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Balance Sheet As at 31 December 2008 Note
2008
2007
(Rupees in '000) Share capital and reserves Authorised share capital [100,000,000 ordinary shares of Rs.10 each (31 December 2007: 100,000,000 ordinary shares of Rs. 10 each]
1,000,000
1,000,000
659,148 (151,066) 1,553,232 2,061,314
549,290 658,434 1,203,939 2,411,663
1,190,064 1,345,366 48,446 2,583,876
1,428,812 1,190,119 53,263 2,672,194
2,501
3,066
18,933
18,478
146,696 28,874 332,280 526,783
270,643 23,520 255,100 567,741
234,137 16,561 250,698
262,856 15,186 278,042
TOTAL LIABILITIES
3,363,858
3,521,043
TOTAL EQUITY AND LIABILITIES
5,425,172
5,932,706
Paid-up share capital Retained earnings Reserves
5 6
Underwriting provisions Provision for outstanding claims (including IBNR) Provision for unearned premium Commission income unearned Total underwriting provisions Deferred liabilities Staff retirement benefits Creditors and accruals Premiums received in advance Amounts due to other insurers / reinsurers Accrued expenses Other creditors and accruals Other liabilities Deposits and other payables Unclaimed dividend
8
9
42 CONTINGENCIES
10
The annexed notes from 1 to 42 form an integral part of these financial statements.
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Balance Sheet As at 31 December 2008 Note
2008
2007
(Rupees in '000) 2,251 690,850 987,524 1,680,625
Loans to employees Secured and unsecured (considered good)
12
364
433
Investments
13
1,430,217
1,955,892
Investment properties
14
123,822
76,197
Deferred taxation
15
35,974
62,570
16
714,385
703,209
17
181,303 20,035 27,617
45,672 17,691 15,468
– 26,626
1,080 13,956
365,729 14,551 136,978 513,058 66,398 2,066,680
501,680 32,381 121,983 454,521 68,116 1,975,757
76,254 18,483 3,223 97,960
57,774 121,178 2,280 181,232
5,425,172
5,932,706
Current assets- others Premiums due but unpaid (unsecured) Amounts due from other insurers / reinsurers Reinsurance recoveries due but unpaid Salvage recoveries accrued Premium and claim reserves retained by cedants Accrued investment income Reinsurance recoveries against outstanding claims Taxation-- payments less provision Deferred commission expense Prepayments Sundry receivables Fixed assets Tangible and intangible Furniture, fixtures and office equipment Motor vehicles Computer softwares
TOTAL ASSETS
Akbarali Pesnani Director
18 7 19 20 21
Tahir Ahmed Managing Director (Chief Executive)
43
2,834 428,915 1,238,406 1,670,155
NEW JUBILEE INSURANCE COMPANY LIMITED
11
ANNUAL REPORT 2008
Cash and bank deposits Cash and other equivalents Current and other accounts Deposits maturing within 12 months
Profit & Loss Account for the year ended 31 December 2008 Note
Fire & Marine property aviation & transport
Motor
Liability Accident & Others Treaty health
2008 2007 Aggregate Aggregate
(Rupees in '000) Revenue account Net premium revenue
494,427
396,408 688,345
18,457
362,306 226,567
(67) 2,186,443 1,818,775
Less: Net claims
255,952
168,010 458,092
17,929
249,343 182,919
216 1,332,461 1,413,733
114,494
91,795 159,398
4,274
83,898
52,465 3,245
Expenses
23
--
506,324
405,432
(27)
239,543
206,643
(12,062) (256)
108,115
(207,033)
25 26 13.1.2
181,707 83,200 101,123 10,773 (19,553) 6,624
599,208 70,864 110,242 2,811 (7,869) 6,818
13.4
(651,142)
Net commission
85,178
75,113
68,467
(2,094)
9,661
Underwriting result
38,803
61,490
2,388
(1,652)
19,404
Investment income Rental income Return on bank deposits Other income General and administration expenses Share of profit of an associate Impairment in value of available for sale securities
24
(Loss) / profit before tax Taxation -- net
27
(Loss) / profit after tax
–
(179,153)
575,041
(88,096)
13,415
(267,249)
588,456
658,434
938,002
(267,249) (350,000)
588,456 (500,000)
(109,858)
(109,858)
(82,393) –
(175,773) (82,393)
(809,500)
(279,568)
(151,066)
658,434
(4.05)
8.93
Profit and loss appropriation account: Balance at commencement of the year (Loss) / profit after tax for the year Transfer to general reserve Issuance of bonus shares for the year 2007 : Rs.2 (20%) per share of Rs.10 each [2006: Rs.1.25 (25%) per share of Rs. 5 each] Final cash dividend for the year 2007: Rs.1.50 (15%) per share of Rs.10 each [2006: Rs. 2.00 (40%) per share of Rs. 5 each] Interim cash dividend for the year 2008: Nil [2007: Rs. 1.50 (15%) per share of Rs. 10 each]
44 Balance of unappropriated (loss) / profit at end of the year (Loss) / earnings per share of Rs. 10/= each -- basic & diluted
39
Rupees
The annexed notes from 1 to 42 form an integral part of these financial statements.
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
Statement of Changes in Equity for the year ended 31 Decembe 2008 Share capital Reserves Issued, Capital reserves Revenue reserves subscribed Reserve for General Retained and paid-up exceptional reserve earnings losses
Total Company's reserves Total share of capital contributed to statutory funds by an associated company (Rupees in '000)
Balance as at 1 January 2007
439,432
9,384
700,000
938,002
1,638,002
(7,245)
Total
1,640,141 2,079,573
Changes in equity for the year ended 31 December 2007 Company's share of capital contributed to statutory funds by an associated company
–
–
–
Total recognised income –– profit for the year
–
–
–
–
–
1,800
1,800
1,800
588,456
588,456
–
588,456
588,456
(175,773) (82,393) (109,858) – (368,024)
– – – –
(175,773) (82,393) (109,858) – (368,024)
(175,773) (82,393) – – (258,166)
– – – – –
– – – 500,000 500,000
(175,773) (82,393) (109,858) (500,000) (868,024)
549,290
9,384
1,200,000
658,434
1,858,434
(5,445)
1,862,373 2,411,663
Changes in equity for the year ended 31 December 2008 Company's share of capital contributed to statutory funds by an associated company
–
–
–
Total recognised loss – loss for the year
–
–
–
(267,249)
– 109,858 – 109,858
– – – –
– – 350,000 350,000
(82,393) (109,858) (350,000) (542,251)
659,148
9,384
1,550,000
(151,066)
–
–
(267,249)
(707)
(707)
(707)
–
(267,249)
(267,249)
– – – –
(82,393) (109,858) – (192,251)
(82,393) – – (82,393)
Appropriations: – Final cash dividend – Issuance of bonus shares – Transfer to general reserve
Balance as at 31 December 2008
(82,393) (109,858) – (192,251)
1,398,934
(6,152)
1,402,166 2,061,314
The annexed notes from 1 to 42 form an integral part of these financial statements.
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
45
Balance as at 31 December 2007
– – 109,858 – 109,858
ANNUAL REPORT 2008
– Final cash dividend – Interim cash dividend – Issuance of bonus shares – Transfer to general reserve
NEW JUBILEE INSURANCE COMPANY LIMITED
Appropriations:
Statement of Cash Flows for the year ended 31 December 2008 2008
2007
(Rupees in '000) Operating cash flows (a) Underwriting activities Premiums received Reinsurance premiums paid Claims paid Reinsurance and other recoveries received Commissions paid Commissions received Other underwriting payments (management expenses) Net cash (outflow) / inflow from underwriting activities (b) Other operating activities Income tax paid General and administration expenses paid Other operating payments Other operating receipts Loans advanced Loans repayment received Net cash inflow / (outflow) from other operating activities Total cash (outflow) / inflow from all operating activities Investment activities Profit / return received Dividends received Rentals received – net of expenses Payments for investments / investment property Proceeds from disposal of investments Fixed capital expenditure Proceeds from disposal of fixed assets
3,515,743 (1,361,670) (2,092,693) 508,393 (319,369) 108,175 (480,085)
3,200,568 (1,435,380) (1,292,042) 224,712 (267,434) 116,083 (396,059)
(121,506)
150,448
(43,670) (13,752) (232,525) 308,519 (824) 873
(141,364) (7,869) (212,683) 269,958 (1,733) 1,549
18,621
(92,142)
(102,885)
58,306
103,644 69,747 19,120 (1,659,363) 1,586,394 (37,086) 90,978
132,351 89,979 211,688 (1,910,055) 1,735,848 (82,125) 10,992
46
Total cash inflow from investing activities
173,434
188,678
Financing activities Dividends paid Total cash (outflow) from financing activities
(81,019) (81,019)
(252,920) (252,920)
Net cash (outflow) from all activities
(10,470)
(5,936)
Cash at beginning of the year Cash at end of the year
1,680,625 1,670,155
1,686,561 1,680,625
Statement of Cash Flows for the year ended 31 December 2008 2008
2007
(Rupees in '000) Reconciliation to profit and loss account Operating cash flows Depreciation / amortisation expense Profit on disposal of fixed assets Profit on disposal of investments Dividend income Rental income Other investment (loss) / income Increase in assets other than cash Decrease / (increase) in liabilities other than running finance
(102,885) (26,474) 2,112 98,571 69,775 83,200 (531,134) 52,286 87,300
(Loss) / profit after taxation
(267,249)
58,306 (17,991) 1,817 493,330 88,010 70,864 134,930 772,068 (1,012,878) 588,456
Cash and bank deposits Cash and other equivalents – Cash – Policy stamps and bond papers in hand Current and other accounts – Current accounts – PLS savings accounts
Deposits maturing within 12 months (encashable on demand) – Term deposits
216 2,618 2,834
760 1,491 2,251
138,841 290,074 428,915
75,179 615,671 690,850
1,238,406 1,670,155
987,524 1,680,625
The annexed notes from 1 to 42 form an integral part of these financial statements.
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
47
Cash for the purposes of the Statement of Cash Flows consists of:
ANNUAL REPORT 2008
Cash comprises of cash in hand, policy stamps, bond papers, cheques in hand, bank balances and other deposits which are readily convertible to cash in hand and which are used in the cash management function on a day–to–day basis.
NEW JUBILEE INSURANCE COMPANY LIMITED
Definition of cash
Statement of Premiums for the year ended 31 December 2008 Business underwritten inside Pakistan 2008 2007 Premiums Unearned premium reserve Premiums Reinsurance Prepaid reinsurance premium Reinsurance Net premium Net premium written Opening Closing earned ceded Opening Closing expenses revenue revenue (note 22) (Rupees in '000)
Class
Direct and facultative
1.
Fire and property damage
1,041,149
369,564
430,771
979,942
498,562
179,322
192,369
485,515
494,427
422,655
2.
Marine, aviation and transport
497,344
49,936
38,033
509,247
100,105
17,417
4,683
112,839
396,408
382,206
3.
Motor
690,705
288,282
277,639
701,348
14,553
5,153
6,703
13,003
688,345
581,390
4.
Liability
196,207
28,711
26,968
197,950
170,321
26,480
17,308
179,493
18,457
13,727
5.
Accident and health
401,440
150,188
189,322
362,306
–
–
362,306
294,819
6.
Miscellaneous
699,619
303,438
382,633
620,424
226,567
123,938
3,526,464
1,190,119
Total
–
–
454,183
218,836
279,162
393,857
1,345,366 3,371,217 1,237,724
447,208
500,225
1,184,707
2,186,510 1,818,735
Treaty 7.
Proportional / non–proportional Grand total
(67) 3,526,397
– 1,190,119
–
(67)
–
1,345,366 3,371,150 1,237,724
– 447,208
– 500,225
– 1,184,707
(67)
2,186,443 1,818,775
The annexed notes from 1 to 42 form an integral part of these financial statements.
48 Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
40
Tahir Ahmed Managing Director (Chief Executive)
Statement of Claims for the year ended 31 December 2008 Business underwritten inside Pakistan
Claims paid
Class
Outstanding claims Opening Closing
Claims expenses
Reinsurance Reinsurance and other and other recoveries in respect of recoveries outstanding claims received Opening Closing (Rupees in '000)
Reinsurance and other recoveries revenue
2008 Net claims expense
2007 Net claims expense
255,952
529,302
1.
Fire and property damage
816,744
522,845
332,847
626,746
398,999
124,627
96,422
2.
Marine, aviation and transport
265,763
294,615
187,758
158,906
123,246
172,279
39,929
(9,104)
168,010
123,904
3.
Motor
506,486
279,366
244,234
471,354
2,223
16,460
27,499
13,262
458,092
438,876
4.
Liability
24,122
3,328
3,159
23,953
6,046
2,192
2,170
6,024
17,929
1,360
5.
Accident and health
243,454
32,802
38,691
249,343
–
–
–
–
249,343
197,957
6.
Miscellaneous
235,908
295,856
383,375
323,427
114,772
201,590
227,326
140,508
182,919
119,371
2,092,477
1,428,812
1,190,064
1,853,729
645,286
517,148
393,346
521,484
1,332,245
1,410,770
216
2,963
1,332,461
1,413,733
Total
370,794
Treaty 7.
Proportional / non–proportional Grand Total
216 2,092,693
– 1,428,812
– 1,190,064
216 1,853,945
– 645,286
– 517,148
– 393,346
– 521,484
ANNUAL REPORT 2008
49
The annexed notes from 1 to 42 form an integral part of these financial statements.
NEW JUBILEE INSURANCE COMPANY LIMITED
Direct and facultative
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
Statement of Expenses for the year ended 31 December 2008 Business underwritten inside Pakistan
Commission paid or payable a
Deferred commission Opening b
Closing c
Net commission expenses d=a+b-c
Other 2008 2007 management Underwriting Commission Net Net expenses expenses from underwriting underwriting (Note 23) reinsurers* expense expense e f=d+e g h=f-g (Rupees in '000)
Class
Direct and facultative
1.
Fire and property damage
142,636
42,165
60,582
124,219
114,494
238,713
39,041
199,672
172,775
2.
Marine, aviation and transport
75,481
7,525
6,287
76,719
91,795
168,514
1,606
166,908
152,326
3.
Motor
63,120
32,103
25,925
69,298
159,398
228,696
831
227,865
185,562
4.
Liability
5,388
2,111
2,235
5,264
4,274
9,538
7,358
2,180
(5,763)
5.
Accident and health
11,313
3,892
5,544
9,661
83,898
93,559
–
93,559
73,585
6.
Miscellaneous
69,620
34,187
36,405
67,402
52,465
119,867
64,157
55,710
33,165
367,558
121,983
136,978
352,563
506,324
858,887
112,993
745,894
611,650
Total Treaty 7.
Proportional / non–proportional Grand total
(27) 367,531
– 121,983
– 136,978
(27) 352,536
– 506,324
(27) 858,860
– 112,993
(27) 745,867
* Commission from reinsurers is arrived at after taking the impact of opening and closing unearned commission.
The annexed notes from 1 to 42 form an integral part of these financial statements.
50 Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
425 612,075
Statement of Investment Income for the year ended 31 December 2008 2008
2007
(Rupees in '000) Income from non-trading investments
Held to maturity Return on Government Securities
14,150
14,150
6,365
6,403
(2,901) 17,614
(2,685) 17,868
1,592 68,183 69,775
3,445 84,565 88,010
87,389
105,878
Gain on sale of non–trading investments
99,671
499,039
Investments related expenses
(5,353)
Return on other fixed income securities and deposits – Term finance certificates Amortisation of premium relative to par
Dividend income – Associates * – Others
Investments income
181,707
(5,709) 599,208
* This represents dividend income of associated undertakings other than the associate where the Company has significant influence.
ANNUAL REPORT 2008
51
The annexed notes from 1 to 42 form an integral part of these financial statements.
NEW JUBILEE INSURANCE COMPANY LIMITED
Available for sale
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
Notes to the Financial Statements 1.
STATUS AND NATURE OF BUSINESS New Jubilee Insurance Company Limited (the Company) is a public limited company incorporated in Pakistan on 16 May 1953. The Company is listed on the Karachi and Lahore stock exchanges and is engaged in general insurance business. The registered office of the Company is situated at 2nd Floor, Jubilee Insurance House, I. I. Chundrigar Road, Karachi.
2.
BASIS OF PREPARATION These financial statements have been prepared on the format of financial statements issued by the Securities and Exchange Commission of Pakistan (SECP) through Securities and Exchange Commission (Insurance) Rules, 2002 [SEC (Insurance) Rules, 2002], vide S.R.O. 938 dated 12 December 2002.
2.1
Statement of compliance These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance,1984, the Insurance Ordinance, 2000 and SEC (Insurance) Rules, 2002. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984, Insurance Ordinance, 2000 and SEC (Insurance) Rules, 2002 shall prevail.
2.2
Basis of measurement These financial statements have been prepared under the historical cost convention.
2.3
Functional and presentation currency These financial statements are presented in Pakistani Rupees, which is the Company's functional currency.
2.4
Use of estimates and judgements
52
The preparation of financial statements in conformity with the requirements of approved accounting standards as applicable in Pakistan requires management to make judgments / estimates and associated assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The judgments / estimates and associated assumptions are based on historical experience, current trends and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making the estimates about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Significant areas where assumptions and estimates were exercised in application of accounting policies relate to:
Classification of investment In classifying investments as "held-for-trading" the Company has determined securities which are acquired with the intention to trade by taking advantage of short term market / interest rate movements.
For the year ended 31 December 2008 In classifying investments as "held-to-maturity" the Company has determined financial assets with fixed or determinable payments and fixed maturity. In making this judgment, the Company evaluates its intention and ability to hold such investments to maturity. The investments which are not classified as held for trading or held to maturity are classified as available for sale.
Income tax In making the estimates for income taxes currently payable by the Company, the management looks, at the current income tax laws and the decisions of appellate authorities on certain issues in the past. In making the provision for deferred taxes, estimates of the Company's future taxable profits are taken into account.
Fixed assets, investment properties, depreciation and amortisation
Outstanding claims including incurred but not reported (IBNR) In making the estimates of the provision for outstanding claims including IBNR, the Company took advice from actuary for the determination of provision for IBNR claims at the year end. The actuary has recommended the month wise factor of each class based on the historic claims lag triangle method to determine provisions in respect of IBNR claims. Accordingly, provision has been made based on IBNR factors recommended by the actuary. Claims received upto reporting date are assessed and recorded accordingly. Subsequently these are reviewed and reassessed wherever necessary. Estimates of reinsurance recoveries against outstanding claims and salvage recoveries are made based on expected recovery
Premium deficiency reserves The Company reviews premium deficiency reserve for each class of business at each reporting date. Liability, if any, is determined on the basis of method as prescribed by the Insurance Ordinance 2000.
Defined benefits plan Liability is determined on the basis of actuarial advice using the Projected Unit Credit Method.
Impairment Available for sale The Company determines that available-for-sale equity investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. This determination of what is significant or prolonged requires judgment. In making this judgment, the Company evaluates among other factors, the
53
The assets residual values, useful lives and methods are reviewed, and adjusted if appropriate, at each financial year end.
ANNUAL REPORT 2008
In making estimates of the depreciation / amortisation method, the management uses method which reflects the pattern in which economic benefits are expected to be consumed by the Company. The method applied is reviewed at each financial year end and if there is a change in the expected pattern of consumption of the future economic benefits embodied in the assets, the method would be changed to reflect the change in pattern. Such change is accounted for as change in accounting estimates in accordance with International Accounting Standard - 8, "Accounting Policies, Changes in Accounting Estimates and Errors".
NEW JUBILEE INSURANCE COMPANY LIMITED
The Company carries its investment properties at their respective cost. The fair values are determined by independent valuation experts and such valuations are carried out after every two years to determine the recoverable amount.
Notes to the Financial Statements normal volatility in share price. In addition, impairment may be appropriate when there is evidence of deterioration in the financial health of the investee, industry and sector performance, changes in technology and operational and financing cash flows.
Associate The Company determined that a significant or prolonged decline in the fair value of its investments in associate below their cost is an objective evidence of impairment. The impairment loss is recognized when the carrying value exceeds higher of fair value less cost to sell or value in use.
Provision against premiums due but unpaid The Company reviews its premium portfolio to assess amount of premium due but unpaid and provision required there-against. While assessing this requirement various factors including the delinquency in the account, financial position of the insured are considered. 3.
STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED APPROVED ACCOUNTING STANDARDS THAT ARE NOT YET EFFECTIVE
3.1
The following standards, interpretations and amendments of approved accounting standards are effective for accounting periods beginning on or after 1 January 2009: – Revised IAS 1 - Presentation of financial statements (effective for annual periods beginning on or after 1 January 2009) introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the income statement and all non-owner changes in equity in a single statement), or in an income statement and a separate statement of comprehensive income. The change will be effected after discussions with regulators. – Revised IAS 23 - Borrowing costs (effective for annual periods beginning on or after 1 January 2009) removes the option to expense borrowing costs and requires that an entity capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The application of the standard is not likely to have an effect on the Company's financial statements.
