(a saudi joint stock company) unaudited interim condensed financial ...
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE-MONTH AND SIX MONTH PERIODS ENDED 30 JUNE 2017
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE-MONTH AND SIX MONTH PERIODS ENDED 30 JUNE 2017
INDEX
PAGE
Independent Auditors’ Review Report
1
Interim Statement of Financial Position
2–3
Interim Statement of Insurance Operations and Accumulated Surplus
4
Interim Statement of Shareholders’ Operations
5
Interim Statement of Comprehensive Income
6
Interim Statement of Changes in Shareholders’ Equity
7
Interim Statement of Insurance Operations’ Cash Flows
8
Interim Statement of Shareholders’ Cash Flows
9
Notes to the Interim Condensed Financial Statements
10 – 22
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS At 30 June 2017 1 a)
ORGANIZATION AND PRINCIPAL ACTIVITIES Organisation and principal activities
United Cooperative Assurance Company (“the Company”) is a Saudi Joint Stock Company incorporated in the Kingdom of Saudi Arabia under Commercial Registration number 4030179955 dated 6 Jamad-al-Thani 1429H (corresponding to 6 June 2008). The Registered Office address of the Company is Al-Mukmal Centre (1st and 4th floors), Al Rawdah Street, Khalediya District, P.O. Box 5019, Jeddah 21422, Kingdom of Saudi Arabia. The activities of the Company are to transact cooperative insurance and reinsurance operations and related activities in the Kingdom of Saudi Arabia. On 29 Rabi Al Thani 1429H (5 May 2008), the Company received a license from the Saudi Arabian Monetary Agency (“SAMA”) to engage in insurance and reinsurance in Saudi Arabia. The Company started the operations on 1 January 2009. At incorporation, the Company was 98% owned by general public and Saudi shareholders and 2% by foreign shareholders. b)
Portfolio transfer
The Company entered into an agreement with UCA Insurance Bahrain B.S.C (‘the seller’) pursuant to which it acquired the seller’s insurance operations in the Kingdom of Saudi Arabia, effective from 31 December 2008, for a total consideration of SR 656.95 million with a goodwill amount of SR 78.4 million. The transaction was approved by SAMA. The goodwill amount payable to the seller was paid in full subsequent to 2008, after obtaining specific approval from SAMA. Goodwill has been tested for impairment by management at least once at the end of each financial year. Last impairment test was carried out by the management at 31 December 2016. Keeping in view the growth rate of premiums, discount rates, market share during the forecast period and growth rates used to extrapolate cash flows beyond the forecast period; and on the basis of the projections from financial budgets, approved by the Board of Directors covering a five-year period, the management determined that there was no impairment of goodwill. 2 a)
BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Statement of compliance
These interim condensed financial statements have been prepared in accordance with International Accounting Standard 34 – “Interim Financial Reporting” (IAS 34) and Saudi Arabian Monetary Authority (“SAMA”) guidance on accounting for Zakat and Income Tax. The accounting policies adopted by the Company for the preparation of these interim condensed financial statements are consistent with those used for the preparation of annual financial statements. These interim condensed financial statements for three-month and six-month periods ended 30 June 2017 (“the period”) should be read in conjunction with the Company’s audited financial statements as at 31 December 2016. In the Company’s Board of Directors opinion, the interim condensed financial statements reflect all adjustments (which include normal recurring adjustments) necessary to present fairly the results of operations for the interim periods presented. The Company’s interim results may not be indicative of its expected annual results. The Company follows a fiscal year ending 31 December. The interim condensed financial statements are expressed in Saudi Riyals, being the functional currency of the Company and have been rounded off to the nearest thousand, unless otherwise specified. The preparation of interim condensed financial statements in conformity with International Financial Reporting Standards (“IFRS”) requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the interim condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates and judgments are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates. The interim condensed financial statements do not contain all information and disclosures required for full financial statements prepared in accordance with International Financial Reporting Standards. The Company presents its interim statement of financial position broadly in order of liquidity. All financial assets and liabilities are expected to be recovered and settled respectively, within twelve months after the interim reporting date. b)
Basis of presentation
As required by the Saudi Arabian insurance regulations, the Company maintains separate accounts for Insurance Operations and Shareholders’ Operations and presents the financial statements accordingly. The physical custody and title of all assets related to the Insurance Operations and Shareholders’ Operations are held by the Company. Revenues and expenses clearly attributable to either activity are recorded in the respective accounts. The basis of allocation of expenses from joint operations is determined by the management and the Board of Directors and is applied on consistent basis.
10
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 2
BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b)
Basis of presentation (continued)
As per the by-laws of the Company, the surplus arising from the Insurance Operations is distributed as follows: Transfer to Shareholders’ operations Transfer to Insurance operations
90% 10% ────── 100% ══════
In case of deficit arising from insurance operations, the entire deficit is allocated and transferred to shareholders’ operations. In accordance with article 70 of the Saudi Arabian Monetary Agency (“SAMA”) implementing regulations, the Company must obtain SAMA approval before distribution of policyholder’s surplus directly to policyholders at a time, and according to criteria set by its Board of Directors. c)
New IFRS, International Financial Reporting and Interpretations Committee’s interpretations (IFRIC) and amendments thereof, adopted by the Company
The accounting policies used in preparation of these interim condensed financial statements are consistent with those of the previous financial year and the adoption of the relevant new and amended standards and interpretations applicable to the Company did not have any significant impact on the interim condensed financial statements of the Company. The Company has adopted the following amendments and revisions to existing standards, which were issued by the International Accounting Standards Board (IASB): Standard IFRS 12
IAS 7
Description The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10– B16, apply to an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale. This did not has any impact on the financial statements of the Company as there is no investment in subsidiary, a joint venture or an associate. Amendments to IAS 7 – “Statement of Cash flows: Disclosure Initiative”, The amendments require entities to provide disclosures about changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). On initial application of the amendment, entities are not required to provide comparative information for preceding periods. The Company is not required to provide additional disclosures in its interim condensed financial statements, but will disclose additional information in its annual financial statements for the year ending 31 December 2017.
