LAGOS, NIGERIA REPORT OF THE DIRECTORS AND AUDITED ... · M. O. Oyegunle, Mr. G. Raghu, Dr. alla Swamy and Mr. Sarberswar Sahoo. The ommittee [s term of reference is to fundamentally

PRESTIGE ASSURANCE PLC LAGOS, NIGERIA

REPORT OF THE DIRECTORS

AND

AUDITED FINANCIAL STATEMENTS

F OR THE Y EAR E NDED 31 DE CEMBER 2016

PRESTIGE ASSURANCE PLC

REPORT OF THE DIRECTORS AND AUDITED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2016 Contents Page

Corporate Information 3

Result at a Glance 4

Corporate Governance Report 5 - 9

Certificate of Pursuant to section 60(2) of Investment and Securities Act 10

Report of Audit and compliance Committee 11

Sustainability and Corporate Responsibility Report 12 - 14

Management Discussion and Analysis 15 - 16

Report of the Directors 17 – 19

Statement of Directors’ Responsibilities in Relation to the Preparation

of the Audited Financial Statements 20 Independent Auditors’ Report 21 - 25

Summary of Significant Accounting Policies 26 - 45

Statement of Profit or Loss and Other Comprehensive Income 46

Statement of Financial Position 47

Statement of Changes in Equity 48

Statement of Cash Flows 49

Notes to the Financial Statements 50 - 89

Revenue accounts 90

Statement of Value Added 91

Five-Y ear Financial Summary 92 – 93

CORPORATE INFORMATION

FOR THE YEAR ENDED 31 DECEMBER 2016

Directors

Mr. Hassan T. M. Usman (Nigerian) - Chairman

Dr. Balla Swamy (Indian) - Managing Director/CEO

Mr. Gopalan Srinivasan (Indian) - Non-Executive Director

Mr. Muftau Olakunle Oyegunle (Nigerian) - Non-Executive Director

Mr. Gopalan Raghu (Indian) - Non-Executive Director

Mr. Kochunni Sanathkumar (Indian) - Non-Executive Director (retired 27 J une 2016)

Mr. Kale Rajaran Chandrakant (Indian) - Non-Executive Director (retired 27 J une 2016)

Mr. Sarbeswar Sahoo (Indian) - Executive Director (appointed 27 June 2016)

Mr. Hermant G. Rokade (Indian) - Non-Executive Director (appointed 27 June 2016)

Registered Number 6753

NAICOM Reg. Number 033

Company Secretary Abayomi Odulana

FRC/2013/0000000000595

Registered Office Ligali Ayodrinde Street

Victoria Island, Lagos

P.O.Box 650 Marina, Lagos

[email protected]

www.prestigeassuranceplc.com

Actuaries Alexander Forbes Nigeria Limited

FRC/2012/00000000000504

HR Nigeria Limited

FRC/NAS/2012/000000001946

Registrars First Registrar Nigeria Limited

Plot 2, Abebe Village Road

Iganmu, Lagos

FRC/2013/00000000001946

Auditors Ernst & Young

10th & 13th Floors, UBA House

57, Marina

Lagos

Bankers Access Bank Plc

City Bank Plc

First Bank of Nigeria Limited

Stanbic IBTC

Sterling Bank Plc

United Bank for Africa Plc

Re-insurers African Reinsurance Coporation Aveni Reinsurer

Continental Reinsurance NCA

Reinsurer

Zep Reinsurer


RESULT AT GLANCE


3

*Restated

2016 2015

₦’000 ₦’000

Gross premium written 2,614,264 2,430,533

========= =========

Net premium income 1,101,808 927,747

Underwriting expenses 1,213,657 1,733,977

Investment income 417,824 532,637

Other operating income 146,361 336,494

Result from operating activities 350,996 39,372

Profit/(loss) for the year 221,992 (137,003)

Net assets 6,228,262 5,809,578

Total assets 9,689,587 10,367,741

Basic earnings/(loss) per share (Kobo) 4.13 (2.94)

Diluted earnings/(loss) per share (Kobo) 4.13 (2.94)

CORPORATE GOVERNANCE REPORT


Introduction

Prestige Assurance Plc (“the Company”) has remained committed to the principles and practice that promote Good

Corporate Governance. We recognize that sound corporate governance practices are necessary for effective

management and control of the Company’s business with a view to maximizing the Shareholders value and meeting the

expectations of other Stakeholders. In furtherance of the commitment to high ethical conduct, we regularly review our

processes and practices to ensure compliance with the legislative and best practice changes in the global corporate

governance environment.

The Company continues to comply with its Internal Governance Policies and the Code of Corporate Governance for

Public Companies in Nigeria. As an Insurance company, Prestige also complies with the Code of Good Corporate

Governance for the Insurance Industry in Nigeria, issued by the National Insurance Commission in March 2015. The


CORPORATE GOVERNANCE REPORT- CONTINUED

4


NAICOM’s Code of Corporate Governance covers a wide range of issues including Board structure, quality of Board

Members, duties of the Board, conduct of the Board of Directors, rights of Shareholders and Committees of the Board.

S/N DIRECTORS CATEGORY OF

DIRECTORSHIP

NUMBER

MEETINGS

HELD

OF NUMBER

MEETINGS

ATTENDED

OF

1 Mr. Hassan T.M Usman Chairman 5 5

2 Dr. Balla Swamy Managing Director/CEO 5 5


5

3 Mr. Gopalan Srinivasan Non-Executive Director 5 1

4 Mr. Muftau Olakunle Oyegunle Non-Executive Director 5 5

5 Mr. Gopalan Raghu Non-Executive Director 5 5

6 Mr. Sarbeswar Sahoo Executive Director 5 4

7 Mr. Hermant G. Rokade Non-Executive Director 5 5

Board of Directors

The Board of Directors has the ultimate responsibility for the overall functioning of the Company. The responsibilities of

the Board include setting the Company’s strategic objectives and policies, providing leadership to put them into effect,

supervising the management of the business, ensuring implementation of decisions reached at the Annual General

Meeting, ensuring value creation to shareholders and employees, determination of the terms of reference and

procedures of all Board Committees, ensuring maintenance of ethical standard as well as compliance with the Laws of

Nigeria. At the moment, the Board is composed of seven members including a Non-Executive Chairman, MD/CEO and

four Non-Executive Directors and one Executive Director. The Directors are experienced stakeholders with diverse

professional backgrounds in Insurance, Accounting, Commerce, Management, Information Technology, etc. The

Directors are men of impeccable character and high integrity.

S/N MEMBERS NUMBER OF MEETINGS

HELD

NUMBER OF MEETINGS

ATTENDED

1 Engr. M.O.T Olayiwola Tobun 5 5

2 Mr. Sarbeswar Sahoo 5 3

3 Mr. J.O Atolagbe 5 5

4 Mr. Muftau Olakunle Oyegunle 5 5



6

The Company is indeed delighted to have a versatile Board with deep understanding of its responsibilities to

Shareholders, Regulatory Authorities, Government and other Stakeholders. The Board always takes proactive steps to

master and fully appreciate all cultural, legislative, ethical, institutional and all other factors, which impact our

operations and operating environment. This has ensured that a culture of compliance with rules and regulation is

entrenched at all levels of operations within the Company. The meetings of the Board are scheduled well in advance

and highlights from the sub-committees of the Board are circulated to all the Directors. During the year under review,

the Board met on 26 February, 27 J une, 18 August, 27 October and 8 December 2016. Details of attendance by the

Directors at Board meetings are as follows:

Board Committees

The Board performed its functions through a total of four Standing Committees during the period under review. The

Committees have clearly defined responsibilities, scope of authority and procedures for reporting to the Board.

Membership of the Committees is structured to take optimum advantage of the skills and experience of Non-Executive

Directors. The following are the standing Committees of the Board during the year under review:

Audit Committee

The Company established an Audit Committee in compliance with Section 359(6) of the Companies and Allied Matters

Act, CAP C20 L FN 2004, which comprises of three representatives of Shareholders (elected annually at the AGM), Two

Non-Executive Directors and one Executive Director during the year under review.

The Audit Committee met five times during the year under review - 25 February, 28 April, 25 July, 25 October and 6

December2016. Membership and attendance at the meetings are as follows:


6 Mr. O.A Odusote 5 5

Finance and General Purpose Committee

The Finance and General purposes Committee comprises of the MD/CEO, 2 non-executive Directors and one executive

Director. The Committee meets to review the investment guidelines of the Company, ensure that investments embarked

upon by the Management are in line with Regulatory and Board Guidelines and also considers other miscellaneous

issues. Mr. Gopalan Raghu Chaired the Committee during the year under review. The Committee met two times in the

year under review as follows: 15 April, 15 August and 6 December 2016.

S/N MEMBERS NUMBERS OF MEETINGS HELD NUMBER OF MEETINGS

ATTENDED

1 Mr. Gopala Raghu 3 3

2 Dr. Balla Swamy 3 3



5 Mr. Gopalan Raghu 5 4



7


Establishment Committee

The Establishment Committee comprises the MD/CEO, Executive Director and two Non-Executive Directors. Mr.

M. O. Oyegunle chaired the Committee which primarily considers general staff matters. The Committee met on 18

February, 14 April and 25 October 2016 as reflected below:

S/N MEMBERS NUMBER MEETINGS HELD NUMBER OF MEETINGS ATTENDED



3 Mr. Sarbeswar Sahoo* 3 1


* Mr. Sarbeswar Sahoo joined the board in June of 2016.

Risk Management Committee

The Risk Management Committee comprises of MD/CEO , 2 non-executive Directors and Executive Director, namely Mr.

M. O. Oyegunle, Mr. G. Raghu, Dr. Balla Swamy and Mr. Sarberswar Sahoo. The Committee’s term of reference is to

fundamentally ensure that the Company’s operations comply with the Enterprise Risk Policy as approved by the Board

in line with regulatory requirements. The Committee met on 15 August and 6 December 2016.

S/N MEMBERS NUMBER MEETINGS HELD NUMBER

OF

ATTENDED

MEETINGS





Roles of Key Members of the Board

The positions of the Chairman of the Board and the Chief Executive Officer are separate and held by different persons.

The Chairman and the Chief Executive Officer are not members of the same extended family.

The Chairman

The main responsibility of the Chairman is to lead and manage the Board to ensure that it is administered effectively

and fully discharges its legal and regulatory responsibilities. The Chairman is responsible for ensuring that Directors

receive accurate, timely and clear information to enable the Board to take informed decisions, monitor effectively and

provide advice to promote the success of the Company.

The Chairman also manages the input of Non-executive Directors to promote effective relationships and open

communications, both inside and outside the Boardroom, between Executive and Independent Non-executive Directors.

The Chairman strives to ensure that any differences on the Board are resolved amicably.

The Chief Executive Officer

The Board has delegated the responsibility for the day-to-day management of the Company to the Chief Executive Officer

(CEO), who is responsible for leading management, making and implementing operational decisions. The CEO is



8

responsible to the Board of Directors and ensures that the Company complies strictly with regulations and policies of

both the Board and Regulatory Authorities. The CEO ensures that optimization of the Company’s resources is achieved

at all times and has the overall responsibility for the Company’s financial performance.

The Company Secretary


The Company Secretary is a point of reference and support for all Directors. He is responsible to update the Directors

with all requisite information promptly and regularly. The Board may through the Company Secretary obtain information

from external sources, such as consultants and other advisers, if there is a need for outside expertise, via the Company

Secretary or directly. The Company Secretary is further responsible to assist the Chairman and Chief Executive Officer to

formulate an annual Board Plan with the administration of other strategic issues at the Board level; organize Board

meetings and ensure that the minutes of Board meetings clearly and properly capture Board’s discussions and decisions.

Director Nomination Process

The Board agrees upon the criteria for the desired experience and competencies of new Directors. The Board has power

under the Articles of Association to appoint a Director to fill a casual vacancy or as an additional Director. The criteria

for the desired experience and competencies of new Non-executive Directors are agreed upon by the Board. The balance

and mix of appropriate skills and experience of Non-executive Directors is taken into account when considering a

proposed appointment. In reviewing the Board composition, the Board ensures a mix with representatives from diverse

background. The Shareholding of an individual in the Company is not considered a criterion for the nomination or

appointment of a Director. The appointment of Directors is subject to the approval of NAICOM. The following core values

are considered critical in nominating a new director; (i) Integrity (ii) Professionalism (iii) Career Success (iv)Goodwill (v)

Ability to add value to the Organization Induction and Continuous Training of Board Members.

Training of Board Member

On appointment to the Board and to Board Committees, all Directors receive a formal induction tailored to meet their

individual requirements. The New Directors are oriented about the Company and its operations through the Company

Secretary via the provision of the Company’s Articles of Association, relevant statutory books and regulations and

adequate information on operations. The Directors are also given a mandate and terms of reference to aid in

performance of their functions. Management further strives to acquaint the new Directors with the operations of the

Company via trainings/seminars to the extent desired by new Directors to enable them function in their position. The

training and education of Directors on issues pertaining to their oversight functions is a continuous process, in order to

update their knowledge and skills and keep them informed of new developments in the insurance industry and operating

environment.

Annual Board Appraisal

The Code of Corporate Governance for the Insurance Industry recognizes the fact that good corporate governance

framework must be anchored on an effective and accountable Board of Directors whose performance is assessed

periodically. The annual appraisal covered all aspects of the Board’s structure, composition, responsibilities, processes,

relationships, individual members’ competencies and respective roles in Board performance, as well as the Company’s

compliance status with the provisions of NAICOM.

The General Meeting of the Company

This is the highest decision making body of the Company. The Company is driven by its desire to deliver significant returns

on its shareholders investment. The shareholders have an opportunity to express their concerns (if any) and opinions on

the Company’s financial results and all other issues at the Annual General Meeting of the Company. The Meetings are

conducted in a fair and transparent manner where the regulators are invited such as The National Insurance Commission,



9

the Securities and Exchange Commission, Corporate Affairs Commission, the Auditors as well as other Shareholder’s

Associations. The Company also dispatches its annual reports, providing highlights of all the Company’s activities to its

shareholders.

Protection of Shareholders Rights

The Board ensures the protection of the statutory and general rights of shareholders at all times, particularly their right

to attend and vote at general meetings. All shareholders are treated equally, regardless of volume of shareholding or

social status.


Communication Policy

It is the responsibility of Executive Management under the direction of the Board, to ensure that the Board receives

adequate information on a timely basis, about the Company’s businesses and operations at appropriate intervals and in

an appropriate manner, to enable the Board to carry out its responsibilities. Furthermore, the Board and Management

of the Company ensures that communication and dissemination of information regarding the operations and

management of the company to shareholders, stakeholders and the general public is timely, accurate and continuous,

to give a balanced and fair view of the Company’s financial and non-financial matters. Such information, which is in plain

language, readable and understandable, is available on the Company’s website, www.prestigeassuranceplc.com. In

order to reach its overall goal on information dissemination, the Company is guided by the following Principles,

legislation and codes of corporate governance of the jurisdictions within which it operates. These include the Insurance

Act, the NAICOM Operational Guidelines, the Companies and Allied Matters Act (CAMA) and the codes of Corporate

Governance issued by NAICOM and SEC. The Company operates in a multicultural environment and accordingly

recognizes the need to be sensitive to the cultural peculiarities of its operating environment.

Feedback

The Company actively and regularly seeks feedback on its image and communication activities both from the media as

well as from its key target groups. This feedback is used in future activities.

Independent Advice

The Board of Directors are at their own discretion and at the Company’s expense required to seek Independent

professional advice when required to enable a Member of the Board effectively perform certain responsibilities.

Insider Trading and Price Sensitive Information

The Company is clear in its prohibition of insider trading by its Board, management, Officers and related persons who

are privy to confidential price sensitive information. Such persons are further prohibited from trading in the Company’s

securities where such transactions would amount to insider trading. Directors, insiders and related parties are prohibited

from disposing, selling, buying or transferring their shares in the Company for a period commencing from the date of

receipt of such insider information until such a period when the information is released to the public or any other period

as defined by the Company from time to time.

Code of Professional Conduct for Employees

The Company has an internal Code of Professional Conduct, which all members of staff are expected to subscribe to

upon assumption of duties. All members of staff are expected to strive to maintain the highest standards of ethical

conduct and integrity in all aspects of their professional life as contained in the Code of Professional Conduct which

prescribes the common ethical standards, culture and policies of the Group relating to employee values.



10


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

11

CERTIFICATE OF PURSUANT TO SECTION 60(2) OF INVESMENT AND SECURITIES ACT


We, the undersigned, hereby certify the following with regards to our audited financial statements for the year ended

31 December 2016 that:

(a) We have reviewed the financial statements;

(b) To the best of our knowledge, the financial statements does not contain:

(i) Any untrue statement of a material fact, or

(ii) Omit to state a material fact, which would make the statements, misleading in the light of circumstances under

which such financial statements were made;

(c) To the best of our knowledge, the financial statements and other financial information included in the report

fairly present in all material respects the financial condition and results of operations of the Company as of, and

for the years presented in the report;

(d) We:

(i) are responsible for establishing and maintaining internal controls;

(ii) have designed such internal controls to ensure that material information relating to the Company is made known

to such officers by others within the entity particularly during the period in which the periodic reports are being

prepared;

(iii) have evaluated the effectiveness of the Company’s internal controls as of date within 90 days prior to the

report;

(iv) have presented in the report our conclusions about the effectiveness of our internal controls based on our

evaluation as of that date;

(e) We have disclosed to the auditors of the Company and Audit Committee:

(i) all significant deficiency in the design or operations of internal controls which would adversely affect the

Company’s ability to record, process, summarize and report financial data and have identified for the Company’s

auditors any material weakness in internal controls, and;

(ii) any fraud, whether or not material, that involves management or other employees who have significant role in

the Company’s internal controls;

(e) We have identified in the report whether or not there were significant changes in internal controls or other

factors that could significantly affect internal controls subsequent to the date of our evaluation, including any

corrective actions with regard to significant deficiencies and material weaknesses.

…..

March 17th 2017



12

REPORT OF AUDIT AND COMPLIANCE COMMITTEE


In accordance with the provision of Section 359 (6) of the Companies and Allied Matters Act, CAP C20, Laws of the

Federation of Nigeria, 2004, we have reviewed the audited financial statements of the Company for the year ended 31st

December, 2016 and report as follows:

The accounting and reporting policies of the Company are consistent within legal requirements and agreed ethical

practices and also in accordance with IFRS.

The scope and planning of the external audit was adequate.

The Company maintained effective systems of accounting and internal control during the year.

Having reviewed the External Auditors' findings and recommendations on management matters, we are satisfied with

management responses thereon.



13

SUSTAINABILITY AND CORPORATE RESPONSIBILITY REPORT


As Insurance services provider with an obligation to comply with international best practices and Corporate Governance,

Prestige Assurance Plc ensures that its operations comply with international performance standards and applicable

national environmental and social regulations.

The principles of Sustainability are deeply entrenched in Prestige’s core values and system, so sustainability is in our

‘Modus Operandi’.

We are conscious of the economic, social and environmental impact of our activities; placing importance on people and

our environment, even as we try to make it a better place.

At Prestige, we look at sustainability from a broad horizon and in an all-encompassing way.

In conducting our business, we take into consideration ethical values in our business relationship and at the same time

addressing some of the biggest challenges faced by our society.

Product development has always been at the apex of Prestige’s drive for market share and coverage. We have opened

a new branch in Ikeja, Kaduna, and other branches have been proposed in order to attract patronage and getting closer

to members of the public for opening of Insurance relationship with us.

During the 2016 financial year under review, new accounts were opened for various categories of people and businesses.

The Company has also strived to meet the needs of Clients and making our products more accessible with the opening

of our E business unit further reducing barriers to Insurance services by increasing number of people with access to

these services by providing more digital options.

Also during the Y ear under review, two new products were introduced in the market namely terrorism and Health

insurance which are already making headway in the industry.

Human Resources Management is important for retaining and attracting the best human resources for sustainable

development.

At Prestige we respect both human and labour Laws in all our business operations and activities.

We belief that social equity needs to be fair and just distribution of economic and environmental resources should be

taken into consideration.

