united cooperative assurance company
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE-MONTH AND TWELVE-MONTH PERIODS ENDED 31 DECEMBER 2016
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE-MONTH AND TWELVE-MONTH PERIODS ENDED 31 DECEMBER 2016
INDEX Independent Auditors’ Limited Review Report Interim Statement of Financial Position
PAGE 1 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 31 December 2016 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 Authority (“SAMA”) to engage in insurance and reinsurance in Saudi Arabia. The Company started the operations on 1 January 2009. As at 31 December 2016 the company is owned 99.01% (2015: 99.01%) by Saudi shareholders and 0.99% (2015: 0.99%) by nonSaudi 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 2015. 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”). 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 twelve-month periods ended 31 December 2016 (“the period”) should be read in conjunction with the Company’s audited financial statements as at 31 December 2015. 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 31 December 2016 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 Authority (“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 11 IFRS 14 IAS 16 and IAS 38 IAS 27 IFRS 10 and IAS 28 IAS 1 IAS 16 and IAS 41 IFRS 10, IFRS 12 and IAS 28 IFRS 5, IFRS 7, IAS 19 and IAS 34
Description Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations Regulatory Deferral Accounts Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to IAS 27 Equity Method in Separate Financial Statements Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Amendments to IAS 1 Disclosure initiative Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants. Amendments to IFRS 10, IFRS 12 and IAS 28 Applying the Consolidation Exception Annual Improvements to IFRS 2012-2014 cycle
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
Description
IAS 12 IAS 7 IFRS 9 IFRS 15 IFRS 16
Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised losses Amendments to IAS 7 Disclosure Initiative Financial Instruments Revenue from Contracts with Customers Leases
Effective date 1 January 2017 1 January 2017 1 January 2018 1 January 2018 1 January 2019
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 31 December 2016 3
CASH AND CASH EQUIVALENTS
Insurance operations Cash at banks
31 December 2016 (Unaudited) SR’ 000
31 December 2015 (Audited) SR’ 000
61,736
281,546
1,268
19,409
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 0.35 million as at 31 December 2016 (31 December 2015: SR 0.045 million) and was debited 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
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
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
4,282 41,102 892 10,000 56,276
60,000 3,962 65,000 128,962
(170) (19) (168) 191 (166)
4,112 101,083 4,686 75,191 185,072
As at 31 December 2016 – Unaudited Investment in bonds Investment in sukuk Investment in equity shares Investment in mutual funds
As at 31 December 2015 – 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 31 December 2016 4
AVAILABLE-FOR-SALE INVESTMENTS (continued)
Shareholders’ operations
Quoted securities Unquoted securities
i)
31 December 2015 (Audited) SR’ 000
33,432 1,923 35,355
83,965 1,923 85,888
Available-for-sale – quoted securities 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
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 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
14,152 22,309 14,097 10,002 60,560
(1,009) (11,263) 29,086 10,000 26,814
(1,699) (119) (18) (1,573) (3,409)
11,444 10,927 43,165 18,429 83,965
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
1,923
-
-
1,923
As at 31 December 2016 – Unaudited Investment in equity shares Investment in bonds Investment in sukuk Investment in mutual funds
As at 31 December 2015 – Audited Investment in equity shares Investment in bonds Investment in sukuk Investment in mutual funds
ii)
31 December 2016 (Unaudited) SR’ 000
Available-for-sale- unquoted securities
As at 31 December 2016 – Unaudited Investment in local company
13
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 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 60,000 59,721 121,644
(60,000) (60,599) (120,599)
878 878
1,923 1,923
As at 31 December 2015 – Audited Investment in local company Investment in sukuk Investment in Murabaha deposit
The unrealized loss of SR 1.598 million for the twelve-month period ended 31 December 2016 (twelve-month period ended 31 December 2015: Unrealized loss of SR 2.531 million) was charged to the statement of changes in shareholders' equity as availablefor-sale investments reserve. The available-for-sale investments reserve as of 31 December 2016 is SR 4.214 million (31 December 2015: SR 5.345 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 31 December 2016 – 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
4,601 8,045
7,694
1,923
4,601 17,662
4,868 17,693 35,207
100,000 107,694
1,923
104,868 17,693 144,824
Level 1 SR’ 000
Level 2 SR’ 000
Level 3 SR’ 000
Total SR’ 000
29,877 11,444
18,429
1,923
29,877 31,796
55,195 56,015 152,531
100,000 118,429
1,923
155,195 56,015 272,883
As at 31 December 2015 – 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 2015: 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 twelve-month periods ended 31 December 2016 and year ended 31 December 2015.
