unaudited financial statements€¦ · comprehensive income and comprises items of income and...
TRANSCRIPT
RC 2176
UNAUDITED FINANCIAL STATEMENTS
31 DECEMBER 2019
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Table of contents
Statement of directors' responsibilities 2
Certification Pursuant to Section 60(2) of Investment and Securities Act No.27 of
2007
3
Statement of significant accounting policies 4
Statement of financial position 29
Statement of Comprehensive income 30
Statement of changes in equity – Group 31
Statement of changes in equity – Company 32
Statement of cash flows
33
Notes to the financial statements 34
2
Statement of Directors’ Responsibilities in Relation to the unaudited Financial Statements The Directors of African Alliance Insurance plc are responsible for the preparation of financial statements that give a true and fair view of the financial position of the company as at 31 December 2019, and the results of its operations, Consolidated and Separate cash flows and changes in equity for the period ended, in compliance with International Financial Reporting Standards ("IFRS"), and in the manner required by the Companies and Allied Matters Act of Nigeria, the Insurance Act, CAP I17 LFN 2004, relevant guidelines and circulars issued by the National Insurance Commission (NAICOM) and Financial Reporting Council Act 2011. In preparing the financial statements, the Directors are responsible for: x Properly selecting and applying accounting policies x Presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and
understandable information; x Providing additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable
users to understand the impact of particular transactions, other events and conditions on the Group’s and Company’s financial position and financial performance; and
x Making an assessment of the Group’s and Company’s ability to continue as a going concern.
The Directors are responsible for: x Designing, implementing and maintaining an effective and sound system of internal controls throughout the Group and
Company; x Maintaining adequate accounting records that are sufficient to show and explain the company's transactions and
disclose with reasonable accuracy at any time the financial position of the Group and Company, and which enable them to ensure that the Consolidated and Separate financial statements of the company comply with IFRS;
x Maintaining statutory accounting records in compliance with the legislation of Nigeria and IFRS; x Taking such steps as are reasonably available to them to safeguard the assets of the Group and Company; and
x Preventing and detecting fraud and other irregularities
By order of the Board _____________________________ _____________________________ Funmi Omo Olabisi Adekola Managing Director Chief Financial Officer FRC/2014/CIIN/00000008645 FRC/2013/ICAN/00000001179
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CERTIFICATION PURSUANT TO SECTION 60(2) OF INVESTMENT AND SECURITIES ACT NO.27 OF 2007 We the undersigned hereby certify the following with regards to our unaudited report for the period ended 31 December 2019 that: a. We have reviewed the report: b. To the best of our knowledge, the report does not contain:
i. Any untrue statement of a material fact, or ii. Omit to state a material fact, which would make the statements, misleading in the light of circumstances
under which such statements were made;
c. To the best of our knowledge, the financial statement and other financial information included in the report fairly present in all material respects the financial condition and results of operation of the company as of, and for the periods presented in the report.
d. We;
(i) Are responsible for establishing and maintaining internal controls. (ii) Have designed such internal controls to ensure that material information relating to the company and its
consolidated subsidiary is made known to such officers by others within those entries particularly during the period in which the periodic reports are being prepared
(iii) Have evaluated the effectiveness of the company’s internal controls as of date within 90 days prior to the report;
(iv) Have, present in the report our conclusions about the effectiveness of our internal controls based on our evaluation as of that date;
e. We have disclosed to the auditors of the company and audit committee: i. All significant deficiency in the design or operation of internal controls which would adversely affect the
company’s ability to record, process, summarise and report financial data and have identified for the company’s auditors any material weakness in internal controls, and
ii. Any fraud, whether or not material, that involves management or other employees who have significant role in the company’s internal controls.
f. We have identified in the report whether or not there were significant changes in internal controls or other factors that could significantly affect internal controls subsequent to the date of our evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
On behalf of the Directors of the Group and Company ____________________________ _____________________________ Funmi Omo Olabisi Adekola Managing Director Chief Financial Officer FRC/2014/CIIN/00000008645 FRC/2013/ICAN/00000001179
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Statement of significant accounting policies
1. General Information
African Alliance Insurance Company is a public limited company incorporated and domiciled in Nigeria. The
registered office is located at 54 Awolowo Road, Ikoyi, Lagos.
The company is principally engaged in the business of providing risk underwriting for life, related financial and
pension services, aviation services to its customers.
1.2 Principal Activities
The principal business of the company is providing risk underwriting and related financial and activation services to
its customers. Such services include provision of life insurance services to both corporate and individual customers.
The Subsidiaries activities are:
• Ghana Life Insurance Company Limited, a Life assurance company in Ghana.
• Axiom Air Limited, a cargo airline company
1.3 Components of Financial Statements
The Financial statements comprise the Consolidated and Separate Statements of Comprehensive income,
Consolidated and Separate statements of Financial Position, Consolidated and Separate Statement of Changes in
Equity, Consolidated and Separate Statements of Cash Flows, and the accompanying Notes.
Income and expenses (excluding the components of other comprehensive income) are recognised in the profit or
loss segment of comprehensive income to arrive at the profit for the year.
Other comprehensive income is recognised in the other comprehensive segment of the statement of other
comprehensive income and comprises items of income and expenses that are not recognised in the statement of
profit or loss as required or permitted by IFRS.
The addition of the loss for the year and the other comprehensive income gives the total comprehensive income for
the year.
Reclassification adjustments are amounts reclassified to statement of comprehensive income in the current year
that were recognised in other comprehensive income in the current or previous years. Transactions with the owners
of the Group in their capacity as owners are recognised in the statement of changes in equity.
1.4 Basis of preparation and measurement
The financial statements are prepared in compliance with International Financial Reporting Standards (IFRS) and
the requirements of the Companies and Allied Matters Act, Insurance Act CAP I17 LFN 2004, the Financial Reporting
Council of Nigeria Act 2011 and regulatory guidelines as pronounced from time to time by National Insurance
Commission (NAICOM). Historical cost basis was used in preparation of the financial statements as modified by the
measurement of certain items at revalued amounts as stated below:
- Property, plant and equipment at valuation
- Investment property at fair value
- Investment at fair value
- Impaired assets at their recoverable amounts
1.5 Compliance with IFRS
These financial statements have been prepared in accordance with the International Financial Reporting Standards
(IFRS) and IFRS Interpretations Committee (IFRIC) Interpretations applicable to companies reporting under IFRS as
issued by the International Accounting Standards Board (IASB). Additional information required by national
regulations have been included where appropriate
1.6 Going Concern status
As at the end of the financial period 31 December 2019, the company’s solvency margin is below the regulatory
requirement as stated in the Insurance Act CAP I17, LFN 2004.
The board of directors and management performed an assessment of its ability to continue as a going concern and
is satisfied that it has the resources to continue in business for the foreseeable future. This conclusion is based on
the board and executive management’s plan of restructuring the assets of the Group, divesting from some of the
subsidiary companies and injecting fresh capital to improve the liquidity position and upturn the current negative
indices in the financials statement with respect to shareholders fund, asset cover and solvency margin to positive
position in the shortest time.
1.7 Significant judgements and key sources of estimation uncertainty
In the process of applying the accounting policies adopted by the Group, the Directors make certain judgements
and estimates that may affect the carrying values of assets and liabilities in the next financial period. Such
judgements and estimates are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the current circumstances. The directors evaluate these at each
financial reporting date to ensure that they are still reasonable under the prevailing circumstances based on the
information available.
The preparation of the Group's financial statements requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of
contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could
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result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected
in the future. These factors should include:
The judgements made by the directors in the process of applying the Group's accounting policies that have the
most significant effect on the amounts recognised in the financial statements include:
- Claims arising from insurance contracts
Liabilities for unpaid claims are estimated on a case by case basis. The liabilities recognised for claims fluctuate
based on the nature and severity of the claim reported. Claims incurred but not reported are determined
using statistical analyses and the Group deems liabilities reported as adequate.
- Fair value of unquoted equity financial instruments
The fair value of financial instruments where no active market exists or where quoted prices are not otherwise
available are determined by using valuation techniques. In these cases, the fair values are estimated from
observable data using valuation models.
- Property, Plant and equipment
Property, Plant and equipment represent one of the most significant proportion of the asset base of the Group,
accounting for about 4% of the Group's total assets. Therefore, the estimates and assumptions made to
determine their carrying value and related depreciation are critical to the Group's financial position and
performance.
The charge in respect of periodic depreciation is derived after determining an estimate of an asset's expected
useful life and the expected residual value at the end of its life. Increasing an asset's expected life or its
residual value would result in the reduced depreciation charge in the statement of comprehensive income.
The useful lives and residual values of the property, plant and equipment are determined by management
based on historical experience as well as anticipation of future events and circumstances which may impact
their useful lives.
- Taxation
Whether it is probable that future taxable profits will be available against which temporary differences can be
utilized; and
1.8 Functional and presentation currency
The financial statements are presented in Nigerian Naira (Naira), rounded to the nearest thousand, this is also the
functional currency of the Group.
1.9 Presentation of financial statements
The Group presents its statements of financial position broadly in order of liquidity. An analysis regarding recovery
or settlement within twelve months after the reporting date (current) and more than 12 months after the reporting
date (non-current) is presented in the Notes.
2.0 Changes in accounting policy and disclosures
2.1 Changes in accounting policy and disclosures
African Alliance Insurance Company plc has fully adopted IFRS 9 as issued by the IASB in July 2014 with a date of
transition of 1 January 2018, which resulted in changes in accounting policies and adjustments to the amounts
previously recognised in the financial statements. African Alliance Insurance Company plc did not early adopt any
of IFRS 9 in previous periods.
2.2 New and amended standards and interpretations not yet adopted by the company
(a) New and amended standards and interpretations not yet adopted by the Company
A number of new standards, interpretations and amendments are effective for annual period beginning after
1 January 2018 and earlier application is permitted; however, the Company has not early adopted the
following new or amended standards in preparing these financial statements:
IFRS 15
IFRS 15 was issued in May 2014 and applies to an annual reporting period beginning on or after 1 January
2018.
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 core principle of IFRS 15 is that an entity will
recognise revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
This core principle is delivered in a five-step model framework:
• Identify the contract(s) with a customer
• Identify the performance obligations in the contract
• Determine the transaction price
• Allocate the transaction price to the performance obligations in the contract
• Recognise revenue when (or as) the entity satisfies a performance obligation.
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The adoption of IFRS 15 did not impact the timing or amount of fee and commission income from contracts
with customers and the related assets and liabilities recognised by the Group. Interest and fee income
integral to financial instruments and leases is accounted for using the applicable standards.
Application of this guidance will depend on the facts and circumstances present in a contract with a customer
and will require the exercise of judgment.
Adoption of this standard does not have any significant impact on the Group
IFRS 16 Leases
IFRS 16 replaces existing leases guidance, including 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 is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted
for entities that apply IFRS 15 at or before the date of initial application of IFRS 16.
IFRS 16 introduces a single, on balance sheet accounting model for leases. A leasee recognises a right-of-
use asset representing its right to use the underlying asset and a lease liability representing its obligation
to make lease payments. There are recognition exemptions for short term leases and leases of low value
items. Lessor accounting remains similar to the current standard, i.e., lessors continue to classify leases as
finance or operating leases.
The Company has completed an initial assessment of the potential impact on its financial statements but
has not yet completed its detailed assessment. The actual impact of applying IFRS 16 on the financial
statements in the period of initial application will depend on future economic conditions.
No significant impact is expected for the Company's finance leases as the Company has a few offices under
operating leases.
New or amended standards
and effective date
Summary of the requirements Possible impact on financial
statements
Amendments to IFRS 10 and IAS
28 (Sept 2014)
Sale or Contribution of Assets
between an Investor and its
Associate or Joint Venture
The IAS 28 was amended so that
a. The current requirements
regarding the partial gain or loss
recognition for transactions
between an investor and its
associate or joint venture only
apply to the gain or loss resulting
from the sale or contribution of
assets that do not constitute a
business as defined in IFRS 3
Business Combinations
The entity does not have any form
of joint venture agreement.
Hence, this amendment is not
applicable to the entity.
IFRIC 23 IFRIC 23 clarifies the accounting for
uncertainties in income taxes.
The interpretation is to be applied
to the determination of taxable
profit (tax loss), tax bases, unused
tax losses, unused tax credits and
tax rates, when there is uncertainty
over income tax treatments under
IAS 12.
IFRIC 23 is effective for annual
reporting periods beginning on or
after 1 January 2019. Earlier
application is permitted.
'IFRIC 23 clarifies the accounting
for uncertainties in income taxes.
The interpretation is to be applied
to the determination of taxable
profit (tax loss), tax bases, unused
tax losses, unused tax credits and
tax rates, when there is uncertainty
over income tax treatments under
IAS 12.
IFRIC 23 is effective for annual
reporting periods beginning on or
after 1 January 2019. Earlier
application is permitted.
Uncertainty over Income Tax
Treatments
Amendments to IFRS 9 (Oct
2017)
Prepayment Features with
Negative Compensation
The amendments in Prepayment
Features with Negative
Compensation (Amendments to
IFRS 9) are:
1. Changes regarding symmetric
prepayment options
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Under the current IFRS 9
requirements, the SPPI condition is
not met if the lender has to make a
settlement payment in the event of
termination by the borrower (also
referred to as early repayment
gain).
Prepayment Features with Negative
Compensation amends the existing
requirements in IFRS 9 regarding
termination rights in order to allow
measurement at amortised cost
(or, depending on the business
model, at fair value through other
comprehensive income) even in the
case of negative compensation
payments.
'2. Clarification regarding the
modification of financial liabilities
The final amendments also contain
(in the Basis for Conclusions) a
clarification regarding the
accounting for a modification or
exchange of a financial liability
measured at amortised cost that
does not result in the de-
recognition of the financial liability.
The IASB clarifies that an entity
recognises any adjustment to the
amortised cost of the financial
liability arising from a modification
or exchange in profit or loss at the
date of the modification or
exchange. A retrospective change
of the accounting treatment may
therefore become necessary if in
the past the effective interest rate
was adjusted and not the amortised
cost amount.
Amendments to IAS 28 (Oct
2017)
Long-term Interests in
Associates and Joint Ventures
The amendments in Long-term
Interests in Associates and Joint
Ventures (Amendments to IAS 28)
are:
• Paragraph 14A has been added to
clarify that an entity applies IFRS 9
including its impairment
requirements, to long-term
interests in an associate or joint
venture that form part of the net
investment in the associate or joint
venture but to which the equity
method is not applied.
• Paragraph 41 has been deleted
because the Board felt that it
merely reiterated requirements in
IFRS 9 and had created confusion
about the accounting for long-term
interests.
The amendments are accompanied
by an illustrative example.
The amendments are effective for
periods beginning on or after 1
January 2019. Earlier application is
permitted
The entity does not have any form
of joint venture agreement.
Hence, this amendment is not
applicable to the entity.
Annual Improvements to IFRS
Standards 2015–2017 Cycle
(Dec 2017)
IFRS 3, IFRS 11, IAS 12 and IAS
23 Amendments
In December 2017, the IASB
published Annual Improvements to
IFRS Standards 2015–2017 Cycle,
containing the following
amendments to IFRSs:
• IFRS 3 Business Combinations
and IFRS 11 Joint Arrangements —
The amendments to IFRS 3 clarify
that when an entity obtains control
of a business that is a joint
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operation, it re-measures
previously held interests in that
business. The amendments to IFRS
11 clarify that when an entity
obtains joint control of a business
that is a joint operation, the entity
does not re-measure previously
held interests in that business.
• IAS 12 Income Taxes — The
amendments clarify that the
requirements in the former
paragraph 52B (to recognise the
income tax consequences of
dividends where the transactions or
events that generated distributable
profits are recognised) apply to all
income tax consequences of
dividends by moving the paragraph
away from paragraph 52A that only
deals with situations where there
are different tax rates for
distributed and undistributed
profits.
• IAS 23 Borrowing Costs — The
amendments clarify that if any
specific borrowing remains
outstanding after the related asset
is ready for its intended use or sale,
that borrowing becomes part of the
funds that an entity borrows
generally when calculating the
capitalisation rate on general
borrowings.
Amendments to IAS 19)
(February 2018) Plan
Amendment, Curtailment or
Settlement
On 7 February 2018, the IASB
published Plan Amendment,
Curtailment or Settlement
(Amendments to IAS 19) to
harmonise accounting practices
and to provide more relevant
information for decision-making.
An entity applies the amendments
to plan amendments, curtailments
or settlements occurring on or after
the beginning of the first annual
reporting period that begins on or
after 1 January 2019.
Amendments to References to
the Conceptual Framework in
IFRS Standards
The Conceptual Framework for
Financial Reporting (Conceptual
Framework) describes the objective
of and concepts for general purpose
financial reporting. It is a practical
tool that helps the IASB to develop
requirements in IFRS® Standards
based on consistent concepts.
Consideration of these concepts, in
turn, should result in the IASB
developing IFRS Standards that
require entities to provide financial
information that is useful to
investors, lenders and other
creditors.
The IASB decided to revise the
Conceptual Framework because
some important issues were not
covered and some guidance was
unclear or out of date. The revised
Conceptual Framework, issued by
the IASB in March 2018, includes:
• A new chapter on measurement;
• Guidance on reporting financial
performance;
• Improved definitions of an asset
and a liability, and guidance
supporting these definitions; and
• Clarifications in important areas,
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such as the roles of stewardship,
prudence and measurement
uncertainty in financial reporting.
The IASB also updated references
to the Conceptual Framework in
IFRS Standards by issuing
Amendments to References to the
Conceptual Framework in IFRS
Standards. This was done to
support transition to the revised
Conceptual Framework for
companies that develop accounting
policies using the Conceptual
Framework when no IFRS Standard
applies to a particular transaction.
'IFRS 17 IFRS 17 establishes the principles
for the recognition, measurement,
presentation and disclosure of
insurance contracts within the
scope of the standard. The
objective of IFRS 17 is to ensure
that an entity provides relevant
information that faithfully
represents those contracts. This
information gives a basis for users
of financial statements to assess
the effect that insurance contracts
have on the entity's financial
position, financial performance and
cash flows.
IFRS 17 was issued in May 2017
and applies to annual reporting
periods beginning on or after 1
January 2021.
Insurance Contracts
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2.3 Foreign currencies
Foreign currency transactions are translated into the functional currency using the
exchange rates prevailing at the dates of the transactions. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement, except when deferred in equity as
qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange
gains and losses that relate to borrowings and cash and cash equivalents are presented
in the income statement within 'other income'.
All other foreign exchange gains and losses are presented in the income statement
within ‘Other income’ or ‘other expenses’. Changes in the fair value of monetary
securities denominated in foreign currency classified as fair value through Other
Comprehensive Income are analysed between translation differences resulting from
changes in the amortised cost of the security, and other changes in the carrying
amount of the security.
Translation differences related to changes in amortised cost are recognised in profit or
loss; other changes in carrying amount are recognised in equity. Translation
differences on financial assets and liabilities held at fair value through profit and loss
are reported as part of the fair value gain or loss. Translation differences on non-
monetary financial assets such as equities classified as fair value through other
comprehensive income financial assets are included in the fair value reserve in equity.
2.4 Cash and cash equivalents
Cash and cash equivalents include cash in hand and at bank, call deposits and short
term highly liquid financial assets with original maturities of three months or less from
the acquisition date, which are subject to insignificant risk of changes in their fair
value, and are used by the Company in the management of its short-term
commitments. Cash and cash equivalents include cash on hand, cash balances and
fixed deposits.