Costs Benefits Analysis (CBA) are tools used to participate in decision-making processes which is thoroughly integrated into the working conditions of the Company. Health and safety of our employees and clients is of utmost importance at Prestige. This is that we were at the fore-front of the Eye care treatment with visits to the Eye Bank of Nigeria, creating awareness about key health issues. We at Prestige are aware that “poor environmental quality’’ is directly responsible for around 25% of all preventable ill health in the world today, with diarrheal diseases and acute respiratory infections (ARI), such as pneumonia heading the list. Other diseases such as malaria, schistosomiasis, other vector-borne diseases, chronic respiratory diseases, childhood infections are also strongly influenced by adverse environmental conditions.

We encourage our staff to carry out routine health check-ups to ensure that they are in perfect health, as human capital

is vital for our sustainability going forward.



14

Also, waste production and mismanagement of resources, for example, are both conditions that affect health. Poor

health and a decreasing quality of life dis-empower the most vulnerable set of people.

SUSTAINABILITY AND CORPORATE RESPONSIBILITY REPORT- CONTINUED


Corporate Governance on environmental and social life is an important aspect of our commitment to sustainable

practices an Insurance institution. We strive to achieve a high level of corporate governance by essentially balancing the

interest of all our stakeholders. We acknowledge that it is not enough for a company to be profitable but also strive to

demonstrate a global standard practice of corporate governance. Typically, the board is charged with overseeing

corporate governance practices Group wide. One of the tenets of corporate governance is ensuring that there are clear

lines of responsibility, authority and accountability and making sure appropriate responsibilities and measures are in

place.

The Company in 2016, appointed an Executive Director Operation/Risk who in conjunction with the Management staff

continued in their efforts to guide, implement and promote the sustainable principles in the Company.

Environmental and Social Risk Management has been incorporated into our enterprise risk management framework,

especially in the delivery of our core business activity. Our customers in the major sectors are subject to a Social and

Environmental Impact Assessment and Environmental Impact Assessment as requested for know your Customers (kyc).

We have continued in our efforts to reduce the use of paper in our general operations. The use of e-mails, workflows,

portals and other e-channels is encouraged as work tools for members of staff. Information to customers is sent

electronically via text, phone calls and e-mails.

In terms of community support, we have continued to invest in the communities in which we have presence through

our Corporate Social Responsibility efforts.

Capacity Building in this area of sustainability is a work-in-progress at Prestige Assurance Plc. Sustainability is included

and considered in all aspect of the Companies operation. Reporting. Sustainability issues will get reported to the Board

through its Risk Management Committee, which meets quarterly. That way, the Board will get briefed of progress being

made in implementing the sustainability policy to be approved by the Board as part of its responsibility of setting the

sustainability tone from the top.

The implementation of the Sustainability Principles and Policy of the Company remains a work in progress – progress at

ingraining the sustainability culture in the Company as we strive to regain our industry leadership position in an

economically viable, socially relevant and environmentally responsible way.

Corporate Social Responsibility Report

Prestige Assurance Plc is committed to the principles and best practices of corporate social responsibility and prides

itself as being a model corporate citizen.

The Company pursues its corporate social responsibility goals through. The Company plays this role by contributing in

strategic areas that are of immense importance to community development: Education, Environment and Economic

Empowerment.

SUSTAINABILITY AND CORPORATE RESPONSIBILITY REPORT- CONTINUED




15

The Company recognizes that doing business in a sustainable manner means doing business in a way that empowers the

present generation of Nigeria without compromising the future.

As in previous years, Prestige Assurance Plc in 2016 continued to intervene in the critical areas of the socioeconomic

environment that has the biggest potential to improve the livelihood and long term sustainability of the Company and

Country.

Education

Quality education is crucial in developing the manpower needed by the Company to exploit emerging opportunities and

propel the Company to higher levels of development.

The Company is therefore actively involved in a number of educational initiatives and projects with payment of

educational allowance to Staff and the scholarships to children of staff who have exceled in their academic endeavors.

Environment and economic empowerment

The Company has a scheme where-in students are engaged for their industrial attachment programme and stipends

paid to them for the period of engagement.



16

MANAGEMENT DISCUSSION ANALYSIS


In accordance with the provision of Section 359 (6) of the Companies and Allied Matters Act, CAP C20, Laws of the

Federation of Nigeria, 2004, Management has reviewed the audited financial statements of the Company for the year

ended 31 December, 2016 and report as follows:

The accounting and reporting policies of the Company are consistent within legal requirements and agreed ethical

practices.

The scope and planning of the external audit was adequate.

The Company maintained effective systems of accounting and internal control during the year.

The Nature of the Business

Prestige Assurance Plc is a non–life insurance business with over sixty years’ experience in Nigeria. The company’s core

areas of business include motor, marine, bond, engineering, fire, aviation, oil and gas and general accident.

The Company is known for providing expertise knowledge especially in high risk businesses such as aviation, marine, oil

and gas.

Our Company is known by populace for prompt settlement of claims and other support as it may be necessary.

The major bulk of our business comes from brokers market and support from the parent company in form of referral.

Management Objectives

(i) To be in the forefront of risk carrying in Nigerian insurance market, with a penchant for quality products

and efficient service delivery to our esteemed customers.

(ii) To position the company amongst the best insurance companies in Nigeria.

(iii) To ensure that values are created for the stakeholders.

(iv) To be an ethical company among the listed institution in Nigeria and the world at large.

Our Strategies

In order to meet the above objectives, the management of the Company have put the following strategies in place.

(i) The Company has instituted sound corporate governance in order to drive both the internal process and

the business environment.

(ii) Adequate reinsurance has been put in place to absorb the impact of high risk which may likely occur due

to the area of specialisation of the company.

(iii) Aside from the normal business, the Company also provides add on services such as customer education,

policy audit and lease financing.

MANAGEMENT DISCUSSION ANALYSIS –CONTINUED



17


Our Strategies – Continued

(iv) The Company engages in training and empowerment of her workforce to meet up with the challenges

of modern business.

(v) It is also in the current agenda of the Company to recruit more hands with specialised skills to compete

favourably in the industry.

(vi) The Company has also met up with her civil responsibility and promised to do more to better the interest

of stakeholders at large.

Our Resources, Risks and Relationship

Our most valuable resources are our human capital. The staff welfare is paramount to the Company. Nonhuman

resources are of small relevance without appropriate personnel to drive the system.

Insurance business is a kind of business that is full of risk known as insurable risks.

This is a known risk but which the likelihood and magnitude of the occurrence is not certain.

The Company has put in place a balanced re-insurance policy to absorb the impact of such risks at any time in future.

Aside from this, the Company is also faced with diverse risks which are financial and non-financial in nature.

Several strategies are already in place to mitigate their negative impact on the business and the Company itself.

Prestige Assurance Plc is a subsidiary of The New India Assurance Company Limited, Mumbai, India. Our parent company

is one of the largest insurance business undertakers across the Afro-Asia continent (except J apan). The parent company

provides support to us in all ramifications which had impact positively in term of skills and financial status to underwrite

high risk businesses rarely underwritten by the local companies.

Financial Results and Prospects

For the year ended 31 December 2016, the gross premium income by the Company increased by N112.92 million

compared with previous year as result of branch expansion and turning in of new product into the market as part

strategy for growing the company.

Underwriting profit for the year went up by N676.39 million when compared with the previous year. Whilst profit for

the year increased by N358.99 million over that of last year.

The total assets of the Company also declined by N678.15 million when compared with December 2015. In view of the

recent upheavals. We have adopted a more proactive approach to the management of our capital, liquidity and

investments towards endowing our Company with needed financial strength to withstand any market-related shocks

and building an enduring platform for world class products and services.

REPORT OF THE DIRECTORS


The Directors hereby submit their report together with the financial statements for the year ended 31 December 2016.



18

PRINCIPAL ACTIVITIES

The principal activities of the Company continue to be insurance business. There were no changes in the activities of the

Company during the year under review.

STATE OF AFFAIRS In the opinion of the Directors, the state of the Company’s affairs is satisfactory.

RESULTS FOR THE YEAR

2016 2015 ₦’000 ₦’000

Profit before income tax expense 340,394 20,339

Income tax expense (118,402) (157,342)

- ------------- --------------

Profit/(loss) for the year 221,992 (137,003)

======== ========

DIVIDEND Dividend will not be declared for the year ended 31 December 2016 (2015:

Nil)

DIRECTORS

The names of the Directors as at the date of this report and those who held office during the year are as follows:

Mr. Hassan T. M. Usman (Nigerian) Chairman

Dr. Balla Swamy (Indian) Managing Director/CEO

Mr. Gopalan Srinivansan (Indian) Non-Executive Director

Mr. Hermant .G. Rokade (Indian) Non-Executive Director

Mr. Gopalan Raghu (Indian) Non-Executive Director

Mr. Muftau Olakunle Oyegunle Non-Executive Director Mr.

Sarbeswar Sahoo (Indian) Executive Director

In accordance with Article 96 of the Company’s Articles of Association, there was no retiring director during the year

under review.

REPORT OF THE DIRECTORS - CONTINUED


Directors’ Interests

The interest of the Directors in the issued share capital of the Company as recorded in the registrar of Members is as

follows:

S/N NAMES NO. OF SHARES AS AT 31 DECEMBER 2016 NO. OF SHARES AS AT 31

DECEMBER 2015

1 Mr. Hassan T. M. Usman - -

2 Dr. Balla Swamy - -

3 Mr. Gopalan Srinivasan - -

4 Mr. Muftau Olakunle Oyegunle 49,997 49,997

5 Mr. Gopalan Raghu - -

6 Mr. Hermant G. Rokade - -

7 Mr. Sarbeswar Sahoo - -



19

Directors’ Interest in Contracts

No Director has given notice for the purpose of Section 277 of the Companies and Allied Matters Act CAP C20, Laws of the Federation of Nigeria 2004, to the effect that he is a member of a Company which could be regarded as interested in a contract with the Company.

Major Shareholders

As at the date of this report, no person or Company held more than 5% of the Issued capital except:

50k Share

Number

%

The New India Assurance Company Limited, Mumbai 3,732,491,383 69.50

Leadway Assurance Company 616,107,411 11.47

Employment of Disabled Persons

The Company has no employee recorded as disabled. It is however, the Company’s policy to consider persons for

employment bearing in mind the aptitudes and abilities of the applicants concerned and facilities available to them.

Health and Welfare of Employees

The Company subsidizes the medical and transportation expenses of staff and grants them Housing and Lunch

allowances. There is a Group Life Insurance Policy for all categories of staff and gratuity and pension scheme.

In addition, the Company offers Scholarship in Higher Institutions to the very brilliant children of employees.

REPORT OF THE DIRECTORS - CONTINUED


Auditors

Ernst and Young have expressed their willingness to continue as the Company’s auditors in accordance with Section 357

(2) of the Companies and Allied Matters Act, Cap C20 Laws of the Federation of Nigeria 2004.

Audit Committee

The members of the Audit Committee elected at the last Annual General Meeting have met and will, in accordance with

the provisions of the Companies and Allied Matters Act, CAP C20, LFN 2004, present their report at this Annual General

Meeting.

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RELATION TO THE PREPARATION OF THE AUDITED F INANCIAL

STATEMENTS




20

The Companies and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria 2004, requires the Directors to prepare

financial statements for each financial year that present fairly, in all material respects, the state of financial affairs of the

Company at the end of the year and of its profit or loss and other comprehensive income. The responsibilities include

ensuring that the Company:

a) keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the Company

and comply with the requirements of the Companies and Allied Matters Act, CAP C20 Laws of the Federation of

Nigeria 2004;

b) establishes adequate internal controls to safeguard its assets and to prevent and detect fraud and other

irregularities; and

c) prepares its financial statements using suitable accounting policies supported by reasonable and prudent

judgments and estimates, and are consistently applied.

The Directors accept responsibility for the preparation and fair presentation of the annual financial statements, which

have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and

estimates, in conformity with International Financial Reporting Standards, and the relevant provisions of the Companies

and Allied Matters Act, CAP C20 Laws of the Federation of Nigeria 2004, the Insurance Act 2003 and the Financial

Reporting Council of Nigeria Act, No. 6, 2011 .

The Directors are of the opinion that the audited financial statements present fairly, in all material respects, the state of the financial affairs of the Company and of its profit. The Directors further accept responsibility for the maintenance of accounting records that may be relied upon in the preparation of the audited financial statements, as well as adequate systems of internal financial control.

Nothing has come to the attention of the Directors to indicate that the Company will not remain a going concern for at

least twelve months from the date of this statement.

09 March 2017



21



22



23



24



25



26

1. General information

a. The financial statements for the year ended 31 December 2016 were authorized for issue in accordance with a

resolution of the Directors on 09 March 2017. Prestige Assurance Plc was incorporated on 6 January 1970.

Its registered office is located at 19, Ligali Ayorinde Street, Victoria Island, Lagos, Nigeria.

The Company is regulated by the National Insurance Commission of Nigeria (NAICOM). b.

Principal activity

The Company is licensed to carry non - life insurance business. The Company provides cover in all classes of

insurance, basically non-life treaty and facultative insurance, backed by reinsurer in the London and African

reinsurance markets. The products and services by the Company cuts across general accident, energy, fire, marine,

workers compensation, terrorism and bond.

2. Summary of significant accounting policies

2.1 Introduction to summary of accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These

policies have been consistently applied to all the years presented, unless otherwise stated.

2.2 Basis of preparation

These are the financial statements of Prestige Assurance Plc and is presented in order of liquidity.

2.2.1 Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)

as issued by the International Accounting Standards Board (IASB). Additional information required by national

regulations, the Company and Allied Matters Act CAP C20 LFN 2004, the Financial Reporting Council of Nigeria Act

No. 6, 2011, Insurance Act 2003 and its interpretations issued by the National Insurance Commission in its Insurance

Industry Policy Guidelines is included where appropriate.

The financial statements comprise the statement of financial position, the statement of profit or loss and other

comprehensive income, the statement of changes in equity, the statement of cash flows and the notes to the

financial statements.

2.2.2 Basis of measurements

The financial statements have been prepared in accordance with the going concern principle under the historical

cost convention, except for available-for-sale financial assets, financial assets designed at fair value through profit

or loss, investment properties and land and building which are measured at fair value.

2.3 New standards and improvements

These improvements are effective for annual periods beginning on or after 1 January 2016. They include:

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Assets (or disposal groups) are generally disposed of either through sale or distribution to owners. The amendment

clarifies that changing from one of these disposal methods to the other would not be considered a new plan of



27

disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of the application of the

requirements in IFRS 5. This amendment must be applied prospectively. This does not have any impact on Prestige

Assurance Plc.

IFRS 7 Financial Instruments: Disclosures Servicing

contracts

The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a

financial asset. An entity must assess the nature of the fee and the arrangement against the guidance for continuing

involvement in IFRS 7 in order to assess whether the disclosures are required. The assessment of which servicing

contracts constitute continuing involvement must be done retrospectively. However, the required disclosures

would not need to be provided for any period beginning before the annual period in which the entity first applies

the amendments.

Applicability of the amendments to IFRS 7 to condensed interim financial statements

The amendment clarifies that the offsetting disclosure requirements do not apply to condensed interim financial

statements, unless such disclosures provide a significant update to the information reported in the most recent

annual report. This amendment must be applied retrospectively. This amendment does not have any impact on

Prestige Assurance plc

IAS 19 Employee Benefits

The amendment clarifies that market depth of high quality corporate bonds is assessed based on the currency in

which the obligation is denominated, rather than the country where the obligation is located. When there is no

deep market for high quality corporate bonds in that currency, government bond rates must be used. This

amendment does not have any impact on Prestige Assurance Plc

IAS 34 Interim Financial Reporting

The amendment clarifies that the required interim disclosures must either be in the interim financial statements

or incorporated by cross-reference between the interim financial statements and wherever they are included

within the interim financial report (e.g., in the management commentary or risk report). The other information

within the interim financial report must be available to users on the same terms as the interim financial statements

and at the same time. This amendment must be applied retrospectively. This amendment does not have any impact

on Prestige Assurance Plc

Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception

The amendments address issues that have arisen in applying the investment entities exception under IFRS 10. The

amendments to IFRS 10 clarify that the exemption from presenting consolidated financial statements applies to a

parent entity that is a subsidiary of an investment entity, when the investment entity measures all of its subsidiaries

at fair value. Furthermore, the amendments to IFRS 10 clarify that only a subsidiary of an investment entity that is

not an investment entity itself and that provides support services to the investment entity is consolidated. All other

subsidiaries of an investment entity are measured at fair value. The amendments to IAS 28 allow the investor, when

applying the equity method, to retain the fair value measurement applied by the investment entity associate or

joint venture to its interests in subsidiaries. These amendments must be applied retrospectively and are effective

for annual periods beginning on or after 1 J anuary 2016, with early adoption permitted. These amendments does

not have any impact on Prestige Assurance Plc.

2.5 Significant accounting judgements, estimates and assumptions

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting

estimates. It also requires management to exercise its judgement in the process of applying its accounting policies.

Changes in assumptions may have a significant impact on the financial statements in the period the assumptions



28

changed. Management believes that the underlying assumptions are appropriate and that the financial statements

therefore present the financial position and results fairly. The areas involving a higher degree of judgement or

complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed

below:

Judgements

In the process of applying the Company’s accounting policies, management has made the following judgement,

which has the most significant effect on the amounts recognised in the financial statements:

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date,

that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within

the next financial year, are described below. The Company based its assumptions and estimates on parameters

available when the financial statements were prepared. Existing circumstances and assumptions about future

developments, however, may change due to market changes or circumstances arising beyond the control of the

Company. Such changes are reflected in the assumptions when they occur.

Fair value of financial instruments

Where the fair values of financial assets and financial liabilities recorded on the statement of financial position

cannot be verified from active markets, they are determined using a variety of valuation techniques that include

the use of mathematical models. The inputs to these models are derived from observable market data where

possible, but if this is not available, judgement is required to establish fair value. The judgements include

considerations of liquidity and model inputs such as volatility for discount rates, prepayment rates and default rate

assumptions for asset-backed securities.

Valuation of Non-life insurance contract liabilities:

For non-life insurance contract, estimates have to be made for the expected ultimate cost of all future payments

attaching to incurred claims at the reporting date. These include incurred but not reported ("IBNR") claims. Due to

the nature of insurance business, ultimate cost of claims is often not established with certainty until after the

reporting date and therefore considerable judgement, experience and knowledge of the business is required by

management in the estimation of amounts due to contract holders. Actual results may differ resulting in positive

or negative change in estimated liabilities.

The ultimate cost of outstanding claims is estimated by using a range of standard actuarial claims projection

techniques, such as Loss ratio method and BCL methods. The BCL method assumes that past experience is indicative

of future experience. i.e claims recorded to date will continue to develop in a similar manner in the future while

Loss ratio method is used for classes with limited claims payments or history and therefore a BCL method would be

inappropriate. The loss ratio method allows for an estimate of the average ultimate loss ratio which needs to be

assumed, it uses the incurred and paid to date loss ratio that have been experienced to date in previous accident

years.

Additional qualitative judgement is required as significant uncertainties remain such as future changes in inflation,

economic conditions, attitude to claiming, foreign exchange rates, judicial decisions and operational process.

2.5 Significant accounting judgements, estimates and assumptions - continued

Estimates and assumptions (continued) Valuation of Insurance contract liabilities (continued)

Similar judgements, estimates and assumptions are employed in the assessment of losses attaching to unearned

premium exposures. The methods used are based on time apportionment principles together with significant

judgement to assess the adequacy of theses liabilities and the attached uncertainty.



29

The carrying value at the reporting date of non-life insurance contract liabilities is N1,799,210,000

(2015:N3,197,127,000). Further details on insurance contract liabilities are disclosed in Note 24 to the financial

statements.

Certain acquisition costs related to the sale of new policies are recorded as deferred acquisition costs (DAC) and are

amortised to the profit or loss over time. If the assumptions relating to future profitability of these policies are not

realised, the amortisation of these costs could be accelerated and this may also require additional impairment

write-offs to the profit or loss.

Deferred tax assets and liabilities

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of

future taxable income. Differences arising between the actual results and the assumptions made, or future changes

to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The

Company establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax

authorities. The amount of such provisions is based on various factors such as experience of previous tax audits and

differing interpretations by the taxable entity.