The adoption of the above standards did not have any impact on the accounting policies, financial position or performance of the Company. d)
New IFRS and amendments thereof, issued but not yet effective
Standards issued but not yet effective up to the date of issuance of the Company’s interim condensed financial statements are listed below. The listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt these standards when they become effective. Standard/ Interpretation IFRS 9 IFRS 15 IFRS 2 IAS 40 IFRIC 22 IFRS 1 and IAS 28 IFRS 16 IFRS 17
Description
Effective date
Financial Instruments Revenue from Contracts with Customers Amendments to IFRS 2 Classification and Measurement of share-based Payment transactions. Amendments to IAS 40 Transfers of investment property. Foreign Currency Transactions and Advance consideration. Annual Improvements 2016 to IFRS 2014- 2016 cycle. Leases Insurance Contracts
1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2019 1 January 2021
The management is currently assessing the implications of adopting the above mentioned standards, amendments or interpretations on the Company’s financial statements. 11
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 3
CASH AND CASH EQUIVALENTS
Insurance operations Cash at banks
30 June 2017 (Unaudited) SR’ 000
31 December 2016 (Audited) SR’ 000
66,556
61,736
4,447
1,268
Shareholders’ operations Cash at banks Cash at banks are placed with counterparties who have good credit ratings. The carrying amounts disclosed above reasonably approximate fair value at the statement of financial position date. 4
AVAILABLE-FOR-SALE INVESTMENTS
Insurance operations Available-for-sale-investments with local banks represent units in investment funds listed in the Saudi Stock Exchange (Tadawul) whereas the investments with foreign banks are listed in international stock exchanges. The available-for-sale investment reserve is SR 0.33 million as at 30 June 2017 (31 December 2016: SR 0.35 million) and was credited to the surplus from insurance operations. Movement in available-for-sale investments has summarized below: Insurance operations
Balance at the beginning of the period SR’ 000
Net movement during the period SR’ 000
Change in fair value for the period SR’ 000
Balance at the end of the period SR’ 000
3,792 101,076 4,601 109,469
(1,073) 210 (863)
69 (3) (48) 6 24
3,861 100,000 4,553 216 108,630
Balance at the beginning of the year SR’ 000
Net movement during the year SR’ 000
Change in fair value for the year SR’ 000
Balance at the end of the year SR’ 000
4,112 101,083 4,686 75,191 185,072
(500) 205 (75,000) (75,295)
180 (7) (290) (191) (308)
3,792 101,076 4,601 109,469
As at 30 June 2017 – Unaudited Investment in bonds Investment in sukuk Investment in equity shares Investment in mutual funds
As at 31 December 2016 – Audited Investment in bonds Investment in sukuk Investment in equity shares Investment in mutual funds
12
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 4
AVAILABLE-FOR-SALE INVESTMENTS (continued)
Shareholders’ operations
Quoted securities Unquoted securities
i)
31 December 2016 (Audited) SR,000
94,418 1,923 96,341
33,432 1,923 35,355
Available-for-sale – quoted securities
As at 30 June 2017 – Unaudited Investment in equity shares Investment in bonds Investment in sukuk Investment in mutual funds
As at 31 December 2016 – Audited Investment in equity shares Investment in bonds Investment in sukuk Investment in mutual funds
ii)
30 June 2017 (Unaudited) SR,000
Balance at the beginning of the period SR’ 000
Net movement during the period SR’ 000
Change in fair value for the period SR’ 000
Balance at the end of the period SR’ 000
8,045 13,621 4,071 7,695 33,432
(6,311) (4,073) 70,000 59,616
(300) 12 2 1,656 1,370
1,434 13,633 79,351 94,418
Balance at the beginning of the year SR’ 000
Net movement during the year SR’ 000
Change in fair value for the year SR’ 000
Balance at the end of the year SR’ 000
11,444 10,927 43,165 18,429 83,965
(5,090) 2,511 (39,085) (10,000) (51,664)
1,691 183 (9) (734) 1,131
8,045 13,621 4,071 7,695 33,432
Balance at the beginning of the period SR’ 000
Net movement during the period SR’ 000
Change in fair value for the period SR’ 000
Balance at the end of the period SR’ 000
Available-for-sale- unquoted securities
As at 30 June 2017 – Unaudited Investment in local company
1,923
13
1,923
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 4
AVAILABLE-FOR-SALE INVESTMENTS (continued)
Shareholders’ operations (continued) ii)
Available-for-sale – unquoted securities (continued) Balance at the beginning of the year SR’ 000
Net movement during the year SR’ 000
Change in fair value for the year SR’ 000
Balance at the end of the year SR’ 000
1,923
-
-
1,923
As at 31 December 2016 – Audited Investment in local company
The unrealized gain of SR 1.566 million for the six-month periods ended 30 June 2017 (six-month periods ended 30 June 2016: Unrealized gain of SR 0.795 million) was credited to the statement of changes in shareholders' equity as available-for-sale investments reserve. The available-for-sale investments reserve as of 30 June 2017 is SR 2.844 million (31 December 2016: SR 4.214 million). These investments are managed by a professional fund manager in accordance with the guidelines approved by the Board of Directors. The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy: As at 30 June 2017 - Unaudited Available-for-sale investments Equity securities Insurance operations Shareholders’ operations Debt securities Insurance operations Shareholders’ operations
Level 1 SR’ 000
Level 2 SR’ 000
Level 3 SR’ 000
Total SR’ 000
4,553 1,434
216 79,351
1,923
4,769 82,708
3,861 13,633 23,481
100,000 179,567
1,923
103,861 13,633 204,971
Level 1 SR’ 000
Level 2 SR’ 000
Level 3 SR’ 000
Total SR’ 000
4,601 8,045
7,695
1,923
4,601 17,663
4,868 17,692 35,206
100,000 107,695
1,923
104,868 17,692 144,824
As at 31 December 2016 – Audited Available-for-sale investments Equity securities: Insurance operations Shareholders’ operations Debt securities: Insurance operations Shareholders’ operations
The Company has unquoted equity instruments of SR 1.923 million (31 December 2016: SR 1.923 million) carried at cost or indicative selling price, where the impact of changes in equity price will only be reflected when the instrument is sold or deemed to be impaired. There were no transfers between level 1, 2 and 3 during the six-month periods ended 30 June 2017 and year ended 31 December 2016.
14
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 5.
HELD TO MATURITY INVESTMENTS
Insurance operations Held-to-maturity investments represent Government Bonds with a maturity of five (5) to ten (10) years issued by Saudi Government. The average commission rate on these investments at 30 June 2017 is 2.375% to 3.25% per annum (31 December 2016: 3.25% – 4.5%). Shareholders’ operations Held-to-maturity investments represent Government Bonds with a maturity of five (5) to ten (10) years issued by Saudi Government. The average commission rate on these investments at 30 June 2017 is 2.375% to 3.25% per annum (31 December 2016: 3.25% – 4.5%). 6
PREMIUMS RECEIVABLE, NET
Due from policyholders Due from policyholders – related parties (note 12) Allowance for doubtful debts
30 June 2017 (Unaudited) SR’ 000
31 December 2016 (Audited) SR’ 000
152,970 202,426 (64,055) 291,341
128,903 112,091 (47,754) 193,240
Six-month period ended 30 June 2017 (Unaudited) SR’ 000
For the year ended 31 December 2016 (Audited) SR’ 000
47,754 16,301 64,055
36,339 14,712 (3,297) 47,754
30 June 2017 (Unaudited) SR’ 000
31 December 2016 (Audited) SR’ 000
10,571 (1,987) 8,584
22,611 (2,007) 20,604
Six-month period ended 30 June 2017 (Unaudited) SR’ 000
For the year ended 31 December 2016 (Audited) SR’ 000
2,007 (20) 1,987
2,352 1,123 (1,468) 2,007
Movement in the allowance for doubtful debts during the period / year was as follows:
Balance at the beginning of the period / year Allowance for the period / year Written off during the period / year Balance at the end of the period / year 7
REINSURANCE RECEIVABLES, NET
Reinsurance receivable Allowance for doubtful debts
Movement in the allowance for doubtful debts during the period / year was as follows:
Balance at the beginning of the period / year Allowance for the period / year Release of provision during the year Written off during the period / year Balance at the end of the period / year 15
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 8
ACCRUED ZAKAT AND INCOME TAX
The Zakat and Income tax payable by the Company has been calculated based on the best estimates of the management. The movement in Zakat payable is as follows:
Balance at the beginning of the period / year Charge for the current period / year Zakat paid for the period / year Balance at the end of the period / year
Six-month period ended 30 June 2017 (Unaudited) SR’ 000
For the year ended 31 December 2016 (Audited) SR’ 000
20,449 2,800 (2,808) 20,441
14,681 5,768 20,449
Six-month period ended 30 June 2017 (Unaudited) SR’ 000
For the year ended 31 December 2016 (Audited) SR’ 000
232 200 (165) 267
232 232
The movement in Income tax payable is as follows:
Balance at the beginning of the period / year Charge for the current period / year Income tax paid for the period / year Balance at the end of the period / year
The differences between the financial and the zakatable results are mainly due to certain adjustments in accordance with the relevant fiscal regulations. Zakat base has been computed based on the Company’s understanding of the zakat regulations enforced in the Kingdom of Saudi Arabia. The zakat regulations in Saudi Arabia are subject to different interpretations, and the assessments to be raised by the GAZT could be different from the declarations filed by the Company.