2.5 Financial assets
The Group classifies its financial assets into the following categories: fair value through
profit or loss, fair value through other comprehensive income and amortized cost. The
classification is determined by management at initial recognition and depends on the
objective of the business model.
2.5.1 Classification and Measurements
Financial assets are classified and measured at initial recognition at fair value,
including directly attributable transaction cost. Subsequent measurement is based on
the business model objective of managing the assets as well as the cashflow
characteristics of the asset.
Business model assessment involves determining if financial assets are managed in
order to generate cash flows from collection of contractual cash flows, selling financial
assets or both. The Group assesses business model at a portfolio level which reflects
how the assets are managed together to achieve a particular business objective.
Financial assets at fair value through profit or loss
Financial assets will be measured at fair value through the income statement if they
do not meet the business model criteria of either “Hold to collect” or “Hold to collect
and sell”. All equity instruments and similar securities (unless designated at inception
to fair value through other comprehensive income); and all derivatives are measured
at fair value through profit or loss. An entity have the option to designate a financial
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asset as measured at fair value through profit or loss if doing so eliminates or
significantly reduces an accounting mismatch. The Group has undertaken an
assessment to determine the potential impact of changes in classification and
measurement of financial assets. The assessment indicated that the adoption of IFRS
9 will not result in significant changes to existing asset measurement bases.
Financial assets at fair value through other comprehensive income
Financial assets will be measured at fair value through other comprehensive income if
they are held within a business model where the objective is achieved by both
collecting contractual cash flows and selling financial assets (“Hold to collect and sell”),
and their contractual cash flows represent solely payments of principal and interest.
Financial assets measured at amortized cost
Financial assets are measured at amortized cost if they are held within a business
model whose objective is to hold for collection of contractual cash flows where those
cash flows represent solely payments of principal and interest. After initial
measurement, debt instruments in this category are carried at amortized cost using
the effective interest rate method. Amortized cost is calculated taking into account any
discount or premium on acquisition, transaction costs and fees that are an integral
part of the effective interest rate. Amortization is included in Interest income in the
Consolidated Statement of Income. Impairment on financial assets measured at
amortized cost is calculated using the expected credit loss approach.
2.5.2 Recognition and measurement
Financial assets are initially recognised at fair value plus, in the case of all financial
assets not carried at fair value through profit and loss, transaction costs that are
directly attributable to their acquisition. Financial assets carried at fair value through
profit and loss are initially recognised at fair value, and transaction costs are expensed
in the statement of comprehensive income. Financial assets are derecognised when
the rights to receive cash flows from them have expired or where they have been
transferred and the Company has also transferred substantially all risks and rewards
of ownership.
Financial assets at fair value through other comprehensive income and financial assets
at fair value through profit and loss are subsequently carried at fair value. Other
financial assets are carried at amortised cost using the effective interest method.
Gains and losses arising from changes in the fair value of the ‘financial assets at fair
value through profit and loss’ category are included in the income statement in the
period in which they arise. Dividend income from financial assets at fair value through
profit and loss is recognised in the statement of comprehensive income as part of
Investment income when the Company’s right to receive payments is established.
Interest on financial assets fair value through other comprehensive income calculated
using the effective interest method is recognised in the income statement. Dividends
on equity instruments fair value through other comprehensive income are recognised
in the income statement when the Company’s right to receive payments is established.
Both are included in the investment income line.
2.5.3 Determination of fair value
For financial instruments traded in active markets, the determination of fair values of
financial assets and financial liabilities is based on quoted market prices or dealer price
quotations. This includes listed equity securities and quoted debt instruments on major
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exchanges. The quoted market price used for financial assets held by the Company is
the current bid price.
A financial instrument is regarded as quoted in an active market if quoted prices are
readily and regularly available from an exchange, dealer, broker, industry, company,
pricing service or regulatory agency, and those prices represent actual and regularly
occurring market transactions on an arm’s length basis. If the above criteria are not
met, the market is regarded as being inactive. Indications that a market is inactive are
when there is a wide bid - offer spread or significant increase in the bid - offer spread
or there are few recent transactions.
For all other financial instruments, fair value is determined using valuation techniques.
In these techniques, fair values are estimated from observable data in respect of
similar financial instruments, using models to estimate the present value of expected
future cash flows or other valuation techniques, using inputs (for example, NIBOR,
MPR etc.) existing at the dates of the statement of financial position.
The Company uses widely recognised money market rates in determining fair values
of non-standardised financial instruments of lower complexity like placements, and
treasury bills. These financial instruments models are generally market observable.
The carrying value less impairment provision of trade receivables and payables are
assumed to approximate their fair values.
The fair value of financial liabilities for disclosure purposes is estimated by discounting
the future contractual cash flows at the current market interest rate that is available
to the Company for similar financial instruments. In cases where the fair value of
unlisted equity instruments cannot be determined reliably, the instruments are carried
at cost less any impairments. The fair value for loans and receivables as well as
liabilities to banks and customers are determined using a present value model on the
basis of contractually agreed cash flows, taking into account credit quality, liquidity
and costs. The fair values of contingent liabilities and irrevocable loan commitments
correspond to their carrying amounts.
2.5.4 De-recognition of financial instruments
The Company derecognises a financial asset only when the contractual rights to the
cash flows from the asset expire or it transfers the financial asset and substantially all
the risks and rewards of ownership of the asset to another entity. If the Company
neither transfers nor retains substantially all the risks and rewards of ownership and
continues to control the transferred asset, the Company recognises its retained
interest in the asset and an associated liability for amounts it may have to pay. If the
Company retains substantially all the risks and rewards of ownership of a transferred
financial asset, the Company continues to recognise the financial asset and also
recognises a collateralised borrowing for the proceeds received.
2.5.5 Reclassification of financial assets
Reclassification of financial assets is determined by The Entity's senior management,
and is done as a result of external or internal changes which are significant to The
Entity's operations and demonstrable to external parties.
Reclassification of financial assets occurs when The Entity changes its business model
for managing financial assets.
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Investments in equity instruments that are designated as at FVTOCI at initial
recognition cannot be reclassified because the election to designate as at FVTOCI is
irrevocable.
For financial assets, reclassification is required between FVTPL, FVTOCI and amortised
cost; if and only if the entity’s business model objective for its financial assets changes
so its previous business model assessment would no longer apply.
IFRS 9 does not allow reclassification:
• when the fair value option has been elected in any circumstance for a financial
asset;
• or equity investments (measured at FVTPL or FVTOCI); or
• for financial liabilities.
If an entity reclassifies a financial asset, it is required to apply the reclassification
prospectively from the reclassification date, defined as the first day of the first
reporting period following the change in business model that results in the entity
reclassifying financial assets. Previously recognised gains, losses (including
impairment gains or losses) or interest are not restated.
All impairment losses are recognized through profit or loss. If any loss on the financial
asset was previously recognized directly in equity as a reduction in fair value, the
cumulative net loss that had been recognized in equity is transferred to the income
statement and is recognized as part of the impairment loss. The amount of the loss
recognized in the income statement is the difference between the acquisition cost and
the current fair value, less any previously recognized impairment loss.
2.5.6 Impairment of financial assets
Financial assets carried at amortized cost and FVTOCI
The impairment model under IFRS 9 reflects expected credit losses, as opposed to
incurred credit losses under IAS 39. Under the impairment approach in IFRS 9, it is no
longer necessary for a credit event to have occurred before credit losses are
recognised. Instead, an entity always accounts for expected credit losses and changes
in those expected credit losses. The amount of expected credit losses should be
updated at each reporting date to reflect changes in credit risk since initial recognition.
The Entity recognizes loss allowances for Expected Credit Losses (ECL) on the following
financial instruments that are not measured at FVTPL:
Financial assets that are debt instruments, Lease receivables, Loan and advances to
customers, Other Loans and receivables, financial guarantee contracts issued; and
Loan commitments issued. The Entity measures expected credit losses and recognizes
interest income on risk assets based on the following stages:
Stage 1: Assets that are performing. If credit risk is low as of the reporting date or
the credit risk has not increased significantly since initial recognition, The Entity
recognize a loss allowance at an amount equal to 12-month expected credit losses.
This amount of credit losses is intended to represent lifetime expected credit losses
that will result if a default occurs in the 12 months after the reporting date, weighted
by the probability of that default occurring.
14
Stage 2: Assets that have significant increases in credit risk. In instances where credit
risk has increased significantly since initial recognition, The Entity measures a loss
allowance at an amount equal to full lifetime expected credit losses. That is, the
expected credit losses that result from all possible default events over the life of the
financial instrument. For these debt instruments, interest income recognition will be
based on the EIR multiplied by the gross carrying amount.
Stage 3: Credit impaired. For debt instruments that have both a significant increase
in credit risk plus observable evidence of impairment
The Entity’s process to assess changes in credit risk is multi-factor and has three main
elements;
I. Quantitative element, a quantitative comparison of PD at the reporting date and
PD at initial recognition
II. Qualitative elements
III. Backstop indicators
For individually significant exposures such as corporate and commercial risk assets,
the assessment is driven by the internal credit rating of the exposure and a
combination of forward-looking information that is specific to the individual borrower
and forward-looking information on the macro economy, commercial sector (to the
extent such information has not been already reflected in the rating process).
For other exposures, significant increases in credit risk is made on a collective basis
that incorporates all relevant credit information, including forward-looking
macroeconomic information. For this purpose, The Entity groups its exposures on the
basis of shared credit risk characteristics.
No impairment reserve is set on financial assets measured at fair value through profit
and loss.
2.5.7 Significant increase in credit risk
The Entity decision on whether expected credit losses are based on 12-month expected
credit losses or lifetime expected credit losses depends on whether there has been a
significant increase in credit risk since initial recognition. An assessment of whether
credit risk has increased significantly is made at each reporting date. When making
the assessment, The Entity uses the change in the risk of a default occurring over the
expected life of the financial instrument instead of the change in the amount of
expected credit losses. The forms the basis of stage 1, 2 and 3 classification and
subsequent migration.
The Entity applies qualitative and quantitative criteria for stage classification and for
its forward and backward migration
i) Assets carried at amortised cost
The amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding
future credit losses that have not been incurred) discounted at the financial
asset’s original effective interest rate. The carrying amount of the asset is
reduced through the use of an allowance account and the amount of the loss is
recognised in income statement. If a financial instrument has a variable interest
rate, the discount rate for measuring any impairment loss is the current effective
interest rate determined under the contract.
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The calculation of the present value of the estimated future cash flows of a
collateralised financial asset reflects the cash flows that may result from disposal
less costs for obtaining and selling the collateral, whether or not disposal is
probable.
For the purposes of a collective evaluation of impairment, financial assets are
grouped on the basis of similar credit risk characteristics (i.e. on the basis of
The Entity’s grading process that considers asset type, industry, geographical
location, collateral type, past-due status and other relevant factors). Those
characteristics are relevant to the estimation of future cash flows for groups of
such assets by being indicative of the debtors’ ability to pay all amounts due
according to the contractual terms of the assets being evaluated.
Future cash flows in a group of financial assets that are collectively evaluated
for impairment are estimated on the basis of the contractual cash flows of the
assets in the group and historical loss experience for assets with credit risk
characteristics similar to those in the group. Historical loss experience is
adjusted on the basis of current observable data to reflect the effects of current
conditions that did not affect the period on which the historical loss experience
is based and to remove the effects of conditions in the historical period that do
not currently exist.
Estimates of changes in future cash flows for groups of assets are reflected and
directionally consistent with changes in related observable data from period to
period (for example, changes in unemployment rates, property prices, payment
status, or other factors indicative of changes in the probability of losses in the
group and their magnitude). The methodology and assumptions used for
estimating future cash flows are reviewed regularly by The Entity to reduce any
differences between loss estimates and actual loss experience.
When a loan is uncollectible, it is written off against the related allowance for
loan impairment. Such loans are written off after all the necessary procedures
have been completed and the amount of the loss has been determined.
Impairment charges relating to loans and advances to Insurance entity’s and
loans and advances to customers are classified in 'impairment charge for credit
losses' whilst impairment charges relating to investment securities (loans and
receivables categories) are classified in 'Net gains/ (losses) on investment
securities'.
If, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment
was recognised (such as an improvement in the debtor’s credit rating), the
previously recognised impairment loss is reversed by adjusting the allowance
account. The amount of the reversal is recognised in profit or loss.
ii) Assets classified as fair value through other comprehensive income
The Entity can choose to make an irrevocable election at initial recognition for
investments in equity instruments that do not meet the definition of held for
trading, which would otherwise be measured at fair value through profit or loss,
to present changes in fair value in other comprehensive income.
Reclassification of amounts recognised in other comprehensive income and
accumulated in equity to profit or loss is not done. This applies throughout the
life of the instrument and also at de-recognition; such investments will not be
subject to the impairment requirements.
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Dividends on investments in equity instruments with gains and losses
irrevocably presented in other comprehensive income are recognised in profit or
loss if the dividend is not a return on investment (like dividends on any other
holdings of equity instrument) when:
a. the entity's right to receive payment of the dividend is established;
b. it is probable that the economic benefits associated with the dividend will
flow to the entity; and
c. the amount of the dividend can be measured reliably.
For debt instruments measured at FVTOCI, changes in fair value is recognised
in other comprehensive income, except for: interest calculated using the
effective interest rate method, foreign exchange gains or losses and;
impairment gains or losses until the financial asset is derecognised or
reclassified.
When the financial asset is derecognised, the cumulative gain or loss previously
recognised in other comprehensive income is reclassified from equity to profit
or loss as a reclassification adjustment. Also, when a debt instrument asset is
measured at fair value through other comprehensive income, the amounts that
are recognised in profit or loss are the same as the amounts that would have
been recognised in profit or loss if the financial asset had been measured at
amortised cost.
2.5.8 Financial liabilities
Classification and subsequent measurement
i. Fair Value through Profit or Loss (FVTPL)
ii. Amortized cost,
Financial Liabilities at fair value through profit or loss
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. At initial recognition, the best evidence of the fair value of a financial instrument
is the transaction price (i.e. the fair value of the consideration paid or received), unless
the fair value of that instrument is evidenced by comparison with other observable
current market transactions in the same instrument, without modification or
repackaging, or based on valuation techniques such as discounted cash flow models
and option pricing models whose variables include only data from observable markets.
Subsequent to initial recognition, for financial instruments traded in active markets,
the determination of fair values of financial assets and financial liabilities is based on
quoted market prices or dealer price quotations. This includes listed equity securities
and quoted debt instruments on major exchanges (for example, Nigerian Stock
Exchange (NSE) and Financial Markets Dealers Quotation (FMDQ)).
A financial instrument is regarded as quoted in an active market if quoted prices are
readily and regularly available from an exchange, dealer, broker, industry group,
pricing service or regulatory agency, and those prices represent actual and regularly
occurring market transactions on an arm’s length basis. If the above criteria are not
met, the market is regarded as being inactive. Indications that a market is inactive are
17
when there is a wide bid-offer spread or significant increase in the bid-offer spread or
there are few recent transactions.
For all other financial instruments, fair value is determined using valuation techniques.
In these techniques, fair values are estimated from observable data in respect of
similar financial instruments, using models to estimate the present value of expected
future cash flows or other valuation techniques, using inputs existing at the dates of
the statement of financial position.
Forward-Looking Information
In the context of IFRS 9, is an enhanced information set that includes credit
information pertaining to future developments (including for example macroeconomic
developments). The inclusion of forward-looking information along with traditional past
due (realized, historical) information is considered to produce comprehensive credit
risk information.
The inclusion of forward-looking information is a distinctive feature of an IFRS 9 ECL
model. Incorporating economically stressed states of the world and their potential
impact on credit performance is critical for the timely recognition of credit losses."
Financial Liabilities at amortized cost
The amortised cost of a financial asset or liability is the amount at which the financial
asset or liability is measured at initial recognition, minus principal repayments, plus or
minus the cumulative amortisation using the effective interest method of any
difference between the initial amount recognised and the maturity amount, minus any
reduction for impairment.
2.5.9 Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement
of financial position only when there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle on a net basis, or to realise the
asset and settle the liability simultaneously.
2.6 Trade receivables
Trade, reinsurance and other receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market. After initial
recognition these are measured at amortised cost using the effective interest method,
less provision for impairment. Discounting is omitted where the effect of discounting
is immaterial.
Individually significant receivables are considered for impairment when they are past
due or when other objective evidence is received that a specific counterparty will
default. Trade receivables arising from insurance contracts are stated after deducting
allowance made for specific debts considered doubtful of recovery. Impairment of trade
receivables are presented within other operating expenses.
Trade and Other receivables amounts are short-term. The net carrying value of trade
receivables is considered a reasonable approximation of fair value. Trade receivables
are reviewed at every reporting period for impairment.
2.7 Trade receivables and payables related to insurance contracts
Receivables and payables are recognised when due. These include amounts due to and
from agents, brokers and insurance contract holders.
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If there is objective evidence that the insurance receivable is impaired, the Group
reduces the carrying amount of the insurance receivable accordingly and recognises
that impairment loss in the income statement.
2.8 Reinsurance contracts
Contracts entered into with reinsurers under which the Group is compensated for
losses on one or more long-term policy contracts issued by the Group and that meet
the classification requirements for insurance contracts are classified as long-term
reinsurance contracts. The expected claims and benefits to which the Group is entitled
under these contracts are recognised as assets where material.
If there is objective evidence that the reinsurance asset is impaired, the carrying
amount is reduced to a recoverable amount, and the impairment loss is recognised in
the statement of comprehensive income.
2.8.1 Reinsurance asset
Reinsurance assets consist of short - term balances due from reinsurers, as well as
longer term receivables that are dependent on the expected claims and benefits arising
under the related reinsured insurance contracts. Amounts recoverable from or due to
reinsurers are measured consistently with the amounts associated with the reinsured
insurance contracts and with the terms of each reinsurance contract.
The reinsurance asset is reviewed quarterly for impairment. Where there are objective
evidence that the insurance asset is impaired, the Group reduces the carrying amount
of the insurance asset to its recoverable amount and recognises that impairment loss
in the statement of comprehensive income. Evidence that the reinsurance asset is
impaired is gathered where the reinsurance Group has refused payment of any
balance.
2.8.2 Reinsurance liabilities
Liabilities are valued gross before taking into account reinsurance. Reinsurance
liabilities are primarily premiums payable for reinsurance contracts and are recognised
as an expense when due.
2.9 Other receivables and prepayment
Other receivables are stated after deductions of amounts considered bad or doubtful
recovery. These are receivables other than investment securities, trade receivables
and reinsurance assets. When a debt is deemed not collectible, it is written off against
the related provision or directly to profit or loss account to the extent not previously
provided for. Any subsequent recovery of written-off debts is credited to profit or loss.
Prepayments represents prepaid expenses and are carried at cost less amortisation
expensed in profit or loss.
2.10 Deferred acquisition costs (DAC)
Acquisition costs comprise all direct and indirect costs arising from the writing of
insurance contracts (life and non-life contracts). Deferred acquisition costs represent
a proportion of commission which are incurred during a financial year and are deferred
to the extent that they are recoverable out of future revenue margins. It is calculated
by applying to the acquisition expenses the ratio of unearned premium to written
premium.