54
– IAS 29 – Financial Reporting in Hyperinflationary Economies (effective for annual periods beginning on or after 28 April 2008). The Company does not have any operations in Hyperinflationary Economies and therefore the application of the standard is not likely to have an effect on the Company's financial statements. – Amendments to IAS 32 Financial instruments: Presentation and IAS 1 Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009) – Puttable Financial Instruments and Obligations Arising on Liquidation requires puttable instruments, and instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation, to be classified as equity if certain conditions are met. The amendments, which require retrospective application, are not expected to have any impact on the Company’s financial statements. – Amendment to IFRS 2 Share-based Payment – Vesting Conditions and Cancellations (effective for annual periods beginning on or after 1 January 2009) clarifies the definition of vesting conditions, introduces the concept of non-vesting conditions, requires non-vesting conditions to be reflected in grant-date fair value and provides the accounting treatment for non-vesting conditions and cancellations. The application of this standard is not likely to have a material effect on the Company’s financial statements.
For the year ended 31 December 2008 – Revised IFRS 3 Business Combinations (applicable for annual periods beginning on or after 1 July 2009) broadens among other things the definition of business resulting in more acquisitions being treated as business combinations, contingent consideration to be measured at fair value, transaction costs other than share and debt issue costs to be expensed, any pre-existing interest in an acquiree to be measured at fair value, with the related gain or loss recognised in profit or loss and any non-controlling (minority) interest to be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of an acquiree, on a transaction-by-transaction basis. The application of this standard is not likely to have an effect on the Company’s financial statements
– IFRIC 13– Customer Loyalty Programmes (effective for annual periods beginning on or after 01 July 2008) addresses the accounting by entities that operate or otherwise participate in customer loyalty programmes under which the customer can redeem credits for awards such as free or discounted goods or services. The application of IFRIC 13 is not likely to have an effect on the Company's financial statements. – IFRIC 15– Agreement for the Construction of Real Estate (effective for annual periods beginning on or after 1 October 2009) clarifies the recognition of revenue by real estate developers for sale of units, such as apartments or houses, 'off–plan', that is, before construction is complete. IFRIC 15 would not effect the accounting policy of the Company. – IFRIC 16– Hedge of Net Investment in a Foreign Operation. (effective for annual periods beginning on or after 1 October 2008) clarifies that net investment hedging can be applied only to foreign exchange differences arising between the functional currency of a foreign operation and the parent entity’s functional currency and only in an amount equal to or less than the net assets of the foreign operation, the hedging instrument may be held by any entity within the group except the foreign operation that is being hedged and that on disposal of a hedged operation, the cumulative gain or loss on the hedging instrument that was determined to be effective is reclassified to profit or loss. The Interpretation allows an entity that uses the step–by–step method of consolidation an accounting policy choice to determine the cumulative currency translation adjustment that is reclassified to profit or loss on disposal of a net investment as if the direct method of consolidation had been used. The amendment is not relevant to the Company’s operations.
55
– IFRS 8 – Operating Segments (effective for annual periods beginning on or after 1 January 2009) introduces the “management approach” to segment reporting. IFRS 8 will require a change in the presentation and disclosure of segment information based on the internal reports that are regularly reviewed by the Company’s “chief operating decision maker” in order to assess each segment’s performance and to allocate resources to them. This standard will have no effect on the Company’s reported total profit or loss or equity.
ANNUAL REPORT 2008
– IFRS 7 – Financial Instruments: Disclosures (effective for annual periods beginning on or after 28 April 2008) supersedes IAS 30 – Disclosures in the Financial Statements of Banks and Similar Financial Institutions and the disclosure requirements of IAS 32 – Financial Instruments: Disclosure and Presentation. The application of the standard is not expected to have significant impact on the Company's financial statements other than increase in disclosures.
NEW JUBILEE INSURANCE COMPANY LIMITED
– Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual periods beginning on or after 1 July 2009) requires accounting for changes in ownership interest by the group in a subsidiary, while maintaining control, to be recognized as an equity transaction. When the group loses control of subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognized in the profit or loss. The application of the standard is not likely to have an effect on the Company’s financial statements.
Notes to the Financial Statements – The International Accounting Standards Board made certain amendments to existing standards as part of its first annual improvements project. The effective dates for these amendments vary by standard and most will be applicable to the Company’s 2009 financial statements. These amendments are unlikely to have an impact on the Company’s financial statements. – IAS 27 ‘Consolidated and separate financial statements’ (effective for annual periods beginning on or after 1 January 2009). The amendment removes the definition of the cost method from IAS 27 and replaces it with a requirement to present dividends as income in the separate financial statements of the investor. The amendment is not likely to have an effect on Company’s financial investments. – IFRIC – 17 Distributions of Non–cash Assets to Owners (effective for annual periods beginning on or after 1 July 2009) states that when a company distributes non cash assets to its shareholders as dividend, the liability for the dividend is measured at fair value. If there are subsequent changes in the fair value before the liability is discharged, this is recognised in equity. When the non cash asset is distributed, the difference between the carrying amount and fair value is recognised in the income statement. As the Company does not distribute non–cash assets to its shareholders, this interpretation has no impact on the Company’s financial statements. – IFRS 5 Amendment – Improvements to IFRSs – IFRS 5 Non–current Assets Held for Sale and Discontinued Operations (effective for annual periods beginning on or after 1 July 2009) specify that: if an entity is committed to a sale plan involving the loss of control of a subsidiary, then it would classify all of that subsidiary’s assets and liabilities as held for sale when the held for sale criteria in paragraphs 6 to 8 of IFRS 5 are met. Disclosures for discontinued operations would be required by the parent when a subsidiary meets the definition of a discontinued operation. The amendment is not likely to have an effect on Company’s financial statements. – IFRS 4– Insurance Contracts, requires to assess at each reporting date adequacy of its insurance liabilities through liability adequacy test. Further, it required additional disclosure relating to identification and explanation of the amount in the financial statements arising from insurance contracts and the amount, timing and uncertainty of future cash flows from insurance contracts. The application of the standard requires additional disclosures in the Company's financial statements. 4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.1
Provision for outstanding claims including incurred but not reported (IBNR)
56
A liability for outstanding claims is recognised in respect of all claims incurred as at the balance sheet date which represents the estimates of the claims intimated or assessed before the end of the accounting year and measured at the undiscounted value of expected future payments. Provision for outstanding claims include amounts in relation to unpaid reported claims, claims incurred but not reported (IBNR) and expected claims settlement costs. Provision for IBNR is made for the cost of settling claims incurred but not reported at the balance sheet date. Reinsurance recoveries against outstanding claims and salvage recoveries are recognised as an asset and measured at the amount expected to be received. 4.2
Premium deficiency reserves The Company is required as per SEC (Insurance) Rules, 2002, to maintain a provision in respect of premium deficiency for the class of business where the unearned premium reserve is not adequate to meet the expected future liability, after reinsurance from claims, and other supplementary expenses expected to be incurred after the balance sheet date in respect of the unexpired policies in that class of business at the balance sheet date. The movement in the premium deficiency reserve is recorded as an expense in the profit and loss account.
For the year ended 31 December 2008 No provision has been made as the unearned premium reserve for each class of business as at the year end is adequate to meet the expected future liability after reinsurance from claims and other expenses, expected to be incurred after the balance sheet date in respect of policies in force at balance sheet date. 4.3
Staff retirement benefits
4.3.1
Defined benefit plan The Company operates an approved defined gratuity scheme for all its permanent employees who attain the minimum qualification period for entitlement to gratuity. Contributions to the fund are made based on actuarial recommendations and in line with the provisions of the Income Tax Ordinance, 2001. The most recent actuarial valuation was carried out for the year ended 31 December 2008 using the Projected Unit Credit Method. Actuarial gains/losses in excess of corridor limit (10% of the higher of fair value of assets and present value of obligation) are recognised over the average remaining service life of the employees.
4.3.3
Employees' compensated absences The Company accounts for the liability in respect of employees' compensated absences in the period in which they are earned.
4.4
Investments
4.4.1
Recognition All investments are initially recognized at cost, being the fair value of the consideration given and include transaction costs, except for held for trading in which case transaction costs are charged to the profit and loss account. These are recognized and classified as follows: – Investment at fair value through profit and loss – Held to maturity – Available for sale
4.4.2
Measurement
4.4.2.1 Investment at fair value through profit or loss – Investments which are acquired principally for the purposes of generating profit from short term fluctuation in price or are part of the portfolio in which there is recent actual pattern of short term profit taking are classified as held for trading. –
Investments which are designated at fair value through profit or loss upon initial recognition.
Subsequent to initial recognition, these investments are remeasured at fair value. Gains or losses on investments on remeasurement of these investments are recognised in profit and loss account. 4.4.2.2 Held to maturity Investments with fixed maturity, where management has both the intent and the ability to hold to maturity, are classified as held to maturity.
57
The Company contributes to a provident fund scheme which covers all permanent employees. Equal contributions are made both by the Company and the employees to the fund at the rate of 8.33 percent of basic salary.
NEW JUBILEE INSURANCE COMPANY LIMITED
Defined contribution plan
ANNUAL REPORT 2008
4.3.2
Notes to the Financial Statements Subsequently, these are measured at amortised cost less provision for impairment, if any. Any premium paid or discount availed on acquisition of held to maturity investment is deferred and amortised over the term of investment using the effective yield. These are reviewed for impairment at year end and any losses arising from impairment in values are charged to the profit and loss account. 4.4.2.3 Available for sale Investments which are intended to be held for an undefined period of time but may be sold in response to the need for liquidity, changes in interest rates, equity prices or exchange rates are classified as available for sale. Quoted Subsequent to initial recognition at cost, quoted investments are stated at the lower of cost or market value (market value on an individual investment basis being taken as lower if the fall is other than temporary) in accordance with the requirements of the SEC (Insurance) Rules, 2002 vide S.R.O. 938 dated December 2002. The Company uses stock exchange quotations at the balance sheet date to determine the market value. Had the Company adopted International Accounting Standard (IAS) 39 "Financial Instruments: Recognition and Measurement" in respect of recognition of gain / loss on remeasurement of available for sale securities directly into equity, the investments of the Company would have been higher by Rs.89.709 million and the net equity would have been increased by the same amount. Unquoted Unquoted investments are recorded at cost less accumulated impairment losses, if any. 4.4.2.4 Investment in associates – equity method
58
Investments in associates, where the Company has significant influence but not control, are accounted for by using the equity method of accounting. These investments are initially recognised at cost, thereafter the Company's share of the changes in the net assets of the associates are accounted for at the end of each year. After application of the equity method, the Company determines whether it is necessary to recognize any impairment loss with respect to the Company's net investment in the associate. Share of profit and loss of associate is accounted for in the Company's profit and loss account, whereas changes in the associate's equity which has not been recognised in the associates profit and loss account, are recognised directly in the equity of the Company. 4.4.2.5 Date of recognition Regular way purchases and sales of investments that require delivery within the time frame established by regulations or market convention are recognised at the trade date. Trade date is the date on which the Company commits to purchase or sell the investment. 4.5
Investment property Investment properties are accounted for under the cost model in accordance with approved International Accounting Standards (IAS) 40, "Investment Property" and S.R.O. 938 issued by the Securities and Exchange Commission of Pakistan.
For the year ended 31 December 2008 –
Leasehold land is stated at cost.
–
Building on leasehold land is depreciated to its estimated salvage value on straight line basis over its useful life, which is estimated to be 40 – 80 years.
–
Installations forming a part of building on leasehold land but having separate useful lives are depreciated at the rate of 10 percent under the straight line method.
Depreciation policy, subsequent capital expenditures on existing properties and gains or losses on disposals are accounted for in the same manner as tangible fixed assets. 4.6
Fixed assets
4.6.1
Tangibles
An item of tangible asset is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit and loss in the year the asset is derecognized. 4.6.2
Intangibles These are stated at cost less accumulated amortisation and impairment loss. Amortisation is charged over the estimated useful life of the asset on a systematic basis to income applying the straight line method at the rates specified in note 21.2 to the financial statements. Amortisation is calculated from the month the assets are available for use. While on disposal, amortisation is charged up to the month in which the assets are disposed off. Software development costs are only capitalised to the extent that future economic benefits are expected to be derived by the Company. The carrying amounts are reviewed at each balance sheet date to assess whether these are recorded in excess of their recoverable amounts, and where carrying values exceed estimated recoverable amount, assets are written down to their estimated recoverable amounts.
4.7
Premium income Premiums including administrative surcharge under a policy are recognised as revenue at the time of issuance of insurance policy.
59
Subsequent cost are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is possible that the future economic benefits associated with the items will flow to the company and the cost of the item can be measured reliably. Maintenance and normal repairs are charged to profit and loss account currently.
ANNUAL REPORT 2008
Depreciation on additions is charged from the month the assets are available for use. While on disposal, depreciation is charged up to the month in which the assets are disposed off.
NEW JUBILEE INSURANCE COMPANY LIMITED
These are stated at cost less accumulated depreciation and impairment loss, if any. Depreciation is charged over the estimated useful life of the asset on a systematic basis to income applying the straight line method at the rates specified in note 21.1 to the financial statements.
Notes to the Financial Statements Revenue from premiums is determined after taking into account the unearned portion of premiums which is calculated using the 1/24th method. The unearned portion of premium income is recognised as a liability. Reinsurance premium is recognised as expense after taking into account the proportion of deferred premium expense which is calculated using 1/24th method. The deferred portion of premium expense is recognised as a prepayment. Pakistan Reinsurance Company Limited (PRCL) retrocession business is booked on the basis of PRCL statements. 4.8
Commission Commission expense incurred in obtaining and recording policies is deferred and recognised as an expense in accordance with pattern of recognition of premium revenue. Commission and other forms of revenue (apart from recoveries) from reinsurers are deferred and recognised as liability and recognised in the profit and loss account as revenue in accordance with the pattern of recognition of the reinsurance premiums.
4.9
Rental income Rental income from investment properties is recognised on time proportion basis.
4.10
Investment income Income from held to maturity investments is recognised on a time proportion basis taking into account the effective yield on the investments. The difference between the redemption value and the purchase price of the held to maturity investments is amortised and taken to the profit and loss account over the term of the investment. Dividend income is recognised when the company's right to receive the payment is established. Gain / loss on sale of available for sale investments is included in income currently. Return on fixed income securities classified as available for sale is recognised on a time propor tionate basis taking into account the effective yield on the investments.
60
Return on bank deposit is recognized on a time proportionate basis taking into account the effec tive yield. 4.11
Dividend declaration and reserve appropriation Dividend declaration and reserve appropriation are recognized when approved.
4.12
Expenses of management Expenses of management have been allocated to various classes of business as deemed equitable by management. Expenses not allocable to the underwriting business are charged as administrative expenses.
For the year ended 31 December 2008 4.13
Taxation
4.13.1
Current Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year, if enacted. The charge for current tax also include adjustments, where considered necessary, to provision for tax made in previous years arising from assessments finalized during the current year for such years.
4.13.2
Deferred
4.14
Segment reporting A business segment is a distinguishable component of the Company that is engaged in providing services that are subject to risks and returns that are different from those of other business segments. The Company accounts for segment reporting of operating results using the classes of business as specified under the Insurance Ordinance, 2000 and the SEC (Insurance) Rules, 2002 as the primary reporting format. The Company has six primary business segments for reporting purposes namely fire, marine, motor, accident and health, liability and miscellaneous. The fire insurance segment provides insurance covers against damages caused by fire, riot and strike, explosion, earthquake, atmospheric damage, flood, electric fluctuation and impact. Marine insurance segment provides coverage against cargo risk, war risk and damages occurring in inland transit. Motor insurance provides comprehensive vehicle coverage and indemnity against third party loss. Liability insurance segment provides coverage against third party liability, product liability and personal liability. Accident and health insurance provides inpatient and outpatient medical coverage. Miscellaneous insurance provides cover against burglary, loss of cash in safe and cash in transit, personal accident, money, engineering losses, crop and other coverages. Assets and liabilities are allocated to particular segments on the basis of premium earned. Those assets and liabilities which can not be allocated to a particular segment on a reasonable basis are reported as unallocated corporate assets and liabilities. Depreciation and amortisation are allocated to a particular segment on the basis of premium earned.
61
Deferred tax is provided on temporary differences arising on investments in associates stated under equity method of accounting.
ANNUAL REPORT 2008
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the profit and loss account, except in the case of items credited or charged to equity in which case it is included in equity.
NEW JUBILEE INSURANCE COMPANY LIMITED
Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences at the balance sheet date between the tax bases and carrying amounts of assets and liabilities for financial reporting purposes. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized.
Notes to the Financial Statements 4.15
Foreign currency translation Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. Exchange differences, if any, are taken to profit and loss account.
4.16
Offsetting of financial assets and liabilities Financial assets and financial liabilities are only offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognised amount and the Company intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.
4.17
Impairment The carrying amount of assets are reviewed at each balance sheet date to determine whether there is any indication of impairment of any asset or group of assets. If such indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in profit and loss account.
4.18
Provisions A provision is recognised in the balance sheet when the Company has a legal or constructive obligation as a result of past events and it is probable that an outflow of economic benefits will be required to settle the obligations and a reliable estimate can be made of the amount of the obligation.
4.19
Financial instruments Financial instruments carried on the balance sheet include cash and bank, loans to employees, premiums due but unpaid, amount due from other insurers / reinsurers, accrued investment income, reinsurance recoveries against outstanding claims, sundry receivables, amount due to other insurers / reinsurers, accrued expenses, other creditors and accruals, deposits and other payables and unclaimed dividends.
62
All the financial assets and financial liabilities are recognised at the time when the Company becomes a party to the contractual provisions of the instrument and derecognized when the Company losses control of contractual rights that comprises the financial assets and in the case of financial liabilities when the obligation specified in the contract is discharged, cancelled or expired. At the time of initial recognition all financial assets and financial liabilities are measured at cost, which is the fair value of the consideration given or received for it. Any gain or loss on derecognition of financial assets and financial liabilities is taken to income directly. 5.
PAID–UP SHARE CAPITAL Issued, subscribed and paid–up 2008
2007
2008
(Number of shares in ‘000) 210
210
65,705
54,719
65,915
54,929
2007
(Rupees in '000) Ordinary shares of Rs. 10 each issued as fully paid in cash Ordinary shares of Rs. 10 each issued as fully paid bonus shares
2,100
2,100
657,048 659,148
547,190 549,290
Shares of the Company held by associates amount to Rs.424.695 million (42,469,489 shares of Rs. 10 each) [31 December 2007: Rs. 335.732 million (33,573,225 shares of Rs. 10 each)].
For the year ended 31 December 2008 6.
RESERVES
2008
2007
(Rupees in '000) Capital reserves Reserve for exceptional losses
6.1
9,384
9,384
6.2
1,550,000
1,200,000
(6,152) 1,553,232
(5,445) 1,203,939
General reserve Company's share of capital contributed to statutory funds by an associated company
6.1
Under the Income Tax Act, 1922 applicable to insurance companies, the Company set aside in prior years amounts upto 10 percent of premium earnings, net of reinsurances of the year as a reserve for exceptional losses, which was treated as an allowable deduction in arriving at the taxable income. This option was withdrawn by the Income Tax Ordinance, 1979 with retrospective effect to the accounting year ended 31 December 1978. Accordingly, the Company has ceased to set aside such amounts, but has retained the reserves created upto 31 December 1978. 2008
2007
(Rupees in '000) 6.2
General reserve Balance at beginning of the year Transfer from retained earnings Balance at end of the year
700,000 500,000 1,200,000
7.1
The Company has filed returns upto tax year 2008. The income tax assessments of the Company have been finalised upto and including assessment year 2002–2003 and tax year 2004. Whereas, the returns filed for tax years 2003, 2005, 2006, 2007 and 2008 are also deemed to be orders under the provisions of section 120 of the Income Tax Ordinance, 2001 unless any amendments have been made by the tax authorities.
63
TAXATION
7.2
The Taxation Officer has passed an assessment order in respect of tax year 2004 consequent to finalisation of tax audit proceedings where disallowances have been made on account of bad debts written off, amortisation of negative goodwill and allocation of expenses against dividend income. Further, the claim of tax credits has also not been allowed in full. The Company has filed an appeal before the Commissioner of Income Tax who has maintained the order passed by the Taxation Officer except allocation of expenses against dividend income. The Company has filed an appeal before the Income Tax Appellate Tribunal (ITAT) which is pending adjudication. Tax amounting Rs. 54.4 million in this respect has been recorded.
ANNUAL REPORT 2008
7.
1,200,000 350,000 1,550,000
NEW JUBILEE INSURANCE COMPANY LIMITED
Revenue reserves
7.3
In the assessment order for the assessment year 2002–2003 certain items have been disallowed and further additional tax has been levied. The appeal against the order filed before the Commissioner of Income Tax (Appeals) has been decided mostly in favour of the company. The Company has filed an appeal before the Income Tax Appellate Tribunal (ITAT). No provision amounting to Rs.11.11 million (31 December 2007: Rs.11.11 million) in this respect has been made in the financial statements as the management of the Company is confident of favourable outcome of ITAT appeal.
Notes to the Financial Statements
8.
9.
OTHER CREDITORS AND ACCRUALS
2008 2007 (Rupees in '000)
Federal excise duty Federal insurance fee Workers welfare fund Tax deducted at source Premiums and commissions Miscellaneous
19,059 1,089 5,801 1,240 286,689 18,402 332,280
9,716 595 – 635 225,952 18,202 255,100
86,834 147,185 118 234,137
153,072 109,666 118 262,856
2008
2007
DEPOSITS AND OTHER PAYABLES Advance rent Security deposits against bond insurance Other deposits
10.
CONTINGENCIES Contingencies in respect of income tax are stated in note 7.
11.
CASH AND BANK DEPOSITS
(Rupees in '000)
Cash and other equivalents – Cash – Policy stamps and bond papers in hand Current and other accounts – Current accounts – PLS savings accounts Deposits maturing within 12 months – Term deposits
64 12.