The carrying value at the reporting date of net deferred tax liabilities is N467,561,000 (2015:N468,559,000). Further

details on taxes are disclosed in Note 10 to the financial statements.

Valuation of pension benefit obligation

The cost of defined benefit pension plans and other post-employments benefits and the present value of the

pension obligation are determined using actuarial valuations. The actuarial valuation involves making assumptions

about discount rates, expected rate of return on assets, future salary increases, mortality rates and future pension

increases. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined

benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each

reporting date. Details of the key assumptions used in the estimates are contained in Note 28 to the financial

statements.

The carrying value at the reporting date of gratuity benefit obligation is N107,646,000

(2015:N136,408,000).

Valuation of investment properties

The Company carries its investment properties at fair value, with changes in fair value being recognised in profit or

loss. The Company engaged an independent valuation specialist to assess fair value as at 31 December 2016. A

valuation methodology based on discounted cash flow model was used as there is a lack of comparable market data

because of the nature of the properties.

The determined fair value of the investment properties is most sensitive to the estimated yield as well as the

longterm vacancy rate. The key assumptions used to determine the fair value of the investment properties are

further explained in Note 20 to the financial statements.

2.6 S tandards and interpretations issued but not yet effective

The International Financial Reporting Standards and interpretations that are issued, but not yet effective, up to the

date of issuance of the Company’s financial statements are disclosed below. The Company intends to adopt these

standards, if applicable, when they become effective.

IFRS 9 Financial Instruments



30

IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and

Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments,

including a new expected credit loss model for calculating impairment on financial assets, and the new general

hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial

instruments from IAS 39.

The mandatory effective date of IFRS 9 is annual periods beginning on or after 1 January 2018. However, early

application of IFRS 9 is permitted.

The Company is assessing the potential impact on its financial statements resulting from the application of IFRS 9.

Given the nature of the Company’s operations, this standard is expected to have a significant impact on the

classification and measurement of the Company’s financial instruments. In particular, this standard is not expected

to have an effect on the entity’s financial statement as it does not give loans.

IFRS 15: Revenue from Contracts with Customers

IFRS 15 Revenue from Contracts with Customers replaces IAS 11 Construction Contracts, IAS 18 Revenue and related

interpretations. IFRS 15 specifies the accounting treatment for all revenue arising from contracts with customers.

It applies to all entities that enter into contracts to provide goods or services to their customers, unless the contracts

are in the scope of other IFRSs, such as IAS 17 Leases. The standard also provides a model for the measurement and

recognition of gains and losses on the sale of certain nonfinancial assets, such as property or equipment. Extensive

disclosures will be required, including disaggregation of total revenue; information about performance obligations;

changes in contract asset and liability account balances between periods and key judgments and estimates. This

will be effective from 1 J anuary 2018. The Company is currently assessing the impact of IFRS 15 and plans to adopt

the new standard on the required effective date.

IFRS 16 Leases

IFRS 16 was issued in January 2016. This standard sets out the principles for the recognition, measurement,

presentation and disclosure of leases. The objective is to ensure that lessees and lessors provide relevant

information in a manner that faithfully represents those transactions.

The mandatory effective date of IFRS 16 is annual periods beginning on or after 1 January 2019. Earlier application

is permitted if IFRS 15 Revenue from Contracts with Customers has also been applied.

The Company is assessing the potential impact on its financial statements resulting from the application of IFRS16.

Amendments to IAS 12 Income Taxes

In J anuary 2016, through issuing amendments to IAS 12, the IASB clarified the accounting treatment of deferred

tax assets of debt instruments measured at fair value for accounting, but measured at cost for tax purposes. The

amendment is effective from 1 January 2017. The Company is currently evaluating the impact, but does not

anticipate that adopting the amendments would have a material impact on its financial statements.

2.6 Standards and interpretations issued but not yet effective – continued

Amendments to IAS 12 Income Taxes - continued

The amendments in recognition of deferred tax assets for unrealized losses clarify the following aspects Unrealised

losses on debt instruments measured at fair value and measured at cost for tax purposes give deductible temporary

difference regardless of whether the debt instrument’s holder expects to recover the carrying amount of the debt

instrument by sale or by use.

The carrying amount of an asset does not limit the estimation of probable future taxable profits.



31

Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary

differences.

An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the

utilisation of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets

of the same type.

IAS 7 Statement of Cash Flows Amendment Reconciliation of components of financing activities The objective of this

project is to identify the information requirements of users regarding the reporting of debt. An ED proposing

amendments to IAS 7 Statement of Cash Flows was issued in December 2014. In J anuary 2016, the IASB issued

amendments to IAS 7 Statement of Cash Flows In J anuary 2016, the IASB issued amendments to IAS 7 Statement

of Cash Flows with the intention to improve disclosures of financing activities and help users to better understand

the reporting entities’ liquidity positions. Under the new requirements, entities will need to disclose changes in their

financial liabilities as a result of financing activities such as changes from cash flows and non-cash items (e.g., gains

and losses due to foreign currency movements). The amendment is effective from 1 January 2017.

The Company is currently evaluating the impact.

2.7 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic environment

in which the entity operates (‘the functional currency’). The financial statements are presented in Nigerian Naira

which is the Company’s functional and presentation currency.

(b) Transactions and balances

Foreign currency transactions are transactions denominated, or that require settlement, in a foreign currency and

these are translated into the functional currency spot rate prevailing at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot

rate of exchange prevailing at the reporting date. Foreign exchange gains and losses resulting from the

retranslation and settlement of these items are recognised in profit or loss.

2.8 Cash and cash equivalents

For the purposes of the statement of cash flows, cash comprises cash balances and deposits with banks. Cash

equivalents comprise highly liquid investments (including money market funds) that are readily convertible to

known amounts of cash and which are subject to insignificant risk of changes in value with original maturities of

three months or less being used by the Company in the management of its short-term commitments. Cash and cash

equivalents are carried at amortised cost in the statement of financial position.

2.9 Financial assets

The Company classifies its financial assets into the following categories: Held at fair value through profit or loss (or held for trading), held-to-maturity, Available-for-sale and loans and receivables. The classification is determined by management at initial recognition and depends on the purpose for which the investments were acquired.

a. Financial assets at fair value through profit of loss

A financial asset is classified at fair value through profit or loss if it is classified as held for trading or is designated

as such upon initial recognition. Financial assets are designated at fair value through profit or loss if the Company

manages such investments and makes purchase and sale decisions based on their fair value in accordance with the



32

Company’s documented risk management or investment strategy. The investments are carried at fair value, with

gains or losses arising from changes in this value recognized in the income statement in the period in which they

arise. Such investments are investments in quoted equity. b. Held-to-maturity.

The Company classifies financial assets as held to maturity when the Company has positive intent and ability to hold

the securities to maturity. Held-to-maturity investments are recognized initially at fair value plus any directly attributable

transaction costs. Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using

the effective interest method, less any impairment losses. Any sale or reclassification of a more than insignificant amount

of held-to-maturity investments not close to their maturity would result in the reclassification of all held-to-maturity

investments as availablefor-sale, and prevent the Company from classifying investment securities as held-to-maturity

for the current and the following two financial years. Debt securities e.g. bonds that are initially classified as heldto-

maturity may, subsequently, be moved to available-for-sale financial assets whenever the market price is higher than

the purchase price in order to sell and take profit. Interest on heldto- maturity investments is included in the income

statement and are reported as ‘investment income’. c. Available-for-sale financial assets.

Available-for-sale financial assets are non-derivative financial assets that are classified as available-forsale or are

not classified in any of the two preceding categories which may be sold in response to the need for liquidity or

changes in interest rates, exchange rates or equity prices. They include investment in unquoted shares. These

investments are initially recognised at fair value plus. After initial measurement, available-for-sale financial assets

are subsequently measured using a discounted cash flow technique in determining the fair value as there is no

quoted market price. Fair value gains and losses are reported as a separate component in other comprehensive

income until the investment is derecognised or the investment is determined to be impaired. On derecognition or

impairment, the cumulative fair value gains and losses previously reported in equity are transferred to profit or

loss.

d. Loans and receivables

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

in an active market other than:

• those that the Company intends to sell in the short term which are reclassified as fair value through profitor

loss and those that the Company upon initial recognition designates at fair value through profit or loss. • those that

the Company upon initial recognition designates as Available for Sale

• those for which the holder may not recover substantially all of its initial investment other than becauseof credit

risk. They include:



2.9 Financial assets - continued

33

(i) Trade receivables

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

an active market. They are mainly receivables arising from insurance contracts. Trade receivables are recognised

initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, trade

receivables are measured at amortized cost less any impairment losses. They include receivables from Brokers and

Co-insurance companies.

(ii) Other receivables

Other receivables are made up of amounts due from parties which are not directly linked to insurance or investment

contracts. Other receivables are stated after deductions of amount considered bad or doubtful of recovery. When

a debt is deemed not collectible, it is written-off against the related provision or directly to the profit and loss

account to the extent not previously provided for. Any subsequent recovery of written-off debts is credited to the

profit and loss account.

e. Impairment of financial assets (i) Financial assets carried at amortised cost

The Company assesses at each end of the reporting period whether there is objective evidence that a financial asset

or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment

losses are incurred only if there is objective evidence of impairment as a result of one or more events that have

occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on

the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the

attention of the Company from the following events: • Default or delinquency by a debtor;

• Restructuring of an amount due to the Company on terms that the Company would not consider

favourable;

• Indications that a debtor or issuer will enter bankruptcy;

• The disappearance of an active market for the security because of financial difficulties; and

Observable data indicating that there is a measurable decrease in the estimated future cash flow from a group of

financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the

individual financial assets in the group.

The Company first assesses whether objective evidence of impairment exists individually for financial assets that

are individually significant. If the Company determines that no objective evidence of impairment exists for an

individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets

with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually

assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a

collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred on

loans and receivables or held-to-maturity investments carried at amortised cost, the amount of the loss is measured

as the difference between the asset’s carrying amount and the present value of estimated future cash flows

(excluding future credit losses that have been incurred) discounted at the financial asset’s original effective interest

rate. The carrying amount of the asset is reduced, and the amount of the loss is recognised in the income statement.

If a held-to-maturity investment or a loan has a variable interest rate, the discount rate for measuring any

impairment loss is the current effective interest rate determined under contract. As is practically expedient, the

Company may measure impairment on the basis of an instrument’s fair value using an observable market price.




34

For the purpose of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit

risk characteristics. Those characteristics are relevant to the estimation of future cash flows for groups of such

assets by being indicative of the issuer’s ability to pay all amounts due under the contractual terms of the debt

instrument being evaluated. If in a subsequent period, the amount of the impairment loss decreases and the

decrease can be related objectively to an event occurring after the impairment was recognised, the previously

recognised impairment loss is reversed by adjusting the assets. The amount of the reversal is recognised in the

income statement.

(i) Trade receivables

These are initially recognised at fair value and subsequently measured at amortised cost less provision for

impairment. A provision for impairment is made when there is objective evidence (such as the probability of

insolvency, significant financial difficulties on the part of the counterparty or default or significant delay in payment

- over 30 days) that the Company will not be able to collect the entire amount due under the original terms of the

invoice. Allowances for impairment are made based on “incurred loss model” which consider premiums

outstanding and not received within one month subsequent to the year-end as lost, given default for each customer

and probability of default for the sectors in which the customer belongs. The amount of such a provision being the

difference between the carrying amount and the present value of the future expected cash flows associated with

the impaired receivable. For amounts due from policy holders and reinsurers, which are reported net, such

provisions are recorded in a separate impairment account with the loss being recognised in income statement. On

confirmation that the amounts receivable will not be collectable, the gross carrying value of the asset is written off

against the associated provision. Any subsequent recoveries are credited to the income statement in the period the

recoveries are made.

(ii) Assets classified as available-for-sale

The Company assesses at each date of the statement of financial position whether there is objective evidence that

a financial asset or a group of financial assets is impaired. In the case of equity investments classified as availablefor-

sale, a significant or prolonged decline in the fair value of the security below its cost is an objective evidence of

impairment resulting in the recognition of an impairment loss. In this respect, a decline of 20% or more is regarded

as significant, and a period of 1 year or longer is considered to be prolonged. If any such quantitative evidence exists

for available-for-sale financial assets, the asset is considered for impairment, taking qualitative evidence into

account. The cumulative loss – measured as the difference between the acquisition cost and the current fair value,

less any impairment loss on those financial assets previously recognised in profit or loss – is removed from equity

and recognised in the income statement.

Impairment losses recognised in the income statement on equity instruments are not reversed through the income

statement. If in a subsequent period the fair value of a debt instrument classified as available for sale increases and

the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or

loss, the impairment loss is reversed through the income statement.

(f) Derecognition of financial instruments

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or

it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which

substantially all the risks and rewards of ownership of the financial asset are transferred, or has assumed an

obligation to pay those cash flows to one or more recipients, subject to certain criteria. Impaired debts are

derecognised when they are assessed as uncollectible. If in a subsequent period the amount of the impairment loss




35

decreases and the decrease can be related objectively to an event occurring after the impairment was recognised,

the previous recognised impairment loss is reversed to the extent that the carrying value of the asset does not

exceed its amortised cost at the reversed date. Any subsequent reversal of an impairment loss is recognised in the

income statement.

(g) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet only when there is a

legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to

realise the asset and settle the liability simultaneously.

2.10 Impairment of non-financial assets

The carrying amounts of the Company’s non-financial assets other than deferred tax assets are reviewed at each

reporting date to determine whether there is any indication of impairment. If any such indication exists, then the

asset’s recoverable amount is estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its

recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that

are largely independent from other assets and groups. Impairment losses are recognised in profit or loss.

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount

of any goodwill asset allocated to the units and then to reduce the carrying amount of the other assets in the unit

(group of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less

costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using

a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific

to the asset. Impairment losses recognised in prior periods are assessed at each reporting date for any indications

that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the

estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying

amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been

recognised. Reversals of impairment losses are recognised in profit or loss.

2.11 Reinsurance receivables

Reinsurance assets consist of short-term balances due from reinsurers, as well as longer term receivables that are

dependent on the expected claims and benefits arising under the related reinsurance contracts. Amounts

recoverable from or due to reinsurers are measured consistently with the amounts associated with the reinsurance

contracts and in compliance with the terms of each reinsurance contract.

The reinsurers' share of unearned premiums (i.e. the reinsurance assets) are recognised as an asset using principles

consistent with the Company's method for determining unearned premium liability. The amount reflected on the

statement of financial position is on a gross basis to indicate the extent of credit risk related to the reinsurance and

its obligations to policy holders.

The Company assesses its reinsurance assets for impairment at each statement of financial position date. If there

is objective evidence that the reinsurance asset is impaired, the Company reduces the carrying amount of the




36

reinsurance asset to its recoverable amount and recognises that impairment loss in the income statement. The

Company gathers the objective evidence that a reinsurance asset is impaired using the same process adopted for

financial assets held at amortised cost.



37

2.12 Deferred acquisition costs (DAC)

Commissions and other acquisition costs that are related to securing new contracts and renewing existing contracts

are capitalised as Deferred Acquisition Costs (DAC) if they are separately identifiable, can be measured reliably and

it is probable that they will be recovered. All other costs are recognised as expenses when incurred. The DAC is

subsequently amortised over the life of the contracts in line with premium revenue using assumptions consistent

with those used in calculating unearned premium. It is calculated by applying to the acquisition expenses the ratio

of unearned premium to written premium. The DAC asset is tested for impairment annually and written down when

it is not expected to be fully recovered.

2.13 Investments in finance lease

Investments in finance lease are recognised when the company transfers substantially all the risks and rewards of

ownership of the leased assets to the leasee. Investment in finance lease at commencement is initially recorded as

an asset and a liability at the lower of the fair value of the asset and the present value of the minimum lease

payments (discounted at the interest rate implicit in the lease, if practicable, or else at the entity's incremental

borrowing rate. The finance lease is recorded as a receivable, at an amount equal to the net investment in the lease.

Interest income on investment in finance lease is recognised in the income statement as investment income in the

period the interest is due receivable. An investment in finance lease is impaired if the carrying amount of the

investment exceeds its recoverable or net realisable amount.

2.14 Investment property

Investment property is property (land or a building or part of a building or both) held (by the owner or by the lessee

under a finance lease) to earn rentals or for capital appreciation or both. Investment property, including interest in

leasehold land, is initially recognised at cost. Subsequently, investment property is carried at fair value representing

the open market value at the statement of financial position date determined by annual valuations carried out by

external registered valuers. Gains or losses arising from changes in the fair value are included in determining the

profit or loss for the year to which they relate.

Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions

at the reporting date.

Subsequent expenditure on investment property where such expenditure increases the future economic value in

excess of the original assessed standard of performance is added to the carrying amount of the investment

property. All other subsequent expenditure is recognised as expense in the year in which it is incurred.

Investment properties are derecognised when either they have been disposed of or when the investment property

is permanently withdrawn from use and no future economic benefit is expected from its disposal. On disposal of

an investment property, the difference between the disposal proceeds and the carrying amount is charged or

credited to comprehensive income.

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

investment property to owner occupied property, the deemed cost for subsequent accounting is the fair value at

the date of change in use. If an owner occupied property becomes an investment property, the Company accounts

for such property in accordance with the policy stated under property, plant and equipment up to the date of the

change in use.

2.15 Intangible assets

Intangible assets comprise computer software purchased from third parties. They are measured at cost less

accumulated amortisation and accumulated impairment losses. Purchased computer software are capitalised on



38

the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised on

straight line basis over the useful life of the asset.

Expenditure, which enhances and extends the benefits of computer software beyond their original specifications

and lives, is recognised as a capital improvement and added to the original cost of the software. All other

expenditure is expensed as incurred.

Amortisation is recognised in income statement on a straight-line basis over the estimated useful life of the

software, from the date that it is available for use. The estimated useful life of software is 10years. The residual

values and useful lives are reviewed at the end of each reporting period and adjusted, if appropriate. An Intangible

asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is

greater than its estimated recoverable amount.

The estimated useful lives for the current and comparative period are as follows:

Computer software 10 years

2.16 Property, plant and equipment

(a) Recognition and measurement

Items of property, plant and equipment are carried at cost less accumulated depreciation and impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset.

(b) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the

item if it is probable that the future economic benefits embodied within the part will flow to the Company and its

cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are

recognised in income statement as incurred.

(c) Depreciation

Depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives of each

item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their

useful lives. Depreciation begins when an asset is available for use and ceases at the earlier of the date that the

asset is derecognised or classified as held for sale in accordance with IFRS 5, Noncurrent Assets Held for Sale and

Discontinued Operations.

Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their

cost or re-valued amounts over their estimated useful lives.

The estimated useful lives for the current and comparative period are as follows:

Plant and machinery 12.5%

Leasehold, land and buildings 2% of cost/valuation

Furniture, fittings and office equipment 10%

Computer equipment 33 1/3%

Motor vehicles 25%

Assets under lease Over the period of lease

The assets’ residual values and useful lives are reviewed at the end of each reporting period and adjusted, if

appropriate. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s

carrying amount is greater than its estimated recoverable amount.



39

2.16 Property, plant and equipment – continued

(d) Revaluation of land and building

Property, plant & equipment are initially recorded at cost. Land and building are subsequently carried at revalued

amount being the fair value at the date of revaluation less any subsequent accumulated depreciation and

subsequent accumulated impairment losses. Revaluations are made with sufficient regularity such that the carrying

amount does not differ materially from that which would be determined using fair value at the end of the reporting

period.

When an individual property is revalued, any increase in its carrying amount (as a result of revaluation) is transferred

to a revaluation reserve, except to the extent that it reverses a revaluation decrease of the same property previously

recognised as an expense in the statement of profit or loss.

When the value of an individual property is decreased as a result of a revaluation, the decrease is charged against

any related credit balance in the revaluation reserve in respect of that property. However, to the extent that it

exceeds any surplus, it is recognised as an expense in the statement of profit or loss.

When revalued assets are being depreciated, part of the surplus is being realized as the asset is used. The amount

of the surplus realized is the difference between the depreciation charged on the revalued amount and the lower

depreciation which would be charged to property revaluation reserve and accumulated losses but not through

profit or loss.