Commissions and other acquisition costs that vary with and are related to securing
new contracts and renewing existing contracts are capitalised as an intangible asset.
All other costs are recognised as expenses when incurred. The DAC is subsequently
amortised over the life of the contracts as follows:
19
For short-duration life insurance contracts, deferred acquisition cost is amortised over
the terms of the policies as premium is earned.
For long-term insurance contracts with fixed and guaranteed terms, deferred
acquisition cost is amortised in line with premium revenue using assumptions
consistent with those used in calculating future policy benefit liabilities; and
For long-term insurance contracts without fixed terms and investment contracts,
deferred acquisition cost is amortised over the expected total life of the contract as a
constant percentage of estimated gross profit margins (including investment income)
arising from these contracts. The resulting change to the carrying value of the DAC is
charged to statement of comprehensive income.
2.11 Investment properties
Investment property comprises investment in land or buildings held primarily to earn
rentals or capital appreciation or both.
Investment property is initially recognized at cost including transaction costs. The
carrying amount includes the cost of replacing part of an existing investment property
at the time that cost is incurred if the recognition criteria are met; and excludes cost
of day to day servicing of an investment property.
An investment property is subsequently measured at fair value with any change
therein recognised in profit or loss. Fair values are determined individually, on a basis
appropriate to the purpose for which the property is intended and with regard to recent
market transactions for similar properties in the same location.
Fair values are reviewed annually by independent valuer, holding a recognized and
relevant professional qualification and with relevant experience in the location and
category of investment property being valued. Any gain or loss arising from a change
in the fair value is recognized in the income statement.
Subsequent expenditure on investment property is capitalized only if future economic
benefit will flow to the Company; otherwise they are expensed as incurred.
2.12 Intangible assets
Software license costs and computer software that is not an integral part of the related
hardware are initially recognised at cost, and subsequently carried at cost less
accumulated amortization and accumulated impairment losses. Costs that are directly
attributable to the production of identifiable computer software products controlled by
the Group are recognised as intangible assets.
Amortization is calculated using the straight line method to write down the cost of each
license or item of software to its residual value over its estimated useful life.
Amortization begins when the asset is available for use, i.e. when it is in the location
and condition necessary for it to be capable of operating in the manner intended by
management, even when idle. Amortization ceases at the earlier date that the asset
is classified as held for sale and the date that the asset is derecognized and ceases
temporarily, while the residual value exceeds or is equal to the carrying value.
Gains or losses arising from derecognition of an intangible asset are measured as the
difference between the net disposal proceeds and the carrying amount of the asset
and are recognised in the income statement when the asset it derecognized.
Intangibles recognised as assets are amortized over their useful lives, which does not
exceed five years.
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2.13 Property, plant and equipment
Property and equipment are reflected at historical cost less accumulated depreciation
and any accumulated impairment losses in value, where appropriate. Land is not
depreciated. Depreciation is provided for on a straight-line basis, taking into account
the residual value and estimated useful lives of the assets as follows:
Asset class Depreciation rate
Buildings 2%
Motor Vehicles 25%
Computer Equipment 20%
Furniture and Fittings 10%
Office Equipment 20%
Plant and Machinery 10%
Aircraft (Componentized)
• Aircraft Engines 4%
• Airframes (Body) 3%
• Landing gears 10%
• APU, Avionic and
Other electronic parts 15%
If the expected residual value is equal to or greater than the carrying value, no
depreciation is provided for. The residual values, estimated useful lives of the assets
and depreciation methods are reviewed at each statement of financial position date
and adjusted as appropriate.
Cost prices include costs directly attributable to the acquisition of property and
equipment, as well as any subsequent expenditure when it is probable that future
economic benefits associated with the item will flow to the Group and the expenditure
can be measured reliably. All other expenditure is recognised in the statement of
comprehensive income when incurred.
Property and equipment are derecognised at disposal date or at the date when it is
permanently withdrawn from use without the ability to be disposed of. The differences
between the carrying amounts at the date of de-recognition and any disposal proceeds,
as applicable, is recognised in 'other income' in the statement of comprehensive
income.
2.14 Impairment of other non-financial assets
Assets that are subject to amortisation are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable.
Additionally, assets that have an indefinite useful life are not subject to amortisation
and are tested annually for impairment. An impairment loss is recognised for the
amount by which the asset’s carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset’s fair value less costs to sell and value in
use. For the purposes of assessing impairment, assets are stated at the lowest levels
for which there are separately identifiable cash flows (cash-generating units).
The impairment test also can be performed on a single asset when the fair value less
cost to sell or the value in use can be determined reliably. Non-financial asset other
than goodwill that suffered impairment are reviewed for possible reversal of the
impairment at each reporting date.
21
Impairment losses recognised in prior periods are assessed at each reporting date for
any indications that the loss has decreased or no longer exists. An impairment loss is
reversed if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had been recognised. An
impairment loss in respect of goodwill is not reversed.
2.15 Statutory deposit
The Group maintains a statutory deposit with the Central Bank of Nigeria which
represents 10% of the minimum capitalisation in compliance with the Insurance Act.
This balance is not available for the day to day operations of the Group. Statutory
deposit is measured at cost.
2.16 Insurance contracts
The Group issues contracts that transfer insurance risk or financial risk or both.
Insurance contracts are those contracts that transfer significant insurance risk. Such
contracts may also transfer financial risk.
2.16.1 Classification of contracts
A contract is classified as an insurance contract where the Group accepts significant
insurance risk by agreeing with the policyholder to pay benefits if a specified uncertain
future event (the insured event) adversely affects the policyholder or other beneficiary.
Significant insurance risk exists where it is expected that for the duration of the policy
or part thereof, policy benefits payable on the occurrence of the insured event will
exceed the amount payable on early termination, before allowance for expense
deductions at early termination. Once a contract has been classified as an insurance
contract, the classification remains unchanged for the remainder of its lifetime, even
if the insurance risk reduces significantly during this period.
2.16.2 Recognition and measurement
(a) Short-term insurance contracts
Short-duration life insurance contracts protect the Group’s customers from the
consequences of events (such as death or disability) that would affect the ability
of the customer or his/her dependents to maintain their current level of income.
They are usually short-duration life insurance contracts ranging between 12 to
24 months period of coverage. Guaranteed benefits paid on occurrence of the
specified insurance event are either fixed or linked to the extent of the economic
loss suffered by the policyholder.
For all these contracts, premiums are recognised as revenue (earned premiums)
proportionally over the period of coverage. The portion of premium received on
in-force contracts that relates to unexpired risks at the balance sheet date is
reported as the unearned premium liability. Premiums are shown before
deduction of commission and are gross of any taxes or duties levied on
premiums.
Claims and loss adjustment expenses are charged to income as incurred based
on the estimated liability for compensation owed to contract holders or third
parties damaged by the contract holders. They include direct and indirect claims
settlement costs and arise from events that have occurred up to the end of the
reporting period even if they have not yet been reported to the Group. The Group
does not discount its liabilities for unpaid claims. Liabilities for unpaid claims are
estimated using the input of assessments for individual cases reported to the
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Group and statistical analyses for the claims incurred but not reported (IBNR),
and to estimate the expected ultimate cost of more complex claims that may be
affected by external factors.
The liability reserve on short term insurance contract is made up of an unexpired
premium reserve (UPR) and reserve for ‘Incurred but not reported’ claims (IBNR).
The UPR are calculated after adjusting for acquisition expenses. IBNR reserves
are required to take account of the delay in reporting claims. These are
determined by considering ultimate claims ratios for the life schemes on the
Group’s books. The ratios differ by industry and have been determined following
a historical analysis of portfolio claims experience. The IBNR reserves are
calculated by adjusting the ultimate claims amounts to allow for claims already
paid and those outstanding for payment, and again adjusted to allow for the
holding of a separate UPR reserve. As the short term insurance contract
experience of FBN in builds up we will be able to adjust for Group-specific claims
settlement patterns.
(b) 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 recognised as revenue when they
become payable by the contract holder. Premiums are shown before deduction
of commission. Benefits are recorded 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 recognised. The liability is determined as the
sum of the expected discounted value of the benefit payments and the future
administration expenses that are directly related to the contract, less the
expected discounted value of the theoretical premiums that would be required to
meet the benefits and administration expenses based on the valuation
assumptions used (the valuation premiums). The liability is based on
assumptions as to mortality, persistency, maintenance expenses and investment
income that are established at the time the contract is issued. A margin for
adverse deviations is included in the assumptions.
Where insurance contracts have a single premium or a limited number of
premium payments due over a significantly shorter period than the period during
which benefits are provided, the excess of the premiums payable over the
valuation premiums is deferred and recognised as income in line with the
decrease of unexpired insurance risk of the contracts in force or, for annuities in
force, in line with the decrease of the amount of future benefits expected to be
paid. The liabilities are recalculated at each end of the reporting period using the
assumptions established at inception of the contracts.
The long term insurance contracts insure events associated with human life. They
include individual insurance contracts.
Individual insurance contracts
The reserve has been calculated using the gross premium valuation approach.
This reserving methodology adopts a cash flow approach taking into account all
expected future cash flows including premiums, expenses and benefit payments
to satisfy the liability adequacy test. The test also considers current estimates of
all contractual cash flows, and of related cash flows such as claims handling costs,
as well as cash flows resulting from embedded options and guarantees (where
23
applicable
2.16.3 Insurance contract liabilities
Life insurance policy claims received up to the last day of each financial period
and claims incurred but not reported (IBNR) are provided for and included in the
policy liabilities. Past claims experience is used as the basis for determining the
extent of the IBNR claims.
Income from reinsurance policies is recognised concurrently with the recognition
of the related policy benefit. Insurance liabilities are presented without offsetting
them against related reinsurance assets.
Insurance liabilities are retained in the statement of financial position until they
are discharged or cancelled and/or expire. The Group performs a liability
adequacy test to determine the recognised insurance liabilities and an
impairment test for reinsurance assets held at each reporting date.
2.17 Technical reserves
These are the reserves computed in compliance with the provision of Section 20,
21, and 22 of the Insurance Act 2003. They are:
(a) General insurance contracts
Reserves for unearned premium
In compliance with Section 20 (1) (a) of Insurance Act 2003, the reserve for
unearned premium is calculated on a time apportionment basis in respect of the
risks accepted during the year.
Reserves for outstanding claims
The reserve for outstanding claims is maintained at the total amount of
outstanding claims incurred and reported plus claims incurred but not reported
("IBNR") as at the reporting date. The IBNR is based on the liability adequacy
test.
Reserves for unexpired risk
A provision for additional unexpired risk reserve (AURR) is recognized for an
underwriting year where it is envisaged that the estimated cost of claims and
expenses would exceed the unearned premium reserve (UPR).
(b) Life business
Life fund
This is made up of net liabilities on policies in force as computed by the actuaries
at the time of the actuarial valuation.
Liability adequacy test
At the end of the reporting period, liability adequacy tests are performed by an
Actuary to ensure the adequacy of the contract liabilities. In performing these
tests, current best estimates of future contractual cash flows including office
premiums, expenses and benefit payments satisfying the liability adequacy test,
are used. Any deficiency is immediately charged to statement of comprehensive
income.
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2.18 Financial liabilities
The Group's holding in financial liabilities represents mainly other financial liabilities.
Such financial liabilities are initially recognised at fair value and subsequently
measured at amortised cost. Financial liabilities are derecognised when extinguished.
Financial liabilities are reported as trade payables, short term bank overdraft and other
liabilities in the financial statement. The carrying values of financial liabilities are
considered to be a reasonable approximation of fair value.
2.19 Trade payables
Trade and other payables are non-derivative financial liabilities with fixed or
determinable payments that are not quoted in an active market. Trade payables
represent liabilities to agents, brokers and re-insurer on insurance contracts as at year
end.
2.20 Other payables and accruals
Other payables and accruals are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method. The fair value of a
non-interest bearing liability is its discounted repayment amount. If the due date of
the liability is less than one year discounting is omitted.
2.21 Taxation
2.21.1 Company income tax
Current income tax liabilities comprise those obligations to, or claims from, fiscal
authorities relating to the current or prior reporting periods, that are unpaid at the
reporting date. Current tax is payable on taxable profit, which differs from profit or
loss in the financial statements. Calculation of current tax is based on tax rates and
tax laws that have been enacted or substantively enacted by the end of the reporting
period.
Management periodically evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject to interpretation and establishes
provisions where appropriate.
Tax expense recognised in profit or loss comprises the sum of deferred tax and current
tax not recognised in other comprehensive income or directly in equity. Management
periodically evaluates positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation and establishes provisions where
appropriate.
Current income tax is assessed at 30% and is tax payable on the taxable profit for the
period determined in accordance with the Company Income Tax Act (CITA). Education
tax is assessed at 2% of the chargeable profit. Where tax on dividend paid exceeds
the current income tax assessed on the preceding basis, tax payable will be computed
as 30% of dividend paid.
2.21.2 Deferred income tax
Deferred income tax is provided for on all temporary differences between the tax bases
of assets and liabilities and their carrying values for financial reporting purposes using
the liability method.
The principal temporary differences arise from depreciation of property and
equipment, provisions for trade receivables and tax losses carried forward (where
deemed as recoverable). The rates enacted or substantively enacted at the balance
25
sheet date are used to determine deferred income tax. However, deferred income tax
is not accounted for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction
affects neither accounting nor taxable profit nor loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted
or substantively enacted by the end of the reporting period and are expected to apply
when the related deferred income tax asset is realisable or the deferred income tax
liability is payable. Deferred income tax assets are recognised only to the extent that
it is probable that future taxable profits will be available against which the temporary
difference can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable
right to offset current tax assets against current tax liabilities and when the deferred
income taxes on assets and liabilities relate to income taxes levied by the same
taxation authority on either the taxable entity or different taxable entities where there
is an intention to settle the balances on a net basis.
The tax effects of carry-forwards of unused losses or unused tax credits are recognised
as an asset when it is probable that future taxable profits will be available against
which these losses can be utilised. Deferred tax related to fair value re-measurement
of investments, which are charged or credited directly in other comprehensive income
or to equity, is also credited or charged directly to equity and subsequently recognised
in the statement of comprehensive income together with the deferred gain or loss.
2.22 Share capital
Share capital is classified as equity where the Group has no obligation to deliver cash
or other assets to shareholders. Incremental costs attributable to the issue or
cancellation of equity instruments are recognised directly in equity, net of tax if
applicable.
2.23 Contingency reserve
Life business
Contingency reserve is calculated at the higher of 1% of gross premium and 10% of
net profits. This reserve is expected to be accumulated until it amounts to the minimum
paid-up capital for a life insurance Group in accordance with section 22(1)(b) of the
Insurance Act.
2.24 Provisions
Provisions for restructuring costs and legal claims are recognised when: the Group has
a present legal or constructive obligation as a result of past events; it is more likely
than not that an outflow of resources will be required to settle the obligation; and the
amount can be reliably estimated. Restructuring provisions comprise lease termination
penalties and employee termination payments. Provisions are not recognised for future
operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be
required in settlement is determined by considering the class of obligations as a whole.
A provision is recognised even if the likelihood of an outflow with respect to any one
item included in the same class of obligations may be small.
Provisions are measured at the present value of the expenditures expected to be
required to settle the obligation using a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the obligation. The
26
increase in the provision due to passage of time is recognised as interest expense.
2.25 Contingent liabilities and assets
Possible obligations of the Group, the existence of which will only be confirmed by the
occurrence or non-occurrence of uncertain future events not wholly within the control
of the Group and present obligations of the Group where it is not probable that an
outflow of economic benefits will be required to settle the obligation or where the
amount of the obligation cannot be measured reliably, are not recognised in the Group
statement of financial position but are disclosed in the notes to the financial
statements.
Possible assets of the Group, the existence of which will only be confirmed by the
occurrence or non-occurrence of uncertain future events not wholly within the control
of the Group, are not recognised in the Group statement of financial position and are
only disclosed in the notes to the annual financial statements where an inflow of
economic benefits is probable.
2.26 Earnings per share
The Group presents basic earnings per share for its ordinary shares. Basic earnings
per share (EPS) are calculated by dividing the net profit attributable to shareholders
by the weighted average number of ordinary shares in issue during the year. The
adjusted EPS is calculated using the number of shares in issue at the balance sheet
date. Diluted earnings per share is calculated by adjusting the weighted average
number ordinary shares outstanding to assume conversion of all dilutive potential
ordinary shares.
2.27 Revenue recognition
Revenue comprises the fair value for services, net of value-added tax. Revenue is
recognised as follows:
2.27.1 Premium income
Short term insurance contract
Premium income are recognised as revenue (earned premiums) proportionally over
the period of coverage. The portion of premium received on in-force contracts that
relates to unexpired risks at the balance sheet date is reported as the unearned
premium liability. Premiums are shown before deduction of commission and are gross
of any taxes or duties levied on premiums.
Long term insurance contract
Premiums are recognised as revenue when they become payable by the contract
holder. Premiums are shown before deduction of commission. Premium income from
individual contracts is recognised as an increase in long-term policy liabilities when
receivable. The unearned portion of accrued premium income is included within long-
term policy liabilities. Group life insurance, mortgage insurance and credit life
premiums are accounted for when receivable.
2.27.2 Interest income and expenses
Interest income and expenses for all interest-bearing financial instruments, including
financial instruments measured at fair value through profit and loss, are recognised
within investment income in the income statement using the effective interest rate
method. When a receivable is impaired, the Group reduces the carrying amount to its
recoverable amount, being the estimated future cash flow discounted at the original
effective interest rate of the instrument, and continues unwinding the discount as
27
interest income. Interest income is accounted for on a time proportionate basis that
takes into account the effective interest rate on the asset.
These services comprise the activity of trading financial assets in order to reproduce
the contractual returns that the Group’s customers expect to receive from their
investments. Such activities generate revenue that is recognised by reference to the
stage of completion of the contractual services.
2.28 Insurance premium ceded to reinsurers
Insurance premium ceded to reinsurers also described as reinsurance expenses
represents outward premium paid to reinsurance companies less the unexpired portion
as at the end of the accounting year.
2.29 Claims
Claims and loss adjustment expenses are charged to income as incurred based on the
estimated liability for compensation owed to policyholders and/or beneficiaries. They
include direct and indirect claims settlement costs and arise from events that have
occurred up to the end of the reporting period even if they have not yet been reported
to the Group.
The Group does not discount its liabilities for unpaid claims. Liabilities for unpaid 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, and to estimate the
expected ultimate cost of more complex claims that may be affected by external
factors. No provisions has been made for possible claims under contracts that are not
in existence at the end of the reporting period.
2.30 Underwriting expenses
Underwriting expenses comprise acquisition costs and other underwriting expenses.
Acquisition costs comprise all direct and indirect costs arising from the writing of
insurance contracts. Examples of these costs include, but are not limited to,
commission expense, and other technical expenses. Other underwriting expenses are
those incurred in servicing existing policies/contract. These expenses are charged in
the statement of comprehensive income.
2.31 Employee benefit expense
2.31.1 Defined contribution plan
A defined contribution plan is a pension plan under which the company pays fixed
contributions into a separate entity. The company has no legal or constructive
obligations to pay further contributions if the fund does not hold sufficient assets to
pay all employees the benefits relating to employee service in the current and prior
periods.