LOANS TO EMPLOYEES – secured and unsecured (considered good)
760 1,491 2,251
138,841 290,074 428,915
75,179 615,671 690,850
1,238,406 1,670,155
987,524 1,680,625
2008
2007
(Rupees in '000)
Due from employees
Less: current portion
216 2,618 2,834
20
988 988
1,036 1,036
624 364
603 433
These represent loans provided to employees for the purchase of motor vehicles (CTF) at the mark up rate of 6 percent per annum and interest free loans for general purposes in accordance with the terms of their employment. These loans are recoverable in four years. The maximum amount due from executives calculated with reference to month – end balances was Rs. Nil (31 December 2007: Rs. 0.027 million).
For the year ended 31 December 2008 13.
INVESTMENTS
2008 2007 (Rupees in '000)
In related parties Investment in an associate – equity accounting Available for sale
13.1 13.4.1
29,961 256,717 286,678
26,060 2,437 28,497
13.2 13.3
138,998 72,717
141,899 50,439
929,324 2,500 1,143,539
1,732,557 2,500 1,927,395
1,430,217
1,955,892
New Jubilee Life Insurance Company Limited (Chief Executive: Mr. Javed Ahmed) 29,961
26,060
13.4.2
13.1
Investment in an associate – equity accounting
13.1.1
Particulars of investment in associate – listed
Number of shares 2008 2007 4,032,766
4,032,766
Face value per share (Rupees)
Name of associate
10
Market value of investment and percentage of holding in associate is Rs. 182.00 million and 6.43% respectively (31 December 2007: Rs. 284.51 million and 6.43%). 13.1.2
Movement of investment in associate
2008
2007
(Rupees in '000) Beginning of the year Share in profit upto 30 September Less: Dividend received Share in net equity as at 30 September Closing balance 13.1.3
26,060 6,624 2,016 4,608 (707) 29,961
19,458 6,818 2,016 4,802 1,800 26,060
Following information has been summarised based on financial statements as at 30 September 2008 of the associated company: Total assets Total liabilities Net equity Profit after tax
5,888,878 5,422,938 465,940 27,068
5,579,493 5,174,208 405,285 49,513
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Available for sale – Quoted – Unquoted
ANNUAL REPORT 2008
Held to maturity – Government securities – Term finance certificates – quoted
NEW JUBILEE INSURANCE COMPANY LIMITED
Others
Notes to the Financial Statements 13.2
Government securities Face value (Rupees)
Profit rate %
Profit payment
Particulars
50,000,000
10
Semi annually
50,000,000
12
Semi annually
Maturity date
2008
2007
(Rupees in '000)
Pakistan Investment Bond – 20 years 20–01–2024
58,458
58,740
54,856
56,240
25,684
26,919
138,998
141,899
Pakistan Investment Bond – 10 years 24–12–2011 Pakistan Investment 22,500,000
14
Semi annually
Bond – 10 years 18–04–2011
Market value of Pakistan Investment Bonds is Rs. 99.64 million (31 December 2007: Rs. 123.19 million). Market values is determined based on quotations obtained from brokers. Pakistan Investment Bonds amounting to Rs. 66.00 million (2007: Rs.Nil) are placed with State Bank of Pakistan under Section 29 of the Insurance Ordinance, 2000. 13.3
Term Finance Certificates – quoted Face value 2008
2007
per certificate
(Number of certificates) –
Type of security
(Rupees)
2008
2007 (Rupees in '000)
300
5,000
MCB Bank Limited
–
10,000
10,000
5,000
Bank AL Habib Limited
49,970
449
5,056
–
5,000
United Bank Limited
22,747
–
72,717
50,439
49,990
Market value of quoted term finance certificates is Rs. 66.72 million (31 December 2007: Rs. 51.17 million). The market values is determined as per rates quoted by Mutual Funds Association of Pakistan on 12 January 2009.
66
Details of term finance certificates are as follows: Particulars Bank AL Habib Limited
Profit rate per annum Base rate plus 1.95% per annum
Profit payment Semi–annually
Maturity date 06–02–2015
United Bank Limited
6 months KIBOR plus 0.85% per annum
Semi–annually
14–02–2018
For the year ended 31 December 2008 13.4
Available for sale securities
13.4.1
In related parties
2008
Cost Less: Impairment during the year
13.4.2
383,498 (126,781) 256,717
2,437 – 2,437
1,453,685 (524,361) 929,324
1,732,557 – 1,732,557
Others Cost Less: Impairment during the year
13.4.3
2007 (Rupees in '000)
Market value of quoted available for sale Investments is Rs.1,275.75 million (31 December 2007: Rs.
Furthermore, SECP vide circular no.3/2009 dated 16 February, 2009 has allowed that for the purpose of application of clause 16(1)(a) of Part A and clause 13(1)(a) of Part B to the Annexure II: “Statements required to be filed by life and non–life insurers” of the Insurance Rules 2002, where the market value of any available for sale investment as at 31 December 2008 is less then cost, the fall in value may be treated as temporary and the investment valued at cost. The fall in value of available for sale investments as temporary, then twenty five percent of the difference after any adjustment/effect for price movements shall be taken to Profit and Loss account on quarterly basis during the calendar year ending on 31 December 2009. The decline in value of available for sale investment as at 31 December 2008 shall be treated as charge to profit and loss account for the purpose of distribution of dividend. International Accounting Standard 39 – Financial Instruments: Recognition and Measurement (IAS 39) requires that available for sale equity investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. Such impairment loss should be charged to Profit and Loss Account. In order to comply with the requirements of IAS 39 and in view of market conditions and current economic scenario in the country, the Company decided to record full impairment of Rs. 651.142 million in the value of available for sale securities in these financial statements.
67
The Karachi Stock Exchange (Guarantee) Limited (“KSE”) placed a “Floor Mechanism” on the market value of securities based on the closing prices of securities prevailing as on 27 August 2008. Under the “Floor Mechanism”, the individual security price of equity securities could vary within normal circuit breaker limit, but not below the floor price level. The mechanism was effective from 28 August 2008 and remained in place until 15 December 2008. Consequent to the introduction of ‘floor mechanism’ by KSE, the market volume declined significantly during the period from 27 August 2008 to 15 December 2008. There were lower floors on a number of securities at 31 December 2008. The equity securities have been valued at prices quoted on the KSE on 31 December 2008 without any adjustment as allowed by the Securities and Exchange Commission of Pakistan (SECP) circular No. Enf/D–III/Misc./1/2008 dated 29 January 2009 and disclosed in the financial statements as required.
ANNUAL REPORT 2008
13.4.4
NEW JUBILEE INSURANCE COMPANY LIMITED
2,258.81 million).
Notes to the Financial Statements 14.
INVESTMENT PROPERTIES 2008 Cost As at 1 January 2008
Depreciation
Additions As at (disposals) 31 December 2008
As at 1 January 2008
Written down value as at 31 December 2008
Useful life
–
34,164
–
5,409
75,931
40–80 years
1,317 (1,157)
5,868
13,727
10 years
2,158
11,277
123,822
For the year
As at 31 December 2008
(Rupees in '000) Leasehold land
34,164
–
34,164
–
Building
39,527
41,813
81,340
4,568
12,782
9,128 (2,315)
19,595
5,708
86,473
50,941
135,099
10,276
– 841
Lifts and other installations
(2,315)
(1,157)
2007 Cost As at 1 January 2007
Additions
Depreciation As at 31 December 2007
As at 1 January 2007
For the year
Written down As at 31 December 2007
value as at 31 December 2007
Useful life
(Rupees in '000)
Leasehold land
34,164
–
34,164
–
–
Building
34,945
4,582
39,527
3,920
12,782
–
12,782
5,036
672
81,891
4,582
86,473
8,956
1,320
648
–
34,164
–
4,568
34,959
40–80 years
5,708
7,074
10 years
10,276
76,197
Lifts and other installations
14.1
The market value of the investment properties as per valuation carried out by professional valuers in 2007 is Rs. 1,214.70 million.
15.
DEFERRED TAXATION
2008 2007 (Rupees in '000)
68
Deferred tax debits / (credits) arising in respect of: – Accelerated depreciation – Provision for doubtful debts – Share of profit from associate – Taxable loss and impairment
16.
(5,122) 41,557 (461) – 35,974
(15,965) 41,557 – 36,978 62,570
PREMIUMS DUE BUT UNPAID – unsecured Considered good Considered doubtful
Less: Provision for doubtful balances
16.1
714,385 64,274 778,659
703,209 64,274 767,483
64,274 714,385
64,274 703,209
For the year ended 31 December 2008 2008 16.1
Provision for doubtful balances
(Rupees in '000)
Opening balance Add: Provision made during the year
17.
2007
23
64,274
54,274
–
10,000
64,274
64,274
181,303
45,672
AMOUNTS DUE FROM OTHER INSURERS /
Considered good Considered doubtful
54,459
54,459
235,762
100,131
54,459
54,459
181,303
45,672
500,225
447,208
Rent
9,494
5,946
Miscellaneous expenses
3,339
1,367
513,058
454,521
Less: Provision for doubtful balances
REINSURANCE RECOVERIES AGAINST OUTSTANDING CLAIMS These are unsecured and considered good.
19.
PREPAYMENTS
20.
69
Prepaid reinsurance premium ceded
SUNDRY RECEIVABLES Current portion of long term loans
624
603
21,869
47,562
Rent receivable
1,326
1,326
Security deposits
5,490
3,260
Advances to suppliers and contractors
12
Receivable in respect of acquisition
–
Other advances – considered good
12,089
464
Receivable against redemption of units
25,000
–
66,398
68,116
14,901
ANNUAL REPORT 2008
18.
NEW JUBILEE INSURANCE COMPANY LIMITED
REINSURERS
Notes to the Financial Statements 21. FIXED ASSETS 21.1 Tangible assets
As at 1 January 2008
Furniture and fixtures
37,651
Cost Additions / Adjustments As at (disposals) 31 December 2008
15,799
256
52,703
2008 Depreciation Written down Depreciation As at For the year / Adjustments As at value as at rate 1 January (disposals) 31 December 31 December % 2008 2008 2008 (Rupees in '000) 17,167
(1,003) Office equipment
44,504
13,691
27,260
4,365
(291)
56,708
17,706
153,873
1,224
(51)
31,552
16,768
35,079
31,544
17
5,940
(34)
22,809
33,899
17
4,029
(53)
20,741
10,811
25
674
10,500
18,483
20
587
75,209
94,737
(3) (4,345)
28,983
32,695
(121,769) 263,288
21,159
(803)
(22) Vehicles
–
(850)
(1,196) Computer equipment
4,842
10,599 (33,468)
(4,431)
169,946
84,336
(123,990)
25,410 (35,124)
2007 As at 1 January 2007
Furniture and fixtures
28,015
Cost Additions / Adjustments As at (disposals) 31 December 2007 2007
10,429
–
37,651
Depreciation Written down Depreciation As at For the year Adjustments As at value as at rate 1 January (disposals) 31 December 31 December % 2007 2007 2007 (Rupees in '000) 12,398
(793) Office equipment
28,215
18,083
23,836
4,378
–
44,504
13,962
70
122,425 202,491
(913)
27,260
16,109
20,484
17
–
17,706
26,798
17
(15)
16,768
10,492
25 20
4,805 682 (8)
48,498 (15,636)
(1,414)
153,873
34,675
7,034 (7,600)
(1,414)
32,695
121,178
81,388
(2,327)
263,288
77,144
17,710
(1,429)
84,336
178,952
(18,264)
21.2
17,167
(1,061)
(41) Vehicles
–
(420)
(1,794) Computer equipment
5,189
(9,089)
Intangible assets
As at 1 January
Additions
Cost Adjustments
As at 31 December
Amortisation Written down Amortisation As at For the year Adjustments As at value as at period 1 January 31 December 31 December (Rupees in '000)
Computer softwares 2008
6,569
2,007
2007
4,934
737
–
8,576
4,289
1,064
–
5,353
3,223
5 years
898
6,569
4,007
282
–
4,289
2,280
5 years
For the year ended 31 December 2008 Disposal of tangible assets Cost
Accumulated depreciation
Book Sale value proceeds (Rupees in '000)
Profit / (loss)
Mode of disposal
Particulars of buyers
2,888 1,543 1,080 1,091 988 921 936 931 928 925 931 922 922 922 1,023 922 922 922 924 902 892 922 1,023 1,024 924 933 933 924 862 959 890 890 1,439 1,202 944 928 928 1,196 889 928 1,032 928 928 928 920 868 916 1,103 923 886 898 886 898 1,087 865 866 950 865 847 600 600
1,009 187 76 219 117 64 94 95 93 94 102 93 93 93 195 102 103 103 111 90 90 120 224 226 130 140 140 138 86 183 124 125 676 462 208 195 195 467 169 213 320 232 232 232 230 181 229 419 249 213 229 230 242 438 230 268 354 277 296 61 61
1,879 1,356 1,004 872 871 856 842 837 835 831 829 828 828 828 828 819 819 819 813 811 802 801 799 797 794 792 792 786 776 776 766 765 763 740 736 733 733 730 720 714 712 696 696 696 690 687 687 684 674 673 669 656 655 648 635 598 596 588 551 539 539
1,575 1,271 738 746 715 704 711 728 704 831 728 728 728 704 815 728 728 728 831 704 704 728 815 815 831 834 831 800 704 805 704 704 746 746 644 675 644 746 675 675 785 675 675 741 675 714 675 780 500 675 793 675 675 811 717 651 751 651 668 557 514
(304) Offer price Tahir Ahmed (85) Offer price Syed Sohail Ahmed (266) Offer price Syed Ather Abbas (125) Offer price Abida Saleem (156) Offer price Shehzad Noorani (153) Offer price Siddique Memon (131) Offer price M. Uzair Mirza (109) Offer price Rizwan Ehsan Puri (132) Offer price Khawaja Iqbal Ahmed (0) Offer price Ejaz Mahmood (101) Offer price Mian Allah Nawaz (100) Offer price Akber Sultan (100) Offer price Muhammad Iqbal (124) Offer price Sunnu F. Golwalla (13) Offer price Razzak Choudhry (91) Offer price Syed Tanzeem–Ul–Hassan (91) Offer price Vishandas Nankani (91) Offer price Syed Waqar Hyder Taqvi 18 Offer price Azfar Arshad (108) Offer price Zahid Farman (98) Offer price Nahid Afzal Panawala (73) Offer price Azam Sultan 16 Offer price Ilyas Muhammad 18 Offer price Haji Muhammad Ramzan 37 Offer price Syed Imran Rabbani 42 Offer price Nasim–Ul–Haq 39 Offer price Atta–Ul–Haq Shaikh 14 Negotiation Mian Mushtaq Ahmed (72) Offer price Syed Obaid–Ur–Rehman 29 Offer price M. Afzal Qureshi (62) Offer price Bilal Q. Alvi (61) Offer price Akber Habib Rajan (16) Offer price Tahir Ahmed 7 Offer price Mehboob Parvaiz (92) Offer price Syed Noman Kadri (58) Offer price Abdul Qadir Moochala (89) Offer price Hashim M. Shamim 17 Offer price Muhammad Safdar (45) Offer price M. Nadeem Irshad (39) Offer price Sharif Ahmed Khan 73 Offer price Shehnaz Kassim (21) Offer price Ishtiaq Ahmed (21) Offer price Shaikh Muhammad Issa 45 Auction Faisal Abdul Aziz (15) Offer price Asif Ali 27 Offer price Qamar Saleem (12) Offer price Zubair Dada 96 Auction Rehman Mithani (174) Negotiation Sunail Kumar Talreja 2 Offer price Amir Mumtaz Paracha 124 Auction Syed Riaz Ahmed 19 Auction Karim Arif 20 Offer price Arslan Bhatti 163 Auction Syed Riaz Ahmed 82 Auction Muhammad Ovais Gaziani 53 Offer price Karim Merchant 155 Offer price Bashir Ahmed Khan 63 Offer price Zulfiqar Ali Abdullah 118 Auction Zahid Qadri 17 Offer price Asghar Moiz (25) Offer price Tariq Zia
Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Other Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Other Employee Employee Employee Other Other Employee Other Other Employee Other Other Employee Employee Employee Other Employee Employee
71
Motor vehicles (including trackers)
NEW JUBILEE INSURANCE COMPANY LIMITED
Disposal of tangible assets during the year having book value exceeding Rs. 50,000
ANNUAL REPORT 2008
21.3
Notes to the Financial Statements Cost
72
601 600 610 913 600 889 889 590 600 605 849 849 600 819 600 632 843 931 571 1,008 1,041 578 577 1,009 950 610 540 608 809 593 583 583 605 813 1,152 600 809 553 1,123 488 595 639 639 557 678 619 773 579 600 404 405 404 600 406 757 405 804 396 396 399 396 379 375 399 850 820 403 404
Accumulated depreciation
67 67 80 384 72 364 364 66 78 85 331 331 84 303 84 117 329 419 67 507 543 81 81 514 456 117 55 129 332 119 111 111 139 351 691 144 353 100 674 39 155 204 217 136 262 222 379 185 221 31 34 38 234 42 394 42 442 36 37 41 41 26 26 52 510 492 75 78
Book Sale value proceeds (Rupees in '000) 533 533 529 529 528 524 524 524 522 520 518 518 516 516 516 515 514 512 504 502 498 497 496 494 494 494 485 479 476 474 472 472 466 462 461 456 455 453 449 449 440 435 422 420 416 397 394 394 379 374 371 367 366 364 363 363 362 360 360 358 355 353 349 347 340 328 327 326
468 514 484 662 535 648 649 514 514 514 461 458 514 672 514 653 458 702 453 717 717 514 514 717 717 507 546 537 516 485 484 518 484 508 600 484 487 508 698 410 484 485 450 545 466 491 377 457 457 326 326 326 395 326 388 326 424 326 326 326 326 326 378 326 455 487 308 308
Profit / (loss)
Mode of disposal
Particulars of buyers
(66) Offer price Syed Shoaib Kamal Zaidi Employee (19) Negotiation Syed Tanveer Akhtar Ex–Employee (45) Offer price Captain Shahid Ahmed Employee 133 Auction Syeda Hafsa Malik Other 7 Offer price Muhammad Arif Employee 123 Auction Syed Riaz Ahmed Other 124 Auction Nauman Ahmed Siddiqui Other (10) Offer price Khalid Hameed Employee (8) Auction Muhammad Aslam Khan Ex–Employee (6) Offer price Mehboob Merchant Employee (57) Auction Rehan Other (60) Offer price Aziz Surani Employee (2) Offer price Ch. Aamir Ali Employee 156 Auction Sarfaraz Khan Other (2) Offer price Shabbir Hassan Employee 138 Auction Haji Nazeer Ahmed Other (56) Offer price Syed Abdul Rahim Employee 190 Auction Atif Shabbir Other (51) Auction Muhammad Ovais Gaziani Other 216 Offer price Hamid Hussain Zaidi Employee 219 Offer price Ch. Sardar Ali Employee 17 Offer price Abdul Hayee Khan Employee 18 Offer price Riaz A. Bhatti Employee 223 Offer price Zahoor A. Shaheen Employee 223 Offer price Mirza Ali Mahmood Employee 13 Auction Malik Abdul Khaliq Other 61 Auction Syed Farhat Abbas Jaffri Other 58 Auction Malik Abdul Khaliq Other 40 Auction Syed Farhat Abbas Jaffri Other 11 Offer price Adnan Junaid Employee 12 Offer price Dr. Siddique Hossain Employee 46 Auction Syed Riaz Ahmed Other 19 Offer price Amjad Habib Employee 46 Auction Sarfaraz Khan Other 139 Offer price Muhammad Ikram Employee 28 Offer price Zermin Sohail Employee 32 Auction Muhammad Owais Other 55 Auction Syed Farhat Abbas Jaffri Other 249 Offer price Atiq A. Mehmudi Employee (39) Offer price Munawwar Ali Siddiqui Employee 44 Negotiation Tayyab Farooq Other 50 Offer price Atiq A. Mehmudi Employee 28 Auction Ratna Kumari Other 124 Auction Syed Riaz Ahmed Other 50 Auction Zahid Qadri Other 94 Auction Sultan Hassan Khan Other (17) Auction Kamran Yaseen Wasti Other 63 Offer price Ali Aasim Khan Employee 78 Offer price Amanullah Khan Employee (48) Offer price Azam Khan Employee (45) Offer price M. Ilyas Qureshi Employee (41) Offer price Abdul Aziz Employee 29 Offer price Hashim M. Shamim Employee (39) Offer price M. Saleem Hashim Employee 24 Offer price Iqbal A. Rohilla Employee (37) Offer price Ghufranullah Khan Employee 62 Auction Syed Riaz Ahmed Other (35) Offer price Birgis Fatima Employee (34) Offer price M. Amin Memon Employee (32) Offer price Tariq Rafiq Employee (30) Offer price Zobia Fayyaz Employee (27) Offer price Naeem Zafar Employee 28 Auction Malik Abdul Khaliq Other (21) Offer price Muhammad Arif Moten Employee 115 Offer price Mian Saeed–Ur–Rehman Employee 159 Auction Kamran Yaseen Wasti Other (19) Offer price Israr Ali Shah Employee (18) Offer price Zulfiqar A. Karim Employee
For the year ended 31 December 2008
Furniture and fixtures
Profit / (loss)
Mode of disposal
Particulars of buyers
403
77
325
309
(16)
Offer price
S.M. Jaffri
395
74
322
253
(69)
Offer price
Arshad Mahmood
Employee Employee
803
482
321
491
170
Auction
Sarzameen Khan
Other
395
75
319
318
(2)
Auction
Syed Riaz Ahmed
Other
412
93
319
308
(11)
Offer price
755
437
318
495
177
Auction
381
68
313
304
(9)
395
83
312
287
(26)
391
80
311
286
(25)
Auction
Tabassum Bashir Qureshi
Employee
Zahid Qadri
Other
Auction
Syed Riaz Ahmed
Other
Auction
Rizwan
Other
Sultan Hassan Khan
Other
352
41
311
333
22
Auction
Zahid Qadri
Other
407
107
300
302
2
Auction
Malik Abdul Khaliq
Other
564
265
299
407
108
Auction
Malik Abdul Khaliq
Other
417
121
296
235
(61) Negotiation Nisar Hussain Uttanwala
Ex–Employee
373
78
295
319
24
Malik Abdul Khaliq
Other Other
Auction
373
79
294
297
3
Auction
Saleem Akhtar Khan
733
440
293
368
75
Auction
Amir Mehmood
Other
423
133
290
291
1
Auction
Faisal Abdul Aziz
Other
468
182
285
335
50
Offer price
Ghulam Hussain
Employee
408
129
279
276
(4) Negotiation Amir Fazal
439
161
278
250
406
129
277
406
132
274
Jan Muhammad Behlum
Ex–Employee
(28)
Auction
Other
275
(2)
Offer price
Abid Hussain
Employee
363
89
Auction
Peeral
Other
Muhammad Ovais Gaziani Other
345
75
270
288
18
Auction
450
181
269
249
(20)
Offer price
373
118
256
262
6
Auction
391
138
253
257
4
470
221
249
343
94
Auction
Syed Riaz Ahmed
Other
424
183
241
257
16
Auction
Atif Shabbir
Other
419
181
238
248
9
Auction
Atif Shabbir
Other
634
397
237
411
174
Auction
Rehan Khalid
Other
417
209
208
249
41
Offer price
Amer Sardar
Employee
466
261
205
333
129
Auction
Wasim Mirza
Other
466
267
199
292
93
Auction
Malik Abdul Khaliq
Other
250
80
170
223
53
Auction
Muhammad Ayoub
Other
324
175
149
190
41
Auction
Muhammad Usman
Other
294
179
115
151
36
Auction
Kamran Yaseen Wasti
Other
250
150
100
100
–
Auction
Syed M. Baqar Abidi
Other
S.M. Abbas Zaidi
Employee
Atif Shabbir
Other
Negotiation Tahir Ahmed–LZO
Ex–Employee
122
31
92
50
(42) Negotiation Winson (Pvt. ) Ltd.