14
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 5
HELD TO MATURITY INVESTMENTS
Insurance operations Held-to-maturity investments represent Government Bonds with a maturity of ten (10) to thirty (30) years issued by Saudi Government. The average commission rate on these investments at 31 December 2016 is 3.25% to 4.5% per annum (31 December 2015: - %). Shareholders’ operations Held-to-maturity investments represent Government Bonds with a maturity of ten (10) to thirty (30) years issued by Saudi Government. The average commission rate on these investments at 31 December 2016 is 3.25% to 4.5% per annum (31 December 2015: - %). 6
PREMIUMS RECEIVABLE, NET
Due from policyholders Due from policyholders – related parties (note 12) Allowance for doubtful debts
31 December 2016 (Unaudited) SR’ 000
31 December 2015 (Audited) SR’ 000
142,590 98,435 (47,754) 193,271
175,080 128,188 (36,339) 266,929
Twelve-month period ended 31 December 2016 (Unaudited) SR’ 000
For the year ended 31 December 2015 (Audited) SR’ 000
36,339 14,712 (3,297) 47,754
22,094 14,245 36,339
31 December 2016 (Unaudited) SR’ 000
31 December 2015 (Audited) SR’ 000
22,611 (2,007) 20,604
25,862 (2,352) 23,510
Twelve-month period ended 31 December 2016 (Unaudited) SR’ 000
For the year ended 31 December 2015 (Audited) SR’ 000
2,352 1,123 (1,468) 2,007
2,462 (110) 2,352
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 allowance during the period / 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 31 December 2016 8
ACCRUED ZAKAT AND INCOME TAX
The Zakat payable by the Company has been calculated based on the best estimates of the management. The movement in Zakat payable is as follows: Twelve-month period ended For the year ended 31 December 2016 31 December 2015 (Unaudited) (Audited) SR’ 000 SR’ 000 Balance at the beginning of the period / year Charge for the period / year Balance at the end of the period / year
14,681 6,000 20,681
11,176 3,505 14,681
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 2015 and obtained restricted zakat certificates. 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 2014. 9
SHARE CAPITAL
The authorised and issued share capital of the Company was SR 280 million divided into 28 million ordinary shares of SR 10 each. In the extra-ordinary general meeting held on 18 February 2015 corresponding to 29 Rabi Al-Thani 1436H, the shareholders approved rights issue of SR 210 million. As approved by the regulators, 21 million ordinary shares were offered at an exercise price of SR 10 during the subscription period which started on 22 February 2015 and ended on 10 March 2015. The legal formalities were completed and the share capital was increased from SR 280 Million to SR 490 Million. The Company incurred a sum of SR 4.95 million during 2015 (nine-month period ended 30 September 2015: SR 4.948 million) as issuance cost to raise additional capital of SR 210 million through rights issue which was accounted through interim statement of changes in shareholders’ equity. 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
31 December 2016 (Unaudited) SR’ 000
31 December 2015 (Audited) SR’ 000
73,500
49,000
As required by Saudi Arabian Insurance Regulations, the Company deposited 10% of its paid up capital, amounting to SR 49 million (31 December 2015: SR 49 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. During the three-month period ended 30 June 2016, the Company has increased its statutory deposit from 10% to 15% of the paidup capital SR 73.5 million as required by SAMA.
16
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 12
RELATED PARTIES TRANSACTIONS AND BALANCES
Related parties represent major shareholders, directors and key management personnel of the Company, and entities controlled or significantly influenced by such parties. The terms and conditions of the related party transactions are approved by management. The Company in the normal course of business carries out transactions with its related parties. The following are the details of related party transactions during the twelve-month period ended 31 December 2016 and 31 December 2015:
Related party Insurance Operations Saudi Bin Laden - Group
Transactions for the twelve-month period ended 31 December 2016 31 December 2015 (Audited) (Unaudited) SR’ 000 SR’ 000
Nature of transaction
87,184 (116,955)
93,049 (107,426)
488
(1,426) 2,803
Key management personnel
Premiums underwritten Claims paid Premiums underwritten Claims paid Remuneration and related expenses
(109) 614 (751) 4,725
376 (642) 515 (496) 4,856
Shareholders’ operations Board members
Board of Directors’ remuneration
1,169
1,123
Board members: Claim and Risk Services – (CARS) Claim and Risk Services – (CARS) Law Office of Hassan Mehassni
Premiums underwritten Claims paid
Claim handling fee Payment made
The following are the balances of related parties: 31 December 2016 (Unaudited) SR’ 000
31 December 2015 (Audited) SR’ 000
98,435 -
128,206 (109) 91
(46)
(488) -
62 270
270
Insurance operations Due from related parties Saudi Bin Laden – Group Claim and risk services – (CARS) Law Office of Hassan Mehassni Due to related parties Claim and risk services (CARS) Law Office of Hassan Mehassni Shareholders’ operations Due to related parties Board Members Najm for Insurance Services
The above balances are included in prepaid expenses and other assets, accrued expenses and other liabilities, premiums receivable, net and due to policyholders.