Status of assessment: The Company has filed its zakat declarations for the years ended 31 December 2009 to 2016 and obtained restricted zakat certificates until 31 December 2015 and awaiting for zakat response for the year ended 2016. During 2013, the Company received the final zakat assessments for the years 2009 to 2011 from the General Authority of Zakat and Income Tax (GAZT) claiming zakat liability amounting to SR 17.69 million. The management believes that the existing provision for zakat is sufficient. The Management has filed an objection against the above assessments and is confident of receiving a favourable ruling. However, during 2014, the Company has paid SR 14.288 million with respect to these assessments. GAZT has not yet raised assessments for the years from 2012 to 2016. The Zakat is applicable on 99% of the shareholders while Income Tax on 1% of the shareholders’. 9
SHARE CAPITAL
The authorised and issued share capital of the Company is SR 490 million divided into 49 million ordinary shares of SR 10 each. 10
STATUTORY RESERVE
As required by Saudi Arabian Insurance Regulations, 20% of the net shareholders’ income shall be set aside as a statutory reserve until this reserve amounts to 100% of paid capital. As the Company has accumulated losses at period end, no transfer to statutory reserve has been made during the period. The reserve is not available for distribution. 11
STATUTORY DEPOSIT
Shareholders’ operations Statutory deposit
30 June 2017 (Unaudited) SR’ 000
31 December 2016 (Audited) SR’ 000
73,500
73,500
During 2016, as required by Saudi Arabian Monetary Authority, the Company has increased its statutory deposit from 10% to 15% of the paid-up capital to SR 73.5 million (31 December 2016: SR 73.5 million) in a bank designated by the Saudi Arabian Monetary Authority (SAMA). The Company cannot withdraw this deposit without SAMA’s approval and commission accruing on this deposit is payable to SAMA. 16
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 12
RELATED PARTIES TRANSACTIONS AND BALANCES
The related parties comprise of directors, companies where directors have control and key management personnel. The following are the details of major related party transactions during the year.
Related party
Insurance Operations Saudi Bin Laden – Group
Amount of transactions For the six-month period ended
Nature of transactions
Key management personnel
Premiums underwritten Payments and claims Premiums underwritten Payments and claims Premiums underwritten Payments and claims Premiums underwritten Claims and expenses paid on behalf of the Company Claims settled Payment made Premiums underwritten Payments and claims Remuneration and related expenses
Shareholders’ Operations Najm for insurance services Board members
Payment received Board of directors remunerations
Haji Hussien Ali Reza Middle East Group United Commercial Agencies UCA Workshop Law Office of Hassan Mahassni
13
30 June 2017 (Unaudited) SR’000
30 June 2016 (Unaudited) SR’000
151,021 (61,334) 3,171 (2,718) 82 (116) 45
88,902 (122,069) 3,410 (8,037) 74 (24) 70
58 (1,749) 4,618 351 (179) 2,364
293 (9,072) 10,571 595 328 2,472
579
568
Balance as of 30 June 2017 (Unaudited) SR’000
31 December 2016 (Audited) SR’000
188,122
98,435
13,317
12,864
85
119
776
673
(419)
(3,288)
126 -
(46) -
(270) (74)
(270) (62)
BASIC AND DILUTED EARNINGS PER SHARE
Earnings per share for the period has been calculated by dividing the net income for the period by the weighted average number of issued and outstanding shares for the period.
17
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 14
SEGMENT INFORMATION
Consistent with the Company’s internal reporting process, operating segments have been approved by Management in respect of the Company’s activities, assets and liabilities as stated below. Segment results do not include general and administrative expenses and investment income. Segment assets do not include insurance operations cash and cash equivalents, available-for-sale investments, premiums receivable (net), reinsurance receivables (net), prepaid expenses and other assets and furniture, fittings and equipment. Segment liabilities do not include due to reinsurers, due to policyholders, accrued and other liabilities, due to shareholders’ operations and employees’ terminal benefits. Consistent with the Company’s internal reporting process, operating segments have been approved by the management in respect of the Company’s activities, assets and liabilities as stated below: Medical SR’000
Motor SR’000
Energy SR’000
Engineering SR’000
Others SR’000
Total SR’000
Gross written premiums Less: Reinsurance premiums ceded Excess of loss premiums Net written premiums Change in net unearned premiums Net premiums earned Reinsurance commissions earned
2,394 491 2,885 10,501 13,386 13,386
91,159 (44,454) (264) 46,441 (18,941) 27,500 4,570 32,070
26,322 (25,869) 453 (190) 263 731 994
116,126 (108,529) 7,597 (3,231) 4,366 3,302 7,668
15,432 (11,520) (443) 3,469 3,247 6,716 3,320 10,036
251,433 (189,881) (707) 60,845 (8,614) 52,231 11,923 64,154
Gross claims paid Less: Reinsurers’ share of claims paid Net claims paid Change in net outstanding claims Net claims incurred Policy acquisition costs Claim handling provisions Unexpired risk provisions
17,388 (3,271) 14,117 (3,719) 10,398 630 11,028
43,059 (15,431) 27,628 (45,005) (17,377) 1,674 (2,013) (17,716)
401 401 401
1,567 (1,246) 321 989 1,310 636 (2,598) (652)
1,692 (1,150) 542 656 1,198 809 2,007
63,706 (21,098) 42,608 (46,678) (4,070) 3,749 (2,013) (2,598) (4,932)
2,358
49,786
593
8,320
8,029
69,086
(93) -
(31,615) (10,934) (642) (180) 3,580 29,295
For the three-month period ended 30 June 2017 (Unaudited)
Net underwriting result General and administration expenses (unallocated) Provision for doubtful debts (unallocated) Supervision and inspection fee CCHI fee Investment income (unallocated) Surplus from insurance operations
(74) (180)
18
(251) -
(132) -
(92) -
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 14
SEGMENT INFORMATION (continued)
For the six-month period ended 30 June 2017 (Unaudited) Gross written premiums Less: Reinsurance premiums ceded Excess of loss premiums Net written premiums Change in net unearned premiums Net premiums earned Reinsurance commissions earned
Gross claims paid Less: Reinsurers’ share of claims paid Net claims paid Change in net outstanding claims Net claims incurred Policy acquisition costs Claim handling provisions Unexpired risk provisions
Net underwriting result General and administration expenses (unallocated) Provision for doubtful debts (unallocated) Supervision and inspection fee CCHI fee Investment income (unallocated) Surplus from insurance operations
As at 30 June 2017 (Unaudited) Insurance operations’ assets Reinsurers’ share of unearned premiums Reinsurers’ share of outstanding claims Deferred policy acquisition costs Unallocated assets Total insurance operations’ assets Insurance operations’ liabilities and surplus Unearned premiums Unexpired risk reserve Claims handling provision Catastrophe reserve Other technical reserves Outstanding claims Unearned commission income Unallocated liabilities and accumulated surplus Total insurance operations’ liabilities and accumulated surplus