The company pays contributions to publicly or privately administered pension insurance
plans on a mandatory, contractual or voluntary basis. The company has no further
payment obligations once the contributions have been paid. The contributions are
recognised as employee benefit expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the future
payments is available.
In accordance with the provisions of the Pension Reform Act 2014, the company
contribute 8% and 10% respectively each qualifying staff’s salary in line with the
provisions of the Pension Reform Act 2014.
28
The company pays contribution to pension fund administrators on a mandatory basis.
The company has no further payment obligations once the contributions have been
paid. The contributions are recognised as employee benefits expenses when they are
due. Prepaid contributions are recognised as an asset to the extent that a cash refund
or a reduction in the future payments is available
2.31.2 Defined benefit plan
A defined benefit plan is a pension plan that defines an amount of pension benefit that
an employee will receive on retirement, usually dependent on one or more factors,
such as age, years of service and compensation.
The liability recognised in the statement of financial position in respect of the defined
benefit pension plan is the present value of the defined benefit obligation at the date
of the statement of financial position less the fair value of plan assets, together with
adjustments for unrecognised actuarial gains or losses and past service costs.
2.31.3 Short term benefit
Short-term employee benefit obligations are measured on an undiscounted basis and
are expensed as the related service is provided.
A liability is recognised for the amount expected to be paid under short-term cash
bonus or profit sharing plans if the company has a present legal or constructive
obligation to pay this amount as a result of past service provided by the employee and
obligation can be estimated reliably.
2.32 Other operating and administrative expenses
Other operating and administrative expenses are expenses other than claims,
investment expenses, and employee’s benefit, expenses for marketing and
administration and supervisory levies. They include professional fee, depreciation
expenses and other non- technical expenses. Other operating and administrative
expenses are accounted for on accrual basis and recognized in the income statement
upon utilization of the service or at the date of their origin.
AFRICAN ALLIANCE INSURANCE PLC STATEMENT OF FINANCIAL POSITION
Note
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18ASSETS N’000 N’000 N’000 N’000
Cash and cash equivalents 6 2,180,301 3,680,801 1,975,288 3,173,108 Financial assets 7 22,920,092 21,162,075 22,889,719 21,153,916 Trade receivables 8 223,556 135,927 - - Reinsurance assets 9 52,322 144,052 52,322 144,052 Other receivables and prepayments 10 298,296 1,612,595 1,231,364 2,093,878 Deferred acquisition costs 11 - - - - Investment properties 12 10,335,895 10,258,314 8,791,171 8,620,913 Investment in subsidiary 13 - - 542,729 542,729 Investment in Associate 14 1,349,172 1,804,083 1,349,172 1,804,083 Retirement benefit assets 22 - - - - Defferred Tax Asset 25b 147,948 148,195 146,476 146,476 Intangible assets 15 65,461 57,343 21,775 19,776 Property plant and equipment 16 1,749,500 2,008,239 528,030 829,046 Statutory deposit 17 354,871 358,182 200,000 200,000
Total assets 39,677,414 41,369,806 37,728,047 38,727,976
LIABILITIESInsurance contract liabilities 18 38,192,590 35,110,631 36,609,105 33,149,205 Investment contract liabilities 19 5,651,966 5,841,759 5,651,966 5,841,759 Trade payable 20 858,296 1,106,999 554,103 850,178 Other payables and accruals 21 613,536 679,591 444,478 461,659 Employee benefit liabilities 22 66,746 42,690 66,746 42,690 Borrowings 23 991,293 507,077 934,160 482,145 Tax payable 24 990,967 826,742 942,838 774,245 Deferred tax liability 25 379,755 428,182 92,107 92,107
Total liabilities 47,745,149 44,543,672 45,295,503 41,693,987
EQUITYShare capital 26 10,292,500 10,292,500 10,292,500 10,292,500 Share premium 26 14,365,133 14,365,133 14,365,133 14,365,133 Contingency reserves 27 1,074,410 975,947 966,336 891,345 Retained earnings 28 (37,147,341) (30,218,535) (35,712,229) (28,940,682)Translation reserve 43 77,489 237,295 - - Non-controlling interest 44 9,522 8,354 Fair value reserves 29 3,260,552 1,165,441 2,520,803 425,693
Total equity (8,067,735) (3,173,867) (7,567,456) (2,966,012)
Total equities and liabilities 39,677,414 41,369,806 37,728,047 38,727,976
Funmi Omo Olabisi AdekolaManaging Director Chief Financial OfficerFRC/2014/CIIN/00000008645 FRC/2013/ICAN/000000001179
FOR THE PERIOD ENDED 31 DECEMBER 2019
Group Company
Signed on behalf of the Board of Directors on '29 December, 2019 by:
29
AFRICAN ALLIANCE INSURANCE PLC STATEMENT OF COMPREHENSIVE INCOME
31-Dec-19 31-Dec-19 31-Dec-18 31-Dec-18 31-Dec-19 31-Dec-19 31-Dec-18 31-Dec-18
3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months
N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000
Gross premium written 30 2,761,495 8,987,063 2,760,416 6,795,577 2,370,699 7,499,083 2,119,921 5,166,396 Unearned premium 30 (100,034) (248,341) 312,386 62,685 (100,034) (248,341) 312,386 62,685
Gross premium income 2,661,462 8,738,722 3,072,802 6,858,262 2,270,666 7,250,742 2,432,307 5,229,081 Insurance premium ceded to reinsurers 31 28,708 (464,852) (16,972) (169,405) (134,749) (456,092) (10,283) (160,946)
Net premium income 2,690,170 8,273,870 3,055,830 6,688,857 2,135,917 6,794,650 2,422,025 5,068,135
Fees and commission income 32 37,790 149,630 332 43,922 37,790 149,630 332 43,922
Net underwriting income 2,727,960 8,423,500 3,056,162 6,732,779 2,173,706 6,944,280 2,422,356 5,112,057
33
3,213,194 10,529,905 2,993,847 9,669,652 2,957,614 9,476,364 2,648,181 8,784,295
33 - (55,562) - (203,837) 28,532 (55,562) - (203,837)
Underwriting expenses 34 383,605 1,357,322 217,708 992,290 324,946 1,178,148 123,280 804,83235 3,814,056 2,865,888 (149,994) (1,150,204) 3,677,231 2,709,902 (240,047) (1,381,616)
Net underwriting expenses 7,410,854 14,697,554 3,061,561 9,307,901 6,988,323 13,308,852 2,531,413 8,003,674
Net underwriting profit (4,682,894) (6,274,053) (5,399) (2,575,122) (4,814,617) (6,364,572) (109,056) (2,891,617)
Other income 36 16,975 68,044 238,432 297,972 16,786 67,408 223,322 295,247
Impairment charges 38 - 2,926 (5,437) (5,638) - 2,926 4,484 (5,638)
Fair value gain/(loss) on investment properties 12 - - - 544,686 - - - 323,662 Fair value through profit or loss 7.1 - (19,893) - (1,168,898) - (19,893) - (1,168,898)Investment income 37 517,834 2,906,665 790,820 3,241,798 350,762 2,670,902 774,145 3,168,218 Loss from investment contracts 37a (17,278) (99,942) (54,406) (137,947) (17,278) (99,942) (54,406) (137,947)
Share of profit of equity accounted investee 14 - 461,389 - 710,728 - 461,389 - 710,728
Employee benefit expenses 39 (302,653) (1,142,989) (363,025) (1,171,447) (224,770) (889,927) (217,897) (899,952)
Other operating and administrative expenses 40 (571,544) (2,500,633) (691,655) (2,065,419) (486,893) (2,209,373) (504,305) (1,757,238)
Impairment loss Allowance (ECL) 41 (3,121) 54,417 (33,370) (74,667) (17,129) 9,828
Finance cost 42 (33,161) (90,699) (15,244) (60,296) (33,161) (90,699) (17,457) (60,296)
Loss before tax (5,075,842) (6,634,768) (105,915) (2,422,954) (5,283,839) (6,488,911) 98,831 (2,413,904)
Income tax expense 45 (77,250) (207,670) 282,277 (273,662) (77,250) (207,645) 47,458 (244,662)
Loss for the year (5,153,093) (6,842,438) 176,362 (2,696,616) (5,361,089) (6,696,556) 146,288 (2,658,566)
Loss attributable to:– Owners of the parent (5,150,766) (6,828,903) 131,082 (2,696,157) – Non-controlling interests (2,327) (13,535) 45,280 (459)
(5,153,093) (6,842,438) 176,362 (2,696,616)
Other comprehensive income:Items that may be subsequently reclassified to profit or loss
29 500 600 4,510 (650) - 600 - (650) Foreign exchange translation
gain/(loss) 43 (133,198) (159,806) (175,412) 51,529 2,508,352 (132,698) (159,206) (170,902) 50,879 - 2,508,952 - (650)
Items that will not be subsequently reclassfied to profit or loss
29 - 100,226 - 162,418 - - - 23,145
Deferred tax on revaluation
gain(loss) 29 - - - (34,818) - -
Remeasurement of net defined
benefit liability/(asset) 35,336 - - 35,336 - 100,226 - 162,936 - - - 58,481
Other comprehensive income for the year (132,698) (58,980) (170,902) 213,815 - 2,508,952 - 57,831
Total comprehensive income for the year (5,285,790) (6,901,418) 5,460 (2,482,801) (5,361,089) (4,187,604) 146,288 (2,600,735)
Total comprehensive income attributable to:– Owners of the parent (5,180,075) (6,763,390) 42,702 (2,484,513) (5,361,089) (4,187,604) 146,288 (2,600,735) – Non-controlling interests (105,716) (138,028) (37,242) 1,712
(5,285,790) (6,901,418) 5,460 (2,482,801) (5,361,089) (4,187,604) 146,288 (2,600,735)
FOR THE PERIOD ENDED 31 DECEMBER 2019
Group Company
Insurance claims incurred recovered from
reinsurers
Changes in long term insurance contracts
Change in value of available for sale financial
assets (net of taxes)
Insurance claims incurred and loss adjustments
expenses
Note
(Loss)/Gain on revaluation of property, plant and
equipment (net of taxes)
30
AFRICAN ALLIANCE INSURANCE PLC STATEMENT OF CHANGES IN EQUITY - GROUP
FOR THE PERIOD ENDED 31 DECEMBER 2019
Share capital Share premium
Fair value
reserve
Contingency
reserve
Translation
reserve Retained earnings
Non-controlling
interest Total equityN'000 N'000 N'000 N'000 N'000 N'000
Balance at 1 January 2019 10,292,500 14,365,133 1,165,442 975,947 237,295 (30,218,535) 8,354 (3,173,864) Total comprehensive income for the yearProfit for the year - - - - - (6,828,903) (13,535) (6,842,438)
Other comprehensive income for the period - - 2,508,952 - (159,806) - 13,264 2,362,410
- - 2,508,952 - (159,806) (6,828,903) (271) (4,480,028)
- - Transfer to contingency reserve - - - 98,463 - (99,903) 1,439 (0) Transfer from properties revaluation reserve (413,842) (413,842)
Total transactions with owners, recognised directly in equity - - (413,842) 98,463 - (99,903) 1,439 (413,843)
Balance at 31 December 2019 10,292,500 14,365,133 3,260,552 1,074,410 77,489 (37,147,341) 9,522 (8,067,735)
Balance at 1 January 2018 10,292,500 14,365,133 1,004,524 908,259 186,441 (27,275,850) 7,816 (511,177)
Day 1 IFRS 9 adjustment - - - - - (178,627) (1,260) (179,887)
Adjusted balance at 1 January 2018 10,292,500 14,365,133 1,004,524 908,259 186,441 (27,454,477) 6,556 (691,064) Total comprehensive income for the yearProfit for the year - - - - - (2,696,156) (459) (2,696,615) Changes in fair value of FVOCI Investments (650) (650) Remeasurement of the net defined benefit liability 35,336 35,336 Gain on revaluation of PPE 160,594 1,824 162,418 Deferred tax on revaluation (34,362) (456) (34,818)
Other comprehensive income for the year - - - 50,854 - 675 51,529
- - 160,918 - 50,854 (2,696,156) 1,584 (2,482,800)
Disposal of interest in Frenchies and Africa Realty - - Transfer to contingency reserve 67,688 (67,902) 214 - Transfer from properties revaluation reserve - - - - - - Total transactions with owners, recognised directly in equity - - - 67,688 - (67,902) 214 -
- - - - -
Balance at 31 December 2018 10,292,500 14,365,133 1,165,442 975,947 237,295 (30,218,535) 8,354 (3,173,867)
Transactions with owners, recorded directly in equity Contributions by and distributions to owners
Total Comprehensive income for the year
Total Comprehensive income for the year
31
AFRICAN ALLIANCE INSURANCE PLC STATEMENT OF CHANGES IN EQUITY - COMPANY
Share capital Share premium
Contingency
reserve
Fair value
reserve
Retained
earnings TotalN'000 N'000 N'000 N'000 N'000 N'000
Balance at 1 January 2019 10,292,500 14,365,133 891,345 425,693 (28,940,681) (2,966,010)
Total comprehensive income for the year
Profit for the year - (6,696,556) (6,696,556)
Other comprehensive income for the year - 2,095,110 2,095,110
- - - 2,095,110 (6,696,556) (4,601,446)
Transactions with owners, recorded directly in equity
Transfer to contingency reserve - 74,991 (74,991) -
- - 74,991 - (74,991) -
Balance at 31 December 2019 10,292,500 14,365,133 966,336 2,520,803 (35,712,228) (7,567,456)
Share capital Share premium
Contingency
reserve
Fair value
reserve
Retained
earnings TotalN'000 N'000 N'000 N'000 N'000 N'000
Balance at 1 January 2018 10,292,500 14,365,133 839,681 367,862 (26,146,738) (281,562) Day 1 IFRS 9 adjustment (83,713) (83,713)
10,292,500 14,365,133 839,681 367,862 (26,230,451) (365,275) Total comprehensive income for the periodPPE Revaluation 57,831 57,831
Profit for the year (2,658,566) (2,658,566)
- - - 57,831 (2,658,566) (2,600,735)
Transactions with owners, recorded
directly in equity Transfer to contingency reserve 51,664 (51,664) -
- - 51,664 - (51,664) -
Balance at 31 December 2018 10,292,500 14,365,133 891,345 425,693 (28,940,681) (2,966,010)
FOR THE PERIOD ENDED 31 DECEMBER 2019
Total Comprehensive income for the
period
Total Comprehensive income for the
period
Total transactions with owners, recognised directly in
equity
Total transactions with owners, recognised directly in
equity
32
AFRICAN ALLIANCE INSURANCE PLC
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 31 DECEMBER 2019
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
Cash flows from operating activities N’000 N’000 N’000 N’000
Cash premium received 8,987,063 6,883,995 7,499,083 5,107,165
Cash received from deposit contract liabilities 867,283 1,234,093 867,283 1,234,092
Cash withdrawals from deposit contract liabilities (1,157,604) (458,757) (1,157,604) (458,757)
Cash Claims recovered 55,562 - 55,562 -
Dividend received 21,407 12,711 21,407 12,711
Claims paid (10,028,249) (9,612,514) (8,974,709) (8,727,157)
Cash paid to reinsurers/ coinsurers (464,852) (184,563) (547,823) (176,104)
Commission received 149,630 43,922 149,630 43,922
Maintenance expenses paid (842,451) (574,325) (663,276) (574,323)
Acquisition costs (514,871) (417,965) (514,871) (230,507)
Employee benefits paid (1,142,989) (1,171,447) (889,927) (899,952)
Other operating expenses paid (2,848,924) (2,019,118) (2,112,639) (1,945,043)
Other income received 68,044 55,537 67,408 52,812
Interest received 2,885,258 3,229,086 2,649,495 3,155,507
Income tax paid (39,051) (18,665) (39,051) (15,703)
Net cash from operating activities (4,004,744) (2,998,010) (3,590,032) (3,421,337)
Cash flow from investing activities:
Purchases of plant and equipment (196,508) (318,288) (183,786) (315,887)
Purchase of intangible assets 16,641 (10,271) (10,522) (15,937)
Capital injection made to subsidiary (475,551) - (475,551)
Capital Improvement of investment properties - -
Proceeds from disposal of property and equipment 2,428 2,428
Proceeds from disposal of investment properties 1,241,064 1,241,064
Purchase of investment properties (170,258) (170,258)
Sale of investment in shares
Sale of investment in subsidiaries
Purchase of financial assets - AFS - -
Purchase of financial assets- HTM - (340,581) (340,581)
Proceed from disposal of financial asset - AFS - -
Principal repayment of finanacial assets- HTM 981,997 981,997
Purchase of financial asstes- loan and receivable 23,713 (10,390) 9,058 (10,390)
proceed of disposal of financial assets 944,463 944,463
Proceeds from disposal of quoted equities
Net cash used in investing activities 1,602,477 85,983 1,573,380 82,718
Cash flow from financing activities:
Repayment of borrowings (102,483) (336,335) (134,684) (256,328)
Proceeds from borrowings 500,000 500,880 500,000 500,880
Net cash used in financing activities 397,517 164,545 365,316 244,552
Net increase/(decrease) in cash and cash equivalents (2,004,750) (2,747,482) (1,651,336) (3,094,067)
Cash and cash equivalent at beginning of year 3,193,759 5,941,241 2,705,401 5,799,468
Net increase/decrease in cash and cash equivalents (2,004,750) (2,747,482) (1,651,336) (3,094,067)
Cash and cash equivalent at end of period 1,189,009 3,193,759 1,054,065 2,705,401
CompanyGroup
33
AFRICAN ALLIANCE INSURANCE PLC
NOTES TO THE FINANCIAL STATEMENTS
1. General Information
1(a) Security Trading Policy
2. Summary of significant accounting policies
3 Solvency
2019 2018 2019 2018
N000 N000 N000 N000
21,781,572 19,994,820 21,781,572 19,994,820
2,180,301 3,680,801 1,975,288 3,173,108
994,129 1,014,023 994,129 1,014,023
Total 24,956,001 24,689,644 24,750,988 24,181,951
4 Management of Financial risk
i)
ii)
iii)
iv)
i)
ii)
iii)
4.1 Market risk
4.1.1 Foreign exchange risk
The Company has in place a Securities Trading Policy in compliance with Rule 17.15 Disclosure of Dealings in issuers' shares, Rule Book of The Nigerian Stock
Exchange, 2015. This policy can be found on the Company's website: www.africanallianceplc.com. All directors have complied with the policy as at date.
The acquisition of policyholders’ assets is based on the design of the product and marketing descriptions. Within these parameters, investments
are managed with the aim of maximising policyholder returns while limiting risk to acceptable levels within the framework of statutory
requirements. The focus of risk measurement and management is to ensure that the potential risks inherent in an investment are reasonable for
the future potential reward, exposure to investment risk is limited to acceptable levels, premium rates are adequate to compensate for
investment risk and an adequate reserving policy is applied for long-term policy liabilities. The diverse product range requires a variety of
approaches to the management of risk; these range from portfolio management practices and techniques such as optimization of expected risks
and rewards based on investment objectives, to asset-liability matching in support of statement of financial position obligations.
Foreign exchange risk is the risk associated with movement in the foreign exchange prices from foreign currency denominated transactions which
the Group is exposed to.
The Group is exposed to foreign exchange currency risk primarily through certain transactions denominated in foreign currency. The Group is
exposed to foreign currency denominated in dollars and Pound through bank balances in other foreign currencies.
