra

ct li

abili

ties

8,26

3,204

-

8

,263,2

04

-

4,4

34,28

5

3,6

56,4

21

-

-

172,4

98

Inve

stm

ent c

ontra

ct li

abili

ties

336

,271

-

336

,271

-

-

336

,271

-

-

-

Divi

dend

pay

able

-

-

-

-

-

-

-

-

-

Cu

rren

t inc

ome

tax

liabi

litie

s 4

88,71

3

-

488

,713

2

55,10

9

217,

737

1,

789

8

,750

1,

132

4

,196

Empl

oyee

s ben

efit l

iabi

lity

570

,008

3

,787

5

66,22

1 4

3,329

4

93,5

30

1,04

6

15,6

61

1,113

11

,542

De

ferr

ed ta

x lia

bilit

ies

244,

868

-

24

4,86

8

-

186,9

16

31,8

09

-

-

26,1

43

Tota

l lia

bilit

ies

19,0

99,0

06

(1,96

3,648

) 2

1,062

,654

2

,370,

680

11

,596

,769

4

,762,

389

1,

703,8

38

182,1

90

446

,788

EQ

UIT

YSh

are

capi

tal

2,5

72,6

85

(7,20

6,84

5)

9,77

9,530

2

,572

,685

4

,366

,667

2

,161,3

39

208

,046

70

,793

4

00,0

00

Shar

e pr

emiu

m

2,6

90,93

6

(2,0

76,94

6)

4,76

7,882

2

,690

,936

8

02,73

7

404

,494

5

40,23

0

101,8

17

227

,668

Co

ntin

genc

y re

serv

e 1,

422,9

19

-

1,42

2,919

-

1,

288,

611

122,5

57

-

-

11,75

1 Tr

easu

ry sh

ares

(5

00,0

00)

(500

,000

) -

-

-

-

-

-

-

Re

tain

ed e

arni

ngs

834

,374

7

7,074

75

7,300

1,

254,

849

2

55,8

87

(381

,872

) (3

52,78

5)

(48,

441)

29,6

62

Othe

r com

pone

nt o

f equ

ity

405

,322

(7

,922)

4

13,24

4

420

72

,455

10

,628

3

08,39

5

3,8

18

17,5

28

Tota

l equ

ity

7,42

6,23

6

(9,71

4,63

9)

17,14

0,87

5

6,5

18,8

90

6,78

6,35

7

2,3

17,14

6

703,8

86

127,9

87

686

,609

Tota

l equ

ity a

nd li

abili

ties

2

6,52

5,24

2

(11,6

78,28

7)

38,

203,5

29

8,8

89,5

70

18,3

83,12

6

7,07

9,535

2

,407

,724

3

10,17

7

1,13

3,397




10 Trade receivables


Due from agents (see note 10(a) below) 221,943 380,535 - - Due from co-insurers (see note 10(b) below) 25,908 147,864 - -

247,851 528,399 - -

Within one year 247,851 528,399 - - More than one year - - - -

247,851 528,399 - -


Gross receivable from agents 637,150 808,264 - - Less: Impairment allowance (see note 10a(i) below) (415,207) (427,729) - -

221,943 380,535 - -

The carrying amount is a reasonable approximation of fair value

(a) The analysis of due from agents is as follows:


Balance, beginning of year 427,729 127,235 - - Allowance made during the year (see note 45) 75,605 302,079 - - Write off - (325) - - Write back (see note 45) (88,127) (1,260) - -

Balance, end of the year 415,207 427,729 - -

(i) The movements in impairment allowance on amount due from agents is analysed below:


Reinsurance receivables 382,542 300,646 - - Less: Impairment allowance (see note 10(b)(i) below) (356,634) (152,782) - -

25,908 147,864 - -

(b) The analysis of due from co-insurers is as follows:




11 Reinsurance assets


Non-life business reinsurance share of insurance liabilities (see 11(a) below) 2,189,935 1,582,128 - - Life business reinsurance share of insurance liabilities (see 11(b) below) 470,591 307,622 - -

2,660,526 1,889,750 - -

Within one year 2,660,526 1,760,238 - - More than one year - 129,512 - -

2,660,526 1,889,750 - -


Balance, beginning of year 152,782 137,510 - - Allowance made during the year (see note 45) 203,852 15,272 - -

Balance, end of the year 356,634 152,782 - -

(i) The movements in impairment allowance on reinsurance receivables is analysed below:


Prepaid reinsurance premium (see note (a)(i)) 1,217,601 858,696 - - Reinsurer’s share of claims expenses outstanding (see note (a)(ii)) 643,402 437,798 Reinsurer’s share of incurred but not reported claims (see note (a)(iii)) 328,932 285,634 - -

2,189,935 1,582,128 - -

(a) Non-life business reinsurance share of insurance liabilities


Balance, beginning of year 858,696 912,846 - - Movement during the year (see note 37) 358,905 (54,150) - -

Balance, end of year 1,217,601 858,696 - -

(i) The movement in prepaid reinsurance premium is shown below:





Short-term insurance contract 16,059 195,232 - - Long-term insurance contract 164,279 8,836 - -

180,338 204,068 - -


Balance, beginning of year 437,798 436,158 - - Movement during the year 205,604 1,640 - -


(ii) The movement in reinsurer’s share of claims expenses outstanding is shown below:


Balance, beginning of year 285,634 396,570 - - Movement during the year 43,298 (110,936) - -


(iii) The movement in reinsurer’s share of incurred but not reported claim is shown below:


Fire 799,554 491,262 - - General accident 95,384 93,060 - - Motor 142,485 126,505 - - Marine 126,358 73,491 - - Oil & gas 946,892 697,414 - - Engineering 72,110 89,924 - - Bonds 7,152 10,472 - -

2,189,935 1,582,128 - -

(iv) Analysis of non-life business reinsurance share of insurance liabilities by business classes are as follows:


Reinsurance asset (actuarial valuation) (see note 11(b)(i)) 180,338 204,068 - - Reinsurer and facultative asset 290,253 103,554 - -

470,591 307,622 - -

(b) Life business reinsurance share of insurance liabilities

(i) Reinsurance assets (actuarial valuation)





At 1 January 307,622 170,687 - - Additions in the year 290,980 374,779 - -Receipts during the year (128,011) (237,844) - -

Balance as at year end 470,591 307,622 - -

(ii) The movement in life business reinsurance assets is as shown below:

Reinsurance assets are valued after an allowance for their recoverability and the carrying amount is a reasonable approximation of fair value.

12 Deferred acquisition costs This represents the unexpired portion of the commission paid to brokers and agents as at reporting date.


Balance at start of the year 382,490 366,892 - - Additions in the year 937,254 853,049 - - Amortization in the year (968,668) (837,451) - -

Balance as at year end 351,076 382,490 - -

Within one year 351,076 382,490 - - More than one year - - - -

351,076 382,490 - -

13 Other receivables and prepayment


Intercompany receivables (see note 13(a) below) - - 252,944 47,280 Accrued investment income (see note 13(b) below) 191,810 172,819 - - Other receivables (see note 13(c) below) 893,336 818,170 29,104 23,537 Prepayments 254,592 274,786 40,208 10,591

1,339,738 1,265,775 322,256 81,408 Impairment allowance on other receivables (see note 13(d) below) (902,857) (878,379) (2,289) (2,289)

436,881 387,396 319,967 79,119

Within one year 436,881 387,396 319,967 79,119 More than one year - - - -

436,881 387,396 319,967 79,119




(a) Due from related parties


Royal Exchange Microfinance Bank Limited - - 3,738 1,397 Royal Exchange Finance and Asset Management Limited - - - 1,897 Royal Exchange Healthcare Limited - - 49,493 43,986 Royal Exchange General Insurance Company Limited - - 199,713 -Royal Exchange Prudential Life Plc - - - -

- - 252,944 47,280

(b) Accrued investment income


Dividend receivables 191,810 172,819 - -

191,810 172,819 - -

(c) Other receivables


Inventory - 8,692 - - Accrued rental income 29,362 20,279 - - Staff advance and other debtors 88,665 115,701 - - Management fees receivable - - 19,048 20,558 Witholding tax receivables 5,481 - - -Income tax receivables 2,262 - - -Trustee fees receivable 1,873 2,635 1,873 2,635 Sundry debtors 624,483 624,028 - - Annuity Transfer to REFAM 11,039 - - - Receivable from Funds under management 2,167 2,167 - - Sundry receivables 128,004 44,668 8,183 344

893,336 818,170 29,104 23,537

(d) Impairment allowance on other receivables The movements in impairment allowance on other receivables is analysed below:


Balance, beginning of year 878,379 869,889 2,289 - Allowance made during the year (see note 45) 42,811 24,610 - 2,289 Write off - (7,265) - - Reclassifications - - - - Write back (see note 45) (18,333) (8,855) - -

Balance, end of year 902,857 878,379 2,289 2,289

Included in other receivables are financial assets as follows:


Financial assets 182,289 112,610 279,759 68,528




14 Investment in associates(a) The movement in balances of investment in associates are as shown below:


Balance, beginning of the year 274,088 295,250 - - Additional investment during the year - 30,000 - - Dividend income - (14,534) - - Share of current year result recognised in OCI (5,988) - - -

268,100 310,716 - -Share of current year result recognised in profit or loss (1,406) (48,799) - - Share of cumulative unrecognised results (87,548) 12,171 - -

Recognised in profit or loss (88,954) (36,628) - -

Balance, end of the year (see note 14(b) below) 179,146 274,088 - -

(b) This represents the Group’s investment in the ordinary shares of City Business Computers EMEA Limited (CBC EMEA) incorporated in Nigeria, representing 26.10% (December 2015: 26.10%) equity interest in the company. The investee company has 31 December as its year end.

The summarised financial information of CBCEMEA Limited are as set out below:

In thousands of Naira 31-Dec-16 31-Dec-15

Percentage ownership interest 26.10% 26.10%

Non-Current Asset 1,788,506 1,767,001Current Asset 3,730,915 3,369,394

Total Assets 5,519,421 5,136,395 Non-Current Liabilities (895,587) (820,867)Current Liabilities (3,937,447) (3,265,328)

Total Liabilities (4,833,034) (4,086,195)

Net Assets 686,387 1,050,200

Company’s share of net assets 179,146 274,088

Carrying amount of associate 179,146 274,088

Revenue 2,734,506 3,078,818 (Loss)/profit after tax from continuing operations (5,387) (186,978)Other comprehensive income (22,942) - Total comprehensive income (28,329) (186,978)

Company’s share of total comprehensive income (7,394) (48,799)

Company’s share of other comprehensive income (5,988) -

Company’s share of loss (1,406) (48,799)




15 Investment properties


At 1 January 6,807,743 7,722,739 - - Additions during the year - - - - Disposals during the year (1,999,306) - - - Fair value gains (see note 44) 611,421 600,530 - - Transfer to property and equipment (see note 17) - (541,887) - - Transfer to non current assets held for sale (see note 16) - (973,639) - -

At 31 December 5,419,858 6,807,743 - -

(a) The items of investment properties are valued as shown below:

Investment properties Location Name of valuer Address of Valuer FRC NOS. 31-Dec-16 31-Dec-15

No.2, Bank road, off Ibrahim Taiwo way, Kano Yayok Associates Suite B7, Halima Plaza, FRC/2013/NIESV/00000000834 405,600 320,700 Estate Surveyor & behind Sahad Stores, Valuer Balanga, Abuja

No.5, NBC road, off Ahmadu Bello way, Kaduna Yayok Associates Suite B7, Halima Plaza, FRC/2013/NIESV/00000000834 275,400 220,800 Estate Surveyor & behind Sahad Stores, Valuer Balanga, Abuja

No. 7, Usuma Cresent Maitama Abuja Emeka Orji Partnership Suite 9G, 9th floor, FRC/2013/NIESV/00000000976 559,999 545,824 Ahmed Talib House (NNDC) 18/19 Ahmadu Bello Way, Kaduna

No 1, Eleko close, Ikoyi, Lagos Saibu Makinde & NIPOST Building, FRC/2013/NIESV/00000000730 799,422 700,000 Associates 5th floor (right wing), Lafiaji, Lagos

No. 2, Eleko close Ikoyi Lagos Saibu Makinde & NIPOST Building, FRC/2013/NIESV/00000000730 981,073 850,000 Associates 5th floor (right wing), Lafiaji, Lagos

No. 26, Abdulrahman Okene cresent, Saibu Makinde & NIPOST Building, FRC/2013/NIESV/00000000730 720,114 628,391Victoria Island, Lagos Associates 5th floor (right wing), Lafiaji, Lagos

29, Oroago crescent Garki 11,Abuja Emeka Orji Partnership Suite 9G, 9th Floor, FRC/2013/NIESV/00000000976 390,000 356,196 Ahmed Talib House. (NNDC), 18/19 Ahmodu Bello Way, Kaduna

15a Asa road, Aba Uma Uma & Company 46 St. Michael’s Road, Aba, FRC/2013/NIESV/00000004050 69,000 69,000 Abia State

36/38, Apapa Oshodi expressway, Oshodi, Lagos Saibu Makinde & NIPOST Building, FRC/2013/NIESV/00000000730 800,750 755,026 Associates 5th floor (right wing), Lafiaji, Lagos

10, Bayo Kuku street, Ikoyi, Lagos Saibu Makinde & NIPOST Building, FRC/2013/NIESV/00000000730 - 1,857,706 Associates 5th floor (right wing), Lafiaji, Lagos

12, Post Office road, Kano Yayok Associates Suite B7, Halima Plaza, FRC/2013/NIESV/00000000834 418,500 362,500 Estate Surveyor & behind Sahad Stores, Valuer Balanga, Abuja

8, Bank street, Jos. Yayok Associates Suite B7, Halima Plaza, FRC/2013/NIESV/00000000834 - 141,600 Estate Surveyor & behind Sahad Stores, Valuer Balanga, Abuja

5,419,858 6,807,743




(a) Movement in investment properties are as shown below: For the year ended 31 December 2016

Balance as at Transfer/ Fair value Balance as at 31Property Details 1 January 2016 Additions disposal Gain/(Loss) December 2016

In thousands of Naira

No. 2, Bank Road, off Ibrahim Taiwo Way, Kano 320,700 - - 84,900 405,600 No. 5, NBC Road, off Ahmadu Bello Way, Kaduna 220,800 - - 54,600 275,400 No. 7, Usuma Cresent Maitama Abuja 545,824 - - 14,175 559,999 No 1, Eleko Close, Ikoyi, Lagos 700,000 - - 99,422 799,422 No. 2, Eleko Close Ikoyi, Lagos 850,000 - - 131,073 981,073 No. 26, Abdulrahman Okene Cresent, Victoria Island, Lagos 628,391 - - 91,723 720,114 29, Oroago Crescent Garki 11, Abuja 356,196 - - 33,804 390,000 15a, Asa Road, Aba 69,000 - - - 69,000 36/38, Apapa Oshodi Expressway Oshodi, Lagos 755,026 - - 45,724 800,750 10, Bayo Kuku Street, Ikoyi, Lagos 1,857,706 - (1,857,706) - - 12, Post Office Road, Kano 362,500 - - 56,000 418,500 8, Bank Street, Jos 141,600 - (141,600) - -

6,807,743 - (1,999,306) 611,421 5,419,858

For the year ended 31 December 2015

Balance as at Transfer/ Fair value Balance as at 31Property Details 1 January 2015 Additions disposal Gain/(Loss) December 2015


No. 2, Bank Road, off Ibrahim Taiwo Way, Kano 302,450 - - 18,250 320,700 No. 5, NBC Road, off Ahmadu Bello Way, Kaduna 214,700 - - 6,100 220,800 No. 7,Usuma Cresent Maitama Abuja 513,502 - - 32,322 545,824 No. 6a/6b Usuma Cresent, Maitama, Abuja 541,886 - (541,886) - - No. 1, Eleko Close, Ikoyi, Lagos 608,970 - - 91,030 700,000 No. 2, Eleko Close Ikoyi, Lagos 570,000 - - 280,000 850,000 No. 26, Abdulrahman Okene Cresent, Victoria Island, Lagos 590,132 - - 38,259 628,391 29, Oroago Crescent Garki 11, Abuja 326,037 - - 30,159 356,196 776 Cadastral Zone A00, Central Business Area, Abuja 973,639 - (973,639) - - 15a, Asa Road, Aba 70,000 - - (1,000) 69,000 36/38, Apapa Oshodi Expressway Oshodi, Lagos 704,973 - - 50,053 755,026 10, Bayo Kuku Street, Ikoyi, Lagos 1,800,000 - - 57,706 1,857,706 12, Post Office Road, Kano 355,850 - - 6,650 362,500 8, Bank Street, Jos 150,600 - - (9,000) 141,600

7,722,739 - (1,515,525) 600,529 6,807,743




(b) Valuation techniques used for fair valuation of investment properties Investment properties are stated at fair value which has been determined based on valuations performed by Messrs

Yayok Associates, Emeka Orji, Uma Uma & Company & Saibu Makinde Associates as at 31 December 2016. They are industry specialists in valuing these types of investment properties. The fair value is supported by market evidence and represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm’s length transaction at the date of valuation, in accordance with standards issued by the International Valuation Standards Committee. Valuations are performed on an annual basis and the fair value gains and losses are reported in profit or loss. The profits or losses on disposal are also reported in profit or loss as they occurred.

The fair value measurement for the investment properties has been categorised as a Level 3 fair value based on the use of significant unobservable inputs in the valuation technique used.

The details of valuation techniques and significant observable inputs used in determining the fair value of investment properties are presented below:

Location of Significant Valuation investment Valuation unobservableProperty description (N’000) properties technique inputs

The property is a fully completed building with 405,600 No 2 Bank Road, Sales Comparison Price per3 floors located in the central business district off Ibrahim Taiwo way, square meterof Kano which is a commercial neighbourhood. Kano State

Site: The site, which is slightly irregular in shape, appears level and well drained and is relatively flat. It has a total area of approximately 1,685 square metres.

Situation: Primary access to the property is vide the Ibrahim Taiwo road Kano State.

The property is a 2 storey office block and a commercial bungalow located in the central business district of Kaduna State.

Site: The site, which is rectangular in shape, 275,400 No. 5, NBC Road, Sales Comparison Price perappears level and relatively flat. It covers a off Ahmadu Bello Way, square metertotal land area of approximately 5,184 square metres. Kaduna

Situation: Primary access to the property is vide the Ahmadu Bello way while a secondary accessis the Broadcasting road Kaduna State.

The property is a 5 bedroom detached duplex 559,999 No. 7, Usuma Cresent, Sales Comparison Price perlocated in a high brow low density residential Maitama, Abuja square meterneighbourhood in Abuja.

Site: The site is rectangular in shape, appears firm and is sloped gently towards the back. It has a total land area of approximately 2,133.60 square metres.

Situation: Primary access to the property is vide the Usman Crescent which takes its root from Gana street which itself takes root from the popular Shehu Shagari way in Maitama Abuja.





The property is a 4 bedroom detached house. 799,422 No 1, Eleko Close, Sales Comparison Price perIt is located in the Old Ikoyi fully developed Ikoyi, Lagos square meterneighbourhoud of Lagos.

Site: The site, which is rectangular in shape, and covers a total land area of approximately 1,041.76 square metres.

Situation: Primary access to the property is vide the Macpherson Street which carries traffic to Bourdillon Road Ikoyi.

The property is a 4 bedroom detached house. 981,073 No. 2, Eleko Close, Sales Comparison Price perIt is located in the Old Ikoyi fully developed Ikoyi Lagos square meterneighbourhood of Lagos.