Medical SR’000
Motor SR’000
Energy SR’000
Engineering SR’000
Others SR’000
Total SR’000
21,341 (8,367) 12,974 10,799 23,773 23,773
96,813 (47,187) (528) 49,098 23,918 73,016 17,159 90,175
52,196 (51,298) 898 (531) 367 828 1,195
134,265 (124,108) 10,157 (4,056) 6,101 7,012 13,113
55,731 (46,725) (886) 8,120 (779) 7,341 7,046 14,387
360,346 (277,685) (1,414) 81,247 29,351 110,598 32,045 142,643
28,505 (4,567) 23,938 (8,383) 15,555 1,278 16,833
117,071 (43,912) 73,159 (91,569) (18,410) 4,728 (2,013) (15,695)
401 401 401
28,048 (27,214) 834 592 1,426 1,257 (2,598) 85
3,603 (2,652) 951 418 1,369 1,747 3,116
177,227 (78,345) 98,882 (98,541) 341 9,010 (2,013) (2,598) 4,740
6,940
105,870
794
13,028
11,271
137,903
(198) -
(58,136) (16,281) (1,409) (364) 4,778 66,491
(148) (364)
Medical SR’000
(639) -
Motor SR’000
(261) -
Energy SR’000
(163) -
Engineering SR’000
Others SR’000
Total SR’000
11,692 7,021 873
54,254 34,132 3,554
30,350 24,288 -
117,587 199,888 5,245
30,691 69,555 1,562
244,574 334,884 11,234 630,995 1,221,687
20,385 76 22,290 -
110,983 3,355 1,968 139,008 9,704
30,881 24,696 -
126,300 395 442 209,448 27,197
36,529 647 758 80,355 6,730
325,078 395 3,355 1,089 2,802 475,797 43,631 369,540 1,221,687
19
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 14
SEGMENT INFORMATION (continued) Medical SR’000
Motor SR’000
Energy SR’000
Engineering SR’000
Others SR’000
Total SR’000
Gross written premiums Less: Reinsurance premiums ceded Excess of loss premiums Net written premiums Change in net unearned premiums Net premiums earned Reinsurance commission earned
6,538 (420) 6,118 20,445 26,563 26,563
152,183 (74,708) (288) 77,187 70,067 147,254 13,836 161,090
30,197 (29,677) 520 (276) 244 475 719
52,973 (49,569) 3,404 2,519 5,923 4,504 10,427
19,039 (15,569) (604) 2,866 2,329 5,195 4,454 9,649
260,930 (169,523) (1,312) 90,095 95,084 185,179 23,269 208,448
Gross claims paid Less: Reinsurers’ share of claims paid Net claims paid Change in net outstanding claims Net claims incurred Policy acquisition costs Claims handling provision Unexpired risk reserve
17,099 (104) 16,995 3,647 20,642 1,413 22,055
137,101 (31,205) 105,896 (7,435) 98,461 7,384 506 106,351
-
4,259 (3,826) 433 1,902 2,335 813 3,148
8,418 (5,785) 2,633 (469) 2,164 1,096 (1,964) 1,296
166,877 (40,920) 125,957 (2,355) 123,602 10,706 506 (1,964) 132,850
4,508
54,739
719
7,279
8,353
75,598
(122) -
(30,012) (345) (1,646) (291) 4,729 48,033
For the three-month period ended 30 June 2016 (Unaudited)
Net underwriting result General and administration expenses (unallocated) Provision for doubtful debts (unallocated) Supervision and inspection fee CCHI fee Investment income (unallocated) Surplus from insurance operations
(135) (291)
20
(1,146) -
(151) -
(92) -
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 14
SEGMENT INFORMATION (continued) Medical SR’000
Motor SR’000
Energy SR’000
Engineering SR’000
Others SR’000
Total SR’000
29,767 (2,079) (476) 27,212 25,153 52,365 52,365
415,266 (213,541) (576) 201,149 107,581 308,730 26,643 335,373
28,765 (28,270) 495 (588) (93) 950 857
69,543 (62,388) 7,155 (274) 6,881 6,566 13,447
65,186 (56,361) (1,208) 7,617 (1,087) 6,530 9,386 15,916
608,527 (362,639) (2,260) 243,628 130,785 374,413 43,545 417,958
Gross claims paid Less: Reinsurers’ share of claims paid Net claims paid Change in net outstanding claims Net claims incurred Policy acquisition costs Claims handling provision Unexpired risk reserve
36,435 (104) 36,331 1,101 37,432 2,959 40,391
304,576 (51,444) 253,132 (17,286) 235,846 14,734 506 251,086
-
36,886 (34,726) 2,160 1,331 3,491 1,166 4,657
34,922 (31,328) 3,594 (3,495) 99 2,318 (1,964) 453
412,819 (117,602) 295,217 (18,349) 276,868 21,177 506 (1,964) 296,587
Net underwriting result
11,974
84,287
857
8,790
15,463
121,371
(257) -
(56,969) (455) (3,105) (594) 8,694 68,942
For the six-month period ended 30 June 2016 (Unaudited) Gross written premiums Less: Reinsurance premiums ceded Excess of loss premiums Net written premiums Change in net unearned premiums Net premiums earned Reinsurance commission earned
General and administration expenses (unallocated) Provision for doubtful debts (unallocated) Supervision and inspection fee CCHI fee Investment income (unallocated) Surplus from insurance operations
As at 31 December 2016 (Audited)
(275) (594)
Medical SR’000
(2,298) -
Motor SR’000
(144) -
Energy SR’000
(131) -
Engineering SR’000
Others SR’000
Total SR’000
Insurance operations’ assets Reinsurers’ share of unearned premiums Reinsurers’ share of outstanding claims Deferred policy acquisition costs Unallocated assets Total insurance operations’ assets
9,070 521 1,511
77,342 48,059 5,400
640 -
51,042 174,781 2,667
47,452 97,696 1,148
184,906 321,697 10,726 674,756 1,192,085
28,563 76 24,174 -
157,989 5,367 1,969 244,504 11,049
648 -
55,601 2,993 442 183,749 15,354
52,609 647 757 108,077 4,457
294,762 2,993 5,367 1,089 2,802 561,152 30,860 293,060
Insurance operations’ liabilities and surplus Unearned premiums Unexpired risk reserve Claims handling provision Catastrophe reserve Other technical reserves Outstanding claims Unearned commission income Unallocated liabilities and accumulated surplus Total insurance operations’ liabilities and accumulated surplus
1,192,085 21
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 15
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the amount for which an asset could be exchanged, or a liability settled between knowledgeable willing parties in an arm’s length transaction. The Company’s financial assets consist of cash and cash equivalents, premiums receivable (net), available-forsale investments, due from reinsurers (net) and statutory deposit and its financial liabilities consist of outstanding claims, due to reinsurers, due to policyholders, due to shareholders’ operations and certain other liabilities. The fair values of financial assets and liabilities are not materially different from their carrying values at the reporting date. Determination of fair value and fair value hierarchy The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments: Level 1: quoted prices in active markets for the identical assets or liabilities (i.e. without modification or repacking). Level 2: quoted prices in active markets for similar financial assets and liabilities or other valuation techniques for which all significant inputs are based on observable market data; and Level 3: valuation techniques for which any significant input is not based on observable market data. 16.
COMPARATIVE FIGURES
Certain of the prior period amounts have been reclassified to conform to the presentation in the current period. 17
APPROVAL OF INTERIM CONDENSED FINANCIAL STATEMENTS
These interim condensed financial statements have been approved by the Board of Directors on 13 August 2017, corresponding to 21 Dhul Qae’dah 1438H.