Other
225
135
90
259
169
Other
135
47
88
216
128
Auction
Muhammad Kamran
Other
542
464
78
78
–
Auction
M. Khalid Awan
Other
403
282
121
132
10
Auction
M. Khalid Awan
Other
75
23
52
53
1
Offer price
Shaikh Muhammad Issa
Employee
Negotiation Ilyas Mirza
Office equipment, electrical installations and computers
NEW JUBILEE INSURANCE COMPANY LIMITED
Book Sale value proceeds (Rupees in '000)
73
Accumulated depreciation
ANNUAL REPORT 2008
Cost
Notes to the Financial Statements 22.
ADMINISTRATIVE SURCHARGE Premium written and net premium revenue include administrative surcharge, class wise detail of which is given below: 2008 2007 (Rupees in '000) Fire and property damage Marine, aviation and transport Motor Miscellaneous
23.
10,690 10,579 21,550 5,658 48,477
9,405 9,783 21,389 4,192 44,769
307,973 32,117 14,548 840 12,447 20,488 3,360 27,734 25,410 1,064 1,034 – 59,309 506,324
224,750 23,469 12,781 – 11,059 19,225 2,508 14,251 17,710 282 2,735 10,000 66,662 405,432
MANAGEMENT EXPENSES Salaries, wages and benefits Rent, taxes and electricity Communications Directors' fee and expenses Printing and stationery Travelling and entertainment Repairs and maintenance Advertisement and sales promotion Depreciation Amortisation Bad debts written off Provision for doubtful balances Other expenses
23.1
21.1 21.2 16.1
23.1
These include Rs.8.24 million (31 December 2007: Rs. 6.89 million ) in respect of employees' provident fund and Rs.10.87 million (31 December 2007: Rs. 8.29 million ) in respect of defined benefit plan.
24.
RENTAL INCOME
74
Rental revenue Investment property related expenditure
25.
93,073 (9,873) 83,200
79,207 (8,343) 70,864
OTHER INCOME Income from financial assets Exchange gain / (loss) Return on loans to employees Income from non–financial assets Gain on sale of fixed assets Others
6,450 56
1,012 3,255 10,773
(14) 30
1,817 978 2,811
For the year ended 31 December 2008 GENERAL AND ADMINISTRATION EXPENSES
Legal and professional Subscription Registration fee Insurance ombudsman Workers welfare fund Charity and donations Expense on bonus issue Authorized capital fee Auditors' remuneration
2008 2007 (Rupees in '000)
26.1
26.2
5,614 364 294 225 5,801 5,017 1,252 – 986 19,553
1,311 235 131 – – 2,548 1,451 1,250 943 7,869
26.1
During the year, no donations were made to any donee in which a director, executives or their spouses were interested.
26.2
Auditors' remuneration
450 89 943
(61,500) (26,596) (88,096)
(12,761) 26,176 13,415
(179,153)
575,041
(62,704)
201,264
Relationship between tax expense and accounting (loss) / profit (Loss) / profit before taxation Tax at the applicable rate of 35% (31 December 2007: 35%)
28.
450 111 986
TAXATION – NET Current Deferred
27.1
250 75 79
NEW JUBILEE INSURANCE COMPANY LIMITED
27.
250 75 100
75
Audit fee Interim review Tax advisory services Special reports and certificates for various government agencies and sundry advisory services Out of pocket expenses
Tax effect of expenses that are not allowable in determining taxable income
226,432
Tax effect of capital gains exempt from tax
(34,885)
(174,664)
Tax effect of income subject to lower rates
(40,747) 88,096
(45,765) (13,415)
5,750
TRANSACTIONS WITH RELATED PARTIES Related parties comprise associated companies, directors, key management personnel and retirement benefit funds. Investments in related parties have been disclosed in the relevant balance sheet note. Remuneration to the key personnel are included in note 30 to these financial statements and are determined in accordance with the terms of their appointments.
ANNUAL REPORT 2008
26.
Notes to the Financial Statements Details of transactions with related parties during the year, other than those which have been disclosed elsewhere in these financial statements, are as follows: 2008 2007 (Rupees in '000) Insurance premium: – Balance at beginning of the year
233,187
62,938
– Insurance premium written (including government levies administrative surcharge and policies stamps)
357,010
360,332
(352,554)
(190,083)
237,643
233,187
9,723
2,868
191,223
100,598
Purchases of goods and services
7,115
9,304
Dividend income
3,608
5,461
Rent income
14,363
13,751
Contributions / provision for staff retirement benefit plans
19,083
15,172
– Received / adjusted during the year – Balance at end of the year Insurance commission expense Insurance claims expense
29.
EMPLOYEES BENEFITS Defined benefit plan The actuarial valuations are carried out annually and contributions are made accordingly. Following were the significant assumptions used for valuation of the scheme:
76
– – – – 29.1
Discount rate 15% (2007: 10%) per annum. Expected rate of increase in the salaries of the employees 15% (2007: 10%) per annum. Expected interest rate on plan assets of the fund 10% (2007: 10%) per annum. Expected service length of the employees 15 years (2007: 15 years).
Asset / (liability) in balance sheet
2008
2007
(Rupees in '000) Present value of defined benefit obligation Fair value of plan assets Net actuarial losses not recognised
29.2
52,504 (43,503) (9,001) –
38,922 (35,427) (3,495) –
– 10,846 (10,846) –
– 8,286 (8,286) –
Movement in asset / (liability) during the year Opening balance Charge to profit and loss account Contributions to the fund during the year Closing balance
For the year ended 31 December 2008 Reconciliation of the present value of the defined benefit obligations
2008 2007 (Rupees in '000)
Present value of obligation as at 1 January
38,922
36,842
Current service cost
10,496
7,971
Interest cost
3,892
3,684
Benefits paid
(5,589)
(10,677)
Actuarial loss Present value of obligation as at 31 December
1,102 38,922
35,427
33,700
Fair value of plan assets as at 1 January
3,542
3,370
Contribution to the fund
Expected return on plan assets
10,846
8,286
Benefits paid
(5,589)
(10,677)
Actuarial gain / (loss)
(723)
Fair value of plan assets as at 31 December 29.5
43,503
35,427
Charge for the defined benefit plan Current service cost
10,496
7,972
3,892
3,684
Interest cost Expected return on plan assets
29.6
748
(3,542)
(3,370)
10,846
8,286
3,542
3,370
Actual return on plan assets Expected return on assets Actuarial gain / (loss) on assets
(723)
748
2,819
2008 29.7
Composition of fair value of plan assets
Debt instruments Equity instruments Others Fair value of plan net assets
4,118
2007
Fair value Percentage Fair value Percentage (Rupees in (Rupees in 000) 000) 14,480 24 28,999 43,503
33% 0% 67%
15,080 4,378 15,969 35,427
43% 12% 45%
NEW JUBILEE INSURANCE COMPANY LIMITED
Changes in fair value of plan assets
77
29.4
4,783 52,504
ANNUAL REPORT 2008
29.3
Notes to the Financial Statements 29.8
Historical data of the fund
2008
2007
52,504
38,922
(43,503)
2006 (Rupees in '000)
2005
2004
36,842
29,927
27,199
(35,427)
(33,699)
(30,036)
(27,224)
9,001
3,495
3,143
(109)
(25)
4,783
1,102
Present value of defined benefit obligations
Fair value of plan assets Deficit / (surplus)
Experience adjustments – Actuarial loss / (gain) on obligation – Actuarial gain /(loss) on assets
(723)
1,260
748
(1,991)
29.9
The estimated contribution to the Fund for the year ending 31 December 2009 is Rs. 12.97 million.
30.
REMUNERATION OF MANAGING DIRECTOR, DIRECTORS AND EXECUTIVES
Managing Director 2008
2007
Directors 2008
473
(612)
1,209
(249)
Executives
2007
2008
Total
2007
2008
2007
(Rupees in '000)
Director fees
–
–
840
–
–
–
– including bonus
6,600
Retirement benefits
900
840
–
5,477
–
–
46,071
30,950
52,671
706
–
–
4,794
2,950
5,694
3,656
1,620
1,271
–
–
14,925
9,564
16,545
10,835
540
424
–
–
4,001
2,496
4,541
2,920
16
12
–
–
1,511
1,115
1,527
1,127
555
808
–
–
2,009
2,417
2,564
3,225
Managerial remuneration
House rent Utilities Medical expenses
36,427
Leave passage / assistance Others
78
Number of persons
1,382
180
–
–
17,989
5,815
19,371
5,995
11,613
8,878
840
–
91,300
55,307
103,753
64,185
1
8
47
29
56
38
1
8
In addition, the managing director and some of the executives are provided with free use of certain items of household furniture, fixtures and equipments in accordance with their entitlements.
31.
309
7,915
2,959
4,181
ANNUAL REPORT 2008
Unallocated capital expenditure
Non–cash expenses other than depreciation / amortisation
Depreciation / amortisation
Consolidated total liabilities
Unallocated corporate liabilities
Segment liabilities
SEGMENT LIABILITIES 905,202 1,059,366
79
2,676
3,781
427,401
194
4,963
647,856
393,412
4,072
5,751
674,634
202,712
Motor 2007
133
3,407
182,852
111,037
96
136
99,714
122,826
Liability 2008 2007 (Rupees in ‘000)
NEW JUBILEE INSURANCE COMPANY LIMITED
166
4,262
470,407
312,824
2008
97
2,470
334,673
203,231
2,064
2,917
235,446
77,205
Accident & Health 2008 2007
135
3,457
573,104
348,018
868
1,226
834,560
581,559
Miscellaneous 2008 2007
Total 2007
1,891,038 1,853,990
2008
189,922
88,027
1,034
26,474
86,707
12,735
17,992
3,363,858 3,521,043
249,764
3,114,094 3,331,121
5,425,172 5,932,706
285,655
Marine 2008 2007
Consolidated total assets
556,864
2007
3,534,134 4,078,716
549,685
Fire
Unallocated corporate assets
Segment assets
SEGMENT ASSETS
2008
Class of business wise revenue and results have been disclosed in the profit and loss account prepared in accordance with the requirement of Insurance Ordinance, 2000 and the SEC (Insurance) Rules, 2002. The following table presents information regarding segment assets, liabilities as at 31 December 2008 and 31 December 2007, unallocated capital expenditures and non–cash expenses during the year:
SEGMENT REPORTING
For the year ended 31 December 2008
Notes to the Financial Statements 32.
FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES Liquidity risk Liquidity risk is the risk that the Company will be unable to meet its funding requirements. To guard against the risk, the Company has diversified funding sources and assets are managed with liquidity in mind, maintaining a healthy balance of cash and cash equivalents and readily marketable securities. The maturity profile is monitored to ensure adequate liquidity is maintained. Interest / Markup rate risk The Company invests in securities and has deposits that are subject to interest / markup rate risk. Interest / markup rate risk to the Company is the risk of changes in market interest / markup rates reducing the overall return on its interest bearing securities. The Company limits interest / markup rate risk by monitoring changes in interest / markup rates in the currencies in which its cash and investments are denominated. The Company's interest sensitivity and liquidity positions based on maturities is as follows: Effective rate % per annum
2008 Interest / mark–up bearing financial instruments Non – interest / Maturity Maturity over Maturity Sub total mark–up bearing upto one one year to more than financial year five years five years instruments (Rupees in '000)
Total
FINANCIAL ASSETS Cash and bank deposits Loans to employees Investments Premiums due but unpaid
0.25–19.25
–
–
1,528,480
6
1,528,480 –
364
–
364
10–14.35
–
80,540
–
–
–
–
–
– –
131,175
211,715
141,675 –
1,670,155 364
1,218,502
1,430,217
–
714,385
714,385
–
–
181,303
181,303
–
–
–
20,035
20,035
–
–
–
26,626
26,626
–
–
–
–
365,729
365,729
278
–
–
Amounts due from other insurers / reinsurers Reinsurance recoveries due but unpaid Accrued investment income Reinsurance recoveries against outstanding claims
80
Sundry receivables
1,528,758
80,904
131,175
278
44,251
44,529
1,740,837
2,712,506
4,453,343
–
1,190,064
1,190,064
146,696
FINANCIAL LIABILITIES
Provision for outstanding claims
–
–
–
Amounts due to other insurers / –
–
–
–
146,696
Accrued expenses
reinsurers
–
–
–
–
12,914
12,914
Other creditors and accruals
–
–
–
–
310,892
310,892
Deposits and other payables
–
–
–
–
147,185
147,185
Unclaimed dividend
–
–
–
–
16,561
16,561
–
–
–
–
1,824,312
1,824,312
888,194
2,629,031
Inter risk sensitivity gap
1,528,758
80,904
131,175
Cumulative interest risk sensitivity gap
1,528,758
1,609,662
1,740,837
1,740,837
For the year ended 31 December 2008
Effective rate % per annum
2007 Interest / mark–up bearing financial instruments Non – interest / Maturity Maturity over Maturity Sub total mark–up bearing upto one one year to more than financial year five years five years instruments (Rupees in '000)
Total
FINANCIAL ASSETS Cash and bank deposits
0.25 to 10.50 1,603,195
Loans to employees Investments
6 10 to 14
Premiums due but unpaid
–
– 433
449
83,159
– – 108,730
1,603,195 433 192,338
77,430 –
1,680,625 433
1,763,556
1,955,894
–
–
–
–
703,209
703,209
–
–
–
–
45,672
45,672
–
–
–
–
17,691
17,691
Amounts due from other insurers / reinsurers Reinsurance recoveries due but unpaid
retained by cedants
–
Accrued investment income
13
–
–
–
1,080
1,080
3,296
2,247
5,556
8,401
13,957
–
–
501,680
501,680
Reinsurance recoveries against outstanding claims Sundry receivables
– 296 1,603,953
– –
–
86,888
110,977
–
–
296
20,258
20,554
1,801,818
3,138,977
4,940,795
–
1,428,812
1,428,812
FINANCIAL LIABILITIES
Provision for outstanding claims
–
Amounts due to other insurers / reinsurers Accrued expenses
–
–
–
–
270,643
270,643
–
–
–
–
7,553
7,553
–
–
–
–
244,154
244,154
Deposits and other payables
–
–
–
–
109,666
109,666
Unclaimed dividend
–
–
–
–
15,186
15,186
–
–
–
–
2,076,014
2,076,014
1,062,963
2,864,781
Inter risk sensitivity gap
1,603,953
86,888
110,977
Cumulative interest risk sensitivity gap
1,603,953
1,690,841
1,801,818
1,801,818
ANNUAL REPORT 2008
81
Other creditors and accruals
NEW JUBILEE INSURANCE COMPANY LIMITED
Premium and claim reserves
Notes to the Financial Statements 33.
FOREIGN CURRENCY RISK The Company is not materially exposed to risk from foreign currency exchange rate fluctuation.
34.
MARKET RISK Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual security, or its issuer, or factors affecting all securities traded in the market. The Company is exposed to market risk with respect to its investments. The Company limits market risk by maintaining a diversified portfolio and by continuous monitoring of developments in equity, money market fund and term finance certificates (TFCs) markets. In addition, the Company actively monitors the key factors that affect stock, money market and TFCs market.
35.
CREDIT RISK AND CONCENTRATION OF CREDIT RISK Credit risk is the risk, which arises with the possibility that one party to a financial instrument will fail to discharge its obligation and cause the other party to incur a financial loss. The Company attempts to control credit risk by monitoring credit exposures by undertaking transactions with a large number of counter parties in various industries and by continually assessing the credit worthiness of counter parties. Concentration of credit risk arises when a number of counter parties have a similar type of business activities. As a result, any change in economic, political or other conditions would affect their ability to meet contractual obligations in a similar manner. The Company is exposed to credit risk on premiums receivable from customers and co–insurers; and for commission and claim recoveries from reinsurers. The management monitors exposure to credit risk through regular review of credit exposure and prudent estimates of provisions for doubtful receivables.
36.
REINSURANCE RISK
82
Reinsurance ceded do not relieve the Company from its obligation to policy holders and as a result the Company remains liable for the portion of outstanding claims reinsured to the extent that reinsurer fails to meet the obligation under the reinsurance agreements. To minimise its exposure to significant losses from reinsurer insolvencies, the Company obtains reinsurance from a number of reinsurers, who are dispersed over several geographical regions. 37.
CAPITAL MANAGEMENT The management's policy is to maintain a strong capital base for the confidence of stakeholders and to sustain future development of the business. The management closely monitors the return on capital along with the level of distributions to ordinary shareholders. The Company meets minimum paid up capital requirements as required by Securities and Exchange Commission of Pakistan.
38.
FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is an amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm's length transaction. Consequently, difference may arise between the carrying values and the fair values estimates.
For the year ended 31 December 2008 The fair value of all the financial instruments are estimated to be not significantly different from their carrying values except for quoted investments in associate, held to maturity and available for sale securities which fair value is Rs. 1,624.11 million (31 December 2007: Rs. 2,717.68 million). The fair value of quoted investments is based on quoted market price (Refer note 13.4). 39.
(LOSS) / EARNINGS PER SHARE Basic (loss) / earnings per share are calculated by dividing the net (loss) / profit for the year by the weighted average number of shares as at the year end as follows: 2008
2007
(Rupees in '000) (Loss) / profit after tax for the year
(267,249)
588,456
(Number of shares in '000) Restated
(Rupees) (Loss) / earnings per share of Rs. 10/= each - basic & diluted
(4.05)
8.93
39.1
No figure for diluted (loss) / earnings per share has been presented as the Company has not issued any instrument which would have an impact on (loss) / earnings per share when exercised.
39.2
The number of shares for the prior year has been adjusted for the effect of bonus shares issued during the current year. Hence, the figure for the prior year's earnings per share has also been restated.
40.
SUBSEQUENT EVENT – NON ADJUSTING The Board of Directors in its meeting held on 11 March 2009 has announced a final cash dividend in respect of the year ended 31 December 2008 of Rs. 1.5 per share of Rs.10 each (15%) [31 December 2007: Rs. 1.5 per share of Rs.10 each (15%) cash dividend and bonus shares 20%]. In addition, the Board of Directors has also approved the transfer from general reserve to unappropriated profit amounting to Rs. 300 million [31 December 2007: Transferred to general reserve of Rs 350 million]. These financial statements for the year ended 31 December 2008 do not include the effect of these appropriations which will be accounted for subsequent to the year end.
41.
AUTHORISATION FOR ISSUE These financial statements have been authorised for issue in accordance with a resolution of the Board of Directors on 11 March 2009.
42.
GENERAL All figures have been rounded off to the nearest thousand of rupees.