17
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 13
BASIC AND DILUTED EARNINGS / (LOSS) PER SHARE
Earnings / (loss) per share for the year have been calculated by dividing the net income / (loss) for the period by the weighted average number of issued and outstanding shares for the period. a)
The weighted average number of shares has been retrospectively adjusted for prior period to reflect the bonus element of right share issue as required by IAS 33 “Earnings per share” as follows: Twelve-month period ended 31 December 2016 (Unaudited)
For the year ended 31 December 2015 (Audited)
Issued ordinary shares as at 1 January (‘000’) Effect of right share issue
49,000 -
28,000 18,238
Weighted average number of ordinary shares (‘000’)
49,000
46,238
The weighted average number of ordinary shares for prior period is computed using an adjustment factor of 1.3 which is a ratio of the theoretical ex-rights price of SR 16.63 per ordinary share and the closing price of SR 21.61 per ordinary share on the last day on which the shares were traded before the right issue. b)
The basic and diluted loss per share are calculated as follows:
Net income / (loss) for the period / year (SR ‘000’) Weighted average number of ordinary shares (‘000’) – (Note 13. a) Basic and diluted earnings / (loss) per share (SR)
18
Twelve-month period ended 31 December 2016 (Unaudited)
For the year ended 31 December 2015 (Audited)
99,768 49,000
(52,975) 46,238
2.04
(1.15)
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 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
Others SR’ 000
Total SR’ 000
17,938 (10,135) (34) 7,769 8,203 15,972 15,972
71,304 (28,022) (288) 42,994 44,095 87,089 9,914 97,003
30,284 (29,763) 521 571 1,092 476 1,568
27,811 (24,226) (660) 2,925 3,036 5,961 10,784 16,745
147,337 (92,146) (982) 54,209 55,905 110,114 21,174 131,288
20,244 (206) 20,038 (5,107) 14,931 896 (345) 15,482
101,888 (34,914) 66,974 (11,587) 55,387 4,865 82 1,746 62,080
8 8 8
27,829 (25,359) 2,470 (2,751) (281) 2,511 (683) (1,529) 18
149,961 (60,479) 89,482 (19,437) 70,045 8,272 82 (683) 1,401 (1,529) 77,588
490
34,923
1,560
16,727
53,700
(242) -
(32,588) (11,276) (1,098) (149) 5,683 14,272
For the three-month period ended 31 December 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 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 Catastrophe reserve Other technical reserves 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
(85) (149)
19
(620) -
(151) -
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 14
SEGMENT INFORMATION (continued)
For the twelve-month period ended 31 December 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 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 provision Catastrophe reserve Other technical reserves Unexpired risk reserve
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 31 December 2016 (Unaudited)
Medical SR’ 000
Motor SR’ 000
Energy SR’ 000
Others SR’ 000
Total SR’ 000
65,667 (12,215) (565) 52,887 34,070 86,957 86,957
491,810 (243,944) (1,152) 246,714 269,304 516,018 49,036 565,054
89,334 (87,796) 1,538 (19) 1,519 1,902 3,421
172,784 (148,142) (2,474) 22,168 4,329 26,497 32,639 59,136
819,595 (492,097) (4,191) 323,307 307,684 630,991 83,577 714,568
80,155 (310) 79,845 (5,808) 74,037 5,115 (345) 78,807
523,180 (119,823) 403,357 (37,160) 366,197 26,189 588 1,746 394,720
8 8 8
146,838 (137,940) 8,898 (4,079) 4,819 7,403 (683) (3,493) 8,046
750,173 (258,073) 492,100 (47,039) 445,061 38,707 588 (683) 1,401 (3,493) 481,581
8,150
170,334
3,413
51,090
232,987
(774) -
(118,714) (15,835) (5,618) (1,006) 20,168 111,982
(1,387) (1,006)
(3,011) -
(446) -
Medical SR’000
Motor SR’000
Energy SR’000
Others SR’000
Total SR’000
9,062 401 1,511
77,692 31,714 5,400
640 -
98,152 244,816 3,815
184,906 277,571 10,726 673,350 1,146,553
28,645 76 32,682 -
158,697 5,367 1,969 220,112 11,049
648 -
107,420 2,993 1,089 757 263,584 19,811
294,762 2,993 5,367 1,089 2,802 517,026 30,860 291,654
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
1,146,553 20
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 14
SEGMENT INFORMATION (continued) Medical SR’ 000
Motor SR’ 000
Energy SR’ 000
Others SR’ 000
Total SR’ 000
23,962 2,079 (1,479) 24,562 5,239 29,801 29,801