22
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE-MONTH AND SIX MONTH PERIODS ENDED 30 JUNE 2017
INDEX
PAGE
Independent Auditors’ Review Report
1
Interim Statement of Financial Position
2–3
Interim Statement of Insurance Operations and Accumulated Surplus
4
Interim Statement of Shareholders’ Operations
5
Interim Statement of Comprehensive Income
6
Interim Statement of Changes in Shareholders’ Equity
7
Interim Statement of Insurance Operations’ Cash Flows
8
Interim Statement of Shareholders’ Cash Flows
9
Notes to the Interim Condensed Financial Statements
10 – 22
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS At 30 June 2017 1 a)
ORGANIZATION AND PRINCIPAL ACTIVITIES Organisation and principal activities
United Cooperative Assurance Company (“the Company”) is a Saudi Joint Stock Company incorporated in the Kingdom of Saudi Arabia under Commercial Registration number 4030179955 dated 6 Jamad-al-Thani 1429H (corresponding to 6 June 2008). The Registered Office address of the Company is Al-Mukmal Centre (1st and 4th floors), Al Rawdah Street, Khalediya District, P.O. Box 5019, Jeddah 21422, Kingdom of Saudi Arabia. The activities of the Company are to transact cooperative insurance and reinsurance operations and related activities in the Kingdom of Saudi Arabia. On 29 Rabi Al Thani 1429H (5 May 2008), the Company received a license from the Saudi Arabian Monetary Agency (“SAMA”) to engage in insurance and reinsurance in Saudi Arabia. The Company started the operations on 1 January 2009. At incorporation, the Company was 98% owned by general public and Saudi shareholders and 2% by foreign shareholders. b)
Portfolio transfer
The Company entered into an agreement with UCA Insurance Bahrain B.S.C (‘the seller’) pursuant to which it acquired the seller’s insurance operations in the Kingdom of Saudi Arabia, effective from 31 December 2008, for a total consideration of SR 656.95 million with a goodwill amount of SR 78.4 million. The transaction was approved by SAMA. The goodwill amount payable to the seller was paid in full subsequent to 2008, after obtaining specific approval from SAMA. Goodwill has been tested for impairment by management at least once at the end of each financial year. Last impairment test was carried out by the management at 31 December 2016. Keeping in view the growth rate of premiums, discount rates, market share during the forecast period and growth rates used to extrapolate cash flows beyond the forecast period; and on the basis of the projections from financial budgets, approved by the Board of Directors covering a five-year period, the management determined that there was no impairment of goodwill. 2 a)
BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Statement of compliance
These interim condensed financial statements have been prepared in accordance with International Accounting Standard 34 – “Interim Financial Reporting” (IAS 34) and Saudi Arabian Monetary Authority (“SAMA”) guidance on accounting for Zakat and Income Tax. The accounting policies adopted by the Company for the preparation of these interim condensed financial statements are consistent with those used for the preparation of annual financial statements. These interim condensed financial statements for three-month and six-month periods ended 30 June 2017 (“the period”) should be read in conjunction with the Company’s audited financial statements as at 31 December 2016. In the Company’s Board of Directors opinion, the interim condensed financial statements reflect all adjustments (which include normal recurring adjustments) necessary to present fairly the results of operations for the interim periods presented. The Company’s interim results may not be indicative of its expected annual results. The Company follows a fiscal year ending 31 December. The interim condensed financial statements are expressed in Saudi Riyals, being the functional currency of the Company and have been rounded off to the nearest thousand, unless otherwise specified. The preparation of interim condensed financial statements in conformity with International Financial Reporting Standards (“IFRS”) requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the interim condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates and judgments are based on management’s best knowledge of current events and actions, actual results ultimately may differ from those estimates. The interim condensed financial statements do not contain all information and disclosures required for full financial statements prepared in accordance with International Financial Reporting Standards. The Company presents its interim statement of financial position broadly in order of liquidity. All financial assets and liabilities are expected to be recovered and settled respectively, within twelve months after the interim reporting date. b)
Basis of presentation
As required by the Saudi Arabian insurance regulations, the Company maintains separate accounts for Insurance Operations and Shareholders’ Operations and presents the financial statements accordingly. The physical custody and title of all assets related to the Insurance Operations and Shareholders’ Operations are held by the Company. Revenues and expenses clearly attributable to either activity are recorded in the respective accounts. The basis of allocation of expenses from joint operations is determined by the management and the Board of Directors and is applied on consistent basis.
10
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 2
BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b)
Basis of presentation (continued)
As per the by-laws of the Company, the surplus arising from the Insurance Operations is distributed as follows: Transfer to Shareholders’ operations Transfer to Insurance operations
90% 10% ────── 100% ══════
In case of deficit arising from insurance operations, the entire deficit is allocated and transferred to shareholders’ operations. In accordance with article 70 of the Saudi Arabian Monetary Agency (“SAMA”) implementing regulations, the Company must obtain SAMA approval before distribution of policyholder’s surplus directly to policyholders at a time, and according to criteria set by its Board of Directors. c)
New IFRS, International Financial Reporting and Interpretations Committee’s interpretations (IFRIC) and amendments thereof, adopted by the Company
The accounting policies used in preparation of these interim condensed financial statements are consistent with those of the previous financial year and the adoption of the relevant new and amended standards and interpretations applicable to the Company did not have any significant impact on the interim condensed financial statements of the Company. The Company has adopted the following amendments and revisions to existing standards, which were issued by the International Accounting Standards Board (IASB): Standard IFRS 12
IAS 7
Description The amendments clarify that the disclosure requirements in IFRS 12, other than those in paragraphs B10– B16, apply to an entity’s interest in a subsidiary, a joint venture or an associate (or a portion of its interest in a joint venture or an associate) that is classified (or included in a disposal group that is classified) as held for sale. This did not has any impact on the financial statements of the Company as there is no investment in subsidiary, a joint venture or an associate. Amendments to IAS 7 – “Statement of Cash flows: Disclosure Initiative”, The amendments require entities to provide disclosures about changes in their liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses). On initial application of the amendment, entities are not required to provide comparative information for preceding periods. The Company is not required to provide additional disclosures in its interim condensed financial statements, but will disclose additional information in its annual financial statements for the year ending 31 December 2017.