(e) De-recognition

An item of property, plant and equipment is derecognised on disposal or when no future economic benefits are

expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference

between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the

asset is derecognised.

2.17 Statutory deposit

Statutory deposit represents a fixed deposit with the Central Bank of Nigeria in accordance with section 10(3) of

the Insurance Act, 2003. The deposit is recognised at the cost in the statement of financial position being 10% of

the statutory minimum capital requirement of N3 billion for General insurance business. Interest income on the

deposit is recognised in the income statement in the period the interest is earned.

2.18 Insurance contracts and insurance contract liabilities

Insurance contracts and Insurance contract liabilities

In accordance with IFRS 4 insurance contracts, the Company has continued to apply the accounting policies it

applied in accordance with Nigerian GAAP. These contracts are accident, workmen’s compensation, motor, marine

and aviation and fire insurance.

Insurance contracts protect the Company’s customers against the risk of harm from unforeseen events to their

properties resulting from their legitimate activities. The typical protection offered is designed for employers who

become legally liable to pay compensation to injured employees (employers’ liability) and for individual and

business customers who become liable to pay compensation to a third party for bodily harm or property damage

(public liability).

Property insurance contracts mainly compensate the Company’s customers for damage suffered to their properties

or for the value of property lost.



40

2.18 Insurance contracts and insurance contract liabilities - continued

Others forms of Insurance contracts include but are not limited to workmen’s compensation, motor, marine and

aviation insurance.

Claims and loss adjustment expenses are charged to income as incurred based on the estimated liability for

compensation owed to contract holders or third parties damaged by the contract holders. They include direct and

indirect claims settlement costs arising from events that have occurred up to the end of the reporting period even

if they have not yet been reported to the Company i.e. Claims incurred but not reported (IBNR) which is actuarial

valuation. The Company does not discount its liabilities for unpaid claims other than for workmen compensation

claims. Liabilities for unpaid claims are estimated using the impute of assessments of provision reported to the

Company and analysis for the claims incurred but not reported (IBNR).

Reinsurance contracts held

The Company holds the under-noted reinsurance contracts:

• Treaty Reinsurance Outward is usually between the Company and Reinsurers.

• Facultative Reinsurance Outward is usually between the Company and other insurance companies or

between the Company and Reinsurers.

• Facultative reinsurance inwards is usually between the Company and other insurance Companies or between

the Company and Reinsurers.

Premiums due to the reinsurers are paid and all claims and recoveries due from reinsurers are received. Contracts

entered into by the Company with reinsurers under which the Company is compensated for losses on one or more

contracts issued by the Company and that meet the classification requirements for insurance contracts are

classified as reinsurance contracts held. Contracts that do not meet these classification requirements are classified

as financial assets. Insurance contracts entered into by the

Company under which the contract holder is another insurer (inward reinsurance) are included with insurance

contracts.

The benefits to which the Company is entitled under its reinsurance contracts held are recognized as reinsurance

assets. These assets consist of short-term balances due from reinsurers, as well as long term receivables that are

dependent on the expected claims and benefits arising under the related reinsured insurance contracts. Amounts

recoverable from or due to reinsurers are measured consistently with the amount associated with the reinsured

insurance contracts and in accordance with the terms of each reinsurance contract. Reinsurance liabilities are

primarily premiums payable for reinsurance contracts and are recognized as an expense when due.

The Company’s Insurance liabilities or balances arising from insurance contracts primarily include those insurance

contract liabilities that were valued by the Actuary. These include unearned premiums reserve and outstanding

claim reserve.

(i) Unearned premium reserve

Unearned premium provision is calculated using a time - apportionment basis, in particular, the 365ths method.

(ii) Outstanding claims reserve

Individual loss estimates are provided on each claim reported. In addition, provisions are made for adjustment

expenses, changes in reported claims and for claims incurred but not reported (IBNR), based on past experience

and business in force.



41

The reserve for outstanding claims is maintained at the total amount of outstanding claims incurred and reported

plus claims incurred but not reported ("IBNR") as at the balance sheet date. The IBNR is based on the liability

adequacy test carried out by an Actuary.

2.18 Insurance contracts and insurance contract liabilities - continued

(iii) Liability adequacy test

At the end of each reporting period, liability adequacy tests are performed by an Actuary to ensure the adequacy

of the contract liabilities net of related DAC assets. In performing these tests, current best estimates of future

contractual cash flows and claims handling and administration expenses, as well as investment income from the

assets backing such liabilities, are used. Any deficiency is immediately charged to profit or loss initially by writing

off DAC and by subsequently establishing a provision for losses arising from liability adequacy tests.

The provisions of the Insurance Act,CAP I17 LFN 2004 require an actuarial valuation for life reserves only however,

IFRS 4 requires a liability adequacy test for both life and non-life insurance reserves. The provision of section 59 of

the Financial Reporting Council Act No.6, 2011 gives superiority to the provisions of IFRS and since it results in a

more conservative reserving than the provision of the Insurance Act, CAP I17 L FN 2004, it supports the Company's

prudential concerns.

(iv) Salvage and subrogation reimbursements

Some insurance contracts permit the Company to sell (usually damaged) property acquired in settling a claim (for

example, salvage). The Company may also have the right to pursue third parties for payment of some or all costs

(for example, subrogation). Estimates of salvage recoveries are included as an allowance in the measurement of

the insurance liability for claims, and salvage property is recognized in other assets when the liability is settled. The

allowance is the amount that can reasonably be recovered from the disposal of the property.

Subrogation reimbursements are also considered as an allowance in the measurement of the insurance liability for

claims and are recognized in other assets when the liability is settled. The allowance is the assessment of the

amount that can be recovered from the action against the liable third party.

2.19 Trade payables

Trade payables (i.e insurance payables) are recognised when due and measured on initial recognition at fair value

less directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost

using the effective interest rate method. Trade payables include payables to agents and brokers, payables to

reinsurance companies, payables to coinsurance companies and commission payable.

The effective interest method is a method of calculating the amortised cost of the financial liabilities and of

allocating interest expenses over the relevant period. The effective interest rate is the rate that exactly discounts

estimated future cash payments through the expected life of the financial liabilities, or (where appropriate) a

shorter period, to the net carrying amount on initial recognition.

The fair value of a non-interest bearing liability is its discounted repayment amount. Trade payables are

derecognised when the obligation under the liability is settled, cancelled or expired.

2.20 Provisions and other payables



42

Provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation

that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the

obligation.

Provisions are measured at the Director's best of estimate of the expenditure required to settle the obligation at

the end of the reporting period. The provisions are reviewed at the end of the reporting period and adjusted to

reflect the current best estimate.

2.20 Provisions and other payables - continued

Other payables are recognised initially at fair value and subsequently measured at amortised cost using effective

interest method.

2.21 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently

carried at amortised cost; any di erence between the proceeds (net of transaction costs) and the redemption value

is recognised in the income statement over the period of the borrowings using the e ective interest method.

2.22 Retirement obligations and employee benefits

The Company operates the following contribution and benefit schemes for its employees:

Defined benefit gratuity scheme

The Company has a defined benefit gratuity scheme for management and non-management staff. Under this

scheme, a specified amount as determined by actuarial valuation is contributed by the Company and charged to

the income statement over the service life of each employee.

Employees are entitled to gratuity after completing a minimum of five continuos full years of service. The gratuity

obligation is calculated annually by Independent Actuaries using the projected unit credit method. The present

value of the gratutity obligation is determined by discounting the estimated future cash outflows using market

yields on high quality corporate bonds (except where there is no deep market in such bonds, in which case the

discount rate is based on market yields on Government bonds). The liability recognised in the statement of financial

position in respect of defined benefit gratuity plan is the present value of the defined benefit obligation at the date

of the statement of the financial position less the fair value of plan assets. Actuarial gains or losses arising from the

valuation are credited or charged to other comprehensive statement in the financial year in which they arise.

Defined contribution pension scheme

The Company operates a defined contributory pension scheme for eligible employees. Company contribute 18% of

the employees' Basic, Housing and Transport allowances in line with the provisions of the Pension Reform Act 2014.

The Company pays the contributions to a pension fund administrator. The Company has no further payment

obligations once the contributions have been paid. The contributions are recognised as employee benefits expense

when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction

in the future payments is available.

Short-term benefits

Wages, salaries, paid annual leave, bonuses and non-monetary benefits are recognised as employee benefit

expenses when the associated services are rendered by the employees of the Company.

2.23 Income taxes- Company income tax and deferred tax liabilities



43

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement

except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity or

in other comprehensive income. Current income tax is the estimated income tax payable on taxable income for the

year, using tax rates enacted or substantively enacted at the statement of financial position date, and any

adjustment to tax payable in respect of previous years.

2.23 Income taxes- Company income tax and deferred tax liabilities - continued

The tax currently payable is based on taxable results for the year. Taxable results differs from results as reported in

the income statement because it includes not only items of income or expense that are taxable or deductible in

other years but it further excludes items that are never taxable or deductible. The company's liabilities for current

tax is calculated using tax rates that have been enacted or substantively enacted at the reporting date.

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax

regulation is subject to interpretation and establishes provisions where appropriate.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability differs from its

tax base. Deferred taxes are recognized using the balance sheet liability method, providing for temporary

differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts

used for taxation purposes (tax bases of the assets or liability). The amount of deferred tax provided is based on

the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates

enacted or substantively enacted by the reporting date.

Deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available

against which the asset can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to

the extent that it is no longer probable that the related tax benefit will be realised. Additional income taxes that

arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend

is recognised.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax

assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes

levied by the same taxation authority on either the taxable entity or different taxable entities where there is an

intention to settle the balances on a net basis. The tax effects of carry-forwards of unused losses or unused tax

credits are recognised as an asset when it is probable that future taxable profits will be available against which

these losses can be utilised.

2.24 Share capital and share premium

Shares are classified as equity when there is no obligation to transfer cash or other assets. Any amounts received

over and above the par value of the shares issued are classified as ‘share premium’ in equity. Incremental costs

directly attributable to the issue of equity instruments are shown in equity as a deduction from the proceeds, net

of tax.

2.25 Dividend on ordinary shares

Dividends on the Company’s ordinary shares are recognised in equity in the period in which they are paid or, if

earlier, approved by the Company’s shareholders. Dividends for the year that are declared after the date of the

statement of financial position are dealt with in the subsequent events note.

2.26 Statutory Contingency reserve



44

In compliance with Section 21 (2) of Insurance Act, CAP I17 LFN 2004, the contingency reserve is credited with the

greater of 3% of total premiums, or 20% of the net profits. This shall accumulate until it reaches the amount of

greater of minimum paid-up capital or 50 percent of net premium.

2.27 Retained earnings/accumulated losses

This reserve represents amount set aside out of the profits of the Company which shall at the discretion of the

Directors be applicable for meeting contingencies, repairs or maintenance of any works connected with the

business of the Company, for equalising dividends, for special dividend or bonus, or such other purposes for which

the profits of the Company may lawfully be applied.

2.28 Contingent assets and liabilities

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by

the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the

Company. A contingent liability is a possible obligation that arises from past events and whose existence will be

confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the

control of the company or the company has a present obligation as a result of past events but is not recognized

because it is not likely that an outflow of resources will be required to settle the obligation; or the amount cannot

be reliably estimated.

Contingent liabilities and contingent assets are never recognized rather they are disclosed in the financial

statements when they arise.

2.29 Premium and unearned premium

Premiums written comprise the premium on contracts incepting in the financial year. Premiums written are stated

gross of commission payable to agents and exclusive of taxes levied on premiums. The Company earns premium

income evenly over the term of the insurance policy generally using the pro rata method. The portion of the

premium related to the unexpired portion of the policy at the end of the fiscal year is reflected in unearned

premium.

2.30 Reinsurance expenses

Reinsurance costs represent outward premium paid to reinsurance companies less the unexpired portion as at the

end of the accounting year.

2.31 Fees and commission income

Insurance and investment contract policyholders are charged for policy administration services, investment

management services, surrenders and other contract fees. These fees are recognised as revenue over the period in

which the related services are performed. If the fees are for services provided in future periods, then they are

deferred and recognised over those future periods.

2.32 Claims expense

Claims incurred consist of claims and claims handling expenses paid during the financial year together with the

movement in the provision for outstanding claims. (See policy for reserve for outstanding claims above)The gross

provision for claims represents the estimated liability arising from claims in current and preceding financial years

which have not yet given rise to claims paid. The provision includes an allowance for claims management and

handling expenses.



45

The gross provision for claims is estimated based on current information and the ultimate liability may vary as a

result of subsequent information and events and may result in significant adjustments to the amounts provided.

Adjustments to the amounts of claims provision for prior years are reflected in the income statement in the financial

period in which adjustments are made, and disclosed separately if material.

2.33 Acquisition costs and maintenance expenses

Acquisition costs represent commissions payable and other expenses related to the acquisition of insurance

contract revenues written during the financial year. Deferred acquisition costs represent the proportion of

acquisition costs incurred which corresponds to the unearned premium provision (See policy for Deferred

Acquisition Cost above). Examples of these costs include, but are not limited to, commission expense, supervisory

levy, superintending fees and other technical expenses. Maintenance expenses are those incurred in servicing

existing policies/contract.

2.34 Investment income

This includes interest income and dividend income. Interest income is recognised in the income statement as it

accrues and is calculated by using the effective interest rate method. Fees and commissions that are an integral

part of the effective yield of the financial asset or liability are recognised as an adjustment to the effective interest

rate of the instrument. Dividend income for equities is recognised when the right to receive payment is established,

this is the ex-dividend date for equity securities.

2.35 Management expenses

Management expenses are expenses other than claims, investment expenses, employee benefits, expenses for

marketing and administration and underwriting expenses. They include wages, professional fee, depreciation

expenses and other non-operating expenses. Other Operating expenses are accounted for on accrual basis and

recognized in the income statement upon utilization of the service or at the date of their origin.

Finance income and expenses

Finance income and expense for all interest-bearing financial instruments are recognised within 'finance income'

and 'finance costs' in the income statement using the effective interest method. The effective interest method is a

method of calculating the amortised cost of a financial asset or liability (or group of assets and liabilities) and of

allocating the finance income or finance costs over the relevant period. The effective interest rate is the rate that

exactly discounts the expected future cash payments or receipts through the expected life of the financial

instrument, or when appropriate, a shorter period, to the net carrying amount of the instrument.

Finance income and expenses - continued

The application of the method has the effect of recognising income (and expense) receivable (or payable) on the

instrument evenly in proportion to the amount outstanding over the period to maturity or repayment. In calculating

effective interest, the Group estimates cash flows considering all contractual terms redemption, are included in the

calculation to the extent that they can be measured and are considered to be an integral part of the effective

interest rate.

Cash flows arising from the direct and incremental costs of issuing financial instruments are also taken into account

in the calculation. Where it is not possible to otherwise estimate reliably the cash flows or the expected life of a

financial instrument, effective interest is calculated by reference to the payments or receipts specified in the

contract, and the full contractual term. Once a financial asset or a group of similar financial assets has been written

down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the

future cash flows for the purpose of measuring the impairment loss.



46

2.36 Income tax expense

Income tax expense comprises current income tax, education tax levy, information technology tax and deferred tax.

(See policy on taxation above).

2.37 Earnings per share

The Company presents basic earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing

the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary

shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to

ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all

dilutive potential ordinary shares.

3 Correction of errors

Between 2012 and 2015, the Company revalued its building which it carried under revaluation model. This building

is expected to be recovered through use and as such, the deferred tax arising from the temporary difference on the

building should have been computed using the company income tax rate of 30%. However, the deferred tax

attributable to temporary difference arising from the revaluation of the building including reversal therefrom has

been computed using capital gain tax of 10%.

Also, over the years, the Company has a defined benefit plan which is operated on ‘pay as you go’ basis. The

movement in this defined benefit plan recognised as expense in profit or loss as well as the remeasurement

gain/loss recognised in OCI is disallowed in computing company income tax. Only payment made to the retired

employees is allowed in computing company income tax. Thus, the defined benefit plan creates a deductible

temporary difference which should have attracted deferred tax asset but no deferred tax was recognised up to 2015

in respect of this defined benefit plan.

In performing the audit of 2016 financial statements, the above prior year errors were discovered and have been

corrected by restating each of the affected financial statement line items for the prior periods as follows:

Impact on equity (increase/(decrease) 31 Dec 15 1 J an 15

N'000 N'000

Deferred tax liabilities 182,249 184,069

------------ ------------

Total liabilities 182,249 184,069

======== ========

Accumulated losses 46,802 38,510

Reserve on actuarial valuation on gratuity 4,199 691

Property revaluation reserve (233,250) (223,270)

-------------- ----------------

Net impact of equity 182,249 184,069

======= ======== Impact on total

comprehensive income increase/(decrease) 31 Dec 15

N'000

Income tax 8,292

-------------

Net impact on profit for the year 8,292

Impact on statement of other comprehensive



47

Income/loss increase/(decrease) in profit

Tax on surplus on property revaluation reserve (9,980)

Tax on actuarial loss 3,508

------------

Net impact on other comprehensive income/loss (6,472)

======

Net impact on total comprehensive income 1,820

Net impact on earnings per share (kobo) 0.18

=====

Prestige Assurance Plc Statement of Profit or Loss and Other Comprehensive Income

for the year ended 31 December 2016 R estated *

2016 2015

=N='000 =N='000

Gross premium written 2,614,264 2,430,533

Gross premium income 1 2,547,531 2,434,614

Reinsurance expenses 2 (1,445,723) (1,506,867)

Net premium income 1,101,808 927,747

Fees and commission income 365,923 383,916

Underwriting profit/(loss) 254,074 (422,314)

Investment income 6 417,824 532,637

Net fair value loss on financial assets 14 (18,433) (154,391)

Net fair value (loss)/gain on investment property 20 (13,436) 165,146

640,029 121,078

Other operating income 7 146,361 336,494

Results from operating activities

Finance costs

Profit before income tax expense

Income tax expense 9

Profit/(loss) for the year

Gain on valuation of Available-for-sale financial assets

Items within OCI that will not be reclassified to the profit/loss:

Re-measurement gain/(loss) on defined benefit plans 11.2

19,638

Gain on revaluation of land and buildings 11.3

-

Total other comprehensive income for the year

Total comprehensive income/(loss) for the year

Net underwriting income 1,467,731 1,311,663

Claims expenses 3 (429,790) (1,024,552)

Acquisition expenses 4 (369,349) (324,622)

Maintenance expenses 5 (414,518) (384,803)

786,390 457,572

Management expenses 8 (435,394) (418,200)

Other comprehensive income:

Items within OCI that may be reclassified to the Profit or loss:

11.1

177,054

109,192

350,996 39,372

(10,602) (19,033)

340,394 20,339

(118,402) (157,342)

221,992 (137,003)

(8,185)

34,930

196,692 135,937

418,684 (1,066)

4.13 (2.94)

Basic earnings/(loss) per share (Kobo)

*Certain amounts shown here do not correspond to the 2015 financial statements, and have reflected adjustments as

described in Note 3 in the summary of significant accounting policies

See accompanying summary of significant accounting policies and notes to the financial statements which form an

integral part of these financial statements.