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
NEW JUBILEE INSURANCE COMPANY LIMITED
65,915
83
65,915
ANNUAL REPORT 2008
Weighted average number of shares of Rs.10 each
2008
2007
(Rupees in '000) Share capital and reserves Authorised share capital [100,000,000 ordinary shares of Rs.10 each (31 December 2007: 100,000,000 ordinary shares of Rs. 10 each]
1,000,000
1,000,000
659,148 (151,066) 1,553,232 2,061,314
549,290 658,434 1,203,939 2,411,663
1,190,064 1,345,366 48,446 2,583,876
1,428,812 1,190,119 53,263 2,672,194
2,501
3,066
18,933
18,478
146,696 28,874 332,280 526,783
270,643 23,520 255,100 567,741
234,137 16,561 250,698
262,856 15,186 278,042
TOTAL LIABILITIES
3,363,858
3,521,043
TOTAL EQUITY AND LIABILITIES
5,425,172
5,932,706
Paid-up share capital Retained earnings Reserves
5 6
Underwriting provisions Provision for outstanding claims (including IBNR) Provision for unearned premium Commission income unearned Total underwriting provisions Deferred liabilities Staff retirement benefits Creditors and accruals Premiums received in advance Amounts due to other insurers / reinsurers Accrued expenses Other creditors and accruals Other liabilities Deposits and other payables Unclaimed dividend
8
9
42 CONTINGENCIES
10
The annexed notes from 1 to 42 form an integral part of these financial statements.
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Balance Sheet As at 31 December 2008 Note
2008
2007
(Rupees in '000) 2,251 690,850 987,524 1,680,625
Loans to employees Secured and unsecured (considered good)
12
364
433
Investments
13
1,430,217
1,955,892
Investment properties
14
123,822
76,197
Deferred taxation
15
35,974
62,570
16
714,385
703,209
17
181,303 20,035 27,617
45,672 17,691 15,468
– 26,626
1,080 13,956
365,729 14,551 136,978 513,058 66,398 2,066,680
501,680 32,381 121,983 454,521 68,116 1,975,757
76,254 18,483 3,223 97,960
57,774 121,178 2,280 181,232
5,425,172
5,932,706
Current assets- others Premiums due but unpaid (unsecured) Amounts due from other insurers / reinsurers Reinsurance recoveries due but unpaid Salvage recoveries accrued Premium and claim reserves retained by cedants Accrued investment income Reinsurance recoveries against outstanding claims Taxation-- payments less provision Deferred commission expense Prepayments Sundry receivables Fixed assets Tangible and intangible Furniture, fixtures and office equipment Motor vehicles Computer softwares
TOTAL ASSETS
Akbarali Pesnani Director
18 7 19 20 21
Tahir Ahmed Managing Director (Chief Executive)
43
2,834 428,915 1,238,406 1,670,155
NEW JUBILEE INSURANCE COMPANY LIMITED
11
ANNUAL REPORT 2008
Cash and bank deposits Cash and other equivalents Current and other accounts Deposits maturing within 12 months
Profit & Loss Account for the year ended 31 December 2008 Note
Fire & Marine property aviation & transport
Motor
Liability Accident & Others Treaty health
2008 2007 Aggregate Aggregate
(Rupees in '000) Revenue account Net premium revenue
494,427
396,408 688,345
18,457
362,306 226,567
(67) 2,186,443 1,818,775
Less: Net claims
255,952
168,010 458,092
17,929
249,343 182,919
216 1,332,461 1,413,733
114,494
91,795 159,398
4,274
83,898
52,465 3,245
Expenses
23
--
506,324
405,432
(27)
239,543
206,643
(12,062) (256)
108,115
(207,033)
25 26 13.1.2
181,707 83,200 101,123 10,773 (19,553) 6,624
599,208 70,864 110,242 2,811 (7,869) 6,818
13.4
(651,142)
Net commission
85,178
75,113
68,467
(2,094)
9,661
Underwriting result
38,803
61,490
2,388
(1,652)
19,404
Investment income Rental income Return on bank deposits Other income General and administration expenses Share of profit of an associate Impairment in value of available for sale securities
24
(Loss) / profit before tax Taxation -- net
27
(Loss) / profit after tax
–
(179,153)
575,041
(88,096)
13,415
(267,249)
588,456
658,434
938,002
(267,249) (350,000)
588,456 (500,000)
(109,858)
(109,858)
(82,393) –
(175,773) (82,393)
(809,500)
(279,568)
(151,066)
658,434
(4.05)
8.93
Profit and loss appropriation account: Balance at commencement of the year (Loss) / profit after tax for the year Transfer to general reserve Issuance of bonus shares for the year 2007 : Rs.2 (20%) per share of Rs.10 each [2006: Rs.1.25 (25%) per share of Rs. 5 each] Final cash dividend for the year 2007: Rs.1.50 (15%) per share of Rs.10 each [2006: Rs. 2.00 (40%) per share of Rs. 5 each] Interim cash dividend for the year 2008: Nil [2007: Rs. 1.50 (15%) per share of Rs. 10 each]
44 Balance of unappropriated (loss) / profit at end of the year (Loss) / earnings per share of Rs. 10/= each -- basic & diluted
39
Rupees
The annexed notes from 1 to 42 form an integral part of these financial statements.
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
Statement of Changes in Equity for the year ended 31 Decembe 2008 Share capital Reserves Issued, Capital reserves Revenue reserves subscribed Reserve for General Retained and paid-up exceptional reserve earnings losses
Total Company's reserves Total share of capital contributed to statutory funds by an associated company (Rupees in '000)
Balance as at 1 January 2007
439,432
9,384
700,000
938,002
1,638,002
(7,245)
Total
1,640,141 2,079,573
Changes in equity for the year ended 31 December 2007 Company's share of capital contributed to statutory funds by an associated company
–
–
–
Total recognised income –– profit for the year
–
–
–
–
–
1,800
1,800
1,800
588,456
588,456
–
588,456
588,456
(175,773) (82,393) (109,858) – (368,024)
– – – –
(175,773) (82,393) (109,858) – (368,024)
(175,773) (82,393) – – (258,166)
– – – – –
– – – 500,000 500,000
(175,773) (82,393) (109,858) (500,000) (868,024)
549,290
9,384
1,200,000
658,434
1,858,434
(5,445)
1,862,373 2,411,663
Changes in equity for the year ended 31 December 2008 Company's share of capital contributed to statutory funds by an associated company
–
–
–
Total recognised loss – loss for the year
–
–
–
(267,249)
– 109,858 – 109,858
– – – –
– – 350,000 350,000
(82,393) (109,858) (350,000) (542,251)
659,148
9,384
1,550,000
(151,066)
–
–
(267,249)
(707)
(707)
(707)
–
(267,249)
(267,249)
– – – –
(82,393) (109,858) – (192,251)
(82,393) – – (82,393)
Appropriations: – Final cash dividend – Issuance of bonus shares – Transfer to general reserve
Balance as at 31 December 2008
(82,393) (109,858) – (192,251)
1,398,934
(6,152)
1,402,166 2,061,314
The annexed notes from 1 to 42 form an integral part of these financial statements.
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
45
Balance as at 31 December 2007
– – 109,858 – 109,858
ANNUAL REPORT 2008
– Final cash dividend – Interim cash dividend – Issuance of bonus shares – Transfer to general reserve
NEW JUBILEE INSURANCE COMPANY LIMITED
Appropriations:
Statement of Cash Flows for the year ended 31 December 2008 2008
2007
(Rupees in '000) Operating cash flows (a) Underwriting activities Premiums received Reinsurance premiums paid Claims paid Reinsurance and other recoveries received Commissions paid Commissions received Other underwriting payments (management expenses) Net cash (outflow) / inflow from underwriting activities (b) Other operating activities Income tax paid General and administration expenses paid Other operating payments Other operating receipts Loans advanced Loans repayment received Net cash inflow / (outflow) from other operating activities Total cash (outflow) / inflow from all operating activities Investment activities Profit / return received Dividends received Rentals received – net of expenses Payments for investments / investment property Proceeds from disposal of investments Fixed capital expenditure Proceeds from disposal of fixed assets
3,515,743 (1,361,670) (2,092,693) 508,393 (319,369) 108,175 (480,085)
3,200,568 (1,435,380) (1,292,042) 224,712 (267,434) 116,083 (396,059)
(121,506)
150,448
(43,670) (13,752) (232,525) 308,519 (824) 873
(141,364) (7,869) (212,683) 269,958 (1,733) 1,549
18,621
(92,142)
(102,885)
58,306
103,644 69,747 19,120 (1,659,363) 1,586,394 (37,086) 90,978
132,351 89,979 211,688 (1,910,055) 1,735,848 (82,125) 10,992
46
Total cash inflow from investing activities
173,434
188,678
Financing activities Dividends paid Total cash (outflow) from financing activities
(81,019) (81,019)
(252,920) (252,920)
Net cash (outflow) from all activities
(10,470)
(5,936)
Cash at beginning of the year Cash at end of the year
1,680,625 1,670,155
1,686,561 1,680,625
Statement of Cash Flows for the year ended 31 December 2008 2008
2007
(Rupees in '000) Reconciliation to profit and loss account Operating cash flows Depreciation / amortisation expense Profit on disposal of fixed assets Profit on disposal of investments Dividend income Rental income Other investment (loss) / income Increase in assets other than cash Decrease / (increase) in liabilities other than running finance
(102,885) (26,474) 2,112 98,571 69,775 83,200 (531,134) 52,286 87,300
(Loss) / profit after taxation
(267,249)
58,306 (17,991) 1,817 493,330 88,010 70,864 134,930 772,068 (1,012,878) 588,456
Cash and bank deposits Cash and other equivalents – Cash – Policy stamps and bond papers in hand Current and other accounts – Current accounts – PLS savings accounts
Deposits maturing within 12 months (encashable on demand) – Term deposits
216 2,618 2,834
760 1,491 2,251
138,841 290,074 428,915
75,179 615,671 690,850
1,238,406 1,670,155
987,524 1,680,625
The annexed notes from 1 to 42 form an integral part of these financial statements.
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
47
Cash for the purposes of the Statement of Cash Flows consists of:
ANNUAL REPORT 2008
Cash comprises of cash in hand, policy stamps, bond papers, cheques in hand, bank balances and other deposits which are readily convertible to cash in hand and which are used in the cash management function on a day–to–day basis.
NEW JUBILEE INSURANCE COMPANY LIMITED
Definition of cash
Statement of Premiums for the year ended 31 December 2008 Business underwritten inside Pakistan 2008 2007 Premiums Unearned premium reserve Premiums Reinsurance Prepaid reinsurance premium Reinsurance Net premium Net premium written Opening Closing earned ceded Opening Closing expenses revenue revenue (note 22) (Rupees in '000)
Class
Direct and facultative
1.
Fire and property damage
1,041,149
369,564
430,771
979,942
498,562
179,322
192,369
485,515
494,427
422,655
2.
Marine, aviation and transport
497,344
49,936
38,033
509,247
100,105
17,417
4,683
112,839
396,408
382,206
3.
Motor
690,705
288,282
277,639
701,348
14,553
5,153
6,703
13,003
688,345
581,390
4.
Liability
196,207
28,711
26,968
197,950
170,321
26,480
17,308
179,493
18,457
13,727
5.
Accident and health
401,440
150,188
189,322
362,306
–
–
362,306
294,819
6.
Miscellaneous
699,619
303,438
382,633
620,424
226,567
123,938
3,526,464
1,190,119
Total
–
–
454,183
218,836
279,162
393,857
1,345,366 3,371,217 1,237,724
447,208
500,225
1,184,707
2,186,510 1,818,735
Treaty 7.
Proportional / non–proportional Grand total
(67) 3,526,397
– 1,190,119
–
(67)
–
1,345,366 3,371,150 1,237,724
– 447,208
– 500,225
– 1,184,707
(67)
2,186,443 1,818,775
The annexed notes from 1 to 42 form an integral part of these financial statements.
48 Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
40
Tahir Ahmed Managing Director (Chief Executive)
Statement of Claims for the year ended 31 December 2008 Business underwritten inside Pakistan
Claims paid
Class
Outstanding claims Opening Closing
Claims expenses
Reinsurance Reinsurance and other and other recoveries in respect of recoveries outstanding claims received Opening Closing (Rupees in '000)
Reinsurance and other recoveries revenue
2008 Net claims expense
2007 Net claims expense
255,952
529,302
1.
Fire and property damage
816,744
522,845
332,847
626,746
398,999
124,627
96,422
2.
Marine, aviation and transport
265,763
294,615
187,758
158,906
123,246
172,279
39,929
(9,104)
168,010
123,904
3.
Motor
506,486
279,366
244,234
471,354
2,223
16,460
27,499
13,262
458,092
438,876
4.
Liability
24,122
3,328
3,159
23,953
6,046
2,192
2,170
6,024
17,929
1,360
5.
Accident and health
243,454
32,802
38,691
249,343
–
–
–
–
249,343
197,957
6.
Miscellaneous
235,908
295,856
383,375
323,427
114,772
201,590
227,326
140,508
182,919
119,371
2,092,477
1,428,812
1,190,064
1,853,729
645,286
517,148
393,346
521,484
1,332,245
1,410,770
216
2,963
1,332,461
1,413,733
Total
370,794
Treaty 7.
Proportional / non–proportional Grand Total
216 2,092,693
– 1,428,812
– 1,190,064
216 1,853,945
– 645,286
– 517,148
– 393,346
– 521,484
ANNUAL REPORT 2008
49
The annexed notes from 1 to 42 form an integral part of these financial statements.
NEW JUBILEE INSURANCE COMPANY LIMITED
Direct and facultative
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
Statement of Expenses for the year ended 31 December 2008 Business underwritten inside Pakistan
Commission paid or payable a
Deferred commission Opening b
Closing c
Net commission expenses d=a+b-c
Other 2008 2007 management Underwriting Commission Net Net expenses expenses from underwriting underwriting (Note 23) reinsurers* expense expense e f=d+e g h=f-g (Rupees in '000)
Class
Direct and facultative
1.
Fire and property damage
142,636
42,165
60,582
124,219
114,494
238,713
39,041
199,672
172,775
2.
Marine, aviation and transport
75,481
7,525
6,287
76,719
91,795
168,514
1,606
166,908
152,326
3.
Motor
63,120
32,103
25,925
69,298
159,398
228,696
831
227,865
185,562
4.
Liability
5,388
2,111
2,235
5,264
4,274
9,538
7,358
2,180
(5,763)
5.
Accident and health
11,313
3,892
5,544
9,661
83,898
93,559
–
93,559
73,585
6.
Miscellaneous
69,620
34,187
36,405
67,402
52,465
119,867
64,157
55,710
33,165
367,558
121,983
136,978
352,563
506,324
858,887
112,993
745,894
611,650
Total Treaty 7.
Proportional / non–proportional Grand total
(27) 367,531
– 121,983
– 136,978
(27) 352,536
– 506,324
(27) 858,860
– 112,993
(27) 745,867
* Commission from reinsurers is arrived at after taking the impact of opening and closing unearned commission.
The annexed notes from 1 to 42 form an integral part of these financial statements.
50 Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
425 612,075
Statement of Investment Income for the year ended 31 December 2008 2008
2007
(Rupees in '000) Income from non-trading investments
Held to maturity Return on Government Securities
14,150
14,150
6,365
6,403
(2,901) 17,614
(2,685) 17,868
1,592 68,183 69,775
3,445 84,565 88,010
87,389
105,878
Gain on sale of non–trading investments
99,671
499,039
Investments related expenses
(5,353)
Return on other fixed income securities and deposits – Term finance certificates Amortisation of premium relative to par
Dividend income – Associates * – Others
Investments income
181,707
(5,709) 599,208
* This represents dividend income of associated undertakings other than the associate where the Company has significant influence.
ANNUAL REPORT 2008
51
The annexed notes from 1 to 42 form an integral part of these financial statements.
NEW JUBILEE INSURANCE COMPANY LIMITED
Available for sale
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
Notes to the Financial Statements 1.
STATUS AND NATURE OF BUSINESS New Jubilee Insurance Company Limited (the Company) is a public limited company incorporated in Pakistan on 16 May 1953. The Company is listed on the Karachi and Lahore stock exchanges and is engaged in general insurance business. The registered office of the Company is situated at 2nd Floor, Jubilee Insurance House, I. I. Chundrigar Road, Karachi.
2.
BASIS OF PREPARATION These financial statements have been prepared on the format of financial statements issued by the Securities and Exchange Commission of Pakistan (SECP) through Securities and Exchange Commission (Insurance) Rules, 2002 [SEC (Insurance) Rules, 2002], vide S.R.O. 938 dated 12 December 2002.
2.1
Statement of compliance These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance,1984, the Insurance Ordinance, 2000 and SEC (Insurance) Rules, 2002. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984, Insurance Ordinance, 2000 and SEC (Insurance) Rules, 2002 shall prevail.
2.2
Basis of measurement These financial statements have been prepared under the historical cost convention.
2.3
Functional and presentation currency These financial statements are presented in Pakistani Rupees, which is the Company's functional currency.
2.4
Use of estimates and judgements
52
The preparation of financial statements in conformity with the requirements of approved accounting standards as applicable in Pakistan requires management to make judgments / estimates and associated assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The judgments / estimates and associated assumptions are based on historical experience, current trends and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making the estimates about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Significant areas where assumptions and estimates were exercised in application of accounting policies relate to:
Classification of investment In classifying investments as "held-for-trading" the Company has determined securities which are acquired with the intention to trade by taking advantage of short term market / interest rate movements.
For the year ended 31 December 2008 In classifying investments as "held-to-maturity" the Company has determined financial assets with fixed or determinable payments and fixed maturity. In making this judgment, the Company evaluates its intention and ability to hold such investments to maturity. The investments which are not classified as held for trading or held to maturity are classified as available for sale.
Income tax In making the estimates for income taxes currently payable by the Company, the management looks, at the current income tax laws and the decisions of appellate authorities on certain issues in the past. In making the provision for deferred taxes, estimates of the Company's future taxable profits are taken into account.
Fixed assets, investment properties, depreciation and amortisation
Outstanding claims including incurred but not reported (IBNR) In making the estimates of the provision for outstanding claims including IBNR, the Company took advice from actuary for the determination of provision for IBNR claims at the year end. The actuary has recommended the month wise factor of each class based on the historic claims lag triangle method to determine provisions in respect of IBNR claims. Accordingly, provision has been made based on IBNR factors recommended by the actuary. Claims received upto reporting date are assessed and recorded accordingly. Subsequently these are reviewed and reassessed wherever necessary. Estimates of reinsurance recoveries against outstanding claims and salvage recoveries are made based on expected recovery
Premium deficiency reserves The Company reviews premium deficiency reserve for each class of business at each reporting date. Liability, if any, is determined on the basis of method as prescribed by the Insurance Ordinance 2000.
Defined benefits plan Liability is determined on the basis of actuarial advice using the Projected Unit Credit Method.
Impairment Available for sale The Company determines that available-for-sale equity investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. This determination of what is significant or prolonged requires judgment. In making this judgment, the Company evaluates among other factors, the
53
The assets residual values, useful lives and methods are reviewed, and adjusted if appropriate, at each financial year end.
ANNUAL REPORT 2008
In making estimates of the depreciation / amortisation method, the management uses method which reflects the pattern in which economic benefits are expected to be consumed by the Company. The method applied is reviewed at each financial year end and if there is a change in the expected pattern of consumption of the future economic benefits embodied in the assets, the method would be changed to reflect the change in pattern. Such change is accounted for as change in accounting estimates in accordance with International Accounting Standard - 8, "Accounting Policies, Changes in Accounting Estimates and Errors".
NEW JUBILEE INSURANCE COMPANY LIMITED
The Company carries its investment properties at their respective cost. The fair values are determined by independent valuation experts and such valuations are carried out after every two years to determine the recoverable amount.
Notes to the Financial Statements normal volatility in share price. In addition, impairment may be appropriate when there is evidence of deterioration in the financial health of the investee, industry and sector performance, changes in technology and operational and financing cash flows.
Associate The Company determined that a significant or prolonged decline in the fair value of its investments in associate below their cost is an objective evidence of impairment. The impairment loss is recognized when the carrying value exceeds higher of fair value less cost to sell or value in use.
Provision against premiums due but unpaid The Company reviews its premium portfolio to assess amount of premium due but unpaid and provision required there-against. While assessing this requirement various factors including the delinquency in the account, financial position of the insured are considered. 3.
STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED APPROVED ACCOUNTING STANDARDS THAT ARE NOT YET EFFECTIVE
3.1
The following standards, interpretations and amendments of approved accounting standards are effective for accounting periods beginning on or after 1 January 2009: – Revised IAS 1 - Presentation of financial statements (effective for annual periods beginning on or after 1 January 2009) introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the income statement and all non-owner changes in equity in a single statement), or in an income statement and a separate statement of comprehensive income. The change will be effected after discussions with regulators. – Revised IAS 23 - Borrowing costs (effective for annual periods beginning on or after 1 January 2009) removes the option to expense borrowing costs and requires that an entity capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. The application of the standard is not likely to have an effect on the Company's financial statements.
54
– IAS 29 – Financial Reporting in Hyperinflationary Economies (effective for annual periods beginning on or after 28 April 2008). The Company does not have any operations in Hyperinflationary Economies and therefore the application of the standard is not likely to have an effect on the Company's financial statements. – Amendments to IAS 32 Financial instruments: Presentation and IAS 1 Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009) – Puttable Financial Instruments and Obligations Arising on Liquidation requires puttable instruments, and instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation, to be classified as equity if certain conditions are met. The amendments, which require retrospective application, are not expected to have any impact on the Company’s financial statements. – Amendment to IFRS 2 Share-based Payment – Vesting Conditions and Cancellations (effective for annual periods beginning on or after 1 January 2009) clarifies the definition of vesting conditions, introduces the concept of non-vesting conditions, requires non-vesting conditions to be reflected in grant-date fair value and provides the accounting treatment for non-vesting conditions and cancellations. The application of this standard is not likely to have a material effect on the Company’s financial statements.