The principal accounting policies applied in the preparation of these financial statements are disclosed under General information on the Reporting Entity and
Summary of Significant Accounting Policies. These policies have been consistently applied to all the years presented unless otherwise stated.
The assets backing the life funds are as follows:
Government Bonds
Cash and bank balances
Group Company
African Alliance Insurance Company is a public limited company incorporated and domiciled in Nigeria. The registered office is located at 54 Awolowo Raod, Ikoyi,
Lagos.
The company is principally engaged in the business of providing risk underwriting for life, related financial and pension services, aviation and hospitality services to
its customers.
The Group manages its exposure to foreign exchange risk using sensitivity analysis to assess potential changes in the value of foreign exchange
positions and impact of such changes on the Group's income. There have been no major changes from the previous year in the exposure to risk
or policies, procedures and methods used to measure the risk.
the implementation and monitoring of the asset management process to ensure that the risks arising from trading positions are effectively
managed within the pre-determined risk parameters.
The Group is exposed to various financial risks in connection with its current operating activities, such as foreign currency risk, interest rate risk,
credit risk, market risk and liquidity risk. These risks contribute to the key financial risk that the proceeds from the Group's financial assets are
insufficient to fund the obligations arising from insurance policy contracts.
The Company manages these risks through the activities of the Audit Committee and the Investment Committee. Each committee meets at least
four times per annum to discuss financial risk issues. Management is responsible for implementing recommendations that have been agreed and
reporting back to the relevant committee.
The Audit Committee is a committee of the Board of African Alliance Insurance Plc and is responsible for the implementation and monitoring of
overall risk management, internal financial controls and financial and actuarial reporting within the Group. The main responsibilities of this
Committee are:
Setting and overseeing the overall standard for financial and actuarial reporting, risk management and internal controls within the Group;
Monitoring the effectiveness of business risk management processes in the Group;
Reviewing and assessing the quality of the work done by professionals responsible for financial and actuarial reporting, risk management and
internal control;
Engaging in discussions with external and internal auditors on the quality and acceptability of the control environment and reporting
structures.
The Investment Committee is a management committee and is responsible for
ensuring that insurance and investment contract liabilities are matched with appropriate supporting assets based on the type of benefits payable
to the contract holders;
ensuring that the long-term investment return on assets supporting policy liabilities are sufficient to fund policyholders' reasonable benefit
expectations and the shareholders' profit entitlement;
Investment in quoted equity
The business's operations are exposed to market risk. Market risk is the risk of adverse financial impact as a consequence of market movements
such as currency exchange rates, interest rates and other price changes. Market risks arises due to flunctuations in both value of assets and
liabilities. The company has established policies and procedures in order to manage market risk.
34
AFRICAN ALLIANCE INSURANCE PLCNOTES TO THE FINANCIAL STATEMENTS
4.1.2 Interest-rate risk
Interest rate risk is the risk that the value of a fixed income security will fall as a result
of movement in market interest rates. Interest rate risk also arises from fluctuations in
future cash flows of a financial instrument because of changes in market interest rates.
The company is exposed to interest rate risk as the company invest in short term
investments at fixed interest rates. Interest rate risk also exists in products sold by the
company. The company manages this risk by adopting close asset/liability matching
criteria, to minimise the impact of mismatches between asset and liability values arising
from interest rate movements. Interest rate risk exposures from guarantees embedded
in insurance liabilities. The company's insurance contracts and investment contracts • options to surrender the insurance contract or the investment contract with DPF where
the surrender value (i.e. the strike price of the option) is either a fixed amount or a fixed
amount plus interest depending on the year in which the contract was issued;
• guaranteed annuity options where the company has guaranteed at the inception of
certain contracts that it will be paying a life annuity to the surviving policyholders at their
retirement dates which will be calculated using the higher of the current annuity rate at
that date or the guaranteed annuity rate set in the contract. The guaranteed rate has
fixed at inception both the level of mortality risk and the interest rate that will be used to
calculate the annuity payments.
35
AFRICAN ALLIANCE INSURANCE PLCNOTES TO THE FINANCIAL STATEMENTS
4.2 Credit risk
Key areas where the Group is exposed to credit risk are:
4.2.1 Maximum exposure to credit risk before collateral and other credit enhancements.
2019 2018 2019 2018
N'000 N'000 N'000 N'000
Cash and bank balances 2,180,301 3,680,801 1,975,288 3,173,108
Investment securities 22,920,092 21,162,075 22,889,719 21,153,916
Trade receivables 223,556 135,927 - -
Reinsurance assets 52,322 144,052 52,322 144,052
Other receivables 298,296 1,612,595 1,231,364 1,502,991
Statutory deposit 354,871 358,182 200,000 200,000
Staff loan 46,510 95,374 43,122 89,316
Due from policy holders 219,971 225,564 152,136 143,074
26,295,918 27,414,570 26,543,951 26,406,456
Group Company
The Company manages its exposure to credit risk through counterparty risk using established limits as approved
by the Board. These limits are determined based on credit ratings of the counterparty amongst other factors.
The investments portfolio are monitored on a monthly basis.
• Amounts due from loans and receivables;
• Amounts due from money market and cash positions
The Company structures the levels of credit risk it accepts by placing limits on its exposure to a single
counterparty, or groups of counterparties. Such risks are subject to an annual or more frequent review. Limits on
the level of credit risk by category and territory are approved by the Management Committee.
Reinsurance is used to manage insurance risk. This does not, however, discharge the Group’s liability as primary
insurer. If a reinsurer fails to pay a claim for any reason, the Group remains liable for the payment to the
policyholder. The creditworthiness of reinsurers is considered on an annual basis by reviewing their financial
strength prior to finalisation of any contract.
The Company’s financial instruments do not represent a concentration of credit risk because the business deals
with a variety of reinsurers and its premiums receivable and loans are spread among a number of major
industries, customers and geographic areas. Amounts receivable in terms of long-term insurance business are
secured by the underlying value of the unpaid policy benefits in terms of the policy contract. An appropriate level
of provisioning is maintained.
• Amounts due from insurance intermediaries;
Credit risk arises from the inability or unwillingness of a counter party to a financial instrument to discharge its
contractual obligations. The Company determines counter-party credit quality by reference to ratings from
independent ratings agencies or, where such ratings are not available, by internal analysis. The Company seeks
to avoid unacceptable concentration of credit risk to groups of counter-parties, to business sectors, product
types, etc.
• Reinsurers’ share of insurance liabilities;
• Amounts due from reinsurers in respect of claims already paid;
• Amounts due from insurance contract holders;
36
4.3 Liquidity risk
Group
31 December 2019 Carrying amount 0-3 months 3 to 9 months 9 months to 1
year
1 to 5 years > 5 years Total
N'000 N'000 N'000 N'000 N'000 N'000 N'000
Trade payables 858,296 85,830 214,574 300,404 128,744 128,744.36 858,296
Other liabilities 2,662,542 266,254 665,636 931,890 399,381 399,381.34 2,662,542
5,651,966 565,197 1,412,992 1,978,188 847,795 847,794.91 5,651,966
Total financial liabilities 9,172,804 917,280 2,293,201 3,210,481 1,375,921 1,375,921 9,172,804
Cash and bank balances 2,180,301 218,030 545,075 763,105 327,045 327,045.19 2,180,301
Marketable investment securities 22,920,092 1,146,005 687,603 1,604,406 1,146,005 18,336,073 22,920,092
Trade receivables 223,556 223,556 - - - - 223,556
Reinsurance assets 52,322 - - 52,322 - - 52,322
Other receivables 298,296 29,830 74,574 104,404 44,744 44,744.36 298,296
Total financial assets 25,674,567 1,617,421 1,307,252 2,524,238 1,517,795 18,707,864 25,674,567
Net financial assets and liabilities 16,501,763 700,141 (985,949) (686,243) 141,874 17,331,943 16,501,763
(38,192,590) (1,909,629) (954,815) (954,815) (3,153,242) (31,089,889) (38,062,391)
Net policyholders assets and liabilities (21,690,827) (1,209,489) (1,940,764) (1,641,058) (3,011,368) (13,757,946) (21,560,628)
Group
31 December 2018 Carrying amount 0-3 months 3 to 9 months 9 months to 1
year
1 to 5 years > 5 years Total
N'000 N'000 N'000 N'000 N'000 N'000 N'000
Trade payables 1,106,999 332,100 387,450 387,450 - - 1,106,999
Other liabilities 2,056,101 411,220 514,025 616,830 514,025 - 2,056,101
5,841,759 876,264 1,460,440 876,264 2,628,792 - 5,841,759
Total financial liabilities 9,004,859 1,619,584 2,361,915 1,880,544 3,142,817 - 9,004,859
Cash and bank balances 3,680,801 736,160 920,200 736,160 552,120 736,160 3,680,800
Marketable investment securities 21,109,127 - - 1,101,733 2,817,497 17,189,898 21,109,127
Trade receivables 135,927 135,927 - - - - 135,927 Reinsurance assets 144,052 - - 144,053 - - 144,053
Other receivables 1,665,543 333,109 416,386 333,109 249,831 333,109 1,665,543
Total financial assets 26,735,450 1,205,196 1,336,586 2,315,055 3,619,448 18,259,167 26,735,450
Liquidity risk is the risk that the Company is unable to meet its obligations when they fall due as a result of policyholder benefit payments, cash requirements from contractual
commitments, or other cash outflows, such as debt maturities. Such outflows would deplete available cash resources for operational, trading and investments activities. In extreme
circumstances, lack of liquidity could result in reductions in the consolidated balance sheet and sales of assets, or potentially an inability to fulfil policyholder commitments. The
risk that the Group will be unable to do so is inherent in all insurance operations and can be affected by a range of institution-specific and market-wide events including, but not
limited to, credit events, merger and acquisition activity, systemic shocks and natural disasters.
Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and month respectively, as these are key periods for liquidity
management. The starting point for those projections is an analysis of the undiscounted contractual cashflow at maturity of the financial liabilities and the expected collection date
of the financial assets.
All policyholder funds are invested in appropriate assets to meet the reasonable benefit expectations of policyholders, which include the expectation that funds will be available to
pay out benefits as required by the policy contract. The disclosure in note 6 demonstrate that the Group has significant liquid resources. The value for policyholders' liabilities and
the assets backing them are as per the carrying amount in the statement of the financial position.
The maturity profile of the total policyholders' liabilities and assets backing them is shown below:
Investment linked contract liabilities
Insurance contract liabilities - Life fund
Investment linked contract liabilities
Net financial assets and liabilities 17,730,591 (414,388) (1,025,329) 434,511 476,631 18,259,167 17,730,591
Insurance contract liabilities - Life fund (35,110,631) (1,768,523) (1,650,200) (1,822,242) (1,755,837) (28,113,829) (35,110,631)
Net policyholders assets and liabilities (17,380,040) (2,182,911) (2,675,529) (1,387,731) (1,279,206) (9,854,662) (17,380,040)
Company
31 December 2019 Carrying amount 0-3 months 3 to 9 months 9 to 1 year 1 to 5 years > 5 years Total
N'000 N'000 N'000 N'000 N'000 N'000 N'000
Trade payables 554,103 55,410 138,526 193,936 83,116 83,115.51 554,103
Other liabilities 2,388,222 238,822 597,056 835,878 358,233 358,233.33 2,388,222
5,651,966 565,197 1,412,992 1,978,188 847,795 847,794.91 5,651,966
Total financial liabilities 8,594,292 859,429 2,148,573 3,008,002 1,289,144 1,289,144 8,594,292
Cash and bank balances 1,975,288 197,529 493,822 691,351 296,293 296,293.20 1,975,288
Marketable investment securities 22,889,719 1,144,486 686,692 1,602,280 1,144,486 18,311,775 22,889,719
Trade receivables - - - - - - -
Reinsurance assets 52,322 - - 52,322 - - 52,322
Other receivables 1,231,364 123,136 307,841 430,977 184,705 184,704.60 1,231,364
Total financial assets 26,148,693 1,465,151 1,488,355 2,776,930 1,625,484 18,792,773 26,148,693
Net financial assets and liabilities 17,554,402 605,722 (660,219) (231,072) 336,340 17,503,628 17,554,401
Insurance contract liabilities - Life fund (36,609,105) (1,108,730) (151,862) (677,658) (3,580,963) (31,089,889) (36,609,105)
Net policyholders assets and liabilities (19,054,703) (503,008) (812,081) (908,730) (3,244,623) (13,586,261) (19,054,704)
Investment linked contract liabilities
31 December 2018 Carrying amount 0-3 months 3 to 9 months 9 to 1 year 1 to 5 years > 5 years Total
N'000 N'000 N'000 N'000 N'000 N'000 N'000
Trade payables 850,178 255,053 297,562 297,563 - 850,178
Other liabilities 1,760,738 352,148 528,384 480,112 400,094 1,760,738
5,841,759 876,264 1,460,440 876,264 2,628,791 5,841,759
Total financial liabilities 8,452,675 1,483,465 2,286,386 1,653,939 3,028,885 - 8,452,675
Cash and bank balances 3,173,108 634,622 793,277 634,622 475,966 634,622 3,173,109
Marketable investment securities 21,100,968 422,019 633,029 844,039 1,055,048 18,146,832 21,100,967
Trade receivables - -
Reinsurance assets 144,052 144,053 - - 144,053
Other receivables 2,146,825 429,365 536,706 429 750,960 429,365 2,146,825
Total financial assets 26,564,953 1,486,006 1,963,012 1,623,143 2,281,974 19,210,819 26,564,954
Net financial assets and liabilities 18,112,278 2,541 (323,374) (30,796) (746,912) 19,210,819 18,112,278
(33,149,205) (662,984) (994,484) (1,720,447) (1,657,461) (28,113,829) (33,149,205)
Net policyholders assets and liabilities (15,036,928) (660,443) (1,317,858) (1,751,243) (2,404,373) (8,903,010) (15,036,928)
4.4 Capital management policies and procedures
2019 2018 2019 2018
N'000 N'000 N'000 N'000
Share capital 10,292,500 10,292,500 10,292,500 10,292,500
Share premium 14,365,133 14,365,133 14,365,133 14,365,133
Contingency reserves 1,074,410 975,947 966,336 891,345
Fair value reserves 3,260,552 1,165,441 2,520,803 425,693
Translation reserve 77,489 237,295 - -
Retained earnings (37,147,341) (30,218,535) (35,712,229) (28,940,682)
(8,077,257) (3,182,219) (7,567,456) (2,966,011)
The Company's policy is to maintain a strong capital base to maintain investor, creditor and market confidence and to sustain the future development of the business. Management
uses regulatory capital ratios to monitor its capital base. Capital is allocated between specific operations and activities and to a large extent driven by optimisation of the return
achieved on the capital allocated. The amount of caiptal allocated to each activity is based primarily on the regulatory capital. In some cases the regulatory requirements do not
fully reflect the varying degree of risk associated with different activities. In such cases, the capital requirements may be flexed to reflect differing risk profiles, subject to the
overall level of capital to support a particular operation not falling below the minimum required for regulatory purposes. The process of allocating capital to specific operations or
activities is undertaken independently of those responsible for the operation by a committee.
The National Insurance Commission (NAICOM) specifies the minimum amount and type of capital that must be held by the company to cover the insurance liabilities. The regulator
measures the financial strenght of insurance companies using the capital adequacy requirements for the category of company. This test compares insurer's capital against the risk
profile.
Insurance contract liabilities - Life fund
The maturity of non-derivative financial liabilities and financial assets have been compiled based on undiscounted cash flows, which include estimated interest payments.
The Company manages its capital to ensure that the company will be able to continue as going concern and comply with the regulators' capital requirements while maximising the
return to stakeholders through the optimsation of the debt and equity balance. The capital structure of the company consists of equity attributable to equity holders of the parent,
comprising issued capital, reserves and retained earnings.
The Company’s Authorized share capital as at 31 December, 2019 is N10,292,500 (2018:N10,292,500). The company is in compliance with the minimum capital requirement of N2
billion as stipulated by the Insurance Act.
Group Company
Investment linked contract liabilities
Life Annuity Investment Contract
Total
(Admissible)
6,937,335 31,089,889 - 38,027,224
- 5,651,966 5,651,966
6,937,335 31,089,889 5,651,966 43,679,190
Less
Reinsurance Receivables
1 Reinsurance expenses prepaid - -
2 Reinsurers' share of Claims expense paid - - -
3 Reinsurers' share of Unearned premium reserve - - -
4 Reinsurers' share of Incurred but not reported claims (52,321) - (52,321)
5 Others (specify) - - - -
Net Insurance Funds 6,885,013 31,089,889 5,651,966 43,626,869
Admissible Assets
1 Cash and Cash Equivalents 532,565 1,176,881 470,855 2,180,301
2 Treasury bills and Government Bonds 5,087,910 15,044,195 2,283,837 22,415,942
3 Corporate Bonds & Debenture - 504,150 - 504,150
4 Quoted Shares 85,328 - 908,801 994,129
5 Unquoted Shares 100,884 - - 100,884
6 Loan to Policy holders 48,452 - - 48,452
7 Investment Properties 1,004,558 2,162,259 1,988,473 5,155,290
Total Admissible Assets 6,859,697 18,887,485 5,651,966 31,399,148
(25,316) (12,202,404) (0) (12,227,721)
0
-
Life Annuity Investment Contract
Total
(Admissible)
5,519,216 31,089,889 36,609,105
- 5,651,966 5,651,966
5,519,216 31,089,889 5,651,966 42,261,071
Less
Reinsurance Receivables
1 Reinsurance expenses prepaid - -
2 Reinsurers' share of Claims expense paid - - -
3 Reinsurers' share of Unearned premium reserve - - -
4 Reinsurers' share of Incurred but not reported claims (52,321) - (52,321)
5 Others (specify) - - - -
Net Insurance Funds 5,466,894 31,089,889 5,651,966 42,208,750
Admissible Assets
1 Cash and Cash Equivalents 178,331 1,326,102 470,855 1,975,288
2 Treasury bills and Government Bonds 4,098,611 14,894,974 2,283,837 21,277,422
3 Corporate Bonds & Debenture 504,150 504,150
4 Quoted Shares 85,328 - 908,801 994,129
5 Unquoted Shares 92,725 - 92,725
6 Loan to Policy holders 21,294 - 21,294
7 Investment Properties 990,605 2,162,259 1,988,473 5,141,337
Total Admissible Assets 5,466,894 18,887,485 5,651,966 30,006,345
(0) (12,202,404) (0) (12,202,405)
Gross Insurance Funds
SURPLUS(DEFICIT ) IN ASSETS COVER
Group Hypothecation
Company Hypothecation
Item
Insurance Contract Liabilities
Investment Contract Liabilities
Item
Insurance Contract Liabilities
Investment Contract Liabilities
Gross Insurance Funds
SURPLUS(DEFICIT ) IN ASSETS COVER
40
NOTES TO THE FINANCIAL STATEMENTS
4.5 Minimum Capital requirement
The Solvency Margin for African Alliance Insurance Plc. as at 31 December
2019 is as follows:N'000 N'000
Admissible Assets
Cash & Cash Equivalent 1,975,288
Financial assets 22,868,425
Trade Receivable -
Reinsurance Assets 52,322
Other Receivable & Prepayment 43,122
Investment properties 8,791,171
Investment in Subsidiary -
Investment in Associate 1,349,172
Defferred Tax Asset -
Intangible assets -
Property Plant & Equipment 466,030
Statutory Deposit 200,000
Total Admissible Assets (a) 35,745,529
Insurance Contract Liabilities 36,609,105
Investment Contract Liabilities 5,651,966
Employee Benefit 66,746
Borrowing 934,160
Trade Payable 554,103
Provision & Other Payables 444,478
Dividend Payable 0
Provision for Current Tax 942,838
Total Admissible Liabilities (b) 45,203,396
SOLVENCY MARGIN (a-b) (9,457,868)
Subject to Higher of:
15% of Net premium income 1,019,198
or
Minimum Capital Requirement 2,000,000 2,000,000
Gross Solvency ratio -473%
Net Solvency ratio -573%
Precisely, the company has adopted the following capital management policies:
(i) Maintenance, as a minimum, of capital sufficient to meet the statutory requirement.