46

Prestige A ssurance Plc

S tatement of F inancial Position

as at 31 December 2016 Restated * Restated *

2016 2015 1-Jan-15

A ssets

=N='000

=N='000 =N='000

Cash and cash equivalents Financial assets: - Financial assets designated as fair value

13 862,680 1,312,659 3,259,625

through profit or loss 14.1 495,841 514,274 831,281 - Held-to-maturity 14.2 1,622,105 698,908 256,699 - Available-for-sale 14.3 1,098,213 820,187 710,023 - Loans and receivables 14.4 97,199 85,145 82,868 Trade receivables 15 7,931 2,723 1,092 Other assets 16 51,982 92,705 92,115 Reinsurance assets 17 1,339,406 2,686,944 2,814,046 Deferred acquisition costs 18 92,839 87,130 71,216 Investment in finance leases 19 132,943 129,070 77,110 Investment property 20 2,286,564 2,300,000 2,100,000 Intangible assets 21 9,162 10,152 5,400 Property, plant and equipment 22 1,292,722 1,327,844 1,292,471 Statutory deposit 23 300,000 300,000 300,000 Total assets 9,689,587 10,367,741 11,893,946 Liabilities

Insurance contract liabilities 24 1,799,210 3,197,127 4,173,905 Trade payables 25 241,066 279,544 532,101 Other liabilities 26 565,557 107,590 103,794 Borrowings 27 152,335 223,149 457,637 Deposit for shares - - 1,504,989

Retirement benefits obligations 28 107,646 136,408 113,873 Current income tax payable 9 127,950 145,786 170,090 Deferred tax liabilities 10 467,561 468,559 445,479 Total liabilities 3,461,325 4,558,163 7,501,868 Share capital 29 2,685,216 2,685,216 1,254,157 Share premium 30 1,127,599 1,127,599 1,140,092 Statutory contingency reserve 31 1,753,651 1,675,223 1,602,307 Accumulated losses 32 (776,511) (945,069) (755,718) Gratuity valuation reserve 33.1 9,841 (9,797) (1,612) Total liabilities and equity

Available - for - sale reserve 33.2 671,542 494,488 385,296 Property revaluation reserve 33.3 756,924 781,918 76 7,556 Total equity 6,228,262 5,809,578 4,392,078

11,893,946

9th

9,689,587 10,367,741

*Certain amounts shown here do not correspond to the 2015 financial statements, and have reflected adjustments as

described in Note 3 in the summary of significant accounting policies.

See accompanying summary of significant accounting policies and notes to the financial statements which form an integral

part of these financial statements.

47

= ='000 N

Prestige Assurance Plc Statement of Changes in Equity for the year

ended 31 December 2016

Share Continge ncy revaluation Share capital premium reserve Accumulated valuation for-sale losses reserve reserve reserve Notes (Note 29) (Note 30) (Note 31) (Note 32) (Note 33.1) (Note 33.2) (Note 33.3) Total equity As at 1 January =N='000 =N='000 =N='000 =N='000 =N='000 =N='000 =N='000 2016 restated Profit for the 2,685,216 1,127,599 1,675,223 (945,069) 221,992 (9,797) 494,488 781,918 5,809,578 year - - - 221,992 Other - - - (78,428) 19,638 177,054 - 196,692

comprehensive - - - income Transfer of contingency reserve Transfer to accumulated losses At 31 December 2016

As at 1 January 2015 1,254,157 1,140,092 1,602,307 (794,228) (2,303) 385,296 990,826 4,576,147

Adjustment on correction (137,003) As at 1 J - - - - - - - (137,003)

anuary 2015 (Restated*) - - - 20,568 (72,916) (8,185)- 109,192- 34,930 135,937-

L oss for theyear restated -- - 72,916 - - - (20,568)- 1,431,059-

- - -

Other 1,431,059 - - - comprehensive income/(loss) Transfer of contingency

reserve Transfer to accumulated losses Rights issue

78,428

- - -

Rights issue Statutory Gratuity expenses Available- Property At 31 December 2015 restated

See accompanying summary of significant accounting policies and notes to the financial statements which form an integral part of these financial statements.

48

57

Prestige Assurance Plc Statement of Cash Flows for the year ended 31 December 2016

2016 2015 Notes =N='000 =N='000

Cash flows from operating activities

Premiums received from policy holders 2,609,056 2,428,902

Commissions received 365,923 383,916

Commission paid (375,058) (340,536)

Reinsurance premium paid (1,429,607) (1,505,638)

Claims paid 3 (1,896,206) (3,447,163)

Claims recoverable from re-insurers 3 1,333,188 1,580,787

Other operating cash payments 34.2 (315,612) (1,024,601) Other operating income 118,252 Cash flow generated from/(used in) operating activities 409,936 Income taxes paid 9 Benefits paid 28 Net cash from/(used in) operating activities 34.1

Net decrease in cash and cash equivalents (464,757) (2,003,324) Cash and cash equivalents at beginning of year 1,293,162 3,259,625 Effects of exchange rate changes on cash and cash equivalents 27,939 36,861

(145,651) (170,028) (35,634)

228,651 228,651

58

Cash flows from investing activities

Purchase of property, plant and equipment 22 (18,799) (32,801) Purchase of investment property 20 - (34,854) Purchase of intangible assets 21 (598) (6,280) Proceeds from disposal of property, plant and equipment 589 4,720

Purchase of held-for-trading assets 14.1 - (44,352)

Proceeds on disposal of held-for-trading assets - 233,371

Purchase of available-for-sale financial assets 14.3 (100,972) (972)

Purchase of held-to-maturity financial assets 14.2 (1,001,321) (531,713) Proceeds on redemption of held-to-maturity financial assets 78,124 89,504

Interest received 324,385 322,208

Dividends received

93,439 184,025

Net cash (used in)/from investing activities (625,153) 182,856 Cash flows from financing activities

Rights issue expenses 29 -

(12,493) Refund on deposit for shares - (73,930)

Repayments of loan during the year 27

(68,255)

(273,019) Net cash used in financing activities (68,255) (359,442)

Prestige Assurance Plc Notes to the financial statements - continued

2016 2015

=N='000 =N='000

Cash and cash equivalents at end of year 35

See accompanying summary of significant accounting policies and notes to the

financial statements which form an integral part of these financial statements. Notes to the financial statements

1 Insurance premium revenue

ross preGross premium income 2,614,264 2,430,533

hange i Changes in unearned income (66,733) 4,081 2,547,531 2,434,614

2 R einsurance expenses

utward Outward reinsurance 1,429,607 1,505,638 ecreaseDecrease in prepaid reinsurance 16,116 1,229

1,445,723 1,506,867

3 Claims expenses

59

aims paClaims paid during the year 1,896,206 3,447,163

hange i Decrease in outstanding claims (Note 24.2) (1,464,650) (972,697)

431,556 2,474,466

hange i Change in re-insurance assets (Note 17.1) 1,331,422 130,873

einsura Reinsurance claims recoveries (1,333,188) (1,580,787)

429,790 1,024,552

4 Acquisition expenses

At 1 J anuary

87,130

71,216

cquistioCommission for the year 375,058 340,536

cquistioGross commission 462,188 411,752 eferredAt 31 December

5 Maintenance expenses

Wages and salaries - Technical Staff 186,433 194,230

avellin Travelling 54,657 22,819

ension &Pension cost 31,851 31,454

ntertainEntertainment & hotel expenses 25,037 26,891

otor ruMotor running expenses 15,293 10,795

ave eneLeave encashment 8,409 7,762

hildren Children school fees 1,575 -

ostage, Postage, telephone & telegrams 8,545 8,261

Prestige Assurance Plc

2016 2015

=N='000 =N='000

Business development expenses - 4,421

5 Maintainance expenses- continued

331,800 306,633

edical Medical 25,442 26,973

aff traiStaff training 16,349 6,164

suranceInsurance levy 16,420 16,302

(92,839) (87,130)

369,349 324,622

331,800 306,633

60

sk insp Risk inspection survey 8,083 13,983

onveny Conveyance 7,456 5,318

dustria Industrial Training Fund 7,242 4,000

aff welStaff welfare 1,726 5,251

Bancassurance handling charges - 179

6 Investment income

terest iInterest income 290,883 301,842

vidend Dividend income 93,439 184,025

ease re Finance lease income 33,502 20,366

rofit onProfit on sale of shares - 26,404

7 Other operating income

ain on fExchange gain 27,939 36,861

ad debt Recovery of bad debt previously written off (Note 7.1) 108,634 160,437

rofit on Profit on disposal of property, plant and equipment 170 4,692

Rebate received on commission due on rights issue - 4,000

Transfer fees on finance lease - 3,780

Provision no longer required - 5,000

undry inSundry income

7.1 This relates to amount received on debts which had previously been written off in prior years before the era

of "no premium no cover".

414,518 384,803

417,824 532,637

9,618 121,724 146,361 336,494


Notes to the financial statements - continued

2016 2015

=N='000 =N='000

61

118,402 157,342

8 Management expenses

ages anWages and salaries - Adminstrative Staff 160,399 158,916

eprecia Depreciation (Note 22) 53,502 47,300

ffice ex Office expenses 43,858 40,956

ther ad Administration expenses 38,775 26,213

ther proProfessional fees 35,165 26,439

roductivProductivity bonus 17,020 -

ubscrip Subscriptions 14,560 16,195

at on coVAT on commission 13,862 23,937

esisdenResidential rent, rates and other expenses 12,776 15,862

suranceInsurance 11,064 3,506

udit feeAudit fees 8,500 6,000

rinting ePrinting expenses 8,336 6,916

rector Directors expenses 6,549 25,299

dvertiseAdvertisement and publicity 4,987 10,279

ank chaBank charges 4,453 8,854

mortisaAmortisation (Note 21) 1,588 1,528

435,394

9 Taxation

Per statement of profit or loss :

Income tax based on profit for the year 117,605 134,068

Education tax 10,210 11,656

Current income tax expense 127,815 145,724 Deferred tax expense (Note 10.1) (9,413) 11,618 Income tax expense

Per statement of financial position: Current

income tax payable

At 1 J anuary 145,786 170,090

Charged to profit or loss 127,815 145,724

Payments during the year (145,651) (170,028)

418,200


- continued

2016 2015

=N='000 =N='000

62

127,950 145,786

9 Taxation - continued

Reconciliation of tax charge

Profit before income tax 340,394 20,339

Notes to the financial statements

Tax at Nigerian's statutory income tax rate of 30% 102,118 6,102

Non-deductible expenses 385,020 441,953

Tax exempt income (381,632) (269,339)

Education tax levy 10,210 11,656

Tax rate differential on fair value gains 2,686 (33,030)

At effective income tax rate of 37% (2015:798%) 118,402 157,342

0

10 Deferred taxation

Deferred income tax (assets)/liabilities are attributable to the following items:

Deferred tax liabilities

(157,342)

Accelerated depreciation 380,030 388,312

499,856 509,481

32,295 40,922

32,295 40,922

467,561 468,559



2016 2015

=N='000 =N='000

63

Fair value gains on investment properties 119,826 Deferred tax assets

Employee benefits

Net

121,169

10.1 Movements in temporary differences during the year:

As at 1 J anuary 468,559 445,479

Recognised in profit or loss on:

Accelerated depreciation (8,282) (1,645)

Fair value gains on investment properties (1,343) 16,515

Employee benefits 212 (3,252)

Total recognised in profit or loss (9,413) 11,618 Recognised in other comprehensive income on:

Revaluation surplus on property plant and equipment

- 14,970

Employee benefits (3,508)

Total recognised in other comprehensive income on: 11,462

At 31 December

8,415

8,415

467,561 468,559



64

2016 2015

11 Other comprehensive income/(loss):

11.1 Net gain on available-for-sale assets

=N='000 =N='000

Fair value loss on available-for-sale financial assets (Note 14 (c)) 177,054 109,192

177,054 109,192

11.2 Actuarial gain/(loss)

Actuarial gain - Assumption (Note 28) (21,011)

Actuarial (loss) - Experience (Note 28) 9,318

Income tax effect (Note 10.1)

11.3 R evaluation surplus on land and buildings

Arising during the year (Note 22) - 49,900

Income tax effect (Note 10.1) - (14,970)

- 34,930

Other comprehensive income for the year, net of tax

12 Earnings/(loss) per share {EPS /(L PS)}

Basic EPS/(LPS) amounts are calculated by dividing the profit/(loss) for the year attributable to ordinary

shareholders by the weighted average number of ordinary shares outstanding during the

The following reflects the income and share data used in the basic 2016 2015 earnings/(loss) per share

computations:

Net profit/(loss) attributable to ordinary shareholders (=N='000) 221,992 (137,003)

Weighted average number of shares for the year ('000) 5,370,432 4,654,904

196,692 135,937

16,725

11,328 28,053 (11,693)

(8 , 4 15) 3,508

19,638 (8,185)



2016 2015

=N='000 =N='000

65

Basis and diluted earnings per ordinary share (kobo) 4.13 (2.94) Except in prior year, there have been no

other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of

completion of these financial statements.

13 Cash and cash equivalents

alance wBalances with local banks 355,326 199,113

alances Balances in foreign banks 45,981 29,512

acemenDeposits and placements with local banks 156,024 134,034

ankers aBankers acceptances 305,349 700,000

ommercCommercial papers - 250,000

862,680 1,312,659

14 Financial assets

eld for tFair value through profit or loss (Note 14.1) 495,841

514,274

eld to mHeld-to-maturity (Note 14.2) 1,622,105 698,908

vailable-Available-for-sale (Note 14.3) 1,098,213 820,187

oans an Loans and receivabels (Note 14.4) 97,199 85,145

3,313,358 2,118,514

14.1 The following table represents movement of the fair value through profit or loss

At 1 J anuary Net fair value loss

Additions during the year

Disposal during the year

514,274

(18,433)

-

-

831,281

(154,391)

44,352

(206,968)

At 31 December 495,841 514,274

14.2 The following table represents movement of the Held-to-maturity financial assets

At 1 J anuary

Additions during the year 698,908 1,001,321 256,699

531,713

1,700,229 788,412

Redemption during the year (78,124) (89,504)

At 31 December 1,622,105 698,908

14.3 The following table represents reconciliation of the available-forsale financial

assets

-

At 1 J anuary Additions 820,187

100,972 710,023

972

921,159 710,995

Net fair value gains (Note 11.1) 177,054 109,192

AvailableAt 31 December 1,098,213 820,187



2016 2015

=N='000 =N='000

66

Available-for-sale financial assets comprise unquoted investments in:

Leadway Pensure PFA Limited

844,436

635,117

Leadway Protea Hotel Limited 178,023 143,788

Other available-for-sale investments 75,754 41,282

1,098,213 820,187

14 Financial assets- continued

Analysis of investment securities

Equity 1,594,054 1,334,461

Debt 1,719,304 784,053

3,313,358 2,118,514

1,622,105 698,908

Held-for-trading

Quoted equities

Available-for-sale:

Unquoted equity 1,098,213

820,187

Total

15 Trade receivables

ue fromDue from brokers 7,931 2,723

Held-to-maturity

FGN Bond 1,492,898 531,713

Corporate bond 129,207 167,195

14.4 L oans and receivables

aff loanStaff loans and advances 97,199 85,145

3,216,159 4,151,883

495,841 514,274



2016 2015

=N='000 =N='000

67

16 Other assets

repaymePrepayments

35,392

28,229

Accrued interest 15,658 12,266

ther recOther receivables 10,629 46,386

WHT receWHT receivable 932 16,453

mpairmeImpairment on other receivables (Note 16.1) (10,629) (10,629)

51,982 92,705

16.1 Impairment loss on other receivables relates to amount advanced to Company's staff cooperative for purchase of land.

17 R einsurance assets

Reinsurance share of claims expenses paid 275,659 183,881

aims re Reinsurance share of outstanding claims expenses 755,088 2,178,288

mpairmeImpairment of claims recoverable

(36,067) (36,067)

Total outstanding claims recoverable 994,680 2,326,102 repaid r Reinsurance share of unearned premium 344,726

360,842 1,339,406 2,686,944

Movement on outstanding claims recoverable: Outstanding claims recoverable:

Balance at beginning

Decrease during the year (Note 3) Balance at end of the year

mpairmeImpairment of claims recoverable (Note 17.1)

17.1 Impairment of claims recoverable

At 1 J anuary

36,067

41,067

Recovered during the year - (5,000)

At 31 December 36,067

18 Deferred acquisition costs

36,067

(1,331,422)

1,030,747

2,362,169 2,493,042 (130,873)

2,362,169

(36,067) (36,067) 994,680

2,326,102



2016 2015

=N='000 =N='000

68

At 1 J anuary

87,130 71,216

Commission incurred during the year 375,058 340,536

Amortised to profit or loss (Note 4) (369,349) (324,622)

At 31 December 92,839

19 Investment in finance leases

Gross investment in finance leases

129,070

77,110

Additions during the year 112,244 143,289

Repayment during the year (108,371) (91,329)

132,943 129,070

The present value of the lease obligations are as follows:

Not later than one year 110,531 44,240

Later than one year, not later than five years 22,412 84,830

Later than five years - -

132,943 129,070

The Company enter into finance lease arangement to finance certain motor vehicles with lease term of maximum

of twenty four months repayment period.

20 Investment properties

At 1 J anuary 2,300,000 2,100,000

Additions during the year - 34,854

Fair value (loss)/gains (13,436) 165,146

At 31 December 2,286,564 2,300,000

Investment properties are stated at fair value, which has been determined based on valuations performed by J C

Obasi & Co, a professional firm of Estate Surveyors and Valuers who are accredited independent valuers, as at 31

December 2016 and 2015. These valuers are specialists in valuing these types of investment properties. The fair

value of the properties has not been determined on transactions observable in the market because of the nature

of the property and the lack of comparable data. Instead, a valuation model, based on discounted cash flows, in

accordance with that recommended by the International Valuation Standards Committee has been applied.

Valuations are performed on an annual basis and the fair value gains and losses are recorded within the profit or

loss.

The Company enters into operating leases for all of its investment properties. However, the property is yet to be

occupied and the rental income expected to arise from the property annually is =N=228,200,000 which is expected

to be included in other income. Direct operating expenses arising in respect of such properties during the year are

included in administrative expenses.

87,130



2016 2015

=N='000 =N='000

69

There are no restrictions on the realisability of investment property or the remittance of income and proceeds of

disposal. The Company has no contractual obligations to purchase, construct or develop investment property or for

repairs or enhancement.

2016 2015

=N='000 =N='000

Rental Income derived from investment properties - -

Direct operating expenses (including repairs & Maintenance) generating

income

(5,974) (1,555)

Loss arising from investment properties carried at fair value (5,974) (1,555)



70

20 Investment property - continued

The fair value disclosure on

investment properties is as Fair value measurement using

Quoted

prices in

active

S ignifican S

ignificant t

unobservabl e

observabl inputs

L evel 1 L evel 2 L evel 3 Total

Date of valuation - 31 December 2016 =N='000 =N='000 =N='000 =N='000

Fair value measurement using

Investment properties -

The fair value disclosure on investment properties is as

- 2,286,564 2,286,564

Quoted

prices in

active S ignifican t

observabl

S

ignifica

nt unobservabl e

inputs


Date of valuation - 31 December 2015 =N='000 =N='000 =N='000 =N='000

Investment properties

Description of valuation techniques used and

key inputs to valuation on investment properties

Winged Duplexes

Valuation technique Significant Range (weighted average)

Income capitalization using DCF Analysis

Estimated rental

per =N=70,000

Average annual growth

Average

6%

annual 1.4%

Discount rate (equated yield) 8.88% - 8.96% (9.20%)

-

-

Fair value mea surement using

2,300,000 2,300,000



71

Under the DCF method, fair value is estimated using assumptions regarding the benefits and liabilities of ownership

over the asset’s life including an exit or terminal value. This method involves the projection of a series of cash flows

on a real property interest. To this projected cash flow series, a market-derived discount rate is applied to establish

the present value of the income stream associated with the asset. The exit yield is normally separately determined

and differs from the

20 Investment property - continued

The duration of the cash flows and the specific timing of inflows and outflows are determined by events such as

rent reviews, lease renewal and related re-letting, redevelopment, or refurbishment. The appropriate duration is

typically driven by market behaviour that is a characteristic of the class of real property. Periodic cash flow is

typically estimated as gross income less vacancy, non-recoverable expenses, collection losses, lease incentives,

maintenance cost, agent and commission costs and other operating and management expenses. The series of

periodic net operating income, along with an estimate of the terminal value anticipated at the end of the projection

period, is then discounted.

L ocation of property Valuation technique S ignificant unobservable input

No. 19B Ligali Ayorinde The valuation was based on It is a purposely built office building on 7 the market

Street, Victoria Island Lagos value of the floors with a mezzanine floor. The 7 story property, with reference to office

building has office and parking to the investment/income spaces inside the

underground. The approach method of parking lot can take about 43 vehicles at

a valuation. The method looks time. only to a property’s future income as may

reasonably The site is rectangular in shape and be anticipated during the appears

firm, level and well drained. It is estimated economic life of fenced round in block

walls with a double the property. Further value leaf metal entrance gate. The site

area is analysis was

approximately 1054sqm. carried out

using market market comparison

method approach as

check.