Site: The site, which is rectangular in shape, and covers a total land area of approximately 1,837.85 square metres.

Situation: Primary access to the property is vide the Macpherson Street which carries traffic to Bourdillon road Ikoyi.

The property is a block of open plain office space on 720,114 No. 26, Abduraman Sales Comparison Price pertwo floors. It is located in the commercial area of Okene Cresent, square meterLagos State. Victoria Island, Lagos

Site: The site, which is rectangular in shape, appears level and relatively flat. It covers a total land area of approximately 1,260 square metres.

Situation: Primary access to the property is vide the Ligali Ayorinde Street.

The property is a fully completed building with 3 floors located in the central business district of Garki II, Abuja which is a commercial neighbourhood.

Site: The site, which is slightly irregular in shape, 390,000 29 Oroago Crescent, Sales Comparison Price perappears level and well drained and is relatively flat. Garki 11, Abuja square meterIt has a total area of approximately 2,017 square metres.

Situation: Primary access to the property is vide the Muhammud Buhari Way, Abuja.





The property is a fully completed building with 2 floors 69,000 15a, Asa Road, Aba Sales Comparison Price perlocated in the central business district of Aba, square meterAbia State which is a commercial neighbourhood.

Site: The site, which is rectangular in shape, appears level and well drained and is relatively flat. It has a total area of approximately 2,017 square metres.

Situation: Primary access to the property is vide the Muhammud Buhari Way, Abuja.

The property is a fully completed building with 800,750 36/38, Apapa Oshodi Sales Comparison Price per3 floors located in Oshodi, Lagos which is a Expressway Oshodi, square metercommercial neighbourhood. Lagos and 10, Bayo Kuku Street, Ikoyi, Lagos

Site: The site, which is rectangular in shape, appears level and relatively flat. It covers a total land area of approximately 5,275 square metres.

Situation: Primary access to the property is vide the Oshodi Apapa Express way and Akin Lawanson Street, Lagos State.

The property is a fully completed building with 2 floors 418,500 12, Post office road, Sales Comparison Price perlocated in the Central Business District Kano Kano square meterMunicipality, which is a commercial neighbourhood.

Site: The site, which is triangular in shape, appears level and relatively flat. It covers a total land area of approximately 2,618 square metres.

Situation: Primary access to the property is vide Post Office Road and Bank Road, Kano.




16 Assets classified as held for sale


Balance, beginning of year 973,639 - - - Transfer from investment properties (see note 15) - 973,639 - -


In December 2015, management committed to a plan to sell one of its investment property located at 776 Cadastral Zone A00, Central business area, Abuja. Accordingly, this property is presented as a non-current assets held for sale.

At 31 December 2016, the non-current assets held for sale was stated at its carrying amount; as investment properties are measured at the lower of its carrying amount and fair value less cost to sell.

The company conducted an impairment test on the non-current asset held for sale in the period under review and there was no indication of impairment on the assets. The fair value of the non current asset held for sale as at 31 December 2016 stood at =N=995 million, higher than the carrying amount of =N=974 million, hence there were no changes to its carrying amount. There are no gains or losses recognised in relation to its classification as a non-current asset held for sale.

The determination of the fair value was conducted by a professional Estate Surveyor and Valuer; Emeka Orji Partnership, with FRC number FRC/2013/NIESV/00000000976 and NIESV number A-1672.




Accumulated Depreciation Balance at 1 January 2016 2,456 - 161,244 257,760 472,755 565,496 1,459,711 Charge for the year - 311 34,897 20,628 42,095 164,017 261,948 Reclassification (3,286) - - - - - (3,286)Disposals - - - - (3,654) (116,566) (120,220)

Balance at 31 December 2016 (830) 311 196,141 278,388 511,196 612,947 1,598,153

Balance at 1 January 2015 16 - 121,064 236,307 425,291 472,993 1,255,671 Charge for the year 2,440 - 40,180 20,850 50,830 141,489 255,789 Reclassification - - - 603 (603) - - Disposals - - - - (2,763) (48,986) (51,749)

Balance at 31 December 2015 2,456 - 161,244 257,760 472,755 565,496 1,459,711

Carrying amounts:

Balance at 31 December 2016 195,069 2,361 1,584,091 37,563 78,237 385,949 2,283,270

Balance at 31 December 2015 195,069 - 1,618,800 42,295 102,863 260,557 2,219,584

(i) There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (2015: nil).

(ii) The Group had no capital commitments as at the balance sheet date (2015: nil) see note 59(a).

(iii) There was no item of plant and equipment that has been pledged as security for borrowings as at year end (2015 : nil).

(iv) During the year, the Group reviewed the estimated useful life of its leasehold land as unlimited on the basis that it is reasonably certain that the Lagos State Governor will renew the lease upon expiration and that the substance of the lease is that the Group has ownership of the land, not a right to use the land for a predefined period.

Consequently, the Group has discontinued depreciation of leasehold land.

17 Property and equipment

(a) Group

Plant Freehold Computer Furniture Motor In thousands of Naira Land and machinery buildings Equipment and Fittings Vehicles Total

Cost Balance at 1 January 2016 197,525 - 1,780,044 300,055 575,618 826,053 3,679,295 Reversal (see note iv below) Reclassification (3,286) - - (2,586) - (5,872)Additions - 2,672 188 15,896 25,204 308,982 352,942 Disposals - - - - (8,803) (136,139) (144,942)

Balance at 31 December 2016 194,239 2,672 1,780,232 315,951 589,433 998,896 3,881,423

Balance at 1 January 2015 137,649 - 1,161,958 280,857 558,544 789,841 2,928,849 Transfer from investment properties (see note 15) - - 541,886 - - - 541,886 Reclassification (2,624) - 2,624 1,747 (1,747) - - Additions 62,500 - 73,576 17,451 22,233 117,012 292,772 Disposals - - - - (3,412) (80,800) (84,212)

Balance at 31 December 2015 197,525 - 1,780,044 300,055 575,618 826,053 3,679,295




(i) There were no capitalised borrowing costs related to the acquisition of property and equipment during the year (2015: nil).

(ii) The Company had no capital commitments as at the balance sheet date (2015: nil) see note 59(a).

(iii) There was no property and equipment that has been pledged as security for borrowing as at year end. (2015: Nil).

(b) Company

Freehold Computer Furniture Motor In thousands of Naira buildings Equipment and Fittings Vehicles Total

Cost Balance at 1 January 2016 - 16,371 25,732 49,150 91,253 Additions - 2,146 3,178 80,097 85,421 Reclassifications - - - - - Disposals - - (3,260) (8,150) (11,410)

Balance at 31 December 2016 - 18,517 25,650 121,097 165,264

Balance at 1 January 2015 - 14,252 27,479 30,650 72,381 Additions - 372 - 18,500 18,872 Reclassifications - 1,747 (1,747) - -


Accumulated DepreciationBalance at 1 January 2016 - 14,731 22,617 27,305 64,653 Charge - 1,184 1,628 13,696 16,508 Transfer - - - - - Disposals - - (1,847) (4,245) (6,092)


Balance at 1 January 2015 - 13,176 21,314 20,403 54,893 Charge - 952 1,906 6,902 9,760 Transfer - 603 (603) - -


Carrying amounts:






19 Employee benefit obligations

The Group operates defined contribution pension plan based on the New Pension Act 2014 and a defined benefit gratuity plan based on employee’s pensionable and other post-employment remuneration and length of service.

The details of the Group’s assets from Employee benefits are as below:

The details of the Group’s liabilities from Employee benefit obligations are as below:


Defined benefit obligations (see note 19.1 below) 234,011 154,016 - -

Employee benefit asset in statement of financial position 234,011 154,016 - -


Defined contribution obligations - 3,787 - - Defined benefit obligations (see note 19.1 below) 39,269 566,221 883 43,329

Employee benefit liability in statement of financial position 39,269 570,008 883 43,329

18 Intangible assets


Cost:At 1 January 231,455 229,445 9,375 9,375 Additions 8,132 2,010 - -

At 31 December 239,587 231,455 9,375 9,375

Accumulated amortisation:At 1 January 192,367 182,582 9,375 9,375 Charge for the year 14,104 9,785 - -

At 31 December 206,471 192,367 9,375 9,375

Carrying Amount as at 31 December 33,116 39,088 - -

The Intangible assets of the Group comprised computer software.The computer software is accounted for using the cost model less accumulated amortization and accumulated impairment. The amortization is charged to the income statements in accordance with the Group’s policy. As at 31 December 2016, these assets were tested for impairment, and Management has determined that no impairment is required of these intangibles.




19.1 Defined benefit plan:

The Group offers its employees defined benefit plans in the form of gratuity scheme and long service awards. The Gratuity Scheme covers all employees and it is payable to an employee on resignation only if the employee has served the entity for more than five years. The gratuity benefit is based on a percentage of an employee’s annual emolument.

The Group operates a Long Service Award scheme for its employees. Qualification for long service awards are 10 years, 15 years, 20 years, 25 years, 30 years and 35 years.

The defined benefit obligations are actuarially determined at the year end by HR Nigeria Limited with FRC number FRC/2012/NAS/00000000738. The actuarial valuation is done based on the “Projected Unit Credit” method. Gains and losses of changed actuarial assumptions are charged to other comprehensive income.

(a) The details of the defined benefit plans are as below:


Pension (net asset) (see note 19.1 (d) below) 234,011 154,016 - -

Defined benefit asset in statement of financial position 234,011 154,016 - -

Gratuity (outstanding liability) (see note 19.1(e) below) - (514,004) - (41,467)Long service award (outstanding liability) (see note 19.1(f) below) (39,269) (52,217) (883) (1,862)

Defined benefit liability in statement of financial position (39,269) (566,221) (883) (43,329)

(b) Company’s obligations for:


– Pension benefits (see note 19.1(d) below) (181,830) (242,792) - - – Gratuity (see note 19.1(e) below) - (551,896) - (41,467)– Long service award (see note 19.1(f) below) (39,269) (52,217) (883) (1,862)

Total Company’s obligation (221,099) (846,905) (883) (43,329)

(c) Fair value of Company’s plan assets


– Pension (see note 19.1(d) below) 415,841 396,808 - -– Gratuity (see note 19.1(e) below) - 37,892 - -

415,841 434,700 - -




i Income statement charge for:


– Pension benefits (see note 19.1(d)(iii) below) (21,904) (27,837) - - – Gratuity (see note 19.1(e)(iii) below) - 98,981 - 21,700 – Long service award (see note 19.1(f)(ii) below) 13,724 12,278 422 443

Total (See note 48) (8,180) 83,422 422 22,143

ii Gain/(loss) on other comprehensive income


- Adjustments for net pension assets (see note 19.1(d)(iv)) 58,091 (74,236) - - - Adjustments for long-service awards obligations (see note 19.1(f)(iii)) 23,230 (909) (1,401) 3

Total 81,321 (75,145) (1,401) 3

Tax effect of remeasurement (4,890) 7,413 - -

Total in other comprehensive income 76,431 (67,732) (1,401) 3

(d) Pension benefits The amounts recognised in the statement of financial position are determined as follows:


Present value of funded obligations (see note 19.1(d)(i) below) (181,830) (242,792) - - Fair value of plan assets (see note 19.1(d)(ii) below) 415,841 396,808 - -

Net asset in the statement of financial position 234,011 154,016 - -

Current - - - - Non-current 234,011 154,016 - -

234,011 154,016 - -

i The movement in the present value of the funded pension benefits obligation over the year is as follows:


At 1 January 242,792 193,545 - - Interest cost 25,713 26,724 - - Actuarial (gains)/ losses-assumption (41,413) 37,436 - - Actuarial (gains)/losses-experience (19,659) 15,303 - - Benefits paid by employer - (30,216) - - Benefits paid by the fund (25,603) - - -

At 31 December 181,830 242,792 - -




ii The movement in the fair value of plan assets of the year is as follows:


At 1 January 396,808 363,744 - - Expected return on plan assets 47,617 54,561 - - Benefits paid (25,603) - - - Actuarial (loss)/gains (2,981) (21,497) - -

At 31 December 415,841 396,808 - -

iii The amounts recognised in the profit or loss are as follows:


Current service costs - - - - Net interest costs/income:- Interest costs (see note 19.1(d)(i)) 25,713 26,724 - -- Expected return on plan asset (see note 19.1(d)(i)) (47,617) (54,561) - -

At 31 December (21,904) (27,837) - -

iv The amounts recognised in other comprehensive income are as follows:


Actuarial (gains)/ losses-assumption for obligation (see note 19.1(d)(i)) 41,413 (37,436) - - Actuarial (losses)-experience for obligation (see note 19.1(d)(i)) 19,659 (15,303) - - Actuarial (losses) on plan asset (see note 19.1(d)(ii)) (2,981) (21,497) - -

At 31 December 58,091 (74,236) - -

The periodic pension costs are included in the staff costs for the reporting period and treated as a single line item.

The principal actuarial assumptions used were as follows:


Discount rate 16% 12% N/A N/ARate of pension increase 3% 3% N/A N/AInflation rate 12% 9% N/A N/A




The mortality rates assumed for the employees are the rates published in the A67/70 Ultimate Tables published jointly by the Institute and Faculty of Actuaries in the United Kingdom.

The average life expectancy in years of a pensioner retiring at age 65, at the end of the reporting period is as follows:

Group Group Company CompanyIn years 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15

Male 79 80 N/A N/AFemale 83 84 N/A N/A

The sensitivity of overall pension liability to changes in the weighted principal assumptions is:

31-Dec-16 Impact on liability including Change in assumption change (N’000)

Discount rate -0.50% 0.50% 186,392 177,486


Discount rate -0.50% 0.50% 250,351 235,659

(e) Gratuity benefitsThe amounts recognised in the statement of financial position are determined as follows:


Present value of obligations (see note 19.1(e)(i) below) - 551,896 - 41,467 Fair value of plan assets (see note 19.1(e)(ii) below) - (37,892) - -

Net obligation in the statement of financial position - 514,004 - 41,467

Current - - - 41,467 Non-current - 514,004 - -

- 514,004 - 41,467




(ii) The movement in fair value of plan assets over the year is as follows:


At 1 January 37,892 26,722 - - Employer contributions - 11,170 - - Expected returns on plan assets - - - - Benefits paid - - - - Actuarial (gains)/losses - - - - Extinguished plan assets (37,892) - - -

At 31 December - 37,892 - -

(iii) The amounts recognised in the profit or loss are as follows:


Current service costs - 50,949 - 2,863 Net interest costs/income:- Interest costs (see note 19.1(e)(i)) - 33,821 - 1,389 Past service costs (including curtailment) (see note 19.1(e)(i)) - 14,211 - 17,448

At 31 December - 98,981 - 21,700

(i) The movement in the present value of the gratuity obligation over the year is as follows:


At 1 January 551,896 530,941 41,467 22,843 Current service cost - 50,949 - 2,863 Interest cost - 33,821 - 1,389 Past service cost (including curtailments) - 14,211 - 17,448 Benefits paid (551,064) (78,026) (41,467) (3,076)Adjustments to gratuity reserves (832) - - - Actuarial (gains)/losses - - - -

At 31 December - 551,896 - 41,467

The gratuity plan has been terminated effective 31 December 2015. The Group’s liability was not actuarially determined in the year ended 31 December 2016 as the liability determined as at 31 December 2015 was adopted as the Group’s liability to its employees.

The Group settled its employees in January 2016.




(f) Long Service Awards


Present value of unfunded obligations (see note 19.1(f)(i) below) 39,269 52,217 883 1,862

39,269 52,217 883 1,862

Current - - - -Non-current 39,269 52,217 883 1,862

39,269 52,217 883 1,862

(i) The movement in the defined benefit obligation over the year is as follows:


At 1 January 52,217 40,987 1,862 1,531 Current service cost 7,836 6,130 259 213 Interest cost 5,888 6,148 163 230 Benefits paid (3,442) (1,957) - (115)Actuarial (gains)/losses (23,230) 909 (1,401) 3

At 31 December 39,269 52,217 883 1,862

(ii) The amounts recognised in the profit or loss are as follows:


Current service costs (see note 19.1(f)(i)) 7,836 6,130 259 213 Net interest costs/income:- Interest costs (see note 19.1(f)(i)) 5,888 6,148 163 230

At 31 December 13,724 12,278 422 443

(iii) The amounts recognised in other comprehensive income are as follows:


Actuarial losses/(gains) on obligations (see note 19.1(f)(i)) (23,230) 909 (1,401) 3


The principal actuarial assumptions used were as follows:

Discount rate 16% 12% 16% 12%Future salary increases 13% 11% 13% 11%Inflation rate 12% 9% 12% 9%




The mortality rates assumed for the employees are the rates published in the A67/70 Ultimate Tables published jointly by the Institute and Faculty of Actuaries in the United Kingdom.

The sensitivity of overall long service award liability to changes in the weighted principal assumptions is:


Discount rate -0.50% 0.50% 36,832 35,008 Future salary increases -0.50% 0.50% 35,163 36,611 Inflation rate -0.50% 0.50% 35,736 36,017


Discount rate -0.50% 0.50% 40,255 37,676 Future salary increases -0.50% 0.50% 38,155 39,737 Inflation rate -0.50% 0.50% 38,337 39,554

20 Statutory deposits

In line with Section 10 (3) of the Insurance Act of Nigeria, a deposit of 10% of the regulatory share capital is kept with the Central Bank of Nigeria (CBN). The cash amount held is considered to be a restricted cash balance.

21 Deposit for shares

Deposit for shares represents cash deposit for additional shares in Royal Exchange Prudential Life Plc, during the year ended 31 December 2016. The Group, through a Board resolution dated 30 December 2016 agreed that the sum of =N=500,000,000 (Five hundred million naira) be deposited for the creation of additional 500,000,000 ordinary shares in Royal Exchange Prudential Life Plc at the price of =N=1 per share. The Company has commenced the process for obtaining regulatory approval for the conversion of the deposit for shares to equity, however, as at 31 December 2016, the Company was yet to receive the approval.


Deposits with CBN 555,000 555,000 - -

The analysis of the statutory deposit is as follows: Deposit with CBN for non-life business 340,000 340,000 - -Deposit with CBN for life business 215,000 215,000 - -

555,000 555,000 - -


Deposit for shares in Royal Exchange Prudential Life Plc - - 500,000 -




22 Deferred taxation

Group The movement in the net deferred tax assets/(liabilities) during the year are shown below:For the year ended 31 December 2016

Net balance as Recognised in Recognised Net balance as atIn thousands of Naira at 1 January profit or loss in OCI 31 December 2016

Deferred tax assetsProperty and equipment, and software 39,401 103,008 - 142,409 Allowances for loans and receivables - - - - Unrelieved loss 242,663 (27,103) - 215,560 Employee benefits 145,557 (138,461) - 7,096 Foreign exchange - - - -

Deferred tax assets 427,621 (62,556) - 365,065

Deferred tax liabilitiesInvestment properties (244,868) (49,772) - (294,640)Employee benefits - - (4,890) (4,890)

Deferred tax liabilities (244,868) (49,772) (4,890) (299,530)

Net deferred tax assets/(liabilities) 182,753 (112,328) (4,890) 65,535

For the year ended 31 December 2015

Net balance as Recognised in Recognised Net balance as atIn thousands of Naira at 1 January profit or loss in OCI 31 December 2015

Deferred tax assetsProperty and equipment, and software (11,235) 50,636 - 39,401 Allowances for loans and receivables - - - - Unrelieved loss 507,197 (264,534) - 242,663 Employee benefits 144,857 (6,713) 7,413 145,557 Foreign exchange (374) 374 - -

Deferred tax assets 640,445 (220,237) 7,413 427,621

Deferred tax liabilitiesInvestment properties (172,495) (72,373) - (244,868)

Deferred tax liabilities (172,495) (72,373) - (244,868)

Deferred tax assets/(liabilities) 467,950 (292,610) 7,413 182,753

Deferred tax assets have been recognised in the account because it is probable that future taxable profit will be available against which the Group can utilise the benefits therefrom.