262,028 (64,102) (1,962) 195,964 (30,512) 165,452 1,897 167,349
41,333 (40,621) 712 558 1,270 650 1,920
23,341 (20,772) (1,413) 1,156 1,083 2,239 10,480 12,719
350,664 (123,416) (4,854) 222,394 (23,632) 198,762 13,027 211,789
56,894 (2,216) 54,678 (13,133) 41,545 1,948 421 (2,200) 41,714 (11,913)
122,007 (2,493) 119,514 97,984 217,498 2,510 2,374 223 222,605 (55,256)
1,920
63,245 (58,116) 5,129 (316) 4,813 1,877 1,272 757 3,203 11,922 797
242,146 (62,825) 179,321 84,535 263,856 6,335 2,374 1,272 1,401 1,003 276,241 (64,452)
(147) (302) -
(380) -
(206) -
(221) -
(42,729) 11,938 (954) (302) 2,711 (93,788)
For the three-month period ended 31 December 2015 (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
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 Catastrophe reserve Other technical reserves Unexpired risk reserve Net underwriting result General and administration expenses (unallocated) Provision for doubtful debts Supervision and inspection fee CCHI fee Investment income (unallocated) Deficit from insurance operations
21
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 14
SEGMENT INFORMATION (continued)
Medical SR’ 000
Motor SR’ 000
Energy 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 Net revenue
123,588 2,079 (2,079) 123,588 754 124,342 1 124,343
794,571 (65,085) (2,676) 726,810 (157,475) 569,335 2,375 571,710
156,500 (153,806) 2,694 (78) 2,616 2,625 5,241
197,077 (155,161) (3,377) 38,539 4,510 43,049 39,714 82,763
1,271,736 (371,973) (8,132) 891,631 (152,289) 739,342 44,715 784,057
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 Catastrophe reserve Other technical reserves Unexpired risk reserve
155,967 (2,216) 153,751 (11,028) 142,723 6,117 421 149,261
492,395 (7,624) 484,771 43,867 528,638 14,568 2,374 223 545,803
-
106,652 (93,622) 13,030 3,808 16,838 7,948 1,272 757 3,203 30,018
755,014 (103,462) 651,552 36,647 688,199 28,633 2,374 1,272 1,401 3,203 725,082
Net underwriting result
(24,918)
25,907
5,241
52,745
58,975
(626) (1,336) -
(2,408) -
(781) -
(846) -
(103,749) (14,135) (4,661) (1,336) 4,777 (60,129)
For the twelve-month period ended 31 December 2015 (Audited)
General and administration expenses (unallocated) Provision for doubtful debts Supervision and inspection fee CCHI fee Investment income (unallocated) Deficit from insurance operations
As at 31 December 2015 (Audited)
Medical SR’ 000
Motor SR’ 000
Energy SR’ 000
Others SR’ 000
Total SR’ 000
3,554
58,403 6,785 16,562
-
115,847 298,984 4,434
174,250 305,769 24,550 985,095 1,489,664
53,562 421 38,089 -
408,354 4,779 223 232,343 12,538
78 -
129,797 6,486 1,772 757 321,831 22,622
591,791 6,486 4,779 1,772 1,401 592,263 35,160 256,012
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
1,489,664 22
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 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
SOLVENCY MARGIN
As required by Saudi Arabian Insurance Regulations (Article 66 of Implementation Regulations issued by SAMA), the Company is required to maintain minimum Solvency Margin equivalent to the highest of minimum capital requirement, premium solvency margin or claims solvency margin. As at 31 December 2016, the Company’s solvency level is more than the minimum solvency margin required by the Implementation Regulations. During the three-month period ended 31 March 2016, the Company received a letter from SAMA requesting the Company for the following:
Improve the solvency margin by 30 September 2016. Increase the statutory deposit from 10% to 15% of the paid-up capital by 20 April 2016. Appoint an advisor by 20 April 2016 to study the reasons for the weak financial position and recommend solutions to improve the situation.
However, as at 30 September 2016, the Company has achieved the followings; 17
Complied with minimum solvency requirement. Increased the statutory deposit from 10% to 15% of the paid-up Capital. Appointed an advisor as per SAMA requirement. COMPARATIVE FIGURES
Certain figures of prior period have been reclassified to conform with the current period presentation. 18
BOARD OF DIRECTORS’ APPROVAL
These interim condensed financial statements have been approved by the Board of Directors on 16 January 2017, corresponding to 18 Rabi Al Thani 1438H.