Computer 21 Intangible assets

software Cost: =N='000

At 1 J anuary 2015 9,000

Additions 6,280

At 31 December 2015 15,280

Additions

At 31 December 2016

Accumulated amortisation and impairment:

Total

= N ='000

9,000

6,280

15,280

598 598

15,878 15,878



72

At 1 J anuary 2015

Amortisation

At 31 December 2015

Amortisation

At 31 December 2016

Carrying amount:

At 31 December 2016

At 31 December 2015

3,600 3,600

1,528 1,528

5,128 5,128

1,588 1,588

6,716 6,716

9 , 16 2 9,162

10,152 10,152


22 Property, plant and equipment

Plant &

machinery

=N='000

Cost/Valuation:

L easehold

L and &

building

=N='000

Furniture &

fittings

=N='000

Computer

equipment

=N='000

Motor

vehicles

=N='000 Assets on lease

=N='000

Total

=N='000

At 1 J anuary 85,037 143,771

2015 33,177 1,240,000 48,375758,432 2,308,792 2,152 28,064

Additions 266 - -

2,319- 32,801

Revaluation ( Note) - 87,189

16,300 -- 16,300 1,651 14,305

Disposals - - -- (40,137)

2016 34,346 1,256,300 51,349758,432 2,335,270

919 24,049

Accumulated depreciation: -

-

At 1 J anuary 2015 22,151 16,800 32,680758,432 1,016,321 Charge for the year 2,198 -

16,800 3,334- 47,300

Tranfer to revaluation reserve - 85,554

(33,600) -- (33,600) 2,931 27,018

Disposal - - - - -

- (40,109)

At 31 December 2015 33,44350,694758,432 , 2 317,756

Additions 903 1,94018,799

Disposals (1,285)(1,285)

At 31 December

88,840 146,003

84,635 101,623

-

-

At 31 December 2015 24,349 - 36,014758,432 989,912 Charge for the year 2,302 17,840 3,41153,502

Disposal - -

(866)- (866)

At 31 December

2016 26,651 17,840 38,559758,432 1,042,548

Net book value:

At 31 December 2016 7,695 1,238,460 12,790- 1,292,722

At 31 December 2015

61


22 Property, plant and equipment- continued

L and and building is stated at fair value, which has been determined based on valuations performed by Messrs J .C Obasi & Co.

FRC/2013/NIESV/00000002148 who are accredited independent valuers, as at 31 December 2015. These valuers are specialists in valuing these type of

property. The fair value of the property has not been determined on transactions observable in the market because of the nature of the property and

the lack of comparable data. Instead, a valuation model based on discounted cash flows in accordance with that recommended by the International

Valuation Standards Committee has been applied.

The revalued properties are the Head office building located at 19, L igali Ayorinde Street, Victoria Island, Lagos and the Company's property located in

flat C, Niger Towers, 51/55 Glover Road, Ikoyi, L agos

The Head office building is used to secure the Company's borrowings.

The Head office building was constructed at a cost of N94,130,000 and the property in nature is a freehold property. In 2009, the property was revalued

to N600,000,000 and a further revaluation on the property was carried out on 31 December 2013 in an open market by reference to the investment

method of valuation and used the market comparison method as a check. Changes in revaluation are recognised in property revaluation reserve. The

earned portion for 2016 financial year was transferred from property revaluation reserve to accumulated losses.

88,485 112,581

355 33,421

1,635 46,135

The Company's property located at flat C, Niger Towers, 51/55 Glover Road Ikoyi Lagos was acquired under a lease agreement with UACN Property

Development Company in 2005. the lease period is 42 years and Prestige Assurance Plc is allowed to sub-lease it for another term after expiration of

the current term. The cost of this building at the date of acquisition was N71,246,000 and has been valued in an open market as at 31 December 2013

by reference to the investment method of valuation and used the market comparison method as a check.

62

76


2016 2015 23 S tatutory deposit =N='000 =N='000

At 31 December

Statutory deposit represents the amount deposited with the Central Bank of Nigeria in accordance with Section 9(1)

and Section 10(3) of the Insurance Act 2003. This is restricted cash as management does not have access to the

balances in its day to day activities. Statutory deposits are measured at cost.

24 Insurance contract liabilities 2016 2015

=N='000

=N='000

nearnedUnearned Premium (Note 24.1) ustandinOutstanding Claims

(Note 24.2)

Total insurance liabilities

24.1 R eserve for Unearned P remium At 1 January premium written in the year (Note 1) premium

earned during the year (Note 1) At 31 December 610,061 614,142

2,614,264 2,430,533

24.2 R eserve for Outstanding Claims At 1 January Incurred in the current accident year aims paPaid during the

year (Note 3) At 31 December 2,587,066 3,559,763

24.3 Analysis of Insurance Contract L iabilities

431,556 2,474,466 2016 2015

Gross Reinsurance Net Gross Reinsurance Net

=N='000 =N='000 =N='000 =N='000 =N='000 =N='000

676,794 1,122,416 610,061

2,587,066

1,799,210 3,197,127

300,000 300,000



77

19,497 223,149

ue to br Due to brokers 10,511 10,949

UE TO DDue to direct insured 71,020 60,971

UE TO RDue to reinsurers 19,993 76,585

UE TO INDue to insurance companies 42,989 40,775

nexpiredUnexpired commission received 82,685 88,891 241,066 279,544

26 Other liabilities

FUND Industrial Training fund 7,211 4,000

suranceInsurance levy 16,000 15,000

rofit shaProfit sharing 18,880 1,860

ther payOther payables (Note 26.1) 73,842 65,635

WHT tax Withholding tax 596 2,044

ayable toPayable to parent company (Note 36) 442,776 -

AT VAT 6,252 11,051

Professional fees - 8,000

107,590

26.1 Other payables comprises of amount yet to be presented for payment on Dana claims. Also included here are

Balance as at beginning of the year 203,652 457,637

Interest payable 10,602 19,033

Repayments during the year (68,255) (273,019) Balance as at end of the year (Note 36) 145,999 203,652 Overdrafts 6,336 152,335

The New India Assurance Company L imited granted a loan of N500,000,000 to the company for the completion

of the Company's seven storey building. The loan was granted at a fixed rate of 8% per annum. The loan is for a

period of 2 years with a moratorium period of a year. Repayment of principal and interest commenced on J uly

2014 and its expected to be repaid quarterly. The loan is secured by the title documents of one storey head

office building located at Number 19, Ligali Ayorinde Street, Victoria Island, Lagos, Nigeria.

28 Retirement benefits obligation

amounts owed various suppliers.

27 Borrowings 2016 2015

=N='000 =N='000

565,557



78

The Group operates a defined benefit staff gratuity plan where qualifying employees receive a lump sum

payment based on the number of years served after an initial qualifying period of five years and gross salary

on date of retirement. 28 Retirement benefits obligation- continued

The most recent actuarial valuations of the present value of the defined benefit obligation were carried out at

31 December 2016 by HR Nigeria L imited. The present value of the defined benefit obligation, and the related

current service cost and past service cost, were measured using the Projected Unit Credit Method.

The amount included in the statement of financial position arising from the entity's obligation in respect of its

defined 2016 2015 benefit plans is as follows. =N='000 =N='000

Balance at the beginning of the year 136,408 113,873

Current service cost 19,094 17,064

Interest cost 15,831 16,099

Benefits paid (35,634) (22,321)

Actuarial (gain)/loss (28,053) 11,693 107,646 136,408

The principal assumptions used for the purposes of the actuarial valuations were as follows.

Discount rate 16% 12% Rate of salary increase 13% 11% Rate of inflation 12%

9%

2016 2015 The amounts recognised in profit or loss =N='000 Current service cost Interest cost Total, included in staff costs

The amounts recognised in other comprehensive income

Actuarial gains- change in assumption (16,725) 21,011

Actuarial losses - experience adjustment (11,328) (9,318)

Re-measurement (gain)/ loss on net defined benefit plans (28,053) 11,693

The plan is unfunded.

The following payments are estimated contributions to the defined

benefit plan obligation in future years:

= N ='000 19,094 17,064 15,831 16,099 34,925 33,163



79

Within the next 12 months (next annual reporting period) 96,190 98,617

Between 2 and 5 years 58,662 64,920

Between 5 and 10 years 30,439 20,722

Beyond 10 years 14,719 27,892

Total expected payments 200,010 212,151

29 Share capital 2016 2015

=N='000 =N='000

Authorised 6,000,000,000 Ordinary shares of 50k each

Issued and fully paid

5,370,432 Ordinary shares of 50k each 2,685,216 2,685,216

30 S hare premium

At 1 January 1,127,599 1,140,092 Rights issue expenses - (12,493)

At 31 December 1,127,599 1,127,599

Premiums from the issue of shares are reported in share premium.

31 S tatutory contingency reserve

At 1 January 1,675,223 1,602,307

Transfer from accumulated losses 78,428 72,916

At 31 December 1,753,651 1,675,223

This is maintained in compliance with Sections 21(1) and (2) and 22(16) of Insurance Act CAP I17, LFN 2004 as

indicated in the accounting policy number 2.26.

32 Accumulated losses 2016 2015 =N='000 =N='000

At 1 J anuary restated (945,069) (755,718)

Transfer to statutory contingency reserve (78,428) (72,916)

Transfer from property revaluation reserve 24,994 20,568

Profit/(loss) for the year 221,992 (137,003) At 31 December (776,511) (945,069)

Retained earnings comprise the undistributed profits from previous years, which have not been reclassified to

other reserves noted below.

3,000,000 3,000,000



80

33 Other reserves 33.1 Gratutiy valuation reserve 2016 2015

=N='000 =N='000

At 1 January Actuarial gain/(loss) during the year At 31 December

This comprise of the cumulative actuarial gain/loss on change in assumption and experience adjustment

2016 2015

33.2 Available-for-sale reserve At 1 J anuary restated Gains on valuation during the year At 31 December

The fair value available-for-sale reserve shows the effects from the

fair value measurement of financial instruments of the category available-for-sale. Any gains or losses are not

recognised in the profit or loss until the asset has been sold or impaired.

Transfer to accumulated losses

(24,994) (20,568) 756,924 781,918

2016 2015

33.3 Property revaluation reserve =N='000 =N='000

At 1 J anuary restated 781,918 767,556

Arising during the year - 34,930

34.1 Reconciliation of profit before income tax expense to net cash

from/(used in) operating activities 2016

=N='000 2015

=N='000

Profit before tax income tax

expense Adjustments to reconcile net

income to net cash provided by operating

activities:

340,394 20,339

Depreciation of property, plant and equipment 53,502 47,300

Amortisation of intangible assets 1,588 1,528

Profit on disposal of property, plant and equipment (170) (4,692)

Investment income (417,824) (506,233)

Gain realised on held for trading financial assets - (26,404)

Fair value loss on held for trading financial assets 18,433 154,391

L oss/(gain) on investment properties 13,436 (165,146)

Exchange gains (27,939) (36,861)

Interest costs on retirement benefit obligations 34,925 33,163

Finance cost Changes in assets and liabilities

10,602 19,033

Increase in trade receivables (5,208) (1,631)

Decrease/(increase) in other assets and receivables 28,669 (2,867)

Decrease in reinsurance assets 1,347,538 127,102

Increase in deferred acquisition costs (5,709) (15,914)

Decrease in finance lease assets (3,873) (51,960)

(9,797) (1,612) 19,638 (8,185)

9,841 (9,797)

= N ='000 = N ='000 494,488 385,296 177,054 109,192 671,542 494,488



81

This comprise cumulative fair value changes on valuation of

leasehold land & building net of deffered tax asset/liabilities

Net cash

generated from/(used in) operating activities

228,651 (1,826,738)

(315,612) (1,024,601)

35 Cash and cash equivalents for purposes of the statement of cash flows

Bank and cash balances Deposits and placements Bankers acceptances Commercial paper

401,307 156,024 305,349

-

228,625 134,034 700,000 250,000

Overdrafts (Note 27) (19,497)

36 Related party transactions

Compensation of key management personnel Key management personnel of the Company includes all directors, executives and non-executive, and senior

management. The summary of compensation of key management personnel for the year is as follows: 2016

2015 Short-term employee benefits: =N='000 =N='000

The number of directors who received fees and other emoluments (excluding

pension contributions and certain

benefit) in the following ranges was: Number Number

Below =N=1,000,000 2 2 =N=1,000,001 - =N=4,000,000 1 1 =N=4,000,001 - =N=7,000,000 - -

Increase/(decrease) in unearned premium 66,733 (4,081)

Decrease in claims provision (1,464,650) (972,697)

Decrease in trade payables (38,478) (252,557)

Increasse in other liabilities 457,967 3,798

Income tax paid (145,651) (170,028)

Benefits paid (35,634) (22,321)

34.2 Reconciliation of other operating cash payments 2016 2015

=N='000 =N='000

Auditor's remuneration (8,500) (6,000)

Other expenses (751,397) (715,012)

Change in other assets and receivables 24,796 (54,827)

Change in trade payables and other liabilities 419,489 (248,762)

(6,336) 856,344 1,293,162



82

Salaries and allowances Long-term employee benefits: Post employment pension benefits - -

=N=7,000,001 and above Employees

The following are the number of persons in employment of the

Number Number

Company as at 31 December 2016:

Executive Directors Management (Managers & above) Senior staff J unior Staff

2 10 33 29

1 12 32 36

74

413,608 417,763

The number of employees of the Company, other than directors, who received emoluments in the following

ranges (excluding pension contribtions and certain benefits) were:

2016 2015 Emolument range Number Number

N500,000 - N1,000,000 - - N1,000,001 - N1,500,000 - -

N1,500,001 - N2,000,000 - - N2,000,001 - N2,500,000 - - N2,500,001 - N3,000,000 - -

2

5

2

5

81

36 Related party transactions- continued 2016 2015

S taff cost =N='000 =N='000

Salaries and allowances 346,832 353,146

Staff pension 31,851 31,454

Staff gratuity 34,925 33,163

6

6

7

7

Balances with related parties

24,660 24,660

24,660 24,660



83

N3,000,001 - Above

Borrowings from:

New India Assurance Company L imited (Note 27) 145,999 203,652

Outstanding balances for intercompany payables relates to expenses settled on behalf of the Company by the

parent company as at the year-end. Intercompany outstanding balances, except for those on borrowings, are

unsecured and interest free and settlement is expected occurs in cash.

37 Contingencies and commitments a L egal

proceedings and regulations

The Company operates in the insurance industry and is subject to legal proceeding in the normal course of

business. While it is not practicable to forecast or determine the final results of all pending or threatened legal

proceedings, management does not believe that such proceedings (including litigation) will have a material

effect on its results and financial position.

The Company is also subject to insurance solvency regulations in all the territories where it operates and has

complied with all these solvency regulations. There are no contingencies associated with the Company's

compliance or lack of compliance with such regulations.

37 Contingencies and commitments- continued

b Compliance with Insurance regulations The Company contravened certain Sections of Securities Exchange Commission (SEC) Act. Details of the

contravention and penalty is as follows:

2016 2015 =N='000 =N='000

L ate filling of annual returns to Securities and Exchange

Commission (SEC), this relates to previous years (2008 -

2010). 10,675 -

c Capital commitments and operating lease

The Company has no capital commitments at the reporting date.

38 Events after the reporting period

Amount due to related parties are as follows: =N='000 =N='000

Payable to:

New India Assurance Company L imited (Note 26) 442,776 -



84

There were no events after the reporting period which could have a material effect on the financial position of

the Company as at 31 December 2016 and the profit for the year then ended.


- continued

85


39 Asset and L iability Management

Asset and Liability Management (ALM) attempts to address financial risks the Company is exposed to which

includes interest rate risks, foreign currency risks, equity price risks and credit risks. The major financial risk is

that in the long run its investment proceeds are not sufficient to fund the obligations arising from its insurance

contracts. ALM ensures that specific assets of the company is allocated to cover reinsurance and liabilities of

the company.

The Company manages these positions within an ALM framework that has been developed to achieve longterm

investment returns in excess of its obligations under insurance and investment contracts. The notes below

show how the company has managed its financial risks.

Cash and cash equivalents Financial assets: 862,680 - 862,680

-Held-for-trading 495,841 - 495,841

-Held-to-maturity - 1,622,105 1,622,105

-Available-for-sale - 1,098,213 1,098,213

-Loans and receivables - 97,199 97,199

Trade receivables 7,931 - 7,931

Other receivables and prepayments - 51,982 51,982

Reinsurance assets 1,339,406 - 1,339,406

Deferred acquisition costs - 92,839 92,839

Investment in finance leases - 132,943 132,943

Investment properties - 2,286,564 2,286,564

Intangible assets - 9,162 9,162

Insurance Shareholder

funds s' funds 2016

AS S ETS =N='000 =N='000 =N='000

L IABIL ITIES

Insurance contract liabilities 1,799,210 - 1,799,210

Trade payables - 241,066 241,066

Provisions and other payables - 565,557 565,557

Borrowings - 152,335 152,335

Retirement benefits obligation - 107,646 107,646

Current income tax liabilities - 127,950 127,950


- continued

86

Property, plant and equipment

- 1,292,722

Statutory deposit


Deferred tax liability 467,561

3,461,325

Gap

Cash and cash equivalents Financial assets: 1,312,659 - 1,312,659

-Held-for-trading 514,274 - 514,274

-Held-to-maturity - 698,908 698,908

-Available-for-sale - 820,187 820,187

-Loans and receivables - 85,145 85,145

Trade receivables 2,723 - 2,723

Other receivables and prepayments - 92,705 92,705

Reinsurance assets 2,686,944 - 2,686,944

Deferred acquisition costs - 87,130 87,130

Investment in finance leases - 129,070 129,070

Investment properties - 2,300,000 2,300,000

Intangible assets - 10,152 10,152

Property, plant and equipment - 1,327,844 1,327,844

Statutory deposit

L IABIL ITIES

Insurance contract liabilities 3,197,127 - 3,197,127

Trade payables - 279,544 279,544

39 Asset and L iability Management- continued

Insurance Shareholder

funds s' funds 2015

AS S ETS =N='000 =N='000 =N='000

-

300,000 300,000

4,516,600 5,851,141 10,367,741

- 300,000

2,705,858 6,983,729

1,292,722 300,000

9,689,587

- 467,561

1,799,210 1,662,115

906,648 5,321,614 6 ,228,262


- continued

87

Provisions and other payables - 107,590 107,590

Borrowings - 223,149 223,149

Retirement benefits obligation - 136,408 136,408

Current income tax liabilities - 145,786 145,786

Deferred tax liability - 468,559

4,558,163

Gap

40 Management of insurance and financial risk

The Company issues contracts that transfers insurance risk. This section summarises the main risks linked to short-

term insurance business and the way they are managed.


a Insurance risk

The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of

the amount of the resulting claim. By the very nature of an insurance contract, this risk is fortuitous and

therefore unexpected and unpredictable.

For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the

principal risk that the Company faces under its insurance contracts is that the actual claims and indemnity

payments exceed the carrying amount of the insurance liabilities.

The Company has developed its insurance underwriting strategy to diversify the type of insurance risks accepted

and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of

the expected outcome.

ii Frequency and severity of claims

The frequency and severity of claims can be affected by several factors the most significant resulting from events

like fire and allied perils and their consequences and liability claims. Inflation is another factor that may affect

claims payments.

468,559

1,361,036 3,197,127

1,319,473 4,490,105 5,809,578


- continued

88

Underwriting measures are in place to enforce appropriate risk selection criteria or not to renew an insurance

contract if the perceived level of risk is very high.

The reinsurance arrangements for proportional and non-proportional treaties are such that the Company is

adequately protected and would only suffer predetermined amounts.

iii Concentration of insurance risk

The following table discloses the concentration of claims by class of business gross and net of reinsurance.