The adoption of the above standards did not have any impact on the accounting policies, financial position or performance of the Company. d)
New IFRS and amendments thereof, issued but not yet effective
Standards issued but not yet effective up to the date of issuance of the Company’s interim condensed financial statements are listed below. The listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt these standards when they become effective. Standard/ Interpretation IFRS 9 IFRS 15 IFRS 2 IAS 40 IFRIC 22 IFRS 1 and IAS 28 IFRS 16 IFRS 17
Description
Effective date
Financial Instruments Revenue from Contracts with Customers Amendments to IFRS 2 Classification and Measurement of share-based Payment transactions. Amendments to IAS 40 Transfers of investment property. Foreign Currency Transactions and Advance consideration. Annual Improvements 2016 to IFRS 2014- 2016 cycle. Leases Insurance Contracts
1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2018 1 January 2019 1 January 2021
The management is currently assessing the implications of adopting the above mentioned standards, amendments or interpretations on the Company’s financial statements. 11
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 3
CASH AND CASH EQUIVALENTS
Insurance operations Cash at banks
30 June 2017 (Unaudited) SR’ 000
31 December 2016 (Audited) SR’ 000
66,556
61,736
4,447
1,268
Shareholders’ operations Cash at banks Cash at banks are placed with counterparties who have good credit ratings. The carrying amounts disclosed above reasonably approximate fair value at the statement of financial position date. 4
AVAILABLE-FOR-SALE INVESTMENTS
Insurance operations Available-for-sale-investments with local banks represent units in investment funds listed in the Saudi Stock Exchange (Tadawul) whereas the investments with foreign banks are listed in international stock exchanges. The available-for-sale investment reserve is SR 0.33 million as at 30 June 2017 (31 December 2016: SR 0.35 million) and was credited to the surplus from insurance operations. Movement in available-for-sale investments has summarized below: Insurance operations
Balance at the beginning of the period SR’ 000
Net movement during the period SR’ 000
Change in fair value for the period SR’ 000
Balance at the end of the period SR’ 000
3,792 101,076 4,601 109,469
(1,073) 210 (863)
69 (3) (48) 6 24
3,861 100,000 4,553 216 108,630
Balance at the beginning of the year SR’ 000
Net movement during the year SR’ 000
Change in fair value for the year SR’ 000
Balance at the end of the year SR’ 000
4,112 101,083 4,686 75,191 185,072
(500) 205 (75,000) (75,295)
180 (7) (290) (191) (308)
3,792 101,076 4,601 109,469
As at 30 June 2017 – Unaudited Investment in bonds Investment in sukuk Investment in equity shares Investment in mutual funds
As at 31 December 2016 – Audited Investment in bonds Investment in sukuk Investment in equity shares Investment in mutual funds
12
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 4
AVAILABLE-FOR-SALE INVESTMENTS (continued)
Shareholders’ operations
Quoted securities Unquoted securities
i)
31 December 2016 (Audited) SR,000
94,418 1,923 96,341
33,432 1,923 35,355
Available-for-sale – quoted securities
As at 30 June 2017 – Unaudited Investment in equity shares Investment in bonds Investment in sukuk Investment in mutual funds
As at 31 December 2016 – Audited Investment in equity shares Investment in bonds Investment in sukuk Investment in mutual funds
ii)
30 June 2017 (Unaudited) SR,000
Balance at the beginning of the period SR’ 000
Net movement during the period SR’ 000
Change in fair value for the period SR’ 000
Balance at the end of the period SR’ 000
8,045 13,621 4,071 7,695 33,432
(6,311) (4,073) 70,000 59,616
(300) 12 2 1,656 1,370
1,434 13,633 79,351 94,418
Balance at the beginning of the year SR’ 000
Net movement during the year SR’ 000
Change in fair value for the year SR’ 000
Balance at the end of the year SR’ 000
11,444 10,927 43,165 18,429 83,965
(5,090) 2,511 (39,085) (10,000) (51,664)
1,691 183 (9) (734) 1,131
8,045 13,621 4,071 7,695 33,432
Balance at the beginning of the period SR’ 000
Net movement during the period SR’ 000
Change in fair value for the period SR’ 000
Balance at the end of the period SR’ 000
Available-for-sale- unquoted securities
As at 30 June 2017 – Unaudited Investment in local company
1,923
13
1,923
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 4
AVAILABLE-FOR-SALE INVESTMENTS (continued)
Shareholders’ operations (continued) ii)
Available-for-sale – unquoted securities (continued) Balance at the beginning of the year SR’ 000
Net movement during the year SR’ 000
Change in fair value for the year SR’ 000
Balance at the end of the year SR’ 000
1,923
-
-
1,923
As at 31 December 2016 – Audited Investment in local company
The unrealized gain of SR 1.566 million for the six-month periods ended 30 June 2017 (six-month periods ended 30 June 2016: Unrealized gain of SR 0.795 million) was credited to the statement of changes in shareholders' equity as available-for-sale investments reserve. The available-for-sale investments reserve as of 30 June 2017 is SR 2.844 million (31 December 2016: SR 4.214 million). These investments are managed by a professional fund manager in accordance with the guidelines approved by the Board of Directors. The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy: As at 30 June 2017 - Unaudited Available-for-sale investments Equity securities Insurance operations Shareholders’ operations Debt securities Insurance operations Shareholders’ operations
Level 1 SR’ 000
Level 2 SR’ 000
Level 3 SR’ 000
Total SR’ 000
4,553 1,434
216 79,351
1,923
4,769 82,708
3,861 13,633 23,481
100,000 179,567
1,923
103,861 13,633 204,971
Level 1 SR’ 000
Level 2 SR’ 000
Level 3 SR’ 000
Total SR’ 000
4,601 8,045
7,695
1,923
4,601 17,663
4,868 17,692 35,206
100,000 107,695
1,923
104,868 17,692 144,824
As at 31 December 2016 – Audited Available-for-sale investments Equity securities: Insurance operations Shareholders’ operations Debt securities: Insurance operations Shareholders’ operations
The Company has unquoted equity instruments of SR 1.923 million (31 December 2016: SR 1.923 million) carried at cost or indicative selling price, where the impact of changes in equity price will only be reflected when the instrument is sold or deemed to be impaired. There were no transfers between level 1, 2 and 3 during the six-month periods ended 30 June 2017 and year ended 31 December 2016.
14
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 5.
HELD TO MATURITY INVESTMENTS
Insurance operations Held-to-maturity investments represent Government Bonds with a maturity of five (5) to ten (10) years issued by Saudi Government. The average commission rate on these investments at 30 June 2017 is 2.375% to 3.25% per annum (31 December 2016: 3.25% – 4.5%). Shareholders’ operations Held-to-maturity investments represent Government Bonds with a maturity of five (5) to ten (10) years issued by Saudi Government. The average commission rate on these investments at 30 June 2017 is 2.375% to 3.25% per annum (31 December 2016: 3.25% – 4.5%). 6
PREMIUMS RECEIVABLE, NET
Due from policyholders Due from policyholders – related parties (note 12) Allowance for doubtful debts
30 June 2017 (Unaudited) SR’ 000
31 December 2016 (Audited) SR’ 000
152,970 202,426 (64,055) 291,341
128,903 112,091 (47,754) 193,240
Six-month period ended 30 June 2017 (Unaudited) SR’ 000
For the year ended 31 December 2016 (Audited) SR’ 000
47,754 16,301 64,055
36,339 14,712 (3,297) 47,754
30 June 2017 (Unaudited) SR’ 000
31 December 2016 (Audited) SR’ 000
10,571 (1,987) 8,584
22,611 (2,007) 20,604
Six-month period ended 30 June 2017 (Unaudited) SR’ 000
For the year ended 31 December 2016 (Audited) SR’ 000
2,007 (20) 1,987
2,352 1,123 (1,468) 2,007
Movement in the allowance for doubtful debts during the period / year was as follows:
Balance at the beginning of the period / year Allowance for the period / year Written off during the period / year Balance at the end of the period / year 7
REINSURANCE RECEIVABLES, NET
Reinsurance receivable Allowance for doubtful debts
Movement in the allowance for doubtful debts during the period / year was as follows:
Balance at the beginning of the period / year Allowance for the period / year Release of provision during the year Written off during the period / year Balance at the end of the period / year 15
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 8
ACCRUED ZAKAT AND INCOME TAX
The Zakat and Income tax payable by the Company has been calculated based on the best estimates of the management. The movement in Zakat payable is as follows:
Balance at the beginning of the period / year Charge for the current period / year Zakat paid for the period / year Balance at the end of the period / year
Six-month period ended 30 June 2017 (Unaudited) SR’ 000
For the year ended 31 December 2016 (Audited) SR’ 000
20,449 2,800 (2,808) 20,441
14,681 5,768 20,449
Six-month period ended 30 June 2017 (Unaudited) SR’ 000
For the year ended 31 December 2016 (Audited) SR’ 000
232 200 (165) 267
232 232
The movement in Income tax payable is as follows:
Balance at the beginning of the period / year Charge for the current period / year Income tax paid for the period / year Balance at the end of the period / year
The differences between the financial and the zakatable results are mainly due to certain adjustments in accordance with the relevant fiscal regulations. Zakat base has been computed based on the Company’s understanding of the zakat regulations enforced in the Kingdom of Saudi Arabia. The zakat regulations in Saudi Arabia are subject to different interpretations, and the assessments to be raised by the GAZT could be different from the declarations filed by the Company.