For the year ended 31 December 2008 – Revised IFRS 3 Business Combinations (applicable for annual periods beginning on or after 1 July 2009) broadens among other things the definition of business resulting in more acquisitions being treated as business combinations, contingent consideration to be measured at fair value, transaction costs other than share and debt issue costs to be expensed, any pre-existing interest in an acquiree to be measured at fair value, with the related gain or loss recognised in profit or loss and any non-controlling (minority) interest to be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of an acquiree, on a transaction-by-transaction basis. The application of this standard is not likely to have an effect on the Company’s financial statements
– IFRIC 13– Customer Loyalty Programmes (effective for annual periods beginning on or after 01 July 2008) addresses the accounting by entities that operate or otherwise participate in customer loyalty programmes under which the customer can redeem credits for awards such as free or discounted goods or services. The application of IFRIC 13 is not likely to have an effect on the Company's financial statements. – IFRIC 15– Agreement for the Construction of Real Estate (effective for annual periods beginning on or after 1 October 2009) clarifies the recognition of revenue by real estate developers for sale of units, such as apartments or houses, 'off–plan', that is, before construction is complete. IFRIC 15 would not effect the accounting policy of the Company. – IFRIC 16– Hedge of Net Investment in a Foreign Operation. (effective for annual periods beginning on or after 1 October 2008) clarifies that net investment hedging can be applied only to foreign exchange differences arising between the functional currency of a foreign operation and the parent entity’s functional currency and only in an amount equal to or less than the net assets of the foreign operation, the hedging instrument may be held by any entity within the group except the foreign operation that is being hedged and that on disposal of a hedged operation, the cumulative gain or loss on the hedging instrument that was determined to be effective is reclassified to profit or loss. The Interpretation allows an entity that uses the step–by–step method of consolidation an accounting policy choice to determine the cumulative currency translation adjustment that is reclassified to profit or loss on disposal of a net investment as if the direct method of consolidation had been used. The amendment is not relevant to the Company’s operations.
55
– IFRS 8 – Operating Segments (effective for annual periods beginning on or after 1 January 2009) introduces the “management approach” to segment reporting. IFRS 8 will require a change in the presentation and disclosure of segment information based on the internal reports that are regularly reviewed by the Company’s “chief operating decision maker” in order to assess each segment’s performance and to allocate resources to them. This standard will have no effect on the Company’s reported total profit or loss or equity.
ANNUAL REPORT 2008
– IFRS 7 – Financial Instruments: Disclosures (effective for annual periods beginning on or after 28 April 2008) supersedes IAS 30 – Disclosures in the Financial Statements of Banks and Similar Financial Institutions and the disclosure requirements of IAS 32 – Financial Instruments: Disclosure and Presentation. The application of the standard is not expected to have significant impact on the Company's financial statements other than increase in disclosures.
NEW JUBILEE INSURANCE COMPANY LIMITED
– Amended IAS 27 Consolidated and Separate Financial Statements (effective for annual periods beginning on or after 1 July 2009) requires accounting for changes in ownership interest by the group in a subsidiary, while maintaining control, to be recognized as an equity transaction. When the group loses control of subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognized in the profit or loss. The application of the standard is not likely to have an effect on the Company’s financial statements.
Notes to the Financial Statements – The International Accounting Standards Board made certain amendments to existing standards as part of its first annual improvements project. The effective dates for these amendments vary by standard and most will be applicable to the Company’s 2009 financial statements. These amendments are unlikely to have an impact on the Company’s financial statements. – IAS 27 ‘Consolidated and separate financial statements’ (effective for annual periods beginning on or after 1 January 2009). The amendment removes the definition of the cost method from IAS 27 and replaces it with a requirement to present dividends as income in the separate financial statements of the investor. The amendment is not likely to have an effect on Company’s financial investments. – IFRIC – 17 Distributions of Non–cash Assets to Owners (effective for annual periods beginning on or after 1 July 2009) states that when a company distributes non cash assets to its shareholders as dividend, the liability for the dividend is measured at fair value. If there are subsequent changes in the fair value before the liability is discharged, this is recognised in equity. When the non cash asset is distributed, the difference between the carrying amount and fair value is recognised in the income statement. As the Company does not distribute non–cash assets to its shareholders, this interpretation has no impact on the Company’s financial statements. – IFRS 5 Amendment – Improvements to IFRSs – IFRS 5 Non–current Assets Held for Sale and Discontinued Operations (effective for annual periods beginning on or after 1 July 2009) specify that: if an entity is committed to a sale plan involving the loss of control of a subsidiary, then it would classify all of that subsidiary’s assets and liabilities as held for sale when the held for sale criteria in paragraphs 6 to 8 of IFRS 5 are met. Disclosures for discontinued operations would be required by the parent when a subsidiary meets the definition of a discontinued operation. The amendment is not likely to have an effect on Company’s financial statements. – IFRS 4– Insurance Contracts, requires to assess at each reporting date adequacy of its insurance liabilities through liability adequacy test. Further, it required additional disclosure relating to identification and explanation of the amount in the financial statements arising from insurance contracts and the amount, timing and uncertainty of future cash flows from insurance contracts. The application of the standard requires additional disclosures in the Company's financial statements. 4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
4.1
Provision for outstanding claims including incurred but not reported (IBNR)
56
A liability for outstanding claims is recognised in respect of all claims incurred as at the balance sheet date which represents the estimates of the claims intimated or assessed before the end of the accounting year and measured at the undiscounted value of expected future payments. Provision for outstanding claims include amounts in relation to unpaid reported claims, claims incurred but not reported (IBNR) and expected claims settlement costs. Provision for IBNR is made for the cost of settling claims incurred but not reported at the balance sheet date. Reinsurance recoveries against outstanding claims and salvage recoveries are recognised as an asset and measured at the amount expected to be received. 4.2
Premium deficiency reserves The Company is required as per SEC (Insurance) Rules, 2002, to maintain a provision in respect of premium deficiency for the class of business where the unearned premium reserve is not adequate to meet the expected future liability, after reinsurance from claims, and other supplementary expenses expected to be incurred after the balance sheet date in respect of the unexpired policies in that class of business at the balance sheet date. The movement in the premium deficiency reserve is recorded as an expense in the profit and loss account.
For the year ended 31 December 2008 No provision has been made as the unearned premium reserve for each class of business as at the year end is adequate to meet the expected future liability after reinsurance from claims and other expenses, expected to be incurred after the balance sheet date in respect of policies in force at balance sheet date. 4.3
Staff retirement benefits
4.3.1
Defined benefit plan The Company operates an approved defined gratuity scheme for all its permanent employees who attain the minimum qualification period for entitlement to gratuity. Contributions to the fund are made based on actuarial recommendations and in line with the provisions of the Income Tax Ordinance, 2001. The most recent actuarial valuation was carried out for the year ended 31 December 2008 using the Projected Unit Credit Method. Actuarial gains/losses in excess of corridor limit (10% of the higher of fair value of assets and present value of obligation) are recognised over the average remaining service life of the employees.
4.3.3
Employees' compensated absences The Company accounts for the liability in respect of employees' compensated absences in the period in which they are earned.
4.4
Investments
4.4.1
Recognition All investments are initially recognized at cost, being the fair value of the consideration given and include transaction costs, except for held for trading in which case transaction costs are charged to the profit and loss account. These are recognized and classified as follows: – Investment at fair value through profit and loss – Held to maturity – Available for sale
4.4.2
Measurement
4.4.2.1 Investment at fair value through profit or loss – Investments which are acquired principally for the purposes of generating profit from short term fluctuation in price or are part of the portfolio in which there is recent actual pattern of short term profit taking are classified as held for trading. –
Investments which are designated at fair value through profit or loss upon initial recognition.
Subsequent to initial recognition, these investments are remeasured at fair value. Gains or losses on investments on remeasurement of these investments are recognised in profit and loss account. 4.4.2.2 Held to maturity Investments with fixed maturity, where management has both the intent and the ability to hold to maturity, are classified as held to maturity.
57
The Company contributes to a provident fund scheme which covers all permanent employees. Equal contributions are made both by the Company and the employees to the fund at the rate of 8.33 percent of basic salary.
NEW JUBILEE INSURANCE COMPANY LIMITED
Defined contribution plan
ANNUAL REPORT 2008
4.3.2
Notes to the Financial Statements Subsequently, these are measured at amortised cost less provision for impairment, if any. Any premium paid or discount availed on acquisition of held to maturity investment is deferred and amortised over the term of investment using the effective yield. These are reviewed for impairment at year end and any losses arising from impairment in values are charged to the profit and loss account. 4.4.2.3 Available for sale Investments which are intended to be held for an undefined period of time but may be sold in response to the need for liquidity, changes in interest rates, equity prices or exchange rates are classified as available for sale. Quoted Subsequent to initial recognition at cost, quoted investments are stated at the lower of cost or market value (market value on an individual investment basis being taken as lower if the fall is other than temporary) in accordance with the requirements of the SEC (Insurance) Rules, 2002 vide S.R.O. 938 dated December 2002. The Company uses stock exchange quotations at the balance sheet date to determine the market value. Had the Company adopted International Accounting Standard (IAS) 39 "Financial Instruments: Recognition and Measurement" in respect of recognition of gain / loss on remeasurement of available for sale securities directly into equity, the investments of the Company would have been higher by Rs.89.709 million and the net equity would have been increased by the same amount. Unquoted Unquoted investments are recorded at cost less accumulated impairment losses, if any. 4.4.2.4 Investment in associates – equity method
58
Investments in associates, where the Company has significant influence but not control, are accounted for by using the equity method of accounting. These investments are initially recognised at cost, thereafter the Company's share of the changes in the net assets of the associates are accounted for at the end of each year. After application of the equity method, the Company determines whether it is necessary to recognize any impairment loss with respect to the Company's net investment in the associate. Share of profit and loss of associate is accounted for in the Company's profit and loss account, whereas changes in the associate's equity which has not been recognised in the associates profit and loss account, are recognised directly in the equity of the Company. 4.4.2.5 Date of recognition Regular way purchases and sales of investments that require delivery within the time frame established by regulations or market convention are recognised at the trade date. Trade date is the date on which the Company commits to purchase or sell the investment. 4.5
Investment property Investment properties are accounted for under the cost model in accordance with approved International Accounting Standards (IAS) 40, "Investment Property" and S.R.O. 938 issued by the Securities and Exchange Commission of Pakistan.
For the year ended 31 December 2008 –
Leasehold land is stated at cost.
–
Building on leasehold land is depreciated to its estimated salvage value on straight line basis over its useful life, which is estimated to be 40 – 80 years.
–
Installations forming a part of building on leasehold land but having separate useful lives are depreciated at the rate of 10 percent under the straight line method.
Depreciation policy, subsequent capital expenditures on existing properties and gains or losses on disposals are accounted for in the same manner as tangible fixed assets. 4.6
Fixed assets
4.6.1
Tangibles
An item of tangible asset is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit and loss in the year the asset is derecognized. 4.6.2
Intangibles These are stated at cost less accumulated amortisation and impairment loss. Amortisation is charged over the estimated useful life of the asset on a systematic basis to income applying the straight line method at the rates specified in note 21.2 to the financial statements. Amortisation is calculated from the month the assets are available for use. While on disposal, amortisation is charged up to the month in which the assets are disposed off. Software development costs are only capitalised to the extent that future economic benefits are expected to be derived by the Company. The carrying amounts are reviewed at each balance sheet date to assess whether these are recorded in excess of their recoverable amounts, and where carrying values exceed estimated recoverable amount, assets are written down to their estimated recoverable amounts.
4.7
Premium income Premiums including administrative surcharge under a policy are recognised as revenue at the time of issuance of insurance policy.
59
Subsequent cost are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is possible that the future economic benefits associated with the items will flow to the company and the cost of the item can be measured reliably. Maintenance and normal repairs are charged to profit and loss account currently.
ANNUAL REPORT 2008
Depreciation on additions is charged from the month the assets are available for use. While on disposal, depreciation is charged up to the month in which the assets are disposed off.
NEW JUBILEE INSURANCE COMPANY LIMITED
These are stated at cost less accumulated depreciation and impairment loss, if any. Depreciation is charged over the estimated useful life of the asset on a systematic basis to income applying the straight line method at the rates specified in note 21.1 to the financial statements.
Notes to the Financial Statements Revenue from premiums is determined after taking into account the unearned portion of premiums which is calculated using the 1/24th method. The unearned portion of premium income is recognised as a liability. Reinsurance premium is recognised as expense after taking into account the proportion of deferred premium expense which is calculated using 1/24th method. The deferred portion of premium expense is recognised as a prepayment. Pakistan Reinsurance Company Limited (PRCL) retrocession business is booked on the basis of PRCL statements. 4.8
Commission Commission expense incurred in obtaining and recording policies is deferred and recognised as an expense in accordance with pattern of recognition of premium revenue. Commission and other forms of revenue (apart from recoveries) from reinsurers are deferred and recognised as liability and recognised in the profit and loss account as revenue in accordance with the pattern of recognition of the reinsurance premiums.
4.9
Rental income Rental income from investment properties is recognised on time proportion basis.
4.10
Investment income Income from held to maturity investments is recognised on a time proportion basis taking into account the effective yield on the investments. The difference between the redemption value and the purchase price of the held to maturity investments is amortised and taken to the profit and loss account over the term of the investment. Dividend income is recognised when the company's right to receive the payment is established. Gain / loss on sale of available for sale investments is included in income currently. Return on fixed income securities classified as available for sale is recognised on a time propor tionate basis taking into account the effective yield on the investments.
60
Return on bank deposit is recognized on a time proportionate basis taking into account the effec tive yield. 4.11
Dividend declaration and reserve appropriation Dividend declaration and reserve appropriation are recognized when approved.
4.12
Expenses of management Expenses of management have been allocated to various classes of business as deemed equitable by management. Expenses not allocable to the underwriting business are charged as administrative expenses.
For the year ended 31 December 2008 4.13
Taxation
4.13.1
Current Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year, if enacted. The charge for current tax also include adjustments, where considered necessary, to provision for tax made in previous years arising from assessments finalized during the current year for such years.
4.13.2
Deferred
4.14
Segment reporting A business segment is a distinguishable component of the Company that is engaged in providing services that are subject to risks and returns that are different from those of other business segments. The Company accounts for segment reporting of operating results using the classes of business as specified under the Insurance Ordinance, 2000 and the SEC (Insurance) Rules, 2002 as the primary reporting format. The Company has six primary business segments for reporting purposes namely fire, marine, motor, accident and health, liability and miscellaneous. The fire insurance segment provides insurance covers against damages caused by fire, riot and strike, explosion, earthquake, atmospheric damage, flood, electric fluctuation and impact. Marine insurance segment provides coverage against cargo risk, war risk and damages occurring in inland transit. Motor insurance provides comprehensive vehicle coverage and indemnity against third party loss. Liability insurance segment provides coverage against third party liability, product liability and personal liability. Accident and health insurance provides inpatient and outpatient medical coverage. Miscellaneous insurance provides cover against burglary, loss of cash in safe and cash in transit, personal accident, money, engineering losses, crop and other coverages. Assets and liabilities are allocated to particular segments on the basis of premium earned. Those assets and liabilities which can not be allocated to a particular segment on a reasonable basis are reported as unallocated corporate assets and liabilities. Depreciation and amortisation are allocated to a particular segment on the basis of premium earned.
61
Deferred tax is provided on temporary differences arising on investments in associates stated under equity method of accounting.
ANNUAL REPORT 2008
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited in the profit and loss account, except in the case of items credited or charged to equity in which case it is included in equity.
NEW JUBILEE INSURANCE COMPANY LIMITED
Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences at the balance sheet date between the tax bases and carrying amounts of assets and liabilities for financial reporting purposes. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized.
Notes to the Financial Statements 4.15
Foreign currency translation Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. Exchange differences, if any, are taken to profit and loss account.
4.16
Offsetting of financial assets and liabilities Financial assets and financial liabilities are only offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognised amount and the Company intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.
4.17
Impairment The carrying amount of assets are reviewed at each balance sheet date to determine whether there is any indication of impairment of any asset or group of assets. If such indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in profit and loss account.
4.18
Provisions A provision is recognised in the balance sheet when the Company has a legal or constructive obligation as a result of past events and it is probable that an outflow of economic benefits will be required to settle the obligations and a reliable estimate can be made of the amount of the obligation.
4.19
Financial instruments Financial instruments carried on the balance sheet include cash and bank, loans to employees, premiums due but unpaid, amount due from other insurers / reinsurers, accrued investment income, reinsurance recoveries against outstanding claims, sundry receivables, amount due to other insurers / reinsurers, accrued expenses, other creditors and accruals, deposits and other payables and unclaimed dividends.
62
All the financial assets and financial liabilities are recognised at the time when the Company becomes a party to the contractual provisions of the instrument and derecognized when the Company losses control of contractual rights that comprises the financial assets and in the case of financial liabilities when the obligation specified in the contract is discharged, cancelled or expired. At the time of initial recognition all financial assets and financial liabilities are measured at cost, which is the fair value of the consideration given or received for it. Any gain or loss on derecognition of financial assets and financial liabilities is taken to income directly. 5.
PAID–UP SHARE CAPITAL Issued, subscribed and paid–up 2008
2007
2008
(Number of shares in ‘000) 210
210
65,705
54,719
65,915
54,929
2007
(Rupees in '000) Ordinary shares of Rs. 10 each issued as fully paid in cash Ordinary shares of Rs. 10 each issued as fully paid bonus shares
2,100
2,100
657,048 659,148
547,190 549,290
Shares of the Company held by associates amount to Rs.424.695 million (42,469,489 shares of Rs. 10 each) [31 December 2007: Rs. 335.732 million (33,573,225 shares of Rs. 10 each)].
For the year ended 31 December 2008 6.
RESERVES
2008
2007
(Rupees in '000) Capital reserves Reserve for exceptional losses
6.1
9,384
9,384
6.2
1,550,000
1,200,000
(6,152) 1,553,232
(5,445) 1,203,939
General reserve Company's share of capital contributed to statutory funds by an associated company
6.1
Under the Income Tax Act, 1922 applicable to insurance companies, the Company set aside in prior years amounts upto 10 percent of premium earnings, net of reinsurances of the year as a reserve for exceptional losses, which was treated as an allowable deduction in arriving at the taxable income. This option was withdrawn by the Income Tax Ordinance, 1979 with retrospective effect to the accounting year ended 31 December 1978. Accordingly, the Company has ceased to set aside such amounts, but has retained the reserves created upto 31 December 1978. 2008
2007
(Rupees in '000) 6.2
General reserve Balance at beginning of the year Transfer from retained earnings Balance at end of the year
700,000 500,000 1,200,000
7.1
The Company has filed returns upto tax year 2008. The income tax assessments of the Company have been finalised upto and including assessment year 2002–2003 and tax year 2004. Whereas, the returns filed for tax years 2003, 2005, 2006, 2007 and 2008 are also deemed to be orders under the provisions of section 120 of the Income Tax Ordinance, 2001 unless any amendments have been made by the tax authorities.
63
TAXATION
7.2
The Taxation Officer has passed an assessment order in respect of tax year 2004 consequent to finalisation of tax audit proceedings where disallowances have been made on account of bad debts written off, amortisation of negative goodwill and allocation of expenses against dividend income. Further, the claim of tax credits has also not been allowed in full. The Company has filed an appeal before the Commissioner of Income Tax who has maintained the order passed by the Taxation Officer except allocation of expenses against dividend income. The Company has filed an appeal before the Income Tax Appellate Tribunal (ITAT) which is pending adjudication. Tax amounting Rs. 54.4 million in this respect has been recorded.
ANNUAL REPORT 2008
7.
1,200,000 350,000 1,550,000
NEW JUBILEE INSURANCE COMPANY LIMITED
Revenue reserves
7.3
In the assessment order for the assessment year 2002–2003 certain items have been disallowed and further additional tax has been levied. The appeal against the order filed before the Commissioner of Income Tax (Appeals) has been decided mostly in favour of the company. The Company has filed an appeal before the Income Tax Appellate Tribunal (ITAT). No provision amounting to Rs.11.11 million (31 December 2007: Rs.11.11 million) in this respect has been made in the financial statements as the management of the Company is confident of favourable outcome of ITAT appeal.
Notes to the Financial Statements
8.
9.
OTHER CREDITORS AND ACCRUALS
2008 2007 (Rupees in '000)
Federal excise duty Federal insurance fee Workers welfare fund Tax deducted at source Premiums and commissions Miscellaneous
19,059 1,089 5,801 1,240 286,689 18,402 332,280
9,716 595 – 635 225,952 18,202 255,100
86,834 147,185 118 234,137
153,072 109,666 118 262,856
2008
2007
DEPOSITS AND OTHER PAYABLES Advance rent Security deposits against bond insurance Other deposits
10.
CONTINGENCIES Contingencies in respect of income tax are stated in note 7.
11.
CASH AND BANK DEPOSITS
(Rupees in '000)
Cash and other equivalents – Cash – Policy stamps and bond papers in hand Current and other accounts – Current accounts – PLS savings accounts Deposits maturing within 12 months – Term deposits
64 12.