(ii)
(iii)
31-Dec-19 31-Dec-18
N'000 N'000
Shareholders’ equity (7,567,456) (2,966,010)
Capital requirement on regulatory basis 2,000,000 2,000,000
Shortfall in Solvency Margin (9,457,868) (6,085,508)
Shortfall in Asset cover for contract liabilities (12,202,405) (10,384,344)
An Economic Capital at Risk (ECaR) approach is also used by the management and the board to ensure that obligations to
policyholders can be met in adverse circumstances
Maintenance of an appropriate level of liquidity at all times. The company further ensures that it can meet its expected capital
and financing needs at all times, having regard to business plans to guarantee its going concern status, forecast and any strategic
initiatives
The company did not meet the minimum capital requirement of N2 billion as stipulated by the Insurance Act
The minimum capital required is compared with the equity maintained during the period in the table below:
Company
41
5 Critical accounting estimates and judgements
5.1 The ultimate liability arising from claims made under insurance contracts
5.2
The insurance liabilities have been made on the following principles:-
5.2.1
5.2.2
5.2.3
Reserves for the supplementary life cover and expenses for individual deposit based business will be calculated using a gross
premium cash flow approach as described in above. This is the present value of future guaranteed risk related benefit costs and
expenses, less future risk premiums
Group life
No separate reserve is proposed for claims handling costs for Group Life business as these are typically insignificant in size. Any costs
incurred are absorbed as part of the general business management costs.
Individual Deposit Based business
Group Life
Group Deposit Administration
Individual business
A gross premium method is adopted for individual traditional risk business. This is a
monthly cash flow approach taking into account the incidence of all expected future
cash flows including office premiums, expenses and benefit payments, satisfying the
Liability Adequacy Test. This implies that no further testing is required as a result of
the implementation of the IFRS; or in other words the liability adequacy test has been
met implicitly and a separate liability calculation will not be required for accounting
purposes.
Deposit reserve: Account balance at val. Date
Negative reserves will be zeroised at the valuation date.
Reserves for Group Life business will comprise an unexpired premium reserve (UPR)
and where necessary, a reserve for Incurred But Not Reported Claims (IBNR) to make
an allowance for the delay in reporting of claims.
The UPR will represent the unexpired portion of the premium for each scheme, net of an expense margin reflecting
the acquisition cost loadings. The adequacy of the UPR will be tested by comparing against an Additional Unexpired
Risk Reserve (AURR), which will be calculated using pooled industry claims data for the underlying assumptions. An
AURR will be held in cases where the UPR is deemed insufficient to meet claims in respect of the unexpired period.
A loss ratio approach will be used for IBNR reserving, where the underlying claim rates are based on an analysis of historical group
life claims experience, with judgement adopted where required.
Individual Deposit Based business
A reserve for the Individual and group deposit-based business (Deposit Plus Plan)
will be maintained being the amount standing to the credit of the policyholders (account balance) at the valuation
date.
Claims on contracts are payable on a claims-occurrence basis. The Group is liable for all insured events that occurred during the term of
the contract, even if the loss is discovered after the end of the contract term. As a result, liability claims are settled over a long period of
time, and a larger element of the claims provision relates to incurred but not reported claims (IBNR).
Uncertainty in the estimation of future benefits payments and premium receipts for insurance contracts arises from the unpredictability of
long-term changes in variables such as the overall levels of mortality, accident level and the variability in policyholder behavior.
Type of Business
Individual Risk Business
Valuation Method
Gross premium
Deposit reserve: Account balance at val. Date
Risk reserve: Gross premium
UPR + IBNR
When preparing the financial statements management undertakes a number of judgements, estimates and assumptions about
recognition and measurement of assets, liabilities, income and expenses. The actual results are likely to differ from the judgements,
estimates and assumptions made by management, and will seldom equal the estimated results. Information about the significant
judgements, estimates and assumptions that have the most significant effect on the recognition and measurement of assets,
liabilities, income and expenses are discussed below.
The estimation of the ultimate liability arising from claims made under insurance contracts is the Group’s most critical accounting
estimate. There are several sources of uncertainty that need to be considered in the estimate of the liability that the Group will
ultimately pay for such claims.
Sources of uncertainty in the estimation of future claim payments
AFRICAN ALLIANCE INSURANCE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
6 Cash and cash equivalent
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
Cash in bank (note 6.2) 710,505 746,326 689,126 720,813 Short-term bank deposits 1,469,796 2,934,475 1,286,162 2,452,295
2,180,301 3,680,801 1,975,288 3,173,108
6.1 Short Term Bank Deposit
Short Term Bank Deposit 1,474,559 2,954,509 1,299,099 2,466,733 ECL Impairment 01 January 2019 (20,034) (29,134) (14,438) (23,854) Additional ECL Impairment during the year 15,271 9,100 1,501 9,416
1,469,796 2,934,475 1,286,162 2,452,295
6.2 Cash and cash equivalent for the purpose of cashflow
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
Cash in bank 710,505 746,326 689,126 720,813 Short-term bank deposits 1,469,796 2,954,509 1,299,099 2,466,733 Bank overdraft (991,293) (507,076) (934,160) (482,145)
1,189,009 3,193,759 1,054,065 2,705,401
7 Financial assets
7.1 Financial assets at fair value through profit and loss
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
Quoted equity securities 994,129 1,014,023 994,129 1,014,023
994,129 1,014,023 994,129 1,014,023
7.1i Movement in FVTPL - Quoted equities
At 1 January 1,014,023 2,182,921 1,014,023 2,182,921
Addition - - - -
Disposal (2) - (2) -
Fair value changes (19,893) (1,168,898) (19,893) (1,168,898)
At 31 Dec 994,129 1,014,023 994,129 1,014,023
7.2 Unquoted Equities FVOCI
Equity securities 97,089 100,284 92,725 92,125
97,089 100,284 92,725 92,125
7.2i Movement in unquoted equities FVOCI
At 1 January 100,284 111,998 92,125 91,525
Additions - - -
Impairment (charge)/write back - 1,250 - 1,250
Reclassification from other receivables - -
Disposal (3,795) (12,314) - -
Fair value changes 600 (650) 600 (650)
At 31 Dec 97,089 100,284 92,725 92,125
FOR THE PERIOD ENDED 31 DECEMBER 2019
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original
maturities of three months or less. They include:
Group Company
Company
Group Company
These are quoted equities in the Nigerian Stock Exchange, the fair value were determined by reference to the quoted closing bid
price at the end of the reporting year derived as follows:
Group
43
AFRICAN ALLIANCE INSURANCE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-187.3
Financial Assets-Amortised costN’000 N’000 N’000 N’000
Government and corporate bonds 19,308,477 20,032,596 19,308,477 20,032,596 ECL Impairment 01 January (37,776) (38,143) (37,776) (38,143) Additional ECL Impairment during the year 2,518 367 2,518 367 Reclassification to FVOCI (19,273,220) (19,273,220)
(0) 19,994,820 (0) 19,994,820
7.3(i)Financial Assets-FVOCI
Government and corporate bonds 19,308,477 19,308,477 ECL Impairment 01 January (37,776) (37,776) Additional ECL Impairment during the year 2,518 2,518 Fair value changes 2,508,352 2,508,352
21,781,572 - 21,781,572 -
7.4 Loans and receivablesLong term loans - 3,000 - 3,000 Mortgage loans - 15,120 - 15,120 Mortgage loans-Staff 73,838 74,656 73,838 74,656 Policy loans 219,971 225,564 152,136 143,074 Short term loans - 60,384 - 60,384
293,809 378,724 225,974 296,234 Impairment allowance (7.4i) (246,506) (325,776) (204,680) (243,286)
47,302 52,948 21,294 52,948
7.4i Impairment allowance in loans and receivableThe movement in impairment allowance is as detailed below
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
N’000 N’000 N’000 N’000
At 1 January-IAS 39 specific impairment 226,838 198,820 226,838 198,820 Reclassification-Mortgage loans 32,206 - 32,206 Specific provision no longer required (58,385) (4,188) (58,385) (4,188) ECL Impairment 01 January 98,938 83,035 16,448 16,222 ECL Impairment during the year (20,885) 15,903 19,779 226
At 31 Dec 246,506 325,776 204,680 243,286
8 Trade receivables
223,556 135,927 - - 58,159 58,159
Impairment allowance (58,159) (58,159)
223,556 135,927
Movement in impairments of trade receivables
58,159 58,159 - - Additional charge during the year - - - -
At 31 Dec 58,159 58,159 - -
9 - -
52,321 122,904 52,321 122,904
Prepaid reinsurance (note 9(ii)) - 21,148 21,148
52,321 144,052 52,321 144,052
FOR THE PERIOD ENDED 31 DECEMBER 2019
Group Company
At 1 January
Reinsurance assets: This is analysed as
follows
Reinsurance share of claims Incurred But Not
Reported (IBNR) (note 9 (i))
Group Company
Premium receivablesTrade debtors
44
NOTES TO THE FINANCIAL STATEMENTS
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
9 (i) N’000 N’000 N’000 N’000
122,904 47,726 122,904 47,726
(70,583) 75,178 (70,583) 75,178
52,321 122,904 52,321 122,904
9 (ii) Prepaid reinsurance
21,148 5,991 21,148 5,991
- 15,157 - 15,157
(21,148) - (21,148) -
- 21,148 - 21,148
10
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
N’000 N’000 N’000 N’000
71,685 77,736 70,182 73,528
20,653 71,090 - 26,121
240,638 189,980 240,638 189,980
158,840 174,490 150,233 165,329
46,510 95,374 43,122 89,316
0 120,061 506,116 626,177
1,191,928 1,608,522 1,600,267 2,016,861
Deposit for aircraft - -
Long outstanding placement - 50,375 - 50,375
8,127 8,748 2,519 3,187
2,131,790 2,131,790 2,131,790 2,131,790
269,200 1,926,201 262,520 1,123,300
4,139,371 6,454,367 5,007,387 6,495,965
(3,841,076) (4,841,772) (3,776,023) (4,402,087)
298,296 1,612,595 1,231,364 2,093,878
Current (1,314,299) 1,348,551 (862,514) 1,838,870
Non-current 1,612,595 264,044 2,093,878 255,008
298,296 1,612,595 1,231,364 2,093,878
Company
Due from agents
FOR THE PERIOD ENDED 31 DECEMBER 2019
Group Company
At 1 January
Changes during the year
At 31 Dec
Movement in reinsurance share of
claims Incurred But Not Reported
(IBNR)
At 1 January
Additions in the year
Amortised in the year-reinsurance expense
(see note 30)
At 31 Dec
Other receivables and prepayments Group
Stock of raw materials & consumables
Staff share loans
Other receivables
Impairment allowance (note 10.1)
Investment Income Recievable
Prepayment Rent
Prepayment - Others
Staff Loans & Receivables
Deposit for Investment (note 10.2)
Due from related company (note 10.3)
45
NOTES TO THE FINANCIAL STATEMENTS
10.1a Staff Share Loan:
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
N’000 N’000 N’000 N’00010.1b The Movement in impairment allowance
is as follow
At 1 January 4,785,263 4,817,469 4,396,864 4,429,070Impairment charge/(written back) for the year (975,739) - (627,435) - Reclassification to loans and receivables (32,206) - (32,206)ECL impairment 01 January 56,509 29,575 5,223 5,494 Additional ECL impairment during the year (24,958) 26,934 1,371 (271)At 31 Dec 3,841,076 4,841,772 3,776,023 4,402,087
10.1b The Movement in impairment allowance
is as follow
Due from Agents 32,751
This relates to advances granted
agents for marketing, recovery is
ongoing
Receivables 4,621This amount represents outstanding
loan for exited staff
Due to related Company 1,600,267
This relates to advances granted
subsidiaries and related companies of
the company.
Staff share loans 2,131,790
This amount is made up of African
Alliance Company Plc share purchased
during the private placement exercise
on behalf of staff of the company
ECL Impairment 6,594
This represents ECL impairment
allowance on Other receivables on the
implementation of IFRS 9
3,776,023
30-Sep-19 31-Dec-18 30-Sep-19 31-Dec-18N’000 N’000 N’000 N’000
10.2 Deposits for shares/InvestmentFirst Ghana Buidling Company Limited,
Ghana0 120,000 0 120,000
Paramount Hotel,Ghana
Fountian Trust Limited - 36 - 36 Golden Securities Limited - 25 - 25 Ghana Life Insurance Limited 506,116 506,116
- 120,061 506,116 626,177
10.3 Due from related companyAfrican Alliance Holding Limited - 8,150 - 8,150 Universal Insurance Company Plc 1,600,267 1,600,267 1,600,267 1,600,267 Frenchies Foods Limited - - - -
Axiom Air Limited - - - 408,339
Ghana Life Insurance - - - -
African Alliance Trustees Limited - 105 - 105
1,600,267 1,608,522 1,600,267 2,016,861
10.4 Movement in impairment allowanceAt 1 January 1,608,522 1,608,522 2,019,787 2,019,787Impairment charge/(written back) for
the year (8,255) (419,520) -
At 31 Dec 1,600,267 1,608,522 1,600,267 2,019,787
This represents impairment allowance on other receivables balances assessed as past due the settlement dates and determined to be individually impaired as at 31
December 2019
CompanyGroup
FOR THE PERIOD ENDED 31 DECEMBER 2019
Group Company
This amount is made up of African Alliance Company Plc share purchased during the private placement exercise on behalf of staff of the company and this
has been fully impaired.
46
AFRICAN ALLIANCE INSURANCE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
11
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
Group Life - - -
Current - - - -
(ii) Movement in Deferred Acquisition CostBalance at beginning of period - - - - Acquisition cost during the period - - - -
- - - -
At 31 Dec - - - -
12 Investment properties
At 1 January 10,258,314 10,794,603 8,620,913 9,285,488 Acquisition / (Disposal) 313,520 (988,237) 170,258 (988,238)Exchange difference adjustment (235,938) (92,738)Acquisition through disposal of subsidiaries - - - - Fair value gain on revaluation - 544,686 - 323,662
At 31 Dec 10,335,895 10,258,314 8,791,171 8,620,913
Of the investment properties, the following relates to insurance Funds:
Insurance funds 5,141,337 4,135,542 5,141,337 4,135,542 Shareholders funds 5,194,558 6,122,771 3,649,834 4,485,370
10,335,895 10,258,313 8,791,171 8,620,913
12.1
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
12.2 A brief descriptions of the properties held by Company are as follows
1,937,180 1,937,180 1,937,180 1,937,180
2,821,000 2,821,000 2,821,000 2,821,000
899,099 793,170 899,099 793,170 874,806 845,370 874,806 845,370 22,552 22,552 22,552 22,552
- - - - - - - -
91,608 91,608 91,608 91,608 - - - -
116,091 91,032 116,091 91,032
828,833 819,000 828,833 819,000 112 Broad Street, Lagos 1,200,000 1,200,000 1,200,000 1,200,000
1,544,725 1,637,401 - -
10,335,895 10,258,314 8,791,171 8,620,913
A brief descriptions of the properties held by the company in its name are as follows:
1,937,180 1,937,180 1,937,180 1,937,180 91,608 91,609 91,608 91,608
- - - - 116,091 91,032 116,091 91,032 22,552 22,552 22,552 22,552
- - - - - - - -
112 Broad Street, Lagos 1,200,000 1,200,000 1,200,000 1,200,000
Sani Abacha Estate, Abuja 874,806 874,806
899,099 793,170 899,099 793,170
5,141,337 4,135,543 5,141,337 4,135,542
2,821,000 2,821,000 2,821,000 2,821,000
1,544,725 1,637,401
29A, Akin Adesola Street, Victoria Island828,833 819,000 828,833 819,000
Sani Abacha Estate, Abuja - 845,370 - 845,370
5,194,558 6,122,771 3,649,833 4,485,370
Total investment property 10,335,895 10,258,314 8,791,171 8,620,913
Land & Residential properties held in Ghana Life
Insurance
Group Company
The properties were valued by A.C. Otegbulu & Partners Estate surveyors & Valuers, a registered member of Financial Reporting Council of Nigeria
(FRCN/2013/NIESV/0000001582), in December, 2018 on the basis of determining the open market value of the investment properties. The open
market value of all the properties were determined using recent comparable market prices.
The properties are held for long term capital appreciation and rental income.