Deferred tax assets have not been recognised in the Company because it is not probable that future taxable profit will be available against which the Company can utilise the benefits therefrom as detailed in Note 22(a) below.




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

The deferred tax assets of Royal Exchange Prudential Life Plc and Royal Exchange Plc, components of the group, which relates primarily to timing difference in the recognition of depreciation and capital allowances on property and equipment, impairment on premium receivables, employee benefit liabilities and unrelieved tax losses were not recognized in these financial statements.

This is due to the uncertainty about the availability of future taxable profits against which deferred tax assets can be utilized.

The unrecognized deferred tax asset during the year is attributable to the following:


Property and equipment 120,439 95,314 37,037 30,436 Employee benefit liabilities 1,629 24,680 283 12,999 Unrelieved tax losses 868,260 672,020 247,604 129,107

990,328 792,014 284,924 172,542

The movement in the unrecognized deferred tax asset during the year was as follows:


Balance, beginning of year 792,014 537,615 172,542 97,531 Increase/(decrease) during the year 198,314 254,399 75,011 75,011

990,328 792,014 247,553 172,542




23 Deferred income


Deferred rental income (see 23(a) below) 29,648 23,392 - - Deferred commission income (see 23(b) below) 133,294 98,777 - -

At 31 December 162,942 122,169 - -

Within one year 154,332 95,885 - - More than one year 8,610 26,284 - -

162,942 122,169 - -

(a) Deferred rental income


At 1 January 23,392 28,716 - - Additions during the year 67,949 34,060 - - Amortised for the year (61,693) (39,384) - -

At 31 December 29,648 23,392 - -

(b) Deferred commission incomeThis represents the unexpired portion of commission received from businesses ceded to reinsurers as at the reporting date.


Balance at start of the year 98,777 73,518 - - Additions in the year 462,937 305,245 - - Amortization in the year (428,420) (279,986) - -

At 31 December 133,294 98,777 - -

Analysis of deferred acquisition income by class of insurance are as follow:


Fire 75,348 23,504 - - Accident (3,495) 9,825 - - Motor 11,832 10,326 - - Marine and aviation 6,531 9,802 - - Oil and gas 22,762 37,480 - - Engineering 20,169 7,291 - - Bond 147 549 - -

133,294 98,777 - -




24 Trade payables


Reinsurance payables 343,410 358,483 - - Deposit for premium (see note (a) below) 8,005,683 5,018,782 - - Premium payables to co-insurers 6,011 10,364 - -

8,355,104 5,387,629 - -

Within one year 8,355,104 5,387,629 - - More than one year - - - -

8,355,104 5,387,629 - -

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

(a) Deposit for premium represents premium collected in advance at the reporting date that are yet to be recognised as at year end.

25 Other liabilities


Due to related parties (see 25(a) below) - - 415,240 738,352 Other liabilities (see 25(b) below) 1,616,032 1,469,737 504,960 461,633

1,616,032 1,469,737 920,200 1,199,985

Within one year 1,382,788 1,382,788 171,996 171,996 More than one year 233,244 86,949 748,204 1,027,989

1,616,032 1,469,737 920,200 1,199,985


Royal Exchange General Insurance Company - - - 466,294 Royal Exchange Prudential Life Plc - - 412,182 272,058 Royal Exchange Finance and Asset Management - - 3,058 -

- - 415,240 738,352

(a) Due to related parties





Sundry creditors 290,135 233,774 6,963 13,597 Provision for litigations and claims 78,954 78,954 - - VAT payable 15,801 - - - Sales deposit and other creditors 271,270 250,821 - - Accrued commissions payable 84,838 76,067 - - Withholding tax 61,806 - - - Co-operative/thrift savings - 10 - - Pay As You Earn (PAYE) tax 428 - - - National Housing Fund payable - 7,418 - - Solicitors fee 51,294 - 51,294 -Judgement sum 150 - 150 -Union dues 3 3 - -

854,679 647,047 58,407 13,597


Deferred income 12,069 9,447 - - Accruals 142,583 248,033 15,404 35,297 WHT and PAYE payables 106,506 105,699 45,336 46,182 VAT payable 101,458 101,326 85,703 76,920 NAICOM levy 50,065 34,491 - - Other statutory payables 6,381 4,423 Deposit for shares - 29,526 - - Staff payables 24,181 108 - - Bank overdrafts 14,015 - - - Dividend payable held as collateral (see note (i) below) 237,193 237,193 237,193 237,193 Unclaimed dividends (see note (ii) below) 66,902 52,444 62,919 52,444 Other payables (see note (iii) below) 854,679 647,047 58,405 13,597

1,616,032 1,469,737 504,960 461,633

(b) Analysis of other liabilities is as follows:

(i) Dividend payable held as collateral represents dividend belonging to Spennymoor Limited, Dantata Investments & Securities Company Limited and Phenonix Holdings Limited which was withheld by the Group in respect to 250 million units of the Group’s shares held by Decanon Investment Limited in relation to an ongoing litigation case involving the Group and the aforementioned counterparties.

(ii) Unclaimed dividend represents all dividends belonging to shareholders of the Group outstanding for more than 15 months, which have been returned to the Group by the Registrar in compliance with the Securities Exchange Commission (SEC)’s directive.

(iii) The analysis of other payables is as follows:




26 Depositors’ funds


Royal Exchange investment notes (see note (a) below) 97,353 31,482 - - High yield investment papers (see note (b) below) 990,039 1,040,041 - - Savings 14,191 29,686 - - Demand deposit 39,584 19,593 - - Term deposit and call deposits 62,289 75,522 - -

1,203,456 1,196,324 - -

27 Insurance contract liabilities


Non-life insurance (see note 27(a) below) 5,398,979 4,434,285 - - Healthcare insurance (see note 27(b) below) 143,949 172,498 - - Life insurance (see note 27(c) below) 4,615,352 3,656,421 - -

10,158,280 8,263,204 - -

(a) Royal Exchange Investment Notes represents customers’ deposits into the Group’s term deposit options. It is a flexible money market investment option that has an upfront interest payment and accepts a minimum of =N=2million as deposit payable over 90 days. It is carried at amortised cost.

(b) High Yield Investment Papers represent customers’ deposits into the Group’s term deposit options. It is a product that offers a certain interest, promising to be higher than the average money market rate. Interests are paid back end and minimum deposits of =N=1million are accepted, payable over 90 days. It is carried at amortised cost.

(c) Analysis of depositor’s funds by maturity


Up to 1 month 62,809 128,306 - - 3 - 6 months 486,884 488,114 - - 6 - 12 months 131,617 71,564 - - Above 12 months 522,146 508,340 - -

1,203,456 1,196,324 - -


Unexpired risk (See note 27(a)(ii) below) 2,459,159 2,223,284 - - Outstanding claims (See note 27(a)(iii) below):- Claims outstanding 1,971,277 1,432,816 - - - Incurred but not reported 968,543 778,185 - -

5,398,979 4,434,285 - -

(a) Non-life general Insurance





Fire 1,507,883 1,021,552 - - Accident 741,719 556,796 - - Motor 1,165,026 1,016,989 - - Marine 327,365 198,273 - - Oil and gas 1,521,538 1,460,760 - - Engineering 121,133 163,055 - - Bond 14,315 16,859 - -

5,398,979 4,434,285 - -

(i) The concentration of non-life insurance by type of contract is summarised below by reference to liabilities.


Fire 573,221 364,277 - - Accident 261,980 165,988 - - Motor 584,333 544,972 - - Marine 145,424 59,587 - - Oil and gas 849,355 1,026,922 - - Engineering 44,829 60,928 - - Bond 17 612 - -

2,459,159 2,223,284 - -

(ii) Unexpired risk is summarised by type below:


Balance, beginning of the year 2,223,284 2,303,340 - - Movement during the year 235,875 (80,056) - -

Balance, end of the year 2,459,159 2,223,284 - -

(iii) The movement in unexpired risk reserve is shown below:





Fire 934,662 657,276 - - Accident 479,739 390,808 - - Motor 580,693 472,017 - - Marine 181,941 138,687 - - Oil and gas 672,183 433,838 - - Engineering 76,304 102,128 - - Bond 14,298 16,247 - -

2,939,820 2,211,001 - -

(iv) Outstanding claims represent the estimated ultimate cost of settling all claims arising from incidents occurring prior to the end of reporting date, but not settled at that date and provision made for claims incurred but not yet reported as at the end of the financial year. This provision is based on the liability adequacy test report.

Analysis of outstanding claims per class of non-life insurance business is shown below:


Balance, beginning of the year 2,211,001 2,430,405 - - Movement during the year 728,820 (219,404) - -

Balance, end of the year 2,939,821 2,211,001 - -

(vi) The movement in outstanding claims is shown below:

Group CompanyIn thousands of Naira 31-Dec-16 31-Dec-15

0 - 90 days 259,590 354,595 91 - 180 days 226,092 167,658 181 - 270 days 177,239 131,392 271 - 360 days 205,290 108,967 Above 360 days 1,103,066 670,204

1,971,277 1,432,816

(v) An ageing analysis of the time between when the outstanding claims were reported and the date of the financial statements is presented below:





Claims and loss adjustment expenses (see note 27(b)(i)) 69,480 65,980 - - Provisions for unearned premiums and unexpired short-terminsurance risks (see note 27(b)(ii)) 74,469 106,518 - -

143,949 172,498 - -

(b) Healthcare insurance


Claims outstanding as at 1 January 65,980 29,228 - - Cash paid for claims settled in the year 500,525 455,851 - - – Arising from current-year claims (431,046) (389,871) - - – Arising from prior year claims (65,979) (29,228) - -

Balance, as at 31 December 69,480 65,980 - -

(i) Analysis of claims and loss adjustment expenses are as follows:


Balance at 1 January 106,518 108,701 - - Increase in period 95,075 88,284 - - Release in the period (127,124) (90,467) - -

Balance, as at 31 December 74,469 106,518 - -

(ii) Provisions for unearned premiums and unexpired short-term insurance risks

The movements for the year are summarised below:

These provisions represent the liability for short-term insurance contracts for which the Group’s obligations are not expired at the end of the reporting period. The unexpired risk provision relates to the casualty insurance contracts for which the Group expects to pay claims in excess of the related unearned premium provision. This assessment is performed using geographical aggregation of portfolios of liability insurance contracts within the casualty segment.





Outstanding claims - Group life (see note 27(c)(i) below) 1,029,893 618,617 - - Outstanding claims - Individual life (see note 27(c)(ii) below) 16,835 17,686 - -

1,046,728 636,303 - - Life insurance contract liabilities (see note 27(c)(iii) below) 3,568,624 3,020,118 - -

4,615,352 3,656,421 - -

(c) Life insurance


Beginning of the year 618,617 421,150 - - Increase during the year (see note 39(ii)) 411,276 197,467 - -

As at year end 1,029,893 618,617 - -

(i) Outstanding claims - group life The movement in the provision for outstanding claims during the year was as follows:


Beginning of the year 17,686 18,531 - - Decrease/(increase) during the year (see note 39(ii)) (851) (845) - -

As at year end 16,835 17,686 - -


Days0- 90 317,928 107,730 - - 91- 180 123,297 118,225 - - 181-270 192,070 102,031 - - 271-360 172,891 122,844 - - Above 360 240,542 185,474 - -

1,046,728 636,303 - -

(ii) Outstanding claims - individual life The movement in the provision for outstanding claims during the year was as follows:

Outstanding claims represent the estimated ultimate cost of settling all claims arising from incidents occurring as at the reporting date. The ageing analysis for claims reported and loss adjusted for life insurance contracts is as stated below:





Beginning of the year 3,020,118 1,782,870 - - Increase/(decrease) during the year 670,393 1,162,291 - - Difference in unearned premium (see note 27(c)(v) below) (121,887) 74,957 - -

As at year end 3,568,624 3,020,118 - -

The life insurance contract liability is analyzed as follows:


Risk-based deposit policies 21,667 24,808 - - Individual life policies 1,341,657 1,321,904 - - Group life policies 1,007,181 940,198 - -Additional reserve by Actuary 112,253 57,900 - -Annuity valuation by Actuary (see 27(c)(iv) below) 1,085,866 675,308 - -

As at year end 3,568,624 3,020,118 - -

(iii) Life insurance contract liability The movement on the Life funds account during the year was as follows:

(iv) Annuity The annuities were reserved for by using a discounted cash flow approach by the Actuary. Here, reserves are set equal to the present value

of future annuity payments plus expenses, with allowance being made for any guaranteed periods as required by the terms of the contract. The assets representing the annuities are invested in near-cash money market financial instruments with a tenor of 30 days on rolling basis.

The annuities fund has supporting assets and liabilities as follows:


Assets 1,085,866 493,008 - - Liabilites 1,085,866 675,308 - -

(v) The movement in the unearned premium during the year was as follows:


Beginning of the year 588,003 513,046 - - Decrease/(increase) during the year (121,887) 74,957 - -

As at year end 466,116 588,003 - -




(b) Investment managed funds


At 1 January 222,360 162,577 - - Deposits 238,658 210,614 - - Interest accrued thereon 22,431 10,248 - - Withdrawals (270,801) (161,079) - -

Balance at 31 December 212,648 222,360 - -

Current 165,985 165,985 - - Non-Current 46,663 56,375 - -

212,648 222,360 - -

28 Investment contract liabilities


Deposit administered funds (see note 28(a)) 126,808 113,911 - - Investment managed funds (see note 28(b)) 212,648 222,360 - -

339,456 336,271 - -

(a) Deposit administered funds


At 1 January 113,911 95,386 - - Deposits received in the year 20,410 32,446 - - Interest paid 3,092 2,152 - - Withdrawals (10,605) (16,073) - -

Balance at 31 December 126,808 113,911 - -

Current 33,496 32,442 - - Non-Current 93,312 81,469 - -

126,808 113,911 - -

The Company has a total sum of =N=126.8 million (2015: =N=113.9 million) in deposit administered funds with guaranteed interest which has been in existence since 2010. The outstanding balance in the account is attributable to clients who are yet to terminate their investment.




29 Taxation

(a) Income tax expense

Group Group Company CompanyIn thousands of Naira Notes 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15

Recognised in profit or lossCurrent Income tax 11,938 7,971 - - Under/(over) provision in prior years 44,945 14,267 - - Tertiary Education Tax 839 3,354 - - NITDA Levy 2,974 1,525 - -

60,696 27,117 - -Withholding tax on dividends - 18,740 - 13,100

60,696 45,857 - 13,100 Deferred tax charge 22 112,327 292,610 - -

173,023 338,467 - 13,100

Minimum tax 63,391 63,532 - -

Recognised in other comprehensive income Deferred tax on remeasurement of defined benefit scheme - - - -

Group Company 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15 Tax rate Amount Tax rate Amount Tax rate Amount Tax rate Amount % N’000 % N’000 % N’000 % N’000

Profit/(loss) before tax (743,838) (896,961) (368,735) (116,707)

Income tax using the domestic corporation tax rate 30% (223,151) 30% (269,088) 30% (110,621) 30% (35,012)Non-deductible expenses -31% 230,726 -35% 311,242 -3% 10,813 -16% 18,473 Tax exempt income 29% (217,003) 9% (79,677) 3% (12,574) 37% (43,257)Derecognition of unutilized tax losses -43% 322,855 -36% 321,589 -30% 112,382 -51% 59,797 Under/(over) provision in prior years -6% 44,945 -2% 14,267 0% - 0% - Change in recognised deductible temporary differences -1% 8,656 -2% 16,515 0% - 0% - Minimum tax -9% 63,391 -7% 63,532 0% - 0% - Capital gains tax 0% 2,182 0% - 0% NITDA Levy 0% - 0% 1,525 0% - 0% - Tertiary Education Tax 0% 3,665 0% 3,354 0% - 0% - Withholding tax on dividends 0% 148 -2% 18,740 0% - -11% 13,100

-32% 236,414 -45% 401,999 0% - -11% 13,100

The Company has not considered the minimum tax rule based on section 33 of CITA which exempts companies from minimum tax as long as they have up to 25% imported equity capital in their capital structure.




(b) Current income tax liabilities


At 1 January 488,714 502,951 255,109 255,109 Charge for the year 124,087 90,649 - - Payment during the year (77,863) (104,887) - - Reclassification of tax assets 2,262 - - -

At 31 December 537,200 488,713 255,109 255,109

30 Borrowings


WEMA Bank (see note 30(i)) 862,254 793,226 862,254 793,226 Central Bank of Nigeria (see note 30(ii)) 25,543 51,100 - - Borrowings from Funds under management (see note 30(iii)) 196,610 175,757 24,911 23,218 Royal Exchange Finance and Asset Management Limited (see note 30(iv)) - - 94,245 55,813 FSDH (see note 30(v)) 1,500,917 - 1,500,917 -

2,585,324 1,020,083 2,482,327 872,257

Current 862,254 793,226 862,254 793,226 Non Current 1,723,070 226,857 1,620,073 79,031

2,585,324 1,020,083 2,482,327 872,257

(i) The amount of =N=862,254,000 represents the carrying amount of a =N=800,000,000 term loan obtained from WEMA Bank Plc as at 31 December 2016 to finance the Company’s investment in Royal Exchange General Insurance Company Limited. The facility’s effective date is 11th August 2016 with a tenor of six months (180 days) at twenty (20) percent interest rate to the Company. The accrued interest and the principal amount are payable by bullet payment on or before maturity.

(ii) The amount of =N=25,453,000 represents the carrying amount of a =N=50,300,000 term loan obtained from the Central Bank of Nigeria as at 31 December 2016 under the Micro, Small and Enterprises Development Fund. The facility’s effective date is 09 April 2015.

(iii) The amount represent the carrying amount of term loans obtained by the Group from the unclaimed debentures under the management of Royal Exchange Plc as at the 31 December 2016.

(iv) Borrowings from Royal Exchange Finance and Asset Management Limited


Term Loan - - 21,228 46,477 Finance Lease Obligations - - 73,017 9,336

- - 94,245 55,813

(v) The amount of =N=1,500,917,000 represents the carrying amount of a =N=1,500,000,000 term loan obtained from FSDH as at 31 December 2016 to finance the Company’s investment in Royal Exchange General Insurance Company Limited and Royal Exchange Prudential Life Plc. The facility’s effective date is 30th December 2016 with a tenor of one year (365 days) at twenty-two (22) percent interest rate to the Company.




33 Contingency reserve In compliance with Section 21(1) of Insurance Act 2003, the contingency reserve for general business is credited with the greater of 3% of

gross premium or 20% of net profit and accumulated until it reaches the amount of greater of minimum paid up capital or 50 percent of net premium, where as, the contingency reserve for life business is credited with the greater of 1% of gross premium or 10% of net profit and accumulated until it reaches the amount of greater of minimum paid up capital or 50 percent of net premium.

34 Treasury shares Treasury shares represent the cost of the 250,000,000 ordinary shares of the Group which is held in respect to Security Holding Trust

Limited in respect to a proposed share ownership scheme for staff of a subsidiary which is subject to a litigation in suit FHC/L/CS/5479/09. The ordinary shares are being held as guarantee that value will not be lost, as well as =N=237million cash dividend. The ordinary shares have a market value of =N=462 million as at 31 December 2016.