31 December 2016 Outstanding claims

No. of claims Gross Net

Class of Business=N='000

Accident 4764,591

Fire 88 608,546 38,103

Workmen's compensation 53 34,301 34,301

Motor 49 58,327 40,171

Marine and Aviation 47 271,459 11,197

Engineering 6 14,900 5,226

Oil and Gas 30 32,568 6,558

Bonds - 1,054

201,201

40 Management of insurance and financial risk- continued

31 December 2015 Outstanding claims


No. of claims Gross Net

Class of Business =N='000 =N='000

Accident 201 248,298 66,975

Fire 199 1,364,706 137,021

Workmen's compensation 116 55,130 55,130

Motor 83 60,576 60,050

Marine and Aviation 73 576,913 293,542

Engineering 21 151,910 31,997

Oil and Gas 28 128,418 98,112

2,108

320 1,122,416


- continued

89

Bonds - 1,115

743,942

The Company manages insurance risks through the underwriting strategy, adequate reinsurance arrangements

and proactive claims handling. The underwriting strategy attempts to ensure that the underwritten risks are well

diversified in terms of type and amount of risk and class of business. iv S ources of uncertainty in the estimation of

future claim payments

Claims are payable on a claims-occurrence basis. The Company is liable for all insured events that occurred during

the term of the contract, even if the loss is discovered after the end of the contract term. As a result, liability

claims are settled over a long period of time and a larger element of the claims provision relates to incurred but

not reported claims (IBNR). There are several variables that affect the amount and timing of cash flows from

these contracts. These mainly relate to the inherent risks of the business activities carried out by individual

contract holders and the risk management procedures they adopted. The compensation paid on these contracts

is the monetary awards

The Company claims are short tail and are settled within a short time and the Company's estimation processes

reflect with a higher degree of certainty all the factors that influence the amount and timing.

The Company takes all reasonable steps to ensure that it has appropriate information regarding its claims

exposures. However, given the uncertainty establishing claims provisions, it is likely that the final outcome will

prove to be different from the original liability established. The liability for these contracts comprise a provision

for IBNR and a provision for reported claims not yet paid at the balance sheet date. The Company has ensured

that liabilities on the balance sheet at year end for existing claims whether reported or not, are adequate.

The Company has in place a series of quota-share and excess of loss covers in each of the last five years to cover

for losses on these contracts.

1,115

721 2,587,066



Claims Paid Triangulations as at 31 December 2016

Fire

Development

Accident Period 0 1 2 3 4 5 6 7 8 9

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

15,881,054

194,210,614 431,070,852 248,103,542 466,026,704 102,168,965 407,769,613 102,831,999 636,775,318 324,688,965 662,250,717

203,954,691 762,621,601 90,392,046 432,605,675

135,173,954 296,652,400

216,806,772 329,994,514

615,385,246 470,275,963 973,331,672 865,648,496 855,107,390 442,657,209

456,082,942

388,444,917

503,774,503 993,539,994 905,063,071 863,341,664

624,656,719

527,681,310 401,287,674

504,350,936 562,108,735

993,576,104 993,576,104 905,697,770

634,021,296 634,754,546 527,752,889 527,752,889 412,323,550 412,323,550

562,108,735

644,006,796 527,752,889 412,323,550

644,006,796 527,752,889 412,323,550

527,752,889 412,323,550

412,323,550

General Accident

Development


2007 46,041,611 59,705,885 126,497,126 121,418,039 129,587,406 129,841,281 150,689,601 125,328,568

2008 2009 2010 2011 2012 2013 2014 2015 2016

20,573,453 23,810,787 60,245,570 4,429,640

166,562,144 145,036,014

18,098,143 37,230,961 10,746,754

106,713,740 84,558,163

118,010,975 286,962,102 210,468,134

47,066,832 77,268,488

115,224,104

110,613,964 151,417,892 306,511,448 223,296,676

53,006,027

60,635,660

123,744,886

155,033,172 306,678,918 223,403,807

145,912,785

73,932,233 124,743,256

156,872,056 158,331,619 306,856,249

147,001,222 150,620,257 74,242,145 74,696,183 124,750,456 124,759,593

129,841,281

150,653,136 74,728,898

124,759,593

74,728,898 124,759,593

74,728,898 124,759,593

75 Prestige

Assurance Plc



Development


2007 135,173,626 254,326,257 230,447,211 164,817,336 164,817,336 164,817,336 318,962,316 315,174,482 196,085,807

Motor

Development


2007 2008 2009 2010 2011 2012 2 013 2014 2015 2016

29,463,763 49,888,878 34,259,623 25,070,479 35,873,793 45,649,003 30,394,322 34,670,486 72,626,497 96,439,959 60,740,094 67,194,401 68,684,401 72,079,801 72,079,801 72,079,801 72,079,801 72,079,801

92,967,730 64,748,542 69,855,836 63,749,146 90,300,035 76,520,397 95,776,329 97,161,831

73,148,369 75,155,625 64,232,146

102,91 1 ,292 77,728,406 96,651,922

75,235,625 64,993,546

103,157,692 77,728,406

75,235,625 75,241,625 75,241,625 65,483,446 65,483,446 103,384,492

74,989,849 74,989,849 74,989,849 74,989,849 74,989,849 94,947,941 96,822,657 96,838,857 96,838,857 102,9 42,310 103,517,410 103,517,410

72,079,801

Marine

2008 2009 2010 2011 2012 2013 2014 2015 2016

135,745,206 148,507,383

29,087,132 92,327,452

151,368,686 64,405,544 65,461,341

44,320,579 106,385,501

224,600,366 122,789,472 292,339,229 244,438,642 150,724,478 160,918,581 104,353,974

173,344,880

159,806,059 343,058,807 251,895,364 207,514,422 174,298,982

308,646,076

193,419,346

345,630,875 255,613,382 207,514,422

311,880,713

309,060,933 195,932,807

345,630,875 345,747,856 261,162,356

318,880,715 318,962,316 309,477,084 309,477,084 196,085,807 196,085,807

164,817,336

318,962,316 315,174,482 196,085,807

315,174,482 196,085,807

196,085,807

Workmen's Compensation

Development


33,309,905

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

5,825,259 8,290,757 5,978,273 5,652,762 5,131,288

17,367,256

9,244,448 9,211,785

13,536,627 4,503,821

23,485,308 17,101,339 42,471,584 26,796,940 32,701,648 24,785,010 33,466,336 30,130,909

25,104,457

30,070,500 46,411,972 31,832,685 42,934,651 29,484,359 34,326,388

33,551,716

31,589,162

48,443,436 37,119,838 47,245,160 32,895,524

34,547,735

38,022,190 32,350,045

48,594,361 49,258,261 37,149,496 37,340,050

52,482,418

35,507,035 44,543,199 39,079,767 39,079,767 32,999,965 33,309,905

49,258,261

44,543,199 39,971,709 33,309,905

44,564,024 39,989,385 33,309,905

39,989,385 33,309,905

76

Prestige Assurance Plc Notes to the financial statements

93

- continued b

Financial risk management

The Company is exposed to financial risks through its financial assets, financial liabilities and insurance and reinsurance assets and liabilities. In

particular, the key financial risk is that investment proceeds are not sufficient to fund obligations arising from insurance contracts.

The most important components of this financial risk are:

-Market risk (which includes currency risk, interest rate risk and equity price risk) -Credit risk; -Liquidity risk; -Capital management; and -Fair value estimation

These risks arise from open position in interest rate, currency and equity products, all of which are exposed to general and open market

movements.

The Company's risk management policies are designed to identify and analyse risks, to set appropriate risk limits and control, and monitor the

risks and adherence to limits by means of reliable and up-to-date administrative and information systems.

The Company regularly reviews its risk management policies and systems to reflect changes in markets, products and emerging best practice.

The Board recognises the critical importance of having efficient and effective risk management policies and systems in place.

To this end, there is a clear organisational structure with delegated authorities and responsibilities from the Board to Board Committees,

executives and senior management, individual responsibility and accountability are designed to deliver a disciplined, conservative and

constructive culture of risk management and control.

i Market risk

Market risk is the risk of adverse financial impact due to changes in fair value of future cashflows of financial instruments from fluctuations in

foreign currency exchange rates, interest rates and equity prices.

The Company has established policies which set out the principles that they expect to adopt in respect of management of the key market risks

to which they are exposed. The Company monitors adherence to this market risk policy through the Company's Investment Committee. The

Company's Investment Committee is responsible for managing market risk.

The financial impact from market risk is monitored at board level through investment reports which examine impact of changes in market risk

in investment returns and asset values. The Company's market risk policy sets out the principles for matching liabilities with appropriate assets,

the approaches to be taken when liabilities cannot be matched and the monitoring processes that are required. The following tables indicate the contractual timing of cash flows in respect of arising from financial instruments and non-financial assets

impacted by this risk: No stated maturity 0 - 90 days

Prestige Assurance Plc Notes to the financial statements - continued b

Financial risk management - continued

94

At 31 December 2016 Cash

and cash equivalents

-Loans and receivables Trade receivables Other assets Reinsurance assets

Investment in finance leases

-Financial asset at FVPL Debt Securities - held to

Carrying amount

=N='000

862,680 97,199

7,931 16,590

1,339,406

132,943

495,841

=N='000

- - - - -

-

495,841

-

- -

1,098,213 - -

=N='000

862,680 -

7,931 16,590

803,644

33,159

-

297,700

- - - - -

91 - 180 days

=N='000

- 97,199

- -

535,762

77,372

-

440,332

- - - - -

180 - 365 days

=N='000

- - - - -

22,412

-

142,893

- - - - -

1 - 5 years

=N='000

- - - - -

-

-

741,180

- - - - -

> 5 years

=N='000

- - - - -

-

-

-

- - -

300,000 -

maturity 1,622,105 Listed Equities - available for sale Listed - Unlisted 1,098,213 Statutory deposit 300,000 Non financial asset


Financial liabilities Other liabilities Trade payables Borrowings

Note: Other assets excludes prepayments whilst other liabilities exclude statutory deductions and rent received in advance The following tables indicate the contractual timing of cash flows in respect of arising from financial instruments and non-financial assets

impacted by this risk: No stated maturity 0 - 90 days

535,498 - 535,498 - - - - 241,066 - 72,320 168,746 - - -

152,335 - - - 152,335 - -

928,899 - 607,818 168,746 152,335 - -



95

At 31 December 2015 Cash

and cash equivalents

-Loans and receivables Trade receivables Other assets Reinsurance assets

Investment in finance leases

-Financial asset at FVPL Debt Securities - held to maturity Listed Equities - available for sale

Listed Unlisted Statutory deposit Non financial asset

Carrying amount

=N='000

1,312,659 85,145

2,723 64,476

2,686,944

129,070

514,274

698,908

- 820,187 300,000

=N='000

- - - - -

-

514,274

-

- -

820,187 - -

=N='000

1,312,659 85,145 2,723

64,476 1,612,166

-

-

-

- - - - -

91 - 180 days

=N='000

- - - -

1,074,778

90,349

-

-

- - - - -

180 - 365 days

=N='000

- - - - -

38,721

-

-

- - - - -

1 - 5 years

=N='000

- - - - -

-

-

167,195

- - - - -

> 5 years

=N='000

- - - - -

-

-

531,713

- - -

300,000


Financial liabilities Other liabilities Trade payable Borrowings

Note: Other assets excludes prepayments whilst other liabilities exclude statutory deductions and rent received in advance Maturity analysis on expected maturity basis

Current Non-current Total

At 31 December 2016 =N='000 =N='000 =N='000

75,495 - 75,495 - - - - 279,544 - 279,544 - - - -

223,149 - - 70,814 152,335 -

578,188 - 355,039 - 70,814 152,335 -



96

Cash and cash equivalents Financial assets:

- Financial assets designated as fair value - Held-to-maturity - Available-for-sale - Loans and receivables Trade receivables Other

assets Reinsurance assets Deferred acquisition costs Investment in finance leases Investment property Intangible assets Property, plant and equipment Statutory deposit

862,680

495,841 880,925

97,199

7,931 51,982 1,339,406 92,839 110,531 - - - -

-

- 741,180 1,098,213 - - - - -

22,412 2,286,564 9,162 1,292,722 300,000

862,680

495,841 1,622,105 1,098,213 97,199 7,931 51,982 1,339,406 92,839 132,943 2,286,564 9,162 1,292,722 300,000

Total assets 3,939,334 5,750,253 9,689,587 Liabilities

Insurance contract liabilities Trade payables Other payable Borrowings Retirement benefits obligations Current income tax payable

1,799,210 241,066 565,557 152,335

- 127,950

-

- - - -

107,646 -

1,799,210 241,066 565,557 152,335 107,646 127,950

Deferred tax liabilities 467,561

Total liabilities 2,886,118 3,461,325

Net maturity

mismatch

1,053,216 Total assets

4,871,929

5,495,812

10,367,741

Liabilities

Maturity analysis on expected maturity basis

Current Non-current Total

At 31 December 2015 =N='000 =N='000 =N='000

Cash and cash equivalents Financial assets:

-Financial asset designated as fair value - Held-to-maturity - Available-for-sale - Loans and receivables Trade receivables Other assets Reinsurance assets Deferred acquisition costs Investment in finance leases Investment property Intangible assets Property, plant and equipment Statutory deposit

1,312,659

514,274

- -

85,145

2,723 92,705 2,686,944 87,130 90,349 - - - -

-

-

698,908 820,187 - - - - -

38,721 2,300,000 10,152 1,327,844 300,000

1,312,659 -

514,274

698,908 820,187 85,145 2,723 92,705 2,686,944 87,130 129,070 2,300,000 10,152 1,327,844 300,000

467,561 575,207

5,175,046 6,228,262



97

Insurance contract liabilities Trade payables Other liabilities Borrowings Retirement benefits obligations Current income tax payable

3,197,127 279,544 107,590

70,814 -

145,786 -

- - -

152,335 136,408

-

3,197,127 279,544

107,590 223,149 136,408 145,786

Deferred tax liabilities 468,559

Total liabilities 3,800,861 4,558,163

Net maturity mismatch 1,071,068

iii Sensitivity

If the Naira had weakened/strenthened against the following currencies with all variables remaining constant, the impact on the results for the

year would have been as shown below mainly as a result of foreign exchange gains/losses:

iv Interest rate risk Interest rate risk arises from the Company's investments in long term debt securities and fixed income securities (Held to-Maturity financial

assets), bank balances and deposits which are exposed to fluctuations in interest rates. Exposure to interest rate risk on short term business is

monitored by the Investment Committee through a close matching of assets and liabilities. The impact of exposure to sustained low interest

rates is also regularly monitored.

The sensitivity analysis for interest rate risk illustrates how changes in the fair value or future cash flows of a financial instrument will fluctuate

because of changes in market interest rates at the reporting date.

A 100 basis point movement in interest rates will result in additional interest income or less of =N=4.178 (2015: =N=5.062 million). (b)

Sensitivity analysis - Market price risk

Market risk is the risk that the value of a financial asset will fluctuate as a result of change in market prices (other than those arising from

interest rate risk and currency risk) whether those changes are caused by factors specific to the individual security or its issuer or factors

affecting the all securities traded in a market.

The Company equity price risk exposure relates to financial assets whose value fluctuate as a result of changes in market prices. The Company

also has unquoted equities classified as available-for-sale whose fair value is determined using a valuation technique because of the lack of

active market for these instruments.

The sensitivity analysis for equity price risk illustrates how changes in the fair value of equity securities will fluctuate because of changes in

market prices, whether those changes are caused by factors specific to the individual equity issuer, or factors affecting all similar equity

securities traded in the market.

A 1% movement in market prices will result in an unrealised gain or loss for the of =N=0.184 million (December 2015: =N=1.544 million).

Management monitors movements of financial assets and equity price risk movements on a monthly basis by assessing the expected

changes in the different portfolios due to parallel movements of a 10% increase or decrease in the Nigeria All share index with all other

variables held constant and all the Company’s equity instruments in that particular index moving ii Currency risk The Company purchases

reinsurance contracts internationally, thereby being exposed to foreign currency fluctuations.

The Company's primary exposures are with respect to the US Dollar.

The Company has a number of investments in foreign currencies which are exposed to currency risk. The Investment Committee closely

monitors currency risk exposures against pre-determined limits. Exposure to foreign currency exchange risk is not hedged.

The Company financial assets and financial liabilities by currency is detailed below:

A 1% movement in foreign exchange rate in USD against the Naira will result in =N=2.117 million gain or loss (2015: =N=0.810 million). In Euro,

=N=0.08 million (2015: =N=0.253 million). And in pounds sterling, =N=0.054 million (2015: =N=0.1 million).

468,559 757,302

4,738,510 5,809,578



98

Naira US D Euro Pounds Total

31 December 2016 =N='000 =N='000 =N='000 =N='000 =N='000

Cash and cash equivalents

31 December 2015

637,448 211,748 8,084 5,400 862,680

Cash and cash equivalents Reinsurance

credit exposures 1,196,346 81,020 25,309 9,984 1,312,659

The Company is however exposed to concentrations of risks with respect to their reinsurers due to the nature of the reinsurance market and

the restricted range of reinsurers that have acceptable credit ratings. The Company is exposed to the possibility of default by their reinsurers in

respect of share of insurance liabilities and refunds in respect of claims already paid. The Company manages its reinsurance counterparty exposures and the reinsurance department has a monitoring role over this risk.

This exposure is monitored on a regular basis for any shortfall in the claims history to verify that the contract is progressing as expected and

that no further exposure for the Company will arise.

Management also monitors the financial strength of reinsurers and there are policies in place to ensure that risks are ceded to toprated and

credit worthy reinsurers only.

Credit Risk

Credit Risk is the risk that one party to a financial instrument will fail to honour its obligations and cause the Group to incur a financial loss.

Credit risk arises mainly from 3 sources: retrocession, reinsurance receivables and cash and investment securities.

Maximum exposure

Maximum exposure to credit risk before collateral held or other cred 2016 2015

=N='000 =N='000

Cash and cash equivalents Trade receivables Loans and other receivables Held-to-maturity Total assets bearing credit risk

862,680 7,931 97,199 1,622,105 2,589,915

- - - - -

862,680 7,931 97,199 1,622,105 2,589,915

Age analysis for past due and impaired L oans and other

Cash and cash Trade receivables equivalents receivables =N

='000 Held-to-maturity Total =N='000 =N='000 =N='000 =N='000

862,680 7,931 1,312,659

2,723

97,199 85,145

1,622,105 698,908

2,589,915 2,099,435

1,312,659 2,723 85,145 698,908 2,099,435 - - - - -



99

31 December 2016 97,199

Neither past due nor impaired 862,680 7,931 - 1,622,105 2,589,915 Past due but not impaired - - - - - Impaired - - - -

Gross Impairment allowance - collective Net

31 December 2015 Neither past due nor impaired Past due but not impaired Impaired Gross Impairment allowance - collective Net

L iquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its insurance liabilities as they fall due. Prestige mitigates this risk by having

an investment strategy which focuses on liquidity and capital preservation before investment returns.

The table below presents the cash flows receivable/payable by the Company. The amounts disclosed in the table are the contractual

undiscounted cash flows. All liabilities are presented on a contractual cash flow basis except for the insurance liabilities, which are presented

with their expected cash flows.