23
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS FOR THE THREE-MONTH AND TWELVE-MONTH PERIODS ENDED 31 DECEMBER 2016
INDEX Independent Auditors’ Limited Review Report Interim Statement of Financial Position
PAGE 1 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 31 December 2016 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 Authority (“SAMA”) to engage in insurance and reinsurance in Saudi Arabia. The Company started the operations on 1 January 2009. As at 31 December 2016 the company is owned 99.01% (2015: 99.01%) by Saudi shareholders and 0.99% (2015: 0.99%) by nonSaudi 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 2015. 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”). 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 twelve-month periods ended 31 December 2016 (“the period”) should be read in conjunction with the Company’s audited financial statements as at 31 December 2015. 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 31 December 2016 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 Authority (“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 11 IFRS 14 IAS 16 and IAS 38 IAS 27 IFRS 10 and IAS 28 IAS 1 IAS 16 and IAS 41 IFRS 10, IFRS 12 and IAS 28 IFRS 5, IFRS 7, IAS 19 and IAS 34
Description Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations Regulatory Deferral Accounts Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to IAS 27 Equity Method in Separate Financial Statements Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture Amendments to IAS 1 Disclosure initiative Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants. Amendments to IFRS 10, IFRS 12 and IAS 28 Applying the Consolidation Exception Annual Improvements to IFRS 2012-2014 cycle
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
Description
IAS 12 IAS 7 IFRS 9 IFRS 15 IFRS 16
Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised losses Amendments to IAS 7 Disclosure Initiative Financial Instruments Revenue from Contracts with Customers Leases
Effective date 1 January 2017 1 January 2017 1 January 2018 1 January 2018 1 January 2019
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 31 December 2016 3
CASH AND CASH EQUIVALENTS
Insurance operations Cash at banks
31 December 2016 (Unaudited) SR’ 000
31 December 2015 (Audited) SR’ 000
61,736
281,546
1,268
19,409
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 0.35 million as at 31 December 2016 (31 December 2015: SR 0.045 million) and was debited 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
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
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
4,282 41,102 892 10,000 56,276
60,000 3,962 65,000 128,962
(170) (19) (168) 191 (166)
4,112 101,083 4,686 75,191 185,072
As at 31 December 2016 – Unaudited Investment in bonds Investment in sukuk Investment in equity shares Investment in mutual funds
As at 31 December 2015 – 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 31 December 2016 4
AVAILABLE-FOR-SALE INVESTMENTS (continued)
Shareholders’ operations
Quoted securities Unquoted securities
i)
31 December 2015 (Audited) SR’ 000
33,432 1,923 35,355
83,965 1,923 85,888
Available-for-sale – quoted securities 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
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 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
14,152 22,309 14,097 10,002 60,560
(1,009) (11,263) 29,086 10,000 26,814
(1,699) (119) (18) (1,573) (3,409)
11,444 10,927 43,165 18,429 83,965
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
1,923
-
-
1,923
As at 31 December 2016 – Unaudited Investment in equity shares Investment in bonds Investment in sukuk Investment in mutual funds
As at 31 December 2015 – Audited Investment in equity shares Investment in bonds Investment in sukuk Investment in mutual funds
ii)
31 December 2016 (Unaudited) SR’ 000
Available-for-sale- unquoted securities
As at 31 December 2016 – Unaudited Investment in local company
13
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 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 60,000 59,721 121,644
(60,000) (60,599) (120,599)
878 878
1,923 1,923
As at 31 December 2015 – Audited Investment in local company Investment in sukuk Investment in Murabaha deposit
The unrealized loss of SR 1.598 million for the twelve-month period ended 31 December 2016 (twelve-month period ended 31 December 2015: Unrealized loss of SR 2.531 million) was charged to the statement of changes in shareholders' equity as availablefor-sale investments reserve. The available-for-sale investments reserve as of 31 December 2016 is SR 4.214 million (31 December 2015: SR 5.345 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 31 December 2016 – 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
4,601 8,045
7,694
1,923
4,601 17,662
4,868 17,693 35,207
100,000 107,694
1,923
104,868 17,693 144,824
Level 1 SR’ 000
Level 2 SR’ 000
Level 3 SR’ 000
Total SR’ 000
29,877 11,444
18,429
1,923
29,877 31,796
55,195 56,015 152,531
100,000 118,429
1,923
155,195 56,015 272,883
As at 31 December 2015 – 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 2015: 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 twelve-month periods ended 31 December 2016 and year ended 31 December 2015.