35 Retained earnings The amount represents the retained earnings available for dividend distribution to the equity shareholders of the company (if approved at

the Annual General Meeting). For the analysis of movement in Retained Earnings, see the ‘Statement of Changes in Equity’.

36 Other Component of Equity Other component of equity comprises of actuarial gains or losses on employee benefit obligation, cumulative net change in the fair value of

available-for-sale financial assets until assets are derecognized and transfers to regulatory risk reserve.

(a) Actuarial gains/losses on employee benefit obligation Actuarial gains/losses on employee benefits represent changes in benefit obligation due to changes in actuarial valuation assumptions or

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

32 Share premium


As at year end 2,690,936 2,690,936 2,690,936 2,690,936

31 Share capital


Share capital comprises

Authorized share capital10,000,000,000 ordinary share of 50k each 5,000,000 5,000,000 5,000,000 5,000,000

Issued share capital5,145,370,074 ordinary share of 50k each 2,572,685 2,572,685 2,572,685 2,572,685

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company.

Dividends on ordinary sharesDividends on ordinary shares are recognised in equity in the period in which they are approved by the Company’s shareholders. Dividends for the year that are declared after the end of the reporting period are dealt with in the subsequent period.

Dividends proposed by the Directors but not yet approved by members are disclosed in the financial statements in accordance with the requirements of the Company and Allied Matters Act of Nigeria.




37 Reinsurance expenses


Non-life reinsurance premiums:Gross written reinsurance premiums 4,339,898 2,257,410 - - Change in reinsurance unearned premiums (see note 11(a)(i)) (358,905) 54,150 - -

3,980,993 2,311,560 - -

Life reinsurance premiums:Insurance premium ceded to reinsurers 282,444 412,765 - -

4,263,437 2,724,325 - -

38 Fee and commission income


Reinsurance commissions on non-life business 428,420 279,985 - - Reinsurance commissions on life business 48,908 50,576 - -

477,328 330,561 - -

39 Insurance claims and benefits incurred


Insurance claims and benefits incurred on non-life business(see note 39(i) below) 2,717,310 2,101,914 - - Insurance claims and benefits incurred on life business(see note 39(ii) below) 1,940,748 1,706,448 - - Insurance claims and benefits incurred on healthcare business (see note 39(iii) below) 211,835 231,930 - -

4,869,893 4,040,292 - -

(b) Fair value reserves Fair value reserves represent the cummulative net change in the fair value of available-for-sale financial assets at the reporting date.

(c ) Regulatory risk reserve Regulatory risk reserves represents the difference between the allowance for impairment losses on loans and advances to customers based

on Central Bank of Nigeria (CBN) prudential guidelines compared with the loss incurred model used in calculating the impairment under IFRSs.





Motor and accident 953,756 834,795 - - Fire and IAR 1,045,221 844,977 - - Marine 415,869 438,174 - - Engineering 20,084 141,495 - - Bond 5,267 7,255 - - Special risk 277,113 (164,782) - -

2,717,310 2,101,914 - -

(i) Analysis of insurance claims and benefits incurred on Non-life business:


Short-term insurance contract 1,101,758 1,249,683 - - Long-term insurance contract 428,565 260,143 - - Increase/decrease in outstanding claims short-term insurance contract (see note 27(c)(i)) 411,276 197,467 - - Increase/decrease in outstanding claims long-term insurance contract(see note 27(c)(ii)) (851) (845) - -

1,940,748 1,706,448 - -

(ii) Analysis of insurance claims and benefits incurred on life business:


Short-term insurance contract 206,126 222,997 - - Increase/decrease in outstanding claims short-term insurance contract 5,709 8,933 - -

211,835 231,930 - -

(iii) Analysis of insurance claims and benefits incurred on healthcare business:

40 Insurance claims and benefits incurred - recoverable from reinsurers


Insurance claims and benefits incurred- recoverable on non-life business (see note 40(i) below) 993,505 626,157 - - Insurance claims and benefits incurred-recoverable on life business (see note 40(ii) below) 290,980 374,779 - -

1,284,485 1,000,936 - -





Motor and accident 179,416 231,808 - - Fire and IAR 490,371 281,298 - - Marine 119,045 114,549 - - Engineering 110,947 63,747 - - Bond (1,500) (1,072) - - Special risk 95,226 (64,173) - -

993,505 626,157 - -

(i) Insurance claims and benefits incurred- recoverable on non-life business:


Short-term insurance contract 290,980 374,779 - -

290,980 374,779 - -

(ii) Insurance claims and benefits incurred- recoverable on life business:

41 Underwriting expenses


Acquisition costs: Non-life business 676,327 768,631 - - Acquisition costs: Life 273,714 241,688 - - Acquisition costs: Healthcare 28,876 5,602 - - Salaries and Allowances - underwriting employees 929,619 789,396 - - Guaranteed interest on life products 25,524 12,399 - - Other commissions 535,437 826,432 - -

2,469,497 2,644,148 - -




42 Net interest income/(expense) on investments and borrowings


Gross Interest Income:Interest income on placement with local banks 61,255 109,506 5,460 3,700 Interest income on treasury bills 29,072 2,832 - - Interest income on loans and receivables 260,624 275,606 - - Interest income on advances under finance lease 32,568 3,053 - - Interest income on deposits with credit institutions 27,584 41,652 - - Interest income on cash and cash equivalents 162,640 72,974 - - Interest on staff loan and advances 2,581 833 - -

576,324 506,456 5,460 3,700

Interest expense:Interest expense on depositors funds (125,406) (141,993) - - Interest expense on borrowings (167,130) (148,112) (172,009) (145,787)

Net interest income 283,788 216,351 (166,549) (142,087)

43 Investment and other incomeIncluded in investment and other income are results from sale and disposals of financial and other investments and dividend income. Analysis of the balance as at year end is as follows:


Debt securities:*At fair value through profit/loss 29,952 22,994 - - *Loans and receivables (amortised cost) 28,419 118,566 - - Equity securities:Dividend from investment in subsidiaries - - - 131,000 Dividend Income:*Available-for-sale 27,108 19,245 - - *At fair value through profit/loss 54,862 86,007 446 - Income on disposal of equities 19,693 38,158 - - Loss on disposal of investment properties (187,206) - - -

(27,172) 284,970 446 131,000

44 Net fair value gain or (loss) on assetsIncluded in net fair value gain or (loss) on assets is fair value gains and losses on assets held at fair value through profit or loss.


Debt securities:*At fair value through profit/loss 2,153 - - - Equity securties: - - - - *At fair value through profit/loss (253,620) (272,980) (5,973) 6,385 Derivative financial instruments: - - - - Investment properties 611,422 600,530 - - Cash and cash equivalents - - - -

359,955 327,550 (5,973) 6,385




45 Charge/(write-back) of impairment allowance


Impairment allowance on premium receivables(see note 10(a)(i)) 75,605 302,079 - - Write back of impairment on premium receivables(see note 10(a)(i) (88,127) (1,260) - - Impairment allowance on reinsurance receivables (see note 10(b)(i)) 203,852 15,272 - - Impairment allowance on financial assets (see note 8(a)(ii)) - 1,974 - - Impairment allowance on loans and advances (see note 6(a)) 43,032 48,516 - - Impairment allowance on advance under lease (see note 7(a)) 10,000 1,936 - - Write back of impairment on advance under lease (see note 7(a)) - (26,737) - - Impairment allowance on other receivables (see note 13(d)) 42,977 24,610 - 2,289 Write back of impairment on other receivables (see note 13(d)) (18,333) (8,855) - - Allowance on WHT credit notes receivables on rental income 5,481 - - -

274,487 357,535 - 2,289

46 Other operating income


Rental income 147,765 71,352 - - (Loss)/profit on disposal of property and equipment (7,060) (7,233) - - Management fee income from subsidiaries - - 221,028 226,485 Investment management income 100,944 66,172 - - Trustee Fee income 410 446 410 446 Other income* 89,608 26,711 31,927 3,729 Insurance brokerage commission 4,251 1,012 - - Income from lead-underwriting business 153,927 11,622 - - Derecognized items - 16,404 - - Bonus payments by brokers (ceding commission profit) - 38,859 - - Third party administration and other related income 36,138 52,828 - - Fees and commission on loans and advances 36,137 38,456 - -

562,120 316,629 253,365 230,660

* Other income concerns, amongst others, bad debt recoveries, trustee fee income, statutory deposit interest, funds management fee, insurance brokerage commission.

47 Foreign exchange gains


(Loss)/gains on translation of foreign currency transactions (15,124) 56,455 - -




48 Management expenses


Salaries and allowances of other employees 875,582 899,086 84,010 102,073 Post employment defined benefit expenses (see note 19.1(c)(i)) (8,180) 83,420 422 22,143 Termination benefits 136,331 - 136,331 - Audit fees 38,068 29,920 8,715 6,000 Loss on disposal of investment properties - - Amortization and impairment charges (see note 18) 14,104 9,785 - - Depreciation on property and equipment (see note 17) 261,948 255,789 16,508 9,760 Promotional and advert expenses 6,431 26,502 - 14,529 Rent and rates 7,051 4,947 - 1,555 Directors’ fees 8,848 1,420 1,420 1,420 Directors’ sitting allowances 31,454 67,791 16,709 48,480 Directors’ other allowances 68,017 23,481 68,017 23,481 Donations 225 4,290 - 2,210 Bank charges 29,023 35,719 3,134 1,223 Legal fee 63,086 22,618 34,964 246 Insurance premium 52,845 37,439 4,970 5,485 Accounting consultancy fee 69,214 71,068 14,899 6,643 Investment expenses 33,263 36,536 - - Finance cost - - - - Power charges - 4,487 - 4,487 Government charges 29,094 53,593 - - Stationeries 4,783 1,397 - - Printing external 34,383 63,525 - 2,790 Repairs and maintenance 143,752 261,756 - 1,820 Transport expenses 106,715 209,337 - 40,132 Transport fare expenses - 3,718 - - Software expenses 19,872 40,481 - - Subscription and journals 2,564 25,482 - 687 E-business - - - - Asset written off 13,363 - - Marketing expenses 858,951 - - Advertisement 130,964 - Fine paid (contravention) 8,152 5,097 7,633 4,925 Electricity and diesel expenses 50,207 116,867 - - VAT paid 16,879 27,008 - - Telephone expenses 18,536 Judgement sum expense 8,279 - 8,279 Other administrative expenses* 334,195 851,811 44,013 40,287

3,467,999 3,274,370 450,024 340,376

Other expenses concerns entertainment and representation, board meetimg expenses and expenses incurred for the day to day running of the Group during the year.




49 Earnings per share

Group GroupIn thousands of Naira 31-Dec-16 31-Dec-15

Basic and diluted earnings per share(kobo) (19) (25)

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:


Loss/(profit) for the year attributable to owners of the company (980,252) (1,298,960)

Group GroupUnit in thousands 31-Dec-16 31-Dec-15

Number of ordinary shares for the purpose of basic and diluted earnings per share 5,145,370 5,145,370

50 Cash and cash equivalents for Cash Flow PurposesFor the purposes of the statement of cash flow, cash and cash equivalents include cash, bank balances, investment in short-term deposits (demand and time deposits) with a maturity date of 3 months or less upon acquisition and bank overdrafts.


Cash (see note 5) 8,079 7,222 75 7 Bank balances (see note 5) 554,963 5,661,565 77,402 45,375 Short-term deposits (see note 5) 10,542,398 1,367,055 49,802 60,070 Bank overdrafts (see note 25(b)) (14,015) - - -

11,091,425 7,035,842 127,279 105,452

51 Reconciliation notes to consolidated and separate statement of cashflows

(i) Net Increase/(decrease) in employee retirement benefit:


Changes in employee retirement benefit asset (79,995) 16,183 - - Changes in employee retirement benefit liability (530,739) 24,802 (42,446) 18,955

Net changes (610,734) 40,985 (42,446) 18,955

Contributions to plan asset - 11,170 - - Cash payment to employees 554,506 110,199 41,467 3,191 Net actuarial gains recognised in OCI 81,321 (75,145) 1,401 (3)

Total changes recognised in statement of cashflows 25,093 87,209 422 22,143




(ii) Net Increase/(decrease) in other receivable and prepayments:


Net changes in other receivable and prepayments (49,485) (88,839) 240,848 (2,801)Dividend received (62,979) 136,262 - - Dividend income 81,970 (105,252) - - Rent received (150,083) 73,016 - - Rental income 147,765 (71,352) - - Writebacks recognised in profit or loss 18,333 (8,855) - - Impairments recognised in profit or loss (42,811) 24,610 - 2,289 Reclassifications from prepayments to PPE - - - -

Total changes recognised in statement of cashflows (57,290) (40,410) 240,848 (512)

(iii) Net Increase/(decrease) in trade receivable:


Net changes in trade receivable (280,548) 208,971 - - Impairment allowance on reinsurance receivables (see note 10(b)(i)) 203,852 15,272 - - Write back of impairment on premium receivables(see note 10(a)(i) (88,127) (1,260) - - Impairment allowance on premium receivables(see note 10(a)(i)) 75,605 302,079 - -

Total changes recognised in statement of cashflows (89,218) 525,062 - -

(iv) Net Increase/(decrease) in reinsurance asset:


Net changes in reinsurance asset (770,776) 26,511 - - Writebacks recognised in profit or loss - - - -

Total changes recognised in statement of cashflows (770,776) 26,511 - -

(v) Changes in financial assets


Balance as at 31 December 2015 (2,184,066) 575,204 (64,709) (17,935)

Impairment recognised in profit or loss - 1,974 - - Fair value changes recognised in OCI (121,899) (12,218) - - Fair value on debt securities recognised in profit or loss (2,153) - - -Fair value changes on equity securities recognised in profit or loss 253,620 272,980 5,973 (6,385)Redemptions/disposals 519,018 809,177 - - Purchases by related companies - - - (11,550)Interest received 416,303 - - -Transfers - - (55,019) - Purchases (3,248,955) (496,709) (15,663) -

Balance as at 31 December 2016 (2,184,066) 575,204 (64,709) (17,935)




(vi) Changes in provision for outstanding claims


Changes in outstanding claims on group-life insurance 411,276 197,467 - - Changes in outstanding claims on individual-life insurance (851) (845) - - Changes in outstanding claims on non-life general insurance (including IBNR) 728,820 (219,404) - - Changes in claims and unadjusted expense on health insuranceCash paid for claims settled in the year 500,525 455,851 - - – Arising from current-year claims (431,046) (389,871) - - – Arising from prior year claims (65,979) (29,228) - - Increase/(decrease) in insurance contract liabilities on life insurance 670,393 1,162,291 - -

Total changes statement of cashflows 1,813,138 1,176,261 - -

(vii) Changes in unearned premium


Changes in unexpired risk on non-life general insurance 235,875 (80,056) - - Changes in provisions for unearned premiums and unexpired short term insurance risks – Increase in period 95,075 88,284 - -– Release in the period (127,124) (90,467) - -Changes in unearned premium on life insurance contract liability (121,887) 74,957 - -

Total changes in statement of cashflows 81,939 (7,282) - -

(viii) Changes in loans and advances to customers


Net changes in loans and advances to customers 286,423 (194,558) - - Interest income 260,624 275,606 - -Interest income received (255,548) - - -Impairment allowance recognised in profit or loss (43,032) (48,516) - -

Total changes in statement of cashflows 48,467 32,532 - -

(ix) Changes in advances under finance lease


Net changes in advances under finance lease (83,621) (20,289) - - Interest income 32,568 3,053 - - Write back of impairment allowance - 26,737 - - Impairment allowance recognised in profit or loss (10,000) (1,936) - -

Total changes in statement of cashflows (61,053) 7,565 - -




(x) Changes in depositors fund


Net changes in depositors fund (7,132) (163,708) - - Foreign exchange difference 15,124 (53,298) - - Interest expense 125,406 141,993 - - Other changes recognised in cashflows 250,812 - - -

Total changes recognised in statement of cashflows 384,210 (75,013) - -

52 Capital management The Group manages its capital to ensure that it will be able to continue as a going concern and comply with the regulators’ capital and

solvency requirements for every of its subsidiaries whose capital is regulated, while maximizing return to stakeholders through the optimisation of the equity balance.

The capital structure of the Group consist of only equity attributable to equity holders of the company, comprising issued capital, reserves and retained earnings.

The regulatory capitals of the subsidiaries in insurance and banking and asset management have been maintained and preserved over the reporting periods. The regulatory capital within the insurance industry in Nigeria, in which the entity has its major operations, is =N=3billion and =N=2billion for Non-life and Life businesses respectively. Also, the regulatory capital for unit microfinance bank is =N=20million, same as for the group’s finance house business.

The insurance industry regulator, NAICOM, measures the financial strength of Non-life underwriters through a solvency margin model. The Insurance Act, under section 24, defines solvency margin of a Non-life underwriter as the difference between the admissible assets and liabilities which shall not be less than 15% of Net premium income or the minimum capital base of =N=3billion, whichever is higher. The regulation requires non-life underwriters to maintain a minimum of 100% solvency margin. The Group’s Solvency requirement was revalidated by HR Nigeria Ltd, the Company’s Consultant Actuaries.

The table below sets out the capital that is managed by the Company on an IFRS and regulatory basis:

The solvency position of the Non-life insurance business The Insurance Act 2003 (Section 24) prescribed that an insurer shall in respect of its business other than life insurance business, maintain a

margin of solvency being the excess of the value of its admissible assets in Nigeria over its liabilities in Nigeria.

The solvency margin, which is determined as the excess of admissible assets over total liabilities shall not be less than 15% of the gross premium income less reinsurance premiums paid out during the year under review or the minimum paid up capital, whichever is greater.





Admissible AssetsCash and cash equivalents 8,967,451 5,500,258- Available-for-sale 409,316 346,211 - At fair value through profit or loss 1,075,988 1,234,425 - Loans and receivables 542,204 1,096,303 Investment in associates 415,429 500,669 Trade receivables 47,587 170,138 Other receivables and prepayment 500,000 500,000 Deferred acquisition cost 283,338 301,965 Reinsurance assets 2,189,935 1,582,128 Investment properties 3,060,609 2,724,214 Statutory deposit 340,000 340,000 Property and equipment 797,879 801,268 Intangible assets 5,907 12,597 Employees benefits assets 234,011 154,016

A 18,869,654 15,264,191

Less: Admissible liabilitiesBank overdrafts 63,718 56,149 Trade and other payables 8,313,225 5,376,586 Provision and other payables 1,052,868 704,396 Deferred income 162,942 122,169 Insurance liabilities 5,398,979 4,434,285 Finance lease obligations 103,925 5,001 Employees benefits obligations 29,995 493,530 Current income tax liabilities 262,572 217,737

B 15,388,224 11,409,853

Solvency margin (A-B) 3,481,430 3,854,338

Minimum paid up capital 3,000,000 3,000,000

Net premium from Non-Life Insurance Business 4,778,662 4,657,133

15% of Net premium 716,799 698,570

The Group’s non-life solvency margin =N=3,481,430,000 (2015: =N=3,854,338,000) is more than the minimum paid up capital of =N=3,000,000,000 (2015: =N=3,000,000,000). Therefore, the Group’s non-life business subsidiary is solvent since the solvency margin is higher than the minimum paid up capital & 15% of net premium.

The solvency position of the Life insurance businessThe solvency level of the Company on the valuation date of 31 December, 2016 was 100%. That is, the admissible assets representing the Life Fund (including outstanding claims) and deposit administration funds, amounting to =N=4,954,808,000 were 100% of the actuarially determined gross liabilities of =N=4,954,808,000.