Status of assessment: The Company has filed its zakat declarations for the years ended 31 December 2009 to 2016 and obtained restricted zakat certificates until 31 December 2015 and awaiting for zakat response for the year ended 2016. During 2013, the Company received the final zakat assessments for the years 2009 to 2011 from the General Authority of Zakat and Income Tax (GAZT) claiming zakat liability amounting to SR 17.69 million. The management believes that the existing provision for zakat is sufficient. The Management has filed an objection against the above assessments and is confident of receiving a favourable ruling. However, during 2014, the Company has paid SR 14.288 million with respect to these assessments. GAZT has not yet raised assessments for the years from 2012 to 2016. The Zakat is applicable on 99% of the shareholders while Income Tax on 1% of the shareholders’. 9
SHARE CAPITAL
The authorised and issued share capital of the Company is SR 490 million divided into 49 million ordinary shares of SR 10 each. 10
STATUTORY RESERVE
As required by Saudi Arabian Insurance Regulations, 20% of the net shareholders’ income shall be set aside as a statutory reserve until this reserve amounts to 100% of paid capital. As the Company has accumulated losses at period end, no transfer to statutory reserve has been made during the period. The reserve is not available for distribution. 11
STATUTORY DEPOSIT
Shareholders’ operations Statutory deposit
30 June 2017 (Unaudited) SR’ 000
31 December 2016 (Audited) SR’ 000
73,500
73,500
During 2016, as required by Saudi Arabian Monetary Authority, the Company has increased its statutory deposit from 10% to 15% of the paid-up capital to SR 73.5 million (31 December 2016: SR 73.5 million) in a bank designated by the Saudi Arabian Monetary Authority (SAMA). The Company cannot withdraw this deposit without SAMA’s approval and commission accruing on this deposit is payable to SAMA. 16
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 12
RELATED PARTIES TRANSACTIONS AND BALANCES
The related parties comprise of directors, companies where directors have control and key management personnel. The following are the details of major related party transactions during the year.
Related party
Insurance Operations Saudi Bin Laden – Group
Amount of transactions For the six-month period ended
Nature of transactions
Key management personnel
Premiums underwritten Payments and claims Premiums underwritten Payments and claims Premiums underwritten Payments and claims Premiums underwritten Claims and expenses paid on behalf of the Company Claims settled Payment made Premiums underwritten Payments and claims Remuneration and related expenses
Shareholders’ Operations Najm for insurance services Board members
Payment received Board of directors remunerations
Haji Hussien Ali Reza Middle East Group United Commercial Agencies UCA Workshop Law Office of Hassan Mahassni
13
30 June 2017 (Unaudited) SR’000
30 June 2016 (Unaudited) SR’000
151,021 (61,334) 3,171 (2,718) 82 (116) 45
88,902 (122,069) 3,410 (8,037) 74 (24) 70
58 (1,749) 4,618 351 (179) 2,364
293 (9,072) 10,571 595 328 2,472
579
568
Balance as of 30 June 2017 (Unaudited) SR’000
31 December 2016 (Audited) SR’000
188,122
98,435
13,317
12,864
85
119
776
673
(419)
(3,288)
126 -
(46) -
(270) (74)
(270) (62)
BASIC AND DILUTED EARNINGS PER SHARE
Earnings per share for the period has been calculated by dividing the net income for the period by the weighted average number of issued and outstanding shares for the period.
17
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 14
SEGMENT INFORMATION
Consistent with the Company’s internal reporting process, operating segments have been approved by Management in respect of the Company’s activities, assets and liabilities as stated below. Segment results do not include general and administrative expenses and investment income. Segment assets do not include insurance operations cash and cash equivalents, available-for-sale investments, premiums receivable (net), reinsurance receivables (net), prepaid expenses and other assets and furniture, fittings and equipment. Segment liabilities do not include due to reinsurers, due to policyholders, accrued and other liabilities, due to shareholders’ operations and employees’ terminal benefits. Consistent with the Company’s internal reporting process, operating segments have been approved by the management in respect of the Company’s activities, assets and liabilities as stated below: Medical SR’000
Motor SR’000
Energy SR’000
Engineering SR’000
Others SR’000
Total SR’000
Gross written premiums Less: Reinsurance premiums ceded Excess of loss premiums Net written premiums Change in net unearned premiums Net premiums earned Reinsurance commissions earned
2,394 491 2,885 10,501 13,386 13,386
91,159 (44,454) (264) 46,441 (18,941) 27,500 4,570 32,070
26,322 (25,869) 453 (190) 263 731 994
116,126 (108,529) 7,597 (3,231) 4,366 3,302 7,668
15,432 (11,520) (443) 3,469 3,247 6,716 3,320 10,036
251,433 (189,881) (707) 60,845 (8,614) 52,231 11,923 64,154
Gross claims paid Less: Reinsurers’ share of claims paid Net claims paid Change in net outstanding claims Net claims incurred Policy acquisition costs Claim handling provisions Unexpired risk provisions
17,388 (3,271) 14,117 (3,719) 10,398 630 11,028
43,059 (15,431) 27,628 (45,005) (17,377) 1,674 (2,013) (17,716)
401 401 401
1,567 (1,246) 321 989 1,310 636 (2,598) (652)
1,692 (1,150) 542 656 1,198 809 2,007
63,706 (21,098) 42,608 (46,678) (4,070) 3,749 (2,013) (2,598) (4,932)
2,358
49,786
593
8,320
8,029
69,086
(93) -
(31,615) (10,934) (642) (180) 3,580 29,295
For the three-month period ended 30 June 2017 (Unaudited)
Net underwriting result General and administration expenses (unallocated) Provision for doubtful debts (unallocated) Supervision and inspection fee CCHI fee Investment income (unallocated) Surplus from insurance operations
(74) (180)
18
(251) -
(132) -
(92) -
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 14
SEGMENT INFORMATION (continued)
For the six-month period ended 30 June 2017 (Unaudited) Gross written premiums Less: Reinsurance premiums ceded Excess of loss premiums Net written premiums Change in net unearned premiums Net premiums earned Reinsurance commissions earned
Gross claims paid Less: Reinsurers’ share of claims paid Net claims paid Change in net outstanding claims Net claims incurred Policy acquisition costs Claim handling provisions Unexpired risk provisions
Net underwriting result General and administration expenses (unallocated) Provision for doubtful debts (unallocated) Supervision and inspection fee CCHI fee Investment income (unallocated) Surplus from insurance operations
As at 30 June 2017 (Unaudited) Insurance operations’ assets Reinsurers’ share of unearned premiums Reinsurers’ share of outstanding claims Deferred policy acquisition costs Unallocated assets Total insurance operations’ assets Insurance operations’ liabilities and surplus Unearned premiums Unexpired risk reserve Claims handling provision Catastrophe reserve Other technical reserves Outstanding claims Unearned commission income Unallocated liabilities and accumulated surplus Total insurance operations’ liabilities and accumulated surplus