14
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 5
HELD TO MATURITY INVESTMENTS
Insurance operations Held-to-maturity investments represent Government Bonds with a maturity of ten (10) to thirty (30) years issued by Saudi Government. The average commission rate on these investments at 31 December 2016 is 3.25% to 4.5% per annum (31 December 2015: - %). Shareholders’ operations Held-to-maturity investments represent Government Bonds with a maturity of ten (10) to thirty (30) years issued by Saudi Government. The average commission rate on these investments at 31 December 2016 is 3.25% to 4.5% per annum (31 December 2015: - %). 6
PREMIUMS RECEIVABLE, NET
Due from policyholders Due from policyholders – related parties (note 12) Allowance for doubtful debts
31 December 2016 (Unaudited) SR’ 000
31 December 2015 (Audited) SR’ 000
142,590 98,435 (47,754) 193,271
175,080 128,188 (36,339) 266,929
Twelve-month period ended 31 December 2016 (Unaudited) SR’ 000
For the year ended 31 December 2015 (Audited) SR’ 000
36,339 14,712 (3,297) 47,754
22,094 14,245 36,339
31 December 2016 (Unaudited) SR’ 000
31 December 2015 (Audited) SR’ 000
22,611 (2,007) 20,604
25,862 (2,352) 23,510
Twelve-month period ended 31 December 2016 (Unaudited) SR’ 000
For the year ended 31 December 2015 (Audited) SR’ 000
2,352 1,123 (1,468) 2,007
2,462 (110) 2,352
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 allowance during the period / 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 31 December 2016 8
ACCRUED ZAKAT AND INCOME TAX
The Zakat payable by the Company has been calculated based on the best estimates of the management. The movement in Zakat payable is as follows: Twelve-month period ended For the year ended 31 December 2016 31 December 2015 (Unaudited) (Audited) SR’ 000 SR’ 000 Balance at the beginning of the period / year Charge for the period / year Balance at the end of the period / year
14,681 6,000 20,681
11,176 3,505 14,681
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 2015 and obtained restricted zakat certificates. 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 2014. 9
SHARE CAPITAL
The authorised and issued share capital of the Company was SR 280 million divided into 28 million ordinary shares of SR 10 each. In the extra-ordinary general meeting held on 18 February 2015 corresponding to 29 Rabi Al-Thani 1436H, the shareholders approved rights issue of SR 210 million. As approved by the regulators, 21 million ordinary shares were offered at an exercise price of SR 10 during the subscription period which started on 22 February 2015 and ended on 10 March 2015. The legal formalities were completed and the share capital was increased from SR 280 Million to SR 490 Million. The Company incurred a sum of SR 4.95 million during 2015 (nine-month period ended 30 September 2015: SR 4.948 million) as issuance cost to raise additional capital of SR 210 million through rights issue which was accounted through interim statement of changes in shareholders’ equity. 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
31 December 2016 (Unaudited) SR’ 000
31 December 2015 (Audited) SR’ 000
73,500
49,000
As required by Saudi Arabian Insurance Regulations, the Company deposited 10% of its paid up capital, amounting to SR 49 million (31 December 2015: SR 49 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. During the three-month period ended 30 June 2016, the Company has increased its statutory deposit from 10% to 15% of the paidup capital SR 73.5 million as required by SAMA.
16
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 12
RELATED PARTIES TRANSACTIONS AND BALANCES
Related parties represent major shareholders, directors and key management personnel of the Company, and entities controlled or significantly influenced by such parties. The terms and conditions of the related party transactions are approved by management. The Company in the normal course of business carries out transactions with its related parties. The following are the details of related party transactions during the twelve-month period ended 31 December 2016 and 31 December 2015:
Related party Insurance Operations Saudi Bin Laden - Group
Transactions for the twelve-month period ended 31 December 2016 31 December 2015 (Audited) (Unaudited) SR’ 000 SR’ 000
Nature of transaction
87,184 (116,955)
93,049 (107,426)
488
(1,426) 2,803
Key management personnel
Premiums underwritten Claims paid Premiums underwritten Claims paid Remuneration and related expenses
(109) 614 (751) 4,725
376 (642) 515 (496) 4,856
Shareholders’ operations Board members
Board of Directors’ remuneration
1,169
1,123
Board members: Claim and Risk Services – (CARS) Claim and Risk Services – (CARS) Law Office of Hassan Mehassni
Premiums underwritten Claims paid
Claim handling fee Payment made
The following are the balances of related parties: 31 December 2016 (Unaudited) SR’ 000
31 December 2015 (Audited) SR’ 000
98,435 -
128,206 (109) 91
(46)
(488) -
62 270
270
Insurance operations Due from related parties Saudi Bin Laden – Group Claim and risk services – (CARS) Law Office of Hassan Mehassni Due to related parties Claim and risk services (CARS) Law Office of Hassan Mehassni Shareholders’ operations Due to related parties Board Members Najm for Insurance Services
The above balances are included in prepaid expenses and other assets, accrued expenses and other liabilities, premiums receivable, net and due to policyholders.