The table below sets out the capital that is managed by the Company on an IFRS and regulatory basis:

The details of the Company’s capital structure are shown in the statement of financial position section of the financial statements.

Including the deposit for shares amounting to =N=0.5billion, the capital level of Royal Exchange Prudential Life Plc is in compliance with the requirements for life insurance companies as stipulated in the Insurance Act 2003. The deposit on shares was contributed by way of a cash payment before year-end to make good on the deficit in shareholders’ funds of Royal Exchange Prudential Life Plc. The Company, Royal Exchange PLC, had committed to the additional capital, currently recorded as deposit for shares, by a written board resolution prior to year-end. Since the capital contribution the Company and the subsidiary are in process of obtaining all regulatory approvals.


Shareholders’ fund as per financial position 1,502,506 2,317,147Less: Intangible assets (1,579) (2,502)

Capital resources on a regulatory basis exclusive of deposit for shares 1,500,927 2,314,645

Deposit for shares 500,000 -

Regulatory capital upon approval for deposit for shares 2,000,927 2,314,645

53 Financial risk managementFactors relating to general economic conditions, such as consumer spending, business investment, government spending, the volatility and strength of both debt and equity markets and inflation, all affect the profitability of businesses in Nigeria.

In a sustained economic phase of low growth, characterized by higher unemployment, lower household income, lower corporate earnings, lower business investment and lower consumer spending, the demand for financial and insurance products could be adversely affected.

The Group’s risk management process includes the identification and measurement of various forms of risk, the establishment of risk thresholds and the creation of processes intended to maintain risks within these thresholds while optimizing returns on the underlying assets and minimizing costs associated with liabilities. Risk range limits are established for each type of risk, and are approved by the Board’s Investment Committee and subject to ongoing review.

The Group’s risk management strategy is an integral part of managing the Group’s core businesses and utilizes a variety of risk management tools and techniques such as:

- Measures of price sensitivity to market changes (e.g., interest rate and foreign exchange rate);- Asset/Liability management;- Periodic Internal Audit and Control, and;- Risk management governance, including risk oversight committee, policies and guidelines, and approval limits.

In addition, the Group monitors and manages the financial risks relating to the operations of the organization through internal risk reports which analyze exposures by degree and magnitude of risks. These risks include market risk (currency risk, interest rate risk and price risk), credit risk and liquidity risk.




54 Fair value of financial instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market

participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. Fair values are determined at prices quoted in active markets. In our environment, such price information is typically not available for all instruments and the Group applies valuation techniques to measure such instruments. These valuation techniques make maximum use of market observable data but in some cases management estimate other than observable market inputs within the valuation model. There is no standard model and different assumptions could generate different results.

Fair values are subject to a control framework designed to ensure that input variables and output are assessed independent of the risk taker. The Group has minimal exposure to financial assets which are valued at other than quoted prices in an active market.

a Fair value hierarchy IFRS 13 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or

unobservable. Observable input reflect market data obtained from independent sources; unobservable inputs reflect the Group’s market assumptions. These two types of inputs have created the following fair value hierarchy:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed equity securities and debt instruments on exchanges.

Level 2 - Valuation techniques based on observable inputs. This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

Level 3 - This includes financial instruments, the valuation of which incorporate significant inputs for the asset or liability that is not based on observable market data (unobservable inputs). Unobservable inputs are those not readily available in an active market due to market illiquidity or complexity of the product. These inputs are generally determined based on inputs of a similar nature, historic observations on the level of the input or analytical techniques.

This hierarchy requires the use of observable market data when available. The Group considers relevant and observable market prices in its valuations where possible.

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, analyzed into Levels 1 to 3 based on the degree to which the fair value is observable.

Group31 December 2016

In thousands of Naira Level 1 Level 2 Level 3 Total

Financial Assets:Fair value through profit or loss:Quoted equity shares 8(b) 1,310,263 - - 1,310,263 Treasury bills 8(b) 1,477,020 - - 1,477,020 Federal government bonds 8(b) 351,506 - - 351,506

3,138,789 - - 3,138,789

Available for sale financial assets:Quoted equity shares 8(a) 495,419 - - 495,419 Bonds: Annuity fund 8(a) 1,026,458 - 1,026,458

1,521,877 - - 1,521,877

Total financial assets measured at fair value 4,660,666 - - 4,660,666






Financial Assets:Fair value through profit or loss:Quoted equity shares 8(b) 1,558,732 - - 1,558,732 Treasury bills 8(b) 79,611 - - 79,611 Federal government bonds 8(b) 298,531 - - 298,531

1,936,874 - - 1,936,87

Available for sale financial assets:Quoted equity shares 8(a) 90,012 - - 90,012

90,012 - - 90,012

Total financial assets measured at fair value 2,026,886 - - 2,026,886

Company31 December 2016


Financial Assets:Fair value through profit or loss:Quoted equity shares 8(b) 82,644 - - 82,644 Federal Government bonds 8(b) - - - -

82,644 - - 82,644

Total financial assets measured at fair value 82,644 - - 82,644



Financial Assets:Fair value through profit or loss:Quoted equity shares 8(b) 17,935 - - 17,935 Treasury bills 8(b) - - - - Federal Government bonds 8(b) - - - -

17,935 - - 17,935

Total financial assets measured at fair value 17,935 - - 17,935




b Financial instruments not measured at fair value The fair value information for financial assets and financial liabilities not measured at fair value has not been disclosed because the carrying

amount is a reasonable approximation of its fair value. These financial instruments include:

Cash and cash equivalents Cash and cash equivalents consists of cash on hand and current balances with banks.

The carrying amounts of current balances with banks is a reasonable approximation of fair value which is the amount receivable on demand.

Loans and receivables Loans and receivables consists of placements with financial institutions and staff mortgage loans.

The estimated fair value of fixed interest earning placements is based on discounted cash flows using prevailing money-market interest rates for the debts. The carrying amount represents the fair value which is receivable on maturity. The estimated fair value of staff mortgage loans represents the market values of the loans, arrived at by recalculating the carrying amount of the loans using the estimated market rate.

Financial assets held to maturity Held to maturity consists of state government and corporate bonds.

The carrying amount of financial assets held to maturity are a reasonable approximation of their fair values which are receivable on demand.

Trade receivables and other receivables The carrying amounts of trade receivables and other receivables are reasonable approximation of their fair values which are receivable on

demand.

Bank overdrafts, trade payables, provision and other payables and finance lease obligations. The carrying amounts of bank borrowings, trade payables, provision and other payables and finance lease obligations are reasonable

approximation of their fair values which are repayable on demand.

(c) Financial risks The Group is exposed to the following categories of risk as a consequence of offering different financial products and services :

(i) Market risk This reflects the possibility that the value of the Group’s investments will fall as a result of changes in market conditions, whether those

changes are caused by factors specific to the individual investment or factors affecting all investments traded in the market. The Group is exposed to this risk through its financial assets and comprises of currency risk, interest rate risk and price risk.

Currency risk This is the risk of the fair value of financial instruments being affected by changes in foreign exchange rates.

The Group seeks to manage its exposures to risk through control techniques which ensure that the residual risk exposures are within acceptable tolerances agreed by the Board. A description of the risks associated with the Group’s principal products and the associated control techniques is detailed below.

Foreign Currency risk The Group accepts receipt of premiums in foreign currency, in addition to Naira, from its clients; hence, exposures to exchange rate

fluctuations arise. The Group is exposed to foreign currency denominated in dollars through a domiciliary bank balance.

The Group has minimal exposure to currency risk as the Group’s financial assets are primarily matched to the same currencies as its insurance and investment contract liabilities. As a result, foreign exchange risk arises from other recognized assets and liabilities denominated in other currencies.

The carrying amounts of the Group’s foreign currency denominated assets and liabilities are as follows:





In thousands of Naira Pounds sterling Euro US Dollars Total

Assets (cash and cash equivalent) 650 25,792 8,327,441 8,353,883Quoted equities - - 40245 40,245 Loans and receivables - - - - Liabilities - - (8,005,683) (8,005,683)

650 25,792 362,003 388,445



Assets (cash and cash equivalent) 2,615 15,689 5,042,278 5,060,582 Quoted equities - - 116,832 116,832 Loans and receivables - - 63,453 63,453 Liabilities - - (5,018,782) (5,018,782)

2,615 15,689 203,781 222,085

Foreign currency sensitivity analysisThe following table details the Group’s sensitivity to a 10% increase and decrease in foreign currency rates against the Naira. A 10% sensitivity rate is used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. For each sensitivity scenario, the impact of change in a single factor is shown, with other assumptions or variables held constant.

31 December 2016


10% increase 65 2,579 36,200 38,845 10% decrease (65) (2,579) (36,200) (38,845)

Impact of increase on:Pre-tax profit - - - (704,993)Shareholders’ equity - - - 6,418,981

Impact of decrease on:Pre-tax profit - - - (782,683)Shareholders’ equity - - - 6,341,291




The tax impact of foreign exchange results is generally 30% of the result. This is not included in the impact on shareholders equity as the final impact will depend on the tax status of the Company when it realises the impact of the foreign exchange results for tax.

Interest rates riskThe Group’s exposure to interest rate risk relates primarily to the market price and cash flow variability of assets and liabilities associated with changes in interest rates.

Insurance liabilities and employee benefits do not form part of this profile. Although they are significant liabilities subject to interest rate risk, they are not financial insturments within the scope of IFRS 7.

Changes in interest rates result to reduction in income ‘spread’ or the difference between the amounts that the Group is required to pay under the contracts and the rate of return the Group is able to earn on investments intended to support obligations under the contracts. Investment spread is, arguably, one of the key components of the net income of insurers.

The Group’s mitigation efforts with respect to interest rate risk are primarily focused on maintaining an investment portfolio with diversified maturities that has a weighted average duration or tenor approximately equal to the duration of its liability cash flow profile.

Also, the Group manages this risk by adopting close asset/liability matching criteria, to minimize the impact of mismatches between asset and liability values arising from interest rate movements.

Furthermore, the Group uses sensitivity analytics to measure the impact of interest rate changes and movements on the value of our financial assets scenarios.

The Group is very moderately exposed to interest rate risk as it invests in fixed income and money market instruments.

31 December 2015


10% increase 262 1,569 20,378 22,209 10% decrease (262) (1,569) (20,378) (22,209)

Impact of increase on:Pre-tax profit - - - (874,752)Shareholders’ equity - - - 7,448,445

Impact of decrease on:Pre-tax profit - - - (919,170)Shareholders’ equity - - - 7,404,027




Interest rate profileAt the end of the reporting period the interest rate profile of the Group’s interest bearing financial instruments as reported to the Management of the Group are as stated below:

GroupFinancial instruments

In addition to the financial instruments listed above, the Group has borrowings amounting to =N=2.59 billion (=N=1.02 billion) and depositors funds amounting to =N=1.20 billion (2015: =N=1.20 billion). The impact on interest sensitivity information below for borrowings is 0.5% of =N=2.59 billion, which is =N=12.91 million (2015: =N=5.1 million) while the impact on depositors funds is 0.5% of =N=1.20 billion, which is =N=6.02 million (2015: =N=5.98 million).

In thousands of Naira Notes 31-Dec-16 31-Dec-15

Fixed Interest rate instructionsCash and cash equivalents 5 10,542,398 1,367,055 Bonds: Annuity fund 8(a) 1,026,458 - Federal Government bonds 8(b) 351,506 298,531 Treasury bills 8(b) 1,477,020 79,611 Staff personal loans 8(c) 4,409 4,755 Staff mortgage loans 8(c) 127,835 214,631 Policyholders Loan 8(c) 20,373 23,045 Other loans and advances 8(c) 836,717 854,315 Loans and advances 6 992,011 1,278,434 Advances under finance lease 7 206,890 123,269 Statutory deposits 20 555,000 555,000

16,140,617 4,798,646

Bank overdrafts 25 14,015 -

16,154,632 4,243,646

CompanyFinancial instruments

In addition to the financial instruments listed above, the Company has borrowings amounting to =N=2.48 billion (2015: =N=872.26million). The impact on interest sensitivity information below is 0.5% of =N=2.48 billion, which is =N=12.54 million (2015: =N=4.36million).

In thousands of Naira Notes 31-Dec-16 31-Dec-15

Fixed Interest rate instructionsCash and cash equivalents 5 49,802 60,070

49,802 60,070




Interest rate sensitivity analysisThe sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at the balance sheet date. A 0.5% increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

The tax impact of interest rate movement is generally 30% of the result. This is not included in the impact on shareholders equity as the final impact will depend on the tax status of the Company when it realises the impact of the interest rate results for tax purposes.

Equity price risk managementThe Group is exposed to equity price risks arising from equity investments primarily from investments not held for unit-linked business. The shares included in financial assets represent investments in listed securities that present the Group with opportunity for return through dividend income and capital appreciation.

Equity investments designated as available-for-sale are held for strategic rather than trading purposes. The Group has no significant concentration of price risk.

The carrying amounts of the Group’s equity investments are as follows:


Increase in interest rate by 50 basis points (+0.5%) 80,773 21,218 249 300 Decrease in interest rate by 50 basis point (-0.5%) (80,773) (21,218) (249) (300)

Equity and profit after adjustments Pre-tax profit (663,065) (875,743) (368,486) (116,407)Shareholders’ equity 6,460,909 7,447,454 6,151,805 6,519,190

Equity and profit after adjustmentsPre-tax profit (824,611) (918,179) (368,984) (117,007)Shareholders’ equity 6,299,363 7,405,018 6,151,307 6,518,590

Notes Group Group Company Company 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15 =N=’000 =N=’000 =N=’000 =N=’000

Equity Securities; - quoted (available for sale) 8(a) 495,419 90,012 - - Equity Securities; - quoted (fair value through profit or loss) 8(b) 1,310,263 1,558,732 66,791 17,935 Equity Securities; - unquoted (available for sale) 8(a) 154,334 325,251 - -

1,960,016 1,973,995 66,791 17,935

Equity price sensitivity analysisThe sensitivity analyses set out below show the impact of a 10% increase and decrease in the value of equities on profit before tax and shareholders’ equity based on the exposure to equity price risk at the reporting date.

Notes Group Group Company Company 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15 =N=’000 =N=’000 =N=’000 =N=’000

10% increase 196,002 197,400 6,679 1,794 10% decrease (196,002) (197,400) (6,679) (1,794)

Equity and profit after adjustmentsPre-tax profit (547,836) (699,562) (362,056) (114,914)Shareholders’ equity 6,576,138 7,623,636 6,158,235 6,520,683

Equity and profit after adjustmentsPre-tax profit (939,840) (1,094,361) 50,919 381,151 Shareholders’ equity 6,184,134 7,228,837 6,144,877 6,517,096




(ii) Credit risk Credit risk refers to the risk that counterparties will default on their contractual obligations resulting in financial loss to the Group. The

key areas of exposure to credit risk for the Group are in relation to its investment portfolio, reinsurance program and receivables from reinsurers and other intermediaries.

Group has adopted a policy of dealing with only creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group transacts with only entities that have an investment grade rating and above.

This information is supplied by independent rating agencies, where available, and if not available, the Group uses other publicly available financial information and its own trading records to rate its major policyholders and reinsurers.

The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counterparty limits that are reviewed and approved by the risk management committee periodically.

The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties. Concentration of credit, otherwise known as single obligor credit, did not exceed 5% of gross monetary assets at any time during the year. The credit risk on liquid funds and other near cash financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

The Group is exposed to credit risk via • Debt securities • Reinsurance assets • Loans and receivables to policyholders, agents and intermediaries • Cash and cash equivalents • Trade/insurance receivables

The Group’s maximum exposure to credit risk at 31 December 2016 and 31 December 2015 respectively, is represented by the net carrying amounts of the financial assets set out below:

Group 2016

Loans and Cash Advances Trade/ Statutory Other advances to Debt and cash under insuranceIn thousands of Naira deposits receivables customers securities equivalent finance lease receivables

Neither past due nor impaired (see note (a) below) 555,000 436,881 1,143,522 989,334 11,105,440 206,890 247,851 Individually impaired (see note (b) below) - 902,857 - - - 23,000 771,841

Gross 555,000 1,339,738 1,143,522 989,334 11,105,440 229,890 1,019,692 Allowance for specific impairment - (902,857) (150,929) - - (23,000) (771,841)Allowance for collective impairment - - (582) - - - -

Net 555,000 436,881 992,011 989,334 11,105,440 206,890 247,851

Group 2015


Neither past due nor impaired (see note (a) below) 555,000 387,396 1,278,434 1,096,746 7,035,842 128,527 528,399 Past due but not impaired - - Individually impaired (see note (b) below) 878,379 108,479 7,742 580,511

Gross 555,000 1,265,775 1,386,913 1,096,746 7,035,842 136,269 1,108,910 Allowance for specific impairment (878,379) (106,990) (13,000) (580,511)Allowance for collective impairment (1,489) - -

Net 555,000 387,396 1,278,434 1,096,746 7,035,842 123,269 528,399




(a) Risk assets: neither past due nor impaired

The credit quality of the Group’s portfolio to customers that were neither past due nor impaired can be assessed by reference to the internal rating system adopted by the Group.

Gross amount of financial instruments are as disclosed below:

(b) Risk assets: individually impaired

The Group’s financial instruments are considered individually impaired based on the Group’s accounting policy as documented in Note 2.10.

Gross amount of financial instruments are as disclosed below:

Group 2016

Neither past due nor impaired


Neither past due nor impaired 555,000 436,881 1,143,522 989,334 11,105,440 229,890 247,851

Total 555,000 1,339,738 1,143,522 989,334 11,105,440 229,890 1,019,692

Group 2016

Indvidually impaired


Individually impaired - 902,857 - - - 23,000 771,841

Total - 902,857 - - - 23,000 771,841

Group 2015

Indvidually impaired


Individually impaired 878,379 108,479 7,742 580,511

Total - 878,379 108,479 - - 7,742 580,511

Group 2015

Neither past due nor impaired


Neither past due nor impaired 555,000 387,396 1,278,434 1,096,746 7,035,842 128,527 528,399

Total 555,000 387,396 1,278,434 1,096,746 7,035,842 128,527 528,399




Analysis of financial assets based on credit risk gradesThe majority of debt securities are investment grade and the Group has very limited exposure to sub-standard credits.

Reinsurance assets are reinsurers’ share of outstanding claims and reinsurance receivables. They are allocated below on the basis of ratings for claims paying ability.

Loans and receivables from policyholders, agents and intermediaries generally do not have a credit rating.