LOANS TO EMPLOYEES – secured and unsecured (considered good)
760 1,491 2,251
138,841 290,074 428,915
75,179 615,671 690,850
1,238,406 1,670,155
987,524 1,680,625
2008
2007
(Rupees in '000)
Due from employees
Less: current portion
216 2,618 2,834
20
988 988
1,036 1,036
624 364
603 433
These represent loans provided to employees for the purchase of motor vehicles (CTF) at the mark up rate of 6 percent per annum and interest free loans for general purposes in accordance with the terms of their employment. These loans are recoverable in four years. The maximum amount due from executives calculated with reference to month – end balances was Rs. Nil (31 December 2007: Rs. 0.027 million).
For the year ended 31 December 2008 13.
INVESTMENTS
2008 2007 (Rupees in '000)
In related parties Investment in an associate – equity accounting Available for sale
13.1 13.4.1
29,961 256,717 286,678
26,060 2,437 28,497
13.2 13.3
138,998 72,717
141,899 50,439
929,324 2,500 1,143,539
1,732,557 2,500 1,927,395
1,430,217
1,955,892
New Jubilee Life Insurance Company Limited (Chief Executive: Mr. Javed Ahmed) 29,961
26,060
13.4.2
13.1
Investment in an associate – equity accounting
13.1.1
Particulars of investment in associate – listed
Number of shares 2008 2007 4,032,766
4,032,766
Face value per share (Rupees)
Name of associate
10
Market value of investment and percentage of holding in associate is Rs. 182.00 million and 6.43% respectively (31 December 2007: Rs. 284.51 million and 6.43%). 13.1.2
Movement of investment in associate
2008
2007
(Rupees in '000) Beginning of the year Share in profit upto 30 September Less: Dividend received Share in net equity as at 30 September Closing balance 13.1.3
26,060 6,624 2,016 4,608 (707) 29,961
19,458 6,818 2,016 4,802 1,800 26,060
Following information has been summarised based on financial statements as at 30 September 2008 of the associated company: Total assets Total liabilities Net equity Profit after tax
5,888,878 5,422,938 465,940 27,068
5,579,493 5,174,208 405,285 49,513
65
Available for sale – Quoted – Unquoted
ANNUAL REPORT 2008
Held to maturity – Government securities – Term finance certificates – quoted
NEW JUBILEE INSURANCE COMPANY LIMITED
Others
Notes to the Financial Statements 13.2
Government securities Face value (Rupees)
Profit rate %
Profit payment
Particulars
50,000,000
10
Semi annually
50,000,000
12
Semi annually
Maturity date
2008
2007
(Rupees in '000)
Pakistan Investment Bond – 20 years 20–01–2024
58,458
58,740
54,856
56,240
25,684
26,919
138,998
141,899
Pakistan Investment Bond – 10 years 24–12–2011 Pakistan Investment 22,500,000
14
Semi annually
Bond – 10 years 18–04–2011
Market value of Pakistan Investment Bonds is Rs. 99.64 million (31 December 2007: Rs. 123.19 million). Market values is determined based on quotations obtained from brokers. Pakistan Investment Bonds amounting to Rs. 66.00 million (2007: Rs.Nil) are placed with State Bank of Pakistan under Section 29 of the Insurance Ordinance, 2000. 13.3
Term Finance Certificates – quoted Face value 2008
2007
per certificate
(Number of certificates) –
Type of security
(Rupees)
2008
2007 (Rupees in '000)
300
5,000
MCB Bank Limited
–
10,000
10,000
5,000
Bank AL Habib Limited
49,970
449
5,056
–
5,000
United Bank Limited
22,747
–
72,717
50,439
49,990
Market value of quoted term finance certificates is Rs. 66.72 million (31 December 2007: Rs. 51.17 million). The market values is determined as per rates quoted by Mutual Funds Association of Pakistan on 12 January 2009.
66
Details of term finance certificates are as follows: Particulars Bank AL Habib Limited
Profit rate per annum Base rate plus 1.95% per annum
Profit payment Semi–annually
Maturity date 06–02–2015
United Bank Limited
6 months KIBOR plus 0.85% per annum
Semi–annually
14–02–2018
For the year ended 31 December 2008 13.4
Available for sale securities
13.4.1
In related parties
2008
Cost Less: Impairment during the year
13.4.2
383,498 (126,781) 256,717
2,437 – 2,437
1,453,685 (524,361) 929,324
1,732,557 – 1,732,557
Others Cost Less: Impairment during the year
13.4.3
2007 (Rupees in '000)
Market value of quoted available for sale Investments is Rs.1,275.75 million (31 December 2007: Rs.
Furthermore, SECP vide circular no.3/2009 dated 16 February, 2009 has allowed that for the purpose of application of clause 16(1)(a) of Part A and clause 13(1)(a) of Part B to the Annexure II: “Statements required to be filed by life and non–life insurers” of the Insurance Rules 2002, where the market value of any available for sale investment as at 31 December 2008 is less then cost, the fall in value may be treated as temporary and the investment valued at cost. The fall in value of available for sale investments as temporary, then twenty five percent of the difference after any adjustment/effect for price movements shall be taken to Profit and Loss account on quarterly basis during the calendar year ending on 31 December 2009. The decline in value of available for sale investment as at 31 December 2008 shall be treated as charge to profit and loss account for the purpose of distribution of dividend. International Accounting Standard 39 – Financial Instruments: Recognition and Measurement (IAS 39) requires that available for sale equity investments are impaired when there has been a significant or prolonged decline in the fair value below its cost. Such impairment loss should be charged to Profit and Loss Account. In order to comply with the requirements of IAS 39 and in view of market conditions and current economic scenario in the country, the Company decided to record full impairment of Rs. 651.142 million in the value of available for sale securities in these financial statements.
67
The Karachi Stock Exchange (Guarantee) Limited (“KSE”) placed a “Floor Mechanism” on the market value of securities based on the closing prices of securities prevailing as on 27 August 2008. Under the “Floor Mechanism”, the individual security price of equity securities could vary within normal circuit breaker limit, but not below the floor price level. The mechanism was effective from 28 August 2008 and remained in place until 15 December 2008. Consequent to the introduction of ‘floor mechanism’ by KSE, the market volume declined significantly during the period from 27 August 2008 to 15 December 2008. There were lower floors on a number of securities at 31 December 2008. The equity securities have been valued at prices quoted on the KSE on 31 December 2008 without any adjustment as allowed by the Securities and Exchange Commission of Pakistan (SECP) circular No. Enf/D–III/Misc./1/2008 dated 29 January 2009 and disclosed in the financial statements as required.
ANNUAL REPORT 2008
13.4.4
NEW JUBILEE INSURANCE COMPANY LIMITED
2,258.81 million).
Notes to the Financial Statements 14.
INVESTMENT PROPERTIES 2008 Cost As at 1 January 2008
Depreciation
Additions As at (disposals) 31 December 2008
As at 1 January 2008
Written down value as at 31 December 2008
Useful life
–
34,164
–
5,409
75,931
40–80 years
1,317 (1,157)
5,868
13,727
10 years
2,158
11,277
123,822
For the year
As at 31 December 2008
(Rupees in '000) Leasehold land
34,164
–
34,164
–
Building
39,527
41,813
81,340
4,568
12,782
9,128 (2,315)
19,595
5,708
86,473
50,941
135,099
10,276
– 841
Lifts and other installations
(2,315)
(1,157)
2007 Cost As at 1 January 2007
Additions
Depreciation As at 31 December 2007
As at 1 January 2007
For the year
Written down As at 31 December 2007
value as at 31 December 2007
Useful life
(Rupees in '000)
Leasehold land
34,164
–
34,164
–
–
Building
34,945
4,582
39,527
3,920
12,782
–
12,782
5,036
672
81,891
4,582
86,473
8,956
1,320
648
–
34,164
–
4,568
34,959
40–80 years
5,708
7,074
10 years
10,276
76,197
Lifts and other installations
14.1
The market value of the investment properties as per valuation carried out by professional valuers in 2007 is Rs. 1,214.70 million.
15.
DEFERRED TAXATION
2008 2007 (Rupees in '000)
68
Deferred tax debits / (credits) arising in respect of: – Accelerated depreciation – Provision for doubtful debts – Share of profit from associate – Taxable loss and impairment
16.
(5,122) 41,557 (461) – 35,974
(15,965) 41,557 – 36,978 62,570
PREMIUMS DUE BUT UNPAID – unsecured Considered good Considered doubtful
Less: Provision for doubtful balances
16.1
714,385 64,274 778,659
703,209 64,274 767,483
64,274 714,385
64,274 703,209
For the year ended 31 December 2008 2008 16.1
Provision for doubtful balances
(Rupees in '000)
Opening balance Add: Provision made during the year
17.
2007
23
64,274
54,274
–
10,000
64,274
64,274
181,303
45,672
AMOUNTS DUE FROM OTHER INSURERS /
Considered good Considered doubtful
54,459
54,459
235,762
100,131
54,459
54,459
181,303
45,672
500,225
447,208
Rent
9,494
5,946
Miscellaneous expenses
3,339
1,367
513,058
454,521
Less: Provision for doubtful balances
REINSURANCE RECOVERIES AGAINST OUTSTANDING CLAIMS These are unsecured and considered good.
19.
PREPAYMENTS
20.
69
Prepaid reinsurance premium ceded
SUNDRY RECEIVABLES Current portion of long term loans
624
603
21,869
47,562
Rent receivable
1,326
1,326
Security deposits
5,490
3,260
Advances to suppliers and contractors
12
Receivable in respect of acquisition
–
Other advances – considered good
12,089
464
Receivable against redemption of units
25,000
–
66,398
68,116
14,901
ANNUAL REPORT 2008
18.
NEW JUBILEE INSURANCE COMPANY LIMITED
REINSURERS
Notes to the Financial Statements 21. FIXED ASSETS 21.1 Tangible assets
As at 1 January 2008
Furniture and fixtures
37,651
Cost Additions / Adjustments As at (disposals) 31 December 2008
15,799
256
52,703
2008 Depreciation Written down Depreciation As at For the year / Adjustments As at value as at rate 1 January (disposals) 31 December 31 December % 2008 2008 2008 (Rupees in '000) 17,167
(1,003) Office equipment
44,504
13,691
27,260
4,365
(291)
56,708
17,706
153,873
1,224
(51)
31,552
16,768
35,079
31,544
17
5,940
(34)
22,809
33,899
17
4,029
(53)
20,741
10,811
25
674
10,500
18,483
20
587
75,209
94,737
(3) (4,345)
28,983
32,695
(121,769) 263,288
21,159
(803)
(22) Vehicles
–
(850)
(1,196) Computer equipment
4,842
10,599 (33,468)
(4,431)
169,946
84,336
(123,990)
25,410 (35,124)
2007 As at 1 January 2007
Furniture and fixtures
28,015
Cost Additions / Adjustments As at (disposals) 31 December 2007 2007
10,429
–
37,651
Depreciation Written down Depreciation As at For the year Adjustments As at value as at rate 1 January (disposals) 31 December 31 December % 2007 2007 2007 (Rupees in '000) 12,398
(793) Office equipment
28,215
18,083
23,836
4,378
–
44,504
13,962
70
122,425 202,491
(913)
27,260
16,109
20,484
17
–
17,706
26,798
17
(15)
16,768
10,492
25 20
4,805 682 (8)
48,498 (15,636)
(1,414)
153,873
34,675
7,034 (7,600)
(1,414)
32,695
121,178
81,388
(2,327)
263,288
77,144
17,710
(1,429)
84,336
178,952
(18,264)
21.2
17,167
(1,061)
(41) Vehicles
–
(420)
(1,794) Computer equipment
5,189
(9,089)
Intangible assets
As at 1 January
Additions
Cost Adjustments
As at 31 December
Amortisation Written down Amortisation As at For the year Adjustments As at value as at period 1 January 31 December 31 December (Rupees in '000)
Computer softwares 2008
6,569
2,007
2007
4,934
737
–
8,576
4,289
1,064
–
5,353
3,223
5 years
898
6,569
4,007
282
–
4,289
2,280
5 years
For the year ended 31 December 2008 Disposal of tangible assets Cost
Accumulated depreciation
Book Sale value proceeds (Rupees in '000)
Profit / (loss)
Mode of disposal
Particulars of buyers
2,888 1,543 1,080 1,091 988 921 936 931 928 925 931 922 922 922 1,023 922 922 922 924 902 892 922 1,023 1,024 924 933 933 924 862 959 890 890 1,439 1,202 944 928 928 1,196 889 928 1,032 928 928 928 920 868 916 1,103 923 886 898 886 898 1,087 865 866 950 865 847 600 600
1,009 187 76 219 117 64 94 95 93 94 102 93 93 93 195 102 103 103 111 90 90 120 224 226 130 140 140 138 86 183 124 125 676 462 208 195 195 467 169 213 320 232 232 232 230 181 229 419 249 213 229 230 242 438 230 268 354 277 296 61 61
1,879 1,356 1,004 872 871 856 842 837 835 831 829 828 828 828 828 819 819 819 813 811 802 801 799 797 794 792 792 786 776 776 766 765 763 740 736 733 733 730 720 714 712 696 696 696 690 687 687 684 674 673 669 656 655 648 635 598 596 588 551 539 539
1,575 1,271 738 746 715 704 711 728 704 831 728 728 728 704 815 728 728 728 831 704 704 728 815 815 831 834 831 800 704 805 704 704 746 746 644 675 644 746 675 675 785 675 675 741 675 714 675 780 500 675 793 675 675 811 717 651 751 651 668 557 514
(304) Offer price Tahir Ahmed (85) Offer price Syed Sohail Ahmed (266) Offer price Syed Ather Abbas (125) Offer price Abida Saleem (156) Offer price Shehzad Noorani (153) Offer price Siddique Memon (131) Offer price M. Uzair Mirza (109) Offer price Rizwan Ehsan Puri (132) Offer price Khawaja Iqbal Ahmed (0) Offer price Ejaz Mahmood (101) Offer price Mian Allah Nawaz (100) Offer price Akber Sultan (100) Offer price Muhammad Iqbal (124) Offer price Sunnu F. Golwalla (13) Offer price Razzak Choudhry (91) Offer price Syed Tanzeem–Ul–Hassan (91) Offer price Vishandas Nankani (91) Offer price Syed Waqar Hyder Taqvi 18 Offer price Azfar Arshad (108) Offer price Zahid Farman (98) Offer price Nahid Afzal Panawala (73) Offer price Azam Sultan 16 Offer price Ilyas Muhammad 18 Offer price Haji Muhammad Ramzan 37 Offer price Syed Imran Rabbani 42 Offer price Nasim–Ul–Haq 39 Offer price Atta–Ul–Haq Shaikh 14 Negotiation Mian Mushtaq Ahmed (72) Offer price Syed Obaid–Ur–Rehman 29 Offer price M. Afzal Qureshi (62) Offer price Bilal Q. Alvi (61) Offer price Akber Habib Rajan (16) Offer price Tahir Ahmed 7 Offer price Mehboob Parvaiz (92) Offer price Syed Noman Kadri (58) Offer price Abdul Qadir Moochala (89) Offer price Hashim M. Shamim 17 Offer price Muhammad Safdar (45) Offer price M. Nadeem Irshad (39) Offer price Sharif Ahmed Khan 73 Offer price Shehnaz Kassim (21) Offer price Ishtiaq Ahmed (21) Offer price Shaikh Muhammad Issa 45 Auction Faisal Abdul Aziz (15) Offer price Asif Ali 27 Offer price Qamar Saleem (12) Offer price Zubair Dada 96 Auction Rehman Mithani (174) Negotiation Sunail Kumar Talreja 2 Offer price Amir Mumtaz Paracha 124 Auction Syed Riaz Ahmed 19 Auction Karim Arif 20 Offer price Arslan Bhatti 163 Auction Syed Riaz Ahmed 82 Auction Muhammad Ovais Gaziani 53 Offer price Karim Merchant 155 Offer price Bashir Ahmed Khan 63 Offer price Zulfiqar Ali Abdullah 118 Auction Zahid Qadri 17 Offer price Asghar Moiz (25) Offer price Tariq Zia
Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Other Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Employee Other Employee Employee Employee Other Other Employee Other Other Employee Other Other Employee Employee Employee Other Employee Employee
71
Motor vehicles (including trackers)
NEW JUBILEE INSURANCE COMPANY LIMITED
Disposal of tangible assets during the year having book value exceeding Rs. 50,000
ANNUAL REPORT 2008
21.3
Notes to the Financial Statements Cost
72
601 600 610 913 600 889 889 590 600 605 849 849 600 819 600 632 843 931 571 1,008 1,041 578 577 1,009 950 610 540 608 809 593 583 583 605 813 1,152 600 809 553 1,123 488 595 639 639 557 678 619 773 579 600 404 405 404 600 406 757 405 804 396 396 399 396 379 375 399 850 820 403 404
Accumulated depreciation
67 67 80 384 72 364 364 66 78 85 331 331 84 303 84 117 329 419 67 507 543 81 81 514 456 117 55 129 332 119 111 111 139 351 691 144 353 100 674 39 155 204 217 136 262 222 379 185 221 31 34 38 234 42 394 42 442 36 37 41 41 26 26 52 510 492 75 78
Book Sale value proceeds (Rupees in '000) 533 533 529 529 528 524 524 524 522 520 518 518 516 516 516 515 514 512 504 502 498 497 496 494 494 494 485 479 476 474 472 472 466 462 461 456 455 453 449 449 440 435 422 420 416 397 394 394 379 374 371 367 366 364 363 363 362 360 360 358 355 353 349 347 340 328 327 326
468 514 484 662 535 648 649 514 514 514 461 458 514 672 514 653 458 702 453 717 717 514 514 717 717 507 546 537 516 485 484 518 484 508 600 484 487 508 698 410 484 485 450 545 466 491 377 457 457 326 326 326 395 326 388 326 424 326 326 326 326 326 378 326 455 487 308 308
Profit / (loss)
Mode of disposal
Particulars of buyers
(66) Offer price Syed Shoaib Kamal Zaidi Employee (19) Negotiation Syed Tanveer Akhtar Ex–Employee (45) Offer price Captain Shahid Ahmed Employee 133 Auction Syeda Hafsa Malik Other 7 Offer price Muhammad Arif Employee 123 Auction Syed Riaz Ahmed Other 124 Auction Nauman Ahmed Siddiqui Other (10) Offer price Khalid Hameed Employee (8) Auction Muhammad Aslam Khan Ex–Employee (6) Offer price Mehboob Merchant Employee (57) Auction Rehan Other (60) Offer price Aziz Surani Employee (2) Offer price Ch. Aamir Ali Employee 156 Auction Sarfaraz Khan Other (2) Offer price Shabbir Hassan Employee 138 Auction Haji Nazeer Ahmed Other (56) Offer price Syed Abdul Rahim Employee 190 Auction Atif Shabbir Other (51) Auction Muhammad Ovais Gaziani Other 216 Offer price Hamid Hussain Zaidi Employee 219 Offer price Ch. Sardar Ali Employee 17 Offer price Abdul Hayee Khan Employee 18 Offer price Riaz A. Bhatti Employee 223 Offer price Zahoor A. Shaheen Employee 223 Offer price Mirza Ali Mahmood Employee 13 Auction Malik Abdul Khaliq Other 61 Auction Syed Farhat Abbas Jaffri Other 58 Auction Malik Abdul Khaliq Other 40 Auction Syed Farhat Abbas Jaffri Other 11 Offer price Adnan Junaid Employee 12 Offer price Dr. Siddique Hossain Employee 46 Auction Syed Riaz Ahmed Other 19 Offer price Amjad Habib Employee 46 Auction Sarfaraz Khan Other 139 Offer price Muhammad Ikram Employee 28 Offer price Zermin Sohail Employee 32 Auction Muhammad Owais Other 55 Auction Syed Farhat Abbas Jaffri Other 249 Offer price Atiq A. Mehmudi Employee (39) Offer price Munawwar Ali Siddiqui Employee 44 Negotiation Tayyab Farooq Other 50 Offer price Atiq A. Mehmudi Employee 28 Auction Ratna Kumari Other 124 Auction Syed Riaz Ahmed Other 50 Auction Zahid Qadri Other 94 Auction Sultan Hassan Khan Other (17) Auction Kamran Yaseen Wasti Other 63 Offer price Ali Aasim Khan Employee 78 Offer price Amanullah Khan Employee (48) Offer price Azam Khan Employee (45) Offer price M. Ilyas Qureshi Employee (41) Offer price Abdul Aziz Employee 29 Offer price Hashim M. Shamim Employee (39) Offer price M. Saleem Hashim Employee 24 Offer price Iqbal A. Rohilla Employee (37) Offer price Ghufranullah Khan Employee 62 Auction Syed Riaz Ahmed Other (35) Offer price Birgis Fatima Employee (34) Offer price M. Amin Memon Employee (32) Offer price Tariq Rafiq Employee (30) Offer price Zobia Fayyaz Employee (27) Offer price Naeem Zafar Employee 28 Auction Malik Abdul Khaliq Other (21) Offer price Muhammad Arif Moten Employee 115 Offer price Mian Saeed–Ur–Rehman Employee 159 Auction Kamran Yaseen Wasti Other (19) Offer price Israr Ali Shah Employee (18) Offer price Zulfiqar A. Karim Employee
For the year ended 31 December 2008
Furniture and fixtures
Profit / (loss)
Mode of disposal
Particulars of buyers
403
77
325
309
(16)
Offer price
S.M. Jaffri
395
74
322
253
(69)
Offer price
Arshad Mahmood
Employee Employee
803
482
321
491
170
Auction
Sarzameen Khan
Other
395
75
319
318
(2)
Auction
Syed Riaz Ahmed
Other
412
93
319
308
(11)
Offer price
755
437
318
495
177
Auction
381
68
313
304
(9)
395
83
312
287
(26)
391
80
311
286
(25)
Auction
Tabassum Bashir Qureshi
Employee
Zahid Qadri
Other
Auction
Syed Riaz Ahmed
Other
Auction
Rizwan
Other
Sultan Hassan Khan
Other
352
41
311
333
22
Auction
Zahid Qadri
Other
407
107
300
302
2
Auction
Malik Abdul Khaliq
Other
564
265
299
407
108
Auction
Malik Abdul Khaliq
Other
417
121
296
235
(61) Negotiation Nisar Hussain Uttanwala
Ex–Employee
373
78
295
319
24
Malik Abdul Khaliq
Other Other
Auction
373
79
294
297
3
Auction
Saleem Akhtar Khan
733
440
293
368
75
Auction
Amir Mehmood
Other
423
133
290
291
1
Auction
Faisal Abdul Aziz
Other
468
182
285
335
50
Offer price
Ghulam Hussain
Employee
408
129
279
276
(4) Negotiation Amir Fazal
439
161
278
250
406
129
277
406
132
274
Jan Muhammad Behlum
Ex–Employee
(28)
Auction
Other
275
(2)
Offer price
Abid Hussain
Employee
363
89
Auction
Peeral
Other
Muhammad Ovais Gaziani Other
345
75
270
288
18
Auction
450
181
269
249
(20)
Offer price
373
118
256
262
6
Auction
391
138
253
257
4
470
221
249
343
94
Auction
Syed Riaz Ahmed
Other
424
183
241
257
16
Auction
Atif Shabbir
Other
419
181
238
248
9
Auction
Atif Shabbir
Other
634
397
237
411
174
Auction
Rehan Khalid
Other
417
209
208
249
41
Offer price
Amer Sardar
Employee
466
261
205
333
129
Auction
Wasim Mirza
Other
466
267
199
292
93
Auction
Malik Abdul Khaliq
Other
250
80
170
223
53
Auction
Muhammad Ayoub
Other
324
175
149
190
41
Auction
Muhammad Usman
Other
294
179
115
151
36
Auction
Kamran Yaseen Wasti
Other
250
150
100
100
–
Auction
Syed M. Baqar Abidi
Other
S.M. Abbas Zaidi
Employee
Atif Shabbir
Other
Negotiation Tahir Ahmed–LZO
Ex–Employee
122
31
92
50
(42) Negotiation Winson (Pvt. ) Ltd.