17
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 13
BASIC AND DILUTED EARNINGS / (LOSS) PER SHARE
Earnings / (loss) per share for the year have been calculated by dividing the net income / (loss) for the period by the weighted average number of issued and outstanding shares for the period. a)
The weighted average number of shares has been retrospectively adjusted for prior period to reflect the bonus element of right share issue as required by IAS 33 “Earnings per share” as follows: Twelve-month period ended 31 December 2016 (Unaudited)
For the year ended 31 December 2015 (Audited)
Issued ordinary shares as at 1 January (‘000’) Effect of right share issue
49,000 -
28,000 18,238
Weighted average number of ordinary shares (‘000’)
49,000
46,238
The weighted average number of ordinary shares for prior period is computed using an adjustment factor of 1.3 which is a ratio of the theoretical ex-rights price of SR 16.63 per ordinary share and the closing price of SR 21.61 per ordinary share on the last day on which the shares were traded before the right issue. b)
The basic and diluted loss per share are calculated as follows:
Net income / (loss) for the period / year (SR ‘000’) Weighted average number of ordinary shares (‘000’) – (Note 13. a) Basic and diluted earnings / (loss) per share (SR)
18
Twelve-month period ended 31 December 2016 (Unaudited)
For the year ended 31 December 2015 (Audited)
99,768 49,000
(52,975) 46,238
2.04
(1.15)
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 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
Others SR’ 000
Total SR’ 000
17,938 (10,135) (34) 7,769 8,203 15,972 15,972
71,304 (28,022) (288) 42,994 44,095 87,089 9,914 97,003
30,284 (29,763) 521 571 1,092 476 1,568
27,811 (24,226) (660) 2,925 3,036 5,961 10,784 16,745
147,337 (92,146) (982) 54,209 55,905 110,114 21,174 131,288
20,244 (206) 20,038 (5,107) 14,931 896 (345) 15,482
101,888 (34,914) 66,974 (11,587) 55,387 4,865 82 1,746 62,080
8 8 8
27,829 (25,359) 2,470 (2,751) (281) 2,511 (683) (1,529) 18
149,961 (60,479) 89,482 (19,437) 70,045 8,272 82 (683) 1,401 (1,529) 77,588
490
34,923
1,560
16,727
53,700
(242) -
(32,588) (11,276) (1,098) (149) 5,683 14,272
For the three-month period ended 31 December 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 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 Catastrophe reserve Other technical reserves 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
(85) (149)
19
(620) -
(151) -
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 14
SEGMENT INFORMATION (continued)
For the twelve-month period ended 31 December 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 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 provision Catastrophe reserve Other technical reserves Unexpired risk reserve
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 31 December 2016 (Unaudited)
Medical SR’ 000
Motor SR’ 000
Energy SR’ 000
Others SR’ 000
Total SR’ 000
65,667 (12,215) (565) 52,887 34,070 86,957 86,957
491,810 (243,944) (1,152) 246,714 269,304 516,018 49,036 565,054
89,334 (87,796) 1,538 (19) 1,519 1,902 3,421
172,784 (148,142) (2,474) 22,168 4,329 26,497 32,639 59,136
819,595 (492,097) (4,191) 323,307 307,684 630,991 83,577 714,568
80,155 (310) 79,845 (5,808) 74,037 5,115 (345) 78,807
523,180 (119,823) 403,357 (37,160) 366,197 26,189 588 1,746 394,720
8 8 8
146,838 (137,940) 8,898 (4,079) 4,819 7,403 (683) (3,493) 8,046
750,173 (258,073) 492,100 (47,039) 445,061 38,707 588 (683) 1,401 (3,493) 481,581
8,150
170,334
3,413
51,090
232,987
(774) -
(118,714) (15,835) (5,618) (1,006) 20,168 111,982
(1,387) (1,006)
(3,011) -
(446) -
Medical SR’000
Motor SR’000
Energy SR’000
Others SR’000
Total SR’000
9,062 401 1,511
77,692 31,714 5,400
640 -
98,152 244,816 3,815
184,906 277,571 10,726 673,350 1,146,553
28,645 76 32,682 -
158,697 5,367 1,969 220,112 11,049
648 -
107,420 2,993 1,089 757 263,584 19,811
294,762 2,993 5,367 1,089 2,802 517,026 30,860 291,654
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
1,146,553 20
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 14
SEGMENT INFORMATION (continued) Medical SR’ 000
Motor SR’ 000
Energy SR’ 000
Others SR’ 000
Total SR’ 000
23,962 2,079 (1,479) 24,562 5,239 29,801 29,801
262,028 (64,102) (1,962) 195,964 (30,512) 165,452 1,897 167,349