The following table shows aggregated credit risk exposure for assets with external credit ratings:


CarryingIn thousands of Naira Notes AAA AA A+ A BBB B Not rated Amount

Fair value through profit or loss carried at fair value (FVTPL)- FGN bonds 8(b) - - - - 351,506 - 351,506 - Treasury bills (> 90 days) 8(b) - - - - - 1,477,020 - 1,477,020

1,828,526

Loans and receivables:- Staff personal loans 8(c) - - - - - - 4,409 4,409 - Staff mortgage loans 8(c) - - - - - - 127,835 127,835 - Policyholders loan 8(c) - - - - - - 20,373 20,373 - Placement 8(c) - - - - - - 836,717 836,717 - Loans and advances to customers 6 - - - - - - 992,011 992,011 - Advances under finance lease 7 - - - - - - 206,890 206,890

2,188,235

Cash and cash equivalents:Bank balances 5 - - - - - 554,963 - 554,963 Short-term deposit 5 - - - - - 10,542,398 - 10,542,398

11,097,361

Non-life reinsurance claims recoverable 11(a) 972,334 972,334Life reinsurance claims recoverable: Short-term insurance contract 11(b) - - - - - - 180,338 180,338 Long-term insurance contract 11(b) - - - - - - 290,253 290,253

1,442,925

Trade/insurance receivables 10 - - - - - - 247,851 247,851

16,804,898





CarryingIn thousands of Naira Notes AAA AA A+ A BBB B Not rated Amount

Fair value through profit or loss carried at fair value (FVTPL)- FGN bonds 9(b) - 298,531 - - - - - 298,531 - Treasury bills (> 90 days) 9(b) 79,611 - - - - - - 79,611

378,142

Loans and receivables:- Lagos state government bond 8(c) - - - - - - - - - Kaduna state government bond 8(c) - - - - - - - - - Corporate bonds 8(c) - - - - - - - - Unlisted debentures 8(c) - - - - - - - - - Staff personal loans 9(c) - - - - - - 4,755 4,755 - Staff mortgage loans 9(c) - - - - - - 214,631 214,631 - Policyholders loan 9(c) - - - - - - 23,045 23,045 - Placement 9(c) - - - - - 854,315 854,315 - Loans and advances to customers 7 - - - - - - 1,278,434 1,278,434 - Advances under finance lease 8 - - - - - - 123,269 123,269

2,498,449

Cash and cash equivalents:Bank balances 6(b) - - - 5,661,565 - - 1,367,055 7,028,620

7,028,620

Non-life reinsurance claims recoverable 11(a) - - - - - - 723,432 723,432 Life reinsurance claims recoverable: Short-term insurance contract 11(b) - - - - - - 204,068 204,068 Long-term insurance contract 11(b) - - - - - - 103,554 103,554

1,031,054

Trade/insurance receivables 11 - - - - 528,399 - 528,399

11,464,664




Analysis of financial assets based on past due statusGroup31 December 2016

Available Fair value for sale Loans Recoverable Insurance/ through profit financial and from tradeIn thousands of Naira or loss assets receivables reinsurers receivables

Past due status Past due and impaired - 171,385 151,511 - 771,841 Past due more than 90 days - - - - - Past due 31 to 90 days - - - - 161,395 Past due less than 30 days - - - - 38,869 Neither past due nor impaired 3,138,789 1,676,211 992,011 2,660,526 47,587

Total carrying amount 3,138,789 1,847,596 1,143,522 2,660,526 1,019,692

Analysis of financial assets based on past due statusGroup31 December 2015

Available Fair value for sale Loans Recoverable Insurance/ through profit financial and from tradeIn thousands of Naira or loss assets receivables reinsurers receivables

Past due status Past due and impaired - - - - 70,248 Past due more than 90 days - - - - 91,647 Past due 31 to 90 days - - - - 147,874 Past due less than 30 days - - - - 179,579 Neither past due nor impaired 1,936,874 415,263 1,096,746 1,889,751 39,051

Total carrying amount 1,936,874 415,263 1,096,746 1,889,751 528,399




Credit concentrations

Geographical Location


Loans Advances Cash and and under Trade/ Other cash advances finance Financial insurance Reinsurance loans andIn thousands of Naira equivalents to customers lease assets receivables assets receivables Total

In Nigeria:North Central - 66,416 - - - - - 66,416 South East - - - - - - - - South South - - - - - - - - South West 11,105,440 925,595 206,890 5,632,949 247,851 2,660,526 - 20,779,251

Total 11,105,440 992,011 206,890 5,632,949 247,851 2,660,526 - 20,845,667

31 December 2015

In Nigeria:North Central - 195,481 18,190 - - - - 213,672 South East - - 11,667 - - - - 11,667 South South - 5,187 - - - - - 5,187 South West 7,028,620 1,077,766 93,412 378,142 528,399 593,256 1,096,746 10,495,847

Total 7,028,620 1,278,434 123,269 378,142 528,399 593,256 1,096,746 11,026,867




Sectorial analysis


Loans Advances Cash and and under Trade/ Other cash advances finance Financial insurance Reinsurance loans andIn thousands of Naira equivalents to customers lease assets receivables assets receivables Total

Agriculture - 33,828 - - - - - 33,828 Manufacturing - 160,502 24,311 - - - - 184,813 Trade and commerce - 86,115 123,182 - - - - 209,297 Finance and insurance 11,105,440 - - 5,632,949 247,851 2,660,526 - 19,646,766 Real estate and construction - 194,551 4,853 - - - - 199,404 Education - 507,379 54,544 - - - - 561,924 Others - 9,635 - - - - - 9,635

Total 11,105,440 992,011 206,890 5,632,949 247,851 2,660,526 - 20,845,667

31 December 2015

Agriculture - 16,236 1,566 - - - - 17,802 Manufacturing - 39,383 3,797 - - - - 43,181 Trade and commerce - 94,807 9,141 - - - - 103,949 Finance and insurance 7,028,620 - - 378,142 528,399 593,256 1,096,746 9,324,669 Real estate and construction - 180,352 17,390 - - - - 197,741 Education - 248,568 23,967 - - - - 272,536 Others - 699,087 67,407 - - - - 766,495

Total 7,028,620 1,278,434 123,269 378,142 528,399 593,256 1,096,746 11,026,867

(iii) Liquidity risk

The Group’s principal objective in managing its liquidity and capital resources is to maximize the returns on capital to shareholders, while enabling it to pay claims, pay dividends, pay staff and fulfill statutory obligations to regulators and the different tiers of government in the environment in which it operates. Effective and prudent liquidity is a priority across the Group.

Management monitors the liquidity of the Group on a daily basis and projects her financial needs over a multi-year time horizon through its quarterly budget and review process. Management believes that the cash flows from the sources of fund available to the Group are sufficient to satisfy the current liquidity requirements of the Group, including under reasonably foreseeable stress scenarios.

In managing liquidity (and of course, capital), the Group seeks to:

- Match the profile of assets and liabilities, taking into account the risks inherent in each line of product;

- Maintain financial strength to support new business growth whilst still satisfying the requirements of policyholders and regulators;

- Retain financial flexibility by maintaining strong liquidity, and;

- Allocate liquid resources efficiently to support growth while paying claims and other commitments promptly.




Sources of Liquidity In managing cash flow position, the Group has a number of sources of liquidity, including the following principal sources:

- Premium Income; - Investment income - Investment maturities

Application of funds The principal uses of our liquidity include: - Payment of Claims - Staff benefits; - Purchase of investments’ and; - Payment in connection with financing activities.

In practice, most of the Group’s assets are marketable securities which could be converted into cash when required.

Maturity Profile The following table shows the Group’s expected maturity for its non-derivative assets. The table has been drawn up based on the undiscounted

contractual maturities of the assets including interest that will be earned on those assets except where the Group anticipates that the cash flow will occur in a different period.Reinsurers’ share of unearned premiums are excluded from this analysis.

It also shows details of the expected maturity profile of the Group’s undiscounted obligations with respect to its financial liabilities and estimated cash flows of recognized insurance contract liabilities. It includes both interest and principal cash flows.

It should be noted that unit-linked assets and liabilities and reinsurers’ share of unearned premiums are excluded from this analysis.


Carrying ContractualIn thousands of Naira Notes amount cashflow < 1 month 1 - 3 months 3 - 12 months 1 - 5 years > 5 years

Non-derivative financial assets/insurance assetsCash and cash equivalents 5 11,105,440 11,191,153 9,836,474 397,375 957,304 - - Fair value through profit or loss carried at fair value (FVTPL) 8(b) 1,828,526 1,867,304 8,227 150,592 1,309,697 355,483 43,305 Loans and receivables 8(c) 989,334 997,925 7,746 819,697 32,213 111,571 26,698 Loans and advances to customers 6 992,011 1,230,418 39,806 22,478 93,688 1,074,446 - Advances under finance lease 7 206,890 439,293 810 1,835 8,021 428,627 - Statutory deposits 20 555,000 982,848 283,360 699,488

15,677,201 16,708,941 9,893,063 1,391,977 2,400,923 2,253,487 769,491

Non-derivative financial liabilities/insurance liabilityBorrowings 30 2,585,324 2,795,845 1,944 911,008 1,882,893 - - Trade payables 24 8,355,104 8,355,104 8,355,104 - - - - Other liabilities 25 1,461,380 1,461,380 1,461,380 - - - - Depositors’ funds 26 1,203,456 1,203,456 76,615 2,269 616,232 508,340 - Investment contract liabilities 28 339,456 336,271 - - 17,811 132,201 186,259

13,944,720 14,152,056 9,895,043 913,277 2,516,936 640,541 186,259

Gap (asset - liabilities) 1,732,481 2,556,885 (1,980) 478,700 (116,013) 1,612,946 583,232 Cumulative liquidity gap 478,700 362,687 1,975,633 2,558,865






Non-derivative financial assets/insurance assetsCash and cash equivalents 5 7,035,842 7,239,479 5,831,412 1,408,067 - - - Fair value through profit or loss carried at fair value (FVTPL) 8(b) 298,531 188,589 14,300 71,842 49,767 273,640 - Loans and receivables 8(c) 1,096,746 1,129,648 - - 1,243,254 294,678 - Loans and advances to customers 6 1,278,434 1,560,311 46,170 48,284 326,935 1,138,922 - Advances under finance lease 7 123,269 152,238 843 2,670 61,201 87,524 - Statutory deposits 20 - - - - - - 555,000

9,832,822 10,270,265 5,892,725 1,530,863 1,681,157 1,794,764 555,000

Non-derivative financial liabilities/insurance liability Borrowings 30 1,020,083 1,120,806 175,757 - 945,049 - - Trade payables 24 5,387,629 5,387,629 5,001,739 385,890 - - - Other liabilities 25 1,182,731 1,182,731 1,182,731 - - - - Depositors’ funds 26 1,196,324 1,196,324 128,306 - 559,678 508,340 - Investment contract liabilities 28 336,271 1,569,062 87,421 - 961,189 520,452.00 -

9,123,038 10,456,552 6,575,954 385,890 2,465,916 1,028,792 -

Gap (asset - liabilities) 709,784 (186,287) (683,229) 1,144,973 (784,759) 765,972 555,000 Cumulative liquidity gap 1,144,973 360,214 1,126,186 1,126,186






Non-derivative financial assets/insurance assetsCash and cash equivalents 5 127,279 127,701 77,477 50,224 - - - Fair value through profit or loss carried at fair value (FVTPL) 8(b) 82,644 83,191 66,791 16,400 - - -

209,923 210,892 144,268 66,624 - - -

Non-derivative financial liabilities/insurance liabilityBorrowings 30 2,482,327 2,867,239 - 31,108 925,023 1,911,108 - Other liabilities 25 841,576 841,576 841,576 - - - -

3,323,903 3,708,815 841,576 31,108 925,023 1,911,108 -

Gap (asset - liabilities) (3,113,980) (3,497,923) (697,308) 35,516 (925,023) (1,911,108) - Cumulative liquidity gap 35,516 (889,507) (2,800,615) (2,800,615)



Non-derivative financial assets/insurance assetsCash and cash equivalents 5 105,452 106,115 45,575 60,540 - - - Fair value through profit or losscarried at fair value (FVTPL) 8(b) 17,935 - - - - - -

141,322 106,115 45,575 60,540 - - -

Non-derivative financial liabilities/insurance liabilityBorrowings 30 872,257 958,947 25,997 5,557 894,049 33,344 - Other liabilities 25 1,102,904 1,102,904 1,102,904 - - - -

1,975,161 2,061,851 1,128,901 5,557 894,049 33,344 -

Gap (asset - liabilities) (1,833,839) (1,955,736) (1,083,326) 54,983 (894,049) (33,344) - Cumulative liquidity gap 54,983 (839,066) (872,410) (872,410)




(b) Financial assets and liabilities

Accounting classification, measurement basis and fair valuesThe table below sets out the Group’s classification of each class of financial assets and liabilities, and their fair values.


Other Total Loans and Designated Available- financial carryingIn thousands of Naira receivables at fair value for-sale liabilities amount Fair value

Cash and cash equivalents 11,105,440 - - - 11,105,440 11,105,440 Financial assets 989,334 3,138,789 1,504,826 - 5,632,949 5,632,949 Loans and advances to customers 992,011 - - - 992,011 1,200,333 Advances under finance lease 206,890 - - - 206,890 250,337 Trade receivables 247,851 - - - 247,851 247,851 Other receivables less prepayments 182,289 - - - 182,289 182,289 Statutory deposits 555,000 - - - 555,000 555,000

14,278,815 3,138,789 1,504,826 - 18,922,430 19,174,199

Borrowings - - - 2,585,324 2,585,324 2,998,976 Trade payables - - - 8,355,104 8,355,104 8,355,104 Depositors’ fund - - - 1,203,456 1,203,456 1,203,456 Other liabilities - - - 1,461,380 1,461,380 1,461,380

- - - 13,605,264 13,605,264 14,018,916



Cash and cash equivalents 7,035,842 - - - 7,035,842 7,035,842 Financial assets 1,096,746 1,936,874 415,263 - 3,448,883 3,448,883 Loans and advances to customers 1,278,434 - - - 1,278,434 1,546,905 Advances under finance lease 123,269 - - - 123,269 149,155 Trade receivables 528,399 - - - 528,399 528,399 Other receivables less prepayments 112,610 - - - 112,610 112,610 Statutory deposits 555,000 - - - 555,000 555,000

10,730,300 1,936,874 415,263 - 13,082,437 13,376,795

Borrowings - - - 1,020,083 1,020,083 1,183,296 Trade payables - - - 5,387,629 5,387,629 5,387,629 Depositors’ fund - - - 1,196,324 1,196,324 1,196,324 Other liabilities - - - 1,182,731 1,182,731 1,182,731

- - - 8,786,767 8,786,767 8,949,980




Management has assessed that the fair value of financial assets, loans and advances and borrowings approximates the carrying value of these instruments following the relatively short tenor of the instruments and that interest approximates market interest rate as at year end.

For other receivables and payables, management has assessed that given the nature of the instruments, carrying value approximates fair value.



Cash and cash equivalents 127,279 - - - 127,279 127,279 Financial assets - 82,644 - - 82,644 82,644 Other receivables less prepayments 279,759 - - - 279,759 279,759

407,038 82,644 - - 489,682 489,682

Borrowings - - - 2,482,327 2,482,327 2,482,327 Other liabilities - - - 841,576 841,576 841,576

- - - 3,323,903 3,323,903 3,323,903



Cash and cash equivalents 105,452 - - - 105,452 105,452 Financial assets - 17,935 - - 17,935 17,935 Other receivables less prepayments 68,528 - - - 68,528 68,528

173,980 17,935 - - 191,915 191,915

Borrowings - - - 872,257 872,257 872,257 Other liabilities - - - 1,102,904 1,102,904 1,102,904

- - - 1,975,161 1,975,161 1,975,161




55 Insurance risk managementThe Group accepts insurance risk through its insurance contracts and certain investment contracts where it assumes the risk of loss from persons or organisations that are directly subject to the underlying loss. The Group is exposed to the uncertainty surrounding the timing, frequency and severity of claims under these contracts.

The Group manages its risk via its underwriting and reinsurance strategy within an overall risk management framework. Pricing is based on assumptions which have regard to trends and past experience. Exposures are managed by having documented underwriting limits and criteria. Reinsurance is purchased to mitigate the effect of potential loss to the Group from individual large or catastrophic events and also to provide access to specialist risks and to assist in managing capital. Reinsurance policies are written with approved reinsurers on either a proportional or excess of loss treaty basis.

Regulatory capital is also managed (though not exclusively) by reference to the insurance risk to which the Group is exposed.

(a) Non-life insuranceThe Group writes fire, general accident, oil and gas, engineering, bond, marine and motor risks primarily over a twelve month duration (usually longer for engineering policies). The most significant risks arise from natural disasters, climate change and other catastrophes (i.e. high severity, low frequency events). A concentration of risk may also arise from a single insurance contract issued to a particular demographic type of policyholder, within a geographical location or to types of commercial business. The relative variability of the outcome is mitigated if there is a large portfolio of similar risks.

The concentration of non-life insurance by the location of the underlying risk is summarised below by reference to liabilities.

The concentration of non-life insurance by type of contract is summarised below by reference to liabilities.

Gross Reinsurance Net In thousands of Naira 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15

Fire 1,507,883 1,021,552 799,554 491,262 708,329 530,290 Accident 741,719 556,796 95,384 93,060 646,335 463,737 Motor 1,165,026 1,016,989 142,485 126,504 1,022,541 890,484 Marine 327,365 198,273 126,358 73,492 201,007 124,781 Oil and gas 1,521,538 1,460,760 946,892 697,414 574,646 763,346 Engineering 121,133 163,055 72,110 89,924 49,023 73,131 Bond 14,315 16,859 7,152 10,472 7,163 6,387

5,398,979 4,434,285 2,189,935 1,582,128 3,209,044 2,852,157


- Within Nigeria 5,398,979 4,434,285 2,189,935 1,582,128 3,209,044 2,852,157 - Outside Nigeria - - - - - -

5,398,979 4,434,285 2,189,935 1,582,128 3,209,044 2,852,157





Outstanding claims:Fire 934,662 657,276 555,691 403,777 378,971 253,499 Accident 479,739 390,808 65,926 64,399 413,813 326,409 Motor 580,693 472,017 100,022 86,204 480,671 385,813 Marine 181,941 138,687 50,286 40,479 131,655 98,208 Oil and Gas 672,183 433,838 149,070 57,701 523,113 376,137 Engineering 76,304 102,128 44,194 62,229 32,110 39,899 Bond 14,298 16,247 7,144 8,644 7,154 7,604

Total 2,939,820 2,211,000 972,334 723,433 1,967,486 1,487,568


Unexpired risk:Fire 573,221 364,277 243,863 87,485 329,358 276,792 Accident 261,980 165,988 29,457 28,660 232,523 137,328 Motor 584,333 544,972 42,464 40,301 541,869 504,671 Marine 145,424 59,587 76,073 33,013 69,351 26,573 Oil and gas 849,355 1,026,922 797,821 639,713 51,534 387,209 Engineering 44,829 60,928 27,915 27,695 16,914 33,233 Bond 17 612 8 1,829 9 (1,217)

Total 2,459,159 2,223,284 1,217,601 858,696 1,241,558 1,364,589




Assumptions and sensitivitiesThe risks associated with the non-life insurance contracts are complex and subject to a number of variables which complicate quantitative sensitivity analysis. The Group uses several statistical and actuarial techniques based on past claims development experience. This includes indications such as average claims cost and expected loss ratio. The key method used by the Group for estimating liabilities is upward or downward adjustment based on documentation and professional judgement. The Group has minimal exposure to these risks, the exposure of which is determined by the number of claims filed and the court process. The Group considers that the liability for non-life insurance claims recognised in the balance sheet is adequate. However, actual experience will differ from the expected outcome.

Claims development table for Royal Exchange InsuranceThe following tables show the development of claims over a period of time on both a gross and net of reinsurance basis. In 2012, in the year of adoption of IFRS, only 5 years were required to be disclosed. This will be increased in each succeeding year, until 8 - 10 years of information is presented. The top half of the table shows how the estimates of total claims for each accident year develop over time. The lower half of the table reconciles the cumulative claims to the amount appearing in the Statement of Financial Position.