Medical SR’000
Motor SR’000
Energy SR’000
Engineering SR’000
Others SR’000
Total SR’000
21,341 (8,367) 12,974 10,799 23,773 23,773
96,813 (47,187) (528) 49,098 23,918 73,016 17,159 90,175
52,196 (51,298) 898 (531) 367 828 1,195
134,265 (124,108) 10,157 (4,056) 6,101 7,012 13,113
55,731 (46,725) (886) 8,120 (779) 7,341 7,046 14,387
360,346 (277,685) (1,414) 81,247 29,351 110,598 32,045 142,643
28,505 (4,567) 23,938 (8,383) 15,555 1,278 16,833
117,071 (43,912) 73,159 (91,569) (18,410) 4,728 (2,013) (15,695)
401 401 401
28,048 (27,214) 834 592 1,426 1,257 (2,598) 85
3,603 (2,652) 951 418 1,369 1,747 3,116
177,227 (78,345) 98,882 (98,541) 341 9,010 (2,013) (2,598) 4,740
6,940
105,870
794
13,028
11,271
137,903
(198) -
(58,136) (16,281) (1,409) (364) 4,778 66,491
(148) (364)
Medical SR’000
(639) -
Motor SR’000
(261) -
Energy SR’000
(163) -
Engineering SR’000
Others SR’000
Total SR’000
11,692 7,021 873
54,254 34,132 3,554
30,350 24,288 -
117,587 199,888 5,245
30,691 69,555 1,562
244,574 334,884 11,234 630,995 1,221,687
20,385 76 22,290 -
110,983 3,355 1,968 139,008 9,704
30,881 24,696 -
126,300 395 442 209,448 27,197
36,529 647 758 80,355 6,730
325,078 395 3,355 1,089 2,802 475,797 43,631 369,540 1,221,687
19
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 14
SEGMENT INFORMATION (continued) Medical SR’000
Motor SR’000
Energy SR’000
Engineering SR’000
Others SR’000
Total SR’000
Gross written premiums Less: Reinsurance premiums ceded Excess of loss premiums Net written premiums Change in net unearned premiums Net premiums earned Reinsurance commission earned
6,538 (420) 6,118 20,445 26,563 26,563
152,183 (74,708) (288) 77,187 70,067 147,254 13,836 161,090
30,197 (29,677) 520 (276) 244 475 719
52,973 (49,569) 3,404 2,519 5,923 4,504 10,427
19,039 (15,569) (604) 2,866 2,329 5,195 4,454 9,649
260,930 (169,523) (1,312) 90,095 95,084 185,179 23,269 208,448
Gross claims paid Less: Reinsurers’ share of claims paid Net claims paid Change in net outstanding claims Net claims incurred Policy acquisition costs Claims handling provision Unexpired risk reserve
17,099 (104) 16,995 3,647 20,642 1,413 22,055
137,101 (31,205) 105,896 (7,435) 98,461 7,384 506 106,351
-
4,259 (3,826) 433 1,902 2,335 813 3,148
8,418 (5,785) 2,633 (469) 2,164 1,096 (1,964) 1,296
166,877 (40,920) 125,957 (2,355) 123,602 10,706 506 (1,964) 132,850
4,508
54,739
719
7,279
8,353
75,598
(122) -
(30,012) (345) (1,646) (291) 4,729 48,033
For the three-month period ended 30 June 2016 (Unaudited)
Net underwriting result General and administration expenses (unallocated) Provision for doubtful debts (unallocated) Supervision and inspection fee CCHI fee Investment income (unallocated) Surplus from insurance operations
(135) (291)
20
(1,146) -
(151) -
(92) -
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 14
SEGMENT INFORMATION (continued) Medical SR’000
Motor SR’000
Energy SR’000
Engineering SR’000
Others SR’000
Total SR’000
29,767 (2,079) (476) 27,212 25,153 52,365 52,365
415,266 (213,541) (576) 201,149 107,581 308,730 26,643 335,373
28,765 (28,270) 495 (588) (93) 950 857
69,543 (62,388) 7,155 (274) 6,881 6,566 13,447
65,186 (56,361) (1,208) 7,617 (1,087) 6,530 9,386 15,916
608,527 (362,639) (2,260) 243,628 130,785 374,413 43,545 417,958
Gross claims paid Less: Reinsurers’ share of claims paid Net claims paid Change in net outstanding claims Net claims incurred Policy acquisition costs Claims handling provision Unexpired risk reserve
36,435 (104) 36,331 1,101 37,432 2,959 40,391
304,576 (51,444) 253,132 (17,286) 235,846 14,734 506 251,086
-
36,886 (34,726) 2,160 1,331 3,491 1,166 4,657
34,922 (31,328) 3,594 (3,495) 99 2,318 (1,964) 453
412,819 (117,602) 295,217 (18,349) 276,868 21,177 506 (1,964) 296,587
Net underwriting result
11,974
84,287
857
8,790
15,463
121,371
(257) -
(56,969) (455) (3,105) (594) 8,694 68,942
For the six-month period ended 30 June 2016 (Unaudited) Gross written premiums Less: Reinsurance premiums ceded Excess of loss premiums Net written premiums Change in net unearned premiums Net premiums earned Reinsurance commission earned
General and administration expenses (unallocated) Provision for doubtful debts (unallocated) Supervision and inspection fee CCHI fee Investment income (unallocated) Surplus from insurance operations
As at 31 December 2016 (Audited)
(275) (594)
Medical SR’000
(2,298) -
Motor SR’000
(144) -
Energy SR’000
(131) -
Engineering SR’000
Others SR’000
Total SR’000
Insurance operations’ assets Reinsurers’ share of unearned premiums Reinsurers’ share of outstanding claims Deferred policy acquisition costs Unallocated assets Total insurance operations’ assets
9,070 521 1,511
77,342 48,059 5,400
640 -
51,042 174,781 2,667
47,452 97,696 1,148
184,906 321,697 10,726 674,756 1,192,085
28,563 76 24,174 -
157,989 5,367 1,969 244,504 11,049
648 -
55,601 2,993 442 183,749 15,354
52,609 647 757 108,077 4,457
294,762 2,993 5,367 1,089 2,802 561,152 30,860 293,060
Insurance operations’ liabilities and surplus Unearned premiums Unexpired risk reserve Claims handling provision Catastrophe reserve Other technical reserves Outstanding claims Unearned commission income Unallocated liabilities and accumulated surplus Total insurance operations’ liabilities and accumulated surplus
1,192,085 21
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 30 June 2017 15
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is the amount for which an asset could be exchanged, or a liability settled between knowledgeable willing parties in an arm’s length transaction. The Company’s financial assets consist of cash and cash equivalents, premiums receivable (net), available-forsale investments, due from reinsurers (net) and statutory deposit and its financial liabilities consist of outstanding claims, due to reinsurers, due to policyholders, due to shareholders’ operations and certain other liabilities. The fair values of financial assets and liabilities are not materially different from their carrying values at the reporting date. Determination of fair value and fair value hierarchy The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments: Level 1: quoted prices in active markets for the identical assets or liabilities (i.e. without modification or repacking). Level 2: quoted prices in active markets for similar financial assets and liabilities or other valuation techniques for which all significant inputs are based on observable market data; and Level 3: valuation techniques for which any significant input is not based on observable market data. 16.
COMPARATIVE FIGURES
Certain of the prior period amounts have been reclassified to conform to the presentation in the current period. 17
APPROVAL OF INTERIM CONDENSED FINANCIAL STATEMENTS
These interim condensed financial statements have been approved by the Board of Directors on 13 August 2017, corresponding to 21 Dhul Qae’dah 1438H.
22