41,333 (40,621) 712 558 1,270 650 1,920
23,341 (20,772) (1,413) 1,156 1,083 2,239 10,480 12,719
350,664 (123,416) (4,854) 222,394 (23,632) 198,762 13,027 211,789
56,894 (2,216) 54,678 (13,133) 41,545 1,948 421 (2,200) 41,714 (11,913)
122,007 (2,493) 119,514 97,984 217,498 2,510 2,374 223 222,605 (55,256)
1,920
63,245 (58,116) 5,129 (316) 4,813 1,877 1,272 757 3,203 11,922 797
242,146 (62,825) 179,321 84,535 263,856 6,335 2,374 1,272 1,401 1,003 276,241 (64,452)
(147) (302) -
(380) -
(206) -
(221) -
(42,729) 11,938 (954) (302) 2,711 (93,788)
For the three-month period ended 31 December 2015 (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
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 Catastrophe reserve Other technical reserves Unexpired risk reserve Net underwriting result General and administration expenses (unallocated) Provision for doubtful debts Supervision and inspection fee CCHI fee Investment income (unallocated) Deficit from insurance operations
21
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 14
SEGMENT INFORMATION (continued)
Medical SR’ 000
Motor SR’ 000
Energy 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 Net revenue
123,588 2,079 (2,079) 123,588 754 124,342 1 124,343
794,571 (65,085) (2,676) 726,810 (157,475) 569,335 2,375 571,710
156,500 (153,806) 2,694 (78) 2,616 2,625 5,241
197,077 (155,161) (3,377) 38,539 4,510 43,049 39,714 82,763
1,271,736 (371,973) (8,132) 891,631 (152,289) 739,342 44,715 784,057
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 Catastrophe reserve Other technical reserves Unexpired risk reserve
155,967 (2,216) 153,751 (11,028) 142,723 6,117 421 149,261
492,395 (7,624) 484,771 43,867 528,638 14,568 2,374 223 545,803
-
106,652 (93,622) 13,030 3,808 16,838 7,948 1,272 757 3,203 30,018
755,014 (103,462) 651,552 36,647 688,199 28,633 2,374 1,272 1,401 3,203 725,082
Net underwriting result
(24,918)
25,907
5,241
52,745
58,975
(626) (1,336) -
(2,408) -
(781) -
(846) -
(103,749) (14,135) (4,661) (1,336) 4,777 (60,129)
For the twelve-month period ended 31 December 2015 (Audited)
General and administration expenses (unallocated) Provision for doubtful debts Supervision and inspection fee CCHI fee Investment income (unallocated) Deficit from insurance operations
As at 31 December 2015 (Audited)
Medical SR’ 000
Motor SR’ 000
Energy SR’ 000
Others SR’ 000
Total SR’ 000
3,554
58,403 6,785 16,562
-
115,847 298,984 4,434
174,250 305,769 24,550 985,095 1,489,664
53,562 421 38,089 -
408,354 4,779 223 232,343 12,538
78 -
129,797 6,486 1,772 757 321,831 22,622
591,791 6,486 4,779 1,772 1,401 592,263 35,160 256,012
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
1,489,664 22
UNITED COOPERATIVE ASSURANCE COMPANY (A SAUDI JOINT STOCK COMPANY) NOTES TO THE INTERIM CONDENSED FINANCIAL STATEMENTS (continued) At 31 December 2016 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
SOLVENCY MARGIN
As required by Saudi Arabian Insurance Regulations (Article 66 of Implementation Regulations issued by SAMA), the Company is required to maintain minimum Solvency Margin equivalent to the highest of minimum capital requirement, premium solvency margin or claims solvency margin. As at 31 December 2016, the Company’s solvency level is more than the minimum solvency margin required by the Implementation Regulations. During the three-month period ended 31 March 2016, the Company received a letter from SAMA requesting the Company for the following:
Improve the solvency margin by 30 September 2016. Increase the statutory deposit from 10% to 15% of the paid-up capital by 20 April 2016. Appoint an advisor by 20 April 2016 to study the reasons for the weak financial position and recommend solutions to improve the situation.
However, as at 30 September 2016, the Company has achieved the followings; 17
Complied with minimum solvency requirement. Increased the statutory deposit from 10% to 15% of the paid-up Capital. Appointed an advisor as per SAMA requirement. COMPARATIVE FIGURES
Certain figures of prior period have been reclassified to conform with the current period presentation. 18
BOARD OF DIRECTORS’ APPROVAL
These interim condensed financial statements have been approved by the Board of Directors on 16 January 2017, corresponding to 18 Rabi Al Thani 1438H.
23