The cumulative claims estimates and payments for each accident year are translated into Nigerian Naira at the year rates that applied at the end of each accident year. Claims development pattern: Non-Life insurance

31 December 2016 Incremental Chain ladder-Yearly Projections (=N=)Accident year 1 2 3 4 5 6 7 8 9 10

2007 76,974 100,566 27,226 16,493 13,104 4,602 2,386 1,605 5,952 5,952

2008 180,779 74,363 10,146 8,951 13,675 2,087 564 873

2009 197,240 91,202 154,490 30,627 15,601 2,402 1,240 983

2010 352,398 334,778 57,260 11,491 9,532 5,249 281

2011 374,208 521,134 92,530 6,147 11,036 81

2012 414,429 465,000 55,092 21,416 4,767

2013 574,907 307,167 73,027 14,108

2014 496,122 343,341 45,878

2015 703,341 376,397

2016 731,908

31 December 2015 Incremental Chain ladder-Yearly Projections (=N=)Accident year 1 2 3 4 5 6 7 8 9

2007 90,369 130,760 40,801 16,493 20,453 4,601 2,386 1,605 5,952

2008 224,573 320,685 10,146 8,950 29,856 2,088 564 873

2009 267,763 144,617 172,929 35,249 23,592 16,790 1,240

2010 423,867 348,593 151,026 19,854 21,506 5,250

2011 690,737 1,100,807 274,558 104,755 12,044

2012 484,693 976,236 349,847 58,722

2013 703,893 571,066 181,076

2014 740,384 1,018,548

2015 1,037,614




(b) Life insurance and investment contracts with discretionary participating features (DPF)The Group writes life, annuities, and investment-linked contracts with or without discretionary participating features (DPF). The most significant risks arise from mortality, persistency, longevity, morbidity, expense variations and investment returns.

Concentration of insurance riskConcentration of risk may arise from geographic regions, epidemics, accumulation of risks and market risk. The concentration of life insurance and investment contracts with DPF by location of the underlying risk is summarized below by reference to liabilities.


Life insurance:- Within Nigeria 4,615,352 3,648,840 470,591 204,068 4,144,761 3,444,772 - Outside Nigeria - - - - - -

4,615,352 3,648,840 470,591 204,068 4,144,761 3,444,772

Investment contracts with DPF:- Within Nigeria 339,456 336,271 - - 339,456 336,271 - Outside Nigeria - - - - - -

339,456 336,271 - - 339,456 336,271

The concentration of life insurance and investment contracts with DPF by type of contract is summarized below by reference to liabilities.


Protection 3,529,487 2,973,532 185,262 129,512 3,344,225 2,844,020 Pensions - - - - - - Annuities 1,085,865 675,308 - - 1,085,865 675,308 Others - - - - - -

4,615,352 3,648,840 185,262 129,512 4,430,090 3,519,328

Investment contracts with DPF 339,456 336,271 - - 339,456 336,271




Assumptions and sensitivitiesThe risks associated with the life insurance and investment contracts with DPF are complex and subject to a number of variables which complicate quantitative sensitivity analysis. The key assumptions in quantifying these liabilities include mortality, persistency, longevity, morbidity, expense variations, investment return and discount rates.

Some results of sensitivity testing are set out below showing the impact on profit before tax and shareholders’ equity before and after reinsurance. For each sensitivity scenario, the impact of a change in a single factor is shown, with other assumptions or variables unchanged.

Pre-tax profit Shareholders’ equity In thousands of Naira 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15

Life insurance:5% increase in mortality/morbidityGross (2016: Nil; 2015: Nil) - - - - Net (2016: =N=3,737; 2015: =N=2,474) (619,958) (899,435) 1,485,171 7,423,762 5% increase in longevity- Gross - - - - - Net - - - - 10% increase in expensesGross (2016: Nil; 2015: Nil) - - - - Net (2016: =N=3,762; 2015: =N=2,499) (619,983) (899,460) 1,485,146 7,423,737 1% increase in interest ratesGross (2016: Nil; 2015: Nil) - - - -Net (2016: =N=3,631; 2014: =N=2,533) (619,852) (899,494) 1,448,277 7,423,703

Claims development table for group life schemeClaims on life insurance contracts are payable on a claims-occurrence basis and the Group is liable for all insured events that occurred during the term of the contract. There is however, uncertainty in the estimation of future benefits payments arising from the unpredictability of long-term changes in overall levels of mortality and the variability in policyholder behavior.

Changes may occur in the amount of the Group’s obligations at the end of a contract period. In setting claims provisions, the Group gives consideration to the probability and magnitude of future claims experience being more adverse than assumed and exercises a degree of caution in setting reserves where there is considerable uncertainty.

The Group has taken advantage of the transitional rules of IFRS 4 that permit only five years of information to be disclosed upon adoption of IFRS.

The following table shows the estimates of cumulative incurred claims, including both claims notified and IBNR for each successive year at each reporting date, together with cumulative payments to date with respect to short-term insurance contract.

Claims development pattern: group life

The company is not exposed to any insurance risk.

31 December 2016 Incremental Chain ladder-Yearly Projections (=N=)Accident year Development year 0 1 2 3 4

2007 122,700 34,905 577 3,634 1,262

2008 45,486 45,342 29,838 1,256 2,379

2009 25,378 54,498 31,968 18,099 2,697

2010 51,891 93,022 27,854 11,738 15,333

2011 76,113 70,612 52,699 43,993 10,754

2012 84,733 171,188 47,664 46,107 47,213

2013 228,475 243,203 52,792 26,114

2014 313,679 431,806 176,710

2015 625,063 334,756

2016 481,742




Revenue Net assets In thousands of Naira 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15

Within Nigeria 2,724,161 2,377,409 6,348,209 7,426,094 Outside Nigeria - - - -

2,724,161 2,377,409 6,348,209 7,426,094

56 Segment reporting IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly

reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. In contrast, the predecessor standard (IAS 14 Segment Reporting) required the Group to identify two sets of segments (business and geographical), using a risks and rewards approach. The Group has adopted IFRS 8 Operating Segments reporting.

Following adoption of IFRS 8, the Group’s reportable segments have not changed as the business segments reported to the monthly executive committee follow clear business lines with distinct risk and rewards which formed the basis under IAS 14.

The Group’s reportable segments under IFRS 8 are therefore identified as follows:

- Non-life insurance; - Life insurance; - Financial services - Healthcare; and - Asset management;

The accounting policies of the reportable segments are the same as the Group’s accounting policies. Segment profit represents the profit earned by each segment without allocation of central corporate expenses, certain finance costs and tax expense. This is the measure reported to the Group’s Chief Executive for the purposes of resource allocation and assessment of segment performance.

(a) Operating segment The Group has the following five operating segments; all corresponding with the activities of one or two subsidiaries:

i Non-life insurance - consists of Royal Exchange General Insurance Company Limited

ii Life insurance - consists of Royal Exchange Prudential Life Plc

iii Financial services - consists of Royal Exchange Plc and Royal Exchange Microfinance Bank Limited

iv Health insurance - consists of Royal Exchange Healthcare Limited

v Asset management- consists Royal Exchange Finance and Asset Management is the only subsidiary in the asset management segment

Reference is made to note 9 for the required quantitative disclosures under IFRS 8

(b) Geographical information The Group’s revenue and information about its segment net assets by geographical location are as follows:




57 Related Parties The Group’s related parties have been considered to be entities that the Group has control or influence over, key management personnel

and persons connected with them. The key management personnel have been identified as the executive and non-executive directors of the Group. Close members of family are those family members who may be expected to influence or be influenced by that individual in their dealings with the Group. Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below:

(a) Transactions with related parties The Group enters into transactions with its subsidiaries, associates, joint ventures and its key management personnel in the normal course

of business. The transactions and balances below concern mainly banking, insurance and administrative transactions. The banking and insurance transactions are done in the ordinary course of business against a pricing that considers related party relationship. For the related party transactions with key management personnel, see note 62.

In thousands of Naira Relationship 2016 2015

Royal Exchange PLCBank balancesRoyal Exchange Microfinance Bank Limited Subsidiary 2,378 146

PayablesRoyal Exchange General Insurance Company Limited Subsidiary - 466,294 Royal Exchange Prudential Life Plc Subsidiary 412,182 272,058 Royal Exchange Finance and Asset Management Subsidiary 3,058 -

Deposit for sharesRoyal Exchange Prudential Life Plc Subsidiary 500,000 -

ReceivablesRoyal Exchange General Insurance Company Limited Subsidiary - - Royal Exchange Prudential Life Plc Subsidiary - - Royal Exchange Healthcare Limited Subsidiary 49,493 43,986 Royal Exchange Microfinance Bank Limited Subsidiary 3,738 1,397 Royal Exchange Finance and Asset Management Subsidiary - 1,897

Premium paidRoyal Exchange Healthcare Limited Subsidiary 1,969 - Royal Exchange General Insurance Company Limited Subsidiary 2,761 5,020 Royal Exchange Prudential Life Plc Subsidiary 240 1,150

LoansRoyal Exchange Finance and Asset Management Subsidiary 21,228 46,477

Finance LeaseRoyal Exchange Finance and Asset Management Subsidiary 73,017 9,336

Management fees receivedRoyal Exchange General Insurance Company Limited Subsidiary 135,243 140,932 Royal Exchange Prudential Life Plc Subsidiary 85,591 85,553

Dividend receivedRoyal Exchange General Insurance Company Limited Subsidiary - 131,000 Royal Exchange Prudential Life Plc Subsidiary - -

Solicitor’s fee paidPunuka Attorneys and Solicitors Director 5,000 5,000




The Group considered the outstanding balances at the reporting date are unsecured and non-interest bearing. The settlements will involve physical delivery of cash.

58 Statement of Prudential Adjustments In accordance with the Regulatory guidelines released by both CBN/NDIC, provisions for loan losses recognized in the income statement

shall be determined based on the requirements of IFRS. The IFRS impairment should be compared with provisions determined under the CBN Prudential guidelines and the expected impact/changes in general reserves should be treated as follows:

(a) If prudential provision is higher than IFRS impairment; Transfer the difference from general reserve to a non-distributable regulatory reserve.

(b) If prudential provision is less than IFRS impairment; Transfer the excess from the non-distributable regulatory reserve to the general reserve to the extent of the non-distributable reserve previously recognized.

In thousands of Naira Relationship 2016 2015

Royal Exchange General Insurance Company LimitedBank Balance with Royal Exchange Microfinance Bank 2,382 - Deposit fund with Royal Exchange Prudential Life Plc 294,146 273,404 Deposit fund with Royal Exchange Finance and Asset Management Ltd 10,136 60,505 Deposit fund with Royal Exchange Microfinance Bank Ltd 2,479 - Finance lease obligation to Royal Exchange Finance and Asset Management Ltd 103,925 5,001 Overdraft facility with Royal Exchange Microfinance Bank Ltd (49,666) 55,968

Royal Exchange Prudential Life PlcBank/(Bank Overdraft) Balance with Royal Exchange Microfinance Bank (1,669) 32,487 Deposit fund with Royal Exchange Finance and Asset Management Ltd 2,537 2,337 Finance lease obligation to Royal Exchange Finance and Asset Management Ltd 24,134 5

Royal Exchange Finance and Asset ManagementBank Balance with Royal Exchange Microfinance Bank 1,245 1,973 Deposit fund with Royal Exchange Microfinance Bank Ltd - - REPRU Annuity Fund - 495,002

Royal Exchange Healthcare LimitedBank overdraft balance with Royal Exchange Microfinance Bank 9,925 5,140 Deposit fund with Royal Exchange Finance and Asset Management Ltd - 40,845


Loans and advances to customersSpecific impairment (see note 6) 150,929 106,990Collective impairment (see note 6) 582 1,489

Advances under finance leaseImpairment allowance (see note 7) 23,000 13,000

Total impairment allowance (a) 174,511 121,479

Total impairment based on prudential guidelines (b) 668,757 419,708

Regulatory risk reserve (c = b - a) 494,246 298,229


59 Contingencies and Commitments

(a) Commitments for expenditureThe Group has no commitment for capital expenditure at the reporting date. However, the Group entered into a contract for the management and maintenance of some of its investment properties on annual basis, which will give rise to an annual expense of =N=1.275 million.

(b) Contingencies and commitments

Contingent liabilities

There are certain pending litigations in some courts of law in Nigeria involving the Group and the Company either as plaintiff or defendant. However,nine cases have been decided against the Group and necessary accruals have been made in the financial statements. The actions are being vigorously contested and the Directors are of the opinion that no significant liability will arise therefrom in excess of the provision made in the financial statements.

Contingent assetsThe Group has no contingent assets as at the reporting date.

60 Events after the reporting periodThere were no events subsequent to the financial position date which require adjustment to, or disclosure in, these financial statements.

61 Fiduciary ActivitiesThe Company acts as a custodian, trustee or in other fiduciary capacity, that results in its holding, placing or performing oversight functions over assets on behalf of its clients.

The Company performs oversight and monitoring functions over two mutual funds. Its responsibilities have been defined in Item 11 of the Directors’ report.

Other assets held on behalf of clients represents unclaimed debentures which have matured and are yet to be claimed by the debenture holders as at reporting date. These assets are excluded from these financial statements, as they are not assets of the Company. The analysis of these assets are as shown below:



In thousands of Naira 31-Dec-16 31-Dec-15

Legal proceedings and litigations 6,083,184 2,200,000 Tax PAYE for 2014 tax audit 25,200 -

6,108,384 2,200,000

Company CompanyIn thousands of Naira 31-Dec-16 31-Dec-15

Funds Under ManagementClients’ Federal Government Bonds 33,103 33,217 Clients’ Commercial Papers 196,599 175,728 Clients’ Treasury Bills 42,925 2,842 Clients’ Fixed Deposits - 41,399 Clients’ Bank balances 111 2,529

272,738 255,715Clients’ Payables - (2,971) Management Fees Payable - (1,553)

272,738 251,191


62 Compensation of key management personnelKey management personnel of the Company includes all directors, executive and non-executive, and senior mangement. The summary of compensation of key manangement personnel for the year is as follows:

(a) Chairman and directors’ emoluments:

(i) Emoluments

(ii) Number of directors (excluding the chairman) within the following emolument range




Non-executive directors Directors’ fees 1,420 1,420 1,420 1,420 Sitting allowance 24,064 67,791 16,709 48,480 Other allowances 46,237 23,481 46,237 23,481

71,721 92,692 64,366 73,381

Executive Directors Executive Compensation 32,782 69,455 32,782 69,455 Post employment benefits 1,470 6,054 1,470 6,054

34,252 75,509 34,252 75,509

Chairman 3,424 3,611 3,424 3,611 Other directors 102,550 164,590 89,395 145,279

105,973 168,201 92,818 148,890

The highest paid director 44,178 52,174 44,178 52,174

Group Group Company Company =N= 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15

400,000 - 500,000 - 11 - - 500,001 - 600,000 6 4 - - 2,000,001 - 5,000,000 3 2 - - Above 5,000,000 7 7 7 7


(b) StaffAverage number of persons employed in the financial year and the related staff cost were as follows:




Managerial 25 29 1 1Senior staff 322 332 7 6Junior staff 88 41 1 1

435 402 9 8

(i) Staff costs


Salaries , wages and allowances 1,637,890 1,708,568 85,100 99,948 Pension cost 88,544 92,763 - -

1,726,434 1,801,331 85,100 99,948

(ii) Pension scheme


At January 1 - 569 - - Provision in the year 88,544 92,763 - - Remittance to pension fund administrators (88,544) (93,332) - -

At December 31 - - - -




(iii) Employees remunerated at higher ratesThe number of employees in receipt of emoluments including allowances within the following ranges were:

Group Group Company Company =N= 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15

Below 400,000 16 3 - - 400,001 - 500,000 6 3 - - 500,001 - 600,000 6 - - - 600,001 - 700,000 4 2 - - 700,001 - 800,000 1 6 1 - 800,001 - 900,000 13 - - - 900,001 - 1,000,000 1 24 - 1 1,000,001 - 2,000,000 98 135 1 1 2,000,001 - 3,000,000 162 85 2 2 3,000,001 - 4,000,000 21 61 2 1 4,000,001 - 5,000,000 49 28 1 - 5,000,001 - 6,000,000 20 16 - 1 6,000,001 - 7,000,000 10 12 - 1 7,000,001 - 8,000,000 7 8 1 - 8,000,001 - 9,000,000 7 5 - - 9,000,001 - 10,000,000 4 1 - - 10,000,001 - 12,000,000 5 9 - - 12,000,001 - 20,000,000 4 3 - - 20,000,001 - 30,000,000 1 1 1 1

435 402 9 8




63 ContraventionsDuring the year, the Group contravened certain sections of the Securities and Exchange Commission rules and regulations.

Company Regulatory Authority Description Penalty paid 31-Dec-16 31-Dec-15


Royal Exchange Plc SEC Penalty for late filing of audited accounts as at 30th April, 2015 - 1,175 SEC Penalty for late filing of 4th quarter returns as at 31st January, 2016 - 2,300 SEC Penalty for late filing of 1st quarter returns as at 30th April, 2015 1,450 SEC Penalty for late filing of 1st quarter returns as at 30th April, 2016 7,505 SEC Penalty for Late Submission of 1st Quarter 2016 Trustee Returns 128

Other Components of Group

Royal Exchange Finance and Asset Management Limited SEC Penalty for non disclosure of exited staff in 2015 - 172 SEC Penalty for Late Filing of Fidelity Bond Insurance Policy 519 -

8,152 5,097


OTHER NATIONAL DISCLOSURES


VALUE ADDED STATEMENTfor the year ended 31 December 2016

Group Group Company CompanyIn thousands of Naira 31-Dec-16 31-Dec-15 31-Dec-16 31-Dec-15 =N=’000 % =N=’000 % =N=’000 % =N=’000 %

Net premium income 8,172,005 8,084,851 - - Investment and other income (27,172) 399,596 446 131,000 Interest income 283,788 101,725 (166,549) (142,087) Net fair value gain or loss on financial assets 359,955 327,550 (5,973) 6,385 Other operating income 562,120 316,629 253,365 230,660 Bought in goods and services (8,645,147) (8,632,688) (349,084) (208,689)

Value added 705,549 100 597,663 100 (267,795) 100 17,269 100

Applied as follows: In payment of employees: - Salaries, wages and other benefits 867,402 164 982,506 164 84,432 719 124,216 719 In payment to government: - Taxation 236,414 67 401,999 67 - 76 13,100 76 For future replacement of assets and expansion of business:- Depreciation 276,052 44 265,574 44 16,508 57 9,760 57 - Contingency reserve 305,933 41 246,544 41 - - - - - General reserve (980,252) (216) (1,298,960) (216) (368,735) (752) (129,807) (752)

705,549 100 597,663 100 (267,795) 100 17,269 100


FIVE YEAR FINANCIAL SUMMARYfor the year ended 31 December 2016

RestatedIn thousands of Naira 31-Dec-16 31-Dec-15 31-Dec-14 31-Dec-13 31-Dec-12

AssetsCash and cash equivalents 11,105,440 7,035,842 6,635,540 1,810,882 1,338,057Loans and advances to customers 992,011 1,278,434 1,083,876 812,571 435,830 Advances under finance lease 206,890 123,269 102,980 218,585 412,961 Financial assets 5,632,949 3,448,883 4,024,087 3,558,965 2,908,585 Trade receivables 247,851 528,399 319,428 421,637 418,381 Reinsurance assets 2,660,526 1,889,750 1,916,261 2,044,041 1,584,733 Deferred acquisition cost 351,076 382,490 366,892 469,160 216,448 Other receivables and prepayments 436,881 387,396 476,235 483,625 188,533 Investment in associates 179,146 274,088 295,250 213,694 220,734 Investment properties 5,419,858 6,807,743 7,722,739 7,092,569 6,356,474 Property and equipment 2,283,270 2,219,584 1,673,178 1,690,707 1,379,719 Intangible assets 33,116 39,088 46,863 37,418 38,035 Employees retirement benefit asset (Net) 234,011 154,016 170,199 166,963 49,370 Statutory deposits 555,000 555,000 555,000 555,000 555,000 Deferred tax assets 365,065 427,621 640,445 699,334 523,150 Assets classified as held for sale 973,639 973,639 - - - Deposit for shares - - - - -