73 Oyemekun street, AkureProperty at Lekki Phase 1Property at Lekki SeagateProperty at Millennium Housing estate34 Marple street, London4 bedroom duplex, Ajah road, Ajah, Lagos
Land & Residential properties held in Ghana Life
Insurance
Breadfruit Street Marina LagosProperty at Millennium Housing estate
FOR THE PERIOD ENDED 31 DECEMBER 2019
Deferred acquisition costs Group Company(i) Analysis by
Amortised in the period-acquisition expenses (see note
34)
Breadfruit Street Marina Lagos
Land at Pankere Village, Abijo, Ibeju Lekki
Plot C4, Rumuogba Layout, Aba road, Port Harcourt
Sani Abacha Estate, Abuja
34 Marple street, London
29A Akin Adesola Street, Victoria Island, Lagos
A brief descriptions of the properties held by
the company in the name of Conau Limited are as
follows:
Land at Pankere Village, Abijo, Ibeju Lekki
4 bedroom duplex, Ajah road, Ajah, Lagos73 Oyemekun street, AkureProperty at Lekki Phase 1Property at Lekki Seagate
Plot C4, Rumuogba Layout, Aba road, Port Harcourt
47
PROPERTIES TITLE OF DOCUMENTS
DATE OF
ACQUISITI
ON
TIITLE
DOCUM
ENT NO
LOCATION
CARRYING
AMOUNT
N'000
Land at Pankere Village, Abijo, Ibeju Lekki
Deed of Assignment & Governor's Consent
for Application to assignment between Land
Owner and Conau Limited
Year 2008 N/A
Abijo GRA Ibeju
Lekki, Lagos
state
2,821,000
Building At 29a Akin
Adesola Street, VI,
Lagos
Lagos State Government Land
Certificate and Deed of Assignment
Year 2017 -
By transfer
from
Subsidiary
Lagos
State
Land
Registry
L07425
29a Akin
Adesola Street,
VI, Lagos
828,833
PROPERTIES TITLE OF DOCUMENTS DATE OF
ACQUISITION
TIITLE
DOCUMEN
T NO
LOCATIONCARRYING
AMOUNT N'000
Property Breadfruit Street Marina LagosLagos State Government Land Certificate and Deed
of AssignmentYear 1960 L03746
13/17 Breadfruit
Street, Lagos1,937,180
Property Rumuogba
Layout, Aba road, Port
Harcourt
Deed of Assignment & Certificate of Occupancy Year 2008 N/A
Plot C4,
Rumuogba Layout,
Aba road, Port
Harcourt
899,099
73 Oyemekun street, Akure Certificate of Right of Occupancy Year 1983 N/A73 Oyemekun
street, Akure22,552
Duplex at Sani Abacha Estate, Abuja
Deed of Assignment between Federal
Republic of Nigeria represented by EFCC and
Conau Limited
Year 2008 N/A
2220 Suez Canal
Crescent Sani
Abacha Estate,
874,806
Property at Millennium Housing estateLagos State Government Allocation Letter Year 2004 N/A
Block B House 9B
Oba Adeyinka
Oyekan Housing
Estate Lekki, Lagos
91,608
4 bedroom duplex, Ajah road, Ajah, LagosDeed of Assignment Year 2009 N/A
Lekki Epe
Expressway, Ajah
Town, Lagos
116,091
Property 112 Broad Street, LagosLagos State Government Land Certificate and Deed
of AssignmentYear 1961 L03990 112 Broad Street, Lagos 1,200,000
12.3 INVESTMENT PROPERTIES NOT IN THE NAME OF AFRICAN ALLIANCE
INVESTMENT PROPERTIES IN THE NAME OF AFRICAN ALLIANCE
FOR THE PERIOD ENDED 31 DECEMBER 2019
FOR THE PERIOD ENDED 31 DECEMBER 2019
48
NOTES TO THE FINANCIAL STATEMENTS
13 Investment in subsidiaryThe company's investment in subsidiary is as stated below:
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
- - - 3,000,000
- - 1,770,741 1,770,741
- - 1,770,741 4,770,741 Impairment allowance (note 13e) - - (1,228,012) (4,228,012)
- - 542,729 542,729
13a Axiom Air Limited:-
13b Ghana Life Insurance Company Limited
Movement in the investment in Ghana life is as follows
31-Dec-19 31-Dec-18
N’000 N’000
At 1 January 1,770,741 1,770,741
- -
-
At 31 Dec 1,770,741 1,770,741
13c Movement in impairment allowance in investment
At 1 January 4,228,012 4,216,936Impairment charge/(written back) for the year - 11,076 At 31 Dec 4,228,012 4,228,012
Movement in impairment charge
At 1 Jan
2019
Additional
charge
31-Dec-19
African Alliance Realty Company Limited - - - Axiom Air Limited 3,000,000 (3,000,000) -
Ghana Life Insurance company 1,228,012 - 1,228,012
4,228,012 (3,000,000) 1,228,012
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
14 Investment In associate
Investment in Pension Alliance Limited 1,349,172 1,804,083 1,349,172 1,804,083
The movement in investment in associate is as follow:
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
At 1 January 1,804,083 1,605,405 1,804,084 1,605,405 Effect of prior year errorsShare of profit after taxation: @ 49% 461,389 710,728 461,389 710,728 Less: Dividend received (916,300) (512,050) (916,300) (512,050)At 31 Dec 1,349,172 1,804,083 1,349,172 1,804,083
This represents the Company's 49% holding in Pensions Alliance Limited. The associated company is engaged in the provision of pension services in accordance with the Pension
Reform Act. The financial year end of the company is 31 December.
Company
The company was incorporated on 17 July 2008 to carry on the business of airline owners and management, provide air transport for public use; to provide all necessary and or
desirable services incidental to this objective, including booking, reservation, routing and ticketing services, baggage management, flight catering and entertainment and provision
of hotel accommodation. The company is wholly owned.
The company is a subsidiary of African Alliance Insurance Plc. The company is domiciled in Ghana and is permitted by its regulation to carry on the business of life insurance.
Company
Group
Group Company
FOR THE PERIOD ENDED 31 DECEMBER 2019
Company Group
Axiom Air Limited (Note 13c)
Ghana Life Insurance Company Limited (Note 13d)
49
NOTES TO THE FINANCIAL STATEMENTS
15 Intangible assets
Software in
Progress
Computer
Software
Total Computer
Software
Total
N’000 N’000 N’000 N’000CostAt 1 January 2019 12,626 128,369 140,995 98,975 98,975 Additions 16,641 16,641 10,522 10,522
At 31 December 2019 12,626 145,010 157,636 109,496 109,496
AmortisationAt 1 January 2019 - 83,652 83,652 79,199 79,199 Charge for the period 8,522 8,522 8,522 8,522
At 31 December 2019 - 92,174 92,174 87,721 87,721
Net book amount
At 31 December 2019 12,626 52,835 65,461 21,775 21,775 At 31 December 2018 12,626 44,717 57,343 19,776 19,776
15.1 Intangible asset
Software in
Progress
Computer
Software
Total Computer
Software
Total
N’000 N’000 N’000 N’000CostAt 1 January 2018 12,626 118,097 130,723 83,038 83,038 Additions - 10,272 10,272 15,937 15,937 At 31 December 2018 12,626 128,369 140,995 98,975 98,975
AmortisationAt 1 January 2018 - 66,578 66,578 62,125 62,125 Charge for the year - 17,074 17,074 17,074 17,074
At 31 December 2018 - 83,652 83,652 79,199 79,199
Net book amountAt 31 December 2018 12,626 44,717 57,343 19,776 19,776 At 31 December 2017 12,626 51,519 64,145 20,913 20,913
FOR THE PERIOD ENDED 31 DECEMBER 2019
Group Company
Group Company
50
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2019
16 Property and equipment
Group
Land Building Motor Furniture Computer Office Plant & Aircraft Total
Vehicles & Fittings Equipment Equipment Machinery
N'000 N'000 N'000 N'000 N'000 N'000
Cost
At 1 January 2019 62,000 1,493,112 402,095 224,357 209,922 246,933 9,171 2,281,122 4,928,711
Additions - 2,751 26,694 87,662 79,401 - - 196,508
Disposal - - (29,995) (3,211) (1,762) (8,238) - - (43,206)
Derecognition (383,115) (383,115)
Exchange adjustment (15,219) (15,219)
Elimination of accum depreciation (10,004) (10,004)
Revaluation - 90,222 - 90,222
At 31 December 2019 62,000 1,177,747 372,100 247,840 295,822 318,095 9,171 2,281,122 4,763,896
Depreciation and impairment
At 1 January 2019 - - 304,740 104,215 140,942 80,282 9,171 2,281,122 2,920,472
Charge for the year - 10,004 52,385 18,727 33,882 27,184 - - 142,183
Disposal - - (29,995) (3,211) (1,041) (4,007) - - (38,254)
Exchange adjustment -
- -
Elimination of accum depreciation - (10,004) (10,004)
- -
At 31 December 2019 - - 327,130 119,731 173,784 103,459 9,171 2,281,122 3,014,397
Net book amount
At 31 December 2019 62,000 1,177,747 44,971 128,109 122,038 214,637 - - 1,749,500
At 31 December 2018 62,000 1,493,112 97,355 120,142 68,980 166,651 - - 2,008,239
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
Property and equipment Land Building Motor Furniture Computer Office Plant & Aircraft Total
Vehicles & Fittings Equipment Equipment Machinery
N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000
Cost
At 1 January 2018 62,000 1,351,101 460,969 153,782 179,616 125,079 9,171 2,281,122 4,622,839
Additions - - 92,510 71,955 31,872 121,951 - - 318,288
Disposal - - (151,384) (1,380) (1,566) (97) - - (154,427)
Liquidation of subsidiaries - - - - -
Exchange adjustment 23,615 23,615
Revaluation - 162,418 - - - - - - 162,418
Elimination of accum. Depreciation at revaluation - (44,022) (44,022)At 31 December 2018 62,000 1,493,112 402,095 224,357 209,922 246,933 9,171 2,281,122 4,928,711
Depreciation
At 1 January 2018 - 26,310 369,503 90,641 116,271 63,713 9,171 2,281,122 2,956,731
Charge for the year - 17,712 80,046 14,954 26,237 16,666 - - 155,615
Disposal - - (144,809) (1,380) (1,566) (97) - - (147,852)
Exchange adjustment - -
Liquidation of subsidiaries - - - - - -
Elimination of accum. Depreciation at revaluation - (44,022) - (44,022)
- - - - - - - - -
At 31 December 2018 - - 304,740 104,215 140,942 80,282 9,171 2,281,122 2,920,472
Net book amount
At 31 December 2018 62,000 1,493,112 97,355 120,142 68,980 166,651 - - 2,008,239
At 31 December 2017 62,000 1,324,791 91,466 63,141 63,345 61,366 - - 1,666,108
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2019
Property and equipment
Company
Motor Furniture Computer Office Total
Land Building Vehicles & Fittings Equipment Equipment
N'000 N'000 N'000 N'000 N'000 N'000
Cost
At 1 January 2019 62,000 383,115 253,716 169,377 165,886 246,934 1,281,028 Additions - - 23,612 80,774 79,401 183,786 Disposal - - (29,995) (3,211) (1,762) (8,238) (43,206)Derecognition (383,115) (383,115)Revaluation - - - - - -
At 31 December 2019 62,000 - 223,721 189,778 244,898 318,096 1,038,493
Depreciation
At 1 January 2019 - - 194,724 69,962 107,014 80,282 451,983
Charge for the year - - 24,036 16,125 29,389 27,184 96,734
Disposal - (29,995) (3,211) (1,041) (4,007) (38,254)Elimination of accum dep on revaluation - - - Revaluation - - -
At 31 December 2019 - - 188,766 82,876 135,362 103,459 510,463
Net book amount
At 31 December 2019 62,000 - 34,955 106,901 109,536 214,637 528,030
At 31 December 2018 62,000 383,115 58,991 99,415 58,872 166,651 829,045
The only property of the Company under property plant and equipment located in 34 Association Avenue Ilupeju was demolished as a result of sudden structural defects. The
Company intend to rebuild it at a possible short period.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DEC 2018
Property and equipment Motor Furniture Computer Office Total
Land Building Vehicles & Fittings Equipment Equipment
N'000 N'000 N'000 N'000 N'000 N'000
Cost
At 1 January 2018 62,000 394,308 306,014 99,748 137,036 125,079 1,124,186 Additions - - 92,510 71,009 30,416 121,951 315,887 Disposal - - (144,809) (1,380) (1,566) (97) (147,852)Elimination of accum dep on revaluation (34,338) (34,338)Revaluation - 23,145 - - - - 23,145
- - - - - At 31 December 2018 62,000 383,115 253,716 169,377 165,886 246,934 1,281,028
Depreciation
At 1 January 2018 - 26,308 260,904 59,216 86,764 63,713 496,905
Charge for the year - 8,030 67,065 12,124 21,816 16,666 125,702
Disposal - (133,245) (1,378) (1,566) (97) (136,286)
Arising on liquidation -
Elimination of accum dep on revaluation - (34,338) - (34,338)
At 31 December 2018 - - 194,724 69,962 107,014 80,282 451,983
Net book amount
At 31 December 2018 62,000 383,115 58,991 99,415 58,872 166,651 829,045
At 31 December 2017 62,000 368,000 45,110 40,532 50,272 61,366 627,281
NOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2019
17 Statutory deposit
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
Statutory deposit 354,871 358,182 200,000 200,000
Non-current 354,871 358,182 200,000 200,000
18 Insurance contract liabilities
GROSS
Outstanding claims (see note i) 58,380 65,967 58,380 65,967
Unearned premiums (see note ii) 429,227 180,885 429,227 180,885
1,600,006 1,090,763 1,600,006 1,090,763
Liability on annuity fund (see note iv) 31,089,889 28,113,829 31,089,889 28,113,829
5,015,088 5,659,187 3,431,603 3,697,761
Total Insurance liabilities (Gross) 38,192,590 35,110,631 36,609,105 33,149,205
Current 3,081,959 (1,267,820) 3,459,900 (1,387,161)Non-current 35,110,631 36,378,451 33,149,205 34,536,366
38,192,590 35,110,631 36,609,105 33,149,205
Recoverable from reinsurers
- -
Unearned premiums - 21,149 - 21,148
IBNR on Short term insurance contract 52,321 122,904 52,321 122,904
52,321 144,053 52,321 144,052
NET
58,380 65,967 58,380 65,967
429,227 180,885 429,227 180,885
1,600,006 1,090,763 1,600,006 1,090,763 31,089,889 28,113,829 31,089,889 28,113,829
5,015,088 5,659,187 3,431,603 3,697,761
Total Insurance liabilities (Net) 38,192,590 35,110,631 36,609,105 33,149,205
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
At 1 January 65,967 52,446 65,967 52,446
8,967,121 8,740,678 8,967,121 8,740,678
- (8,974,709) (8,727,157) (8,974,709) (8,727,157)
At 31 Dec 58,380 65,967 58,380 65,966
Liability on long term insurance
contract - Life fund
Claims reported and loss adjustment
expenses
Total reinsurers’ share of insurance
liabilities
Claims reported and loss adjustment
expenses
Unearned premiums
This represents 10% of the regulatory minimum share capital deposited with the Central Bank of Nigeria as at 31
December 2019 in accordance with the requirement of section a(i) and section 10(3) of Insurance Act. Interest Income
earned on this deposit is included in investment income
Claims paid during the period
Liability on annuity fundLiability on long term insurance contract
(Life fund )
(i) The movement in outstanding claims during the year was as follows:
Group Company
Additions claims incurred during the
period (see note 32)Exchange difference arising from
translation
Claims incurred but not reported on Short
term insurance contract
Group Company
Short term insurance contract - Claims
incurred but not reported (IBNR) (see
note iii)
55
NOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2019
(ii) The movement in unearned premium during the year was as follows:
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
At 1 January 180,885 243,570 180,885 243,570 Change during the year 248,341 (62,685) 248,341 (62,685)
At 31 Dec 429,227 180,885 429,227 180,885
(iii) The movement in IBNR claims on Short term insurance during the year was as follows:
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
At 1 January 1,090,763 1,047,146 1,090,763 1,047,146 Change during the year 509,243 43,617 509,243 43,617
At 31 Dec 1,600,006 1,090,763 1,600,006 1,090,763
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
N’000 N’000 N’000 N’000
At 1 January 28,113,829 30,092,990 28,113,829 30,092,990
Change during the year 2,976,060 (1,979,161) 2,976,060 (1,979,161)
At 31 Dec 31,089,889 28,113,829 31,089,889 28,113,829
Group Company
Group Company
Group Company
(iv) The movement in annuity fund during the year was as follows:
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
At 1 January 5,659,187 4,942,301 3,697,761 3,100,216 Exchange difference from translation - (112,071)
Change during the year (644,099) 828,957 (266,158) 597,545
At 31 Dec 5,015,088 5,659,187 3,431,603 3,697,761
(vi) Insurance contract liabilities at the end of the period were as follows:
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
58,380 65,967 58,380 65,967 429,227 180,885 429,227 180,885 1,600,006 1,090,763 1,600,006 1,090,763
Liability on Annuity contract 31,089,889 28,113,829 31,089,889 28,113,829
5,015,088 5,659,187 3,431,603 3,697,761
38,192,590 35,110,631 36,609,104 33,149,205
(v) The movement in life fund contract (excluding annuity) during the year was as follows:
Group Company
Group Company
Outstanding claims Unearned premiums
Short term insurance contract- IBNR
Liability on long term insurance contract - Life
fund
NOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2019 -
19 Investment contract liabilities
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
At 1 January 5,841,759 4,927,104 5,841,759 4,927,104
Deposits received during the year 867,283 1,234,095 867,283 1,234,095
Withdrawals during the year (1,157,604) (458,757) (1,157,604) (458,757)
Guaranteed interest in the year 100,528 139,317 100,528 139,317
At 31 Dec 5,651,966 5,841,759 5,651,966 5,841,759
Non-current 5,651,966 5,841,759 5,651,966 5,841,759
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
19.1 Liabilities on administered deposits
At 1 January 2,892,757 3,242,415 2,892,757 3,242,415
Deposits received during the year 628 513 628 513
Withdrawals during the year (807,552) (420,852) (807,552) (420,852)
Guaranteed interest in the year 61,228 70,680 61,228 70,680
At 31 Dec 2,147,061 2,892,757 2,147,061 2,892,757
19.2 Investment linked fundAt 1 January 2,949,003 1,684,689 2,949,003 1,684,689 Deposits received during the year 866,655 1,233,582 866,655 1,233,582
Withdrawals during the year (350,052) (37,905) (350,052) (37,905)
Guaranteed interest in the year 39,299 68,637 39,299 68,637
At 31 Dec 3,504,905 2,949,003 3,504,905 2,949,003
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
20 Trade payable
Unallocated premium deposits 422,900 861,873 406,620 859,302
Due to co-insurance - - - -
Due To/from Reinsurance 147,148 (9,460) 147,148 (9,460)
Trade creditors 288,248 254,586 336 336
858,296 1,106,999 554,103 850,178
Current 858,296 1,106,999 554,103 850,178
The investment contract liabilities comprise interest-linked guaranteed investment funds. The movement in the investment contract
liabilities is shown below:Group Company
Investment contract liabilities consist of group deposit adminstered funds and account balance of policy holders under investment linked
insurance funds. Movement in the relevant funds are detailed below
Group Company
Group Company
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
N’000 N’000 N’000 N’000
21 Other payables and accruals
Due to related party 139,024 - - -
Agent savings 154,050 175,047 145,075 131,744 PAYE and other witholding taxes payable 90,193 259,123 89,763 84,494 Provisions and accruals 48,099 13,219 27,469 13,219 Rent receivable 4,531 40,110 4,531 40,110 Due to Conau Limited - 140,365 - 140,365 Other creditors 177,640 51,727 177,640 51,727
Current (Payable within the period) 613,536 679,591 444,478 461,659
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
22.1 Retirement benefit asset - -
22.2 Retirement benefit liabilities
Staff pension scheme 37,832 30,880 37,832 30,880 Staff defined benefit plan 28,914 11,810 28,914 11,810
66,746 42,690 66,746 42,690
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
23 Borrowings
Secured -at amortised costBank overdraft (i) - Overdraft Facility (note ii) 991,293 507,077 934,160 482,145
- -
991,293 507,077 934,160 482,145
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
At 1 January 507,077 287,652 482,145 182,714 Additions 500,000 500,881 500,000 500,880 Transaction cost (4,000) (5,417) (4,000) (5,417)Interest expense 90,699 60,296 90,699 60,296 Repayment (102,483) (336,335) (134,684) (256,328)
At 31 Dec 991,293 507,077 934,160 482,145
24 Tax payable
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
Company income tax payable:At 1 January 826,742 594,024 774,245 545,285 Charge to profit and loss 207,670 273,662 207,645 244,662 Transfer of liabilities upon liquidation - - - -
(4,394) (22,279)
Tax paid in the year (39,051) (18,665) (39,051) (15,702)
At 31 Dec 990,967 826,742 942,838 774,245
Current 990,967 826,742 942,838 774,245
Movement in overdraft facility
and term loan
(i) Bank overdraft represents current accounts held with banks which was overdrawn as at the financial reporting date.
Group Company
Group Company
(ii) Overdraft facility represents the sum of N450.88 Million granted to the company by Fidelity Bank plc, the sum of N300Million
from FCMB and the sum of N250Million from Sterling Bank to meet working capital requirements. The facility has a tenor of 12
months with a nominal interest rate of 19% (effective interest rate of 19.33%). The repayment term is quarterly repayment of
principal and interest.