Over 1 year but 31 December 2016 0 - 30 days 31 - 90 days 91 - 180 days 181 - 365 days less than 5 yrs Over 5 years Total



100

Cash and cash equivalents Insurance receivables Loans

and other receivables Other

assets Reinsurance assets

Debt Securities at

amortised cost Equities at

available for sale

Total financial assets

Financial liabilities Other liabilities Borrowings Total financial liabilities

Insurance contract liabilities

31 December 2015

Cash and cash equivalent Insurance receivables Loans and other receivab Other assets Reinsurance assets

Debt Securities at

amortised cost Equities at available for

sale Total

relevant

financial assets

Financial liabilities Other liabilities Borrowings Total financial

liabilities

Insurance contract liabilities (a) Financial instruments not measured at fair value

At 31 December 2016 At 31

December 2015

=N='000 =N='000 =N='000 =N='000 =N='000 =N='000 =N='000

706,656 156,024 - - - - 862,680 - - 7,931 - - - 7,931

- - 97,199 - - - 97,199

- - 51,982 - - - 51,982

737,924 491,949 1,229,873

- - 738,032 142,893

- 741,180 1,622,105

- - - - - - -

- - - - - 1,098,213 1,098,213 706,656 893,947 1,387,093 142,893 - 1,839,393 4,969,983

- - 535,498 - - - 535,498 - - - 152,335 - - -

- - 535,498 - - - 535,498

179,921 269,882 449,803 899,605 - - 1,799,210

1,178,625 134,034 - - - - 1,312,659 - - 2,723 - - - 2,723

- - 85,145 - - - 85,145

- - 2,723 - - - 2,723

- 1,612,166 1,074,778 - - - 2,686,944

- - - - - 698,908 698,908

- - - - - 820,187 820,187

1,178,625 1,746,200 1,165,369 - - 1,519,095 5,609,289

86,072 21,518 - - - - 107,590 - - - 70,814 152,335 - 223,149

319,713 479,569 799,282 159,856 1,438,707 - 3,197,127



101

Carrying Fair Carrying Fair

value value value value

Financial assets

=N='000 =N='000 =N='000 =N='000

Cash and cash equivalents 862,680 862,680 1,312,659 1,312,659 Trade receivables 7,931 7,931 2,723 2,723 Loans and other receivables 97,199 97,199 85,145 85,145 Other assets 51,982 51,982 92,705 92,705 Reinsurance assets Debt securities at amortised cost

1,339,406 1,339,406 2,686,944 2,686,944

Listed

Financial liabilities

1,622,105 1,622,105 698,908 698,908

Trade payables 241,066 241,066 279,544 279,544

Other liabilities 565,557 565,557 107,590 107,590

Borrowings 152,335 152,335 223,149 223,149 Fair Value Hierarchy

Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of fair value

hierarchy. This grouping is determined based on the lowest level of 'significant inputs used in fair value

• level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities

• level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.eas prices) or

indirectly (ie derived from prices)

• level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The hierarchy of the fair value measurement of the Company’s financial assets and financial liabilities are as follows:


31 December 2016 =N='000 =N='000 =N='000 =N='000

Financial assets

Financial assets designated at fair value 495,841 - - 495,841 Equity securities at available for sale

Unlisted - - 1,098,213 97,199 1,098,213 Asset for which fair value are disclosed Loans and

other recivables - - 97,199

31 December 2015 - Financial assets

Financial assets designated at fair value 514,274 - 820,187 514,274 Equity securities at available for sale

Unlisted - - 820,187

85,145 Asset for which fair value are disclosed Loans and

other recivables - - 85,145


102

Enterprise risk management

Prestige Assurance is committed to the management of various enterprise risks that could hinder the achievement of its strategic objectives. In

doing this, the company follows its internal control and enterprise risk management policies which was developed according to the provisions

of the Committee of Sponsoring Organizations of Treadway Commission (COSO) and approved by the National Insurance Commission, NAICOM.

While this framework does not provide answers to all the questions and the challenges experienced in the market in the past year, its

engagement has strengthened our organization’s resilience to major risk exposures.

Our risk philosophy and objectives are clearly defined and has been integrated into our decision making process. Some of the components of

our enterprise risk management system are:

Governance System: The overall responsibility for the management of our enterprise risks resides with the Board through its Enterprise Risk

Management (ERM) Committee. This committee works closely with the Chief Risk Officer/ERM Steering Committee to ensure significant risks

are not only identified but escalated to the Management and Board. The functional Managers are saddled with the responsibility to carry out

regular assessment of existing, newly identified and emerging risk applicable to the functional operations.

Risk Identification & Assessment: Risks associated with Company’s operations that may affect its strategic objectives and annual performance

are regularly identified and evaluated by management. This process involves a dynamic and interactive procedure where the staff, functional

managers, chief risk officer and management staff attempt to identify significant risk situations, assess risk exposures from them and suggest

controls to combat them. In the course of the year the company encountered some significant risks:

Significant Risks Impact on Operations

Reputation Risks Brand Image of the company

Financial Risks Paid higher values on claims due to Naira devaluation.

Legal Risks Increased management cost.

Risk Control & Mitigation: Risk control activities are engaged at different levels and by different functional units. Its major focus is to reduce the

impact of losses from identified risk categories and emerging significant risks. Some of our existing risk categories and control measures are:

Risk Categories Control Measures

Insurance Risks Finalization of underwriting policies and acceptance of risk defined to the Underwriting

department and branches.

Financial Risks Interest rate gap analysis, reports, priority focus, measurement testing

Strategic Risks Instituted Risk Strategy Committee

Hazard Risks Risks and Control Assessment, Monitoring and Control Measures

Reputational Risks Due diligence, Trend in Customer Complaints and customer feedback mechanism.

Internal & External Communication: in line with the company’s philosophy of open communication, management provides relevant

information to staff, Board, shareholders and industry regulators. This enhances the achievement of our corporate objectives in various ways.

We do this by sharing regular information with staff, provision of standard operating systems and standard level agreement for effective

internal operations. We also provide quarterly report to the Board, Securities and Exchange Commission, Nigerian Stock Exchange and the

National Insurance Commission on all aspects of the company’s operations.

Risk Monitoring: management ensures an ongoing monitoring of the operations of the company through the activities of internal audit and

control and the risk management department of the company. Adherences to existing policies are checked, control activities are evaluated and

deficiencies are identified and corrected.

Enterprise-wide Risk Management Principles

Here in prestige, we try as much as possible to balance our portfolio while maximizing our value to stakeholders through an approach that

mitigate the inherent risk.

To ensure effective and economic use of resources, we operate strictly by the following principles: - The company will not take any action that will compromise its integrity - The company will at all times comply with all government regulations and uphold best international practice. - The company will build an

enduring risk culture, which shall pervade the entire organisation Notes to the financial statements

Prestige Assurance Plc - continued

103

- The company will at all time hold a balanced portfolio and adhere to guidelines on investment issued by the regulator and Finance and General

Purpose Committee of the company. - The company will ensure that there is adequate reinsurance in place for the business above its limit and also prompt payment of such

premiums.

Approach to Risk Management

In Prestige Assurance, there are levels of authority put in place for the oversight function and management of risk to create and promote a

culture that mitigate the negative impact of risks facing the company.

The Board

The Board sets the organisation's objectives, risk appetite and approves the strategy for managing risk. There are various committee

nominated to serve of whom their various functions are geared towards minimising likehood impacts of risks faced by the company.

The Audit Committee:

This is one of the most powerful arms of the Board which is saddled with the following functions: Perform oversight function on accounting and financial reporting Liase with the external auditor Ensure regulatory compliance Monitoring the effectiveness of internal control processes within the company.

Board Risk Committee

This is more of a technical committee that oversee the business process. Their functions include; Reviewing

of company's risk appetite Oversee management's process for the identification of significant risk across the company and the adequacy of prevention detection and

reporting mechanisms. Review underwriting risks especially above limit for adequacy of reinsurance and company's participation.

Review and recommend for approval of the Board risk management procedures and controls for new products and services Board Investment

Committee

Set the investments limit and the type of business the company should invest in Reviews and approves the above company's investment policy Approves investments over and above managements' approval limit Ensures that there is optimal asset location in order to meet the targeted goals of the company.

The second level is the management of the company. This comprises of Managing Director and the management staff of the company.

They are responsible for strategy implementation of the Enterprise Risk Management policies and guidelines set by the regulator, government

and the board for risk mitigation. This is achieved through the business unit they supervised. The last level is that of independent assurance.

This comprises the internal audit function that provides independent and objective assurance of the effectiveness of the company's systems

of internal control established by the first and second lines of defence in management of enterprise risks across the organisation. Risk Categorisation As a business entity and an underwriter, Prestige Assurance Plc is exposed to an array of risk through its operations. The company has

identified and categorised its exposure to these broad risks as listed below.

Financial risk Business risk Operational risk Hazard

risk Underwriting risk PRESTIGE ASSURANCE PLC FINANCIAL STATEMENTS, 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS

Financial Risk Financial risk comprises of market, liquidity and credit risk.



104

Market risks are sub-divided into interest-rate risk, exchange risk, property price risk and equity risk. Liquidity risk includes liquidation value

risk, affiliated investment risk and capital funding risk. Credit risk includes default risk, downgrade or mitigation risk, indirect credit or

spread risk and concentration risk. Business Risk

Business risk relates to the potential erosion of our market position. This includes customer risk, innovation risk and brand reputation risk.

Operational Risk This is the risk of loss resulting from inadequacy or failure of internal processing arising from people, systems and or from external events.

Hazard Risk

These are risk which are rare in occurrence but likely impact may be major on the company. Examples of these are natural disaster, terrorism,

health and environmental risk, employee injury and illness, property damage and third-party liability.

Insurance/underwriting Risk Our activities involve various range of risk arising from the business itself. This manifest from underwriting, re-insurance, claims management,

reserve development risk, premium default, product design and pricing risk. Our company has a pragmatic approach in identifying, assessing

and mitigating risk of such approaches as stated above.

Capital Management The main objectives of the Company when managing capital are:

To ensure that the Minimum Capital Requirement of N3 billion as required by the Insurance Act CAP I17, LFN 2004, is maintained at all times.

This is a risk based capital method of measuring the minimum amount appropriate for an insurance company to support its overall business

operations in consideration of its size and risk profile. The calculation is based on applying capital factors to amongst others, the Company's

assets, outstanding claims, unearned premium reserve and assets above a certain concentration limit.

To safeguard the Company's ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for

other stakeholders and;

To provide an adequate return to shareholders by pricing insurance contracts and other services commensurately with the level of risk.

The Insurance Act CAP I17, LFN 2004 specifies the amount of capital that must be held in proportion to the Company's liabilities, i.e in respect of outstanding claims liability risk, unearned premium liability risk, investment risk, catastrophe risk and reinsurance ceded.

Capital Management - Continued

The Company is also subject to a solvency requirement under the Insurance Act CAP I17, LFN 2004 and is required to maintain its solvency at

the minimum capital required at all times. Solvency margin is the excess of admissible assets in Nigeria over admissible liabilities in Nigeria and

shall not be less than the minimum paid-up capital or 15% of the gross premium income less reinsurance premiums paid out during the year,

whichever is higher in accordance with section 24 of Insurance Act CAP I17 LFN, 2004.

The Company's capital requirement ratio and Solvency margin exceed the requirement of the Insurance Act CAP I17, LFN 2004.

Capital Adequacy Test Based on the capital adequacy claculation below, Prestige Assurance Plc has a surplus of N5.7 billion.

31 December 2016

=N='000 =N='000

Shareholders' fund as per Statement of Financial Position

6,228,262

(476,723) Capital base 5,751,539 Notes to the financial statements

Management uses regulatory capital ratios to monitor its capital base. Based on the capital base computed above, the Company capital base is

above the minimum capital requirement of N3 billion specified by NAICOM.

Less:

Intangible Assets (9,162) Deferred tax liabilities (467,561)


105

Determination of Solvency Margin 2016 2015 =N='000 =N='000

Cash and cash equivalents Financial 781,673 1,150,902 assets -Held-for-trading @FVTPL 495,841 514,274

-Held-to-maturity 1,622,105 698,908

-Available-for-sale 1,098,213 820,187

Reinsurance assets 1,339,406 2,686,944

Deferred acquisition costs 92,839 87,130

Trade receivables 7,931 2,723

Staff loans 97,199 85,145

Investment in finance leases 132,943 129,070

Investment properties 2,286,564 2,300,000

Intangible assets 9,162 10,152

Property, plant and equipment 1,292,722 1,327,844

Statutory deposit 300,000 300,000

Admissable assets 9,556,598 10,113,279

Liabilities Insurance contract liabilities 1,799,210 3,197,127

Trade payables 241,066 279,544

Provisions and other payables 565,557 107,590

Borrowings 152,335 223,149

Retirement benefit obligations 107,646 136,408

Current income tax liabilities 127,950 145,786

Admissible liabilities 2,993,764 4,089,604

Solvency margin 6,562,834 6,023,675 Minimum share capital 3,000,000 3,000,000 Surplus in solvency margin 3,562,834 3,023,675

The Company's capital requirement ratio and Solvency margin is above the requirements of the Insurance Act CAP I17, LFN 2004.

Prestige Assurance Plc Revenue account for the year ended 31 December 2016

Workmen CAR &

General Compen- Marine and Oil & Engineering

Fire Accident Motor sation Aviation Energy All risk Bond GIT Terrorism Mediclaim 2016 2015

REVENUE N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000 N'000

Direct premium 1,234,137 252,904 286,549 33,945 363,129 135,253 63,318 34,577 141,270 17,710 31,105 2,593,897 2,416,470

Inward premium 6,800 3,840 1,488 - 3,146 4,201 656 236 - - - 20,367 14,063

Gross premium written Decrease/(increase) in unearned premium

Gross premium income Outward reinsurance Increase/(decrease) in prepaid re-insurance

Net premium income Commission Income

Total income

EXPENSES Gross claims paid (Decrease)/increase in outstanding claims

Gross claims expenses

Movement in outstanding claims recoverables from

reinsurance Reinsurance claims recoveries

Net claims expenses Acquisition cost Maintenance costs

Total expenses

Underwriting (loss)/profit

90

1,240,937 (21,350)

256,744 35,197

288,037 (27,108) 33,945 (1,099)

366,275 (33,680)

139,454 37,378

63,974 2,145

34,813 (14,986)

141,270 (7,673)

17,710 (5,363)

31,105 (30,194)

2,614,264 (66,733)

2,430,533 4,081

1,219,587 291,941 260,929 32,846 332,595 176,832 66,119 19,827 133,597 12,347 911 2,547,531 2,434,614 956,370 49,872 15,781 - 277,871 65,815 40,913 8,323 270 14,392 - 1,429,607 (1,505,640)

24,976 729 (6,490) - (4,426) 10,164 (575) (3,981) - (4,281) - 16,116 (1,229)

238,241 241,340 251,638 32,846 59,150 100,853 25,781 15,485 133,327 2,236 911 1,101,808 927,745 255,321 17,728 1,569 - 66,479 11,759 9,207 1,021 - 2,839 - 365,923 383,916

-

493,562 259,068 253,207 32,846 125,629 112,612 34,988 16,506 133,327 5,075 911 1,467,731 1,311,662

661,098 59,072 122,078 31,267 866,728 6,211 32,184 - 101,687 15,881 - 1,896,206 3,447,163 (756,160) (148,091) (2,249) (10,373) (272,165) (95,851) (147,466) 993 (33,288) - - (1,464,650) (972,696)

(95,062) (89,019) 119,829 20,894 594,563 (89,640) (115,282) 993 68,399 15,881 - 431,556

- -

2,474,467

801,343 109,879 (5,156) - 273,621 22,500 104,775 - 24,460 - - 1,331,422 130,873 (613,662) (15,173) (6,925) - (633,646) (537) (31,616) - (18,601) (13,028) - (1,333,188) (1,580,788)

-

92,619 5,687 107,748 20,894 234,538 (67,677) (42,123) 993 74,258 2,853 - 429,790 1,024,552 189,064 40,958 25,751 4,828 52,617 24,494 5,555 3,794 19,772 2,516 - 369,349 324,621 196,763 40,709 45,671 5,382 58,077 22,112 10,144 5,520 22,400 2,808 4,932 414,518

- 384,803

478,446 87,354 179,170 31,104 345,232 (21,071) (26,424) 10,307 116,430 8,177 4,932 1,213,657 1,733,976

-

15,116 171,714 74,037 1,742 (219,603) 133,683 61,412 6,199 16,897 (3,102) (4,021) 254,074 (422,314)

108

100 100

(24.5) 100


S tatement of value added for the year ended

31 December 2016

Reinsurance,claims,commission 2,693,892 2,771,108

and services - local (1,806,372) (2,211,262)

Value added 887,520 559,846

Applied as follows:

To pay employees:

Salaries and other employees benefits To pay

government:

413,608 46.6 417,763 74.6

Taxation

Retained for replacement of

assets and expansion of business:

127,815 14.4 145,724 26.0

Deferred taxation (9,413) (1.1) 11,618 2.1

Depreciation and amortization 55,090 6.2 48,828 8.7

Contingency reserve 78,428 8.8 72,916 13.0

Result for the year 221,992 25.0 (137,003)

Value added 887,520 100 559,846

2016 2015

=N='000 % =N='000

%

Gross premium income 2,547,531 2,434,614

Other income - Local 146,361 336,494

109

300,000 300,000 11,893,946 10,134,493

1,716,341 300,000

9,720,864

Prestige Insurance Plc

Five-year financial summary

STATEMENT OF FINANCIAL POSITION

Property, plant and equipment 1,292,722 1,327,844 1,292,471 2,354,776 Statutory deposit 300,000 300,000 Total assets 9,689,587 10,367,741

LIABILITIES

Insurance contract liabilities 1,799,210 3,197,127 4,173,905 3,877,074 4,596,879

Trade payables 241,066 279,544 532,101 383,526 482,170

Provisions and other payables 565,557 107,385 103,794 154,242 170,773

Borrowings 152,335 223,149 457,637 529,370 -

Deposit for shares - - 1,504,989 - -

Retirement benefit obligations 107,646 136,408 113,873 116,958 89,313

Current income tax payable 127,950 145,991 170,090 391,091 319,565

Deferred tax liabilities 467,561 468,559 445,479 268,889 173,234 Total liabilities 3,461,325 4,558,163 7,501,868 5,721,150 5,831,934

EQUITY

Share capital 2,685,216 2,685,216 1,254,157 1,254,157 1,254,157

Share premium 1,127,599 1,127,599 1,140,092 1,155,540 1,155,540

Statutory contingency reserve 1,753,651 1,675,223 1,602,307 1,522,696 1,396,026

Accumulated losses (776,511) (945,069) (755,718) (742,695) (525,190)

Gratuity valuation reserve 9,841 (9,797) (1,612) (29,058) (20,028)

Available-for-sale reserve 671,542 494,488 385,296 247,986 157,928

Property revaluation reserve 756,924 781,918 767,556 1,004,717 470,497

<---------------------------------------31 DECEMBER --------------------------------->

*Restated *Restated

AS AT 2016 2015 2014 2013 2012

=N='000 =N='000 =N='000 =N='000 =N='000

ASSETS

Cash and cash equivalents 862,680 1,312,659 3,259,625 2,449,694 1,670,851

Financial assets (investments) 3,313,358 2,118,514 1,880,871 1,562,881 1,334,149

Trade receivables 7,931 2,723 1,092 222 695,644

Other assets 51,982 92,705 92,115 41,906 65,836

Reinsurance assets 1,339,406 2,686,944 2,814,046 3,168,227 3,674,016

Deferred acquisition costs 92,839 87,130 71,216 120,121 188,783

Intangible assets 9,162 10,152 5,400 6,300 7,200

Investment in finance leases 132,943 129,070 77,110 130,366 68,044

Investment property 2,286,564 2,300,000 2,100,000 - -

110

Total equity 6,228,262

5,809,578 4,392,078 4,413,343 3,888,930

Total liabilities and equity

Prestige Insurance Plc

Five year financial summary - continued

9,689,587 10,367,741 11,893,946 10,134,493 9,720,864

INCOME S TATEMENT FOR Y EAR

ENDED <---------------------------------------31 DECEMBER ---------------------------------> Restated*

2016 2015 2014 2013 2012 =N='000 =N='000 =N='000 =N='000 =N='000

Gross premium written Profit before income tax Income tax expense

Profit /(loss) for the year

Appropriations:

Transfer to statutory contingency reserve

Transfer to retained earnings 78,428

143,564

72,916

(209,919)

79,611

(63,656)

126,670

(216,231)

143,702

478,152

Earnings per share (kobo) 4.13 (2.94) 0.57 (3.62) 24.44

Net assets per share (kobo) 116 112 182 176 155

Note: Earnings and dividend per share were computed based on the profit for the year and on the number of issued and fully paid

ordinary shares at the end of the year. Net assets per share were computed on the number of issued and fully paid ordinary shares

at the end of the respective years.

340,394 20,339 176,755 127,484 879,759

(118,402) (157,342) (160,800) (217,045) (257,905) 221,992 (137,003) 15 ,955 (89,561) 621,854

2,614,264 2,430,533 2,653,695 4,222,338 4,790,054

Documents

LAGOS, NIGERIA REPORT OF THE DIRECTORS AND AUDITED ... · M. O. Oyegunle, Mr. G. Raghu, Dr. alla Swamy and Mr. Sarberswar Sahoo. The ommittee [s term of reference is to fundamentally