Other
225
135
90
259
169
Other
135
47
88
216
128
Auction
Muhammad Kamran
Other
542
464
78
78
–
Auction
M. Khalid Awan
Other
403
282
121
132
10
Auction
M. Khalid Awan
Other
75
23
52
53
1
Offer price
Shaikh Muhammad Issa
Employee
Negotiation Ilyas Mirza
Office equipment, electrical installations and computers
NEW JUBILEE INSURANCE COMPANY LIMITED
Book Sale value proceeds (Rupees in '000)
73
Accumulated depreciation
ANNUAL REPORT 2008
Cost
Notes to the Financial Statements 22.
ADMINISTRATIVE SURCHARGE Premium written and net premium revenue include administrative surcharge, class wise detail of which is given below: 2008 2007 (Rupees in '000) Fire and property damage Marine, aviation and transport Motor Miscellaneous
23.
10,690 10,579 21,550 5,658 48,477
9,405 9,783 21,389 4,192 44,769
307,973 32,117 14,548 840 12,447 20,488 3,360 27,734 25,410 1,064 1,034 – 59,309 506,324
224,750 23,469 12,781 – 11,059 19,225 2,508 14,251 17,710 282 2,735 10,000 66,662 405,432
MANAGEMENT EXPENSES Salaries, wages and benefits Rent, taxes and electricity Communications Directors' fee and expenses Printing and stationery Travelling and entertainment Repairs and maintenance Advertisement and sales promotion Depreciation Amortisation Bad debts written off Provision for doubtful balances Other expenses
23.1
21.1 21.2 16.1
23.1
These include Rs.8.24 million (31 December 2007: Rs. 6.89 million ) in respect of employees' provident fund and Rs.10.87 million (31 December 2007: Rs. 8.29 million ) in respect of defined benefit plan.
24.
RENTAL INCOME
74
Rental revenue Investment property related expenditure
25.
93,073 (9,873) 83,200
79,207 (8,343) 70,864
OTHER INCOME Income from financial assets Exchange gain / (loss) Return on loans to employees Income from non–financial assets Gain on sale of fixed assets Others
6,450 56
1,012 3,255 10,773
(14) 30
1,817 978 2,811
For the year ended 31 December 2008 GENERAL AND ADMINISTRATION EXPENSES
Legal and professional Subscription Registration fee Insurance ombudsman Workers welfare fund Charity and donations Expense on bonus issue Authorized capital fee Auditors' remuneration
2008 2007 (Rupees in '000)
26.1
26.2
5,614 364 294 225 5,801 5,017 1,252 – 986 19,553
1,311 235 131 – – 2,548 1,451 1,250 943 7,869
26.1
During the year, no donations were made to any donee in which a director, executives or their spouses were interested.
26.2
Auditors' remuneration
450 89 943
(61,500) (26,596) (88,096)
(12,761) 26,176 13,415
(179,153)
575,041
(62,704)
201,264
Relationship between tax expense and accounting (loss) / profit (Loss) / profit before taxation Tax at the applicable rate of 35% (31 December 2007: 35%)
28.
450 111 986
TAXATION – NET Current Deferred
27.1
250 75 79
NEW JUBILEE INSURANCE COMPANY LIMITED
27.
250 75 100
75
Audit fee Interim review Tax advisory services Special reports and certificates for various government agencies and sundry advisory services Out of pocket expenses
Tax effect of expenses that are not allowable in determining taxable income
226,432
Tax effect of capital gains exempt from tax
(34,885)
(174,664)
Tax effect of income subject to lower rates
(40,747) 88,096
(45,765) (13,415)
5,750
TRANSACTIONS WITH RELATED PARTIES Related parties comprise associated companies, directors, key management personnel and retirement benefit funds. Investments in related parties have been disclosed in the relevant balance sheet note. Remuneration to the key personnel are included in note 30 to these financial statements and are determined in accordance with the terms of their appointments.
ANNUAL REPORT 2008
26.
Notes to the Financial Statements Details of transactions with related parties during the year, other than those which have been disclosed elsewhere in these financial statements, are as follows: 2008 2007 (Rupees in '000) Insurance premium: – Balance at beginning of the year
233,187
62,938
– Insurance premium written (including government levies administrative surcharge and policies stamps)
357,010
360,332
(352,554)
(190,083)
237,643
233,187
9,723
2,868
191,223
100,598
Purchases of goods and services
7,115
9,304
Dividend income
3,608
5,461
Rent income
14,363
13,751
Contributions / provision for staff retirement benefit plans
19,083
15,172
– Received / adjusted during the year – Balance at end of the year Insurance commission expense Insurance claims expense
29.
EMPLOYEES BENEFITS Defined benefit plan The actuarial valuations are carried out annually and contributions are made accordingly. Following were the significant assumptions used for valuation of the scheme:
76
– – – – 29.1
Discount rate 15% (2007: 10%) per annum. Expected rate of increase in the salaries of the employees 15% (2007: 10%) per annum. Expected interest rate on plan assets of the fund 10% (2007: 10%) per annum. Expected service length of the employees 15 years (2007: 15 years).
Asset / (liability) in balance sheet
2008
2007
(Rupees in '000) Present value of defined benefit obligation Fair value of plan assets Net actuarial losses not recognised
29.2
52,504 (43,503) (9,001) –
38,922 (35,427) (3,495) –
– 10,846 (10,846) –
– 8,286 (8,286) –
Movement in asset / (liability) during the year Opening balance Charge to profit and loss account Contributions to the fund during the year Closing balance
For the year ended 31 December 2008 Reconciliation of the present value of the defined benefit obligations
2008 2007 (Rupees in '000)
Present value of obligation as at 1 January
38,922
36,842
Current service cost
10,496
7,971
Interest cost
3,892
3,684
Benefits paid
(5,589)
(10,677)
Actuarial loss Present value of obligation as at 31 December
1,102 38,922
35,427
33,700
Fair value of plan assets as at 1 January
3,542
3,370
Contribution to the fund
Expected return on plan assets
10,846
8,286
Benefits paid
(5,589)
(10,677)
Actuarial gain / (loss)
(723)
Fair value of plan assets as at 31 December 29.5
43,503
35,427
Charge for the defined benefit plan Current service cost
10,496
7,972
3,892
3,684
Interest cost Expected return on plan assets
29.6
748
(3,542)
(3,370)
10,846
8,286
3,542
3,370
Actual return on plan assets Expected return on assets Actuarial gain / (loss) on assets
(723)
748
2,819
2008 29.7
Composition of fair value of plan assets
Debt instruments Equity instruments Others Fair value of plan net assets
4,118
2007
Fair value Percentage Fair value Percentage (Rupees in (Rupees in 000) 000) 14,480 24 28,999 43,503
33% 0% 67%
15,080 4,378 15,969 35,427
43% 12% 45%
NEW JUBILEE INSURANCE COMPANY LIMITED
Changes in fair value of plan assets
77
29.4
4,783 52,504
ANNUAL REPORT 2008
29.3
Notes to the Financial Statements 29.8
Historical data of the fund
2008
2007
52,504
38,922
(43,503)
2006 (Rupees in '000)
2005
2004
36,842
29,927
27,199
(35,427)
(33,699)
(30,036)
(27,224)
9,001
3,495
3,143
(109)
(25)
4,783
1,102
Present value of defined benefit obligations
Fair value of plan assets Deficit / (surplus)
Experience adjustments – Actuarial loss / (gain) on obligation – Actuarial gain /(loss) on assets
(723)
1,260
748
(1,991)
29.9
The estimated contribution to the Fund for the year ending 31 December 2009 is Rs. 12.97 million.
30.
REMUNERATION OF MANAGING DIRECTOR, DIRECTORS AND EXECUTIVES
Managing Director 2008
2007
Directors 2008
473
(612)
1,209
(249)
Executives
2007
2008
Total
2007
2008
2007
(Rupees in '000)
Director fees
–
–
840
–
–
–
– including bonus
6,600
Retirement benefits
900
840
–
5,477
–
–
46,071
30,950
52,671
706
–
–
4,794
2,950
5,694
3,656
1,620
1,271
–
–
14,925
9,564
16,545
10,835
540
424
–
–
4,001
2,496
4,541
2,920
16
12
–
–
1,511
1,115
1,527
1,127
555
808
–
–
2,009
2,417
2,564
3,225
Managerial remuneration
House rent Utilities Medical expenses
36,427
Leave passage / assistance Others
78
Number of persons
1,382
180
–
–
17,989
5,815
19,371
5,995
11,613
8,878
840
–
91,300
55,307
103,753
64,185
1
8
47
29
56
38
1
8
In addition, the managing director and some of the executives are provided with free use of certain items of household furniture, fixtures and equipments in accordance with their entitlements.
31.
309
7,915
2,959
4,181
ANNUAL REPORT 2008
Unallocated capital expenditure
Non–cash expenses other than depreciation / amortisation
Depreciation / amortisation
Consolidated total liabilities
Unallocated corporate liabilities
Segment liabilities
SEGMENT LIABILITIES 905,202 1,059,366
79
2,676
3,781
427,401
194
4,963
647,856
393,412
4,072
5,751
674,634
202,712
Motor 2007
133
3,407
182,852
111,037
96
136
99,714
122,826
Liability 2008 2007 (Rupees in ‘000)
NEW JUBILEE INSURANCE COMPANY LIMITED
166
4,262
470,407
312,824
2008
97
2,470
334,673
203,231
2,064
2,917
235,446
77,205
Accident & Health 2008 2007
135
3,457
573,104
348,018
868
1,226
834,560
581,559
Miscellaneous 2008 2007
Total 2007
1,891,038 1,853,990
2008
189,922
88,027
1,034
26,474
86,707
12,735
17,992
3,363,858 3,521,043
249,764
3,114,094 3,331,121
5,425,172 5,932,706
285,655
Marine 2008 2007
Consolidated total assets
556,864
2007
3,534,134 4,078,716
549,685
Fire
Unallocated corporate assets
Segment assets
SEGMENT ASSETS
2008
Class of business wise revenue and results have been disclosed in the profit and loss account prepared in accordance with the requirement of Insurance Ordinance, 2000 and the SEC (Insurance) Rules, 2002. The following table presents information regarding segment assets, liabilities as at 31 December 2008 and 31 December 2007, unallocated capital expenditures and non–cash expenses during the year:
SEGMENT REPORTING
For the year ended 31 December 2008
Notes to the Financial Statements 32.
FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES Liquidity risk Liquidity risk is the risk that the Company will be unable to meet its funding requirements. To guard against the risk, the Company has diversified funding sources and assets are managed with liquidity in mind, maintaining a healthy balance of cash and cash equivalents and readily marketable securities. The maturity profile is monitored to ensure adequate liquidity is maintained. Interest / Markup rate risk The Company invests in securities and has deposits that are subject to interest / markup rate risk. Interest / markup rate risk to the Company is the risk of changes in market interest / markup rates reducing the overall return on its interest bearing securities. The Company limits interest / markup rate risk by monitoring changes in interest / markup rates in the currencies in which its cash and investments are denominated. The Company's interest sensitivity and liquidity positions based on maturities is as follows: Effective rate % per annum
2008 Interest / mark–up bearing financial instruments Non – interest / Maturity Maturity over Maturity Sub total mark–up bearing upto one one year to more than financial year five years five years instruments (Rupees in '000)
Total
FINANCIAL ASSETS Cash and bank deposits Loans to employees Investments Premiums due but unpaid
0.25–19.25
–
–
1,528,480
6
1,528,480 –
364
–
364
10–14.35
–
80,540
–
–
–
–
–
– –
131,175
211,715
141,675 –
1,670,155 364
1,218,502
1,430,217
–
714,385
714,385
–
–
181,303
181,303
–
–
–
20,035
20,035
–
–
–
26,626
26,626
–
–
–
–
365,729
365,729
278
–
–
Amounts due from other insurers / reinsurers Reinsurance recoveries due but unpaid Accrued investment income Reinsurance recoveries against outstanding claims
80
Sundry receivables
1,528,758
80,904
131,175
278
44,251
44,529
1,740,837
2,712,506
4,453,343
–
1,190,064
1,190,064
146,696
FINANCIAL LIABILITIES
Provision for outstanding claims
–
–
–
Amounts due to other insurers / –
–
–
–
146,696
Accrued expenses
reinsurers
–
–
–
–
12,914
12,914
Other creditors and accruals
–
–
–
–
310,892
310,892
Deposits and other payables
–
–
–
–
147,185
147,185
Unclaimed dividend
–
–
–
–
16,561
16,561
–
–
–
–
1,824,312
1,824,312
888,194
2,629,031
Inter risk sensitivity gap
1,528,758
80,904
131,175
Cumulative interest risk sensitivity gap
1,528,758
1,609,662
1,740,837
1,740,837
For the year ended 31 December 2008
Effective rate % per annum
2007 Interest / mark–up bearing financial instruments Non – interest / Maturity Maturity over Maturity Sub total mark–up bearing upto one one year to more than financial year five years five years instruments (Rupees in '000)
Total
FINANCIAL ASSETS Cash and bank deposits
0.25 to 10.50 1,603,195
Loans to employees Investments
6 10 to 14
Premiums due but unpaid
–
– 433
449
83,159
– – 108,730
1,603,195 433 192,338
77,430 –
1,680,625 433
1,763,556
1,955,894
–
–
–
–
703,209
703,209
–
–
–
–
45,672
45,672
–
–
–
–
17,691
17,691
Amounts due from other insurers / reinsurers Reinsurance recoveries due but unpaid
retained by cedants
–
Accrued investment income
13
–
–
–
1,080
1,080
3,296
2,247
5,556
8,401
13,957
–
–
501,680
501,680
Reinsurance recoveries against outstanding claims Sundry receivables
– 296 1,603,953
– –
–
86,888
110,977
–
–
296
20,258
20,554
1,801,818
3,138,977
4,940,795
–
1,428,812
1,428,812
FINANCIAL LIABILITIES
Provision for outstanding claims
–
Amounts due to other insurers / reinsurers Accrued expenses
–
–
–
–
270,643
270,643
–
–
–
–
7,553
7,553
–
–
–
–
244,154
244,154
Deposits and other payables
–
–
–
–
109,666
109,666
Unclaimed dividend
–
–
–
–
15,186
15,186
–
–
–
–
2,076,014
2,076,014
1,062,963
2,864,781
Inter risk sensitivity gap
1,603,953
86,888
110,977
Cumulative interest risk sensitivity gap
1,603,953
1,690,841
1,801,818
1,801,818
ANNUAL REPORT 2008
81
Other creditors and accruals
NEW JUBILEE INSURANCE COMPANY LIMITED
Premium and claim reserves
Notes to the Financial Statements 33.
FOREIGN CURRENCY RISK The Company is not materially exposed to risk from foreign currency exchange rate fluctuation.
34.
MARKET RISK Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual security, or its issuer, or factors affecting all securities traded in the market. The Company is exposed to market risk with respect to its investments. The Company limits market risk by maintaining a diversified portfolio and by continuous monitoring of developments in equity, money market fund and term finance certificates (TFCs) markets. In addition, the Company actively monitors the key factors that affect stock, money market and TFCs market.
35.
CREDIT RISK AND CONCENTRATION OF CREDIT RISK Credit risk is the risk, which arises with the possibility that one party to a financial instrument will fail to discharge its obligation and cause the other party to incur a financial loss. The Company attempts to control credit risk by monitoring credit exposures by undertaking transactions with a large number of counter parties in various industries and by continually assessing the credit worthiness of counter parties. Concentration of credit risk arises when a number of counter parties have a similar type of business activities. As a result, any change in economic, political or other conditions would affect their ability to meet contractual obligations in a similar manner. The Company is exposed to credit risk on premiums receivable from customers and co–insurers; and for commission and claim recoveries from reinsurers. The management monitors exposure to credit risk through regular review of credit exposure and prudent estimates of provisions for doubtful receivables.
36.
REINSURANCE RISK
82
Reinsurance ceded do not relieve the Company from its obligation to policy holders and as a result the Company remains liable for the portion of outstanding claims reinsured to the extent that reinsurer fails to meet the obligation under the reinsurance agreements. To minimise its exposure to significant losses from reinsurer insolvencies, the Company obtains reinsurance from a number of reinsurers, who are dispersed over several geographical regions. 37.
CAPITAL MANAGEMENT The management's policy is to maintain a strong capital base for the confidence of stakeholders and to sustain future development of the business. The management closely monitors the return on capital along with the level of distributions to ordinary shareholders. The Company meets minimum paid up capital requirements as required by Securities and Exchange Commission of Pakistan.
38.
FAIR VALUE OF FINANCIAL INSTRUMENTS Fair value is an amount for which an asset could be exchanged, or a liability settled, between knowledgeable willing parties in an arm's length transaction. Consequently, difference may arise between the carrying values and the fair values estimates.
For the year ended 31 December 2008 The fair value of all the financial instruments are estimated to be not significantly different from their carrying values except for quoted investments in associate, held to maturity and available for sale securities which fair value is Rs. 1,624.11 million (31 December 2007: Rs. 2,717.68 million). The fair value of quoted investments is based on quoted market price (Refer note 13.4). 39.
(LOSS) / EARNINGS PER SHARE Basic (loss) / earnings per share are calculated by dividing the net (loss) / profit for the year by the weighted average number of shares as at the year end as follows: 2008
2007
(Rupees in '000) (Loss) / profit after tax for the year
(267,249)
588,456
(Number of shares in '000) Restated
(Rupees) (Loss) / earnings per share of Rs. 10/= each - basic & diluted
(4.05)
8.93
39.1
No figure for diluted (loss) / earnings per share has been presented as the Company has not issued any instrument which would have an impact on (loss) / earnings per share when exercised.
39.2
The number of shares for the prior year has been adjusted for the effect of bonus shares issued during the current year. Hence, the figure for the prior year's earnings per share has also been restated.
40.
SUBSEQUENT EVENT – NON ADJUSTING The Board of Directors in its meeting held on 11 March 2009 has announced a final cash dividend in respect of the year ended 31 December 2008 of Rs. 1.5 per share of Rs.10 each (15%) [31 December 2007: Rs. 1.5 per share of Rs.10 each (15%) cash dividend and bonus shares 20%]. In addition, the Board of Directors has also approved the transfer from general reserve to unappropriated profit amounting to Rs. 300 million [31 December 2007: Transferred to general reserve of Rs 350 million]. These financial statements for the year ended 31 December 2008 do not include the effect of these appropriations which will be accounted for subsequent to the year end.
41.
AUTHORISATION FOR ISSUE These financial statements have been authorised for issue in accordance with a resolution of the Board of Directors on 11 March 2009.
42.
GENERAL All figures have been rounded off to the nearest thousand of rupees.
Twofiq H. Chinoy Chairman
Akbarali Hashwani Director
Akbarali Pesnani Director
Tahir Ahmed Managing Director (Chief Executive)
NEW JUBILEE INSURANCE COMPANY LIMITED
65,915
83
65,915
ANNUAL REPORT 2008
Weighted average number of shares of Rs.10 each
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