Foreign exchange difference arising
from translation
Group Company
Group Company
Group Company
NOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2019 -
25 Deferred tax liability31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
N’000 N’000 N’000 N’000The analysis of deferred tax liabilities is as follows:
- -
379,755 428,182 92,107 92,107
379,755 428,182 92,107 92,107
The movement on the deferred tax liabilities account is as follows:
25a At 1 January 428,182 384,873 92,107 92,107
- -
- - - -
(48,427) (41,359)
Income statement charge (note 38) - 84,668 - -
At 31 Dec 379,755 428,182 92,107 92,107
Non- current 379,755 428,182 92,107 92,107
25b Deferred tax assetThe movement on the deferred tax asset account is as follows:At 1 January 148,195 148,195 146,476 146,476 Exch
(248) -
Income statement charge (note 42) - - - -
At 31 Dec 147,947 148,195 146,476 146,476
Non- current 147,947 148,195 146,476 146,476
26 Share capitalOrdinary Shares 31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
Number Number Number Number
30,000,000 30,000,000 30,000,000 30,000,000
N’000 N’000 N’000 N’000
10,292,500 10,292,500 10,292,500 10,292,500
Number of shares 31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-1820,585,000 20,585,000 20,585,000 20,585,000
Paid up during the year ('000): - - - -
At 31 Dec 20,585,000 20,585,000 20,585,000 20,585,000
Share premium
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
N’000 N’000 N’000 N’000
14,365,133 14,365,133 14,365,133 14,365,133 - - - -
At 31 Dec 14,365,133 14,365,133 14,365,133 14,365,133
27 Contingency reserves
At 1 January 975,947 908,259 891,345 839,681
Transfer from retained earnings 98,463 67,688 74,991 51,664
At 31 Dec 1,074,410 975,947 966,336 891,345
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18N’000 N’000 N’000 N’000
28At 1 January (30,218,534) (27,275,850) (28,940,682) (26,146,738)Liquidation of subsidiaries - - - -
Opening ECL Adjustment (178,627) - (83,716)Transfer to contingency reserves (99,903) (67,901) (74,991) (51,664)
- - -
Profit for the period (6,828,904) (2,696,156) (6,696,556) (2,658,564)
(37,147,341) (30,218,534) (35,712,229) (28,940,682)
Company
Deferred tax liability to be incurred within 12
Deferred tax liability to be incurred after more than 12
months
Tax charge recognised in other comprehensive income
Shares at the beginning of the year('000)
Authorised share capital ('000)
Transfer of liabilities upon liquidation of subsidiaries
Foreign exchange difference arising from translation
Foreign exchange difference arising from translation
Group
Group Company
Paid up share capital of 20.585 billion ordinary shares of
50 kobo each
At 31 Dec
At 1 January
Retained earnings
In accordance with the insurance act, a contingency reserve is credited with the greater of 1% of total premiums or 10% of net profit. This shall
accumulate until it reaches the amount of greater of minimum paid-up capital or 50 percent of net premium
Group Company
Fair value reserves on properties of subsidiaries
liquidated
60
NOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2019
29 Fair value reserves
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
N’000 N’000 N’000 N’000
1,165,442 1,004,524 425,693 367,862
(413,842) 160,594 (413,842) 23,145
600 (650) 600 (650)
Deferred tax - (34,362)
Remeasurement of the net defined benefit liability(asset) - 35,336 - 35,336
- -
Fair value changes - Financial Assets FVOCI 2,508,352 2,508,352
3,260,552 1,165,442 2,520,803 425,693
29a Fair value changes-statement of comprehensive income
31-Dec-19 31-Dec-18 31-Dec-19 31-Dec-18
N’000 N’000 N’000 N’000
(413,842) 160,594 (413,842) 23,145
600 (650) 600 (650)
Fair value cahnges - Financial Asset FVOCI 2,508,352
2,508,352
- (34,362)
- 35,336 - 35,336
2,095,110 160,918 2,095,110 57,831
3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months
N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000
30 Gross premium income
Individual life 1,064,946 4,091,576 1,398,917 3,756,235 698,456 2,650,880 824,370 2,127,054 Group life 406,163 2,328,513 164,920 915,838 381,857 2,281,228 98,972 915,838 Annuity 6,356 40,659 10,211 544,011 6,356 40,659 10,211 544,011 Takaful 84,947 430,788 65,177 240,600 84,947 430,788 65,177 240,600 Esusu 1,199,083 2,095,528 1,121,192 1,338,893 1,199,083 2,095,528 1,121,192 1,338,893
Gross premium written 2,761,495 8,987,063 2,760,416 6,795,577 2,370,699 7,499,083 2,119,921 5,166,396
Unearned premium
Group life (100,034) (248,341) 312,386 62,685 (100,034) (248,341) 312,386 62,685
2,661,462 8,738,722 3,072,802 6,858,262 2,270,666 7,250,742 2,432,307 5,229,081
31
Gross reinsurance expense 28,708 (464,852) (16,972) (184,563) (134,749) (547,823) (10,283) (176,104)Changes in prepaid reinsurance - - 15,158 91,731 15,158
28,708 (464,852) (16,972) (169,405) (134,749) (456,092) (10,283) (160,946)
32 Fees and commission income
Group Life 37,314 147,530 332 41,663 37,314 147,530 332 41,663 Individual Life 476 2,100 2,259 476 2,100 2,259
37,790 149,630 332 43,922 37,790 149,630 332 43,922
Change in value of available for sale
financial assets (net of taxes)
Insurance premium ceded to
reinsurers
Gain on revaluation on land and
building
Group Company
At 1 January
Gain/(Derecognition) on revaluation
on land and building
At 31 Dec
Change in value of available for sale
financial assets (net of taxes)
CompanyGroup
Group Company
31-Dec-2018 31-Dec-2019 31-Dec-2018
Income tax on items that will not be
subsequently reclassfied to profit or
loss
Remeasurement of the net defined
benefit liability(asset)
31-Dec-2019
61
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2019
33 Insurance claims and loss adjustment expenses
a Group
12 months
N’000 N’000 N’000
Gross Reinsurance Net
Individual life 2,397,782 2,397,782
Group life 574,914 574,914
Annuity 4,474,468 4,474,468
Takaful 404,240 404,240
Esusu 2,176,846 2,176,846
10,028,249 10,028,249
-
(7,587) (7,587)
Claims incurred during the period 10,020,662 - 10,020,662
IBNR on Short term insurance contract 509,243 (55,562) 453,681
10,529,905 (55,562) 10,474,343
3 months
N’000 N’000 N’000
Gross Reinsurance Net
Individual life 601,760 601,760
Group life 30,833 30,833
Annuity 1,097,866 1,097,866
Takaful 73,735 73,735
Esusu 1,201,157 1,201,157
3,005,351 3,005,351
-
(207,535) (207,535)
Claims incurred during the period 2,797,816 - 2,797,816
IBNR on Short term insurance contract 415,378 26,025 441,403
3,213,194 26,025 3,239,219
12 months
N’000 N’000 N’000
Gross Reinsurance Net
Individual life 2,076,755 - 2,076,755
Group life 921,892 921,892
Annuity 4,532,002 4,532,002
Takaful 284,689 284,689
Esusu 1,797,176 - 1,797,176
9,612,514 9,612,514
13,521 13,521
Claims incurred during the period 9,626,035 - 9,626,035
IBNR on Short term insurance contract 43,617 (203,837) (160,220)
9,669,652 (203,837) 9,465,815
3 months
N’000 N’000 N’000Gross Reinsurance Net
Individual life 675,798 - 675,798Group life 107,929 107,929Annuity 1,125,152 1,125,152Takaful 55,523 55,523Esusu 1,156,434 - 1,156,434
3,120,837 3,120,837 (459,309) (459,309)
Claims incurred during the period 2,661,528 - 2,661,528 IBNR on Short term insurance contract 332,319 - 332,319
2,993,847 - - 2,993,847
31-Dec-19
Increase in the expected cost of claims for unexpired risks
31-Dec-18
Increase in the expected cost of claims for unexpired risks
31-Dec-19
Increase in the expected cost of claims for unexpired risks
31-Dec-18
Increase in the expected cost of claims for unexpired risks
Insurance claims and loss adjustment expenses
b Company
12 months
N’000 N’000 N’000Gross Reinsurance Net
Individual life 1,344,242 - 1,344,242 Group life 574,914 574,914 Annuity 4,474,468 4,474,468 Takaful 404,240 404,240 Esusu 2,176,846 2,176,846
8,974,709 8,974,709
(7,587) -
(7,587)
Claims incurred during the year 8,967,121 - 8,967,121 IBNR on Short term insurance contract 509,243 (55,562) 453,681
9,476,364 (55,562) 9,420,802
Insurance claims and loss adjustment expenses
b Company
3 months
N’000 N’000 N’000Gross Reinsurance Net
Individual life 346,180 - 346,180 Group life 30,833 30,833 Annuity 1,097,866 1,097,866 Takaful 73,735 73,735 Esusu 1,201,157 1,201,157
2,749,772 2,749,772 (207,535) - (207,535)
Claims incurred during the year 2,542,236 - 2,542,236 IBNR on Short term insurance contract 415,378 28,532 443,910
2,957,614 28,532 2,986,147
12 months
N’000 N’000 N’000Gross Reinsurance Net
Individual life 1,191,398 - 1,191,398 Group life 921,892 921,892 Annuity 4,532,002 4,532,002 Takaful 284,689 284,689 Esusu 1,797,176 - 1,797,176
8,727,157 8,727,157
13,521
-
13,521
Claims incurred during the period 8,740,678 - 8,740,678 IBNR on Short term insurance contract 43,617 (203,837) (160,220)
8,784,295 (203,837) 8,580,458
3 months
N’000 N’000 N’000
Gross Reinsurance Net
Individual life 333,898 - 333,898
Group life 104,163 104,163
Annuity 1,125,152 1,125,152
Takaful 55,523 55,523
Esusu 1,156,434 - 1,156,434
2,775,171 2,775,171
(459,309) - (459,309)
Claims incurred during the period 2,315,862 - 2,315,862
IBNR on Short term insurance contract 332,319 - 332,319
2,648,181 0 2,648,181
34 Underwriting expenses
3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months
N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000
Acquisition cost (see note 33.1) 171,443 514,871 36,624 417,965 171,443 514,871 36,624 230,507
Maintenance cost 212,162 842,451 181,084 574,325 153,502 663,276 86,656 574,325
383,605 1,357,322 217,708 992,290 324,946 1,178,148 123,280 804,832
31-Dec-2019 31-Dec-2018 31-Dec-2019 31-Dec-2018
31-Dec-19
31-Dec-18
Increase in the expected cost of claims for unexpired risks
CompanyGroup
Increase in the expected cost of claims for unexpired risks
31-Dec-19
Increase in the expected cost of claims for unexpired risks
31-Dec-18
Increase in the expected cost of claims for unexpired risks
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2019
3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months
N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000
34.1 Acquisition costCommission paid 171,443 514,871 36,624 417,965 171,443 514,871 36,624 230,507 Changes in deferred acquisition cost - - - - -
171,443 514,871 36,624 417,965 171,443 514,871 36,624 230,507
35 Changes in long term insurance contracts
2,581,306 2,976,060 (250,188) (1,979,161) 2,581,306 2,976,060 (250,188) (1,979,161)
1,232,750 (110,172) 100,194 828,957 1,095,925 (266,158) 10,140 597,545
3,814,056 2,865,888 (149,994) (1,150,204) 3,677,231 2,709,902 (240,047) (1,381,616)
36 Other income
Rental income 12,775 50,077 8,200 32,745 12,775 50,077 8,200 30,020 Gain upon disposal of investment properties - - 209,126 - - - 209,126 - Gain on disposal of PPE (1,687) 2,428 200 (10,390) (1,687) 2,428 200 (10,390)Sundry charges on investment linked products 4,608 9,214 3,865 15,173 4,608 9,214 3,865 15,173 Gain on disposal of investment - 43 - 252,826 - 43 - 252,826 Sundry( loss)/ income 1,279 6,282 17,042 7,618 1,090 5,646 1,932 7,618
16,975 68,044 238,432 297,972 16,786 67,408 223,322 295,247
37
3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months
N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000 206,596 445,404 101,642 553,578 39,524 209,642 84,967 479,998 309,138 2,394,739 686,427 2,590,217 309,138 2,394,739 686,427 2,590,217
- - - 39,115 - - - 39,115
2,048 21,407 993 12,711 2,048 21,407 993 12,711 - 27,873 - 33,037 - 27,873 - 33,037
Interest income on loans and receivables 52 17,241 1,759 13,140 52 17,241 1,759 13,140
517,834 2,906,665 790,820 3,241,798 350,762 2,670,902 774,145 3,168,218
37a Loss from investment contract:
182 585 246 1,370 182 585 246 1,370 Excess reserve on deposit administration - - - - Shortfall in deposit administration (note 36b) - - Guaranteed interest (17,460) (100,528) (54,652) (139,317) (17,460) (100,528) (54,652) (139,317)
(17,278) (99,942) (54,406) (137,947) (17,278) (99,942) (54,406) (137,947)
38 Impairment on assets
3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months
N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000 - - - - -
- - 5,437 (1,250)
- - (4,484) (1,250)
Impairment on trade receivables (8.1) - - - -
-
(2,926) - -
- (2,926)
-
Specific impairment no longer required - (4,188) - (4,188)
- - 11,076 - 11,076
- (2,926) 5,437 5,638 - (2,926) (4,484) 5,638
31-Dec-201831-Dec-201931-Dec-201831-Dec-2019
CompanyGroup
Impairment on investment in subsidiary (see note 13e)
Impairment on other receivables and prepayments (see note
10.1)
Impairment on unquoted equities (see note 7.2)
Impairment on loans and receivables (see note 7.4)
Changes in annuity fund
Changes in individual life fund excluding annuity
Interest income on cash and bank balances
Interest income on bonds
Dividend IncomeInterest income on statutory deposit
Investment income
Group Company
Investment income from investment contract liabilities
Investment income on planned asset
Group Company
31-Dec-201831-Dec-201931-Dec-201831-Dec-2019
31-Dec-201831-Dec-201931-Dec-201831-Dec-2019
64
NOTES TO THE FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER 2019
39
3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months
N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000
Wages and salaries 244,311 853,090 261,977 881,544 178,086 659,085 168,467 610,050 Other Staff Cost 38,636 213,373 74,095 133,076 33,308 178,922 22,730 133,075 Defined contribution pension costs 13,419 53,296 14,520 92,670 8,299 36,390 8,407 92,670 Defined benefit pension cost 6,287 23,230 12,433 64,157 5,077 15,530 18,292 64,157
302,653 1,142,989 363,025 1,171,447 224,770 889,927 217,897 899,952
40 Other operating and administrative expenses
3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 months
N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000
Directors’ emoluments 29,222 87,115 29,322 12,500 10,000 62,546 5,250 12,500 Bank Charges 658 90,335 40,304 54,916 4,122 59,469 15,571 54,916 Auditors' remuneration 17,500 17,500 17,500 17,500 17,500 17,500 - 17,500 Depreciation 73,277 142,183 49,525 125,700 40,323 96,734 28,564 125,700 Amortisation 3,157 8,522 2,975 17,074 3,157 8,522 2,975 17,074 Consultancy expenses 57,830 396,484 122,630 296,051 57,170 381,772 112,712 296,051 Security 11,653 29,365 21,594 14,328 3,827 13,587 6,066 14,328 Rent and rates 52,740 162,043 38,858 438,925 55,095 151,581 31,933 130,760 General maintenance and running costs 43,872 208,420 93,519 128,337 30,253 144,721 40,395 128,337 Advert and Publicity 98,810 452,984 113,197 219,588 98,292 448,517 109,102 219,588 Telecommunications 6,607 31,373 15,836 24,201 3,045 17,519 8,654 24,201 Dues and Subscription 519 9,006 3,212 27,873 354 7,277 1,959 27,873 Travels and accomodation 86,965 323,282 67,354 307,076 79,269 293,057 89,368 307,076 Insurance supervision fees 2,510 72,624 0 62,230 - 64,005 - 62,230 Insurance expenses 4,878 29,226 6,598 10,746 4,483 25,718 2,070 10,746
Printing and stationeries 11,696 67,624 2,595 13,275 11,202 58,906 2,175 13,275 Industrial training fund - 6,578 0 3,441 - 6,578 - 3,441 Entertainment 9,362 34,810 15,107 18,765 9,179 30,818 5,596 18,765 Regulatory levies 607 12,011 9,899 34,700 - 9,195 75 34,700 Penalties - 0 0 18,410 - - - 18,410 Lease 12,029 41,524 8,140 25,851 12,029 41,524 8,140 25,851 Office ICT expenses 20,310 126,107 20,736 113,651 20,311 126,046 20,701 113,651 Donation - 150 700 900 - 150 700 900 Office cleaning expenses 8,361 26,567 3,817 9,759 8,361 26,567 3,817 9,759 Medical expenses 1,942 6,289 9,566 2,309 167 1,975 435 2,309 Cost of sales restaurant - - 0
- - Other Adminstrative Expenses 17,040 118,511 -1,328 67,314 18,754 115,089 8,048 67,298
571,544 2,500,633 691,655 2,065,419 486,893 2,209,373 504,305 1,757,238
41 ECL Allowance on cash and cash equivalents and Financial AssetsIFRS 9 Opening
ECL
Movement during
the year Balance c/d IFRS 9 Opening ECL
Movement during
the year Balance c/d
N’000 N’000 N’000 N’000 N’000 N’000Cash & Cash Equivalents 20,034 (2,333) 17,701 14,438 (1,501) 12,937 Amortised Cost-bonds 37,776 (2,518) 35,258 37,776 (2,518) 35,258 Agency Loans 89,279 (19,915) 69,364 37,992 1,370 39,362 Loans and Receivables 325,776 (29,650) 296,126 243,286 19,779 263,065
472,865 (54,417) 418,448 333,492 17,129 350,621
3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 monthsN’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000
42 Finance cost
Interest expense on borrowings 33,161 90,699 15,244 60,296 33,161 90,699 17,457 60,296
43 Translation reserve
Balance at beginning of year 237,295 186,441
(159,806) 50,854 Balance at end of year 77,489 237,295
44 Non-controlling interestBalance at beginning of year 8,353 7,816 Opening ECL Adjustment (1,260) Share of profit/(loss) (13,535) (459) Share of contingency reserve 1,439 213
1,032 675
12,232 1,368 9,521 8,353
3 months 12 months 3 months 12 months 3 months 12 months 3 months 12 monthsN’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000
45 Income tax expenseCurrent tax on profits for the year (note 24) 77,250 207,670 (282,277) 273,662 77,250 207,645 (47,458) 244,662 Deferred tax charge for the year (note 25) - - - - - -
77,250 207,670 (282,277) 273,662 77,250 207,645 (47,458) 244,662
31-Dec-201831-Dec-201931-Dec-201831-Dec-2019
31-Dec-201831-Dec-201931-Dec-201831-Dec-2019
Group Company
The movement in translation reserve during the year is shown below:
Exchange difference arising on translating the foreign operation
Share of foreign exchange translation difference
Share of gain on revaluation of land and building
31-Dec-201831-Dec-201931-Dec-201831-Dec-2019
31-Dec-201831-Dec-201931-Dec-201831-Dec-2019
Employee benefit expenses
Group Company
Group Company
CompanyGroup
65