Total assets 31,676,729 26,525,242 26,028,973 20,275,151 16,626,010

LiabilitiesBank borrowing 2,585,324 1,020,083 1,051,959 52,554 - Deferred income 162,942 122,169 102,234 84,797 92,675 Trade payables 8,355,104 5,387,629 5,151,843 528,509 369,863 Other liabilities 1,616,032 1,469,737 1,233,863 1,170,182 635,069 Depositors’ funds 1,203,456 1,196,324 1,032,616 595,449 593,225 Insurance contract liabilities 10,158,280 8,263,204 7,094,226 6,973,096 4,878,504 Investment contract liabilities 339,456 336,271 257,963 599,106 573,494 Dividend payable - - - 80,525 80,525 Current income tax liabilities 537,200 488,713 502,951 494,388 519,109 Employees retirement benefit liability 39,269 570,008 545,206 550,660 475,150 Deferred tax liabilities 299,530 244,868 172,495 167,931 88,378

Total liabilities 25,296,593 19,099,006 17,145,356 11,297,197 8,305,992

EquityShare capital 2,572,685 2,572,685 2,572,685 2,572,685 2,572,685 Share premium 2,690,936 2,690,936 2,690,936 2,690,936 2,690,936 Contingency reserve 1,728,852 1,422,919 1,176,375 947,734 722,231 Treasury shares (500,000) (500,000) (500,000) (500,000) (500,000)Retained earnings (647,828) 834,374 2,657,434 3,045,281 2,803,330 Other component of equity 535,491 405,322 286,187 221,318 30,836

Total equity 6,380,136 7,426,236 8,883,617 8,977,954 8,320,018

Total equity and liabilities 31,676,729 26,525,242 26,028,973 20,275,151 16,626,010

GROUP


Gross premium 12,517,381 10,790,628 9,425,451 9,083,092 7,614,209

Net income 2,724,161 2,377,409 3,391,805 3,403,995 2,665,834

Profit/ (loss) before taxation (743,838) (896,961) 304,730 828,213 703,094 Income tax expense (236,414) (401,999) (13,100) (21,929) (129,801)

Profit/(loss) after taxation (980,252) (1,298,960) 291,630 806,284 573,293

Earnings per share (kobo) (19) (25) 3 31 22

Statement of Profit or Loss and Other Comprehensive Income


FIVE YEAR FINANCIAL SUMMARYfor the year ended 31 December 2016


AssetsCash and cash equivalent 127,279 105,452 49,606 35,595 579 Financial assets 82,644 17,935 - - -Investment in subsidiaries 8,689,990 8,660,464 8,660,464 7,620,464 7,620,464 Other Receivables and prepayments 319,967 79,119 81,920 76,384 46,135 Property and Equipment 90,195 26,600 17,488 16,852 20,641 Intangible Assets - - - - 1,875 Deposit for shares 500,000 - - - -

Total assets 9,810,075 8,889,570 8,809,478 7,749,295 7,689,694

LiabilitiesBank borrowing 2,482,327 872,257 1,106,011 - 1,688 Other liabilities 920,200 1,199,985 672,377 452,819 436,014 Dividend payable - - - 80,525 80,525 Current income tax liabilities 255,109 255,109 255,109 254,373 289,039 Employees retirement benefit liability 883 43,329 24,374 20,139 14,845

Total Liabilities 3,658,519 2,370,680 2,057,871 807,856 822,111

EquityShare capital 2,572,685 2,572,685 2,572,685 2,572,685 2,572,685 Share premium account 2,690,936 2,690,936 2,690,936 2,690,936 2,690,936 Retained earnings 886,114 1,254,849 1,487,563 1,677,257 1,601,795 Other component of equity 1,821 420 423 561 2,167

Shareholders’ funds 6,151,556 6,518,890 6,751,607 6,941,439 6,867,583

Total Equities and Liabilities 9,810,075 8,889,570 8,809,478 7,749,295 7,689,694

COMPANY


Net income 81,289 223,669 549,855 559,721 362,348

Profit/ (loss) before taxation (368,735) (116,707) 150,093 311,803 205,608 Income tax expense - (13,100) (31,606) (30,526) (45,140)

Profit/(loss) after taxation (368,735) (129,807) 118,487 281,277 160,468

Statement of Profit or Loss and Other Comprehensive Income


MANAGEMENT GROUP& SUBSIDIARIES


REGIONAL DIRECTORS

Lagos-CentralMrs. J. EkomwererenB.A., ACII

Lagos-SouthMr. S. T. OkohACII, MBA

South-EastMr. G. N. ChukwumaHND, BSc., MBA

WestMr. R. A. AjanaBSc., MMP

South-SouthMrs. V. O. EluemeHND, MBA

EXECUTIVE GROUP

ROYAL EXCHANGE PLC

Group Managing DirectorAlhaji A. MuktariBSc., MSc., AIoD, AMIN

Group General ManagerMs. S. I. EzeukoB.Ed., LLB, BL, ACIARB, PGD INSURANCE LAW, PGCL CORPORATE & COMMERCIAL

LAW

Deputy General Managers

Human ResourcesMr. D. NosiriBA, MSc, CIPD

Strategic & Business PlanningMr. N. A. MelieBSc, ACIIN, MBA

Retail DivisionMr. Nelson AkereleHND, ACII

Finance and AccountsMr. F. C. OkoliBSc., M.Sc, FCA, FCTI, FCIB, CISA, CISSP,

CIA, CISM, MNIM

Information TechnologyMr. E. J. OsisiomaBSc., MBA

Assistant General Managers

Enterprise Risk ManagementMr. H. Y. BomanBSc., FCA, ACTI, ACS, ACPIN, MIoD

Facilities ManagementMr. B. T. BabajoBSc., MBA

Senior Manager

Legal and CompanySecretariat ServicesMrs. N. S. OnyemeLL.M, LL.B, BL, ACIARB

EXECUTIVE (SUBSIDIARIES)

Royal Exchange GeneralInsurance Company Limited

Managing DirectorMr. B. C. AgiliHND, MBA, FCII, FIIM

Director (Business Development)Mr. A. A. NwankwoHND, ACII, MBA

Senior ManagersMr. Ayo KamoruBSc, LLB, BL, MBA, ACIIN, LLM

Mrs. D. A. L. AkintayoHND, ACIIN, MBA

Mr. A. O. AjalaND, ACIIN, MMP

Royal Exchange Prudential Life Plc

Managing DirectorMr. B. O. BanmoreBSc, MMP, ACII

Assistant General ManagerMarketingMr. A. A. KasimBSc, MBA, ACIIN, ACEN, ACIP

Royal Exchange Finance & Asset Management Limited

Managing DirectorMr. Abiola SanniBSc, NIMN, ACIB, FCA

Assistant General ManagerMrs. Irene OparaMBA, HND, CPIN

Senior ManagerMrs. Funke OluyemiBSc, MBA

Royal Exchange Healthcare Limited

Managing DirectorDr. C. P. OfulueMBBS, MBA

Senior ManagersDr. E. OnwutaluMBBS, MBA, PGD (HSE)

Mr. O. O. SobuloHND, BSc, ACA

Royal Exchange Microfinance Bank Limited

Managing DirectorMrs. E. O. ElgbocheBSc., (Ed.), MBA, FCB, ACIM

Senior ManagerMr. K. HassanBSc, MBA, MSC

MANAGEMENT GROUP

AND SUBSIDIARIES


Royal Exchange General Insurance Company Limited is a wholly owned subsidiary of Royal Exchange Plc, licensed by the National Insurance Commission to offer the full range of general and special risks insurance products. With over 90 years in the Nigerian market, Royal Exchange General Insurance has an enviable reputation for reliability, integrity, professionalism, technical competence and financial strength.

The company operates from thirty three (33) branches country wide to ensure maximum outreach and complete accessibility to its customer base. The recent implementation of a web-enabled backbone IT system will further enhance its ability to provide incomparable service. The company’s capacity to underwrite oil and gas risks is widely acknowledged throughout the industry and its oil and gas treaty is widely recognized to be one of the best in the market.

With its unwavering dedication to its core values, the company continues to maintain its lead on many of the major corporate risks in Nigeria.

ROYAL EXCHANGE GENERAL

Mr. Ben AgiliManaging Director (Royal Exchange General)


Royal Exchange Prudential Life Plc is a wholly owned subsidiary of Royal Exchange Plc and is licensed to underwrite life insurance and related risks. Following the re-organization of the erstwhile Royal Exchange Assurance (Nigeria) Plc into a group holding company in April 2007, Royal Exchange Prudential Life Plc emerged as the subsidiary providing a variety of life and investment linked savings products to cater for individual and corporate needs.

Royal Exchange Prudential Life has pioneered the use of a GSM based electronic platform which enables some of our products to be purchased and activated via scratch cards. This platform, which is user friendly, has also aided the accessibility of our products to all branches, friendship centers and other outlets nationwide.

As part of our efforts aimed at adding value to the growing needs of our customers, we have also introduced a number of new products namely:• Annuity Policies (with four different variants)• Funeral Policies (Basic and Commonwealth)

In the coming months, our clients will also be able to enjoy new additions to our product bouquet covering medical health annuity schemes, disability benefit cover and dreaded illness cover.

At the corporate level, we are also at the forefront of providing cover under Compulsory Group Life Schemes for employees of both private and public sectors of the economy as required by the Pension Reform Act, 2004. We presently enjoy the partnership and collaboration of brokers and related organizations in providing quality services to the insuring public, in line with professional best practices.

ROYAL EXCHANGEPRUDENTIAL LIFE

Mr. Olawale BanmoreManaging Director (Royal Exchange Prudential Life)


Royal Exchange Healthcare Limited is a nationwide accredited NHIS health maintenance organization, providing financial intermediation within the health industry. We therefore act as a fulcrum between the enrollees and the healthcare providers selected purely on the quality of their services.

Royal Exchange Healthcare Limited’s primary function is the design of medical health plans that are both flexible and accommodating. Our provider network is spread across the country and through rigorous continuous quality auditing, we strive to ensure the highest possible standards in medical services to our clients.

We utilize the principle of risk pooling and managed care in controlling and hedging risks associated with our business.

In performing these functions, the risk bearing responsibility and its innovative management have been the distinguishing factor of the Royal Exchange Healthcare brand in the health insurance industry.

Royal Exchange Healthcare Limited will, in the long term, create a one-stop health solution for its customers.

ROYAL EXCHANGE HEALTHCARE

Dr. Pius OfulueManaging Director (Royal Exchange Healthcare)


Royal Exchange Finance & Asset Management Ltd (previously called Royal Exchange Finance & Investment Ltd) was incorporated as a wholly-owned subsidiary of Royal Exchange Plc in October 2004 and licensed in April 2005 by Central Bank of Nigeria to provide a wide range of professional services in the areas of credit-finance, funds mobilization and financial advisory services. The company is also licensed by Securities and Exchange Commission to provide portfolio and fund management services.

We adopt a customer-centric approach to fill the service delivery gaps evident in Nigeria financial sector in the area of financing businesses, especially small and medium scale enterprises. We are also excellent team players.

Royal Exchange Finance & Asset Management Ltd recognizes the indispensability of technology to straight-through processing and rapid turnaround times. We are at the verge of upgrading our system to a more advanced multi-functional financial software package to execute large-scale business transactions without hitches.

The technical expertise of Royal Exchange Finance & Asset Management Ltd is reflected in our creative approach to financing engagements. Our in-depth transaction knowledge and customer-centric approach allow us develop mutually beneficial long-term relationship with our clients. Our variety of personalized products meets specific needs. These products include:

• High Yield Investment Paper (HYIP)• Royal Investment Note (RIN)• Investment Plan (I-Plan)• Leasing• Loans• Mortgage Financing• Project and L.P.O Financing• Financial Advisory Services

ROYAL EXCHANGE FINANCEAND ASSET MANAGEMENT

Mr. Abiola SanniManaging Director (Royal Exchange Finance)


Royal Exchange Microfinance Bank Limited is a wholly owned subsidiary of Royal Exchange Plc, licensed by the Central Bank of Nigeria on October 15, 2009 to provide comprehensive micro financial services to the unbanked and under banked in urban, semi-urban and rural areas of Nigeria. We commenced business on October 19, 2009.

In line with the vision of Royal Exchange Plc to be a one-stop financial service shop and with its passion to alleviate poverty, Royal Exchange Microfinance Bank was set up to provide micro finance services to improve the lives of the common people, alleviating poverty and building a better society. Our focus is on micro, small, medium and retail markets, leveraging on state of the art technology to deliver superior and quality services.

The bank is in the process of converting to a State Microfinance Bank. Royal Exchange Microfinance Bank offers a broad range of products and services, most of which are unique and tailored to meet the needs of our diverse clientele.

The bank offers the following products:

Savings Products:• Royal Target Micro Savings (ROTMIS) Account• Royal Ordinary Micro Savings (ROMIS) Account• Royal Mandatory Savings (REMAS) Account• Current Account (ROCA)• Fixed Deposit (ROFID) Account

Loan Products:• Trade Group Loan (Royal Ordinary Microcredit - ROMIC)• Working Capital Loan (Royal Flexible Credit - ReFlex)• Personal loan for salary earners (Royal Bail Me Microcredit)• Asset acquisition finance• LPO financing (Royal Real Microcredit - REMIC)

The corporate head office of Royal Exchange Microfinance Bank is located at 34/36 Apapa-Oshodi Expressway, Oshodi.

ROYAL EXCHANGEMICROFINANCE BANK

Mrs. E. O. ElghocheManaging Director (Royal Exchange Microfinance Bank)


HEAD OFFICENew Africa House, 31, Marina, P.O. Box 112, Lagos, Nigeria.Email: [email protected]: www.royalexchangeplc.comTel: 01-4606690 to 01-4606699

CONTROL OFFICEPlot 34/36, Apapa/Oshodi Expressway, Charity Bus-stop, Oshodi, P.M.B. 1804, Ikeja, Lagos.Tel: 01-4606690 to 01-4606699

GROUP RETAIL OFFICEMosesola House, 3rd Floor,103/7, Allen Avenue,Opposite Alade Market, Ikeja,Tel: 01-2955662, 08023254096

ABA1, Asa Road, Aba, P. O. Box 604, Abia StateTel: 08037763428 ABUJA26, Mahatman Ghandi Crescent, Area 11, Garki, Abuja.Tel: 08035900354 AKUREOld National Bank Building 34, Oyemekun Road, P.M.B. 771, Akure.Tel: 08033887730

ALABA123, Olojo Drive, Ojo Alaba Int’l Market Road, Lagos.Tel: 08029314777 APAPATop Floor, Front Building1A, Plateau Road, Apapa, LagosP.O.Box 636 Apapa. Tel: 08055266886 ASABA14, Dennis Osadebey Way,Asaba, Delta State. Tel: 08130922757

AWKANifson Millennium Plaza, Opposite Federal Prison, Along Ziks Avenue, Amawbia, Anambra StateTel: 08036774177

BENIN113, New Lagos Road, Benin City, Benin.Tel: 08068044177

BERGER 1Agha Park Apapa/Oshodi Expressway, Berger, Lagos. Tel: 01-2912135, 08101971401 BERGER 2Plot 34/36 Apapa/Oshodi Expressway,Charity Bus-Stop, Oshodi, Lagos.Tel: 01-2912135, 08101971401

CALABAR103, Ndidem Usang Iso Road,Effio-ete Junction, Calabar Tel: 08037248052 ENUGUCanute House, 19/25 Ogui Road, Enugu State.Tel: 04-229108, 08023133497 IBADANOld Sketch Building, First Floor,Cocoa House Complex,Dugbe, Ibadan, Tel: 08094686750

IKEJAMosesola House, 3rd Floor,103/7 Allen Avenue,Opposite Alade Market, Ikeja, P.O.Box 1803, Ikeja.Tel: 01-8973858, 08037221503

ISOLOPlot 34/36 Apapa/Oshodi Expressway,Charity Bus-Stop, Oshodi, Lagos.Tel: 01-4540443, 08023207102

JOS1B, Richard Road, Muritala Mohammed Way, Jos.Tel: 08023634873

KADUNA2, Muritala Mohammed Square/Independence Way, P.O. Box 261, Kaduna.Tel: 08025842947

KANO2B, Post Office Road, Kano.P.O.Box 301, KanoTel: 08036613580

LAGOS MAIN BRANCH (MARINA)New African House,31, Marina, Lagos. P.O.Box 112, LagosTel:01-4181750, 08033327946Fax: 01-2713248

MAKURDI19, Railway Bye-Pass,High Level, Makurdi.Tel:08060009305

LEKKIRoyal Exchange (Phoenix House) 26E Abdul-Rahman Okene Close,Off Ligali Ayorinde Street,Victoria Island, Lagos.Tel: 01-8428234, 08023405365

OWERRI21 Wetheral Road, Owerri, Imo State.Tel: 08034481679

PORT HARCOURT42, Evo Road, GRA Phase II, Port Harcourt Tel: 08033373133

UYO130, Atiku-Abubakar Avenue,Uyo, Akwa-Ibom State.Tel: 08056049482

VICTORIA ISLANDRoyal Exchange (Phoenix House)26E Abdul-Rahman Okene Close,Off Ligali Ayorinde Street,Victoria Island, LagosTel: 01-7418620, 08033160496

WARRIOgun House, 107, Effurun/Sapele Road,Opp. Stanbic IBTC Bank,Effurun, Delta State.Tel:08033516212

YABAAlhaja Falilat Abegbe Ipaye Villa2nd Floor, 371, Borno Way,Off Spencer Street, Yaba, Lagos.P.O.Box 1804, Ikeja.Tel: 01-2956805, 08055517419

YOLAModibbo Raji House,2, Lamido Aliu Way, Jimeta, Yola, Adamawa State.Tel: 08037468679

BRANCH/OFFICE NETWORKCUM DIRECTORY


Royal Exchange Group Retail Friendship Centres

Alaba Int’l Market, Ibadan 123, Olojo Drive, Old Sketch Building, First Floor,Ojo, Alaba. Cocoa House Complex,08029314777 Dugbe, Ibadan. 08155538272

Royal Prudential Sales Outlets

S/N Name of Unit Manager Location Telephone No.

1 Micah Ikegbu Aba 08097902604

2 Umeadi Gloria Awka 08032910128

3 Adedapo Oladejo Ibadan 08066439677

4 Omolade Agbelusi Akure 08064945360

5 Ogbuchukwu Genevive Asaba 08065368210

6 Vincent Ojeagbase Port Harcourt 08036642606

7 Nwobodo Obinna Abuja 08037836308

8 Akachukwu Okey Enugu 08063497754

9 David Solomon Jos 08069694488

10 Frank Ogaganefe Auchi 09090808066

11 Gabriel Kolawole Adedeji Uyo 08053942500

12 Okhihie Bosede Warri 08036268899

13 Oluwatobi Oyegbemi Abeokuta 08136740556

14 Ibukun Akintubi Ikeja 07062995712

15 Ijeoma Anorue Apapa 08025952430

16 Muyiwa Adedayo Ilorin 08187145155

17 Aminu Shuibu Kano 08061353781

18 Clementina Omokaro Benin 08037972436

19 Bolaji Odusola Ikorodu 08095304485

FRIENSHIP CENTRE NETWORK


CORPORATE EVENTS


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